PRA bans former Co-op Bank executives

The Prudential Regulation Authority (PRA), which conducts prudential regulation of some of the UK’s largest financial services firms, has banned two former executives of The Co-operative Bank – Barry Tootell and Keith Alderson – from holding significant influence functions in the future. Former chief executive Mr Tootell has also been fined £173,802; and former Managing Director of the Corporate and Business Banking Division Mr Alderson has also been fined £88,890.

The issues concerning Mr Tootell lasted for almost four years, between July 2009 and May 2013. He prioritised the bank’s short-term financial position at the expense of its longer-term capital position, and neglected to ensure that the Risk team challenged the bank over its practices regarding this. The PRA Final Notice says he was “centrally involved in a culture which encouraged prioritising the short-term financial position of the Firm at the cost of taking prudent and sustainable actions to secure the longer-term capital position of the Firm.”

Mr Alderson has been banned and fined over his failure to ensure adequate due diligence was carried out regarding the bank’s acquisition of Britannia Building Society. He is also said to have challenged staff as to the impairment figures – the sum by which an asset’s cash flows are lower than its book value – they had proposed.

The PRA conceded that the two men did not act dishonestly or recklessly, but has “concluded that they are not fit and proper persons to carry out a significant influence function at a PRA-authorised firm on the grounds of a lack of competence and capability.”

Both men left their positions at the bank in 2013.

The bank itself was censured by the PRA in August 2015 over issues with its risk management, capital management and corporate lending policies. Had it not been for its parlous financial situation at the time, the bank would also have been fined £120 million.

The Co-operative Bank required a massive hedge fund-led bailout after running up a capital shortfall of £1.5 billion. These hedge funds now hold a majority stake in the bank, meaning it lost its mutual status. The stake of former parent company The Co-operative Group is now less than 20%.

The media chose to concentrate on the drug-taking activities of former non-executive chairman Reverend Paul Flowers, but of much more concern from a regulatory point of view was Mr Flowers’ performance at the Treasury Select Committee in November 2013, when he appeared not to know the size of the bank’s balance sheet, stating it as £3 billion instead of the correct figure of £47 billion.

Andrew Bailey, Deputy Governor, Prudential Regulation, Bank of England and CEO of the PRA said:

“Banks that are not well governed have the potential to pose a threat to UK financial stability. The actions of Mr Tootell and Mr Alderson posed an unacceptable threat to the safety and soundness of the Co-op Bank which is why we have decided a prohibition is appropriate in these cases. This action makes clear that there are serious consequences for senior individuals who fall short of the PRA’s expectations. The new Senior Managers Regime, which will be introduced in March, will further ensure that senior managers are held duly responsible for their actions.”

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.


FSCS levies announced

The total levy to be paid by the financial services industry to fund the Financial Services Compensation Scheme (FSCS) will rise by 13.8%, from £319 million to £363 million, in the 2016/17 financial year.

The share of the levy to be paid by investment intermediaries is down by £8 million to £108 million.

Life and pensions intermediaries are set to contribute £80 million to the levy, which is substantially greater than their initial 2015/16 levy of £57 million, but also significantly lower than the eventual bill of £100 million these firms were hit with in the last financial year. Life and pensions firms are being forced to make significant contributions as the FSCS is having to settle a large number of claims relating to Self Invested Personal Pensions (SIPPs). Some commentators have forecast that the bill for these firms will rise from the quoted figure of £80 million during the course of the year.

The levy for deposit takers will be £28 million, more than double the 2015/16 figure of £13 million. General insurers will pay £94 million, up from £62 million; and general insurance intermediaries will pay £19 million, having not been subject to a levy in 2015/16. The bill for home finance intermediaries has doubled to £10 million, and investment providers will contribute the remaining £2 million.

These figures are subject to consultation, and will be confirmed in April 2016.

Mark Neale, the FSCS chief executive, chose to concentrate on the fact that his organisation’s operating costs are forecast to fall by £1.7 million from £69.1 million to £67.4 million. Mr Neale said:

“I am happy to report that our operating costs are lower than last year again. It’s an indication of our commitment to value for money.”

