29Oct

FCA chief comments on time firms spend on regulation in speech to the City

The Financial Conduct Authority (FCA)’s acting chief executive has commented on the amount of time that firms devote to compliance matters.

Tracey McDermott made her remarks to the City Banquet in late October 2015. She said that the current volume of regulatory activity was unsustainable, before commenting:

“We are often told that boards are now spending the majority of their time on regulatory matters. This cannot be in anyone’s interests. If that continues indefinitely we will crowd out the creativity, innovation and competition which should present the opportunities for growth in the future.”

However, she did speak with a sense of pride when saying “conduct is firmly on the agenda in the boardrooms of financial services companies.”

She admitted that the banking crisis and numerous conduct issues at authorised firms “highlighted fundamental errors” made by both the firms and her organisation.

Ms McDermott went on to say that she hoped to avoid “pendulum shifts” in regulation in the future. Previously, long periods of light touch regulation have given rise to serious issues, which then required tough action to sort out. But as memories of these incidents faded, and the economy recovered, the general appetite for tough regulatory action reduced, and so the cycle re-commenced once more.

“We become caught in a loop where we regulate, deregulate, repeat on an infinite cycle. And if we do that, if we take too big a step back when things are going well, then history suggests we will fail to anticipate and prevent the problems of the future,” said the FCA chief executive on this subject.

Going on to describe how she had spent much of the last few weeks talking to industry figures and others about these issues, Ms McDermott then used sporting terminology to explain that, in her view, the FCA carries out each of the following roles:

• Referee – ensuring the players, i.e. authorised firms, abide by the rules. However, she also spoke in this section of the speech of the need to ensure competitive markets were maintained
• Groundsman – ensuring that the pitch on which firms operate, i.e. the FCA’s rules, is suitable. Here she spoke of the need “to look at rules which are not working and be prepared to change them”. Examples she gave were the recent changes in retirement risk warnings firms were required to give, and the freshly produced FCA consultation on scrapping certain disclosure documents
• Post-match commentator – reflecting on and analysing past events to find new solutions to problems and issues

She concluded that regulators and firms alike had a part to play in ensuring the UK had a “world leading financial services industry known for its integrity and creativity.”

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.

28Oct

FCA proposes removing certain disclosure documents

With the aim of improving the client experience and reducing the regulatory burden on authorised firms, the Financial Conduct Authority (FCA) has announced plans to withdraw four disclosure documents that it describes as “ineffective communication requirements”.

The regulator points to previous behavioural economics research that suggests overloading clients with information can lead to poor decision making.

Firstly, the FCA plans to withdraw the Initial Disclosure Document (IDD), and the associated Combined Initial Disclosure Document (CIDD). These are documents that firms in the mortgage and insurance sectors can use to explain the extent of the services they provide, and how much these services will cost.

Secondly, the proposal contains a similar plan to scrap the Services and Costs Disclosure Document (SCDD), which is equivalent to the IDD and CIDD, but is used by firms providing investments, or who give advice in this area.

Advisory firms, and providers in the insurance, mortgage and investment sectors, should note however that there are no plans to change the FCA’s rules on what information needs to be disclosed to the client. In its consultation paper, the FCA highlights the need to use effective disclosure documents when it comments:

“We are concerned that [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][the IDD, CIDD and SCDD] templates create a risk that firms adopt a ‘tick-box’ approach to their disclosure obligations rather than designing an effective disclosure to help their target customers understand the scope and cost of their service.”

The IDD, CIDD and SCDD were simply one way that firms could have addressed the need to provide the necessary information. The best way for firms to provide the information about how they will do business with a client is via a Client Agreement, Terms of Business letter or similar.

For example, a Client Agreement for an investment advisory firm should include:

• The scope of the service to be provided. Firms should indicate: whether they are independent or restricted, whether they offer advice on all types of investment product or not, and whether they can consider products from all providers
• Its advice process – e.g. fact finding, followed by research and a presentation meeting
• The fee charging method (s) the firm uses
• The level of ongoing service the firm will provide to its clients

Strictly speaking, it will still be possible for firms to issue a disclosure document that uses the same format as the IDD, CIDD or SCDD. However, if a firm chooses to do this, it must no longer use the FCA’s Key Facts logo on the document.

