Regulation Matters Brochure January 2019

January 2019

Regulation Matters Welcome to this edition of Regulation Matters covering regulatory updates which impact financial advisers. If you have any questions about any of the subject matters and would like further information on the additional service available to support directly authorised firms, please contact 0800 085 0825 .

IN THIS ISSUE

Who is it relevant to? Summary

Action recommended / for your information?

Subject

HANDBOOK NOTICE 60

All Firms

Impacts the renewal of professional indemnity insurance from June 2019

Engage at an early stage with your insurers

SM&CR

All Firms

Plans to support you implement this next regulatory change

Review relevant FCA policy statements and guidance

FG18/5

All Firms

FCA Guidance on AML has been updated

Review and update your AML practices and controls

PENSIONS COLD CALLING BAN

All Investment Firms

Cold calling ban introduced from 9th January

Good news to share with clients

REMINDER OF KEY REGULATORY MATTERS

All Firms

A reminder of key regulatory matters and recommended actions

For your information

REGULATORY MATTERS ON THE HORIZON

All Firms

Overview of FCA planned activity For your information

Regulation Matters is produced by TenetSelect as guidance only and is based on their interpretation, it is not and should not be relied upon as professional or legal advice. TenetSelect does not accept any liability for any losses arising directly or indirectly in connection with any of the information contained within Regulations Matters to the extent it can be excluded by law.

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Handbook Notice 60

AT A GLANCE As a result of changes made in this Handbook Notice, you will need to review the provisions within your professional indemnity insurance (PII) to ensure the requirements are met from renewals due after 1st June 2019. Other changes remind firms of the change of approach regarding regular premium PPI complaints.

Want to know more? CLICK HERE (or turn to page 5) for a more detailed summary, including recommended actions.

Senior Managers and Certification Regime (SM&CR) AT A GLANCE We will shortly publish our guide to SM&CR that should help firms gain an appreciation of the impact and the material available from the FCA, to help them understand the process and the requirements. If you would like access to this guide, please contact 0800 085 0825 for further information on the additional services available to directly authorised firms. The deadline for the first phase of implementation is 9th December 2019, however we recommend you gain an early appreciation of the requirements and start to build your project plan.

Want to know more? CLICK HERE (or turn to page 6) for a more detailed summary, including recommended actions.

DO YOU NEED FURTHER HELP OR SUPPORT? If you have concerns about being compliant, get in touch with TenetSelect, the directly authorised regulatory experts, by calling 0800 085 0825. We have a wide range of services to help your firm, and we would love to have a chat to tell you more. Regulation Matters is produced by TenetSelect as guidance only and is based on their interpretation, it is not and should not be relied upon as professional or legal advice. TenetSelect does not accept any liability for any losses arising directly or indirectly in connection with any of the information contained within Regulations Matters to the extent it can be excluded by law.

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FG18/5: Finalised Guidance on financial crime systems and controls: insider dealing and market manipulation AT A GLANCE On 13th December 2018, the FCA published finalised guidance on financial crime systems and controls: insider dealing and market manipulation (FG18/5). This updates the FCA guidance on financial crime (FC) with an additional chapter on insider dealing and market manipulation (likely to be applicable to MiFID firms only) and a number of minor amendments to other parts of FC to reflect recent regulatory changes and ensure it remains up to date. Among other things: • FC Part 1: A firm’s guide to preventing financial crime, is renamed as the ‘Financial Crime Guide: A firm’s guide to countering financial crime risks’ (FCG). • FC Part 2: Financial crime thematic reviews, is renamed as the ‘Financial Crime Thematic Reviews’ (FCTR). The FCA Handbook website reflects the updated FCG and FCTR. We would particularly recommend firms review their practice about ongoing updates of ‘Know Your Client’ information and how and when they check clients are not sanctioned individuals or are subject to the rules on politically exposed persons.

Want to know more? CLICK HERE (or turn to page 7) for a more detailed summary.

Pension Cold Calling Ban

AT A GLANCE Steps to protect consumers from scams took a step forward when HM Treasury brought about a cold calling ban on pensions with immediate effect from 9th January 2019. No consumer should receive any unsolicited calls about their pension (except where there is an existing relationship with the caller e.g. their pension provider or their adviser).

