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Regulation Matters brochure February 2019

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Regulation Matters brochure February 2019

February 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

OCCASIONAL PAPER 47 Firms using social media

An FCA think piece covering the growth of social media usage by financial services firms Key areas likely to be included in a FCA visit focusing on Financial Crime systems and controls

Review use of social media in your firm and any changes to your policy and practice. Carry out your self- assessment, looking at these areas.

PREPARING FOR AN AML AUDIT

All firms

MIFID II, PENSIONS AND CP19/5

Investment firms

The current position on pensions and future developments

Respond to CP19/5

POLICY STATEMENT 19/1 – RETIREMENT OUTCOMES REVIEW: FEEDBACK ON CP18/17

Investment firms

Policy changes principally impacting product providers and will influence the information they provide to consumers

For your information but you should familiarise yourselves with the new illustrations and statements from providers

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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Occasional Paper 47

AT A GLANCE The FCA has issued a paper which reflects its thinking about the use of social media to facilitate advertising by financial services firms. Firms should examine their existing practice in the light of the paper, particularly where character restricted platforms may inhibit the provision of adequate risk warnings.

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

Preparing for an AML Audit AT A GLANCE Anti-money laundering and counter-terrorist financing represents a key area of interest for the FCA. Whilst banks and other institutions represent potentially the highest risk, intermediaries are subject to the same regime but may not have the dedicated AML support approach. Our article provides some likely hot topics where and FCA visit may focus and may stimulate you to review your existing processes in this area, and in particular to recognise the EU’s blacklist of countries with deficient AML/ CTF regimes. Want to know more? CLICK HERE (or turn to page 7) for a more detailed summary, including recommended actions. functions to help them implement a risk based

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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MiFID II, Pensions and CP19/5

AT A GLANCE

Updated guidance on personal pension arrangements and the impact of ex-post cost and charges disclosures under MiFID II.

Want to know more? CLICK HERE (or turn to page 8) for a more detailed summary, including recommended actions.

Policy Statement 19/1 – Retirement Outcomes Review: Feedback on CP18/17 AT A GLANCE The FCA has published a policy statement setting out feedback to its consultation paper on changes to its rules and guidance to address harms identified in its retirement outcomes review (RoR), together with its final rules and guidance (PS19/1). The FCA confirms that it is proceeding largely on the basis on which it consulted, with some refinements in places to reflect feedback received and recent developments.

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

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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 (issue 138).

Subject

Recommended Action

Handbook Notice 60

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. • Download the FCA guidance and latest JMLSG guidance • Review the systems and controls • Review the financial crime training material you use • Review the capability of any systems used for electronic verification of identity; and • Satisfy yourself that you have proportionate risk based systems to monitor existing client relationships and reflect this in your annual MLRO report or self-assessment.

FG18/5: Finalised Guidance on financial crime systems and controls

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Regulatory Matters on the Horizon

It’s 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 Mortgage Market Study - Final Report 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

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.

Market study

Q1 2019

Lenders, sourcing and other software providers, and intermediaries.

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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Occasional Paper 47 In 2015, the FCA published guidance on social media advertising (FG15/4), in which it reminded firms that any form of communication (including character- restricted social media adverts) is capable of being a financial promotion, which means it must contain certain information, including any necessary risk warnings. This makes social medial advertising for financial services firms technically challenging. According to occasional paper 47, consumers are increasingly using social media to research and buy products and so financial services firms are incorporating it into their marketing strategies. However, ‘standalone compliance’ (meaning the requirement that ‘the advert must be balanced, for example including risk warnings, or information about unusual features, alongside positive information about the product’) is a challenge in this context because of character limits, even in the light of recent increases in this by Twitter. The FCA ran a series of behavioural experiments in simulated social media environments that examined the design and timing of risk warnings and other balancing information. The overall conclusion was that, for character- limited social media, standalone compliance reduces consumers’ information search and understanding of risks, ultimately leading to them choosing less suitable products and services. The results also suggested that advertisers and consumers could benefit from experimenting with the design and presentation of risk warnings. The focus was on examining several design features of character- limited risk warnings, together with the effect of standalone compliance (SC) on three key aspects of consumer choice: preference, information search and understanding. The results demonstrate that: n For character-limited social media, ‘standalone compliance’ reduces consumers’ preference rating, search activity (such as shopping around) and understanding of risks, ultimately leading to an increased likelihood of choosing less suitable products. n Products advertised through standalone compliant tweets are less attractive to potential customers. They are then less likely to be clicked on and have their webpages explored relative to non-compliant tweets.

n There is an important role for well-placed risk warnings in educating consumers. More detailed risk warnings on product webpages were found to be most effective at increasing understanding. They were significantly more effective when designed using insights from behavioural science. n The effects of risk warnings can be skewed by otherwise irrelevant presentational choices, such as including the Money Advice Service (MAS) logo, or explicitly referencing that a risk warning is FCA-mandated. The paper notes that the findings on risk warning design emphasises their importance for financial products, but also demonstrates the difficulty in designing appropriate frameworks and maximising their effectiveness. The results suggest that advertisers and consumers could benefit from experimentation on the design and presentation of risk warnings. Future research could identify the properties that maximise the effectiveness of risk warnings on product landing pages, and webpages more generally. The paper concludes that there is potential to incorporate the paper’s findings into policy, but that this must be done ‘with caution and monitoring of any effects’. Occasional paper 47 scratches the surface of a much more fundamental task for firms wanting to think more broadly about the effectiveness of risk warnings and, ultimately, whether their customers understand the key features of the products they buy. We must hope that this work ultimately leads to more innovative ways in which firms engage with their clients. WHAT SHOULD FIRMS DO NOW? It would be worth considering how/if you use social media to promote your firm and or its products and services. The Occasional Paper does not change any rules but it is a clear indicator of an area of regulatory interest and attention. At TenetSelect we have a team of compliance specialists who can support in the assessment of your financial promotions. If you would like to access this service please give us a call on 0800 085 0825 for further information on the additional services available to directly authorised firms.

CLICK HERE to return to page 2.

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Preparing for an AML Audit Whilst it is not common for small firms to receive a visit from the regulator, they will request >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10

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