FCA reports on switching service: FCA has published a report into the current account switching service, which shows that, generally, it is working for consumers. The report found the vast majority of switches are completed within five days and without error but there is still a lack of consumer awareness and confidence in the service. FCA found there could be improvements around current account number portability, which would make it easier and more attractive for customers. On the other hand, it thought making switching happen within five days rather than seven would be unlikely to make a significant difference. The Payment Services Regulator (PSR) will take this forward. (Source: FCA Finds Current Account Switching Service Working for Consumers)
FCA feeds back on SMR: Following Treasury's announcement that the Senior Manager Regime (SMR) will apply to UK branches of overseas banks, FCA has published feedback on its previous consultations on the SMR generally, and, with PRA, is consulting on how to apply the SMR to senior managers of UK branches of non-EEA banks. See PRA section below for PRA's key proposals and a discussion of the application of the SMR to overseas banks.
The feedback statement:
- confirms the decision that the SMR will not apply to those non-executive directors (NEDs) who do not perform delegated responsibilities;
- addresses concerns that the Money Laundering Reporting Officer (MLRO), if required to be a senior manager, might become a scapegoat. FCA has retained its proposal but will also prescribe an overall financial crime responsibility as a senior manager function (SMF) (which may, but need not, be carried out by the MLRO);
- retains the proposed SMF18 (Significant Responsibility Senior Management): FCA comments that in many cases firms will not need to use this responsibility, as it will be allocated to other senior managers, but it wants the flexibility to allow firms to use this function if the person with responsibility would not otherwise need senior manager approval;
- explains why FCA has introduced a prescribed responsibility in relation to overall responsibility for the firm's compliance with the Client Assets Sourcebook (CASS);
- says FCA is considering whether it can provide examples of simplified templates for smaller firms to help them to create their responsibility maps;
- clarifies some of the concerns firms raised over the responsibilities the new Certification Regime requirements and Conduct Rules will place on them. It says it will consider whether it can give firms any further guidance. It will also allow an uncertified person to perform a role for up to four weeks in exceptional circumstances, provided the role does not require a qualification;
- confirms that only a certified person can supervise any other certified person - this will include managers overseas if the manager is dealing with clients in the UK; and
- confirms the wide scope of the conduct rules but will consider whether it can lessen the burden of reporting breaches, perhaps by adjusting the frequency and method of reporting.
FCA has provided a list of FCA prescribed responsibilities, and has confirmed it expects firms to ensure that one or more SMFs have overall responsibility for each activity, business area and management function of the firm.
FCA is now consulting on detailed guidance on the Presumption of Responsibility. It looks at when FCA would seek to apply this presumption (where the senior manager with responsibility for any aspect of a firm's activities in relation to which a breach occurs is presumed to have committed misconduct unless that person can satisfy the regulator they took all steps it is reasonable to expect them to take to avoid the breach). The presumption will stand alongside the power FCA has to fine senior managers for breach of Conduct Rules and for being knowingly concerned in a breach of a regulatory requirement. The guidance will apply to any individual performing an SMF, wherever they are based, and includes NEDs covered by the regime. The guidance, however, distinguishes between expectations on NEDs and on executive directors. The guidance would form part of the Decision Procedure and Penalties Manual and Enforcement Guide.
