29Jun

FCA outlines differences in the experience of financial services between people in different areas of the UK

The Financial Conduct Authority (FCA) has released data showing how people’s experience of financial services differs depending on where in the UK they live. These data are the latest to be published from the regulator’s far-reaching Financial Lives study, which examined the way in which some 13,000 consumers use financial services.

Some of the key findings from the latest report include:

  • Of the UK adults who do not use the internet, 70% live in rural areas. In rural areas, only 23% of people use mobile banking, compared to 45% in urban areas; and only 54% in rural areas use internet banking, compared to 72% in urban areas; in spite of the fact that a number of rural bank branches have closed in recent years
  • 7% of adults in urban areas rely on some form of high-cost credit, compared to 5% of adults in rural areas. Scotland and Yorkshire and the Humber were regions where people were more likely to take out this form of credit. People in urban areas are also more likely than their rural-dwelling counterparts to have been overdrawn in the last 12 months (27% compared to 20%) and to have an outstanding credit card debt (20% compared to 14%)
  • For 51% of retired people in rural areas, the state pension is their main source of income, however the equivalent figure for the entire UK is 44%, and for urban areas it is just 37%
  • 27% of those based in rural areas said they were ‘highly satisfied’ with their general financial circumstances, compared to 20% of people in urban areas across the UK, and just 16% of those resident in London
  • As many as 50% of adults display some signs of possible vulnerability, but this rises to 54% in rural areas and 55% in the North West of England
  • 39% of UK adults say that they trust financial advisers to act in the interests of their clients, however only 6% have actually accessed professional advice in the last 12 months. When asked to rate the honesty of the financial services industry as a whole, only 31% had a favourable view of financial firms
  • 57% of people have either no cash savings or have savings of less than £5,000. This rises to 67% of the population in Northern Ireland and 66% of people in the North East of England
  • 71% have no form of investments, rising to 78% in Northern Ireland

Andrew Bailey, FCA Chief Executive, said:

“This survey shows just how different the experience of financial services is for consumers across the country. That’s important for us, as we shape financial services policy. But it is also important for firms, as they decide how best to serve their customers.”

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

28Jun

Government rules out extension of cold calling ban, as news of a possible delay emerges

As of June 26, the Government is still to table its proposals for a ban on pension-related cold calling.

The legislation providing for the ban, the Financial Guidance and Claims Act 2018, has already passed into law, however the specific regulations relating to the cold calling ban have not yet been presented to Parliament. Under the terms of an amendment to the Act, if these regulations have not been presented by the end of June, then Secretary of State for Work and Pensions Esther McVey MP must explain the delay in the House of Commons. It is understood that the Government has had difficulty finding parliamentary time to debate the issue.

When the Act became law, it was widely reported in the media that “pension cold calling will be banned by June.”

The Government has previously said of the amendment to the Act:

“This new clause inserts a power for the Secretary of State to make regulations (subject to the affirmative procedure) banning unsolicited direct marketing relating to pensions. If the power is not exercised by June, the Secretary of State must explain to Parliament why not.”

Tom Selby, senior analyst at specialist pensions firm AJ Bell, said:

“The government needs to get its act together and ban pensions cold calling now. It is well over 18 months since the Treasury announced with some fanfare its decision to introduce the measure as part of an important package of reforms designed to protect savers. The progress since then has been depressingly slow.

“While Brexit is clearly draining time and resource from Parliament, this measure is a vital part of the fightback against the scourge of pension fraud. Indeed, I had hoped by now we would be debating further potential interventions, rather than kicking the government to implement something which should have been in place long ago.

“Hopefully this delay is simply due to a lack of time rather than anything more sinister and an effective ban will be in place shortly.”

