UK: Weekly Financial Services Regulatory Update (Week To 28.06.13)

This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FCA, the PRA, 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. If you have any queries about any of the information in this update or financial services regulatory matters generally, please contact one of the individuals listed in the 'Contacts' section of this publication.

If you have any comments on the content or format of the update or if you no longer wish to receive it, or have a colleague who would like to receive it, please email .

Consultation papers:

No new developments this week.

Discussion papers:

No new developments this week.

Policy statements:

28 June: PS4/13 PRA - Regulated fees and levies: rates for 2013/14. The PRA has published a policy statement setting out the final fees rates to recover the PRA's Annual Funding Requirement (AFR) and the Special Project Fee (SPF) for Solvency II. The policy statement summarises the responses the PRA received to its consultation on the fees and levies in April 2013. It states that after considering these responses, the PRA will not be making any changes. Pages/publications/regulatedfeelevies.aspx

28 June: PS13/6 FCA Regulated fees and levies 2013/14 - including feedback on CP13/1 and 'made rules'. The FCA has published a policy statement setting out the 2013/14 periodic regulatory fees and levies rules for the FCA, the Financial Ombudsman Service general levy and the Money Advice Service. The policy statement also summarises the feedback received to CP13/1 and the FCA's response to that feedback.

28 June: FCA PS13/5 Implementation of the Alternative Investment Fund Managers Directive. The FCA has published a policy statement setting out the rules for implementing the Alternative Investment Fund Managers Directive (AIFMD) and responding to the feedback to its consultations in November 2012 (CP12/32) and March 2013 (CP13/9). The policy statement covers issues relating to the scope of the AIFMD, operating requirements and prudential rules for alternative investment fund managers, consumer redress, depositaries, marketing, and remuneration. The rules will come into force on 22 July 2013, although there are some transitional reliefs for firms for up to one year from then. implementation-of-the-aifmd

Press releases:

28 June: FCA reminds banks of their obligations when cancelling Continuous Payment Authorities. The FCA has reviewed how the largest high street banks and mutuals process requests to cancel Continuous Payment Authorities (CPAs). Following this review, these card providers have agreed that they will ensure that when a customer asks for a recurring payment to end - that will be sufficient to cancel the arrangement. They have also agreed that where a payment goes through by mistake following cancellation by a customer, the customer will be refunded immediately. The FCA noted that, particularly in relation to payday loans, some banks and mutual were not cancelling CPAs when asked to do so. However, banks and mutuals must cancel a payment themselves and not require their customer to contact the merchant to cancel the CPA. In addition to this, the largest banks and mutuals have agreed to review every complaint they have received about the non-cancellation of a CPA and to pay redress where payments have continued to be made despite the customer cancelling the arrangement. This applies to all complaints since November 2009.

27 June: FCA review into mobile phone insurance (TR13/2) finds examples of poor product design, unclear terms, and inadequate claims and complaints handling. The FCA has published its key findings following a review focusing on the way mobile phone insurance firms design products and handle claims from customers that have lost or damaged their phone, or had it stolen. The FCA reviewed the practices of nine firms that have a majority share of the mobile phone insurance market. The FCA's findings include:

  • Failings to feed the reasons for high numbers of claim rejections back into the product design process
  • Products that were not always designed to meet the needs of consumers
  • The majority of policies, despite offering to cover loss, did not cover instances where the customer accidentally leaves their phone somewhere
  • Descriptions of what is covered and what is not were too broad and ambiguous
  • Examples of inadequate claims and complaints handling

The FCA has presented the findings to the firms that took part in the review and, in addition, in July the FCA will impose a significant fine on one firm in this market for poor handling of complaints. The publishing of this review is part of a series of FCA reviews into everyday insurance products, with the FCA currently also looking into how insurers use private investigators and how firms handle complaints.

Press release:

Report: 02-mobile-phone-insurance


26 June: Balance of interests. The FCA has published a speech on the balance of interests of participants in the wholesale derivatives market with the interests of the man on the street, delivered by Martin Wheatley, its Chief Executive, at the International Derivatives Expo in London. Acknowledging that the FCA was in the middle of implementing a once-in-a-lifetime reform of derivatives markets, Mr Wheatley noted that there was plenty to debate, particularly over global regulatory reform, and that there was no simple formula for the balance of interests.

