COMPLIANCE NEWS FOR IFAs January-February 2017 edition

COMPLIANCE NEWS FOR IFAs January-February 2017 edition Regular newsletters since 2004 see our website www.compliancenews.org Welcome to Compliance News: This free bulletin is issued by Compliance News Limited to over 21,000 IFAs (& restricted advisers) and compliance staff in the UK. Please feel free to encourage any other IFAs you know to register for the bulletin by emailing Compliance News via compliance@ifahelpline.co.uk Since March 2016, Phil has been a Director & Steering Council member of the APCC. The Association of Professional Compliance Consultants. www.apcc.org.uk CONTENTS Introducing the Editor: Phil Dibb has over 20 years experience in financial services. He worked at the PIA / FSA from 1997 to 2002 and now runs his own Compliance Consultancy firm. He also holds Chartered status. Phil spends the majority of time training IFAs on Compliance and T & C issues. In addition he is Chairman to a number of regional Compliance forums held around the UK. 1 LIMITED PENSION TRANSFER PERMISSION 13 STILL A SOLE-TRADER OR BASIC PARTNERSHIP? 2 CII LAUNCH NEW CERTIFICATE IN PENSION TRANSFERS 14 FCA MOVING OFFICES IN 2018 3 DB TRANSFER SANITY CHECKLIST 15 FCA LIVE & LOCAL VERY USEFUL! 4 5 OCCUPATIONAL TRANSFERS FILE CHECKING AN ALTERNATIVE TO CII EXAMS FOR TRANSFERS 16 COMPLIANCE DIARY & PLANNING 17 VULNERABLE CLIENTS 6 FCA CONSULTATION ON TAPING CALLS 18 IT RISKS & RANSOMWARE 7 COURSES FOR IFAS IN 2017 19 MORTGAGE ADVICE FILE CHECKLIST 8 P2P LENDING & FCA PERMISSIONS 20 FCA UPDATE FINANCIAL ADVISER FIRMS ON ADVISER CHARGING 9 REMOTE FILE CHECKING ON A PAYG BASIS 21 FCA - REGULATION ROUND UP 10 PENSION EXIT CHARGE CAPPING 22 COMPLAINT HANDLING CHANGES 11 FCA ISSUE WARNING ABOUT INTRODUCERS 23 12 ASSISTANCE WITH GABRIEL 24 PREMIER SERVICE RECENTLY ISSUED UPDATE EMAILS COMPLIANCE NEWS PREMIER SERVICE / SUBSCRIBE Firms can subscribe to the Premier Service (from only 330- p.a. per firm) to receive a wide range of up to date forms, templates and procedural documents to assist with the running of their business. All forms are issued direct to subscribers and most are in word format so that they can be made firm specific. In addition subscribers are kept up to date by e-mail on the key regulatory issues of the day with advice as to the steps your business should take to mitigate against any risks that these issues may present. Recently designed documents include: DB Transfer Sanity checklist Lifetime ISA (LISA) quick adviser test Updated checklists for PPP switching / Drawdown / ISA transfers / Admin staff Updated Drawdown Review fact-find and the standard fact-finds too. GP IFA knowledge assessment and also a Mortgage adviser knowledge assessment Pension Transfer Specialist (PTS) knowledge assessment. Disclaimer: Compliance News is a trading style of Compliance News Limited. Compliance News cannot be held responsible for the views and interpretations shown in this publication. Authorised firms remain responsible for complying with the FCA requirements and such obligations cannot be transferred to a third party. Errors and omissions excepted. 1

1. APPLY FOR PENSION TRANSFER PERMISSIONS (WITH LIMITATION) WITH NO G60/AF3 This area is aimed at directly-authorised IFA firms who are active in the Pensions & at Retirement planning areas. Are you likely to come across clients with Occupational Money Purchase pension schemes (without safeguarded benefits) and / or PPP s with a Guaranteed Annuity Rate? We have now assisted a large number of firms with this variation of permission (VOP). This allows non G60/AF3 authorised firms to provide a much wider scope when dealing with retirement option cases. To quote the FCA: This activity is limited to the provision of advice in relation to the conversion or transfer of benefits from: pension policies with a Guaranteed Annuity Rate (for the avoidance of doubt, this includes policies which are retirement annuity contracts with a minimum guaranteed income, where that income satisfies limb (b) of the Glossary definition of Guaranteed Annuity Rate); defined contribution occupational schemes without safeguarded benefits. Source: FCA. We are able to assist such firms with the VOP. We would prepare all the necessary forms / input ready for you to read, check and press submit. Our fee for this complete service is 348. In addition, the FCA charge an application fee of 250. Please make contact should you wish us to assist your firm with the VOP application process. 