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1. Reporting of Pensions Transfers and Opt outs Business
2. ‘Mortgage Day’ - October 2004.
3. Modification to the FSA’s rules for PII cover
4. FSA Menus – table d’hote or a la carte?
5. Mortgage Endowment Complaints
6. Data Protection - Beware of Impostors

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
Directors/Partners
Compliance / A&O Function
Money Laundering Officer
Advisers & Trainees
T&C Supervisor
Pensions Transfer Specialist
Back Office

1. Reporting of Pensions Transfers and Opt outs Business

There has been confusion surrounding reporting of pensions transfer and opt-outs statistics. ATEB have spoken with the FSA and they have confirmed verbally that the first reports are generally not expected until January 2003. Some firms have already been reporting their figures to the FSA. The FSA have explained that this is fine. The requirements surrounding reporting pensions transfer and opt-outs is not clearly stated anywhere in the rulebook and it has been left very much to the imagination.

Why January 2003?

This coincides with 6 months following the end of the “grandfathering’ period for most ex PIA firms (Ex RPB, firms will have a longer period because the grandfathering period ends on 30th November 2002). However, if the firm has transacted business that falls under quarterly reporting (see below) then the firm should have already issued its first report. As an alternative, the authorised firm could use its accounting reference date as a base for sending the information. i.e. six months following the accounting reference date. However, once the firm has decided its base date, it should continue with that date and issue reports quarterly or every six months as required.

Although, the FSA are reasonably laid back about this area, ATEB consulting would still recommend that firms build a diary system that enables a return to be issued with the minimum of fuss, who knows what the FSA have in mind for the future?

The FSA does not have strict guidance in this area as it does with, say, complaints and presently late transfers & opt out returns will not result in a fine. 

Quick summary of what needs to be reported

The requirement is to report the number of

1. ALL transfers and opt-outs the firm has handled in the previous six-month period

2. Transfers and opt-outs the firm has handled in the previous quarter where transactions represent more than 1% of all pensions transfers and opt-outs during the period, relating to:

• Execution-only
• Insistent customer
• Advice given on a correspondence only basis (No face to face meeting)

Reporting Proforma

If you are still uncertain as to the requirements please call ATEB consulting. We have produced a proforma for reporting in this area; it also doubles up as a register. If you would like a copy we can email or send a copy in the post.

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2. ‘Mortgage Day’ - October 2004.

The treasury announced in mid October that ‘Mortgage Day’ – the date on which the Financial Services Authority will assume its statutory responsibilities over mortgage regulation would be in October 2004. The Mortgage Code Compliance Board (the consumer watchdog and non-statutory regulator of the UK home loans market) continues to raise industry standards and enhance consumer protection – for example, through the full implementation of its Fitness and Competence requirements, which include compulsory qualifications for all mortgage advisers, from 31 December 2002.

Any adviser providing mortgage advice and a recommendation (section 3.1(a) of the Mortgage Code) must have completed either the Certificate in Mortgage Advice and Practice (CeMAP), or be FPC or CeFA qualified and have passed either the CeMAP ‘Bridge’ paper or the Mortgage Advice Qualification (MAQ) by 31 December 2002.

With only 60 days until the 31 December 2002 deadline, time is running out for mortgage advisers to gain the required professional qualification.

Main implications to advisory firms: Those failing to qualify will no longer be able to advise on mortgages unless under supervision of a Competent and qualified adviser  Where the firm does not have any qualified advisers, or single adviser firms where the adviser fails to obtain the qualification, the firm must cease providing mortgage advice from 31st December 2002, until the qualification is passed.

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3. Modification to the FSA’s rules for PII cover

This article explains that the FSA have made changes to their rules for PII cover. Brokers and underwriters have indicated the changes are likely to increase capacity in the PII market, which in theory should make it easier for IFA firms to obtain cover.

An FSA Press Release on the 29th October 2002, gave details of three firms which have been “prevented from carrying on any activities regulated by the FSA” i.e. shut down! One firm had “failed to maintain professional indemnity insurance”.

