FINANCIAL CONDUCT AUTHORITY (FCA)

Transcription

1 MONTHLY REGULATORY UPDATE AUGUST 2017

2 The following is a summary of the pronouncements issued since our last regulatory update for the financial services sector issued in July This update will be provided on a monthly basis and the format is currently under review. FINANCIAL CONDUCT AUTHORITY (FCA) Consultation Paper (CP) CP17/28 Financial Advice Market Review (FAMR): implementation Part II and insistent clients Date Published 1 August 2017 Overview: In its final report, FAMR set out a series of recommendations intended to tackle the barriers to consumers accessing advice and guidance. The proposed guidance aims to address two of these recommendations: The FCA are updating rules and guidance to reflect an amendment to the scope of the regulated activity of advising on investments in the Regulated Activities Order. The FCA are introducing new guidance to support firms offering services that help consumers making their own investment decisions without a personal recommendation Following FAMR, the FCA established the Advice Unit to provide regulatory feedback to firms developing automated models to deliver lower cost advice, or lower cost discretionary investment management services, to consumers. As part of its cohort 1 and cohort 2 intakes, the Unit has identified common areas of uncertainty with the FCA rules. Accordingly, the FCA believe it would be helpful to provide guidance that can be beneficial to a broader spectrum of firms; therefore in this paper the FCA are proposing new guidance. This guidance will form part of the tools and resources informed by the experiences and insights gained through work with individual firms. Applicable to: The proposals will most directly impact on: firms providing advice on or distributing retail investment products and financial instruments to retail clients; and trade associations and consumer groups involved in retail investment markets. Next Steps: The FCA will carefully consider feedback to this consultation and issue a response in late CP17/29 Client money and unbreakable deposits Date Published 1 August 2017 Overview: Some investment firms are experiencing difficulty depositing client money at banks in accordance with CASS requirements. The proposals in this paper are intended to address the potential harm to consumers resulting from this. Monthly Regulatory Update August

3 CP17/29 Client money and unbreakable deposits The FCA are seeking feedback on the following proposed changes to CASS: permitting a firm to deposit an appropriate proportion of client money in an unbreakable deposit of a maximum of 90 days; where a firm deposits client money in an unbreakable deposit of 31 to 90 days, it must comply with certain conditions; require CASS medium and large firms to report client money in an unbreakable deposit of 31 to 90 days in their client money and asset return (CMAR). The proposals are intended to enhance the client assets regime and improve consumer outcomes by ensuring client money continues to be appropriately protected when it is held by firms. Applicable to: This consultation principally affects or is of interest to: regulated firms that hold client money in relation to investment business; banks that deposit client money; and auditors in relation to the provision of client assets audit reports. Next Steps: After considering all feedback, the FCA aims to publish a policy statement making final rules. The FCA s current expectation is for the rules to come into force concurrent to the Handbook changes required by the Markets in Financial Instruments Directive II (MiFID II) coming into force. CP17/30 PSR regulatory fees 2018/19 and onwards Date Published 17 August 2017 Overview: Together with the Payment Systems Regulator (PSR), the FCA are considering whether and how to review the approach to allocating and collecting the PSR regulatory fees in 2018/19 and in subsequent years. The FCA have taken on board feedback about the existing approach to the allocation and collection of fees, and consider it the right time to review the current methodology. The FCA want to ensure that the approach to fees is proportional, encompasses the drive to promote competition in the market, and is flexible enough to withstand industry developments. This includes, for example, the creation of the New Payment System Operator (NPSO) and the implementation of the Payment Services Regulations 2017 (PSD2). Next Steps: This is the first in a series of consultations which will be published around November 2017 and March The confirmation of the PSR fee rates for 2018/19 will be published in June Monthly Regulatory Update August

