Conduct regulation

Regulation round up

On 18 October, the FCA published its monthly Regulation round-up. The hot topics included the consultations on Brexit and the temporary permissions regime for inbound passporting EEA firms and funds,  the Firm Feedback Survey and the FCA’s Discussion Paper on the impact of climate change and green finance on Financial Services. This edition includes the following articles that are relevant to insurers or insurance intermediaries:

  • Digital regulatory reporting – this updates the progress on the pilot scheme and also the FCA’s feedback statement on the call for input on smarter regulatory reporting.
  • General Insurance Value Measures - in March 2018, the FCA published the second set of data in its general insurance value measures pilot. The FCA are now collecting a third set of value measures data across  claims frequency; claims acceptance rates; and average claims pay-out, and intend to publish the data in the new year alongside a consultation on the reporting of GI value measures.
  • Insurance Distribution Directive – reminding firms that it came into force on 1 October 2018.
  • Live & Local 2018/19 events for regulated firms including their workshop on the extension of the Senior Managers and Certification Regime (SM&CR) and the Insurance Distribution Directive (IDD).

Improving the quality of pension transfer advice - final rules and guidance – PS18/20

On 4 October the FCA published a Policy Statement (PS18/20) on improving the quality of pension transfer advice. The PS summarises the feedback that the FCA received to their Consultation Paper 18/7, as well as introducing the final rules and guidance to improve the advice received when people consider transferring their safeguarded benefits. 

The changes will be coming into force at various points in time from October 2018 onwards.

Brexit: proposed changes to the Handbook and Binding Technical Standards – CP18/28

On 10 October the FCA published a Consultation Paper (CP18/28) setting out its proposals on how it will amend its Handbook and EU derived binding technical standards (BTS) if the UK leaves the EU without an implementation period in place. The CP also sets out the proposed approach to EU non-legislative material such as Level 3 Guidelines and Q&As.

For the most part, the amendments proposed are straightforward changes that update references to:

  • EU legislation.
  • UK law which relates to or refers to the EU.
  • EU institutions and concepts.
  • the European Economic Area (EEA).
In a small number of cases the FCA identified more than one solution to resolve an issue. Where this is the case the chosen proposal is set out and feedback is welcomed. All the proposals are aimed at ensuring the FCA Handbook and the BTS continue to function when the UK is no longer a member of the EU.

The FCA do not propose wider policy changes and are not making other changes unrelated to Brexit to the Handbook or to BTS.

The consultation ends on 7 December 2018.

Temporary permissions regime for inbound firms and funds – CP18/29

The temporary permissions regime will allow EEA firms and funds to continue regulated business in the UK, if the UK leaves the EU in March 2019 without an implementation period in place. This FCA Consultation Paper (CP18/29), published on 10 October, sets out how the FCA expects the regime to work in practice, how firms and funds can enter it, how long it will operate for, and the rules the FCA propose should apply to firms and fund marketing activities during the regime.

The consultation ends on 7 December 2018.

SM&CR: Proposed guidance on statements of responsibilities and responsibilities maps for FCA firms – GC18/4

On 11 October the FCA has issued a consultation on proposed guidance to give FCA solo-regulated firms practical assistance and information in preparing Statement of Responsibilities (SoR) and Responsibilities Maps. This follows the extension of the Senior Managers and Certification Regime (SM&CR), under which all Senior Managers must have a SoR, to all FSMA authorised firms. Additionally, all enhanced firms must have a responsibilities map. 

Comments are requested by 10 December 2018.

FCA Board Minutes: 25 and 26 July 2018

On 11 October the FCA has published the minutes of the FCA Board Meeting held on 25 and 26 July 2018. Among other matters, the meeting discussed: 
  • the UK's preparations for withdrawal from the EU; 
  • the "Accountability 2" business case for delivery of the extended Senior Managers and Certification Regime; 
  • the FCA's investigation into the involvement of the senior management of the Royal Bank of Scotland in the activities of its Global Restructuring Group unit; and 
  • proposals to extend the jurisdiction of the Financial Ombudsman Service for small and medium-sized enterprises.
Climate change and green finance – DP18/8

On 15 October the FCA opened a discussion on the impact of climate change and green finance on financial services by publishing a Discussion Paper (DP18/8) on climate change and green finance. Specifically, the paper outlines the FCA's proposed approach to take into account: 
  • the impact of climate change on the FCA's long and short-term objectives; 
  • the opportunities and risks involved in transitioning to a low carbon economy present in the UK’s financial services markets; and 
  • the necessary actions to ensure the markets function well and deliver good outcomes for consumers. 
  • The FCA is seeking views on areas to develop further to ensure the FCA continues to take decisions in the public interest and support innovation in the growing market for green finance. The Discussion Paper seeks input on four areas in which the FCA considers a greater regulatory focus is warranted:
  • climate change and pensions – ensuring that those making investment decisions take account of risks including climate change;
  • enabling competition and market growth for green finance;
  • ensuring that disclosures in capital markets appropriately give adequate information to investors of the financial impacts of climate change;
  • the scope for the introduction of a new requirement for financial services firms to report publicly on how they manage climate risks.
Comments should be received on or before 31 January 2019.

