PIMFA Weekly News Bulletin - 2 August 2021

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PIMFA WEEKLY NEWS BULLETIN | 2 August 2021 Dear Nigel,

Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read the latest industry news impacting you and your firm.

FCA Consults on Proposals to Boost Disclosure of Diversity on Listed Company Boards and Executive Committees

The FCA is proposing to change Listing Rules to require companies to disclose annually, on a comply or explain basis, whether they meet specific board diversity targets and to publish diversity data on their boards and executive management. The FCA is seeking to increase transparency for investors on the diversity of company boards and executive management and to improve considerations of broader diversity aspects within diversity policies and related disclosures by companies.

This proposal is made in the context of domestic and wider international initiatives to promote greater diversity on listed company boards, increasing scrutiny of companies by investors looking at environmental, social and governance (ESG) factors, a desire for better data to inform decisions and academic studies which suggest that greater diversity on boards may have positive effects on corporate governance and corporate performance.

The FCA’s proposals aim to build on progress achieved under existing initiatives to improve diversity on the boards of the largest UK companies. Such initiatives include the

Hampton-Alexander Review and Parker Review, and similar initiatives in international markets.

The changes also follow the FCA’s recent discussion paper, published earlier in July, exploring how to promote diversity and inclusion across the financial services sector as a whole. Diversity will be an ongoing focus for the FCA, beyond the proposals it sets out here. The FCA is consulting for 12 weeks on these proposals, with a closing date of 22 October 2021.

Talent, Diversity and Inclusion within the Wealth Management and Advice sector

Talent, Diversity and Inclusion are a high priority for CEOs in the sector, according to CEO sentiment surveys PIMFA have conducted over the past 18 months. In order to understand the make-up, challenges and current activities of firms, we have compiled a simple survey, based on data that we believe firms may have gathered.The questionnaire is timely given the publication of the Discussion Paper from the FCA/PRA/BoE on diversity and inclusion.

Data is key to understanding the picture in the sector and any required action.

We would really appreciate it if HR colleagues or other individuals in the wealth management sector firms would provide response to the survey. All information received will be aggregated and anonymised by PIMFA staff. Individual company data will be stored securely and not shared in any way. The data required by the questionnaire will be harder to provide for some firms, particularly smaller ones. However, even incomplete data will be useful.

No matter where your organisation finds itself and how advanced your people data or diversity and inclusion initiatives are, providing responses will help obtain an accurate picture. The purpose of gathering this data is to inform initiatives we can undertake together as an industry, to promote the sector more broadly and to identify gaps where collective action can be undertaken.

The link to the survey can be found here. If you have any questions, please get in touch with Maja Erceg.

Changes to the FCA’s Decision-Making Procedure

The FCA is consulting on changes to the decision-making process that will enable the regulator to make faster and more effective decisions, prioritising the right outcomes for consumers, markets and firms. This will help the FCA improve how it tackles firms and individuals who do not meet the required regulatory standards, a key part of the Transformation Programme. This involves streamlining the decision-making and governance so that it can respond more quickly, and so the FCA wants to move some decision making from the Regulatory Decisions Committee (RDC) back to the Executive.

The RDC will still make decisions in relation to enforcement cases where the FCA is proposing a disciplinary sanction or seeking to impose a prohibition order.

The consultation, published on 29 July, is proposing that certain decisions will now be made by FCA staff, including: using own-initiative intervention powers to impose a requirement on a firm, or to vary its permissions; making a final decision in relation to a firm’s application for authorisation or an individual’s application for approval that is contested; where the FCA decides to take action in straightforward cancellation cases where it wants to remove a firm’s permissions because a firm does not meet their regulatory requirements; the decision to commence civil and/or criminal proceedings. The Consultation is open for comments until 17 September 2021.

Simon Harrington, Senior Policy Adviser at PIMFA commented: “PIMFA welcomes moves by the Regulator to streamline its decision making which should, in principle, make it a more agile and proactive Regulator.

“We have been very clear – publicly and privately – that thriving retail markets depend on effective and proactive supervision of firms, which are either willingly or unknowingly introducing harm into the market.

“We believe that the proposals set out will make the Regulator more efficient in its decision making and, provided that they are accompanied by improvements in identifying harm in the first place, lead to better outcomes for consumers.”

PIMFA’s paper on the future of the regulator can be found here.

Inform, Influence, Improve - City Corporation urges finance sector to get behind Socio-Economic Diversity Taskforce

The City of London Corporation has called on firms from the UK’s financial and professional services industry to harness their colleagues and networks to support the work of the Socio-Economic Diversity Taskforce, which aims to create a more diverse and inclusive financial and professional services sector.

Speaking at a virtual meeting of the Taskforce, City Corporation Policy Chair Catherine McGuinness outlined three asks for individuals and organisations across the sector: inform – get involved in shaping our outputs; influence – raise awareness of the need for greater socio-economic diversity within financial and professional services organisations and beyond; improve – encourage organisations to collect data on workforce socio-economic diversity and explore their own areas for improvement.

The City Corporation was commissioned to establish the Taskforce by HM Treasury and the Department for Business, Energy and Industrial Strategy in November 2020 to boost socio-economic diversity in UK financial and professional services. The taskforce is the first of its kind. The vision is for equity of progression - where high performance is valued over ‘fit’ and ‘polish’.

