FCA consults on MCD implementation: FCA has published a consultation paper setting out its approach to implementation of the Mortgage Credit Directive (MCD). Where possible, FCA will implement the MCD using provisions in its existing rules, specifically the Mortgage and Home Finance: Conduct of Business Sourcebook (MCOB). Where not possible, it will use the standard copy-out approach. It has produced a table that shows the main areas where the MCD goes further than current UK requirements, particularly in information provision and tying of products. In principle, FCA will:
- move the rules on second charge mortgages from its consumer credit modules to apply the same rules and protections as currently apply to first charge mortgages. Second charge mortgages will be included within the definition of "regulated mortgage contract" and so most MCOB provisions will apply to them. FCA thinks there are relatively few second charge lenders active in the market, although many more lenders and intermediaries applied for interim permissions in relation to these products. FCA asks for comment on whether there are any aspects of the changes that firms will find it hard to implement on time, as some changes will not stem from the MCD and therefore FCA has some timing flexibility. It confirms that, in principle, existing loans will transfer to the new regime, while keeping any extra protections they had under the current one;
- revise its approach to authorisation of second charge lenders and intermediaries. FCA hopes to start accepting applications from second charge firms who wish to add regulated mortgage activities from April 2015. Treasury is, however, proposing to extend the definition of regulated mortgage contract in such a way as to deem that firms with regulated mortgage permissions will automatically have permission for second charge business. FCA warns that firms should check their business to assess whether they need formally to apply for a variation. In any event it will ask firms to notify it of whether they conduct both first and second charge business. For some firms, which carry on second charge mortgage business and other consumer credit activities, FCA is considering changes to the consumer credit application forms, and may need to change the landing slots of some of these firms to cater for MCD implementation. Firms wanting to apply for second charge business before the new forms are available will need to apply for consumer credit permissions and amend their applications in-flight as appropriate; and
- make further changes to strengthen consumer protection and ensure consistency across first and second charge lending.
Among the detailed proposals are:
- a choice for firms to meet the "European Standardised Information Sheet" (ESIS) requirements by providing a "top up" to the current Key Facts Illustration (KFI) for first charge mortgages until March 2019. ESIS for second charge mortgages will have to be fully compliant by March 2016. FCA asks for comment on any difficulties firms foresee with using the ESIS and its accompanying instructions;
- a discussion on how firms may need to reassess their sales processes in light of how the MCD assesses when they make a binding offer;
- bringing together current rules on promotions and communications, which will in the main consolidate existing rules;
- FCA's approach to how firms should assess knowledge and competency of key individuals;
- a copy out of the ban on tying products with the available exemptions;
- to create a new chapter of MCOB to deal with the requirements that apply to lending that is not secured on the home but is used to acquire or retain property rights;
- to bring second charge mortgage advising and arranging activities within the scope of the Financial Services Compensation Scheme;
- to require second charge mortgage firms to appoint approved persons to the same range of controlled functions as currently apply to first charge mortgage firms;
- to apply broadly similar requirements in relation to second charge data reporting as apply to first charges;
- to introduce rules requiring firms to make customers aware of alternative financing options when they look to increase their secured borrowing; and
- transitional arrangements, which FCA plans to make full use of, as well as allowing firms to comply from December 2015 if they wish.
The UK will use exemptions in the MCD to avoid imposing new requirements in relation to lifetime mortgages, bridging loans (although the MCD exemption is narrower than the current FCA definition so it will need to make some adjustments), credit union mortgages and overdrafts that last less than a month. FCA stresses that both the MCD and its rules largely exclude business borrowing.
While FCA takes the primary role in MCD implementation, PRA will consult separately on the impact of any new prudential duties that affect dual-authorised firms.
