SlideShare una empresa de Scribd logo
1 de 4
Descargar para leer sin conexión
Click here
                                                                                                                                   Join Our

                                                                                                                                    metric Group




                                                               CHASE COOPER




FSA's Retail Risk Conduct Outlook - new areas for
concern?
                                                             metric
                                                    Nick Gibson, Chase Cooper’s Director of Compliance Solutions discusses:
Guidance on new Bribery                             the FSA’s first Retail Conduct Risk Outlook — emerging risks and
Act Published                                       potential concerns
The UK's Bribery Act 2010 comes into force on       The FSA published its very first Retail Conduct Risk Outlook on 28th February.
the 1st of July this year. At the end of last
month the Ministry of Justice released a 45-        Most of the retail industry is already coming to the end of its decision-making process in
page guidance for commercial organisations          terms of new business models to meet the requirements of the Retail Distribution Review,
impacted by this new
                                                             so the article provides some interesting reality checks.
act, together with a
9-page quick start                                           The outlook is interesting less for its analysis of current issues - including payment
guide. This welcome
                                                             protection insurance and sales of structured products and deposits to retail
guidance seeks to
                                                             investors - but more for what it tells us about the FSA's likely activities going
clarify many of the
areas of concern,                                            forward. This forward-looking element is split between emerging risks (where
namely the treatment                                         there is already evidence of poor conduct by firms) and potential concerns, which
of joint ventures,                                           is the FSA's own crystal ball gazing based on their
corporate hospitality,
                                                             assessment of the environment.                                  IN THIS ISSUE OF metric
bribery within the
                                                                                                                             ● SEC probe Chinese firms
supply chain, and                                            FSA regulated firms, from retail banks to                       ● ERM Discussion Drafts
activities of
                                                             independent financial advisers, should be                       ● Singapore targets CRAs
"associated persons". It also states that, should
any of the infringements be committed by an         methodically reviewing their current and proposed services               ● Vickers Report released
employee or agent, the existence of adequate        and activities in those areas described by the FSA as emerging
anti-bribery procedures in that organisation        risks to assure themselves that they are operating to an adequate standard, as FSA will
would be considered favourably as defence
                                                    certainly be looking at them itself. We look at some key issues.
against penalties. Key statements were - that
an organisation was not necessarily liable for      FSA's Retail Distribution Review (RDR)
any bribery within a supplier simply on the
                                                    Many of the emerging risks described implicitly arise from the imminent implementation of
basis that it was receiving that supplier's
goods, - also that genuine hospitality and          the Retail Distribution Review, and the changes to firms' business models that arise from it.
promotional expenditure was not necessarily
                                                    As an aside, it is interesting to note that Barclays has already declared its intention to exit
banned. The guidance laid down six key
principles in the creation of adequate              the business of advising retail customers on investments through its branch network - the
procedures: proportionality, top level              Barclays Financial Planning division - apparently due to low levels of customer
commitment, risk assessment, due diligence,         activity and increasing regulatory costs.
communication and monitoring/review. It also
clearly stated that procedures were not             A clear risk is that firms may be seeking to minimise cost and maximise



                                                                                                                                                3
                                                                                                                                        ISSUE




needed where there was very little risk of          recurring income streams ahead of RDR go-live, through a variety of
bribery being committed on behalf of the
                                                    mechanisms, to cushion themselves against the new regulatory
organisation. m
                                                    environment. Examples are:                         continued on page 2
network, as those charged with control try to manage more people,
 § Accepting large commissions offered by providers who are seeking
                                                                                  learn new products, and cope with a greater volume of sales. All this
    to maximise market share, resulting in unnecessary product churn
    from the investor's viewpoint;                                                seems self-evident, but network firms need to show that they
                                                                                  recognise the risk and take steps to mitigate it.
 § Increasing the amounts of trail commission charged on current sales;
                                                                                  Remuneration Issues
 § Maximising commission generation ahead of selling the firm or                  Remuneration issues are always an area of concern, particularly where
    exiting the market;                                                           there are explicit links
                                                                                                                         More than half of unsuitable
 § Leveraging inconsistency between levels of commission on                       between remuneration




                                                                                                                metric
    equivalent products packaged in different ways, leading to the                and the achievement of                 investment files reviewed by
    possibility that firms will favour products offering a higher                 sales targets: the FSA is              the FSA failed on the point
    commission but delivering similar results;                                    concerned that firms                   of the portfolio not meeting
                                                                                  operating such targets                 the risks the customer was
 § Using third party investment platforms to facilitate advice and
                                                                      are not devoting enough                 willing and able to take.
   administer client portfolios (about half of all new investor money
                                                                      effort to oversee the
   now is placed through platform services) which only view a limited
   range of investment products, thus risking unsuitable advice.      suitability of such sales given the clear conflict of interest faced by the
                                                                      sales staff.
 The FSA acknowledges inconsistencies between firms' terms of
 business and platform services provided, and a lack of clarity around            Whilst it is interesting that the FSA describes this as an emergent risk
 the platform charging model towards the investor.                                - the conflict between sales levels and related incentives has always
 It is not remotely surprising that this should be the case, given that the FSA   been with us - it can only be that the economic environment makes
 has effectively unilaterally changed the retail advice business model within     achievement of targets more challenging, increasing the risk that
 the industry. However, in the light of this new reality, actions to maximise     sales advisers will act inappropriately to achieve targets.
 income and shareholder value to ensure survival and prosperity by firms in       Customer Risk Profiling
 the retail financial services sector could have some unforeseen
                                                                                  Investment risk profiling for customers is also an emerging area of
 consequences: a business model that is unacceptable to the FSA is likely to
                                                                                  concern, likely to lead to customer detriment. Simply, if the risk
 cost the owners more than the revenues generated or safeguarded.
                                                                                  profile is inaccurate or incomplete, there is a high chance that advice
                                                                                  and sales based upon it will be unsuitable.
 In itself, this is a significant governance risk for firms: how do senior
 management or proprietors mitigate the risk that all of the initiatives          More than half of unsuitable investment files reviewed by the FSA
 adopted to meet the RDR and carry on in business, as a package, are              failed on the point of the portfolio not meeting the risks the
 not sufficiently focused on ensuring that the clients' best interests            customer was willing and able to take. This appears to include a
 continue to be served? Have senior management taken a step back                  recognition that an unduly conservative portfolio selection fails the
 and looked at the new business model from soup to nuts?                          customer by reducing their opportunity for income and capital
                                                                                  gain. The FSA is - not unreasonably - expecting a reasonably
 IFA Networks
                                                                                  precise calibration between the consumer's expressed risk
                                                                                                                                                             2
 A further risk generated in part by the RDR is a lack or downgrading
                                                                                  appetite and the advice or portfolio constructed for them.
 of systems and controls within IFA networks. Smaller firms may be
 seeking to reduce overheads by becoming appointed representatives                This is increasingly challenging at a time when customers seek the
 of an adviser network. At the same time, existing networks are, in               unrealistic objective of minimal risk for high returns, leading firms to
                                                   common with the rest of consider more highly-structured products (which they themselves
                                        metric