Once it is in force, the ban will be enforced by the Information Commissioner’s Office. Under the terms of the ban, firms will be prevented from making marketing calls, or sending marketing texts and emails, unless one of two exemptions applies:

  • The individual is an established client of the firm making the marketing communication, or
  • The individual has clearly requested information from the firm

The Government has ruled out suggestions that the cold calling ban should be extended to cover unregulated introducers – firms who would then refer the consumer to an authorised advisory 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

26Jun

FCA regulation proposed for funeral plan sector

The remit of the Financial Conduct Authority (FCA) has certainly increased significantly in recent years. Now the Government is proposing to add the pre-paid funeral plan sector to the areas which the FCA will regulate. The proposals also advocate bringing the sector under the jurisdiction of the Financial Ombudsman Service.

The Government press release says that the proposals are designed “to stop grieving families from being ripped off.”

At present, the sector is subject to voluntary regulation by the Funeral Planning Authority (FPA), and around 95% of the sector has signed up to its Code of Practice and its Rules. However, the Government notes that the FPA does not have the power to stop an errant firm from trading – it can merely suspend the firm’s membership of the Association, or impose a fine of no more than £5,000, and these powers have never actually been used.

The press release also makes reference to research conducted by Citizens Advice Scotland and by Fairer Finance – a consumer group that seeks to deliver a fairer financial services market for consumers – and says that this has shown that “people at their most vulnerable are being pressured, harassed and misled by some pre-paid funeral plan providers.”

John Glen MP, Economic Secretary to the Treasury said:

“I’m appalled by the lengths that some dishonest salesmen have gone to in order to sell a funeral plan. It breaks my heart to think that our oldest and most vulnerable are being pressured into funeral plans that leaves their grieving families out of pocket.

“There are thousands of pre-paid funeral plans bought each year, and most providers are fair and legitimate. But tougher regulation will ensure robust standards are enforced for all plan providers and protect individuals and their families if things go wrong.”

James Daley, Managing Director of Fairer Finance, said:

“Funeral plans are an important and valuable product, and we hope regulation of this sector will give responsible companies the chance to thrive and give consumers the necessary reassurances they need to buy in confidence.”

The FPA says that it “welcomes the government consultation into the regulation of funeral plans”. However, it opposes FCA regulation, suggesting that this will reduce competition and increase costs for customers. Instead, it is calling for the Government to make it compulsory for funeral plan providers to register with the FPA, instead of the current voluntary regime. In its earlier response to the Fairer Finance study, the Association noted that the conduct of FPA members was found to be much better than that of the firms who did not sign up to its voluntary Code.

The consultation closes on August 1.

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

25Jun

FOS finds against adviser who failed to explain his ongoing services

The Financial Ombudsman Service (FOS) has instructed an adviser to refund £4,250 to a client, after finding that the adviser had failed to be transparent over what he was entitled to expect in return for paying an ongoing service charge.

The central concern of Mr W’s initial complaint was that his adviser failed to make him aware of the existence of ongoing service charges when advice was given to switch his pension to another provider.

The FOS rejected this assertion, saying that the adviser had provided sufficiently clear information regarding the existence of ongoing charges. However, the independent complaints adjudication body still found in favour of Mr W, saying that his adviser failed to fully explain the level of ongoing service that was available.

One of the key reasons that ombudsman Ivor Graham reached this decision was that the adviser had used the potentially confusing term ‘external investment charge’, instead of the normal terminology of ‘ongoing advice charge’.

The adviser said that the services available to Mr W, should he have chosen to use them, included:

  • An unlimited number of face-to-face conversations with his adviser
  • Unlimited telephone conversations with the adviser
  • Use of tools made available by the pension provider, including a pension review service, an at retirement tool and a risk profiler

However, Mr W argued that he did not use these services as he was confused as to what was available to him.

In his published decision, Mr Graham said:

“I uphold this complaint and I direct [ADVISER NAME] to recompense Mr W.

“I am satisfied that [ADVISER NAME] gave Mr W information about both the initial and ongoing charges. Furthermore, I have seen nothing to support the view that the advice was unsuitable.