After describing the recent explosion in the trading of derivatives accompanied by the inability of firms and regulators to aggregate information on highly complex risks and exposures in the derivatives market during past boom years, Mr Wheatley outlined the FCA's new style of regulation. Under this new approach, the FCA will look more actively at trends, innovations and data to monitor risk and deal with it early. It will also look far more closely at outcomes; ensuring not just whether a firm is complying with rules, but whether customers are being treated fairly. Highlighting the importance of transparency, Mr Wheatley described how over the next 12 to 24 months we will see a greater use of central counterparties, and more organised trading to encourage transparency and restore equilibrium. He noted that the introduction of mandatory trade reporting, the move towards greater central clearing, and the demand for more use of on-venue trading will help manage systematic risk more effectively and restore the balance. Mr Wheatley also outlined the various new technical standards, requirements and other prudential obligations and, while acknowledging that there will be a significant compliance challenge, stated that firms have time to start preparing now and that regulators will not be sympathetic to any future arguments that they had insufficient time to comply.

Finally, Mr Wheatley discussed LIBOR and the future of benchmarks. He commented that despite the uncertainty, there are sound economic and ethical reasons for strengthening the regulation of benchmarking as a whole, and that the wide-ranging review of interest rate benchmarks will be a consultative process engaging with firms in order to identify any transition issues.

Bulletins and newsletters:

No new developments this week.

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 FCA and PRA publications:

28 June: FCA policy development update No. 3. The FCA has published its policy development update for June 2013 summarising publications issued since the last edition and an updated timetable for forthcoming publications.

27 June: FCA Statement on CRD IV. On 27 June the legislative package known as "CRD IV" was published. The bulk of the rules contained in this legislation will apply from 1 January 2014. This is in line with the expected timetable set out by the FCA in April. The FCA will consult later this summer on the changes to the FCA's rules to remove current FCA provisions covered in the Regulation and to implement the Directive and relevant discretions provided in the Regulation. The FCA will also consult on the specific issues related to the procedure for transitioning, as appropriate, existing waivers.

25 June: FCA Finalised Guidance on super complaints and references. The FCA has published final guidance (FG13/1 and FG13/2) for designated consumer bodies on making a super-complaint under s234C, and for regulated persons and the Financial Ombudsman Service on making a reference under s. 234D. The FCA has also published a summary of the feedback received through the consultation and its responses to the issues raised.

24 June: Regulation round-up June 2013. The FCA has published its monthly regulation round-up email, which provides updates on the latest news affecting different sectors.

UKLA publications:

No new developments this week.

Upper Tribunal (Tax and Chancery Chamber):

27 June: Tribunal upholds FCA ban and significant fine on insurance broker. The Upper Tribunal has upheld the decision of the FCA to ban Andrew Jeffery, director of Jeffery Flanders (Consulting) Limited, and fine him £150,000. This is one of the largest fines imposed on a broker for insurance fraud. The Tribunal found that Mr Jeffery had retained clients' premiums without passing the premiums onto the underwriter, meaning that some clients did not get the cover they paid for and were exposed to risk. His actions also meant that underwriters dealing with Jeffery Flanders were contractually obliged to meet claims, even though they had never received the premium from Mr Jeffery. The Tribunal also described how Mr Jeffery sought to evade the FCA's requirements for information. It remains open to Mr Jeffery to appeal this judgment.

Press release:

Judgment: Documents/decisions/Jeffery_v_fca.pdf

June: Upper Tribunal grants application to amend Statements of Case and for directions in Stephen Robert Allen v FCA. This application relates to a Decision Notice dated 25 July 2012 by which the Authority informed Mr Allen of its decision to make an order prohibiting him from performing any function in relation to any regulated activities. Mr Allen referred the Decision Notice to the Upper Tribunal. The Authority had based its conclusions on evidence of a witness; however, following a High Court ruling that the witness' signed witness statements contained untrue statements, the FCA applied for permission to amend its Statement of Case to remove the references to the evidence of the witness and to rely on other evidence to prove its case. The FCA sought instead to allege that Mr Allen's serious misconduct in those High Court proceedings demonstrated a lack of honesty and integrity and that Mr Allen is not a fit and proper person to perform any functions in relation to regulated activities.

The Tribunal distinguished Parker v FSA, finding that in this case, amendments to the Statements of Case would not change the charge made against Mr Allen. It noted that there is a distinction between an allegation or charge and the evidence relating to it. The 'subject-matter of the reference' to the Tribunal was whether Mr Allen is a fit and proper person, and although the evidence for that allegation had changed, the fundamental allegation remained the same. Therefore any evidence relating to Mr Allen's honesty and integrity, whether or not it was available to the Authority at the time of the Decision notice, could be considered by the Tribunal. In addition to this, the Tribunal found that it would be fair and just to allow the FCA to amend its Statement of Case and admit the new evidence as the alternative was to start the whole process again which would not be fair to either party. The Reference was likely to take place in late 2013 or early 2014, which would give Mr Allen plenty of time to make representations and provide any further evidence in response to the new evidence. decisions/stephen_robert_allen_v_fca_directions.pdf

Financial Ombudsman Service (FOS):

No new developments this week.

London Stock Exchange (LSE):

No new developments this week.

Legislative updates

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.

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