PS18/23: Claims management regulation for CMCs

Policy Statement
PS18/23
December 2018
Claims management: how we will regulate claims management companies

PS18/23 Financial Conduct Authority
Claims management: how we will regulate claims management companies Consultation Paper 18/15 which is available on our website at:
www.fca.org.uk/publications/ consultation/cp18-15.pdf Please send any comments or queries to:
Rob Muskett
Financial Conduct Authority
12 Endeavour Square
London E20 1JN
Telephone:
0300 500 0597
Email:
CP18-15@fca.org.uk
This relates to
Contents
1 Summary
2 High-level standards
3 Conduct standards
4 Supervision and reporting
5 Prudential standards & wind-down procedures 6 Client money 7 Dispute Resolution 8 Enforcement 9 Authorisation 10 FCA Fees Proposals 11 Financial Ombudsman Service general levy and case fees for CMCs and the 12 Feedback to our Cost Benefit Analysis 13 Feedback on the Equality Impact Assessment 14 Other Issues
Annex 1
List of non-confidential respondents
Annex 2
Abbreviations used in this paper
Appendix 1
Made rules (legal instruments) returns you to the contents list takes you to helpful abbreviations How to navigate this document onscreen

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Claims management: how we will regulate claims management companies 1 Summary Introduction
1.1 On 1 April 2019 we become the regulator of claims management companies (CMCs)
that are set up or serving customers in England, Wales and Scotland. At the same time, the Financial Ombudsman Service (the Ombudsman Service) becomes responsible for resolving customer disputes about CMCs.
1.2 In June 2018, we consulted on draft rules and guidance for CMCs in Consultation Paper
(CP) 18/15 – ‘Claims management: how we propose to regulate claims management companies’. This described the standards that CMCs regulated by the FCA should meet.
1.3 We proposed to introduce a new Claims Management: Conduct of Business
sourcebook (CMCOB) and to apply relevant parts of the existing FCA Handbook. This Policy Statement (PS) summarises the feedback we received on CP18/15 and our response to it.
1.4 In August 2018 we consulted on the regulatory fees for CMCs in Consultation Paper
18/23 (CP18/23) – ‘Claims management companies: recovering the costs of FCA regulation and the Financial Ombudsman Service’. We include feedback and our final rules on fees in this PS.
1.5 We also consulted on how the Senior Managers and Certification Regime (SM&CR) will
apply to CMCs in autumn 2018. We will publish final SM&CR rules in early 2019. Who this applies to
1.6 You need to read this document if you are:

• a CMC set up or serving customers, in England, Scotland and Wales, including those
  dealing with section 751 claims
• an organisation that is not a CMC but is affected by CMCs, such as those using
  CMCs to generate leads
• a trade body representing CMCs or representing firms that receive claims from
  CMCs
• representing customers’ interests
• involved in regulating businesses that provide claims management services, for
  example, the Information Commissioner’s Office (ICO) 1 Under section 75 of the Consumer Credit Act 1974, the credit card company is jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader.

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1.7 You might also be interested in this document if you are a customer who uses, or is
thinking of using, firms that provide claims management services.
1.8 Some categories of organisation are excluded from FCA regulation when providing
claims management services. For example, claims management services carried on by law firms will be excluded. Context
1.9 Since 2007 the Government has been increasingly concerned about misconduct in the
claims management sector. In 2015, it commissioned the independent Brady Review to examine the problems and make recommendations to improve the way this sector is regulated.
1.10 The Government accepted these recommendations. The Financial Guidance and
Claims Act 2018 (FGCA) transfers the regulation of CMCs from the existing Claims Management Regulator (CMR), which is part of the Ministry of Justice (MoJ), to the FCA. It also extends regulation of CMCs to Scotland. The Government also confirmed that those CMCs dealing with section 75 claims will be regulated by the FCA.
1.11 Parliament has approved secondary legislation that defines which claims management
activities will be regulated. It sets out the CMC temporary permissions regime, and the other changes necessary to transfer powers and responsibilities to us. The activities we will regulate
1.12 We will regulate 2 different groups of activities across 6 claims sectors. Diagram 1
shows these activities and illustrates the 7 permissions that firms can apply for. CMCs that are set up or serving customers in England, Wales and Scotland must apply for the permissions which cover their activities in the relevant sector. There will be 1 permission for lead-generation activities covering all the sectors, and 6 sectoral permissions that cover the activities of advising a claimant, investigating a claim and representing a claimant.

PS18/23
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Claims management: how we will regulate claims management companies Diagram 1: The activities and claims sectors we will regulate2 :
Other changes to the regulatory environment for CMCs
1.13 The FGCA introduced an interim fee cap for Payment Protection Insurance (PPI) claims
of 20% (excluding Value Added Tax (VAT)), which came into force in July 2018. The CMR will enforce this cap until responsibility for regulation is transferred to the FCA. The FGCA also gives the FCA powers to cap fees for claims management services more broadly, and puts a duty on the FCA to use these powers for claims for all financial services and financial products. The FGCA cap will stay in place until we use our own powers to impose a new fee cap. We will consult on any fee cap rules we propose to make. Authorisation process for CMCs
1.14 Diagram 2 summarises the key dates for CMCs who want to continue providing
regulated claims management activities after April 2019. Chapter 9 provides more detail on the authorisation process for CMCs. 2 This table is not intended to be guidance on legislation. For a full description, CMCs should refer to the Claims Management Activity Order. CMC sectors Personal Injury Financial Services and Financial Products Housing Disrepair Specifi ed Benefi t Criminal Injury Employment Related Claims for damages for personal injuries or death Claims in relation to fi nancial services and fi nancial products Claims relating to certain landlord and tenant legislation, for the disrepair of premises under a term of a tenancy agreement or lease, or under the common law relating to nuisance Claims relating to certain industrial injuries, benefi ts, supplements or allowances Claims under the Criminal Injuries Compensation Scheme Includes claims in relation to wages and other employment-related payments, and claims in relation to wrongful or unfair dismissal, redundancy, discrimination and harassment Regulated Activities Seeking out of claims or potential claims seeking out persons who may have a claim Seeking out, referrals and identifi cation of claims or potential claims Referrals of claims or potential claims referring details of a claim, potential claim or of a claimant, or potential claimant to another person Identifi cation of claims or potential claims identifying a claim, potential claim or a claimant, or potential claimant Advice in relation to a claim providing advice in relation to a claim or potential claim Advising, investigating or representing in relation to a personal injury claim Advising, investigating or representing in relation to a fi nancial services or fi nancial products claim Advising, investigating or representing in relation to a housing disrepair claim Advising, investigating or representing in relation to a claim for a specifi ed benefi t Advising, investigating or representing in relation to a criminal injury claim Advising, investigating or representing in relation to an employment claim Investigation in relation to a claim investigating or commissioning the investigation of the circumstances, merits or foundation of a claim with a view to using the results in pursuing the claim Representation in relation to a claim representation in writing or orally, regardless of the tribunal, body or person before which or to whom the representation is made

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Claims management: how we will regulate claims management companies Diagram 2 – The key dates CMCs need to be aware of for registering and applying for authorisation with the FCA What we want our regulation of CMCs to achieve
1.15 In this PS, we set out the final rules and guidance for CMCs. Our aim is to make sure
they are trusted providers of high quality, good value services that help customers pursue legitimate claims for redress, and benefit the public interest.
1.16 We have 3 main areas of focus:

• customers – we want customers to be empowered and confident in choosing a
  value-for-money service which is appropriate for their needs
• CMCs – we want CMCs to help customers get redress in a way that complies with
  our rules and be authorised so that they meet a common set of standards
• regulatory – we want to regulate in a way that prioritises high standards of conduct
  and improves public confidence in claims management services Summary of feedback and our response
  1.17 We received 87 responses to CP18/15. Over 200 firms registered to attend our
  regional roadshows. We have incorporated feedback from responses to CP18/15, feedback from the roadshows and other stakeholder meetings.
  1.18 The vast majority of responses supported our proposals. Respondents recognised
  the need to strengthen the regulation of the industry. Many expressed frustration that some CMCs were tarnishing the reputation of those CMCs who were working on behalf of the customer. We also received some suggestions for changes to the proposed rules. In general, we intend to implement the consultation proposals, but will make some changes based on the feedback. Register for temporary permissions Apply for authorisation in their application period 1 January 2019 to 31 March 2019 All CMCs must register then apply for authorisation 1 April 2019 to 31 May 2019 CMCs making claims in relation to financial services or financial products and CMCs being brought into regulation for the first time 1 June 2019 to 31 July 2019 All other CMCs

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Claims management: how we will regulate claims management companies Changes to our original proposals
1.19 Following this feedback, we made the following changes to our CP18/15 and CP18/23
proposals, including:

• Clarified the requirements for lead generators when using the term ‘no win, no fee’.
  Lead generators who do not know the fee of the firm they are referring to must give an indication of the fee that the customer may need to pay. Lead generators must also provide details in the financial promotion about any termination fees which exist. If they are unsure of the termination fee, for example they do not know which firm the customer will be referred to and therefore the fee that will be charged, they will need to state that a customer may have to pay a termination fee.
• Reduced the amount of information CMCs need to set out on the services they will
  provide in the one-page summary document.
• Made some changes to our pre-contract disclosures requirements including:
  – requiring that CMCs clarify whether their fee is based on the gross or net amount of the compensation award – clarifying that CMCs must ask the customer if they know of other methods to pursue their claim, such as legal expense cover – requiring that CMCs get a customer’s consent before charging costs that were not disclosed upfront – requiring the CMC to ask the respondent and customer if they are aware of an outstanding liability which any compensation could be off-set against – requiring CMCs to ask the customer whether the customer is bankrupt or in an Individual Voluntary Arrangement (IVA) or similar arrangement – where the customer has outstanding liabilities which the compensation may be off set against, or is bankrupt or in an IVA or similar arrangement, making them aware that some or all of the compensation award may go towards paying off the debt and the customer will still have to pay the CMC’s fee from their own funds – requiring the CMC to make customers aware that in pension-related claims, they may not have immediate access to their pension fund at the time they are required to settle the CMC fee
• Made some minor changes to our ongoing disclosure requirements including:
  – expanding our guidance to include further examples of what constitutes a ‘material development’ that must be notified to the customer – requiring CMCs to notify and obtain consent from their customers for any significant steps they intend to take to progress the claim where more than six months has passed since they last notified and obtained consent from the customer

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Claims management: how we will regulate claims management companies – supplementing and adjusting the rule requiring a CMC to give customers a revised fee estimate once it has enough information to do so

• Made some changes to our reporting requirements including:
  – asking an extra question to collect figures for client money held for more than 5 days, apart from when a cheque or other payable order has been made, but not banked – altering the complaint form’s guidance to reflect that lead generators do not need to report complaints about third parties
• Accepted the suggestion to allow CMCs to deduct a portion of marketing
  expenditure from a CMC’s total expenditure when calculating the overheads requirement.
• Allowed CMCs to amend their overheads expenditure, used in the calculation of
  their fixed overheads requirement, by basing it on a multiple of the last 6 months’ unaudited overheads expenditure where there has been a decrease in overheads spending of 20% or more in that time.
• Included a transitional provision to make clear that the FCA’s client money rules
  apply to existing client money which was held or received by CMCs immediately before they obtained their temporary permission or Part 4A permission.
• For the FCA fees, we have introduced a lower minimum periodic fee of £500 for
  smaller firms with turnover up to £50,000 instead of the single minimum fee we had proposed of £1,000 for firms with turnover up to £100,000. We have also added a new transitional provision to clarify what data will be used to calculate the Ombudsman Service general levy in 2019/20. We have not made any other changes to the proposals we consulted on in CP18/23.
  1.20 As part of our CP we conducted a cost benefit analysis (CBA) under section 138I(2)
  (a) of the Financial Services and Markets Act 2000 (FSMA). We have updated our CBA in response to comments received regarding the CBA as set out in CP18/15. We have also updated our assumptions of the number of CMCs we expect to register. And we have updated some of the estimated costs to reflect certain changes made in response to the CP. We give further detail on this in Chapter 12.
  1.21 We received several general comments from respondents about CMCs’ behaviour.
  These included submitting multiple redundant claims, behaving unethically and generally providing a poor service. We also had several comments from CMCs themselves about the behaviour of the firms dealing with claims. They reported how complaints went missing, letters of authority (LoAs) were lost or ignored and claims were turned down without being fully investigated.
  1.22 One of our aims is to improve the professionalism of the CMC sector. CMCs provide a
  valuable service for consumers, especially consumers in vulnerable circumstances who may not feel confident or able to raise a claim themselves. We expect firms dealing with claims to treat CMCs in a professional manner and to provide the same service to CMCs that they would if they were dealing directly with the customer. We welcome

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Claims management: how we will regulate claims management companies information about CMCs not dealing with customers fairly in the same way that we welcome intelligence about firms not dealing with customers or CMCs fairly. Implications of EU Withdrawal
1.23 In March 2018, the UK and the EU agreed the terms of an implementation period,
which would start on 29 March 2019 and last until at least 31 December 2020. During this period, common rules would continue to apply and access to each other’s markets would continue on current terms.
1.24 However, the implementation period is part of the withdrawal agreement which must
be ratified by the UK and the EU. In order to be ready for all scenarios, we have worked to put the necessary arrangements in place for us to continue to meet our statutory objectives and reduce harm should the withdrawal agreement not come into effect. As
part of that, we have consulted3
on changes to our Handbook so that it is consistent with wider UK legislation and the UK’s new position outside of the EU in the event that there is no implementation period.
1.25 The rules in the instrument do not take those proposed changes into account. If the
withdrawal agreement is not ratified and there is no implementation period, then we will update the rules (including references to EU legislation) accordingly. We will consider further whether it is necessary to consult on those changes. Equality and diversity considerations
1.26 We have considered the equality and diversity issues that may arise from the changes
described in this PS, as well as the impact our rules may have on vulnerable customers.
1.27 Overall, we consider there are no specific negative impacts for consumers in groups
with protected characteristics4 or customers who are considered vulnerable. We are making a rule, as consulted on, that requires a CMC to establish and implement clear, effective and appropriate policies and procedures to identify and protect vulnerable customers.
1.28 We will continue to work with other agencies to ensure we have due regard to groups
with protected characteristics in line with our duties under the Equality Act 2018. We have published various resources which may help CMCs in dealing with customers with protected characteristics and vulnerable customers and in meeting their obligations under the Equality Act. We give further details in Chapter 13. Next steps and implementation dates
1.29 In general, the rules set out in this PS will apply from 1 April 2019. The prudential
resources requirements will come into force on the 1 August 2019. If your firm is 3 See CP18/28 & CP18/36 4 ie age, disability, sex, marriage or civil partnership, pregnancy and maternity, race, religion and belief, sexual orientation and gender reassignment, or customers who are considered to be vulnerable.

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Claims management: how we will regulate claims management companies affected by these changes, you should review your policies and procedures in light of the new rules and guidance and make changes where needed.

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Claims management: how we will regulate claims management companies 2 High-level standards
2.1 In this chapter, we summarise the feedback we received on our proposal to extend the
high-level standards that apply to all FCA-regulated firms to CMCs. These will provide CMCs with a clear statement of the standards of behaviour we expect and will help address the harms identified in the market. Principles for Businesses Our proposals
2.2 In CP18/15 we proposed to apply our Principles for Businesses (PRIN) to all CMCs. PRIN
is a general statement of the fundamental obligations that all FCA-regulated firms must meet. We also said that CMCs need to carefully consider the detailed rules and guidance which come from the Principles. Feedback received Q1: Do you agree with our proposal to apply our Principles for Businesses to CMCs?
2.3 All respondents welcomed our proposal. Some suggested broadening the scope of
Principle 11 to refer specifically to the other regulators with whom CMCs should be open and cooperative. Our response We are implementing PRIN broadly as consulted on and have updated the territorial application to make clearer how it applies to CMCs. CMCs should be aware of the regulators that enforce laws that apply to them. We have discussions with other regulators about their relationships with CMCs and expect these to continue, especially when we take over regulation of the sector. Principle 11 already requires firms to deal with other regulators in an open and cooperative way. Threshold Conditions Our proposals
2.4 To be authorised by the FCA, firms must comply with Threshold Conditions. The
Threshold Conditions are set out in FSMA, which can only be changed by an act of Parliament, so we did not consult on those Conditions. However, to help CMCs understand what is required, we proposed to apply the guidance that is in the Threshold Conditions section of our Handbook (COND) to CMCs.

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Claims management: how we will regulate claims management companies Feedback received Q2: Do you have any comments on the application of COND to CMCs?
2.5 All respondents, apart from one, agreed with our proposals. One respondent
suggested that it would be appropriate to require CMC staff to get some form of qualification. A small number of respondents asked us to clarify the meaning of a ‘fit and proper person’. Others made suggestions about how the FCA would supervise CMCs to make sure that individuals who run CMCs are fit and proper. Our response We will proceed with our approach as consulted on. There are requirements in COND about the suitability of individuals. Firms must satisfy these both at authorisation and afterwards. These requirements include the applicant being a fit and proper person, which is more fully described under the Suitability Threshold Condition in COND. They also include the requirement to be ready, willing and organised which is described in the Adequate Resources section of COND with some useful information in the systems and controls part of the Handbook (SYSC). SYSC 5.1.1 states ‘A firm must employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them.’ The SM&CR proposals set out in CP18/26 are intended to provide related requirements for individuals. An important part of the SM&CR is to make sure that all staff are appropriately trained to carry out their roles, including being fit and proper to perform them. We aim to publish a policy statement in response to the SM&CR CP in the new year. Systems and Controls Our proposals
2.6 We proposed to apply most of our rules and guidance about systems and controls to
all CMCs. These are set out in the SYSC section of our Handbook and they explain how CMCs should organise and manage their affairs. We also proposed that the guidance in ‘Financial Crime: a guide for firms’ should apply to CMCs. As we set out in the CP, the rules and guidance in SYSC expand on Principle 3: ‘A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.’ They describe what we will expect from CMCs to comply with Principle 3. Feedback received Q3: Do you agree with our proposal to apply SYSC to CMCs?
2.7 All the respondents but one welcomed our proposals. The one objection came from a
respondent who felt our approach was too burdensome and would mean many firms would have to become experts on a large rulebook unnecessarily.

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2.8 Some respondents included additional comments, some of which were about our
statement that we would not expect a small CMC dealing with a low number of customers to have the same systems and controls as a large CMC. Our response We will implement the rules and guidance in SYSC and the guidance in 'Financial Crime: a guide for firms' as consulted on. We believe the requirements are proportionate. CMCs are required to take reasonable care to establish and maintain such systems and controls as are appropriate to its business. When assessing how a CMC complies with these requirements we will take into account, amongst other things, the nature, scale and complexity of the CMC’s business. General Provisions Our proposals
2.9 In CP18/15 we proposed to apply our General Provisions (known as GEN) to CMCs.
GEN rules cover the administrative duties that apply to all the firms we regulate. The rules aim to make sure customers are not misled, that firms are subject to the same general standards and firms clearly state if they are regulated by us. Feedback received Q4: Do you agree with our proposals to apply GEN to CMCs?
2.10 All respondents but one agreed with our proposals. The respondent who disagreed
was concerned that we were proposing too many rules for CMCs, which are mainly small businesses. Some other respondents who supported our proposals asked us to consider providing further guidance. Our response We do not believe we are applying too many rules to CMCs and will apply GEN to CMCs as consulted on. We do not intend to provide further rules or clarification on terms used in our Handbook. CMCs may find the guidance the FCA has already published in relation to its rules helpful5 . 5 For example, www.fca.org.uk/firms/fair-treatment-customers sets out our expectations on the fair treatment of customers.

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Claims management: how we will regulate claims management companies 3 Conduct standards
3.1 In this chapter, we summarise the feedback to our proposals to apply various conduct
of business rules to CMCs. These proposals aimed to raise CMCs’ standards and tackle harms such as some customers not being clear about the services provided. General conduct of business rules to apply to CMCs Our proposals
3.2 The conduct of business rules, which we proposed to apply to CMCs, would be
included in a new Handbook sourcebook called CMCOB.
3.3 We outlined several conduct of business rules that would apply to CMCs, including
expecting them always to act in the best interests of their customers. To address the harm from spurious and fraudulent claims in the sector, we proposed a specific rule prohibiting CMCs from presenting claims which are fraudulent or vexatious or which have no good arguable basis. Feedback received Q5: Do you agree that CMCs should be obliged to comply with these proposed general conduct of business rules?
3.4 All respondents agreed with our proposals. A small number asked us to clarify our
expectations of CMCs when investigating the basis of a claim. We proposed in CP18/15 that CMCs should take reasonable steps to investigate the existence and merits of a potential claim, and to substantiate the claim’s basis before submitting a claim. Two respondents also asked that, to enable CMCs to comply with the proposed requirements for investigating a claim, we impose a new requirement on banks and other financial institutions to co-operate with requests for information from CMCs.
3.5 As part of our consultation process, we considered findings raised in Richard Lloyd’s
July 2018 report on his independent review of the Ombudsman Service. In that report, it was recommended that the FCA consider the impact of CMC threats of legal action against the Ombudsman Service where CMCs are unhappy with the decision made. It also recommended that the FCA should take this impact into account when developing conduct rules for CMCs. We also received feedback on the wording of our rule which applies when CMCs consider whether there is a good arguable base for the claim, and that it is neither fraudulent, frivolous or vexatious. Our response We will implement most of our proposals unchanged. We continue to monitor the behaviour of banks and other financial institutions in our ongoing supervisory work. We expect third parties to co-operate fully with valid requests for information from CMCs. Where CMCs act

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Claims management: how we will regulate claims management companies on behalf of customers we expect third parties to deal with CMCs in the same way that they would deal with a customer. We welcome any information where this is not happening. It is important that customers continue to have access to justice, whilst also ensuring that public body resources are used prudently. In response to the Richard Lloyd report, we are including guidance that CMCs should take account of relevant guidance published by the Ombudsman Service or other relevant statutory bodies, as well as any decisions addressed to a customer they have acted for. CMCs should do this as part of establishing whether the claim has a good arguable base. This should help ensure CMCs do not threaten the Ombudsman Service with legal action if a decision is made which they are unhappy with but which is in line with previous guidance or decisions made by the Ombudsman Service. Using third-party lead generators Our proposals
3.6 We proposed that CMCs should do due diligence on any lead generator they
accept leads from. To comply with these requirements, CMCs should check that the lead generator is authorised and has processes to make sure they are getting leads in line with relevant data protection legislation and the Privacy and Electronic Communications Regulations 2003 (PECR). We proposed that CMCs must not use a lead generator if the CMC is not satisfied about their systems and processes. CMCs would also need to keep a record of lead sources. Feedback received Q6: Do you agree that CMCs should be obliged to comply with these proposed rules on using third-party lead generators?
3.7 All respondents but one supported our proposals. Several respondents, though
supportive, asked us to clarify the steps CMCs should undertake to ensure that they have carried out sufficient due diligence.
3.8 Some respondents considered that the proposed rules did not go far enough. They
proposed that a CMC that obtains leads should be made responsible for the lead generator’s actions.
3.9 Other respondents also said that CMCs should have to tell a potential customer where
they got the lead from.
Our response
We will proceed with our general approach as outlined in CP18/15, but will include additional suggestions about the kind of enquiries that CMCs should make when accepting leads. We received requests from some CMCs for extra information and clarification in responses to the CP and

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Claims management: how we will regulate claims management companies at our roadshow events. The CMR has issued guidance on this topic, some of which we have now replicated. We are proceeding with our proposal that CMCs should keep a record of the source of any leads and clarifying that this would also include leads as a result of a referral or data about claims or potential claimants. We note the request to make CMCs responsible for the actions of the lead generator from whom they acquire business. We do not intend to make CMCs directly responsible for the actions of a lead generator. CMCs must carry out enough due diligence to make sure that the lead generators, from whom they acquire referrals, leads or data, comply with PECR and data protection legislation. We have added some guidance to this requirement to clarify our expectations with regard to CMCs ensuring the lead generator has obtained the relevant consent. Under the privacy and electronic communications legislation6 a CMC will be responsible for the actions of the lead generator where the lead generator is acting on the CMC’s behalf. We do not expect the location of a lead generator to change the due diligence the CMC is required to undertake. If a lead generator is based abroad and a CMC is unable to satisfy itself that the lead generator has the appropriate systems and controls in place to ensure compliance with PECR and data protection legislation, that lead generator should not be used. Recording calls Our proposals
3.10 We proposed that CMCs will have to record all calls with customers and keep the
recordings for a minimum of 12 months after the latest of:

• the CMC’s final contact with the customer
• the conclusion of the contract with the customer
• the settlement of the claim
• the customer’s decision to no longer pursue the claim or to withdraw the claim
• the conclusion of any related ongoing legal proceedings
• the conclusion of the handling of any complaint made by the customer to or about
  the CMC
  3.11 These requirements would apply to all CMCs, including those who don’t enter into
  a contract with a customer. It would mean CMCs keep a recording of a sales call to a customer for 12 months, including where a lead isn’t generated, if there was no further contact with a customer. If a customer makes a complaint in the 12 months following 6 For example, under Regulations 19, 21 and 22

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Claims management: how we will regulate claims management companies a call, the CMC would need to keep the recording for 12 months after the investigation of the complaint by either the CMC or an ombudsman service had concluded.
3.12 CMCs would not have to record calls with third parties (eg financial services providers).
Feedback received
Q7: Do you agree with our proposal to require CMCs to record all calls and electronic communications with their existing and potential customers? Q8: Do you agree with our proposal to require call recordings to be kept for a minimum of 12 months from the latest of the events specified above?
3.13 Feedback on these proposals was broadly positive. Most respondents who answered
this question agreed that CMCs should be required to record all calls. A typical comment was that it helps tackle cold calling and CMCs threatening vulnerable consumers.
3.14 Some disagreed with the proposals, mainly due to cost and some felt that a written
record would be enough. Some respondents were concerned about how this requirement could interact with the General Data Protection Regulation 2018 (GDPR). Smaller firms were worried about how they could meet these requirements. However, at our roundtables we found that some small firms were already recording calls. They said it wasn’t an overly burdensome requirement and it had significant benefits.
3.15 Feedback on the time needed to hold recordings was also supportive. A large majority
felt that call recordings should be kept for a year, and in some cases, more. Those who disagreed mainly did so based on cost and highlighted that if a case lasted for 5 years some calls would need to be kept for 6 years. Some also felt that any requirements here should also apply to other firms that we regulate and some felt that CMCs in sectors such as employment or housing disrepair should be exempt from the requirement.
3.16 Some lead generator CMCs asked whether the call would need to be kept until the
conclusion of the claim by the firm they passed the claim onto. Our response We think the benefits of call recording outweigh the costs and have not amended our approach. We also think that we need specific requirements for this sector compared to other sectors that we regulate. CMCs carry out a large amount of business by telephone and we have seen aggressive sales and marketing techniques in this sector. These requirements also had strong support from consumer bodies. Costs of call recording In response to the feedback received, we checked the cost assumptions we used in the CBA. We also asked CMCs who raised concerns about the costs of our proposals to support their concerns with evidence. The responses did not suggest our cost estimates were incorrect. It is

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Claims management: how we will regulate claims management companies important to note that our CBA broke down the costs between CMCs with a turnover of above £1 million and those below. This means that a firm with a turnover of much less than £1 million will probably face lower costs than the average CMC set out in the CBA. We considered the ‘per line’ cost of recording calls for those CMCs who currently do this. For a CMC with a turnover of under £1 million the average costs are £300 for the installation of a line, £487 a year on recording and £259 a year on storage. We also know of products where the cost per line includes keeping the call recording for 25 years. GDPR FCA rules have the status of ‘legal obligations’ under GDPR. We and the ICO consider that our call recording requirements are consistent with the GDPR requirements. CMCs who act as lead generators If a CMC passes a claim onto a third party and has no further contact with the customer they will need to keep the relevant calls. This could be for a year after their final contact with the customer, or a year after a customer’s complaint about the CMC has been resolved, whichever is later. If CMCs acting as lead generators have no further contact with the customer and there has been no complaint about the lead generator they do not need to keep the call for a year after the claim is concluded by the third party. Employment and housing disrepair CMCs We have considered the value of recording calls in these sectors to see if we should amend our requirements. Although CMCs make fewer marketing calls in the employment sector, the CMR felt there is considerable value in recording calls, especially as poor record keeping can be an issue for CMCs in the employment sector. The CMR also highlighted that a large number of CMCs in the housing disrepair sector are lead generators and we believe call recording would also be helpful in this sector. Marketing by CMCs Our proposals
3.17 All CMCs that we regulate will be subject to our rules on financial promotions. These
include rules to make sure materials are clear, fair and not misleading. We also proposed that:

• where any marketing includes reference to the cost of the claim being on a ‘no win,
  no fee’ basis the CMC should also set out details of their fee
• any marketing will also have to show, where relevant, that there are statutory
  ombudsman or compensation schemes that the customer could use for free

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Claims management: how we will regulate claims management companies Feedback received Q9: Do you agree with our proposals for marketing by CMCs?
3.18 Most respondents broadly supported our proposals on marketing by CMCs.
Financial promotions mentioning ‘no win, no fee’ and similar terms
3.19 Some lead generator respondents asked if they would have to comply with the ‘no win,
no fee’ rule, while others stated that they would not be able to confirm what the fee of the firm that handled the claim would be. Some respondents said that it would be complicated to comply with the rule, or that the rule created an uneven playing field with CMCs that do not mention they charge on a ‘no win, no fee’ basis.
3.20 One respondent said that the requirement to include any termination fee that may be
charged in the financial promotion is unfair compared to what is required of other firms we regulate and so is discriminatory for CMCs.
3.21 Some respondents asked whether a free PPI check would need to meet the financial
promotion requirements.
Claims that may be referred to a statutory ombudsman or compensation scheme and can be made by the customer for free
3.22 Most respondents were supportive of this proposal. Some respondents were unsure if
lead generators had to comply with the requirement to show these options and others asked whether the alternative options had to be set out in all scenarios.
3.23 Those disagreeing with the proposal said that customers should already know that
they can claim for free. They stated the requirement to set this out was punitive as no other FCA regulated sector had similar rules. A couple of respondents questioned whether there was evidence of consumer harm caused by not signposting to free alternatives.
3.24 Others suggested that limited character space in social media marketing would make
it difficult to comply with the information disclosure rules. Some respondents also said this would cause problems with radio advertising due to the cost of airtime. Marketing styles
3.25 Respondents outlined various marketing styles and asked us to consider implementing
rules to prohibit CMCs from advertising in those ways.
Our response
Financial promotions mentioning ‘no win, no fee’ and similar terms Although some respondents opposed the rule because they felt it was complicated to comply with and could create an unlevel playing field, they did not provide any detail on the difficulties they would experience. Other firms we regulate do not use wording such as ‘no win, no fee’ or similar terms so we consider it reasonable to have specific requirements for CMCs in relation to this statement. We believe that requiring CMCs that use ‘no win, no fee’ in their advertising to outline their fees provides important information to customers to help them make an informed decision as to whether or not to use the CMC. In any event, CMCs can choose whether or not to use this type of marketing and whether

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Claims management: how we will regulate claims management companies they will be captured by the specific requirements in relation to this statement. We acknowledge that some lead generators may not know the exact fee that the customer will pay where claim details are forwarded on to a third party. So, we are clarifying the requirements for lead generators who use the term ‘no win, no fee’, but do not know the actual fee. We will require lead generators to set out an indication of the fee or fees which customers may be charged for their claim. Lead generators can do this by either setting out the typical fee or a range of fees which customers may pay. We also set out guidance on this rule. Where the lead generator sets out the range of fees, this should include the highest and the lowest fee which may become payable. To comply with this rule, lead generator CMCs will need to know the potential fees charged by the third parties they pass on claim details to. If they do not know the potential fees they should not advertise as ‘no win, no fee’. So that customers are not misled, we are clarifying that the lowest fee presented in the range should not be quoted unless the lead generator passes on a reasonable proportion of its customers to the firm which charges that fee. We maintain that CMCs must include details of a termination fee in financial promotions that use the term ‘no win, no fee’ or similar. This reduces the risk of a potential customer not realising they may still have to pay a termination fee if they decide to end the claim after the expiry of the cooling off period. We do not consider the rule to be discriminatory. We apply rules that further our operational objectives to address the harms in the sectors we regulate. We consider this requirement is a proportionate way of reducing the potential for customer harm. We are also making the requirements for disclosing termination fees the same for lead generators and CMCs that handle the claim. We require that, if the lead generator does not know what the termination fee is, they include a statement highlighting that the customer may need to pay a termination fee if they withdraw from the claim before it concludes. The activity of carrying out a free PPI check is a regulated claims management activity. As a result, both CMCs that handle claims and lead generators will have to meet our general rules on financial promotions. This includes the requirement to set out that the customer is not required to use the services of the CMC to make a claim and can present the claim themselves for free, should a statutory ombudsman or compensation scheme exist. We do not consider a free PPI check in itself to be similar wording to a ‘no win, no fee’ service. However, if the free check advert links to such a service it is likely to be captured by this rule. When deciding this, we will consider whether the customer may reasonably believe they are using the services of a CMC who operates on a ‘no win, no fee’
basis. If CMCs are unsure of whether their marketing has similar wording to ‘no win, no fee’, the cautious approach would be to include the fees the customer will have to pay.

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Claims management: how we will regulate claims management companies Claims that may be referred to a statutory ombudsman or compensation scheme which the customer could make for free We are implementing our rule as proposed. We proposed this rule as responses to our Financial Lives Survey confirmed that 35% of UK adults who had made a mis-sold financial services or financial products claim did not know that they could have done so without using a CMC. This proposal was intended to provide potential customers with information to make an informed decision about whether they wanted to use a CMC. This approach is consistent with how we regulate firms in other sectors. We require debt management companies, for example, to inform customers that there are free alternatives to the advice they offer. CMCs, including those that are solely lead generators, will be required to state that the customer can use a statutory ombudsman or compensation scheme in a financial promotion only where these bodies or schemes can be used for the sort of claim the financial promotion relates to. Where they can be used, CMCs, including lead generators, must also make clear that the customer does not have to use the services of the CMC to make their claim and that customers can make the claim themselves for free. For instance, where a financial promotion involves a personal injury claim, and there is no relevant statutory ombudsman or compensation scheme, the rule that the financial promotion makes clear that the customer can make the claim themselves for free will not apply. We require that communications with customers, including financial promotions, must be clear, fair and not misleading. In line with this requirement we have clarified our rules to make clear that when a CMC identifies itself in a financial promotion or communication, it identifies itself as a CMC. We have previously provided guidance on using social media for financial promotions. CMCs can refer to this guidance when considering our general approach to using social media in financial promotions. It is important that customers receive relevant information, such as which statutory ombudsman or compensation scheme is available to their type of claim, at the point the financial promotion is made. This is so they can make an informed decision as to whether to use a CMC or take the claim forward themselves. We will implement the disclosure requirements as consulted on equally to various mediums of advertising, including where broadcasting on radio.

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Claims management: how we will regulate claims management companies Marketing styles Respondents raised concerns about marketing styles they had seen. We set these out below for clarification in a non-exhaustive list. We consider such marketing styles are unlikely to meet the requirement for CMCs’ communication to be fair, clear and not-misleading. In some cases, such marketing styles may also conflict with the firm’s requirement to act with integrity:

• guaranteed pay-out or misleading high percentage success rates,
  particularly where these may affect vulnerable people
• customer testimonials used in marketing which suggest a specific
  outcome rather than a typical outcome
• using images and/ or names of public figures without their consent
• CMCs holding themselves out as having been instructed by another
  regulated firm when they have not been
• CMCs implying they have had information supplied to them by
  regulated firms when they have not
  Pre-contract disclosure
  Our proposals
  One page summary document
  3.26 We proposed that CMCs must provide additional pre-contractual information before
  entering into a contract with a customer. The main disclosure requirements included a standardised fee illustration or estimate, details of any relevant statutory ombudsman or compensation scheme, a summary of the service the CMC will provide and the customer’s right to cancel or terminate the contract. Additional pre-contractual information
  3.27 We proposed that CMCs must provide additional pre-contractual information before
  entering into a contract with customers. This includes, but is not limited to, the terms and conditions of the contract, details of any referral fee paid to a third party for the introduction of the claim and an outline of the CMC’s complaints procedure. Finding out if there are other ways a customer can pursue the claim
  3.28 We proposed to carry over the existing CMR Client Specific Rule 10. This requires
  CMCs to make reasonable enquiries into alternative options available to the customer to pursue the claim, such as whether the customer has some form of legal expenses insurance. Reasonable steps to ensure customers understand the contract
  3.29 We proposed to carry over Client Specific Rule 14. This requires CMCs to take
  additional steps to ensure that the customer understands the contract they are agreeing to. We supplemented this rule with proposed guidance to direct CMCs to take further steps when dealing with vulnerable customers.

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Claims management: how we will regulate claims management companies Fee illustration
3.30 So that potential customers could understand and compare the CMC fees they may
have to pay, we proposed a standard approach to calculating ‘typical examples’ to illustrate fees. We proposed that CMC fees would be illustrated for redress values of £1,000, £3,000, and £10,000 and be inclusive of VAT. We also proposed that CMCs promptly update customers with a reasonable estimate of the fee that will be charged once it has enough information to do so. Lead generator disclosure requirements
3.31 For CMCs that are lead generators, we proposed that these firms prominently state
when communicating with customers that they receive a fee for introducing the customer to a third party. Feedback received Q10: Do you agree with our proposal for existing pre-contract disclosure requirements?
3.32 Feedback on these proposals was generally supportive. Most respondents broadly
agreed with the package of pre-contract disclosure proposals because it enables customers to make an informed decision.
3.33 Some had concerns about the feasibility of some of the disclosure requirements being
contained on a single page. Some respondents suggested that the FCA or a trade body should create templates for the CMC sector.
3.34 Some firms also said that for certain claims, such as pension and investment, the
requirement to set out fees based on compensation amounts of £1,000, £3,000, and £10,000 were too low. Some respondents pointed to the Financial Services Compensation Scheme (FSCS) limit of £50,000 being more realistic. Others said that providing higher figures would create unreasonable customer expectations of likely compensation amounts. Feedback also highlighted the potential for customer harm if it is not clear whether the CMC fee is based on the gross or net amount of the customer’s compensation award.
3.35 Some respondents didn’t agree with telling customers they can pursue a claim
themselves for free, although others felt this was sensible and mirrored what they did already.
3.36 Some respondents asked for clarity about how we expected them to comply with our
proposals for firms to find out whether the customer already has an alternative means in place to fund the claim.
3.37 One respondent suggested that CMCs should be prevented from charging a fee they
have not disclosed. Another proposed that we should prohibit CMCs from charging fees based on a percentage of a set-off or reduction on an outstanding balance where no cash payment was made. Another suggested that CMCs should do due diligence to establish whether the customer is bankrupt before they offer any contract, as fees cannot be deducted from the award in these cases.
3.38 One respondent asked us to clarify whether the requirement for disclosure of
fees paid to a third party includes marketing costs paid to marketing agencies for advertisements undertaken using the CMC’s brand name, as opposed to the ‘traditional’ lead generation model.

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3.39 We also spoke to the Legal Ombudsman Service (LeO) about common complaints
they received and the key information they thought should be provided to customers. Our response One page summary document It is important that customers can easily digest information. We have considered feedback on the challenge of including all information requirements on a single page. In response, we are requiring the single
page summary CMCs provide to contain a high-level summary only of
the services they offer, as opposed to more detailed information. In response to comments received by LeO, we are also requiring that CMCs include concise details of how they will keep the customer updated on their claim’s progress and to set out what steps the customer will be expected to take. CMCs that are not entering into a contract with a customer, such as many lead generators, will not have to provide a one
page summary document.
Templates
In response to requests for templates of the one page summary, trade bodies may wish to work with their members to develop a template which meets the information requirements and in particular, Principle 7. Fee illustration We have re-assessed the average claim size in pension and investment claims. We analysed our Complaints Data Analysis in 2017 H2 and data from the Ombudsman Service. The evidence from these sources did not show that average redress figures for pension and investment claims fell outside the originally proposed standardised figures of £1,000, £3,000 and £10,000. Based on the evidence available, the desire for fee illustrations to be presented in a consistent manner and the wide agreement to the original proposals, we will be proceeding with our rules as consulted on. We acknowledge that there are CMCs that handle claims that generate redress amounts in higher brackets. We proposed that we would require CMCs to state that the fee illustration is not an estimate of the amount likely to be recovered for the customer and to update customers on fee estimates when they have sufficient information to do so. This will enable the CMC to give the customer more accurate fee information. We give more detail on this requirement in our response to the on-going disclosure requirements. We are also requiring that CMCs entering into a contract with the customer clarify in their pre-contract disclosure whether they will charge the fee based on the gross or net amount of the compensation award. CMCs are not required to include this in the one page summary document. Finding out if there are other ways a customer can pursue the claim We are clarifying what we expect from CMCs when complying with the proposed rule requiring them to find out whether there are other ways

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Claims management: how we will regulate claims management companies a customer can make their claim. We expect CMCs to ask the customer if they are aware of, for example, any insurance policy such as legal expenses cover, that relates to the claim. CMCs will not be required to contact third parties, such as insurers, to find out this information. We have made minor amendments to our rules to reflect this. Undisclosed upfront costs Before a CMC charges a customer for a cost it has not disclosed – and which the customer therefore did not have the chance to agree to – the CMC must obtain and record the customer’s consent. We have reflected this in our finalised rules. Outstanding liabilities We will require the CMC to carry out due diligence to establish whether the customer has an outstanding liability which the compensation may be used to pay towards. CMCs must check this with the customer before the customer signs the contract. In these cases, the CMC must tell the customer that they will still have to pay the CMC fee if the redress is used to off-set an outstanding liability. We consider that where the customer pursues a claim that has the effect of reducing a liability owed, there may be some value to this pursuit and so it would be legitimate for a CMC to charge a fee. We are requiring CMCs to make the customer aware of the possibility that the customer might not receive any redress directly from their claim, as it will be offset against the liability, and would therefore still have to pay the CMC fee from their own funds. This would help customers make a fully informed decision about whether to engage the services of a CMC. In complying with this rule, we remind CMCs of their responsibility to ensure that any communication with the customer is clear, fair and not misleading. This information needs to be set out in the pre-contractual information provided to the customer. The CMC must check this with a third party when submitting an information request. They should also update the customer if such an outstanding liability is identified as this is in line with the ongoing disclosure requirements set out below. Bankruptcy and similar arrangements We are also requiring CMCs to perform due diligence to understand if the customer is bankrupt or has an IVA or similar arrangement. One way of complying with this requirement is to ask the customer. We are also requiring the CMC to record the customer’s response to this question. The CMC will need to do this before the customer signs the contract. Should the CMC choose to offer its services in this case, we require them to tell the prospective customer that they will still have to pay the CMC fee from their own funds if the redress is used to pay creditors. Disclosing fees paid to third parties We have carried across Client Specific Rule 11 from the existing regulatory regime for CMCs on fees paid to third parties that need to be disclosed. All fees disclosed under the existing regime will still need to
be disclosed under the new regime.

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Claims management: how we will regulate claims management companies Ongoing disclosure requirements Our proposals
3.40 We proposed that, once the claim has begun, CMCs must update the customer
about any material developments. We set out proposed guidance on what might be considered a material development.
3.41 We proposed that CMCs must notify their customers on becoming aware of a cost
which had not already been disclosed but which the customer must meet.
3.42 We proposed that where a CMC has not offered a fixed fee, or where the likely fee
differs from the fee illustration, it should update the customer about the fees for handling the claim once it has enough information to do so.
3.43 We proposed that the CMC should send the customer an itemised bill and provide a
clear explanation of how the fee had been calculated. We proposed that firms must not deduct their fee from the compensation amount unless they have received the customer’s consent to do so.
3.44 Where the claim is rejected by the respondent, we proposed that the CMC must
tell the customer of the available methods by which the customer may continue to pursue their claim and whether there is a statutory ombudsman or compensation scheme they can use. We also proposed that where the CMC becomes aware of an alternative dispute resolution scheme that the respondent is subject to, that the CMC must inform the customer that they can present the claim to that alternative dispute resolution scheme.
3.45 When providing its services, we proposed a requirement for CMCs to forward on
information intended for relevant parties promptly and within at most 10 working days. Feedback received Q11: Do you agree with our proposals for ongoing disclosure?
3.46 Most respondents agreed with our proposals. A small number asked us to clarify what
would be captured under ‘material developments’. Some said that the requirement to update the customer every 6 months was not frequent enough, with most of these respondents suggesting that updating customers every 3 months was a better timeframe.
3.47 A respondent suggested that CMCs should be prevented from charging a fee it has not
already disclosed.
3.48 A small number of respondents commented on the proposal to provide the customer
with a revised fee estimate. While most of these comments focused on clarifying when the revised fee update should be provided, only a few respondents expressed difficulty in providing a revised fee estimate. Some respondents highlighted that in providing a revised fee estimate, customers might be led to expect a higher compensation amount than they would actually receive. We also received comments stating that providing updates, such as revised fees, is crucial to the good conduct of a claim.
3.49 Some respondents requested that CMCs be required to tell the customer about offers
of settlement whether financial or non-financial and the full amount of compensation. It was also suggested that CMCs should not be allowed to deduct their fee from the compensation amount, although some respondents expressed the alternative view, supporting deductions as a way of making payment.