4 News FCA s supervisory approach to PPI The FCA will soon be launching a campaign to inform people about the 29 August 2019 deadline to complain about payment protection insurance (PPI). This campaign will complement the regulatory and supervisory work the FCA has done and will continue to do around PPI. The consumer campaign is being funded by 18 firms that together receive more than 90 per cent of complaints about the sale of PPI. These firms include banks and other providers. Press release Upper Tribunal upholds the Financial Conduct Authority s decision to fine and ban Charles Palmer former CEO of adviser network - On 8 August 2017, the Upper Tribunal upheld the Financial Conduct Authority s (FCA) decision to ban Charles Palmer, former CEO of Financial Limited and Investments Limited (the Firms), from performing FCA significant influence functions. The Tribunal also upheld the FCA s decision to impose a financial penalty of 86,691 on Mr Palmer. The Tribunal agreed with the FCA that Mr Palmer failed to act with due skill, care and diligence in carrying out his role of director and as de facto CEO of the Firms. The Tribunal also agreed with the FCA that Mr Palmer s failings were particularly serious in the light of findings made against him by the FCA s predecessor, the Financial Services Authority (FSA) in a Final Notice of 24 February 2010 and Mr Palmer s failure to respond adequately to the failings found in that Notice. PAYMENT SYSTEM REGULATOR (PSR) CP17/1 Direct Debit Facilities Management Switching service provider Date Published 4 August 2017 Overview: The PSR is consulting on provisional conclusions and proposals to change the direct debit rules relating to the switching of Facilities Management providers. The PSR is concerned with the difficulties that some FM clients currently face when trying to switch FM providers. The PSR is concerned this may be inhibiting fair competition. The PSR considers that it is possible for an existing FM provider to raise barriers to an FM client switching to another provider. This may have a detrimental impact on FM clients and their customers, on competition between FM providers and on innovation. Applicable to: This consultation paper is most relevant to: Providers (and prospective providers) of Direct Debit Facilities Management services ( FM providers ); The Bacs member banks who sponsor FM providers; Users (and prospective users) of Direct Debit Facilities Management services ( FM clients ); and BPSL, as the operator of the Bacs system (which includes the Direct Debit scheme). Monthly Regulatory Update August

5 CP17/1 Direct Debit Facilities Management Switching service provider Next Steps: The PSR welcome stakeholder s views on the proposals by 15 September News PSR issues public censure on Cheque and Credit Clearing Company Ltd - The Payment Systems Regulator (PSR) has imposed a public censure on the Cheque & Credit Clearing Company Ltd (C&CCC) following its failure to comply with the PSR s General Directions. As part of the PSR s regular compliance monitoring, it became aware that the C&CCC had stopped publishing minutes of some of its board meetings held after February One of the PSR s General Directions requires that regulated payment systems operators publish the minutes of board meetings as soon as practicable to ensure their decision making is transparent. During the spring and summer 2016, the C&CCC failed to publish its board minutes for a number of different meetings within an adequate timescale. These breaches occurred despite the PSR sending repeated reminders to C&CCC of their obligations to publish their board minutes and the importance of compliance with the PSR s General Directions. Monthly Regulatory Update August

6 BUILDING SOCIETIES ASSOCIATION (BSA) Policy brief Start of the two year deadline for submission of PPI complaints The two year deadline for PPI misselling complaints and unfair relationship complaints under the Pleivn rules starts on 29 August The FCA is launching a media campaign to ensure that all consumers become aware of the deadline and its implications and to help them decide whether they have a claim to make. While building societies and MPPI are not specifically referenced, BSA members should be ready to handle higher volumes of claims during this period. The FCA would like to encourage all regulated firms to support their campaign by signposting general PPI enquiries to the FCA s helpline and website or other sites that provide information on how to claim for free. Data Protection Bill On 7 August 2017, the Department for Digital, Culture, Media and Sport issued a statement of intent that it will update and strengthen data protection laws through a new Data Protection Bill. The new Bill is expected to implement GDPR and the Data Protection Law Enforcement Directive into UK law post Brexit. Corporate governance - The government responds to its consultation on the 2016 corporate governance green paper. This sets out a package of measures focused mostly on listed companies, although some go wider and are aimed at addressing concerns about the management of large private companies. These include: o o o A requirement for listed companies to publish the pay ratio between executives and employees; A new public register is to be set up to include the names of all listed companies where there is or has been significant shareholder opposition to executive pay packages; and New measures aimed at ensuring the interests of employees are better represented in boardrooms. The FRC has confirmed it will take account of the government's proposals in its current review of the UK Corporate Governance Code. So, to the extent that building societies are required to have regard to the Code, that will have an impact the sector. BEIS has said it will be bringing forward draft legislation in March, for implementation in June The FRC will consider this and the extent to which it may be appropriate for societies to adopt voluntarily provisions that will be compulsory for listed companies. Mortgage Debt Consolidation - The BSA recently instructed Radcliffe Chambers to answer a number of member queries relating to the FCA's change of approach around mortgage debt consolidation. The change in approach dates back to a note in the FCA's June 2016 Regulatory Roundup, which warned that firms offering debt consolidation mortgage could also be carrying on credit-related activities. Further communication with the FCA clarified the FCA's view that where firms advise customers to consolidate some but not all of a customer's debts, the exclusion under article 39J of the RAO may not apply and debt counselling permissions would be required. Radcliffe Chambers concludes that the FCA has too narrowly interpreted article 39J of the RAO and that the exclusion does not depend on the outcome of the advice on consolidation being that all the existing debts should be consolidated into the new or varied RMC. Support for mortgage interest and mortgage interest direct - The Government announced in the 2015 Summer Budget that SMI would be changed from a benefit to a loan. This loan will be secured by a second charge on the claimant s property. Monthly Regulatory Update August

