Central Bank Intermediary Times – October 2022 October 2022
In this latest edition of the Central Bank’s newsletter the following items are covered of interest to retail intermediaries:
- Recent developments
- Changes to the Fitness & Probity application process and Central Bank Portal
- Issuing of the 2021 industry funding levy
- Central Bank publications relevant for retail intermediaries
- An update on the Consumer Protection Code Review
- Risk of under-insurance in the home insurance market and the role of insurance intermediaries (see RegSol’s article here)
- The impact of Covid-19 on operational resilience and implications for customer service
- Upcoming changes to the voluntary revocation process
1. Changes to the Fitness & Probity application processIQs for PCFs
- Reminders on obligations relating to:
- Changes in qualifying shareholdings
- Legal Entity Identifiers for passporting retail intermediaries (see RegSol’s article here)
For the submission of all applications to become a holder of a Pre-Approval Controlled Function (PCF) in 2023, Individual Questionnaires (IQs) will no longer be submitted through the Online Reporting System (ONR), but will instead be submitted through the Central Bank Portal (Portal). These changes will go live in Q1 2023 and aim to provide applicants with an enhanced process for submitting applications. Changes to the Portal
Since 27th June 2022, Portal users have had the ability to link their ONR accounts to their Portal accounts, which allows users to access the returns service via the Portal platform. For those that have not yet taken this action, the Central Bank are requesting those to link their account as soon as possible, as access to the ONR via the old login screen will be removed for all users in 2023. 2. Changes to the Voluntary Revocation Process & Form
The Central Bank is introducing a number of changes to the voluntary revocation form (where a retail intermediary no longer wishes to retain its authorisation/registration) to ensure the firm assesses the impact of revocation on a its customers. Complaints and Customer Awareness
The Central Bank expects all retail intermediaries applying for voluntary revocation to ensure their clients are not adversely affected by the action, and seek to address any outstanding complaints, where possible, ahead of making an application. Clients should be made aware of the fact that any complaint or claim made after the revocation of an authorisation/registration may not be covered by the firm’s Professional Indemnity Insurance (PII). PII Cover
The Central Bank’s expectation remains that adequate PII cover is in place and will remain in place at least until the revocation has been granted. Firms also need to ensure that they make adequate provisions for liabilities that may fall due post-revocation, and should consider the use of run-off PII cover, where appropriate. From November 2022, in addition to the pre-existing conditions of revocation, the application form will also seek attestations from the applicant that:
- PII is in place and will remain in place until the revocation is granted;
- Where there are unresolved, unsatisfied or undischarged complaints against the applicant, that these have been notified to the applicant’s PII insurer;
- The applicant will inform its PII insurer of any further complaints and/or potential claims that it is aware of up to the point of revocation; and
3. Changes to Qualifying Shareholdings – Obligations for Retail Intermediaries
- Where there is a complaint under assessment with the Financial Services and Pensions Ombudsman (FSPO) that the applicant has liaised with the FSPO in respect of the complaint and made adequate provisions for any potential liabilities that may arise from any settlement.
The Central Bank reminds retail intermediaries of their regulatory requirements when engaging in transactions that involve a change in shareholding of the firm. All Regulated Entities
- In accordance with the Consumer Protection Code (CPC), where a firm intends to cease operating, merge with another, or to transfer all or part of its regulated activities to another regulated entity it must:
- Notify the Central Bank immediately;
- Provide at least two months’ notice to affected consumers to enable them to make alternative arrangements;
- Ensure all outstanding business is properly completed prior to the transfer, merger or cessation of operations or, alternatively in the case of a transfer or merger, inform the consumer of how continuity of service will be provided following the transfer or merger;
Investment Intermediaries (Acquiring Transactions)
- In the case of a merger or transfer of regulated activities, inform the consumer that their details are being transferred to the other regulated entity, if that is the case.
In addition to obligations under the CPC, prior approval from the Central Bank is required before a proposed acquiring transaction as defined under the Investment Intermediaries Act 1995 (IIA) can proceed.
Under the IIA an acquiring transaction means ‘any direct or indirect acquisition by a person or more than one person acting in concert of shares or other interest in an authorised investment business firm:
Provided that after the proposed acquisition –
(a) the proportion of voting rights or capital held by the person or persons making the acquiring transaction would reach or exceed a qualifying holding, or
(b) the proportion of voting rights or capital held by the person or persons making the acquiring transaction would reach or exceed 20 per cent, 33 per cent, or 50 per cent.
(c) an authorised investment business firm would become a subsidiary of the acquirer.’
Section 40 of the IIA requires the following: ‘An acquiring transaction shall not proceed until a supervisory authority has informed the authorised investment business firm and the party making the acquiring transaction in writing that it approves of the acquiring transaction or until three months have elapsed during which the supervisory authority has not refused to approve of the acquiring transaction.’ Insurance Intermediaries
While prior Central Bank approval is not required for a change in shareholding for insurance intermediaries, firms should note that Regulation 12 of the Insurance Distribution Regulations 2018 (IDR) sets out the following requirement:
An insurance, reinsurance and ancillary insurance intermediary or, where applicable, an insurance or reinsurance undertaking, shall notify the Bank in writing without undue delay of any material change in the information provided under Regulation 9(8)2.
Therefore, it is a requirement under the IDR for insurance intermediaries to notify the Central Bank, without undue delay, of any material change in shareholdings and any material change in the information provided under Regulation 9(8).
If you have a query regarding any of the issues highlighted by the Central Bank above, contact us at email@example.com
To read the Intermediary Times publication in full, please see the link below: Intermediary Times October 2022