The FCA also plans to end the requirement for with-profits pension providers to supply a document known as the ‘Consumer-Friendly Principles and Practices of Financial Management’ – where they explain how they manage the with-profits fund – and for fund managers of certain retail investments and collective investment schemes to produce a ‘Short Report’ – a six monthly report on fund performance.

Christopher Woolard, director of strategy and competition at the FCA, said:

“We would like to see firms changing the way they interact with their customers. We have been encouraged to see a number of firms are already doing this.

“Today’s announcement reflects our commitment to sustainable regulation and addresses disclosures that are not working for consumers, giving firms the freedom to communicate with their customers in a more flexible and open way.”

A consultation on the proposals has commenced and will continue until December 18 2015.

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.
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26Oct

FOS reports increase in pension complaints

Certain products which financial advisers regularly recommend have seen significant increases in the numbers of complaints being received by the Financial Ombudsman Service (FOS).

In the three months from July to September 2015, the FOS received 458 complaints about personal pensions, which represents an increase of 39% compared to the same period in 2014.

Complaints about self-invested personal pensions (SIPPs) rose by 34% to 281.

The figure for stocks & shares ISA complaints has risen by 29% to 327.

An increasing number of claims management companies are now assisting with claims for mis-sold pensions. Common reasons for making a personal pension or SIPP complaint include:

• The fund (s) or underlying investments recommended do not match the client’s attitude to risk and/or capacity for loss. Contrary to what some advisers believe, they are also responsible for ensuring the underlying investments in a SIPP are suitable for the client, as well as ensuring the product itself is appropriate
• The risks involved with the fund (s) or underlying investments were not explained to the client at point of sale
• A recommendation has been made to transfer from one pension arrangement to another, and the reasons as to why this was recommended are unclear. A pension switch or pension transfer may not be suitable if the new arrangement has higher charges, or if there are penalties imposed for switching, or if the client has given up valuable benefits (e.g. bonuses, guaranteed annuity rates) in the old pension
• A SIPP has been recommended for no apparent reason. Many SIPP clients are paying the higher charges associated with this type of plan when they do not need the increased investment flexibility that a SIPP offers, and their aims and objectives could have been met just as easily by a conventional personal pension

The FOS received a total of 85,896 complaints during the quarter, which is almost the same as for the equivalent period in 2014. Payment protection insurance (PPI) continues to account for more than half the total, with 49,672 cases. Packaged bank accounts is the second most complained about area, with 10,163 cases.

Of the total complaints closed by the FOS between July and September, 51% were upheld. The FOS found in the customer’s favour in 72% of PPI cases, 47% of SIPP cases, 37% of investment ISA cases and 27% of personal pension cases.

In her foreword to the October 2015 issue of Ombudsman News, chief ombudsman Caroline Wayman suggested that firms could learn lessons from having complaints upheld.

Ms Wayman commented:

“I hope we can either provide reassurance that [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][firms have] done their best by their customer – or help them to recognise and learn from what hasn’t gone well.”

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.
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23Oct

FCA senior manager’s regime to be extended to all firms

New obligations for senior managers in all authorised financial services firms are expected to be introduced from 2018.

From March 7 2016, firms in the banking sector will need to carry out their own assessment of whether senior individuals are ‘fit and proper’ on at least an annual basis. Now the Government has announced it intends to legislate – via its new Bank of England and Financial Services Bill – for the ‘Senior Managers & Certification Regime’ to be extended to all firms authorised by the Financial Conduct Authority (FCA). This would include all consumer credit firms and all of the smallest advisory or brokerage firms.

One of the requirements under the regime is the need for senior managers to take all possible steps to prevent regulatory breaches. Firms will also need to supply documentation to the regulator regarding each manager’s individual responsibilities.

FCA acting chief executive Tracey McDermott said of the proposals:

“Extending the senior managers’ and certification regime is an important step in embedding a culture of personal responsibility throughout the financial services industry.”

Lawyer Tamasin Little, a partner at King & Wood Mallesons, summarised the requirements by saying:

“The senior managers regime essentially shifts responsibility from the regulator to the firm for vetting and certifying most of the customer-facing staff.”