The FSCS levy is a significant cost faced by authorised firms, as they try and cope with the rising cost of regulation. One of the perceived injustices of the current system is that life and pensions intermediaries are grouped together in one category. This means that the burden for SIPP claims falls on firms who only provide insurance broking services, mortgage brokers who offer insurance but not pensions, and firms who do give pension advice but who have never sold a SIPP.

One alternative mooted by the industry is a risk-based levy, where firms with a lower excess on their professional indemnity insurance would be allowed to make a smaller contribution to the levy. Other suggestions have included a specific levy on each individual plan, reflecting the risk it poses; and re-directing revenue from Financial Conduct Authority fines to reduce the levy.

The system operates on the basis that solvent, law abiding firms are forced to foot the bill for insolvent firms who are subject to compensation claims, and even if the system was revised, some individuals have a real problem accepting this principle.

Many firms are hoping that the ongoing Financial Advice Market Review provides some sort of solution to the FSCS issue.

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.


Government plans new tax on payday lenders

The Government is considering a new tax on the UK’s payday lenders. The move is designed to address a funding shortfall for the unit that tackles illegal lending.

The Illegal Money Lending Team, based at Birmingham City Council, has helped borrowers throughout the UK recover funds from loan sharks since it was launched in 2004. Richard Burden, the Labour MP for Birmingham Northfield, raised the issue of cuts to its funding at Prime Minister’s Questions in December 2015, and received a reply suggesting that short-term lenders may be asked to foot the bill in future.

Mr Burden asked:

“Why are you choosing now to cut the budget of the Birmingham-based England Illegal Money Team by a third when they’ve helped 24,000 loan shark victims to get £63 million of illegal debts written off?”

Chancellor of the Exchequer George Osborne MP, who was standing in for the Prime Minister on the day in question, told the House of Commons in reply:

“We take very seriously illegal loan sharks and excessive interest charges on payday lending – which is why it was Conservatives who introduced the first ever cap on payday lending.”

“[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”][With regards to] the funding for illegal money laundering and loan shark teams we are looking now at a levy on the industry to meet the funding requirement.”

Russell Hamblin-Boone, Chief Executive of the Consumer Finance Association, a trade association that counts some of the UK’s largest payday lenders amongst its membership, suggested that any such tax would be unfair on payday lenders, and would actually result in more customers falling victim to loan sharks.

In a press release issued by the Association, Mr Hamblin-Boone commented:

“The Chancellor is wrong to conflate illegal money lenders with legitimate, regulated payday lenders. All credit providers have an obligation to tackle illegal lending so any levy to fund the important work by the Illegal Money Lending Team should apply across the entire consumer credit industry. To tax payday lenders alone is completely unjustified and will be wholly ineffective as short-term credit now accounts for less than 1% of unsecured personal borrowing and lending has decreased by more than 70% under FCA regulation. Further restrictions on access to legitimate short-term loans will drive even more people into the arms of the very loan sharks that the Government is seeking to tackle.”

The Labour manifesto for the 2015 election also proposed a tax on payday lenders, but in this case the funds would have been used to fund alternative sources of credit, such as credit unions.

The Conservative-led coalition government introduced a number of cost caps on payday lenders from the start of 2015. For all loans offered by firms who meet the Financial Conduct Authority (FCA)’s definition of ‘high cost short-term credit’, interest is capped at 0.8% per day. This means that a customer borrowing £100 for 30 days and who repays on time cannot be asked to pay more than £24 in interest. No matter how many times a loan is rolled over, or how late payment is made, no borrower can ever be asked to repay more in interest and charges than the amount of their loan. The maximum default fee is £15.

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.


FCA issues warning notice to director/CEO over SIPP transfer business

On December 7 2015, the Financial Conduct Authority (FCA) issued a Warning Notice to an individual whose firm is alleged to be advising clients to transfer their pension savings into Self Invested Personal Pensions (SIPPs). The individual is said to be both the chief executive and a director of the firm. As with previous Warning Notices, neither the individual nor the firm is named.

The FCA believes that a number of the firm’s clients have transferred into SIPPs which are not suitable for them, and that the firm failed to comply with the High Level Principles for firms that require communications with customers to be clear, fair and not misleading; and ask that customers are treated fairly.