A business model that is                           the industry, seeing           may not understand in depth) in an attempt to satisfy their clients.
unacceptable to FSA is                             falling business levels
                                                                                  In response to this key issue, the FSA released guidance in January
likely to cost the owners                          due to the adverse
                                                                                  2011 on assessing suitability, underlining that firms often fail to
more than the revenues                             economic environment.
                                                                                  collect comprehensive information - an example given is the client's
generated or safeguarded.                          Some are adopting a
                                                                                  tolerance for loss - or misinterpret the information collected through
                                                   strategy of increasing
                                                                                  vagueness and a lack of clarity in the collection process, resulting in
 numbers of appointed representatives to sustain income levels,
                                                                                  unsuitable outcomes. The main thrust is that firms should ask very
 together with increasing product sales and moving into more
                                                                                  clear questions in order to get precise information that enables them
 complex investment products.
                                                                                  to provide specific advice that they can demonstrate is in the
 The FSA is concerned that fast expansion at a time of falling business           customers' best interests.
                                                                                                                                      continued on page 3
 will put strains on the systems and controls used to manage the
What should firms be doing?                                              New ERM draft standards issued
Taking a step back, and looking across the piste of the proposed new     Discussion drafts developed by the Enterprise Risk Management
business model to seek to ensure that:                                   (ERM) Task Force of the Actuarial Standards Board (ASB) are now
                                                                         available for comment. The two documents are titled "Actuarial
§ The business model for the new environment, when looked at as a                                Professional Standards for Risk Evaluation"
  whole, will continue to serve the best interests of customers;
                                                                                                 and "Actuarial Professional Standards for
                                                                                                 Risk Treatment." Both drafts are contained
§ The information held about customers is sufficiently clear and                                 within the document, Actuarial Standards of



