Category Archives: Suitability & Appropriateness

Is the FCA creating a new category of customer with the Vulnerable Customer Guidance?

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Is the FCA creating a new category of customer with the Vulnerable Customer Guidance?

compliance consultants london vulnerable customers

One of the key elements of the FCA’s remit is ensuring consumers have an appropriate degree of protection. Specifically at this time and central to their role, includes protecting vulnerable consumers.

Protection of the most vulnerable is a sign of an advanced society, but not necessarily if it removes individual responsibility or deprecates the need for autonomous decision making in lieu of expensive and cossetting rules. What of the expense of a provider of products, who will then have to increase costs to meet the imposed procedures and standards for this “category” of consumer. Could this then exclude the most vulnerable and financially deprived even further of the services of the society it forms part of?
The Guidance (FG21/1-Guidance for firms on the fair treatment of vulnerable customers) identifies in the introduction that “When we (the FCA) consider our consumer protection objective, we have regard to the general principle that consumers should take responsibility for their choices and decisions. However, we know that there are very real factors that might limit their ability to do so.”
The FCA obviously want vulnerable consumers to experience outcomes as good as those for other consumers and receive consistently fair treatment across the firms and sectors they regulate. Does the existing Conduct Risk and Treating Customers Fairly initiative, fail to cover this already?
Further, the “vision” as stated in point 1.7 of the Guidance states “We want to see the fair treatment of vulnerable customers embedded as part of a healthy culture throughout firms, not just on the frontline but also in areas such as product development. Firms’ senior leaders should create and maintain a culture that enables and supports staff to take responsibility for reducing the potential for harm to vulnerable customers. They should ensure that firms embed the fair treatment of vulnerable customers in their policies and processes throughout the whole customer journey. We have seen some good examples where commitment comes from the top and where there is a culture of feedback and learning from the frontline.”
In FG 21/1 the FCA state We expect firms to provide their customers with a level of care that is appropriate given the characteristics of the customers themselves. The level of care that is appropriate for vulnerable consumers may be different from that for others and firms should take particular care to ensure they are treated fairly.
Does this then mean that there is a comparable category of customers (predominantly retail based) that are considered as vulnerable at various times, so they overlap with normal and embedded TCF treatment rom time to time. With recent statements that nearly one third of UK adults are “vulnerable” due to the pandemic, this then puts the onus on firms to draw up a raft of assessment tools to test the vulnerability of every consumer, customer or client they have contact with. This also lends itself to those who may not be “natural persons” and act on behalf of incorporated bodies or even associations of firms that may display signs of vulnerability. This is a “should” and cannot be ignored, thus, perhaps a seperate regimen of assessment is needed?
Throughout their document, the regulator uses terms like 
Must: where an action is required by a Principle or rule. (25 appearances)
Should: where we think a firm ought to consider a course of action (not specified in a Principle) to comply with a Principle, but that does not necessarily mean they should follow a detailed or prescribed course of action. (207 appearances)
May: where an action is only one of several ways of complying with a Principle. (203 appearances)
To be fair, the “Must” references are predominantly concerning the Data Protection applicable references. However, this makes the should, even more poignant.
In the guidance document, under customer service, it states that firms should; 
  • Set up systems and processes in a way that will support and enable vulnerable consumers to disclose their needs. Firms should be able to spot signs of vulnerability.
  • Deliver appropriate customer service that responds flexibly to the needs of vulnerable consumers.
  • Make consumers aware of support available to them, including relevant options for third party representation and specialist support services.
  • Put in place systems and processes that support the delivery of good customer service, including systems to note and retrieve information about a customer’s needs.
To ram home the point, in the TCF section the FCA state; “Under Principle 6 we expect firms to have management information (MI) or measures in place to test whether they are treating their customers fairly, including delivering the 6 TCF outcomes. The MI should demonstrate to firms and to us that they are consistently treating customers fairly and delivering the TCF consumer outcomes.” Regrettably in, in our experience as a consultancy, many firms that we have seen wildly inadequate or outdated MI, some that has not been refreshed with contemporary data!
So how much of this can be consider necessary and how much is proportionate? 
The answer to that needs to be looked at under the “Must” statement, such as the Principles for Business PRIN 1.2.1G states that the extent to which firms meet their requirements under Principles 6, 7 and 9 will depend, in part, on the characteristics of the customers concerned. The relevant interests and needs that firms must have due regard to and what is reasonable care in the relevant circumstances will depend on those characteristics. The way to establish those characteristics is then to assess them, which requires a full process to identify any vulnerability on all customers. Therefore this means that every firm must instigate the requirements without fail, whether they deal with any of the categories of customer, consumer or client.
The requirements, of course, are welcome for the treatment of vulnerable customers, and I know first hand of the abuse that firms engage in from a close relative of mine and their treatment. But the requirements do not end at the consumer. Firms are required to ensure that staff are fully GDPR trained as when handling data, it should be managed appropriately. The ICO is clear that consent is not always needed to process data.
Product design should cater for vulnerable customers, and that has been echoed through time under the TCF regime. Customer services, KYC onboarding etc are required to have available systems and processes in a way that will support and enable vulnerable consumers to disclose their needs. Firms “should” be able to spot signs of vulnerability, which means that if you don’t have the systems or procedures in place, you are not conforming to a “should”, whereby the FCA think a firm ought to consider a course of action (not specified in a Principle) to comply with a Principle. Further, to deliver appropriate customer service that responds flexibly to the needs of vulnerable consumers, another part of the “should” means you need a written process that can be switched into on identification of any area of vulnerability. Don’t forget, someone may be vulnerable under more than one area.
Every firm also needs to readdress their communications to customers and encapsulate the possibility of vulnerability, and inform them of all facilities available. With that, staff skills and capability needs to be considered and evidenced (SMCR reasonable steps as well as TCF). Firms are required to embed the fair treatment of vulnerable consumers across the workforce. All relevant staff should understand how their role affects the fair treatment of vulnerable consumers. Alongside that role responsibility, frontline staff have to be able to demonstrate the necessary skills and capability to recognise and respond to a range of characteristics of vulnerability. As a good employer, firms should also offer practical and emotional support to frontline staff dealing with vulnerable consumers. These areas are often lacking in most firms we encounter, but there is now guidance on what is required and the areas that need to be interrogated for ways to enhance your service.