SIPPs are considered to be a high risk area by the regulator, and firms active in this market can expect considerable scrutiny. They are complex products which often carry high charges. A client should not be recommended to switch to a pension arrangement with higher charges without good reason, and a SIPP should not be recommended if the individual requires a simple investment mix that would have been available via a conventional personal pension. Many claims management companies are also inviting clients to contact them if they believe they have been sold a SIPP without sufficient justification.

Firms recommending SIPPs must note that they are responsible not only for ensuring the plan itself is suitable, but also that the underlying investments are suitable, given the client’s needs, financial position, attitude to risk and capacity for loss.

Some SIPPs allow investment in high risk, complex Unregulated Collective Investment Schemes, which might include investment in precious metals or jewels, overseas property developments, forestry and film schemes. If the underlying investments in a SIPP are unregulated, then the client may not have recourse to the Financial Ombudsman Service or Financial Services Compensation Scheme.

The individual is also a shareholder and a director of an unregulated firm which has been introducing business to his FCA authorised firm. He has therefore benefitted from the advice to switch in two ways, having received both fees for the advice given and commission paid by the authorised firm to the introducer firm. Another allegation made by the FCA is that he has failed to disclose this conflict of interest to clients, or take steps to manage and mitigate the conflict.

The FCA believes that the individual is in breach of Principle 7 of the FCA’s Statement of Principles for Approved Persons, which says that:

“An approved person performing a significant influence function must take reasonable steps to ensure that the business of the firm for which he is responsible in his controlled function complies with the relevant requirements and standards of the regulatory system.”

Following the publication of a Warning Notice, the individual or firm concerned is entitled to make representations to the FCA’s Regulatory Decisions Committee. This Committee will then decide whether to issue a Decision Notice, i.e. it will decide whether it is appropriate to take enforcement action against the individual.

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.


FCA objects to individual’s bid to acquire a stake in wealth manager

The Financial Conduct Authority (FCA) has issued a Final Notice formally indicating that it wishes to object to a bid by Lynda Jayne Croome to purchase a 33% stake in Nottingham-based wealth management firm Ubiety Wealth Management Limited. The regulator has taken this stance owing to Ms Croome’s failure to fully disclose information regarding the circumstances of her departure from previous roles, and believes that this demonstrates her lack of integrity.

Ms Croome was previously a director and financial adviser of an unnamed firm, referred to as Firm A in the Notice, and was also an adviser at firm B. She was ultimately dismissed from both roles.

In respect of her time with Firm A, she incorrectly informed the FCA that she resigned from the role of her own volition. With regard to Firm B, she admitted having been dismissed, but played down the seriousness of her wrongdoing in communications with the FCA.

The actual reason for her dismissal from Firm B was that she signed money laundering verification certificates saying both that she had met the client and that the photographic ID provided was a true likeness, when in fact she had not met the client in question. However, Ms Croome told the FCA that her offence was simply “completing documentation incorrectly,” suggesting that her errors were administrative rather than anything that suggested misconduct.

The FCA also comments that Ms Croome failed to accurately report the date on which she became a director of Ubiety. On her application to the FCA she gave the date as June 2 2014, when evidence from Companies House shows that she was registered as a director on February 11 2014.

The FCA has a statutory objective to protect and enhance the integrity of the UK’s financial system. This objective includes an obligation to ensure that the system is not used to facilitate financial crime. In the Notice, the FCA cites this statutory objective as an additional reason for objecting to Ms Croome’s plans to acquire a stake in Ubiety.

Section 178 of the Financial Services and Markets Act 2000 says that:

“A person who decides to acquire or increase control over a UK authorised person must give the Authority notice in writing before making the acquisition.”

The Act goes on to say:

“Where the Authority receives a section 178 notice, it must determine whether to approve the acquisition to which it relates unconditionally; or propose to approve the acquisition subject to conditions, or object to the acquisition.”

Val Smith, chairman of the FCA’s regulatory transactions committee, commented:

“The issues of non-disclosure raise serious concerns in relation to the integrity of Ms Croome.”

