In December 2004 it was clear to the FSA that significant numbers of insurance businesses who had applied for authorisation under the new regime effective 14/1/05 would not get it by the deadline. Was it going to be regulatory Armageddon? Find out
Topic: | Financial promotions |
Who: | HM Treasury in the Financial Services Authority |
Where: | London |
When: | December 2004 |
What happened: |
14 January 2005 was the date on which the marketing, selling and administration of insurance became regulated by the Financial Services Authority and governed by the Financial Services and Markets Act 2000, related statutory instruments and the FSA's "Handbook" of rules.
All of the new rules had been in place for many months before this, with the in force date set for just as long, but nevertheless come late 2004, many insurers throughout the UK were caught with their authorisations down and realised that although they had applied for authorisation, they were very unlikely to get it by the 14 January deadline.
Representations were made to the authorities and fortunately a realistic decision was taken: an order was handed down by H M Treasury on 16 December 2004 which put in place transitional arrangements for general insurance intermediaries. The order applied to those intermediaries whose authorisation applications had not been completed satisfactorily by 14 January 2005.
For these insurance businesses, a new status of "interim authorisation" was created. The effect of this was that even if an insurance business were not fully authorised by 14 January 2005, it would be regarded as authorised for the purposes of the FSA's rules, the supervisory jurisdiction and the associated sanctions and penalties which the FSA can apply.
This interim status would continue to apply until the business in question was granted authorisation, withdrew with FSA consent or the application was refused. In addition, a longstop date of 14 January 2006 was designated. From this date, there will be no more "interim authorised status" and any insurance business enjoying only that status as of 14/1/06, will be regarded as unauthorised and will have to immediately cease all activity in relation to insurance.
Another important provision in the "Interim Permitted General Insurance Intermediaries Instrument 2005" is a requirement that all interim authorised firms, in disclosures which comply with the relevant provisions in the FSA Handbook, must make clear to consumers that they are only authorised on an interim basis and that they are not members of the Financial Services Compensation scheme.
Why this matters: |
One imagines that the sheer numbers of insurance businesses that were caught out by the looming FSA deadline must have been a relevant factor in the pragmatic decision to create this new interim authorised status. Otherwise, the FSA's task of enforcing the regulations against such high numbers of miscreants would have stretched its resources beyond their limits. It means that not having fully authorised status will not necessarily prevent an insurance business from marketing or supplying insurance products, but to enjoy this special provisional status it must be established that the relevant authorisation application was filed before 14 January 2005.