Is the FCA creating a new category of customer with the Vulnerable Person Guidance? We would have to say no, but the impact of dealing with any customers, consumers or clients needs to be minutely investigated and areas for improvement identified. This would be a fairly major project for most firms, and the worst part is, if they don’t take external opinion, they will continue to choke on their own exhaust. or call 0207 097 1434 to arrange an exploratory call.

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Rogue FCA Authorisations or Genuine Requirement?

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FCA Short Deadline Letter for CMCs

The FCA have issued 2 week notice letters to CMCs insisting on them submitting the new Long Form As and SORS, well ahead of the November 24th Deadline. The appear to want to get the SMF’s in place well before the rest of the industry.

The SMFs that apply to CMCs are SMF 29 Limited Scope Function and SMF 16 Compliance Oversight Function.

If the Individual Form attached to the CMC application for that senior manager was submitted less than 9 months before, CMCs can use the Short Form A to apply for approval, unless there have been any changes since the Individual Form was submitted, in which case please complete the Long Form A. This is unlikely in the majority of cases.
Where required, you should ensure that an SM&CR Form A and SOR is completed and sent to the FCA, apparently to give sufficient time for them to consider the contents.
They have also thrown in a red-herring: “Please also let us know if you have determined that your firm does not need any SMFs“. The SM&CR Guide for Solo-Regulated Firms clearly states that they have to.
Authorised firms need to comply with SM&CR from 9 December 2019, or as soon as they are authorised if this is after 9 December 2019.  To do this firms should:
• prepare Statements of Responsibilities for Senior Managers
• train all Senior Managers and Certification staff on the Conduct Rules
• identify individuals that will perform a certification function
To ensure your firm is prepared to meet the requirements of the new regime, please visit or refer to the SM&CR Guide for Solo-Regulated Firms. We did refer, and in no place could we find information requiring CMCs to submit these forms early and so soon after completing their full permissions application forms. Is this a rogue supervision/authorisations action???