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3.50 Another suggested that CMCs should notify their customer as soon as the CMC
receives any allegation of fraud about their customer.
Our response
We are making some minor amendments and clarifications to our proposed rules. Keeping customers informed Our rules require CMCs to tell customers of material developments in the progress of the claim. We proposed guidance in CMCOB to give examples of what we considered would be captured under this requirement. We received feedback requests to clarify further what a material development is. As a result, we will be expanding this guidance to include any offer of settlement, even where the settlement offered was not the desired result of making that claim (e.g. because it is a non-financial offer). We have also included examples, such as where a statutory ombudsman decision has been received. We remind CMCs that the guidance set out in CMCOB is not an exhaustive list of material developments. It is important that customers are kept informed of the steps which CMCs plan to take in relation to presenting and pursuing the claim. CMCs will be required to update the customer on any steps that were not outlined to the customer prior to the agreement commencing. This can include referring the claim to a statutory ombudsman or commencing legal proceedings. CMCs will also be required to notify the customer of any significant step the CMC intends to take to progress the claim where six months has passed since the CMC last notified the customer of that step. The CMC must also obtain customer consent within 6 months prior to taking that significant step. We consider a significant step to be an action such as referring the claim to a third party, such as an ombudsman, or commencing legal action. We have provided guidance to clarify this. CMCs may obtain customer consent over the telephone or in a durable medium. It is also important that customers agree to a cost before they are asked for payment. We are making our expectations clear by introducing a rule that requires CMCs to obtain and record customer consent before invoicing the customer for a cost which was not previously disclosed. CMCs will be required to obtain customer consent either over the telephone or in a durable medium. We are requiring CMCs to ask the person against whom the claim is to be made, whether the customer has any outstanding liabilities which the compensation may be used to offset. This should be done at the first opportunity the CMC has, for example when sending an LoA or an initial information request. Where the respondent confirms this is the case, we are requiring the CMC to promptly inform the customer of this. The CMC must also inform the customer that any compensation secured in respect of that claim may be used to reduce the outstanding liability and

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Claims management: how we will regulate claims management companies that the customer will still have to pay the CMC’s fee themselves. These new requirements complement the requirement under pre-contract disclosure where CMCs must ask the customer if they are aware of any outstanding liability which the compensation might be used to reduce. Deducting fees Our finalised rules do not ban CMCs from deducting their fee from the compensation amount. We understand that this arrangement may be helpful to some customers who have said they want their compensation to be handled in this way. In our consultation we proposed to require CMCs to get customer consent before they deduct the CMC fee from the compensation award. We will implement this rule as consulted on. Frequency of updates We have considered how often CMCs need to update customers under CMCOB 6. This includes updates on material developments as well as passing on information. Taken together, we consider these requirements will mean customers receive updates more often than once every 6 months. However, we recognise that when a claim is, for example, being heard in a tribunal or referred to an ombudsman, material developments may not happen as frequently. We provide guidance to CMCs on how to manage customers’ expectations for example, CMCs may wish to tell customers that updates may not be as frequent while the claim is not within its control. This may be, for example, because a third party that is not expected to provide an update for a significant period of time is dealing with the claim. In these cases, CMCs should also consider telling the customer that they can contact the CMC at any point to discuss the claim if they want to. Revised fee estimate We will proceed with implementing the rule that requires a CMC to provide customers with a revised fee estimate once it has enough information to do so. In response to feedback, we have added guidance to illustrate when CMCs will be expected to provide this. This is particularly relevant for CMCs dealing with claims that will have a higher value than the figures in the fee illustration, e.g. pension or investment claims, and we have added guidance to make this clear. We recognise that the full amount of compensation due may not be known, especially in some pension cases, until the end of the claims process. However, CMCs should consider carefully whether they have enough information to give the customer a better indication of the likely fee based on the CMC’s experience of similar claims. We would not expect this to result in CMCs overstating the likely compensation amount in order to attract customers. When calculating a revised fee estimate CMCs should take into account any interest and investment income that is likely to be payable to the customer by the respondent. We have clarified this in the guidance. We have also made a minor adjustment by providing guidance suggesting that CMCs may include a disclaimer when they are providing the revised
fee update and should communicate any assumptions on which their revised fee estimate is based. The disclaimer would explain that the

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figure given might change and may not represent the actual amount the
customer will get. This will help better manage customer expectations about the likely compensation they might get and the fee they might have to pay. Allegations of fraud If a CMC becomes aware of an allegation that the customer has committed fraud, that information must be forwarded on to the customer promptly. We have updated our rules on CMCs notifying customers to include this to avoid any uncertainty. We would also expect the firm to tell the customer of the consequences of making a fraudulent claim. Collecting Fees Our proposals
3.51 We proposed a requirement for CMCs to give customers a clear explanation of their
fees and charges by giving them an itemised bill when requesting payment. Our rules also required CMCs not to deduct their fees from compensation awards without the customer’s consent.
3.52 We also proposed to require that CMCs develop and implement clear and effective
policies and procedures for dealing with customers who cannot pay fees and charges. Our proposals also required CMCs to focus on customers that the CMC reasonably believes are vulnerable. We reminded CMCs that they may be carrying out a credit￾related regulated activity if they allow the customer to enter into an instalment plan or an extended period of time to pay fees and charges. CMCs will need to make sure they have the appropriate permission for this. Feedback received Q12: Do you agree with our proposals for collection of fees by CMCs?
3.53 Most respondents agreed with our proposals. Some respondents argued that it was
better to require banks or FCA-regulated firms to pay the CMC fee directly to the CMC and the remaining compensation to the customer. There were also a couple of requests for us to clarify what qualified a customer as ‘in arrears’.
3.54 Many respondents agreed that CMCs should implement clear, effective and
appropriate policies and procedures for customers who are in arrears, and who may therefore be vulnerable customers.
3.55 There were also calls for fee caps on personal injury claims.

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Claims management: how we will regulate claims management companies Our response We will be implementing our rules on explaining and collecting fees as consulted on, with the following amendment. One suggestion was that CMCs should inform customers of the full compensation amount being offered. In our original proposal, we required CMCs to explain in their itemised bill how they had calculated their fees and charges. We are amending the rule so that when providing the itemised bill which shows their fee and charges calculation, CMCs also include the full compensation amount being offered, or recovered, for the customer. We have not seen evidence of harm resulting from FCA regulated firms paying the customer directly, so we have not introduced rules to require CMCs to be paid directly. In CP18/15 we proposed that CMCs should have clear, effective and appropriate policies and procedures for dealing with customers in arrears. We consider this phrase to capture customers who were unable to meet the CMC fee payment once it has fallen due. To ensure these customers are treated fairly we have changed some of the guidance in the relevant section of CMCOB to rules, to make clear our expectations for CMCs. The Government has imposed on us a duty to implement a fee cap for financial services claims, and we will consult on that fee cap in due course. We will also consider whether we need to implement a fee cap in other sectors, including for personal injury claims.

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Claims management: how we will regulate claims management companies 4 Supervision and reporting
4.1 In this chapter, we summarise the feedback we received on our proposed rules for
supervision of CMCs. This includes CMCs’ obligations to report key information, events and changes to us both on a regular and one-off basis. Application of SUP rules and guidance to CMCs Our proposals
4.2 In CP18/15, we proposed to apply the relevant sections of our supervision manual
(SUP) to CMCs. We proposed to require CMCs to tell us about significant changes in their business, and to report key data to us every year. Feedback received Q13: Do you agree with our proposed application of the existing SUP rules to CMCs?
4.3 Almost all respondents supported our proposals.
4.4 One respondent wanted us to highlight how SUP 2 rules mean that CMCs that
outsource work to other companies (including lead generators) must take reasonable steps to ensure that the outsourced suppliers are open and cooperative with the FCA’s information gathering work. Our response We will introduce our proposals as consulted on. SUP 2 rules will apply to authorised CMCs who outsource work to different organisations. This includes lead generators working on behalf of CMCs. Event-driven notifications that apply to CMCs Our proposals
4.5 We proposed to apply our notification requirements to CMCs. We also proposed a
specific requirement in CMCOB that CMCs are required to inform us if they find out that a lead generator is operating as a CMC without the appropriate authorisation. Feedback received Q14: Do you agree with the new notification requirements and guidance we are introducing into SUP 15?
4.6 Almost all respondents supported our proposals.

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4.7 A few respondents suggested that the new notification should go beyond requiring
CMCs to tell us about unauthorised activity to include notifications of illegal behaviour by other CMCs, the ability to report suspicious individual or firm activity and data breaches.
4.8 Some respondents asked whether we required changes in control under the SUP rules.
If not, they proposed that these notifications should be required. One respondent suggested CMCs should notify us of changes in control before they happen.
4.9 A small number of respondents wanted us to clarify how and whether to report
personal data breaches to us and the division of responsibilities between us and the ICO. Our response We will introduce our proposals as planned. Further notification requirements As set out in CP18/15, whistleblowing mechanisms for individuals and firms will be available to CMCs as they are for other FCA-regulated firms. CMCs are required to notify us of any civil, criminal or disciplinary proceedings brought against the firm. Additionally, Principle 11 states that a firm must deal with its regulators in an open and cooperative way, and must disclose to the FCA appropriately anything relating to the firm of which we would reasonably expect to be told. We welcome intelligence about illegal or suspicious behaviour by other CMCs. Controllers and close links Controllers and information about those with close links to the CMC will be collected from CMCs and assessed at the point of authorisation. Regulated firms are also obliged to notify us of proposed or actual changes in control7 . A CMC should notify us when a person has decided to acquire, increase, reduce or cease control of its business. For the CMC to fail to do so would be a breach of FCA rules. It is also a criminal offence for controllers to fail to notify a change in control, or to acquire or increase control before receiving our approval for the transaction. HM Treasury has exempted persons who decide to acquire, increase, reduce or cease to have control over certain non-Directive firms8 . Most CMCs will only need to notify a change in shares or voting power of 20% or more, or where the change will enable the controller to exercise significant influence over the management of the firm9 . CMCs should satisfy themselves as to which rules apply to them10. 7 See SUP 11.4 in the Handbook for further information. 8 A non-Directive firm is one that has its head office or registered office in the UK and is not; a bank; investment firm authorised under MIFID; UCITS management company; or Solvency II firm. 9 See SUP 11.3.2A(3). 10 See SUP 11.1.1 and 11.1.2

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Claims management: how we will regulate claims management companies Data breaches A breach of GDPR could potentially mean a firm is breaching FCA rules on adequate systems and controls as per the SYSC Handbook module. As part of the obligations under SYSC, firms should establish, maintain and improve appropriate technology and cyber resilience systems and controls. If data systems are breached we expect a notification to be provided to us under Principle 11. We may consult with the ICO when considering our response to such a notification. Ongoing reporting requirements Our proposals
4.10 In CP18/15, we proposed to introduce a set of specific reporting requirements
to clarify our expectations under the overarching obligations of Principle 11. The proposals aimed to set out clearly the information we required from CMCs to ensure we could monitor the industry and supervise effectively. Feedback received Q15: Do you have any comments on the reporting requirements set out in this CP and accompanying legal instrument? We are particularly interested in any specific data requirements that you think should not apply to CMCs and any additional data to what we have set out that you think would be valuable for the FCA to collect from the sector. Q16: Do you agree with the proposals for the FCA to impose an administration fee on CMCs for late data submissions?
4.11 Most respondents accepted the data requirements. Some made suggestions on
further data that we might want to collect. Almost all respondents agreed that we should collect an administration fee from CMCs if they were late in submitting data.
4.12 Some suggested that we should collect data more frequently than we proposed. One
respondent disagreed with our proposals and stated that we are collecting too much data.
4.13 Many respondents had suggestions on the administration fee that we proposed to
introduce to CMCs. Among these were requests that we should consider:

• extenuating circumstances (such as an FCA IT failure)
• highlighting potential enforcement action
• increasing the fee depending on how late the data was submitted
• introducing a formal appeals process
• that smaller CMCs should not have to pay an administrative fee

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Claims management: how we will regulate claims management companies Our response We are proceeding with our proposals largely as consulted upon. However, we do intend to make some minor changes as set out below. Additional reporting requirements We have included an additional question on form CM001. This asks CMCs to confirm for how many customers they held client money for a period of longer than 5 business days. We do not believe it is proportionate to further increase our annual reporting requirements. This does not prevent us making ad hoc data requests from firms if we consider this is necessary to supervise the market effectively. More frequent data collection There is a wide range in size and type of firms covered by our CMC rules and guidance. As such, we feel the most appropriate frequency of reporting the data in SUP and the Dispute Resolution: Complaints sourcebook (DISP) is yearly. So, we will not change these proposals as set out in CP18/15. Proportional reporting requirements We considered our data collection and still think all the questions are valuable and necessary to allow effective supervision of CMCs. So we will keep the level of reporting requirements we proposed in CP18/15. Submission method We will provide information on how to submit regulatory data before any submissions are due. Our preferred way for CMCs providing us with notifications is for them to use the CONNECT system. Clarification on client money question in form CMC001 Question 31 of form CMC001 should include clients whose money has been sent out by cheque and is uncleared or unbanked. Cheques are counted as client money until they are cleared in the client’s account. We have changed our reporting requirements to ask an additional question in CMC001 in relation to where client money has been held for more than 5 days, excluding where a cheque or other payable order has been made, but not banked. This data will help our supervision of CMCs handling of client money. Complaints reporting for firms undertaking lead-generation activities The only complaints that lead generators should report are those which directly relate to their services providing or collecting leads. We have altered the complaint form’s guidance to reflect this and make it clearer to CMCs. Administration fee We are implementing the proposals on the administration fee as consulted on. It applies to every firm we regulate and we see no reason that this should not be extended on the same terms to CMCs. There is already flexibility in the process to give relief from the payment of the administration fee. If we think the payment of any fee would be unfair, we may reduce or remit all or part of the fee the CMC would have to pay.

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Claims management: how we will regulate claims management companies 5 Prudential standards & wind-down procedures
5.1 In this chapter, we summarise the feedback we received on our proposals to apply
prudential standards to CMCs and our response to this feedback. Our key proposals
5.2 We proposed that all CMCs will need to have sufficient financial resources to meet
their liabilities, which is reflected in a general solvency requirement. General solvency requirement
5.3 We classified CMCs into 2 groups based upon their annual reported turnover in the
year ending on their Account Referencing Date (ARD):

• Class 1 CMC – a CMC with annual total income of £1 million or above
• Class 2 CMC – a CMC with annual total income below £1 million
  Prudential resources requirement
  5.4 We proposed that all CMCs, apart from those that are solely lead generators, would be
  required to hold a minimum level of eligible capital to meet the prudential resources requirement, which is the higher of:
• £10,000 for Class 1 CMCs and £5,000 for Class 2 CMCs, or
• the CMC’s fixed overheads requirement
  5.5 We proposed that this requirement will apply from 1 August 2019.
  5.6 We also proposed that if the CMC holds client money they will need to hold an
  additional £20,000 in eligible capital. This includes CMCs that are lead generators and hold client money. CMCs that hold client money would need to comply with this requirement from 1 August 2019.
  5.7 We proposed the existing professional indemnity insurance (PII) requirements for
  CMCs that represent customers in personal injury claims would remain. Wind-down procedures
  5.8 We proposed that CMCs that decide not to carry on claims management activity, or
  are stopping operations (whether voluntarily or involuntarily) would be required to carry out specific wind-down procedures. This included applying the wind-down planning guidance which sets out key steps firms should consider.

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Claims management: how we will regulate claims management companies
5.9 For CMCs that are not lead generators, we proposed that within 20 business days of it
being decided that they will stop claims management activities, they must:

• tell their customers that they will cease to trade and where relevant, explain the next
  steps the client could take
• tell each third party involved in the claim that the CMC will cease to trade and where
  relevant, provide the name of the CMC who will take over the claim if they know this
  5.10 We proposed that these CMCs must:
• return a copy of all information and documents relating to the claim to the customer
  within 40 business days, where the claim is open or ongoing
• tell the customer if it passes details of the customer’s claim to a third party, such as
  another CMC, to progress it
  5.11 We proposed that any lead generator that has told a customer that it intends to pass
  on a lead to someone who will help with a claim, but has not done so, must tell the customers this. Feedback received Q17: Do you agree with our proposal to apply bespoke prudential standards to CMCs, other than lead generators, and to separate these CMCs into 2 groups for the purposes of applying prudential requirements?
  5.12 Over half of the respondents agreed with the proposal. Others disagreed with all or
  part of the proposals.
  5.13 A few respondents thought the proposals were not wide enough and should include
  CMCs that are lead generators. One of these respondents thought that 2 tiers would not be enough to cover the different types of firms and suggested having a class for micro-companies and sole-traders. Another said that the threshold for Class 1 should be reduced to £500k, with a minimum requirement of £20k, and Class 2 firms should have a minimum requirement of £10k.
  5.14 One respondent was concerned that it was smaller CMCs who could do the most
  harm to customers and that all CMCs should have the same requirements. Some respondents also suggested that the CMC business model was too different from those in other regulated sectors to be subject to similar prudential regulation. Our response We have considered the feedback and decided to implement the proposals as planned. Based on our assessment of CMCs’ financial soundness, and our findings from last year’s survey of CMCs, our package of proposals for the prudential standards provide a set of requirements that we think adequately address the harms we have identified.

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Claims management: how we will regulate claims management companies Our approach to firms that we prudentially regulate is to focus upon the customer harms they could cause and potential market disruption. A sudden exit from the market by a firm could result in harm to customers since there would be a disruption to customer claims. CMCs need to have enough capital resources to withstand unexpected shocks to their finances. Not having enough capital could result in a sudden exit from the market. If a firm exits the market, having this resource can help to make sure that it happens in an orderly way with minimal harm to customers. By linking the prudential resources requirement to overheads expenditure, we have effectively created multiple tiers as a CMC’s prudential resources requirement adjusts in accordance with their overheads expenditure. Therefore, the prudential resources requirement captures the different types of firms based on the consumer harm that could materialise if they face unexpected shocks to their finances or if they wind-down in a disorderly manner. For the application of the prudential standards, we decided to separate CMCs into 2 groups based on annual income so that a CMC with an annual income below £1 million and relatively small overheads expenditure would have a lower capital requirement to reflect the lesser consumer harm that could occur. Feedback received Q18: Do you agree with our proposal to set the prudential resources requirement for CMCs, other than lead generators, on the basis of a fixed minimum amount and the fixed overheads requirement? If not, what other approach would achieve the same outcome of achieving an orderly wind-down?
5.15 Most respondents broadly agreed with the proposals – although a few thought they
did not go far enough. One respondent thought that the proposals were the minimum that should be required while another suggested that the fixed overhead requirement should be based on 6 months of fixed overheads. Some respondents also suggested that the proposals did not require an adequate amount of capital to be held.
5.16 One respondent suggested that the requirement should be based on a percentage of
income, rather than fixed overheads. Another was concerned that we should not rely on the forecast amount of fixed overheads for new applicants, and that £5,000 should be the only requirement for the first year that a firm operated.
5.17 Of the respondents that disagreed, one thought that all the requirements were too
high. Another thought that a ‘one size fits all’ approach would not work for the diverse size and business models of CMCs. One thought that CMCs that charged an ‘up-front fee’ did not need to have a fixed minimum requirement as the fee would cover any work that needed to be done during wind-down. Most of the others were concerned about what constituted a fixed overhead and did not think that advertising, marketing and staff costs should be included. One respondent thought that the fixed overheads requirement was too high and suggested having to hold the equivalent of one sixth of the rolling last 6 months’ overheads. They were also concerned about what could be included or had to be deducted to calculate the amount of capital that a firm had.

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Claims management: how we will regulate claims management companies
5.18 One respondent suggested that if certain costs were to be excluded in the calculation
of a firm’s overheads expenditure, they would support extending the overheads requirement from 2 to 3 months of the firm’s overheads expenditure. The respondent argued that during wind-down these costs, such as advertising expenditure, would not be incurred and so should be removed from a firm’s overheads expenditure. Two respondents suggested basing the requirement on a more current indicator of activity levels giving the volume of transactions through the client account as an example.
5.19 One respondent thought that CMCs’ business models were unlike any other sector,
with a lot of upfront costs. They felt these would probably change once the PPI deadline was reached as these costs would be significantly reduced. They also thought that the potential for consumer harm was reduced as the lender would correspond directly with the client, rather than through the CMC. Our response Our intention is to introduce a prudential requirement that would move in step with a firm’s size, risk profile and complexity of operations. This would mean that the amount of capital resources required would change according to the harm to customers that could be caused if a CMC was in financial distress or voluntarily or involuntarily wound-down. CMCs that do not have enough capital to absorb unexpected shocks to their finances are a significant risk to customers, as they find it difficult to remain solvent. We used survey and financial statement data in deciding the appropriate level of the prudential resources requirement. We have decided that we will retain the proposed fixed minimum amounts of £10,000 for Class 1 CMCs and £5,000 for Class 2 CMCs. We consider that these represent the appropriate minimum amounts of eligible capital required to minimise harm to customers should a CMC suffer unexpected shocks to their finances. These amounts will also ensure that if a CMC exits the market it does so in an orderly way. We have concluded that the fixed minimum amounts of £10,000 for Class 1 CMCs and £5,000 for Class 2 CMCs represent the minimum level of capital required to address the consumer harm that we have identified in the sector. We have looked at alternative suggestions for the risk-based element of the prudential requirement and whether they would align with our objective for this. We do not believe that alternative proposals would perform any better than the fixed overheads requirement in fully addressing the prudential risks effectively. So we will implement the risk-based element of the prudential resources requirement, calculated according to overheads expenditure, as planned. Later in this chapter, we address the situation that may arise where a change in a CMC’s business activities leads to a fall of more than 20% in their overheads expenditure as measured over a six-month period.

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Claims management: how we will regulate claims management companies Marketing expenditure Some respondents suggested that marketing expenditure is a major
part of many CMCs’ expenditure, and they would no longer incur this
cost if they were winding-down. Respondents felt it should be excluded from overheads expenditure when calculating their fixed overheads requirement. Although not specifically raised by respondents, this would imply that marketing expenditure could be viewed as discretionary and so classified as ‘other variable expenditure’ when deciding the amount of overheads expenditure used to arrive at the fixed overheads requirement. Marketing expenditure includes:

• advertising or public relations fees and expenses
• financial promotion expenses
• salaries of staff that are exclusively attached to the marketing
  function
• market research and customer surveys
• publications including printed promotional material such as brochures
  and leaflets and the firm’s annual report and accounts
• sponsorships
• gifts to customers
  It is not clear what the exact proportion of marketing expenditure that should be considered discretionary is. It depends upon several factors, many of which are unique to each CMC. In some cases, contractual arrangements dictate marketing expenditure in the near term and firms cannot terminate these arrangements at short notice. Marketing expenditure is an important driver of revenue generation for CMCs, and so CMCs might be reluctant to reduce it. This could speed up a disorderly wind-down if revenue falls significantly or if it hinders the CMC’s ability to emerge from a period of financial distress with a viable business plan. However, we do recognise that sometimes a proportion of marketing expenditure could be discretionary. Despite its importance in revenue generation, it is possible that CMCs would reduce marketing expenditure in the event of wind-down. So we recognise that some types of marketing expenditure can be discretionary. We will reflect this by allowing firms to deduct 20% of total marketing expenditure from their total expenditure when they determine their overheads requirement.

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Claims management: how we will regulate claims management companies Specific requirements for CMCs that hold client money Feedback received Q19: Do you agree with requiring CMCs that hold client money to have additional prudential resources and/or do you feel the level that we propose is appropriate?
5.20 Most respondents to this question broadly supported the proposals. Of those who
agreed, some did not think that there should be a flat rate but suggested having tiered rates based on the amount of client money held, the size of the CMC, turnover, or using a percentage of the amount of client money held. A small number of respondents felt £20,000 was inadequate.
5.21 Of those who disagreed, one thought that there should not be a ‘one size fits all’
approach and another thought it was disproportionate for micro-companies and sole traders. One respondent thought it was not clear how we arrived at the additional requirement for holding client money. Another suggested that it should be set at 50% of the average claim pay-out from the FSCS. One respondent said that client money should be held in a separate client trust account so that it would be protected in the event of wind-down. Our response We will proceed with our proposals as consulted on. If a firm fails, holding client money is likely to complicate insolvency proceedings. An insolvency practitioner (IP) would have to spend additional time dealing with returning the money or transferring it to another firm. It is difficult to say how much this would cost, given that each case will have many variables and specific factors. For example, the time the IP needs would vary according to the amount of money, state of the firm’s records and complexity of the firm’s activities. We think that the additional capital resources amount of £20,000 does provide an appropriate contribution to resolving the client money a firm holds. We did consider using a metric to tier the amount of additional capital resources based on the amount of client money held or other alternatives such as annual income. To align the incentives of directors and shareholders with those of clients so appropriate care is taken with the client money and to provide additional consumer protection in the actual event of an insolvency, we believe that tiering the client money requirement would be disproportionate. This would apply higher capital requirements for firms that would already be expected to hold more capital, worked out as a proportion of their overheads expenditure. It would also penalise firms that are not necessarily more likely to cause consumer harm.

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Claims management: how we will regulate claims management companies When the prudential resources requirement will apply Feedback received Q20: Do you agree that CMCs should meet the prudential resources requirement from 1 August 2019?
5.22 Most respondents broadly agreed with our proposals. One asked how we would
deal with applications for authorisation if the rules did not apply until later. A few respondents thought that CMCs should have to meet the requirement as soon as the FCA becomes the regulator – 1 April 2019. One respondent was concerned that the requirements were not appropriate for micro-companies and sole-traders but otherwise agreed with the proposed date. One respondent said they agreed if we amended the requirements.
5.23 Most of the respondents who disagreed said that the overall requirements were not
appropriate and so they could not agree to the implementation date. A small number of respondents thought that CMCs should have to meet the requirements from a later date. Two of these noted the PPI deadline was also in August and that some firms may change their business model because of this, meaning that their capital requirements would change. Our response We will continue with the proposals set out in CP15/18, and the prudential resources requirement will apply from 1 August 2019. Many CMCs have no experience of prudential standards and it is right to give them extra time to adapt to them. Keeping the prudential requirement date We examined the capital positions of CMCs and assessed their ability to build up additional capital resources. This analysis showed us that firms need more time to get enough relevant capital to meet their prudential resources requirement. However, delaying the application date beyond 1 August 2019 is unnecessary and potentially bad for customers. Our concern is that some CMCs may choose to wind-down shortly after the PPI deadline of 29 August 2019. This will effect customers and so CMCs must comply with the prudential resources requirement before the PPI deadline. Another issue is that a CMC could change the type of business activities they carry out because of the PPI deadline. This could significantly change how much they spend on overheads. Respondents suggested that CMCs in this position should be able to adjust their capital resources to reflect the lower fixed overheads requirement, as there has been a significant reduction in the firm’s overheads expenditure. Calculating the fixed overheads requirement Our approach for calculating the fixed overheads requirement is called a ‘subtractive’ approach. This means that we deduct variable cost items (items whose cost increases or decreases according to activity levels) from the total expenditure to arrive at the value for overheads

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Claims management: how we will regulate claims management companies expenditure. We recognise that if a firm’s business activities change, then this could change the profile of their overheads expenditure, reducing the potential harm to customers or the market. If a business reduces its spending on a higher risk activity, the risk reduces. We accept that if this happens, it should be reflected in a lower prudential resources requirement. We will consider a change in business activities is significant and material if there has been at least a 20% reduction in actual overheads expenditure, over a 6 month period since the fixed overheads requirement was last updated. When this happens, to determine the fixed overheads requirement, we will allow CMCs to amend their overheads expenditure, used in the calculation, by basing it on a multiple of the last 6 months’ unaudited overheads expenditure. Professional indemnity insurance Feedback received Q21: Do you agree with our proposal that the PII requirements for CMCs that represent customers in personal injury claims be retained but for the PII requirements not to be extended to all CMCs?
5.24 All the respondents broadly agreed with keeping PII for CMCs dealing with personal
injury claims. Of these, the majority thought the requirement should also be extended to all CMCs. A few thought it should be extended to employment claims only, and one thought it should be extended to timeshare claims, if that becomes regulated. One respondent thought that CMCs should not be allowed to use PII against regulatory penalties. Our response We considered extending the PII requirement to all CMCs but decided that this was not necessary. The justification for requiring CMCs that represent customers in personal injury claims to hold PII insurance is based on the nature of personal injury claims. The most common type of claim in a personal injury case is professional negligence. In professional negligence cases, claimants must begin legal action within a 3-year time limit. In these cases, if a CMC represents a claimant but makes mistakes that could jeopardise a claimant’s right to compensation, a CMC may face a civil liability claim. In these cases, additional protection from PII would be helpful to pay redress. This underlying reasoning cannot be translated across to CMCs that represent consumers in other claim sectors. Extending the PII requirements to all CMCs would mean higher insurance costs. Without an appropriate justification, including evidence to show a gap that would not be filled by our other prudential (and conduct)

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Claims management: how we will regulate claims management companies requirements, we believe it would be disproportionate to extend the scope of PII insurance cover to all CMCs. In our CP18/15, we recognised the value of PII in managing risk through loss control and the benefits from risk transfer. We would support firms that choose to voluntarily buy this insurance protection even where it is not a requirement. We consider that our PII proposals are in line with our approach to concentrate on the harm to consumers and markets that could be caused when a CMC cannot absorb unexpected shocks to their finances or exits the market suddenly. We will be proceeding with our proposals to keep the PII requirements for CMCs that represent customers in personal injury claims but not to extend these requirements to all CMCs. Feedback received Q22: Do you agree with our proposal to carry over the minimum terms for the PII policy as set out in the Compensation (Claims Management Services) (Amendment) Regulations 2008?
5.25 Most respondents to this question broadly agreed with our proposal. A small
number of these respondents agreed with our proposals as long as we did not lessen the proposed prudential requirements. A small number of others wanted these requirements to be extended to all CMCs.
5.26 Two respondents disagreed as they thought the minimum level of cover should
be increased. One suggested an aggregate limit of indemnity of £1m, the other thought it should be £2m to bring it in line with Solicitors Regulation Authority (SRA) requirements. Our response There was little support for applying different minimum policy terms for the PII policy to those set out in the Compensation (Claims Management Services) (Amendment) Regulations 2008. However, we acknowledge there are concerns that the minimum PII policy terms include relatively low limits of indemnity. These may not be enough to cover the third party liabilities from a CMC’s professional negligence, wrongful acts, errors and omissions when they represent customers in personal injury claims. We do not have any evidence to support the view that our minimum terms are inadequate. We will keep the minimum terms for the PII policy under review to ensure that the PII requirements continue to adequately address the professional and civil liabilities that could arise from CMC activities.

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Claims management: how we will regulate claims management companies Status of actionable damages in relation to prudential rules FSMA allows individuals to take court action for damages where they have suffered loss resulting from a breach of an FCA rule. However, the FCA has the power to provide that individuals cannot claim damages in relation to particular rules. In the rules we consulted on, we proposed that the fair, clear and not misleading rules in CMCOB should not provide the basis for customers to claim damages provided that certain conditions were met. In line with the approach taken for other types of firm, we have added prudential rules in CMCOB 7 (with the exception of the rules on professional requirements) to the list of rules customers cannot claim damages for if they were breached. This list is set out in a new schedule in the rules under CMCOB. Wind-down procedures Feedback received Q23: Do you have any comments on the approach to wind￾down planning that is being proposed, or evidence to support an alternative approach?
5.27 We received mixed responses to this question. Most respondents either agreed
with having wind-down procedures in place or did not raise any concerns with the proposals. The main issues they raised were about the length of time a CMC has to tell its customers that it will cease its claims management activities, and the issue of phoenixing when claims are transferred to another CMC.
5.28 One respondent suggested that the 40-day timeframe should be extended to 60 days.
Other respondents suggested the timescales should be shorter, pointing out the risk of critical deadlines in the claims process being missed or the CMC closing down before it has complied with the requirements. They argued the proposals should go further and require that the CMC’s notification to customers should include details of imminent deadlines.
5.29 Respondents also had concerns that a CMC might transfer the claim to another CMC it
has close ties to, enabling ‘phoenixing’. They called for specific monitoring where CMCs recommend another CMC, as well as prohibiting CMCs from unilaterally transferring the claim to another CMC without the customer agreeing before it was transferred. Our response We consider that the rules and guidance in other areas of our Handbook will reinforce our proposed rules to ensure an orderly wind-down takes place. As a result, we will implement these proposed rules in full. We have considered respondents’ concerns about the timescales for sending the customer notification, and we think our proposals are adequate. We expect CMCs to still comply with other areas of the Handbook while they are winding down until they have cancelled their authorisation. This includes complying with the rule to inform customers of material developments in their claim. This will make sure that the

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Claims management: how we will regulate claims management companies customer is kept informed of important deadlines, even while the CMC is winding down. As discussed earlier in this chapter, we have prudential requirements in place which mean CMCs have resources to wind-down in an orderly manner. We see no need to shorten the timeframes in which CMCs have to notify customers or return customer files to reduce the risk that they would close before complying with these requirements. We addressed more broadly how we will tackle the practice of phoenixing in CP18/15. These measures will still apply when we begin to regulate CMCs. Transferring a claim to another CMC can provide the customer with a seamless claims experience. We do not want to ban CMCs from transferring a claim to another company if this is in the customer’s best interest. However, we remind CMCs that they will also be expected to comply with the Principles for Businesses while winding down. Where a CMC recommends another company to the customer, it will also have to explain any connection it has with the CMC it is recommending, in order to comply with the principle of client communication being fair, clear and not misleading. Where CMCs recommend a claim, we require them to manage any conflicts of interest fairly between themselves and their client.

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Claims management: how we will regulate claims management companies 6 Client money
6.1 In this chapter, we summarise the feedback we received on our proposals for CMCs
holding client money and our response.
General responses to the proposals
6.2 Most respondents supported our proposals, while some suggested amendments or
challenged aspects of the proposals. Some respondents made general suggestions about adjusting CMC client money requirements depending on the size of the firm. Our response We have decided to keep one set of rules for CMCs based on our overall understanding of the market and the size and nature of firms involved. Client Asset (CASS) oversight officer Our proposals
6.3 We proposed that CMCs appoint a person to be responsible for overseeing a CMC’s
client money operations, reporting to the CMC’s governing body and completing client money-related aspects of regulatory returns. Feedback received Q24: Do you agree with our proposals for appointing a CASS oversight officer? If not, why not?
6.4 Most respondents agreed with the proposal. A few gave responses which either
did not address whether CMCs should have a CASS oversight officer or saying that CMCs should not hold client money or should not need to hold client money. Other respondents suggested that only CMCs that hold above a certain threshold of client money should have a CASS oversight officer. Our response We will take forward the rules as proposed in CP18/15. We do not believe that holding a small amount of client money justifies removing the need for a CASS oversight officer. All CMCs holding client money have specific responsibilities. It is important to have one person with oversight of a firm’s client money, ensuring there is a clear and consistent approach. Without a CASS oversight officer, there is a risk that responsibilities are split between different areas or that the focus on meeting CASS responsibilities is watered down.

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Claims management: how we will regulate claims management companies Segregation of client money Our proposals
6.5 We proposed that CMCs hold all client money in one or more dedicated client bank
accounts, use accounts held at an approved bank in the name of the CMC and include the word ‘client’ in the title, receive and hold client money as trustee on the terms of a statutory trust set out in CASS 13 and pay a customer any interest earned on their client money. We also proposed that CMCs pay out all client money as soon as possible. Feedback received Q25: Do you agree with our proposals on segregating client money and paying out client money as soon as practicable? If not, why not?
6.6 Most respondents agreed with our proposals. One respondent who agreed proposed
that holding money for longer than 7 days should be reportable to the FCA. A small number of respondents disagreed with the proposal to pay money to clients as soon as reasonably possible, proposing time periods between 5 and 10 days. One of these respondents felt that the risks did not justify reconciliations being carried out more than monthly. Some other respondents thought that the requirement was to pay money to clients within 2 days of receipt and had various concerns including the time it takes for cheques to clear and the need to collect client payment details.
6.7 The remaining responses included a request for clarification of how to treat payments
on account and one to broaden the definition of client money to include upfront fees taken before the ban on them came into effect. One respondent asked what a CMC should do if it cannot contact the customer to make a payment. Our response The requirement in CP18/15 was to pay money for damages, compensation or settlement of a claim recovered for a customer as soon as reasonably possible after receiving it and to take steps to do so within 2 business days. We did not propose a strict requirement for CMCs to pay this money to clients within 2 days. As some respondents pointed out, this may not be possible if, for example, money is received as a cheque, given the time it takes for the cheque to clear. CMCs should make sure that they do not use one client’s money to pay another and that their systems and controls should ensure this. CMCs should make every effort to contact customers to pay money due to them, even if this is difficult. CMCs must continue to hold the money as client money until returned. We understand that CMCs may take a payment on account for expected work. This should be protected as client money, until it is due and payable to the CMC.

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Claims management: how we will regulate claims management companies We want CMCs to pass monies on to clients promptly and will take forward these rules as proposed. We have included a CASS transitional provision in our final rules to make clear that the FCA’s client money rules apply to existing client money which was held or received by CMCs immediately before they obtained their temporary permission or Part 4A permission. Statutory trusts in the event of lapse of permission
6.8 CASS 13.3.1R provides that any client money held or received by a CMC is held by the
firm as a trustee under a statutory trust. The statutory trust is intended to protect the money received or held by the firm on behalf of its customers from loss, including on the failure of the firm. Such a statutory trust created by CASS 13 is not intended to come to an end in the event that a CMC’s temporary permission or its Part 4A permission ceases. This means that where a CMC’s temporary or Part 4A permission ceases, the CMC continues, after that point, to be a trustee under the statutory trust in respect of any client money it held immediately before its temporary or Part 4A permission ceased. This could also impact on the CMCs wind-down planning arrangements which are referenced in Chapter 5. Record keeping Our proposals
6.9 We proposed requirements on record keeping, reconciliations and dealing with
excess or shortfalls on a client bank account and notification requirements. The main requirement we proposed was that CMCs should keep the records and accounts they need to allow them at any time and without delay to distinguish client money held for one customer from that held for another, and from their own money. Feedback received Q26: Do you agree with our proposals on record keeping; reconciliations, including on top up of any shortfall and withdrawal of excess; and on notification requirements? If not, why not?
6.10 Most respondents agreed with the proposals. Those that disagreed generally
focused on our proposal of daily reconciliations which they saw as too frequent. They suggested these were made between every 5 and 10 days. Some said they felt longer timescales were appropriate as daily reconciliations would create a significant burden for a small benefit. One felt that it would not stop theft. Some said that other proposals, such as the requirement for a CASS oversight officer, meant that less frequent than daily reconciliations were justified. Another respondent pointed out that there are different frequencies for reconciliations for other types of firms holding client money.

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Claims management: how we will regulate claims management companies Our response We are implementing the proposals as consulted on. We recognise that our proposals included some additional elements to the current regime, such as the CASS oversight officer. However, these proposals do not reduce the need for CMCs to have accurate books and records, and reconciliations are a key way to ensure this. We agree that reconciliations will not prevent someone from wilfully committing fraud, but in a strong control environment they can allow fraud to be detected earlier. When considering the frequency of reconciliations, we drew experience from a wide range of firms as the burden of conducting daily reconciliations matches the scale, nature and complexity of CMC business. For a simple business with a small number of transactions, this is likely to be relatively resource-light. For a highly complex business with very frequent transactions, the exercise will require more resource. The more frequent the transactions, the greater the possibility for errors. Mistakes can happen for many reasons, not necessarily originating with the CMC itself. For example, counterparties making unexpected payments that need to be identified, clients paying incorrect fees etc. Some firms have told us that dealing with these matters is usually easier when they happen so we think that conducting reconciliations daily as proposed is not overly burdensome, and likely to ensure more protection for clients. Daily reconciliations make sure that if a CMC fails, an IP tasked with resolving the failed CMC will have a more recent record of transactions to help. The longer the time between the most recent reconciliation and a CMC’s failure, the more difficult, time consuming and expensive it is for the IP to reconstitute the records and return money to clients. If a CMC has few staff able to carry out these functions, it should plan for this work to be done when these staff are available. Firms need to have adequate arrangements to safeguard client money and should have suitable contingency plans in place. External audit Our proposals
6.11 We proposed that CMCs subject to the client money rules must appoint an auditor to
produce a report on client assets. This report should set out the auditor’s opinion on whether or not the CMC has complied with the CMC client money rules. The auditor must produce the report, rather than the CMC, and CMCs must cooperate with the auditor and provide them with relevant information. Feedback received Q27: Do you agree with our proposals for an external client audit to be carried out? If not, why not?

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Claims management: how we will regulate claims management companies
6.12 Most respondents agreed with our proposals. Two respondents suggested that
smaller CMCs should be exempt from the requirement. One respondent suggested that the 4-month deadline for submission to the FCA was too strict and should be 6 months instead. Another respondent requested guidance on what to do with untraceable money. Our response We will proceed with our approach as consulted on. We do not agree that smaller CMCs should be exempt from the external audit requirement. The auditor’s report on client money is one of our key supervisory tools and we review all reports. Making sure firms protect client money is one of our priorities. This is an external check and balance on the CMC’s compliance in an area where there is the potential for harm to customers. It is also an opportunity for firms to find potential improvements. Even if a CMC is small and handles only a few cases involving client money, there is still a risk of harm for its customers. The deadline for submission of 4 months is in line with other sectors and ensures that information is not too out of date when we get it. We have not included specific rules on untraceable clients. CMCs should make every effort to return money to clients and continue to protect this money until they are able to do so. Money due to the CMC, distributing client money if a firm fails and overall proposals Our proposals
6.13 In CP18/15 we set out our expectation that CMCs should remove any money they
are owed from a client bank account because it does not need to be treated as client money. We also set out our proposals for a failed CMC to return client money on a pro-rata basis. Feedback received Q28: Do you agree with our overall proposals for a CMC client money regime? If not, why not?
6.14 Most respondents agreed with our proposals. A few other respondents asked us to
clarify ‘pro-rata’ payments to clients in our proposals for returning client money if a CMC fails. One respondent disagreed with the pro-rata approach and suggested instead a ‘first in, first out’ approach. One respondent opposed the proposals for being too burdensome.

PS18/23
Chapter 6
Financial Conduct Authority
Claims management: how we will regulate claims management companies Our response We proposed pro-rata distribution of funds to customers in the case of insolvency of a CMC because not all client money may be left. For example, a CMC may not have segregated client money in a client bank account and it could be in the CMC’s bank account instead. The cost of returning client money to the customers of a failed CMC can be paid out of the client money the CMC holds. We feel the fairest way to deal with these losses, in line with other industries under CASS, is that clients bear any losses in proportion to what the CMC owes them. Additional rules and guidance Feedback received Q29: Are there any of our proposals where more prescriptive rules or additional guidance would be beneficial? If so, what rules and guidance would you propose and why?
6.15 Most respondents suggested additional rules or guidance that were not CASS-related.
We have dealt with these under the relevant sections of this PS.
6.16 Of responses that do involve CASS rules, one suggested that we should be notified
of any breaches within 24 hours. Another suggestion, also in response to question 28, was that CMCs should have a CASS resolution pack modelled on CASS 10. One respondent asked us to clarify whether we would conduct an audit of a failed CMC’s client account before funds were returned to customers. Two respondents suggested we introduce specific rules about payments from accounts, including deducting fees and payments to third parties. Our response Firms should report breaches to us promptly when they discover them so that we can decide if we need to take any action. We won’t introduce a CASS resolution pack at this time, but will keep the rules under review. If a CMC fails, they will appoint an IP. To distribute any client money held by the CMC, the IP will need to complete a reconciliation of the accounts to identify which clients are due any money. This will not be done by us. CMCs should deduct fees from a client bank account immediately. This is because once these fees are due and payable to the CMC, this money is no longer client money and should not be held in a client bank account. Carrying out reconciliations should help firms ensure they deduct fees promptly. They must remove any money that is not client money from a client bank account.

PS18/23
Chapter 7
Financial Conduct Authority
Claims management: how we will regulate claims management companies 7 Dispute Resolution
7.1 In this chapter, we summarise the feedback we received on our proposals to apply our
complaints-handling rules and guidance, as set out in DISP, to all CMCs we regulate. These are the rules that cover how CMCs should handle customer complaints and when complaints can be referred to the Ombudsman Service. We are making changes to the Ombudsman Service compulsory jurisdiction. The Ombudsman Service is mirroring those changes to its voluntary jurisdiction. So this chapter is issued jointly by the FCA and the Ombudsman Service. Our proposals
7.2 We proposed that complaints about authorised CMCs should come under the
compulsory jurisdiction of the Ombudsman Service.
Feedback received
Q30: Do you agree with our approach to apply our complaint handling rules and guidance in DISP, including the compulsory jurisdiction of the Ombudsman Service, to all CMCs we authorise?
7.3 Most respondents supported our proposal, saying it would give customers the
necessary opportunity for redress.
7.4 A few respondents raised concerns about the body that will deal with customer
complaints about CMCs being the same body that deals with customers’ claims brought by CMCs. These respondents felt that this could affect the Ombudsman Service’s view of them and may prejudice the Ombudsman Service’s decision-making.
7.5 Other concerns raised by respondents included how the Ombudsman Service intends
to undertake the additional workload of complaints against CMCs, and asked whether the Ombudsman Service would have the capacity and capability to manage this.
7.6 A few respondents asked us to clarify how the complaints forwarding requirements
and the complaints reporting requirements in DISP interact. They also asked whether there might be privacy issues when forwarding on complaints. Our response We are implementing our proposals on DISP as consulted on. Below we give our response to the issues raised. Potential for conflicts of interest at the Ombudsman Service The Ombudsman Service publishes its policy on conflicts of interest on its website. It will be updating this before its compulsory jurisdiction is expanded to include complaints against CMCs in April 2019 to ensure that it continues to be adequate for the Ombudsman Service to carry out its functions. It is worth noting that the Ombudsman Service already considers complaints against businesses and organisations which represent consumers on complaints. For example, it considers

PS18/23
Chapter 7
Financial Conduct Authority
Claims management: how we will regulate claims management companies complaints against both not-for-profit debt advice agencies and independent financial advisers. Richard Lloyd’s recent independent review of the Ombudsman Service found no evidence of “institutional bias”. As part of the Ombudsman Service’s normal plan and budget consultation later this year, it will provide an update on its transfer arrangements and proposed operating structure. The capacity and capability of the Ombudsman Service The Ombudsman Service has assured the FCA that it has both the capability and the capacity to take on the additional workload of complaints against CMCs. It already considers many hundreds of thousands of complaints every year on a wide range of consumer problems, and has also informed the FCA it will be recruiting additional staff. Complaints forwarding If a CMC is satisfied that another firm or CMC is solely or jointly responsible for the matter being complained about, the CMC may forward the complaint, or the relevant part of it, in writing to the other firm or CMC. The forwarding CMC must do this in line with DISP requirements. It must inform the complainant in a final response of why it has done this, and give the complainant the contact details of the other firm or CMC. The complaints reporting rules make it clear that a CMC must not include a complaint that has been forwarded in its entirety to another respondent under the complaints forwarding rules in its FCA reports. However, where a CMC has only forwarded part of a complaint or where the CMC and another firm may be jointly responsible for a complaint, then it should be reported by both firms. When forwarding complaints according to the DISP requirements, we expect CMCs to comply with any other legal requirements that apply to them, including for example, requirements under the GDPR. Feedback received Q31: Do you agree with our proposal to apply our rules in DISP
Chapter 1 to CMCs?
7.7 Almost all respondents supported our proposal. A few respondents made additional
suggestions and raised some related issues.
7.8 One respondent asked what will happen to customer complaints that a CMC is
dealing with if its authorisation is cancelled. Another asked how small CMCs should manage complaints made against them when, for example, the only person available to consider a complaint may be the same person whose acts or omissions are being complained about.
7.9 One respondent questioned the fairness of the requirement to self-publish complaints
data once the threshold of 1,000 complaints in 12 months is met. Another respondent challenged including ‘expressions of dissatisfaction’ in the definition of a complaint.