Want to know more? CLICK HERE (or turn to page 9) for a more detailed summary.

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Reminder of key regulatory matters Below is a useful reminder of key regulatory matters affecting financial adviser firms, including actions recommended in last month’s issue of Regulation Matters.

Subject

Recommended Action

PROD

Ensure you know who is responsible for product governance in your firm and that your advisers know the target market for the products you recommend/distribute. If you would like access to a guide outlining a firms obligations under the FCA’s product oversight and governance rules, along with recommended actions, please contact 0800 085 0825 for further information on the additional services available to directly authorised firms.

FOS Published Ombudsman News no 146

Review the case examples and consider your existing systems and controls.

Regulatory Matters on the Horizon

It is an ever-changing market with a constant stream of new and updated regulation for financial advisers to worry about. We have provided a brief overview of the FCA’s planned activity as we currently understand it, but please be aware that the FCA does sometimes change the timing. Rest assured, as part of our service we will keep you informed and provide guidance to help you remain compliant.

Subject

Publication Type

Expected Date

Intended Audience

Guidance on SM&CR for solo- regulated firms Regulatory fees and levies Regulatory fees and levies General insurance value measures reporting Investment Platforms Market Study remedies Impact of FCA regulation on small firms

Finalised guidance based on GC18/4

Winter 2018/19 – consultation closed 10/12/2018

All FCA solo-regulated firms.

Policy proposals for 2019/20 - PS to CP18/34 Rates proposals 2019/20 Consultation Paper

March 2019

Firms that pay the illegal money lending levy and single financial guidance body levy.

April 2019

All firms

Q1 2019

Insurers, intermediaries and other firms involved in the insurance

market, and trade bodies representing these firms.

Consultation and discussion on (to be published alongside the Market Study Final Report)

March 2019

Platform service providers, other firms that distribute retail investment products, fund managers.

The FCA is carrying out a survey of smaller firms on how FCA regulation specifically impacts them to inform FCA cost benefit analyses and judgements of proportionality. The independent consultancy, Kantar Public, has been engaged by the FCA to conduct in-depth interviews with a small representative sample of firms over the next month. These interviews will inform the design of an online questionnaire which will be sent to a larger sample of firms in April and May. As with the wider FCA and Practitioner Panel Survey, Kantar will fully anonymise all results.

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FCA Handbook Notice 60 As a result of changes made in this Handbook Notice, you will need to review the provisions within your professional indemnity insurance (PII) to ensure the requirements are met from renewals due after 1st June 2019. Other changes remind firms of the change of approach regarding regular premium PPI complaints. The Handbook Notice changes the following parts of the FCA Handbook: n Appendix 3 of the Dispute sourcebook (DISP App 3) to resolve uncertainty about whether firms should consider the non-disclosure of commission at the point of sale and subsequent “recurring non-disclosure” (RND) when assessing regular premium payment protection insurance (PPI) complaints. It came into force on 8th November 2018. n Chapter 13 of the FCA’s Interim Prudential sourcebook for investment businesses (IPRU (INV) 13) and the table in IRU (INV) 13, TP 1. The changes require personal investment firms (PIFs) to have professional indemnity insurance (PII) policies that do not limit cover where the policyholder or a third party is insolvent, or where a person other than the PIF (such as, the Financial Services Compensation Scheme (FSCS)) makes a claim on the policy. The instrument comes into force on 1st June 2019, for PII policies affected or renewed from that date.

The FCA consulted on the proposals in its third consultation paper on its review of the funding of the FSCS (CP18/11). Feedback is set out in chapter 3 of Handbook Notice 60. The FCA notes concerns expressed about the consequences of increased costs for firms and reduced availability of PII, but believes that as most existing PII policies do not contain relevant exclusions, premiums are unlikely to increase significantly. The FCA will work with the FSCS to monitor compliance and the effectiveness of the intervention. WHAT SHOULD FIRMS DO NOW? You need to engage with your PII provider to verify that your policy is not exposed to the insolvency limitations described. This may mean you need to consider re-broking your PII cover.

CLICK HERE to return to page 2.

