FSA – INVESTMENT ADVISERS AND THE RDR

The Financial Services Authority has published proposals for enhancing the professionalism of investment advisers under the Retail Distribution Review (RDR).

The RDR is seeking to rebuild people’s trust and confidence in the retail investment market by raising standards of professionalism. A key element of the FSA’s wide-ranging reforms is that by the end of 2012, advisers, whether independent or restricted, will need to demonstrate greater knowledge and skills and meet enhanced standards in dealing with clients.

The FSA is proposing to create a new in-house governance structure to ensure advisers achieve this greater level of professionalism, both initially and on an ongoing basis through the achievement of new, higher level qualifications; meeting enhanced standards of continuing professional development; and adhering to common ethical standards.

This streamlined approach fits with the FSA’s existing role in approving and supervising investment advisers, and would enable the FSA to apply its more intensive supervisory approach, including its greater focus on individuals in key positions, to the retail investment advice sector. At the same time, the FSA is proposing that professional bodies, registered with and overseen by the FSA, should play a greater role in helping their members meet its new professionalism requirements.

The FSA has also clarified a number of important issues about the new level of qualification investment advisers will need to meet by the end of 2012. In particular, it has published a list of qualifications that advisers may already hold or be studying towards, with the guarantee that should they hold one of these qualifications they will not need to take further exams once the content for meeting the new qualification standard is confirmed. Instead, advisers are able to meet any gaps through on-the-job continuing professional development.

In addition, the FSA has set out proposals for removing commission bias from the group personal pension (GPP) market by ensuring that employers will be able to agree up-front how much investment advice will cost them and how they will pay for it. The FSA has also set out its views on the extent to which it may be appropriate to apply the RDR’s proposals to pure protection products and invites views on extending higher professional standards to pure protection advice.

The FSA is inviting responses to its proposals by 16 March 2010.

For clarification or assistance in meeting the standards set out in the Retail Distribution Review (RDR), call us on 020 7645 8808 or visit our dedicated web pages.


Source: Financial Services Authority

FSA Website

FSA AND HMT – REFORMING OTC DERIVATES MARKETS

A joint paper has been published by the FSA and HMT dealing with risks highlighted by the financial crisis.

The report states that the financial crisis has highlighted deficiencies within the over-the-counter (OTC) derivative markets: most notably shortcomings in the management of counterparty credit risk and the absence of sufficient transparency.

This paper sets out the steps required to address these issues, where relevant identifying further necessary work streams.

In summary, the Treasury and the FSA (‘UK Authorities’) propose that the following measures need to be implemented and/or developed to address systemic shortcomings in OTC derivative markets:

• Greater standardisation of OTC derivatives contracts

• More robust counterparty risk management

• Consistent and high global standards for Central Counterparties (CCPs)

• International agreement as to which products are ‘clearing eligible’

• Capital charges to reflect appropriately the risks posed to the financial system

• Registration of all relevant OTC derivative trades in a trade repository

• Greater transparency of OTC trades to the market

• On-exchange trading

The paper sets out detailed thinking on each of these key issues as well as outlining the FSA and HMT approach for taking these measures forward.


Source: Financial Services Authority

FSA Website

ABI – RDR PROGRESS POSITIVE

Responding to the release of the FSA’s latest Consultation papers on the Retail Distribution Review, Maggie Craig, the ABI’s acting Director General, said:

“We welcome the FSA’s continued emphasis on increasing the professionalism of financial advisers. It is particularly good news for consumers that the FSA will formally recognise the benefits of membership of professional bodies in relation to adviser competence and professionalism.”

Protection

“We are pleased that the FSA has accepted our arguments that adviser charging should not be applied to the protection market purely for the sake of consistency.”

Group Personal Pensions (GPP) – Consultancy Charge

“It is appropriate that the FSA has applied similar adviser charging rules for individual and group pensions, ensuring a level playing field. We welcome that the FSA has recognised that this will have a knock-on effect for occupational pension schemes which will have to be addressed.”

