Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Context

The FCA has published multi-firm review report of Payment firms’ implementation of Consumer Duty, having asked 23 Payment firms in January 2024 how they had implemented the Consumer Duty’s requirements.  Although not a sector relevant to our client base, the messages contained within the review report can be applied to all sectors, with examples of good / better practice and areas for improvement under a number of headings.

Key points to note and next actions

• Of the 23 firms, just over half were rated as satisfactory, and the FCA did not view them as presenting a risk of significant poor consumer outcomes (although some minor actions may still have been needed).  However, just under half of the firms in the review had only partially implemented the Duty and required significant work to comply with it. 
• The ‘satisfactory’ firms tended to have clearly articulated, customer-centric purposes and understood what good outcomes and foreseeable harms looked like for their customers. They tended to have strong governance and control frameworks which they used to scrutinise and challenge the firm’s implementation of the Duty and deliver any enhancements required.
• These firms tended to have a systematic implementation approach, starting with clearly identifying the target market for their products and services and what good outcomes looked like for products and services, price and value, consumer understanding and consumer support.  They had a clear governance structure to monitor delivery of good consumer outcomes and to take action to address shortfalls in a timely manner. This included:
  • regular summary management information (MI) aligned to each of the 4 outcomes reported to their Boards;
  • MI which included Red, Amber and Green (RAG) rated measures with conclusions drawn from the data; and
  • conclusions which clearly identified any shortfalls, the mitigating actions required and who was responsible for delivering these actions.
• The report sets out findings under seven main headings:
  • Products and services: establishing the target market
  • Products and services: agent oversight
  • Fair value assessments
  • Consumer understanding
  • Consumer support
  • Governance
  • Management Information

Context

Although not directly relevant to the financial services sectors we support, the FCA has included some guidance on its expectations in relation to firm consolidations in a Portfolio Letter.  The FCA has noted an increase in the acquisition of firms or their assets over the last 2 years.  While industry consolidation can provide benefits, various types of harm can occur where this is not done in a prudent manner with effective controls to promote good outcomes.

Key points to note and next actions

The FCA expects firms to:

• Notify it and get its approval to acquire or increase control in a firm it regulates.
• Ensure that the delivery of good outcomes is central to firms’ culture.  Leadership, governance, oversight arrangements and controls should be effective, adequately resourced, and commensurate with a firm’s growing size and complexity.
• Undertake adequate due diligence of the selling firm or client bank.
• Hold adequate financial resources at all times. Where acquisitions are funded by debt, firms should have a credible plan to service the debt. This should be supported by realistic and stress-tested financial projections.

Where the FCA receives notifications from individuals or firms to acquire or increase control in regulated firms, it will assess and challenge their suitability and the financial soundness of the acquisition.

Where acquisitions complete without prior regulatory approval, the FCA may use its enforcement powers to object to the transaction or initiate criminal proceedings.

Context

The FCA has published an infographic (an extract from the Consultation Paper CP24.19) to demonstrate which current elements of the existing consumer credit returns (CCRs) will be partially or completely replaced for differing groups of activities / Permissions.  It has also updated its consumer credit reporting web page to reflect the current position of the Consultation.

Key points to note and next actions

For threshold and fees data purposes, the existing returns will not be switched off and replaced entirely until the completion of all stages of the FCA’s work to improve consumer credit reporting.  The duplication or overlap between the returns is created as a result of moving away from the existing form structure to an activity specific return structure as well as reviewing the range of activities in two separate returns. This is an interim proposal and will be removed when the remaining credit related activities are reviewed as shown in the infographic published.

Context

The FCA has published Handbook Notice 122, in which it has confirmed updates to the Dispute Resolution Sourcebook (DISP) in relation to the pause on the requirement for firms to provide a final response to Discretionary Commission Arrangement (DCA) complaints, and SUP 11 in relation to the prudential assessment of acquisitions and increases in control.

