UK: FIG Bulletin, 6 September 2019

Last Updated: 10 September 2019
Article by Hogan Lovells

General

Fair treatment of vulnerable customers: FCA delays response to GC19/3

The Financial Conduct Authority (FCA) has updated its webpage on guidance consultation 19/3 (GC19/3), which seeks views on proposed guidance for firms on the fair treatment of vulnerable customers. The consultation closes on 4 October 2019 and the FCA was due to issue a response in autumn 2019. However, an update to the GC19/3 webpage indicates that this response will be postponed until 2020.

Financial promotions: FCA warns claims management companies

The FCA has published a press release stating that claims management companies (CMCs) must do more to ensure that their financial promotions do not mislead potential customers. Since the FCA took over regulation of CMCs on 1 April 2019 it has reviewed over 200 CMC adverts in various media and found widespread poor practice.

The FCA reminds firms of key requirements in relation to financial promotions and gives some examples of the poor practice it has found.

The FCA lists the action it has been taking in response to these findings, including:

  • issuing a Dear CEO letter on 4 June 2019 to remind CMCs of the FCA's financial promotions rules, among other matters;
  • using its power to ban financial promotions where a CMC appeared to be using a celebrity endorsement without the individual's permission;
  • highlighting the FCA's concerns to CMCs, resulting in many firms amending or withdrawing their adverts; and
  • visiting CMCs where the FCA considers that their financial promotions are particularly poor.

2019/20 remuneration round: FCA letter to level 1 firms

The FCA has published a letter, dated 19 August 2019, sent by the FCA to the Remuneration Committee Chairs of level 1 firms. In the letter, the FCA sets out its findings and observations from the 2018/19 remuneration round, and explains how it plans to assess firms throughout 2019/20. In particular, the FCA comments on ex-post risk adjustments, diversity and inclusion, the annual review of remuneration policy statements, and its expectations of Remuneration Committee Chairs.

The FCA notes that it is currently looking at non-financial incentives as well as financial incentives. In particular, the FCA invites views on the following issues it is focussing on:

  • what motivates individuals in the financial services sector including the role of nonfinancial incentives and recognition;
  • the role of financial incentives in developing a successful business model; and
  • how the interests of different stakeholders are viewed as competing and require a tradeoff (for example, as between consumers and shareholders).

Pension Ombudsman: DWP tailored review concludes no current case for merger with FOS

The Department for Work and Pensions (DWP) has published its tailored review of The Pensions Ombudsman (TPO). Among other things, the DWP concludes that there is not a strong case to merge TPO and the Financial Ombudsman Service (FOS) at the present time. The DWP agrees with the conclusion of the 2014 tailored review, that a merger of TPO and the FOS would be possible to establish a single centre of pensions expertise within the FOS, or alternatively to bring all pensions work into TPO. However, without changes to the underlying regulatory framework it states that this would cause inevitable operational risk and realise limited savings, without addressing the underlying differences in the legal framework and ownership of regulatory responsibilities. The Pensions Regulator (TPR) remains separate from the FCA due to the differences between the type of pensions they regulate. Therefore, at the present time, the DWP considers it logical for TPO to remain "in the same space" as TPR, focused on complaints concerning occupational and personal pensions, and accountable to DWP.

However, the issue of a merger should be kept "in view" in future tailored reviews.

The DWP recommends that:

  • TPO and the FOS should develop a collaborative process to reduce the potential for customer confusion and duplication of efforts; and
  • the TPO senior leadership team should work with the FOS to commission a transparent and regular feed of case data to both boards to assist the DWP and HM Treasury in their policy consideration of whether any further action is necessary to reduce the scope for jurisdictional overlaps and gaps.

The next tailored review will take place in five years' time.

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