Current News

Due diligence
The FCA remain interested in how firms are identifying providers and solutions which they recommend to their clients. The concern is that some will just take what providers tell them at face value rather than probing to 'see what's under the bonnet'. A good starting point is to identify what it is that your clients want and then use that to ask challenging questions.

Crowdfunding
Increasingly entrepreneurs are seeking alternative financing and crowdfunding via equity or loans has a potential role. Clarity of what secuity is offered to investors and around the risks involved reamins critical. FCA authorisation is required for many organisations in this sector and getting it right is not as easy as it may at first seem.
A recent review has lead the FCA to consider new rules to strengthen the assessment of credit risk, extend marketing restrictions and improve disclosure.

Claims management

Soon the FCA will become the regulator of claims management companies (CMCs). It is anticipated that the new standards and rules will have a big impact on the firms currently in this sector and that they will need to re-apply for authorisation or risk losing their licence. The FCA see this as an opportunity for CMCs to be trusted providers of high quality, good value services that help customers pursue legitimate claims for redress and benefit the public interest.

Planning for retirement

The advent of flexibility in pensions has caused some significant shifts in approach for providers and advisers. For the FCA the key is ensuring that consumers are given advice which is both accurate and comprehensible. One key area that we are finding firms needing to consider is how they ensure that they can demonstrate options are considered appropriately and kept under review.

Insurance Disribution Directive

The IDD is a recast of the existing Insurance Mediation Directive and is designed to ensure a level playing field across all participants selling insurance products.

Firms first need to understand their current level of compliance with IDD requirements. This is not a tick box exercise and will involve several areas of the business. It will be crucial to involve the business areas from the outset when carrying out the impact analysis of some of the requirements, such as customers’ demands and needs, POG and disclosure.

Firms will also need to keep a watching brief on more rules and guidelines from EIOPA and the FCA as the regime takes shape.

Incentives

The FCA remain concerned about the scope for incentives to distort behaviour. We are seeing more questions during the application process around conflicts of interest than previously. Firms should be looking again at what incentives they have in place and considering whether rewards motivate behaviour that is in the clients’ best interests.

Senior Manager Regime

While the Regime currently applies to deposit takers and investment firms regulated by the FCA and PRA it will be extended to cover solo FCA regulated firms.

The Regime aims to raise standards of governance, increase individual accountability and help restore confidence in the financial services sector.

The FCA will be adopting and applying the core principles of Management Responsibilities Maps to allocate key responsibilities to the senior individuals in the organisation.

Their expectation is that senior management should meet standards of professional conduct as those required in regulated firms and be held accountable for functions they personally direct.

Payment services and e-money firms

The FCA are concerned that standards of conduct and customer communication are not yet sufficient. They're looking to extend the application of the Principles for Business to payment services and e-money issuers and work towards rules and guidance on customer communications to ensure they are clear and transparent and that the marketing and promotion of currency exchange transfer services with unachievable exchange rates or unsubstantiated claims ceases.

The FCA’s aim is to increase consumer protection in the market and to ensure consumers are provided with the information they need to make an informed decision about the services that best meet their needs.

Creditworthiness in the consumer credit industry

The FCA has published its final rules and guidance on assessing credit worthiness within the consumer credit industry. These rules will come into force shortly. Firms affected by these changes should review their policies and processes making any necessary amendments prior to the implementation date.

The final rules:

• Clarify the distinction between credit risk and affordability risk and state that firms should not grant credit without conducting a creditworthiness assessment;

• Enable household or other income sources to be included in an affordability assessment where the firm can reasonably expect income to be available to repay the credit;

• Clarify that income does not just refer to earned income;

• Define non-discretionary expenditure;

• Outline the factors that should inform the scope, extent and proportionality of an affordability assessment;

• Outline how to treat business lending, allowing firms to tailor the affordability assessment to the product and customer; and

• Define the assumptions to be used when assessing affordability for credit cards and other forms of running credit.