Investment Firms
If you would like to read this newsletter offline click here for a PDF download.
Note: You will need Adobe Reader to view this document.
1.
ATEB Supervisor Workshop for IFA, Mortgage & General Insurance Brokers
2.
TCF ‘must read’ and reminder of deadlines
3.
FSA increase its contact with small firms – TCF initiative
4.
Key Performance Indicator (KPI) Ideas
5.
Are the FSA trying to contact you?
6.
Regular and Periodic Assessment of Knowledge
7.
Data Protection
8.
File checking – Are you closing the loop?
9.
RMAR Verification
10.
Appointed Representatives – Thematic Review Findings
11.
Are your websites fair, clear and not misleading?
12.
Retail distribution review (RDR) – Running out of time to respond
13.
Are you signing off your Pension Transfers?
14.
Advising clients in EEA - Passports
15.
Money Laundering Regulations 2007
16.
Pension Reform - Personal accounts and advice
17.
FSA will clamp down on brokers unwilling to change
18.
FSA fines two firms and bans a third for sub-prime failings
19.
Right to Buy - Do you have the relevant systems and controls in place?
Ladies & Gentlemen
Please find enclosed the latest compliance and industry news.
As usual, sit back and enjoy!
Kind Regards
ateb consultants
Which article applies to me?
Please use the following table to decide which article applies to you, if any:
| |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
12 |
13 |
14 |
15 |
16 |
17 |
18 |
19 |
| Directors/Partners |
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Compliance / A&O Function |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Money Laundering Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Advisers & Trainees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| T&C Supervisor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pensions Transfer Specialist |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Back Office |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mortgage Related (M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M |
M |
M |
1.
ATEB Supervisor Workshop for IFA, Mortgage & General Insurance Brokers
Date:
Tuesday 19th February 2008
Content:
- Overview of general T&C requirements on regulated firms
- Setting customer facing sales process standards
- Consistent and accurate assessment skills
- Theory of coaching and training
- Training Needs Analysis completion
- Constructing SMARTA development plans
- Structuring one to ones
- Monitoring performance
Timings:
10.00am until 4.00 pm
Location:
Horton Grange Country House Hotel
Berwick Hill
Seaton Burn
Newcastle Upon Tyne
NE13 6BU
Cost:
£175 plus vat per person
Joining Instructions:
These will be issued 7-10 days prior to the workshop
Limited Spaces:
Only 10 places are available and will be allocated on a first-come, first-served basis.
| Ateb view: |
| None - for information only. |
| Action required by you: |
We have provisional names on the list which we will hold for a period, however these now need to be secured.
Please let us know if you would be interested in attending by simply replying to this email. An invoice will then be issued which, on receipt of payment, will secure your place(s). |
Return to Features List or
Contact Us
2.
TCF ‘must read’ and reminder of deadlines
As firms should now be aware, for TCF to be effective, firms should be making it an integral part of their business culture. In ‘Treating customers fairly initiative: progress report’, May 2007, the FSA set the following deadlines:
- All firms should have appropriate management information or measures in place to test whether they are treating their customers fairly by the end of March 2008.
- All firms are expected to be able to demonstrate to themselves and to the FSA that they are consistently treating their customers fairly by the end of December 2008.
I counted 35 main documents released on TCF since June 2001 (excluding case studies) quite bewildering for those of you trying to make a living! We have therefore selected these key documents as a ‘Must read’ by Directors and Partners.