There will be three workstreams, supported by three delivery partners - Deloitte, MyKindaFuture and PwC. Industry consultation and roadmap on how government, regulators and sector bodies can incentivise employer action; membership body/peer network for financial services, focusing specifically on progression, a safe space to share best practice / benchmark against sector peers, and a productivity analysis, to build the business case for socio-economic diversity at senior levels.

Latest PIMFA Press Releases

PIMFA welcomes FCA proposals to streamline decision making

Latest PIMFA Press Coverage

FT Adviser: PIMFA warns on 'flawed' Action Fraud revamp

PIMFA welcomes Government moves to improve fraud reporting by replacing Action Fraud – but says action through the Online Safety Bill would be more effective Coalition of consumer groups, charities and industry bodies calls for inclusion of paid-for online advertising in Online Safety Bill

Money Marketing: PIMFA chief: How to fix Generation X’s looming pension emergency

FT Adviser: FCA plan shows the regulator has been listening

IFA Magazine: PIMFA Diversity & Inclusion PIMFA welcomes FCA business plan proposals to prevent harm arising in the market faster and more effectively

Awards

Money Management: Adviser lessons from the UK

The Retail Intermediary Market 2020

The FCA has published their latest analysis of the intermediary sector based on data drawn from the Retail Mediation Activities Return (RMAR) for 2020. Firms that provide advice on, or arrange, mortgages, insurance policies or retail investment products for consumers must send the FCA information about their activities on the RMAR.

Key findings: Compared to 2019, reported revenue earned from retail investment intermediation fell by 1% to £4.4 billion and reported revenue from mortgage broking fell by 4.2% to £1.22 billion. In contrast, revenue from non-investment insurance distribution rose by 1.2% to £18.62 billion. The share of retail investment revenue accounted for by commission continues to fall – down from 16% in 2019 to 14% in 2020.

For non-investment insurance distribution and mortgage broking, commission remains the primary source of revenue, accounting for 84% (83% in 2019) and 78% (77% in 2019) respectively. The reported number of retail investment adviser posts across all firms fell slightly to 36,377 from 36,401 in 2019. Posts at financial adviser firms accounted for 76% (27,501) of these. Within these, firms with over 50 advisers accounted for 49% of all adviser posts in 2020, up from 47% in 2019.

For firms providing retail investment advice, those providing independent advice accounted for 61% of revenue earned from adviser charges (up from 59% in 2019) and those

providing restricted advice accounted for 39%. The share of revenue from adviser charges accounted for by ongoing advice services increased to 74% from 70% in 2019 and the share accounted for by initial/one-off advice services fell to 26%. This continues a trend seen in recent years.

EVENTS & LEARNING

Diversity & Inclusion Awards Entries Close: 17 August | Event Date: 20 October 8 Categories 15 Judges 2 weeks remaining to submit your entry FREE to Enter WHY ENTER? •

High profile FREE opportunity to raise awareness of the fantastic work you and/or your firm have been doing over the last 12 months

•

Build the credibility and diversity of your industry while showcasing your firm and staff

•

Attract the best talent you need to push your business forward and gain a competitive advantage

•

Showcase your new initiatives while gaining inspiration and ideas from your peers

•

Gain recognition for your expertise and share your experiences and insights.

We are encouraging all organisations - large or small - at whatever point they are on with their D&I Journey to enter. Whether you are just starting out with a

small pilot or initiative, or are further along in your journey, and you can share experiences and insight, and we want to hear from you about the work you are doing - all 8 of the categories are available to enter here.

Find out more and start your entry

View upcoming PIMFA Events and Learning here.

FCA publish second Policy Statement on IFPR

The FCA have published their second Policy Statement (PS21/9) on IFPR. The PS broadly covers the themes consulted on in CP 21/7, including the interaction between AUM and COH and the ICARA process. Here are some key points from the PS: 1.

K-DTF now can apply to firms who deal in its own name as an agent (e.g. RSP

trades). This means that agency trades performed in the name of the firms are to be included in DTF (and there is no requirement for the firm to change permission).

2.

The PS contains clarifications on the application of the Remuneration Code to

Prudential Consolidation Groups - the Remuneration Code applies at individual level where the Group Capital test has been approved or where a Consolidated Situation does not exist).

3.

There are further clarifications on the differences between Investment Advice and

Investment Advice on an ongoing basis (i.e. the divide between whether K-AUM or K-COH apply to trades when undertaking the MiFID Activity of Investment Advice).

4.

There is additional guidance on ICARA and risk management and a commitment to

produce more in the next 12-36 months, as well as a statement recognising that this is a new regime and that the approach will be kept under review and revisited at a later date may this become necessary.

The work of the PIMFA IFPR working group will resume once the third CP is published.

HM Treasury consult on UK Prospectus Regime

In response to Lord Hill’s UK Listing Review, the HM Treasury have recently published a Consultation paper on proposals to reform the UK’s prospectus regime, which invites comments on the following proposed statements of the purpose of a prospectus: “a document of record, available to the public free of charge, that provides potential investors with the information they need and that they can rely on to make an investment decision in a security.”

The CP presents a valuable opportunity for market participants to voice their views on the current prospectus framework and contribute to replacement regime in the UK. The consultation closes on 24 September 2021, but will require further Government consultation, followed by legislation (if the proposals are taken forward), together with a corresponding FCA review and consultation on the more detailed rules.

Please contact Michael Cahill for further information.

PIMFA's Consultation Responses

PIMFA’s latest Consultation Response is to the FCA's CP21/9 on the changes to UK MiFID’s conduct and organisational requirements.

Read this and all other PIMFA consultation papers here.

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