                                     metric
  precise to enable the provision of suitable advice, neither
                                                                                                 Practice for Enterprise Risk Management.
  overshooting nor undershooting the client's risk appetite;
                                                                                                 The purpose is to share the work done to
                                                                         date and to collect input from interested parties. Comments are
§ Risks inherent in new products and in using platform services are
                                                                         requested by June 15th, and are welcome from all interested
  properly understood and communicated internally; and
                                                                         parties, including non-ASB members. The drafts can be viewed at:
                                                                         www.actuarialstandardsboard.org m
§ That the control environment does not lag behind the business
  environment, and that the systems and controls for managing the
  risks inherent in all of the client-facing processes (whether in a     Singapore proposal
  single firm or a distributed network) remain sufficiently robust to    to regulate credit
  mitigate the risk of negative outcomes for clients. m
                                                                         rating agencies
                                                                         The Monetary Authority of
                       Coming up in Issue 4 of metric,
                                                             metric
                                                                         Singapore (MAS) has released
                       Tony Blunden, Chase Cooper's
                                                                         a consultation paper on proposed regulation of credit rating
                       Head of Consulting discusses:
                                                                         agencies (CRAs). The MAS proposes that CRAs be licensed
                       ‘KRIs: Finding the right way’. A
                                                                         under the Capital Markets Services (CMS) licensing regime,
                       considerable number of firms are
                                                                         and "Providing credit rating services" be added as a regulated
                       still finding key risk indicators a
                                                                         activity. Licensees who carry on the business of providing
                       difficult task. During a recent
                                                                         credit rating services will be required to comply with existing
                       Chase Cooper Risk Breakfast
                                                                         requirements that apply to all CMS licensees. The proposal,
there was a lively discussion on KRIs and attendees
                                                                         which aims to promote the quality and integrity of rating,
were surveyed on their current state of development.
                                                                         strengthen CRA independence and investor protection, and
The article will look at a straightforward methodology
                                                                         enhance protection of information, is based on the IOSCO
for identifying KRIs and their controls. In addition,
                                                                         Code of Conduct Fundamentals for CRAs.
the result of the survey will be published.
                                                                         The European Union has already introduced new CRA licensing
                                                                         requirements and the US has extended existing licensing
                                                                         regulations. Hong Kong consulted on new CRA rules in 2010
                                                                         and these are expected to take effect in June. m
 SEC probes Chinese firms listing in the USA
 Following a series of accounting scandals, the US SEC has launched                          Chase Cooper Strategic                            3
 a fraud investigation into Chinese companies buying into quoted US
                                                                                             Compliance Breakfast
 companies. The target for this investigation is those firms that have
                      gained US listings by reverse mergers into                             Briefings are held each month and
                      existing publically quoted, but possibly                              are free to attend. Breakfast is provided.
                      dormant, US companies. Since the beginning of      For more information visit www.chasecooper.com.
                      2007 there have been over 600 such mergers         Recent briefings addressed the FSA’s changed Client Money
                      with a quarter of these coming from Greater        and Assets regime, and what firms should be doing in the face
                      China. There is concern that companies are         of FSA’s more aggressive approach, coupled with the new re-
 carrying out these mergers with the express purpose of raising          quirements for client money oversight, reporting, and diversi-
 capital on US exchanges and that the overseas companies are often       fication of client money deposits. In April we reviewed the
 already in financial difficulties and that their mergers may have       sometimes controversial Bribery Act 2010 following the Treas-
 been based on inadequate or, at worst, falsified accounting             ury’s guidance in March, particularly the new corporate obliga-
 records. In the past few weeks, the SEC has suspended trading on        tions, with a view to taking some of the fear and heat out of
 two organisations, China Century, a media company, and                  responses to the new Act earlier in the year. We looked at the
 Chianjiang Mining and New Energy. In both these cases the US            practical steps necessary for a risk-based and proportionate
 auditors of these companies had resigned saying they were unable        approach based on the guidance – whilst still being able to
 to verify the sources of accounting details. m                          take clients to Twickenham. m
Regulatory                                             ASYMmetricAL
                                                       The back page, sometimes critical view from the Editor
NEWS
The Financial Stability Board (FSB) has published         There has been a lot in the press about the possibilities of banks moving away from the City of
the detailed national responses to an FSB survey          London. This would be as a consequence of the UK Coalition Government's plans to increase
on the implementation of the latest G20                   the restrictions on banks in the areas of remuneration, to impose levies on banks' balance
recommendations which was conducted in                    sheets, and, critically, to look at breaking up large bank's into separate investment and retail
September 2010. The responses formed the
                                                          banks. This last threat has caused major banks such as Barclays, HSBC and Standard Chartered
progress report on implementation submitted
                                                          to issue veiled threats that they may consider moving their reporting base to another country.
to the G20 Seoul Summit in November 2010.
The Hong Kong Monetary Authority has                      Whilst the mayors of New York and Paris say they would welcome the large British banks,
released a further supervisory policy (LM-2) on           would governments feel the same. After all, who would then bail them out following another
sound systems and controls for liquidity risk             crisis? The recent Vickers Report has also played down the threat – whilst still leaving the door
management. These are based on the Liquidity              open to regulatory restructuring of banks. It is also a given fact that moving headquarters, and
Sound Principles release by the BIS in                    regulatory oversight, of a global bank is no easy operation. Ignoring logistical and regulatory
September 2008.                                           problems, there are reputational questions - what will existing depositors and investors do?
Hector Sants, the FSA's CEO,                                             What will be the reaction from both London or losing financial centres? There
has sent out an update on                                                could be reputational impact and, this being difficult to quantify, is a risk that no
February's plans to transfer                                             bank wishes to run.
prudential supervision of
                                                                         But regulatory inconsistencies are of serious concern to financial institutions. In
banking and insurance to three
bodies - a subsidiary of the                                             the years leading to the last financial crisis, the first 8 years of the 21st century,
Bank of England, the Prudential                                          there was a consistency in global financial regulation - although the criticism that
Regulation Authority, and the                                            it did not work could be valid. Basel II was on the way to being adopted in a
Financial Conduct Authority.                                             globally consistent manner - the US was lagging but the view was that they
This announces the                                                       would have come into line. Sarbanes-Oxley was being adopted by most large
achievement of the first                                                 global corporations and was seen as a global best practice for many companies
milestone - the replacement of                                           who were not otherwise bound by this US regulation. And IFRS with its mark-to-
the current Supervision and         HECTOR SANTS, current Chief
                                                                         market principles was well on the way to being a global standard for all
Risk business units with a         Executive of the FSA and Chief
                                    Executive designate of the PRA       accounting disclosures.
Prudential Business Unit (PBU)
and a Conduct Business Unit (CBU).                        All this has now changed. Although Basel III has global approval from regulators, there are a
The much awaited report from the Independent              significant number that have suggested that its implementation will have regional variations,
Banking Commission (the Vickers Report named              both in implementation and in the recognition of capital components. The USA has come up
after Sir John Vickers, its chairman) was released        with a new set of rules - the Dodd-Frank Act, a massive piece of legislation with new standards
April 11th. It makes recommendations on how               and new supervisory agencies to monitor these standards. This will occupy the attention of US
the retail banking business of UK banks is to be          banks for many years to come and the impact on foreign companies quoted on US exchanges
isolated from their investment banking arms               (the means by which they were drawn into Sarbanes-Oxley compliance requirements) remains
and recommends that the retail banking arms
                                                          to be seen. The global roll-out of IFRS has been set back by criticisms, amongst which
carry an extra regulatory Tier 1 capital obligation
of 3% taking them to a minimum of 10%. It also
                                                          are that mark-to-market makes the accounts excessively volatile. In addition to these
                                                          potential inconsistencies, there are national differences in the regulatory treatment of
                                                                                                                                                                     4
makes recommendations on how bondholders
should bear responsibility for bank losses.               hedge funds - the UK being at odds with the rest of Europe who wish these to be more
However the report falls short of proposing               tightly regulated - and in the wish to restrict the remuneration and bonus packages of bankers
complete separation of the investment and                 - here the UK is considered one of the hawks.
retail banking businesses and does not specify
                                                          Whereas the first decade of this century was marked by a collaboration and consistency
how the bondholder losses will be
                                                          between the regulators of the major financial markets, this second decade looks like it is
implemented. The reaction seems to be relief
                                                          moving towards a free-for-all market with each country aiming to satisfy its national
from the banks and dissatisfaction for those
who saw this report as a way to significantly             requirements and the wishes of its voters. Given the situation, can one blame banks, and bank
restructure the banking industry.                         shareholders, for considering moving their head offices to those cities that will allow them the
                                                          greater freedom and the larger profits? Surely it is time for the G20 to come up with some
Reports from Washington indicate that the US
authorities are divided on the list of US SIFIs           agreement on regulatory consolidation - or are we into the era of regulatory arbitrage, and
(systemically important financial institutions).          increased regulatory risk?
The US Fed and the Treasury favour a list limited         Early this month the UK's House of Lords Committee on Economic Affairs released a vitriolic
to only the major US global banks whilst the
                                                          criticism of the auditing profession in regards to its failure to play a part in preventing the last
FDIC wish to include large hedge funds, insurers
                                                          financial crisis. Recommendations included the
and asset managers. Institutions in question
                                                          encouragement of increased competition and that risk                            metric is published by
                                                                                                                                 metric




have launched a major lobbying action to avoid                                                                                            Chase Cooper.
being designated as SIFIs claiming it would add           committees audit the auditors. Could this be an additional area                 web: www.chasecooper.com
to their costs and lock up capital.                       of arbitrage? Auditor arbitrage? m                                              email: editor@chasecooper.com

Más contenido relacionado

La actualidad más candente

Ny Law Journal 10 28 08
Ny Law Journal 10 28 08Ny Law Journal 10 28 08
Ny Law Journal 10 28 08HMS Associates
 
Valuation Discounts for Holding Company: A Business Valuation Article
Valuation Discounts for Holding Company: A Business Valuation ArticleValuation Discounts for Holding Company: A Business Valuation Article
Valuation Discounts for Holding Company: A Business Valuation ArticleCorporate Professionals
 
Working capital adjustments - Transfer pricing
Working capital adjustments - Transfer pricing Working capital adjustments - Transfer pricing
Working capital adjustments - Transfer pricing TAXPERT PROFESSIONALS
 