2. CII LAUNCH NEW CERTIFICATE IN PENSION TRANSFERS The new unit / paper is the AF7 The certificate is issued when AF7, R01, R02 & R04 are passed. http://www.cii.co.uk/qualifications/certificate-in-pension-transfers-qualification The CII are now going through the process of getting Regulatory approval for this. The industry awaits some very clear guidance in respect of how existing G60 / AF3 holders will be treated and whether the stand-alone AF7 will hold any specific value. Once we are clear on this area, we will update our subscribing firms. 3. DB TRANSFER SANITY CHECK We have recently designed a form to assist firms who are looking at DB transfers. This form is designed to be a one-sheet initial sanity checklist. Once completed, it is for the Authorised firm to decide whether the advice process is worth taking further. It is designed to identify, at an early stage, such cases which are very high-risk. As firms who already carry-out DB transfers are probably aware, this whole area is now attracting attention from PI insurers. This form is proving very popular Subscribers will automatically receive a copy on word. As mentioned in section 4, our connected company Pension Transfer Checking Limited are now able to undertake file-checks for such DB transfers. Please contact us for more information. 2

4. OCCUPATIONAL PENSION TRANSFERS FILE CHECKING SERVICE We are pleased to announce that this service is now available on a PAYG basis from Pension Transfer Checking Limited. The costs are: Costs: 480+VAT for a DB / final-salary scheme transfer to be checked. 350+VAT for a DC / Money-purchase scheme transfer to be checked. The main element to this is to highlight that we are not able to take-on the advice liability from completing such a check. Pension Transfer Checking Limited is NOT authorised by the FCA and has no plans to change this. The majority of cases we are involved in are linked to authorised IFA firms looking to undertake third-party checking / Compliance control of such higher-risk cases. Turnaround times: Our typical time to complete such a check is 7 to 10 days from when we receive the complete file. However, we hope to be able to reduce this in many situations. Getting started: Please email office@filecheck.co.uk and we send you a full copy of our Due Diligence pack along with our file review service request form and Terms & Conditions. 5. AN ALTERNATIVE TO TAKING THE CII EXAMS FOR PENSION TRANSFERS? More IFAs are taking an interest in the alternative to the AF7 / AF3 exams (AF3 is the one offered by the CII which was originally G60). AF7 has not yet obtained FCA approval but we expect this will happen in due course. The new alternative exam is the Award in Pension Transfers (AwPETR) offered by the IFS (now known as the LIBF). We understand the pass mark is 40% (with a maximum of 25% attributed from the coursework assignment and a maximum of 75% from the exam). http://www.libf.ac.uk/study/professional-qualifications/financial-advice/award-in-pension-transfers- (awpetr) 6. FCA CONSULTATION ON TAPING TELEPHONE CALLS This Consultation ended on 4/1/17. As a business we drafted a response and issued this to all subscribers on a word document. Did your Compliance supplier assist? https://www.fca.org.uk/sites/default/files/cp16-29.pdf The gist of our view is that such a suggestion for IFA firms to tape-record calls is probably over-thetop and not required. In brief, a typical advice process may take between 4 & 6 hours (face to face) and this may include a few telephone calls taking 10 minutes. In addition, IFA firms create 1% of the complaints at FOS and have had to pay increasing Regulatory / FSCS fees over the past decade. So in summary, the significant extra costs would be of very little benefit. We await further feedback from the FCA. # STOP PRESS # We have just updated the five annual update tests for ALL staff they are now ready for Subscribers Anti-Money Laundering update - Complaints handling update - Data-Protection update Anti-Bribery update - Whistleblowing update 3

