West Midlands Region by monkey6


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									West Midlands Region
Compliance Forum
Minutes of Meeting held at Ace UK Ltd at 11.00 am Wednesday 18 November 2009
1 Present Bob Darwin – Regional Executive – BIBA West Midlands Steve White – BIBA Head of Compliance and Training 21 BIBA members. Apologies were received from 3 members. Bob Darwin welcomed all to this meeting,

2 3 4

Apologies Introduction Topics discussed

Steve White chaired the meeting and dealt with the following points. Industry Guidance Commission Disclosure etc. FSA did a survey of commercial customers and found that 50% did not know they could ask about commission earned. It was their (FSA) intention to bring in compulsory disclosure but backed away when the Industry Guidance was put forward. The FSA will now conduct a thematic review during 2010 by ringing you and asking what you have done to put the Industry Guidance in place. They will expect you to know that receiving commission from an insurer is a potential conflict of interest. You can have conflicts but you need to know how to mitigate them and manage them. They will look at disclosure and its accuracy e.g. status and choice. It was said that there is no rule that states you have to have a Business TOBA for your clients but the rules do require contract specific disclosure. You do not always act on the clients behalf certainly not if you have a binder or scheme. It is likely that FSA will write a rule that means that firms must disclose that customers can ask about commission OR make commission disclosure compulsory should they find that there is insufficient

implementation of the Industry Guidance. All Insurance Brokers are encouraged to use the Industry Guidance (and Annex 1 and 2 which you can adapt to suit your own requirements). You should also maintain a log of customer enquiries on commission. BIBA has produced “top 10 tips” on Industry Guidance. These are available in the BIBA (Quarter 3 2009) Compliance Rules bulletin (also available on the BIBA Website www.biba.org.uk ). FSA will expect you to make changes and you should keep a log of the changes you make. Item 8 of the top ten tips suggests you should write a schedule of services you provide to clarify what you do for the customer. (This could be an added sales opportunity). The following organisations appear to be in favour of disclosure, or are already doing it, which is putting pressure on the FSA - MIFID, IMD2, Competition Authority, Scandinavian Market (do not allow commission) The Law Commission, Large US Brokers. (Note: New York was also looking to bring in compulsory disclosure but have, for time being at least, backed away from this – supposedly waiting to see how the Industry Guidance may work within the UK). Insurance Mediation Directive (IMD) This is subject to revision. Apparently the only state that implemented the IMD as intended was Austria. We messed up by not including an "appropriate product" requirement for non-advised sales. Considerations for revision are - Secondary Intermediaries. Introducers needs a definition and could come out of scope. There are also problems with aggregators which need consideration. There is nothing in the IMD about disclosure however, the new IMD will have FAR greater transparency. Some Europeans will argue for customer agreed remuneration whilst Italy has no laws about disclosure, as Napoleonic law does not require it. This needs to be considered. So as a minimum the IMD2 will require you to tell the customer how you are remunerated (as a maximum it may even go as far as to say that you cannot receive commission at all -i.e. the customer must pay you). BIBA, in conjunction with BIPAR (the European Insurance Intermediary Body), has been, and is being, very proactive in representing the interests of UK Insurance Brokers in the IMD2 discussions.

A change of Government

See the Conservative document "From crises to confidence a plan for sound banking". See page 47 of 54 for the only one comment on General Insurance (GI) brokers. The Conservatives propose abolishing the FSA and split regulation between the Bank of England (B o E) and The Consumer Protection Agency (CPA). The latter would undoubtedly be manned by FSA type people and Office of Fair Trading people. The Bank of England will do high level work whilst GI will probably come under the CPA. Therefore brokers will not be in Bank of England “bucket” for fees etc. Transparency will be part of the requirements. It is likely that the new regime would move back to being rules based rather than the present (FSA) principles based. A Regulation Ministry to likely to head it up rather than the Treasury. The link to the Conservative Party’s White Paper –
http://www.conservatives.com/News/News_stories/2009/07/~/media/Files/Dow nloadable%20Files/PlanforSoundBanking.ashx

Client Money (CM). All broking firms should check that they are handling CM correctly. Please refer to the recently issued CEO letter about concerns the FSA have and make sure you are ok. BIBA will also be issuing a CEO letter and you should give this attention as necessary. Ensure that you handle Insurer money in accordance with the insurer TOBA’s also or else you become liable if the money is lost for any reason. You need a formal written procedure regarding CM. You may need to consider diversification regarding CM. Depending on how much CM you hold you may need to consider using more than one bank (bearing in mind the guarantee limit on the first £50,000 in any one bank). The link to the FSA letter on client money –

Financial Crime. The Proceeds of Crime Act applies to all General Insurance (GI) Brokers. You need to report suspicious activity. The Serious Organised Crime Agency (SOCA) get no reports from the GI sector and are concerned about this. It is suggested that you look at the SOCA website www.soca.gov.uk (go to proceeds of crime - suspicious activity reports - source registration).

Register your firm and write a procedure for staff to follow. An example may be a person who always pays by cheque but pays £5K in cash. IFA apparently did a "know your customer" with a potential client but found some problems and refused to deal with him. Subsequently the potential client was imprisoned but so too was the IFA - for not reporting their suspicions. It is understand that if you report suspicious activity it is treated anonymously.

Financial Sanctions. Check all clients against the HM Treasury list or risk 2 years in jail.

Data Security. FSA are active in this area. Main reason is to prevent identity fraud. Think about the use of memory sticks, laptops and home computers. What are the security arrangements and the potential for theft of data. Be aware that there are no small firms exemptions. Have a documented policy and procedure in place. . Contract Certain (CC). Keep measuring CC to ensure that you are protecting your interests. When not CC you are exposing your PI cover Decide what cases are contract uncertain and record them as well as CC cases. Ensure that all contracts become certain. FSA are doing desk based thematic work in this area. You should keep at least 6 months figures before the FSA email you. Feed CC figures into your Management Information (MI) meetings (should be held regularly), discuss and record.

Treating Customers Fairly (TCF). FSA are very active in this area and have seen everybody who is involved in higher risk products. They are now due to telephone or see all others as well - beware.




Broker Academy. This Is going well
Please note that details of the West Midlands Region 2010 Training Programme are available on the BIBA website. Please contact Bob Darwin if you need additional of the courses available to members. More details can be obtained from Bob Darwin (0121 354 7760 or BobDarwin@blueyonder.co.uk )


Future meetings

Bob Darwin thanked all members for their attendance, their help, and participation. Thanks were also extended to Steve White for his comprehensive review of the present position with the FSA The meeting concluded at about 1.00 pm.

Next Meeting The next compliance forum will be held at the same venue in March and details will be advised

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