For your CMC Compliance needs, call us on

0207 097 1434

21 SMCR Solo Regulated FAQ’s From Leading Consultancy

faq 21 smcr answers fca compliance

The extension of the SM&CR to FCA solo-regulated firms will affect over 45,000 financial companies.

But how will the extension of the Senior Managers and Certification Regime (SM&CR) to FCA Solo-Regulated firms impact your firm?

Basically every employee at a firm regulated by the FCA will be affected by the regime. The SM&CR is created to hold every one of financial sector employees to certain standards of conduct and to hold senior managers answerable for any misconduct that falls inside of their area of responsibility.
Answers to SMCR extension to solo-regulated firms questions:
When is the regime effective for solo-regulated firms?
The extension of the SM&CR to solo-regulated firms will begin on 9 December 2019.
Do the same requirements involve all solo-regulated firms?
No, the requirements are being employed proportionally. The FCA is categorising firms depending on to their size and complexity. Depending on the firm categorisation the regime will apply differently.
There are 3 categories:
  • Limited scope: this categorisation will apply to firms who already have exemptions under the Approved Persons Regime. Firms within this category will be exempt from some baseline requirements and will generally have fewer senior management functions.
  • Core: firms in this particular tier will have to abide by the baseline requirements. The majority of solo-regulated firms will fall into this category.
  • Enhanced: this category will concern a small number of firms whose size, complexity and potential influence on consumers or markets warrant more focus. These firms will have extra requirements.
How is the firm’s categorisation established?
The FCA is providing each firm with it’s assessment of the firm’s categorisation, however, the assessment is indicative. Firms are in charge of assessing which tier they come under based upon the rules. If businesses disagree with the FCA’s assessment they must inform the FCA. The FCA has provided an online tool to assist firms in their categorisation at.
What are the biggest changes for firms?
The new certification regime, the extension of conduct rules to all staff with the exception of those in ancillary roles and for Senior Managers, and the new duty of responsibility.
To what activities do the Individual Conduct Rules and Senior Manager Conduct Rules apply?
The conduct rules relate to an individual’s activities in connection with the firm’s regulated and unregulated financial services activities (including any activities carried on in connection with a regulated activity).
Which staff will fall under the Certification Regime?
The Certification Regime will apply to people whose roles the FCA has established could cause harm to customers, the firm itself or the markets it operates in. The FCA has defined a series of “certification functions”. The regime will also apply to anybody who supervises or manages a Certified Function, that isn’t a Senior Manager. Typically CF30s will be among the new certificated persons.
Don’t forget that the FCA Directory for certificated persons will be up and running in March 2020 and solo regulated firms have until December to upload their details. All those CF30’s that will be removed from the FCA Register, will now appear in the Directory so that the public can ensure that the person they are dealing with has been assessed and approved by the firms they are working for.
Not all of the certification functions will apply to all firms and firms are only required to apply those that relate to them. It is possible that in very small firms there will be no one in the Certification Regime if there are only a handful of senior individuals (who will be Senior Managers) supported by administrative staff. Also if the firm is a sole trader with no employees, the Certification Regime won’t apply to them.
The Certification Regime only applies to employees of firms, it doesn’t apply to Non-Executive Directors.
In a partnership structure, will all partners need to be senior managers?
All partners must be senior managers, unless they are what the FCA rules uncharitably call “partners without influence”, i.e. they play no part in the management of the firm. In this case they are “unlikely” to be performing the partner function. The FCA’s view is that most partners will have some engagement in managing a firm, though it recognises that this will not apply in every partnership. Partnerships will have to think carefully about how their governance and management arrangements work in practice, and decide whether any of their partners definitely play no part in the firm’s management
How does the Certification Regime differ from the Approved Persons Regime?
Firms must determine every year whether anyone that is to conduct a certification function is fit and proper to perform their role and issue a certificate to them if they are. A few of the staff in the scope of the Certification Regime may previously have undergone FCA approval under the Approved Persons Regime. This will no longer be required under the Certification Regime. This reinforces that firms, rather than the regulator, are in charge of ensuring their staff are fit and proper.

