Tag Archives: Fca Compliance Checklist

2016 FCA Changes to Regulated Complaints Handling

The changes made to the FCA’s complaint handling rules (appearing inthe FCA Handbook – DISP)in June 2016 are well documented and should have been embedded by this time.

In conclusion: 

  • The ‘next business day rule’ has been extended to develop into a ‘three business day rule’ (where sending final response letters (FRLs) are required).
  • Firms must now send a ‘Summary Resolution Communication’ (SRC) in response to all complaints that are solved within three days of receipt.
  • The SRC must confirm that the complaint has been resolved and inform the customer of their rights to refer the matter to the Financial Ombudsman Service (FOS).
  • All complaints must be recorded and submitted to the FCA via their new ‘complaints return’.

The rules are devised to benefit customers by “ensuring that complaints are handled more quickly, easily and transparently”.

Firms no longer have to attempt to resolve complaints on the same day to avoid reporting or sending the customer an FRL. As a result, more time and greater consideration may be given to each individual complaint and the circumstances of the complainant. This should also support a more versatile operating model and relieve some functional triage and case management burdens.

Firms lose the ability to resolve complaints without reporting them; nevertheless, where all complaints are logged and reported, firms should have access to management information (MI) that better demonstrates their complaint population, and therefore root cause analysis (RCA) should be more robust- revealing a more accurate understanding of the firm’s performance.

On the face of it, there are positives for customers and the industry, but how are firms coping with the changes?

WHAT HAVE BEEN THE PRACTICAL IMPLICATIONS FOR FIRMS?

Theoretically, where the firm is positive that complaints, which were being closed by the next business day, were identified and resolved fairly (and in-line with regulatory expectations), then the shifting to the new rules should certainly be more straightforward. In this example, the biggest change for the complaint handling department is logging the grievance correctly, and issuing an SRC to the client. This, however, still results in an immediate need to present systems training to staff, and to update procedures to ensure SRCs are issued to customers in the correct manner.

values compliance consultant london compliance framework annual monitoring planThe new reporting rules mean that there is now a record of every dissatisfaction handled by the firm, and therefore fair customer outcomes and compliant complaint handling will need to be demonstrable in each instances. This has exposed some firms’ capability to appropriately identify and handle complaints in their frontline and client support departments, or those who do not handle complaints on a regular basis. Reasons for this typically include:.

  • A training or capabilities gap.
  • Conflicting incentive schemes.
  • Inadequate processes and procedures.
  • Inadequate back up and oversight.
  • Issues with company conduct.

Nevertheless, this has also led to the inherent expectation that frontline staff- who might receive complaints infrequently- are able to serve as skilled complaint handlers. For some staff, this will feel like a change to their role, so firms ought to provide the appropriate support to individuals for them to execute effective complaint handling that meets regulatory criteria.

Aside from this, the regulatory definition of a complaint- and a firm’s treatment of it- has entered the spotlight. Previously, ‘minor’ or ‘immaterial’ complaints could be quickly dealt with and resolved without too much concern for whether the regulatory definition of a complaint had been met. Now that all complaints are recorded, firms need to be confident that complaints are being identified in line with regulatory expectations, resulting in ‘materiality’ coming into question. This serves to make the understanding of what is and isn’t a complaint an intrinsic part of the process, and comes at the same time as an increased reliance on non-skilled frontline staff to perform complaint handling.

These changes have also meant that firms’ operating models and controls have had to be augmented, since added departments and complaint channels have to be more closely monitored. Some firms have miscalculated the extent of the required changes.

HOW CAN FIRMS ADDRESS THE CURRENT CHALLENGES?

Firms should revaluate their complaint handling operating model whilst taking into consideration the FCA’s expectations around a ‘fair customer outcome – at the earliest feasible opportunity’, and whilst also reviewing their “risk appetite”. They should be comfortable that complaints will be suitably identified and handled in all frontline area, with appropriate evidence of good practice recorded and retained.

No matter what process for complaints a firm deems appropriate, as a minimum, complaints ought to be identified correctly by frontline staff, so a level of training, guidance and support is needed on an immediate and ongoing basis to mitigate ‘knowledge gap’ and ‘skill fade’ possibilities where complaint handling is not the day-to-day role.

