PIMFA Fortnightly News Bulletin - 8th February 2019

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PIMFA Fortnightly News Bulletin - 8th February 2019 Welcome to the PIMFA Bulletin, our fortnightly e-newsletter delivering a snapshot of the latest news and current affairs from within PIMFA and the industry.

What is PIMFA working on?

New PIMFA Member Firms We are delighted to welcome a new member firm to PIMFA: -

Royal London - Mutual life, pensions and investment company

We look forward to working with them.

Financial Ombudsman Service (FOS) The Financial Ombudsman Service has opened a public consultation on its Strategic Plan and Budget for 2019/2020, which we will engage with.

We noted the expansion of the service to cover a wider range of SME complaints and the proposed new SME operating model. PIMFA would welcome further engagement on this operating model. We are supportive of the concept of the Service using an external expert panel to deal with its expanded SME remit. However, we do have questions about the transparency of the process followed to appoint members of the panel and the terms under which they would serve (term limits and remuneration etc). It also raises a concern about why the service wouldn’t have access to sufficiently skilled staff internally or has not

applied this model to other complex case areas if it’s effective for the SME sector.

The consultation mentions the pressure on timescales arising from increasing caseloads and the expectation the Service will struggle to meet the ADR Directive timescales. This implies that despite recent structural changes, which have been ongoing for a number of years, the organisation is still not best placed to process complaints in a timely manner and reach outcomes that do not lead to challenge and then regard ombudsman level review. We would welcome the Service being more forthcoming on the number of cases awaiting review at the ombudsman stage and about what specific steps the Service is taking to address those backlogs.

PIMFA was concerned to note the Service response to the issue of bias was that its ‘decision-making tools reduce the likelihood of bias by helping our case handlers navigate to an indicative answer’. This raises questions about how each case can be impartially resolved on its own merits, based on the specific circumstances of each case, if staff are required to use processes that lead to pre-determined outcomes.

With regard to the cost model examples, we understand a further consultation will take place at later stage, which we intend to engage with our members on and contribute to. PIMFA notes the Service faces a number of challenge but it’s not clear from the plans out in the consultation how the Service has the ability to meet those challenges.

For more information, please contact Des FitzGerald

Financial Services Compensation Scheme (FSCS) The Financial Services Compensation Scheme (FSCS) published its Plan and Budget for 2019/20 on 31 January 2019. As it had advised in November 2018, FSCS confirmed it would raise supplementary levies in 2018/19 mainly because of the rising cost of claims against pension advisers. These supplementary levies fall on firms in the life and pensions intermediary, deposits, investment intermediary, general insurance provision, general insurance intermediation and debt management sectors. FSCS expects to levy the industry £516m for 2019/20 – a 12-month period compared with £468m FSCS levied firms for the nine-month levy year in 2018/19 (from July 2018 to March 2019). The change from a nine to a 12-month period is the main reason for the increase in the levy from the previous year. A levy for 12 months in 2018/19 would have been £574m – £58m higher than the proposed 2019/20 levy.

PIMFA engages regularly with the FSCS making it aware of our members concerns. In particular we are conscious of how work undertaken by the FSCS could feed back into

helping the FCA tackle the root causes of how some claims end up at the FSCS that should not: • High level of ongoing claims calling into question the effectiveness of FCA’s supervisory work; • Mitigating hits on FSCS must be the subject of greater focus by FCA senior management in particular there should be a formal root and branch analysis of major claims - feeding into FCA supervisory processes the lessons learnt and also feeding issues back to the industry; • Firms PII policies can currently exclude FSCS being able to make a claim in the event of the firms default – following a lot of work on this issue, these rules will change with effect from April 2019 which will require firms PII policies not to exclude FSCS but there may still be historical claims; • PII policies require regulated firms to meet their contractual obligations but there are many instances where firms have failed to meet their contractual obligations resulting in FSCS being unable to make a claim subsequently. The FCA should be proactively ensuring firms are aware of their obligations and periodically check they are aware of their reporting obligations and timescales; • FCA needs to appreciate that the cost of regulation includes FSCS levy as far as firms are concerned and year on year regulatory costs are a burden on firms and are excessive.

We appreciate that claims arrive at the FSCS when firms or product providers are no longer in a position to meet potential claims but there are still steps that can be taken to minimise the reason why legitimate claims cannot be settled at the firm level and we believe the FSCS can be a valuable source of data for the FCA to more proactively engage with firms and the PI sector to reduce the reliable on the FSCS. For more information, please contact Des FitzGerald.

Financial Conduct Authority (FCA) Climate Change/Green Finance PIMFA submitted its response (available on our website for members) to DP18/8 setting out its position on how the industry can contribute to meeting the challenges faced in tackling Climate Change and Green Finance.

