FCA finalises referrals payments ban: FCA has published a policy statement confirming its new rules which:

  • ban new referral payments from a discretionary investment manager (DIM) to an adviser where the adviser recommends a client places additional money with a DIM who makes payments to the adviser following a pre-Retail Distribution Review (RDR) referral; and
  • ban referral payments when an adviser firm does not provide personal recommendations to clients but provides other services to them.

Respondents to the consultation on the rule changes were supportive. Some respondents favoured a phase-out of trail commission, but this would require further consultation and would not be consistent with the regulatory view previously adopted. FCA also proposes a small amendment to the rules to confirm that firms should report complaints against individual advisers to it. The referral bans will take effect from December 2014 but FCA intends the complaints changes to take effect from June 2014. (Source: FCA Finalises Referrals Payments Ban)

FCA fines State Street for transitions management failings: FCA has fined two State Street entities a total of £22,885,000 for developing and using a strategy in its transitions management business that would deliberately charge clients substantial mark-ups on certain transitions. The mark-ups were hidden from the clients and were in addition to the agreed fees and commissions. FCA found that, in a 15-month period, the firms deliberately overcharged six clients a total of over $20 million. The failings came to light when a client notified staff of unagreed mark-ups. The individuals responsible told both the client and the State Street compliance department that the overcharging was a mistake. They arranged for a substantial rebate to the client but did not disclose the existence of other mark-ups relating to the same transition. Once senior management became aware of the issues it took action to investigate and improve its culture. FCA said these failings showed complete disregard for the interests of customers and are at the most serious end of the spectrum, and said firms must be in no doubt it will continue to shine a spotlight on wholesale conduct. FCA found the firms had breached three of its principles. In assessing the penalty, it considered the seriousness of the breaches to be at level 5, and applied a further increase of 10% for aggravating and mitigating factors and a multiplier of three for deterrence. (Source: FCA Fines State Street for Transitions Management Failings)

FCA finalises AIFM remuneration guidance: FCA has published its finalised guidance on the Alternative Investment Fund Manager (AIFM) Remuneration Code. The guidance covers:

  • the date the Code takes effect (from 31 January 2014), its scope (all firms once they are authorised as full-scope AIFMs) and the payments to which it will first apply (the first full performance period after the firm becomes authorised);
  • proportionality in applying the Code, in relation to different characteristics of AIFMs, including size and thresholds and other elements such as internal organisation, and nature and complexity of activities. The guidance also looks at proportionality in respect of delegation of portfolio management, staff performing permitted business which is not AIF management and remuneration committees;
  • how to treat payments to partners or members of an AIFM, assessing various possible approaches;
  • remuneration in the form of units, shares or other instruments, including applying proportionality to these payments; and
  • minimum retention periods.

FCA also gives examples of Code application. It has updated its AIFMD web pages to reflect the new guidance. (Source: FCA Finalises AIFM Remuneration Guidance and FCA Updates AIFM Web Page)

FCA makes new rules: FCA has made several new instruments. It made the instruments at its meeting on 30 January unless stated otherwise below:

  • on 12 December it made an instrument not listed in its December Handbook Notice  ̶  the Supervision Manual (SUP) (Product Sales Data and Mortgage Lending and Administration Return) Instrument 2013. This amends SUP from 1 January 2015 and sets requirements for data collection connection with the Mortgage Market Review reforms;
  • on 17 January it made various changes in the Capital Requirements Directive IV (CRD IV) (Reporting Guidance) Instrument 2014. These changes amended SUP from 20 January 2014 to make minor changes to reporting requirements under CRD IV;
  • the Senior Management Arrangements, Systems and Controls Sourcebook (SYSC) (AIFM Remuneration Code) Instrument 2014 amends SYSC and the Investment Funds Sourcebook (FUND) from 31 January 2014 to provide guidance on compliance with the AIFMD Remuneration Code;
  • the CRD IV (Handbook Administration) Instrument 2014 took effect on 31 January 2014 and makes minor changes to the Glossary, the Prudential Sourcebook for Investment Firms (IFPRU) and SUP;
  • the Training and Competence Sourcebook (TC) (Accredited Bodies and Qualifications Amendments No 10) Instrument 2014 took effect on 1 February 2014 and updates the list of appropriate qualifications in the Glossary and TC;
  • the Retail Distribution Review (Adviser Charging No 7) Instrument takes effect on 31 December 2014 and amends the Conduct of Business Sourcebook (COBS) in respect of referral payments (see above);
  • the SUP (Suspicious Transaction Reports) (Amendment) Instrument 2014 took effect on 6 February and deletes SUP 9.5 to discontinue the Listing Authority Review Committee;
  • the Over-the-Counter Derivatives, Central Counterparties and Trade Repositories (No 2) Instrument 2014 took effect on 31 January and amends the Glossary, SUP and the Enforcement Guide to cater for the additional supervisory and enforcement powers FCA has under EMIR;
  • the Listing Rules (LR) and Disclosure and Transparency Rules (DTR) (Primary Information Providers) (PIPs) Instrument 2014 took effect on 31 January and amends the Glossary, the Fees Manual (FEES), LR and DTR in respect of the new statutory regime for PIPs; and
  • the Fees (Consumer Credit) Instrument 2014 takes effect on 1 April 2014 and amends the Glossary and FEES in respect of fees payable under the consumer credit licensing regime.