The expectancies of staff and the firm should be assessed for you to gain insight on how to align the two. As part of its suite of training pertaining to complaints, firms should also aim to improve their personnel’s contextual understanding around why effective complaint handling is critical across the industry today. They could also use this opportunity to determine their complaint handling culture, and reaffirming the crucial elements of treating customers fairly, where appropriate.

Firms should ensure that they have a clear and, most significantly, consistent definition of a complaint which gives context and meaning to the idea of ‘materiality’, using a broad spread of real examples in line with their risk appetite.

Firms’ operational controls under the former rules (including quality assurance (QA), training & competence (T&C), MI, RCA and governance arrangements) may not give the full understanding of complaint handling across the company, causing an increased risk of unjust customer outcomes and regulatory breaches.

Therefore, in order for the firm to demonstrate compliant complaint handling to the regulator, these operational controls ought to be appropriately broadened (while ensuring a risk-based approach) to give a correct view of complaint handling in all areas. This brings about updated requirements for QA and RCA frameworks, T&C schemes, MI reports, scorecards, training programmes, governance structures and agendas; to name but a few.

Ultimately, firms should be satisfied that their systems and infrastructure allows them to record, report and handle complaints in line with regulatory expectations. This means ensuring that calls are recorded (i.e. interactions can be proven), all relevant individuals have access to the firm’s complaint handling system and the system has the ability to support effective MI and RCA.

A CONTINUED EXPERIENCE HEADING TOWARDS COMPLAINTS EXCELLENCE.

As well as the initial challenges that were projected at the outset of PS15/ 19 and during the prior consultation, there have been some inadvertent issues arising through the reasonable implementation of the rules which are more nuanced and harder for firms to diagnose.

Firms wishing to gain assurance that they are reacting appropriately to these challenges can examine their procedure to the areas above to give themselves a richer picture. It is needless to say perfectly natural that tasks should arise when such a significant change is carried out, nevertheless it is the ability to react to these challenges with appropriate and proportionate action that will differentiate firms in the marketplace.

 

Lee Werrell Chartered FCSI

Compliance Doctor

compliance consultants london specialist remedial risk management fca handbook

Do You Really Want To Afford Generic Ongoing Compliance Support?

Compliance is an ambivalent function. On the one hand you are viewed as the regulators’ ally inside the investment company; overseeing the implementation of their regulation. Conversely, you are paid by the investment firm and a part of their culture and hierarchy. You might say ‘front office’ (traders making the cash) considers compliance the way compliance in turn considers the regulators.

The problem with most firms, whether they be IFAs, Stockbrokers, Payment Services or whatever sector, is that the Compliance Officer is treated unfairly, if they are running the compliance function as a part of their job. Whether they are advising, trading or operate the financial side of the business, unlike 10 or even 5 years ago, there is far too much to get done, to gratify the conditions of the regulatory authorities.

Obviously there are 5 main options;

  1. You can proceed as normal and let things get slowly further and further behind; not a great option, running the gauntlet of “not” being visited.
  2. You can devote more time to the compliance aspect, rejig the annual compliance monitoring plan and enlist other individuals in order to help; but you will have to supervise their efforts and if they are not “compliance” people, it may be more work than you save.
  3. Engage any of the numerous consultancies that are either big 5 or quasi big 5, made successful by all the mis-selling of the past and not necessarily concentrated on your sort of business. These guys usually want a big chunk of profits to be “available” and present ongoing support.
  4. You can recruit a compliance manager (or team) to execute the main bodies of work required, and have regular meetings to ensure they are staying on top of everything. This is expensive with all the rights of employees and the fringe benefits.
  5. The final option is to engage with a particular niche consultancy that only provided experienced and qualified consultants that can help you fit in all the compliance commitments and carry on your day job. Not the cheapest option, but a wise person would never confuse cost with price.