“However, the investigator identified that there was some confusion on the level of service which would be provided as a result of Mr W paying the ongoing charges. It seems Mr W didn’t make use of these services and that may have been as a result of the confusion in the terminology used e.g. ‘external investment charge’ rather than ongoing advice charge.

“So, while I don’t believe Mr W wasn’t told about the charges I don’t think he was necessarily aware of what these were for.”

This case illustrates the importance of being totally transparent with clients about exactly what the adviser will provide in return for any fee paid by a client.

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

22Jun

FCA bans adviser for fabricating qualification evidence

For at least the third time in the last three years, the Financial Conduct Authority (FCA) has taken enforcement action against an individual who fabricated evidence of his professional qualifications. As in the previous two cases, the individual – a director of a Northern Ireland advice firm – has been banned from working in financial services in any capacity. He has also had his permission to carry out the director function cancelled and has been fined £29,300.

Since the Retail Distribution Review (RDR) requirements came into force in 2013, investment and pension advisers have been required to hold a suitable QCF level 4 Diploma qualification in financial advice. Acceptable examples include the Chartered Insurance Institute (CII) Diploma in Regulated Financial Planning and the Diploma for Financial Advisers offered by The London Institute of Banking & Finance (LIBF), previously known as the Institute of Financial Services.

The RDR also requires advisers to obtain a Statement of Professional Standing (SPS) on an annual basis. The CII and LIBF are two of the organisations who can issue this Statement, and they will only do so if satisfied that the adviser holds the required Diploma and has carried out sufficient Continuing Professional Development during the relevant 12-month period.

In this case, the FCA acted after discovering that the individual fabricated an SPS on two occasions. He would have been unable to obtain an SPS through the usual channels as he had not obtained the required Diploma qualification and was therefore giving advice without being qualified to do so.

The FCA’s Final Notice says that he “knowingly made numerous false and misleading statements to the Authority concerning his qualifications and experience.” It adds that “[NAME]’s misconduct amounts to a failure to act with integrity in breach of Statement of Principle 1 of the Authority’s Statements of Principle.”

The firm, of which the individual in question was the sole director, was authorised by the FCA to give insurance and mortgage advice in February 2014. One year later, it applied to add investment advice permissions to its list of permitted activities. At the same time, applications were made for the firm’s director to carry out the roles of CF10 (Compliance Oversight) and CF30 (Customer).

In support of these applications, he submitted two SPS documents, along with a CV which stated that he had passed the CII’s Diploma in 2012. However, in later interviews with the FCA, he confessed that:

  • The CII had never provided him with an SPS
  • The two SPS documents he provided had been fabricated
  • He claimed to have held the CF30 function at another firm right up until December 2014, when in fact he only held this permission until January 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

21Jun

FCA director asks if industry has improved in the 10 years since the crisis

Mark Steward, Director of Enforcement and Market Oversight at the Financial Conduct Authority (FCA) addressed the Banking Litigation & Regulation Forum in June 2018. Noting that it was ten years since the 2008 financial crash, his speech was entitled “Has the industry improved ten years on?”

Mr Steward began by speaking of his personal experiences of the global crisis when working for the Hong Kong regulator. He described how “public anger and protest was directed not only at banks who had sold this paper in large volumes, but also at regulators and the financial system in general”, and added that “confidence and trust, as well as savings, were the first casualties.”

Now, having taken a senior role at the FCA in the meantime, the speaker posed the question of “whether the public anger that erupted ten years ago has entirely dissipated which brings me to today’s main question of whether we are now in a better position.”

Much of the rest of the speech was devoted to explaining the approach the FCA now takes, and to documents it has issued recently such as the Mission, the Approach to Supervision and the Approach to Enforcement.

Regarding his organisation’s Mission, the FCA director said that “our Mission is to serve the public interest through the objectives given to us by Parliament in the legislation that we administer,” and added that the FCA “will focus on harm or potential harm to consumers, markets and firms as the springboard for regulatory intervention.”

Next, he highlighted that the consultation periods for the Approach to Supervision and Approach to Enforcement close on June 21.

