FCA takes over consumer credit regulation: FCA took over the regulation of firms that provide consumer credit and related activities on 1 April. It noted 9 million people are in serious debt and has already said it will prioritise thematic reviews into payday lending. Other studies and reviews will focus on credit cards, overdrafts, debt management and logbook loans. FCA has also published a list of firms that have interim permissions for consumer credit business and a set of full authorisation and variation of permission application forms. (Source: FCA Takes Over Consumer Credit RegulationInterim Permissions Register and Consumer Credit Authorisation Pack)

FCA publishes consumer credit permission guidance: FCA has published a new page on its website giving guidance on when firms with interim permission will need to apply for FCA authorisation or variation of permission. The page states that firms must apply within their assigned slots and that each slot will last for three months. They will run from 1 October 2014 to 31 March 2016. FCA will be writing to firms during April to tell them when their slot is. It has confirmed that high-cost short-term credit lenders, logbook lenders and debt management firms will be the first firms it requires to apply. However, FCA will allow firms that want to act as principal to appointed representative firms to apply over the summer. The information page is supported by a detailed direction to firms explaining what they must do and that a firm's interim permission will cease if it does not apply within its assigned slot. The direction also lists the slots for each type of business, divided by business and region. (Source: FCA Publishes Consumer Credit Permission Guidance)

FCA publishes Business Plan: FCA has published its 2014/15 Business Plan. The wide-ranging plan:

  • looks at the new activities that FCA will assume, specifically the regulation of consumer credit, implementation of aspects of the Banking Reform Act and preparing for the launch of the UK payment systems regulator;
  • notes that FCA will continue to advance its competition objectives, and will continue to use market studies. Over the next year, its focus will include wholesale markets and parts of the consumer credit market, including credit cards;
  • discusses how FCA will continue to embed its risk-based supervision model through proactive assessment of firms, event-driven work and thematic reviews;
  • highlights that from April 2015 FCA will be able to use its supervisory toolkit to enforce competition law in financial services;
  • says FCA will work with PRA on the hurdles firms face when entering or expanding in the banking markets;
  • heralds a review of prudential requirements for personal investment firms;
  • notes the importance of Europe. FCA will embed the AIFMD in its rules and prepare to implement the revised Markets in Financial Instruments Directive (MiFID 2);
  • says FCA will focus on remaining mis-sales of payment protection insurance;
  • explains how FCA will undertake a post-implementation review of the Retail Distribution Review (RDR) and will implement the Mortgage Market Review (MMR);
  • confirms FCA will continue to take tough action against firms and individuals where appropriate;
  • notes FCA's commitments to deliver a strong supervisory system for LIBOR. Its work will include looking at how firms can reduce the risk of traders manipulating benchmarks;
  • warns that FCA will continue its review of anti-money laundering (AML) processes and controls in major banks and those staff responsible for them but that it will also extend its review in places to smaller firms;
  • commits to clear, consistent, constructive communications and to invest in high-quality new staff; and
  • introduces work to assess whether the relationship between the FCA Handbook and firms' perceptions of it work in the interest of consumers.

The plan addresses how FCA uses its powers and gives further detail of its current and planned work. (Source: FCA Business Plan 2014-2015)

FCA publishes Risk Outlook: As usual, FCA's Risk Outlook accompanies its Business Plan. FCA focuses on:

  • the inherent factors and structure and business conduct features that are present when markets are not working well and therefore create risk. It includes in this analysis matters like information asymetries, financial capability expectations and biases as well as conflicts, cultural issues and market structures;
  • how environmental developments affect consumer behaviours and firms' business models and strategies;
  • the interaction between underlying risk drivers and environmental conditions, specifically cross-market pressures and related risks;
  • identifying forward-looking areas of focus. FCA has identified seven, including technological developments, poor culture and controls, the unaffordable debt arising from the growth in consumer credit and unnecessarily complex terms and conditions; and
  • addressing cross-market pressures and how firms can deal with them.

FCA then looks at how it uses its regulatory approach to address the forward-looking risks. (Source:FCA Risk Outlook 2014)

FCA clarifies plans on life insurance customers and fair treatment: FCA has responded to press coverage on its proposed supervisory work on long-standing customers in life insurance. It explains how it will look at how people in closed accounts are being treated. It stresses that it will not review 30 million cases, nor apply current rules retrospectively. It will start its review in the summer. (Source: FCA Clarifies Life Insurance TCF Plans)

FCA and PRA respond on mutuality and with-profits funds: FCA has published a policy statement in response to its consultation on a way forward for mutuality and with-profits funds. It has now made rules amending the Conduct of Business Sourcebook (COBS) with effect from 28 March. The changes set out FCA's expectations on mutuals that undertake exercises to identify parts of with-profits funds to which it considers certain COBS rules should not apply. PRA has also published a supervisory statement, looking at the way forward for mutuality and with-profits funds. (Source: FCA Responds on Mutuality and With-Profits Funds and PRA Publishes Supervisory Statement on Mutuality and With-Profits Funds)

FCA makes new rules: At FCA's March Board meeting, it made:

  • the Handbook Administration (No 33) Instrument 2014: this amends various Handbook modules from, variously, 1 April 2014, 26 April 2014 and 1 January 2015 by making minor administrative or clarificatory changes;
  • the Financial Services Compensation Scheme (FSCS) (Management Expenses Levy Limit 2014/15) (FCA) Instrument: see under PRA below for details of this instrument, which applies across both regulators;
  • the Capital Requirements Directive IV (Capital Buffers) Instrument 2014: this amends the Glossary and the Investment Firms Prudential Sourcebook (IFPRU) from 1 May 2014 and 1 January 2016 and introduces a new chapter 10 to IFPRU and new transitional provisions to implement the EU provisions on capital buffers;
  • the COBS (Mutuals) Instrument 2014: see item above for detail of these changes;
  • the Consumer Credit (Debt Management Client Money Supplementary Amendments) Instrument 2014: this instrument follows FCA's policy statement 14/3 and confirms the templates for acknowledgement letters for debt management firms and amends chapter 11 of the Client Assets Sourcebook (CASS). The changes took effect on 1 April 2014;
  • the CASS (Amendment No 4) Instrument 2014: this amends CASS 7 from 1 April 2014 in relation to firms that carry on loan-based crowdfunding. It prevents these firms from using the individual client balance method as part of a standard method of internal reconciliation;
  • the Supervision Manual (SUP) (Waiver Process) (Amendment) Instrument 2014: this amends SUP from 1 April to remove FCA's stated aim of giving a waiver decision within 20 business days as it does not think this is a useful statement; and 
  • the Consumer Credit (Statutory Notices) Instrument 2014. This amends, again from 1 April 2014, the decision-making block of FCA's Handbook to set out the decision-making procedure and nominate the "relevant decision maker" when FCA exercises its powers in relation to the carrying on of certain regulated activities by EEA authorised payment institutions or electronic money institutions.

FCA's Board also approved the Fees Manual (Financial Ombudsman Case Fees 2014/15) Instrument 2014 which takes effect from 2014 and moves fees relating to consumer credit activities into the compulsory jurisdiction, reduces the case fee for payment protection cases to zero (but with the right to increase it) and keeps the group account fee arrangement for the largest four banking groups and extends it to a further four.

FCA has also made three further instruments not covered by the Handbook Notice, which are:

  • the Fees (Issuers) (Late Publication of Reports) Instrument 2014: this amends FEES from 1 April 2014 in relation to late payments by issuers;
  • the Fees (Consumer Credit No 2) Instrument 2014: this amends FEES and SUP from 1 April 2014 in respect of consumer credit activities and fee-blocks; and
  • the Fees (Miscellaneous Amendments) (No 7) Instrument 2014: this amends the Glossary, FEES and SUP from 1 April 2014 in respect of clarification and changes to fees charged to certain fee-blocks.

(Source: Handbook Notice No 10)

FCA bans director for falsifying documents: FCA has banned Philip Eley, former director of an insurance broker, and fined him £7,200. It found Mr Eley had falsified documents requested by an insurer with whom his firm did business. (Source: FCA Bans Director for Falsifying Documents)

FCA responds on Complaints Commissioner recommendation: The Complaints Commissioner received a complaint against FCA (then FSA) alleging a number of failings. These ranged from acting in a disproportionate manner in respect of the start of FCA's investigation, though failing to act in good faith when it did not look at the complainant's Compliance Manual despite being told where to find it, to the crux of the complaint which was that the firm had complained about the investigating officer, who continued to be involved in the investigation. The complainant was subsequently denied access to key evidential documents. All in all the complainant alleged FCA had not acted fairly or proportionately and had then taken a long time to address the complaint. The Complaints Commissioner focused on two particular aspects of the complaint and recommended FCA apologise for the delay and make a payment to the complainant in recognition of the distress caused by its failure to recognise the complainant's health problems and a further payment for failing to consider correctly its statutory responsibilities. Moreover it recommended FCA should review its procedures and consider withdrawing publication of the Final Notice published by FSA in respect of the complainant. FCA accepted the delay but did not accept it was unreasonable to publish the notice nor did it see a reason to withdraw it. (Source: FCA Responds on Complaints Commissioner Recommendation)

FCA consults on fees: FCA is consulting on its rates proposals for its regulatory fees and levies for 2014/15. FCA has an increased annual funding requirement for this year and says it has in principle distributed the increase evenly across fee-blocks unless there was a good reason not to. This means a 3.1% to 3.2% increase for most fee-blocks. However, there is a large proposed change to the AP.0 FCA prudential fee-block, with decreases for certain advisory firms. The increase for the AP.0 fee-block reflects the time FCA has spent on prudential supervision to maintain consumer protection and market stability, and its focus on ensuring key firms could undergo an orderly wind-down should they fail. Different chapters of the consultation address how FCA has calculated periodic fees and also address fees for consumer credit firms. The paper also addresses the financial penalty scheme and rebates FCA has applied to certain fee-blocks. Finally it looks at the FOS general levy. It asks for comment by 30 May. (Source: FCA Consults on Fees)

FCA speaks on focus: Martin Wheatley has spoken on the past year and FCA's focus for the year ahead. He spoke on:

  • market focus including pricing, conflicts, financial crime and market infrastructure;
  • conflicts in the use of information; and
  • benchmarks in relation to governance of trading activity and conflicts of interest.

(Source: FCA Speaks on Focus)

FCA signs MoU with trading authorities: FCA has signed a Memorandum of Understanding (MoU) with trading standards supervisory bodies in respect of co-operating in consumer credit and related matters. (Source: FCA Signs MoU with Trading Authorities)

FCA updates on AIFM applications: FCA's latest update on the AIFM application process encourages firms to apply for AIFM status by no later than 22 April. It warns that, although firms whose authorisation is not yet granted by 22 July may continue to operate while FCA considers their applications, they must in any event comply fully with the AIFMD from that date and will not be able to use the AIFMD passport until they are authorised. (Source: FCA Updates on AIFM Applications)

FCA ready to start receiving CRD4 reports: FCA has confirmed that its GABRIEL reporting system is now ready to receive submissions for COREP and FINREP from 1 April 2014. (Source: GABRIEL)