FCA Temporary Permission Registration for Claims Management Firms

Claims Management Firms are now able to register for temporary permission with the Financial Conduct Authority. From April 2019, the FCA will take over regulation of CMCs that serve customers in England, Scotland and Wales and these companies will need to be authorised by the FCA to continue to operate legally. Firms that are currently authorised by the Claims Management Regulator will not automatically be transferred to the FCA. Any Claims Management Firm wishing to operate after April 2019 must apply for temporary permission with the FCA, including companies based in Scotland.

Temporary permission registration is open until the end of March 2019.

Firms that gain temporary permission will be able to continue to act as a CMC while they apply for full authorisation, which takes place in one of two application periods;

1. 1 April – 31 May 2019 for CMCs making claims in relation to financial services or financial products and CMCs being brought into regulation for the first time, and

2. 1 June – 31 July 2019 for all other CMCs.

New CMCs entering the market after 1 April 2019 won’t need to apply for temporary permission, but will need to apply for full authorisation and cannot perform regulated activities until they have received authorisation.

The FCA have advised that firms should not leave registration until the last minute, to avoid potential problems or delays.

Similarly, given the relatively short window for full application, applicant CMCs should ensure that they are fully prepared for the application process, which includes the submission of a wide range of information including fully completed application questions and supporting documentation, including a regulatory business plan, compliance monitoring programme, organisational structure charts and account information.

The FCA aims to ensure that all operational CMCs are ‘trusted providers of high quality, good value services that help customers pursue legitimate claims for redress and benefits to the public interest’. Once authorised, CMCs must comply with FCA standards or face action. The FCA’s authorisation process ensures that firms meet certain threshold conditions which set out the minimum conditions all firms must meet if they want to be authorised. Firms should ensure they are familiar with the Threshold Conditions, as set out in COND before beginning their full authorisation application.

Firms must also consider the implications that abiding by the FCA’s Principles for Businesses (PRIN), the Senior Management Arrangements, Systems and Controls (SYSC), and General Provisions (GEN) will have on the firm; firms should be aware of potential required adjustments prior to application.

CMCs will also be subject to the rules contained in a new Handbook, the Claims Management Conduct of Business sourcebook, CMCOB. This sets out conduct of business rules aimed at addressing harms within the sector, and the expectation that firms will always act in the best interests of their customer, along with a new set of rules including:

• The requirement to record all calls and electronic communications with existing and potential customers, and to keep these call recordings for a minimum of 12 months. This includes, for example, a sales call where a lead isn’t generated.

• Financial promotions rules; all materials should be clear, fair and not misleading, and should show, where relevant, that there are statutory ombudsman or compensation schemes that the customer could use for free

• The provision of a pre-contract disclosure with particular requirements, including a standardised fee illustration or estimate, details of any relevant ombudsman or compensation scheme, a summary of the service the CMC will provide, and the customer’s right to cancel the contract

• The provision of additional pre-contractual information, including the terms and conditions, details of any referral fee paid to a third party, and an outline of the CMC’s complaints procedure.

• The requirement to ‘keep customers informed’ of any material developments in the progress of the claim.

If your firm needs to apply for FCA Authorisation, we can help. We have helped hundreds of companies receive FCA authorisation and have a 100% track record. See our Services page for more information, or contact us to discuss your requirements.

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