The regulator’s business plan for 2018 has created a raft of focused areas for the remainder of 2018 and start of 2019. From the FCA Handbook there are a range of hotspots and they are determined to use their powers under the FSMA 2000 to progress, investigate and enforce where necessary. Whatever FCA Regulated Activities you have permissions for, I am sure you will see that there is something for everyone.

The following list identifies the regulators cross-sector priorities to be addressed over the coming few months:

– Firms’ culture and governance
– Tackling Financial crime (fraud & scams) & anti-money laundering (AML).
– Data security, resilience and outsourcing.
– Innovation, big data, technology and competition.
– Treatment of existing customers.
– Long-term savings, pensions and intergenerational differences.
– High cost credit.
– Wholesale financial markets.
– Investment Management.

As a component of the FCA’s ongoing programme of work they continue to mitigate harm from firms selling Contracts for Difference (CFDs) and spread bets to retail consumers who often do not understand the risks of these complicated, leveraged instruments.

They are also concentrating on binary options, which entered the FCA’s regime from January 2018. Their work involves a coordinated programme of policy and supervisory activity. In 2018, they will evaluate how well their interventions have worked and act where firms fall down and cannot meet expectations.

The FCA support the European Securities and Markets Authority’s (ESMA) agreed EU-wide temporary product intervention measures announced 27th March 2018. These include the prohibition of the marketing, distribution or sale of binary options to retail clients and a range of constraints on the marketing, distribution or sale of CFDs to retail clients, including rolling spot forex. The FCA expect to consult on whether to apply the ESMA measures on a permanent basis to firms offering CFDs and binary options to retail clients.

The importance of self-governance and accountability: this is shown in the extension of the Senior Managers and Certification Regime (SM&CR) to all regulated firms, incorporating dual regulated insurers. The FCA’s policy statement and new rules will be published in the summer of 2018 and the SM&CR will be extended to insurers on 10 December 2018.

There is a huge raft of work going on and that is quite apart from the changes to the FCA Handbook after MiFID II, and your own monitoring plan, that we calculate for most firms includes over 60 different events, from governance reviews (several day’s work in itself) through to whistleblowing and reporting (Gabriel returns anyone?), financial promotions and conflicts of interest through to KYC and Money Laundering and TCF, to name but a few.

With Liz Field of PIMFA joining with the FCA in encouraging advisers to whistleblow on “bad behaviour” within the profession in order to bring down the cost of the FSCS levy, all firms should make certain they have their house in order if they have the time.

Compliance Consultant offers various support packages that can be managed on-site or remotely (depending upon your needs), or a mixture of the two. Experienced and professionally qualified people that are as flexible as you need, with the goal of providing you with the most ideal compliance function possible, with regular reports by email of the work they have planned, work that they have undertaken and any challenges identified along the road.

Lee Werrell Chartered FCSI

Compliance Doctor
Making Compliance Work

Homepage

FCA Complaints Handling Changes in 2016

compliants fca handbook compliance doctor management

The alterations made to the FCA’s complaint handling rules in June 2016 are well documented.

In conclusion:

  • The ‘next business day rule’ has been extended to develop into a ‘three business day rule’ (where sending final response letters (FRLs) are concerned).
  • Firms must now send a ‘Summary Resolution Communication’ (SRC) in response to all complaints that are solved within three days of receipt.
  • The SRC must confirm that the complaint has been resolved and inform the customer of their rights to refer the matter to the Financial Ombudsman Service (FOS).
  • All complaints must be recorded and submitted to the FCA via their new ‘complaints return’.

The rules are devised to benefit customers by “ensuring that complaints are handled faster, efficiently and transparently”. Firms do not have to strive to resolve complaints on the same day in order to avoid reporting or sending the customer an FRL. Consequently, more time and greater consideration might be provided for each individual complaint and the circumstances of the complainant. This should also support a more adaptable operating model and relieve some operable triage and case management pressures.

Firms lose the possibility to resolve complaints without reporting them; on the other hand, where all complaints are logged and reported, firms should have access to management information (MI) that better demonstrates their complaint population, and therefore root cause analysis (RCA) should certainly be more robust- revealing a more accurate picture of the firm’s performance.