7 On 5 April 2018, SMI benefit will end. From 6 April 2018 claimants can accept the offer of SMI loan payments from DWP, this is entirely voluntary. The SMI loan would need to be repaid, plus interest, once their property has been sold or its ownership transferred. The SMI loan will consist of ongoing payments towards interest on their mortgage and eligible home improvement loans. Once SMI loan payments have ended, the total owing will be the value of SMI loan payments made plus interest. Interest will be calculated daily and added to this amount on a monthly basis. Deceased ISAs and additional permitted subscriptions - HMRC confirmed on 14 August 2017 that the ISA savings of a deceased account holder will continue to benefit from tax advantages during the administration of his / her estate from 6 April There is no backdating provision. Regulations will be laid after parliamentary recess, 5 September Guidance reflecting the changes is due at the end of October Leverage Ratio (LR) - The Bank (FPC) and PRA issued a brief consultation in June on one specific change regarding the LR: formalising the exclusion of central bank deposits from the exposure measure, and recalibrating the LR minimum from 3 per cent to 3.25 per cent. Although the FPC had been due to conduct a more in-depth review of the leverage ratio this summer, that appears to have been put on hold. The consultation formalises something that was first introduced last summer (2016) but this time accompanied by recalibration. Pressures in the economy challenge home buyers and savings The BSA confirmed developments in the wider economy are making it more challenging for homebuyers and savers. Building societies continue to support both groups, and maintained a high market share of new mortgage lending and savings in the second quarter of Mortgage lending Q2 Building societies approved 112,340 new mortgage loans. Down 5 per cent on the 118,637 mortgage loans approved in Q2 2016, and broadly the same as Q (112,286). There were 383,980 new mortgages approvals across the market in Q2, giving building societies a marketshare of 29 per cent. Gross lending by building societies was 16.1bn, up 1 per cent on the 15.9bn lent in Q2 2016, and up 6 per cent on Q ( 15.1bn). Total market gross lending was 61.9bn, giving building societies a market-share of 26 per cent. Building societies were responsible for 30 per cent of the growth in the mortgage market, contributing 3.3bn net lending out of the total 11.2bn across the market. Building societies hold outstanding mortgage balances of 292bn, a 22 per cent market-share. Savings balances Q Savings balances with building societies increased by 3.3bn, down 51 per cent on the 6.8bn rise in the same period in 2016, but up substantially on Q ( 1.0bn). Savings balances across the market increased by 14.0bn, giving building societies a 24 per cent marketshare; banks took 65 per cent and NS&I 11 per cent. Building societies hold savings balances of 265bn, an 18 per cent share of the 1,449bn across the market. Commenting Joseph Thompson, Business Economist at the BSA said: It is a challenging market for those looking to buy a home. Choice is limited as the number of properties coming on to on the market has fallen, and the contribution from new-build is still too low. At the same time, house-prices have been rising faster than earnings putting additional financial pressure on homebuyers. These challenges can be seen in lower numbers of mortgage approvals. As none of these factors is likely to change this year, the number of property transactions is likely to remain relatively weak. Many homebuyers, Monthly Regulatory Update August

8 especially those with a more complicated financial situation, prefer dealing with a building society as they can take a more personal approach to lending. Challenges in the wider economy are making it difficult for households to save. Consumer prices are rising faster than average earnings, so people are using their savings to maintain spending levels. The pressures on households are likely to persist over the rest of the year, so savings balances are expected to increase at a slower pace than we saw in Monthly Regulatory Update August

