FSA Cancel Kenwood Associates Ltd Permissions under Schedule 6 Failings

Kenwood Associates Limited (“Kenwood”) final notice about a decision to cancel the permission granted to Kenwood to carry on regulated activities. The firm owed £1,017.20 in unpaid fees amounting to the FSCS levy, despite several requests from the FSA for payment. A Warning Notice was issued in February 2010 and a Decision Notice on the 30th March 2010.

If nothing else, this and other withdrawals of permission (Sytaz Finance, Magic Mortgages etc) that have occurred recently, show that the FSA will not tolerate being ignored when they request information or overdue fees.

Should you get any kind of communication from the FSA, even if it is in error; contact your compliance professional for advice.

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Dan Waters, the FSA’s director of conduct risk, said:

“A culture of fair complaint handling is an important indicator of whether a firm is committed to treating its customers fairly. It is vital that customers know that if something goes wrong, their complaint will be deal with in a reasonable way and that they will get a fair outcome. “While we found some good practice, there is clearly evidence of unacceptable standards of complaints handling in banks. Delivering change in this area is a major priority and we are determined to use all the tools available to us to ensure that banks comply with our rules.”

WARNING!This template alone does not guarantee that the complaints are being handled correctly or fairly, it simply provides an assessment tool which, if your policy, processes and complaint handling procedure is aligned and accurate, will provide a good overall assessment and help demonstrate treating complainants fairly.

Additionally, if the FSA are looking at the banks, they obviously will apply the lessons to other firms across the regulatory spectrum. The report of findings in the banks is published in the form of a Complaints Review document (link below). To get a head start on any visit you may have, please read this or consult your compliance professional firm to review your processes.

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From our experience and with the 2nd anniversary of TCF having been embedded into firms, we thought it a timely reminder that you need to address the TCF actions that you have taken for your firm.

Most compliance providers will supply a TCF form for a price, with any number of questions which you need to consider. This type of form is good for provoking a reaction and making you think of the relevant business area.

We, being alternative thinkers, consider that something relevant to the prescribed and required outcomes from 1 to 6, with a reference to your company documentation, the FSA handbook and ideas on how best to answer the various elements would be more useful..... and hold on, why not do it for free too?

Due to the ongoing popularity of the service (and even those who see it is a threat) we have decided to leave it running for May. Our competitors need time to evaluate and amend their own offering and the average number of requests shows no sign of waning as this has now gone viral.

The document is purely designed to give you ideas and prompts and should not be seen as a TCF panacea but hopefully will assist you, using the thousands of hours experience in TCF that we possess.

We would welcome any (constructive) feedback from people using the guide, so that we may refine it. please email feedback@cei-compliance-limited.co.uk

Client Categorisation - Do You Have It Right?

Client Categorisation is a necessity for anyone providing investment business advice or services.

UK regulatory reference - COBS 3.3.1

Regulatory requirement - Yes.

Function - Used in order to give formal notification to clients of the status they have been given under COBS, which will determine the level of protection they are afforded under the regulatory regime (consumer protection rules applicable, complaints arrangements, compensation, etc).

Products/services - Required in relation to designated investment business.

Contents requirements

• All types of client must be notified as to whether they have been classified as a retail client, a professional client or an eligible counterparty.
• Persons who have been classified as professional clients or eligible counterparties must be notified of their right to request a Categorisation that will afford them a higher level of protection under the regulatory regime.
• Firms should also notify clients of their option to request a lower level of protection (e.g. retail client as elective professional client), but only if the firm will consider requests for such reclassifications.

Timing requirements - Notification letters must be given to the client prior to the provision of any services.

There may be occasion where you inherit a client from a merger of practices or generally pick up a lead who has been a higher category of client with their previous firm. You may have a policy of treating everyone as retail and that could be key in your back-office systems to maintain that continuity and consistency, however, the client may insist on a professional status, what do you do then? You have to satisfy your company processes and MiFID rules that the client has suitable experience and knowledge to act in that capacity.

A sample assessment form could look like this ; Sample elective professional assessment record

Customer name ……………………………………………………………………………………………. If entity, name of person authorised to operate the account (see footnote 1)

………………………………………………………………………………………………

Relationship manager ………………………………………………………………………………………

Date form completed ………………………………………………………………………………………

Products and services in relation to which professional status requested:

• Product/service 1 ………………………………………………………………………………………
• Product/service 2 ………………………………………………………………………………………
• Product/service 3 ………………………………………………………………………………………
• Product/service 4 ………………………………………………………………………………………
• Product/service 5 ………………………………………………………………………………………

Qualitative test

Client’s expertise in relation to the above products

Type of evidence obtained:

Evidence attached? Yes/No

Client’s experience in relation to the above products

Type of evidence obtained:

Evidence attached? Yes/No

Client’s knowledge in relation to the above products

Type of evidence obtained:

Evidence attached? Yes/No

Quantitative test (at least two of the following criteria must be satisfied) (Required only for MiFID and equivalent third country business)

Provide details confirming that the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters.

Type of evidence obtained:

Evidence attached? Yes/No

Confirm that the client's financial instrument portfolio (including cash deposits and financial instruments) exceeds EUR 500,000.

Type of evidence obtained:

Evidence attached? Yes/No Confirm that the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.

Type of evidence obtained:

Evidence attached? Yes/No

Results

Classified as professional?

Type of evidence obtained:

Evidence attached? Yes/No

Yes/ No – if “Yes” list products and services to which this categorisation relates:

Name of classifier …………………………………………………………………………

Signature of classifier …………………………………………………………………………

Date of Categorisation …………………………………………………………………………

1 Note that if the customer is a company, trust etc the qualitative test is to be undertaken in relation to the person who will give the instructions on behalf of the customer.

END