Compliance Update Graeme Stewart, Compliance Partner
Agenda • Due Diligence • Inducement and Conflicts of Interest • Recent Developments
Due Diligence A good due diligence document is one where the firm has: • Documented its thought process • Highlighted its key criteria • Demonstrated that their selection matches their own objectives in achieving good customer outcomes.
Due Diligence • When using 3rd party assistance; such as Compliance Consultants • For a Centralised Investment Proposition • For new products or providers • For checking the identity and veracity of clients In short; in any event where you or your firm is placing its reliance on any outside party.
Due Diligence • Paradigm has provided a pack of information for you • Member events> Spring Partner Forums > Handouts
Due Diligence • Due Diligence is covered in Chapter 3e of the Compliance Manual • Includes DD template Questions for, e.g., DFM, a third party risk profiler, wraps • FCA guidance; one minute guide. • Audit Report agenda item examples • Business Consultant auditing
Due Diligence • Any Questions?
Inducements and Conflicts of Interest RDR; • To remove the potential for adviser remuneration to distort the advice consumers receive. • So providers compete on the price and quality of their products to secure distribution rather than on commission levels • Advisory firms are not inappropriately influenced by the payment of commission when providing advice to their customers
Inducements and Conflicts of Interest FCA; • Principle 8, of our Principles for Business states that a firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
Inducements and Conflicts of Interest FCA Examples; • an insurance intermediary passing large amounts of business to a particular insurer because they previously worked at the insurer and still had friends there; • a mortgage intermediary passes large amounts of business to a lender because they have a relative working at that lender; or • a product provider may offer a loan and cash gift in the expectation of getting more business in return. These are inducements or bribes.
Inducements and Conflicts of Interest Basically; • Identify Conflicts of Interests • Make sure all staff know • Disclose any Conflicts of Interest • Manage any Conflicts of Interest (Suitability of Advice)
Inducements and Conflicts of Interest • Paradigm Discretionary Trust
Inducements and Conflicts of Interest Paradigm has provided a policy document template Use it stand alone/ insert into your Business & Compliance plan
Inducements and Conflicts of Interest • Any Questions?
Recent Developments • MMR (26th April 2014) • Feedback from website (thanks) • File Review Outcomes