Compliance Newsletter – September 2019

Welcome to the newsletter from Compliance Management Services Ltd (CMS) for brokers and intermediaries supplying general insurance products. We hope you will find its content interesting and helpful. If you would like further information relating to any of the issues raised, please click here to contact us.

SMCRround-up

The Senior Managers & Certification Regime (SMCR) comes into effect for solo-regulated firms in a little over two months. The FCA’s Guide to SMCR for solo-regulated firms, originally published in July 2018, has been updated to take account of subsequent FCA publications. The new version, which is dated July 2019 (although only published within the last week) contains no material changes for most general insurance intermediaries. It reflects updated definitions brought about by the Insurance Distribution Directive, final rules for the Directory and how SMCR applies to Claims Management Companies. It also clarifies the application of Conduct Rules to non-Senior Manager Directors, and to staff based overseas.

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The FCA has a Firm Checker Tool on its website which firms can use to double-check which status they should have under the new regime from 9 December 2019.

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The FCA has uploaded a podcast to its website in which it addresses questions about the importance of achieving a healthy culture in financial services, and embedding the SMCR.

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Transcripts of two recent FCA podcasts on the subject of SMCR have also been published.The first takes a look at certification and regulatory references.

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The second podcast focuses on the newConduct Rules, including the specific outcomes which the FCA will be seeking from firms.

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Finally, the FCA has published a new page on its website explaining when and how firms should submit data for the new public register of key people working in financial services (‘Directory Persons‘).

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FCA consults on treatment of vulnerable customers

The FCA has issued Guidance Consultation paper GC19/3 asking for views on its proposals for treatment of vulnerable customers. This follows publication of its Financial Lives Survey which showed that 50% of UK adults display one or more characteristics of being potentially vulnerable. The deadline for responses is 4 October 2019.

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Staying connected to the FCA

A new annual requirement for firms to review and confirm the accuracy of their Financial Services Register details begins in January 2020, in line with each firm’s year end. Even if there are no changes to the details shown on the Register, firms will be required to log on to the Connect system and confirm that their information is correct.

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Consumers urged to ‘carefully consider’ their travel insurance

The FCA is urging consumers to ensure that any travel cover they purchase meets their individual needs, particularly when it comes to medical emergencies abroad, and not to focus solely on the price. At the same time, the regulator has reminded firms that they must comply with the ‘appropriate information’ rule, including the provision of an Insurance Product Information Document (IPID).

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Stay of execution onSCA

Following representation by the European Banking Authority (EBA), the FCA has agreed to a phased plan for the implementation of Strong Customer Authentication (SCA). This covers the way in which the e-commerce industry of card issuers, payments firms and online retailers verify customer identity and validate payment instructions. The regulator has announced that it will not take enforcement action against firms which have not met relevant SCA requirements, which came into effect on 14 September 2019, as long as they can evidence that they are taking the necessary steps to achieve compliance with the plan by March 2021.

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Regulations create a newoffence

The Cyber-Attacks (Asset-Freezing) Regulations 2019 now make it an offence for firms to deal with designated individuals who have either committed previous cyber-attacks or where there is reasonable belief that they could commit a cyber-attack. The penalty, on conviction, is up to seven years’ imprisonment and/or a fine. The UK government’s financial sanctions list has been expanded to include those parties suspected of cyber-criminal activity.

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Spotlight on the regulatory perimeter

The House of Commons has published a paper which follows the publication of the FCA’s first annual report on ‘the perimeter’ (the term used to describe what the FCA can and cannot regulate). The remit and powers of the FCA need particular scrutiny because, according to the FCA’s CEO, Andrew Bailey, ‘Firms operating on the edges of the perimeter have recently caused serious harm to consumers’.

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FCA told it could do better

In conjunction with the Practitioner Panel, the FCA has published the results of its 2019 joint survey of regulated firms. Contributors were asked to rate the regulator’s performance in meeting its regulatory objectives. From almost 3,000 responses, dissatisfaction was expressed about the number of information requests sent to firms and a lack of appropriate expertise shown by some of those carrying out supervision work.

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Telling the FCA about competition investigations

In the September 2019 edition of ‘Regulation Round-up’ the FCA commented that some firms are failing to notify it immediately when a competition authority has started an investigation or imposed disciplinary measures or sanctions against them. This is be in breach of SUP 15.3.15(3). The FCA warns that it will consider using its regulatory powers against firms if such non-compliance continues.

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ICO to update data-sharing code of practice

Following the completion of its recent public consultation, the ICO is now working to update its 2011 data-sharing code of practice. The revised code will address new legislation on transparency, lawful bases for processing, the new accountability principle and the requirement to record processing activities.

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Lloyd’s changes coverholder reporting standards

Lloyd’s has issued a Market Bulletin announcing changes to its coverholder reporting standards. Version 5.2 of the standards will be issued in Q3 of 2019 and Managing Agents must have implemented these by September 2020.

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Brexitround-up

The FCA continues to urge firms to ensure that their final preparations are in place for the possibility of a no-deal Brexit.

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The FCA has additionally updated and published draft directions under its Temporary Transitional Power (TTP), which enables it to exercise flexibility in applying post-Brexit requirements, allowing firms to transition to a new UK regulatory framework. The directions will only come into effect on exit day if the UK leaves the EU without an agreed implementation period.

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The FCA has also published links to the dedicated Brexit websites hosted by financial regulators in other EEA member states.

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Latest complaints data from the FOS

The Financial Ombudsman Service (FOS) has published its quarterly update, including the number of new cases received, the number of complaints passed to an ombudsman for a final decision, and the proportion of complaints resolved in favour of customers (30%). Unsurprisingly, taking account of the 29 August 2019 deadline, PPI made up 44% of new complaints received.

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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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