Key points to note and next actions

• The amendment to DISP is straightforward, covering the extension of the ‘pause’ (to December 2025) in dealing with DCA complaints, which we have covered in earlier Regulation Updates.
• Chapter 11 of the Supervision Manual (SUP 11) sets out rules and guidance for controllers and close links. It also refers to the EU guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (3L3 Guidelines).
• The amends to SUP 11.3 and SUP 11 Annex 6G refer readers to the final non-Handbook guidance in relation to the prudential assessment of acquisitions and increases in control, and removes duplicative text in relation to guidance on the aggregation of shares / voting power and acting in concert.
• The FCA is replacing the 3L3 Guidelines with non-Handbook guidance on the prudential assessment of acquisitions and increases in control (Change in Control Guidelines), and intends to issue final non-Handbook guidance in Q4 2024.
• The FCA is aiming to provide clarity on the factors it would consider when applying the assessment criteria and deciding when a proposed acquirer is suitable to control and / or direct a UK authorised firm.  The changes will make the FCA Handbook requirements clearer and more transparent to persons proposing to acquire or increase control over a UK authorised firm.

Context

The ICO has today launched a new audit framework designed to help organisations assess their own compliance with key requirements under data protection law.  The framework will empower organisations to identify necessary steps to improve their data protection practices and create a culture of compliance.

Key points to note and next actions

The audit framework provides firms with a starting point to evaluate how they handle and protect personal information.  Whether for senior management, data protection officers, compliance auditors or those responsible for records management or cybersecurity, the framework offers practical tools for building and maintaining strong privacy management.  The framework is an extension of the ICO’s existing Accountability Framework, and it has nine toolkits covering the following key areas:

• Accountability
• Records management
• Information & cyber security
• Training and awareness
• Data sharing
• Requests for data
• Personal data breach management
• Artificial intelligence
• Age-appropriate design 

Each toolkit has a downloadable data protection audit tracker that will help organisations conduct their own assessment of compliance, tracking actions that must be taken in areas needing improvement. 

Context

The ICO has announced that it has fined two companies for making unlawful marketing calls to individuals registered with the Telephone Preference Service (TPS).  WerepairUK Ltd, based in Tonbridge has been fined £80,000 for making 42,688 unsolicited calls. It has appealed the ICO decision.  Service Box Group Limited, based in Hove, East Sussex, has been fined £40,000 for 5,361 calls.

Key points to note and next actions

These calls were made to people who had explicitly opted out of receiving marketing communications, violating their privacy and in some cases causing significant distress. There is clear evidence that, in both cases, older people and those living with illnesses such as dementia were targeted.  Some individuals were subjected to repeated phone calls, attempting to pressure them into buying warranties for white goods, such as fridges and washing machines, that they did not need.

Context

Lloyd’s has published its Q3 2024 Market Bulletin Y5446 to provide Managing Agents at Lloyd’s with information required for the completion of the Q3 2024 QMA, QMB and Pillar 3 returns including the list of major losses to be reported, suggested exchange rates and confirmation of the instructions.

Key points to note and next actions

This bulletin provides:

1. the list of major losses to be reported in QMA800u (in Appendix 1);
2. suggested exchange rates (in Appendix 2);
3. other information relevant to the completion of the Q3 2024 Quarterly Monitoring Return; and
4. contact details.

Context

The LMA and the IUA have launched two online claims job simulations to improve visibility of career opportunities in claims.

Key points to note and next actions

The online simulations aim to provide students with an immersive, hands-on learning experience.  The initiative, formed through the 2023 LMA Claims Strategy, is informed by findings in the LMA’s 2023 Heads of Claims Talent Survey, which identified an urgent need to attract candidates into the early claims talent pipeline.

• The two simulations have been developed together with Forage, a platform with a global reach of over six million enrolments and collaborations with universities and charitable organisations.
• The platform enables students to experience work on the job, practice their skills and build confidence to source a career.
• In addition, the simulations connect to the London Market Group’s (LMG) London Insurance Life platform, giving access to career guides and job opportunities in specialty insurance.