February compliance update


It’s time for our second compliance update of 2019, and this time we’ve partnered with a specialist from the industry Robert Bell – director of RB Compliance Consultancy.

Here are the latest changes in the F&I compliance world…


Deloitte’s Global Automotive Consumer Study


Within the recent survey findings from Deloitte UK, 71% of consumers said that their sales experience was an important factor in choosing where to buy a vehicle. 60% of purchasers also visited the dealer where they made their purchase more than once, which suggests that building and establishing a relationship with customers – even when they may be ‘window shopping’ – is an important aspect of the car-buying process.


Technology is constantly evolving, and now plays a huge part in the vehicle purchasing journey. But, interaction with a real person was ranked the most important aspect for consumers.


Add to that, the FCA’s regulations which state that dealerships must communicate clearly and fairly with car buyers in order to stay compliant. And it highlights how important this is for customers!


FCA changes – Fit and proper requirement of SM&CR


Later this year, significant change will come from the FCA which will affect all of the dealerships and lenders we work with. The ‘fit and proper requirement’ in the Senior Management and Certification Regime (SM&CR) is designed to reinforce the need for firms need to take responsibility for their staff being suited to their jobs.


While the FCA hasn’t yet published how this will be assessed, it is clear they will be particularly looking at the fitness and propriety of senior managers and certified staff. Firms must be satisfied that employees are ‘fit and proper’ before making an application for approval to the FCA. When a member of staff has passed this test, the business must continue to assess the team member, to ensure standards don’t fall. If any issues arise surrounding this, the FCA must be informed immediately.


The SM&CR is flexible – where appropriate – to allow firms to make decisions about how the rules best apply to their business, but there are some key regulations which all organisations must follow.


· Have a process that ensures annual re-certification of affected staff

· Ensure disciplinary procedures are updated or designed so that any relevant issue or incident is captured and reported to the FCA

· Procedures must be up-to-date, or created, to make sure the firm can provide information on disciplinary matters.


Building the assessments into current practices can be a challenge for some organisations that have limited experience with this regime. But here are some things to pay attention to, to make this process a little easier…


What do the assessments need to evaluate?


The FCA’s FIT Handbook outlines the criteria set out in the Financial Services and Markets Act 2000, which states the person has obtained the appropriate qualification, has undergone training and/or possesses a level of competence. There are three specific criteria that should be assessed:


· Honesty, integrity and reputation

· Competence and capability

· Financial soundness


The handbook provides some guidance for each of the factors listed above, but the topics are purposefully kept broad so that firms can tailor assessments to suit the size and type of their organisation.


What is the personal and professional background of your staff?


Each person must be considered on a case-by-case basis, to examine whether they have previously been:


· Convicted of a criminal offence

· The subject of any adverse finding or settlement in civil proceedings

· Involved in disciplinary proceedings – including by the regulator, other regulatory, agencies authorities, professional or government bodies

· Seen to have contravened any requirements or standards of the regulatory system

· The subject of any justified complaint relating to regulated activities

· Involved with a firm that has been refused registration, authorisation, or licence to carry out trade or profession, or has had it revoked

· A director, partner or part of the management in a business that has gone into insolvency, liquidation or administration during their tenure or within one year of that connection

· Dismissed or asked to resign from employment or a position of trust

· Disqualified from acting as a director or managerial role

· Candid and truthful in all dealings with a regulatory body, demonstrating a readiness and willingness to comply with requirements and standards.


Criminal convictions will not automatically result in the rejection of an application, as the FCA will take into consideration the nature of the crime, and the explanation provided by the individual.


Does your employee have the required training?


An examination into the individual’s competence, knowledge and experience, including:


· Whether the person satisfies any relevant FCA training and competence requirements in relation to the controlled function they perform

· If they have demonstrated – by experience and training – they are suitable to perform the controlled function.


Assessment may be through direct testing or a formal appraisal review.


What is their financial stability?


In line with the FCA’s objective to protect the integrity of the UK’s financial systems, firms should consider the soundness of the candidate or employee as an important part of the examination. It’s important to think about:


· If they have any judgement debt or award that remains outstanding or was not satisfied within a reasonable period

· Whether any arrangements have been made with their creditors or filed for bankruptcy.


All assessments should be documented, logged and stored appropriately.


If you require any further information, please feel free to contact our compliance manager, Sam Marsden: sam.marsden@dealtrak.co.uk, or Robert Bell at robert.bell@rbcompliance.co.uk.

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