SME access to the Financial Ombudsman Service - near-final rules – PS 18/21

On 16 October the FCA confirmed its plans to extend access to the Financial Ombudsman Service (‘the ombudsman service’) to more small and medium-sized enterprises (SMEs).

The changes will mean that SMEs with an annual turnover below £6.5m and fewer than 50 employees, or an annual balance sheet below £5m will now be able to refer unresolved complaints to the ombudsman service. Under the ‘near-final’ rules published today in its Policy Statement (PS18/21) around 210,000 additional UK SMEs will be eligible to complain to the ombudsman service.

The FCA has published  the near-final rules, to enable the ombudsman service to start taking practical steps towards putting the extension of its remit in place, including starting recruitment of additional staff with the skills and experience required. The FCA intends to publish final rules later this year, following its normal scrutiny of the ombudsman service’s draft business plan and budget. The FCA expect the final rules on the SME extension to come into force on 1 April 2019.

Together with the near-final rules, the FCA has published a Consultation Paper (CP18/31) on raising the maximum amount of compensation the ombudsman service can require financial services firms to pay out from £150,000 to £350,000.

Women and Equalities Committee Report on Sexual Harassment in the Workplace

On 16 October the FCA published a letter from Megan Butler, the FCA’s Executive Director of Supervision – Investment, Wholesale and Specialists Division to the Chair of the Parliamentary Women and Equalities Committee regarding sexual harassment within FCA regulated firms. 

The letter sets out that the FCA see sexual harassment as misconduct. It emphasises the importance of transparency and whistleblowing, along with the Senior Managers and Certification Regime requiring proper assessments of whether staff are 'fit and proper' and notes that there have been instances where either the FCA or a firm have found an individual not to be fit and proper on the basis of their ‘non-financial’ conduct, with the consequence that they were unable to be take up or else continue in their role.

Trust and ethics - a regulator's perspective

On 16 October, Andrew Bailey, Chief Executive of the FCA, delivered a speech to St Mary's University School of Business and Society, London regarding the importance of ethical behaviour and consumer trust in the aftermath of the 2008 financial crisis. 

In the speech, he sought to define what is trust: consider what has happened over recent times; assess whether it is different for individuals and institutions; and suggest some routes forward.

Recovering the costs of OPBAS: proposed fee rates for 2018/19 – CP18/32

On 18 October the FCA published a Consultation Paper (CP18/32) on its fee-rate proposals for charging professional body supervisors (PBSs) in 2018/19 to recover the costs of establishing and running the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). 

The FCA are also consulting on the timetable for reporting data in the future and confirming the minimum fee structure. The proposed fees apply to all professional body supervisors (PBSs) listed in Schedule 1 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and any other professional bodies considering applying to be listed. 

The FCA is suggesting a fee of £45.49* per supervised individual for 2018/19, to align the timetable for reporting the number of individuals PBSs supervise with the annual reports they submit to the Treasury. * this was subsequently updated to £41.03 per individual and not £45.49 as quoted in the CP.

Comments must be submitted by 14 December 2018.

Regulating the pensions and retirement income sector: a strategic approach

On 18 October the FCA and The Pensions Regulator (TPR) launched a joint regulatory strategy aimed at strengthening their relationship, and taking joint action to deliver better outcomes for pension savers and those entering retirement. In addition the FCA and the TPR published a Feedback Statement (FS18/3) following the call for comment regarding proposed approaches to regulation and legislation within the pension and retirement income sector. 

The joint strategy identifies the key issues which contribute to the prospect of people not having adequate income, or the income they expected in retirement. To tackle the main drivers of this harm, the FCA and TPR set out a vision for the pensions sector over the next 5 to 10 years. This includes making clear their areas of priorities and how to address fundamental changes in the sector.

The strategy also outlines a number of ways in which the FCA and TPR will work together going forward. This includes 2 new priority areas for joint action:
  • a strategic review of the entire consumer pensions journey – taking an in-depth look at what tools are needed to enable people to make considered decisions about their pensions; and
  • using regulatory powers to drive value for money for members of pension schemes, including the setting and enforcement of clear standards and principles where relevant.

charles.portsmouth@moorestephens.com