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FCA to review ‘highly dangerous’ pension transfer info

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The FCA is to scrutinise adviser support firm IFA Compliance after it published what it says is incorrect information about pension transfers.

In a post on its website the firm – which charges firms £350 a month for compliance support – says network members “are banned from transferring safeguarded rights”.

In what it calls a “major blow” to network advisers and appointed representatives, it says FCA rules mean they cannot advise on the transfer of safeguarded benefits, which includes defined benefit funds and policies with guaranteed annuity rates.

The post says: “Safeguarded rights (guaranteed annuities) cannot be transferred by network members or AR firms, because it falls under Regulated Activity Order Article 53 E  and the rules in SUP12.2.2 have not been amended to confirm that.

“This means that network members are banned from transferring safeguarded rights.

“While the rules on this have not changed, what is different today is firstly that guaranteed annuities are taken into account under the new definition of pension transfers.”

It also says consultancy Towers Watson confirmed that it blocked a transfer because FCA guidance meant it could not accept transfer requests from appointed representative firms.

However, Towers Watson told Money Marketing this was not the reason the transfer was blocked.

An FCA spokeswoman says the information is incorrect and that the matter will be referred to its supervision team.

Personal Touch Financial Services sales and marketing director David Carrington says: “It is highly dangerous behaviour.

“Directly authorised advisers rely on that type of information, buying services like this is how they protect themselves from the FCA.

“The comeback on wrong advice would be on the adviser, not on the compliance company.

“It’s at the heart of the DA model. You have more flexibility on how you run your business, but you have to provide all the different bits yourself.

“You choose your support providers carefully to give you what you would otherwise get from a network. For one building block to be wrong or unreliable is a fairly scary place for DAs to be.”

IFA Compliance declined to comment.

At the time of writing the post remains live on its website.



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. It would be useful if this article could make it clear that ‘IFA Compliance’ is not regulated by the FCA and FCA Supervision will NOT scrutinise what it says.

    It would also help if what IFA Compliance says is incorrect, the FCA explains why and clarifies the position. The scope of what is and is not allowable by appointed representatives however is something that is decided by Treasury Order laid before Parliament, not by the FCA’s rule making powers, and certainly not down to the pronouncements of FCA’s staff. Anyone who regularly deals with FCA supervisors knows that they are trained in principles and outcomes, and their grasp of their own rules let alone the legislative framework is something that they often require ‘assistance’ with.

    If I was to criticise what IFA Compliance have said (according to this article), it would be referring to SUP 12.2.2. It’s actually 12.2.7 G that lists the activities. This hasn’t been amended either (because the Regs themselves haven’t), and what matters is what those Regulations say.

    In substance however, IFA Compliance seem right to raise this.

    An appointed representative is exempt from having to be authorised, and so doesn’t breach the general prohibition in s.19, FSMA if he “is a party to a contract with an authorised person (“his principal”) which…permits or requires him to carry on business of a prescribed description” [s.39(1), FSMA]

    The Treasury prescribes these business types in the FSMA (Appointed Representative) Regulations 2001 SI 1217. These in turn have always included the activity of “advising on investments” [at Reg.2(c)]. Traditionally, this will have sufficed for pension transfer business. This is because whilst FCA (like PIA before it) distinguished in its own permissions regime between ‘advising on investments (excluding pension transfers and opt-outs)’ and ‘advising on investments that are pension transfers and opt-outs’, these were both ‘advising on investments’ as far as Art.53 of the Regulated Activities Order was concerned.

    What has now happened however is that the Treasury have introduced a separate Regulated Activity of ‘Advising on conversion or transfer of pension benefits’ – Art.53E inserted by RAO (Amendment) Order (No.2) 2015.

    This order however does not amend the Appointed Representative Regs to add this new activity to the list of those “of a prescribed description” for the purposes of s.39(1), FSMA. Certainly, searching the ‘changes to legislation’ function on, there is no mention of any other amending regulations to add this. Unless these have been made but not published(!), it therefore follows that an A/R is indeed up against the s.19 ‘general prohibition’ here.

    Immediately after the Regs amending the RAO (SI 2015/731) there were ‘transitional provision’ regulations (SI 2015/732) that basically grandfathered authorised firms with the pension transfer permissions to have permission covering Art.53E, but these made no provision for appointed representatives.

    This is not to say that Network adviser are completely barred in all circumstances from this type of advice. One would be able to do this if the adviser is able to give the client a Terms of Business / Client Agreement that says “I’m doing this as an adviser of AN Network”. If however he purports to do this with a ToB/Agreement that says “We’re Joe Schmoe Financial Services Ltd, an appointed representative of AN Network”, then arguably the A/R is breaching s.19. The consequences are (1) that it’s arguable they’re committing an offence [s.23, FSMA], and (2) if the client loses money, he is possibly going to be able to get it back (plus any adviser fees and transaction charges), regardless of the merits of the advice [ss.26-28, FSMA].

    But technically, what ‘IFA Compliance’ has said has some merit about it – and shouldn’t be dismissed as “dangerously wrong” like this, or disregarded by the trade press just because some nameless schmoe at FCA says so.

    Now, if somebody could draw my attention to a set of amending Regs that I’ve missed, or has an alternative argument based on an analysis of the legislation and statutory instruments, please be my guest…

    • Rely on an unnamed person at the FCA…. I don’t think so. I trust Jonathan and IFAC as they have pit their name to this. MM please reveal the name of the person at FCA so they can be disciplined if they are proven wrong as they have made accusations about someone else’s competence and if it turns out they are in fact wrong, they should be held to account.

  2. It seems that what is ‘highly dangerous’ is FCA lack of knowledge of the legislation and the headline of this article! Well done the Compliance Consultants who are standing up for the rule of law.

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