The move could mean that more enforcement action – via fines and bans from working in the industry – is taken against individuals rather than their firms.

At present, all individuals carrying out ‘approved persons’ roles need to be individually ratified by the FCA before they commence their duties. Under these plans, the firms themselves will need to carry out their own assessment on at least an annual basis. Essentially, this Senior Managers & Certification Regime will replace the Approved Persons Regime.
Anyone who carries out an approved person role must demonstrate that they are a ‘fit and proper’ person, having regard to their honesty, integrity and reputation; competence and capability; and financial soundness.
Those who will require this individual authorisation include:
• Directors – those who are responsible for the governance of the organization, whether or not they actually have the word Director in their job title. Non-executive directors also require approval
• Chief executive
• Partners
• Apportionment and oversight officer – the individual who assigns responsibilities to other individuals, and who oversees the firm’s systems and controls
• Compliance officer – the individual who has overall responsibility for ensuring the organisation complies with its regulatory obligations
• Money laundering reporting officer (MLRO) – the individual to whom staff within the organisation should report any suspicions of possible money-laundering activity
• Those carrying out systems and controls functions – the individuals responsible for finance, risk assessment and internal audit
• Those carrying out significant management functions – such as the heads of key departments within the firm. Especially in smaller firms, it is often the case that those carrying out significant management functions also carry out at least one of the other controlled functions, and so a separate application may not be required here
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.

21Oct

Select Committee member expresses concern over size of advisers’ FSCS levy

Advisory firms dismayed at the rising costs of regulation may be heartened by comments made by a member of the House of Commons committee that oversees financial services.

Mark Garnier MP has called for revenue the Financial Conduct Authority (FCA) gets from regulatory fines to be used to reduce the levy authorised firms pay to fund the Financial Services Compensation Scheme (FSCS), the scheme whereby clients of insolvent financial firms can receive compensation for losses incurred.

Firms need to pay authorisation fees to the FCA, and levies to fund the Financial Ombudsman Service, Money Advice Service and Pension Wise. Some of these fees have risen significantly in recent years, but it is the FSCS levy that perhaps upsets advisory firms the most.

Not only does FSCS funding require law-abiding, solvent firms to pay for the losses of insolvent firms, but the FSCS also classes ‘life and pension’ firms as one category. Paying compensation for mis-selling of self-invested personal pensions (SIPPs) is one of the most significant portions of the FSCS workload, and the current system forces advisory firms who only sell insurance, or only insurance and mortgages, to fund this compensation, simply because they fall into the ‘life and pensions’ category. Likewise, advisory firms who do offer pension advice, but who rarely recommend a SIPP, are also required to contribute.

The total FSCS levy for 2015/16 is £319 million, of which £116 million is paid by investment intermediaries and £100 million by firms in the wide ranging ‘life and pensions intermediaries’ category. In 2014/15, the total levy was £276 million, but life and pensions intermediaries paid just £33 million of this.

In previous years, the FCA’s predecessor, the Financial Services Authority, retained all the revenue it gained when it fined authorised firms for misconduct. But as the levels of fines started to increase significantly (the FCA’s record fine is the £284 million penalty handed to Barclays Bank for rigging the foreign exchange market), the Treasury started taking the revenue from fines to boost the public purse. For example, £35 million of the money obtained from the LIBOR rigging fines was spent on the armed forces.

Now Mr Garnier has called for fines to once again be ploughed back into the financial services industry, but this time to reduce the FSCS levy.

Mr Garnier commented:

“There’s always this ‘if something goes wrong it cannot possibly be the individual’s fault’ culture.’ It also manifests itself quite worryingly in the huge amount of money that IFAs pay now into the FSCS, which really is causing a great deal of problems.

“One of the things that I think we do need to have a very sensible conversation about is actually where some of these bank fines are going. [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][…] Actually should we be diverting some of that money into a fund that backs the FSCS payout? I think it’s the right thing for people who contribute to wrong-doing to [be creating] an element of self-policing.”