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7.10 Some respondents asked for clarification on how the complaints record rule and the
GDPR requirements interact.
Our response
We are implementing these proposals as consulted on. We set out below our response to the issues raised. In-progress complaints with the Ombudsman Service or a firm that a CMC has raised on behalf of customers before its authorisation is cancelled As set out in CP18/15,11 CMCs that are no longer authorised to carry out claims management activity or are going out of business must give customers and third parties specific information and return copies of documents about ongoing claims to customers. This will allow customers to choose a new CMC to continue with their claim or the current CMC can transfer its claims on to a new authorised CMC which will continue to manage the claims on the customer’s behalf. These requirements apply to a CMC before it stops operating. In-progress complaints against a CMC before its authorisation is cancelled The cancellation of authorisation would not, by itself, affect the Ombudsman Service’s jurisdiction over an in-progress complaint against a CMC, but the Ombudsman Service might not progress the complaint unless it obtains consent to do so from the administrator. If a CMC is winding-down and is insolvent, we are unlikely to cancel its authorisation until the wind-down process is completed. However, whether redress is paid out for complaints against a CMC that has stopped its regulated claims management business or is going to close down will depend on the facts in each case and any insolvency process. Small CMCs managing complaints against them The DISP rules apply whatever a firm’s size, and the complaint would still need to be considered fairly and independently by the CMC. The DISP rules do not stop a firm from outsourcing its complaints handling function. Self-publication of complaints data We consulted on requiring CMCs with more than 1000 complaints in a 12-month reporting period to publish a summary of their complaints data. The requirement for CMCs to publish complaints data is a way to ensure that CMCs are transparent about the level of complaints made against them. Many FCA-authorised firms also have to meet this requirement and our view is that CMCs should have to meet the same complaints reporting requirements. We expect this requirement will encourage CMCs to correct problems that have previously caused complaints, to reduce the level of future complaints. Customers and CMCs should both benefit from improved customer satisfaction. 11 Paragraphs 6.22-6.25

PS18/23
Chapter 7
Financial Conduct Authority
Claims management: how we will regulate claims management companies As CMCs will come under our jurisdiction, the definition of a complaint in the DISP handbook will apply to CMCs. The definition includes ‘any oral or written expression of dissatisfaction’. This is similar to the definition of complaint in the CMR rules that CMCs already understand and apply. How the complaints record rule and GDPR interact DISP will require a CMC to keep a record of each complaint received and how it was resolved. It will also require CMCs to keep those records for 3 years from the date they received the complaint. The GDPR has introduced a right for individuals to have their personal data erased. It will be for each firm to decide how it complies with its obligations under DISP and under the GDPR both on an ongoing basis and in the event of an individual exercising its right to have its personal data erased. Feedback received Q32: Do you agree with the Ombudsman Service’s proposal to grant CMCs outside our regulatory regime access to the voluntary jurisdiction?
7.11 Most respondents supported our proposal. Many said that consumers dealing with
CMCs not covered by the compulsory jurisdiction might not have access to redress if these CMCs are not given the option to join the voluntary jurisdiction. Our response We will implement our proposals unchanged.

PS18/23
Chapter 8
Financial Conduct Authority
Claims management: how we will regulate claims management companies 8 Enforcement Our proposals
8.1 In CP18/15, we proposed to apply our Enforcement Guide (EG) and our Decision and
Procedure and Penalties Manual (DEPP) to CMCs.
Feedback received
Q33: Do you have any comments on our proposal to apply the same approach to enforcement investigations and action to CMCs and individuals as we do to other regulated firms, as set out in EG? Q34: Do you have any comments on our proposal to follow the same procedures for decision-making and imposing penalties in relation to CMCs and individuals set out in DEPP?
8.2 All the responses were broadly positive. Many welcomed the proposals and saw
them as a positive step to improve the industry. Some respondents said that these proposals would help provide clarity and ensure enforcement was consistent.
8.3 Some additional comments from firms covered issues they wanted us to address
or consider more generally. For example, one respondent called for us to prioritise tackling ‘nuisance marketing’ and to work with the ICO and other stakeholders to implement a joint strategy to tackle it. Some respondents also asked us to work closely with the ICO to avoid unnecessary duplication of regulation. One respondent asked us to consider including free complaint tools offered by some CMCs, which help customers raise and resolve claims themselves, within the scope of regulation. This respondent argued that these tools follow very similar processes to a CMC, although they accepted that this was presently outside the regulatory framework.
8.4 Another respondent asked us to clarify the circumstances where we would use our
power to suspend a CMC’s authorisation, and whether this would allow a firm to collect fees or resolve ongoing complaints.
8.5 One respondent called for a robust programme of investigations in the first 3 years to
ensure we identified unscrupulous CMCs quickly and regulated them out of the sector. Another urged us to increase the number of unannounced visits and audits of CMCs, looking at those with a track record of non-compliance. We were also asked to make wider use of warrants and seizure powers to get a true picture of CMCs’ activities. One respondent said that before acting, we should make sure that we have conducted a full and thorough investigation and give the firm or individual the opportunity to respond to the allegations.
8.6 Another respondent proposed that we add an entry to the Financial Services Register
when a firm had been subject to any warnings. Others said that we should publish the notice of enforcement action on our website as soon as possible to send a strong message and to deter non-compliant CMCs.

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Chapter 8
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Claims management: how we will regulate claims management companies
8.7 Several respondents said that we should pay attention to those CMCs who do not seek
re-authorisation and monitor their activities to ensure that they do not operate as an unregulated CMC and continue their activities without being regulated. Our response Having considered the feedback, we will introduce our proposals as consulted on. We will take the same general enforcement approach to claims management activities as we apply to other regulated activities. Some of the issues raised by respondents will not only involve enforcement. There will be issues that mean we need to use a combination of our powers and functions, including our authorisation and supervision powers. We may also tackle some issues by working with other external stakeholders such as the ICO. We have had a Memorandum of Understanding with the ICO since 2014, and will continue to work with them on cold calling issues. DEPP 6A gives more information about our powers to impose suspensions or restrictions. As well as the power to suspend a firm from carrying out a specific regulatory activity for a set period of time, we can also put a restriction on a firm. This allows us to require a firm to take, or stop taking, specific actions involving their regulated activities. Both these powers are disciplinary measures we can use as well as, or instead of, imposing a financial penalty or issuing a public censure. When we decide whether to suspend or place a restriction on a firm, one of the factors we will consider is the effect on others, including customers of the firm. We set out our approach to publicity in chapter 6 of EG. In some circumstances, we can issue a warning notice statement, and decide what information about the firm or individual we will include on the Financial Services Register. The factors we consider when deciding what information to publish about a warning notice include whether publication would be unfair, the fact we have a choice, as opposed to a duty, to publish and that those we send a warning notice to have not had a formal opportunity to make their case yet. This is why we consult those we send warning notices to and have to consider whether any of the grounds in section 391 of FSMA, that prevent us from publication, apply in each case. We will also monitor to make sure that unauthorised CMC activity is not being carried out by previously authorised firms. We will do this by monitoring different information sources including consumer reports received through our contact centre and online reporting by authorised firms within the CMC sector.

PS18/23
Chapter 9
Financial Conduct Authority
Claims management: how we will regulate claims management companies 9 Authorisation
9.1 In CP18/15 we gave details of our proposed approach to authorising CMCs. We also
explained the temporary permission (TP) regime proposed by HM Treasury and the time periods in which CMCs must send us their applications for authorisation. HM Treasury laid a Statutory Instrument (SI) before Parliament, which was made on 28 November 2018. Among other things, the SI introduces the TP regime for CMCs12.
9.2 It is important that all CMCs know what they need to do and when. We give detailed
information about this on our website, and summarise it in this chapter. Temporary Permission
9.3 When the FCA’s regime begins on 1 April 2019, there will be a period of TP. Qualifying
CMCs must register for TP with us between 1 January and 31 March 2019. Once TP begins on 1 April, qualifying CMCs that have registered with us for TP will be able to continue trading. We will send them an invoice for their first year’s FCA periodic fee for payment within 14 days of registration.
9.4 A CMC that does not register for TP by 31 March 2019 will have to stop carrying on
regulated claims management activities or face potential enforcement action through the civil or criminal courts for unlawful activity.
9.5 All CMCs with TP will need to apply for authorisation during the application period we
have given them, to replace their TP.
9.6 We will regulate 2 different groups of activities across 6 claims sectors. CMCs set
up,13 or serving customers, in England Wales and Scotland will need the permission or permissions which cover the activities they carry on in the relevant sector. HM Treasury has provided that there will be one permission for lead-generation activities covering all the sectors, and one permission for each of the 6 claims sectors we will regulate covering the activities of advising a claimant, investigating a claim, and representing a claimant14. Depending on what activities they undertake, some CMCs will require just one permission and others may require several. This allows us to assess CMCs only against the permissions that they need.
9.7 All CMCs will need to demonstrate that they meet minimum standards, known as
Threshold Conditions, both at the point we authorise them and on a continuous basis at all times, for each permission that they apply for.
9.8 CMCs will need to apply for authorisation by us in the right application period for their
businesses. We plan to publish directions that set out 2 application periods:
12 See the Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018. 13 ‘The territorial scope of the FCA’s claims management regime is set out in Article 2 of the Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018.’ 14 Diagram 1 in the chapter entitled ‘Summary’ of this Policy Statement sets out the permissions for each of the claim sectors.

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• Application period 1 (between 1 April 2019 and end of May 2019):
  – all financial services CMCs that advise claimants, investigate claims or represent claimants (but not those who are solely lead generators) – CMCs being brought into regulation for the first time15
• application period 2 (between 1 June 2019 until the end of July 2019): all other
  CMCs16
  9.9 If a CMC does not apply during their allocated application period they will lose their TP
  and be unable to carry on regulated claims management activities. These CMCs will have 30 days to wind-down their regulated business and will be unable to enter into any new contracts involving regulated claims management activity.
  9.10 Firms which are already authorised by the FCA in other sectors will need to apply for
  a variation of permission rather than make a new application. These firms will still be required to register for TP for their claims management activity and must submit their variation of permission application in the relevant application period. As with other CMCs, a failure to follow this process means the firm would not have TP and couldn’t carry on regulated claims management activity after 1 April 2019.
  9.11 New CMCs will continue to be able to submit authorisation applications to the CMR
  until 31 March 2019. If the CMR grants that application before 1 April, the CMC can obtain TP as described above. If the CMR has not made a decision about the application before 1 April, as required by HM Treasury’s SI we will treat the application as though it had been made to the FCA, as long as the CMC submits a further form to us and pays the top up fee. We will make this form available online in due course17.
  9.12 CMCs with TP will appear on the FCA Register from 1 April 2019. Once they have been
  re-authorised this will be reflected in the FCA Register.
  9.13 All CMCs with a temporary permission or a full FCA authorisation are required to fully
  comply with the relevant FCA rules and will be supervised by us from 1 April 2019. Firms that currently benefit from Part XX FSMA
  9.14 The exemption in section 327 (Part XX of FSMA - Provision of Financial Services by
  Members of the Professions) will not be available for regulated claims management activity in Great Britain18. Even if a CMC is a member of a professional body, it will not be able to benefit from Part XX exemption for regulated claims management activity, or any other FSMA-regulated activity it carries on if it has permissions to carry on regulated claims management activity. These firms need to get authorisation from the FCA for all of their FSMA-regulated activities plus any authorisation they have obtained from their designated professional body. Firms can continue to rely on the 15 For example, those operating only in Scotland or dealing exclusively with claims in relation to section 75 of the Consumer Credit Act 1974. 16 For example, those involved in personal injury or housing disrepair and those that are solely lead generators. 17 See Article 41(3)-(8) of the SI. Article 41(9) and (10) of the SI provide that where the CMR had approved the grant of an authorisation to an applicant but at the time of the transfer the applicant has not paid the authorisation fee, they are entitled to TP provided they pay the fee to the FCA. Once paid, the CMC will be deemed to have both registered with the FCA for TP and paid any TP fee. 18 See s. 327(7) FSMA and Article 91(5) of Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018.

PS18/23
Chapter 9
Financial Conduct Authority
Claims management: how we will regulate claims management companies exemption whilst they have claims management temporary permission and as such can seek authorisation for other FSMA regulated activities at the same time as seeking authorisation for regulated claims management activity. Firms that are currently FCA Appointed Representatives
9.15 CMCs that are exempt from authorisation as they are currently Appointed
Representatives (ARs) for activities regulated by the FCA will need to decide how they wish to proceed. There will not be an AR regime for CMC firms and firms cannot be both authorised and exempt at the same time once they exit TP. Further detail is available on our website.

PS18/23
Chapter 10
Financial Conduct Authority
Claims management: how we will regulate claims management companies 10 FCA Fees Proposals
10.1 This chapter sets out our feedback on the proposals for FCA fees that we published
for consultation last August in CP 18/23. We received 27 responses to CP18/23. The
chapter covers:

• application fees
• periodic fees
• fee arrangements for temporary permission: payment of 2019/20 periodic fee in
  advance.
  Application fees
  Our proposals
  10.2 We proposed tiered application fees based on CMCs' turnover:
• CMC turnover up to £1m - £1,200 fee
• CMC turnover above £1m - £10,000 fee
  10.3 In line with our standard practice, firms already authorised by the FCA with Part 4A
  permissions will pay only 50% as a variation of permission (VoP) fee. Feedback received CP18/23 Q1: Do you agree with our proposed application fees for authorisation?
  10.4 There was some support for the fees but several respondents thought the fee
  increase from £1,200 to £10,000 for firms with turnover above £1m was too steep. One suggested that it might have a detrimental effect on competition by putting off new market entrants. This respondent would have preferred us to adopt the structure we use for other FSMA fees, which are based on the complexity of the application rather than the size of the CMC. Others suggested more graded tiering above £1m. Some said it was wrong in principle to charge CMCs to reapply after they had already paid to be authorised by the CMR. Our response The CMR charged a single fee of £2,000 and we have reduced that to £1,200 for CMCs anticipating turnover up to £1m. We believe this avoids the risk of the fee discouraging market entry. We don’t agree that £10,000 should be a deterrent to CMCs expecting turnover above £1m and so we don’t accept the need for further tiering. New applicants are normally business start-ups but CMCs are already trading so we think it’s reasonable to take account of the incomes of the smaller CMCs.

PS18/23
Chapter 10
Financial Conduct Authority
Claims management: how we will regulate claims management companies Periodic fees Our proposals
10.5 We will recover our costs through annual periodic fees. There will be 7 claims
management permissions and we proposed to include all of them in a single fee-block rather than setting up separate fee-blocks for different permissions, or for CMCs that limit their activity to a single permission. Feedback received CP18/23 Q2: Do you have any comments on our proposal to create a single new fee block for CMCs?
10.6 While several respondents strongly supported a single fee-block for CMCs, the
balance of opinion was against this proposal. One commented that the single block assumes the same risk for all, regardless of regulatory activity. Categorising CMCs on the activities they conduct would, the respondent considered, bring the cost of regulation down for the FCA and consumers. A few suggested all 7 claims management permissions should be put into separate fee-blocks. Respondents were more concerned that CMCs with permissions which they considered less risky, such as lead generation, should be kept separate from CMCs which had more risky business models. One recommended a two-tier fee-structure based on risk. The permission that includes lead generation (advice, investigation or representation of a PPI claim) would be put in a lower risk, therefore lower cost, fee-block. The remaining 6 permissions would be in the higher risk fee-block where the bulk of the FCA’s regulatory activities would be targeted. One of the arguments presented for regarding lead generation as less risky was the lower volume of complaints from customers. Our response This question does not apply until 2020/21 onwards. In 2019/20, we will be charging CMCs as they register for temporary permission. From 2020/21 CMCs will be granted specific permissions and put into a separate CMC fee-block. Once CMCs have successfully been authorised and have obtained their permissions, we do not propose to subdivide the CMC fee-block. We do not agree that lead generation poses less regulatory risk than other claims management activities. Lead generators are usually the first point of contact with customers. They carry out the initial assessment of the claims, their merits and their chances of success, in the course of which they handle large volumes of personal data. They choose the appropriate agencies to pass their clients on to and, critically, they set clients’ expectations. So, there is a risk of consumer detriment from lead generation. Complaints may not be a satisfactory indicator in this context, as they are often directed against the CMCs that handled the cases rather than the intermediaries with whom the client may no longer have a relationship. Many FCA fee-payers have more than one permission and so it is unlikely that all CMCs with a particular permission will be ring-fenced into one fee-block or the other. If we create more than one fee-block, several

PS18/23
Chapter 10
Financial Conduct Authority
Claims management: how we will regulate claims management companies CMCs will find themselves paying fees in both, all or some of them. It is our experience that fee-payers benefit from sharing cost recovery with a larger population. Speculation by some CMCs that creating separate fee-blocks might affect the cost of regulation was misjudged. Fee-blocks are neutral mechanisms for recovering costs and have no impact on the way we regulate. Our proposals
10.7 We calculate our fees on the basis of a metric known as a ‘tariff base.’ This is an
objective, transparent and simple measure that can be consistently applied across the fee-block for fair distribution of cost recovery. We proposed that the tariff base for CMCs should be the definition of turnover used by the CMR which the firms are already familiar with. Our regulatory remit is slightly broader than the CMR’s and so our definition also encompasses:

• all regulated activity in Scotland
• business arising from section 75 of the Consumer Credit Act 1974
  Feedback received
  CP18/23 Q3: Do you agree that we should base our periodic fees for CMCs on the definition of turnover that they already use when submitting data for fees to their current regulator, including the new activities relating to Scotland and section 75 of the Consumer Credit Act 1974?
  10.8 Most respondents supported the continuation of the CMR definition, but some argued
  for a risk-based tariff applying a ‘polluter pays’ model. One commented that it was not fair that CMCs with a high turnover will pay the highest fees, even though they might not pose the highest risk. Our response We will maintain the definition as consulted on. We do not base FCA fees on risk assessments because these are open to challenge and lack transparency, since it is often not possible to explain the rationale behind them without violating commercial sensitivity. In addition, assessments may change from year to year, making risk potentially a volatile measure which does not offer certainty to fee-payers. Instead, we use size as a proxy for impact. Our proposals
  10.9 The CMR requires CMCs to report their turnover for the 12 months up to 30 November
  in the year preceding the relevant fee-year.

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Claims management: how we will regulate claims management companies Feedback received CP18/23 Q4: Would you prefer in future to report turnover on the basis of your own financial year, or would you prefer to maintain the current reporting requirement of a year ending 30 November?
10.10 Many respondents expressed no preference, some said they wanted to stay with the
current arrangement, several said they would find it easier to use their own year end. Our response Although respondents did not express strong views, we believe it will be more convenient for CMCs to report their turnover on the basis of their own financial years because they will not have to conduct a separate exercise for fees. This is the model we apply to the great majority of FCA fee-payers. They submit their data within 2 months of the end of the financial year ending during the calendar year preceding the relevant fee year. We will apply this rule from 2020/21 onwards, so that means the fees for CMCs in 2020/21 will be based on their turnover for the financial year ending during 2019. Our proposals
10.11 We proposed a minimum fee of £1,000 on turnover up to £100,000. CMCs with
turnover above that threshold would pay £1,000 plus the variable rate per £1,000 on the balance of their income.
10.12 Firms authorised for other FCA-regulated activities will have to pay the CMC minimum
fee, plus the minimum fee they pay in other fee blocks, because we need to make sure that all firms with permission to undertake claims management work contribute to the set-up costs. Feedback received CP18/23 Q5: Do you have any comments on our proposals for periodic fees, including the minimum fee of £1,000?
10.13 We received comments on 2 areas:
Minimum fee
10.14 The CMR set tiered minimum fees, starting at £200 for CMCs with turnover up to
£5,000. Several respondents asked us to return to a similar model, arguing that the increase to £1,000 was disproportionate. Some said the fee might put CMCs out of business or discourage them from entering the claims management market. Others pointed out that when CMCs reported low turnover it was often because they operated in other sectors and registered for claims management only for the occasional times they helped a client with a complaint. These experienced practitioners could be lost to the market. Similar points were made by participants in the regional roadshows we held in October. Removal of cap on higher fees
10.15 The CMR caps the fees of the largest CMCs but there is no cap on FCA fees. We did not
consult on this but several respondents considered it unfair. One commented that size

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Claims management: how we will regulate claims management companies does not necessarily correspond to risk. Another pointed out that a large proportion of the fees would be paid by a small number of CMCs, and their contribution would amount to considerably more than the cost of their own regulation. One commented that the impact would be to treble its own fees, and that it could result in CMCs cutting costs, with potential for consumer detriment.
10.16 2 respondents agreed with our proposal, one asserting that it was the largest CMCs
which required the most regulation, the other welcoming it because it would ensure CMCs’ fees were proportionate to their size and impact in the market. Our response Minimum fees Our tiered application fee recognises that there can be a case for alleviating the impact of fees on smaller CMCs to avoid barriers to market entry. We also recognise that, with CMCs, we are dealing with firms that are already trading. Unlike start-up businesses, they have not factored our fees structure into their business planning, to help them decide whether to enter this market. If they want to continue trading, CMCs must pay the fees. We note the argument that professionals who are not primarily engaged in claims management might be reluctant to help their clients if they will be out of pocket. We want to avoid potential barriers to market entry. As a result, we have decided to tier our minimum fees:

• Turnover up to £50,000 - £500
• Turnover up to £100,000 - £1,000
  CMCs with turnover above £100,000 will pay £1,000 plus the variable fee. Removal of cap on higher fees
  10.17 We don’t cap other FCA fees and don’t accept the argument that we should make
  an exception for CMCs. Capping passes costs down the line to the smaller variable fee-payers. For example, if we capped the fee at £500,000 of turnover, applying the rate of £13 per £1,000 on which we consulted, a CMC with turnover of £1m would pay £6,200 in fees, or 0.62% of turnover. A CMC with £500,000 would also pay £6,200, representing 1.24% of turnover. This is not reasonable.
  10.18 We have learned from experience that, whatever their initial risk profile, the impact of
  large firms in the event of market failure can be substantial – both on regulation and the repercussions for other firms. Our proposals
  10.19 We proposed that CMCs must pay their full periodic fee for 2019/20 when they
  register for temporary permission. For CMCs with turnover above £100,000, this is the minimum fee of £1,000 plus the variable rate per £1,000 of turnover. CMCs that are authorised during the year will not have to pay any additional periodic fees. From 2020/21 onwards, they will be invoiced for their periodic fees on the same basis as all other fee payers.

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10.20 These fees will contribute towards, but not pay off, the cost of constructing the
regulatory gateway for temporary permissions and authorisations and the supervisory structure. There have been changes within the claims management industry and we are concerned that a number of CMCs may exit the market without seeking authorisation. It would be unfair for CMCs that take advantage of the regulatory gateway, but leave within the first year, to pass their share of the project costs to those CMCs still authorised by us in the future. We have estimated the total cost of setting up and delivering the new regulatory regime up to 2020/21 at £16.8m. Creating and operating the gateway for temporary permissions represents much of the cost and so we have decided to collect a substantial proportion of our project costs in the first year. Feedback received CP18/23 Q6: Do you have any comments on our proposal to charge the 2019/20 periodic fee when CMCs register for temporary permission?
10.21 Most respondents objected to payment in advance, one calling it a ‘fractious
approach.’ Others argued that it would drive CMCs out of the market. Two regarded it as unfair on businesses who did not go on to apply for full authorisation.
10.22 Several respondents agreed that some CMCs would enter temporary permission
with no intention of seeking authorisation and so payment in advance was reasonable to avoid costs being passed on to others. One commented that it would be unfair if CMC’s which have been the subject of widespread customer complaints leave other businesses to pay their share. Our response We are collecting our fees in advance to reduce the level of cost recovery to be carried forward in the future by CMCs which are successfully authorised by us and are therefore compliant with our standards. CMCs which do not intend to remain in the market should not be able to use our gateway without contributing towards our costs. Separate to the feedback we have received on our fees consultation, some CMCs have questioned the numbers of CMCs that we estimated will register with the FCA in the CBA we published in CP18/15. We have run scenarios for different numbers of CMCs remaining in the market. When we consulted in CP18/23, we said we were aiming to recover around 42% of our set-up costs in 2019/20. This was based on a cautious assumption of 547 CMCs of which 89 were Class 1. We will not be certain of the number of CMCs that will seek to be regulated by the FCA until registration begins. As we explain in our feedback on the CBA, we have updated our projections of firm numbers to take account of information received after publication of the CP. Consequently, we have revised both our cautious scenario and our core CBA scenario. The updated numbers are set out in the CBA.

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Claims management: how we will regulate claims management companies Our updated modelling suggests our cost recovery in 2019/20 could be between 48% and 58%. The CMCs which satisfy our threshold conditions and obtain authorisation will have to pay off the remaining balance of the set-up costs from 2020/21 onwards. Having considered the consultation responses, we remain of the view that it would be unfair for a substantial proportion of the project costs to be met solely by those firms that successfully apply for authorisation. In view of that and the continued uncertainty about how many CMCs will remain in the market, we have decided not to adjust our fee rate in the light of the updated numbers; if higher cost recovery were to materialise in 2019/20, it would help to relieve the pressure on those CMCs who obtain full authorisation. For the same reason, we do not propose to refund fees for CMCs that close their business without obtaining authorisation or applying to cancel their temporary permission. Our proposals
10.23 We have calculated the rate for 2019/20 on the basis of the turnover figures up to 30
November 2017 which CMCs submitted to the CMR for their 2018/19 periodic fees. These are the most recent data available to us. On this basis, we proposed a periodic fee of £13 per £1,000 of turnover for 2019/20. This is payable on incomes above £100,000.
10.24 To make sure all CMCs are satisfied that our records match the figures they supplied to
the CMR, we wrote to them in September 2018, asking them to confirm that the figure is correct and to add any income from Scottish business and activity under section 75 that are not currently regulated by the CMR. Feedback received CP18/23 Q7: Do you have any comments on our proposed periodic fee rates and arrangements for recovering 2019/20 fees?
10.25 Most respondents considered the £13 fee rate too high and many questioned our
cost estimates, saying we had not given sufficient information to judge whether the amounts we were recovering were reasonable. A number reiterated their concern about the removal of the fee cap. Several asserted that our fees might deter CMCs from remaining in the market.
10.26 Many objected to basing our fees on their November 2017 figures, arguing that we
should use more recent data, especially since that year represented the high point of PPI business, and there had been widespread reductions in income since then. Our response As we explained in our consultation paper on our proposals to regulate CMCs (CP18/15), we are setting up an enhanced, new regulatory regime. This requires significant investment and we have to recover our costs. Next year, when we know how many CMCs we will be regulating and how much we have been able to recover through the current exercise, we

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Claims management: how we will regulate claims management companies will take a view on the period for cost recovery to mitigate costs going forward. We explained that we are removing the fee cap to make sure that the larger CMCs pay their fair share of the costs. The November 2017 data set is the most recent validated data available so we have to use it. It would have been ideal to use data from November 2018, but that will not be available by the time we start collecting fees in January 2019.

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Claims management: how we will regulate claims management companies 11 Financial Ombudsman Service general levy and case fees for CMCs and the Financial Services Compensation Scheme
11.1 Responsibility for considering complaints about CMCs will transfer from the LeO to
the Ombudsman Service. In this chapter, we summarise the feedback we received to our proposals in CP18/23 for recovering the associated transfer costs and the Ombudsman Service’s ongoing costs. We also summarise the feedback we received to our proposal not to extend Financial Service Compensation Scheme cover to customers of CMCs at present. The powers to make rules on funding the Ombudsman Service are shared between the FCA and the Ombudsman Service, so this chapter is issued jointly. Case fees Our proposals
11.2 The Ombudsman Service is responsible for writing the rules about case fees which are
then approved by the FCA Board. The Ombudsman Service does not charge a business for the first 25 cases that it deals with. For the 26th and each subsequent complaint, a case fee is charged (in 2018/19 this fee was set at £550). The Ombudsman Service currently expects to charge CMCs the same case fees as other businesses it covers. Ombudsman Service case fees for 2019/20 will be consulted on by the Ombudsman Service in December 2018 as part of the usual plan and budget process.
11.3 In CP18/23 we proposed that CMCs should be subject to the same requirements as
other businesses covered by the Ombudsman Service regarding case fees. These rules set out penalties for late payment of case fees and enable the Ombudsman Service to refund, reduce or waive case fees in certain limited circumstances. Feedback received CP18/23 Q8: Do you agree that CMCs should be subject to the same requirements as other businesses covered by the Financial Ombudsman Service regarding case fees?
11.4 Most respondents supported our proposal and thought that CMCs should be subject
to the same requirements as other businesses covered by the Ombudsman Service.
11.5 Some thought case fees should be linked to turnover or size to make sure smaller
businesses were charged proportionate fees. A few said case fees should be adjusted depending on the amount of work the Ombudsman Service had carried out on an individual case. Some respondents suggested there should be reduced case fees

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Claims management: how we will regulate claims management companies for straightforward complaints concerning fees because the costs of investigation are likely to be minimal. Charging the same fee for all cases could result in CMCs subsidising complaints received from other FCA-authorised firms. Our response The decision to transfer responsibility for dealing with all types of complaint about CMCs from the LeO to the Ombudsman Service is a decision which has already been taken by HM Treasury. Most respondents were supportive of our proposals on fees for the Ombudsman Service so we intend to implement the rules as consulted. The Ombudsman Service will consider the feedback received to CP18/23 when it consults on case fees as part of its annual plan and budget consultation and will confirm case fees for CMCs and other businesses in March 2019. Annual fees and levies Our proposals
11.6 The general levy applies to all businesses covered by the compulsory jurisdiction, and
it is raised and collected by the FCA. It is payable across industry blocks and a business will fall into one of more of the industry blocks depending on the business activities it conducts. In CP18/23 we proposed to create a new industry block for all types of business with one or more of the CMC permissions that we consulted on in CP18/15 (including CMCs with only the lead generator permission). The Ombudsman Service estimated that it will need to raise £1.5m to £2.5m by general levy for 2019/20 to cover transfer costs and deal with complaints about CMCs in the 2019/20 financial year. The general levy will be divided between CMCs in the new CMC industry block.
11.7 In CP18/23 we proposed that the tariff base for CMCs will be annual income and
the general levy payable by CMCs will be £x per £1,000 of annual income subject to a minimum fee of £50. We estimated that £x would be £2.70 to £4.50. Since we consulted, the Ombudsman Service has revised its estimations and has asked us to collect £2.2m by general levy. Currently, CMCs that have notified us that they do not conduct business with eligible complainants,19 are exempt from certain rules in DISP and from paying the Ombudsman Service general levy. In CP18/23 we proposed that the same exemption should apply to CMCs. Feedback received CP18/23 Q9: Do you have any comments on our proposals to create a new industry block for CMCs in FEES 5
Annex 1R?
CP18/23 Q10: Do you agree that the tariff base for CMCs should be income? If you disagree what alternative approach would you suggest? 19 as defined in DISP

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Claims management: how we will regulate claims management companies CP18/23 Q11: Do you agree that CMCs should be exempt from paying the Financial Ombudsman Service general levy if they do not deal with eligible complainants?
11.8 Most respondents supported our proposal to create a new industry block for CMCs.
A few respondents thought that a separate industry block with a reduced levy or tariff base should be created for CMCs carrying out activities which had historically generated low numbers of LeO complaints (for example CMCs not involved in complaints about financial services and financial products).
11.9 The majority of respondents supported our proposal that the tariff base for CMCs
should be income. Those that disagreed thought that the tariff should be risk based and that it should take into account compliance history, the size of the business and the activities carried out by the CMC. One respondent thought that the rates should be identical to those currently charged by the LeO.
11.10 Respondents generally supported our proposal that CMCs not dealing with eligible
complainants should be exempt from paying the general levy.
Our response
We plan to proceed with the proposals that we consulted on. We do not think that it would be appropriate to create separate industry blocks or tariffs for CMCs that generate fewer complaints. Low numbers of referrals are not necessarily a good indication of a lower risk of consumer harm. For example, an ombudsman scheme may receive a lower number of referrals if a business has not provided appropriate information to customers on how they can escalate their complaint, or if it is dealing with certain types of consumer who are less sophisticated and less likely to escalate their complaint. Developing different industry blocks or tariffs based on numbers of complaints would be costly and difficult to implement and may require revision throughout the financial year. The general levy is based on the budgeted costs and numbers of staff required to handle complaints in each industry sector. These ongoing fixed costs reflect the extent to which different sectors generate different levels of complaints. The Ombudsman Service sets the case fee at the level necessary to raise the budget not covered by the general levy, which enables the Ombudsman Service to collect additional funds as demand increases. In 2018/19 approximately 12% of the Ombudsman Service’s total revenue was received via the general levy and the rest was received via case fees and group fees. This means that most of the costs of handling complaints are recovered through the case fee, which ensures that the businesses that generate large numbers of referrals are required to make a greater contribution to costs. Since we consulted, the Ombudsman Service has revised its estimations and has asked us to collect £2.2 m by general levy. The general levy payable by CMCs on 2019/20 will be £3 per £1,000 of annual income subject to a minimum fee of £50. This rate has been

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Claims management: how we will regulate claims management companies calculated based on the number of firms that we expect to apply for authorisation in the core CBA scenario. The updated numbers are set out in the CBA. Reporting requirements and joining and leaving the Financial Ombudsman Service Our proposals
11.11 To enable the Ombudsman Service to calculate its general levy, firms must provide a
statement (or a best estimate) of their ‘relevant business’ for each fee year. In CP18/23 we proposed that CMCs must provide this information by the end of February each year20. If not, it must pay an administrative fee of £250 and the general levy will be calculated using the valuation for the previous period (where available) multiplied by a factor of 1.10.
11.12 We proposed that if a CMC becomes subject to the Ombudsman Service during a
financial year it must pay a rateable proportion21 of the general levy. If a respondent ceases to be a CMC during a financial year it will remain liable to pay case fees in respect of cases within the jurisdiction of the Ombudsman Service. CMCs that apply for, but do not obtain authorisation will not receive a refund of the amount that they have paid towards the general levy. Feedback received CP18/23 Q12: Do you have any comments on our proposed reporting requirements for CMCs? CP18/23 Q13: Do you agree with our proposals for CMCs that join or leave the Financial Ombudsman Service part way through a financial year?
11.13 Most respondents supported our proposals. A few respondents thought that the
general levy should be refunded in full if the FCA refuses a full application. Our response We intend to implement the proposals that we consulted on with one amendment. We do not think it would be appropriate to refund the full amount that a CMC has paid towards the general levy if its application for authorisation is not approved, because it is possible that the Ombudsman Service will have incurred costs in dealing with cases during that financial year. Implementing the proposal as consulted on will ensure that requirements are the same for all businesses covered by the Ombudsman Service. We are introducing a transitional provision that will enable us to use the same data that we will use to calculate FCA fees to calculate the FOS general levy for 2019/20. We intend to use turnover data as at November 2017 already received from the CMR to calculate the 20 or at a date requested by the FCA if the CMC becomes subject to the Ombudsman Service part way through the financial year. 21 as specified in the formula set out in FEES 4.2.7ER8.

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Claims management: how we will regulate claims management companies 2019/2020 FOS general levy for CMCs. In September 2018, we wrote to all CMCs registered with the CMR and explained that we intended to use the same data for both FOS and FCA fees and we provided firms with an opportunity to confirm the accuracy of the data or provide revised data. The transitional provision will ensure that we have the relevant data to enable us to invoice CMCs from April 2019. Financial Services Compensation Scheme Our proposals
11.14 The FSCS is an industry funded scheme of last resort that acts as a compensation
safety net for consumers of authorised financial services firms. Currently, customers of CMCs do not have access to FSCS or an equivalent compensation scheme. In CP18/23 we explained that we do not plan to extend FSCS cover to customers of CMCs, but we may review the position in the future if there is evidence of significant consumer harm. Feedback received CP18/23 Q14: Do you agree that FSCS cover should not be extended to customers of CMCs?
11.15 Most respondents agreed with our proposal. A few respondents suggested that
customers of CMCs that handled client money should be protected but noted that we had proposed to review the position at a later date. Our response We do not intend to extend FSCS cover to customers of CMCs at present, but we may review the position in the future if there is evidence of significant consumer harm. Our Client Money regime which is set out in detail in chapter 6 introduces new requirements for CMCs holding client money to protect client money and ensure a smooth wind-down if a CMC closes.

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Claims management: how we will regulate claims management companies 12 Feedback to our Cost Benefit Analysis
12.1 When we propose rules, we must publish a CBA under Section 138I(2)(a) of FSMA.
The CBA must include an analysis and estimate of the costs from, and the benefits delivered by, our proposed rules. We published a CBA for our proposals in June, alongside CP18/15. We conducted a rigorous and detailed assessment of the costs and benefits of introducing our proposed rules, using survey information we asked firms to provide.
12.2 This chapter sets out our response to the CBA feedback.
Feedback received
Q35: Do you have any comments on the costs and benefits as set out in our cost benefit analysis? Exit /amalgamation
12.3 Some respondents suggested that our proposals would result in fewer CMCs
remaining in the market than our CBA estimate. Respondents gave a number of reasons why CMCs would have lower revenues or higher costs, potentially leading to more CMCs exiting the market or an increase in smaller CMCs amalgamating. These reasons were:

• interim fee cap: a small number of respondents said that the fee cap imposed
  through the FGCA may lead to reduced CMC revenues
• pre-contract disclosure: one respondent said that the proposed pre-contract
  disclosure rules may lead to reduced CMC revenues
• PPI deadline: one respondent said that the deadline for PPI claims would reduce
  revenues for CMCs
• prudential requirements: one respondent said that what they described as the
  ‘substantial prudential requirements’ may create costs that would lead to a ‘substantially greater than anticipated CMC exit’
• increased fees compared to CMC’s current regulatory regime: one respondent
  noted the increase in regulatory fees (set out in the fees CP)
• compliance costs: one respondent said that the costs of compliance could result in
  CMC exits and amalgamations
  Our response
  In our CP18/15 CBA, to calculate the total compliance costs to CMCs, we assumed a population of 736 CMCs (89 Class 1 and 647 Class 2). This was based on the number of CMCs that told us in survey responses that they intend to leave the market. Separately, because of the uncertainty

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Claims management: how we will regulate claims management companies in the number of CMCs that will remain in the market we used a more cautious (lower) scenario for the number of CMCs that will register with the FCA to inform our fees consultation. It is impossible to predict how many CMC’s will exit the market or amalgamate. Overall CMC numbers have been declining for some time and for several reasons. Respondents raised further factors that may reduce the number of CMCs, compared to our estimates based on the pre-consultation survey. CMCs also have more information on regulatory fees now than they did when they answered our survey. If more CMCs exit the market than we predicted, the compliance costs for the industry as a whole would go down accordingly. We also know that we have less reliable data on the number of Scottish CMCs and CMCs that deal with s75 claims that are likely to apply for FCA permissions. We have produced an updated projection of firm numbers that includes 2 scenarios. The core scenario applies the methodology used in the original CBA to new CMC data and responses to our CMC awareness and communications preferences survey (both received after the publication of the CP). We arrived at the revised estimate of 790 firms. Of these, 111 are Class 1 firms, and 679 are Class 2 firms. This reflects a greater number of CMCs, especially Class 1 firms that are in the market since we published CP18/15. Because of the ongoing uncertainty about the number of CMCs that will remain in the market, and the potential response bias in the surveys (where CMCs exiting the market may be less likely to respond to our survey), we have set out an alternative, more cautious scenario. The alternative scenario has 25% fewer CMCs (across Class 1 and Class 2 firms) with 592 remaining in the market, of which 83 are Class 1 firms and 509 are Class 2 firms. Cost of compliance
12.4 Some respondents argued that our estimates of the costs of compliance were
outdated and inaccurate, which meant that we understated them. Many of these respondents did not say which aspects of compliance costs we had understated, and offered limited arguments or evidence. In a small number of initial responses to CP18/15 respondents gave reasons for questioning the costs of compliance, or offered suggestions and improvements:

• Fees for compliance consultants: One respondent suggested that a more accurate
  measure of compliance costs would be the fees that a professional services company would charge to advise clients on compliance and help set up complaint processes. They gave the hourly fee rate for these services as £350 - £1500 depending on quality, and suggested that we ask professional services companies about the costs of their compliance services.
• Cost of investment in compliance: The same respondent also suggested that there
  would be extra costs over and above compliance officers. These would include the opportunity cost of investment in staff and management time to ensure compliance. The respondent suggested that these costs could be as high as 10%-15% of overall costs.

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• Compliance cost may be 4 times the average estimated cost: One respondent
  said that they have begun to implement the new compliance requirements. This includes delivering a significantly improved quality assurance process which they believe will satisfy the new regulatory requirements. They said their ongoing costs for this process would be about £570,000, which is significantly higher than the CBA’s estimated ongoing costs per CMC. This respondent’s costs include 10 team leaders and 10 assistant team leaders undertaking quality assurance, a dedicated compliance team of 3 staff and ongoing professional compliance support. Two trade bodies also gave similar views.
• One respondent suggested that CMCs should link the variable costs of compliance
  to the revenues from their regulated activities.
  12.5 We wrote to a number of respondents asking for more information on compliance
  costs but did not receive substantial new information to cause us to change our estimates. Our response Much of our Handbook applies to all or most firms and is not CMC￾specific. We consider that applying those (non-CMC specific) parts of the Handbook to CMCs is a consequence of HM Treasury’s decision to transfer regulation to the FCA. Those non-CMC specific parts of the Handbook do not therefore fall within the scope of this CBA which is limited to assessing the costs of applying the rules we proposed to introduce specifically for CMCs. Our CBA factored in the costs to CMCs of familiarising themselves with the rules and guidance we have introduced specifically for CMCs. We expect CMCs to understand for themselves how our rules will impact their business. CMCs do not need to consult professional services to comply with our CMC-specific rules and guidance. As such, we do not account for compliance consultants’ fees in the CBA and so have not asked professional services firms for new information about their fees. We have set out the expected involvement of compliance personnel and legal staff in our cost estimates (which do not include costs for training to comply with the Senior Managers and Certification Regime). This includes the costs of familiarising themselves with our proposed regulations and a review of the legal text. In CP18/15 we set out the type of staff costs for each of our policy proposals. In our view, these costs allow for sufficient staff costs to ensure CMCs can comply with our proposals. We based some of our CBA estimates on the survey results of CMCs’ compliance costs. We asked the CMCs that disagreed with our CBA for further evidence. They did not provide us with further details of why their quality assurance processes require higher staffing costs than our estimates. As a result, we are unable to comment on the reasons for the difference between our estimates and respondents’ estimates. More generally, the CBA’s CMC cost estimates are the averages for a wide range of firms with significantly different sizes and reported costs. These averages are useful for estimating the compliance costs to the

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Claims management: how we will regulate claims management companies industry as a whole. But they do not accurately reflect the costs faced by individual CMCs: some will inevitably be higher or lower than these averages. Our compliance cost estimates do take into account the revenue the CMC generates (i.e. Class 1 or Class 2). While we could have broken the estimates down further into their component parts, we believe our approach is reasonable for estimating industry-level costs. Our estimates also reflect the reality that some compliance costs do not vary with sales volume. Potential impact of reduced profits or numbers of CMCs
12.6 Two respondents said that CMC consolidation and exits, caused by the proposed
regulations, may lead to reduced competition and ultimately to poorer value services to customers.
12.7 One of the same respondents said that the positions in the CBA are inconsistent. In
particular, our assumption that the proposed rules would lead to reduced CMC profits due to higher compliance costs, but lower costs and better quality of service for customers. Our response We think that the combination of policy proposals in CP18/15 ensure that customers will receive better service quality from CMCs, or enable them to make claims directly or with the help of a fee-free service. The proposed rules may lead to more customers making direct claims, so lowering their costs and encouraging greater price competition among CMCs. Both of these effects reduce customers’ overall financial cost for claiming compensation. The proposed rules also increase our expectations of the service and information a CMC will need to provide. If they are not currently meeting these expectations, then this will improve the quality of the service and information they give. While we agree that the compliance costs will reduce CMC profits, and that some CMCs may exit the market, we do not see why this would hinder these positive effects. Changes to our CBA as a result of feedback to CP
12.8 If we consider the final rules to differ significantly from those consulted on, we are
required to publish the details of the difference together with a cost benefit analysis. We have updated the cost estimates in some places to reflect changes to the prudential rules and the rules about communications with customers which were made following the consultation. We have also updated our assumptions about the number of CMCs that will register with the FCA when compared with the CBA in CP18/15. This takes account of both the new information from the CMR and responses to CP18/15 about the CBA.
12.9 We have made a number of minor changes across our sourcebooks. A large majority of
these changes are to the proposed rules in 3 areas of the Policy Statement:

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• Chapter 3 – Conduct standards
• Chapter 6 – Client money
• Chapter 5 – Prudential standards
  12.10 Below we give examples of changes made to these sections.
  Conduct standards and client money
  12.11 In the conduct standards and client money chapters we have made some minor
  changes and clarifications to our proposed rules. We do not believe these changes have a material impact on the CBA. This is because the changes are either minor amendments, helping CMCs better understand how to meet a rule or in some cases reducing the requirements. We have set out the changes and rationale in the preceding chapters. We give some examples below.
• We clarified that CMCs must have clear, effective and appropriate policies and
  procedures for dealing with customers in arrears. We provide detail on our existing expectation that this includes customers who are unable to meet the CMC fee payment once it has fallen due. We do not consider this requirement will create significant extra costs, as CMCs can still recover any reasonable costs they incur in recovering a debt.
• Before submitting a claim, CMCs should take into account guidance produced by
  relevant statutory ombudsmen or statutory compensation schemes about their decisions and previous Ombudsman or compensation scheme decisions in which the relevant CMC was involved. Our guidance clarifies how CMCs can comply with the existing requirement to decide if a case has a good arguable base.
• We have required CMCs to report 1 additional field as part of client money reporting
  they would already need to submit. We do not believe that this would materially affect their costs.
• Some firms questioned whether the requirement to set out the fees customers
  could be charged applies to lead generators. We have clarified this in our updated rules. The CBA reflected our original intention that lead generators would be required to update their marketing materials so we have not adjusted the costs. Additional communication in pre-contract and ongoing disclosure
  12.12 We have set out a number of new communication requirements for CMCs to
  undertake as part of their pre-contract and ongoing disclosure to their customers. They include:
• Requiring CMCs to ask the customer when making enquiries before the start of the
  contract whether the customer has any outstanding liabilities with the respondent or is about to become involved in insolvency arrangements such as bankruptcy or similar. If this is the case, CMCs must inform the customer that they will, where necessary, need to pay the CMC’s fees from their own funds.
• For pension claims, requiring CMCs to inform the customer when making enquiries
  before the start of the contract that they may not have access to their pension at the point the CMC’s fee becomes payable, but will, where necessary, need to pay the CMC’s fees from their own funds.

