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The FCA changeover – what to expect

by: Gavin Earnshaw
  • 28/03/2013
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The FCA changeover – what to expect
The transfer to the Financial Conduct Authority takes place this Easter weekend on Monday 1 April.

The effect will be subtle at first where Pink’s Appointed Representatives are concerned, but the FCA is likely to impose itself more as time goes on.

A ‘grandfathering’ approach means changes can and will take time. It’s just as well, really, as there are a few crucial bits of information that the FCA has yet to tell us. At the time of writing, and heading into the final week of March, we await to find out which of the four conduct classifications we will be in.

Our classification will dictate how much supervision we can expect from the regulator. The strongest regime will be reserved for “those firms with the greatest potential to cause risks to consumers or market integrity”. This will mean firms in some sectors may experience a highly intensive level of contact with a supervisor, whereas others may only be contacted once every four years. As a network we’re expecting to be in category C4 and therefore subject to a ‘touch point’ once every four years. It would be nice to know, one week from the changeover, which it will be.

Disclaimer changes

One of the biggest jobs within our network this Spring, will be changing the disclaimers that are displayed at the bottom of many hundreds of websites and items of literature. Each and every mention of being regulated by the FSA will need to be changed and replaced. However, like the classification letter that should drop in the post soon, we await confirmation of the text that needs to be used. Once advised, every firm in the network will be notified and so will start that process of changing websites and leaflets.

Pink ARs that attend our ongoing programme of quarterly Business Development Conferences will know about these changes and will have heard my advice on delaying orders for material (or to only buy small stocks) as everything will need to be replaced. Unused stationery referencing the FSA will likely need to be destroyed by the last day of September.

So my team has a busy few months ahead as we set out to check every financial promotion for each AR firm. With over 250 firms, each having up to several dozen items to review, I anticipate we’ll be checking over 1,000 websites alone after Easter.

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The heavier hand of enforcement

There will, of course, be many other changes that advisers can expect to see, not least in terms of enforcement of rules. The FCA promises to take a much firmer line than its predecessor and already is talking tough in terms of the speed in which firms will be investigated and penalties that will be dished out. So, for example, when it comes to firms that flagrantly disregard financial promotions rules I expect to see swift removal of offending adverts and naming and shaming of those firms.

Greater clarity

The FCA has committed to using examples of poor performance to educate other firms which I believe will be hugely helpful. I have also been very impressed with recent communications from the regulator, obviously influenced by the new team, which have been much clearer and more helpful than those under the FSA. For example the recent guidance document on sales incentives was full of practical examples and in the ‘Journey to the FCA’ document the language and layout used was much clearer and more user-friendly.

So, despite some key information coming in as a bit of a rush at this late stage, my view is that if the FCA continues to communicate with firms in this more open way, with clearer guidance, stronger enforcement of the rules and a more open approach to dealing with firms, it will be better for the industry and ultimately, our customers.

Gavin Earnshaw is head of compliance at Pink Network

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