"That measure puts the eligibility of appointed representatives to advise on these transactions beyond doubt".
Harriet Baldwin, MP, Economic Secretary to HM Treasury, at the House of Commons Public Bill Committee, 23 February 2016
Appointed Representatives are now expressly permitted to advise on the conversion or transfer of pension benefits under the Bank of England and Financial Services Act 2016 which came into effect on 4 May 2016.
In June 2015, following the Government's pension reforms, the FCA updated their Handbook to cover the new regulated activity of advising on conversion or transfer of pension benefits which had been added as a regulated activity to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The effect of this new regulated activity was that firms were required to obtain specific permission to carry out pension transfer business, otherwise they could not provide advice on certain pension conversions or transfers.
However, neither the Financial Services and Markets Act 2000 (Appointed Representative) Regulations 2001, nor the FCA Handbook were amended to permit appointed representatives to carry out this new regulated activity and remain exempt from requiring authorisation. The result was that appointed representatives who had previously carried on such work had to seek permission for authorisation in their own right, cease to advise on the pension transfers caught by the new regulated activity, or find alternative methods to continue providing such advice. This has presented difficulties for appointed representatives and their principals as well as the underlying clients.
2. Regulatory Amendments
It appears that the failure to include advising on certain pension conversions or transfers as an exempt activity was likely an oversight as the Bank of England and Financial Services Act 2016, labelled by HM Treasury as "the third major piece of legislation that the government has taken through parliament to fundamentally reform the financial sector", amends other legislation to permit appointed representatives to be able to advise on such pension transfers (amongst other changes).
The amendments are as follows:
- the Pension Schemes Act 2015's definition of "Authorised Independent Adviser" is expanded to include "or is acting as an appointed representative"; and
- regulation 2(1) of the Appointed Representative Regulations is expanded to include the activity of advising on conversion or transfer of pension benefits as one of the descriptions of business for which appointed representatives are exempt.
Harriet Baldwin MP, the Economic Secretary to HM Treasury, on the Act's passage through Parliament commented that "around two thirds of financial advisers are appointed representatives". She also stated that the new Act will not "reduce consumer protections or weaken the accountability of financial advisers or their appointed representatives" due to the set-up of the appointed representative regime where "the principal takes full responsibility for the quality of the advice and compliance with the FCA rules".
3. Next steps
However, whilst the Minister has described the new Act as putting "the eligibility of appointed representatives to advise on these transactions beyond doubt" as of the date of this briefing the FCA Handbook has not yet been. We would expect this to occur shortly.
If you require further information on anything covered in this briefing please contact Rachel Lowe or your usual contact at the firm on 020 3375 7000. Further information can also be found on the Commercial and Regulatory page on our website.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
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