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‘Making Compliance Work’

What is the Duty of Responsibility?
Every Senior Manager will have a Duty of Responsibility due to the Financial Services and Market Act (FSMA). This means that if a firm breaches one of the FCA’s requirements, the Senior Manager responsible for that area could be incriminated if they did not take reasonable steps to prevent or stop the breach.
The Duty of Responsibility specifies that the FCA can act against a Senior Manager where they can show that:
  1. There was misconduct by the Senior Manager’s firm
  2. At the time of the misconduct or during any part of it, the Senior Manager was in charge of the management of any of the firm’s activities in relation to which the misconduct occurred
  3. The Senior Manager did not take such steps as a person in their position could reasonably have been expected to take to avoid the misconduct occurring or continuing.
The burden of proof for all these elements rests on the FCA. The Senior Manager does not need to show that they took reasonable steps, it is for the FCA to prove that they did not.
What records do senior managers need to take to adhere to the duty of responsibility?
One of the most difficult practical issues for senior managers in banks is how to record that they are, on a day-to-day basis, taking reasonable steps to prevent regulatory breaches in their areas (the so-called “duty of responsibility”). Senior managers’ understandable concerns that the regulator may seek evidence of compliance years after the fact have led, in some cases, to a culture of excessive paperwork and unnecessary making and recording of challenges during the decision-making process.
In response to concerns about this raised during the consultation, the FCA states that the duty of responsibility does not impose additional obligations to keep records explaining or justifying steps taken (or not taken). It goes on to say, however, that it may be in senior managers’ interests to keep records of relevant steps they take. Furthermore, the FCA explains that senior managers (and significant influence function holders under the current regime) are obliged to take reasonable steps to ensure that their business area abides by the FCA’s rules, including the requirement to keep records allowing the FCA to monitor the firm’s compliance with its rulebook.
It is unlikely that firms or their senior managers will take comfort from the FCA’s statement on these points. They will have to strike a balance between the need to keep reasonable evidence of compliance and the need to run their business efficiently and effectively.
Will firms need to appoint someone to each Senior Management Function?
The SMCR provides a more granular list of Senior Management Functions (SMFs) than the current list of controlled functions. This has prompted some firms to ask whether they are required to have individuals fulfilling each function. The FCA has confirmed that they do not: the general principle is that if a person is to carry out a role that is designated as an SMF they must be approved as such, but otherwise there is no general requirement to appoint individuals to hold SMFs.
This means that those firms that are not currently required to have a Compliance Officer or Money Laundering Reporting Officer are not required to appoint them under the SMCR. Likewise, although there are designated SMFs for the chairs of the Risk, Audit, Remuneration and Nominations Committees, the SMCR does not itself require firms to establish such committees or appoint individuals as their chairs.
Can an individual be both a Senior Manager and a Certified Person?
Yes, if a senior manager performs a role within their firm that is subject to the certification regime, and that role is not related to their Senior Management Function, then they will also need to be certified.
What is a Statement of Responsibilities?
A Statement of Responsibilities (SoR) is a single document that every Senior Manager must have, which clearly sets out their role and responsibilities and what they are accountable for. Statements of Responsibilities must be submitted to the FCA when a Senior Manager is being approved and when there is a significant change. It must be kept up to date. In March 2019 the FCA published final guidance to assist solo-regulated firms when preparing their Statements of Responsibilities.
Do firms need to appoint someone to each Senior Management Function?
The SMFs applicable to each firm vary according to SM&CR firm type. Seventeen SMFs apply to Enhanced firms, six apply to Core Firms and three SMFs apply to the Limited Scope tier. If a person is to undertake a role that is designated as an SMF for their firm type they must be approved as such, but otherwise there is no general requirement to appoint individuals to hold SMFs.
The FCA will automatically convert most firms Approved Persons Regime (APR) functions to the corresponding Senior Management Functions (SMFs), but some firms will need to complete a form to convert individuals manually.
Can a Senior Manager hold more than one SMF?
