If there’s one issue that dominated the regulatory landscape in 2019, it was Brexit. With every deadline that came and went, and the possibility of a no-deal exit becoming all the more real, it’s proved one of the most immediate challenges for the regulator.
Main developments in 2019 included:
- Legislation and Temporary Transitional Power
The FCA, together with the Treasury and the Bank of England, has been working to make sure that EU financial services legislation is on-shored by the exit date. There have been various alterations to the Handbook and over 50 legislative changes to achieve this. No need to panic though – the FCA has confirmed they will provide a one-year transitional relief period for firms to meet any regulatory obligations that come from on-shoring.
- New co-operation agreements
Co-operation agreements have been established with the EU markets, insurance and banking authorities. They’ll come into effect in the case of a no-deal, but affected firms should be aware that they are only temporary and certainly don’t amount to long-term access to EU markets.
With the new date for leaving the EU just around the corner, there’s still a lot of uncertainty around what will be the Brexit outcome. In the event of a no-deal exit, the FCA’s precautionary measures will come into play and it’s unlikely that regulated activities passported into the UK will be affected for the time being. But, there’ll be plenty more work to do before we see greater clarity on EU access in the long run.
If we go ahead with the Withdrawal Agreement in its current form, we’ll move into a transition period and the focus will shift towards agreeing on a form of equivalence or new agreement between regulatory regimes before the end of 2020.
In either scenario, the FCA will see its resources further squeezed as it navigates Brexit and establishes what UK regulation will look like outside the EU.
Suitability of DB transfer advice
Following the regulator’s findings in December of 2018 that, having reviewed files and visited a sample of firms, less than 50% of advice was suitable, the stage was set for a year of unprecedented scrutiny into DB transfer advice throughout the industry.
The headline-grabbing developments hit a high in June, when the FCA released findings from its research into the size and value of the DB pensions transfer market. It concluded that the advice it had seen was “still not of an acceptable standard”.
The statistics are familiar to most by now. The FCA found that 69% of clients receiving advice on DB pension transfers were recommended to transfer. The figure stood in stark contrast to the FCA’s assertion that transfers are unlikely to be suitable for the majority of clients.
The fallout continued throughout the rest of the year. From July to October the FCA announced it was consulting on a ban on contingent charging for most DB transfers. As of the end of 2019 we’re still waiting on the outcome of that consultation.
Then in October 2019 the news came that the regulator was contacting 1,600 to 1,700 firms, telling them to take action over their DB transfer business. Firms who didn’t act, we heard, were to be targeted by further steps.
Even if you’re not one of the 1,700 firms who’ve been contacted, you should still check you can evidence the measures you’ve taken to make sure your transfer advice is suitable for clients.