7. COURSES FOR IFAs.. AF7 - RO4 SUPERVISOR REFRESHER CPD DAYS. We are now planning our course schedule for the year. To include the new AF7 CII study text available in July 2017, first exam in October 2017. If you are interested in any of the following, please contact us by email and we will include you on our course specific mail-outs. R04 / AF7 / Supervisor Refresher courses / CPD days / AF3 / IFA Compliance forums / Pension Transfer Specialists (PTS) / Financial Crime / update Refresher course focusing on DB transfers. To register your interest, please drop us a quick email showing which sessions you are interested in. compliance@ifahelpline.co.uk 8. P2P LENDING & FCA PERMISSIONS The FCA has commented on this area recently. The vast majority of our subscribers will have automatically had the permission advising on peer to peer (P2P) agreements added from April 2016. This should be now showing on your permissions via the FCA Register. Firms were able to remove this (if required) via a short link (up to 31/12/16). The FCA have said that Firms automatically receiving the new permission will not pay additional FCA regulatory fees for holding the P2P advice permission, unless they earn income from that business. This is the same approach as is taken for all other types of investment business. However, firms who do not undertake designated investment business will be subject to an additional fee in relation to the Financial Ombudsman Service. This is currently 45 and will not be charged until the 2017/18 financial year. https://www.fca.org.uk/firms/advising-p2p-agreements Whilst only an opinion, many firms have decided to retain the permission to operate across the whole of the market (and be independent) for when the P2P market starts to develop. 9. REMOTE FILE CHECKING A FLEXIBLE ALTERNATIVE FOR IFA FIRMS Below are five key areas which are regularly focused on when client files are reviewed. In our opinion, it is very important that your own files can clearly demonstrate the following: Issue of Regulatory documents / client agreements / agreement of payment method & services to be provided. File to show full know your client records, linking in needs, priorities, objectives, liquid cash funds and affordability with the client s attitude to risk. Research: To demonstrate that non-provider led research has taken place. Suitability report / letter: To link the client s circumstances / ATR / objectives with the advice. Follow-up documentation and a clear record of what happens next ; including any review dates (in particular drawdown cases). Through our sister company Just CRS Limited, we are able to provide a remote file checking service to IFA firms on a pay as you go basis. The costs are: 75 + VAT per remote client file review with summary sheet (excluding multiple transaction files or higher risk cases such as drawdown or PPP switching) or 105 + VAT per drawdown / PP switching (up to 3 into 1) / replacement business / structured products remote file check. Please contact Katherine Horgan at katherine@justcrs.co.uk or 07815 767204. 4

10. PENSIONS EXIT CHARGE CAPPING AND THE FCA POLICY STATEMENT PS 16/24 In summary, with effect from 31 March 2017, early exit charges: will be capped at 1% of the value of a member s benefits being taken, converted or transferred from a scheme cannot be increased in existing schemes that currently have early exit charges set at less than 1% of the member s benefits under a scheme, and cannot apply in schemes entered into after the proposed new rules come into force. Please refer to the full Policy Statement for more information. https://www.fca.org.uk/publication/policy/ps16-24.pdf 11. FCA ISSUE WARNING ABOUT INTRODUCERS TO AUTHORISED FIRMS During August 2016 the FCA issued a warning to the industry regarding the risks of certain types of introduced business. It is very important that all directly-authorised IFA firms understand the specifics highlighted by the FCA. https://www.fca.org.uk/news/news-stories/investment-advisers%e2%80%99-and-authorisedfirms%e2%80%99-responsibilities-when-accepting Please can we suggest that a list of all introducers to your firm is drafted. Once complete, each introducer should be discussed by your Senior Management team to decide what action should be taken. In many cases, we expect that no further action is required (for those legitimate introducers). 12. ASSISTANCE WITH GABRIEL & OTHER REGULATORY SUBMISSIONS Regulatory Returns Limited is able to provide a dedicated full time service for all Regulatory Returns for directly authorised IFAs (Non MiFid). This service includes: SERVICE COST GABRIEL/RMAR Query 65.00 GABRIEL validation checking service to offer piece of mind that your return is correct prior to submission GABRIEL completion Return fully completed and validated on your behalf. Feedback on any areas where your data appears incorrect or areas that we feel the FCA may question. Connect - Removal of Permission Complete request to ask for authority to remove a permission that is no longer required i.e. mortgages, in light of the MMR rules Connect application for new permissions (price dependant on complexity) Application to become directly authorised Initial meeting to discuss requirements, completion of application form and all supporting documents required, assistance throughout the whole process. 220 per return 300 per return 95 From 250 From 1500 For further assistance please contact Lisa Simpson lisa@regulatoryreturns.co.uk or 07859 194096 5