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Claims management: how we will regulate claims management companies

• Requiring CMCs to ask the person against whom the claim is to be made whether
  the customer has any outstanding liabilities which they might use some or all of the compensation to reduce. If this is the case, the CMC must inform the customer that where necessary, they will have to pay the fee from their own funds.
• Requiring CMCs to gain and record customer consent before invoicing the customer
  for a cost which had not been disclosed in the pre-contractual documentation.
• Requiring CMCs to notify the customer of any step it intends to take to progress
  the claim if this was not set out in the pre-contract disclosure information, or if 6 months has passed since then, customer consent would, where necessary, need to be obtained before taking that step.
  12.13 Collectively, we estimate that these communications will add an average of 1.5
  minutes of telephone communication per claim. These communication requirements may therefore add around £0.5m - £0.8m in ongoing costs to the industry22. Prudential standards
  12.14 As a result of the feedback on our prudential proposals we are amending the draft
  rules in 2 places. Firstly, we accepted the suggestion that CMCs could deduct a portion of marketing expenditure from their total expenditure when they calculate their overheads requirement. Secondly, we also agreed with the proposal to amend the fixed overheads requirement when there is a material change in a CMC’s business activities. If CMCs are allowed to deduct 20% of their marketing expenditure from total expenditure when calculating their overheads requirement (based upon the range of estimates for the capital shortfall and the cost of equity) this would result in a reduction of £0.2m in ongoing costs compared to the original CBA published in CP18/15.
  12.15 By further accounting for the revised number of CMCs we expect to remain in the
  market, under both the core scenario and the alternative scenario, we expect the ongoing compliance costs to the industry arising from prudential standards to be between £2.0m and £5.7m.
  12.16 We have not amended the CBA to account for changes to the fixed overheads
  requirement when there is a material change in a CMC’s business activities. If CMCs choose to exercise this option to reduce the cost of their prudential requirement, the estimated ongoing costs above (£2.0m – £5.7m) will overstate the cost to the industry. Revised summary table
  12.17 In line with the methodology set out in paragraph 12.6 we have produced two revised
  scenarios on the projected number of CMCs that will become FCA authorised. The costs CMCs will incur under these two scenarios, taking into account the changes in compliance costs of additional communication and prudential standards, are set out below.23 22 We have based this estimation on the following assumptions: Class 1 CMCs (of which there will be 83 and 111) will process on average 14,300-15,800 claims per year, while Class 2 CMCs (of which there will be between 509 and 679) will process on average 580-640 claims per year. The hourly staff cost is assumed to be £13 - £14.40 based on the firm survey conducted pre-consultation. If there is a decrease in claims after the PPI deadline we expect the ongoing compliance cost associated with this requirement to decrease accordingly. 23 Note: numbers may not sum to the total due to rounding.

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Claims management: how we will regulate claims management companies
Table: Summary of different firm number scenarios
CP18/15 PS core scenario PS alternative scenario Class 1 CMCs 89 111 83 Class 2 CMCs 647 679 509 Total 736 790 592 Core scenario: 790 firms, of which 111 are Class 1 (with revenue > £1m) Proposal One-off (£m) Ongoing (£m) High-level standards – SYSC 0.3 – 0.7 0.8 - 1.1 Conduct standards – Use of lead generators N/A 0.1 Amending marketing materials 1.0 - 1.1 N/A Communication – Pre-sale disclosure 0.1 N/A Communication – Ongoing disclosure N/A 0.7 - 1.7 Call recording 1.0 - 1.1 1.6 - 1.8 Prudential N/A 2.7 - 5.7 Wind-down procedures N/A 0.5 - 1.4 Client money 0.1 0.8 - 1.5 Supervision and reporting (SUP) N/A 0.3 - 0.4 Familiarisation costs 0.7 N/A Legal review 0.9 N/A Additional communication N/A 0.6 - 0.8 Total 4.0 - 4.6 8.2 - 14.4 Alternative scenario: 592 firms, of which 83 are Class 1 (with revenue > £1m) Proposal One-off (£m) Ongoing (£m) High-level standards – SYSC 0.3 - 0.5 0.6 - 0.9 Conduct standards – Use of lead generators N/A 0.1 Amending marketing materials 0.7 - 0.8 N/A Communication – Pre-sale disclosure 0.1 N/A Communication – Ongoing disclosure N/A 0.5 - 1.3 Call recording 0.7 - 0.8 1.2 - 1.3 Prudential N/A 2.0 - 4.3 Wind-down procedures N/A 0.4 - 1.0 Client money 0.0 0.6 - 1.1 Supervision and reporting (SUP) N/A 0.2 - 0.3 Familiarisation costs 0.5 N/A Legal review 0.6 N/A Additional communication N/A 0.5 - 0.6 Total 3.0 – 3.4 6.1 – 10.8

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Chapter 13
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Claims management: how we will regulate claims management companies 13 Feedback on the Equality Impact Assessment
13.1 In CP18/15 we considered whether our proposals could have a potentially
discriminatory impact on groups with protected characteristics. We noted that certain groups with protected characteristics are more likely to use CMCs. Feedback received Q36: Do you agree with our assessment of the impacts of our proposals on the protected groups? Are there any others we should consider?
13.2 Respondents raised concerns about CMCs exiting the market and the impact on
customers with protected characteristics, the PPI deadline leading to aggressive marketing directed at vulnerable customers and the need for a united approach between the FCA and other agencies to help consumers with protected characteristics. Several responses focussed on the supervision of CMCs and the importance of the supervision of their services for customers with protected characteristics. Our response Overall, we do not consider that the PS will materially impact any of the groups with protected characteristics under the Equality Act 2010. We will, however, take account of any equality and diversity implications as
part of monitoring the impact of the new rules and guidance.
We acknowledged the likelihood of CMCs leaving the market in our CP. We noted that the expected shrinkage in the market was in line with the annual reduction in numbers of CMCs. The exact extent of exit remains uncertain at this stage. We recognise that there are a number of factors such as the PPI deadline and the fee cap which may further reduce the number of CMCs that would remain in the market compared to our estimates from the pre-consultation survey. Our Equality Impact Assessment (EIA) considered the impact of the proposals in the CP, rather than other developments in the market. The concerns raised in response were generally about these other developments. Our rules on marketing undertaken by CMCs will apply from April 2019 and we have introduced a rule that requires a CMC to establish and implement clear, effective and appropriate policies and procedures to identify and protect vulnerable customers. We will monitor the market, including in the lead up to the PPI deadline, for behaviour which is not in line with our rules and will act where we find this. We will continue to work with other agencies to make sure we have due regard to groups with protected characteristics in line with our duties under the Equality Act.

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Chapter 13
Financial Conduct Authority
Claims management: how we will regulate claims management companies The FCA has published various resources to help CMCs in dealing with customers with protected characteristics and following some of their obligations under the Equality Act. These resources include:

• Our Approach to Customers
• Occasional Paper no. 8: Customer Vulnerability
• Ageing populations: update from the FCA
• Financially vulnerable customers’ thematic review: key findings
  We will be undertaking a consultation in 2019 on guidance for all firms on the identification and treatment of vulnerable customers. This guidance will be a useful resource for CMCs in the future. It is the responsibility of CMCs to ensure that they are complying with their obligations under the Equality Act.

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Chapter 14
Financial Conduct Authority
Claims management: how we will regulate claims management companies 14 Other Issues
14.1 In this chapter, we summarise the feedback we received that was unrelated to the
questions we had asked.
Feedback Received
Cold calling ban
14.2 We received several pieces of feedback on the cold calling ban. These respondents felt
that cold calling should be banned across all CMCs.
Collaboration
14.3 We also received feedback on collaboration between CMCs and banks as well as
between CMCs and the FCA. Some respondents called for the relationship between CMCs and solicitors to be as transparent as possible and for the FCA to work closely with the SRA. Some respondents asked who the FCA contact would be for CMCs. Customer consent
14.4 Respondents asked us about the ways customers give consent to CMCs and
requested more guidance on LoAs. Some CMCs felt that counterparties were putting unnecessary steps in the way of a CMC representing a customer, including seeking a new signature every 6 months. CHCs
14.5 Some respondents felt that credit hire companies (CHCs) should be regulated by the
FCA.
DBAs24
14.6 Some respondents commented on the relationship between the rules relating to
CMCs and Damages Based Agreements (DBAs) regulations. One respondent asked whether the interim PPI CMC fee cap applies to DBAs given there is an existing fee cap set out in the DBAs regulations. Firm authorisation
14.7 Some respondents asked if groups or platforms that perform a function similar to a
CMC should be authorised and regulated by the FCA.
GDPR
14.8 We have addressed GDPR in the PS where it is relevant to specific issues. There were
some more general queries raised by respondents and we address these points in this
chapter.
14.9 Respondents queried how GDPR applied to our rules in a range of areas, such as
passing on of information where a customer is uncontactable and collecting payment data. 24 References to DBA regulations in this Policy Statement refer to The Damage Based Agreement Regulations 2013 (SI 2013/609) applicable in England and Wales. At the time of writing The Scottish Government is consulting on Scottish Damages Based Agreement Regulations, these rules are not yet finalised, however, the consultation paper can be found here https://consult.gov.scot/justice/success-fee-agreements/

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Chapter 14
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Claims management: how we will regulate claims management companies
14.10 They were also unclear on requirements around data retention and purging of data
when a firm winds down. We were asked to clarify if explicit customer consent is required where a firm intends to pass customer data on to another firm.
14.11 One respondent suggested that the FCA should require the CMC to disclose the
identity of the lead generator. The respondent reasoned that this would ensure that the customer can consider if their Data Protection Act rights have been observed, and to exercise their new rights under the new Data Protection Act. Our response The majority of responses we have summarised here raise issues that either fall outside the scope of our regulation or are covered by FCA principles and conduct rules. CMCs will be expected to abide by the FCA’s conduct rules. Cold calling ban
14.12 A ban on CMC cold calling without consent was introduced in September 2018 by
Government who is responsible for determining its scope. The ICO is the main enforcer of the cold calling ban and we will work closely with the ICO to address any concerns. We require all CMCs, when using a lead generator, to take steps to ensure the lead generator has appropriate systems and controls in place to comply with the Privacy and Electronic Communications Regulations 2003 (or the equivalent legislation in the EEA State where the lead generator is established) and the GDPR. We have included additional guidance in the CMCOB to this effect. Collaboration
14.13 CMCs can contact us via claimsmanagement@fca.org.uk with enquires or to highlight
poor behaviour of third parties/other CMCs. We will continue to work closely with other bodies that regulate the behaviour of CMCs, or similar firms. We expect firms we regulate to work professionally together and in the interests of consumers, and this is also true for CMCs and financial service firms including banks. We will expect CMCs to deal with their regulators, including the FCA, in an open and cooperative way, and to disclose appropriately to the relevant regulator anything relating to the firm which that regulator would reasonably expect notice of. This is required by Principle 11. Customer consent
14.14 We expect LoAs to provide sufficient information to allow firms to undergo necessary
checks that the CMC has the customer’s consent to act on their behalf. We recognise that UK Finance, working with the CMR, released guidance and a template for claim LoAs. Although it is correct for respondents to put measures in place to make sure the CMC has authority to act on behalf of a customer, we would be concerned if these measures were being used to hinder a customer’s ability to progress their complaint using a CMC. We also note the guidance does not require a new signature every 6 months once a claim has been submitted. CHCs
14.15 Which firms we regulate is set by government and it is not appropriate for us to
comment on those firms that fall outside of scope. If a credit hire company is not carrying out claims management activity it will not be regulated for this activity by the FCA.

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Chapter 14
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Claims management: how we will regulate claims management companies DBAs
14.16 We’ve consulted with the MoJ and the CMR on the topic of DBAs. We agree that
the interim PPI CMC fee cap supersedes the DBA fee cap where both fee caps are applicable to a CMC. Therefore, CMCs must abide by the interim 20% PPI CMC fee cap for PPI claims even when the DBA fee cap also applies to their business.
14.17 CMCs should consider carefully whether any agreement is captured by the DBA
regulations and take steps to make sure they comply. Not complying with the DBA regulations makes an agreement unenforceable. The MoJ is responsible for this policy area and we will work closely with the MoJ where we identify concerns. Firm Authorisation
14.18 Whether firms not currently regulated are carrying out a claims management activity is
a matter of fact. We expect firms carrying out activities that are similar to the activities of a CMC to carefully consider whether they need to be authorised by the FCA.
14.19 Penalties for carrying out unregulated activity which should be regulated can be
significant. We encourage firms to engage with us if they are unsure of the position, although we expect firms to have undertaken their own assessment of their activity prior to contacting us. GDPR
14.20 The ICO is the competent authority that regulates and enforces GDPR.
14.21 It is for firms to ensure that they are GDPR compliant. GDPR requires that CMCs
process data lawfully and sets out six lawful bases. CMCs should consider the guidance on that set out on the ICO website. Where firms are still unclear, we advise that they seek independent legal advice. Expected effect on mutual societies
14.22 In CP18/15 and CP18/23, we explained, as required by Section 138K of FSMA, that we
did not expect our proposals to affect mutual societies. The responses received to our consultations have not changed this assessment. Changes to PERG 5
14.23 We have made some non-substantive changes to chapter 5 of the Perimeter Guidance
Manual (PERG 5) to remove some of the existing references to “claims management”. Whilst this is a change to the insurance distribution chapter it is done to benefit CMC’s by removing non-relevant references to claims management from the handbook to help avoid any confusion.

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Annex 1
Financial Conduct Authority
Claims management: how we will regulate claims management companies
Annex 1
List of non-confidential respondents
33rds Limited
Able Financial Limited
ABTA
Adam Samuel
AGB Financial Services Ltd
Allianz Insurance
Allied Claims Management Ltd
Andrew Hepinstall
Andrew Hummersone
Association of British Insurers
Association of Member-Directed Pension Schemes Association of Mortgage Intermediaries Association of Personal Injury Lawyers Crystal Legal Services Ltd British Insurance Brokers’ Association Building Societies Association Canopus Carey Pensions UK LLP Caroline Neal Employment Law Chediston Partners LLP Chubb Churchill Sloan Limited Claims (London) Limited Claims Management Compliance Ltd

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Annex 1
Financial Conduct Authority
Claims management: how we will regulate claims management companies Compliance News Limited Team Congruent Actuarial Limited Consumer Finance Association Credit Hire Organisation Crystal Financial Claims Limited DGS Direct Line Group DWF LLP Edam Group Elementary Financial Planning Etico Group Limited Financial Recovery Solutions Ltd Financial Services Consumer Panel First 4 Lawyers Limited FLA FSCS Gladstone Brookes Limited Goodwin Barrett Limited Graeme Andrew Grosvenor House Associates (Cornwall) Limited Hastings O’Loughlin HB&O Financial Services helpandclaim.com Indigo Financial Advice Ltd Investment & Life Assurance Group Jewell & Petersen Limited JFH Services Ltd

PS18/23
Annex 1
Financial Conduct Authority
Claims management: how we will regulate claims management companies Keoghs Keystone Financial Law Society of Scotland Legal Ombudsman Lloyd’s Market Association LV= Mayfield Financial Services Limited MoneySavingExpert.com Motor Insurers’ Bureau MyChargBack.com National Accident Helpline Philip J Milton & Company Plc Phenix Consultancy Resort Development Organisation Richard Tomkinson RS Mortgage Consultancy RSA The Alliance of Claims Companies The Claims Guys The Forum of Insurance Lawyers The Insurance Partnership Financial Services Limited The Legal Brokerage Ltd The National Franchised Dealers Association (NFDA TUI Group Tynebank Claims Ltd UK Finance United Legal Assistance Limited

PS18/23
Annex 1
Financial Conduct Authority
Claims management: how we will regulate claims management companies We Fight Any Claim Limited Weightmans Which?

PS18/23
Annex 2
Financial Conduct Authority
Claims management: how we will regulate claims management companies
Annex 2
Abbreviations used in this paper
AR Appointed Representative
ARD Account Referencing Date
CASS Client Asset
CBA Cost Benefit Analysis
CHCs Credit Hire Companies
CMCOB Claims Management: Conduct of Business Sourcebook CMCs Claims Management Companies CMR Claims Management Regulator COND The Threshold Conditions section of the FCA Handbook CP Consultation Paper DBA Damages Based Agreement DEPP Decision and Procedure and Penalties Manual DISP Dispute Resolution: Complaints Sourcebook EG Enforcement Guide EIA Equality Impact Assessment FCA Financial Conduct Authority FGCA The Financial Guidance and Claims Act 2018 FSCS Financial Services Compensation Scheme FSMA Financial Services and Markets Act 2000 GDPR General Data Protection Regulation GEN General Provisions ICO Information Commissioner’s Office

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Annex 2
Financial Conduct Authority
Claims management: how we will regulate claims management companies IP Insolvency Practitioner IVA Individual Voluntary Arrangement LeO Legal Ombudsman Service LoA Letter of Authority MoJ Ministry of Justice PECR Privacy and Electronic Communications Regulations 2003 PERG Perimeter Guidance Manual PII Professional Indemnity Insurance PPI Payment Protection Insurance PRIN Principles for Businesses PS Policy Statement SI Statutory Instrument SM&CR Senior Managers and Certification Regime SRA Solicitors Regulatory Authority SUP Supervision Manual SYSC Systems and Controls The Ombudsman Service Financial Ombudsman Service TP Temporary Permission VAT Value Added Tax VoP Variation of Permission We have developed the policy in this Policy Statement in the context of the existing UK and EU regulatory framework. The Government has made clear that it will continue to implement and apply EU law until the UK has left the EU. We will keep the proposals under review to assess whether any amendments may be required in the event of changes in the UK regulatory framework in the future. All our publications are available to download from www.fca.org.uk. If you would like to receive this paper in an alternative format, please call 020 7066 9644 or email: publications_graphics@fca.org.uk or write to:
Editorial and Digital team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.

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Appendix 1
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Claims management: how we will regulate claims management companies
Appendix 1
Made rules (legal instruments)

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FOS 2018/6
CLAIMS MANAGEMENT INSTRUMENT 2018
Powers exercised by the Financial Ombudsman Service Limited A. The Financial Ombudsman Service Limited makes and amends the scheme rules, makes and amends the Voluntary Jurisdiction rules, and fixes and varies the standard terms for Voluntary Jurisdiction participants, as set out in Annex A and Annex G to this instrument in the exercise of the following powers and related provisions in the Financial Services and Markets Act 2000 (“the Act”):
(1) section 227 (Voluntary jurisdiction); (2) paragraph 8 (Information, advice and guidance) of Schedule 17; (3) paragraph 14 (Scheme operator’s rules) of Schedule 17; (4) paragraph 18 (Terms of reference to the scheme) of Schedule 17; (5) paragraph 20 (Voluntary jurisdiction rules: procedure); and (6) paragraph 22 (Consultation) of Schedule 17. B. The Financial Ombudsman Service Limited notes that, for the avoidance of doubt, the Transitional Provisions at TP 1.1 in Annex G to this instrument apply equally to the Voluntary Jurisdiction of the Financial Ombudsman Service and the Compulsory Jurisdiction.
C. The making and variation of the scheme rules in Annex A and Annex G by the
Financial Ombudsman Service Limited is subject to the consent of the Financial Conduct Authority, and the making and amendment of the Voluntary Jurisdiction rules and fixing and variation of the standard terms in Annex A and Annex G by the Financial Ombudsman Service Limited is subject to the approval of the Financial Conduct Authority. Powers exercised by the Financial Conduct Authority D. The Financial Conduct Authority makes this instrument in the exercise of the following powers and related provisions in or under the Act:
(1) section 59 (approval for particular arrangements); (2) section 137A (The FCA’s general rules); (3) section 137B (FCA general rules: clients’ money, right to rescind etc); (4) section 137R (Financial promotion rules); (5) section 137T (General supplementary powers); (6) section 138D (Actions for damages); (7) section 139A (The FCA’s power to give guidance); (8) section 226 (Compulsory jurisdiction); (9) paragraph 13 (FCA’s rules) of Schedule 17; and (10) article 1(2) of the Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018. E. The rule-making powers listed above are specified for the purpose of section 138G(2) (Rule-making instruments) of the Act.

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F. The Financial Conduct Authority consents to the making and variation of the scheme rules in Annex A and Annex G by the Financial Ombudsman Service Limited, and approves the making and amendment of the Voluntary Jurisdiction rules and the fixing and variation of the standard terms in Annex A and Annex G by the Financial Ombudsman Service Limited. Commencement G. This instrument comes into force on 1 April 2019 except for Part 1 of Annex A, which comes into force on 1 January 2019. Amendments to the FCA Handbook H. The modules of the FCA’s Handbook of rules and guidance listed in column (1) below are amended in accordance with the Annexes to this instrument listed in column (2). (1) (2) Glossary Annex A Principles for Businesses (PRIN) Annex B Senior Management Arrangements, Systems and Controls (SYSC) Annex C General Provisions (GEN) Annex D Client Assets (CASS) Annex E Supervision manual (SUP) Annex F Dispute Resolution: Complaints sourcebook (DISP) Annex G Consumer Credit sourcebook (CONC) Annex H Making the Claims Management: Conduct of Business sourcebook (CMCOB)
I. The Financial Conduct Authority makes the rules, gives the guidance in accordance
with Annex I to this instrument.
J. The Claims Management: Conduct of Business sourcebook (CMCOB) is added to the Business Standards block within the Handbook, immediately after the Banking:
Conduct of Business sourcebook (BCOBS).
Amendments to material outside the Handbook K. The Financial Crime guide (FC) is amended in accordance with Annex J to this instrument.
L. The Perimeter Guidance manual (PERG) is amended in accordance with Annex K to
this instrument.
M. The Wind-down Planning Guide (WDPG) is amended in accordance with Annex L to this instrument. N. The Reader’s Guide is amended in accordance with Annex M to this instrument.

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O. The Financial Conduct Authority confirms and remakes in the Glossary of definitions:
(1) the defined expression “Regulated Activities Order”; and (2) to the extent that they appear in the Glossary of definitions, the defined expressions relating to any other legislation amended by The Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018. Notes P. In the Annexes, the “notes” (indicated by “Note:”) are included for the convenience of readers but do not form part of the legislative text. Citation Q. This instrument may be cited as the Claims Management Instrument 2018. By order of the Board of the Financial Ombudsman Service Limited 7 December 2018 By order of the Board of the Financial Conduct Authority 13 December 2018

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Annex A
Amendments to the Glossary of definitions unless otherwise stated.
Part 1: Comes into force 1 January 2019
Insert the following new definitions in the appropriate alphabetical position. The text is not underlined. advice, investigation or representation in relation to a claim for a specified benefit the regulated activity, specified in article 89K of the Regulated Activities Order, of each of advising a claimant or potential claimant, investigating a claim and representing a claimant, in relation to a claim for a specified benefit. advice, investigation or representation in relation to a criminal injury claim the regulated activity, specified in article 89L of the Regulated Activities Order, of each of advising a claimant or potential claimant, investigating a claim and representing a claimant, in relation to a criminal injury claim. advice, investigation or representation in relation to an employment￾related claim the regulated activity, specified in article 89M of the Regulated Activities Order, of each of advising a claimant or potential claimant, investigating a claim and representing a claimant, in relation to an employment-related claim. advice, investigation or representation in relation to a financial services or financial product claim the regulated activity, specified in article 89I of the Regulated Activities Order, of each of advising a claimant or potential claimant, investigating a claim and representing a claimant, in relation to a financial services or financial product claim. advice, investigation the regulated activity, specified in article 89J of the Regulated Activities Order, of each of advising a claimant or potential claimant, investigating a

FCA 2018/56
FOS 2018/6 or representation in relation to a housing disrepair claim claim and representing a claimant, in relation to a housing disrepair claim. advice, investigation or representation in relation to a personal injury claim the regulated activity, specified in article 89H of the Regulated Activities Order, of each of advising a claimant or potential claimant, investigating a claim and representing a claimant, in relation to a personal injury claim. claimant (in CMCOB, and elsewhere in the FCA Handbook in relation to regulated claims management activities) includes, for the purposes of civil proceedings in Scotland, a pursuer. claim for a specified benefit a claim of the description specified in article 89F(2)(f) of the Regulated Activities Order (that is, a claim for certain industrial injuries benefits). claims management company a person carrying on a regulated claims management activity in Great Britain. Claims Management Order the Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018. claims management services (in accordance with section 419A of the Act) advice or other services in relation to the making of a claim. claims management temporary permission a temporary Part 4A permission, or variation of permission to carry on regulated claims management activity pursuant to article 80 of the Claims Management Order. CMCOB the Claims Management: Conduct of Business sourcebook. controlled claims management activity (in accordance with Part 1A of the Financial Promotion Order) one of the following activities, if carried on in Great Britain:
(a) seeking out persons who may have a claim, referring details of a claim or potential claim or a claimant or a potential claimant to another person (including a person having the right to conduct litigation), or identifying a claim or potential claim or a claimant or

FCA 2018/56
FOS 2018/6 potential claimant in respect of:
(i) a personal injury claim;
(ii) a financial services or financial product claim; (iii) a housing disrepair claim; (iv) a claim for a specified benefit; (v) a criminal injury claim; or (vi) an employment-related claim. (b) advising a claimant or potential claimant, investigating a claim or representing a claimant in respect of a personal injury claim; (c) advising a claimant or potential claimant, investigating a claim or representing a claimant in respect of a financial services or financial product claim; (d) advising a claimant or potential claimant, investigating a claim or representing a claimant in respect of a housing disrepair claim; (e) advising a claimant or potential claimant, investigating a claim or representing a claimant in respect of a claim for a specified benefit; (f) advising a claimant or potential claimant, investigating a claim or representing a claimant in respect of a criminal injury claim; or (g) advising a claimant or potential claimant, investigating a claim or representing a claimant in respect of an employment-related claim. criminal injury claim a claim of the description specified in article 89F(2)(g) of the Regulated Activities Order. employment￾related claim a claim of the description specified in article 89F(2)(h) of the Regulated Activities Order. Great Britain England and Wales and Scotland (but not Northern Ireland, the Channel Islands or the Isle of Man). housing disrepair claim a claim of the description specified in article 89F(2)(e) of the Regulated Activities Order. personal injury claim a claim of the description specified in article 89F(2)(c) of the Regulated Activities Order. regulated claims management each of:

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FOS 2018/6 activity
(a) seeking out, referrals and identification of claims or potential claims; (b) advice, investigation or representation in relation to a personal injury claim; (c) advice, investigation or representation in relation to a financial services or financial product claim; (d) advice, investigation or representation in relation to a housing disrepair claim; (e) advice, investigation or representation in relation to a claim for a specified benefit; (f) advice, investigation or representation in relation to a criminal injury claim; and (g) advice, investigation or representation in relation to an employment￾related claim. seeking out, referrals and identification of claims or potential claims the regulated activity, specified in article 89G of the Regulated Activities Order, which is any or all of:
(a) seeking out persons who may have a claim (unless that activity constitutes controlled claims management activity), (b) referring details of a claim or a potential claim or a claimant or potential claimant to another person, and (c) identifying a claim or potential claim or a claimant or potential claimant, when carried on in relation to a personal injury claim, a financial services or financial product claim, a housing disrepair claim, a claim for a specified benefit, a criminal injury claim or an employment-related claim. Amend the following definitions as shown. agreeing to carry on a regulated activity the regulated activity, specified in article 64 of the Regulated Activities Order (Agreeing to carry on specified kinds of activity), of agreeing to carry on an activity specified in Part II, or Part 3A, or Part 3B of that Order other than:
… claim …
(3) (in CMCOB, and elsewhere in the FCA Handbook where used in relation

FCA 2018/56
FOS 2018/6 to regulated claims management activity and ancillary activity) any claim for compensation, restitution, repayment or any other remedy or relief in respect of loss or damage or in respect of an obligation, whether the claim is made or could be made:
(a) by way of legal proceedings;
(b) in accordance with a scheme of regulation (whether voluntary or compulsory); or (c) in pursuance of a voluntary undertaking. regulated activity (A) … (B) in the FCA Handbook: (in accordance with section 22 of the Act (Regulated activities)) the activities specified in Part II (Specified activities), Part 3A (Specified activities in relation to information) and Part 3B (Claims management activities in Great Britain) of the Regulated Activities Order, (Specified Activities) which are, in summary:
…
(to) administering a benchmark (article 63S); (tp) seeking out, referrals and identification of claims or potential claims (article 89G); (tq) advice, investigation or representation in relation to a personal injury claim (article 89H); (tr) advice, investigation or representation in relation to a financial services or financial product claim (article 89I); (ts) advice, investigation or representation in relation to a housing disrepair claim (article 89J); (tt) advice, investigation or representation in relation to a claim for a specified benefit (article 89K); (tu) advice, investigation or representation in relation to a criminal injury claim (article 89L); and (tv) advice, investigation or representation in relation to an employment-related claim (article 89M); which is carried on by way of business and, except for (ta), (tb) and (to), relates to a specified investment applicable to that activity or, in the case of (l), (m), (n) and (o), is carried on in relation to property of any kind or, in the case of (tm) and (tn), is carried on in relation to information about a person’s financial standing or, in the case of (tp),

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(tq), (tr), (ts), (tt), (tu) and (tv), is or relates to claims management services and is carried on in Great Britain; (u) agreeing to carry on a regulated activity (article 64); which is carried on by way of business and relates to a specified investment applicable to that activity or, in the case of (na), (nb), (nc), (nd), (ne) and (o), is carried on in relation to property of any kind or, in the case of (tm) and (tn), is carried on in relation to information about a person’s financial standing or, in the case of (tp), (tq), (tr), (ts), (tt), (tu) and (tv), is, or relates to, claims management services and is carried on in Great Britain.

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Part 2: Comes into force 1 April 2019
Insert the following new definitions in the appropriate alphabetical position. The text is not underlined. CAPR CSR the Client Specific Rules of the Claims Management Regulation Conduct of Authorised Persons Rules 2018 (effective on 1 April 2018). CAPR GR the General Rules of the Claims Management Regulation Conduct of Authorised Persons Rules 2018 (effective on 1 April 2018). CASS 13 claims management firm a firm that is subject to the rules and guidance in CASS 13. claims management client money distribution rules the rules and guidance in CASS 13.11. claims management client money rules the rules and guidance in CASS 13. claims management fee cap the provisions in sections 29 and 31of the Financial Guidance and Claims Act 2018 (see CMCOB 5). engage in claims management activity (as defined in section 21(10A) of the Act) (Restrictions on financial promotion)) enter or offer to enter into an agreement the making or performance of which by either party constitutes a controlled claims management activity. housing complaint service in England, the Housing Ombudsman Service; in Wales, the Public Services Ombudsman; and in Scotland, the Scottish Public Service Ombudsman, the Scottish Housing Regulator, and the Housing and Property Chamber of the First-tier Tribunal for Scotland. Legal Ombudsman the Legal Ombudsman scheme operated by the Office for Legal Complaints under Part 6 of the Legal Services Act 2007. relevant claims management complaint a relevant existing claims management complaint or a relevant new claims management complaint. relevant existing claims a complaint in respect of which the Financial Ombudsman Service has jurisdiction by operation of article 69(1) of the Financial Services and

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Markets Act 2000 (Claims Management Activity) Order 2018. relevant new claims management complaint a complaint in respect of which the Financial Ombudsman Service has jurisdiction by operation of article 70(1) of the Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018. termination fee (in CMCOB) any fee or charge which a firm charges in the event that the customer terminates an agreement in respect of services provided or to be provided by the firm. Amend the following definitions as shown. acknowledge ment letter fixed text … (3) (in CASS 13) the text in the client bank account acknowledgement letter that is not in square brackets. acknowledge ment letter variable text … (3) (in CASS 13) the text in the client bank account acknowledgement letter that is in square brackets. client … (10) (in relation to regulated claims management activity and ancillary activity) a customer. client bank account … (3) (in CASS 11 and CASS 13):
(a) an account at an approved bank which:
(i) holds the money of one or more clients; (ii) is held in the name of the firm to which CASS 11.9 or CASS 13.6 (segregation and the operation of client money accounts) applies; (iii) includes in its title the word “client” (or, if the system constraints of the approved bank or the firm that holds the account (or both) make this impracticable, an appropriate abbreviation of “client” that has the same meaning); and (iv) is a current or a deposit account. client bank …

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FOS 2018/6 account acknowledge ment letter (3) (in CASS 13) a letter in the form of the template in CASS 13 Annex 1R. client money … (2C) (in CASS 13) money which a firm receives or holds on behalf of a customer in the course of or in connection with providing claims management services. … client’s best interests rule COBS 2.1.1R or, in relation to regulated claims management activity and ancillary activity, CMCOB 2.1.1R. consumer … (2) (as further defined in section 1G of the Act) (in relation to the discharge of the FCA’s general functions (sections 1B to 1E of the Act), the application of the regulatory principles by the regulators in
section 3B of the Act and references by scheme operators or regulated
persons (section 234D of the Act)) a person:
…
(d) (in relation to the FCA’s power to make general rules (section 137A of the Act (The FCA’s general rules)) a person within the extended definition of consumer in article 7 of the Financial Services Act 2012 (Transitional Provisions)) Miscellaneous Provisions) Order 2013 (SI 442/2013 Definition of “consumer”); (e) [deleted] (f) in respect of whom a person carries on the regulated activity of seeking out, referrals and identification of claims or potential claims whether that activity, as carried on by that person, is a regulated activity, or is, by reason of an exclusion provided for under the Regulated Activities Order or the Act, not a regulated activity; (2A) (as further defined in section 425A of the Act) (in relation to the issue of statements or codes under section 64 of the Act), general exemptions to consultation by the FCA (section 138L of the Act) in the publication of notices (section 391 of the Act) and the exercise of Treaty rights (Schedule 4 to the Act) a person:
(a) who uses, has used, may have used, or has relevant rights or interests in relation to any services provided by:
(a) (i) authorised persons in carrying on regulated activities;

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(b) (ii) authorised persons who are investment firms, or credit institutions, in providing relevant ancillary services; or (c) (iii) persons acting as appointed representatives; or (b) in respect of whom a person carries on the regulated activity of seeking out, referrals and identification of claims or potential claims whether that activity, as carried on by that person, is a regulated activity, or is, by reason of an exclusion provided for under the Regulated Activities Order or the Act, not a regulated activity. … complaint (1) [deleted] (2) (in DISP, except DISP 1.1 and (in relation to collective portfolio management) in the consumer awareness rules, the complaints handling rules and the complaints record rule, and in CREDS 9) any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service, claims management service or a redress determination, which:
(a) alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience; and (b) relates to an activity of that respondent, or of any other respondent with whom that respondent has some connection in marketing or providing financial services or products or claims management services, which comes under the jurisdiction of the Financial Ombudsman Service. (3) (in DISP 1.1 and (in relation to collective portfolio management) in the consumer awareness rules, the complaints handling rules and the complaints record rule) any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service, claims management service or a redress determination, which alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience. (4) (in DISP) reference to a complaint includes:
(a) under all jurisdictions, part of a complaint; and (b) under the Compulsory Jurisdiction, all or part of a relevant complaint, a relevant claims management complaint or a relevant credit-related complaint. customer …

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(B) in the FCA Handbook:
(1) (except in relation to SYSC 19F.2, ICOBS, a credit-related regulated activity, regulated claims management activity, MCOB 3A, an MCD credit agreement, CASS 5, PRIN in relation to MiFID or equivalent third country business DISP 1.1.10-BR, PROD 1.4 and PROD 4) a client who is not an eligible counterparty for the relevant purposes. … (7) (in relation to regulated claims management activity and ancillary activity) means a person who has, has had, or may have a claim:
(a) who uses, has used, or may use the services of a person who carries on a regulated claims management activity or an activity which would be a regulated claims management activity but for an exclusion in the Regulated Activities Order; or (b) in respect of whom a person carries on the regulated activity of seeking out, referrals and identification of claims or potential claims or an activity which would be the regulated activity of seeking out, referrals and identification of claims or potential claims but for an exclusion in the Regulated Activities Order. external client money reconciliatio n (1) (in CASS 7) the client money reconciliation described in CASS 7.15.20R. (2) (in CASS 13) the client money reconciliation described in CASS 13.10.17R. fair, clear and not misleading rule COBS 4.2.1R or, in relation to regulated claims management activity and ancillary activity, CMCOB 3.2.1R. financial promotion (1) an invitation or inducement to engage in investment activity or to engage in claims management activity that is communicated in the course of business; … financial promotion rules …

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(6) (in relation to CMCOB) any or all of the rules in CMCOB 3, that impose requirements in relation to a financial promotion but only to the extent that they apply to a financial promotion. firm … (10) (in DISP 2 and 3) includes, in accordance with the Claims Management Order, unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant claims management complaints. former scheme (1) (except in relation to a relevant transitional complaint or a relevant claims management complaint) any of the following:
…;
(2) (in relation to a relevant transitional complaint) (a) the GISC facility; or (b) the MCAS scheme; (3) (in relation to a relevant claims management complaint) the Legal Ombudsman. internal client money reconciliatio n (1) (in CASS 7) the client money reconciliation described in CASS 7.15.12R. (2) (in CASS 13) the client money reconciliation described in CASS 13.10.5R to 13.10.14R. lead generator (1) a person that acquires the personal contact details of customers and passes the customers’ details to a firm in return for a fee; (2) (in CMCOB, and elsewhere in the FCA Handbook where used in relation to regulated claims management activity) a person who carries on the regulated activity of seeking out, referrals and identification of claims or potential claims. primary pooling event … (5) (in CASS 13) an event that occurs in the circumstances described in CASS 13.11.3R. relevant complaint (1) (in DISP) a relevant existing complaint, a relevant new complaint, or a relevant transitional complaint, and (in DISP and FEES 5) a relevant claims management complaint. … respondent …

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(6) (in DISP 2 and 3 and FEES 5) includes, in accordance with the Claims Management Order, an unauthorised person subject to the Compulsory Jurisdiction in relation to relevant claims management complaints. retail client … (3) (in relation to credit-related regulated activity and regulated claims management activity) a customer. secondary pooling event … (5) (in CASS 13) an event that occurs in the circumstances described in CASS 13.11.11R. UK financial system (as defined in section 1I of the Act (meaning of “the UK financial system”)) the financial system operating in the United Kingdom including:
(a) financial markets and exchanges;
(b) regulated activities (including regulated claims management activities); and (c) other activities connected with financial markets and exchanges.

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Annex B
Amendments to the Principles for Businesses (PRIN) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Introduction …
1.2 Clients and the Principles
…
Approach to client categorisation
1.2.2 G Principles 6, 8 and 9 and parts of Principle 7, as qualified by PRIN 3.4.1R,
apply only in relation to customers. The approach that a firm (other than for credit-related regulated activities and regulated claims management activities in relation to which client categorisation does not apply) needs to take regarding categorisation of clients into customers and eligible counterparties will depend on whether the firm is carrying on designated investment business, insurance risk transformation and activities directly arising from insurance risk transformation, or other activities, as described in PRIN 1.2.3G.
1.2.3 G …
(1AB) Client categorisation under COBS 3 or PRIN 1 Annex 1R is not relevant to regulated claims management activities and therefore the guidance on client categorisation does not apply in relation to a regulated claims management activity. … … 3 Rules about application …
3.2 What?
…
3.2.2A R PRIN 1 Annex 1R, PRIN 3.4.1R and PRIN 3.4.2R do not apply with respect to the carrying on of credit-related regulated activities or regulated claims management activities. …

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3.3 Where?
Territorial application of the Principles
3.3.1 R Principle Territorial application
Principles
1, 2 and 3 in a prudential context, apply with respect to activities wherever they are carried on; otherwise, apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom, or in respect of regulated claims management activities, apply with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A), unless another applicable rule or EU regulation which is relevant to the activity has a wider territorial scope, in which case the Principle applies with that wider scope in relation to the activity described in that rule or EU regulation. … Principle if the activities have, or might reasonably be regarded as likely to have, a negative effect on confidence in the UK financial system, applies with respect to activities wherever they are carried on; otherwise, applies with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom, or in respect of regulated claims management activities, applies with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A). Principles 6, 7, 8, 9 and 10 Principle 8, in a prudential context, applies with respect to activities wherever they are carried on; otherwise, apply with respect to activities carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom, or in respect of regulated claims management activities, apply with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A), unless another applicable rule or EU regulation which is relevant to the activity has a wider territorial scope, in which case the Principle applies with that wider scope in relation to the activity described in that rule or EU regulation. … …
3.4 General

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Clients and the Principles
…
3.4.3 G …
(4) PRIN 3.4.1R and PRIN 3.4.2R do not apply with respect to the carrying on of regulated claims management activities. Client categorisation does not apply in relation to carrying on a regulated claims management activity. …

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Annex C
Amendments to the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) In this Annex, underlining indicates new text and striking through indicates deleted text. 1 Application and purpose … 1 Annex Detailed application of SYSC …
Part 2 Application of the common platform requirements
Who?
…
2.13A R SYSC 6.3 only applies to a firm in relation to carrying on a credit-related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, to which the Money Laundering Regulations also apply. … Where?
2.15 R The common platform requirements, except the common platform record￾keeping requirements, apply to a firm in relation to activities which:
(1) (except for regulated claims management activities and ancillary activities) are carried on by it from an establishment in the United Kingdom; or (2) are, or are ancillary to, regulated claims management activities. … …
2.17 R The common platform record-keeping requirements apply to activities which:
(1) (except for regulated claims management activities and ancillary activities) are carried on by a firm from an establishment maintained in the United Kingdom; or

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(2) are, or are ancillary to, regulated claims management activities. , unless If, however, another applicable rule which is relevant to the activity has a wider territorial scope, in which case the common platform record￾keeping requirements apply with that wider scope in relation to the activity described in that rule. [Note: article 16(11) first paragraph of MiFID] 2.17A G For an activity to amount to a regulated claims management activity it must be carried on in Great Britain (see PERG 2.4A). Subject to the exception for common platform record-keeping requirements in paragraph 2.17R of this
Annex, the application of the common platform requirements to firms which
carry on regulated claims management activities (and ancillary activities) depends on whether the activity is carried on in Great Britain rather than whether it is carried on from an establishment maintained in the United Kingdom. …
Part 3 Tables summarising the application of the common platform requirements to
different types of firm
…
Table A: Application of the common platform requirements in SYSC 4 to SYSC 10
…
Provision
SYSC 6
COLUMN A
Application to a common platform firm other than to a UCITS investment firm COLUMN A+ Application to a UCITS management company COLUMN A++ Application to a full-scope UK AIFM of an authorised AIF COLUMN B Application to all other firms apart from insurers, UK ISPVs, managing agents, the Society, full￾scope UK AIFMs of unauthorised AIFs, MiFID optional exemption firms and third country firms …

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SYSC 6.3.1R Rule
For firms carrying on a credit
-related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Rule does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.2G Guidance Guidance Guidanc e Guidance For firms carrying on a credit -related regulated activity or regulated claims

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FOS 2018/6 management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Guidance does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.3R Rule For firm s carrying on a credit -related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies only where the

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Money
Laundering
Regulations apply to the firm. Rule does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.4G Guidance For firms carrying on a credit -related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Guidance does not apply to a firm for which a professional

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Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.5G Guidance For firms carrying on a credit -related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Guidance does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory

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(FCA
Handbook only)
SYSC 6.3.6G Guidance
For firms carrying on a credit
-related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Guidance does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only)

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SYSC 6.3.7G Guidance
For firms carrying on a credit
-related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Guidance does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.8R Rule For firms carrying on a credit -related regulated activity or regulated

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FOS 2018/6 claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Rule does not apply to a firm with a limited permission for entering into a regulated credit agreement as lender. Rule does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.9R Rule For firms carrying on a credit -related regulated activity or regulated

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FOS 2018/6 claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Rule does not apply to a firm with a limited permission for entering into a regulated credit agreement as lender. Rule does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.10G Guidance For firms carrying on a credit -related regulated activity or regulated

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FOS 2018/6 claims management activity, or operating an electronic system in relation to lending, applies only where the Money Laundering Regulations apply to the firm. Guidance does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) SYSC 6.3.11G Guidance For firms carrying on a credit -related regulated activity or regulated claims management activity, or operating an electronic system in relation to lending, applies

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Money
Laundering
Regulations apply to the firm. Guidance does not apply to a firm for which a professional body listed in
Schedule 1 to
the Money
Laundering
Regulations, and not the
FCA, acts as the supervisory authority for the purposes of those regulations. (FCA Handbook only) … 4 General organisational requirements
4.1 General Requirements
…
Mechanisms and procedures for a firm
4.1.4 R A firm (with the exception of a common platform firm and a sole trader who
does not employ any person who is required to be approved under section 59 of the Act (Approval for particular arrangements)) must, taking into account the nature, scale and complexity of the business of the firm, and the nature and range of the financial services, claims management services and other activities undertaken in the course of that business:
…
…
5 Employees, agents and other relevant persons
5.1 Skills, knowledge and expertise

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…
General
5.1.13 R The systems, internal control mechanisms and arrangements established by a
firm (other than a common platform firm) in accordance with this chapter must take into account the nature, scale and complexity of its business and the nature and range of financial services, claims management services and other activities undertaken in the course of that business. [Note: articles 4(1) final paragraph and 5(4) of the UCITS implementing Directive]

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Annex D
Amendments to the General Provisions (GEN) In this Annex, underlining indicates new text and striking through indicates deleted text. 4 Statutory status disclosure
4.1 Application
…
Where?
…
4.1.2 R GEN 4.3 (Letter disclosure) applies in relation to activities carried on from an
establishment maintained by the firm (or by its appointed representative) in the United Kingdom, subject to GEN 4.3.4R (Exception: insurers). In relation to regulated claims management activities, GEN 4.3 applies with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A).
4.1.4 R GEN 4.5 (Statements about authorisation and regulation by the appropriate
regulator) applies in relation to activities carried on from an establishment maintained by the firm (or by its appointed representative) in the United Kingdom, provided that, in the case of the MiFID business of an EEA MiFID investment firm or the activities of an EEA UCITS management company, it only applies to business conducted within the territory of the United Kingdom. In relation to regulated claims management activities, GEN 4.5 applies with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A).
4.2 Purpose
…
4.2.2 G There are other pre contract information requirements outside this chapter
including:
…
(7) …; and
(8) … ; and
(9) for regulated claims management activities, the pre-contract

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4.4 Business for retail clients from non-UK offices
…
Exception
4.4.3 R This section does not apply in relation to regulated claims management
activities (but firms carrying on such activities in Great Britain will be subject to GEN 4.3: see GEN 4.1.2R). … 6 Insurance against financial difficulties
6.1 Payment of financial penalties
Application
…
6.1.2 G For the purposes of GEN 2.2.17R (Activities covered by general rules), the
chapter applies to regulated and unregulated activities carried on in the
United Kingdom or overseas. In relation to regulated claims management activities and ancillary activities, this chapter applies with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A). … 7 Charging consumers for telephone calls
7.1 Application
Who? Where?
7.1.1 R This chapter applies to a firm carrying on activities from an establishment in
the United Kingdom. In relation to regulated claims management activities, this chapter applies with respect to activity carried on in Great Britain, even if the establishment from which it is carried on is not located in the UK (see PERG 2.4A). …