- FSA paper: ‘Culture’:
http://www.fsa.gov.uk/pubs/other/tcf_culture.pdf
- FSA paper: ‘A guide to management information’:
http://www.fsa.gov.uk/pubs/other/tcf_mi.pdf
- Cluster reports for each sector (Investment, Mortgage & Insurance):
http://www.fsa.gov.uk/pages/Doing/Regulated/tcf/cluster/advice/index.shtml
http://www.fsa.gov.uk/pages/Doing/Regulated/tcf/pdf/mortgages.pdf
http://www.fsa.gov.uk/pages/Doing/Regulated/tcf/pdf/insurance.pdf
- FSA paper: ‘Measuring Outcomes’:
http://www.fsa.gov.uk/pubs/other/tcf_outcomes.pdf
The culture document explains that leadership at all levels sets the tone of an organisation, driving the behaviour of staff and the quality of decisions. The MI paper reinforces the point that to enable firms to take action and make the necessary changes, they will need MI to identify where they are failing to deliver fair consumer outcomes. The cluster reports together with the culture and MI papers give an array of good and bad TCF practice. The most recent is the outcomes document which sets out progress the FSA has seen against the six TCF Outcomes.
| Ateb view: |
| Treating Customers Fairly (TCF) is a cultural issue. It is only through establishing the right culture that senior management can convert their good intentions into actual fair outcomes for consumers. Many firms have still not quite grasped TCF, we therefore strongly encourage firms to consider the issues identified in the above publications and think about how to use the content to review their approach to treating customers fairly. |
| Action required by you: |
Directors / Partners should read the publications and ensure that you have a ‘hands on approach’ to TCF.
ATEB have some Powerpoint slides that firms can use by Directors / Partners to present to staff. ATEB cannot present to staff on your behalf it MUST be done by the Directors / Partners. The slides contain ideas on TCF and encourage staff to take ownership of their own individual role within the TCF strategy. If you would like a copy of the slides please contact your local ATEB consultant. |
Return to Features List or
Contact Us
3.
FSA increase its contact with small firms – TCF initiative
The Financial Services Authority (FSA) has recently announced it is introducing new measures to increase its contact with small firms. The FSA expects to carry out full on-site visits to approximately 25% of firms in order to verify the assessments and follow-up identified issues.
Building on its current risk-based approach, the FSA is introducing an ongoing programme of structured visits and/or telephone assessments to test the quality of management and progress towards embedding TCF.
The results will help inform its risk profile of individual firms so that it can better target resources at the firms that pose the biggest risk to its objectives.
| Ateb view: |
| Superficial TCF (i.e. a few documents on TCF) will not be enough should you receive a visit. TCF needs to be part of the culture of the firm and habitual at all levels. |
| Action required by you: |
| Review your TCF strategy and ensure that you are implementing throughout your business. Ensure that all staff have been briefed. |
Return to Features List or
Contact Us
4.
Key Performance Indicator (KPI) Ideas
As we move closer towards the March 2008 deadline we thought it would be useful to give you a few examples of KPI that you could be using to help demonstrate control within the business:
|
IFA |
Mortgages
|
General Insurance |
Material Compliance |
|
|
|
Suitability |
|
|
|
Persistency |
|
|
|
Product Splits |
|
|
|
Company Splits |
|
|
|
Cancellation |
|
|
|
Recent training |
|
|
|
Results on customer feedback |
|
|
|
Higher Risk ML situations |
|
|
|
Pension Transfer cases |
|
|
|
Drawdown cases |
|
|
|
|
|
|
|
Replacement cases |
|
|
|
Non-Advised sales |
|
|
|
|
|
|
|
Commissions claw back |
|
|
|
Complaints resolved |
|
|
|
Complaints received |
|
|
|
Fees / Commission splits |
|
|
|
Source of business |
|
|
|
|
|
|
|
Self Cert Cases |
|
|
|
Interest Only Cases |
|
|
|
Sub Prime Cases |
|
|
|
Lifetime Mortgage Cases |
|
|
|
|
|
|
|
Claims rejected |
|
|
|
Claims settled |
|
|
|
Client money balances |
|
|
|
Renewal timings |
|
|
|
Contract certainty timings |
|
|
|
Sale of additional features |
|
|
|
Some of the above KPI figures may be available via your back office systems others may need to be produced manually. These are just examples I’m sure you can think of others.
| Ateb view: |
There is nothing new about KPI and they make excellent business sense if used correctly.
Remember sales figures and targets are not really TCF related MI. |
| Action required by you: |
| By all means speak to ATEB if you would like to understand more about how to display KPI and action to take following a review. |
Return to Features List or
Contact Us
5.