We noted that the current supervisory focus is on developing risk-management tools. But proponents of regulatory change could reasonably be confident more will be done - not just relating to climate-related risk but also for green investment choices across the full Environmental, Social & Governance (ESG) spectrum.

However, we noted regulation in this area was a balancing act because targeting green assets could be counter-productive if taxing assets weakens the market or limits the evolution of green finance products. In the event of rating agencies accurately factoring in climate change risk and applying genuine disclosure, it could see capital move toward sustainable investments creating new opportunities but exposing new risks too. Climate risk responses could also have an impact on monetary and quantitative policies.

The financial services sector needs to be aware of potential implications if governments did include climate change objectives to central bank remits as a secondary objective or issues clarity on what it considered sustainable investment to be.

The paper touches on the increase in consumer demand for ‘green’ financial services but the FCA should remain aware if new or targeted regulation and rules stifle innovation. The impact of climate change is a material fact the FCA must be aware of and prepare to quantify as it could affect the value of some investments. It is important to make sure that disclosures relating to climate change are a help to those making investment decisions.

Part of the policy process for disclosing important information in green finance is to have some minimum standards, which will also help develop investor and market trust. The FCA has for the moment focused on: • The Law Commission recommendation2 (on Pension Funds and Social Investment) concerning climate change and pensions; • Boosting innovation in the evolution of green products; • Assessing if more support is needed to provide for appropriate information for investors and disclosures on the issuing of securities.

• The option of a new requirement for financial services to report publicly on how they are managing climate change risk Additional input from our sector would be required to map out how to manage the effects and risks from climate change and the transition to a low carbon economy for consumers and how the impacts of climate change might affect appropriateness of certain products or asset allocations.

If you need any more information, please contact Des FitzGerald.

Asset Allocation Changes to be implemented on 1st March, 2019 In response to quarterly surveys submitted by PIMFA member firms regarding the asset allocation to the Conservative, Income, Balanced, Growth and Global Growth portfolios,

the Private Investor Indices Committee has made the following changes to the MSCI WMA Private Investor Index Series.

The following asset allocation changes will be effective from Friday 1st March 2019: • -

MSCI WMA Private Investor Income Portfolio: UK Equities down from 30.0% to 27.5% International Equities up from 22.5% to 25.0%

Further details can be found here Asset allocations in all portfolios remain subject to quarterly reviews by the Private Investor Indices Committee.

If you require any further information, please contact Jonathan Reid.

PIMFA Press Releases In order to keep you up to speed with what PIMFA is saying to the media and key stakeholders about important issues that affect our members, you can see our latest Press Releases here.

PIMFA Criticises FSCS £300M Levy PIMFA Calls on Committee to Rethink its Conclusions on Contingent Charging PIMFA Responds to Parliament Votes on Brexit Next Steps PIMFA Calls Retirement Outcomes Review from FCA an Opportunity Missed for Consumer Engagement PIMFA Comments on Government’s heavy defeat on Brexit Withdrawal Motion

PIMFA Consultation Responses PIMFA responds on behalf of our membership to numerous key issues within our industry.

We do this via vital feedback and discussion with member firms. From this member feedback PIMFA create responses to consultation documents and discussion papersissued by bodies such as the UK’s regulator, the Financial Conduct Authority (FCA), Government departments and many European and International bodies.

The scope of regulation is increasing and one of PIMFA’s key objectives is to ensure this regulation is proportionate and fair, bringing real benefits to the investment management

and financial advice community and their clients.

Read PIMFA's Consultation Papers Here

What's coming up in PIMFA? PIMFA/Bovill CPD Seminar: CSDR – The Forgotten Regulation Wednesday 13th February 2019, 17:00 – 18:30 Bovill Offices, 82 Blackfriars Road, London, SE1 8HA CPD:1hr The torrent of regulatory change continues unabated, but one set of regulations is slipping past largely unnoticed – the Central Securities Depositories Regulation This joint PIMFA and Bovill event will help firms to understand CSDR, why it is important and where it impacts upon their business

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Topics covered will include: • An overview of CSDR, Segregated / Omnibus Accounts, • Settlement Discipline Internalised Settlement Reporting Sign Up

PIMFA Women in Wealth Networking Reception 2019 Wednesday 13th March 2019, 18:00 - 21:00 Central London Venue – TBC

The PIMFA Women in Wealth event series is back for 2019, continuing to provide a platform for candid discussion amongst professionals within the world of wealth.

This event will provide access to the UK’s top professionals in the investment management and financial advice industry.

