FCA finalises retail investment advice guidance: FCA has published a response to its guidance consultation on retail investment advice, which was open from July to October 2014, and its finalised guidance. The guidance primarily focuses on what amounts to a "personal recommendation" with regards to retail investment advice. The guidance is intended to address firms' concerns, raised during the consultation, that there was a lack of clarity in existing FCA rules and guidance on personal recommendations to retail customers. In the final guidance FCA has answered the following key questions:
- what is regulated advice under the Regulated Activities Order?
- when would generic advice become specific advice?
- what is the difference between "information" and "investment advice"?
- what is MiFID investment advice?
The final guidance goes on to address the use of:
- decision trees;
- various methods of customer information collection;
- automated sales processes;
- advice given through public media, such as social media;
- the assessment of risk; and
- rules applicable to simplified advice.
The finalised guidance also contains a revised table of different advice models, a statement of the appropriateness test (for use when a personal recommendation is not being given) and specific advice on the provision of discretionary services.
The last section of the finalised guidance sets out a number of example scenarios alongside FCA's comments as to the classification of the advice given in each case. (Source: Retail Investment Advice: Consultation Responses and Final Guidance)
FCA publishes retrospective action feedback: FCA has published its feedback from the comments received in response to its call for examples of occasions when it had applied rules retrospectively. FCA received 36 responses, from individuals, intermediaries, product providers and trade associations, none of which raised the specific issue of retrospective application. However, the responses did identify other issues with FCA's approach, including:
- the branding of traded life policy investments as "toxic" by the then FSA;
- FOS and, specifically, the interplay of its decisions with those of FCA;
- instances (including pensions, endowments and PPI mis-selling, Arch Cru and interest rate hedging products) where FCA had, by its inaction, appeared to permit certain activity only to label it bad practice at a later date; and
- instances where FCA had used a new methodology (such as behavioural economics) to judge firms' past actions.
Despite the lack of responses directly addressing retrospective application, FCA identified a number of areas where regulatory practice could be improved. These included:
- firm communication and clarifying the way FCA provides guidance;
- ensuring recognition of the fact that fast-paced technological change may mean rules become inappropriate and so FCA needs to consider how it uses waivers; and
- the need to intervene at an earlier stage to avoid the perception that certain activities are tolerated.
FCA is in the process of acting on some of these issues already but, in the interests of making it a more "forward-thinking" regulator, it will take the feedback provided on board. (Source: The Retrospective Application of Rules: Feedback on the Call for Examples)
FCA introduces new pension protections: FCA has published a "Dear CEO" letter outlining its intention to put in place additional pension protection rules from April. The new protections require that firms:
- ask consumers about the circumstances that relate to decisions they make about their pension, such as health and lifestyle choices or marital status;
- give consumers relevant risk warnings, such as the tax implications of their decisions, in response to queries from consumers; and
- highlight the availability of the Government's new Pension Wise scheme.
FCA will mandate the precise language firms must use to deliver these messages clearly and directly. The rules will come into force temporarily, before consultation, on 6 April. (Source: Dear CEO Letter on New Pension Protections)
FCA announces card security compensation: FCA has announced that Affinion International Limited (Affinion) and 11 banks and credit card issuers have agreed to a compensation scheme for card security product holders. Although FCA has not conducted a formal investigation into the matter, or made a statement identifying mis-selling, Affinion has voluntarily agreed to implement the scheme. Those affected are likely to have been sold insurance against fraudulent use following theft or loss of a card, despite the fact that any purchases taking place after such an event were the responsibility of the issuer. The scheme must now be voted on by affected Affinion customers, who will be contacted from late January. (Source: Card Security Compensation Agreed)
FCA fines and bans executives for LIBOR failings: FCA has fined the former Chief Executive and Compliance Officer of Martin Brokers (UK) Limited £210,000 and £105,000 respectively and has banned them both from holding significant influence functions at authorised firms. It found the failings of David Caplin and Jeremy Kraft contributed to a culture at the firm that allowed LIBOR manipulation to take place and continue over a long period. FCA had fined the firm £630,000 for LIBOR-related misconduct in 2014 (saying it would have fined it £3.6 million were it not for the fact that the firm could not pay this amount as well as other regulatory fines it faced in relation to LIBOR). FCA said the compliance culture at the firm was weak, and noted:
- Mr Caplin did not ensure effective oversight of its compliance function or implementation of a compliance consultant's recommendations. He also failed to remedy the firm's lack of controls over corrupt inducements, despite having express responsibility for this;
- Mr Kraft was not competent as a compliance officer as he did not give due attention to his responsibilities, did not oversee brokers and did not challenge Mr Caplin. He also failed to act on external advice that identified serious deficiencies in the firm's compliance.
These are the first published fines resulting from LIBOR manipulation on individuals holding significant influence functions. (Source: FCA Fines and Bans Executives for LIBOR Failings)
FCA publishes MoUs: FCA has published Memoranda of Understanding (MoUs) between it and the Advertising Statements Authority (ASA) and between it and the Information Commissioner's Office (ICO). (Source: FCA and ASA MoU and FCA and ICO MoU)