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Annex E
Amendments to the Client Assets sourcebook (CASS)
Part 1
In this Part, underlining indicates new text.
1A CASS firm classification and operational oversight … 1A.2 CASS firm classification … 1A2.2 R (1) … (2) For the purpose of determining its ‘CASS firm type’ in accordance with CASS 1A.2.7R, a firm must:
…
(c) in either case, exclude from its calculation any client money held in accordance with CASS 5 (Client money: insurance distribution activity) or CASS 13 (Claims management: client money). … TP 1 Transitional Provisions (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitional provision:
dates in force
(6)
Handbook provision:
coming into force
…
(15) CASS 13 R CASS 13 applies in relation to money held by the firm on 1 April 2019 to the extent that such money was received or is held on behalf of an individual, in the course of or in connection with the Indefinitely 1 April 2019

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(a) carried on before 1 April
2019; and
(b) would, if carried on after that date, be regulated claims management activities. (16) CASS 13 G The rule in (15) applies to the firm irrespective of whether it has a claims management temporary permission or a Part 4A permission. Indefinitely 1 April 2019 Schedul e 1G Record keeping requirements …
1.3 Handbook
reference
Subject of record
Content of record
When record must be made
Retention period
…
CASS 13.2.3R Allocation of oversight function in CASS 13.2.3R The person to who the oversight function is allocated Upon allocation 5 years (from the date the record was made) CASS 13.5.8 R Client bank account acknowledgeme nt letters sent in accordance with CASS 13.5.2R Each countersigne d client bank account acknowledge ment letter received On receipt of each letter 5 years (following closure of the last client bank account to which the letter relates)

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CASS 13.5.9R Demonstration that the firm has complied with the requirements of CASS 13.5 Evidence of such compliance On compliance with the relevant provision None specified CASS 13.6.5R Money received from customers in the form of cash, cheques or other payable orders Details of money received On receipt None specified CASS 13.6.6R(2) Unidentified client money under CASS 13.6.6R(2) Details of unidentified client money held Being unable to identify money as client money or its own money, and deciding it is reasonably prudent to so record Until it performs the necessary steps to identify the money under CASS 13.6.6R(1) CASS 13.10.1R(1) Client money held for each customer and the firm’s own money All that is necessary to enable the firm to distinguish client money held for one customer from client money held for any other customer and from the firm’s own money Maintain up￾to-date records None specified CASS 13.10.3R Client money held for each customer Accurate records to ensure the corresponde nce between the records and accounts of the entitlement Maintain up￾to-date records None is specified

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FOS 2018/6 of each customer for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank accounts CASS 13.10.4R Payments made to, for or on behalf of customers by the firm Details of payments made Maintain up￾to-date records None is specified CASS 13.11.13R A record of each customer’s shortfall in the event of a secondary pooling event Details of the shortfall On the secondary pooling event occurring None is specified Schedul e 2G Notification and reporting requirements
2.1 Handbook
reference
Matter to be notified
Contents of notification
Trigger
Event
Time allowed
…
CASS
13.10.21R(1) to (5)
The firm’s inability or failure to comply with CASS 13.10.1R to 13.10.4R, CASS 13.10.5R, CASS 13.10.15R, CASS 13.10.17R, or CASS The inability or failure to comply Awareness of the inability or failure Without delay

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13.10.19R.
CASS
13.10.21R(6)
Amount of money segregated in client bank accounts is materially different from total aggregate of client money required to be segregated The fact that there is a material difference Awareness of the difference Without delay
Part 2
In this Part, all the text is new and is not underlined.
13 Claims management: client money
13.1 Application
13.1.1 R This chapter applies to a firm that:
(1) carries on a regulated claims management activity; and (2) receives or holds client money.
13.2 Organisational requirements and responsibility for CASS operational
oversight
13.2.1 R A firm must, when holding client money, make adequate arrangements to
safeguard the customer’s rights and prevent the use of client money for its own account.
13.2.2 R A firm must introduce adequate organisational arrangements to minimise the
risk of the loss or diminution of client money, or of rights in connection with client money, as a result of misuse of client money, fraud, poor administration, inadequate record-keeping or negligence.
13.2.3 R A firm must allocate to a director or senior manager responsibility for:
(1) oversight of the firm’s operational compliance with CASS 13;

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(2) reporting to the firm’s governing body in respect of that oversight; and (3) completing and submitting the client money parts of a CMC001 return in accordance with SUP 16.25.3R to SUP 16.25.8R.
13.2.4 R (1) A firm must make and retain an appropriate record of the person to
whom responsibility is allocated in accordance with CASS 13.2.3R. (2) But a firm must make and retain such a record only where:
(a) there is a person in that firm who performs the compliance oversight function; and (b) it allocates responsibility in accordance with CASS 13.2.3R to a person other than the person in that firm who performs the compliance oversight function. (3) A firm must ensure that a record made under this rule is retained for a period of five years after it is made.
13.3 Statutory trust
13.3.1 R A firm receives and holds client money as trustee on the following terms:
(1) for the purposes and on the terms of the claims management client money rules and the claims management client money distribution rules; (2) subject to (3), for the customers for whom that money is held, according to their respective interests in it; (3) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and (4) after all valid claims and costs under (2) and (3) have been met, for the firm itself.
13.4 Selecting an approved bank at which to hold client money
13.4.1 G A firm owes a duty of care as a trustee to its clients in relation to client
money and has to exercise that duty of care in deciding where to hold client money.
13.4.2 R Before a firm opens a client bank account and as often as is appropriate on a
continuing basis (such frequency being no less than once in each financial year) it must take reasonable steps to establish that it is appropriate for the

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13.4.3 R A firm must consider the risks associated with holding all client money with
one approved bank and should consider whether it would be appropriate to hold client money in client bank accounts at a number of different approved banks.
13.4.4 G In complying with CASS 13.4.3R, a firm should consider as appropriate,
together with any other relevant matters:
(1) the amount of client money held by the firm; (2) the amount of client money the firm anticipates holding at the approved bank; and (3) the creditworthiness of the approved bank.
13.4.5 G A firm can demonstrate compliance with CASS 13.4.2R by checking that the
person it proposes to hold client money with is an approved bank and that nothing has come to the firm’s attention to cause it to believe that such person is not an appropriate place at which to hold client money.
13.5 Client bank account acknowledgement letters
13.5.1 G The main purposes of a client bank account acknowledgement letter are:
(1) to put the approved bank on notice of a firm’s clients’ interests in client money that has been deposited with such person; (2) to ensure that the client bank account has been opened in accordance with CASS 13.6.3R, and is distinguished from any account containing money that belongs to the firm; and (3) to ensure that the approved bank understands and agrees that it will not have any recourse or right against money standing to the credit of the client bank account, in respect of any liability of the firm to such person (or person connected to such person). Requirement for and content of client bank account acknowledgement letters
13.5.2 R (1) For each client bank account, a firm must, in accordance with CASS
13.5.4R, complete and sign a client bank account acknowledgement letter clearly identifying the client bank account, and send it to the approved bank with whom the client bank account is, or will be, opened, requesting the bank to acknowledge and agree to the terms of the letter by countersigning it and returning it to the firm. (2) Subject to CASS 13.5.6R, a firm must not hold or receive any client money in or into a client bank account unless it has received a duly countersigned client bank account acknowledgement letter from the

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13.5.3 R In drafting client bank account acknowledgement letters under CASS
13.5.2R a firm is required to use the relevant template in CASS 13 Annex 1R.
13.5.4 R When completing a client bank account acknowledgement letter under CASS
13.5.2R(1) a firm:
(1) must not amend any of the acknowledgement letter fixed text; (2) subject to (3), must ensure the acknowledgement letter variable text is removed, included or amended as appropriate; and (3) must not amend any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text.
13.5.5 G CASS 13 Annex 2G contains guidance on using the template client bank
account acknowledgement letters, including on when and how firms should amend the acknowledgement letter variable text that is in square brackets. Countersignature by the bank
13.5.6 R (1) If, on countersigning and returning the client bank account
acknowledgement letter to a firm, the relevant approved bank has also:
(a) made amendments to any of the acknowledgement letter fixed text; or (b) made amendments to any of the acknowledgement letter variable text in a way that would alter or otherwise change the meaning of the acknowledgement letter fixed text; the client bank account acknowledgement letter will have been inappropriately redrafted for the purposes of CASS 13.5.2R(2). (2) Amendments made to the acknowledgement letter variable text, in the client bank account acknowledgement letter returned to a firm by the relevant approved bank, will not have the result that the letter has been inappropriately redrafted if those amendments:
(a) do not affect the meaning of the acknowledgement letter fixed text; (b) have been specifically agreed with the firm; and (c) do not cause the client bank account acknowledgement letter to be inaccurate.

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13.5.7 R A firm must use reasonable endeavours to ensure that any individual that has
countersigned a client bank account acknowledgement letter that has been returned to the firm was authorised to countersign the letter on behalf of the relevant approved bank. Retention of client bank account acknowledgement letters
13.5.8 R A firm must retain each countersigned client bank account acknowledgement
letter it receives from the date of receipt until the expiry of a period of five years starting on the date on which the last client bank account to which the acknowledgment letter relates is closed.
13.5.9 R A firm must also retain any other documentation or evidence it believes is
necessary to demonstrate that it has complied with each of the applicable requirements in this section (such as any evidence it has obtained to ensure that the individual that has countersigned a client bank account acknowledgement letter that has been returned to the firm was authorised to countersign the letter on behalf of the relevant approved bank). Review and replacement of client bank account acknowledgement letters
13.5.10 R A firm must, periodically (at least annually, and whenever it becomes aware
that something referred to in a client bank account acknowledgement letter has changed) review each of its countersigned client bank account acknowledgement letters to ensure that they remain accurate.
13.5.11 R Whenever a firm finds a countersigned client bank account
acknowledgement letter to contain an inaccuracy, the firm must promptly draw up a new replacement client bank account acknowledgement letter under CASS 13.5.2R and ensure that the new client bank account acknowledgement letter is duly countersigned and returned by the relevant approved bank.
13.5.12 G Under CASS 13.5.10R, a firm should obtain a replacement client bank
account acknowledgement letter whenever:
(1) there has been a change in any of the parties’ names or addresses or a change in any of the details of the relevant account(s) as set out in the letter; or (2) it becomes aware of an error or misspelling in the letter.
13.5.13 R If a firm’s client bank account is transferred to another approved bank, the
firm must promptly draw up a new client bank account acknowledgement letter under CASS 13.5.2R and ensure that the new client bank account acknowledgement letter is duly countersigned and returned by the relevant approved bank within 20 business days of the firm sending it to that person.
13.6 Segregation and the operation of client money accounts

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Requirement to segregate
13.6.1 R A firm must take all reasonable steps to ensure that all client money it
receives is paid directly into a client bank account at an approved bank, rather than being first received into the firm’s own account and then segregated.
13.6.2 G A firm should arrange for clients and third parties to make transfers and
payments of any money which will be client money directly into the firm’s client bank accounts.
13.6.3 R A firm must ensure that client money is held in a client bank account at one
or more approved banks.
13.6.4 R Cheques received by a firm, made out to the firm, representing client money
or a mixed remittance must be treated as client money from receipt by the firm.
13.6.5 R Where a firm receives client money in the form of cash, a cheque or other
payable order, it must:
(1) pay the money into a client bank account in accordance with CASS 13.6.1R promptly and no later than the business day after the day on which it receives the money; (2) if the firm holds the money overnight, hold it in a secure location in line with Principle 10; and (3) record the receipt of the money in the firm’s books and records under the applicable requirements of CASS 13.10 (Records, accounts and reconciliations).
13.6.6 R If a firm receives money (either in a client bank account or an account of its
own) which it is unable immediately to identify as client money or its own money, it must:
(1) take all necessary steps to identify the money as either client money or its own money; and (2) if it considers it reasonably prudent to do so, given the risk that client money may not be adequately protected if it is not treated as such, treat the entire balance of money as client money and record the money in its books and records as “unidentified client money” while it performs the necessary steps under (1).
13.6.7 G If a firm is unable to identify money that it has received as either client
money or its own money under CASS 13.6.6R(1), it should consider whether it would be appropriate to return the money to the person who sent it (or, if that is not possible, to the source from where it was received, for example, the bank). A firm should have regard to its fiduciary duties when considering such matters.

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13.6.8 G A firm must ensure that client money received by its agents is:
(1) received directly into a client bank account of the firm; or (2) if it is received in the form of a cheque or other payable order:
(a) paid into a client bank account of the firm promptly and, in any event, no later than the next business day after receipt; or (b) forwarded to the firm promptly and, in any event, so that it is received by the firm no later than the close of the third business day following the receipt of the money from the customer; or (3) if it is received in the form of cash, paid into a client bank account of the firm promptly and, in any event, no later than the next business day after receipt. Mixed remittance
13.6.9 R If a firm receives a mixed remittance it must:
(1) pay the full sum into a client bank account promptly and in accordance with CASS 13.6.1R to 13.6.5R; and (2) no later than one business day after the payment of the mixed remittance into the client bank account has cleared, pay the money that is not client money out of the client bank account. Interest
13.6.10 R A firm must pay a client any interest earned on client money held for that
client.
13.7 Money due and payable to the firm
13.7.1 R Money is not client money when it is or becomes properly due and payable
to the firm for its own account.
13.7.2 G (1) The circumstances in which money may be or become due and
payable to the firm for its own account could include:
(a) when fees and/or third party disbursements have become due and payable to the firm for its own account under the agreement between the customer and the firm; and (b) when money recovered for a customer or a sum in respect of damages, compensation or settlement of a claim is paid into a client bank account and the firm has agreed with the client that a proportion of the sum is to be paid to the firm for fees or in

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13.7.3 G Firms are reminded that when entering into or varying contractual
arrangements with customers regarding circumstances in which money becomes properly due and payable to the firm for its own account, firms should comply with any relevant obligations to customers including the client’s best interests rule and requirements under the Unfair Terms Regulations and the Consumer Rights Act 2015.
13.8 Money due to a client or third party.
13.8.1 R Client money in respect of money recovered for a customer or money in
respect of damages, compensation or settlement of a claim received into a client bank account must be paid to the customer, or a duly authorised representative of the customer, as soon as reasonably practicable after receipt and, in any event, a firm must take steps within two business days of receipt to make such a payment.
13.8.2 R Money received from a customer in respect of third party disbursements
which is due and payable to the third party in accordance with the terms of the contractual arrangements between the parties should be paid to the third party as soon as reasonably practicable after receipt.
13.9 Discharge of fiduciary duty
13.9.1 G CASS 13 provides important safeguards for the protection of client money
held by firms that sit alongside the fiduciary duty owed by firms in relation to client money. CASS 13.9.2R to 13.9.3R provide for when money ceases to be client money for the purposes of CASS 13 and the fiduciary duty which firms owe to clients in relation to client money.
13.9.2 R Money ceases to be client money if:
(1) it is paid to the customer, or a duly authorised representative of the customer; or (2) it is:
(a) paid to a third party on the instruction of the customer, or with the specific consent of the customer; or (b) paid to a third party further to an obligation on the firm under any applicable law; or

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(3) it is paid into an account of the customer (not being an account which is also in the name of the firm) on the instruction, or with the specific consent, of the customer; or (4) it is due and payable to the firm for its own account (see CASS 13.7.1R to 13.7.2G); or (5) it is paid to the firm as an excess in the client bank account (see CASS 13.10.15R(3)).
13.9.3 R When a firm draws a cheque or other payable order to discharge its fiduciary
duty to the client, it must continue to treat the sum concerned as client money until the cheque or order is presented and paid.
13.10 Records, accounts and reconciliations
Records and accounts
13.10.1 R (1) A firm must keep such records and accounts as are necessary to
enable it, at any time and without delay, to distinguish client money held for one customer from client money held for any other customer, and from its own money. (2) A firm must allocate in its books and records any client money it receives to an individual customer promptly and, in any case, no later than two business days following the receipt. (3) Pending a firm’s allocation of a receipt of client money to an individual customer under (2), it must record the received client money in its books and records as “unallocated client money”.
13.10.2 G In accordance with CASS 13.10.1R, a firm must maintain internal records
and accounts of the client money it holds (for example, a cash book and client ledger accounts). These internal records are separate to any external records it has obtained from approved banks with whom it has deposited client money (for example, bank statements).
13.10.3 R A firm must maintain its records and accounts in a way that ensures their
accuracy and, in particular, their correspondence to the client money held for individual customers.
13.10.4 R A firm must maintain up-to-date records that detail all payments received
for, or on behalf of, customers and all payments to, from, or made on behalf of, customers. Internal client money reconciliation
13.10.5 R A firm must carry out an internal client money reconciliation each business
day.

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13.10.6 R An internal client money reconciliation requires a firm to check whether its
client money resource, as determined by CASS 13.10.8R, on the previous business day, was at least equal to the client money requirement, as determined by CASS 13.10.9R, as at the close of business on that day.
13.10.7 R In carrying out an internal client money reconciliation, a firm must use the
values contained in its internal records and ledgers (for example, its cash book or other internal accounting records), rather than the values contained in the records it has obtained from approved banks with whom it has deposited client money (for example, bank statements). Calculating the client money resource
13.10.8 R The client money resource for client money held in accordance with CASS
13.10.6R is the aggregate of the balances on the firm’s client bank accounts, as at the close of business on the previous business day. Calculating the client money requirement
13.10.9 R (1) The client money requirement is the sum of:
(a) the aggregate of all individual customer balances calculated in accordance with CASS 13.10.13R and CASS 13.10.14R; (b) the amount of any unallocated client money under CASS 13.10.1R(3); (c) the amount of any unidentified client money under CASS 13.6.6R(2)R; and (d) any other amounts of client money included in the calculation under (2). (2) For the purposes of (1)(d), the firm must consider whether there are amounts of client money, other than those in (1)(a) to (c), to which the requirement to segregate applies and that it is appropriate to include in the calculation of its client money requirement and, if so, adjust the calculation accordingly.
13.10.10 G The client money requirement calculated in accordance with CASS 13.10.9R
should represent the total amount of client money a firm is required to have segregated in client bank accounts under CASS 13.
13.10.11 G Firms are reminded that, under CASS 13.9.3R, if a firm has drawn any
cheques, or other payable orders, to discharge its fiduciary duty to its clients (for example, to return client money to the client), the sum concerned must be included in the firm’s calculation of its client money requirement until the cheque or order is presented and paid.
13.10.12 G (1) The following guidance applies where a firm receives client money
in the form of cash, a cheque or other payable order.

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(2) In carrying out the calculation of the client money requirement, a firm may initially include the amount of client money received as cash, cheques or payment orders that has not yet been deposited in a client bank account in line with CASS 13.6.5R. If it does so, the firm should ensure, before finalising the calculation, that it deducts these amounts to avoid them giving rise to a difference between the firm’s client money requirement and client money resource. (3) In carrying out the calculation of the client money requirement, a firm may alternatively exclude the amount of client money received as cash, cheques or payment orders that has not yet been deposited in a client bank account in line with CASS 13.6.5R. If it does so, the firm is reminded that it must separately record the receipt of the money in the firm’s books and records under CASS 13.6.5R(3). (4) A firm that receives client money in the form of cash, a cheque or other payable order is reminded that it must pay that money into a client bank account promptly and no later than on the business day after it receives the money (see CASS 13.6.5R).
13.10.13 R The individual customer balance for each client must be calculated as
follows:
(1) the amount received for or on behalf of the customer by the firm; plus (2) the amount of any interest, and any other sums, due from the firm to the customer; less:
(3) the aggregate of the amount of money:
(a) paid to that customer by the firm; and (b) due and payable by the customer to the firm; and (c) due by the customer to a third party in accordance with the contractual arrangements in place between the firm and the customer.
13.10.14 R Where the individual customer balance calculated in respect of an individual
client under CASS 13.10.13R is a negative figure (because the amounts received for or on behalf of, or due, to a client under CASS 13.10.13R(1) and CASS 13.10.13R(2) are less than the amounts paid by, or due and payable by, that customer under CASS 13.10.13R(3), that individual customer balance should be treated as zero for the purposes of the calculation of the firm’s client money requirement in CASS 13.10.9R. Reconciliation differences and discrepancies
13.10.15 R When an internal client money reconciliation reveals a difference between
the client money resource and its client money requirement a firm must:

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(1) identify the reason for the difference; (2) ensure that any shortfall in the amount of the client money resource as compared to the amount of the client money requirement is made up by a payment into the firm’s client bank accounts by the end of the business day following the day on which the difference was discovered; and (3) ensure that any excess in the amount of the client money resource as compared to the amount of the client money requirement is withdrawn from the firm’s client bank accounts by the end of the business day following the day on which the difference was discovered. External client money reconciliation
13.10.16 G The purpose of the reconciliation process required by CASS 13.10.17R is to
ensure the accuracy of a firm’s internal accounts and records against those of any third parties by whom client money is held.
13.10.17 R A firm must perform an external client money reconciliation:
(1) each business day; and
(2) as soon as reasonably practicable after the relevant internal client money reconciliation; to ensure the accuracy of its internal accounts and records by comparing its internal accounts records against those of approved banks with whom client money is deposited.
13.10.18 G An external client money reconciliation requires a firm to conduct a
reconciliation between its internal accounts and records and those of any approved banks by whom client money is held.
13.10.19 R When any discrepancy is revealed by an external client money
reconciliation, a firm must identify the reason for the discrepancy and correct it as soon as possible, unless the discrepancy arises solely as a result of timing differences between the accounting system of the party providing the statement or confirmation and that of the firm.
13.10.20 R While a firm is unable to resolve a discrepancy arising from an external
client money reconciliation, and one record or a set of records examined by the firm during the reconciliation process indicates that there is a need to have greater amount of client money than is in fact the case, the firm must assume, until the matter is finally resolved, that the record or set of records is accurate and pay its own money into a relevant client bank account. Notification requirements
13.10.21 R A firm must inform the FCA in writing without delay if:

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(1) its internal records and accounts of client money are materially out of date or materially inaccurate so that the firm is no longer able to comply with the requirements in CASS 13.10.1R to CASS 13.10.4R; or (2) it will be unable to or materially fails to conduct an internal client money reconciliation in compliance with CASS 13.10.5R; or (3) after having carried out an internal client money reconciliation in accordance with CASS 13.10.5R it will be unable to, or materially fails to, pay any shortfall into (or withdraw any excess from) a client bank account so that the firm is unable to comply with CASS 13.10.15R; or (4) it will be unable to or materially fails to conduct an external client money reconciliation in compliance with CASS 13.10.17R; or (5) after having carried out an external client money reconciliation in accordance with CASS 13.10.17R it will be unable to, or materially fails to, identify the reason for any discrepancies and correct them in accordance with CASS 13.10.19R; or (6) it becomes aware that, at any time in the preceding 12 months, the amount of client money segregated in its client bank accounts materially differed from the total aggregate amount of client money the firm was required to segregate in client bank accounts in accordance with the segregation requirements in CASS 13.6.
13.11 Client money distribution in the event of a failure of a firm or approved bank
Application
13.11.1 R This section (the claims management client money distribution rules) applies
to a firm that holds client money which is subject to the claims management client money rules when a primary pooling event or a secondary pooling event occurs. Purpose
13.11.2 G The claims management client money distribution rules seek, in the event of
the failure of a firm or of an approved bank at which the firm holds client money, to protect client money and to facilitate the timely return of client money to clients. Failure of the authorised firm: primary pooling event
13.11.3 R A primary pooling event occurs:
(1) on the failure of the firm;

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(2) on the vesting of assets in a trustee in accordance with an ‘assets requirement’ imposed under section 55P(1)(b) or (c) (as the case may be) of the Act; or (3) on the coming into force of a requirement or requirements which, either separately or in combination:
(a) is or are for all client money held by the firm; and (b) require the firm to take steps to cease holding all client money. Pooling and distribution after a primary pooling event
13.11.4 R If a primary pooling event occurs, then:
(1) all client money:
(a) held in the firm’s client bank accounts; and (b) any client money identifiable in any other account held by the firm into which client money has been received; is treated as pooled together to form a notional pool; and (2) a firm must calculate the amount it should be holding on behalf of each individual customer as at the time of the primary pooling event using the method of calculating individual customer balance provided for by CASS 13.10.13R. Distribution if client money not transferred to another firm
13.11.5 R Where a primary pooling event occurs and the client money pool is not
transferred to another firm in accordance with CASS 13.11.6R, a firm must distribute client money comprising the notional pool so that each client receives a sum that is rateable to its entitlement to the notional pool calculated in accordance with CASS 13.11.4R(2). Transfer of client money to another firm
13.11.6 R If, in the event of a primary pooling event occurring, the regulated claims
management activity business undertaken by a firm (“the transferor”) is to be transferred to another firm (“the transferee”), then the transferor may move the client money pool to the transferee.
13.11.7 R If the transferor decides to move the client money pool to the transferee, the
transferor must immediately on making the decision, and before the move takes place, notify the FCA in writing of:
(1) the proposed move, including the date of the proposed move if known at the time of the notification; and

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(2) the proposed transferee.
13.11.8 R The client money pool may be transferred under CASS 13.11.6R only if it
will be held by the transferee in accordance with CASS 13, including the statutory trust in CASS 13.3.1R.
13.11.9 R If there is a shortfall in the client money transferred under CASS 13.11.6R
then the client money must be allocated to each of the customers for whom the client money was held so that each client is allocated a sum which is rateable to that customer’s client money entitlement in accordance with CASS 13.11.4R(2). This calculation may be done by either transferor or transferee in accordance with the terms of any transfer.
13.11.10 R The transferee must, within seven days after the transfer of client money
under CASS 13.11.6R notify customers that:
(1) their money has been transferred to the transferee; and (2) they have the option of having client money returned to them or to their order by the transferee, otherwise the transferee will hold the client money for the customers and conduct regulated claims management activities for those customers. Failure of an approved bank: secondary pooling event
13.11.11 R A secondary pooling event occurs on the failure of an approved bank at
which a firm holds client money in a client bank account.
13.11.12 R (1) Subject to (2), if a secondary pooling event occurs as a result of the
failure of an approved bank where one or more client bank accounts are held then in relation to every client bank account of the firm, the provisions of CASS 13.11.13R(1), CASS 13.11.13R(2) and CASS 13.11.13R(3) will apply. (2) CASS 13.11.13R does not apply if, on the failure of the approved bank, the firm pays to its clients, or pays into a client bank account at an unaffected approved bank, an amount equal to the amount of client money that would have been held if a shortfall had not occurred as a result of the failure.
13.11.13 R Money held in each client bank account of the firm must be treated as pooled
and:
(1) any shortfall in client money held, or which should have been held, in client bank accounts, that has arisen as a result of the failure of the approved bank, must be borne by all customers whose client money is held in a client bank account of the firm, rateably in accordance with their entitlements to the pool; (2) a new client money entitlement must be calculated for each customer by the firm, to reflect the requirements in (1), and the firm’s records

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13.11.14 R The term “which should have been held” is a reference to the failed
approved bank’s failure to hold the client money at the time of the pooling event.
13.11.15 R Any interest earned on client money following a primary or secondary
pooling event will be due to clients in accordance with CASS 13.6.10R (Interest).
Annex
1R
CASS client bank account acknowledgement letter template [Letterhead of firm subject to CASS 13.5.3R, including full name and address of firm] [Name and address of approved bank] [Date] Client Money Acknowledgment Letter (pursuant to the rules of the Financial Conduct Authority) We refer to the following [current/deposit account[s]] which [name of firm], regulated by the Financial Conduct Authority (Firm Reference Number [FRN]), (“us”, “we” or “our”) has opened or will open with [name of approved bank] (“you” or “your”):
[Insert the account title[s], the account unique identifier[s] (for example, as relevant, sort code and account number) and (if applicable) any abbreviated name of the account[s] as reflected in the approved bank’s systems] ([collectively,] the “Client Bank Account[s]”). In relation to [each of] the Client Bank Account[s] identified above you acknowledge that we have notified you that:
(a) we are under an obligation to keep money we hold belonging to our clients separate from our own money;

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(b) we have opened or will open the Client Bank Account for the purpose of depositing money with you on behalf of our clients; and (c) we hold all money standing to the credit of the Client Bank Account in our capacity as trustee under the laws applicable to us. In relation to [each of] the Client Bank Account[s] identified above you agree that:
(d) you do not have any recourse or right against money in the Client Bank Account in respect of any sum owed to you, or owed to any third party, on any other account (including any account we use for our own money), and this means for example that you do not have any right to combine the Client Bank Account with any other account and any right of set-off or counterclaim against money in the Client Bank Account; (e) you will title, or have titled, the Client Bank Account as stated above and that such title is different to the title of any other account containing money that belongs to us or to any third party; and (f) you are required to release on demand all money standing to the credit of the Client Bank Account, upon proper notice and instruction from us or a liquidator, receiver, administrator, or trustee (or similar person) appointed for us in bankruptcy, (or similar procedure) in any relevant jurisdiction, except for any properly incurred charges or liabilities owed to you on, and arising from the operation of, the Client Bank Account, provided that you have a contractual right to retain such money and that this right is notwithstanding (a) to (c) above and without breach of your agreement to (d) above. We acknowledge that:
(g) you are not responsible for ensuring compliance by us with our own obligations, including as trustee, in respect of the Client Bank Account[s]. You and we agree that:
(h) the terms of this letter will remain binding upon the parties, their successors and assigns, and, for the avoidance of doubt, regardless of any change in name of any party; (i) this letter supersedes and replaces any previous agreement between the parties in connection with the Client Bank Account[s], to the extent that such previous agreement is inconsistent with this letter; (j) in the event of any conflict between this letter and any other agreement between the parties in connection with the Client Bank Account[s], this letter agreement will prevail; (k) no variation to the terms of this letter will be effective unless it is in writing, signed by the parties and permitted under the rules of the Financial Conduct Authority;

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(l) this letter will be governed by the laws of [insert appropriate jurisdiction]; and (m) the courts of [insert same jurisdiction as previous] will have jurisdiction to settle any dispute or claim arising out of or in connection with this letter or its subject matter or formation (including non-contractual disputes or claims). Please sign and return the enclosed copy of this letter as soon as possible. We remind you that, pursuant to the rules of the Financial Conduct Authority, we are not allowed to use the Client Bank Account[s] to deposit any money belonging to our clients with you until you have acknowledged and agreed to the terms of this letter. For and on behalf of [name of firm] x___________________________ Authorised Signatory Print Name:
Title:
ACKNOWLEDGED AND AGREED:
For and on behalf of [name of approved bank] x___________________________ Authorised Signatory Print Name:
Title:
Contact Information: [insert signatory’s phone number and email address] Date:
Annex
2G
Guidance notes for client bank account acknowledgement letters (CASS 13.5.5G) Introduction

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1. This annex contains guidance on the use of the template client bank
   account acknowledgement letters in CASS 13 Annex 1R.
   General
2. Under CASS 13.5.2R(2), firms are required to have in place a duly signed
   and countersigned client bank account acknowledgement letter for a client bank account before they are allowed to hold or receive client money in or into the account.
3. For each client bank account a firm is required to complete, sign and send
   to the approved bank a client bank account acknowledgement letter identifying that account and in the form set out in CASS 13 Annex 1R (CASS claims management firm client bank account acknowledgment letter template).
4. When completing a client bank account acknowledgement letter using the
   appropriate template, a firm is reminded that it must not amend any of the text which is not in square brackets (acknowledgment letter fixed text). A firm should also not amend the non-italicised text that is in square brackets. It may remove or include square bracketed text from the letter, or replace bracketed and italicised text with the required information, in either case as appropriate. The notes below give further guidance on this. Clear identification of relevant accounts
5. A firm is reminded that for each client bank account it needs to have in
   place a client bank account acknowledgement letter. As a result, it is important that it is clear to which account or accounts each client bank account acknowledgement letter relates. As a result, the template in CASS 13 Annex 1R requires that the client bank account acknowledgement letter includes the full title and at least one unique identifier, such as a sort code and account number, deposit number or reference code, for each client bank account.
6. The title and unique identifiers included in a client bank account
   acknowledgement letter for a client bank account should be the same as those reflected in both the records of the firm and the relevant approved bank, as appropriate, for that account. Where an approved bank’s systems are not able to reflect the full title of an account, that title may be abbreviated to accommodate that system, provided that:
   (a) the account may continue to be appropriately identified in line with the requirements of CASS 13 (for example, ‘segregated’ may be shortened to ‘seg’, ‘account’ may be shortened to ‘acct’ etc); and (b) when completing a client bank account acknowledgement letter, such letter must include both the long and short versions of the account title.

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7. A firm should ensure that all relevant account information is contained in
the space provided in the body of the client bank account acknowledgement letter. Nothing should be appended to a client bank account acknowledgement letter.
8. In the space provided in the template letter for setting out the account title
and unique identifiers for each relevant account/deposit, a firm may include the required information in the format of the following table:
Full account title Unique identifier Title reflected in [name of approved bank] systems [Claims Management Firm Client Bank Account] [00-00-00 12345678] [CM FIRM CLIENT A/C]
9. Where a client bank account acknowledgement letter is intended to cover a
range of client bank accounts, some of which may not exist as at the date the client bank account acknowledgement letter is countersigned by the approved bank, a firm should set out in the space provided in the body of the client bank account acknowledgement letter that it is intended to apply to all present and future accounts which: (a) are titled in a specified way (e.g. with the word ‘client’ in their title); and (b) which possess a common unique identifier or which may be clearly identified by a range of unique identifiers (e.g. all accounts numbered between XXXX1111 and ZZZZ9999). For example, in the space provided in the template letter in CASS 13 Annex 1R which allows a firm to include the account title and a unique identifier for each relevant account, a firm should include a statement to the following effect:
Any account open at present or to be opened in the future which contains the term [‘client’][insert appropriate abbreviation of the term ‘client’ as agreed and to be reflected in the Approved Bank’s systems] in its title and which may be identified with [the following [insert common unique identifier]][an account number from and including [XXXX1111] to and including [ZZZZ9999]][clearly identify range of unique identifiers]. Signatures and countersignatures
10. A firm should ensure that each client bank account acknowledgement
letter is signed and countersigned by all relevant parties and individuals (including where a firm or the approved bank may require more than one signatory).
11. A client bank account acknowledgement letter that is signed or
countersigned electronically should not, for that reason alone, result in a breach of the rules in CASS 13.5. However, where electronic signatures are used, a firm should consider whether, taking into account the governing law and choice of competent jurisdiction, it needs to ensure that the

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12. A firm should use at least the same level of care and diligence when
completing a client bank account acknowledgement letter as it would in managing its own commercial agreements.
13. A firm should ensure that each client bank account acknowledgement
letter is legible (e.g. any handwritten details should be easy to read), produced on the firm’s own letter-headed paper, dated and addressed to the correct legal entity (e.g. where the approved bank belongs to a group of companies).
14. A firm should also ensure each client bank account acknowledgement
letter includes all the required information (such as account names and numbers, the parties’ full names, addresses and contact information, and each signatory’s printed name and title).
15. A firm should similarly ensure that no square brackets remain in the text of
each client bank account acknowledgement letter (e.g. after having removed or included square bracketed text, as appropriate, or having replaced square bracketed and italicised text with the required information as indicated in the template in CASS 13 Annex 1R) and that each page of the letter is numbered.
16. A firm should complete a client bank account acknowledgement letter so
that no part of the letter can be easily altered (e.g. the letter should be signed in ink rather than pencil).
17. In respect of the client bank account acknowledgement letter’s governing
law and choice of competent jurisdiction (see paragraphs (11) and (12) of the template client bank account acknowledgement letters), a firm should agree with the approved bank and reflect in the letter that the laws of a particular jurisdiction will govern the client bank account acknowledgement letter and that the courts of that same jurisdiction will have jurisdiction to settle any disputes arising out of, or in connection with, the client bank account acknowledgement letter, its subject matter or formation.
18. If a firm does not, in any client bank account acknowledgement letter,
utilise the governing law and choice of competent jurisdiction that is the same as either or both:
(a) the laws of the jurisdiction under which either the firm or the relevant approved bank are organised; or (b) as is found in the underlying agreement/s (e.g. banking services

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FOS 2018/6 agreement) with the relevant approved bank; then the firm should consider whether it is at risk of breaching CASS 13.5.4R(3) or CASS 13.4.2R. Authorised signatories
19. A firm is required under CASS 13.5.7R to use reasonable endeavours to
ensure that any individual that has countersigned a client bank account acknowledgement letter returned to the firm was authorised to countersign the letter on behalf of the relevant approved bank.
20. If an individual that has countersigned a client bank account
acknowledgement letter does not provide the firm with sufficient evidence of their authority to do so then the firm is expected to make appropriate enquiries to satisfy itself of that individual’s authority.
21. Evidence of an individual’s authority to countersign a client bank account
acknowledgement letter may include a copy of the approved bank’s list of authorised signatories, a duly executed power of attorney, use of a company seal or bank stamp, and/or material verifying the title or position of the individual countersigning the client bank account acknowledgement letter.
22. A firm should ensure it obtains at least the same level of assurance over
the authority of an individual to countersign the client bank account acknowledgement letter as the firm would seek when managing its own commercial arrangements. Third party administrators
23. If a firm uses a third party administrator (TPA) to carry out the
administrative tasks of drafting, sending and processing a client bank account acknowledgement letter, the text “[Signed by [Name of Third Party Administrator] on behalf of [firm]]” should be inserted to confirm that the client bank account acknowledgement letter was signed by the TPA on behalf of the firm.
24. In these circumstances, the firm should first provide the TPA with the
requisite authority (such as a power of attorney) before the TPA will be able to sign the client bank account acknowledgement letter on the firm’s behalf. A firm should also ensure that the client bank account acknowledgement letter continues to be drafted on letter-headed paper belonging to the firm. Client bank accounts
25. A firm must ensure that each of its client bank accounts follows the
naming conventions prescribed in the Glossary. This includes ensuring that all client bank accounts include the term ‘client’ in their title or an appropriate abbreviation in circumstances where this is permitted by the

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Glossary definition.
26. All references to the term “Client Bank Account[s]” in a client bank
account acknowledgement letter should also be made consistently in either the singular or plural, as appropriate.

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Annex F
Amendments to the Supervision manual (SUP) unless otherwise stated. 1A The FCA’s approach to supervision 1A.1 Application and purpose … Purpose … 1A.1.3 G The design of these arrangements is shaped by the FCA’s statutory objectives in relation to the conduct supervision of financial services firms as well as the prudential supervision of firms not supervised by the PRA. These objectives are set out in Chapter 1 of the Act. The FCA has one strategic objective:
ensuring that the relevant markets function well. In discharging its general functions, the FCA must, so far as is reasonably possible, act in a way which is compatible with its strategic objective and which advances one or more of its three operational objectives:
…
1A.1.3A G (1) The meaning of “UK financial system” when used in Chapter 1 of the Act includes regulated claims management activities. (2) The term “regulated financial services” when used in Chapter 1 of the Act includes services provided by an authorised person in carrying on any regulated activity. Accordingly, for the purposes of
Chapter 1 of the Act: a regulated claims management activity is a
“regulated financial service” and a customer of a firm carrying on a regulated claims management activity is a “consumer” for the purposes of the FCA’s consumer protection and competition statutory objectives. … 1A.4 Tools of supervision … 1A.4.4 G Some of these tools, for example the use of public statements to deliver messages to firms or consumers of financial services, do not involve the FCA in direct oversight of the business of firms. In contrast, other tools do involve

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FOS 2018/6 a direct relationship with firms. The FCA also has powers to act on its own initiative to impose or vary individual requirements on a firm (see SUP 7) and to ban or impose requirements in relation to specific financial promotions financial promotions. The FCA may also use its general rule-making powers to ban or impose requirements in relation to specific products, types of products or practices associated with a particular product or type of product. The use of the FCA’s tools in its oversight of market practices, in ensuring the protection of client assets and for prudential supervision of FCA-only firms, will also contribute to the integrity and orderly operation of the financial markets. … 2 Information gathering by the FCA or PRA on its own initiative
2.1 Application and purpose
…
Purpose
…
2.1.9 G The purpose of SUP 2.4 is to explain a particular method of information
gathering used by the FCA, known as “mystery shopping”. Information about how a firm sells financial products and services can be very difficult to obtain, and the purpose of this method is to obtain such information from individuals who approach a firm in the role of potential retail consumers on the FCA’s initiative. The FCA may seek information about particular issues or the activities of individual firms by means of mystery shopping. …
2.4 ‘Mystery shopping’
…
2.4.2 G The FCA uses mystery shopping to help it protect consumers. This may be by
seeking information about a particular practice across a range of firms (SUP 2.4.3G(1)) or the practices of a particular firm (SUP 2.4.3G(2)). One of the risks consumers face is that they may be sold financial products or services which are inappropriate to them. A problem in protecting consumers from this risk is that it is very difficult to establish after the event what a firm has said to a ‘genuine’ consumer in discussions. By recording what a firm says in discussions with a ‘mystery shopper’, the FCA can establish a firm’s normal practices in a way which would not be possible by other means. … 3 Auditors

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3.1 Application
…
3.1.2 R Applicable sections (see SUP 3.1.1R)
…
(1) Category of firm (2)
Sections applicable to the firm
(3)
Sections applicable to its auditor
… … … …
(5D) A CASS 13 claims management firm
SUP 3.1-3.7,
3.11
SUP 3.1, SUP
3.2, SUP 3.8,
SUP 3.10
… … … …
…
3.10 Duties of auditors: notification and report on client assets
…
3.10.5 R Client assets report
Whether in the auditor’s opinion
(1) the firm has maintained systems adequate to enable it to comply with the custody rules (except CASS 6.7), the collateral rules, the client money rules (except CASS 5.2), the debt management client money rules, the claims management client money rules and the mandate rules throughout the period; (2) the firm was in compliance with the custody rules (except CASS 6.7), the collateral rules, the client money rules (except CASS 5.2), the debt management client money rules, the claims management client money rules and the mandate rules, at the date as at which the report has been made; … … … (4) if there has been a secondary pooling event during the period, the firm has complied with the rules in CASS 5.6 and CASS 7A (Client money distribution) and, CASS 11.13 (debt management client money distribution rules) and CASS 13.11 (claims management

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6.3 Applications for variation of permission and/or imposition, variation or
cancellation of requirements
…
How long will an application take?
…
6.3.38A G If the relevant regulator fails to determine an application within the time period specified in section 55V of the Act, this does not mean that the application is deemed to be granted. … 10A FCA Approved Persons 10A.1 Application General … 10A.1.1 R This chapter applies to every:
(1) firm that is not an SMCR firm; and
(2) SMCR firm, but only to the extent required by SUP 10A.1.16BR (Appointed representatives), other than a firm which has permission to carry on only regulated claims management activities. … 12 Appointed Representatives …
12.2 Introduction
…

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12.2.7 G …
(4) Regulated claims management activity is not a type of business for which an appointed representative may be exempt. … 15 Notifications to the FCA …
15.5 Core information requirements
Change in name
15.5.1 R A firm must give the FCA reasonable advance notice of a change in:
(1) the firm’s name (which is the registered name if the firm is a body corporate); (2) any business name under which the firm carries on a regulated activity (other than a regulated claims management activity) or ancillary activity either from an establishment in the United Kingdom or with or for clients in the United Kingdom; and (3) any business name under which the firm carries on a regulated claims management activity or ancillary activity. … 16 Reporting requirements
16.1 Application
…
16.1.3 R Application of different sections of SUP 16 (excluding SUP 16.13, SUP
16.15, SUP 16.16, SUP 16.17 and SUP 16.22) (1)
Section(s)
(2) Categories of firm to which
section applies
(3) Applicable rules and guidance
…
SUP 16.4 and SUP
16.5
All categories of firm except: Entire sections … (jb) a firm with permission to carry

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16.3 General provisions on reporting
Structure of the chapter
16.3.2 G This chapter has been split into the following sections, covering:
…
(18) annual financial crime reporting (SUP 16.23); and (18 A) employers’ liability register compliance reporting (SUP 16.23A). ; (19) retirement income data reporting (SUP 16.24); and (20) claims management reporting (SUP 16.25). … After SUP 16.24 (Retirement income data reporting) insert the following new section, SUP
16.25. The text is not underlined.
16.25 Claims management reporting
Application
16.25.1 G The effect of SUP 16.1.3R is that this section applies to a firm with
permission to carry on regulated claims management activities. Purpose
16.25.2 G (1) The purpose of this section is to ensure that the FCA receives, on a
regular basis, comprehensive information about the activities of firms

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16.25.3 R A firm must submit an Annual Claims Management Report to the FCA
annually in respect of the period of 12 months ending on the firm’s accounting reference date.
16.25.4 G Firms are only required to disclose in Annual Claims Management Reports
information relating to the part of their business which is involved in carrying on regulated claims management activities and ancillary activities, except for questions 13 to 15, 19 to 27 and 30 to 34, which relate to the firm as a whole. Method for submitting Annual Claims Management Report
16.25.5 R A firm must submit an Annual Claims Management Report in the format as
set out in SUP 16 Annex 45AR, using the appropriate online systems specified on the FCA’s website.
16.25.6 G A firm submitting an Annual Claims Management Report should read the
guidance notes available in SUP 16 Annex 45BG.
Time period for submitting Annual Claims Management Report
16.25.7 R A firm must submit the Annual Claims Management Report within 30
business days of the firm’s accounting reference date.
Group reporting
16.25.8 R If a group includes more than one firm, a single Annual Claims Management
Report may be submitted, and so satisfy the requirements of all firms in the group. Such a report should contain the information required from all of the firms in the group, meet all relevant due dates, indicate all the firms on whose behalf it is submitted and give their firm reference numbers. Nevertheless, the requirement to provide a report and the responsibility for the report remain with each firm in the group. … After SUP 16 Annex 44BG (Guidance notes for the completion of the Employers’ Liability Register compliance return in SUP 16 Annex 44AR) insert the following new Annexes, SUP 16 Annex 45AR and SUP 16 Annex 45BG. The text is not underlined.
Annex
Annual Claims Management Report form

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45AR
CMC001: Key data for Claims Management
Currency: Sterling only
Units: integers
A
Group reporting
1 Does the data reported in this return relate to more than one firm? (NB: You should always answer “No” if your firm is not part of a group) 2 If “Yes” then list the firm reference numbers (FRNs) of all of the additional firms included in this return. Nil return 3 Do you wish to report a nil return? All firms answering 'no' to question 3, must complete the following:
4 Over the reporting period, how many employees did the firm have on average? 5 How many employees left the firm (for any reason) during the reporting period? 6 What was the firm’s annual employee turnover rate during the reporting period? 7 What was the total remuneration paid to the firm’s employees over the reporting period? 8 What was the total amount of variable remuneration paid to the firm’s employees over the reporting period? 9 How does the firm charge fees to its customers? 10 What was the total annual income for all regulated claims management activities, as defined in FEES 4 Annex 11AR for the purposes of FCA fees reporting (see guidance in FEES 4 Annex 13G)? Profit and loss account (over reporting period) 11 What was the firm’s income from seeking out, referrals

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28 Was the firm a Class 1 firm or a Class 2 firm (as defined in CMCOB 7.2.5R) at the end of the reporting period? 29 What was the firm’s overheads requirement (as calculated in CMCOB 7.2.8R) as at the end of the reporting period? 30 As at the end of the reporting period, was the firm’s overheads requirement (as calculated in CMCOB 7.2.8R) greater than the amount set out in whichever of CMCOB 7.2.6R(1)(a) or 7.2.7R(1)(a) was applicable to the firm? 31 Did the firm hold client money at any point during the reporting period? 32 What was the firm’s prudential resources requirement (as calculated in CMCOB 7.2.6R and 7.2.7R) as at the end of the reporting period? 33 Did the firm have a prudential surplus or deficit at the end of the reporting period? 34 What was the amount of the prudential surplus or deficit at the end of the reporting period? The rest of the questions are only for firms that have permission for one or more of:
 advice, investigation or representation in relation to a personal injury claim;  advice, investigation or representation in relation to a financial services or financial product claim;  advice, investigation or representation in relation to a housing disrepair claim;  advice, investigation or representation in relation to a claim for a specified benefit;  advice, investigation or representation in relation to a criminal injury claim; and  advice, investigation or representation in relation to an employment-related claim. Professional Indemnity Insurance 35 Does the firm have permission for advice, investigation or representation in relation to a personal injury claim?