This forum provides the opportunity to network, meet inspirational people while gaining insights on the wider industry and ways to progress your career #WomenInWealth Sign Up

PIMFA Financial Crime Conference 2019 Tuesday19th March 2018, 09:00 – 17:00 Central London Venue – TBC CPD: 5 hrs Join us at the PIMFA Financial Crime Conference and access leading industry debate from professionals across the regulatory, law enforcement and cyber security space.

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Sessions will include: • FCA Update • GDPR • Bitcon/DLT • Regulatory Update • Networking Lunch • Risk Assessment Good Practice Offence of Failure to Prevent Economic Crime & Legal Privilege • Vulnerable Customers • Cyber Cecurity #PIMFAFinCrime19 Book now

PIMFA Associate Members Briefing and Drinks Reception Wednesday 27th March 2019, 17:30 – 21:00 London Attendees will benefit from networking opportunities with other industry professionals over a drinks reception.

We will explore topics such as regulation, operations, taxation etc and provide an opportunity to discuss with PIMFA staff specific issues important to the membership.

This event also showcases our ongoing events and publications programme providing examples of how Associates can engage with Members and maximise the value they receive from their membership.

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PIMFA Compliance Conference 2019 Tuesday 18th June 2019, 0900-1700 Herbert Smith Freehills Offices, Exchange House, Primrose St, London, EC2A 2EG CPD:5hrs The annual PIMFA Compliance Conference will be taking place on Tuesday 18th June 2019.

Hear from leading industry experts on the key issues facing compliance professionals in the investment management and financial advice world. #PIMFAComplianceConf Sign Up

TELL US WHAT EVENTS YOU WOULD LIKE IN 2019 Five Key Questions…

1.

Which type of events/subjects would you like to see from PIMFA in 2019?

2.

Which events would you like us to continue for 2019?

3. Are you interested in attending a PIMFA seminar in your region? If so, please state below the region you are in and content you’d like covered: 4. If you have recently attended a PIMFA event, please select the most valuable aspects of attending a PIMFA event: • • • • 5.

CPD Hours Content Networking Other (please state) If you would like to submit general events feedback, please do so below:

We look forward to an exciting year ahead, exploring new initiatives in support of our members and the investment management and financial advice community.

What's happening in our industry Invitation to Fund Trading and Settlement project update The Fund Trading and Settlement project (“FTS”) was established in 2016 to review the operations of how £1 trillion of mutual funds are traded and settled plus the processing of associated activities such as fund prices and standing data, with the aim of increasing efficiency, reducing costs and risk. It is an industry led initiative supported by over twentyfive of the leading providers including fund managers, platforms, transfer agents plus representatives from the Association of British Insurers, the Investment Association, PIMFA, TISA and the UK Platform Group.

The project has been focusing on the following five areas; order routing, settlement, fund standing data, service level agreements and providing governance for the development, maintenance and adoption of industry standards.

As the project draws to a close we would like to provide an update to the industry covering the progress that has been made and proposed way forward. This will be held on 26th March 2019 at 1pm at Hogan Lovells offices in Holborn, London. The update will include:• Announcement on new ISO 20022 standards for Order Routing • New order routing BCP best practice • Update on adoption of net settlement models • Announcement on new ISO 2022 standards for Fund Standing Data • Update on standard Distributor Agreements • Proposed governance arrangements for adoption, maintenance and ongoing governance • Next steps for 2019 If you are interested in attending this event, please contact:linda.lee@tisa.uk.com

Joint Money Laundering Steering Group (JMLSG) Update On the 31st January, the JMLSG published an update on its website setting out a comprehensive work-plan for 2019. The revised guidance will include the changes expected from the implementation of the 5th Money laundering Directive together with reviews of sectoral guidance.

New areas of guidance will include virtual currency exchanges, digital identities and payment initiation services. Further updates will be periodically published on their website.

Financial Conduct Authority (FCA) consult on guidance on cryptoassets On the 23rd January, the FCA published CP19/3 on guidance for cryptoassets in order to provide regulatory clarity for market participants carrying on activities in this area.

The final guidance will help firms understand whether the cryptoassets they use are within the regulatory perimeter.

You can read the full consultation here.

Are your MiFID II Transaction Reports is up to scratch?

It may be more than a year since the scramble to get over the line for MiFID II, but when it comes to transaction reporting, firms can’t afford to lose focus.

Reconciliations of transaction reporting data are a regulatory requirement and under MiFIR, “Investment firms must…take reasonable steps to verify the completeness, accuracy and timeliness of the transaction reports which were submitted on their behalf.”

In a recent article on Regulatory Consultants Bovill’s website, they offer helpful guidance on steps that all firms can take to ensure their transaction reports are complete and accurate, and that any errors are identified and remedied promptly.