Presumably, there are positives for customers and the industry, but how are firms managing the changes?compliance doctor consultants london fca handbook

WHAT HAVE BEEN THE PRACTICAL IMPLICATIONS FOR FIRMS?
Theoretically, where the firm is positive that complaints, which were being closed by the next business day, were identified and resolved fairly (and in-line with regulatory expectations), then the cross over to the new rules ought to be more straightforward. In this instance, the biggest change for the complaint handling department is logging the complaint correctly, and issuing an SRC to the consumer. This, however, still leads to an immediate need to present systems training to staff, and to update procedures to ensure SRCs are issued to customers in the correct manner.

The new reporting rules mean that there is now a record of each grievance handled by the firm, and therefore fair customer outcomes and compliant complaint handling will need to be demonstrable in every instances. This has exposed some firms’ capacity to appropriately identify and handle complaints in their frontline and customer services departments, or those who do not handle complaints regularly. Reasons for this typically include:

  • A training or capabilities gap.
  • Conflicting incentive schemes.
  • Inadequate processes and procedures.
  • Inadequate assistance and oversight.
  • Issues with company conduct.

Having said that, this has also resulted in the inherent expectation that frontline staff- who might receive complaints infrequently- have the ability to act as skilled complaint handlers. For some staff members, this will seem like a change to their role, so firms have to provide the appropriate support to individuals for them to execute effective complaint handling that meets regulatory guidelines.

Additionally this, the regulatory definition of a complaint- and a firm’s treatment of it- has entered the spotlight. Previously, ‘minor’ or ‘immaterial’ complaints might be quickly managed and resolved without too much concern for whether the regulatory definition of a complaint had been met. Now that all complaints are recorded, firms need to be confident that complaints are being identified in line with regulatory expectations, resulting in ‘materiality’ coming into question. This serves to make the understanding of what is and isn’t a complaint an intrinsic part of the process, and comes at the same time as an increased reliance on non-skilled frontline staff to perform complaint handling.

These changes have also meant that firms’ operating models and controls have had to be increased, since supplementary departments and complaint channels have to be more closely monitored. Some firms have taken too lightly the extent of the required changes.

HOW CAN FIRMS REACT TO THE CURRENT CHALLENGES?

Firms should revaluate their complaint handling operating model whilst thinking about the FCA’s expectations around a ‘fair customer outcome – at the first possible opportunity’, and whilst also checking their “risk appetite”. They should be certain that complaints will be properly identified and handled in each frontline area, with relevant evidence of good practice captured and retained.

Regardless of the process for complaints a firm deems appropriate, as a minimum, complaints must be identified successfully by frontline staff, so a level of training, guidance and support is necessitated on an immediate and ongoing basis to mitigate ‘knowledge gap’ and ‘skill fade’ risks where complaint handling is not the day-to-day role.

The expectancies of staff and the firm should be assessed so as to gain insight on the best ways to align both. As a part of its suite of training related to complaints, firms should also aim to improve their staff members’s contextual understanding around why effective complaint handling is critical across the industry today. They could also use this opportunity to evaluate their complaint handling culture, and reaffirming the crucial elements of treating customers fairly, where appropriate.

Firms should ensure that they have a clear and, most essentially, constant distinction of a complaint which gives context and meaning to the idea of ‘materiality’, using a broad spread of real examples in line with their risk appetite.

Firms’ operational controls under the preceding rules (including quality assurance (QA), training & competence (T&C), MI, RCA and governance arrangements) may never give the full understanding of complaint handling across the company, producing an increased risk of unreasonable customer outcomes and regulatory breaches.

compiance doctor compliance risk management complaintsTherefore, in order for the firm to exhibit compliant complaint handling to the regulator, these operational controls need to be appropriately broadened (while ensuring a risk-based approach) to give a correct view of complaint handling in all areas. This results in updated requirements for QA and RCA frameworks, T&C schemes, MI reports, scorecards, training programmes, governance structures and agendas; to name but a few.