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36 Did the firm have a professional indemnity insurance policy in place for advice, investigation or representation in relation to a personal injury claim as at the end of the reporting period? If yes:
(a) Who is the underwriter of the insurance?
(b) What is the policy renewal date?
(c) Have the minimum terms of the policy been reviewed in the last five years? (d) What is the amount of the limit of indemnity (liability) for any single claim? (e) What is the amount of the limit of indemnity (liability) for claims in the aggregate over the policy period? (f) What is the amount of the excess (or deductible) that would be applicable for any one claim? (g) Has the identity of the insurance provider or the terms and conditions of the insurance policy changed from the content of the last Annual Claims Management Report form submitted to the FCA? Client Money 37 What was the highest balance of client money held by the firm at any point during the reporting period? 38 In relation to the balance reported for question 37, for how many different customers did the firm hold client money? 39 For how many different customers did the firm hold client money for a period longer than two business days? 40 For how many different customers did the firm hold client money for a period longer than five business days? 41 What was the longest period of time for which the firm held client money for a customer? Product Data 42 What was the average fee charged by the firm, during the reporting period in respect of a claim?

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Third-party Lead Generators
43 How many leads did the firm purchase from lead generators during the reporting period? 44 If you have provided a figure in response to the previous question, provide the following details in respect of the three lead generators from which the firm purchased the most leads during this reporting period:
Name Postal address
Email address
Does supplier use overseas facilities
(e.g. a call centre)?
Number of leads purchased from supplier over reporting period Average cost per lead purchased from supplier over reporting period 45 How many leads did the firm supply to a third party? (include all the occasions on which the firm passed a customer, or details of a customer or claim, to a third party) Product data How was the firm’s regulated claims management activity divided among the following areas of work? Revenue Number of claims where lead obtained from lead generator Number of claims pursued Number of successful claims Number of claims halted or not taken forward because: no good arguable base (left hand column), suspected fraud (middle column), or being

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(right hand column)
46 financial services or financial product claims (a) Payment protection insurance (b) Packaged bank accounts (c) Investments (d) Payment card or bank charges (e) Mortgages (f) Consumer credit (g) Pensions, including SERPS (h) Interest rate swaps and hedging products (i) Other (please specify) 47 personal injury claims (a) Holiday sickness

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(b) Road traffic accidents (excluding whiplash) (c) Slips, trips and falls (excluding accidents at work) (d) Accidents at work (e) Clinical negligence (f) Whiplash (g) Other (please specify) 48 housing disrepair claims 49 claims for a specified benefit 50 criminal injury claims 51 employment-related claims 52 Of the above types of claim, which three saw the largest percentage change in number of successful claims? Type of claim Percentage change (a)

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(b)
(c)
Annex
45BG
Guidance notes for completion of the Annual Claims Management Report form Guidance for CMC001 General notes This data item collects key information annually from firms with permission to undertake regulated claims management activity. Except for rows 13 to 15, 19 to 27 and 30 to 34, the data provided in this form should relate only to regulated claims management activity, even if the firm undertakes regulated or unregulated activities in other areas. Except where a single Annual Claims Management Report is submitted in respect of a group in accordance with SUP 16.25.8R, the data should not include the assets, liabilities, income or costs of any consolidated subsidiaries of the firm. If you have undertaken no regulated claims management activity during the reporting period, answer “yes” to question 3 “do you wish to report a nil return?” to attest that there is no activity to report to us. All questions requiring a monetary answer must be answered in sterling only. Figures should be reported in integers (that is, single units, to the nearest whole number), except where otherwise specified in the form: for example, income figures should be given to the nearest pound, not to the nearest thousand pounds. In the form there are two sections. The first section must be answered by all firms (including those that only have permission for seeking out, referrals and identification of claims or potential claims, or agreeing to carry on a regulated activity in respect of one of these activities). The second section however (from question 35 onwards) is only required from those firms that have permission for one or more of the following activities:
 advice, investigation or representation in relation to a personal injury claim;  advice, investigation or representation in relation to a financial services or financial product claim;  advice, investigation or representation in relation to a housing disrepair claim;  advice, investigation or representation in relation to a claim for a specified benefit;

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 advice, investigation or representation in relation to a criminal injury claim; and  advice, investigation or representation in relation to an employment￾related claim, collectively referred to in these guidance notes as ‘advising on a claim, investigating a claim, or representing a claimant’. Data elements Question Notes 3 Do you wish to report a nil return? If the firm has undertaken no regulated claims management activity during this reporting period then answer “yes” and submit the form. 4 Over of the reporting period, how many employees did the firm have on average? State how many employees the firm had on average during the reporting period. Include part time workers in this
figure as 0.5.
5 How many employees left the firm
(for any reason) during the reporting period?
State the figure for the number of employees who left the firm. Include part time workers in this
figure as 0.5.
6 What was the firm’s annual employee turnover rate during the reporting period? This should be the number of employees who left the firm during the reporting period (item 5) divided by the average number of employees the firm had during the reporting period (item 4), multiplied by 100. 7 What was the total remuneration paid to the firm’s employees over the reporting period? Include all remuneration received by employees, including any variable remuneration such as bonuses, commissions or performance-based pay. Include share-based remuneration, options and the monetary value of benefits in kind. 8 What was the total amount of variable remuneration paid to the firm’s Include only variable remuneration such as bonuses, commissions or

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FOS 2018/6 employees over the reporting period? performance-based pay. Include share-based remuneration, options and the monetary value of benefits in kind to the extent that these are variable. 9 How does the firm charge fees to its customers? Please describe all the ways in which the firm charges fees: for example, whether calculated by reference to the amount recovered for the customer or on an hourly rate, and whether fees are charged up front or on account, or are invoiced periodically or at the end of the claim. 10 What was the total annual income for all regulated claims management activities, as defined in FEES 4 Annex 11AR for the purposes of FCA fees reporting (see guidance in FEES 4
Annex 13G)?
Refer to the guidance contained in
FEES 4 Annex 13G before completing this question. If you undertake other activities this will be a subset of your total income. 11 What was the firm’s income from seeking out, referrals and identification of claims or potential claims? State the revenue from generating leads for, or selling leads to, third parties. If you do not have this permission enter “0”. 12 What was the firm’s income from all regulated claims management activities? 13 What was the firm’s income from all regulated activities? 14 What was the firm’s income from activities which are not regulated activities? 15 What was the firm’s total income, including from activities which are not regulated activities? This should be the sum of items 13 and 14. 16 What was the firm’s expenditure in respect of all regulated claims management activities? Include any share of overheads which is allocated to income from regulated claims management activities. 17 What was the firm’s expenditure in respect of all regulated claims management activities (excluding expenditure of the sort listed in

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CMCOB 7.2.8R(2)(b))?
18 What was the firm’s operating profit from regulated claims management activities? Operating profit is equal to income (item 12) less expenditure (item 16). Balance sheet Questions 19 to 27 are to be answered as at the end of the relevant reporting period 19 What was the value of the firm’s total assets? Include all fixed and current assets. 20 How much cash did the firm hold? This should relate to the whole firm but should not include the cash of any consolidated subsidiaries. This should include cash held in a bank account available for instant withdrawal. 21 What was the value of the firm’s other current assets? A current asset is an asset that is expected to be converted to cash within a year of the date of measurement (but does not include cash). This should relate to the whole firm (including investments in or receivables from other group entities) but should not include the assets of any consolidated subsidiaries. 22 How much did the firm owe in overdrafts and bank loans due within one year? Include only the drawn amount of overdrafts. 23 What was the value of the firm’s current liabilities (other than overdrafts and bank loans)? A current liability is a debt or obligation that falls due within one year of the date of the liability arising. This should relate to the whole firm (including any amounts owed to other group entities) but should not include any consolidated subsidiaries. 24 What was the value of the firm’s total (current and non-current) liabilities? Non-current liabilities are those falling due more than one year after the date of measurement. 25 What was value of the firm’s current assets less the value of its current liabilities? This should equal the sum of items 20 and 21 less the sum of items 22 and 23. 26 What was the value of the firm’s total This should equal the sum of item

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FOS 2018/6 assets less the value of its current liabilities? 19, less the sum of items 22 and 23. 27 What level of prudential resources did the firm hold at the end of the reporting period (as calculated in CMCOB 7.3)? CMCOB 7.3 sets out how prudential resources are to be calculated and which forms of capital are eligible for inclusion. 28 Was the firm a Class 1 firm or a Class 2 firm (as defined in CMCOB 7.2.5R) at the end of the reporting period? 29 What was the firm’s overheads requirement (as calculated in CMCOB 7.2.8R) as at the end of the reporting period? CMCOB 7.2.8R sets out how the overheads requirement is to be calculated. 30 As at the end of the reporting period, was the firm’s overheads requirement (as calculated in CMCOB 7.2.8R) greater than the amount set out in whichever of CMCOB 7.2.6R(1)(a) or 7.2.7R(1)(a) was applicable to the firm? The sums applicable under CMCOB 7.2.6R and 7.2.7R are £10,000 for a Class 1 firm and £5,000 for a Class 2 firm. 31 Did the firm hold client money at any point during the reporting period? Answer “yes” or “no”. For the purposes of this question, include client money which has been sent out by cheque and is uncleared and/or unbanked. 32 What was the firm’s prudential resources requirement (as calculated in CMCOB 7.2.6R and 7.2.7R) as at the end of the reporting period? CMCOB 7.2.6R sets out how the prudential resources requirement is to be calculated for Class 1 firms. CMCOB 7.2.7R sets out how the prudential resources requirement is to be calculated for Class 2 firms. 33 Did the firm have a prudential surplus or deficit at the end of the reporting period? A firm with prudential resources in excess of its prudential resources requirement has a prudential surplus. A firm with prudential resources less than its prudential resources requirement has a prudential deficit. 34 What was the amount of the prudential surplus or deficit at the end of the reporting period? Enter positive figures only (irrespective of whether the amount was a surplus or deficit.)

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The rest of the questions are only for firms that have permission for advising on a claim, investigating a claim, or representing a claimant. All the questions below relate to advising on a claim, investigating a claim, or representing a claimant and should not include data for any other regulated claims management activity. 35 Does the firm have permission for advice, investigation or representation in relation to a personal injury claim? Answer “yes” or “no”. Having these permissions in respect of personal injury claims triggers a requirement to hold professional indemnity insurance. 36 Did the firm have a professional indemnity insurance policy in place for advice, investigation or representation in relation to a personal injury claim at the end of the reporting period? Answer “yes” or “no”. If yes:
(a) Who is the underwriter of the insurance?
State the underwriter’s name.
(b) What is the policy renewal date? Provide the end date of the policy in the format dd/mm/yyyy. (c) Have the minimum terms of the policy been reviewed in the last five years? (d) What is the amount of the limit of indemnity (liability) for any single claim? If the policy applies different indemnity limits to different insured events, enter the lowest applicable limit. (e) What is the amount of the limit of indemnity (liability) for claims in the aggregate over the policy period? (f) What is the amount of the excess (or deductible) that would be applicable for any one claim? (g) Has the identity of the insurance provider or the terms and conditions of the insurance policy changed from the content Answer “yes” or “no”.

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Management Report form submitted to the FCA?
37 What was the highest balance of client money held by the firm at any point during the reporting period? Report rounded to the nearest pound. 38 In relation to the balance reported for question 37, for how many different customers did the firm hold client money? Report the number of customers to whom the balance reported for question 37 relates. 39 For how many different customers did the firm hold client money for a period longer than two business days? Report the total number of customers for whom the firm held client money for longer than two business days. 40 For how many different customers did the firm hold client money for a period longer than five business days? Report the total number of customers for whom the firm held client money for longer than five business days. Exclude (for question 40 reporting purposes only) any customers to which the firm has sent a cheque or other payable order which is uncleared and/or unbanked. For the avoidance of doubt, a firm must continue to treat this money as client money until the cheque or order is presented and paid by the bank. 41 What was the longest period of time for which the firm held client money for a customer? Report in days. 42 What was the average fee charged by the firm, during the reporting period in respect of a claim? Include in the average only claims where a fee was charged. 43 How many leads did the firm purchase from lead generators during the reporting period? State “None” or provide a positive
figure.
44 If you have provided a figure in response to the previous question, provide the following details in respect of the three lead generators from which the firm purchased the most Provide all the information requested in each column.

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FOS 2018/6 leads during this reporting period:
45 How many leads did the firm supply to a third party? (include all the occasions on which the firm passed a customer, or details of a customer or claim, to a third party) How was the firm’s regulated claims management activity divided among the following areas of work? Provide the following figures for each area of work. For financial services and products claims and personal injury claims show how this work is split between different subcategories. When reporting “other”, complete the free text box to indicate what the figures relate to. Revenue Enter the total income earned from this type of work during the reporting period. Number of claims where lead obtained from lead generator Enter the number of claims where the customer was obtained from a lead purchased from a lead generator. Number of claims pursued Enter the number of claims in respect of which an agreement was reached with the customer for the firm to investigate, advise or represent. Number of successful claims Enter the number of claims which resulted in a payment or other remedy for the customer. Include claims settled on such terms. Number of claims halted or not taken forward because: no good arguable base, suspected fraud, or being frivolous or vexatious Enter the number of claims which the firm declined, or declined to continue to pursue because there was no arguable case in the left hand column; the number of those where there was suspected fraud in the middle column; and the number of those which were frivolous or vexatious in the right hand column.

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52 Of the above types of claim, which three saw the largest percentage change in number of successful claims? Percentage change is the increase or decrease in the number of successful claims concluded during the reporting period compared to the number in the equivalent period ending 12 months earlier. Enter the name of the type of claim and the percentage change. For financial services or financial product claims and personal injury claims, enter the more detailed claim category (e.g. Whiplash). … Amend the following as shown. TP 1 Transitional provisions … TP 1.2 (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitional provision:
dates in force
(6)
Handbook provision:
coming into force
… … … … … …
3AC SUP 3.10.4R to SUP
3.10.6R
R (1) This transitional provision applies in respect of an auditor which was subject to SUP 3.10 immediately before 1 April 2019 in relation to a firm which becomes subject to the claims management client money rules on 1 April 2019. (2) For the purposes of SUP 3.10.5R(1) in its application to the claims management From 1 April 2019 1 April

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FOS 2018/6 client money rules, the first report which the auditor submits under SUP 3.10.4R which covers the claims management client money rules must state whether, in the auditor’s opinion, the firm was in compliance with those rules from 1 April 2019 to the end of the period covered by the report. … … … … … … 19 SUP 16.25.7 R (1) This transitional provision applies in respect of the first Annual Claims Management Report which a firm is required to submit under SUP 16.25.7R. (2) No report is required under SUP 16.25.7R in respect of a period ending on an accounting reference date of the firm earlier than 1 July 2019. (3) If no report is provided under SUP 16.25.7R in respect of a period ending on an accounting reference date of the firm earlier than 1 July 2019, the first report under SUP 16.25.7R must address the period from 1 April 2019 to the firm’s first accounting reference date which occurs on or after 1 July 2019. From 1 April 2019 to 1 July 1 April

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Annex G
Amendments to the Dispute Resolution: Complaints manual (DISP) unless otherwise stated. 1 Treating complainants fairly
1.1 Purpose and application
Purpose
1.1.1 G This chapter contains rules and guidance on how respondents should deal
promptly and fairly with complaints in respect of business carried on from establishments in the United Kingdom, by certain branches of firms in the EEA or by certain EEA firms carrying out activities in the United Kingdom under the freedom to provide cross border services. In respect of regulated claims management activities, this chapter applies to business carried on in Great Britain (see PERG 2.4A). It is also relevant to those who may wish to make a complaint or refer it to the Financial Ombudsman Service. … Application to firms
1.1.3 R …
(1A) This chapter also applies to a firm in respect of complaints from eligible complainants concerning activities which are, or which are ancillary to, regulated claims management activities. …
1.1.5 R This chapter does not apply to:
…
(3A) a firm in respect of complaints concerning activities which:
(a) are not carried on in Great Britain but which would be regulated claims management activities if they were carried on in Great Britain; or (b) are ancillary to activities described in (a); … 1.1.5-B G For an activity to amount to a regulated claims management activity it must be carried on in Great Britain (see PERG 2.4A). The effect of DISP 1.1.3R(1A) and DISP 1.1.5R(3A) is that the application of this chapter to

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FOS 2018/6 regulated claims management activities and activities ancillary to regulated claims management activities depends on whether the activity is carried on in Great Britain rather than whether it is carried on from an establishment maintained in the United Kingdom. …
1.1.10 R In relation to a firm’s obligations under this chapter, references to a
complaint also include an expression of dissatisfaction which is capable of becoming a relevant new complaint, a relevant transitional complaint, or a relevant new credit-related complaint, or a relevant new claims management complaint. …
1.3 Complaints handling rules
…
Further requirements for all respondents …
1.3.6 G Where a firm identifies (from its complaints or otherwise) recurring or
systemic problems in its provision of, or failure to provide, a financial service or claims management service, it should (in accordance with Principle 6 (Customers’ interests) and to the extent that it applies) consider whether it ought to act with regard to the position of customers who may have suffered detriment from, or been potentially disadvantaged by, such problems but who have not complained and, if so, take appropriate and proportionate measures to ensure that those customers are given appropriate redress or a proper opportunity to obtain it. In particular, the firm should:
…
…
1.10 Complaints reporting rules
1.10.1 R (1) Unless (2) applies, twice a year a firm must provide the FCA with a
complete report concerning complaints received from eligible complainants. (2) If a firm:
(a) has permission to carry on only credit-related regulated activities or operating an electronic system in relation to lending and has revenue arising from those activities that is less than or equal to £5,000,000 a year,; or (b) has permission to carry on only regulated claims management activities;

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FOS 2018/6 the firm must provide the FCA with a complete report concerning complaints received from eligible complainants once a year. (3) The report required by (1) and (2) must be set out in the format in:
(a) DISP 1 Annex 1R, in respect of complaints which do not relate to regulated claims management activity or any activity ancillary to regulated claims management activity; and (b) DISP 1 Annex 1ABR, in respect of complaints relating to regulated claims management activity or any activity ancillary to regulated claims management activity. … Information requirements … 1.10.2B R DISP 1 Annex 1ABR requires (for the relevant reporting period) information about:
(1) in Table 1, the total number of complaints received by the firm and the main focus of the complaint; (2) in Table 2:
(a) the number of complaints that were closed or upheld within different time periods; (b) the total amount of redress paid by the firm in relation to complaints upheld and not upheld in the relevant reporting period; and (c) redress in relation to the claims management fee cap, where this was done at the firm’s instigation rather than as the result of a complaint about the fee.
1.10.3 G For the purposes of DISP 1.10.2R, DISP 1.10.2-AR, and DISP 1.10.2AR, and
DISP 1.10.2BR, when completing the return, the firm should take into account the following matters. … (2) Under DISP 1.10.2R(1)(b), DISP 1.10.2R(2)(b), or DISP 1.10.2-AR or DISP 1.10.2BR(2), a firm should report information relating to all complaints which are closed and upheld within the relevant reporting period, including those resolved under DISP 1.5 (Complaints resolved by close of the third business day). Where a complaint is upheld in
part, or where the firm does not have enough information to make a
decision yet chooses to make a goodwill payment to the complainant, a firm should treat the complaint as upheld for reporting purposes.

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However, where a firm rejects a complaint, yet chooses to make a goodwill payment to the complainant, the complaint should be recorded as “rejected”. (3) If a firm reports on the amount of redress paid under DISP 1.10.2R(1)(b)(ii), DISP 1.10.2R(2)(b)(ii), DISP 1.10.2-AR(4), or DISP 1.10.2AR or DISP 1.10.2BR(2)(b), redress should be interpreted to include an amount paid, or cost borne, by the firm, where a cash value can be readily identified, and should include:
…
(e) waiver of an excess on an insurance policy; and (f) payments to put the consumer back into the position the consumer should have been in had the act or omission not occurred; and (g) the refund of fees paid in excess of the claims management fee cap, and any amount which the firm had attempted to charge but which was written off or waived (before the customer paid it) on the basis that it would have exceeded the claims management fee cap. … … 1.10.4A R If a firm has permission to carry on only credit-related regulated activities or operating an electronic system in relation to lending and has revenue arising from those activities that is less than or equal to £5,000,000 a year, is one to which DISP 1.10.1R(2) applies, the relevant reporting period is the year immediately following the firm’s accounting reference date. … 1.10A Complaints data publication rules Obligation to publish summary of complaints data or total number of complaints 1.10A.1 R … (1A) (a) This paragraph applies to a firm which:
(i) has permission to carry on only credit-related regulated activities or to operate an electronic system in relation to lending; and (ii) has revenue arising from those activities that is less than or equal to £5,000,000 a year.

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(aa) This paragraph also applies to a firm which has permission to carry on only regulated claims management activities. (b) Where a firm to which this paragraph applies submits a report to the FCA in accordance with DISP 1.10.1R reporting 1000 or more complaints, it must publish a summary of the complaints data contained in that report (the complaints data summary). … … After DISP 1 Annex 1AAG (Notes on completing electronic money and payment services complaints return form) insert the following new Annex, DISP 1 Annex 1ABR. The text is not underlined. 1 Annex 1ABR Claims management complaints and redress return form Currency: Sterling only Units: Integers A Group reporting 1 Does the data reported in this return cover complaints relating to more than one firm? (NB: You should always answer “No” if your firm is not
part of a group.)
2 If “Yes” then list the firm reference numbers (FRNs) of all of the additional firms included in this return. Nil return declaration 3 We wish to declare a nil return (If yes, leave all questions on complaints activities, including contextualisation, blank.) Return details required 4 Total complaints outstanding at reporting period start date. 5 Total number of complaints opened during the reporting

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Complaints data publication by FCA
6 If you are reporting 1000 or more complaints, do you consent to the FCA publishing the complaints data and information on context contained in this report in advance of the firm publishing the data itself? 7 If “Yes”, do you confirm that the complaints data and information on context contained in this report accurately reflects the information required to be published by the reporting firm under DISP? Contextualisation data 8 Total number of leads generated or obtained during the reporting period 9 Total number of claims opened during the reporting period
Table 1
A B C D E F
Type of claim
Numbers of complaints during reporting period personal injury claims financial services or financial product claims housing disrepair claims claims for a specified benefit criminal injury claims employm ent￾related claims 10 Total number of complaints Main focus of complaint 11 Lead generation, unsolicited marketing and cold calling 12 Quality of advice / provision of misleading information

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(including in advertisements)
13 Customer service issues
(including call handling)
14 General administration
15 Upfront fees
16 Fee dispute (at settlement – other than one in 17 below) 17 Fees in excess of the claims management fee cap 18 Claim outcome 19 Process for obtaining and/or sharing of customer data 20 Delay in processing claim 21 Other – please provide details
Table 2
Number of complaints closed during the reporting period (22 to 25) and complaints upheld (26) Redress paid, in integers (27 to 30): for example, figures for redress paid should be to the nearest pound not to the nearest thousand pounds. Include all amounts in excess of the claims management fee cap, whether a refund of fees paid or a waiver of excess fees. 22 Complaints closed within 3 days 23 Complaints closed within 8 weeks, but after more than 3 days 24 Complaints closed after more than 8 weeks

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25 Total complaints closed
26 Complaints upheld
27 Redress paid for upheld complaints
28 Redress paid for complaints not upheld 29 Redress in relation to the claims management fee cap, where this was done at the firm’s instigation rather than as the result of a complaint about the fee 30 Total redress paid Amend the following as shown. 1 Annex 1B Complaints publication report … Number of complaints opened by volume of business Product / service groupin g Provisio n (at reportin g period end date) Interme diation (within the reportin g period) Number of complai nts opened Number of complai nts closed Percent age closed within 3 days Percent age closed after 3 days but within 8 weeks Percent age upheld Main cause of complai nts opened … Credit related … … … … … Claims manage ment per claims in progres s and/or leads generat N/A

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…
2 Jurisdiction of the Financial Ombudsman Service …
2.1 Purpose, interpretation and application
2.1.1 G The purpose of this chapter is to set out rules and guidance on the scope of
the Compulsory Jurisdiction and the Voluntary Jurisdiction, which are the Financial Ombudsman Service’s two jurisdictions:
(1) the Compulsory Jurisdiction is not restricted to regulated activities, payment services, issuance of electronic money, and CBTL business and covers:
…
(b) relevant complaints against former members of former schemes under the Ombudsman Transitional Order, and the Mortgage and General Insurance Complaints Transitional Order and the Claims Management Order; … …
2.1.2 G Relevant complaints covered by the Compulsory Jurisdiction comprise:
…
(4) … ; and
(5) … .;
(6) relevant existing claims management complaints referred to the Legal Ombudsman before 1 April 2019 and inherited by the Financial Ombudsman Service under the Claims Management Order; and (7) relevant new claims management complaints about events which took place before 1 April 2019 but referred to the Financial Ombudsman Service on or after 1 April 2019 under the Claims Management Order.
2.1.3 G The Ombudsman Transitional Order and the Claims Management Order
requires the Financial Ombudsman Service to complete the handling of relevant existing complaints and relevant existing claims management complaints, in a significant number of respects, in accordance with the requirements of the relevant former scheme rather than in accordance with the requirements of this chapter.

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…
2.3 To which activities does the Compulsory Jurisdiction apply?
…
Activities by firms and unauthorised persons subject to a former scheme
2.3.2 G The Ombudsman can also consider under the Compulsory Jurisdiction:
(1) … ; or
(2) … ; or
(2A) as a result of the Claims Management Order, a relevant claims management complaint that relates to an act or omission by a firm or an unauthorised person which was subject to a former scheme at the time of the act or omission; … …
2.5 To which activities does the Voluntary Jurisdiction apply?
2.5.1 R The Ombudsman can consider a complaint under the Voluntary Jurisdiction
if:
…
(2) it relates to an act or omission by a VJ participant in carrying on one or more of the following activities:
…
(c) activities, other than regulated claims management activities and activities ancillary to regulated claims management activities, which (at 3 January 2018 1 April 2019) would be covered by the Compulsory Jurisdiction, if they were carried on from an establishment in the United Kingdom (these activities are listed in DISP 2 Annex 1G); (ca) an activity which would be a regulated claims management activity and would be covered by the Compulsory Jurisdiction if it were carried on in Great Britain (see PERG 2.4A); … …
2.5.3 G DISP 2.5.1R (2)(a) is for those that are subject to the Compulsory
Jurisdiction for regulated activities but are not covered by the Ombudsman

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Transitional Order, or the Mortgage and General Insurance Complaints Transitional Order, or the Claims Management Order. It enables the Financial Ombudsman Scheme to cover complaints about earlier events relating to those activities before they became regulated activities. …
2.6 What is the territorial scope of the relevant jurisdiction?
Compulsory Jurisdiction
2.6.1 R (1) The Compulsory Jurisdiction covers complaints about the activities of
a firm (including its appointed representatives), of a payment service provider (including agents of a payment institution), of an electronic money issuer (including agents of an electronic money institution), of a CBTL firm, of a designated credit reference agency or of a designated finance platform which:
(a) (except for regulated claims management activities and activities ancillary to regulated claims management activities) are carried on from an establishment in the United Kingdom; or. (b) are, or are ancillary to, regulated claims management activities. …
2.6.2 G This:
…
(2) excludes complaints about business conducted in the United Kingdom on a services basis from an establishment outside the United Kingdom other than:
(a) … ; and
(b) … ; and
(c) complaints in relation to regulated claims management activity. 2.6.2A G For an activity to amount to a regulated claims management activity it must be carried on in Great Britain (see PERG 2.4A). The application of the Compulsory Jurisdiction to firms which carry on regulated claims management activities (and activities ancillary to regulated claims management activities) depends on whether the activity is carried on in Great Britain rather than whether it is carried on from an establishment maintained in the United Kingdom. …

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Voluntary Jurisdiction
…
2.6.4A G Complaints about activities which are claims management services but which are not regulated claims management activity (for example, services provided by a company incorporated in Northern Ireland to a natural person ordinarily resident in Northern Ireland) may be covered by the Voluntary Jurisdiction under DISP 2.6.4R(1) where the activities are carried on from an establishment in the United Kingdom. …
2.7 Is the complainant eligible?
…
Eligible complainants
…
2.7.6 R …
(17) the complainant is a customer of the respondent in relation to regulated claims management activity. …
2.7.8 G In the Compulsory Jurisdiction, under the Ombudsman Transitional Order,
and the Mortgages and General Insurance Complaints Transitional Order and Claims Management Order, where a complainant:
(1) wishes to have a relevant new complaint, or a relevant transitional complaint or a relevant new claims management complaint dealt with by the Ombudsman; and (2) is not otherwise eligible; but (3) would have been entitled to refer an equivalent complaint to the former scheme in question immediately before the relevant transitional order came into effect; if the Ombudsman considers it appropriate, he may treat the complainant as an eligible complainant. … 2 Annex 1G Regulated Activities for the Voluntary Jurisdiction as at 27 July 2018 1 April …

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The activities which were covered by the Compulsory Jurisdiction (at 27 July 2018 1 April 2019) were:
…
The activities which (at 27 July 2018 1 April 2019) were regulated activities were, in accordance with section 22 of the Act (Regulated Activities), any of the following activities specified in Part II and Parts 3A and 3B of the Regulated Activities Order (with the addition of auction regulation bidding and administering a benchmark):
…
(41) seeking out, referrals and identification of claims or potential claims (article 89G); (42) advice, investigation or representation in relation to a personal injury claim (article 89H); (43) advice, investigation or representation in relation to a financial services or financial product claim (article 89I); (44) advice, investigation or representation in relation to a housing disrepair claim (article 89J); (45) advice, investigation or representation in relation to a claim for a specified benefit (article 89K); (46) advice, investigation or representation in relation to a criminal injury claim (article 89L); (47) advice, investigation or representation in relation to an employment￾related claim (article 89M); which is carried on by way of business and relates to a specified investment applicable to that activity or, in the case of (22) , (22A), (22B), (22C), (22D), (22E) and (23), is carried on in relation to property of any kind or, in the case of (40A) or (40B) relates to information about a person’s financial standing or, in the case of (41) to (47), is or relates to claims management services and is carried on in Great Britain. 3 Complaint handling procedures of the Financial Ombudsman Service
3.1 Purpose, interpretation and application
…
Interpretation
…

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3.1.4 G The Ombudsman Transitional Order and the Claims Management Order
requires the Financial Ombudsman Service to complete the handling of relevant existing complaints and relevant existing claims management complaints, in a significant number of respects, in accordance with the requirements of the relevant former scheme rather than in accordance with the requirements of this chapter. …
3.3 Dismissal without consideration of the merits and test cases
…
3.3.3 G Under the Ombudsman Transitional Order and the Mortgage and General
Insurance Complaints Transitional Order and the Claims Management Order, where the Ombudsman is dealing with a relevant complaint, he must take into account whether an equivalent complaint would have been dismissed without consideration of its merits under the former scheme in question, as it had effect immediately before the relevant transitional order came into effect. 3.3.3A G Under the Claims Management Order the Ombudsman may dismiss a relevant claims management complaint, if he considers that the complaint would have been dismissed under the rules of the former scheme or should be dismissed under the grounds for dismissal in DISP 3.3.4R or DISP 3.3.4AR. Where the Ombudsman is dealing with a relevant new claims management complaint the rules of the former scheme must be read as if they were subject to paragraph 13 of Schedule 3 of the ADR Regulations. …
3.6 Determination by the Ombudsman
Fair and reasonable
…
3.6.5 G Where the Ombudsman is determining what is fair and reasonable in all the
circumstances of a relevant new complaint or a relevant transitional complaint or a relevant new claims management complaint, the Ombudsman Transitional Order, and the Mortgage and General Insurance Complaints Transitional Order and the Claims Management Order require make provision for him to take into account what determination the former Ombudsman might have been expected to reach in relation to an equivalent complaint dealt with under the former scheme in question immediately before the relevant transitional order came into effect. …
3.7 Awards by the Ombudsman

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…
Money awards
…
3.7.3 G Where the Ombudsman is determining what amount (if any) constitutes fair
compensation as a money award in relation to a relevant new complaint, or a relevant transitional complaint or a relevant new claims management complaint, the Ombudsman Transitional Order, and the Mortgages and General Insurance Complaints Transitional Order and the Claims Management Order require make provision for him to take into account what amount (if any) might have been expected to be awarded by way of compensation in relation to an equivalent complaint dealt with under the former scheme in question immediately before the relevant transitional order came into effect. … TP 1 Transitional provisions TP1.1 Transitional provisions table (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitional provision:
dates in force
(6)
Handbook provision:
coming into force
… … … … … …
47 DISP
1.10.1R,
DISP
1.10.4AR,
DISP
1.10.5R, and
DISP 1
Annex 1ABR
R (1) This transitional provision applies where a firm with permission to carry on only regulated claims management activities is required to provide the FCA with its first report under DISP 1.10.1R in the form of DISP 1 Annex 1ABR. (2) No report is required under DISP 1.10.1R in the form of DISP 1 Annex 1ABR in respect of a period ending on an accounting reference date of the firm earlier From 1 April 2019 to 1 July 1 April

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FOS 2018/6 than 1 July 2019.
(3) If the firm does not provide a report in the form of DISP 1 Annex 1ABR under DISP 1.10.1R in respect of a period ending on an accounting reference date of the firm earlier than 1 July 2019, the first report in the form of DISP 1 Annex 1ABR provided under DISP 1.10.1R must cover the period from 1 April 2019 to the firm’s first accounting reference date which occurs on or after 1 July 2019. 48 DISP 2 and DISP 3 R In DISP 2 and DISP 3 references to a “firm” or “firms” include unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant claims management complaints in accordance with the Claims Management Order. From 1 April 2019 From 1 April 2019 49 DISP 2 and DISP 3 G Under the Claims Management Order, a relevant claims management complaint is subject to the Compulsory Jurisdiction whether or not it is about a firm or an unauthorised person. Unauthorised persons are not subject to DISP 1, but references to “firm” in DISP 2 From 1 April 2019 From 1 April 2019

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FOS 2018/6 and DISP 3 include unauthorised persons subject to the Compulsory Jurisdiction in relation to relevant claims management complaints, where applicable. 50 DISP 1, DISP 2, DISP 3 and DISP 4 R In relation to relevant claims management complaints, references in DISP 1, DISP 2, DISP 3 and DISP 4 to an “eligible complainant” include a person who is to be treated as an eligible complainant in accordance with the Claims Management Order and references to a complaint shall be construed accordingly. From 1 April 2019 From 1 April 2019

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Annex H
Amendments to the Consumer Credit sourcebook (CONC) In this Annex, underlining indicates new text and striking through indicates deleted text. 2 Conduct of business standards: general …
2.5 Conduct of business: credit broking
2.5.3 R A firm must:
…
(4) before referring the customer to a third party which carries on regulated activities or a claims management service (within the meaning of section 4 of the Compensation Act 2006 419A of the Act) or other services, obtain the customer’s consent, after having explained why the customer’s details are to be disclosed to that third party; [Note: paragraph 3.9r of CBG] … … 3 Financial promotions and communications with customers …
3.9 Financial promotions and communications: debt counsellors and debt
adjusters
…
3.9.5 R A financial promotion or a communication with a customer by a firm must
not:
…
(3) promote a claims management service (within the meaning of section 4 of the Compensation Act 2006 419A of the Act) as a way of managing a customer’s debts; [Note: paragraph 3.18k of DMG] …

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Annex I
Claims Management: Conduct of Business sourcebook (CMCOB) In this Annex, all the text is new and is not underlined. Claims Management: Conduct of Business sourcebook (CMCOB) 1 Application and purpose
1.1 Application
Application
1.1.1 G (1) The Claims Management: Conduct of Business sourcebook
(CMCOB) is the specialist sourcebook for regulated claims management activities. (2) CMCOB applies as described in this chapter, unless the application of a chapter, section or a rule is described differently in the chapters, sections or rules in CMCOB. Purpose
1.1.2 G The purpose of CMCOB is to set out the detailed obligations that are
specific to regulated claims management activities and activities connected to those activities carried on by firms. These build on and add to the high￾level obligations, for example, in PRIN, GEN and SYSC.
1.1.3 G Other parts of the FCA Handbook also apply to regulated claims
management activities. For example, the arrangements for supervising firms, including applicable reporting obligations, are described in the Supervision manual (SUP) and the detailed requirements for handling complaints are set out in the Dispute Resolution: Complaints sourcebook (DISP). The Client Assets sourcebook (CASS) also contains rules about client money that apply in certain circumstances.
1.1.4 G Firms are reminded that they may require permissions to carry on regulated
activities other than regulated claims management activities: for example, credit broking, entering into a regulated credit agreement as lender or insurance distribution activity.
1.2 Who? What? Where?
1.2.1 R CMCOB applies to a firm with respect to carrying on regulated claims
management activities and ancillary activities, unless otherwise stated in, or in relation to, a rule.

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1.2.2 G For an activity to amount to a regulated claims management activity it must
be carried on in Great Britain. Firms should note that regulated claims management activities (and activities ancillary to regulated claims management activities) can be carried on in Great Britain whether or not they are carried on from an establishment maintained in the United Kingdom (see PERG 2.4A).
1.2.3 R A firm must:
(1) ensure that its employees and agents comply with CMCOB; and (2) take reasonable steps to ensure that other persons acting on its behalf comply with CMCOB. 2 Conduct of business
2.1 General principles
2.1.1 R A firm must act honestly, fairly and professionally in accordance with the
best interests of its customer (the client’s best interests rule).
2.1.2 R A firm must establish and implement clear, effective and appropriate
policies and procedures to identify and protect vulnerable customers.
2.1.3 G Customers who have mental health difficulties or mental capacity
limitations may fall into the category of particularly vulnerable customers.
2.1.4 R A firm must not engage in high pressure selling in relation to regulated
claims management activity.
[Note: CAPR CSR 3]
2.1.5 R A firm must not carry out a cold call in person.
[Note: CAPR CSR 4]
2.1.6 G CMCOB 2.2 sets out further rules and guidance in relation to generating,
obtaining, and passing on leads.
2.1.7 R A firm must not make or pursue a claim on behalf of a customer, or advise a
customer to make or pursue a claim, if the firm knows or has reasonable grounds to suspect that the claim:
(1) does not have a good arguable base; or (2) is fraudulent; or (3) is frivolous or vexatious.
2.1.8 G (1) A firm should take all reasonable steps to investigate the existence

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FOS 2018/6 and merits of each element of a potential claim before making or pursuing the claim or advising the customer themselves to make or pursue the claim. [Note: CAPR GR 2(a)] (2) In accordance with Principle 1 (Integrity) and Principle 2 (Skill, care and diligence), the firm’s investigations should be such that it is able, in presenting a claim, to make representations which:
(a) substantiate the basis of the claim; (b) relate to the nature of the claim and are specific to the claim; and (c) are not false or misleading, or an exaggeration- (3) In complying with CMCOB 2.1.7R firms should have regard to:
(a) relevant guidance, including about their decisions, published by the Financial Ombudsman Service, any other relevant statutory ombudsman, or statutory compensation scheme; and (b) decisions by the Financial Ombudsman Service, or any other relevant statutory ombudsman, or statutory compensation scheme concerning similar claims in respect of which the firm acted for the claimant to whom the decision was addressed.
2.1.9 R A firm must publish on its website (if it operates a website) the standard
terms and conditions of the contracts it enters into with customers. [Note: CAPR CSR 11]
2.1.10 R A firm must not take any payment from a customer until the customer has
signed an agreement with the firm which provides for such a payment to be made. [Note: CAPR CSR 11]
2.1.11 G (1) CMCOB 2.1.10R prohibits a firm from taking a payment from a
customer before the customer has signed an agreement with the firm. It is not sufficient for the firm to enter into an agreement with the customer orally for this purpose: the agreement should be signed. (2) The signature should be on a hard copy of the agreement which may be given or posted to the firm, else sent by fax, or scanned or photographed and sent electronically. Alternatively, the customer could insert a digital image of their handwritten signature into an electronic copy of the agreement before returning the agreement to the firm by email. (3) The FCA would not view an agreement as having been signed for the

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FOS 2018/6 purposes of CMCOB 2.1.10R where the customer does no more to indicate their acceptance of the firm’s terms and conditions than to send a text message or email or to tick a box on a website or web￾based form. (4) The firm will also need to have complied with the requirements of CMCOB 4 (Pre-contractual requirements), including the requirement to take reasonable steps to ensure that the customer understands the agreement (see CMCOB 4.3.1R(3)). Where an agreement is entered into electronically, those steps should include the firm satisfying itself that the customer has had the opportunity to familiarise themselves with the contract.
2.1.12 R (1) This rule applies in respect of an agreement entered into between the
customer and the firm under which the firm is to provide claims management services. (2) The firm must:
(a) allow the customer to cancel the agreement during a period of 14 days beginning on the day that the agreement is entered into; and (b) permit the customer to terminate the agreement at any time after that period. (3) Where the customer cancels an agreement under (2)(a), the firm must provide the customer with a refund of any payments made to the firm. (4) Where the customer terminates an agreement as in (2)(b), the firm must not charge the customer an amount in excess of what is reasonable in the circumstances and reflects the work undertaken by the firm. (5) This rule:
(a) does not apply if regulation 8 (Terms and conditions of termination in an employment matter) of the Damages-Based Regulations 2013, or any equivalent provision made under the law of Scotland, applies; and (b) is subject to:
(i) CMCOB 2.1.13R and CMCOB 2.1.14R; and (ii) the claims management fee cap (see CMCOB 5). [Note: CAPR CSR 17 and 18]
2.1.13 R (1) A firm must not charge a fee to a customer in relation to a financial
services or financial product claim before the provision of a claims

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FOS 2018/6 management service to the customer other than seeking out, referrals and identification of claims or potential claims. [Note: CAPR CSR 15] (2) This rule is subject to CMCOB 2.1.14R.
2.1.14 R (1) A firm must not charge a fee to a customer in relation to a claim in
respect of a payment protection contract prior to the later of:
(a) the customer withdrawing or deciding not to pursue the claim; and (b) the settlement of the claim. (2) A firm must not charge a fee to a customer in relation to a claim in respect of a payment protection contract if there was no such contract between the customer and the person whom it was alleged was the counterparty to the contract. [Note: CAPR CSR 15 and 16]
2.2 Generating, obtaining and passing on leads
2.2.1 G (1) The Principles (in particular Principle 6 and Principle 7) apply to
actions of a firm dealing with a claim or a customer whose details the firm has obtained from a lead generator. For example, where there is a possibility that the lead generator is using misleading information, advice or actions to obtain a customer’s personal data, acting on those sales leads could amount to a breach by the firm of Principle 6 and Principle 7. (2) The definition of “customer” in the Glossary includes a person who may have a claim and either (i) may use the services of a person who carries on a regulated claims management activity or an activity which would be a regulated claims management activity but for the exclusion in the Regulated Activities Order; or (ii) in respect of whom a person carries on the regulated activity of seeking out, referrals and identification of claims or potential claims or an activity which would be the regulated activity of seeking out, referrals and identification of claims or potential claims but for an exclusion in the Regulated Activities Order. An individual who is contacted by a lead generator, or whose details are obtained by a lead generator and passed on to another firm, is, therefore, a customer of both the lead generator and, where relevant, that other firm. Requirements relating to use of a lead generator

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2.2.2 R (1) A firm that accepts or proposes to accept sales referrals, leads or data
(including details of claims or of customers) from a lead generator must:
(a) ascertain whether the lead generator is an authorised person with a permission to carry on seeking out, referrals and identification of claims or potential claims; and (b) satisfy itself as to whether the lead generator has appropriate systems and processes in place to ensure compliance with (i) and (ii) (including that the referrals, leads or data have been obtained in compliance with (i) and (ii)):
(i) data protection legislation; and
(ii) the Privacy and Electronic Communications (EC Directive) Regulations 2003 (or, if the lead generator is established in an EEA State but has no establishment in the United Kingdom, the equivalent legislation in that EEA State). (2) The firm must take the steps required by (1):
(a) before accepting sales referrals, leads or data from a particular lead generator for the first time; and (b) if the firm continues to accept sales referrals, leads or data from that lead generator, at appropriate intervals. (3) If the lead generator is not an authorised person with a permission to carry on seeking out, referrals and identification of claims or potential claims, the firm must take reasonable steps to satisfy itself that the lead generator may carry on that regulated activity without breaching the general prohibition. (4) The firm must keep a record of the steps it has taken under (1), and its conclusions in relation to (1)(a) and (1)(b).
2.2.3 G (1) A firm may ascertain whether a person is an authorised person by
checking the Financial Services Register on the FCA website. (2) In order to comply with CMCOB 2.2.2R(1)(b) the FCA expects firms and lead generators to ensure that they are aware of any requirements to obtain consent under:
(a) regulation 21A of the Privacy and Electronic Communications (EC Directive) Regulations 2003 (the cold calling ban); (b) data protection legislation; and

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(c) any guidance published by the Information Commissioner’s Office in relation to data protection legislation and the cold calling ban. (3) In satisfying itself as to whether a lead generator has appropriate systems and processes in place to ensure compliance with data protection legislation, a firm should consider, in particular, the procedures by which the lead generator obtains customers’ personal data and customers’ consent to the use (including the acquisition, storage and sharing) of that data and whether there is consent to use it in the firm’s intended marketing. (4) Firms are reminded that, under data protection legislation, they must have consent from the customer to process the customer’s personal data, for example to contact the customer or to pass their details on to a third party, unless one of the other conditions which renders the processing of that data lawful is satisfied. In this context, the FCA would normally expect firms to obtain consent and would only expect firms to be able to rely on the legitimate interests condition (under article 6(1)(f) the General Data Protection Regulation (EU) No 2016/679) very occasionally. Where the firm relies on consent which has been obtained by a lead generator, the firm should satisfy itself that the consent was properly obtained, and clearly covers both the firm and the use that the firm intends to make of the customer’s personal data. In relation to consent, firms are also reminded of the requirements in article 7(2) of the General Data Protection Regulation (EU) No 2016/679. (5) In satisfying itself as to whether a lead generator has appropriate systems and processes in place to ensure compliance with the Privacy and Electronic Communications (EC Directive) Regulations 2003, a firm should consider, in particular, the systems and processes the lead generator has in place to ensure compliance with the prohibition of cold-calling in relation to claims management services (regulation 21A) and the requirements in relation to the use of electronic mail, including text messages, for direct marketing purposes (regulation 22). The Regulations also contain restrictions on marketing by fax, email and text message and apply to both the caller/sender of the marketing (e.g. the lead generator) and the instigator (e.g. the firm, where the lead generator is acting on behalf of the firm). Both the instigator of the marketing and the business carrying out the marketing may be subject to enforcement action if any breaches occur. Firms should therefore ensure that any marketing carried out on their behalf by a lead generator is compliant. (6) A firm should have regard to the frequency with which it accepts leads from a lead generator when determining what an appropriate interval is at which it should take the steps required by CMCOB 2.2.2R: the more frequently it accepts leads from that lead generator,

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FOS 2018/6 the shorter should be the interval; and where the firm accepts leads from the lead generator on an ongoing basis, it should take those steps regularly. Recording the source of sales referrals, leads or data
2.2.4 R Where a firm accepts a sales referral, lead or data, or details of a claim or of
a customer, from a lead generator, the firm must keep a record of the lead generator from whom it accepted that lead or those details for at least three years.
2.2.6 R If the firm is not satisfied as to the matters in CMCOB 2.2.2R(1)(b), it must
neither accept sales referrals, leads or data from that lead generator nor use sales referrals, leads or data obtained from that lead generator. Notifying the FCA if a lead generator is not authorised
2.2.7 R (1) If the lead generator is not an authorised person with a permission
to carry on seeking out, referrals and identification of claims or potential claims and the firm is not satisfied that the lead generator may carry on that regulated activity without breaching the general prohibition, the firm must:
(a) promptly notify the FCA in writing, using the form at SUP 15
Annex 4R; and
(b) neither accept sales referrals, leads or data from that lead generator nor use sales referrals, leads or data obtained from that lead generator. (2) A notification under (1)(a) must include:
(a) the identity of the lead generator and, if known, contact details for the lead generator; and (b) the firm’s reasons for not being satisfied that the lead generator may carry on seeking out, referrals and identification of claims or potential claims without breaching the general prohibition. Provision of information by lead generators
2.2.8 R (1) This rule applies to a firm from the time at which it could reasonably
be expected to know or suspect that it is going to:
(a) pass the customer, or details of a customer or of a claim, to a third party, or give details about the third party to a customer; and (b) receive a payment from the third party in relation to the firm doing so.