OSD - Corporate Govenance part II
OSD - Corporate Govenance part IIOSD - Corporate Govenance part II
OSD - Corporate Govenance part IImokshwalia
 
Risk in dervatives
Risk in dervativesRisk in dervatives
Risk in dervativesAkhel99
 
Insidertrading602 (1)
Insidertrading602 (1)Insidertrading602 (1)
Insidertrading602 (1)saharkhan1011
 
Introduction to Business Valuation & Understanding the Engagement
Introduction to Business Valuation & Understanding the EngagementIntroduction to Business Valuation & Understanding the Engagement
Introduction to Business Valuation & Understanding the Engagementbrienj1nacva
 
Investor Presentation - November 2011
Investor Presentation - November 2011Investor Presentation - November 2011
Investor Presentation - November 2011Multiplus
 
Benchmarking
BenchmarkingBenchmarking
BenchmarkingDomball
 
Creating Value Through Corporate Trade
Creating Value Through Corporate TradeCreating Value Through Corporate Trade
Creating Value Through Corporate TradeActive International
 
Competition policy, cartel enforcement and leniency program
Competition policy, cartel enforcement and leniency programCompetition policy, cartel enforcement and leniency program
Competition policy, cartel enforcement and leniency programDr Danilo Samà
 
Marketing Intangibles - A Critical analysis of the transfer pricing debate
Marketing Intangibles - A Critical analysis of the transfer pricing debateMarketing Intangibles - A Critical analysis of the transfer pricing debate
Marketing Intangibles - A Critical analysis of the transfer pricing debateAjit Kumar Jain
 
Obtaining Australian merger and acquisition clearances in 2012
Obtaining Australian merger and acquisition clearances in 2012Obtaining Australian merger and acquisition clearances in 2012
Obtaining Australian merger and acquisition clearances in 2012Martyn Taylor
 
Insights Newsletter Autumn 2011.Final[1]
Insights Newsletter Autumn 2011.Final[1]Insights Newsletter Autumn 2011.Final[1]
Insights Newsletter Autumn 2011.Final[1]mcarruthers
 
Paying the ad_agency
Paying the ad_agencyPaying the ad_agency
Paying the ad_agencyAdCMO
 

La actualidad más candente (17)

Ny Law Journal 10 28 08
Ny Law Journal 10 28 08Ny Law Journal 10 28 08
Ny Law Journal 10 28 08
 
Valuation Discounts for Holding Company: A Business Valuation Article
Valuation Discounts for Holding Company: A Business Valuation ArticleValuation Discounts for Holding Company: A Business Valuation Article
Valuation Discounts for Holding Company: A Business Valuation Article
 
Working capital adjustments - Transfer pricing
Working capital adjustments - Transfer pricing Working capital adjustments - Transfer pricing
Working capital adjustments - Transfer pricing
 
OSD - Corporate Govenance part II
OSD - Corporate Govenance part IIOSD - Corporate Govenance part II
OSD - Corporate Govenance part II
 
Risk in dervatives
Risk in dervativesRisk in dervatives
Risk in dervatives
 
Insidertrading602 (1)
Insidertrading602 (1)Insidertrading602 (1)
Insidertrading602 (1)
 
Introduction to Business Valuation & Understanding the Engagement
Introduction to Business Valuation & Understanding the EngagementIntroduction to Business Valuation & Understanding the Engagement
Introduction to Business Valuation & Understanding the Engagement
 
Investor Presentation - November 2011
Investor Presentation - November 2011Investor Presentation - November 2011
Investor Presentation - November 2011
 
Benchmarking
BenchmarkingBenchmarking
Benchmarking
 
Creating Value Through Corporate Trade
Creating Value Through Corporate TradeCreating Value Through Corporate Trade
Creating Value Through Corporate Trade
 
Competition policy, cartel enforcement and leniency program
Competition policy, cartel enforcement and leniency programCompetition policy, cartel enforcement and leniency program
Competition policy, cartel enforcement and leniency program
 
Marketing Intangibles - A Critical analysis of the transfer pricing debate
Marketing Intangibles - A Critical analysis of the transfer pricing debateMarketing Intangibles - A Critical analysis of the transfer pricing debate
Marketing Intangibles - A Critical analysis of the transfer pricing debate
 
Obtaining Australian merger and acquisition clearances in 2012
Obtaining Australian merger and acquisition clearances in 2012Obtaining Australian merger and acquisition clearances in 2012
Obtaining Australian merger and acquisition clearances in 2012
 
Adwitiya
AdwitiyaAdwitiya
Adwitiya
 
Insights Newsletter Autumn 2011.Final[1]
Insights Newsletter Autumn 2011.Final[1]Insights Newsletter Autumn 2011.Final[1]
Insights Newsletter Autumn 2011.Final[1]
 
51746
5174651746
51746
 
Paying the ad_agency
Paying the ad_agencyPaying the ad_agency
Paying the ad_agency
 

Destacado

Devon pcp monitoring march 2011 short version
Devon pcp monitoring march 2011 short versionDevon pcp monitoring march 2011 short version
Devon pcp monitoring march 2011 short versionDevonPCP
 
Metric (Issue 07) V3
Metric (Issue 07) V3Metric (Issue 07) V3
Metric (Issue 07) V3chasecooper
 
CC Metric Issue 02
CC Metric Issue 02CC Metric Issue 02
CC Metric Issue 02chasecooper
 
The NonProfit Times 2011 Salary & Benefits Survey Participation
The NonProfit Times 2011 Salary & Benefits Survey ParticipationThe NonProfit Times 2011 Salary & Benefits Survey Participation
The NonProfit Times 2011 Salary & Benefits Survey ParticipationNpt Publishing Group
 
Or Rankings 2012
Or Rankings 2012Or Rankings 2012
Or Rankings 2012chasecooper
 

Destacado (9)

World dance music
World dance musicWorld dance music
World dance music
 
Browsers tegnologia
Browsers tegnologiaBrowsers tegnologia
Browsers tegnologia
 
Devon pcp monitoring march 2011 short version
Devon pcp monitoring march 2011 short versionDevon pcp monitoring march 2011 short version
Devon pcp monitoring march 2011 short version
 
Metric (Issue 07) V3
Metric (Issue 07) V3Metric (Issue 07) V3
Metric (Issue 07) V3
 