The issue of the FSCS levy may be looked at as part of the Financial Advice Market Review, a wide ranging review looking at consumers’ ease of access to financial services, which was launched by the Treasury and the FCA in summer 2015. As the FSCS levy and other regulatory costs rise, firms are often forced to pass these costs on to their clients in the form of higher fees, thus making it harder for some people to afford financial advice.

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.
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19Oct

Fears of drawdown ‘mis-buying’ scandal

Paul Lewis, presenter of BBC Radio 4’s Money Box, has spoken of his fears about the suitability of many of the drawdown contracts being purchased by those seeking to access their pension funds, suggesting that retirement savings could instead be invested in cash accounts to reduce the risk the monies are exposed to.

Drawdown has become increasingly popular as traditional annuities are now seen as representing poor value. Of the 204,581 people who accessed their pension savings between April 6 2015 and July 5 2015, only 12,418 (6.1%) purchased an annuity – this figure is less than one seventh of the number of annuities purchased in the equivalent time period in 2013. Whereas an annuity simply pays a set income for life, with a drawdown policy, pensioners can withdraw (draw down) as much of their fund as a lump sum and/or income as they wish at any time. However, there is an added element of needing to predict how long they will live, and ensure that they retain sufficient funds to see them through the later years of retirement.

Mr Lewis commented that most customers entering drawdown invest in risky, equity-based funds. He remarked on the recent falls in global stock markets, and that tracker funds – those that shadow the movements of major stock market indices – had fallen in value by an average of 16% between March and September 2015.

At the FTAdviser Retirement Freedoms Forum, Mr Lewis said:

“[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Drawdown] is not what you want in life. You want certainty, not risk.”

He then went on to promote cash accounts as an alternative, by saying:
“The one thing we know about cash is you go to the bank, put £10,000 in your savings account and in a year’s time you get your £10,000 back plus £200. You have still got your capital, and a little bit more, and you have done no work. Fantastic.”

An apparently low-risk cash account can still expose an individual to inflation risk – the risk that inflation will be higher than the interest rate on the account and thus reduce the value of the savings in real terms.

Mr Lewis described drawdown as “a potential mis-buying scandal.” Drawdown can certainly be mis-sold by financial advisers unless they take care to follow these guidelines:

• The adviser should consider whether drawdown is suitable at all – regardless of the investment funds recommended, if a client has a cautious risk profile, it may not be appropriate to recommend a product that carries the risk of them running out of money later in retirement
• The adviser must make an assessment of how much they believe the client should access as a lump sum and as income – if an adviser recommends a client accesses too much, then the individual risks being much poorer in later years. It may be best advice for some clients to recommend that they do not draw down any of their funds, and instead leave them to grow
• The adviser must recommend where to invest the funds not being accessed – fund recommendations must be compatible with a client’s attitude to risk and capacity for loss
• Drawdown case files should always evidence why it was deemed to be a more suitable option than the various annuity options available
• The tax implications of any recommended course of action must be carefully explained.

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.
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19Oct

MoJ addresses the regulatory review, the fines system and co-operation in its latest bulletin to CMCs

A number of important issues are once again covered in the Claims Management Regulator’s regular bulletin to claims management companies (CMCs).

Firstly, companies are alerted to the Government’s review of the regulatory system for the claims management industry. A link is provided to the consultation document, and companies are invited to participate in this consultation. Another consultation will take place in due course over plans to cap the level of charges CMCs can impose on their clients.

The second section makes reference to the first two claims management practitioners to receive fines from the Regulator. The Hearing Clinic was fined £220,000 for making large numbers of unsolicited marketing calls, some to consumers who had registered with the Telephone Preference Service; and Rock Law Limited was fined £567,423 for taking payments from clients without express permission being given, and for pressurising clients into accepting their terms and conditions.

CMCs who introduce personal injury claims to solicitors are reminded that they cannot engage in cold calling in order to obtain clients. Anyone who is contacted must have given their explicit consent to being called about a claim, and their contact details must not have been obtained via an unsolicited communication (via telephone or personal contact). A CMC will still be held responsible if the details were obtained in an inappropriate way by a third party acting on their behalf.

