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Regulatory Round Up: July 2024

The Financial Conduct Authority has proposed extending the current complaint handling pause until 4 December 2025. The pause will allow the FCA to consider how and when to take any actions that might be relevant, for example building a consumer redress scheme.


On 11 January, the FCA announced a review into whether motor finance customers have been overcharged because of past use of DCAs. They paused the 8-week deadline for a final response for affected customer complaints. During the pause, the FCA planned to assess the issue and hoped that the pause would prevent inconsistent and inefficient outcomes.


The review has been lengthy, with the regulator saying that some firms have struggled to supply the data, which now means that the next steps won’t be published by the end of September 2024, as originally intended. A judicial review against a decision to uphold a DCA complaint is also expected to happen in the autumn, so the FCA wants to wait on that decision before moving on with their own conclusions.


The pause extension – if it goes ahead - will mean that firms will not need to issue a final response to DCA complaints until after 4 December 2025 at the earliest. The consultation on the extension closes on 28 August.

Funeral Plan Providers: New FCA Regulations
 

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Streamlining the rules

The FCA have launched a review into reducing the complexity of the FCA’s rulebook. They hope that, post-Consumer Duty, this could lead to lower costs, encourage innovation and support the risk appetite needed for growth.


The implementation of the Consumer Duty should mean that the FCA can begin to move to a clear outcomes-based approach and reduce duplication and over-prescription in the rule book.


The call for input asks which rules or guidance could be simplified, how any simplification would affect the regulator’s statutory objectives, and the potential benefits and costs arising from simplifying the rules.


The call for input is open until 31 October 2024. 


PRA statement on the design of the dynamic general insurance stress test 2025

The DyGIST test is designed to assess the UK general insurance sector’s solvency and liquidity resilience to a specific adverse scenario. It will also assess risk management systems and actions and inform the PRA’s supervisory response. 


The live exercise will take place over a three-week period in May 2025, and firms will be asked to react to these as they would to real events. Firms will then need to submit a final quantitative template with estimates of the impact of the events by the end of July 2025. Insurers listed in Annex A will be invited to participate. The statement is published here.


Whistleblowing Data

The FCA has published Q2 data showing the number of new whistleblowing reports received and closed. The number of reports received has decreased by a sixth since the same period in 2023, and by the same proportion since Q1 2024.


Interestingly, 72% of whistleblowers shared their identity with the FCA, demonstrating a good level of trust in the regulator’s use of their information. Allegations around compliance remain the most reported allegation, with 135 submitted in Q2, down from 154 in Q1. Fitness and propriety and culture are the second and third most reported allegations respectively.


The FCA has closed 382 whistleblowing reports between April and June 2024, up from 253 in Q1. Significant action was taken in 25 (7%) of reports, which could include enforcement action, a section 166 skilled person report, or restricting permissions. The most common action was action to reduce harm, taken in 200 cases. This might include writing to a firm, asking for information, or asking a firm to attest to complying with FCA rules.


£100m in redress offered to British Stell pension scheme members

Redress payments totaling £106m have now been offered to 1870 former pension scheme members. The FCA, jointly with FOS and FSCS worked to help former BSPS members after they were given advice to transfer out of the scheme following a restructure. The FCA has estimated that just under half of this advice was unsuitable, and that poor conduct by some advisers caused significant harm and distress.


FCA action against those who caused “significant harm through poor financial advice” continues and has so far led to 15 individuals being banned from working in financial services or holding a specific role, and fines or payments to FCS totaling around £8.87m.


Treatment of Politically Exposed Persons

Financial firms have been told to do more to ensure parliamentarians, senior public servants and their families are not treated unfairly. FCA research has found that most firms did not subject PEPs to disproportionate checks, but all firms could improve some practices, including:


  • Ensuring that their definition of a PEP, family member or close associate is tightened to the minimum required by law and not go beyond that

  • To review the status of PEPs and their associates promptly once they leave public office

  • Communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible

  • Effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks

  • Improve the training offered to staff who deal with PEPs.


Legislative changes introduced in January 2024 sets out that the status of UK PEPs is different to overseas PEPs. In practice, domestic PEPs should be subject to enhanced due diligence, but treated as a lower risk than overseas PEPs.


The FCA is starting a detailed review of a small number of firms’ practices. 


The FCA is proposing changes to their guidance that:


  • Reflects that domestic PEPs should be treated as lower risk

  • Makes clear that non-executive board members of civil service departments should not be treated as PEPs solely for that reason

  • Gives greater flexibility in who can approve or sign off PEP relationships within firms.


The guidance consultation is open until 18 October 2024.


Our online training courses introduce new staff to regulatory requirements, key legislation and process, and offer excellent refresher training for established staff, with up-to-date scenarios and soft skills training. Our full range of e-learning courses are available online: Online Compliance Training | RB Compliance Consultancy



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