The post Coronavirus (COVID-19) Update: The FCA Proposed Supportive Measures For Motor Finance And High-Cost Credit Customers first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The FCA advises firms to allow a 3-months payment freeze to customers that are facing financial difficulties in meeting their finance or leasing payments due to coronavirus and suggests firms not to end any agreements or repossess vehicles.
Furthermore, the FCA proposes that firms should:
The FCA proposes that high-cost short-term credit firms should provide a 1-month interest-free payment freeze to customers that are adversely affected by the coronavirus. This shorter period reflects both the short length of most loans and prevents firms from acquiring additional interest during the freeze period. At the end of the freeze period firms are encouraged to allow customers to pay the deferred payment affordably, either as one single payment or multiple smaller instalments.
High-cost short-term credit firms should also consider whether formal forbearance may be more suitable in the case where a customer has been suffering from financial problems before the coronavirus.
Firms that enter into rent-to-own (“RTO”), buy-now-pay-later (“BNPL”) or pawnbroking agreements should provide a 3-month payment freeze to customers facing payment difficulties due to coronavirus.
The FCA suggests that:
The FCA advises that in most other loan freeze arrangements, firms will be able to charge interest rates during the payment freeze period but, for those customers who require full forbearance, their interest rates should be waived. The current forbearance arrangements, such as suspending, reducing, waiving or cancelling any further interest or charges, deferring payment of arrears or accepting token payments, will still be applicable for customers with pre-existing financial problems.
The measures proposed by the FCA do not limit firms from providing more favourable terms to their customers if needed.
How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:
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]]>The post Coronavirus (COVID-19) Update: FCA Confirms Temporary Measures For Financial Relief For Customers Impacted By The Coronavirus first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>On behalf of the FCA, Christopher Woolard stated, inter alia: that many people are suffering financial distress as a result of the pandemic and these measures could provide some short-term financial support. These measures are targeted to consumers with credit cards, loans and overdrafts that are negatively affected by the pandemic. Nevertheless, customers who still have the capacity to make payments are advised to continue to do so. Additional supportive measures for other credit markets, e.g. the motor finance sector, will follow.
The measures require firms to:
The rule changes will be in force from 9 April 2020 and the total full range of measures will apply by 14 April 2020. The time in-between will allow firms to ensure they have the appropriate level of resources needed to handle their customers’ requests. Some firms, including banking institutions[1] and building societies, will be adopting these changes as of today (9 April 2020).
The FCA suggests that consumers should firstly check the firms’ websites and social media platforms as well as their online services to request assistance prior to contacting the firms by telephone in order to avoid increasing pressure on call centres.
The FCA confirmed that the following products are covered: guarantor loans, logbook loans, home collected credit, a loan issued by Community Development Finance Institution and some loans issued by credit unions, but only where these are regulated. The guidance also applies to firms which have acquired such loans.
How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:
[1] The banks and building societies who are implementing the changes from today are – HSBC, Lloyds, RBS, Barclays, Santander and Nationwide.
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]]>The post Coronavirus (COVID-19): Update FCA Urgent Consultation: Temporary Financial Relief For Borrowers first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The consultation is targeted at banks, building societies, credit card and store card issuers and other providers of consumer credit loans. The proposed measures are intended as an emergency measure.
They will provide urgent but temporary support to users of certain consumer credit products who are facing a financial impact because of the exceptional circumstances arising from Coronavirus.
The FCA is conducting an extremely brief consultation on the proposed measures.
The consultation begins today (2 April 2020) with a deadline of 9am Monday 6 April 2020. If confirmed the measures would start to come into force by 9 April 2020.
It is intended the measures would be in force for up to 3 months.
The proposals focus on ensuring consumers have access to cash or credit at a time when many may be financially stretched but do not have to pay severe charges or interest penalties as a consequence. The proposals are summarised below.
This package is intended to complement measures already announced by the government to support mortgage holders and tenants in the rental sector and the assistance being provided for furloughed employees and the self-employed. The FCA has already issued separate guidance to banks, mortgage lenders and insurers regarding dealing with consumers during the Coronavirus Pandemic.
In setting out its proposals and the extremely short consultation period, the FCA has cited the need to act to protect consumers at a time of national emergency.
Lenders do not have to put these measures in place until they come into force.
It may take a short period of time for lenders to put in place arrangements to provide these measures. Consumers should not contact their lender yet unless their lender is already offering voluntary assistance. The FCA expects to make a further announcement about these measures next week.
These proposals from the FCA would not prevent firms from offering more generous assistance to their customers. Some banks and lenders are already offering more favourable assistance to consumers than that proposed by the FCA.
