Consumer Protection: Insurance, Investments & Intermediaries Retail Intermediaries - Regional Event Galway

1. Consumer Protection: Insurance, Investments & Intermediaries Retail Intermediaries - Regional Event Galway

2. Prudential Supervision Strategy • Historic issue • Lack of prudential information • Concerns about level of compliance • Lack of knowledge about sector • Online Annual Return developed • Legislative basis for requiring IIA and IMR firms to submit return • PRISM

3. Online Annual Return - Update • Submission rate is around 75% • Project ongoing to increase this percentage • Updating Guidance Material in 2013 • On-line video now on website • Publication of key market data for the sector Q1 2013 • Review of the Annual Return in 2013

4. PRISM for Retail Intermediaries • Probability Risk and Impact SysteM • Provides a structured framework for supervising firms • Judgement based and outcome-focused regulation • Tool for supervisors to challenge firms • Provides supervisors with a consistent approach to risk

5. PRISM • Under PRISM – Low impact firms • High Risk Appetite • Expect that Low impact firms will fail • Supervision • On a reactive basis – triggered by changes in risk • Sectoral thematic reviews • Credible threat of enforcement

6. On-going Supervision • Key Risks • Professional Indemnity Insurance requirements • Insolvency • Annual Returns – feed into PRISM • Automatic alerts to supervisors to flag risks • Reports to supervisors • Further analysis of firms

7. Types of Inspection under PRISM Reactive / Filter/ Triage • Firm Specific • Issues must be significant with potential for serious impact Thematic • Issue Specific • Focused • High number of firms inspected

8. Reactive Inspections Referrals come from different sources/ Market Intelligence: • Whistle-blowers • Competitors and other Regulators • Employees or ex-employees • Consumers • Gardai • Internal referral • Media

9. PRISM Triage/ Filter We assess the information available in respect of the firm: • Number of customers • Size of firm/ number of employees • Annual return submitted on time • ICCL fee paid • Industry funding levy paid • Previous regulatory history

10. PRISM Triage/ Filter (cont.) The supervisor will also assess aspects of the referral in their own opinion, particularly the: • Seriousness of potential breach • Potential consumer detriment • How widespread is the issue • Inputs for each case result in a ranking of high/medium/low risk • Enforcement/ Legal

11. Themed Inspections • A themed inspection • Inspection team visit/review a number of firms • Focus on only one area/issue in all firms to gauge industry standards in that area

12. Professional Indemnity Insurance Theme • Risk to consumers • PII cover provides protection for negligent advice • Serious prudential concern • PRISM - PII is a key risk • Failure to comply is a criminal offence • 50 firms in 7 counties • Enforcement

13. Findings & Outcomes 50 Firms Reviewed 11 Non-Compliant Firms

14. Further Findings • Firms failing to inform us of changes of address/ contact details • Firms failing to inform us of changes of Directors • Firms failing to get approval for new Directors • Advertising issues – misleading the consumer • Regulated/ non-regulated activities • Unapproved Acquiring Transactions

15. Enforcement • 5 cases referred to ENF • 2 firms fined - €800 and €1,100 • More cases imminent • 2nd PII theme commenced Sep 2012

16. Next Themed Inspection – Insolvency • Insolvent Firms – Investment (IIA) and Insurance (IMR) • Risk Appetite - high • Fitness & Probity – Financial soundness • PII • Findings from themed inspection were that not all firms held PII • Firm’s financial position may be considered by PII underwriter when determining whether to grant cover or not • Director’s duties

17. Engagement Strategy • Newsletter to inform industry • compliance issues • Proposed themed inspections • Updates on emerging issues • 5Cs • To promote compliance • To improve the supervisory culture • Protect Consumers by highlighting current and emerging topics; • Challenge the industry on compliance • Promote confidence • Intermediary Road-shows • 5 regional events in 2012 • Circa 800 attendees

18. Compliance Checklist ‘To get it right for consumers’ • Submit online annual return - timely and accurately • Ensure you have PII (IMR firm) • Ensure firm is solvent • Follow the Code when dealing with a consumer • Ensure accredited staff of firm meet Minimum Competency/ CPD • Keep up to date – Intermediary Times/ Website • Inform us immediately of proposed Acquiring Transactions (IIA firms) • Inform us about post-authorisation changes e.g. new trading name/ contact details • Ensure you have the correct authorisation for the activities you engage in • Ensure your website/advertising is not misleading for the consumer – differentiate between regulated and un-regulated activities • Inform RTD about proposed new Directors • Industry Funding levy – on time • ICCL Levy– on time

19. Thank You

20. Presentation on Fitness & Probity and Minimum Competency Codes Anne Moylan and Deirdre Norris, Central Bank of Ireland

21. Contents • Fitness & Probity Regime. • Minimum Competency Code. • Submission of the online Individual Questionnaire (IQ) to take up a PCF (Pre approval controlled function) role.

