FCA publishes mortgage advice review results: FCA has published the results of its review of advice and distribution under the Mortgage Market Review (MMR). It looked at the quality of advice provided by lenders and intermediaries and was generally pleased with the findings. It noted that:
- many lenders have taken significant steps to provide advice for the first time. These firms, and those that have always provided advice, should now focus on delivering consistently good outcomes for customers. The report identified that some firms relied on highly structured processes which made communication with customers stilted, inflexible and unsatisfactory for customers. On the other hand, some had no structure, which meant outcomes for customers could be inconsistent and it was hard to show what steps firms had taken to ensure suitability;
- there was no evidence of systemic customer detriment;
- some firms were not taking reasonable steps to get sufficient, relevant information about customers’ needs and circumstances before making recommendations;
- 59% of advice was assessed as suitable but the basis for 38% of recommendations was unclear. In 19% of the mystery shops FCA carried out, customers thought they had received a recommendation but in fact there had been no advice.
Accompanying consumer research highlighted that some customers place the greatest importance on the initial monthly payment to the detriment of other factors. Generally, customers did not appreciate the value and importance of advice, and did not separate it from the rest of the mortgage buying process. FCA is engaging with firms where it found problems and will continue to encourage good practices within the sector. In general, it expects:
- firms to consider whether they need to take steps to improve how they communicate with customers when providing mortgage advice or information;
- advisers to take reasonable steps to establish customers’ needs and circumstances when giving advice and making recommendations;
- firms to review whether their practices have the potential to create unintended consequences that can lead to poor customer outcomes; and
- where appropriate, senior managers and board members to ensure the firm has appropriate controls and reporting mechanisms to demonstrate it acts in accordance with the best interests of its customers.
FCA publishes new enforcement referral criteria: FCA has published an update to the criteria it uses when deciding whether to refer matters to enforcement, and clearer explanations of how it uses them. It will use the criteria when the potential outcome of an investigation might be to (i) take disciplinary action to fine, publicly censure, suspend and/or restrict firms/individuals or (ii) make a prohibition order. FCA has clarified how it assesses the three overarching questions it asks, which are:
- is an enforcement investigation likely to further FCA’s aims and statutory objectives?
- what is the strength of the evidence and is an enforcement investigation likely to be proportionate?
- what purpose or goal would be served if FCA were to take enforcement action in this case?
The clarifications follow a Treasury recommendation in December 2014, and FCA will consult later in the year on other elements of Treasury's request. (Source: FCA Publishes New Enforcement Referral Criteria)
FCA makes new rules: During June and early July, FCA has made several minor changes to its rules:
- the Periodic Fees (Pension Guidance Providers) Instrument 2015 amends the Glossary and Fees Manual from 19 June. It puts in place the framework for raising the pensions guidance providers levy and sets the amount payable by each designated pensions guidance provider in 2015/16;
- the Periodic Fees (2015/2016) and Other Fees Instrument 2015 amends various chapters of the Fees Manual, also from 19 June in respect of FCA, Financial Ombudsman Service (FOS) and Money Advice Service fees and the pensions guidance levy;
- the Fees (Consumer Buy to Let) Instrument 2015 also amends the Glossary and Fees Manual from 19 June in respect of application fees for applicants to undertake consumer buy-to-let related activities in 2015/16 and puts in place a framework for FCA and FOS periodic fees and levies for 2016/17;
- the Handbook Administration (No 38) Instrument 2015 makes minor amendments to several modules of FCA's Handbook, mainly from 1 August;
- the Individual Accountability Instrument 2015 amends the Glossary, parts of the Senior Management Arrangements, Systems and Controls Sourcebook, the Fit and Proper Test for Approved Persons and the Supervision Manual, and introduces the new Code of Conduct (COCON). It implements FCA rules on the Senior Manager Regime (SMR). The changes take effect partly on 13 July 2015, partly on 7 March 2016 and the remainder on 7 March 2017; and
- the ADR Directive Supplementary Instrument 2015 is an FOS instrument amending the Glossary and Dispute Resolution Sourcebook to ensure consistency with the Alternative Dispute Resolution (ADR) Directive. The changes take effect from 9 July.
(Source: Handbook Notice 23)
FCA consults on NRFB disclosure: FCA is consulting on disclosures to consumers by "non-ring-fenced bodies" (NRFB). An NRFB is a deposit-taker that is not a ring-fenced body (RFB), or is exempt from ring-fencing. FCA must make rules specifying the information that an NRFB must provide to individuals with financial assets of at least £250,000 that are account holders or that have applied to open an account, including joint accounts, with an NRFB. NRFBs will have to give the relevant consumers descriptions of the investment and commodities trading activities that they carry out, and details of any "prohibited actions". FCA says its proposals do not go significantly beyond the requirements of the law, except in relation to timing of information provision. FCA says firms will usually provide the information before they become NRFBs, and, once the regime is in force in 2019, when an individual applies to open an account with an NRFB. NFRBs will have to give out explanatory information to help consumers to understand the implications of banking with a non-ring-fenced entity in the group, and display up-to-date information on their website. FCA does not plan any requirements on banks that are not subject to the ring-fencing regime. FCA asks for comment by 13 November. (Source: FCA Consults on NRFB Disclosure)
FCA speaks on accountability: Martin Wheatley spoke on preparing to implement the SMR. He explained the background and the basic structure, and the need for firms' executive bodies to be fully engaged. He noted concerns that firms would need to register too many people. He said he expects that only the most senior people will need to be registered, and FCA will push back on firms that it feels are seeking to register too many individuals. He discussed measures the regulators have taken to address other concerns and said FCA is preparing its feedback on the presumption of responsibility. He said firms must remember the ultimate test is about reasonable standards. (Source: FCA Speaks on Accountability)
FCA speaks on FEMR: Tracey McDermott has spoken to the International Capital Market Association (ICMA) on the Fair and Effective Markets Review (FEMR). She addressed the focus and findings of the review, and moved on to discuss the SMR and current initiatives that will address some of the FEMR recommendations. She also provided information on the role of the proposed FICC (Fixed Income, Currency and Commodity) Standards Board. (Source: FCA Speaks on FEMR)
FCA publishes competition powers guidance: FCA has published its final form guidance on how it will use its concurrent competition powers with the Competition and Markets Authority (CMA). The new powers came into force on 1 April and FCA the ability to enforce against infringements of competition law, additional powers to conduct market studies and powers to refer markets to CMA – which can also exercise the powers. (Source: FCA Publishes Competition Powers Guidance)