13. ARE YOU STILL A SOLE-TRADER or BASIC PARTNERSHIP? As a business we regularly assist firms with their change of legal entity application to the FCA. Many firms undertake this process as they fear the litigious society and worry about the FSCS chasing them during retirement it is a very contentious topic (especially funding the FSCS in general). The FCA are now using a Deed form with firms (when typically changing legal entity to a Limited Co or LLP) to protect consumers, in an attempt to reduce the past business liabilities of a firm going to the FSCS. Whilst the devil is in the detail, this is worth knowing about, should you be planning such FCA Registration changes. In addition we are aware that a number of individual Network members (where Limited companies are AR s of the Network) have signed personal guarantees in respect of covering compensation from upheld complaints. One recent issue which is now becoming common, is that in the eyes of the AR business owner (active or retired) the network may not be strongly defending the complaint as they hold a personal guarantee on file. It is our opinion that being Directly-Authorised (DA) as a Limited Company or LLP is the way to run an IFA business. We assist firms with their DA application on a frequent basis. For complete applications where no issues exist, the current time for authorisation is between 5 & 6 months. Please contact us for more information. 14. FCA MOVING OFFICES IN 2018 The London HQ of the FCA will move out of Canary Wharf and go to a new location in The International Quarter, Stratford, London during 2018. 15. FCA Live & Local TRAINING / SEMINARS Well worth your time! The FCA continue to offer these sessions, they are generally very well attended and worth the time out of the office. Please see the link below and consider booking on a session. https://www.fca.org.uk/events-live-local 16. COMPLIANCE DIARY & PLANNING Yes 2017 is here.! We have devised an easy to use Compliance diary for a small to medium sized Directly Authorised IFA firm. For a FREE COPY please email compliance@ifahelpline.co.uk this is available to both paying subscribers and those who do not pay any subscription. 17. VULNERABLE CLIENTS A general policy This is now a key focal point for the FCA and appeared as a specific subject in their recent Mission Statement. Over the coming weeks, we will complete our Vulnerable client policy a brief document for small to medium sized IFA firms to use to document their own policy. We will be taking a very clear common-sense approach. Paying subscribers will automatically receive a copy. 6

18. IT RISKS & RANSOMWARE We continue to hear various stories from directly-authorised IFA firms regarding IT issues and attacks. The current theme does seem to be on Ransomware. This is where your computer / system / data is either encrypted or locked by cyber criminals. Whilst we are not experts, we understand that many of the problems start when someone opens an attachment or zip file. Please would you remind all staff to be vigilant. Firms should obtain expert help in making sure that your systems are adequately protected and backed-up. 19. MORTGAGE ADVICE FILE CHECKLIST Whilst most of our subscribers are mainly involved in Pensions, Drawdown & Investments, a small % still offer Mortgage advice mainly on a re-active basis only for existing clients and their children. We therefore offer a basic range of mortgage specific forms & suitability letters. We have just updated our Mortgage advice file checklist ready for subscribers to use. 20. FCA UPDATE FINANCIAL ADVISER FIRMS ON ADVISER CHARGING The FCA has issued some further information on payment in instalments of an initial advice charge for advice on a lump sum investment or single premium policy. https://www.fca.org.uk/firms/financial-advice-market-review-famr/initial-advice-charges-lump-suminvestments In our opinion, much of this is not applicable to the firms which we assist but knowing the FCA is issuing such material might be of help. In the majority of cases we see, the client would normally agree the fee at the start and not require this to be paid over a number of instalments. 