This case illustrates the importance placed on the fitness and propriety of senior individuals at authorised firms. Additional requirements in this area will arrive when the Senior Managers & Certification Regime comes into force, which will be in March 2016 in the banking industry and in 2018 in other authorised firms. The Regime will essentially transfer the responsibility for assessing individuals’ fitness & propriety from the FCA to the firm.

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.


CMC loses authorisation for multiple breaches of the rules

The Claims Management Regulator at the Ministry of Justice (MoJ) has published details of the action it has taken against Swansea-based claims management company (CMC) Falcon & Pointer Limited.

The MoJ has cancelled the company’s authorisation after the CMC was found to have made almost 40 million automated calls over a three month period to promote its payment protection insurance claims services. Automated calls are only permitted where the recipient has given express consent to receiving them, and including an option within the call to decline future marketing calls is not sufficient.

Falcon & Pointer also pressured clients into signing contracts, and took payments, without allowing the clients time to understand the contract terms.

The company was in fact in breach of as many as six sections of the Conduct of Authorised Persons Rules.

General Rule 2 requires companies to conduct themselves responsibly and with diligence. The company was in breach of four of the requirements of Rule 2: making reasonable attempts to establish the merits of a claim, making case specific representations on each claim, maintaining necessary records and establishing that leads from third parties have been legitimately obtained.

General Rule 5 simply asks that companies observe all applicable laws and regulations.

Client Specific Rule 1b requires companies to ensure that their service meets the needs of the client.

Client Specific Rule 4 prohibits cold calling in person; and requires all marketing activity to comply with the Direct Marketing Association (DMA)’s Code and other DMA guidance.

Client Specific Rule 11 concerns contracts between CMCs and their clients. Requirements in this area include that contracts must be signed by the client, and that payment cannot be taken until the contract has been signed. Before a contract is agreed, the following information must be provided to the client in a durable medium:

• The risks of making a claim, including the risk of losing money, or the risk of being subject to legal action
• The nature of the service to be provided
• Any additional contracts, such as for insurance or loans, that the client will be requested to enter into
• The company’s charges, giving a cash example if this is calculated on a percentage basis
• Details of any referral fees paid

Finally, Client Specific Rule 16 requires companies to allow clients to exit contracts at any time. Any charge levied on withdrawal must be reasonable and must reflect the work undertaken by the company on the client’s behalf.

Kevin Rousell, head of the Claims Management Regulator, said:

“Falcon & Pointer has demonstrated the worst excesses of the industry. This firm clearly set out to plague the public and rip off consumers. They ignored warnings by us and the Information Commissioner’s Office, and today have had their licence revoked as a result of that wilful ignorance.”

The Government is proposing new legislation that will make it illegal for companies to hide their number when making marketing calls. Any breach of the proposed new law would result in a fine of up to £500,000.

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.


Adviser trade body calls for firms to have an independent FOS appeals process

Financial advisers’ trade association the Association of Professional Financial Advisers (APFA) has called for authorised firms to be allowed to appeal Financial Ombudsman Service (FOS) decisions to an independent body.
At present, if a firm has a complaint upheld against them by an FOS adjudicator, then their only option is to appeal to an ombudsman at the FOS, i.e. another employee of the same organisation.
Writing on the Association’s website, APFA director general Chris Hannant said that “not only must justice be done, but it must be seen to be done.” He acknowledged the need for consumers to have access to a dispute resolution service that avoided the need to use the legal system, but suggested that the appeals process may not work in the interest of firms when he commented: “I think there is a problem in the close working of ombudsmen and adjudicators.”
Firms can appeal to an independent tribunal in the case of Financial Conduct Authority (FCA) enforcement decisions, and firms and consumers who make complaints about the FCA have access to an independent Complaints Commissioner. Mr Hannant appears to be calling for a similar body to be established to review FOS decisions.
Mr Hannant went on to say that he believes one of the reasons why some form of simplified advice process has not been established is a fear of how the FOS would handle a complaint about a sale made under the simplified process. “It is clear one of the primary obstacles is the fear, in the event of a complaint, that the service would be treated as if it was a full advice service by FOS,” said Mr Hannant.
APFA made its call for an independent appeals process as part of its evidence to the Government’s Financial Advice Market Review – a comprehensive review of the advice market and the barriers preventing widespread public access to financial advice.
Mr Hannan’s comments are similar to those made in a recent speech by APFA chairman Lord Deben (the former MP John Gummer) who said firms should be able to appeal FOS adjudications to judges.
According to a recent interview given by Caroline Mitchell, the lead ombudsman at the FOS, the uphold rate for financial advisers was just 40% in the last full financial year, below the uphold rate of for all cases considered by the Service. However, many advisers can cite examples of individual cases where they believe the FOS has unfairly sided with the client. One of the advisers’ frustrations is that the FOS can make general judgements about whether the firm’s conduct was ‘fair and reasonable’, and can thus find against a firm even if they did not actually break any of the FCA’s rules.
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.


