Compliance & Regulation in 2012 Evelyn Hanrahan Managing Director

Transcription

1 Compliance & Regulation in 2012 Evelyn Hanrahan Managing Director Financial Services Compliance & Training Ltd 1

2 What I will cover today.. The New Central Bank of Ireland The Structure of Enforcement in 2012 The New Structure of Regulation 2012 Consumer Protection Code Fitness & Probity Standard Minimum Competency Code Financial Services Compliance & Training Ltd 2

3 Central Bank Core Message. The establishment of a framework of assertive risk-based regulation underpinned by the credible threat of enforcement. Matthew Elderfield, Head of Financial Regulation, Central Bank of Ireland March 2010 Financial Services Compliance & Training Ltd 3

4 The New Look of Enforcement The Enforcement Directorate and Strategy Financial Services Compliance & Training Ltd 4

5 Enforcement Directorate Obviously. Enforcement plays a fundamentally important role in achieving a regulatory regime that is credible. To this end the Enforcement Directorate has been established. Peter Oakes, Director Enforcement. Dec 2010 Financial Services Compliance & Training Ltd 5

6 Enforcement Strategy December 2010: The newly established Enforcement Directorate s sets out its Enforcement strategy for December 2011: Probability Risk & Impact SysteM. (PRISM) A system which assesses the risk posed by a firm to the financial stability of the market and the consumer Financial Services Compliance & Training Ltd 6

7 PRISM High Impact Firms with the ability to have the greatest impact on the financial stability AND the consumer will receive high level supervision. (High 20, Med High 70 Med Low 450) Low Impact Firms with the lowest potential adverse impact will be supervised reactively and/or thematically. (Low 10,300, of this Intermediaries make up 2,300 approx) Financial Services Compliance & Training Ltd 7

8 Intermediaries PRISM rating Intermediaries: Defined as Low Impact Supervision; the objective is to have the capacity to get automatic alerts to dedicated teams when a low impact firm fails a key financial health check. Annual on line return alerts: Number of Customers Number of Customer facing advisors Turnover Financial Services Compliance & Training Ltd 8

9 Supervision of Intermediaries Reactive supervision will be paired with strong enforcement. Reactive: where action is needed as a result of serious concerns which arise from Supervisory work and other sources, the teams are in place to meet this requirement Financial Services Compliance & Training Ltd 9

10 Intermediaries Enforcement will be swift and effective and will serve as a deterrent to others in the industry sector Thematic Inspections will focus on Treating the Customer Fairly. The Enforcement team has significantly increased resources to reflect this new approach. Financial Services Compliance & Training Ltd 10

11 Intermediary News Letter COMING TO A TOWN NEAR YOU. In the coming weeks the Retail Intermediaries Team will be conducting regional events where you will have the opportunity to speak with us in person, and we will seek to answer any queries that you may have. We look forward to seeing you on: 21 March, Cork 26 April, Sligo 02 May, Limerick If you wish to register for one of these events, please your name, number of people attending with you and your preferred venue to: brokers@centralbank.ie (Central Bank of Ireland 1 st Feb 2012) Financial Services Compliance & Training Ltd 11

12 Overhaul of the Regulatory Model We need to move beyond the debate on rules versus principles-based regulation, where it s clear a judicious mix of the two is required, rather than swings between the extreme * *Matthew Elderfield, Head of Financial Regulation, Central Bank 11 th March 2010 Financial Services Compliance & Training Ltd 12

13 Regulatory Model now Rules and More Rules: Consumer Protection Code (CPC2) Fitness & Probity Standards Minimum Competency Code Financial Services Compliance & Training Ltd 13

14 New Consumer Protection Code Financial Services Compliance & Training Ltd 14

15 Key Areas of Change: 1 st Jan 2012 Micro Matters: Independent Broker or Intermediary (Macro Matter) Written Procedures Terms of Business Fees & Charges Web Site Financial Services Compliance & Training Ltd 15

16 Key Areas of Change: CPC More Micro Matters Product Producers; (Responsibilities, Appointments & Commissions) Contact with Customers Vulnerable Clients Knowing the Client Statement of Suitability Advertising Financial Services Compliance & Training Ltd 16

17 Mind your language Restrictions on use of Independent and Broker Financial Services Compliance & Training Ltd 17

18 Scope of Advice... Is the Scope of your Advice Limited to the appointments you hold? OR Is the Scope of your Advice through a fair analysis of the market? Financial Services Compliance & Training Ltd 18

19 Definition of Fair Analysis Fair Analysis of the market: "fair analysis of the market" means providing services on the basis of a sufficiently large number of contracts and product producers available on the market to enable the intermediary to make a recommendation, in accordance with professional criteria, regarding which contract would be adequate to meet the consumer s needs (CPC 2011) Financial Services Compliance & Training Ltd 19

