FCA publishes ‘watered down’ Sipp rule changes

The FCA has published what it called ‘minor changes’ to its new capital adequacy rules this afternoon – with one expert saying the original proposals had been ‘watered down’. Changes to capital requirements had already been outlined to take effect in September 2016.But the regulator, after calls for further clarity from the industry, today published proposed amendments on the rules.Greg Kingston, head of communications and insight at Suffolk Life, said: “If the reason that the original capital requirements outlined in CP12/33 have been so watered down because the regulator has gained an improved view and understanding of the Sipp market then that’s a good thing.“My sense is that there’s little energy to challenge or question further, and Sipp firms should now implement as required and prepare for a post implementation review by the regulator in the next 24 months.”{desktop}{/desktop}{mobile}{/mobile}The FCA document, released this afternoon, stated: “Based on the feedback received from firms, we propose guidance to clarify what ‘capable of being readily realised within 30 days’ means.“The key consideration is whether this would be capable of taking place. This is a broad judgement on whether there is a market for the asset and whether it could be sold at a value close to the most recent valuation if no material change to the underlying economic condition has occurred.“For a UK commercial property, the asset should be considered to have been realised at the point that the land registry is formally notified. In addition to this, we clarify that responsibilities and expectations around valuations and due diligence is in line with previous FCA guidance.“Basing the financial requirements on assets under administration requires firms to value their assets correctly. In particular, where firms have been involved in a high proportion of non- standard investments in the past and/or where they have had difficulties carrying out their due diligence or receiving valuations.“Where a firm has doubts about the values it has been provided, it should make further enquiries and take appropriate steps to ensure that the investment is real and to establish if it is impaired. A proper level of enquiries needs to be undertaken by the firm to establish the correct value of the assets.”Practicalities of the policy had been flagged up since the original consultation, officials said, suggesting this was what had prompted today’s notice.The report stated: “In some cases, these comments identified areas where it was felt that clarifications could be useful.“Therefore, we propose some minor changes to the rules along with some guidance to clarify certain areas, as explained in more detail below. We expect these changes to reduce compliance costs on firms, who we strongly encourage to read them.”Under Amendments to the standard asset list, the paper stated: “In respect of quoted shares, the standard asset list in PS14/12 only allows shares traded on the Alternative Investment Market, London Stock Exchange or a recognised overseas investment exchange to be categorised as a standard asset. We propose to expand this to all securities admitted to trading on a regulated venue.“Regulated venue means an exchange (for example a stock exchange, or trading venue such as a multilateral trading facility) that is authorised by a financial regulator or government agency. It is not restricted to the EEA. The term ‘security’ is defined in the FCA Handbook and is broader than shares, including bonds.“As such, we propose to remove ‘corporate bonds’ from the standard asset list, to capture quoted corporate bonds, which are covered by this new wording. Firms should note that, whilst this proposal expands the standard asset list, the requirement that the asset must be capable of being readily realised within 30 days, to be considered a standard asset, will still apply.“We also propose to change ‘bank deposits’ to ‘deposits’, as defined in the FCA Handbook, which makes clear that building society or credit union deposits are eligible. We would expect that most deposits should be breakable, albeit with a penalty, and so should qualify as standard. However, if a firm believes that this is not the case for an individual deposit they should contact the FCA.”

FCA publishes ‘watered down’ Sipp rule changes

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