Next, companies are alerted to the possibility of having enforcement action taken against them should they supply incorrect or misleading information to the Regulator. CMCs are warned that the Regulator will be increasing the level of checks it carries out regarding accuracy of information. Examples given in the bulletin include companies stating an incorrect figure for their annual turnover, and a claims management practitioner who failed to disclose his outstanding County Court Judgements when applying for authorisation.

The bulletin then mentions that it is a criminal offence to carry out claims management services without authorisation, and that it is also an offence to claim to be authorised when this is not the case. The Regulator can initiate criminal prosecutions of unauthorised firms, and can also take enforcement action against CMCs who are found to be supporting unauthorised firms in any way. The case study examples in the bulletin include a claims management practitioner who was jailed for four years for fraudulent activities carried out whilst operating an unauthorised claims management company.

CMCs are asked to note that the Regulator will be informed every time a company fails to adequately co-operate with the Legal Ombudsman regarding the investigation of a complaint. The Regulator can take enforcement action in these circumstances. All requests from the Ombudsman must be complied with promptly.

Finally, the Department for Culture, Media & Sport has launched a competition, where respondents are invited to propose solutions to the problem of nuisance calls.

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.

15Oct

Second CMC receives fine from MOJ

On October 2 2015, Swansea-based claims management company (CMC) Rock Law Limited became the second company to receive a fine from the Claims Management Regulator at the Ministry of Justice (MoJ).

Payment Protection Insurance claims company Rock Law has been fined £567,423, largely for what appear to be irregularities in its contracts with clients.

When it releases information about companies it has taken action against, the MoJ does not give specific details of a company’s individual failings. However, the notification on the MoJ website states that Rock Law breached Client Specific Rule 11 of the Conduct of Authorised Persons Rules 2014. Rule 11 covers entering into contracts with clients, and the provision of pre-contractual information.

This rule requires companies to have clear and not misleading standard terms and conditions for all contracts, and to publish these terms and conditions on the company website. No payments may be taken from a client until a legally binding contract has been signed.

The following information must also be provided to the client in a durable medium (i.e. in writing or electronically, in such a way that the client can refer back to the information as required) before any contract is entered into:

• The risks the client faces in making a claim, including the risks of losing money or having legal proceedings taken against them
• A clear description of the services the CMC will provide
• The procedures the CMC will follow in servicing the client
• Any contracts that a client will be asked to agree to, including insurance policies and loans
• The charges the CMC will impose on the client, with a cash example given where any charge is expressed as a percentage
• Any referral fees the CMC has paid in connection with the client’s claim, or any other payments made to third parties for introducing the claim

Rock Law also breached the following sections of the Conduct of Authorised Persons Rules 2014:

• General Rule 1 – A business shall conduct itself with honesty and integrity
• General Rule 2d – A business shall conduct itself responsibly overall including, but not limited to acting with professional diligence and maintaining appropriate records and audit trails
• General Rule 5 – A business shall observe all laws and regulations relevant to its business
• Client Specific Rule 1c – A business shall ensure that all information given to the client is clear, transparent, fair and not misleading

In addition to the fine, the MoJ has imposed conditions on Rock Law’s authorisation. The company must wait 24 hours from the later of the initial sales call and the time the pre-contractual information is provided before it enters into a contract with a client, or asks for a client’s payment details. The company must also record all calls made to/by clients or potential clients, and retain these recordings for six months.

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.

13Oct

FCA confirms new pension freedom studies to take place

The Financial Conduct Authority (FCA)’s technical specialist has confirmed that the regulator will conduct several pension-related market studies over the next year, including one looking at the advice consumers are receiving in light of the new pension freedoms, and another covering non-advised sales of pension drawdown contracts.

Addressing the annual conference of financial advisers’ trade association the Institute of Financial Planning, the FCA’s Rory Percival said:

“On the non-advised side, we will look at whether customers are getting the right information and whether they are making the right decisions based on that information.

“We will also look at whether people are getting suitable advice, which is a market study so quite a big piece of work. Clearly we needed to wait until we were a number of months into the new regime before we could assess that.”

Mr Percival suggested he had concerns over the fact many people had entered into complex drawdown contracts without having an adviser to provide ongoing servicing, and over the level of charges being levied.