On the same day, another press release announced a modification to the FSA’s rules for PII cover. The modification introduces a number of changes to the detailed requirements with which a firm’s PII cover has to comply.

The modification will be available from 1 November 2002 and will run for a period of eight months. It will apply for the duration, usually one year, of PII contracts entered into during that period.

Some interesting PII facts (source FSA):

• Premiums have increased on average by 50% this year
• Over a five year period IFAs’ premiums have, as a percentage of turnover, increased from 1.4% to 3.5%
• Other professionals still pay higher premiums for their PII.
• FSA regulates over 4000 IFAs; Between January to mid-September 2002, only 124 IFA firms were referred for regulatory action relating to non-compliant PII. Out of these 124 firms, all but 7 had other regulatory problems.

This suggests that underwriters are assessing the risks attached to individual IFA firms when deciding whether to underwrite cover or not. This also appears to be backed up by data, which shows that IFAs with a poor claims history pay higher premiums than IFAs with no recent claims history.

NB: Importantly, if you are offered cover that does comply with this amendment (but is non compliant in old terms), then you must send a form to the FSA. Firms can confirm their compliance with the amended requirements by sending a new self-certification form to the FSA indicating their consent to the modification. The form and further guidance (although the guidance is aimed at the PII underwriters) are available on the FSA website at http://www.fsa.gov.uk/waivers/waiver_consent.html or by telephoning the Investment Firms Division Contact Centre on 0845 606 9966

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4. FSA Menus – table d’hote or a la carte?

In its Consultation Paper 121, the regulator discussed potential ways to help consumers compare the cost of financial advice. The FSA’s objectives were:

• Reducing the potential for commission bias
• Making consumers more aware of the cost of advice; and
• Facilitating shopping around by consumers.

In the light of CP121 responses, the FSA have decided to drop the defined payment system in favour of a so-called “Menu” approach.

The “Menu” is envisaged as a document provided to consumers in the early stages of the sales process. It would set out:

• An outline of the services the adviser is offering
• For independent advice, the option of paying by fee and a fee scale
• Where offered, the option of paying by commission and, for a range of popular products, the commission that the adviser normally receives set alongside average rates paid in the market.

A full consultation will be issued next year on draft rules for the Menu. It is aiming to develop ways of applying the menu approach across all advice channels, not just the independent sector. The FSA will make a further announcement on the outcome of its consultation on the reform of polarisation before the end of the year.

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5. Mortgage Endowment Complaints

These are becoming increasingly common.

There is some good news however. Apparently (as highlighted by the Consumers Association), there is a deadline for submitting such complaints – this is a little known, not very well publicised (by FSA) fact.

Under current legislation, consumers must complain within 6 years of buying the product or within 3 years of when they first became aware, there was a problem i.e. from when a first re-projection (“traffic light” letter) was received.

Please note that we have yet to see this rule put to use and further clarification will be required before it can be enforced.

Calculations. Where redress has to be calculated (where compliance cannot be demonstrated), such calculations may well have to be outsourced to actuaries. The only alternative is to undertake the calculations yourselves. Note however that the ombudsman uses one of the actuarial packages to ‘check’ complaints that are referred to them.

If enough of you are interested however, we could pool together to buy one licence to be used across all ATEB clients. The cost of licence is likely to be in the region of £3,000 (to be confirmed).

Anyone interested? Email huw@ATEBconsulting.co.uk

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6. Data Protection - Beware of Impostors

Something some of you may wish to be alert to, ATEB consulting are aware of letters being sent to businesses by a company claiming to be a Data Protection Agency.  These letters inform the recipient that they have not notified the fact that they hold personal data for individuals with the Information Commissioner.  They also provide a form to do this at a cost of £95.00. The Information Commissioner's Office has made it clear that this company is not entitled to act as a representative of their office.

If required, the cost of Notification is only £35.00. There is an easy to follow booklet that can be found under Notification on the Information Commissioners Website, which is www.dataprotection.gov.uk You can also contact the Information Commissioner at Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF or alternatively contact your local ATEB consultant who will answer any questions on Data Protection you may have.

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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.

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Northumberland
NE22 6AX

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