9 INFORMATION COMMISSIONERS OFFICE (ICO) News ICO issues nuisance calls warning as two firms from same city are fined The Information Commissioner s Office (ICO) has reminded companies making direct marketing calls that people registered with the Telephone Preference Service are off limits. The warning comes as the ICO issues fines totaling 150,000 to two firms based in Bradford that, between them, sparked hundreds of complaints. HPAS Ltd (trading as Safestyle UK) and Laura Anderson Ltd (trading as Virgo Home Improvements) broke the law when they called people who were registered with TPS. Personal data belonging to up to 21,000 TalkTalk customers could have been used for scams and fraud The Information Commissioner s Office has fined TalkTalk Telecom Group PLC 100,000 after it failed to look after its customers data and risked it falling into the hands of scammers and fraudsters. An ICO investigation found TalkTalk breached the Data Protection Act because it allowed staff to have access to large quantities of customers data. Its lack of adequate security measures left the data open to exploitation by rogue employees. ICO warns NHS employees that unlawfully accessing patient records is an offence The Information Commissioner s Office (ICO) has reminded NHS staff about the potentially serious consequences of prying into patients medical records without a valid reason. The warning came after a former health care assistant was ordered to pay a total of 1,715 in fines and costs after pleading guilty to offences of unlawfully obtaining and unlawfully disclosing personal data. North London council fined after parking ticket system flaw leaves personal information at risk Islington Council failed to keep up to 89,000 people s information secure on its parking ticket system website. That was the conclusion of an Information Commissioner s Office (ICO) investigation which has resulted in a 70,000 fine for the London borough. Islington Council s Ticket Viewer system allows people to see a CCTV image or video of their alleged parking offence. It was found to have design faults meaning the personal data of up to 89,000 people was at risk of being accessed by others. That data included a small amount of sensitive personal information such as medical details relating to appeals. ICO warns companies about the costly consequences of making nuisance calls - Companies carrying out direct marketing have been reminded that properly screening numbers against the Telephone Preference Service (TPS) register is much cheaper than a fine for making nuisance calls. The warning comes after domestic energy saving firm Home Logic UK Ltd was given a 50,000 penalty by the Information Commissioner s Office (ICO) for making marketing calls to people who had made it clear they didn t want to be contacted in that way. The TPS allows people to register their number and opt out of receiving marketing calls. Between April and July , it received 133 complaints from members of the public about nuisance calls made to their TPS-registered numbers by Southampton-based Home Logic. A further three were made by callers passing themselves off as the firm Council of Mortgage Lenders (CML). Monthly Regulatory Update August

10 COUNCIL OF MORTGAGE LENDERS (CML) News Mortgage arrears and possessions fell again in the second quarter - The number of mortgages in arrears of 2.5 per cent or more of the outstanding balance declined to 88,200 in the second quarter of this year, the lowest level since at least 1994 when this run of data began. The total was 5 per cent lower than in the first quarter (92,600) and amounted to 0.8 per cent of the more than 11 million mortgages outstanding in the UK. The second quarter also saw a fall in the number of mortgages across all arrears bands, including those with the highest levels of arrears. In the same period, the number of mortgages with arrears of 10 per cent or more of the outstanding balance totalled 25,200, down 5 per cent from 26,500 in the preceding quarter. This brought a welcome end to a period of five successive quarters in which this figure had edged upwards from 23,400 in the first quarter of Monthly Regulatory Update August

11 FOR FURTHER INFORMATION CONTACT Jonathan Pepper RSM 5 th Floor, Central Square 29 Wellington Street Leeds LS1 4DL T: M: jonathan.pepper@rsmuk.com rsmuk.com The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm each of which practises in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number ) whose registered office is at 50 Cannon Street, London EC4N 6JJ. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. RSM Corporate Finance LLP, RSM Restructuring Advisory LLP, RSM Risk Assurance Services LLP, RSM Tax and Advisory Services LLP, RSM UK Audit LLP, RSM UK Consulting LLP, RSM Employer Services Limited, RSM Northern Ireland (UK) Limited and RSM UK Tax and Accounting Limited are not authorised under the Financial Services and Markets Act 2000 but we are able in certain circumstances to offer a limited range of investment services because we are members of the Institute of Chartered Accountants in England and Wales. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide. RSM Legal LLP is authorised and regulated by the Solicitors Regulation Authority, reference number , to undertake reserved and non-reserved legal activities. It is not authorised under the Financial Services and Markets Act 2000 but is able in certain circumstances to offer a limited range of investment services because it is authorised and regulated by the Solicitors Regulation Authority and may provide investment services if they are an incidental part of the professional services that it has been engaged to provide. Baker Tilly Creditor Services LLP is authorised and regulated by the Financial Conduct Authority for credit-related regulated activities. RSM & Co (UK) Limited is authorised and regulated by the Financial Conduct Authority to conduct a range of investment business activities. Before accepting an engagement, contact with the existing accountant will be made to request information on any matters of which, in the existing accountant s opinion, the firm needs to be aware before deciding whether to accept the engagement RSM UK Group LLP, all rights reserved