Ultimately, firms have to be satisfied that their systems and infrastructure allows them to record, report and handle complaints in line with regulatory expectations. This means ensuring that calls are recorded (i.e. interactions can be proven), all relevant individuals have access to the firm’s complaint handling system and the system has the ability to support effective MI and RCA.

A CONTINUED JOURNEY TOWARDS COMPLAINTS EXCELLENCE.

Alongside the initial challenges that were projected at the outset of PS15/ 19 and during the prior consultation, there have been some inadvertent issues arising through the pragmatic implementation of the rules which are more nuanced and more difficult for firms to diagnose.

Firms wishing to gain assurance that they are responding appropriately to these challenges can assess their strategy to the areas above to give themselves a fuller picture. It is naturally perfectly natural that problems should arise when such a significant change is carried out, having said that it is the ability to react to these challenges with appropriate and proportionate action that will differentiate firms within the industry.

Lee Werrell – Chartered FCSI

Compliance Doctor

compliance consultants london specialist remedial risk management fca handbook

Fee Proposals – Honest & Transparent

compliance consultants london specialist remedial risk management fca handbook
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.

Flexibility.
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.

Can You Or Your Firm Really Afford Generic Ongoing Compliance Support?

compliance consultants london specialist remedial risk management fca handbook

Compliance is an ambivalent function. On the one hand you are considered as the regulators’ ally inside the investment firm; overseeing the implementation of their regulation. Conversely, you are paid by the investment company and part of their culture and hierarchy. You might say ‘front office’ (traders making the money) looks at compliance the way compliance successively sees the regulators.

The problem with most companies, whether they be IFAs, Stockbrokers, Payment Services or whatever sector, is that the Compliance Officer is treated unfairly, if they are running the compliance function as part of their job. Whether they are advising, trading or operate the financial side of the business, unlike 10 or perhaps 5 years ago, there is far too much to get done, to satisfy the criteria of the regulatory authorities.

Obviously there are 5 main options;

  • You can continue as normal and let things get slowly further and further behind; not a great option, running the gauntlet of “not” being visited.
  • You can devote more time to the compliance aspect, rejig the annual compliance monitoring plan and enlist others in order to help; but you will have to supervise their efforts and if they are not “compliance” people, it may be a lot more work than you save.
  • Engage some of the many consultancies that are either big 5 or quasi big 5, made successful by all the mis-selling of yesteryear and not necessarily focused on your sort of business. These guys usually want a big chunk of profits to be “available” and provide ongoing support.
  • You can recruit a compliance manager (or team) to carry out the main bodies of work required, and have regular meetings to ensure they are staying on top of everything. This is expensive with all the rights of employees and the fringe benefits.
  • The final option is to engage with a particular niche consultancy that only provided experienced and qualified consultants in order to help you fit in all the compliance obligations and maintain your day job. Not the cheapest option, but a scholar would never confuse cost with price.

The regulator’s business plan for 2018 has created a raft of focused areas for the remainder of 2018 and start of 2019. From the FCA Handbook there are a range of hotspots and they are determined to use their powers under the FSMA 2000 to progress, investigate and enforce where appropriate. Whatever FCA Regulated Activities you have permissions for, I am sure you will see that there is something for everyone.

The following list identifies the regulators cross-sector priorities to be addressed over the coming few months:

– Firms’ culture and governance
– Tackling Financial crime (fraud & scams) & anti-money laundering (AML).
– Data security, resilience and outsourcing.
– Innovation, big data, technology and competition.
– Treatment of existing customers.
– Long-term savings, pensions and intergenerational differences.
– High cost credit.
– Wholesale financial markets.
– Investment Management.

As a component of the FCA’s ongoing programme of work they continue to mitigate harm from firms selling Contracts for Difference (CFDs) and spread bets to retail customers who often do not comprehend the risks of these complicated, leveraged instruments.

They are also focused on binary options, which entered the FCA’s regime from January 2018. Their work involves a coordinated programme of policy and supervisory activity. In 2018, they will evaluate how well their interventions have worked and act where firms fall down and cannot meet expectations.