Are the FSA trying to contact you?
The FSAs preferred method of contact seems to be email. So much so that they recently sent an email request to all investment firms for information on the split of business between ‘Investment’ and ‘Life & Pensions’ to enable them to calculate the correct FSCS fees for next year.
This email only reached a small % of ATEB clients and we suspect an even smaller % of the wider IFA audience.
There could be a number of reasons for this but we suspect that key ones are:
- Firms IT systems are spamming FSA email due to their settings being too ‘high’ or
- The firms email address shown on the FSA register is out of date or being sent to the wrong person
| Ateb view: |
| None - for information only. |
| Action required by you: |
| Regarding point 1) we suggest speaking to your IT support to make sure FSA emails will get through. Regarding point 2) we suggest logging on to Firms Online and altering your standing data to show the correct email address. Either way we recommend checking your details to ensure they are still correct. |
Return to Features List or
Contact Us
6.
Regular and Periodic Assessment of Knowledge
On our travels we see CPD assessment and review as an area of weakness within firms.
Therefore, we thought it was worth bringing your attention to a cost effective solution to meet the FSA rules. The facility will also support individuals looking to take exams in the future.
The system benefits from:
- Knowledge Assessment System
- Record-keeping and Management Information
- Technical learning material
- Interactive tutorials
| Ateb view: |
| There are of course alternative ways of assessing competence and firms should ensure that they have systems in place to deal with assessment of their staff. We feel it’s just a matter of time before the FSA catch up with firms that do not conduct regular or periodic assessments of competence. |
| Action required by you: |
| For more information click on http://www.ed.cii.co.uk/ |
Return to Features List or
Contact Us
7.
Data Protection
Following the media coverage of identity theft and the dumping of customers' personal information by banks, and more recently the government losing child benefit data, we thought it would be useful to remind firms about the interactive training DVD produced by the information commissioner’s office.
The DVD is called 'The lights are on'. It was released to improve understanding of the Data Protection Act in the work place and ensure individuals' personal information is effectively protected.
The DVD highlights a few common mistakes and the eight principles of good data protection practice in order to encourage better compliance with the Act. It explains the problems that can arise for individuals when their personal information is wrongly disclosed to a third party. It also provides employees with an opportunity to refresh their knowledge of data protection and test it using a selection of quizzes.
| Ateb view: |
| None - for information only. |
| Action required by you: |
| To request a copy visit www.ico.gov.uk and use the site navigation to visit "Request Publications" ordering " ICO The Lights are On" or call 08453 091091. |
Return to Features List or
Contact Us
8.
File checking – Are you closing the loop?
Do you conduct and record regular file checks? If not you should be!
As a rule of thumb you should be looking at 10% of files so, for example, firms producing 50 new cases a month should be checking at least 5 cases per month.
A risk based approach, which is recommended, may increase or decrease this figure.
Forgetting the FSA rules for a second, this is a great way for management to stay in touch with the quality of advice that customers of the firm receive.
The feedback from checks can then be presented to management in the form of KPI. In doing so you are now ticking one of the boxes that will help you towards the March 2008 deadline for TCF.
Of course these checks only become worthwhile if the firm takes action following the feedback. If you are not taking documented action (i.e. ‘closing the loop’) then this could be grave error of judgment.
| Ateb view: |
| Many of these smaller firms that are now receiving FSA fines could have avoided these problems by having their files checked from day one. |
| Action required by you: |
Ensure that you are checking sufficient cases AND taking action.
If you would like assistance in this area ATEB offer a file checking service, so feel free to email us if you would like more information. |
Return to Features List or
Contact Us
9.
RMAR Verification
The FSA have looked at a number of firms across all sectors to check the quality of RMAR completion. 85% of firms were able to demonstrate and verify the data and information provided on their RMAR.