FCA provides update on payday lender’s redress programme, as the lender enters liquidation

On January 6 2016, former payday lender Ariste Holding Limited (which traded as Cash Genie) updated customers on its redress programme, saying that it had now attempted to contact all affected customers. Anyone who believes they are due a compensation payment but who has not been contacted is urged to contact the firm immediately.
In August 2015, it was announced that Cash Genie was to pay £20.3 million in redress – £10.3 million of write offs and £10 million in cash payments – to some 92,000 customers. The firm voluntarily notified the Financial Conduct Authority (FCA) regarding issues with the firm’s fee charging practices and its stance on rolling over loans.
It is understood that the firm has been unable to contact some 12,000 customers, who are collectively owed around £1.5 million.
The issues that are the subject of this redress date right back to when the company started trading in September 2009, and in some cases the practices continued until early 2014.
Cash Genie’s unfair practices included:
• Charging customers £50 to have their debts transferred to another firm, even though this other firm was a sister firm and no costs were incurred by making the transfer
• Rolling over and re-financing loans without customers’ consent, and without conducting the necessary affordability checks
• Using banking details supplied when customers applied via the websites of other Ariste brands to collect sums owed on Cash Genie loans, without the customer’s consent
• Applying additional fees for customers who had not repaid after 12 months, even though the required annual statement had not been provided
Cash Genie is taking the following steps to compensate affected customers:
• Writing off fees and charges incorrectly applied, or taken without authorisation
• Writing off or refunding rollover interest if the action to roll over the loan was inappropriate
• Where refund payments were taken without authorisation, writing off the entire loan
• Writing off interest and fees charged after the point at which the annual statement should have been provided
The firm has not offered new loans since September 2014.
Since the FCA action, the firm has entered into voluntary liquidation, and is now being administered by liquidator RSM Restructuring Advisory LLP. However, the payment of compensation is unaffected, and customers with Cash Genie loans should continue to make repayments as normal, and should contact the firm if they are experiencing repayment difficulties.
The sister firm Twyford Developments Limited has also been liquidated.
Steven Law, a partner at RSM, said:
“In this case Cash Genie has voluntarily entered into a solvent liquidation, meaning there is enough capital left in the business to redress all affected customers. We have been working closely with Cash Genie and its sister company, and are keen to find and pay those remaining customers.”
Money Advice Trust chief executive Joanna Elson OBE, said:
“Few will mourn the liquidation of this rogue payday lender, which the FCA rightly took action against in July after uncovering deeply unfair treatment of customers in financial difficulty.
“It is crucial that anyone who has taken a loan from Cash Genie claim the compensation they may be due. I would strongly encourage former customers to contact the phone line that has been set up as soon as possible.”
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.


