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Proposed ban on contingent charging: This week in regulation

01/08/19

The speed read

  • There’s more to the proposed ban on contingent charging
  • The final rules on SM&CR for solo-regulated firms are here
  • The FCA wants to extend its temporary transitional powers
  • Here’s the FCA’s consultation paper on its responsibilities after a hard Brexit
  • There’s now final guidance to clarify cryptoassets regulation
  • The FCA and Practitioner Panel have published their survey results

There’s more to the proposed ban on contingent charging

The FCA has announced a number of proposals designed to help consumers get better value for money from their pensions and improve the standard of pension transfer advice.

The announcement includes a proposed ban on contingent charging for pension transfer advice as the regulator believes poor advice may be being driven by conflicts of interest in the way advisers are remunerated. The consultation outlines:

  • Measures to ban contingent charging, except where consumers have clearly identifiable circumstances that mean a transfer is likely to be in their best interests. In these circumstances, advisers must charge the same as they would for non-contingent advice.
  • Plans to introduce a form of ‘abridged’ transfer advice based on a high-level assessment ofa client’s circumstances. This will fall outside of the contingent charging ban and should help maintain access to financial advice.
  • New requirements for pension transfer specialists to undertake 15 hours of relevant continuing professional development (CPD) annually, on top of existing CPD requirements.
  • New data requirements for financial advisers to help the FCA regulate the sector more effectively.

The regulator has also published a policy statement following its second consultation on remedies proposed following the Retirement Outcomes Review (ROR). The new rules and guidance include:

  • Introducing investment pathways for those entering drawdown without financial advice
  • Ensuring that only consumers who take an active decision to invest predominantly in cashare able to do so
  • Requiring firms to provide consumers with an outline of costs and charges on an annual

Finally the FCA has published an update on its work in the non-workplace pensions market. The feedback statement outlines that a lack of consumer engagement and market complexity have combined to create a climate of low competitive pressure. Consumers are unable to effectively compare charges due to this complexity, meaning that they may be paying too much or not getting value for money.

The regulator has outlined potential measures to address the following areas:

  • Protecting unengaged consumers
  • Reducing charge complexity and promoting greater transparency
  • Considering methods to open charging practices up to external scrutiny

The regulator is seeking stakeholders’ views on its proposals and alternative suggestions for addressing the identified issues.

 

The final rules on SM&CR for solo-regulated firms are here

The FCA has published the final rules for extending the SM&CR to all solo-regulated firms, including claims management companies. Broadly, the rules are as consulted on in CP19/4, published in January 2019.

Key areas of interest include:

  • The confirmation that the Head of Legal function is excluded from the requirement to be approved as a Senior Manager
  • Clarification around the requirements and scope of the Certification Regime
  • The extension of Senior Managers Conduct Rule 4 (SC4) ‘You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice’ to non-approved Executive Directors at Limited Scope

 

The FCA wants to extend its temporary transitional powers

The FCA has announced its intention to extend its use of the temporary transitional power, designed to minimise disruption to firms in the event of a ‘hard’ Brexit, to 31st December 2020 following the extension of Article 50.

However, there are still a number of areas where the FCA will not be granting transitional relief and those firms should continue with the necessary preparations in order to remain compliant. The regulator will be publishing further information ahead of the UK’s exit from the EU on how firms should approach their compliance with the post-exit rules.

 

Here’s the FCA’s consultation paper on its responsibilities after a hard Brexit

In the event the UK leaves the EU without a withdrawal agreement or implementation period the FCA would be responsible for establishing and regulating an onshored securitisation market.

The regulator has published its first consultation paper to establish the necessary infrastructure to ensure the market functions effectively, including specifying the necessary information originators and sponsors are required to submit, and the templates it intends to use.

 

There’s now final guidance to clarify cryptoassets regulation

The FCA has published final guidance which sets out the cryptoassets that are within the regulatory perimeter. This is designed to help firms understand whether they need authorisation and the standards expected of them.

The paper outlines the circumstances where tokens are likely to be:

  • Specified investments under the Regulated Activities Order
  • E-money under the E-Money Regulations
  • Included under the Payment Services Regulations
  • Outside the regulatory perimeter.

 

The FCA and Practitioner Panel have published their survey results

The joint FCA and Practitioner Panel survey provides a snapshot of how the industry believes the FCA is performing as a regulator and achieving its regulatory objectives.

Participants were asked to rate their confidence in the regulator’s achievement of each of its objectives. The scores against its first two objectives (protecting consumers and protecting the integrity of the UK financial system) have increased slightly, while firms’ confidence in its ability to promote effective competition has decreased by two points. However, the FCA did highlight that last year’s results for this objective rose significantly due to the publication of its Approach to Competition.

The survey also highlighted two key areas for ongoing improvement:

  • Ensure the cost of providing information to the regulator is proportionate to the benefits achieved, as many perceive that the volume of information requests has increased
  • Overall trust in the supervisory process and the experience of FCA staff was low. Since the survey, the regulator has taken steps to clarify its approach to supervision and will analyse the impact this has on next year’s survey results.

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