Common problems the FSA found were
- Using 'rounded figures'
- Estimating values, even for items that are absolute
- Using old accounts to complete their RMAR
- Including client money as part of their capital resources (GI Brokers mainly)
- Using 'intangible' assets (namely goodwill) as part of their assets
We thought it may be useful to make our own observations …
Common problems that we find:
- 6 months information input in section B for a year end period of 12 months
- Insufficient recording of business sources
- Lack of financial management information
- Financial information on back office system does not tally with accounts
- Poor access to records of insurance premiums
| Ateb view: |
| Firms that have good systems and controls, effective management information and record keeping are able to report timely and accurate RMAR returns without any undue burden to their day to day activity. |
| Action required by you: |
If you want to see more detailed information on this project work see the following link:
http://www.fsa.gov.uk/Pages/Doing/small_firms/general/rmar/index.shtml |
Return to Features List or
Contact Us
10.
Appointed Representatives – Thematic Review Findings
A recent thematic review has found that principal firms are not doing enough to ensure their appointed representatives (ARs) are treating customers fairly in the sale of general insurance, mortgage and investment products.
The FSA highlighted the following key areas for improvement:
- Making sure written procedures are adhered to in practice.
- Having suitable, risk-based monitoring of ARs, rather than just using just remote checking of client files.
- Making more progress towards Treating Customers Fairly with more effective communication to ARs.
- Using appropriate management information or other measures to test whether ARs are delivering the Treating Customers Fairly consumer outcomes and working towards the end of December 2008 deadline.
| Ateb view: |
| ARs up until now for many firms have been “easy money”. We predict this will change in the future, and principal firms will need to think carefully whether they continue to have ARs and if they decide to retain them, that charges are set at the right level to ensure sufficient resource is allocated to compliance. |
| Action required by you: |
We would urge firms with ARs to look carefully at the good and poor practice and ensure a gap analysis is established to plug shortfalls.
The review is detailed on the following link:
http://www.fsa.gov.uk/pages/Doing/small_firms/general/appointed_reps/index.shtml |
Return to Features List or
Contact Us
11.
Are your websites fair, clear and not misleading?
The FSA have conducted a review of advertising on 77 regulated firms’ websites.
The review showed that a significant minority of the websites sampled failed to present information in a fair, clear and not misleading way. The FSA found some websites difficult for consumers to navigate and failed to sign-post key information.
The FSA expect the senior management of all regulated firms to ensure their customers are treated fairly. They will be carrying out a further review in March 2008 and will take action if it finds further failings.
| Ateb view: |
| As we have said in previous newsletters a poor website is the perfect advert to the FSA! |
| Action required by you: |
As required, firms should take immediate steps to improve their websites.
The FSA has published examples of good and bad practice to further help firms address failings in their web-based advertising. These can be found on the following link:
http://www.fsa.gov.uk/pages/Doing/Regulated/Promo/key_issues/website.shtml |
Return to Features List or
Contact Us
12.
Retail distribution review (RDR) – Running out of time to respond
There are still a few weeks to go for you to have your say on the FSA proposals for reform of the retail investment market.
To get an overview of the proposals take a look at the summary:
http://www.fsa.gov.uk/pages/Doing/small_firms/advisers/rdr/index.shtml
| Ateb view: |
| This review is likely to radically reshape the industry in years to come, even if you have never responded previously we would urge all firms to have their say. |
| Action required by you: |
Please use the response form on the FSA website to let them know what you think, or email or write to them at the address on their response web page.
http://www.fsa.gov.uk/pages/library/policy/dp/2007/dp07_01_response.shtml |
Return to Features List or
Contact Us
13.
Are you signing off your Pension Transfers?
Just a reminder that the FSA rules specify that Pension Transfers and / or Opt Outs still need to be signed off by a pension transfer specialist.
ATEB recommend a Pre and Post Sign Off (Forms are available via the ATEB website).
Don’t forget that Pension Transfers include transfers from Money Purchase Occupational Schemes and Section 32 to Personal Pensions and Stakeholder Pensions as well as transfers from Occupational Money Purchase (including EPP) to S32.
