On 20 September 2018, the FCA published a consultation paper, CP18/26, which sets out its proposals for applying the senior managers and certification regime (SM&CR) to claims management companies (CMCs). The FCA will regulate CMCs from April 2019.
The FCA says that an independent review into CMCs found evidence of harm to customers, including harassment, aggressive sales tactics and business practices that reward the firm at the expense of its customers. It also highlighted issues with the fitness and propriety of senior managers within CMCs. The FCA's proposals aim to reduce misconduct in CMCs, by raising standards of governance, management and professionalism in the claims management sector.
Among other things, the FCA is proposing:
- to make a small number of senior roles within CMCs senior management functions (SMFs). The SMFs that apply to CMCs will depend on whether a CMC is a "Class 1" CMC, "Class 2" CMC, or other firm that is not a Class 1 CMC, such as a lead generator (for further details see chapter 4 of the consultation paper);
- to apply the certification regime to individuals who are not senior managers in CMCs, but who could have a significant impact on customers or the firm (see chapter 5);
- to require CMCs, at least once a year, to make sure that the individuals performing SMFs and certification functions are fit and proper to do their jobs (see chapter 6);
- to introduce standards for the conduct of nearly everyone who works in a CMC (see chapter 7).
Chapter 8 of the consultation gives details of transitional arrangements. The FCA says that although it will begin authorising CMCs as firms from April 2019, it is proposing not to begin authorising individuals in these CMCs until the SM&CR begins for solo regulated firms on 9 December 2019.
Comments are requested by 6 December 2018. The FCA will review the responses and publish its feedback, including the final text of the rules proposed in appendix 1 to the consultation paper, in the first quarter of 2019.