CC Metric Issue 02
CC Metric Issue 02CC Metric Issue 02
CC Metric Issue 02
 
Stpatriick
StpatriickStpatriick
Stpatriick
 
Ctt spain may13
Ctt spain may13Ctt spain may13
Ctt spain may13
 
The NonProfit Times 2011 Salary & Benefits Survey Participation
The NonProfit Times 2011 Salary & Benefits Survey ParticipationThe NonProfit Times 2011 Salary & Benefits Survey Participation
The NonProfit Times 2011 Salary & Benefits Survey Participation
 
Or Rankings 2012
Or Rankings 2012Or Rankings 2012
Or Rankings 2012
 

Similar a Metric issue-03

Disruption in Wealth Management
Disruption in Wealth ManagementDisruption in Wealth Management
Disruption in Wealth ManagementGreg Simmons
 
Forward-Looking Practices in Wealth Management
Forward-Looking Practices in Wealth ManagementForward-Looking Practices in Wealth Management
Forward-Looking Practices in Wealth ManagementCognizant
 
2008 pfi brave new world of ppps
2008 pfi brave new world of ppps2008 pfi brave new world of ppps
2008 pfi brave new world of pppsRickard Wärnelid
 
CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...
CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...
CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...CBIZ, Inc.
 
24 the use_of_economic_capital
24 the use_of_economic_capital24 the use_of_economic_capital
24 the use_of_economic_capitalNên Trần Ngọc
 
Commercial: PwC Top Issues
Commercial: PwC Top Issues Commercial: PwC Top Issues
Commercial: PwC Top Issues PwC
 
Basel III Is Here - What are the implications for your business?
Basel III Is Here - What are the implications for your business?  Basel III Is Here - What are the implications for your business?
Basel III Is Here - What are the implications for your business? Infosys
 
CLIENT SEGMENTATION:HOW, WHEN AND WHY?
CLIENT SEGMENTATION:HOW, WHEN AND WHY?CLIENT SEGMENTATION:HOW, WHEN AND WHY?
CLIENT SEGMENTATION:HOW, WHEN AND WHY?Gustavo Sousa
 
Operational risk: the new frontier
Operational risk: the new frontierOperational risk: the new frontier
Operational risk: the new frontierMichel Rochette
 
McLagan_HR_RiskBasedCompensation_final
McLagan_HR_RiskBasedCompensation_finalMcLagan_HR_RiskBasedCompensation_final
McLagan_HR_RiskBasedCompensation_finalVamsi Srinivas
 
Article quality growth and sustainability
Article  quality growth and sustainabilityArticle  quality growth and sustainability
Article quality growth and sustainabilityWilliam 'Bill' Holmberg
 
SCI CVA Special Report Oct2011
SCI CVA Special Report Oct2011SCI CVA Special Report Oct2011
SCI CVA Special Report Oct2011JohnOwenWaller
 
The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...
The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...
The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...Jacob Kosoff
 
Impact of Recent Supervisory Guidance on Capital Planning
Impact of Recent Supervisory Guidance on Capital PlanningImpact of Recent Supervisory Guidance on Capital Planning
Impact of Recent Supervisory Guidance on Capital PlanningJacob Kosoff
 
Essay About Cathay Pacific Hbs Case Analysis
Essay About Cathay Pacific Hbs Case AnalysisEssay About Cathay Pacific Hbs Case Analysis
Essay About Cathay Pacific Hbs Case AnalysisBuy Resume Paper UK
 
Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...
Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...
Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...sagar1337
 
Risk Management for Asset Managers
Risk Management for Asset ManagersRisk Management for Asset Managers
Risk Management for Asset ManagersHarris Samaras
 
What's next for the investment management industry?
What's next for the investment management industry?What's next for the investment management industry?
What's next for the investment management industry?SimCorp
 
Crm maximizing crm effectiveness during lean times
Crm maximizing crm effectiveness during lean timesCrm maximizing crm effectiveness during lean times
Crm maximizing crm effectiveness during lean timesMarcus Vannini
 
Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...
Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...
Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...Cognizant
 

Similar a Metric issue-03 (20)

Disruption in Wealth Management
Disruption in Wealth ManagementDisruption in Wealth Management
Disruption in Wealth Management
 
Forward-Looking Practices in Wealth Management
Forward-Looking Practices in Wealth ManagementForward-Looking Practices in Wealth Management
Forward-Looking Practices in Wealth Management
 
2008 pfi brave new world of ppps
2008 pfi brave new world of ppps2008 pfi brave new world of ppps
2008 pfi brave new world of ppps
 
CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...
CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...
CBIZ Quarterly Manufacturing & Distribution “Hot Topics” Newsletter (Sep-Oct ...
 
24 the use_of_economic_capital
24 the use_of_economic_capital24 the use_of_economic_capital
24 the use_of_economic_capital
 
Commercial: PwC Top Issues
Commercial: PwC Top Issues Commercial: PwC Top Issues
Commercial: PwC Top Issues
 
Basel III Is Here - What are the implications for your business?
Basel III Is Here - What are the implications for your business?  Basel III Is Here - What are the implications for your business?
Basel III Is Here - What are the implications for your business?
 
CLIENT SEGMENTATION:HOW, WHEN AND WHY?
CLIENT SEGMENTATION:HOW, WHEN AND WHY?CLIENT SEGMENTATION:HOW, WHEN AND WHY?
CLIENT SEGMENTATION:HOW, WHEN AND WHY?
 
Operational risk: the new frontier
Operational risk: the new frontierOperational risk: the new frontier
Operational risk: the new frontier
 
McLagan_HR_RiskBasedCompensation_final
McLagan_HR_RiskBasedCompensation_finalMcLagan_HR_RiskBasedCompensation_final
McLagan_HR_RiskBasedCompensation_final
 
Article quality growth and sustainability
Article  quality growth and sustainabilityArticle  quality growth and sustainability
Article quality growth and sustainability
 
SCI CVA Special Report Oct2011
SCI CVA Special Report Oct2011SCI CVA Special Report Oct2011
SCI CVA Special Report Oct2011
 
The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...
The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...
The Impact of Recent Supervisory Guidance on Capital Planning by Kosoff and B...
 
Impact of Recent Supervisory Guidance on Capital Planning
Impact of Recent Supervisory Guidance on Capital PlanningImpact of Recent Supervisory Guidance on Capital Planning
Impact of Recent Supervisory Guidance on Capital Planning
 
Essay About Cathay Pacific Hbs Case Analysis
Essay About Cathay Pacific Hbs Case AnalysisEssay About Cathay Pacific Hbs Case Analysis
Essay About Cathay Pacific Hbs Case Analysis
 
Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...
Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...
Shadow Accounting - The Evolving Practice Of Exercising Due Diligence In Fund...
 
