RegulationMay 29 2015

New rules, old scores, the Queen speaks: The week in news

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New rules, old scores, the Queen speaks: The week in news

This week’s news was again dominated by regulatory action, with the Financial Conduct Authority’s belated proposals on adviser capital requirements, even more belated enforcement action with the Keydata case, and implementation of European rules all garnering multiple stories.

This all almost overshadowed the re-opening of parliament, with all the attendant pomp and circumstance that comes from the Queen sticking her hat on and performing as the prime minister’s puppet, running through the proposed legislative agenda.

So here are the five key themes from the last five days:

1. Long awaited proposals surprisingly ‘sensible’.

After waiting several years and fearing the worst, the industry was pleasantly surprised by the proposed calculation for personal investment firms’ capital requirements.

Most firms will need to hold the greater of £20,000 or 5 per cent of their investment business income, although firms acting as principal or holding client money could have to hold 10 per cent of income.

As per usual, FTAdviser pored through the paper for pertinent points, unearthing the fact that the Financial Services Compensation Scheme’s funding model will be formally reviewed by the regulator by the end of 2016, in a move designed to limit the burden of industry claims.

2. Keydata trio fined - but Tribunal awaits.

Another long-awaited FCA publication came through earlier this week, in the form of the regulator’s suggested bans and fines for the trio of senior figures blamed for Keydata’s demise.

The FCA cited “reckless” actions when handing down almost £80m worth of fines - the majority being levelled at founder Stewart Ford in what would be a record individual penalty - and also complained it was “deliberately misled” by the firm.

The case will be decided at the Upper Tribunal, as all three have contested the decision notices. Mr Ford soon claimed that he will be “glad to see the FCA in court” and will launch a claim against the regulator and auditor PricewaterhouseCoopers for damages worth £650m.

“I am glad it has now come to this stage... once the spotlight is on the FCA, it will find itself wanting,” he stated.

3. Industry debates EU rule implementation.

Amid chatter about a referendum on EU membership that is now officially pending, several industry stakeholders got on their soapboxes this week to support or disparage the FCA transposing various parts of the European Markets in Financial Instruments Directive to UK law.

First up was the Wealth Management Association, which called for the existing “failed” definition of independent advice to be scrapped, so providing “an opportunity to address some of the anomalies arising under the current RDR regime”.

This was then backed by the Association of Professional Financial Advisers, whose director general Chris Hannant also came out in support of Mifid II’s standard “as it better reflects the guidance the FCA has issued and the standard it seems to expect”.

However, the adviser trade association was more concerned with the potentially onerous EU rules requiring advisers to record all calls relating to actual or proposed client transactions, giving the FCA an ultimatum to choose between ‘gold plating’ the directive “or pursuing... common sense”.

Finally, it was provider versus campaigner over the issue of whether to include pension products alongside general investment in the new rules.

Aegon unsurprisingly did not want insurance-based investments like self-invested personal pensions to be included, while the True and Fair Campaign sensed an opportunity to implement consistency between them and regular investments to enable savers to make like-for-like comparisons.

4. Queen’s speech signals route of road ahead.

It only lasted eight minutes, but still got the nation talking (insert ‘sex tape’ joke here). Crucially though, the ceremonial presentation was accompanied by a 103-page briefing pack outlining the policy agenda for the newly-elected majority Conservative government.

Much was already anticipated - like the contents of the Housing Bill - but there were still some interesting tidbits to nibble on before the politics starts in earnest.

There will be more austerity - including a £23,000 welfare cap and restriction in jobseekers allowance to under-21s; more powers for the rampant SNP in Scotland, and a kicking for Labour whilst they’re down in the form of change to the political funding opt-in rules for union members.

5. West Brom saga rumbles on.

FTAdviser’s sister title Financial Adviser had two scoops this week on the long-running battle between the West Bromwich Mortgage Company and a group of customers claiming their rate was unfairly increased on buy-to-let tracker mortgages.

Firstly, a search of the Financial Ombudsman Service’s database revealed that for the year up until 26 May alone, more than 80 complaints had been made against the subsidiary of West Bromwich Building Society.

In these cases, complainants alleged the lender had unfairly increased the interest rate by changing the differential; however all were rejected by Fos.

Secondly, the complainant group’s founder revealed that the case could be taken to the Court of Appeal, following its recent rejection in the High Court.

peter.walker@ft.com