Firms will have to comply with the new rules by 21 March 2016, but FCA will introduce the ability to comply with them from December 2015. It asks for responses by 29 December. (Source: FCA Consults on MCD Implementation)
FCA updates on complaints data: FCA has published complaints data for the first half of 2014. Its figures show an overall decrease of 5% in new complaints, and the big banks are the firms that receive the most. Payment protection insurance (PPI) was still the subject of the most complaints, although this was down 11% on the previous six months, followed by current accounts, other general insurance, credit cards and savings, and other banking products. (Source: FCA Updates on Complaints Data)
FCA notes use of specialist advisers: FCA has encouraged firms to use specialist advisers within their firms where this can improve consumer outcomes. It has clarified that this use is allowed under its Finalised Guidance 12/15 and has updated its website and thematic review to clarify this. (Source: FCA Notes Use of Specialist Advisers)
FCA makes new rules: At FCA's September Board Meeting, it made:
- the Handbook Administration Instrument (No 35) 2014. This takes effect from 1 October and made minor administrative changes to various parts of the Handbook;
- the Training and Competence Sourcebook (TC) (Qualifications Amendments No 11) Instrument 2014. This took effect from 26 September and updates qualification requirements in TC for individuals carrying out retail business;
- the Employers' Liability Insurance: Disclosure by Insurers (No 6) Instrument 2014. This took effect from 1 October and amends the Insurance: Conduct of Business Sourcebook (ICOBS) to replace existing transitional provisions and allow firms to comply with FCA's rules without including an employer's reference number on their employer's liability register, where the reason for its omission is the failure of a third party outside the firm's control;
- the Supervision Manual (SUP) (Amendment No 20) Instrument 2014. This takes effect on various dates up to 1 January 2015 and makes minor changes to the rules on persistency, annual reporting, accounts and product sales data reporting;
- the Consumer Credit (Amendment) Instrument 2014. This took effect from 26 September and amends various modules of the Handbook to clarify existing provisions and to address queries raised after FCA made the Consumer Credit Sourcebook (CONC) and consequential changes to its rules; and
- the Listing Rules (Sponsors) (Amendment No 5) Instrument 2014. This took effect partly on 1 October and the remainder will take effect from 1 February 2015 and enhances the sponsor regime and brings listing and prospectus rules in line with market standard.
Separately, FCA published a policy statement and made rules in the Supervision Manual (Amendment No 19) Instrument 2014, which also amends SUP, on the dates referred to in the Amendment 20 instrument, but does so in respect of adviser charging and other aspects of the Retail Mediation Activities Return (RMAR).
(Source: Handbook Notice No 15)
FCA speaks on investor outcomes: William Amos, Director or Wholesale Banking and Investment Management at FCA has spoken on what the "right outcomes" for a client are, and how to achieve them. He gave some examples of where firms have approached FCA for its views on marketing new products and how firms can co-operate with FCA where FCA raises a potential problem that might affect investors. He said this shows FCA's goal of deeper understanding of the sectors in which firms work, and their business drivers and cultures. He spoke in detail about culture in the wholesale industry and how firms should act as agents for their customers. He spoke on the current debate over dealing commissions and fund charges. He then went on to discuss how FCA supervises funds, from authorisation of new funds to its supervisory approach. (Source: FCA Speaks on Investor Outcomes)
FCA publishes guide on AIFMD reporting for non-EEA managers: FCA has published a guide for small non-EEA managers and above-threshold non-EEA managers, where they market into the UK further to an article 42 notification, to comply with their obligations to report Annex IV transparency information under the Alternative Investment Fund Managers Directive (AIFMD). Above-threshold AIFMs, who are required to report quarterly starting with the period ending on 30 September, will need to make their first submissions by email until the GABRIEL transparency reporting functions are rolled out. (Source: Annex IV Reporting Guide)
FCA speaks on payment systems and the PSR: Hannah Nixon, Managing Director of the Payment Systems Regulator (PSR) has spoken on the statutory duties of the PSR, its progress, vision and approach. She said the PSR would be an evidence-based regulator - taking action where there is evidence it needs to do so. She also said the PSR would be looking to change industry behaviour, and said it would consult in November on its priorities and approach. (Source: FCA Speaks on Payment Systems and the PSR)