To:Rachel Donaldson

Professional Standards Policy Team

Investment Policy Department, Conduct Policy

Financial Services Authority

25 The North Colonnade

CanaryWharf

LondonE14 5HS

6 September 2010

Dear Rachel,

AFM Response toCP10/12, Competence and ethics

  1. I am writing in response to this consultation paper, on behalf of the Association of Financial Mutuals. The objectives we seek from our response are to:
  • Indicate our general support for the proposals in the consultation and comment on some of areas more specifically.
  1. The Association of Financial Mutuals (AFM) was established on 1 January 2010, as a result of a merger between the Association of Mutual Insurers and the Association of Friendly Societies. Financial Mutuals are member-owned organisations, and the nature of their ownership, and the consequently lower prices, higher returns or better service that typically result, make mutuals accessible and attractive to consumers.
  1. AFM currently has 56 members and represents mutual insurers and friendly societies in the UK. Between them, these organisations manage the savings, protection and healthcare needs of 19 million people, and have total funds under management of over £80 billion.
  1. In general terms, AFM and its members are very supportive of this work by FSA, and we were pleased to meet the Cattalyst Consultancy during their research work.
  1. We consider that it is paramount that individuals that speak to consumers should have the relevant knowledge, skills and experience to deal with queries and to be confident that they have taken or recommended appropriate action that is in the best interests of the customer. We suggest it is vital that the knowledge, skills and experience expected are commensurate with the role and that FSA takes a proportionate view in assessing these issues, and that the firms T&C manual must provide clarity about the relevant skills, knowledge and experience required for different roles within the organisation.
  1. With regard to the specific issues highlighted in the paper, we agree that:
  1. A thirty month time limit suggests no transition is needed;
  2. Individuals fulfilling a significant influence function should demonstrate responsibility for the T&C regime in the relevant business areas;
  3. FSA guidance should encourage firms to adopt a T&C scheme, where appropriate; and
  4. Proposals for updating qualification in Chapter 4 are appropriate.
  1. With regard to the new principles for ethics in Chapter 5 we question the appropriateness of one of the principles as currently worded. The proposal “paying due regard to the interests of a customer” could we consider be misconstrued as suggesting that individual customers who do not feel this has happened would have recourse to complain to FSA. Of course it is the role of the FOS to deal with complaints from individuals, so we suggest this principle might be better worded in general terms, i.e.: “paying due regard to the interests of customers”.
  1. Wewould be pleased to discuss further any of the items raised by our response.

Yours sincerely,

Martin Shaw

Chief Executive

Association of Financial Mutuals

AFM Response to CP10/12, Competence and Ethics1 of 2

September 2010