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See Scott Robert’s regulatory roundup for the second half of May:
- The Financial Conduct Authority has released a consultation paper on ‘Preventing claims management phoenixing’.
Within the consultation paper the FCA are proposing to clamp down on individuals who liquidate their financial services business and then set up a Claims Management Company with the intention of pursuing complaints against the firm it previously liquidated to the FSCS. The FCA seeks to prohibit this activity by preventing firms managing (and lead generating) any claim which have ‘relevant links’ to their previous business. For example, a director of a CMC who used to manage a previous firm which mis-sold pensions is a ‘relevant link’ thus, under FCA proposals, that CMC firm would be unable to pursue that claim due to a ‘relevant link’ being identified. Some examples of ‘relevant links’ the FCA have suggested are, a spouse or familial connection, previous employment or the director of the previous firm receiving remuneration from the CMC. The consultation paper in full can be found here.
- Firms are no longer able to apply for change of Legal Status Applications. Instead firms will need to submit a new authorisation application.
From the 1st of June 2021, firms will no longer be able to retain their authorisation if they change their legal status. Firms will need to reapply through to FCA Connect portal if they wish to continue regulated activity and change their legal status. The FCA’s rationale for this change is that by making firms reapply the process will be more straightforward as Legal Status Applications were often incomplete, delaying the assessment window. There are a few exceptions to reapplying to the FCA for authorisation such as Partnerships becoming Limited Partnerships and Private Limited Companies becoming Public Limited Companies, these changes do not require a new authorisation application. For more information please see the FCA’s webpage here.
- The FCA has released a policy statement in response to its General Insurance Market Study where it plans to prohibit ‘Price Walking’.
In September 2020 the FCA carried out a market study that found millions of home and motor insurance customers are charged more if they renew with their current providers than new customers. ‘Price Walking’ is where firms increase the cost of the insurance policy per renewal, with many customers having automatic renewal arrangements with insurers. This means that often customers are suffering a ‘loyalty penalty’ when renewing their policy with the same insurer, paying higher premiums where they may have paid a more competitive premium elsewhere. The FCA notes, while this is standard market practice, firms were using sophisticated methods to target customers who were more likely to be loyal in order to increase their revenue. In response to these finding’s the FCA is requiring firms to charge loyal customer’s the same rate they would offer a new customer. The FCA has highlighted the changes required which must be implemented within internal governance, systems and controls by no later than 1st October 2021 and price changing requirements will be in effect by 1st January 2022. The FCA’s policy statement can be found here.
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