1. Learning & Development Regulatory Update Round 2 - 2017

2. Learning Objectives
Understand the proposals for senior managers and certified persons, and how this affects your firm
Gain an understanding to the proposed changes to the pension transfer rules
Understand the continuing changes delivered through the Financial Advice Market Review and how this impacts services provided by firms

3. Senior Managers and Certification Regime

4. Background
Following the financial crisis, Parliament tasked FCA to bring in a new regime of accountability
This led to the introduction of the Senior Managers & Certification Regime (SM&CR)
This replaced the approved persons regime for PRA regulated firms from March 2016
It is a requirement of the FCA to introduce this for all other regulated firms

5. Purpose of the SM&CR The regime aims to:
- encourage staff to take personal responsibility for their actions
- improve conduct at all levels
- make sure firms and staff clearly understand and can demonstrate who does what
We were told by FCA the rules for smaller firms would be ‘proportionate’

6. The Proposals
Your firm will need to determine if it has to comply with the ‘core’ or ‘enhanced’ requirements
Proposals for individuals:
Senior Managers
Certified Persons
We need to compare this against the existing approved persons (AP) regime

7. Core or Enhanced? The firm All firms will be Core unless:
A large CASS firm
Assets under management over £50 billion
Annual regulated revenue of £35 million
We will focus on ‘core’ requirements

8. Senior Managers
Each senior manager will be allocated a relevant Senior Management Function:
SMF1 – Chief Executive
SMF3 – Executive Director
SMF9 – Chair (non-executive director)
SMF27 – Partner
Similar to existing controlled functions (CF) for approved persons

9. Senior Managers Senior management roles will also include:
SMF16 – Compliance Oversight
SMF17 – Money Laundering Reporting Officer*
*not applicable to sole traders with no additional advisers

10. Senior Managers Each senior manager will be allocated:
Statement of Responsibilities
Prescribed Responsibilities
Duty of Responsibilities
These will be specific to each of the senior management roles

11. Statement of Responsibilities
Senior Managers
Statement of Responsibilities
This will set out the responsibilities of the individual
If there is a change to an individuals responsibilities it must be sent to the FCA
Will it look like a job description?
FCA to consult on producing a template

12. Prescribed Responsibilities
Senior Managers PR
Description 1
Performance by the firm of its obligations under the Senior Managers Regime – including implementation and oversight 2
Performance of the firm of its obligations under the Certification Regime 3
Performance by the firm of its obligations in respect of notifications and training of the Conduct Rules 4
Responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime 5
Responsibility for the firm’s compliance with CASS (if applicable) 6
Responsibility for ensuring that the firm’s governing body is informed of its legal and regulatory responsibilities 7
Responsibility for an AFM’s value for money assessments, independent director representation and acting in investors’ best interests
Prescribed Responsibilities
There are 7 prescribed responsibilities set out by the FCA
These apply to all senior managers

13. Duty of Responsibilities
Senior Managers
Duty of Responsibilities
To report or to stop breaches from happening
FCA will determine if ‘reasonable steps’ were taken to prevent the breach
It is always the Senior Manager that is ‘accountable’

14. Senior Managers - General
All senior managers need to be approved by FCA
On application a criminal records check must be submitted
Grandfathering for existing senior managers – no approval needed
Awaiting guidance on ARs

15. Pension Transfer Specialist Office managers? Supervisors?
Certified Persons
Applies to individuals who are not senior managers
It is designed for individuals whose job means they can have a big impact on customers or the firm.
This includes:
Investment advisers
Mortgage advisers
Pension Transfer Specialist
Office managers?
Supervisors?
Paraplanners?

16. Certified Persons
The firm approves the individual for the role not the FCA
FCA will not register them!
Removal from the FCA register of investment advisers
Is this in the interests of firms or consumers?

17. SM&CR – General Requirements
First Tier – Individual Conduct Rules 1
You must act with integrity 2
You must act with due care, skill and diligence 3
You must be open and cooperative with the FCA, the PRA and other regulators 4
You must pay due regard to the interests of customers and treat them fairly 5
You must observe proper standards of market conduct
Second Tier – Senior Management Conduct Rules
SC1
You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
SC2
You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
SC3
You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of your responsibilities effectively
SC4
You must disclose appropriately any information of which the FCA or PRA would reasonable expect notice
Fit & Proper assessment of all SMs & CPs annually, inc. Non-Exec Directors
New Code of Conduct principles
Notification to FCA of any disciplinary action
Regulatory references required for all SM&CR roles

18. SM&CR – General Requirements
Regulatory References
There will be a standard template for all firms
Disclosure of information over previous 6 years
Must include any disciplinary action
Review references in light of new action arising

19. SM&CR – Individuals not covered
Human Resources
Receptionists
PA / Secretaries
Data Controllers
Also:
Cleaners
Catering staff
Security guards
Vending Machine Staff