FCA releases latest data on how consumers access their pension

The Financial Conduct Authority (FCA) has published its latest data on how customers are accessing their pension funds. Its figures cover the third quarter of 2015, and are based on figures from 95 pension and retirement income providers that collectively represent 95% of pension plan assets.
Between July and September 2015, 178,990 pension plans were accessed by customers in some way, a reduction of 13% on the second quarter figure of 204,581. 120,969 pension plans were fully cashed out, although this includes customers who are already accessing their pension prior to the second quarter, and then chose to cash out during the second quarter. The FCA has thus corrected an erroneous statement it issued earlier, when it said that 68% of customers were fully cashing out their pensions (a percentage arrived at by dividing 120,969 by 178,990). 88% of the full cash withdrawals were of ‘small pots’ worth £30,000 or less, and only 4% of the full withdrawals were of more than £50,000.
The proportions of customers using each of four methods of accessing their funds were:
• 60,600 (34%) made use of the Uncrystallised Fund Pension Lump Sum (UFPLS) method to make a partial or full withdrawal
• 54,604 (30%) used a drawdown plan to partially or fully access their funds
• 23,385 (13%) purchased an annuity
• 40,401 (23%) made a full withdrawal of a small pot
The annuity figure is significantly higher than that reported in the FCA’s data for the first quarter. However, this may not mean that more annuities are being purchased, as the FCA says that some firms previously mis-interpreted the regulator’s instructions and under-reported the number of annuities sold.
One statistic in the report that has worried consumer groups is that only 32% of customers whose plan offered a Guaranteed Annuity Rate took up this guarantee. In some cases, customers accessed their funds before the minimum age at which the GAR applied. However, most of the GARs given up applied to smaller pots – when we look at pots worth more than £30,000, then a majority (59%) of GARs are being used.
Generally speaking, those using the UFLPS method are not making large withdrawals. 71% of partial withdrawals were of less than 2% of the total fund. However, those aged 55-59 are the most likely to make a larger withdrawal, when intuitively it might be expected that the youngest pensioners would make the smallest withdrawals, as their pension monies need to last the longest. 27% of customers in the 55-59 age group withdrew more than 10%, and most of these individuals will expect their retirement to last for much longer than 10 years.
Unsurprisingly, customers with larger pension pots are more likely to take regulated financial advice on their options. A majority of customers (58%) entering drawdown, and 37% of annuity purchasers, sought this type of advice. 17% of customers used the free Pension Wise guidance service.
Many customers are still not shopping around. 58% of those entering drawdown did so with their existing pension provider, while 64% of annuity purchasers took the offer made by their pension provider.
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.


Lead ombudsman calls for firms to produce more concise suitability reports

Many financial advice firms that produce long suitability reports say they do so to defend themselves against having complaints upheld by the Financial Ombudsman Service (FOS).

A desire to produce a robust defence document should the FOS be asked to adjudicate on the case often over-rides any thoughts of producing a more concise document that a client would be more likely to read, in spite of the well-known requirement for firms to treat their customers fairly.

However, the lead ombudsman at the FOS has now cast doubt on the benefits of producing long reports. Caroline Mitchell commented:

“The report doesn’t have to be the length of ‘War and Peace’ – the consumer won’t read it if it is – but it needs to explain why that particular product is right for that particular consumer at that particular time.

“Risk warnings are most effective when they are directed at that consumer in terms of the investment being considered, rather than being lost in some small print.”

Given that the FOS makes adjudications on what it believes is ‘fair and reasonable’, it was always questionable whether they would be swayed by one sentence on page 30 of a 40 page report as evidence that an issue had been covered with the client.

According to the Financial Conduct Authority, the only information that needs to be included in a suitability report is:

• The client’s aims and objectives
• How the recommendation meets these aims and objectives
• A balanced view of the main features and risks of the recommended products
• Reference to any need areas not addressed
• A like-for-like cost comparison where the adviser is recommending that a new product is taken out to replace a new one

The regulator recommends using bullet points rather than long sentences to highlight important information, and if firms want to include generic technical information, they can put this in an appendix at the end.

There has never been a requirement to include the following in a suitability report:

• Basic personal information about the client, such as their age, income and occupation
• Information that is available in other documents, such as the firm’s client agreement, or the key features document or illustration
• Detailed information about the recommended product providers
• Comprehensive descriptions of the features of products that were not recommended

Other issues mentioned by Ms Mitchell were that the FOS uphold rate for financial advisers was just 40% in the last financial year, below the uphold rate of for all cases considered by the Service; and that advisers should not worry about the risks of insistent client business provided that the file clearly documented the reasons for the adviser’s recommendation, the client’s reasons for disregarding this advice and the risks the client is taking in going against the recommendation.

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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