The FSA transfer definition refers to “deferred benefits” so if transferred benefits are being taken immediately then technically they are outside the definition. However, in our view, they should still have a sign off from a risk management perspective.
| Ateb view: |
| These are easy to miss if the systems and controls don’t exist within the firm. |
| Action required by you: |
| Ensure all relevant transactions are identified for sign off. If you have missed signing of we suggest you go back to these cases for re-examination. Don’t forget to inform the FSA of this breach. |
Return to Features List or
Contact Us
14.
Advising clients in EEA - Passports
Do you advise clients located in another EEA country? If so, you may have to obtain a passport to provide such services to comply with various European Directives.
- Broadly speaking, Passporting allows UK based firms to provide cross-border services (for example advise a customer in Spain) into another EEA States, as long as they fulfil the conditions in the relevant directive.
- An IMD passport covers life and pensions business (includes investment bonds).
- A MiFID passport covers unit trust, investment trusts, OEICs, shares.
- A MiFID passport will have financial implications in terms of higher resources and compliance costs.
- If you advise within countries outside of the EEA (including the Isle of Man and Channel Islands) you will have to apply direct to the relevant financial regulators in each territory for permission to conduct business there. The FSA have no formal involvement in this process (although we would recommend that you email the firm contact centre to let them know your intentions).
- Where you only conduct business with clients on their return visits to the UK, the FSA would not generally expect a passport to be required.
Return to Features List or
Contact Us
15.
Money Laundering Regulations 2007
The new Money Laundering Regulations 2007 come into effect on 15th December 2007.
The main changes (which are quite subtle) are:
- There is a new requirement to monitor the ongoing business relationship with the Customer. In simple terms the firm must keep up to date records at all times and be vigilant to anything out of the ordinary.
- Firms have to identify not just the customer, but the beneficial owner of the customer.
- More information has been supplied to help firms understand the risk-based approach.
- Terminology has changed in that “Exemptions” that existed are now referred to as simplified due diligence.
- Additional clarification of the extent to which reliance can be placed on other firms
- More businesses now have to comply with the Regulations (e.g., estate agents)
| Ateb view: |
| None - for information only. |
| Action required by you: |
You may wish to brief staff on the changes and re-visit the firms procedures overall. ATEB have updated its web based procedures to deal with the December changes. These are version 3.00 and will be available by the end of this week.
All Money Laundering Officers should also read the latest FSA newsletter and record this within their CPD records:
http://www.fsa.gov.uk/pubs/newsletters/fc_newsletter9.pdf |
Return to Features List or
Contact Us
16.
Pension Reform - Personal accounts and advice
The government is planning reforms which will have a significant impact on the pension’s environment.
The proposal is that from 2012 all employers will have to provide a workplace pension (Personal Account), automatically enrol all of their employees who meet certain criteria and contribute a minimum of 3% of salary (between a lower and upper limit).
The FSA have stated that where an individual has a need and a desire to save (be that generally or specifically for retirement) there should be no question of delaying saving until 2012. Putting off saving would not be in the best interests of the individual. They also state that advisers will need to be aware of the developments as they happen to enable them to make reasonable assumptions when giving advice.
| Ateb view: |
| None for information only. |
| Action required by you: |
| These reforms are up for debate and subject to Parliamentary approval, so keep an eye on developments. |
Return to Features List or
Contact Us
17.
FSA will clamp down on brokers unwilling to change
A series of reviews by the Financial Services Authority (FSA) has found that several mortgage brokers continue to operate well below standard, with senior management failing to adequately monitor and control their firm's performance to ensure that they are treating their customers fairly. The reviews examined the following:
- assessment of affordability
- self-certification (self-cert) mortgages
- training and competence standards
- effectiveness of senior management controls
The FSA found some firms willing to offer mortgages they knew to be unaffordable and to accept self-cert business even where they had concerns that the financial information provided by the customer was implausible. These practices are completely inconsistent with Treating Customers Fairly - hence the large number of enforcement referrals and other regulatory actions. The reviews also identified areas where firms' practices could lead to an increased risk of fraud and money laundering.