21. SM&CR – What Next FCA policy statement on transition of regimes
Expected implementation late 2018
We will provide a range of templates
SimplyBiz will provide a service to carry out these assessments and prepare annual statements and declarations

22. FCA consults on Pension Transfers

23. Proposed key areas of change
Changing the starting assumption that all transfers will be unsuitable
Replacing the TVAS with an ‘appropriate pension transfer analysis’ (APTA)
Carrying out a pension transfer comparator
Review of the pension transfer specialist arrangements

24. The starting assumption
The current assumption is that all transfers will be unsuitable
Replacing it with a statement that the adviser must prove a transfer is in the client’s best interests
It will be assumed for most, it will be in the client’s best interests to retain safeguarded benefits

25. The starting assumption
Are there any consequences to this?
Change to the definition of advice
Recording a pension scheme in the factfind
Implication of retaining the existing scheme?
Will the definition of pension advice need changing

26. Appropriate Pension Transfer Analysis
This will be replacing the current transfer value analysis (TVAS)
The APTA will include:
an assessment of the client’s outgoings
the role of the ceding and receiving scheme in meeting those income needs
obtaining an understanding of the client’s potential cashflows
consideration to death benefits on a fair basis
Cashflow forecasts will be required for all cases

27. Pension Transfer Specialists
Currently a PTS does not need to be a qualified financial adviser
No requirement for a PTS to be appointed within a firm, as the role can be outsourced
A change will confirm the PTS must sign off the case as suitable
BUT - The responsibility for the advice will always remain with the firm advising the client

28. Suitability of pension transfer advice
Since October 2015 the FCA have reviewed a total of 88 DB transfers where the recommendation was to transfer The results – • 47% were suitable • 36% were unclear • 17% were unsuitable

29. FCA High level findings
Insufficient information about clients’ needs and personal circumstances
Failing to consider the needs of the client alongside their objectives
Inadequate assessment of risk the client is willing and able to take
Introducer relationships and the lack of information sharing
Lack of resource due to increase in demand

30. What next
Generally consistent with the guidance SimplyBiz have produced in this area
Some ‘tweaks’ made to our suitability reports
Final rules due early 2018
Full guidance at that time by Policy and Pensions Technical

31. FAMR

32. FAMR: Insistent clients
FCA published a consultation paper to formalise rules on dealing with insistent clients
The rules will be based on what was originally guidance in Factsheet 035 in relation to pension reforms
These rules will apply to any kind of business not just pensions transfers

33. Insistent clients
An individual who has received a personal recommendation and chooses to do something other than follow the adviser’s personal recommendation.
The file should evidence:
The recommended outcome and the reasons for it
The risks of the alternative course of action and why this is not recommended
A clear distinction between the advice that is being acted against and any subsequent advice
Through distinct suitability reports

34. Insistent clients
Is there still any uncertainties?
A range of scenarios
Client best interest rules
Liaising with the Ombudsman to seek their views

35. Finalised Guidance Firms providing streamlined advice models
Factfind porting

36. Streamlined advice
This includes both automated and face-to-face advice
The guidance expects that many of these services will be automated
Examples of the information required is given in various advice scenarios
If your firm offers an automated advice service we strongly recommend you read this paper
A term used to describe focused and simplified advice that provides a personal recommendation that is limited to one or more specific needs

37. Automated advice Automated advice is ‘advice’
It carries the same responsibility and liabilities as face to face advice
It is important the nature of the service is accurately reflected

38. Fact Finds
The paper discusses the potential for fact finds to be both;
Portable
Completed by the client(s)
And for firms to rely on the information, provided:
The firm is, or ought to be aware, of the information being out of date

39. Fact Finds
The key regulatory purpose is to reduce cost MiFID II requires suitability reviews to be carried out at least annually Sending the fact find to the client to update, could streamline the review process Firms can rely on confirmation from client(s) and completion of a further risk questionnaire

40. General Data Protection Regulation GDPR

41. What is the General Data Protection Regulation (GDPR)?
Harmonised law across EU Member States
Becomes enforceable on 25 May 2018
Now is the time to start preparing

42. Changes from current DPA
Same basic principles as current DP law, but strengthened
Accountability
New rights for individuals, and strengthening of existing rights
Breach reporting
Data Protection Impact Assessments
Higher penalties for non-compliance
Greater emphasis on documentation held by data controllers

43. What are we doing? Adviser Today Autumn 2017 Email 12 October 2017
Guide to GDPR coming soon…
Training – step one of ICO advice
Info from ICO:
ICO page has full details of 12 steps, plus an online checklist to see how you’re preparation is going

44. Looking Ahead
Overview of the General Data Protection Regulation (GDPR)
Update on FSCS review
How MiFID II has been implemented

45. Learning Objectives
Understand the proposals for senior managers and certified persons, and how this affects your firm
Gain an understanding to the proposed changes to the pension transfer rules
Understand the continuing changes delivered through the Financial Advice Market Review and how this impacts services provided by firms