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(2) The firm must, in its financial promotions and in any communication with the customer, include a prominent statement to the effect that the firm receives payments from third parties to whom it passes customers, or the details of customers or of claims, or whose details it passes to customers, in respect of doing so. (3) If a communication relates to a claim which may be made by a customer, without using the services of the firm and without incurring a fee, to a statutory ombudsman or statutory compensation scheme the firm must ensure that the communication contains a prominent statement to the effect that:
(a) the customer is not required to use the services of a firm which carries on regulated claims management activity to pursue their claim; and (b) it is possible for the customer to present the claim themselves for free, either to the person against whom they wish to complain or to the relevant statutory ombudsman or statutory compensation scheme. (4) Where the communication is made by voice telephony, the firm must comply:
(a) with (2) at the start of the call; and (b) with (3) as soon as the firm knows the sort of claim to which the communication relates. (5) The firm need not comply with (2) or, as relevant, (3) if it has previously complied with those rules in respect of that customer within the previous month.
2.2.9 G (1) CMCOB 2.2.8R applies to lead generators, and to other firms which
generate leads, as soon as there is a possibility of customers, or the details of customers or of claims being passed to another person. (2) Examples of a firm receiving a payment from a third party in relation to doing any of the things mentioned in CMCOB 2.2.8R(1)(a) include (but are not limited to):
(a) the third party paying the firm a fee for each sales referral or lead it passes on; and (b) the third party making a monthly, occasional or a one-off payment to the firm irrespective of how many sales referrals, or leads or data the firm actually passes on and irrespective of how this might be described (for example as a ‘marketing budget’). (3) Where that rule applies to telephone calls, it applies in respect of

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FOS 2018/6 both incoming and outgoing calls, including voice telephony over the internet. (4) The guidance at CMCOB 3.2.8G also applies in relation to CMCOB 2.2.8R(3). (5) Firms are reminded that section 56 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 prohibits the payment and receipt of fees for the referral of legal services in cases involving personal injury or death.
2.3 Recording and retention of telephone calls and electronic communications
Recording and retention of telephone calls and electronic communications
2.3.1 R This section applies to telephone calls and electronic communications
between the firm and a customer made for the purposes of, or in connection with, a regulated claims management activity carried on by the firm (“relevant communications”).
2.3.2 R Firms must record all telephone calls and retain all other relevant
communications.
2.3.3 G The requirement to record and retain all relevant communications applies to
incoming and outgoing calls, text messages, emails, and other electronic communications between the firm (or a person acting for the firm) and a customer, including calls and communications relating to complaints about the firm.
2.3.4 R A firm must take all reasonable steps to prevent an employee or contractor
from making, sending, or receiving relevant communications:
(1) on equipment owned by a person other than the firm; and (2) which the firm is unable to record or retain.
2.3.5 R A firm must notify a customer at the start of each telephone call (including a
call made by voice telephony via the internet) that the call will be recorded. Retention period
2.3.6 R The firm must retain telephone call recordings (including recordings of calls
made by voice telephony via the internet) for a minimum of 12 months, from the latest of:
(1) the customer withdrawing or deciding not to pursue the claim; (2) the settlement of the claim; (3) the conclusion of any legal proceedings commenced in connection

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(4) the conclusion of the handling of any complaint made by the customer to or about the firm, including the handling of the complaint by an alternative dispute resolution scheme (such as the Financial Ombudsman Service); (5) the termination of the agreement between the firm and the customer; and (6) the date of the firm’s last contact (by whatever method) with the customer.
2.3.7 G (1) For the purposes of CMCOB 2.3.6R(2), a claim is settled when the
customer receives compensation, damages or redress in respect of the claim. (2) The effect of CMCOB 2.3.6R is that where, for example, the only contact with the customer is a telephone call made with a view to selling the firm’s services, but the customer does not engage the firm, the firm is required to keep a record of that call for at least 12 months. (Firms are reminded that, in relation to cold calling by telephone, the Privacy and Electronic Communications (EC Directive) Regulations 2003 prohibit unsolicited calls for the purposes of direct marketing in relation to claims management services without the consent of the subscriber of the line being called (regulation 21A).) (3) The effect of CMCOB 2.3.6R(4) is as follows. Where the firm would otherwise become entitled to cease to keep the record absent that provision but at that time there is a complaint that has been made and not concluded, the firm must retain that record for a minimum of twelve months from the point at which the complaint has been concluded.
2.4 Record keeping
2.4.1 G (1) Firms are reminded that SYSC 9.1.1R requires a firm to arrange for
orderly records to be kept of its business and internal organisation, including all services and transactions undertaken by it, which must be sufficient to enable the FCA to monitor the firm’s compliance with the requirements under the regulatory system, and in particular to ascertain that the firm has complied with all obligations with respect to clients. (2) Firms are also reminded that SYSC 9.1.5G states that in relation to the retention of records, a firm should have appropriate systems and controls in place with respect to the adequacy of, access to, and the security of its records so that the firm may fulfil its regulatory and

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FOS 2018/6 statutory obligations. With respect to retention periods, the general principle is that records should be retained for as long as is relevant for the purposes for which they are made. For these purposes retaining records would include keeping all text messages, emails, and other electronic communications between the firm (or a person acting for the firm) and a customer. (3) As a minimum, firms should retain records in their files of any advice given to, and correspondence with, their customers, and of any correspondence with third parties in the course of their providing services to their customers. (4) CMCOB also imposes a number of specific record-keeping requirements: see Schedule 1. 3 Financial promotions, and communications with customers
3.1 Application
3.1.1 G This chapter sets out rules and guidance on financial promotions and
communications with customers that relate to regulated claims management activity.
3.1.2 G (1) In accordance with Principle 7, a firm’s financial promotions and
communications with its customers should be fair, clear and not misleading. (2) The guidance in this chapter is relevant to all stages of a firm’s interaction with its customers: from seeking out and obtaining customers, whether for itself or for another firm; negotiating and entering into contracts with its customers; advising its customers; investigating claims; presenting claims and representing customers; keeping its customers informed of progress; and through to settling a claim, being paid and the relationship with the client coming to an end.
3.2 Financial promotions and communications – general standards
The fair, clear and not misleading rule
3.2.1 R (1) A firm must ensure that each of its communications and financial
promotions is fair, clear and not misleading (the fair, clear and not misleading rule). (2) This rule applies in relation to all communications with customers, including:

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(a) communications intended to generate leads either for the firm or for another person; (b) pre-contract disclosures and other information which CMCOB 4 requires a firm to give to a customer; and (c) post-sales communications with customers, including:
(i) communications intended to keep the customer up to date, in accordance with CMCOB 6.1; (ii) communications of or about fees, charges, invoices and payments; and (iii) communications about complaints relating to the firm. (3) This rule and the other rules in this chapter apply when a firm approves a financial promotion in the same way as when a firm communicates a financial promotion itself. Before a firm approves a financial promotion it must confirm that it complies with the rules in this chapter and if, at any time after the firm approves a financial promotion, it becomes aware that the financial promotion no longer complies with the rules in this chapter, it must withdraw its approval and notify any person it knows to be relying on its approval as soon as practicable.
3.2.2 G (1) The fair, clear and not misleading rule means that firms should
communicate with their customers in a way that is appropriate, taking into account the means of communication, the information the communication is intended to convey and the nature of the customer and of the claim. (2) In complying with that rule, firms should:
(a) have regard to the average customer’s understanding of the services that the firm provides; (b) present information in a logical order; (c) use plain and intelligible language and, where the use of jargon or technical terms is unavoidable, explain the meaning of any jargon or technical terms; (d) make key information prominent and easy to identify, including by means of headings and the layout, display and font attributes of text, and by the use of design devices such as tables, bullet points and graphs; and (e) avoid unnecessary disclaimers.
3.2.3 R If, in relation to a particular communication or financial promotion, a firm

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3.2.4 R A firm must ensure that each of its financial promotions and
communications with a customer:
(1) identifies the firm and that it is a claims management company; (2) does not offer a cash payment or any benefit in money or money’s worth (for example, a ‘free’ gift) as an inducement for entering into an agreement with the firm or making a claim; (3) does not promote the idea that it is appropriate that compensation be used in a way that is not consistent with the basis of the claim; (4) does not falsely imply that the business is approved by the Government or is connected with any government agency or any regulator. [Note: CAPR CSR 6]
3.2.5 G (1) The firm may identify itself by using a trading name or shortened
version of the legal name of the firm (provided the customer can identify the firm communicating the information) and that it is a claims management company. (2) The FCA would view a financial promotion or communication as promoting the idea that it is appropriate that compensation be used in a way that is not consistent with the basis of the claim if the financial promotion or communication states or implies that a claim is a means of making money, rather than being for the purpose of compensating the customer for damage, injury or loss.
3.2.6 R (1) Where a claim is one that falls within the province of a statutory
ombudsman or statutory compensation scheme such as the Financial Ombudsman Scheme, the compensation scheme, the Criminal Injuries Compensation Authority, a housing complaint service or any other such body, the firm must not suggest that a customer will have a more favourable outcome if the customer uses the services of the firm. [Note: CAPR CSR 12] (2) Where (1) does not apply, a firm must not state or imply in any financial promotion or communication with a customer that a claim will be resolved more quickly, or with a better prospect of success, or with a better outcome for the customer, than if the customer were to make the claim themselves, unless the statement or implication is true and the firm can provide evidence to substantiate the statement or implication.

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3.2.7 R If a claim to which a financial promotion relates is of a sort that may be
made by a customer to a statutory ombudsman or statutory compensation scheme, without using the services of the firm and without incurring a fee, the firm must ensure that the financial promotion contains a prominent statement to the effect that:
(1) the customer is not required to use the services of a firm which carries on regulated claims management activity to pursue their claim; and (2) it is possible for the customer to present the claim themselves for free, either to the person against whom they wish to complain or to the relevant statutory ombudsman or the statutory compensation scheme.
3.2.8 G (1) Where a claim can be made to a statutory ombudsman or statutory
compensation scheme, CMCOB 3.2.7R requires firms to name the relevant ombudsman or compensation scheme. (2) The relevant statutory ombudsmen or statutory compensation schemes that the firm should name should include those specified in the following table. If there are other statutory ombudsmen or compensation schemes relevant to the nature of claims to which the financial promotion relates, the firm should name them in addition. Claim Ombudsman or compensation scheme criminal injury claim the Criminal Injuries Compensation Authority employment￾related claim none specified financial services or financial product claim the Financial Ombudsman Service: for any financial promotion which is generic in nature or where the firm would expect those to whom the financial promotion is addressed to be eligible to pursue their claim with the Financial Ombudsman Service the compensation scheme: for any financial promotion addressed to persons who may have a claim against a person which is no longer in business, where the firm would expect those to whom the financial promotion is addressed to be eligible to pursue their claim with compensation scheme the Pensions Ombudsman: for any financial promotion addressed to persons who may to be eligible to pursue their claim with the Pensions

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Ombudsman, for example where the financial promotion relates to claims against an occupational pension provider housing disrepair claim a housing complaint service personal injury claim none specified claim for a specified benefit none specified (3) Firms should also indicate whether claims may be made direct to the ombudsman or compensation scheme, or whether it is necessary for the customer first to pursue their claim directly with the person to whom it relates. (4) For example, where the financial promotion that relates to claims in respect of packaged bank accounts, a firm could comply with CMCOB 3.2.7R by indicating: “You do not need to use a claims management company to make your complaint to your bank, and if your complaint is not successful you can refer it to the Financial Ombudsman Service yourself for free”. ‘No-win, no-fee’
3.2.9 R (1) This rule applies if a firm uses the term “no win, no fee” or a term
having a similar meaning in a financial promotion.
(2) In the case of a firm which charges or may charge a fee for services to which the financial promotion relates, the firm must include prominently in the financial promotion:
(a) the fees that the firm charges in respect of claims of the sort to which the financial promotion relates; (b) where those fees are not fixed or ascertainable in advance, the method by which the fees would be calculated; and (3) In the case of a firm which charges a termination fee in respect of an agreement with a customer for services to which the financial promotion relates (see CMCOB 2.1.12R(2)(b) and CMCOB 2.1.12R (4)), the firm must ensure that the financial promotion indicates:
(a) that the firm may charge a termination fee in the event that the customer terminates the agreement other than during the cancellation period (see CMCOB 2.1.12R(2)(a)); and (b) what that termination fee is or, where it is not fixed or ascertainable in advance, the method by which it would be

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(4) Subject to (5), where a firm (F) passes customers, or details of a customer or of a claim, to a third party (T), or gives details about the third party (also T) to a customer, F must include prominently in the financial promotion:
(a) the fees that T charges in respect of claims of the sort to which the financial promotion relates; or (b) where those fees are not fixed or ascertainable in advance, the method by which the fees would be calculated. (5) Where F does not know the information required by (4), F must include prominently in the financial promotion an indication of the fee that may be charged for services to which the financial promotion relates. (6) Subject to (7), where T charges a termination fee in respect of an agreement with a customer for services to which the financial promotion relates (see CMCOB 2.1.12R(2)(b) and CMCOB 2.1.12R(4)), F must ensure that the financial promotion indicates:
(a) that T may charge a termination fee in the event that the customer terminates the agreement other than during the cancellation period (see CMCOB 2.1.12R(2)(a)); and (b) what that termination fee is or, where it is not fixed or ascertainable in advance, the method by which it would be calculated. (7) Where F does not know the information required by (6), F must still inform the customer that they may be required to pay a termination fee. (8) Where a firm is required, under this rule, to include information about fees or termination fees in a financial promotion, that information must be no less prominent than the term referred to in (1).
3.2.10 G (1) As a consequence of CMCOB 3.2.9R(4) and CMCOB 3.2.9R(5) if a
firm is unaware of the charging basis of the third parties, to whom they pass the customer or details of the customer, or of a claim , or whose details they give to a customer, they should not advertise a no￾win, no-fee service. (2) When providing an indication of the fee for the purposes of CMCOB 3.2.9R(5), the FCA expects firms to provide a reasonable indication of the fee the customer is likely to pay bearing in mind the fair, clear and not misleading rule.

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(3) In particular, the FCA expects firms to provide:
(a) an indication of a typical fee; or
(b) a range of the fees; that may become payable by the customers:
(c) whom the firm passes to third parties or whose details the firm passes to third parties; (d) whose claims the firm passes to third parties; or (e) to whom the firm gives the details of third parties. (4) A firm could provide an indication of a typical fee where a significant majority of such customers all pay the same fee (e.g. where the fee inclusive of VAT is 25% of the compensation amount). (5) Where the firm provides an indication of a typical fee, it should make clear that that figure is only an indication of the amount which customers may be required to pay and that the actual fee may be higher. For example, the firm could state:
“Typically customers pay 25% of the amount recovered, although this will be subject to your individual circumstances and the actual fee may be more or less than this”. (6) Where the firm provides a range of fees:
(a) subject to (c), the range should represent all of the third parties to whom the firm passes customers or details of customers, or of claims, or whose details the firm gives to customers, (b) the range should include the highest and the lowest fee that may become payable by such customers; (c) the firm should not include a fee as the lowest fee unless that fee is charged to a reasonable proportion of such customers. Restriction on advertising in certain buildings
3.2.11 R A firm must not make a financial promotion, or a communication intended
to generate a lead, in a medical facility, a care facility or a public building without the approval in writing of the management of the facility or building. [Note: in part, CAPR CSR 5]

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3.2.12 G (1) The purpose of CMCOB 3.2.11R is to prohibit the marketing of
regulated claims management activity, and lead generation for regulated claims management activity, in medical facilities and public buildings without permission. Permission should be obtained from the management of the organisation which occupies the facility or building, rather than from junior members of staff. (2) In CMCOB 3.2.11R:
(a) a “medical facility” should be taken to include hospitals, GP surgeries, walk-in clinics and any other medical establishment in which people who have suffered an accident or other incident that might give rise to a claim may go to seek treatment; (b) a “care facility” includes any sort of establishment in which children or adults receive social care, either as residents or as outpatients; and (c) a “public building” should be taken to include any building to which the public has access, such as police stations and court buildings. 4 Pre-contractual requirements
4.1 Application and purpose
4.1.1 R This chapter applies to a firm in relation to regulated claims management
activities other than seeking out, referrals and identification of claims or potential claims.
4.1.2 G This chapter sets out rules and guidance on the information that firms
should provide to customers before entering into an agreement that relates to regulated claims management activity.
4.2 Pre-contract information and advice
Summary document
4.2.1 R A firm must provide summary information (see CMCOB 4.2.2R) to a
customer in accordance with this section before entering into an agreement with the customer that relates to regulated claims management activity.
4.2.2 R (1) The firm must provide the summary information:
(a) in a single page document, which contains only the summary information;

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(b) in a durable medium; and
(c) in plain and intelligible language.
(2) The summary information is:
(a) a brief description of the services that the firm will provide under the agreement (see CMCOB 4.2.8R); (b) a brief description of the steps that the customer will need to take in respect of the claim; (c) a brief description of how the firm will keep the customer updated on the progress of the claim; (d) a fee illustration or estimate, and explanation (see CMCOB 4.2.5R); (e) a brief description of the customer’s right to cancel the agreement (see CMCOB 2.1.12R(2)(a)); and (f) a brief description of:
(i) the customer’s right to terminate the agreement; and (ii) any fees that may be payable by the customer to the firm if the customer terminates the agreement (see CMCOB 2.1.12R(2)(b) and CMCOB 2.1.12R(4)); (g) if the claim is of a sort which may be made by the customer to a statutory ombudsman or a statutory compensation scheme, without using the services of the firm and without incurring a fee, a statement to the effect that:
(i) the customer is not required to use the services of a firm which carries on regulated claims management activity to pursue their claim; and (ii) it is possible for the customer to present the claim themselves for free, either to the person against whom they wish to complain or to the statutory ombudsman or the statutory compensation scheme; and (h) if the firm is aware that the person against whom the claim is to be made is a member of, or subject to, an alternative dispute resolution scheme (other than an ombudsman or a scheme of a sort mentioned in (g)), a statement to the effect that it is possible for the customer to present the claim themselves to that alternative dispute resolution scheme.
4.2.3 G The guidance at CMCOB 3.2.8G also applies in respect of CMCOB

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4.2.2R(2)(g).
4.2.4 G The requirement at CMCOB 4.2.2R(2)(b) to describe the steps a customer
will need to take in respect of a claim will generally include, but are not limited to, providing documentation relevant to the claim (such as background information) and completing the necessary paperwork.
4.2.5 R (1) The firm must explain the basis on which it would calculate its fee,
and provide an illustration or estimate of that fee.
(2) Where the fee would be payable by reference to the amount recovered for the customer, the firm must provide an illustration of what its fee would be by reference to each of the following amounts recovered for the customer:
(a) £1,000;
(b) £3,000; and
(c) £10,000.
(3) For the purposes of (2), the “amount recovered for the customer” means the amount paid or payable by the person against or about whom the claim would be made, ignoring any set-off or netting against any sum owed or payable by the customer to that person. (4) Where the firm’s fee is not ascertainable as in (2), but is instead dependent on factors which cannot be known in advance (for example, where the firm charges an hourly rate), the firm must provide an estimate calculated by reference to:
(a) the fact and circumstances of the claim, to the extent that the firm has knowledge of them; and (b) the typical number of hours the firm would expect to spend on a claim of that type. (5) The illustration or estimate must be accompanied:
(a) where (2) applies, by a statement that the fee illustration is not to be taken as an estimate of the amount likely to be recovered for the customer; (b) where (4) applies, an explanation of how the estimate has been calculated; and (c) a statement to the effect that the fee that the customer will have to pay may be more than or less than the illustration or estimate. (6) Where the fee is a fixed amount, the firm may indicate that the fee is a fixed amount and not an estimate.

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4.2.6 G (1) If the firm is unable to provide a precise figure under CMCOB
4.2.5R(4), it may provide an estimate in the form of a range. Firms should be able to demonstrate the basis for their calculations under CMCOB 4.2.5R(4), and should ensure that their estimates are accurate. (2) Estimates and illustrations should be shown inclusive of VAT. VAT￾exclusive fees should only be shown if the customer pays no VAT or can recover VAT, or the firm is not subject to VAT. Provision of information and advice
4.2.7 R (1) Before entering into an agreement with the customer that relates to
regulated claims management activity, the firm must give the customer objective information, in a durable medium, to assist the customer to reach a decision as to whether to pursue the claim. (2) The information given under (1) must include information on:
(a) the risks and costs involved in making the claim, in particular (where relevant) the possibility of not recovering any money but becoming liable for costs; and (b) the possibility, in the case of legal action, of attending Court and giving evidence. [Note: CAPR CSR 11a]
4.2.8 R Before entering into an agreement with the customer that relates to
regulated claims management activity, the firm must also give the customer information, in a durable medium, on:
(1) the services that will be provided under the agreement, including but not limited to:
(a) the actions the firm will take to ascertain the basis and merits of the claim, including (where relevant):
(i) the nature of inquiries that the firm will make of the person about whom the claim is to be made and of third parties; and (ii) the procurement of legal, specialist or expert advice; (b) the nature of any advice to be provided by the firm including:
(i) advice on the merits of the claim; and (ii) advice on any particular steps that the customer may need to take;

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(c) the actions the firm will take to present and pursue the claim; (d) the actions the firm will take and the advice it will give when the claim is completed (that is, when it is either rejected or successful, whether in whole or in part); (2) the person who will provide those services; (3) the terms under which and the conditions on which those services will be provided; (4) any charge the firm makes; (5) whether the firm’s fees are:
(a) calculated on the gross or net amount of the customer’s damages, compensation or monies in settlement of a claim; and (b) a clear explanation of how this will affect the damages, compensation or settlement monies that the customer will actually receive; (6) any referral fee paid by the firm to, or other financial arrangement with, any other person in respect of the introduction of the customer to the firm; (7) any steps that the customer is likely to have to take in respect of the claim; (8) any costs that the customer may have to pay, in relation to repayments of a loan taken out for the purchase of a legal expenses insurance policy, or any similar purpose, and whether the customer may be liable to pay any shortfall in recoverable costs or premiums from the person against whom the claim is to be made; (9) the documentation likely to be needed to pursue the claim; (10) any relationship between the firm and any solicitor or panel of solicitors to whom the firm might refer the customer or from whom the firm might commission services in relation to the customer; (11) the procedures to follow if the customer wishes to make a complaint about the firm; (12) how the customer may cancel or terminate the contract and what the consequences of cancellation and termination are, including the reimbursement of any costs paid during the cancellation period and any charges for work completed after that cancellation period (see CMCOB 2.1.12R); (13) the nature and frequency of updates that the firm will give the

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4.2.9 R In addition to the matters in CMCOB 4.2.7R and 4.2.8R, the firm must also
inform the customer, in a durable medium, that:
(1) if the customer has outstanding liabilities with the person against whom the claim is to be made:
(a) any damages, compensation or settlement monies might, in certain circumstances, be off-set against those outstanding liabilities; and (b) the customer will, where necessary, need to pay the firm’s fees from their own funds. (2) in the case of pension related claims:
(a) it is possible that the firm’s fee may become payable before the customer has access to their pension; and (b) the customer will, where necessary need to pay the firm’s fees from their own funds. (3) if the customer is subject to or proposing any of the processes or arrangements listed at CMCOB 4.3.1R(6)(a) to (f) that:
(a) any damages, compensation or settlement monies might, in certain circumstances, be off-set against the customer’s outstanding debts; and (b) the customer will, where necessary need to pay the firm’s fees from funds which are not subject to the processes or arrangements listed at CMCOB 4.3.1R(6)(a) to (f).
4.2.10 G (1) Examples of outstanding liabilities in CMCOB 4.2.9R(1) include:
(a) late repayments due under a credit agreement for financial services claims; or (b) the training costs paid by an employer for the employee which become repayable by the employee in accordance with the conditions of a contract. (2) Outstanding liabilities would not include arranged debts such as a mortgage account.
4.2.11 R When a firm gives information to a customer as required by CMCOB

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4.2.1R, CMCOB 4.2.7R, CMCOB 4.2.8R and CMCOB 4.2.9R, the firm must accompany the information with:
(1) the name, postal address and other contact details of the firm; and (2) the reference number under which the firm appears in the Financial Services Register. [Note: in part, CAPR CSR 11(l)]
4.2.12 G (1) The information required by CMCOB 4.2.7R, CMCOB 4.2.8R and
CMCOB 4.2.9R cannot be given in the same document as the information required by CMCOB 4.2.2R. However, it is permissible for all of this information to be provided in attachments to the same email or enclosures to the same letter. (2) When giving the information referred to in CMCOB 4.2.11R, firms are reminded of their obligations under GEN 4.3.1R.
4.2.13 G Firms are reminded that SYSC 10.1.7R requires them to maintain and
operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest (as defined in SYSC 10.1.3R) from adversely affecting the interests of their customers. If those arrangements are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a customer will be prevented, SYSC 10.1.8R requires the firm to disclose the general nature or sources of conflicts of interest, or both, and the steps taken to mitigate those risks, before undertaking business for the customer. The FCA would expect firms to do so at the same time as they provide the information required by CMCOB 4.2.
4.3 Pre-contract requirements
4.3.1 R Before entering into an agreement with the customer that relates to
regulated claims management activity, the firm must:
(1) take reasonable steps to:
(a) ascertain whether the customer has other methods for pursuing the claim, and if so:
(i) ensure that the customer understands that those methods are available to them; (ii) seek confirmation in writing from the customer that the customer does not wish to use those methods, and the customer’s reasons for not wishing to do so; (iii) record the customer’s confirmation and reasons; and

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(b) draw the customer’s attention to the information provided under CMCOB 4.2.2R(2)(g) and (h), if that information is relevant to the claim; [Note: in part, CAPR CSR 10] (2) make it clear to the customer that the customer may seek further advice or look for another person to assist the customer with the claim, subject to any time limits within which a claim must be made; and [Note: CAPR CSR 13] (3) take reasonable steps to ensure that the customer understands the agreement; [Note: in part, CAPR CSR 14 (4) ask the customer whether they have outstanding liabilities with the person against whom the claim is to be made and explain that if they do:
(a) that any damages, compensation or settlement monies might, in certain circumstances, be off-set against those outstanding liabilities; and (b) the customer will, where necessary, need to pay the firm’s fees from their own funds; (5) in the case of pension related claims explain:
(a) that the firm’s fee may become payable before the customer has access to their pension; and (b) that the customer will, where necessary, need to pay the firm’s fees from their own funds; (6) ask the customer if they, whether in Great Britain or in another jurisdiction:
(a) have been declared bankrupt;
(b) are subject to a bankruptcy petition; (c) are subject to an individual voluntary arrangement; (d) have proposed an individual voluntary arrangement which is yet to be approved or rejected by creditors; (e) are subject to a debt relief order; or (f) have any other similar process or arrangement to those listed in

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(a) to (e) including but not limited to sequestration; and if so, explain that any damages, compensation or settlement monies might, in certain circumstances be off-set against the customer’s outstanding debts; and that the customer will, where necessary, need to pay the firm’s fees from funds that are not subject to the processes or arrangements listed above at (a) to (f). (7) record the customer’s response to questions (4) and (6) and where the customer does not know the answer, advise them to check.
4.3.2 G (1) For the purposes of CMCOB 4.3.1R(1)(a) a firm will have complied
with its obligations if it has provided relevant examples of potential alternative methods of pursuing the claim and has asked the customer whether any such methods are available to them. (2) A customer should be treated as having other methods for pursuing a claim for the purposes of CMCOB 4.3.1R(1) if, for example:
(a) the claim is for personal injury and the customer has legal expenses cover under a contract of insurance relating to their car or home and that cover includes legal advice, assistance and representation; or (b) the customer is entitled to legal advice, assistance and representation by virtue of their membership of a trade union. (3) Where the customer does have other methods for pursuing a claim, the firm should explore whether the customer has investigated whether they might pursue the claim through those methods (for instance, by using any advice, assistance and representation available under a contract of insurance or through their trade union membership). (4) Where a customer is unable to confirm whether they have other methods for pursuing the claim or is unaware of whether they have suitable cover in place, the firm should advise the customer to check whether they have such cover in place and inform the customer that it is possible to pursue a claim through such alternative arrangements if they are in place. (5) Firms are reminded that DISP 1.2.1R(4) requires firms to provide information to eligible complainants, in a clear, comprehensible and easily accessible way, about the Financial Ombudsman Service (including the Financial Ombudsman Service’s website address):
(a) on the firm’s website, where one exists; and (b) if applicable, in the general conditions of the firm’s contract with the eligible complainant.

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4.3.3 G (1) The firm may need to take additional steps under CMCOB 4.3.1R(3)
to ensure that the customer understands the agreement where the customer is one whom the firm understands or reasonably suspects to be vulnerable. (2) Customers who have mental health difficulties or mental capacity limitations may fall into the category of particularly vulnerable customers. 5 Fee cap for regulated claims management activities
5.1 Fee cap for payment protection insurance claims
5.1.1 G (1) Under section 29(3) of the Financial Guidance and Claims Act 2018,
the fee cap applicable to regulated claims management activity in connection with a PPI claim is 20% of the amount recovered. The cap applies by reference to a sum comprising all amounts charged for such services in connection with the claim (whether or not charged under a single agreement), exclusive of VAT. (2) Section 31 of that Act (PPI claims: interim restriction on charges imposed by authorised persons after transfer of regulation to FCA) prohibits a firm from:
(a) charging an amount which exceeds the claims management fee cap in connection with a PPI claim; and (b) entering into an agreement which provides for the payment by a customer of charges which would breach or are capable of breaching the claims management fee cap in connection with a PPI claim. (3) Any payment in excess of the claims management fee cap is recoverable by the customer. The FCA would expect the firm to reimburse the customer promptly, irrespective of whether the customer has asserted that the firm has breached the fee cap. (4) Any agreement which provides for the payment by a customer of charges which would breach or are capable of breaching the claims management fee cap are not enforceable to the extent that they provide for such a payment. (5) A firm that breaches the claims management fee cap is subject to the FCA’s disciplinary powers in the same way as if the firm had breached a rule. 6 Post-contractual requirements

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6.1 Keeping the customer and others informed
Application
6.1.1 R This section applies to a firm in relation to it carrying on regulated claims
management activities other than seeking out, referrals and identification of claims or potential claims. Enquiries regarding outstanding liabilities
6.1.2 R (1) After a firm has entered into an agreement with a customer relating
to regulated claims management activity, the firm must promptly ask the person against whom the claim is to be made whether the customer has any outstanding liabilities with that person, which the damages, compensation or settlement monies might be off-set against. (2) If the person against whom the claim is to be made confirms that the customer has such liabilities with it, the firm must:
(a) in a durable medium, promptly inform the customer of this; (b) inform the customer that they will, where necessary, need to pay the firm’s fees from their own funds.
6.1.3 G (1) The guidance at CMCOB 4.2.10G also applies in relation to CMCOB
6.1.2R.
(2) A firm should comply with CMCOB 6.1.2R(1) at the first opportunity it has, for example at the time of sending a letter of authority or initial information request to the person against whom the claim is to be made. Passing on information and requests for information
6.1.4 R (1) The firm must pass on to the customer:
(a) any information received from a third party which is addressed to, or meant for, the attention of that customer; and (b) any request received by the firm from a third party for the supply of information by the customer that the firm does not already hold. (2) The firm must pass on the information or request:
(a) promptly, and in any event within ten business days of receiving the information or request; and (b) in a durable medium.

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6.1.5 R (1) A firm must notify the customer of:
(a) the firm becoming aware of:
(i) any costs that the customer may have to meet which the firm has not previously notified to the customer; or (ii) where the firm has notified the customer of the amount of any costs, any change to those costs (including any changes to the firm’s fees); and (b) any material development in the progress of the customer’s claim; and (c) if the firm becomes aware that the person against whom the claim is being or to be made is a member of, or subject to, an alternative dispute resolution scheme (other than an ombudsman or a scheme of a sort mentioned in CMCOB 4.2.2R(2)(g)), the fact that it is possible for the customer to present the claim themselves to that alternative dispute resolution scheme; and (d) any actions the firm intends to take to present and pursue the claim that were not notified to the customer under CMCOB 4.2.8R (1)(c) at the time of contracting; and (e) any allegation by a third party that the claim is fraudulent, except where there is a legal obligation preventing such disclosure. Where a firm is required to make such a notification under this provision, the firm must also advise its customer of the consequences of pursuing a fraudulent claim. Firms are reminded of their obligations under CMCOB 2.1.7R(2). (2) The firm must make a notification in (1):
(a) promptly, and in any event within ten business days of an event listed in (1) occurring; and (b) in a durable medium, except for (1)(d), which may alternatively be made over the telephone. (3) Where a firm notifies the customer of any costs or changes to costs in accordance with (1)(a), the firm must obtain and record the customer’s consent in relation to those costs before it invoices the customer for them. (4) The firm must obtain consent for any actions it proposes to take that:
(a) have not previously been notified to the customer; or (b) were notified to the customer more than six months ago and

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(5) For the purposes of (4)(b), examples of actions that are significant in nature include, but are not limited to, the firm proposing to:
(a) commence legal proceedings; or
(b) submit a claim to a statutory ombudsman, a statutory compensation, or alternative dispute resolution scheme. (6) A firm must obtain the customer’s consent in (3) and (4):
(a) over the telephone; or
(b) in a durable medium.
6.1.6 G (1) Examples of developments in the progress of the claim which should
be treated as material for the purposes of CMCOB 6.1.5R(1)(b) include:
(a) the firm becoming aware of the timetable for any court proceedings or alternative dispute resolution schemes (such as the Financial Ombudsman Scheme), or of any changes to that timetable; (b) the firm receiving any information relating to the claim which is likely to have an effect on the amount of time within which the firm expects the claim to be determined; (c) the firm becoming aware of any information relating to the claim which is likely to have an effect on the prospects of the claim succeeding; (d) the firm receiving an offer of any kind from the person against whom the claim is being made to settle the claim, whether for money or some other non-monetary benefit, even where such an offer was not originally the intended outcome of the claim; and (e) the firm receiving a decision in respect of the claim from a statutory ombudsman, a statutory compensation, or alternative dispute resolution scheme. (2) When making a notification in accordance with CMCOB 6.1.5R (1)(b), a firm should consider whether it is necessary to inform the customer that:
(a) updates from the firm are likely to be less frequent while the progress of the claim is not within the firm’s control; and (b) the customer may contact the firm at any time to discuss their claim and its progress.

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Revised fee estimates
6.1.7 R When the firm has sufficient information from which it may reasonably
estimate what its fee will be, or that the fee payable by the customer will differ from the illustration or estimate provided under CMCOB 4.2.5R or a previous estimate provided under this rule, the firm must promptly provide the customer, in a durable medium, with:
(1) an estimate of the fee; and
(2) an explanation of why that estimate differs from the illustration or the estimate (if any) which the firm has most recently provided.
6.1.8 G (1) CMCOB 6.1.7R requires a firm to give a customer updated fee
estimates. For example, a firm is likely to have sufficient information to produce a revised estimate once:
(a) it knows how much compensation the customer is claiming in relation to a missold financial product (for example because it has obtained the relevant credit agreement) where the fee is a percentage of that sum; or (b) it realises that its fee, if charged by reference to an hourly rate, is likely to differ from its original estimate. (2) When calculating the likely compensation, damages or redress to provide the revised fee estimate under CMCOB 6.1.7R, a firm should include in their calculation any interest or other sum likely to be paid in satisfaction of the claim on which the firm’s fees will be based. (3) If the firm realises that a revised estimate is incorrect, it should provide a further revised estimate. (4) When giving a revised fee estimate as required by CMCOB 6.1.7R the firm:
(a) should, where relevant, communicate to the customer any assumptions it has used in its calculations, for example that the customer made all of the payments they were obliged to make under the agreement; and (b) may, where appropriate, include a statement to the effect that the fee estimate may be subject to change and may be different to the actual amount the customer will receive. (5) For claims concerning pension or investment products or services, firms are expected to:
(a) take all reasonable steps to obtain sufficient information about the claim as soon as reasonably practicable after entering into an agreement with the customer to provide regulated claims

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6.1.9 R (1) A firm must provide each customer with an update on the progress of
the claim at least once every six months, in a durable medium. (2) But the firm need not provide an update under (1) if, in the previous six months, the firm has:
(a) as part of a notification required under CMCOB 6.1.5R(1), given an update on the progress of the claim; and (b) the notification contains sufficient information as to constitute an update for the purposes of (1). (3) An update under (1) must:
(a) summarise the progress of the claim since the last report (or, in the case of the first report, since the firm entered into an agreement with the customer in relation to the claim); and (b) indicate the current state of affairs in relation to the claim; for example, whether the firm is awaiting an expert’s report, whether solicitors have issued a letter before action, or whether the claim has been submitted to the Financial Ombudsman Service but it is yet to make a determination.
6.1.10 G (1) If, during the period to which the report relates, the firm has not sent
any notifications to the customer under CMCOB 6.1.5R, the update should indicate why, to the best of the firm’s knowledge, there have been no material developments. (2) The firm should give updates under CMCOB 6.1.9R until such time as the claim is finally determined or settled, or is withdrawn or discontinued. (3) If, for the purposes of notifications under CMCOB 6.1.5R(1) and updates under CMCOB 6.1.9R, the firm has made available an online portal through which customers may receive such notifications and updates, the firm should ensure that it alerts the customer to the notification or update being available via the portal, for example by sending a text message or email (and provided that the customer is content to, and is able to, receive such communications).

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6.1.11 R CMCOB 6.1.9R does not apply if the customer expressly requests not to
receive such updates.
Providing information to persons other than the customer
6.1.12 R (1) A firm must pass on to a third party any information received from a
customer and intended for that third party:
(a) promptly, and in any event within ten business days; and (b) in a durable medium. (2) Where the information received from the customer is incomplete for the third party’s purposes, the firm need not comply with (1) until such time as the customer has supplied the outstanding information, provided that the delay caused by waiting for the outstanding information does not, and could reasonably be expected not to, harm, prejudice or invalidate the claim. Advising the customer where the claim is not successful
6.1.13 R (1) If a customer’s claim is not successful, the firm must advise the
customer of the available methods by which the customer may continue to pursue their claim. (2) If the claim is of a sort which may be made by the customer to a statutory ombudsman or a statutory compensation scheme, without using the services of the firm and without incurring a fee, the advice must include a statement to the effect that:
(a) the customer is not required to use the services of a firm which carries on regulated claims management activity to pursue their claim; and (b) it is possible for the customer to present the claim themselves for free, either to the person against whom they wish to complain or to the statutory ombudsman or the statutory compensation scheme. (3) If the firm is aware that the person against whom the claim was made is a member of, or subject to, an alternative dispute resolution scheme (other than an ombudsman or a scheme of a sort mentioned in (2)), the advice must also include a statement to the effect that it is possible for the customer to present the claim themselves to that alternative dispute resolution scheme. (4) For the purposes of this rule, a claim is not successful if it produces an outcome with which the customer is not satisfied.
6.1.14 G (1) A claim may progress through several stages. For example, it may start
as a complaint made against a company, then proceed to an

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6.2 Fees and fee collection
Explanation of fees and charges
6.2.1 R (1) A firm must provide the customer with an itemised bill, in a durable
medium:
(a) if the agreement is terminated under CMCOB 2.1.12R(2)(b), before the firm takes any payment (for example, using payment details provided by the customer); or (b) before the firm takes or deducts its fees and charges from money received from a third party for onward transmission to the customer; or (c) when the firm presents an invoice or request for payment to the customer. (2) The itemised bill must explain:
(a) what claims management services the firm has provided; and (b) how the fees and charges have been calculated including, where relevant, by reference to the full amount of any money recovered for the customer in respect of damages or compensation, or in settlement of the claim. (3) A firm must not take or deduct its fees and charges from money received from a third party for onward transmission to the customer without the customer’s consent.
6.2.2 G Firms are reminded that they may be carrying on a credit-related regulated
activity if they permit customers to enter into instalment plans or give them an extended period of time to pay fees and charges later than the date on which they are payable (see PERG 2.7.19AG and 2.7.19GG). Fee collection
6.2.3 R A firm must establish and implement clear, effective and appropriate
policies and procedures for:
(1) dealing with customers who are unable to pay fees and charges to the firm when they fall due; and

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(2) the fair and appropriate treatment of customers in (1) whom the firm understands or reasonably suspects to be vulnerable.
6.2.4 R (1) If a customer is unable to pay fees and charges to the firm when they
fall due, a firm must:
(a) treat the customer with forbearance and due consideration, including by allowing the customer a reasonable opportunity to pay the fee and charges; and (b) where appropriate, direct the customer to sources of free and independent debt advice. (2) A firm must not impose charges on a customer who is unable to pay fees and charges to the firm when they fall due unless the charges are no higher than necessary to cover the reasonable costs of the firm.
6.2.5 G (1) Customers who have mental health difficulties or mental capacity
limitations may fall into the category of particularly vulnerable customers. (2) In developing procedures and policies for dealing with customers who may not have the mental capacity to make financial decisions, firms may wish to have regard to the principles outlined in the Money Advice Liaison Group (MALG) Guidelines “Good Practice Awareness Guidelines for Consumers with Mental Health Problems and Debt” (March 2015). [Note: see http://malg.org.uk/resouces/malg-mental-health-and-debt￾guidelines/] (3) A firm should suspend the pursuit of the recovery of fees and charges from a customer who is unable to pay those fees and charges when they fall due, when:
(a) the firm has been notified that the customer might not have the mental capacity to make relevant financial decisions and/or to engage at the time in the process for recovery of unpaid fees and charges; or (b) the firm understands or ought reasonably to be aware that the customer might not have the mental capacity to make relevant financial decisions and/or to engage at the time in the process for recovery of unpaid fees and charges.
6.2.6 R A firm must not take or deduct its fees and charges from money received
from a third party for onward transmission to the customer unless it has written consent from the customer to do so, whether given in the firm’s agreement with the customer or by some other means.

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6.3 Ceasing regulated claims management activities
Who and when?
6.3.1 R (1) CMCOB 6.3.3R to 6.3.6R apply to a firm:
(a) which carries on any regulated claims management activities other than seeking out, referrals and identification of claims or potential claims; and (b) in respect of which it has been determined that the firm is to cease carrying on any of those regulated claims management activities. (2) CMCOB 6.3.7R applies to a firm:
(a) which carries on seeking out, referrals and identification of claims or potential claims; and (b) in respect of which it has been determined that the firm is to cease carrying on that regulated activity. (3) The following provisions in CMCOB 6.3 apply to a firm with a claims management temporary permission as modified below:
(a) the reference in CMCOB 6.3.3R(1) to 20 business days will apply provided that the period does not exceed 30 days; (b) the reference in CMCOB 6.3.5R to 40 business days must be read as 30 days; and (c) the reference in CMCOB 6.3.7(1) to 20 business days will apply provided that the period does not exceed 30 days.
6.3.2 G Circumstances of it being determined that a firm is to cease carrying on a
regulated claims management activity would include:
(1) the governing body of the firm deciding to cease carrying on that activity; (2) the firm becoming insolvent or insolvency proceedings being commenced in respect of the firm; and (3) the FCA issuing a written notice under the Act or final notice removing or suspending the relevant permission. Notifying customers
6.3.3 R (1) Within 20 business days of it being determined that the firm is to
cease carrying on any regulated claims management activities, the firm must, in a durable medium:

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(a) notify each customer in relation to whom it carries on those activities that it is to cease carrying on the relevant activities; (b) explain to each customer what options are available for the customer to continue with their claim; and (c) notify each third party to whom the claim has been presented and (if different) each third party against which the claim has been made:
(i) that the firm is to cease carrying on those regulated claims management activities; and (ii) of the identity of the person who will act for the customer in place of the firm (where the identity of that person is known). (2) In explaining to the customer what options are available to them to continue with their claim, the firm must include a statement to the effect of:
(a) the statement in (3), if the claim is of a sort which may be made by the customer to a statutory ombudsman or a statutory compensation scheme without using the services of the firm and without incurring a fee; and (b) the statement in (4), if the firm is aware that the person against whom the claim is being or is to be made is a member of, or subject to, an alternative dispute resolution scheme (other than an ombudsman or a scheme of a sort mentioned in (a)). (3) The statement in this paragraph is that:
(a) the customer is not required to use the services of a firm which carries on regulated claims management activity to pursue their claim; and (b) it is possible for the customer to present the claim themselves for free, either to the person against whom they wish to complain or to the statutory ombudsman or a statutory compensation scheme. (4) The statement in this paragraph is that it is possible for the customer to present the claim themselves to the alternative dispute resolution mechanism mentioned in (3)(b).
6.3.4 G The guidance at CMCOB 3.2.8G also applies in respect of CMCOB
6.3.3R(2)(a).
Sending information and documents to customers

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6.3.5 R Within 40 business days of it being determined that the firm is to cease
carrying on any regulated claims management activities, the firm must send to each customer whose claim has not been settled, withdrawn or discontinued all information and documentation the firm holds relating to their claim. Passing customer details to third parties
6.3.6 R If the firm passes the customer, or details of the customer or of the claim to a
third party, with a view to that third party carrying on a regulated claims management activity in respect of the claim or the customer (or activity which would constitute such a regulated activity but for an exemption or an exclusion), the firm must promptly notify the customer in a durable medium:
(1) that it has done so; and
(2) of the identity and contact details of the third party.
Ceasing to carry on seeking out, referrals and identification of claims or potential claims
6.3.7 R (1) This rule applies in respect of a firm which has indicated to a
customer that it will:
(a) identify a third party to assist the customer with their claim; and (b) pass the customer’s details or details relating to the claim to the third party, or pass details of the third party to the customer, but has not yet done so and will not do so within 20 business days of it being determined that the firm is to cease carrying on seeking out, referrals and identification of claims or potential claims. (2) Within the time period referred to in (1), the firm must, in respect of each customer to whom it has made an indication of the sort described in (1) in a durable medium, notify the customer that it has not done so and explain why. 7 Prudential requirements and professional indemnity insurance
7.1 Purpose
7.1.1 G (1) This chapter builds upon the appropriate resources threshold
condition set out in paragraph 2D of Schedule 6 to the Act (see COND 2.4), which requires firms to have appropriate resources including financial resources.

