How is the FCA planning to improve standards in claims management?

Web Process-01-3This week, the Financial Conduct Authority launched a new consultation on the rules it will apply to claims management firms when it starts regulating them in 2019.

We summarise the proposed new rules and outline the consultation process here.

What is happening to claims management regulation?

From 1 April 2019, the FCA will regulate claims management companies (CMCs) in the UK, including those in Scotland, where firms are currently unregulated. In the rest of the UK, the industry is currently governed by the Claims Management Regulator, part of the Ministry of Justice.

In June this year, the Authority published draft rules outlining how it will regulate the sector; you can read more on this in our blog on how to prepare for FCA regulation – advice for claims management firms.

SM&CR to apply to claims management companies

This week the regulator issued a consultation on applying the Senior Managers and Certification Regime (SM&CR) to CMCs.

The SM&CR will apply to authorised CMCs from December 2019. The FCA is encouraging claims firms to read the consultation paper for more details and specific information on when the SM&CR may apply to them and what action they will need to take.

What is the Senior Managers and Certification Regime?

The new regime aims to ‘reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence’.

Two key ways it hopes to achieve this are by:

  • encouraging a culture of staff at all levels taking personal responsibility for their actions.
  • making sure firms and staff clearly understand and can demonstrate where responsibility lies.

All firms must follow five conduct rules set out by the SM&CR. Senior managers also need to follow four additional rules. You can read more about the regime and its implications here.

How can you respond to the consultation?

The consultation is open until 6 December. You can respond by completing the online form, emailing your responses to or writing to Governance & Professionalism Policy, Financial Conduct Authority, 12 Endeavour Square London E20 1JN.

How can you prepare for FCA regulation and the SM&CR?

Launching this week’s consultation, the FCA said that:

‘Firms’ culture and governance is a continuing priority for us. The aim of the SM&CR is to reduce harm to consumers and help strengthen the integrity of the market by making individuals more accountable for their conduct. Nearly all employees of CMCs will have to abide by Conduct Rules and some senior managers will have to be approved by us.’

Claims firms preparing for regulation can get a step ahead by putting in place governance-oriented cultures, where compliance is an in-built part of the business.

You can also subscribe to the FCA’s email updates to receive details of the CMC-focused events the regulator is considering holding in the autumn; you can sign up online if you’re interested in attending.

Look at your communications – familiarise yourself with the FCA’s rules on Treating Customers Fairly and make sure your marketing and customer communications meet their requirements around being ‘fair, clear and not misleading’.

If you are new to FCA regulation, it’s worth reading up on what constitutes a financial promotion. You can also read our 6 tips for making your approval process better, to help you speed promotions to market while remaining compliant.

Find out how you can build in Compliance team approval to your promotions and how technology can help Compliance teams to minimise the risk of regulatory breaches.

Embedding a compliance culture across your business

Adapting to FCA regulation can seem daunting – but if you work in claims management, there are steps you can take to prepare your firm.

Our whitepaper, How to embed a compliance culture into your business has some good tips on making regulatory compliance ‘business as usual’. It’s free to download and you can get a copy here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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