20 Independent Independent: Research* has found that the use of the word INDEPENDENT in describing an Insurance Broker is central to the clients decision to engage with that brokerage. Restrictions are now in place in relation to the use of this word in your legal name, trading name or any other description of the firm *Landsdown Marketing Research Financial Services Compliance & Training Ltd 20

21 Independent Independent: To describe either yourself or your business in your legal name and or trading name or in any description of your services as Independent your principle regulated activities must be provided on the basis of a fair analysis of the market AND you must allow the client the option to pay for your services in full by means of a fee Financial Services Compliance & Training Ltd 21

22 Broker Broker: To describe either yourself or your business in your legal name and or trading name or in any description of your services as a Broker your principle regulated activities must be provided on the basis of a fair analysis of the market Financial Services Compliance & Training Ltd 22

23 Intermediary & Tied Agent Intermediary: Advice is offered to clients on a limited basis; limited to the number of agency appointments held Tied Agent: Advice offered is on a restricted basis to that of the products of the provider to which the firms is tied agent. Financial Services Compliance & Training Ltd 23

24 Advisory Services Advisory Services: If you offer different levels of advice there can be no ambiguity about the range of services that are provided in an independent capacity You must explain the nature of the regulated activities and services in a way that seeks to inform the client. (Terms of Business) Financial Services Compliance & Training Ltd 24

25 What Action do you need to take? Questions you need to answer first: Q: Decide what definition best suits your business? Q: Is it vital to your business model to have the word Independent or Broker in the legal or trading name? Q: With the extensive list of appointments you hold how limited is your advice? Financial Services Compliance & Training Ltd 25

26 What Action do you need to take? Q: Will offering limited advice result in the loss of a customer/client? Q: Do you need to re-apply to the Central Bank? A: The CBoI have not issued specific guidance on the matter: the MAI & AA definitions are still in the Investment Intermediaries Act Financial Services Compliance & Training Ltd 26

27 Extended Principles.. New Principal 2.4 has and employs effectively the resources and procedures, systems and control checks, including quality control checks and staff training that are necessary for compliance with this Code Financial Services Compliance & Training Ltd 27

28 Compliance Function: Effectively resourced; human & technical Appropriate systems; voice recording or not you must decide Control checks; including quality control checks, not just a box ticking exercise Staff training; formalised and recorded in training and/or HR records Financial Services Compliance & Training Ltd 28

29 Procedures Written procedures: Compulsory Conflict of Interest Chinese Walls Claims Handling Complaints Handling & Resolution Errors Handling & Resolution All relevant staff made clearly aware of these requirements Financial Services Compliance & Training Ltd 29

30 Fees and Charges Fees & Charges: A schedule of fees and charges must be publicly available. If you have a website the schedule must also be publicly available on the website. Regulated and Non regulated products: Clearly separate on Website no reference to regulatory statement on non regulatory section Financial Services Compliance & Training Ltd 30

31 Terms of Business New Statement: This firm is subject to the Central Bank of Ireland Code(s) of Conduct; list the Codes relevant to your business. This firm must comply with these codes which offer protection to a consumer and these Code(s) can be found on Date valid from noted on the Terms of Business Material change to the Terms of Business notify consumer as soon as possible Financial Services Compliance & Training Ltd 31

32 Terms of Business A description of the level of service you provide: fair analysis of the market, limited analysis or tied with an explanation of that type of service in a way that seeks to inform the consumer. This should include the option to pay for the service by fee if applicable Financial Services Compliance & Training Ltd 32

33 Commission disclosure: Financial Services Commission disclosure: Financial Services Mortgages and Investment products from product producers (other than Insurance Co. s): In writing to the consumer the existence, nature and amount of any fee, commission, or other remuneration receivable. If cannot be ascertained the method of calculation the amount must be disclosed; on paper or on another durable medium Insurance Policies commissions disclosure covered under the Insurance Act(s) Financial Services Compliance & Training Ltd 33

34 Commission & Fee Disclosure Disclosed in a manner comprehensive, accurate and understandable Ongoing remuneration from product producer disclose in writing prior to the provision of product or service the nature of the service to be provided in respect of this remuneration Disclose in advance the option to pay by fee and the amount of the fee. Combined Fee and Commission must be explained whether the commission will be off set against the fee either in part or full. Financial Services Compliance & Training Ltd 34

35 Product Producer matters.. Appointments cannot be conditional on achieving certain levels of business Best interests of client not protected if remuneration arrangement, in place, focus solely on sales volumes Override agreements; no undue pressure this links to Conflict of Interest procedures Clients circumstances, needs and objectives must come first Financial Services Compliance & Training Ltd 35