“We now need the FSA to work with the industry on a simplified advice process, that will meet the needs of consumers who are unable to afford, or do not require, full advice. “

The ABI has supported the objectives of the RDR since it began in 2006 and continues to believe these changes are essential to rebuild consumer confidence in the retail investment market.

We can help you meet the challenging exam standards set out in the Retail Distribution Review (RDR). Call us on 020 7645 8808 to discuss how we can assist you.


Source: Association of British Insurers

ABI Website

ABI – LAW COMMISSION REVIEW OF INSURANCE LAW

Responding to the publication of the Law Commission’s report on insurance law, Nick Starling, the ABI’s Director of General Insurance and Health, said:

“We share the Law Commission’s desire that customers should be treated fairly. The insurance industry is committed to ensuring that customers understand their rights and obligations, and have their genuine claims paid quickly."

"We are pleased that The Law Commission recognises that best practice throughout the industry, supplemented by FSA regulation and the approach of the Financial Ombudsman Service, already protects the consumer. The Commission’s proposals give legal status to existing best practices, and brings them together in one place in a clear format.”

Our TCF Frameworker is a proven and practical solution to your organisation’s need to progress and evidence your endeavours to Treating Customers Fairly. Call 020 7645 8808 to arrange a demonstration.


Source: Association of British Insurers

ABI Website

CML – COMMENTS ON FSA THIRD QUARTER MORTGAGE STATISTICS

The latest mortgage statistics from the FSA show that the proportion of mortgages with arrears of more than 1.5% of the balance have decreased slightly in the third quarter to 2.57% from 2.63%, with possessions slightly up from 13,600 to 14,000.

Figures from the Council of Mortgage Lenders released last month show a larger decrease in arrears - down from 2.80% to 2.61% in the first mortgage market.

The FSA statistics cover a large proportion of second charge lending, which is excluded from the CML's equivalent figures (11,400 to 11,700 in the last quarter), and for this reason FSA possessions will always be substantially higher than the CML's.

According to the FSA, 60% of outstanding mortgages are on variable rates, compared to 51% one year ago. This demonstrates partly how popular tracker rates are now, but also - given the low volumes of new business over the past year - that those reverting off fixed rates are staying on standard variable rates because they are currently attractive.

Commenting on the data, CML director general Michael Coogan said:

"The FSA data reflects what our numbers have already portrayed. Arrears and possessions are lower than expected earlier in the year, and the majority of the population have been choosing to stay on their SVRs or move to trackers, rather than take out fixed rate mortgages."

"The fact that the CML figures on arrears fell faster than the FSA's may indicate that regulated and buy-to-let arrears are improving more quickly than arrears on secured loans which are not regulated in the same way."


Source: Council of Mortgage Lenders

CML Website

CML – NOVEMBER GROSS LENDING NEWS

Gross mortgage lending totalled an estimated £12 billion in November, a 10% drop from £13.3 billion in October and down 14% from £13.9 billion in November of last year, according to new data from the Council of Mortgage Lenders. A modest seasonal decline between October and November is typical, although the 10% fall is a little larger than normal.

The underlying story, though, is one of market conditions holding steady and the CML does not expect this position to change much in the coming months.

In the CML monthly market commentary, CML economist Paul Samter says:

"There is little reason to expect much underlying change in the coming months. There could be a modest decline in underlying house buying activity in early 2010 due to the stamp duty holiday ending, with activity "bunching" over the last few months of 2009. But seasonal factors are likely to be the dominant driver over the next few months.”

"There has been a modest increase in the availability of mortgage credit recently, including some tentative signs of a few higher LTV products emerging. But there is no sign of a swift recovery in lending volumes, especially with remortgaging set to remain at subdued levels while low interest rates persist."


Source: Council of Mortgage Lenders

CML Website