Yes, it is possible to hold more than one SMF. For example, an SMF3, Executive Director may also hold the SMF17, Money Laundering Reporting Officer function. The need for this will be determined by the governance structure of the firm. Where this is the case, the individual will need approval from the FCA for each function. The Senor Manager will only need one Statement of Responsibilities, but this must clearly describe all their responsibilities.
What is the 12-week rule?
The Senior Managers Regime allows someone to cover for a Senior Manager without being approved where the absence is temporary or reasonably unforeseen, where the appointment is for less than 12 consecutive weeks. (SUP 10C.3.13 R in the FCA Handbook provides more information).
The regime applies on a legal entity basis, what does this mean to firms?
The FSMA requires the SM&CR to be applied at a legal entity level and not at group level. This means that firms with group structures will need to consider the impact of SM&CR applicable to each legal entity.
For groups with several legal entities the SM&CR could apply in varying way to each company. This means that there will be groups which will contain firms in different tiers of the new regime. Groups may choose to apply the highest tier of the regime to all entities in their group, as an example, to make all entities Enhanced firms. However, there is no expectation or requirement for firms to do this.
How should firms assess the fitness and propriety of different levels of staff?
The FCA notes that firms should apply the certification requirements proportionately to different functions, and do not need to adopt the same criteria for fitness and propriety regardless of a person’s seniority or role. It gives the example of a trainee retail investment adviser, who may be certified as fit and proper on the condition that they continue to meet basic standards and work under supervision.
Does the regulatory reference requirement contravene employment law or the GDPR?
One of the more onerous requirements of the SMCR is that firms are required to give a “regulatory reference”, i.e. a detailed reference in a standard template, in relation to a former employee or director who is applying for a senior management or certification function at another firm. Firms are also required to update these references if new information turns up. The reference must contain all information relevant to the assessment of an individual’s fitness and propriety (although the FCA says that this is an existing requirement).
In response to concerns around employment law and GDPR compliance, the FCA states that its rules only require firms to disclose information that has been properly verified, and there is therefore no conflict with duties under the general law to former employees or firms seeking references. The FCA also believes that the requirement does not contravene the GDPR, as the information employers are required to give is proportionate, storage of the information is for an appropriate amount of time, and it is appropriate to store it and provide it to a new employer, in order to comply with regulatory rules.
Are there any training requirements?
Yes, firms must make individuals who are subject to the Conduct Rules cognizant that this is the case, and take all reasonable steps to ensure that they comprehend how the rules concern them and their role. There are 2 tiers of Conduct Rules, individual conduct rules, which apply to the majority of individuals working in the financial services sector and Senior Manager conduct rules which apply only to Senior Managers.
Four Conduct Rules apply to senior managers and a further five individual conduct rules apply to all non-ancillary employees within a firm. Ancillary employees, in roles such as post room staff, receptionists, catering staff and cleaners are not required to comply with the Conduct Rules.
Senior Managers and Certification Staff will need to have been trained, and abide by the Conduct Rules from the start of the new regime at 9 December 2019. Firms will have 12 months to put in place processes to comply with the training and reporting requirements, and train their other staff on the Conduct Rules.
What is the new handover procedures requirement?
This requirement only relates to firms categorised as ‘Enhanced’. Such firms must take all reasonable steps to make sure that a person taking on a Senior Manager role has all the information and materials they could reasonably expect to have to do their job effectively. One way of carrying out this may be for the predecessor to prepare a suitable handover note. Enhanced firms are also required to have a policy which explains how it complies with this requirement, and maintain adequate records of the steps it has taken.
Are there any transition arrangements?
The FCA has confirmed transitional provisions to help firms move to the new regime:
While Senior Managers and Certification Staff will need to have been identified and trained and abide by the Conduct Rules from the start of the new regime, firms have 12 months to train their other staff on the Conduct Rules.
Firms have to identify their Certification Staff and ensure they meet the Conduct Rules by 9 December, however they have 12 months to complete assessments and complete the certification process.

