On 27 April 2012, the Financial Services Authority (FSA) published its newsletter for smaller wholesale intermediaries. The newsletter focuses on particular regulatory issues which the FSA wishes to bring to the attention of regulated firms. This latest edition is particularly interesting as it provides wholesale intermediaries with an indication of the initial priorities of the new Financial Conduct Authority (FCA) which will succeed the FSA next year.
Gender equality is evidently going to be on the agenda for the FCA as the newsletter highlights both the proposals to amend the Equality Act 2010 to reflect the Test Achats decision on gender neutral pricing, and also the need for firms to increase gender diversity at senior levels of their business.
Following the decision of the Court of Justice of the European Union (ECJ) last year (for further information please refer to our briefing Gender based insurance pricing - European Commission issues guidelines on the Gender Directive in the light of the Test-Achats decision), HM Treasury published a Consultation Paper acknowledging that UK legislation will be amended to ensure that contracts entered into after 21 December 2012 are not priced according to gender. In their newsletter the FSA make it clear that it will be the responsibility of firms to make appropriate and timely changes to their systems and controls to ensure that product pricing meets the new requirements. Intermediaries should be conscious of all the implications of these changes and may wish to carry out their own review of compliance with the new law.
The FSA are also considering the gender diversity of senior management in regulated firms. The regulator is under a statutory obligation in the Equality Act 2010 to have due regard to eliminating discrimination and advancing equal opportunities. Furthermore, the Davies Report on Women on Boards has brought board diversity in financial services firms into focus. The FSA has undertaken an anonymous survey of firms in order to generate diversity benchmarks. Initial findings from this survey suggest that the financial services sector needs to improve the career development and retention of female staff. Various proposals to improve diversity at senior levels in firms are being considered but the inclusion of this issue in the newsletter should send a message that firms should anticipate greater supervisory interest in the gender balance of their boards.
The newsletter also identifies problems with firms failing to provide timely reports on breaches of capital resource and solvency requirements, as required under Chapter 15 of the Supervision Handbook (SUP 15.3.1 R). The FSA reminds firms that where they have breached capital resource and solvency requirements it is likely that they will also be in breach of the Threshold Conditions. SUP 15.3.1 R requires notification as soon as a firm becomes aware of the following: a failure to satisfy the threshold conditions; any matter that might have a significant adverse affect on the firm’s reputation; any matter which could affect the firm’s ability to continue to provide adequate services to its customers; and any matter which might result in serious financial consequences to the UK financial system or to other firms. According to the FSA, firms failing to meet their solvency or capital requirements have been waiting until the submission of their Retail Mediation Activities Return (RMAR) to notify the FSA of breaches. Firms in breach of MIPRU requirements should notify the FSA as soon as possible, as required by the Handbook.
The newsletter also reminds firms of the developments concerning director certification and independent assurance of insurers' Employers' Liability Registers (ELRs), including those made available through the Employers’ Liability Tracing Office (ELTO). Intermediary firms that place (or who have previously placed) employer liability business may be asked to supply additional information to insurers to assist them in their information requirements.
In addition to the matters considered above, the newsletter considers: the key conduct issues identified in the Retail Conduct Risk Outlook 2012; the publication of the annual fees and levies Consultation Paper (CP12/3); improving standards in consumer contracts; and, the accuracy of information supplied by firms in their RMAR.
For further information: FSA publishes Smaller Wholesale Insurance Intermediaries Newsletter