The introduction of the new pension freedoms on April 6 2015 – allowing all holders of money purchase pension schemes aged 55 or over to access as much of their fund as they wish, has given rise to a number of regulatory and consumer protection issues:

• The Government has commenced a consultation on the exit charges being levied by providers, and the ease of the switching process. Not all providers are offering full access to the freedoms, and so some consumers have thus been prompted to switch to another provider that will allow full access
• More financial advisers are being faced with insistent client situations, particularly where clients wish to withdraw all of their fund, but where this is not good advice due to the tax implications or other factors. The FCA, via Mr Percival, has designed a three-point strategy for advisers to use in insistent client cases
• Advisory firms are facing ever increasing regulatory costs, leaving them increasingly unable to service mass market clients who might benefit from advice on their retirement income options
• Take up of the Government’s free Pension Wise guidance service has been fairly low, and concerns have been raised over the limited experience some of the staff have

Based on an analysis of 23 providers, the FCA has revealed that 84% of consumers have not been charged a fee to switch their pension.

Of the 204,581 people who have accessed their pension savings between April 6 2015 and July 5 2015 (the period covered by an FCA survey):

• 57,568 (28.1%) made a full cash withdrawal of their fund (this is the new Uncrystallised Fund Pension Lump Sum or UFPLS option that became available in April)
• 53,543 (26.2%) made a partial withdrawal via a drawdown policy
• 43,094 (21.1%) used the small pots payment method – full cash withdrawal of a pension pot worth £10,000 or less
• 17,912 (8.8%) fully encashed their fund via drawdown
• 16,872 (8.2%) withdrew just the tax free lump sum of 25% of the fund as cash
• Only 12,418 (6.1%) purchased an annuity – this figure is less than one seventh of the number of annuities purchased in the equivalent time period in 2013

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.

12Oct

FCA updates credit authorisation process in latest Data Bulletin

The Financial Conduct Authority (FCA) has provided a great deal of information on the ongoing process of authorising around 50,000 consumer credit firms in its latest Data Bulletin, published in early October 2015.

All credit firms that were regulated by the Office of Fair Trading on April 1 2014 and which wished to continue trading were allocated ‘interim permission’ status with the FCA. These firms were all then allocated a three-month period in which they would need to submit their application for full or limited permission. The last of these application periods ends on March 31 2016.

Excluding appointed representatives, there were 41,937 active consumer credit firms as of June 30 2015. 25,073 of these still hold an interim permission, 16,096 have been fully authorised and 768 have been grandfathered into the FCA regime (this is a special facility only available to certain not-for-profit firms). Most of the firms authorised so far are credit brokers.

In total, 23,960 firms have applied for authorisation (16,410 are or were holders of interim permission and 7,450 firms are new to the credit market). 11,972 holders of interim permission have not proceeded to full/limited permission after the close of their application period – this might be because the firm has exited the market, or because a group of firms has re-arranged its corporate structure so that it contains fewer regulated entities.

94% of applications to date have been successful, and only 23 firms (around 0.1% of the total) have seen their applications refused. The remaining 5.9% of firms have withdrawn their application.

Applications for full permission are currently taking as long as 24 weeks to assess on average. This reduces to 10 weeks for a limited permission case, although the FCA expects processing times to increase in the foreseeable future.

The bulletin also reports that only 28 (3.7%) of the 749 financial promotions the FCA reviewed in the second quarter of 2015 needed to be amended or withdrawn. 11 of these were consumer credit promotions and 10 were from the investment sector.

Complaints against the FCA are also mentioned in the bulletin. These have risen slightly, with 243 being received in the first half of 2015, compared to 192 in the second half of 2014. In the first instance, the FCA investigates complaints made against themselves, and only 13% of the complaints received in this 12 month period were upheld, with another 7% partially upheld. 34% were rejected and 45% were not investigated, perhaps because they were little more than a general expression of dissatisfaction, or because they were outside the FCA’s scope.

If the complainant is not satisfied with the FCA’s response, they can refer it to the Complaints Commissioner, who upheld just three previously rejected complaints against the FCA in this time period.

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.

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