Financial Conduct Authority (FCA) publishes its second set of rules following its Asset Management Market Study The Financial Conduct Authority (FCA) has published new rules and guidance to improve the quality of the information available to consumers about the funds they invest in.

The asset management industry plays an important role in the UK’s economy. Asset managers seek returns for investors by investing in a variety of assets. Over £1 trillion is managed for individual investors and £3 trillion on behalf of UK pension funds and other institutional investors. The FCA’s asset management market study presented evidence of weak price competition in many areas of the asset management industry. This means lower returns for savers, pensioners and other investors.

To view the FCA's New Rules and Guidance, please click here.

To view the FCA's Asset Management Market Study, please click here.

Crowe Cyber Maturity Survey The PIMFA CEO Sentiment Survey and recent discussions with PIMFA members have confirmed that cyber security is a key area of focus for senior executives.

In seeking to provide a tangible way for members to better understand their current readiness and exposure, Crowe Risk Consulting has designed a bespoke Cyber Maturity Assessment (CMA) questionnaire, based on their comprehensive CMA offering, designed to help firms determine their current state and an appropriate pathway forward.

Crowe are facilitating a multi-faceted approach that brings together self-assessment, benchmarking and research components to help you understand your cyber maturity and how this compares to your peers.

The assessment has been designed to provide meaningful results so please plan up to an hour to complete it, however it can be saved and progressed as convenient for you. The assessment will remain available until 6th of March at which time it will close to allow the Benchmark reports to be produced.

PIMFA members can anonymously access the assessment here https://www.questionpro.com/t/AJckGZdnhp.

If you have any questions about the Cyber Maturity Assessment, please contact neil.currie@crowe.com

Latest Industry Events Bovill briefing: Getting DB pension transfer advice right Wednesday 23 January 2019, 17.00-18.15 Bovill London, 82 Blackfriars Road, London SE1 8HA Bovill Consultants are running a briefing on DB pension transfer advice, looking at what is going wrong with DB pension advice and how firms can get it right.

Bovill have reviewed the suitability of DB pension transfers in a variety of situations and will explain the failings they have noted and how firms can ensure their DB pension transfer advice is always suitable.

Sign Up

Structured Retail Products (SRP) Europe Conference 2019 Tuesday 5th February, 2019, 0800 - Wednesday 6th February, 2019, 13.30

Radisson Blu Portman Hotel, 22 Portman Square, London W1H 7BG The 16th SRP Europe Conference 2019 is set to bring together more than 300 seniorlevel delegates from 114+ companies from over 23 countries worldwide. As the longestrunning Structured Products & Derivatives Conference in the world, SRP Europe is a must–attend annual conference senior representatives from local and international investment banks, insurance companies, retail & private banks, asset managers, hedge funds, IFAs, law firms, regulators, index providers, exchanges and the wider derivatives market to debate the most relevant and important topics facing the Structured Products & Derivatives industry.

The two-day Conference is preceded by a day-long Derivatives Masterclass, which provided delegates with an introduction to structured products, what is involved in designing them as well as exclusive market overviews.

To view the latest brochure, please click here.

Sign Up

European MIFID Template Version 2: Are You Prepared?

Thursday 14th February 2019, 1200 -1430 Ice Data Services, Milton Gate, 60 Chiswell Street, London, EC1Y 4SA CPD: 4.5hrs Join us for a briefing to discuss the key changes to version 2 of the EMT Topics will include: 

Examining key changes and plans of the European associations guiding this change  Understanding industry pain points and gain insight into regulator feedback  Discussing challenges and resolutions with peers and representatives from Industry bodies for both Manufacturers and Distributors

Speakers:

 

Ian Cornwall, Director of Regulation, PIMFA

Ghislain Perisse, Chairman of the European Working Group for EMT version 2  Carol Thomas, Retail Markets Specialist, The Investment Association Lunch will be provided Sign Up

Implementing Senior Managers & Certification Regime (SM&CR) as an LLP Tuesday 26th February 2019 Grocer’s Hall, Princes Street, London, EC2R 8AD You’re invited to join Duff & Phelps for a breakfast seminar where we will address the specific issues confronting LLPs when implementing the Senior Managers and Certification Regime (SM&CR) which will apply to solo regulated firms from 9 December 2019.

We are delighted to be joined by keynote speaker, Peter Ewing of the Financial Conduct Authority, and guest speaker, Nick Colston, Partner, Simmons and Simmons.

Topics include: • The Financial Conduct Authority’s expectations on how SM&CR will apply to LLPs • The legal challenges presented by SM&CR facing LLPs and their members • How SM&CR impacts the tax status of the LLP’s members • Practical application of SM&CR relating to Corporate Members Sign Up

View all the latest industry events on our website here If your firms has an event which you would like to post on this area, please click here to submit it.

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