April 2013 Update

4th June 2013

Introductory Financial Conduct Authority (FCA) VideoMartin Wheatley, Chief Executive Officer at the FCA, has stated their aim is to ensure that consumers get well treated in financial markets and that the firms providing these services are beyond reproach.  The FCA now supervises 26,000 firms.

To find out more about, take a look: http://vimeo.com/63093895


Explanation of FCA document types
Not unlike the previous regulator, the FCA are constantly releasing material on their website.  Here is a quick guide to help you make sense of it all:

Official information released by the FCA on a specific topic.

Consultation paper
Paper seeking views of firms, consumers or both on a particular topic or proposed rules.

Policy statement
Summary of responses received on a consultation paper including the FCA’s response to them.

Final notice
Publicly issued statement of FCA’s regulatory action against an individual or company.

Discussion paper
Paper sharing current thinking on a specific topic in order to open up a debate and invite responses.

Handbook Notices
Notification of changes to the Handbook for firms and regulated individuals.

Form to be downloaded and completed by firms or consumers.

Finalised guidance
Final guidance on rules for firms.

Guidance notes
Notes on guidance for firms.


Staff Training & Conduct Risk
2gether Consulting were key speakers at an industry conference in April on the topic of training as an important way to mitigate conduct risk.

Why is this relevant to your firm?
The FCA have already made it clear that they will take action, including enforcement, where particular aspects of a firm’s business model or culture – such as staff training – are likely to harm consumers.  Staff training is a key way to mitigate conduct risk.

A firm’s Training and Competence (T&C) regime is good evidence of how well it is protecting its consumers’ interests.  Firms have responsibilities under three specific areas:

Assessing Competence
A firm;
•       must decide how they assess their employee’s competence;
•       will need the to ensure they have the skills, knowledge and expertise specific to their specific job;
•       culture must cover a good standard of ethical behaviour;
•       should look at the statements of principle for approved persons as a start point; and
•       needs to implement procedures, or publish criteria for how you establish competence and when it has been met.

Maintaining Competence
•       Employee competence must be assessed on an ongoing basis;
•       Changes in marketplace, product, regulation or legislation could all trigger a further training requirement;
•       Responsibility for appropriate ongoing training sits with your firm, FCA don’t tell you how to do it; and
•       Check out TC 2.1.11G and think about the level of supervision required.

Record Keeping
•       Record anything that relates to your firm’s compliance with the FCA’s TC sourcebook;
•       Divide records by recruitment, training and assessment of competence;
•       Retain records for at least 3 years after stopping the activity; and
•       Check out TC 3.1.1R.


Enforcement and the FCA
The job of the regulator’s enforcement team is to help the FCA change behavior by making it clear that there are real and meaningful consequences for those firms or individuals who don’t play by the rules. Credible deterrence will remain central to FCA’s enforcement approach. Any enforcement action with originate from FCA’s objectives to make sure that firms put consumers at the heart of their business and that markets work well.

The FCA will build on their predecessor’s enforcement work by:

  • bringing more enforcement cases and pressing for tough penalties for infringements of rules to reset conduct standards;
  • pursuing more cases against individuals and holding members of senior management accountable for their actions;
  • pursuing criminal prosecutions, including for insider dealing and market manipulation;
  • taking action to tackle unauthorised business; and
  • continuing to prioritise getting compensation for consumers.

FCA have said they are committed to identifying potential problems at an early stage, and will continue to work closely with other organisations both at home and abroad to combat financial crime.


Areas to Watch
Two important consultation papers (CPs) have been released in the last month which could be of interest:

CP13/1 - FCA Regulated fees and levies: Rates proposals 2013/14
Published 09/04/2013: This CP covers the proposed 2013/14 regulatory fees and levies for the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS) and the Money Advice Service.

FSA - CP13/7 Consumer credit regulation – our proposed regime
Published 06/03/2013: On 1 April 2014, the regulation of the consumer credit market will be transferred from the Office of Fair Trading (OFT) to the FCA). This move was announced by the Government, with the aim of increasing protection for consumers. The Government has now published a consultation document setting out its proposals for this transfer.


Quick Guide

FCA Regulated Insurance Intermediaries need to:

• Give clients disclosure documents that reflect new compensation limits. FCA’s disclosure templates will help or read their one-minute guide;
• Be aware of conflicts of interest such as product providers offering you incentives in return for your business;
• Tell FCA if you witness or are suspicious of insurance fraud by any providers you deal with; and
• Understand FCA’s insurance conduct of business sourcebook (ICOBS) and client categorisation so that the advice and services you offer best meet your clients’ needs

How do I know whether my sales process involves giving advice?
The essential elements of 'advice' are that it must be on the advantages and disadvantages of the customer buying or selling a particular insurance contract (or contracts). Recommending that someone should buy household contents insurance (without mentioning a specific insurer or policy) that is unconnected with the sale of a contract would not fall within the definition of 'advice'.