Transcript Resources Global Professionals

Resources Compliance (UK) Ltd
Financial Services, Regulation & Ethics
The Regulation of Financial Services
Gaps 1-3
Gaps 1-3
The UK financial services industry:
1.
Additional oversight - senior management, external compliance support
services
2.
FSMA 2000
3.
Role of the FSA, HM Treasury and the Bank of England in regulating
markets
2
3. Role of the ‘Tripartite’ authorities
 HM Treasury
 Bank of England
 Financial Services Authority
3
HM Treasury
 Runs UK Government’s financial and economic policy
 Raise the rate of sustainable growth
 Maintain financial stability
 Work on financial contingencies
4
Bank of England
 UK’s central bank
 Core purposes
 Monetary stability
 stable prices: inflation target
 confidence in the currency
 Financial stability
 detecting and reducing threats
 acting as the lender of last resort.
5
Financial Services Authority
 Sole UK financial services industry regulator
 Independent body
 Powers under FSMA 2000
 Regulates most financial services markets, exchanges and firms
 Created 2001 from SIB, PIA, SFA, IMRO , DTI, BofE, BSC, FSC & others
6
FSA: Statutory objectives
The FSA has been given a wide range of rule-making, investigatory and
enforcement powers in order to meet four statutory objectives:

Market confidence;

Financial stability;

Consumer protection; and

Reduction of financial crime.
7
FSA: Principles of good regulation
The FSA is also obliged to give regard to the principles of good regulation
which involve awareness of:

Efficiency and economy;

Role of management;

Proportionality;

Innovation;

International character;

Competition; and

Public awareness.
8
FSA: Strategic aims
The FSA summarises its statutory objectives and principles of good
regulation in three strategic aims:

Promoting efficient, orderly and fair markets;

Helping retail consumers achieve a fair deal; and

Improving their business capability and effectiveness.
9
A peek into 2013
New ‘twin peaks’ regulatory structure:
 Financial Policy Committee
 Prudential Regulation Authority
 Financial Conduct Authority
 National Crime Agency
10
2. Financial Services & Markets Act 2000 “FSMA”
The objective of FSMA was to bring together the regulation of all sectors of
the financial services industry under one regulatory system.
Previously, different parts of the financial services industry were regulated
under different Acts.
11
2. Financial Services & Markets Act 2000 “FSMA”
Consolidation under one regulator of:
 Banking Act 1987;
 Building Societies Act 1986;
 Friendly Societies Act 1992;
 Insurance Companies Act 1982;
 Financial Services Act 1986
12
Scope of FSMA 2000
Financial Services & Markets Act 2000 (Regulated Activities Order) 2001
“RAO” - as secondary legislation - lists:
 Regulated Activities (Part II)
 Specified Investments (Part III)
13
FSMARAO Regulated Activities
Banking
 Accepting deposits; and
 Issuing e-money.
Investment
 Advising on investments;
 Providing basic advice on stakeholder products;
 Arranging deals in investments;
 Managing investments;
 Dealing in investments (as principal or agent); and
 Safeguarding and administering investments.
14
FSMARAO Regulated Activities
Insurance
 Effecting or carrying out contracts of insurance as principal; and
 Assisting in the administration and performance of a contract of
insurance.
Scheme operator
 Establishing, operating or winding-up collective investment schemes
and/or stakeholder pension schemes.
15
FSMARAO Regulated Activities
Home finance
 Advising on home finance activities;
 Arranging home finance activities; and
 Entering into and/or administering a home finance activity.
Agreeing to do most of the above activities.
16
FSMARAO Specified Investments
 Deposits;
 Electronic money;
 Rights under a contract of insurance;
 Shares, debentures etc.;
 Government and public securities;
 Certificates representing certain securities;
 Units in a collective investment scheme;
 Rights under a personal/stakeholder pension scheme;
 Options, futures and contracts for differences;
 Rights under regulated mortgage contracts;
 Rights under a home reversion plan;
 Rights under a home purchase plan; and
 Regulated sale and rent back agreements (effective 1 July 2010).
17
1. Additional oversight
 Senior management,
 Compliance support services
 Other persons
18
Senior management
 Overall responsibility
 Risk assessment
 Leadership
 Treating Customers Fairly
 Control
 Oversight
 Management Information (and KPIs)
19
Senior management
Leadership & Tone From The Top
 Business Definition & Purpose
 Business Plan
 Director/Partner/Management Competence
 Risk appetite
 Risk Assessment
 Capital & Liquidity Assessment (formal ICAAP where needed)
 Financial Control
 Culture
 Competence of advisers and staff
 Oversight and Management of people and resources
20
Senior management
 Business Metrics – Measuring Performance
 Financial Metrics (profit/loss, cashflow/balance sheet)
 Performance to Plan
 Capital Adequacy
 TCF Metrics/Client Feedback
 Client Activity Metrics
 Compliance/Quality Control/Quality Assurance Metrics
 Complaints Data & Metrics
 Marketing Activity Metrics
 Training and Competence Activity & Metrics
 You can’t monitor if you don’t measure!
21
Senior Management
Management Information

Risk Monitoring – what risks is the business facing and mitigating action

Compliance Monitoring – regulatory filings/returns, conduct of business,
file checks etc

Financial Monitoring – profit, cash flow, balance sheet and capital
adequacy

TCF KPIs

Complaints

Conflicts of Interest

Business prospects & pipeline
22
Senior Management
Service/Product Design & Treating Customers Fairly (TCF)
The 6 TCF Consumer Outcomes (COs)
1.
Consumers can be confident that they are dealing with firms where the
fair treatment of customers is central to the corporate culture.
2.
Products and services marketed and sold in the retail market are
designed to meet the needs of identified consumer groups and are
targeted accordingly.
3.
Consumers are provided with clear information and are kept
appropriately informed before, during and after the point of sale.
4.
Where customers receive advice, the advice is suitable and takes
account of their circumstances
5.
Consumers are provided with products that perform as firms have led
them to expect, and the associated service is both of an acceptable
standard and as they have been led to expect.
6.
Consumers do not face unreasonable post-sale barriers imposed by firms
to change product, switch provider, submit a claim or make a complaint.
23
Senior Management
RETAIL DISTRIBUTION REVIEW (RDR)
RDR READINESS

Independent Advice or Restricted Advice (or Multi-Tied /Tied)

Adviser Firm Remuneration – client agreed remuneration

Professionalism – QCF Level 4 qualification/Gap Fill

Client Agreements/Terms of Business

Branding & Marketing Literature/Website
24
Compliance support services
 Internal and/or External
 Cannot contract out regulatory obligations
 Firms must have a framework for:
 assessing and covering the risks to their business;
 meeting regulatory requirements; and
 checking the firm continues to be compliant.
25
Compliance support services
Using a Compliance Consultant
 Compliance is the firm’s responsibility
 Establishing the needs: choosing the right service
 Assessing and monitoring consultants
 Acting on recommendations
26
Compliance support services
In summary:

Compliance and controls are always the firm’s responsibility.

The firm must have appropriate processes and controls in place and have a good
understanding of the compliance processes and monitoring arrangements it operates.

The firm cannot delegate its responsibility for compliance to another party, but it can
get help to ensure its controls are appropriate.

Firms should take action if any reviews undertaken by their consultants reveal
weaknesses in their compliance with FSA requirements.
27
Other persons
 Accountants
 Financial reporting
 Capital adequacy
 Auditors
 Companies Acts statutory audit
 Client assets audits
 Trustees
 exercising their duties under a trust: utmost diligence
 exercising discretion: ‘prudent man’
28