Risk Management for Asset Managers
Risk Management for Asset ManagersRisk Management for Asset Managers
Risk Management for Asset Managers
 
What's next for the investment management industry?
What's next for the investment management industry?What's next for the investment management industry?
What's next for the investment management industry?
 
Crm maximizing crm effectiveness during lean times
Crm maximizing crm effectiveness during lean timesCrm maximizing crm effectiveness during lean times
Crm maximizing crm effectiveness during lean times
 
Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...
Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...
Retail Distribution Review: Preparing Insurance IT for Compliance and Strateg...
 

Último

MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.Arifa Saeed
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismBrian Lin
 
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.KumarJayaraman3
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESKumarJayaraman3
 
Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxPrecize Formely Leadoff
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707harshan90
 
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneurabcisahunter
 
CSR01P4 The foundations of CSR Part 4 Economic
CSR01P4 The foundations of CSR Part 4 EconomicCSR01P4 The foundations of CSR Part 4 Economic
CSR01P4 The foundations of CSR Part 4 EconomicMatthieu Bruckert
 
TriStar Gold- 03-13-2024 presentation pdf
TriStar Gold- 03-13-2024 presentation pdfTriStar Gold- 03-13-2024 presentation pdf
TriStar Gold- 03-13-2024 presentation pdfAdnet Communications
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 
Shrambal_Distributors_Newsletter_Mar_2024.pdf
Shrambal_Distributors_Newsletter_Mar_2024.pdfShrambal_Distributors_Newsletter_Mar_2024.pdf
Shrambal_Distributors_Newsletter_Mar_2024.pdfvikashdidwania1
 
CLUB DEAL - DECK INVESTOR
CLUB DEAL - DECK INVESTORCLUB DEAL - DECK INVESTOR
CLUB DEAL - DECK INVESTORhnaour
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfMichael Silva
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxOffice for National Statistics
 
The Pension Regulator's "desputed numbers"
The Pension Regulator's "desputed numbers"The Pension Regulator's "desputed numbers"
The Pension Regulator's "desputed numbers"Henry Tapper
 

Último (20)

MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
 
Effects & Policies Of Bank Consolidation
Effects & Policies Of Bank ConsolidationEffects & Policies Of Bank Consolidation
Effects & Policies Of Bank Consolidation
 
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
 
Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptx
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707
 
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
 
Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024
 
CSR01P4 The foundations of CSR Part 4 Economic
CSR01P4 The foundations of CSR Part 4 EconomicCSR01P4 The foundations of CSR Part 4 Economic
CSR01P4 The foundations of CSR Part 4 Economic
 
TriStar Gold- 03-13-2024 presentation pdf
TriStar Gold- 03-13-2024 presentation pdfTriStar Gold- 03-13-2024 presentation pdf
TriStar Gold- 03-13-2024 presentation pdf
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 
Shrambal_Distributors_Newsletter_Mar_2024.pdf
Shrambal_Distributors_Newsletter_Mar_2024.pdfShrambal_Distributors_Newsletter_Mar_2024.pdf
Shrambal_Distributors_Newsletter_Mar_2024.pdf
 
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
 
CLUB DEAL - DECK INVESTOR
CLUB DEAL - DECK INVESTORCLUB DEAL - DECK INVESTOR
CLUB DEAL - DECK INVESTOR
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdf
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
 
The Pension Regulator's "desputed numbers"
The Pension Regulator's "desputed numbers"The Pension Regulator's "desputed numbers"
The Pension Regulator's "desputed numbers"
 