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]]>The post FCA retires Finalised Guidance 12/15 and 14/1 on describing advice services and inducements first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>Two Finalised Guidance publications (FG12/15: Retail Distribution Review: independent and restricted advice and FG14/1: Supervising retail investment advice: inducements and conflicts of interest) and a factsheet (Using platform-based investments and the independence rule) are being retired by the FCA with immediate effect as they were largely superseded on 3 January 2018 by changes brought about by the revision (“MiFID II”) of the original Markets in Financial Instruments Directive (“MiFID I”).
Firms should already be complying with the MiFID II-based requirements and no longer need to have regard to FG12/15 and FG14/1.
FG12/15 was originally developed to help firms apply the rules on describing advice services as either ‘independent’ or ‘restricted’, introduced as part of the Retail Distribution Review (“RDR”) at the end of 2012.
New requirements on describing advice in COBS 6.2B were brought in as a result of MIFID II, specifying:
As a result of the MiFID II-based rules being different in substance to the RDR rules, FG12/15 is considered no longer current or required.
The FCA is also withdrawing with immediate effect a separate FCA factsheet (‘Using platform-based investments and the independence rule’) referenced in FG12/15 which has also been superseded.
In broad terms, FG14/1 provided guidance to firms on compliance with the inducement rules derived from MiFID I. In particular, it focused on the various kinds of non-monetary benefit which firms may be able to give and receive in relation to the sale of retail investment products in compliance with the rule on inducements.
With effect from 3 January 2018, the FCA has made a number of changes to the inducement and adviser charging rules, to:
The effect of these changes is to further restrict the ability of retail advice firms to accept any monetary or non-monetary benefits (other than certain minor non-monetary benefits meeting various conditions) in connection with their business of advising.
FG14/1 has effectively been superseded and is therefore no longer considered current or required.
The practical effect of one aspect of these new rules is that firms which provide independent or restricted advice to retail clients in the UK, and which are subject to COBS 2.3A.15 R, and/or to the rules in COBS 6.1A, cannot accept any payment, commission or benefit of any kind which is paid or provided in connection with their business of advising, except for:
These new rules do not prevent firms from organising or attending conferences, providing that their actions comply with applicable rules.
The list of potentially acceptable minor non-monetary benefits (in COBS 2.3A.19 R(5) and COBS 6.1A.5A R(2)(e)), expressly refers to participation in conferences.
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]]>The post UK PRIIPs Regulation published – KIDs required 1 January 2018 first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>| Of relevance to: | Manufacturers of packaged retail and insurance-based investment products and persons advising on, or selling, those products to retail investors Don’t be caught unawares – if you have staff invested or distributors, you could be caught! |
| Key date: | Applicable from 1 January 2018 |
EU Regulation No 1286/2014 (the “PRIIPs Regulation”) requires those manufacturing a packaged retail and insurance-based investment product (“PRIIP”) to draw up a key information document (“KID”) containing standard information, and requires persons advising on or selling PRIIPs to provide the KID to retail investors, with effect from 1 January 2018.
The UK PRIIPs Regulations (Statutory Instrument 2017 No.1127: The Packaged Retail and Insurance-based Investment Products Regulations 2017) have been laid before Parliament and similarly come into force on 1 January 2018. They designate the FCA as the competent authority in the UK for the purposes of the PRIIPs Regulation and give the FCA certain enforcement powers.
Where a person has infringed the requirements of the PRIIPs Regulation, these enforcement powers include the power to:
The FCA also now has the power to impose penalties and make a statement (such as a ‘supervisory notice’, ‘warning notice’ or a ‘decision notice’) in relation to a contravention of the PRIIP Regulation.
Where any of these have been actioned, the FCA may—
The UK PRIIPs Regulations make the following important additions:
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]]>The post PRIIPs: Implementation Delay Confirmed first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>As advised in Regulatory Roundup 80, the European Parliament rejected a proposed Delegated Regulation which was a key part of the Packaged Retail and Insurance-based Investment Products Regulation (“PRIIPs”).
The core provision behind PRIIPs – which applies to both PRIIP ‘manufacturers’ and to those that advise on or sell such products – is the need provide a Key information Document (“KID”) “before a PRIIP is made available to retail investors”.
The regulatory technical standards (“RTS”) on the content, presentation etc. of the KID were contained in the (rejected) Delegated Regulation and its associated Annexes. Given that PRIIPs applies from 31 December 2016 the rejection of the Delegated Regulation so late in the day causes obvious problems for firms. Whilst PRIIPs on its own is clear, the RTS is essential for the format and methodology used to compile the KID.
Fortunately the European Commission has proposed an extension to the date of application of the PRIIPs Regulation by one year.
