Regulator conducting a cost benefit analysis and considering smaller brokers’ views
The FCA will take its final view on the shape of the new CASS 5 client money rules for brokers before the end of the year, according to the regulator’s head of general insurance and protection Simon Green.
Speaking to delegates at the Biba 2014 conference in Manchester yesterday, Green said the FCA is undertaking a cost benefit analysis of the rules and considering the impact on smaller brokers.
The new rules have been a long time coming. The FCA’s predecessor regulator, the FSA, issued a consultation paper, CP 12/20, on the proposed new rules in August 2012. The deadline for responses was November 2012.
A policy statement factoring in the industry response and outlining the new rules was expected in the second quarter of 2013, but has yet to emerge.
The FCA took over from the FSA on 1 April 2013.
Green told Biba delegates yesterday: “One of the things we need to do as the regulator is make sure that when we transpose the policy statements across into rules that they are proportionate.
“As part of that proportionality we need to make sure we undertake a cost benefit analysis.
“The response to the consultation paper did not have as much feedback as we were expecting around some of the costs, particularly from smaller firms.”
Green added that Biba had helped the FCA’s CASS team “enormously” by putting it in touch with brokers to talk to about the new rules.
It has contacted 100 brokers and had responses from 20.
Green said that the FCA is working through the cost benefit analysis and is looking at the competition aspects of the new rules given the FCA’s new powers to promote competition in the markets it regulates.
He said: “The expectation is that we will be coming to our final view before the end of this year.”
The new rules are designed to combat the complexity and confusion around the current CASS 5 rules.
The FSA’s original consultation was prompted by a review of the rules, which had been in place since the FSA began regulating brokers in 2005.
The then-regulator said its findings included “poor understanding of the rules and subsequent poor compliance, [and] missing or incomplete documents, such as trust deeds and trust letters”.