The FCA support the European Securities and Markets Authority’s (ESMA) agreed EU-wide temporary product intervention measures announced 27th March 2018. These include the prohibition of the marketing, distribution or sale of binary options to retail clients and a series of constraints on the marketing, distribution or sale of CFDs to retail clients, including rolling spot forex. The FCA expect to consult on whether to apply the ESMA measures on a permanent basis to firms offering CFDs and binary options to retail clients.

The importance of self-governance and accountability: this is shown in the extension of the Senior Managers and Certification Regime (SM&CR) to all regulated firms, including dual regulated insurers. The FCA’s policy statement and new rules will be published in the summer of 2018 and the SM&CR will be extended to insurers on 10 December 2018.

There is a huge raft of work going on and that is quite apart from the changes to the FCA Handbook after MiFID II, and your own monitoring plan, that we calculate for most firms includes over 60 different activities, from governance reviews (several day’s work in itself) through to whistleblowing and reporting (Gabriel returns anyone?), financial promotions and conflicts of interest through to KYC and Money Laundering and TCF, to name but a few.

With Liz Field of PIMFA joining with the FCA in encouraging advisers to whistleblow on “bad behaviour” within the profession in order to bring down the cost of the FSCS levy, all firms should make certain they have their house in order if they have the time.

Compliance Consultant offers various support packages that can be managed on-site or remotely (depending on your needs), or a mixture of both. Experienced and professionally qualified people that can be as flexible as you need, with the goal of providing you with the best compliance function possible, with regular reports by email of the work they have planned, work that they have undertaken and any challenges identified along the way.

Lee Werrell Chartered FCSI

Compliance Doctor
Making Compliance Work.

Homepage

Authorisation with the FCA: Magic Trick?

It might sound trite, to compare making an application for authorisation to a magic trick, Yet if you are under any impression that less-than-perfect preparation is good enough, take heed. Sarah Rapson, director of authorisations at the FCA said that, “We have begun to take a harder line on submissions that border on the vexatious.”

Of course, it’s hard to know what others identify as vexatious. Maybe almost anything from mildly bothersome to properly annoying or completely exasperating. If indeed there’s a scale at all!

The good news is, the FCA has indeed given us a number of clues.

When examining an application, your case officer is practically contemplating three things.

To start with, they seek out indicators of what you’ve carried out when preparing your application. So they want to know factors like whether or not you’ve read the details on the FCA website, made enquiries of the contact centre, or looked for legal or professional compliance advice. They also judge your application on how distinctly you’re able to articulate your regulatory obligations.

Next, they consider your attitude during the application process. (I’m sure they didn’t mean that to sound quite the way it does). They judge whether you’re being open and honest with them and positive about procuring information for them. They also want to see that you understand your regulatory obligations and answer rapidly to any questions they have about your application.

Third, they want to make certain you have your supporting documentation completely ready and arrangements in place to comply from the first day you become authorised. So they take into consideration why you’re applying now, what’s still outstanding that would stop you from doing whatever you’ve made an application for, and whether you would be able to do that activity if you were authorised immediately.

You need to pass all three of these ‘tests’. It’s inadequate, for example, to be happy to correct mistakes or gaps in your application if you fell at the first hurdle. Quite clearly, they ‘d find this vexing!

“We will move to refuse firms earlier on in the authorisation process where the firm is not ‘ready, willing and organised’ to operate in the regulated financial services market,” Rapson has said.

And those are the magic words: ready, willing and organised. From the day they receive your application, and through the process, they want to make sure you’re ready, willing and organised to adhere to the rules and requirements at all times.

compliance consultants London

Can You Really Afford Generic Ongoing Compliance Support?

Compliance Consultants, London and Nationwide

Compliance is an ambivalent function. On the one hand you are seen as the regulators’ ally inside the investment firm; overseeing the implementation of their regulation. Meanwhile, you are paid by the investment firm and part of their culture and hierarchy. You might say ‘front office’ (traders making the money) sees compliance the way compliance subsequently looks at the regulators.

The problem with most firms, whether they be IFAs, Stockbrokers, Payment Services or whatever sector, is that the Compliance Officer is treated unfairly, if they are running the compliance function as a component of their job. Whether they are advising, trading or operate the financial side of the business, unlike 10 or perhaps 5 years ago, there is a bit too much to get done, to satisfy the demands of the regulatory authorities.