Metric issue-03

  • 1. Click here Join Our metric Group CHASE COOPER FSA's Retail Risk Conduct Outlook - new areas for concern? metric Nick Gibson, Chase Cooper’s Director of Compliance Solutions discusses: Guidance on new Bribery the FSA’s first Retail Conduct Risk Outlook — emerging risks and Act Published potential concerns The UK's Bribery Act 2010 comes into force on The FSA published its very first Retail Conduct Risk Outlook on 28th February. the 1st of July this year. At the end of last month the Ministry of Justice released a 45- Most of the retail industry is already coming to the end of its decision-making process in page guidance for commercial organisations terms of new business models to meet the requirements of the Retail Distribution Review, impacted by this new so the article provides some interesting reality checks. act, together with a 9-page quick start The outlook is interesting less for its analysis of current issues - including payment guide. This welcome protection insurance and sales of structured products and deposits to retail guidance seeks to investors - but more for what it tells us about the FSA's likely activities going clarify many of the areas of concern, forward. This forward-looking element is split between emerging risks (where namely the treatment there is already evidence of poor conduct by firms) and potential concerns, which of joint ventures, is the FSA's own crystal ball gazing based on their corporate hospitality, assessment of the environment. IN THIS ISSUE OF metric bribery within the ● SEC probe Chinese firms supply chain, and FSA regulated firms, from retail banks to ● ERM Discussion Drafts activities of independent financial advisers, should be ● Singapore targets CRAs "associated persons". It also states that, should any of the infringements be committed by an methodically reviewing their current and proposed services ● Vickers Report released employee or agent, the existence of adequate and activities in those areas described by the FSA as emerging anti-bribery procedures in that organisation risks to assure themselves that they are operating to an adequate standard, as FSA will would be considered favourably as defence certainly be looking at them itself. We look at some key issues. against penalties. Key statements were - that an organisation was not necessarily liable for FSA's Retail Distribution Review (RDR) any bribery within a supplier simply on the Many of the emerging risks described implicitly arise from the imminent implementation of basis that it was receiving that supplier's goods, - also that genuine hospitality and the Retail Distribution Review, and the changes to firms' business models that arise from it. promotional expenditure was not necessarily As an aside, it is interesting to note that Barclays has already declared its intention to exit banned. The guidance laid down six key principles in the creation of adequate the business of advising retail customers on investments through its branch network - the procedures: proportionality, top level Barclays Financial Planning division - apparently due to low levels of customer commitment, risk assessment, due diligence, activity and increasing regulatory costs. communication and monitoring/review. It also clearly stated that procedures were not A clear risk is that firms may be seeking to minimise cost and maximise 3 ISSUE needed where there was very little risk of recurring income streams ahead of RDR go-live, through a variety of bribery being committed on behalf of the mechanisms, to cushion themselves against the new regulatory organisation. m environment. Examples are: continued on page 2
  • 2. network, as those charged with control try to manage more people, § Accepting large commissions offered by providers who are seeking learn new products, and cope with a greater volume of sales. All this to maximise market share, resulting in unnecessary product churn from the investor's viewpoint; seems self-evident, but network firms need to show that they recognise the risk and take steps to mitigate it. § Increasing the amounts of trail commission charged on current sales; Remuneration Issues § Maximising commission generation ahead of selling the firm or Remuneration issues are always an area of concern, particularly where exiting the market; there are explicit links More than half of unsuitable § Leveraging inconsistency between levels of commission on between remuneration metric equivalent products packaged in different ways, leading to the and the achievement of investment files reviewed by possibility that firms will favour products offering a higher sales targets: the FSA is the FSA failed on the point commission but delivering similar results; concerned that firms of the portfolio not meeting operating such targets the risks the customer was § Using third party investment platforms to facilitate advice and are not devoting enough willing and able to take. administer client portfolios (about half of all new investor money effort to oversee the now is placed through platform services) which only view a limited range of investment products, thus risking unsuitable advice. suitability of such sales given the clear conflict of interest faced by the sales staff. The FSA acknowledges inconsistencies between firms' terms of business and platform services provided, and a lack of clarity around Whilst it is interesting that the FSA describes this as an emergent risk the platform charging model towards the investor. - the conflict between sales levels and related incentives has always It is not remotely surprising that this should be the case, given that the FSA been with us - it can only be that the economic environment makes has effectively unilaterally changed the retail advice business model within achievement of targets more challenging, increasing the risk that the industry. However, in the light of this new reality, actions to maximise sales advisers will act inappropriately to achieve targets. income and shareholder value to ensure survival and prosperity by firms in Customer Risk Profiling the retail financial services sector could have some unforeseen Investment risk profiling for customers is also an emerging area of consequences: a business model that is unacceptable to the FSA is likely to concern, likely to lead to customer detriment. Simply, if the risk cost the owners more than the revenues generated or safeguarded. profile is inaccurate or incomplete, there is a high chance that advice and sales based upon it will be unsuitable. In itself, this is a significant governance risk for firms: how do senior management or proprietors mitigate the risk that all of the initiatives More than half of unsuitable investment files reviewed by the FSA adopted to meet the RDR and carry on in business, as a package, are failed on the point of the portfolio not meeting the risks the not sufficiently focused on ensuring that the clients' best interests customer was willing and able to take. This appears to include a continue to be served? Have senior management taken a step back recognition that an unduly conservative portfolio selection fails the and looked at the new business model from soup to nuts? customer by reducing their opportunity for income and capital gain. The FSA is - not unreasonably - expecting a reasonably IFA Networks precise calibration between the consumer's expressed risk 2 A further risk generated in part by the RDR is a lack or downgrading appetite and the advice or portfolio constructed for them. of systems and controls within IFA networks. Smaller firms may be seeking to reduce overheads by becoming appointed representatives This is increasingly challenging at a time when customers seek the of an adviser network. At the same time, existing networks are, in unrealistic objective of minimal risk for high returns, leading firms to common with the rest of consider more highly-structured products (which they themselves metric A business model that is the industry, seeing may not understand in depth) in an attempt to satisfy their clients. unacceptable to FSA is falling business levels In response to this key issue, the FSA released guidance in January likely to cost the owners due to the adverse 2011 on assessing suitability, underlining that firms often fail to more than the revenues economic environment. collect comprehensive information - an example given is the client's generated or safeguarded. Some are adopting a tolerance for loss - or misinterpret the information collected through strategy of increasing vagueness and a lack of clarity in the collection process, resulting in numbers of appointed representatives to sustain income levels, unsuitable outcomes. The main thrust is that firms should ask very together with increasing product sales and moving into more clear questions in order to get precise information that enables them complex investment products. to provide specific advice that they can demonstrate is in the The FSA is concerned that fast expansion at a time of falling business customers' best interests. continued on page 3 will put strains on the systems and controls used to manage the
