Do you have a Rapid Response Plan?

Earlier this week, preparations took an unexpected twist with regard to the pension reforms to be introduced in April 2015.

This is because the FCA issued a Dear CEO Letter on the 26th  January 2015 entitled "Retirement Reforms and the Guidance Guarantee: Intention to make rules before April 2015 in addition to those set out in PS 14/17", stating that it intends to introduce additional rules that pension providers must follow when customers contact them asking about taking their pension benefits.

I mention this, not to expand on what the proposed changes mean for firms, but on the principle of what’s happened here.

Regulatory power

The first point to make is that this brings home exactly how much power the regulators have; particularly with regard to setting rules. In this particular instance, there is very little time for additional requirements to be implemented, as the new pension regime takes effect from 6 April. So the FCA has taken the step of introducing these rules without consultation – presumably because there just isn’t time to go through the consultation process.

But the FCA is able to respond in this way, and will do so if it feels that additional rules are required to mitigate threats to its statutory objectives.

And, as the above example demonstrates, this won’t be just to make technical adjustments to rules, but to introduce new requirements to which firms have no choice but to respond.

The importance of vigilance

All of this just brings into focus how important it is for firms not only to remain extremely vigilant to the activities of the regulators, but also, to anticipate that there will be occasions when short-notice rule changes bring extra training requirements. In this particular instance, the rule changes were communicated in a letter to pension provider CEOs. But this may not always be the case.

So, what will be the plan of action?

Taking this particular example, the impact will most likely be felt by those in the front line in pension providers – the people taking the calls from customers. But the impact will be felt throughout other areas of firms too. Compliance departments will have to move fast to make sure they interpret the changes correctly and communicate them in a way that the wider business can understand.

Then the business teams will have to implement the necessary changes – which could lead to the question – how much time is there for additional training where necessary?

Time poor?

In instances such as this where compliance has to be maintained, there is a short-term and a long term issue, both of which can be managed by external training resources.

In the short-term, the issue is always going to be making sure enough is done to avoid being non-compliant on the deadline date. Depending on what it is, firms have the option, if such a service is available, of bringing outside training consultants to help deliver staff development on specific points in a short space of time.

Short-notice rule changes can also bring into focus whether longer-term training needs exist across different business areas or functions. In this case, there’s not so much of a rush, but nonetheless,  there may be a need for certain staff members to acquire technical knowledge or particular insight into upcoming developments.

History has shown that this situation tends to play out when there are significant changes to be made to sectors of the regulatory regime, often accompanied by changes to tax legislation too. Examples from recent memory include the pensions tax simplification rules that were introduced in 2006. And going back even further than that was the introduction of Stakeholder Pensions in 2001. In both of these instances, firms had to get to grips quite quickly with a raft of new rules and regulations – not just from the financial regulator (the FSA at the time), but also new secondary legislation and guidance from HM Revenue and Customs as well. That was a lot to take on board, and quite quickly too, as businesses were often up against tight internal development deadlines.

And this situation continues today, particularly with regard to developments from Europe. Take Solvency II for example. Even though the deadline for its introduction is 1 January 2016, and whilst most of the requirements have been laid out, there are still some pieces which are awaited. For example, whether there will be any further national-specific reporting requirements from the PRA, as well as final details of the proposed new regime for insurance senior managers and non-executive directors.

Also, the requirements for various aspects of MiFID II are still being issued by ESMA, and the final details of mandatory clearing under EMIR are awaited, which could take effect for some larger firms quite soon.

Closer to home, firms that offer contract-based workplace pension schemes await the final rules on the requirement to appoint Independent Governance Committees; yet these are expected to take effect from April.

So actually, if you look at this a bit more closely, the need to respond rapidly to regulatory developments could well become a permanent feature of our industry. One which may require firms to review exactly what resources they have available to ensure their people obtain the required amount of technical knowledge, insight and understanding at the right time.

This is where external training resources become invaluable, and a means to access an ever-increasing amount of providers and materials becomes invaluable too. No longer does the industry have to rely solely on existing contacts. A wealth of assistance is now available at Industry Events Online, and it’s growing all the time too.


Martyn Oughton    

By Martyn Oughton a Professional Member of the International Compliance Association (ICA).  Martyn now writes a regular blog for Industry Events Online focusing on the importance of training in all aspects of compliance. Read Martyn's other publications at Martyn's Writers' Residence website.

To keep up to speed with new events and blog posts sign up to the Industry Events Online weekly newsletter.