The European Commission press release informs us that “the revised PRIIPS framework should be in place during the first half of 2017 and apply as of 1 January 2018”.
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]]>The post CFDs and other Speculative Products first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>Firms involved in CFDs and similar products such as binary options and rolling spot forex
ESMA has updated its Q&As on ‘the provision CFDs and other speculative products to retail investors under MiFID’. – see Regulatory Roundup 78 for the previous version which included the addition of the importance of determining whether the client has the necessary experience and knowledge to understand the risks involved in such investments (the ‘appropriateness’ test).
In addition to CFDs, the paper also references rolling spot forex and binary options – these products will also fall under the heading of ‘PRIIPs’.
Strictly speaking the paper is addressed to the competent authorities rather than to firms but, of course, the messages within will also be relevant to firms.
New Q&As added concern:
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]]>The post Financial Advice Market Review (FAMR) first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>Having thrown out the old financial advice model based on commission, hidden costs and hidden conflicts of interest, politicians and regulators have realised something financial advisers have been telling them all along. The new fee based model only works for the wealthy and wise. The cost of fee based activities is prohibitive for the majority of consumers.
“The review will consider the current regulatory and legal framework governing the provision of financial advice and guidance to consumers and its effectiveness in ensuring that all consumers have access to the information, advice and guidance necessary to empower them to make effective decisions about their finances.”
A laudable objective but one that was doomed from the start. If all consumers are to be able to make effective decisions they must be equipped with the knowledge, skills and tools to do so. The task is one that starts at school not in later life. If the Retail Distribution Review (RDR) demonstrated anything, it was that advice is costly. Under the pre-RDR commission based system the cost of advice was hidden by the often large commissions paid by product providers to financial advisers to remunerate them for recommending the providers product. Without the cross subsidy of Robin Hood type commissions and the larger investment commissions cross-subsidising the cost of advising on and arranging smaller investments, total costs (advice costs, platform charges, product charges) often outweigh the benefits of taking the advice itself. Particularly for the cautious investor client. Low returns coupled with high costs of advice and high product and service charges can mean taking advice is not in the client’s best interests.
Getting to know enough about a client in order to deliver competent financial advice takes time. A comprehensive review of the market, takes time. Recording what has been done and why it has been done also, takes time. Time is money and by and large the customers that are the target of the review don’t seek information, advice or guidance if it costs money. Fees are fine if you know you have a problem. Plumbing problems, even legal problems tend to manifest themselves in clear, immediate and practical ways. The need is clear as is the solution to the problem and the cost of implementation. But providing for pensions, life cover and planning for the future can all be put on hold. Especially if the consumer has student debt, rent or a mortgage to pay, not to mention living costs and an occasional holiday.
In its own paper on Simplified Advice (March 2012) the then FSA recognised that 49% of the population do not have enough savings to cope in an emergency. These customers have an immediate need and generally will not be seeking to pay for financial advice.
For those who work hard, do the right thing but do not have significant wealth, there is a need to avoid the danger that advice may simply become a remuneration contract for the adviser, potentially adding additional risk to savings and delivering no added value. The fact is that for many consumers who do not have significant wealth, the cost of financial advice is not affordable and the value added in investment terms, after charges and fees, is questionable. Short cuts in the advice process or lowering standards will only lead to poorer customer outcomes.
Those without wealth make do when choosing a car. They rarely buy new or top of the range, often foregoing the warranty protection offered with a new car and take the risk on servicing and other costs. In seeking to protect consumers, regulation has arguably increased the standard (perhaps another debate) but in doing so has put financial advice out of the reach of those targeted by the review – the mass consumer.
Affordability of Advice
Affordability is recognised as a problem and streamlined advice is a solution, beyond that and the observation that technology will help, the review came out with no firm commitments.
Access to Advice
Lack of accessibility through high cost and lack of trust in advisers was considered with an emphasis being placed on developing advice through the workplace.
Past Liabilities
Unquantifiable liabilities for past advice and potential consumer redress were seen by some as a barrier to developing alternative advice offerings. Rightly, in our view, if consumers are to be protected standards cannot be relaxed, nor can consumer protections be weakened. Indeed, it is not in the interests of the professionals for it to be otherwise as, longer term, levies and compensation costs will only rise.
The answer has to be in trying to take cost out of the advice process. There are at least two potential ways in which this can be approached.
Cost Reduction via Technology
The first is to use technology to automate much of the time consuming and labour intensive tasks involved in the collection, collation and analysis or financial data from the consumer. Much of this information is factual and can be readily compiled from personal and household documentation. This can be achieved by providing software tools for a client to collate and store such data for use by their adviser.