  • 3. What should firms be doing? New ERM draft standards issued Taking a step back, and looking across the piste of the proposed new Discussion drafts developed by the Enterprise Risk Management business model to seek to ensure that: (ERM) Task Force of the Actuarial Standards Board (ASB) are now available for comment. The two documents are titled "Actuarial § The business model for the new environment, when looked at as a Professional Standards for Risk Evaluation" whole, will continue to serve the best interests of customers; and "Actuarial Professional Standards for Risk Treatment." Both drafts are contained § The information held about customers is sufficiently clear and within the document, Actuarial Standards of metric precise to enable the provision of suitable advice, neither Practice for Enterprise Risk Management. overshooting nor undershooting the client's risk appetite; The purpose is to share the work done to date and to collect input from interested parties. Comments are § Risks inherent in new products and in using platform services are requested by June 15th, and are welcome from all interested properly understood and communicated internally; and parties, including non-ASB members. The drafts can be viewed at: www.actuarialstandardsboard.org m § That the control environment does not lag behind the business environment, and that the systems and controls for managing the risks inherent in all of the client-facing processes (whether in a Singapore proposal single firm or a distributed network) remain sufficiently robust to to regulate credit mitigate the risk of negative outcomes for clients. m rating agencies The Monetary Authority of Coming up in Issue 4 of metric, metric Singapore (MAS) has released Tony Blunden, Chase Cooper's a consultation paper on proposed regulation of credit rating Head of Consulting discusses: agencies (CRAs). The MAS proposes that CRAs be licensed ‘KRIs: Finding the right way’. A under the Capital Markets Services (CMS) licensing regime, considerable number of firms are and "Providing credit rating services" be added as a regulated still finding key risk indicators a activity. Licensees who carry on the business of providing difficult task. During a recent credit rating services will be required to comply with existing Chase Cooper Risk Breakfast requirements that apply to all CMS licensees. The proposal, there was a lively discussion on KRIs and attendees which aims to promote the quality and integrity of rating, were surveyed on their current state of development. strengthen CRA independence and investor protection, and The article will look at a straightforward methodology enhance protection of information, is based on the IOSCO for identifying KRIs and their controls. In addition, Code of Conduct Fundamentals for CRAs. the result of the survey will be published. The European Union has already introduced new CRA licensing requirements and the US has extended existing licensing regulations. Hong Kong consulted on new CRA rules in 2010 and these are expected to take effect in June. m SEC probes Chinese firms listing in the USA Following a series of accounting scandals, the US SEC has launched Chase Cooper Strategic 3 a fraud investigation into Chinese companies buying into quoted US Compliance Breakfast companies. The target for this investigation is those firms that have gained US listings by reverse mergers into Briefings are held each month and existing publically quoted, but possibly are free to attend. Breakfast is provided. dormant, US companies. Since the beginning of For more information visit www.chasecooper.com. 2007 there have been over 600 such mergers Recent briefings addressed the FSA’s changed Client Money with a quarter of these coming from Greater and Assets regime, and what firms should be doing in the face China. There is concern that companies are of FSA’s more aggressive approach, coupled with the new re- carrying out these mergers with the express purpose of raising quirements for client money oversight, reporting, and diversi- capital on US exchanges and that the overseas companies are often fication of client money deposits. In April we reviewed the already in financial difficulties and that their mergers may have sometimes controversial Bribery Act 2010 following the Treas- been based on inadequate or, at worst, falsified accounting ury’s guidance in March, particularly the new corporate obliga- records. In the past few weeks, the SEC has suspended trading on tions, with a view to taking some of the fear and heat out of two organisations, China Century, a media company, and responses to the new Act earlier in the year. We looked at the Chianjiang Mining and New Energy. In both these cases the US practical steps necessary for a risk-based and proportionate auditors of these companies had resigned saying they were unable approach based on the guidance – whilst still being able to to verify the sources of accounting details. m take clients to Twickenham. m
  • 4. Regulatory ASYMmetricAL The back page, sometimes critical view from the Editor NEWS The Financial Stability Board (FSB) has published There has been a lot in the press about the possibilities of banks moving away from the City of the detailed national responses to an FSB survey London. This would be as a consequence of the UK Coalition Government's plans to increase on the implementation of the latest G20 the restrictions on banks in the areas of remuneration, to impose levies on banks' balance recommendations which was conducted in sheets, and, critically, to look at breaking up large bank's into separate investment and retail September 2010. The responses formed the banks. This last threat has caused major banks such as Barclays, HSBC and Standard Chartered progress report on implementation submitted to issue veiled threats that they may consider moving their reporting base to another country. to the G20 Seoul Summit in November 2010. The Hong Kong Monetary Authority has Whilst the mayors of New York and Paris say they would welcome the large British banks, released a further supervisory policy (LM-2) on would governments feel the same. After all, who would then bail them out following another sound systems and controls for liquidity risk crisis? The recent Vickers Report has also played down the threat – whilst still leaving the door management. These are based on the Liquidity open to regulatory restructuring of banks. It is also a given fact that moving headquarters, and Sound Principles release by the BIS in regulatory oversight, of a global bank is no easy operation. Ignoring logistical and regulatory September 2008. problems, there are reputational questions - what will existing depositors and investors do? Hector Sants, the FSA's CEO, What will be the reaction from both London or losing financial centres? There has sent out an update on could be reputational impact and, this being difficult to quantify, is a risk that no February's plans to transfer bank wishes to run. prudential supervision of But regulatory inconsistencies are of serious concern to financial institutions. In banking and insurance to three bodies - a subsidiary of the the years leading to the last financial crisis, the first 8 years of the 21st century, Bank of England, the Prudential there was a consistency in global financial regulation - although the criticism that Regulation Authority, and the it did not work could be valid. Basel II was on the way to being adopted in a Financial Conduct Authority. globally consistent manner - the US was lagging but the view was that they This announces the would have come into line. Sarbanes-Oxley was being adopted by most large achievement of the first global corporations and was seen as a global best practice for many companies milestone - the replacement of who were not otherwise bound by this US regulation. And IFRS with its mark-to- the current Supervision and HECTOR SANTS, current Chief market principles was well on the way to being a global standard for all Risk business units with a Executive of the FSA and Chief Executive designate of the PRA accounting disclosures. Prudential Business Unit (PBU) and a Conduct Business Unit (CBU). All this has now changed. Although Basel III has global approval from regulators, there are a The much awaited report from the Independent significant number that have suggested that its implementation will have regional variations, Banking Commission (the Vickers Report named both in implementation and in the recognition of capital components. The USA has come up after Sir John Vickers, its chairman) was released with a new set of rules - the Dodd-Frank Act, a massive piece of legislation with new standards April 11th. It makes recommendations on how and new supervisory agencies to monitor these standards. This will occupy the attention of US the retail banking business of UK banks is to be banks for many years to come and the impact on foreign companies quoted on US exchanges isolated from their investment banking arms (the means by which they were drawn into Sarbanes-Oxley compliance requirements) remains and recommends that the retail banking arms to be seen. The global roll-out of IFRS has been set back by criticisms, amongst which carry an extra regulatory Tier 1 capital obligation of 3% taking them to a minimum of 10%. It also are that mark-to-market makes the accounts excessively volatile. In addition to these potential inconsistencies, there are national differences in the regulatory treatment of 4 makes recommendations on how bondholders should bear responsibility for bank losses. hedge funds - the UK being at odds with the rest of Europe who wish these to be more However the report falls short of proposing tightly regulated - and in the wish to restrict the remuneration and bonus packages of bankers complete separation of the investment and - here the UK is considered one of the hawks. retail banking businesses and does not specify Whereas the first decade of this century was marked by a collaboration and consistency how the bondholder losses will be between the regulators of the major financial markets, this second decade looks like it is implemented. The reaction seems to be relief moving towards a free-for-all market with each country aiming to satisfy its national from the banks and dissatisfaction for those who saw this report as a way to significantly requirements and the wishes of its voters. Given the situation, can one blame banks, and bank restructure the banking industry. shareholders, for considering moving their head offices to those cities that will allow them the greater freedom and the larger profits? Surely it is time for the G20 to come up with some Reports from Washington indicate that the US authorities are divided on the list of US SIFIs agreement on regulatory consolidation - or are we into the era of regulatory arbitrage, and (systemically important financial institutions). increased regulatory risk? The US Fed and the Treasury favour a list limited Early this month the UK's House of Lords Committee on Economic Affairs released a vitriolic to only the major US global banks whilst the criticism of the auditing profession in regards to its failure to play a part in preventing the last FDIC wish to include large hedge funds, insurers financial crisis. Recommendations included the and asset managers. Institutions in question encouragement of increased competition and that risk metric is published by metric have launched a major lobbying action to avoid Chase Cooper. being designated as SIFIs claiming it would add committees audit the auditors. Could this be an additional area web: www.chasecooper.com to their costs and lock up capital. of arbitrage? Auditor arbitrage? m email: editor@chasecooper.com