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Senior Managers and Certification Regime (SM&CR) Firms need to comply with key elements of the SM&CR regime by 9th December 2019. We are publishing a guide aimed at core and limited scope firms as our client research indicated that this reflected the regimes that directly authorised firms would be subject to. We will remain engaged with trade bodies, specialist forums and the FCA as further information and guidance for firms becomes available and we will consider whether or not further developments will be best communicated via an update to the guide or a standalone communication. It is important that you understand the requirements and are prepared for their implementation that will require some planning, which we recommend you start to do now. Our guide will be available to download shortly and should be used to support your understanding of the FCA papers and requirements. We have included a suggested template for certification purposes as there are requirements in the source documents which these will have to meet but you will have ‘design freedom’ to align to your own house style in terms of colour, logos, font etc. WHAT SHOULD FIRMS DO NOW? If you would like access to this guide, please contact 0800 085 0825 for further information on the additional services available to directly authorised firms. You should then set some time aside to plan what steps you need to take next and who in your firm is going to be best placed to lead on this. We would suggest this should sit at principal level as there will be some decisions that will need to be taken by the firm’s senior managers.

CLICK HERE to return to page 2.

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FG18/5: Finalised Guidance on financial crime systems and controls: insider dealing and market manipulation

The Financial Crime Guide for firms consolidates the FCA’s guidance on financial crime and aims to enhance firms’ understanding of the regulator’s expectations of systems and controls in this area. The guide gives practical help and information (including very useful examples of good and poor practice) to firms of all sizes on actions they can take to counter the risk that they might be used to further financial crime. The FCA keeps the guide under periodic review to make sure that it accurately reflects their findings and covers emerging risks and concerns. It is designed to help firms adopt a more effective, risk-based and outcomes-focused approach to mitigating financial crime risk. This version incorporates a number of minor changes to the guidance, although the most significant is the introduction of new guidance on insider dealing which is likely to be of interest to only a limited number of firms. Among other things: n FC Part 1: ‘A firm’s guide to preventing financial crime’ is renamed as the ‘Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG)’. n FC Part 2: ‘Financial crime thematic reviews’ is renamed as the ‘Financial Crime Thematic Reviews’ (FCTR).

Senior management should take clear responsibility for managing financial crime risks and be actively engaged in addressing these risks. Your firm should: n Have a thorough understanding of its financial crime risks in order to apply proportionate systems and controls n Have an organisational structure that promotes coordination and information sharing across the business n Have appropriate, up-to-date policies and procedures in place that can be easily accessed and understood by all staff n Employ staff who have the skills and expertise to do their jobs effectively n Review employees’ competence and take appropriate action to ensure they remain competent for their role n Manage the risk of staff being rewarded for taking unacceptable financial crime risks and n Be able to provide evidence to demonstrate that it has adequate systems and controls to prevent the risk that the firm might be used to further financial crime

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FG18/5: Finalised Guidance on financial crime systems and controls: insider dealing and market manipulation (cont.)

WHAT SHOULD FIRMS DO NOW? Some firms will be subject to the new CRIM- REP Gabriel reporting requirement but most directly authorised firms will fall under the exemptions described in SUP16.23.2. However, the prevention of financial crime is a key focus of the FCA and even where you are not subject to the reporting requirement, the prevention of financial crime (i.e. money laundering, terrorist financing, fraud or dishonesty, handling the proceeds of crime and market misconduct) will be an area of accountability under the SM&CR. You should therefore: n Download the FCA guidance and latest JMLSG guidance n Review the systems and controls in the business to prevent exposure to financial crime n Review the financial crime training material you use within your business n Review the capability of any systems used for electronic verification of identity; and n Satisfy yourself that you have proportionate risk based systems to monitor existing client relationships and reflect this in your annual MLRO report (where this is a requirement) or self assessment. You may wish to consider the Money Laundering Officer’s Practical Handbook as an additional resource for your firm https://www.ctp.co.uk/ product/mlro-handbook/. We have a team of highly experienced Regulatory Consultants on hand to complete audits of your systems and control. If you feel you need support in this area please contact 0800 085 0825 for further information on the additional services available to directly authorised firms.