36 Unsolicited visits to Private Individuals and Customers Individual Consumer: NO unsolicited personal visits at any time. Unless they give informed consent to be visited. Separate consent for each visit. Telephone contact: existing customer only if you have provided customer within previous 12months with a product or service similar to the purpose of telephone contact Product requires you to do so Contact limited to Protection policies Consumer has given consent to be contacted Financial Services Compliance & Training Ltd 36

37 Unsolicited visits to Private Individuals and Customers Telephone contact: other than existing customer, only if written statement within previous 12 months agreeing to contact listed in business directory, trade or profession Subject of a referral for which they have given express consent, received from authorised financial services entity, solicitor or certified person Offering limited to protection policies Financial Services Compliance & Training Ltd 37

38 Vulnerable clients Definition of Vulnerable clients: Those capable of making decisions Those with limited capacity to make decisions Use your common sense: assess can they make a particular decision at the time it needs to be made? Not can they make decisions in general. Q: So what has changed? A: Age no longer the benchmark; incapacity and/or inability to make a decision now the key Financial Services Compliance & Training Ltd 38

39 Vulnerable clients The Knowing the Client and Suitability process is the basis for determining, with common sense, whether there is any evidence of client incapacity. You must provide the vulnerable customer with such reasonable arrangements or assistance that may be necessary to facilitate their dealings with your firm. Financial Services Compliance & Training Ltd 39

40 Product Producer Responsibilities Enhanced Responsibilities and Information provisions requirements for Product Producers: Main features investment products Risks attaching Clear, accurate, up to date and not misleading Responsibility for advice ultimately rests with regulated firm providing the advice Financial Services Compliance & Training Ltd 40

41 More micro matters.. Financial Services Compliance & Training Ltd 41

42 Knowing your Client: your responsibilities Level of information gathered should be appropriate to the nature and complexity of the product tor service being sought by the client Existing Clients: maintain a record of any material changes. Where there have been no changes: this must be record also Refusal to provide information: record this Endeavour to have client certify accuracy of information where they refuse to do so note this on client records Financial Services Compliance & Training Ltd 42

43 Establish Suitability At minimum consider & document why/how the Product/service meets the clients needs and objectives Clients Circumstances Client can meet the financial commitment associated with product Client is able to bear any related risks consistent with their needs and objectives Financial Services Compliance & Training Ltd 43

44 Establish Suitability At minimum consider & document why/how the Client has the necessary experience & knowledge to understand the risk involved Where client is vulnerable their needs and circumstances requiring particular consideration are noted. Financial Services Compliance & Training Ltd 44

45 Documenting Suitability Document why the recommended product or service is suitable; taking account the facts disclosed by the client and other relevant facts about the client of which you are aware vulnerable Where you recommend a product it must be the most suitable product for your client If a selection of product options are put to your client your options must represent the most suitable from the range of products available to you (given authorised status) Financial Services Compliance & Training Ltd 45

46 Written Statement of Suitability Before offering, arranging or recommending a product or service you must prepare a written statement of suitability setting out the following: The reasons why the product or service offered in considered to be suitable for that client The reasons why a product recommendation is considered to be the MOST suitable for that client The reasons why the selection of product options are considered to be the MOST suitable for that client Financial Services Compliance & Training Ltd 46

47 Written Statement of Suitability Each of these reasons why must be linked directly to the information gathered in the Knowing the Client session and referenced under the headings: Needs and Objectives Personal Circumstances Financial Situation Investment Recommendations Financial Services Compliance & Training Ltd 47

48 Your Advice is offered by Verbal Assurances For all customers; trust and reliance on your word and promises given is central to their decision to proceed with the policy. Maintain a contemporaneous record of these discussions NOTES, NOTES & MORE NOTES Up to date file notes are an important tool and aid the audit trail. Firms should document all work carried out and retain it on the client file. *CBoI correspondence 15 th June 2010 Financial Services Compliance & Training Ltd 48

49 New Content in Statements of Suitability NEW OPENING STATEMENT: Important Notice Statement of Suitability This is an important document, which sets out the reasons why the product (s) offered or recommended is/are considered suitable, or the most suitable for your particular needs objectives and circumstances Financial Services Compliance & Training Ltd 49

50 New Content in Statements of Suitability You must inform you client that they have the right to ask questions about the information in the Statement of Suitability If the client asks questions and an oral explanation is given, details of this must be recorded in the statement of suitability You must sign the statement, dated on the day it is completed then give a copy to your client BEFORE providing that product or service Retain a copy on you file Financial Services Compliance & Training Ltd 50