21. REGULATION ROUND UP The FCA continues to publish this monthly newsletter, which features hot topics and other news about their activities. It is an easy read document typically 6 or 7 pages and we recommend it is read by all approved persons within your firm. July 2016 issue New complaints return, wind-down planning, Guidance on fund suspensions August 2016 issue Redress for pension transfers, Appointed Representatives & Principals. September 2016 issue Ageing population, Live & Local, Pensions with guaranteed income benefits. October 2016 issue Engaging with firms about Gabriel, MiFID II & Annuity sales practices. November 2016 issue EU Regulation, Capping exit charges, Lifetime ISA & Social investments. December 2016 issue Live & local, ScamSmart, FCA Mission update, Annuities & P2P. The following link can be used to subscribe for future issues of Regulation round-up: https://www.fca.org.uk/firms/sign-up-regulation-round-up 7

22. COMPLAINT HANDLING CHANGES Many firms still have not updated their Complaints processes following the changes in July 2016. Compliance News Premier Service clients now have access to the following updated documents - Complaints handling procedures (to be used within the firm) CNPS 19 - Complaints handling procedure (short version) to be issued to clients upon receipt of a complaint or upon request CNPS 198 - Summary Resolution Letter (Rapidly resolved) Rejected by firm CNPS 425 - Summary Resolution Letter (Rapidly resolved) Upheld in favour of client CNPS 426 Please note the key changes are linked to the rapid resolution of complaints moving from 1 to 3 days. To put this into context, the following two extracts from the Rules are useful to know (rules as at 6 th July 2016): DISP 1.5.2A - Complaints resolved by close of the third business day A complaint is resolved where the complainant has indicated acceptance of a response from the respondent, with neither the response nor acceptance having to be in writing. DISP 1.5.4 - Summary resolution communication Where the respondent considers a complaint to be resolved under this section, the respondent must promptly send the complainant a summary resolution communication, being a written communication from the respondent which: (1) Refers to the fact that the complainant has made a complaint and informs the complainant that the respondent now considers the complaint to have been resolved; (2) Tells the complainant that if he subsequently decides that he is dissatisfied with the resolution of the complaint he may be able to refer the complaint to the Financial Ombudsman Service; (3) Indicates whether or not the respondent consents to waive the relevant time limits in DISP 2.8.2R or DISP 2.8.7R (Was the complaint referred to the Financial Ombudsman Service in time?) by including the appropriate wording set out in DISP 1 Annex 3R; (4) Provides the website address of the Financial Ombudsman Service; and (5) Refers to the availability of further information on the website of the Financial Ombudsman Service. Source FCA 6/7/16. Our paying subscribers automatically received the updated procedures & changes. We believe that the Premier Service will save a typical firm at least 50 hours each year. See page 10 for full details of how to subscribe or e-mail compliance@ifahelpline.co.uk Recent feedback from our subscribing IFA firms Thanks Phil, an invaluable service.the updated Excel spreadsheet of all the forms is a great idea keep up the good work. The Premier Service is available from only 330- per firm for the year. Compliance News Premier Service Any questions? If you cannot decide whether this service will be of benefit, or if you have any questions as to how many documents you will get / have access to, we will be glad to call you to answer any queries. Please send a quick email to the address below with Premier News Enquiry in the title box and we will call you. compliance@ifahelpline.co.uk Tel: 0113-2583111 8