If you want to know more about the SMCR and how you need to have all documentation submitted by November 24th 2019 please contact us.

Alternatively, if you want to implement the SMCR in your company and use our 90+ point project plan, you can find details here.

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Rocket Science? Not really!

remedial compliance sales process smcr ifa kyc questions

Having conducted some remedial work with an IFA practice, it still amazes me to find the level of confusion that seems to abound about the simplest of processes.

Quite simply put, if you are in sales, there is no way you should recommend anything to your client’s unless you can prefix it with “… because you said X and Y and Z, I recommend ABC …

Once that is introduced into the mix, then the recording of the client’s thoughts, feelings, beliefs, understanding and ultimately their needs, will be recorded clearly on the fact find or Know Your Customer documentation.
As specialist compliance consultants, we often see a scantily completed fact find, with hard facts and many blank spaces, accompanied with a verbose (usually overladen with hard facts) suitability report that suddenly states “you said you wanted ….” or “you said this was important to you“. Where none of this was previously recorded.
To any third party, it could appear that these statements were manufactured to make the product fit, although I am sure that is not the case for most advisers.
The difficulty seems to be in the understanding that whoever asks the questions may well be in control, but you need to do the work beforehand to know what questions you will ask.
Then the Questions => Discussions => Relationships => Opportunities => Recommendations => Sales. It honestly isn’t rocket science and recording what the client said and then replaying the key parts in a suitability report will not only be more professional, but serve to defend any future complaint. There is no point in having all the information in your head if you get run over by a bus or have to retire due to ill health.

if your firm needs a compliance check, and is looking to apply best practice, call us.

Fee Proposals – Honest & Transparent

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We recognise that value for money is a pre-requisite for all business expenditure. Professional fees are no exception.

We have the following values, to which we adhere;

  • Fairness – we don’t judge
  • Sound recommendations (with evidence to support)
  • Long Term plans/strategy
  • Excellence in Primary & Remedial care
  • Serving you as an individual and respecting your complete confidentiality
  • Understanding your pain
  • Intervention Parsimony with an outcomes based perspective
  • Team commitment – we work together
  • Honest & Candid communications
  • Transparency & Collaboration

Finally, our Mission is to be: Clear, Fair & Evidence Based

We always adopt an open and transparent approach to fees. We are proud of this principle and our reputation in this respect and believe this sets us apart from our competitors. We strive to set our fee levels on a practical and fair basis, based upon the level of staff involved, their particular skills and the time called for to complete our work, without compromising on quality.

Indicative fees in relation to our services could be summarised as follows: FCA Authorisation Application Services associated with new or startup authorisation applications.

Review of FCA authorisation application pack already completed: ₤ 2,250 – ₤ 3,500.
Further to our review we shall provide recommendations to you for update to ensure that the application pack meets the FCA expectations.

Completion of and project managing the FCA authorisation application pack for: ₤ 5,250 – ₤ 6,500.

Compliance Documentation including Compliance Manual and Monitoring Programme and required policies (CMP) *: ₤ 3,200- 4,350.
* Note the CMP is required to be submitted with the FCA application pack.

Ongoing retained regulatory compliance support.
On-site compliance reviews on a monthly, quarterly or six monthly basis, in line with your requirements:.

Potential areas for additional support Our indicative costs.

Monthly face-to-face ₤ 1,000 – ₤ 1,300 per month.
Quarterly face-to-face ₤ 850 – ₤ 1,150 per month.
Six monthly face-to-face ₤ 550 – ₤ 800 per month.

In providing these fee estimates we have included an indicative range formed on the information you have provided to us in regard to the intended business model, however the scope of work and our final fees will be agreed with you once we have full view of the Firm’s permission and you have further identified your requirements.

Ad-hoc advice and projects.
This will be provided as a pay as you go service for any help and support you may require beyond the scope of the Retained Service above. Whether it is related to drafting a new policy, training or simply answering a query you may have at any given time, the scope of work and a fee estimate will be agreed with you beforehand. The cost of our ad-hoc services will indicatively be charged on the basis of time spent at our hourly rates as follows:

Resource Hourly rate.
Director ₤ 165 ph.
Associate Director ₤ 128 ph.
Managing Consultant ₤ 103 ph.
Senior Consultant ₤ 85 ph.
Consultant ₤ 65 ph.

