Top Tips For 2017

What can we expect on the regulatory horizon in 2017?

The following, (non-exhaustive) list highlights some of the things we can “look forward” to in the coming year….

  1. Increased focus on competency of staff and regular testing. The IDD will have something to say about evidence and CPD. The consultation paper for this, which will eventually set out proposed rules, is long overdue and the new rules have to be implemented by Feb 2018, so not much time to prepare.

  2. Supervisors’ competency, assessment, evidence, and ongoing monitoring of how your supervisors are deemed competent. These have been popular topics for some time, but it is a matter of importance and the FCA will want to see robust evidence.

  3. No new client money rules - These have been long awaited since the October 2012 consultation, which was ‘scrapped’ in 2016, but this does not mean that there will be no interest from the FCA. They will be looking at specific ‘projects’ to test brokers on how they handle money.

  4. New focus on Conduct Risk and Governance, looking at how firms are managed. This will gain momentum in 2017 and is closely linked to the Fifth Threshold Condition of a Sustainable Business Model. The FCA want to see that firm’s governance and culture is evidenced and that firms do not pose any risk to the wider community.

  5. How firms demonstrate good governance and the need for up to date and robust business and succession planning is vital. The FCA expect all firms to have considered this and have current plans in place with associated business risk gap analyses.

  6. More rules in certain areas of consumer credit, particularly in debt management. This is an area that worries the FCA somewhat and we are seeing many debt management applications being refused; a sign of a general tightening up of consumer credit, so do not be surprised by more rules in this area.

  7. The publication of the thematic review into AR/IAR management was a wakeup call to firms who have these as part of their structure. This has brought increased requirements for managing those entities. The FCA will want to see that their concerns are being addressed.

  8. New Data Protection Rules from the EU in the shape of the General Data Protection Rules will apply from 25/5/18, but firms need to start working soon on new privacy notices and background reviews of their processes. A lot more will be heard about this as the ICO releases more guidance on what is required.

  9. Consultations on the new senior manager’s regime for all financial services firms are long overdue and will bring in additional work for firms in vetting senior staff, but also more individual accountability for senior staff below board level. Until the consultation is released it’s all guesswork, so, there is nothing specific at this stage.

  10. Further thematic work on commercial claims was promised in 2015, but whilst it has gone a little quiet, it is still on the regulatory agenda.

  11. Proposed FCA visits to test insurance brokers’ systems and controls relating to the management of financial incentives did not happen, but this does not mean it has gone off the radar.

  12. New FCA Chief Executive and Chairman – How will this influence the direction of regulation? This is the big unknown and the Brexit vote has not helped matters as it has brought a lot of additional areas of concern to the FCA which is distracting from the day to day work, hence the delays in issuing some consultations.

  13. Overseas / unrated Insurers is an area giving a lot of concern to the FCA in relation to the information being given to customers so that they can make an informed decision, and what due diligence insurance brokers carry out on these firms to ensure they are suitable for their clients. We are seeing increased interest from PI Insurers on what is being done here as well as the FCA interest.

  14. Expect more thematic reviews, whistleblowing, and the use of ‘chains’ on the horizon.

  15. On the subject of thematic reviews; the review of insurance brokers’ PI insurance produced some interesting reading. You do need to ensure that not only have you considered and documented whether your PII limit is sufficient for you own specific firm, but also that the policy complies with the FCA rules. Sadly, the review threw up evidence that some policy wordings fall far short of what is needed.