Obviously there are 5 main options;

  1. You can continue as normal and let things get slowly further and further behind; not a great option, running the gauntlet of “not” being visited.
  2. You can devote more time to the compliance component, rejig the annual compliance monitoring plan and enlist others to help; but you will have to supervise their efforts and if they are not “compliance” people, it may be even more work than you save.
  3. Engage any of the many consultancies that are either big 5 or quasi big 5, made successful by all the mis-selling of days gone by and not necessarily concentrated on your sort of business. These guys usually want a big chunk of profits to be “available” and produce ongoing support.
  4. You can recruit a compliance manager (or team) to execute the main bodies of work required, and have regular meetings to ensure they are keeping up with everything. This is expensive with all the rights of employees and the additional benefits.
  5. The final option is to engage with a niche consultancy that only provided experienced and qualified consultants to help you fit in all the compliance commitments and carry on your day job. Not the cheapest option, but a thinker would never confuse cost with price.

The regulator’s business plan for 2018 has created a raft of focused areas for the remainder of 2018 and start of 2019. From the FCA Handbook there are a lot of hotspots and they are determined to use their powers under the FSMA 2000 to progress, investigate and enforce where appropriate. Whatever FCA Regulated Activities you have permissions for, I am sure you will see that there is something for everyone.

The following list identifies the regulators cross-sector priorities to get addressed over the coming few months:

– Firms’ culture and governance
– Tackling Financial crime (fraud & scams) & anti-money laundering (AML).
– Data security, resilience and outsourcing.
– Innovation, big data, technology and competition.
– Treatment of existing customers.
– Long-term savings, pensions and intergenerational differences.
– High cost credit.
– Wholesale financial markets.
– Investment Management.

As part of the FCA’s ongoing programme of work they continue to mitigate harm from firms selling Contracts for Difference (CFDs) and spread bets to retail individuals who often do not understand the risks of these complex, leveraged instruments.

They are also concentrating on binary options, which entered into the FCA’s regime from January 2018. Their work involves a coordinated programme of policy and supervisory activity. In 2018, they will evaluate how well their interventions have worked and act where firms fail to meet expectations.

The FCA support the European Securities and Markets Authority’s (ESMA) agreed EU-wide temporary product intervention measures announced 27th March 2018. These include the prohibition of the marketing, distribution or sale of binary options to retail clients and a variety of constraints on the marketing, distribution or sale of CFDs to retail clients, including rolling spot forex. The FCA expect to consult on whether to apply the ESMA measures on a permanent basis to firms offering CFDs and binary options to retail clients.

The importance of self-governance and accountability: this is shown in the extension of the Senior Managers and Certification Regime (SM&CR) to all regulated firms, including dual regulated insurers. The FCA’s policy statement and new rules will be published in the summer of 2018 and the SM&CR will be extended to insurers on 10 December 2018.

There is a huge raft of work going on and that is quite apart from the changes to the FCA Handbook after MiFID II, and your own monitoring plan, that we calculate for most firms includes over 60 different tasks, from governance reviews (several day’s work in itself) through to whistleblowing and reporting (Gabriel returns anyone?), financial promotions and conflicts of interest through to KYC and Money Laundering and TCF, to name but a few.

With Liz Field of PIMFA joining with the FCA in encouraging advisers to whistleblow on “bad behaviour” within the profession in order to bring down the cost of the FSCS levy, all firms should ensure they have their house in order if they have the time.

Compliance Consultant offers various support packages that can be managed on-site or remotely (depending on your needs), or a mixture of the two. Experienced and professionally qualified people that could be as flexible as you need, with the goal of providing you with the very best compliance function possible, with regular reports by email of the work they have planned, work that they have undertaken and any challenges identified along the way.

Compliance Consultant.
Making Compliance Work.

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Exactly how do I eventually become FCA authorised?

How do I come to be FCA authorised?

You want to satisfy the Threshold Conditions, which are the FCA’s minimum standards for getting, and remaining, authorised; see below.