‘Honest’ fees
Before each assignment commences we will agree which of our proposed rates applies and the budgeted number of days for the expected completion of the assignment. We will conduct careful initial detailed budgeting at staff member and activity level. We will also offer a fixed rate for the service.

Other services.
We will agree terms of reference/letter of engagement and fees for any additional work in advance.

The clock does not start running as soon as we pick up the phone to a client. We want to encourage you to call us as early as possible, since our aim is to resolve issues before they become problems. We will not charge you for general telephone calls, but obviously will charge you if further action is required (although we will, of course, agree our fees with you beforehand).

Billing arrangements, including payment terms.
The firm has a 7 day payment terms for payments whether initial or subsequent. Our proposed fees exclude necessary disbursements, for example, travel, which will be billed at cost, and VAT (if applicable), which is payable at the standard rate prevailing at the time of billing.

Relevant experience.
Compliance Consultant has the expertise and experience to meet your needs.

If you have any queries, please call our Compliance Consultant London Office on 0207 097 1434

Lee Werrell Chartered FCSI

Compliance Doctor
Making Compliance Work.

Making Compliance Work: New FCA SMCR Directory Consultation

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approved persons regime and senior managers regime 2018

Current Situation

Following the extension of the Senior Managers Regime 2018 (SMCR), the change from the FCA Approved Persons Regimes (APER), the number of individuals on the Financial Services Register (“FCA Register”) will drastically reduce, as only specified Senior Manager roles at FSMA firms will be required to be approved by the FCA and appear on the Register. Firms will in future, be in charge of certifying the suitability, skills, fitness and propriety of their own people to the FCA.

Throughout the consultation process for the SMCR extension, a variety of firms expressed issues about the absence of an FCA register for those individuals who are no longer required to be approved by the FCA (and in connection with whom there would be no FCA mark of approval). In response to these worries, the FCA is proposing a new Directory of facts to be supplied by firms. However, the FCA has not reversed the fundamental concept that it is no longer required to grant approval.

On 4th July 2018, the FCA released their “near final rules” and their senior managers regime guide as well as the consultation for the new “Directory”

Whether the Directory meets those issues is a question for the consultation process, do firms think that this Directory will have any value to the market?gdpr uk financial services fca

The FCA believes the improved visibility of firms and individuals would:

  • assist consumers to locate appropriate advisers or check the qualifications and conduct history of their existing adviser, thus increasing competition and improving consumer protection
  • allow firms to determine the suitability of counterparties, and
  • aid the FCA with monitoring and enforcement activities, making it more difficult for unsuitable individuals to operate in the UK financial market.

What do the FCA propose?

The FCA proposes to introduce the Directory: a new public register and user interface that will make details public on additional individuals conducting a wider variety of roles (including Certification staff, non-Senior Manager Function Directors (executive and non-executive) and those who the FCA does not approve, for example, financial advisers, pensions and mortgage advisers, traders, portfolio managers and additional managers), and also presenting information on the Senior Managers that the FCA continues to approve.

The Directory would include information such as:

  • Workplace location: list of individuals active in specific areas
  • Qualifications: list of individuals who hold appropriate qualifications e.g. to provide financial or pensions advice
  • Regulatory sanctions and prohibitions: facility to check which individuals are prohibited by the FCA and PRA or have limits on any activities they are authorised to undertake

What do you need to do?

  • Provide insightful feedback: The deadline is 5th October 2018 to provide the FCA with feedback on this proposal. The FCA aims to publish final rules in the winter. Final system testing would then occur before the FCA would accept notifications from firms.
    If the FCA introduces the Directory:
  • Provide relevant information: firms would have to provide the FCA with the information detailed above on all Directory Persons who work on their account, by the end of an individual’s first business day performing a relevant role. For existing staff, firms would have until completion of the SMCR transition period to certify relevant employees and report to the FCA accordingly.
  • Update of information: firms would be accountable for the timely and accurate reporting of this particular information on an ongoing basis (with a ₤250 administrative fee for late or inaccurate data; effectively a fine).

important please read

Compliance Consultant specialise in UK Regulatory Financial Services Governance and can assist your firm in the preparations for the SM&CR. Just search Google for “Compliance Consultants, London” and look for our tag on Google Maps (we’re usually #1).

