Investment Management Regulatory Updates for 2014
Firstly, the Office of Fair Trading’s (OFT) guidelines and licensing will be subsumed under the FCA. Any firms currently licensed by the OFT to conduct consumer credit-based business have to apply under the FCA by March 31st, 2014. Firms can apply for interim permission to legally conduct business, which allows them some breathing room for becoming fully compliant with the FCA and PRA. However, any firms that have not obtained interim permission by April 1st, 2014 must become fully authorized by the FCA. Full authorization requires full compliance with FCA and PRA regulations as of April 1st. Therefore, it would be prudent to meet the deadline for temporary permission if a firm is not prepared to comply fully.
Major issues to keep in mind during new investments
There are alternative ways to gain authorization and a couple of circumstances that can lead to exemption but, for the most part, all consumer credit business activities will be affected. Consumers should be aware of a company’s status so that they can make an informed decision about with whom they should be doing business. One commonly cited factor in such a decision is what fees a consumer should expect to pay.
Every business that obtains full FCA authorization as opposed to interim permission will have to pay a one-time authorization fee as well as an annual fee. The topbridgingfinance.co.uk provides full financial advice and provide loan on bridging finance. Addition, depending on what a particular company needs to do to become fully compliant, one can suspect that there will be further costs on the road to such compliancy. And although one cannot pigeonhole all businesses in the financial sector, it is likely that many which have to front the cost of authorization will pass some of the burden onto consumers.
Also, the FCA will begin dividing businesses into high-risk and low-risk categories. As expected, the FCA will monitor high-risk activities much more closely than low-risk activities. Sometime down the line, this could potentially put high-risk businesses in precarious financial and fiduciary constraints. For instance, high-risk businesses have capital requirements that they must meet in order to both continue with their current level of business and to expand it (particularly by gaining new clients).
Low-risk businesses, on the other hand, have no capital requirements and less stringent regulation overall. The following are some examples of high-risk and low-risk business activities:
High-Risk:
- For-profit credit information services
- Credit brokerage
- Peer-to-peer lending
- Debt collection
- For-profit debt adjusting and counseling
- Consumer credit lending with interest (such as credit cards) or fees (like overdrafts)
- Non-profit debt adjusting and counseling
- Non-profit credit information services
- Hiring goods such as cars
- Lending and credit brokering activities dealing with goods and non-financial services as the primary focus of the business.
New horizon for investing?
Consequently, very little will change for consumers deciding how to invest their money in 2014.As always, investments dealing with physical goods carry significantly lower risks than dealing with incorporeal debts and credits? Much will also remain unchanged for those choosing to dabble with intangible investments or to take out a new line of credit. These consumers should still be diligent in choosing who to do business with and should also remain up-to-date with what exactly is changing.
Fortunately for consumers, the FCA promises to be the “champion of the consumer.” If they can live up to this lofty goal, consumers can expect to be well-protected from the many investment pitfalls that lead us into a financial crisis in the first place.
Michele Duchet is a graduate of Economics. She has been working partly as a financial advisor for topbridgingfinance.co.uk which is a main bridging finance and loans advisory site.
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