Some of the discussion points in the Approach to Enforcement that were referred to in the speech included:

  • The FCA needs to treat the detection of serious misconduct as a priority, as failure to detect misconduct leads to a loss of confidence and trust in the marketplace
  • The over-riding principle of the FCA’s approach to enforcement will be the need to achieve fair and just outcomes
  • The FCA is prepared to impose less severe sanctions on firms who voluntarily elect to pay redress to disadvantaged parties
  • The FCA will explain the thinking behind its enforcement decision making so that its actions can educate other firms

Linking the themes of enforcement and supervision, Mr Steward observed that “the incidence of misconduct can be reduced, but not wholly eradicated by better conduct and regulation.” He also suggested that “[the FCA’s] ability to anticipate better, to detect and to manage what has gone wrong, especially our ability to detect suspected misconduct, as early as possible, needs to improve.”

Returning to the central question of his speech, as to whether the industry has improved in the last ten years, Mr Steward concluded by saying:

“I still hear the noise. The memory is not painful at all: for me, it is a good and helpful reminder of what is really at stake.”

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

19Jun

FCA issues data bulletin on financial advisory firms’ revenue & costs

For its latest data bulletin, the Financial Conduct Authority (FCA) concentrates on the retail intermediary sector, using data submitted by around 12,000 advisory firms via the Retail Mediation Activities Return. The figures largely relate to the calendar year 2017, and how it compares to 2016.

Firms’ revenues from retail investment and home finance activities increased significantly when the figures for 2017 are compared to the equivalent statistics for 2016, with growth of 21% and 26% respectively being demonstrated in this area.

Total revenues reported by advisory firms grew by 22% over the year. Revenues from mortgage broking were up by 23%, but those reported by insurance intermediaries only rose by 7%.

20% of advisory firms’ revenue still comes from commission – it is to be assumed that this income comes largely from mortgage and insurance business.

The number of clients paying for an ongoing advice service from an authorised firm rose by 36% over the year, and now stands at 2.8 million. Firms also provided one-off advice to 1.2 million clients during 2017.

96% of advisory firms reported that they made some form of pre-tax profit, and the sector’s total pre-tax profits rose by 23%. The average pre-tax profit margin at sole trader advisory firms was as high as 43%, whilst as many as 28% of the firms with 50 or more advisers actually made a loss during 2017.

Other statistics from the bulletin include:

  • 89% of firms said they had five or fewer advisers
  • 84% say they still provide fully independent advice, and this figure is largely unchanged from the 83% reported the previous year. However, whilst only 14% of firms described their advice service as restricted, these firms generated 40% of the sector’s total revenue from adviser charges, suggesting that it is often the larger firms that choose to go restricted, while the smallest firms stay independent
  • More than a third of firms use a percentage of the investment amount as their main charging method, and this method is more than twice as popular as the fixed fee method, where set amounts are charged for completing various stages of the advice process

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

18Jun

FCA unveils proposed rules for CMC regulation, and reveals switchover date

The Financial Conduct Authority (FCA) has unveiled its proposals for the rules claims management companies (CMCs) will need to follow once the FCA has taken over the existing responsibilities of the Claims Management Regulator.

For the first time, we also have a definitive date for the switch. The FCA will regulate, supervise and take enforcement action against CMCs with effect from April 1 2019. Claims companies based in Scotland will also experience formal regulation for the first time from April 2019 – there is currently no regulatory authority supervising claims companies based north of the border.

One of the most significant changes being proposed by the FCA concerns pre-contract disclosure. Before a CMC agrees a contract with a customer, they will be required to provide a summary document, which must include:

  • An illustration or estimate of the fees to be charged
  • An overview of the services the CMC will provide on a customer’s behalf, and the tasks customers will need to undertake themselves under the arrangement with the CMC
  • A statement to the effect that the customer is not required to use the CMC’s services, and that the same claim can be presented free of charge were the customer not to use the company’s services

The obligation for CMCs to keep customers informed as to the progress of their claim will encompass a requirement to provide updated estimates of potential fees, where appropriate.

