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Financial services regulation and ethics


FCA reviews cash savings market

Samuel Dale

The Financial Conduct Authority (FCA) is to study the £1 trillion UK cash savings market as part of a competition review, and it may also review competition in the annuities market.

The study will be part of a programme surveying across financial services markets and assessing whether or not competition is effective and in the best interests of consumers.

The cash savings study will look at a range of issues, including the effects of “teaser rates” (the introductory interest rates offered to new customers), and account switching. Seven-day switching for current accounts came into effect on 16 September. The FCA says it will consider a market study into competition in the annuities market towards the end of the year if it seems necessary.

The FCA says market studies enable it to examine competition in a market, assessing how consumers and firms behave and interact. The FCA will also call for evidence in early 2014 as part of a strategic review to look at the way competition works between financial services firms. The FCA has a duty to promote competition in financial services.


Investment matters

Rebecca Prestage, The Consulting Consortium

The Financial Ombudsman Service (FOS) has recently published its latest ombudsman news and, as expected, some of the cases make interesting reading.

While there was the anticipated surge in PPI claims, with consumers now reacting angrily to reports that the actual complaints may have been mishandled, there was also the usual selection of investment dispute cases.

Over the last ten years or so, the FOS has seen the performance of the stock market reflected in the number and type of investment related complaints it has received. When markets fall, the number of complaints from consumers unhappy about their investments losing value tends to rise too. However, even though stock markets have generally risen over the last year, there has not been a fall in complaints.

Unsurprisingly, stock-market performance notwithstanding, it would seem that many of the investment dispute case studies can be traced back to the issue of suitability, or lack thereof. The FOS has seen a significant number of complaints where an investment product was recommended that carried a level of risk that was not appropriate for the consumer.

The effects of unsuitability have more of an impact on older consumers and will often result in their family members either bringing about the complaint, or being involved in its resolution. The number of people aged over 85 is expected to double in the next 20 years and nearly treble in the next 30, so it is vital that firms equip their staff and systems to respond effectively and considerately to the needs of older people.

The FOS regularly publishes case studies which illustrate the types of complaint that it receives, as well as the outcome and the reasons for its decisions. Firms would do well to read from these cases and learn from the mistakes of others.


Legacy cash rebates can continue, FCA confirms

Sam Macdonald

The Financial Conduct Authority (FCA) has set out circumstances where cash rebates will be allowed to continue and given specific examples, and confirmed that platform cash rebates on legacy business can continue indefinitely.

The examples include where a client’s investment or regular contributions to an investment are reduced and where a product is re-registered between platforms but otherwise unchanged. The FCA’s earlier platform policy statement confirmed a ban on cash rebates above £1 on new business from April 2014 while unit rebates were allowed to continue but with a tax charge applied.

It also banned all legacy payments between fund managers and platforms from April 2016 but did not stipulate whether it would ban cash rebates to clients on legacy business. Responses to the latest consultation are due by 6 November 2013.



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FCA finds ‘material problems’ in £900bn unit-linked funds review

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