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Claims Management Companies: FCA releases Policy Statement

Business meeting Print publication

12/02/2019

Following its proposals and consultation period [1], the Financial Conduct Authority (FCA) has released its Policy Statement on how it intends to regulate Claims Management Companies (CMCs) from 1 April 2019.  Walker Morris Banking & Finance Litigation Partner Louise Power summarises the key points to note.

Registration and Authorisation

One of the most immediate points to note from the FCA’s Policy Statement PS18/23 is in relation to the timing for implementation of a new, more robust, authorisation process for new firms.

In particular, by 31 March 2019, all CMCs must register for temporary permissions; from 1 April to 31 May 2019, any CMCs making claims in relation to financial services or financial products must apply for authorisation; and from 1 June 2019 to 31 July 2019 all other CMCs must then apply for authorisation.

Regulation

The Policy Statement sets out a number of areas in which it intends to regulate CMCs. The FCA wants to ensure that CMCs are working to the standards of behaviour and at the appropriate level expected of its other regulated firms. The FCA will therefore apply the majority of its rules and guidance about systems and controls as set out in the SYSC section of its Handbook as well as the Conduct of Business rules, Principles of Business rules and COND rules amongst others [2]. Where necessary these will be altered to be specific to CMCs.

Other areas include:

  • Supervision and Reporting – the FCA will apply the relevant sections of its Supervision Manual to CMCs.
  • Financial Resources – to ensure that all CMCs have sufficient financial resources to meet their liabilities, the FCA will require all CMCs to meet the prudential resources requirement. Where CMCs are ceasing operations, specific winding down processes must be followed, including informing clients and setting out what steps the client should take next.
  • Client MoneyThe FCA will introduce a set of rules with regards to the holding of client money applicable to all CMCs irrelevant of size. It will also require all CMCs to have a client asset oversight officer responsible for overseeing a CMC’s client money operations, reporting to the CMC’s governing body and completing client money-related aspects of regulatory returns.
  • Dispute Resolution CMCs will be subject to the FCA’s Complaint Handling rules and guidance as set out in DISP. CMCs will also fall under the jurisdiction of the Ombudsman Service.
  • Enforcement the FCA will take the same general enforcement approach to claims management activities as it does to other regulated activities. It’s Enforcement Guide and its Decision and Penalties Manual will apply to CMCs.
  • FCA fees – The FCA has introduced a lower minimum periodic fee of £500 for smaller firms with turnover up to £50,000, instead of the single minimum fee it had proposed of £1,000 for firms with turnover up to £100,000. The FCA has also added a new transitional provision to clarify what data will be used to calculate the Ombudsman Service general levy in 2019/20, but otherwise fee provisions are as per the proposals consulted on in CP18/23.

The FCA’s full policy statement can be accessed here.

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[1] Please see our earlier briefing for more information
[2] See: https://www.handbook.fca.org.uk/handbook/SYSC/; https://www.handbook.fca.org.uk/handbook/PRIN/ https://www.handbook.fca.org.uk/handbook/COBS/; and https://www.handbook.fca.org.uk/handbook/COND

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