The UK's regulator has published general plans, discussing its new responsibilities and and activities. This is a summary for the wealth management sector.

This article is by Chris Hamblin, editor of Compliance Matters, a specialist news service produced by the publisher of WealthBriefing.

The UK's Financial Conduct Authority, the conduct-of-business regulator, has just published its general plans for regulation over the next year, discussing its new responsibilities and the continuing activities by which it will attempt to realise its objectives. This is a summary for the wealth management sector.

Under the heading of “long-term savings and pensions” the FCA promises: "Use of in-house funds in wealth management firms: We will assess how wealth managers and private banks effectively control the conflicts of interest that arise when client assets are invested in in-house investments." Thematic work here is timed for the end of the third quarter of the year.

This year the FCA aims to 'embed' the Alternative Investment Fund Managers Directive and prepare for the implementation of the second Markets in Financial Instruments Directive, which covers the regulation of investment services, i.e. the buying, selling and organised trading of financial instruments.

Governance of with-profit funds are another priority. The FCA is to review whether firms have effectively implemented the changes it made to its 'with profits' rules in 2012. It wants to assess how adequate their with-profits governance arrangements are for a this-or-that aspect of their business.

A new direction from Europe?

With a new European Parliament due to be elected in May 2014 and a new group of people to follow on the European Commission in November 2014, the regulators are expecting a new agenda and new initiatives in 2014/15 along with existing initiatives such as the revised Insurance Mediation Directive, the revised Payment Services Directive, European regulations to do with money-market funds and long-term investment funds, the fourth Money Laundering Directive and a new Wire Transfer Regulation.

They say that they want to “focus on” implementing some major sets of EU legislation and supporting standards, including the AIFMD and the CRD IV package of legislation for FCA investment firms, MiFID and a European Market Abuse Regulation (MAR). MAR is a non-criminal regime that bars insider dealing and market manipulation and requires surveillance and the public disclosure of “inside information” (a fairly tightly defined term in the FCA rulebook) and directors’ dealings.

When is the FCA's SWAT team likely to invade your firm?

The FCA's plans for thematic work (visiting financial institutions and finding things wrong with them - and there always is something - by subject) are as follows, with rough dates. Projects carried over from last year are identified:

•    Product governance (a carry-over) going on till end of year.
•    Personal Protection Insurance (also a carry-over) going on indefinitely;
•    Mobile banking (a carry-over as well) ending at end of second quarter;
•    Cash savings starting at beginning of year and going on till end;
•    Unauthorised transactions Q2 - Q4;
•    Pension reform started at the beginning of the year and will go on till Q2 of 2015;
•    Retirement income study (including sales practices in retirement) ditto;
•    Advice models going on till end of 2015;
•    MiFID II ditto;
•    Crowdfunding (a carry-over) ending at end of second quarter;
•    Review of post-Retail-Distribution-Review adviser charging and service disclosure;
•    (a carry-over) going on till middle of Q1 next year;
•    Use of in-house funds in wealth management firms Q1-Q3;
•    Risks at client take-on in contract-for-difference providers the same;
•    Simplifying disclosure early Q1 till late Q4;
•    RDR post-implementation review early Q1 till the end of Q4 2015;
•    Governance over mortgage-lending strategies early Q1 to mid-Q3;
•    Fairness in changes to mortgage contract terms ditto;
•    MMR post-implementation review and testing from early Q1 to late Q2 next year;
•    Maturity of interest-only mortgages from mid-Q1 to late Q3;
•    Regulated covered bonds (2nd line) from early Q2 to end of year;
•    Financial crime controls at C3 and C4 firms from early Q1 to late Q3;
•    Resilience against cyber-attacks from early Q1 to late Q1 next year;
•    Visibility of resilience and risks at board-level from early Q2 to late Q1 next year;
•    Managing the performance of staff ditto. This presumably takes in continuing;
•    Professional development (CPD) and training and competence (T&C).

To be announced...
Other, vaguer, thematic review objectives are in the pipeline but not properly planned. The FCA's tentative dates for them cluster around the middle-to-late period of the year and going on into Q1-Q2 the next. New long-term 'slow burners' are therefore not envisaged. For the wealth management sector, the relevant subjects are likely to be:
•    Packaged bank accounts;
•    Effective due diligence for retail (including HNW) investment advice;
•    Governance of with-profit funds;
•    Cover holders;
•    Premium finance;
•    Protection of client money by small firms.

At the moment the FCA is at the “scoping” stage with these subjects, trying to work out what shape the thematic reviews are to take and what firms to visit. “Retail” as an FCA term always includes HNW individuals.

Fees (the FCA is run on a compulsory “guild” system) this year are up 2¼ per cent from £393.9 million to £402.8 million. All fines now go straight to the coffers of HM Treasury, by-passing the FCA's fee system and therefore doing nothing to ameliorate the average contribution every year.