Your firm’s efforts to combat financial crime should also be subject to challenge. Senior management should ensure that policies and procedures are appropriate and are followed, e.g. having robust audit and compliance processes that routinely test the firm’s defences against specific financial crime threats. The FCA Handbook website reflects the updated FCG and FCTR. n https://www.fca.org.uk/publication/finalised- guidance/fg18-05.pdf n https://www.handbook.fca.org.uk/handbook/FCG/ n https://www.handbook.fca.org.uk/handbook/FCTR/ n http://www.jmlsg.org.uk/ We would particularly recommend firms review their practice with regard to ongoing updates of ‘Know Your Client’ information and how and when they check clients are not sanctioned individuals, or are subject to the rules on politically exposed persons, as this status can change from the point the business relationship started.

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Pension Cold Calling Ban

Companies that make unwanted, unsolicited phone calls to people about their pensions may face enforcement action, including fines of up to half a million pounds, from 9th January 2019. Pension fraud can be devastating, leaving victims without the means to fund their retirement. One of the most common methods used by scammers to commit pension fraud is through cold calls, which is why the Government has taken action. The ban prohibits cold calling in relation to pensions, except where: n the caller is authorised by the FCA, or is the trustee or manager of an occupational or personal pension scheme; and n the recipient of the call consents to calls, or has an existing relationship with the caller Anyone looking for help on their pensions can visit Pension Wise, a free and impartial service that helps you understand the options for your pension pot. As of 1st January 2019, Pension Wise is delivered by the new single financial guidance body (which will be named later in 2019). Full detail of the announcement is available on the Government website:- https://www.gov.uk/government/news/ pensions-cold-calling-banned

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A range of services to add value to your firm At TenetSelect, we provide a wide range of services and expertise to help directly authorised firms meet their compliance requirements and grow their business. If you have a particular compliance concern or any of our services are of interest, please get in touch by calling 0800 085 0825.

COMPLIANCE SUPPORT SOLUTIONS File checking service n Full range of product areas covered, including pension transfers Themed audit n Systems & controls, Training & Competence, disclosure & ongoing servicing, Centralised Investment Proposition Fully outsourced T&C implementation n One-to-one visits, file reviews, observations/role plays Compliance helpdesk for ongoing queries n Access to our regulatory experts as and when you need support Financial promotions and stationery approval n Assessment of your marketing and stationery to help ensure it meets the FCA’s requirements On-site attendance for FCA visit n A regulatory expert on hand to reduce potential risk Comprehensive compliance guidance manual n Manual which you can adopt for your firm Compliance, systems & controls template documentation n Wide range of documentation available via the Extranet Full suite of regulatory registers n Designed to capture a variety of management information and highlight potential risks Regulatory guidance bulletins n Ongoing updates and guidance to help you remain compliant RMAR submission software and report completion n Software to help you do it or outsource it to us Complaint handling service n Outsource the handling of client complaints

RESEARCH, TECHNICAL & SPECIALIST INVESTMENT SUPPORT Research & technical support n The Tenet panel, technical guidance, including access to a helpdesk Investment solutions n Tenet’s active Model Portfolios powered by Morningstar Specialist investment support n Review of EIS/BPR/Tax Planning Schemes and the client profile n Feedback on general suitability of the client and the legitimacy of the scheme

BUSINESS SUPPORT SOLUTIONS Paraplanning

n Full paraplanning service including data gathering research, analysis and client report Advanced Diploma (AF) exam days

n 1 day revision programme New adviser recruitment

n Our recruitment service will find the right adviser for your business Exclusive software discounts n Range of discounts to save you money e.g. software CPD events n Invite to our events where you have everything you need for your CPD Marketing support n Utilise our range of compliant marketing support Protection panels & mortgage club

n Access to leading terms via our panels Account management

n Access to a dedicated account manager to help you make the most of our service

WANT TO KNOW MORE? To find out how your firm could benefit from the many services available or for details of packages and costs, please call 0800 085 0825 . Regulation Matters is produced by TenetSelect as guidance only and is based on their interpretation, it is not and should not be relied upon as professional or legal advice. TenetSelect does not accept any liability for any losses arising directly or indirectly in connection with any of the information contained within Regulations Matters to the extent it can be excluded by law.

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