Given the need for firms to comply with the new rules by 7 March 2016, FCA has published near-final rules now (mainly amending the Senior Management Systems and Controls and Supervision Manuals) so firms can identify the roles that need pre-approval and seek clarity where they need it before they can prepare their Statement of Responsibilities. There will be a further policy statement with final rules in the summer, when FCA may also consult on increasing the scope of the Certification Regime to wholesale market firms as there is an anomaly in the current proposals. This anomaly means some individuals performing activities that may pose significant harm to the firm would not otherwise be within the regime. It will consider in due course how to deal with the anomalies the regime creates in, for example, bringing mortgage advisers within banks within the regime, while those working in firms outside the regime will themselves be outside it. The consultation closes on 25 May. (Source: FCA Feeds Back on SMR)
FCA consults on performance management risks: FCA has published a guidance consultation following its Thematic Review on firms' performance management practices. It has not found evidence of widespread issues but its investigations, especially those initiated because of whistleblower reports, show there are risks that firms could address. FCA's study focused on performance management of staff in sales or similar roles, including those with appointed representatives. FCA has identified some practices that can create undue pressure, including intensive micro-management of sales results, pressure from sharing sales results with peers and performance management practices that are not reflective of the firm's policy. The draft guidance aims to reduce the risk from undue pressure by suggesting good practice in terms of objectives and targets for sales staff and proper performance monitoring. It suggests firms keep good relationships with trade unions and staff bodies and make better use of information from staff. The draft includes an illustrative case study. FCA asks for views by 15 May. (Source: FCA Consults on Performance Management Risks)
FCA finalises social media guidance: FCA has published its finalised guidance on its supervisory approach to financial promotions in social media. The guidance:
- outlines FCA's views of what a financial promotion is;
- reminds firms of the need to meet the fair, clear and not misleading test;
- stresses that each communication must be in compliance on a standalone basis, and how to ensure risk warnings are properly used; and
- reminds firms that image advertising is exempt from many requirements.
It also addresses other issues such as where recipients share or forward communications. In response to its consultation, FCA revised its suggestion that firms use #ad to identify a promotion. (Source:Finalised Guidance: Social Media and Customer Communications)
FCA fines and bans former CEO: FCA has fined the former chief executive of Gracechurch Investments Limited £450,000 and banned him from holding a position in the financial services industry. Gracechurch is now dissolved and FCA found Sam Kenny had himself used pressure selling techniques and had been in charge of the firm when it routinely sold stocks using pressure, misrepresentation and unsuitable advice. It also found he had decided to withhold a recording of a non-compliant call it had requested, deliberately caused the firm's lawyers to provide FCA with false information and misled it over the handling of a conflict. The then Financial Services Authority (FSA) had previously banned the firm's former compliance officer and censured the firm. In both cases it would also have fined them, had it not been not for their financial position. (Source: FCA Fines and Bans Former CEO)
FCA fines and bans former compliance director: FCA has fined the former compliance director of the network Financial Group £33,800 and banned him from the compliance oversight function. It found Financial Limited and Investment Limited had significant weaknesses in their systems and controls over a long period, and Stephen Bell was responsible for those systems and controls. In particular, FCA identified weaknesses in recruitment, training, monitoring and control of its appointed representatives and those in customer functions, and their compliance and file checking process. FCA noted the failings were particularly serious as Mr Bell was on notice of the need for significant improvement. It acknowledged he had been working within the firm's business model, which was flawed, and also that he had taken significant steps to make improvements, but said this was not enough. FSA had taken action against the two firms and their CEO in 2009 and 2010. (Source: FCA Fines and Bans Former Compliance Director)
FCA creates MCD resource: FCA has created a new page on its website, setting out the main changes the Mortgage Credit Directive (MCD) will make to regulation of first and second charge lending and consumer buy-to-let lending. The page includes its indicative timetable, which notes a policy statement on MCD implementation and the new regime for second charge firms, together with sample application forms for these firms in March, and a policy statement on buy-to-let in June. (Source: FCA Creates MCD Resource)
FCA bans former Rabobank trader: FCA has banned Paul Robson, a former trader with Rabobank, after he pleaded guilty in the US to fraud for his role in conspiring to manipulate the bank's Yen LIBOR submissions. (Source: FCA Bans Former Rabobank Trader)
FCA postpones PSR directions: FCA has released a statement saying that it has decided that none of the PSR directions it proposed in its November 2014 consultation paper will come into force before 30 April. Initially, directions had been scheduled to come into force on 1 April. FCA has stated that the decision has been taken to allow stakeholders more time to consider FCA's final views and directions in the PSR Policy Statement. The Policy Statement will be published before the end of March. (Source:PSR Directions to Start From 30 April 2015)
FCA announces instalment credit exemption extension: FCA confirmed legislation took effect from 18 March that extended the exemption from the need for authorisation to firms that offer instalment credit. Provided all other conditions to the exemption apply (which remain unchanged) the exemption is available for loans with up to 12 repayments (previously four) within no more than 12 months. (Source:FCA Announces Instalment Credit Exemption Extension)