The operation of applying for authorisation requires the appropriate completion and submission of particular recommended forms:
An applicant for Part 4A Permission, other than in so far as the FCA may direct in individual cases, must apply in writing in the way directed, and along with the information mandated, in the application pack provided by the FCA

A MiFID investment adviser or investment manager will usually be a “wholesale investment company” and should comply with the FCA application pack procedure for that group. An AIFM under AIFMD will also need to follow the FCA’s specific method for AIFMs.

The application forms required will feature some or all of the following:

  • A core details form: this requires valid information about your business framework, controllers, monitoring and personnel. Details on systems and controls, featuring business continuity is also required here.
  • Supplement for investment managers: this covers the applicant’s regulatory business plan, including specific FCA requirements and its proposed consumer types and investment strategy, and the range of regulatory permissions ordered. This form also requires information on financial resources and available resources estimations, further detailed information on workers and regulatory compliance systems

Documents for individuals who will be conducting “controlled functions” (called Approved Persons; see below).

  • Owners and influencers appendix.
  • Forms for controllers: This is required for all persons or bodies who (broadly) hold or control 10 per cent or more of the applicant firm.
  • IT Controls form: for those firms who are much more dependent on IT systems, and.
  • Supporting documents including organisation charts/ financial information/ compliance procedures, etc

Some details will be different and it is best to consult with a specialist compliance consultancy like Compliance Consultant, one of the longest established compliance consultancy firms in London, on 0207 097 1434 or email at info@complianceconsultant.org.


You May Also Be Interested In

What Is A Regulatory Business Plan? Why Is It Important? https://wp.me/p7OMfd-3VP

Professional FCA Authorisations, Registrations & Licencing https://www.complianceconsultant.org/fca-authorisations-registrations-licencing/

What Does A FCA Regulatory Business Plan Really Need To Say? https://www.complianceconsultant.org/what-does-a-regulatory-business-plan-need-to-say/

FCA New Business Compliance Requirements https://www.complianceconsultant.org/fca-new-business-compliance-requirements/


Some Other Information for you

If you have completed and want your application assessed?

FCA Authorisation for CCA Firms

FCA Authorisation Guide AIFMD

FCA Authorisation for AIFMD

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The Best London FCA Authorisation Consultants Today – Authorised or Approved Persons?

What are FCA Authorised Persons and FCA Approved Persons?

Authorised Persons

( applying section 31 of the Financial Services & Markets Act [FSMA] defines Authorised persons) as just one of the following:

( a) a person who has a Part 4A permission to carry on one or more regulated activities;
( b) an incoming EEA firm;
( c) an incoming Treaty firm;
( d) a UCITS qualifier;
( e) an ICVC;
( f) the Society of Lloyd’s.

For that reason the business can become authorised in it’s own right (see legal entity).

FCA Approved Persons
The UK legislation calls for persons performing particular functions (quoted as “controlled functions”) to be approved by the FCA in advance. These are as follows, and are shown in the FCA Handbook:

  • Governing Functions (Directors, Partners, etc.).
  • Required Functions (Compliance Oversight, MLRO).
  • Systems and Controls Function.
  • Significant Management Function (less pertinent for a new investment manager).
  • Customer Functions (eg for those carrying on investment advisory or portfolio management activities).

For a recently established business, the FCA is likely to expect (and will require for an AIFM) a minimum of two senior individuals to be involved with the operation and management of the UK enterprise.

For wholesale business, there are no longer specified exam requirements. However, businesses can still call for employees to take exams for them to be satisfied that an individual has the requisite skills, knowledge and expertise.

How do I become an approved person?
Your company must apply on your behalf.

In an application, your firm will be asked to help prove that an individual performing a controlled function:

  • meets the FCA criteria for authorisation (the fit and proper test) and.
  • can comply with the standards demanded to carry out their controlled function or functions (the Statements of Principle and Code of Practice for Approved Persons – APER) Please be aware that this is changing in 2019 to the ‘Senior Managers and Certification Regime’ (SM&CR or SMCR). Please ask for details.

Call Us today on 0207 097 1434