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FSA Handbook Notice 103 - Financial promotion changes

New definitions of “staff mortgage” and “work-related insurance” have been introduced, together with changes to PERG, to reflect the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2010 (SI 2010/905). This Order amends the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529).

The 2005 Order sets out a number of exemptions from the restrictions on financial promotions contained in section 21(1) of the Act. The 2010 Order inserts five new articles into the 2005 Order to provide further circumstances in which the financial promotion restriction is disapplied. It also makes consequential changes to articles 2 and 72 of the 2005 Order.

The change to Article 2 defined “direct financial benefit” as “includes any commission, discount, remuneration or reduction in premium;”

Article 72 of the order is tighter definition and explanation by insertion of;

(1) New article 72A relates to communications made to employees by or on behalf of third parties about group personal pension schemes and stakeholder pension schemes.

(2) New articles 72B and 72C relate to communications made to employees about work-related insurance by employers and by or on behalf of third parties.

(3) New articles 72D and 72E relate to communications made to employees about staff mortgages by employers and by or on behalf of third parties.

For details please see The Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2010

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

Call 07092 289901 Now to arrange a free quotation

Call 07092 289901 Now to arrange a free quotation

Should you get any kind of communication from the FSA, even if it is in error; contact your compliance professional for advice. Look at the CP10/18 letters here | Email Feedback

“Regulatory scrutiny is like a car crash in slow motion, the right compliance consultant is your ABS brakes. You don’t know where you will end up but at least you can steer through it!”

We are getting increasingly nvolved in FSMA Section 166 Skilled Persons Reports and have produced a pdf in association with Tony Woodward FCSI who has actually experienced the wrath of the S166.

The download is free and available from our site at this link

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

Lifting the fog

What is an unregulated collective investment scheme?

Many Collective Investment Schemes (CIS) are sold to investors in the UK. Regulated CIS are those that are authorised by the FSA or are non-UK CIS that we recognise.

Our recognition enables overseas CIS to be marketed to the public in the UK and we will only recognise an overseas scheme if certain specified criteria are met.

If the FSA do not authorise or recognise a CIS in this way, it is a UCIS. UCIS may be established, operated and/or managed in the UK or in a jurisdiction outside the UK.

If it is unregulated, what powers does the FSA have?

UCIS are described as unregulated because they are not subject to the same restrictions as a regulated CIS (e.g., in terms of their investment powers and how they are run). Although the schemes themselves are not authorised or recognised, persons carrying on regulated activities in the UK in relation to UCIS (including providing personal recommendations, arranging deals and establishing, operating and managing schemes) will be subject to FSA regulation, including Handbook requirements).

Article 3 MiFID exemption and the promotion and selling of UCIS

Where a UCIS promotion can be made, the COBS rules apply differently in relation to the Markets in Financial Instruments Directive (MiFID) or equivalent third country business and non-MiFID business.

If you consider yourself a non-MiFID firm, you must ensure you do not fall foul of the ‘Article 3 MiFID exempt firm’ requirement. For example, you will fall outside the MiFID exemption if you transmit orders directly to operators of UCIS unless they are fund managers to which MiFID applies.

For more details please refer to Chapter 4 of the ‘MiFID Permissions and Notifications Guide – Update’ and PERG 13 ‘Guidance on the scope of the Markets in Financial Instruments Directive and the recast Capital Adequacy Directive’, in particular, PERG 13.5 “Exemptions from MiFID” Q49 and Q50.

Should you breach any of the qualifying conditions (PERG 13, Q51), you are required to notify us of the breach (SUP 15.3.11 R ‘Breaches of rules and other requirements in or under the Act’).

We will then consider whether you should continue to benefit from the exemption and what, if any, supervisory or enforcement action will be taken.

For more details please refer to ‘Promoting unregulated CIS – Communicating with clients, including financial promotions.’

Can I recommend a UCIS?

Under COBS 9, ‘Suitability (including basic advice)’ rules, before you recommend a UCIS, you will need to gather information about your client to establish whether the UCIS is suitable for that person.

When making a personal recommendation or providing discretionary portfolio management services on a UCIS, you must meet all suitability obligations. This includes obtaining the necessary information regarding your client’s knowledge and experience in relation to UCIS, his financial situation and investment objectives, so you can make a suitable recommendation.

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