Insistent Clients: Identifying Them Then Dealing With Them And Remaining Compliant

fca conduct rules cobs insistent client sales process

fca conduct rules cobs insistent client sales process

What is an Insistent Client and how to deal with them.

The FCA Handbook does not refer to insistent clients and there are no rules or guidance specifically about this.

The following will hopefully help to show the FCA’s current stance after their recent consultation paper.

Insistent Clients must not be confused with an Execution Only client


What Is Execution Only?
This is where the Client knows exactly what they want and the choices readily available incorporating the premium, sum assured, term and availability of critical illness, waiver, etc.

So What Is An Insistent Client?
This term is used to describe a situation where a client is adamant that they should be taking a different route of advice to that prescribed by the adviser.

This presentation contains images that were used under a Creative Commons License. Click here to see the full list of images and attributions:

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MIFID II What Compliance Wealth Managers & Advisers Need To Get In Place

MiFID II finally comes into effect on 3 January 2018

Although there may still be some grey areas, it is time to make sure you have your compliance arrangements in place or being progressed so that there are no nasty surprises.

Get a PDF of this post from this link (right click and “download as…”)

Here are 11 things we suggest wealth managers, asset managers or independent financial advisers do to best prepare themselves ahead of the New Year deadline:

1. Not only make a register of all conflicts of interest, but also articulate how these are mitigated or managed and review them, at least annually.

2. Review whether your firm needs additional qualifications, training or Part IV permissions to maintain independent status.

3. Structured Deposits: * HOTSPOT* Apply for new permissions by 2 January 2018 if you wish to advise on these.

4. Carefully consider your recruitment procedures and ascertain if they need tightening (consider SM&CR impacts too).

5. Conduct Risk: Review your remuneration structure and ensure no incentives negatively impact clients.

6. Decide which staff the “Personal Account Dealing” rule should apply to, and create a register of direct equities they hold.

7. Create or amend your Personal Account Dealing policy to reflect the need to report staff holdings changes.

8. Legal Entity Identifier: * HOTSPOT* Decide if you need to apply for this through the London Stock Exchange.

9. Confirm if your discretionary fund manager (DFM) or platform will offer online reporting access and thereby avoid the need for time consuming paper reporting.

10. Ensure you are comfortable with and confirm whether your DFM or platform will issue the 10% loss notification and how. This an extension of the COBS 16.3 rules (

11. Check your agency agreement with your DFM where model portfolios are being used: does the responsibility for regular and ongoing checking of suitability sit with you as the adviser?

Legal Entity Identifier (LEI)
A key impact of the new regulations is that from 3 January 2018, an investment management firm will only be able to continue trading in financial markets on behalf of certain clients if those clients have obtained a LEI. If you have clients that are required to have an LEI, have you informed them of this? These entities include; Trusts (but not bare trusts), Companies (public and private), Pension Funds (but not selfinvested, personal pensions), Charities, and Unincorporated Bodies.

Note that investment trusts and ETFs are not excluded from the requirement for a LEI. Advisers might need to consider whether the cost of an LEI has any impact on a decision to use other than collectives in portfolios. The other point to note is that an LEI is NOT required if investment is being made exclusively in collectives such as investment bonds, OEICs or unit trusts.

How do you obtain an LEI?
The LEI can be obtained directly from the London Stock Exchange (LSE) for an initial fee of £115+VAT and there is an annual renewal fee of £70+VAT.


Mifid Ii Requirements, Mifid Ii Transaction Reporting Requirements, Mifid Ii Compliance, Mifid Ii Compliant, Mifid Ii Regulation, Mifid Ii Esma, Mifid Ii For Dummies, Mifid Ii Lei, Mifid Ii Overview

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