(Source: FCA Handbook Notice No 8)

FCA bans and fines adviser for making up certificates: FCA has banned Ewan King and fined him £19,900 for fabricating the Statements of Professional Standing (SPS) FCA requires advisers to hold. Mr King was an appointed representative who led his principal to believe he held an SPS from the Chartered Insurance Institute and had made up two certificates when asked to produce them when in fact he had failed the relevant exams. (Source: FCA Bans and Fines Adviser for Making Up Certificates)

FCA publishes regulation round up: FCA's latest regulation round up encourages firms to complete a survey on FCA's website and digital presence, and highlights key recent publications and regulatory changes. (Source: FCA Publishes Regulation Round Up)

FCA publishes warning notice statements: FCA has published two individual warning notices using its new powers under the Financial Services Act 2012. The notices do not name the individuals but note FCA intends to take action in respect of the conduct the notices describe. The notices relate, respectively, to a submitter at a bank and a manager at a bank. One notice refers to the trader's conduct in making benchmark submissions which took into account trader requests, collusion with other dealers and traders and the fact he was aware of the interest rate derivative positions on the trading book when making submissions. The other notice refers to the fact the manager was aware of the conduct and the lack of policies, systems or controls and of the conflicts of interest and was responsible for the oversight and supervision of the submitters. (Source: FCA Publishes Warning Statement on Benchmark Submitter and FCA Publishes Warning Statement on Benchmark Supervisor)

FCA announces CPP redress scheme: FCA has announced the compensation scheme for customers who were mis-sold Card Protection Plan (CPP) products will be open from mid-February to the end of August. FCA expects the first payments under the redress scheme to start from March. The amount of redress will depend on the length of time a customer had the product. (Source: FCA Announces CPP Redress Scheme)

FCA updates on IRHP review: FCA has updated on banks' progress in their review of sales of interest rate hedging products (IRHP). Overall, banks have completed more than half the compliance assessments of customers who have opted into the review and the number of customers in the redress phase or whose redress determinations are complete is continuing to rise. The amount of redress paid has almost doubled since the December report. The banks are also close to their estimates of completed cases at this stage in the review, which all will have completed by the end of June. (Source: FCA Updates on IRHP Review)

FCA publishes MIPRU modification by consent: FCA has published a modification by consent for home financing firms and home finance administration connected to regulated mortgage contracts. It will delay some of the amendments that should take effect with the Mortgage Market Review (MMR) from 26 April for one year. It is available only to firms with £50 million or less of total lending in the 12 months the waiver covers. It will delay a change in the prudential requirements in Chapter 4 of the Prudential Sourcebook for Mortgage and Insurance Intermediaries (MIPRU) and a reporting requirement in SUP. Firms that want to take advantage of the waiver should apply to FCA. (Source: FCA Publishes MIPRU Modification by Consent)

FCA consults on sponsor competence: FCA is proposing amendments to LR in relation to regulating the competence of sponsors. Sponsors provide guidance to premium listed issuers and confirm the ability of these issuers to meet their obligations. FCA's consultation focuses on the competency requirements that sponsors need to meet to become approved and on joint sponsor arrangements. (Source: FCA Consultation on Sponsor Competence)

FCA speaks on price formation: David Lawton, Director of Markets at the FCA, has spoken on how maintaining the integrity of price formation is reflected in the FCA's agenda. He noted the trend to push for transparency in the functioning of benchmarks and off-exchange mechanisms. (Source: Price: the Cornerstone of Markets)

FCA publishes guidance on applying for CRR permissions: FCA has published on its website guidelines to the following CRR applications:

  • liquidity subgroup applications;
  • individual consolidation method applications;
  • inclusion of interim or year-end profits in Common Equity Tier 1 capital; and
  • issuances of Common Equity Tier 1 instruments.

(Source: Useful CRR Permission Application Guidelines for CRD IV Firms)