2017年-FCA英国金融行为监管局_restrictions_on_the_retail_distribution_of_regulatory_capital_instruments_ps15_14_4页_143kb

Regulator Assessment Summary: Qualifying Regulatory Provisions

Core Content

This document outlines the FCA's regulatory assessment regarding the restrictions on the retail distribution of regulatory capital instruments, specifically contingency convertible (CoCo) securities and common equity tier 1 (CET1) share instruments issued by mutual societies. The assessment was conducted in July 2016, and the rules came into effect in 2015 (1 July for mutual society shares and 1 October for CoCos). The regulations are domestic and do not include the Cutting Red Tape review.

The primary objective of the FCA is to protect ordinary retail investors from the risks associated with complex and high-risk financial products by implementing a risk-based approach. These rules apply across the whole of the UK and are aimed at ensuring that only sophisticated or high net worth investors can access these instruments.

Main Regulatory Provisions

• CoCo Securities:

  • Firms must check that prospective clients meet specific criteria before distributing CoCos in the retail market.
  • Direct sales and promotions to ordinary retail clients are restricted.
  • Rules apply to the primary issuance of CoCos, not the secondary market.

• Mutual Society Shares:

  • Retail investors must receive specific risk warnings and commit to not investing more than 10% of their net investable assets.
  • The rules apply only to the primary issuance and not to secondary market dealings.
  • The process for self-certification is mechanistic, requiring clients to confirm they have read the warnings and will not exceed the investment limit.

Affected Businesses

The proposed changes are expected to affect 48 to 90 distributors, including:

• 5–10 banks
• 3–5 building societies
• 40–75 specialist wealth managers

Cost and Benefit Analysis

Direct Costs to Business

Direct Benefits to Business

• The FCA does not quantify direct benefits to businesses in this assessment.
• The expected benefit for the FCA is a reduction in resource requirements over time as the market adapts and the risk to retail customers decreases.
• The benefits to businesses are considered indirect, such as increased sales to qualified investors, and are not included in the business impact target.

Key Information

• Implementation Date:

  • Mutual society shares: 1 July 2015
  • CoCo securities: 1 October 2015

• Impact on Sales:

  • CoCo: Direct lost revenue is estimated at £10m to £100m annually, with a corresponding loss of dealing commission of £0.1m to £1m.
  • Mutual Society Shares: Retail investors are expected to reduce their investment from 25%–50% to 10% of their net assets, resulting in a reduction in sales of 60%–80%, or £15m to £30m. However, dealing commissions remain unaffected, so there is no significant direct loss in this area.

• BIT Score Calculation:

  • The total one-off cost to the industry is estimated at £8.0m.
  • The total ongoing cost per year is estimated at £8.4m.
  • These figures are used to calculate the BIT score, which is a measure of the cost impact on the industry.

• Business Impact Target (BIT):

  • The assessment focuses on direct costs and benefits.
  • Indirect benefits, such as increased sales to qualified investors, are not included in the BIT score.

• Compliance and Training:

  • Firms must implement client categorisation systems, appropriateness tests, and compliance confirmation processes.
  • The ongoing costs for these processes are expected to fall within existing training and compliance budgets.

• Record Keeping:

  • Firms already have record-keeping obligations; the new rules only require minimal changes to existing processes.
  • The ongoing cost for record keeping is estimated at £0.3m per year.

Conclusion

The FCA's regulatory changes aim to protect retail investors from high-risk instruments by imposing distribution restrictions and safeguard requirements. While these rules may lead to direct losses in revenue for some firms, the overall net impact is expected to be small due to the shift in sales to qualified investors. The total direct costs to the industry are estimated at £8.0m one-off and £8.4m annually, which are used to inform the BIT score.