The Financial Conduct Authority has written to firms confirming that it will not be taking forward changes proposed in Consultation Paper 12/20 as a result of its review of the client money regime for general insurance intermediaries.
The existing rules and guidance in Chapter 5 of the FCA’s Client Assets Sourcebook (CASS) remain in place as they are and general insurance intermediaries holding client money or operating under risk transfer agreements are required to comply with these.
The FCA said in a statement: “The consultation process is designed to encourage stakeholders to share their views with the FCA so the right policy is put in place before changes to rules are made. Following feedback received on the original proposals, re-consideration of their costs and benefits in light of the new requirements brought about by the Financial Services Act 2012, and review of additional data collected about the impact of the proposals on smaller firms, the FCA has concluded that it would not be proportionate to proceed with the proposed rule changes at this time.”
The regulator said that it had been working very closely with the industry, including trade bodies such as BIBA, since publication of CP12/20 in August 2012. The FCA believes that the industry has increased its focus on protecting client money and engaging with its policies in this area. A number of initiatives had also been introduced that are leading to improvements. These include:
- an enhanced proactive CASS supervision strategy for general insurance intermediaries, informed by the review of audit reports from approximately 400 firms, has been rolled out; and
- an updated reporting requirement applicable to general insurance intermediaries holding client money (RMA-C), which will help the regulator collect more robust information from firms.
The FCA intends to continue to work with general insurance intermediaries to mitigate risks such as conditional risk transfer and incorrect client money calculations and reconciliations. Where poor practice is appropriate steps will be taken to ensure client money is protected.
The FCA said it will not pursue any rule changes to CASS 5 without a new consultation.
BIBA members’ compliance and regulation queries should be directed to: firstname.lastname@example.org
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