Compliance Newsletter – January 2019

FCA begins to look at IDD compliance

The FCA says it is ‘taking a keen interest’ in the way firms are applying the new rules under the Insurance Distribution Directive (IDD), focusing on how firms are considering their customers’ needs and improving outcomes. The regulator has published a new page on its website which considers some of the key issues in these areas and concludes with a message which confirms that IDD compliance will form part of its on-going supervision work. 

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FCA confirms wider access to FOS from 1 April 2019

The FCA has confirmed that its near-final rules in PS18/21 will be implemented from 1 April 2019 without any changes. This means that businesses with an annual turnover below £6.5 million will be able to refer unresolved complaints to the Financial Ombudsman Service (FOS) if they also have fewer than 50 employees OR an annual balance sheet below £5 million. The FCA’s separate proposal (in Consultation Paper CP18/31) to increase the maximum FOS award limit from £150,000 to £350,000 from the same date has not yet been confirmed, although an announcement is expected soon. 

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CMA now on the case of loyalty penalty charges

Following the ‘£4 billion super-complaint’ made to the Competition and Markets Authority (CMA) by Citizens Advice in relation to the ‘loyalty penalty’ suffered by existing customers being charged higher prices than new customers, the CMA has published its response. It considers that not only the CMA but also regulators like the FCA and government must together tackle the problems ‘head on’. It has made several recommendations, including some for the FCA, and stated that it will take further action should it feel that progress is not quick enough.  

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FCA identifies areas of customer harm

The latest edition of the FCA’s ‘Sector Views’ states that in the GI and Protection sector the regulator is seeing harm which affects or is related to specific products, suppliers and customer groups. Of particular concern is over-pricing or poor value in consumer products, which often comes to light when a claim is made.

The publication covers a number of other topics, including technology as a driver of change and the increasing personalisation of insurance products as a result. 

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FCA publishes rules for Claims Management Companies

The FCA has issued a Policy Statement (PS18/23) which sets out the conduct, rules and fees that will apply to Claims Management Companies (CMCs) from 1 April 2019. This is the date from which the FCA takes over the regulation of such firms from the Ministry of Justice. 

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Brexit round-up

The FCA’s Temporary Permissions Regime (TPR), which will come into effect on 29 March 2019 for firms currently passporting-in to the UK if there is a ‘No-deal Brexit’, has opened for applications. The regulator has published a ‘How to notify’ document on its website to help relevant firms with the process. Incoming EEA firms have until 28 March 2019 to apply. 

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The FCA has published a consultation paper (CP19/2) proposing a Financial Services Contracts Regime (FSCR) which would run alongside the TPR if there is no withdrawal agreement when the UK leaves the EU. The FSCR would allow Incoming EEA firms who do not enter the TPR (or who exit the TPR without full UK authorisation) to conduct an orderly exit from the UK market by running-off their regulated business. 

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Cyber and technology resilience firmly on the regulatory agenda

The FCA has published themes from a cross-sector survey which assessed 296 firms’ cyber and technology capabilities during 2017 and 2018. The report identifies areas of strength and those in need of improvement. Amongst the areas of concern were firms’ due diligence of third party supplier relationships, where only 19% of small firms said they understood their third parties’ response and recovery plans and included those third parties in their own testing plans. The FCA says the report is relevant to all firms, whatever their size, and it encourages engagement in its findings.

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In a speech recently delivered at Bloomberg, London, the FCA commented that it saw no immediate end in sight to the escalation in tech and cyber incidents that are affecting UK financial services. In the year to October 2018, the FCA noted an increase of 138% in reports of technology outages it received from firms, alongside an 18% increase in cyber incidents.

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The government’s Treasury Committee has launched its own inquiry into IT failures in the financial services sector. The inquiry will focus on the common causes of operational incidents in the sector, the ways in which consumers lose out as a result of such incidents, and whether regulators have the relevant skills to adequately hold people to account. 

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FCA sounds warning over unregulated products

The FCA has issued a ‘Dear CEO’ letter to all regulated firms to remind them of their responsibilities relating to the use of financial promotions. The regulator has identified that some firms, which undertake both regulated and unregulated business, are issuing financial promotions which falsely imply that all of their activities are regulated. As a consequence, such promotions are unlikely to provide consumers with the “clarity” required by FCA rules and could leave consumers “unable to understand” whether the promoted products or services are regulated. 

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Lloyd’s Round-up

Lloyd’s has replaced its Conduct Risk Minimum Standards publication (MS11) by a new MS9 standard from 1 January 2019. In effect, MS9 consolidates the previous Minimum Standards for Claims, Conduct and Delegated Authority.  

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A new version (V4.2, 28 November 2018) of the joint LMA/Clyde & Co Guidance on Consumer Wordings is now available to download from the Lloyd’s Market Association (LMA) website. It contains a number of updates from the previous version and is designed to provide a point of reference for those involved in reviewing or drafting wordings for consumer insurance products. 

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Government and CMA to research targeting of consumers through personalised pricing

The government and the CMA are undertaking new research into the practice of retailers targeting online shoppers and charging people different prices for the same items through personalised pricing. The study will explore how widespread personalised pricing practices are, how businesses are applying it through different mediums like search engines, apps or comparison tools and the extent to which it is preventing shoppers getting the best deals. 

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FCA consults on how SMCR will apply to Head of Legal

The FCA has included in its Consultation Paper CP19/4 a proposal that, for solo-regulated firms who will be part of the enhanced Senior Managers & Certification Regime (SMCR), the Head of Legal (where applicable) will no longer require approval as a Senior Manager. The consultation is open until 23 April 2019. 

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ICO issues its new Guide to Data Protection

The Information Commissioner’s Office (ICO) has published a new Guide to data protection, which covers the Data Protection Act 2018 and the GDPR as it applies in the UK. 

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The information provided in this Newsletter is based on the Managing General Agents’ Association’s knowledge and understanding of regulatory issues at the date of publication. However, it is generic in content, and matters in UK regulation change regularly. Members should take their own professional advice in connection with any issues which could affect their business. The Managing General Agents’ Association accepts no responsibility or liability for any actions taken based on the information contained within this Newsletter

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