Where a customer could pursue a do-it-yourself claim for free, this also needs to be highlighted on any marketing material issued by a CMC that relates to ‘no win no fee’ services. If a company is claiming to offer ‘no win no fee’ services, then marketing material must also give a prominent indication of the fees the CMC will charge, or how they would be calculated.

Another very significant change will be the need for companies to record all calls with customers and keep the recordings for a minimum of 12 months. They must also maintain records of text message and email communications.

Where CMCs purchase leads from third parties, they will need to carry out sufficient due diligence to ensure both that the lead generator is authorised and that it has appropriate systems and processes in place to ensure compliance with relevant data protection, privacy and electronic communications legislation. CMCs will need to keep a record of these checks.

The Financial Ombudsman Service will take over from the Legal Ombudsman as the body that can adjudicate on complaints about CMCs when the customer disagrees with the company’s handling of the matter.

Although a separate consultation on the issue will be conducted at a later date, this consultation paper makes it clear that the FCA’s Senior Managers and Certification Regime will apply to CMCs. This Regime allows the FCA to hold key individuals within companies personally responsible for compliance failures within their business area.

Some of the FCA’s high-level standards that will apply to CMCs include:

  • The Principles for Business – such as the need to treat customers fairly, to provide information that is ‘clear, fair and not misleading’, and to co-operate with the FCA
  • The Threshold Conditions – including the need to have adequate financial resources, and for the company to be ‘fit and proper’
  • The need to have systems and controls in place to ensure compliance with regulatory obligations

On an annual basis, CMCs will need to submit both a Complaints Return and a CMC001 form to the FCA. The latter asks for information on: staff numbers, client money held, prudential resources, professional indemnity insurance, detailed product information and information on third party generator leads.

CMCs will need to hold prudential resources of £10,000 for Class 1 CMCs (those with annual turnover of £1 million or above) and £5,000 for Class 2 CMCs (turnover below £1 million), with a requirement to hold an additional £20,000 if the company handles client money.

CMCs that are currently authorised by the Ministry of Justice can register for temporary permissions with the FCA – this must be done prior to April 1 or else the company will lose its authorisation entirely. Once temporary permissions have been granted, the company must then apply for full authorisation from the FCA during a specified application period – the dates for which are yet to be confirmed.

CMCs entering the market after April 1 cannot benefit from the temporary permissions regime, and so cannot commence trading until the FCA has approved a full authorisation application.

The FCA welcomes responses to the consultation up until August 3 2018. Final rules will be published in the fourth quarter of 2018.

CMCs are also reminded that the new caps on fees which can be charged, which include a ban on all upfront fees for payment protection insurance claims, come into force before the FCA regime commences. These fee caps apply from July 1 2018.

Andrew Bailey, Chief Executive of the FCA said:

“A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm. But the market doesn’t always work as it should and poor conduct persists across the sector.

“We want CMCs to be trusted providers of high quality, good value services that can truly help consumers. A key element of our approach to regulation will be ensuring that consumers are both protected and treated fairly. The proposals we have outlined today are integral to achieving that aim.”

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

18Jun

CMCs banned over various issues regarding customer interactions

We may now know that there will be a change of claims management regulator on April 1 2019, with the Financial Conduct Authority’s tougher regime due to commence on this date. However, up until next April the Claims Management Regulator at the Ministry of Justice (MoJ) will continue to take action against companies who fail to meet their regulatory obligations.

The early days of June 2018 have seen the MoJ give details of action taken against two claims management companies, both based in Swansea and both active in the financial claims arena. In both cases the regulator has imposed the most serious sanction available – removing the companies’ authorisation to carry out claims management services.

