This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FSA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.
We hope that you will find this update useful.
Consultation papers:
6 September: Client assets regime – EMIR, multiple pools and the wider view. The FSA has published a combined Consultation and Discussion Paper about the client assets regime (CP12/22). The paper will consult on the required changes to the client assets regime in accordance with the European Market Infrastructure Regulation (EMIR), propose a radical change in the client money rules, and open a discussion on the wider client assets regime. The paper is specifically divided into these three areas with comments being invited on the first part (changes as required by EMIR) by 16 October 2012, and on the second and third by 30 November 2012. A feedback statement in relation to the first section is expected to be published with final rules in December 2012. Feedback to the second and third sections with final rules is anticipated in the first half of 2013.
http://www.fsa.gov.uk/library/policy/cp/2012/12-22.shtml
4 September: The FSA's role under the Payment Services Regulations 2009. The FSA has updated and amended its Approach Document to the Payment Services Regulations ("PSRs") first published in April 2009. It has been updated in order to reflect the changes to registration requirements for applicants seeking to become small payment institutions and those that are already small payment institutions, to update the information on disclosure of spent convictions in the UK, and to clarify the status of virtual offices for the purposes of the PSRs. Comments on these revisions are invited by 17 September 2012 and the FSA anticipates publishing its finalised Approach Document in October 2012.
http://www.fsa.gov.uk/static/pubs/other/draft-psd-oct12.pdf
Discussion papers:
See CP12/22 above.
Policy statements:
No new developments this week.
Press releases:
6 September: FSA consults on changes to the client money and custody assets regime. The FSA is proposing, in addition to the changes required by the European Market Infrastructure Regulation (EMIR) in relation to segregation and porting, to introduce multiple pooling which could result in the most significant changes it has made to the client money regime in over 20 years. Part III of the paper is intended to open discussion on the wider client assets review currently underway on the subject of improving results in the context of a firm's insolvency.
http://www.fsa.gov.uk/library/communication/pr/2012/085.shtml
5 September: FSA launches initiative to outlaw flawed sales bonuses that encourage mis-selling. Martin Wheatley has announced that he wishes to see an end to mis-selling incentives. He has emphasised that cultural change is needed so that consumers are no longer viewed as sales targets and so that the type of action incentivised is to get the best deal for the customers rather than for the person or firm selling. A report has simultaneously been published which will assist firms in understanding the FSA's expectations. It is currently being considered whether new enforceable rules will be the best way in which to ensure that these expectations are met.
http://www.fsa.gov.uk/library/communication/pr/2012/084.shtml
Speeches:
5 September: The incentivisation of sales staff – are consumers getting a fair deal? The FSA has published a speech by Martin Wheatley, Managing Director, FSA, about incentive schemes used in the sale of financial products. He highlights the FSA's findings that most incentive schemes looked at are likely to drive mis-selling which is a risk that is not being properly managed, and then sets out the FSA's expectations. In the first instance, it expects that firms should react to the FSA's findings to try to mitigate the potential risk of mis-selling and then, when the FCA takes over, a further review will take place to determine what further steps are needed to ensure that consumers are getting the best deal from their advisers.
http://www.fsa.gov.uk/library/communication/speeches/2012/0905-mw.shtml
Bulletins and newsletters:
3 September: Credit Union Newsletter - Issue 16. The FSA has published Issue 16 of the Credit Union Newsletter which provides more details on the internal Twin Peaks regulatory model that is developing within the FSA, and explains how the internal split into the FCA and PRA will affect credit unions during and after completion of the process.
http://www.fsa.gov.uk/static/pubs/newsletters/cu-newsletter16.pdf
Final notices:
No new developments this week.
Application refusals:
No new developments this week.
Approved person refusals:
No new developments this week.
Research publications:
No new developments this week.
Consumer research:
No new developments this week.
Other FSA publications:
6 September: Ulster Bank, Natwest and RBS to refund customers after computer problems. Ulster Bank, Natwest and RBS have begun the process of refunding fees, charges and interest incurred by their customers when technical issues hit the banks' computer systems and affected their customers' accounts and processing of payments. Customers of other banks who were adversely affected by the computer problems of these banks are being encouraged to contact their own banks to find out how they will be reimbursed or compensated.
http://www.fsa.gov.uk/consumerinformation/firmnews/2012/rbs-natwest-ulster
6 September: Digital Protect Ltd – unauthorised firm offering insurance. The FSA has found that Digital Protect Ltd has been offering insurance for home entertainment and digital equipment without authorisation, and authorisation is required for such regulated activities. Any customers who have had insurance arranged for them by Digital Protect are being encouraged to read their policies and check with their insurers if they are in any doubt as to whether or not they are covered.
http://www.fsa.gov.uk/consumerinformation/firmnews/2012/uk-general.shtml
5 September: Risks to customers from financial incentives. The FSA has issued a Guidance Consultation which follows a review of the way in which incentive schemes are used by firms to encourage selling of financial products by their employees. It was found that most firms did not have adequate systems in place to manage the increased risk of mis-selling caused by the presence of these incentive schemes. The FSA expects firms to apply the relevant principles and values of the FSA when developing their incentive schemes and to have a mitigation strategy in place to prevent mis-selling by their employees. This guidance helps to clarify the FSA's expectations and assists with the identification and management of risks arising from incentive schemes. The deadline for responses to the consultation is 31 October 2012.
http://www.fsa.gov.uk/library/policy/guidance_consultations/2012/1211
3 September: Information on Interest Rate Hedging Products. The FSA has published an update on its webpage about the progress it has so far made, and the next steps it plans to take, in relation to Interest Rate Hedging Products. The FSA has so far implemented a robust process for approving the relevant banks' nominated independent reviewers to ensure that those appointed have sufficient skill, expertise and independence to perform the role. There is a heavy focus on the banks' methodology for reviewing and providing redress for customers as swiftly as possible and steps to be taken will include ensuring that communication with customers is clear.
http://www.fsa.gov.uk/library/other_publications/interest-rate-swaps/interest-rate-products
31 August: Short selling instruments and related material. The FSA has updated its webpage on the provisions in the FSA Handbook on short selling. The update requests firms not to submit notifications concerning exemptions available under the Short Selling Regulation until it has published its procedures for these notifications. It aims to ensure that its procedure is in line with the ESMA Guidelines on this process which are likely to be finalised in November 2012.
http://www.fsa.gov.uk/pages/Library/Policy/Handbook/short-selling.shtml
UKLA publications:
No new developments this week.
Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):
No new developments this week.
Financial Ombudsman Service (FOS):
No new developments this week.
London Stock Exchange (LSE):
No new developments this week.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.