22. FITNESS AND PROBITY

23. REGULATIONS, STANDARDS AND GUIDANCE

24. Key Dates for PCFs and CFs

25. Who does Fitness & Probity apply to?

26. Fitness and Probity Standards (1)

27. Fitness and Probity Standards (2)

28. Non Statutory Guidance

29. Minimum Competency Code 2011

30. Background • Minimum Competency Requirements introduced 1 January 2007 • Review in 2010 • Link with Fitness and Probity Regime • Minimum Competency Code 2011 effective 1 December 2011

31. Scope • Providingadvice • Arranging or offering to arrange • Specified functions • Includes: • Restructuring and rescheduling of loans • Amendments to insurance cover • Services provided over the internet

32. Retail Financial Products • Retail financial products: • Life assurance • Pensions • Savings and investments • Personal general insurance • Commercial general insurance • Private medical insurance and associated insurances • Housing loans, home reversion agreements and associated insurances • Consumer credit agreements and associated insurances.

33. Specified Functions • Specified functions: • assisting consumers in making a claim • determining the outcome of claims by consumers • reinsurance mediation • direct management or supervision of accredited persons • adjudicating on complaints

34. The Minimum Competency Standards • Recognised qualification, or • Grandfathering arrangements, or • New entrant, or • Prescribed script function, and in the case of a) and b), CPD requirements.

35. Prescribed Script Function • Script devised by accredited person • Initial and ongoing training • Outside script – refer to accredited person • Supervision by accredited person • Monitoring and records

36. Recognised Qualifications • Restructure of CIP and QFA • Accredited Product Adviser • for each category of retail financial product

37. Grandfathering • Grandfathering arrangements retained • Assessments up to 31 December 2012 subject to: • Carrying out activity on 1 January 2007 • Four years’ experience in eight-year period prior to 1 January 2007 • Assessment and certification by regulated firm • Completion of all CPD from 1 January 2008 to date of assessment

38. Grandfathering • Documentation to be retained: • Documented assessment • Certification of compliance • Supporting documentation • Confirmation from previous employer, if relevant • Reason for delay in assessment

39. Grandfathering • Statement of Grandfathered Status • Standard format • Completed by 1 January 2013 • Completed by firm on whose behalf the grandfathered person is currently acting • Signed by firm • Retained on file by firm • Statement provided to grandfathered person when ceasing employment or if requested

40. New Entrants • Training programme that includes: • Initial training • Supervision by accredited person • Working towards a recognised qualification • Timeframe – maximum four years

41. New Entrants • A regulated firm must: • inform new entrant of requirement to obtain qualification; • agree a plan; • monitor; and • document the reasons why an opportunity to sit an examination is not availed of.

42. New Entrants • Detailed supervision requirements, including: • All documentation checked and signed off • New entrant accompanied by accredited person for a period • Regular meetings and contact • No more than seven new entrants per supervisor • Reduction in supervision based on documented assessment • Supervision of tied agents by product producer

43. Continuing Professional Development (CPD) • Change from three-year cycle to annual requirement • 15 formal hours per year • At least one hour for each function undertaken • At least one hour relating to ethics • Person who is qualified and grandfathered – 15 formal hours

44. Continuing Professional Development (CPD) • Surplus hours may not be carried forward • Shortfall may be made up by end of following year provided no other shortfall within previous five years • Firm must have procedures to ensure compliance with CPD requirements

45. Register and Certificate of Competency • Register of Accredited Persons • removal from Register for failure to complete CPD more than once in five years • Certificate of Competency • confirmation for consumers that person meets the standards

46. Finally… • Minimum competency standards are a key component of our consumer protection measures • The Code builds on the framework introduced in 2007 and provides more clarity in a number of areas • A wider range of professional development opportunities

47. PCF Appointments & Individual Questionnaire

48. New PCF Appointments from 1 December 2011 • Approval process is managed by the Regulatory Transactions Division (RTD), within the Central Bank established to centralise, streamline and automate regulatory transactions. • Requires the submission of an online IQ which includes the facility to attach supporting documentation such as: • Evidence demonstrating the applicant meets the MCC including supporting documentation evidencing new entrant status, grandfathering status and CPD, where appropriate. • Supporting documentation relevant to Section 5 (Reputation & Character). • Garda disclosure Forms. • Publication of target turnaround times for processing IQs to commence in January 2013.

49. New PCF Appointments The system has the following key features: • IQ Form completed online by proposed holder of PCF (including pre-formatted CV sections); • Sections appropriate to applicant only to be filled / certain sections locked; • Ability to attach additional supporting documentation; • Ability to export core data which can be imported for a subsequent PCF application; • Online Declaration by proposed holder of PCF as to accuracy / veracity of information provided; • Online Declaration by officer from the proposing firm confirming that checks of the individual were undertaken and that the firm is satisfied that the proposed holder of the PCF is fit and proper; • Possible to download a copy of the IQ for your records.

50. Completing the online IQ form The Central Bank wishes to stress the importance of providing and attaching the appropriate information/documentation when making a submission as this will reduce the probability of the IQ being returned. Some examples of reasons for an IQ being returned/rejected are as follows: • Section 3 relating to experience and training not being fully completed to demonstrate the applicants competency and capabilities to undertake the role; • Incomplete documentation in relation to compliance with the MCC such as evidence of qualifications, grandfathering status, new entrant status, and/or continuing professional development; • Lack of documentation to demonstrate that an issue disclosed in Section 5 (Reputation & Character) does not have a material impact on the applicants ability to perform the role; • IQ completed by and/or submitted by a person other than the applicant and/or the proposer; • IQ submitted by a proposer who is not an approved person within the entity with the authority to submit the IQ; • Choosing the incorrect sector applicable to the roles. • Incorrectly advising whether the proposing entity is currently authorised/approved or a new entity seeking authorisation/approval.