The only sections of the MoJ rulebook breached by both companies were:

  • General Rule 5 – the over-riding requirement to observe all relevant regulations and laws
  • Client Specific Rule 1a – the general obligation to act fairly and reasonably in dealings with clients
  • Client Specific Rule 1c – the need to ensure all information provided to clients is is clear, transparent, fair and not misleading

The other rules breached by the first company were:

  • General Rule 2d – the need to maintain appropriate records and audit trails
  • General Rule 8 – which requires companies to operate a complaints scheme that meets the MoJ requirements
  • Client Specific Rule 2 – which requires that promotional activity complies with relevant legislation and codes of practice
  • Client Specific Rule 18 – the need to keep clients informed of the progress of their claim
  • Complaints Handling Rule 10d – the stipulation that responses to client complaints must address adequately the subject matter of the complaint and appropriate redress should be offered where appropriate
  • Complaints Handling Rule 15 – the requirement for companies to co-operate with the Legal Ombudsman when complaints are referred to that organisation
  • Complaints Handling Rule 16 – the need for companies to comply with requests from the Ombudsman for information and/or documentation
  • Complaints Handling Rule 17 – the requirement that companies must accept any instructions made by the Ombudsman, such as an instruction to pay redress to a particular client

The other rules breached by the second company were:

  • General Rule 11 – which asks that companies comply with the MoJ’s efforts to supervise and regulate them
  • Client Specific Rule 6d – which prevents companies from stating that they have been approved by the Government or are connected with any government agency or any regulator
  • Client Specific Rule 12 – the stipulation that companies cannot state or imply that using their services will improve the client’s chances of a successful claim
  • Client Specific Rule 15 – the requirement to give clients a 14 day ‘cooling off’ period after signing any agreement

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

15Jun

ICO head says May 25 is a ‘beginning’ not an ‘end’ for GDPR

The European Union’s General Data Protection Regulation is now law, as is the Data Protection Act 2018 that means that the provisions of the Regulation will be enshrined in UK law post-Brexit.

Firms should have carried out extensive work prior to the GDPR implementation date. They should have made sure that their privacy policies meet the new requirements; that procedures for obtaining consent for data processing are in line with GDPR obligations; that they are totally transparent with their customers about what data is collected and who it might be shared with; and their staff should have been trained on what the new law means in practice. Some firms may also have been required to appoint a dedicated Data Protection Officer.

However, just because firms may have done a lot of work preparing for GDPR does not mean that they can rest on their laurels now the implementation date has passed. In a blog on her organisation’s website, Information Commissioner Elizabeth Denham commented that the introduction of the new laws was “not an end point, it’s just the beginning.”

Ms Denham added:

“Effective data protection requires clear evidence of commitment and ongoing effort. It’s an evolutionary process for organisations –no business, industry sector or technology stands still. Organisations must continue to identify and address emerging privacy and security risks in the weeks, months and years beyond 2018.”

As well as stressing the need to identify and mitigate data protection risks in the future, her blog post also highlighted how the new law has increased the responsibility firms have to protect consumer data. Ms Denham commented:

“The legislation requires increased transparency and accountability from organisations, and stronger rules to protect against theft and loss of data with serious sanctions and fines for those that deliberately or negligently misuse data.”

Firms who breach data protection law can now be fined up to the greater of £17 million and 4% of global turnover.

Putting the customer first was a common theme of her blog post. GDPR and the 2018 Act give consumers new rights to view their data free of charge, and to request that data is amended or erased where appropriate.

On this subject, the Commissioner commented:

“The new laws provide tools and strengthened rights to allow people to take back control of their personal data.

“And although the ICO will be able to impose much larger fines – this law is not about fines. It’s about putting the consumer and citizen first. Telling people we can’t lose sight of that.”

Finally, Ms Denham emphasised that her organisation remains willing to assist firms to comply with their obligations, with considerable amounts of guidance and resources available on the Information Commissioner’s Office website.

In conclusion, Ms Denham said:

“Governed by these laws, organisations will have the incentive and the opportunity to put people at the heart of their data services. Being fair, clear and accountable to their customers and employees, organisations large and small will be able to innovate with the confidence that they are building deeper digital trust.”

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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