Technology and software tools can also be made available to allow clients to self-explore objectives, financial priorities, investment risk attitudes and investment risk tolerance i.e. the ability to absorb temporary or permanent losses.
The information provided by the consumer can assist the financial adviser to assess whether they can assist them, whether to accept them as a client and if so at what level of fee. In this manner the technology can remove much of the labour intensive and thus very costly but relatively low value work carried out by the financial adviser. There may still be a need for an experienced professional to interpret or review certain information, but at least this is a value adding task and not routine information gathering.
A further use of technology can deal with two other areas of the advice process that are often problematic if not sometimes contentious.
The disclosure of information required to be provided to prospective clients can readily be given (and recorded) using on-line delivery. Similarly, Client Agreements and/or Terms of Business can be produced, in bespoke form where required, delivered and agreed to via on-line means. Traditionally, this has also been a necessary but relatively labour intensive part of or precursor to the advisory process.
Similarly, gathering sufficient evidence regarding the identity of a client to satisfy the requirements under the Money Laundering Regulations is often time consuming and confusing for many clients. However, most people (including those who may not have a passport or driving licence) now use a mobile phone, which in most cases is a “Smart phone”. Most smart phones now have the ability to securely store identity data, which can be verified by a central data verification source, eg, the data network, utilities providers or even local government or central government agencies. (As an example the Road Fund Licence is now normally renewed on line, with no requirement for paper documents or third party certification.) Indeed, the modern smart phone is beginning to serve as a banking tool or electronic wallet. This provides the basis for a digital verification of identity that in turn can take labour and thus cost out of the advice and client engagement process.
The development of platform technology and mobile computing and applications brings such tools within the realms of being deliverable at a cost that can be readily absorbed by the product and/or platform provider(s) meaning distribution and use by the consumer can potentially be free of charge.
In much the same way that common protocols were agreed in numerous other areas of technology, it is entirely feasible that common formats could be agreed between product and service providers and regulators. This would facilitate mass use by consumers, with data and attitudinal information stored, collated and analysed in common format, for use by advisers.
Product Simplification
The second approach is that of introducing simplified products suited to and designed for relatively simple and straightforward financial planning objectives. At present most products are designed for and aimed at relatively well-informed clients or those who must rely on the advice of a financial adviser. They are generally relatively complex and are not designed with the objective of being simple, transparent and designed to meet relatively simple needs at low cost.
There is ample evidence to suggest that selecting star fund managers is not an easy task – even for seasoned financial professionals. There is also much evidence to suggest that charges and not the fund manager alone, are a very significant determinant of medium to long term fund performance, with low charges often being a very significant factor behind longer term fund performance.
Just as has happened in the area of Workplace Pensions, the compulsory introduction of products that meet mandatory requirements in design, charges and fees, access to risk rated asset classes, liquidity and portability would assist consumers to better understand the savings and investment options open to them.
The Treating Customer Fairly (TCF) initiative rolled out by the FSA was supposed to promote the development of fit for purpose products. However, it is clear that relatively little development has been undertaken by product providers to bring forward simple and low cost savings and investment products for consumers.
Of course, just as turkeys are unlikely to vote for more Christmas Days in the year, the investment houses, banks, pension companies and life assurance providers are unlikely to voluntarily re-vamp their business model to more effectively meet consumer needs. Such a change will not happen without regulatory and consumer pressure.
It must surely only be a matter of time before either consumer and regulatory pressure builds or before a major financial institution realises its potential to steal a march on its competitors and re-engage along the lines described with the mass of consumers who are arguably excluded from financial advice by the consumer perception of disproportionate cost to value.
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]]>The post Making the FCA Application for Consumer Credit Easier first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>These will be relevant to all firms applying for consumer credit authorisation and to trade associations representing consumer credit firms.
Each short video is available with accompanying text. The guides can be viewed on the FCA website and Youtube.
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]]>The post Pension Changes to Enhance Consumer Protection first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .
]]>The FCA’s paper contains proposals designed to ensure that the pensions market works well for consumers, including new requirements to help consumers shop around, ensuring they have the right information to make informed decisions and to be able to understand the remuneration arrangements for the non-advised purchase of annuities.
The paper sets out expectations about how existing rules and guidance operate in the new environment, providing illustrative examples. It makes proposals for rule changes and asks for views from the industry and consumer groups.
Key proposals include:
The FCA has also asked for views on other areas where further action could be taken including the remuneration for arranging the sale of non-advised annuities, reminding firms of their responsibilities to ensure lifestyling strategies remain appropriate and possible changes to the product disclosure regime.
The full FCA paper can be found here
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