51 Fitness & Probity Standards Financial Services Compliance & Training Ltd 51

52 Central Bank Reform Act st time in Irish law a harmonised statutory system for the regulation of persons performing: Pre approved Controlled Functions (PCF) in regulated financial service providers* Controlled functions (CF) March 2012: Due Diligence PCF December 2012: Due Diligence CF s *Exception Credit Unions Financial Services Compliance & Training Ltd 52

53 Effective Dates: 2011 & 2012 Controlled Functions: 1st Dec 2011: effective date for existing persons in Pre Approved Controlled Functions and Controlled Functions. New regulations not required BUT firm must document individuals and continue ongoing and annual monitoring e.g. CPD and any other material changes which may affect the CF s ability to meet The Standards 31st December 2011: Each firm must notify the Central Bank in writing of each individual holding a PCF. 31 st March 2012: CEO must confirm in writing at this time that he/she is satisfied that there persons are compliant with The Standards and the relevant due diligence has been completed. Financial Services Compliance & Training Ltd 53

54 Effective Dates: st March 2012 all new entrants, transferred staff &/or new advisory employees will be subject to the Regulations & Standards 1st December 2012 the firm to identify and record (on file in office) all persons holding a CF on 1st December 2011 AND any new CF appointments made after March 1st Record all due diligence undertaken, include documentation and individual declarations on file. Financial Services Compliance & Training Ltd 54

55 Competencies of an Advisor Controlled Function: the giving of advice to a customer in relation to the provision of the financial service To offer Advice you have to be: Competent and capable Honest, ethical and to act with integrity Financially sound The Central Bank Reform Act 2010, Regulations 2011 Financial Services Compliance & Training Ltd 55

56 Minimum Competency Code Financial Services Compliance & Training Ltd 56

57 New Entrants offering Advice New Entrants: Written contract of employment informing new entrant of their obligations Written procedures covering all aspects of Training and Supervision of new entrants After an initial induction/in house training course the individual may commence offering advice Must be regular and documented meetings with supervisor and new entrant to assess progress. Financial Services Compliance & Training Ltd 57

58 New Entrants offering Advice New Entrants: Studying towards qualification 4 years to qualify; HOWEVER, have to show immediate sign up for next exam sitting (leaving enough time for study), missed exams, failed exams explained and documented. LIA Learning resources assists students by provide a platform for progression through the study modules, ultimately leading to qualification. New qualifications Accredited Product Advisors (APA) Financial Services Compliance & Training Ltd 58

59 Qualified Persons: Obligations Qualified Persons Maintain membership of Educational Body Make Annual return to body Comply with CPD requirement (15 hours annually) At least one hour on Ethics Remember your AML/CTF Annual Training Requirement Financial Services Compliance & Training Ltd 59

60 Qualified Persons: Obligations Qualified Persons Surplus hours cannot be carried forward CPD must be relevant to your designation 8 hours in any one day Financial Services Compliance & Training Ltd 60

61 Employer Monitoring of CPD Must have procedures in place to monitor CPD compliance Staff checks at least ONCE between Jan- Sept Check again within 6 weeks of year end Spot check CPD completed and pre booked to ensure CPD is relevant Have procedure in place to deal with any breaches of CPD requirement All breaches of CPD MUST be recorded on staff file Financial Services Compliance & Training Ltd 61

62 Monitoring of CPD A breach in CPD requirements is directly connected to the Controlled Function requirements and must be reported to the Central Bank You can rely on information from LIA in relation to compliance of staff members. Responsibility rests with the firm to see & maintain proof of compliance with MCC The Central Bank reserves the right to check any individuals compliance with CPD requirements Financial Services Compliance & Training Ltd 62

63 Public Access Competencies of Advisory Staff Certificate of Competence Can be requested by member of public and must be given to them on request Headed paper and Signed by Senior Management, Compliance Officer Confirms the Accredited/Qualified Status of the individual employee Maintain a record of all certificates requested and issued Conduct annual review to ensure records are accurate and up to date. Financial Services Compliance & Training Ltd 63

64 What we have covered today.. The New Central Bank of Ireland The Structure of Enforcement in 2012 The New Structure of Regulation 2012 Consumer Protection Code Fitness & Probity Standard Minimum Competency Code Financial Services Compliance & Training Ltd 64

65 The way forward. "There are costs and risks to a program of action, but they are far less than the longrange risks and costs of comfortable inaction." John F. Kennedy. Financial Services Compliance & Training Ltd 65

66 THANK YOU for your kind attention Evelyn Hanrahan Financial Services Compliance & Training Ltd 66