The FSA will begin a further review in January 2008 of mortgage quality of advice processes, and it is looking to report a considerable improvement when the work is concluded in June 2008.
| Ateb view: |
| 2008 is going to be quite an expensive year for mortgage brokers acting in a non-compliant manner. |
| Action required by you: |
All mortgage brokers are advised to make improvement to the way they do things.
The FSA has published case studies and examples of good and poor practice to help firms assess and improve their own progress. These can be found at:
http://www.fsa.gov.uk/Pages/Doing/small_firms/mortgage/practice/roadmap/index.shtml |
Return to Features List or
Contact Us
18.
FSA fines two firms and bans a third for sub-prime failings
The FSA has fined ‘The Loan Company trading as Greenhill Finance’ (TLC) £31,500 and ‘Next Generation Mortgages Limited’ (NGM) £10,500. It has also stopped ‘Homebuyer Securities Limited’ (HSL) from trading. All three firms have been required to conduct a past business review to identify whether customers have suffered losses as a result of receiving unsuitable advice. The FSA investigations found various failings in the firms which include the following:
Failure to:
- correct record keeping failings identified during FSA visits in 2005.
- gather adequate customer information to assess affordability or support the mortgage recommendations made
- adequately train its staff
- to monitor or review client files properly
- give customers consistent information about the key features of the product
- demonstrate why recommendations were made
- to explain the details or risks of recommended mortgages to customers
- ensure that all of its advisers were qualified to give mortgage advice.
As a result of their failings NGM has agreed to stop selling self-certification mortgages, which require no verification of income by lenders, due to FSA concerns and HSL has agreed that its director will never work as a mortgage broker again.
Return to Features List or
Contact Us
19.
Right to Buy - Do you have the relevant systems and controls in place?
Following on from our last bulletin regarding the FSA regular contact with small firms, it appears the next thematic review is targeting mortgage Firms who have carried out Right to Buy schemes (RTB)
Letters are already being distributed to firms who have carried out RTBs informing them that thematic visits are possible.
This is incorporating the firms TCF regime and ensuring you are meeting their requirements.
The FSA consider people in the RTB market to be a potentially vulnerable group due to, what they consider, a lower level of financial awareness and experience. They feel therefore it is important that clients are made fully aware of;
- The risks and cost implications before making financial decisions such as a mortgage contract.
And that those firms have robust procedures in place to ensure suitability of the mortgages sold and to ensure affordability is fully assessed as well as demonstrated.
Firms must also be reminded that Cold calling is not permitted under the FSA rules.
The FSA are reiterating the fact that they are taking action against firms who have failed in their performance in the RTB market.
They intend to carry out a number of visits in 2008 in the RTB sector. Failure to demonstrate the firms awareness of the responsibilities to the consumer may result in supervision or enforcement action.
| Ateb view: |
| Another example of the FSA tightening the screw (or is that noose?) |
| Action required by you: |
| Ensure the firm has the correct systems and controls in place particularly surrounding a sales process and the training and competence of advisers surrounding RTB schemes. It must be demonstrated that these are effective in supporting their principle of Treating Customers Fairly. |
Return to Features List or
Contact Us
Important Note:
The ATEB Newsletter is intended to provide general guidance on areas of compliance and T&C; however it is not a replacement for the main Rules and Guidance contained within the FSA Handbook.
We welcome all feedback. If you have any feedback or questions relating to any articles then please direct them to your local ATEB consultant or the newsletter editor Steve Bailey email steve@atebconsulting.co.uk
Unless you have consulted specifically (as part of a regular visit) with ATEB on a particular issue then ATEB Consulting accept no liability for any actions taken based on the information contained solely within the newsletter. |
Contact Us:
Ateb Consulting
The Old Post House
29 Nedderton Village
Northumberland
NE22 6AX
T: (01670) 822984
M: (07703) 576951
E: steve@atebconsulting.co.uk
W: www.atebconsulting.co.uk
