The legislation that will see the Financial Conduct Authority (FCA) become the new claims management regulator is still to complete its passage through Parliament, and the change of regulator is not expected to occur for another 12 months, in spring 2019.
However, the Government has nonetheless published a consultation paper. At present, the consultation concerns only proposals for secondary legislation, and new conduct rules for claims management companies (CMCs) are not being proposed at this stage.
As well as transferring regulation of CMCs in England and Wales to the FCA, the Financial Guidance and Claims Bill will also provide for the FCA to regulate claims management activity in Scotland. CMCs in Scotland are at present not subject to any form of regulation.
Under the new proposals, there will be seven separate ‘permissions’ that CMCs may need to apply for. Depending on the activities they undertake, a CMC may need to apply for just one, or more than one, or all of these permissions:
- Seeking out, referring and identifying claims in relation to any type of claim
- Advising, investigating and representing in relation to personal injury
- Advising, investigating and representing in relation to financial services and products
- Advising, investigating and representing in relation to employment
- Advising, investigating and representing in relation to criminal injuries
- Advising, investigating and representing in relation to industrial injuries disablement benefit
- Advising, investigating and representing in relation to housing disrepair
Applicant firms will need to demonstrate that they have the necessary competence to operate in their chosen business sector but will not need to satisfy FCA competency requirements for the other sectors. For example, a CMC that handles only personal injury claims may require the first two permissions in the above list, but not the others.
The FCA proposes that from the date of the handover of regulation, a temporary permissions regime will apply for a period of 15 months. All CMCs currently regulated by the Ministry of Justice (MoJ) will be eligible to register for temporary permissions, as will any CMC who will become regulated for the first time on the handover date, such as those operating in Scotland.
Any CMC that does not register for temporary permissions will have to cease trading prior to the handover date.
During their temporary permission period, each CMC will need to comply with the FCA’s rules and pay the necessary authorisation fees. Companies must then submit an application to the FCA for ‘full authorisation’. Each CMC will be given an application window during which this application must be submitted. If an application is not submitted by the appropriate deadline, then the company must cease trading.
Other proposals include retaining the existing exemption whereby trade unions do not require regulatory authorisation to carry out claims activity, provided that they comply with a Code of Practice published by the Government.
The Treasury invites responses to this consultation, which closes on June 1 2018.
The FCA’s Business Plan, published in April 2018, says that a consultation on its proposed conduct rules for CMCs will be issued later in the year. The financial watchdog also promises to open communication with claims companies.
Over the coming months, CMCs should keep a close eye on communications from the FCA and the MoJ, as the handover date approaches.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article