Greg Kilminster
Head of Product - Content
ESAs PRIIPs KID Q&A update
The European Supervisory Authorities (ESAs) have updated the consolidated Questions and Answers (Q&A) on the Key Information Document (KID) for Packaged Retail and Insurance-Based Investment Products (PRIIPs).
This update covers a range of topics, including general subjects, the ‘What is this product?’ section, market risk assessment, summary risk indicator (SRI), performance scenarios, past performance, and cost presentation.
The update includes clarifications on several points, such as the definition of PRIIPs open to subscription, the difference between a “benchmark” and a “proxy,” what to disclose when the same product aspect or feature has implications for different sections of the KID, and when costs tables need to be aligned. It also covers SRI calculation, including whether an artificially created “synthetic” proxy can be considered an appropriate proxy and how to approach currency risk. Additionally, it explains what cost and scenario information to disclose in case investors may not be allowed to exit a PRIIP before the end of the recommended holding period (RHP) and the deadline to make past performance information available.
As usual, these answers are just intended to clarify provisions in the legislation.
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FINRA March fines summary
FINRA has published its latest disciplinary summary for March 2024 covering a range of enforcement actions. Amongst the firms fined for violations are MMA Securities, UBS Financial Services, Vision Financial Markets and Wells Fargo Securities LLC. The briefing also details the numerous individuals fined or barred by the regulator.
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MAS joins in with outcomes-based treating customers fairly philosophy
In a speech at the LIA Annual Luncheon on 15 March 2024, Ho Hern Shin, Deputy Managing Director of Financial Supervision at the Monetary Authority of Singapore (MAS), spoke about the importance of prioritising customer interests and ensuring better outcomes for customers in the financial services industry.
Ho began by highlighting the industry's resilience in facing various challenges, from the COVID-19 pandemic to ongoing issues like medical cost inflation and an aging society. She commended the industry's efforts in tackling common problems and emphasised MAS's commitment to continued close engagement with industry stakeholders.
Ho focused on the theme of "treating customers right" stressing its significance for the insurance sector. She noted that prioritising customer satisfaction leads to repeat business and referrals, ultimately benefiting both insurers and customers. She also acknowledged that while insurers already pursue customer satisfaction to varying degrees, there is room for improvement across the entire insurance value chain.
One key announcement was MAS's plan to update the Guidelines on Fair Dealing in the near future. The revised guidelines will have a broader scope, applying to all financial institutions and covering all financial products and services offered to customers. Ho explained that the updated guidelines will provide guidance on treating customers fairly at different stages of their interaction with financial institutions, emphasising a risk-proportionate approach.
Ho then delved into specific areas where fair treatment of customers could be improved, starting with product design. She highlighted examples of innovative product designs that incentivise desirable behaviours and improve risk outcomes for policyholders, such as wellness programs and flexible payment options for insurance products.
Underwriting was also covered in the speech with Ho commenting on the importance of fair and responsible underwriting practices for all customers. She stressed the need for objective assessments and urged insurers to gather relevant data to ensure fair treatment, particularly for individuals with disabilities or mental health conditions.
In terms of sales and advisory services, Ho encouraged insurers to offer holistic financial advice rather than solely focusing on product sales. She highlighted local region tools like SGFinDex and the Basic Financial Planning Guide, which facilitate financial planning for consumers and enable quick alignment between customers and financial advisors.
Ho also addressed post-sales services, stressing the importance of providing seamless user experiences and prompt resolution of customer concerns. She highlighted the role of digital tools in empowering customers and encouraged insurers to invest in efficient after-sales service channels.
In concluding, Ho said that building trust requires a commitment to ethical conduct and customer-centric practices at all levels of the organisation. She urged boards and senior management to prioritise treating customers fairly and set the right tone for the organisation. As MAS finalises its Guidelines on Fair Dealing, Ho expressed hope that insurers would respond with commitment and investments to deliver superior customer outcomes, ensuring the resilience and trustworthiness of the Singapore life insurance industry.
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Commodity pool operator ordered to pay over $64 million in penalties
The US Commodity Futures Trading Commission (CFTC) has announced that Empires Consulting, a Florida-based corporation that operated commodity pools under the name EmpiresX, has been ordered by to pay $32,178,397 in restitution and an equal amount in civil monetary penalties, totalling $64,356,794 in fines by the US District Court for the Southern District of Florida.
The court order found that Empires Consulting unlawfully operated commodity pools without being registered as required, defrauding participants and commingling participant funds. The CFTC’s litigation against the defendants is ongoing.
The US Securities and Exchange Commission (SEC) has also taken action against Empires Consulting and the individuals involved for related conduct and resolved its claims in 2023. Additionally, the US Department of Justice filed a parallel criminal matter against certain employees or officers of Empires Consulting on 30 June 2022.
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