23. PREMIER SERVICE RECENTLY ISSUED UPDATE EMAILS All subscribers are able to use the extensive range of forms we maintain. In addition, we issue regular email updates. Our minimum standard is every six weeks but shown below is what has actually been issued to our subscribers during the last 6 months:. Update 143 - December 2016 - General update / Test on LISA's / P2P permissions / Pension exit cap / CP16-29 response to the FCA. Update 142 - November 2016 - DB transfer checklist / updated general checklists / Regulatory Forums / R04 training. Update 141 - November 2016 - CII launches new AF7 / certificate for Pension Transfers Update 140 - October 2016 - Consultation to record telephone calls & FCA Survey on Senior Management changes Update 139 August 2016 Updated GP test / FCA & introducers / FCA use of Deed Document for change of legal entity applications Update 138 June 2016 Updated complaints handling procedures & forms Please also see the home page of documents. www.compliancenews.org for the current Excel list of all our 24. COMPLIANCE NEWS PREMIER SERVICE The annual costs is per firm! We believe this service will save a typical IFA firm at least 50 hours per year. MOST DOCUMENTS ARE SENT ELECTRONICALLY ON WORD Benefit: You have access to all the forms we have, at no extra charge. We will send a wide range of IFA forms / guidance on a regular basis to you in word document format. In addition, wherever possible we will try and assist with individual requests. Firms with 1 to 2 advisers - 330 p.a. ( 275+VAT) Firms with 3 to 6 advisers - 480 p.a. ( 400+VAT) Firms with 7 to 12 advisers - 780 p.a. ( 650+VAT) Firms with 13 of more advisers To be agreed individually due to their size. Please contact us for costs. The following is a list of just some of the documents issued. Generic Knowledge test for advisers IFA Product research form Reference Request forms Conflicts of Interest Policy Data Security documents Copies of relevant FSA/FCA guidance Anti-Money Laundering Annual test Updated Terms of Business letters (RCA) Compliance / Risk Mitigation plan, Compliance Audit forms, Updated Observation forms Adviser Role / Job Description templates Risk Assessment / calculator of adviser, Fit & Proper adviser annual declarations, Client agreements / Fee agreements, IFA Research / Committee minutes Customer Satisfaction Surveys, Maintaining Competence (T & C) form, Suitability Letter templates, File completeness checking forms, Blank reference request forms, diary template, Disaster Recovery / Continuity plan, Provider Research summary forms, Recruitment checklists TCF forms Too many to list New IDD (SCDD) documents Mortgage advice/file checking forms Personal account dealing declaration Compliance Board Report templates, T & C audit / help. Whilst the above list may appear to be comprehensive the real benefit to most subscribers is being able to email a request and receive a template. We are generally able to help with 90% of all requests Phil Dibb Editor. 9

25. COMPLIANCE NEWS PREMIER SERVICE HOW TO SUBSCRIBE SHOULD YOU WISH TO SUBSCRIBE TO THE COMPLIANCE NEWS PREMIER SERVICE OR REGISTER YOUR INTEREST FOR ANY OTHER SERVICE, PLEASE COMPLETE THE FOLLOWING SUBSCRIPTION FORM AND POST OR SCAN TO: Compliance News Limited, Egerton House, 14 Egerton Terrace, Rawdon, Leeds, LS19 6QA compliance@ifahelpline.co.uk Firm Name: Compliance News Premier Service Subscription Contact Point: Address: Telephone No: FCA Number: E-mail: Current number of advisers (CF30 s & any mortgage advisers): Current number of Appointed Representatives: Costs for Small to medium sized IFA firms who do not provide Compliance / Commercial services to other firms and agree not to pass on the material to external firms. Please tick Firms with 1 to 2 advisers - 330 p.a. ( 275+VAT) Firms with 3 to 6 advisers - 480 p.a. ( 400+VAT) Firms with 7 to 12 advisers - 780 p.a. ( 650+VAT) Firms with 13 of more advisers To be agreed individually due to their size. Please contact us for costs. How can Compliance News Help You Further Chargeable Additional Services Tick for more info ( ) Remote file-checking service Variation of Permission / FCA New Authorisation assistance Structured CPD Sessions DB Transfer file-checking GABRIEL assistance, ad-hoc queries or completion of your returns T & C Supervisor / Refresher Course Please make cheques payable to Compliance News Limited and post to Compliance News Ltd, Egerton House, 14 Egerton Terrace, Rawdon, Leeds, LS19 6QA Or, to pay by BACS, please email us for bank details. An invoice marked as paid will be issued with all orders. IF PAYING BY BACS PLEASE QUOTE YOUR FCA AS THE REFERENCE. Please e-mail: compliance@ifahelpline.co.uk should you have any questions. 10