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(2) This chapter also builds upon Principle 4, which requires a firm to maintain adequate financial resources, by focusing upon the adequacy of that part of a firm’s financial resources that consists of capital resources. (3) The chapter also includes requirements for firms to have professional indemnity insurance if they carry on advice, investigation or representation in relation to a criminal injury claim.
7.1.2 R A contravention of the rules in CMCOB 7.2 or CMCOB 7.3 does not give
rise to a right of action by a private person under section 138D of the Act (and each of those rules) is specified under section 138D(3) of the Act as a provision giving rise to no such right of action).
7.2 Prudential requirements
General solvency requirement
7.2.1 R A firm must ensure that it is able at all times to meet its liabilities as they fall
due.
General prudential resources requirement
7.2.2 R A firm must ensure at all times that its prudential resources, calculated in
accordance with CMCOB 7.3, are not less than its prudential resources requirement. Prudential resources: general accounting principles
7.2.3 R A firm must recognise an asset or liability, and measure its amount, in
accordance with the relevant accounting principles applicable to it for the purpose of preparing its annual financial statements unless a rule requires otherwise. Prudential resources requirement: firms carrying on other regulated activities
7.2.4 R The prudential resources requirement for a firm carrying on a regulated
activity in addition to those covered by this chapter, is the higher of:
(1) the requirement which is applied by this chapter; and (2) the prudential resources requirement or capital resources requirement which is applied by another rule or requirement to the firm. Classification of firms for prudential resources purposes
7.2.5 R (1) For the purposes of this chapter, a firm which carries on any
regulated claims management activities other than seeking out, referrals and identification of claims or potential claims is:

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(a) a “Class 1 firm” if its total income in the year ending on its most recent accounting reference date is not less than £1million; and (b) a “Class 2 firm” if its total income in the year ending on its most recent accounting reference date is less than £1million. (2) A firm which carries on no regulated claims management activities other than seeking out, referrals and identification of claims or potential claims is neither a Class 1 firm nor a Class 2 firm, and its prudential resources requirement is specified in CMCOB 7.2.10R. (3) For the purposes of this chapter, total income only includes income relating to the part of the business which is involved in carrying on regulated claims management activities and ancillary activities. (4) Where the firm has not yet started to trade, total income is to be calculated based on forecast income included in the budget for the first twelve months’ trading, as submitted with the firm’s application for authorisation. Prudential resources requirement for a Class 1 firm
7.2.6 R Subject to CMCOB 7.2.10R, the prudential resources requirement for a
Class 1 firm is:
(1) the higher of:
(a) £10,000; and
(b) the firm’s overheads requirement (see CMCOB 7.2.8R); plus (2) if the firm has held client money at any time in the last 12 months, the client money requirement (see CMCOB 7.2.9R). Prudential resources requirement for a Class 2 firm
7.2.7 R Subject to CMCOB 7.2.10R, the prudential resources requirement for a
Class 2 firm is:
(1) the higher of:
(a) £5,000; and
(b) the firm’s overheads requirement (see CMCOB 7.2.8R); plus (2) if the firm has held client money at any time in the last 12 months, the client money requirement (see CMCOB 7.2.9R). The overheads requirement
7.2.8 R (1) A firm’s overheads requirement is an amount that is equal to one

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(2) For the purposes of (1), a firm’s overheads expenditure is to be calculated as follows:
(a) the firm’s total expenditure in the period of 12 months ending on its most recent accounting reference date; less (b) the total of the following items (if they are included in such expenditure) in that period:
(i) staff bonuses, except to the extent that they are guaranteed; (ii) employees’ and directors’ shares in profits, except to the extent that they are guaranteed; (iii) other appropriations of profits and other variable remuneration, except to the extent that they are guaranteed; (iv) shared commission and fees payable which are directly related to commission and fees receivable, which are included within total revenue; (v) interest charges in respect of borrowings made to finance the acquisition of the firm’s readily realisable investments; (vi) interest paid to customers on client money; (vii) 20% of total marketing expenditure; and (viii) other variable expenditure. (3) Where the firm’s total expenditure in the year ending on its accounting reference date was incurred in a period of less than twelve months, the items in (2)(a) and (2)(b) are to be calculated on a pro￾rated basis to produce an equivalent annual amount. (4) Where the firm has not yet started to trade, the items in (2)(a) and (2)(b) are to be calculated based on forecast expenditure included in the budget for the first twelve months’ trading, as submitted with the firm’s application for authorisation. (5) In (2)(b)(vii) total marketing expenditure means spending in the twelve months ending on the firm’s most recent accounting reference date on, or relating to:
(a) advertising across different media channels; (b) digital marketing;

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(c) publicity expenses;
(d) advertising agency fees;
(e) public relations consultancy fees;
(f) expenses for promotions offered in connection with services provided by the firm; (g) market research and customer surveys; (h) publications including printed promotional material such as brochures and leaflets, and the firm’s annual report; (i) sponsorships; and (j) gifts to customers. (6) Where, during a period of six months, a firm’s overheads expenditure, calculated according to (2), decreases by 20% or more relative to the overheads expenditure calculated at the last accounting reference date, the firm may recalculate its overheads requirement and therefore its prudential resources requirement accordingly. (7) For the purpose of the recalculation in (6), the firm’s overheads requirement shall be equal to one third of:
(a) the firm’s total expenditure in the period of 6 months ending on the date it changes its prudential resources requirement; less (b) the total of the items in (2)(b) (if they are included in such expenditure) in that six month period. (8) A firm must notify the FCA of any change in its prudential resources requirement within 14 days of that change. The client money requirement
7.2.9 R The client money requirement is £20,000.
Prudential requirement for lead generators
7.2.10 R If a lead generator holds client money, the prudential requirement for the
firm is the client money requirement (see CMCOB 7.2.9R).
7.3 Calculation of prudential resources
Eligible prudential resources
7.3.1 R (1) A firm must calculate its prudential resources only from the items

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FOS 2018/6 which are eligible to contribute to a firm’s prudential resources as set out in the table in CMCOB 7.3.2R. (2) In arriving at its calculation of its prudential resources, a firm must deduct certain items as set out in the table in CMCOB 7.3.3R. 7.3.2R Table: Items which are eligible to contribute to the prudential resources of a firm Item Additional explanation 1 Share capital This must be fully paid and may include:
(1) ordinary share capital; or
(2) preference share capital (excluding preference shares redeemable by shareholders within two years). 2 Capital other than share capital (for example, the capital of a sole trader, partnership or limited liability partnership) The capital of a sole trader is the net balance on the firm’s capital account and current account. The capital of a partnership is the capital made up of the partners’:
(1) capital account, that is the account:
(a) into which capital contributed by the partners is paid; and (b) from which, under the terms of the partnership agreement, an amount representing capital may be withdrawn by a partner only if:
(i) the person ceases to be a partner and an equal amount is transferred to another such account by the person’s former partners or any person replacing that person as their partner; or (ii) the person ceases to be a partner and an equal amount is transferred to another such account by the person’s former partners or any person replacing that person as their partner; or (iii) the partnership is otherwise dissolved or wound up; and (2) current accounts according to the most recent financial statement.

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For the purpose of the calculation of capital resources in respect of a defined benefit occupational pension scheme:
(3) a firm must derecognise any defined benefit asset; (4) a firm may substitute for a defined benefit liability the firm’s deficit reduction amount, provided that the election is applied consistently in respect of any one financial year. 3 Reserves (Note 1) These are, subject to Note 1, the audited accumulated profits retained by the firm (after deduction of tax, dividends and proprietors’ or partners’ drawings) and other reserves created by appropriations of share premiums and similar realised appropriations. Reserves also include gifts of capital, for example, from a parent undertaking. For the purposes of calculating capital resources, a firm must make the following adjustments to its reserves, where appropriate:
(1) a firm must deduct any realised gains or, where applicable, add back in any unrealised losses on debt instruments held, or formerly held, in the available￾for-sale financial assets category; (2) a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost; (3) in respect of a defined benefit occupational scheme:
(a) a firm must derecognise any defined benefit asset; (b) a firm may substitute for a defined benefit liability the firm’s reduction amount, provided that the election is applied consistently in respect of any one financial year. 4 Interim net profits (Note 1) If a firm seeks to include interim net profits in the calculation of its capital resources, the profits have, subject to Note 1, to be verified by the firm’s external auditor, net of tax, anticipated dividends or proprietors’ drawings and other appropriations. 5 Revaluation reserves Revaluation reserves such as reserves arising from the revaluation of land and buildings, including any net unrealised gains for the fair valuation of equities held in the available-for-sale financial assets category.

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6 Subordinate d loans/debt
Subordinated loans/debt must be included in capital on the basis of the provisions in this chapter that apply to subordinated loans/debts. Note:
1 Reserves must be audited and interim net profits, general and collective provisions must be verified by the firm’s external auditor unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemption from audit) or, where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies; Conditions for exemption from audit)) relating to the audit of accounts. 7.3.3R Table: Items which must be deducted in arriving at prudential resources 1 Investments in own shares 2 Investments in subsidiaries (Note 1) 3 Intangible assets (Note 2) 4 Interim net losses (Note 3) 5 Excess of drawings over profits for a sole trader or a partnership (Note 3) Notes:
1 Investments in subsidiaries are valued at the full balance sheet value. 2 Intangible assets are the full balance sheet value of goodwill, capitalised development costs, brand names, trademarks and similar rights and licences. 3 The interim net losses in row 4, and the excess of drawings in row 5, are in relation to the period following the date as at which the prudential resources are being computed. Subordinated loans/debt
7.3.4 R A subordinated loan/debt must not form part of the prudential resources of
the firm unless it meets the following conditions:
(1) it has an original maturity of:
(a) at least five years; or
(b) it is subject to five years’ notice of repayment; (2) the claims of the subordinated creditors must rank behind those of all unsubordinated creditors; (3) the only events of default must be non-payment of any interest or

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7.3.5 R When calculating its prudential resources, the firm must exclude any amount
by which the aggregate amount of its subordinated loans/debts exceeds the amount calculated as follows:
a – b where:
a = the sum of Items 1-5 in the Table of items, which are eligible to contribute to a firm’s capital resources (see CMCOB 7.3.2R) b = the sum of Items 1-5 in the Table of items, which must be deducted in arriving at a firm’s capital resources (see CMCOB 7.3.3R)
7.3.6 G CMCOB 7.3.5R can be illustrated by the examples set out below:
(1) Share capital £20,000
Reserves £30,000
Subordinated loans/debts £10,000
Intangible assets £10,000
As subordinated loans/debts (£10,000) are less than the total of share capital + reserves - intangible assets (£40,000) the firm need not exclude any of its subordinated loans/debts pursuant to CMCOB

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7.3.4R when calculating its prudential resources. Therefore the firm’s total prudential resources will be £50,000. (2) Share capital £20,000 Reserves £30,000 Subordinated loans/debts £60,000 Intangible assets £10,000 As subordinated loans/debts (£60,000) exceed the total of share capital + reserves - intangible assets (£40,000) by £20,000, the firm should exclude £20,000 of its subordinated loans/debts pursuant to CMCOB 7.3.5R when calculating its prudential resources. Therefore the firm’s total prudential resources will be £80,000.
7.4 Professional indemnity insurance: personal injury claims management
Application
7.4.1 R This section applies only to firms who carry on advice, investigation or
representation in relation to a personal injury claim.
Requirement to hold
7.4.2 R A firm must take out and maintain at all times a professional indemnity
insurance contract that provides for a level of cover at least equal to the requirements in this section from an insurer which is authorised to enter into professional indemnity insurance contracts in:
(1) a Zone A country; or
(2) the Channel Islands, Gibraltar, Bermuda or the Isle of Man.
7.4.3 R The professional indemnity insurance contract must make provision for
cover in respect of any claim for loss or damage, for which the firm may be liable as a result of a negligent act, error or omission by:
(1) the firm; or
(2) any person acting on behalf of the firm including employees, or its other agents.
7.4.4 R The minimum limit of indemnity per year in the professional indemnity
insurance contract must be no lower than:
(1) £250,000 for a single claim against the firm; (2) £500,000 in the aggregate.

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7.4.5 R (1) Where the professional indemnity insurance contract includes an
excess, the excess must not be greater than £10,000 per claim. (2) The professional indemnity insurance contract must contain cover in respect of legal defence costs. (3) The professional indemnity insurance contract must provide for continuous cover for all claims:
(a) first made against the firm during the period of insurance; or (b) made against the firm during or after the period of insurance and arising from claims first notified to the insurer during the period of insurance. 8 Requirements for firms with temporary permission for regulated claims management activities
8.1 Application and purpose
8.1.1 R This chapter applies to a firm with a claims management temporary
permission.
8.1.2 G The purpose of these rules is to provide that certain provisions of the FCA
Handbook:
(1) that would otherwise apply to persons with a claims management temporary permission are not to apply; or (2) are to apply to those persons with the modifications specified in the
table in CMCOB 8.1.4R.
Disapplication or modification of certain modules or provisions of the Handbook
8.1.3 R The modules or parts of the modules of the FCA Handbook listed in the table
in CMCOB 8.1.4R:
(1) do not apply, to the extent set out in the table, to a person with a claims management temporary permission with respect to the carrying on of a regulated claims management activity; or (2) are to apply to such a person with the modifications specified in the
table.
Table: Disapplied or modified modules or provisions of the Handbook
8.1.4 R Module Disapplication or modification
Threshold
Conditions
Guidance applies with necessary modifications to reflect the Claims Management Order (see Note 1).

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(COND) Note 1 A firm is treated as having a claims management temporary permission on and after 1 April 2019 to carry on regulated claims management activity under the Claims Management Order if it met the conditions set out in Chapter 5 of Part 3 of that Order at that date. According to article 83(9) of the Claims Management Order section 55B(3) of the Act (The threshold conditions) does not require the FCA to ensure that the firm will satisfy, and continue to satisfy, in relation to regulated claims management activity for which it has a claims management temporary permission, the threshold conditions for which the FCA is responsible. The FCA can, however, exercise its power under section 55J of the Act (variation or cancellation on initiative of regulator) or under section 55L of the Act (imposition of requirements by the regulator) in relation to a firm if, among other things, it appears to the FCA that the firm is failing, or is likely to fail, to satisfy the threshold conditions in relation to the regulated claims management activity for which it has a claims management temporary permission for which the FCA is responsible. The guidance in COND should be read accordingly. Supervision Manual (SUP) SUP 6 (Applications to vary and cancel Part 4A permission and to impose, vary or cancel requirements) applies with necessary modifications to reflect Chapters 2 and 5 of Part 3 of the Claims Management Order (see Note 2). Note 2 If a firm with claims management temporary permission applies to the FCA under section 55A of the Act for permission to carry on a regulated activity or under section 55H or 55I of the Act to vary a permission that the firm has otherwise than by virtue of the Claims Management Order by adding a regulated activity to those to which the permission relates, the application may be treated by the FCA as relating also to some or all of the regulated activities for which the firm has claims management temporary permission. For a firm with only claims management temporary permission: SUP 15.5.1R, SUP 15.5.2G, SUP 15.5.4R, SUP 15.5.5R are modified so that the words “reasonable

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FOS 2018/6 advance”, “and the date on which the firm intends to implement the change of name” and “and the date of the change” are omitted. TP 1 Transitional provisions (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitional provision:
dates in force
(6)
Handbook provision coming into force
1 CMCOB
6.1.7R
R In relation to an agreement entered into before 1 April 2019:
(1) the firm need not comply with CMCOB 6.1.7R until 1 July 2019; and; (2) the reference in CMCOB 6.1.7R to an illustration or estimate provided under CMCOB 4.2.5R is to be treated as a reference to the most recent illustration or estimate of fees (if any) provided before 1 April 2019. From 1 April 1 April 2019 2 CMCOB 6.1.7R G The effect of TP 1.1 is that, where a firm has sufficient information from which it may reasonably estimate what its fee under an agreement entered into before 1 April 2019 will be, the firm must provide an estimate to the customer no later than 1 July 2019 unless that estimate is unchanged from the most recent estimate given before 1 April 2019. 3 CMCOB 7.2.4R to 7.2.10R R A firm need not comply with CMCOB 7.2.4R to 7.2.10R. 1 April 2019 to 31 July 1 April 2019

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Sched ule 1
Record keeping requirements
1.1 G The aim of the guidance in the following table is to give the reader a quick
overall view of the relevant record keeping requirements in CMCOB.
1.2 G It is not a complete statement of those requirements and should not be relied
on as if it were.
Handbook reference
Subject of record
Content of record
When record must be made
Retention period
CMCOB
2.2.2R
Lead generators
Steps taken to ascertain whether lead generator authorised and has systems and processes in place to comply with data protection legislation and the Privacy and Electronic Communicati ons (EC Directive) Regulations 2003; and conclusions reached When the steps are taken Not specified CMCOB 2.2.4R Source of sales leads Lead generator which supplied the lead When the lead is accepted Not specified CMCOB 2.3.2R and 2.3.6R Telephone calls and electronic communicatio ns Call recording; and retention of electronic communicatio ns When the call or the electronic communicatio n is made or received At least 12 months for call recording; according to SYSC 9.1.1R for electronic

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CMCOB
4.3.1R
Availability of alternative methods for pursuing a claim; whether customer has outstanding liabilities with the person claim made against; and whether customer subject to bankruptcy etc The customer’s confirmation that they have alternative methods and the reasons for not using them; and the customer’s confirmation regarding outstanding liabilities and bankruptcy etc Before an agreement is entered into with the customer Not specified CMCOB 6.1.5R Costs not previously notified or changes to notified costs Customer’s consent in relation to costs When consent obtained Not specified Sched ule 2 Notification and reporting requirements
2.1 G The aim of the guidance in the following table is to give the reader a quick
overall view of the relevant notification and reporting requirements in CMCOB.
2.2 G It is not a complete statement of those requirements and should not be relied
on as if it were.
Handbook reference
Matter to be notified
Contents of notification
Trigger
Event
Time allowed
CMCOB
2.2.7R
Lead generator not an authorised person
Identity and contact details
(if known) of the lead generator, and the firm’s reasons for not being satisfied that The firm not being satisfied that the lead generator may carry on seeking out, referrals and identification of claims or Promptly

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FOS 2018/6 the lead generator may carry on seeking out, referrals and identification of claims or potential claims without breaching the general prohibition potential claims without breaching the general prohibition CMCOB 7.2.8R Changes in prudential resources requirement Change in prudential resources requirement The firm changing its prudential resources requirement Within 14 days of that change Sched ule 3 Rights of action for damages Sch 3.1 G The table below sets out the rules in CMCOB contravention of which by an authorised person may be actionable under section 138D of the Act (Actions for damages) by a person who suffers loss as a result of the contravention. Sch 3.2 G If a “Yes” appears in the column headed “For private person?”, the rule may be actionable by a “private person” under section 138D (or, in certain circumstances, his fiduciary or representative; see article 6(2) and (3)(c) of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256)). A “Yes” in the column headed “Removed” indicates that the FCA has removed the right of action under section 138D(2) of the Act. If so, a reference to the rule in which it is removed is also given. Sch 3.3 G The column headed “For other person?” indicates whether the rule may be actionable by a person other than a private person (or his fiduciary or representative) under article 6(2) and (3) of those Regulations. If so, an indication of the type of person by whom the rule may be actionable is given. Right of action under section 138D
Chapter /
Appendix
Section/
Annex
Paragraph For private person?
Removed? For other person?
The clear, fair and not misleading rule in CMCOB 3.2.3 R Yes In part (Note 1) No

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The prudential rules for firms carrying on regulated claims management activity in CMCOB 7.2 and 7.3 No Yes, CMCOB 7.1.2R No All other rules in CMCOB Yes No No Note: CMCOB 3.2.3R provides that if, in relation to a particular communication or financial promotion, a firm takes reasonable steps to ensure it complies with the fair, clear and not misleading rule, a contravention of that rule does not give rise to a right of action under
section 138D of the Act.

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Annex J
Amendments to the Financial Crime Guide (FC) In this Annex, striking through indicates deleted text. 5 Data Security …
5.1 Customers routinely entrust financial firms with important personal data; if this
falls into criminal hands, fraudsters can attempt to undertake financial transactions in the customer’s name. Firms must take special care of their customers’ personal data, and comply with the data protection principles set out in Schedule 1 to the Data Protection Act 1998. The Information Commissioner’s Office provides guidance on the Data Protection Act and the responsibilities it imposes on data controllers and processors. …

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Annex K
Amendments to the Perimeter Guidance manual (PERG) unless otherwise stated. 2 Authorisation and regulated activities …
2.3 The business element
2.3.2 G …
(3C) No provision in relation to the business element is made in respect of not-for-profit bodies carrying on regulated claims management activity; but article 89O of the Regulated Activities Order provides an exclusion for such bodies (see PERG 2.8.14DG(2)). … … After PERG 2.4 (Link between activities and the United Kingdom) insert the following new
section PERG 2.4A. The text is not underlined.
2.4A Link between regulated claims management activities and Great Britain 2.4A.1 G Under section 22(1B) of the Act, a claims management activity specified in the Regulated Activities Order is only a regulated activity if it is carried on by way of business in Great Britain. 2.4A.2 G (1) Article 89F(3) of the Regulated Activities Order provides that a person is to be treated as carrying on a regulated claims management activity when either or both of the conditions in (2) and (3) are met. (2) The condition in this paragraph is that the activity is carried on by a person who is:
(a) a natural person who is ordinarily resident in Great Britain; or (b) a person, other than a natural person, who is constituted under the law of a part of Great Britain. (3) The condition in this paragraph is that the activity is carried on in

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(a) a natural person who is ordinarily resident in Great Britain; or (b) a person, other than a natural person, who is constituted under the law of a part of Great Britain. 2.4A.3 G Ordinary residence is to be determined for these purposes by reference to the Statutory Residence Test set out in Schedule 45 to the Finance Act 2013:
(1) at the time of the facts giving rise to the claim or potential claim; or (2) at the time when the activity is carried out in respect of that claimant or potential claimant. 2.4A.4 G Accordingly, the following list gives examples of activity which would be regulated claims management activity if carried on by way of business and where no exemption or exclusion applies:
(1) a sole trader in England and Wales advising a natural person who is ordinarily resident in Northern Ireland in relation to a financial services or financial product claim; (2) a company incorporated in Northern Ireland advising a natural person who is ordinarily resident in Scotland in relation to a personal injury claim; (3) a company incorporated in France advising a natural person who is ordinarily resident in England in relation to a financial services or financial product claim; (4) a company incorporated in Scotland investigating a personal injury claim for a natural person who is ordinarily resident in Germany; and (5) a company incorporated in India seeking out details of claimants with personal injury claims who are ordinarily resident in Great Britain. Amend the following as shown.
2.7 Activities: a broad outline
…
Regulated claims management activity
2.7.20M G (1) Section 22(1B) of the Act provides that an activity is a regulated activity if it is an activity of a specified kind which:

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(a) is, or relates to, claims management services; and (b) is carried on in Great Britain. (2) The activities which have been specified are those set out in articles 89G to 89M of the Regulated Activities Order; these are listed in the Glossary definition of “regulated claims management activity” and set out in PERG 2.7.20N. However, these are subject to the exclusions set out in articles 89N to 89W of the Regulated Activities Order: an activity which falls within one of the exclusions is not a regulated activity (see PERG 2.8.14D). (3) The activity must be or relate to a claims management service. The drafting of the Regulated Activities Order has the effect that the regulated claims management activities all meet this condition. (4) The activity must be carried on in Great Britain: see PERG 2.4A. A person outside Great Britain (including a person outside the United Kingdom) may require permission for a regulated claims management activity if they deal with claims involving claimants who are constituted or ordinarily resident in Great Britain or handle details of such claimants, even if that person has no branch, office or establishment in Great Britain. 2.7.20N G (1) Seeking out, referrals and identification of claims or potential claims, as specified in article 89G of the Regulated Activities Order, involves any or all of the following:
(a) seeking out persons who may have a claim (unless that activity constitutes a controlled claims management activity: see PERG 8.7A.5G); (b) referring details of a claim or a potential claim or a claimant or potential claimant to another person; and (c) identifying a claim or potential claim, or a claimant, or potential claimant; when carried on in relation to a personal injury claim, a financial services or financial product claim, a housing disrepair claim, a claim for a specified benefit, a criminal injury claim or an employment￾related claim. (2) The other regulated claims management activities are:
(a) advice, investigation or representation in relation to a personal injury claim; (b) advice, investigation or representation in relation to a financial services or financial product claim;

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(c) advice, investigation or representation in relation to a housing disrepair claim; (d) advice, investigation or representation in relation to a claim for a specified benefit; (e) advice, investigation or representation in relation to a criminal injury claim; and (f) advice, investigation or representation in relation to an employment-related claim. (2) Advice includes any type of advice in relation to a claim, including advice on the merits of a claim, advice on the procedure for pursuing a claim, advice on how best to present a claim, and advice on possible means of challenging an unsatisfactory outcome to a claim. (3) Investigation of a claim means carrying out an investigation into, or commissioning the investigation of, the circumstances, merits or foundation of a claim (see article 89F(2)(i) of the Regulated Activities Order). (4) Representation of a claimant means representation in writing or orally, regardless of the tribunal, body or person before which or to whom the representation is made (see article 89F(2)(j) of the Regulated Activities Order). …
2.8 Exclusions applicable to particular regulated activities
…
Regulated claims management activity
2.8.14D G The Regulated Activities Order excludes a number of activities from regulated claims management activity. The exclusions include:
(1) activity carried on by or through a legal practitioner, or by a natural person who carries on that activity at the direction of, and under the supervision of, a legal practitioner, provided that the legal practitioner carries on that activity in the ordinary course of legal practice pursuant to the professional rules to which that legal practitioner is subject (article 89N); (2) activity carried on by a charity or not-for-profit body (article 89O); (3) exclusion from seeking out, referrals and identification of claims or potential claims for providers of referrals who meet all the following conditions (article 89V):

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(a) the person who refers those details (“the introducer”) carries on no other regulated claims management activity; (b) the activity is incidental to the introducer’s main business; (c) the details are only referred to authorised persons, legal practitioners, or a firm, organisation, or body corporate that provides the service through legal practitioners; (d) of the claims that the introducer refers to such persons, that introducer is paid, in money or money’s worth, for no more than 25 claims per calendar quarter; (e) the introducer, in obtaining and referring those details, has complied with the provisions of the Data Protection Act 2018, the Privacy and Electronic Communications (EC Directive) Regulations 2003, the General Data Protection Regulation (EU) and the Unfair Trading Regulations (but this condition does not apply in the case of a referral to a legal practitioner, or to a firm, organisation, or body corporate that carries on the activity through legal practitioners); and (4) any regulated activity of the kind specified in articles 21, 25, 39A, 53 or 64 of the Regulated Activities Order carried on by a person who has permission to carry on that activity in relation to a contract of insurance (article 89U). 5 Guidance on insurance distribution activities
5.1 Application and purpose
…
Guidance on other activities
5.1.11 G A person may wish to carry on activities related to other forms of
investment in connection with contracts of insurance, such as advising on and arranging regulated mortgage contracts. Such a person should also consult the guidance in PERG 2 (Authorisation and Regulated Activities), PERG 4 (Regulated activities connected with mortgages) and PERG 8 (Financial Promotion and Related Activities). A person may also wish to carry on regulated claims management activities (where their activities are not insurance distribution activities, and they fall outside of the exclusion in
article 89U of the Regulated Activities Order). Such a person should also
consult the guidance in PERG 2.7.20M and PERG 2.7.20N.
…
5.7 The regulated activities: assisting in the administration and performance of a

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5.7.1 G The regulated activity of assisting in the administration and performance of
a contract of insurance (article 39A) relates, in broad terms, to activities carried on by intermediaries after the conclusion of a contract of insurance and for or on behalf of policyholders, in particular in the event of a claim. Loss assessors acting on behalf of policyholders in the event of a claim are, therefore, likely in many cases to be carrying on this regulated activity. By contrast, managing claims management on behalf of certain insurers is not a regulated activity (see PERG 5.7.7G (Exclusions)). …
5.7.8 G …
So, a person whose activities are excluded under article 12 of the Regulated Activities Order (Breakdown insurance) will not be a relevant insurer for these purposes and any person who performs loss adjusting or managing claims management on behalf of such a person will not be able to use the exclusion in article 39B. …
5.15 Illustrative tables
…
5.15.4 G Types of activity – are they regulated activities and, if so, why?
Type of activity Is it a regulated activity?
Rationale
…
ASSISTING INSURANCE UNDERTAKING WITH CLAIMS BY POLICYHOLDERS Negotiation of settlement of claims on behalf of an insurance undertaking No. Claims management Managing claims on behalf of an insurance undertaking does not amount to assisting in the administration and performance of a contract of insurance by virtue of the exclusion in article 39B (see PERG 5.7.7G) … Loss adjusters adjusting and claims management managing Potentially. These activities may amount to assisting in the administration and performance of a contract

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FOS 2018/6 claims services (for example, by administration outsourcing providers) of insurance. Article 39B excludes these activities, however, when undertaken on behalf of an insurance undertaking only (see PERG 5.7.7G). … 8 Financial promotion and related activities
8.1 Application and purpose
…
Purpose of guidance
…
8.1.3 G In particular, this guidance covers:
…
(4A) meaning of ‘engage in claims management activity’ (see PERG 8.7A); … …
8.2 Introduction
8.2.1 G The effect of section 21 of the Act (Restrictions on financial promotion) is
that in the course of business, an unauthorised person must not communicate an invitation or inducement to engage in investment activity or to engage in claims management activity unless either the content of the communication is approved for the purposes of section 21 by an authorised person or it is exempt. … …
8.2.4 G A person who is concerned to know whether his communications will
require approval or, if he is an authorised person, whether the appropriate financial promotion rules will apply to his communications will need to consider the following:
…
(4A) alternatively, is the invitation or inducement to engage in claims management activity? (see PERG 8.7A); …

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…
8.3 Financial promotion
…
8.3.2 G Section 21 of the Act does not itself (other than in its heading and side-note)
refer to a ‘financial promotion’ but rather to the communication of ‘an invitation or inducement (a) to engage in investment activity or (b) to engage in claims management activity’. References in this guidance to a financial promotion mean an invitation or inducement to engage in investment activity or to engage in claims management activity.
8.3.3 G Section 21 of the Act contains a number of key expressions or phrases
which will determine whether or not it will apply. These are:
…
(4) …; and
(4A) ‘engage in claims management activity’ (see PERG 8.7A); and … …
8.4 Invitation or inducement
Promotional element
…
8.4.4 G The FCA considers that it is appropriate to apply an objective test to decide
whether a communication is an invitation or an inducement. In the FCA’s view, the essential elements of an invitation or an inducement under section 21 are that it must both have the purpose or intent of leading a person to engage in investment activity or to engage in claims management activity, and be promotional in nature. So it must seek, on its face, to persuade or incite the recipient to engage in investment activity or to engage in claims management activity. The objective test may be summarised as follows. Would a reasonable observer, taking account of all the circumstances at the time the communication was made:
(1) consider that the communicator intended the communication to persuade or incite the recipient to engage in investment activity or to engage in claims management activity, or that that was its purpose; and (2) … …

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Invitations
8.4.5 G An invitation is something which directly invites a person to take a step
which will result in his engaging in investment activity or engaging in claims management activity. It follows that the invitation must cause the engaging in investment activity or engaging in claims management activity. Examples of an invitation include:
…
…
Inducements
8.4.7 G An inducement may often be followed by an invitation or vice versa (in
which case both communications will be subject to the restriction in section 21 of the Act). An inducement may be described as a link in a chain where the chain is intended to lead ultimately to an agreement to engage in investment activity or to engage in claims management activity. But this does not mean that all the links in the chain will be an inducement or that every inducement will be one to engage in investment activity or to engage in claims management activity. Only those that are a significant step in persuading or inciting or seeking to persuade or incite a recipient to engage in investment activity or to engage in claims management activity will be inducements under section 21. …
8.4.8 G PERG 8.4.9G to PERG 8.4.34G apply the principles in PERG 8.4.4G to
PERG 8.4.7G to communications made in certain circumstances. They do not seek to qualify those principles in any way. A common issue in these circumstances arises when contact details are given (for example, of a provider of investments or investment services). In the FCA’s view, the inclusion of contact details should not in itself decide whether the item in which they appear is an inducement or, if so, is an inducement to engage in investment activity or to engage in claims management activity. However, they are a factor which should be taken into account. The examples also refer, where appropriate, to specific exemptions which may be relevant if a communication is an invitation or inducement to engage in investment activity or to engage in claims management activity. Directory listings
8.4.9 G Ordinary telephone directory entries which merely list names and contact
details (for example where they are grouped together under a heading such as ‘stockbrokers’) will not be inducements. They will be sources of information. Were they to be presented in a promotional manner or accompanied by promotional material they would be capable of being inducements. Even so, they may merely be inducements to make contact with the listed person. Specialist directories such as ones providing details of venture capital providers, unit trust managers, contractual scheme managers or investment trusts will usually carry greater detail about the services or products offered by the listed firms and are often produced by

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FOS 2018/6 representative bodies. Such directories may also be essentially sources of information. Whether or not this is the case where individual entries are concerned will depend on their contents. If they are not promotional, the entries will not be inducements to engage in investment activity or to engage in claims management activity. However, it is possible that other parts of such a directory might, for example, seek to persuade recipients that certain controlled investments offer the best opportunity for financial gain. They may go on to incite recipients to contact one of the member firms listed in the directory in order to make an investment. In such cases, that part of the directory will be an inducement to engage in investment activity. But this does not mean that the individual entries or any other part of the directory will be part of the inducement. PERG 8.6 provides guidance on the meaning of ‘communicate’ and ‘causing a communication’. This is of relevance to this example and those which follow. Tombstone advertisements (announcements of a firm’s past achievements)
8.4.10 G Such advertisements are almost invariably intended to create awareness,
hopefully generating future business. So they may or may not be inducements. This depends on the extent to which their contents seek to persuade or incite persons to contact the advertiser for details of its services or to do business with it. Merely stating past achievements with no contact details will not be enough to make such an advertisement an inducement. Providing contact details may give the advertisement enough of a promotional feel for it to be an inducement. But, if this is the case, it will be an inducement to contact the advertiser to find out information or to discuss what he can offer. Only if the advertisement contains other promotional matter will it be capable of being an inducement to engage in investment activity or to engage in claims management activity. In practice, such advertisements are often aimed at influencing only investment professionals. Where this is the case, the exemption in article 19 of the Financial Promotion Order (Investment professionals) may be relevant (see PERG 8.12.21G). Tombstone advertisements will not usually carry the indicators required by article 19 to establish conclusive proof. However,
article 19 may apply even if none of the indicators are present if the
financial promotion is in fact directed at investment professionals. Links to a website
8.4.11 G Links on a website may take different forms. Some will be inducements.
Some of these will be inducements under section 21 and others not. Links which are activated merely by clicking on a name or logo will not be inducements. The links may be accompanied by or included within a narrative or, otherwise, referred to elsewhere on the site. Whether or not such narratives or references are inducements will depend upon the extent to which they may seek to persuade or incite persons to use the links. Simple statements such as ‘these are links to stockbrokers’ or ‘click here to find out about stockmarkets – we provide links to all the big exchanges’ will either not amount to inducements or be inducements to access another site to get information. If they are inducements, they will be inducements to engage in investment activity or to engage in claims management activity only if they

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FOS 2018/6 specifically seek to persuade or incite persons to use the link for that purpose. Where this is the case, but the inducement does not identify any particular person as a provider of a controlled investment or as someone who carries on a controlled activity or a controlled claims management activity, the exemption in article 17 of the Financial Promotion Order (Generic promotions) may be relevant (see PERG 8.12.14G). Banner advertisements on a website
8.4.12 G These are the Internet equivalent to an advertisement in a newspaper and are
almost bound to be inducements. So whether they are inducements to engage in investment activity or to engage in claims management activity will depend upon their contents as with any other form of advertising and the comments in PERG 8.4.11G will be relevant. … Journalism
8.4.15 G Journalism can take many forms. But typically a journalist may write an
editorial piece on a listed company or about the investments or investment services that a particular firm provides or the controlled claims management activity that it carries on. This may often be in response to a press release. The editorial may or may not contain details of or, on a website, a link to the site of the company or firm concerned. Such editorial may specifically recommend that readers should consider buying or selling investments (whether or not particular investments) or obtaining investment services (whether or not from a particular firm) or obtaining services which constitute a controlled claims management activity (whether or not from a particular firm). If so, those recommendations are likely to be inducements to engage in investment activity (bearing in mind that a recommendation not to buy or sell investments cannot be an inducement to engage in investment activity) or to engage in claims management activity. In other cases, the editorial may be an objective assessment or account of the investment or its issuer or of the investment firm and may not encourage persons to make an investment or obtain investment services or other services which constitute a controlled claims management activity. If so, it will not be an inducement to engage in investment activity or to engage in claims management activity. … … Image advertising
8.4.20 G Activities which are purely profile raising and which do not identify and
promote particular investments or investment services or services which constitute a controlled claims management activity may not amount to either an invitation or inducement of any kind. Examples of this include where listed companies sponsor sporting events or simply put their name or logo on the side of a bus or on an umbrella. This is usually done with a view, among other things, to putting their names in the minds of potential

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FOS 2018/6 investors or consumers. In other cases, an image advertisement for a company which provides investment services (for example, on a pencil or a diary) may include, along with its name or logo, a reference to its being an investment adviser or fund manager or a telephone or fax number or both. Profile raising activities of this kind may involve an inducement (to contact the advertiser) but will be too far removed from any possible investment activity or, where relevant, controlled claims management activity, to be considered to be an inducement to engage in investment activity or to engage in claims management activity. Advertisements which invite contact with the advertiser
8.4.21 G These will be advertisements that contain encouragement to contact the
advertiser. They are likely to be inducements to do business with him or to get more information from him. If so, they will be inducements to engage in investment activity or to engage in claims management activity if they seek to persuade or incite persons to buy or sell investments or to get investment services or services which constitute a controlled claims management activity. See PERG 8.4.7G for more guidance on preliminary communications and whether they are a significant step in the chain of events which are intended to lead to the recipient engaging in investment activity or engaging in claims management activity. Where advertisements invite persons to send for a prospectus, article 71 (Material relating to prospectus for public offer of unlisted securities) may provide an exemption. Any financial promotion which contains more information than is allowed by article 71 but which is not the prospectus itself is likely to require approval by an authorised person unless another exemption applies. Introductions
8.4.22 G (1) Introductions may take many forms but typically involve an offer to
make an introduction or action taken in response to an unsolicited request. An introduction may be an inducement if the introducer is actively seeking to persuade or incite the person he is introducing to do business with the person to whom the introduction is made. So it may fall under section 21 if its purpose is to lead to investment activity or controlled claims management activity. For example, if a person answers the question ‘do you or can you provide investment advice’ with a simple ‘no, but I can introduce you to someone who does’, that may be an inducement. But, if so, it is likely to be an inducement to contact someone to find out information about his services rather than to engage in investment activity or to engage in claims management activity. … … Invitations to attend meetings or to receive telephone calls or visits
8.4.25 G These are clearly invitations or inducements. Whether they will involve

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FOS 2018/6 invitations or inducements to engage in investment activity or to engage in claims management activity rather than to attend the meeting or receive the call or visit, will depend upon their purpose and content. PERG 8.4.7G discusses communications which are a significant step in the chain of events leading to an agreement to engage in investment activity or to engage in claims management activity. The purpose of the meeting, call or visit to which the invitation or inducement relates may be to offer the audience or recipient investment services or services which constitute a controlled claims management activity. In this case, the invitation or inducement will be a significant step in the chain if it seeks to persuade or incite the invitee to engage in investment activity or to engage in claims management activity at the meeting, call or visit. Any financial promotions made during the meeting, call or visit would still need to be communicated or approved by an authorised person or be exempt. … Enquiries about a person’s status or intentions
8.4.27 G A person (‘A’) may enquire:
(3) …; or
(4) whether a person has been involved in an accident.
Enquiries of this or a similar kind will not amount to inducements to engage in investment activity or to engage in claims management activity unless they involve persuasion or incitement to do so. … Solicited and accompanying material
8.4.28 G Solicited or accompanying material which does not contain any invitation or
inducement to engage in investment activity or to engage in claims management activity will not itself be a financial promotion. This is provided that the material is not part of any financial promotion which may accompany it. This is explained in greater detail in PERG 8.4.29G to 8.4.30G. … Telephone services … 8.4.31A G Where the telephone services that P provides, or other services provided in conjunction with those telephone services, have the result that P is carrying on the regulated activity of seeking out, referrals and identification of claims or potential claims, instead of (or in addition to) communicating a financial promotion that relates to controlled claims management activity, P will require permission to carry on the regulated activity of seeking out, referrals and identification of claims or potential claims.

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…
8.7 Engage in investment activity
8.7.1 G A communication must be an invitation or inducement to engage in
investment activity (or to engage in claims management activity (see PERG 8.7A)) for the restriction in section 21 to apply. … … After PERG 8.7 (Engage in investment activity) insert the following new section PERG 8.7A. The text is not underlined. 8.7A Engage in claims management activity Controlled claims management activity 8.7A.1 G A communication must be an invitation or inducement to engage in claims management activity (or to engage in investment activity (see PERG 8.7)) for the restriction in section 21 to apply. Section 21(10A) of the Act defines this phrase as “entering into or offering to enter into an agreement the making or performance of which by either party constitutes a controlled claims management activity”. And section 21(10B) of the Act provides that an activity is a “controlled claims management activity” if:
(a) it is an activity of a specified kind; (b) it is, or relates to, claims management services; and (c) it is carried on in Great Britain. 8.7A.2 G The activities which have been specified are those set out in Part 1A of the Financial Promotion Order (which are listed in the Glossary definition of “controlled claims management activity”). These are the same as the activities which have been specified in the Regulated Activities Order as regulated claims management activities; the exclusions set out in articles 89N to 89W of the Regulated Activities Order in relation to regulated claims management activities are set out as exemptions in articles 73A to 73J of the Financial Promotions Order in relation to controlled claims management activity. 8.7A.3 G The activity must be or relate to a claims management service. The drafting of the Financial Promotions Order has the effect that the controlled claims management activities all meet this condition. 8.7A.4 G The activity must be carried on in Great Britain: see PERG 2.4A.

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The distinction between controlled claims management activity and regulated claims management activity 8.7A.5 G The regulated activity of seeking out, referrals and identification of claims or potential claims, as specified in article 89G of the Regulated Activities Order, constitutes three activities one of which is seeking out persons who may have a claim unless that activity constitutes a controlled claims management activity. 8.7A.6 G For a communication to constitute a financial promotion, it must constitute an invitation or inducement to engage in claims management activity (or to engage in investment activity): see PERG 8.4. Where a person advertises the services of a firm which carries on a regulated claims management activity with a view to seeking out customers, the person is likely to be communicating an invitation or inducement to engage in claims management activity: the person will therefore have to be an authorised person or the communication will have to be approved by an authorised person, if the person is not to breach the prohibition in section 21 of the Act. 8.7A.7 G It may be possible for a person (for example, for a lead generator) to seek out claimants or potential claimants without communicating an invitation or inducement to engage in claims management activity. Whether or not there is an invitation or inducement would depend on the facts and circumstances of the communication. Where there is no invitation or inducement, the seeking out would constitute the regulated activity of seeking out, referrals and identification of claims or potential claims, and the person would need to be an authorised person if they are not to breach the general prohibition, or to hold the necessary permission if they are not to breach the requirement for permission in section 20 of the Act. Amend the following as shown.
8.9 Circumstances where the restriction in section 21 does not apply
…
8.9.4 G With approval generally, issues may arise as to what would be subject to the
restrictions in section 21 where an invitation or inducement to engage in investment activity or to to engage in claims management activity is made through a publication, broadcast or website or is accompanied by other material. … …
8.10 Types of financial promotion
…

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Solicited v unsolicited real time financial promotions …
8.10.10 G Article 8(3) of the Financial Promotion Order also has the effect in broad
terms that financial promotions made during a visit, call or dialogue will be solicited only if they relate to controlled activities or controlled investments or controlled claims management activities of the kind to which the recipient envisaged that they would relate. …
8.10.11 G … Article 8(4) of the Financial Promotion Order recognises this and has
the effect that an unsolicited real time financial promotion will have been made to the persons other than the person who expressly asked for or initiated the call, visit or dialogue in which it was made unless they are:
(1) …; or
(2) expected to engage in any investment activity or to engage in claims management activity jointly with that person.
8.10.12 G In the FCA’s view, persons who may be engaging in investment activity or
engaging in claims management activity jointly include:
…
8.10.13 G There will be occasions when financial promotions are received by persons
other than those in PERG 8.10.11G(1) or PERG 8.10.11G(2) who will not have solicited them. For example, a more distant relative or friend (‘F’) who acts as a support to the person who is to engage in investment activity or to engage in claims management activity (‘P’) or P’s professional adviser (‘A’). As explained in PERG 8.6.10G, in such cases the financial promotion will not be made to F or A unless it is also addressed to them. And it will only be addressed to F or A if the invitation or inducement relates to F or A engaging in investment activity or engaging in claims management activity. So a solicited financial promotion made to P will not also be an unsolicited financial promotion made to F or A. …
8.11 Types of exemption under the Financial Promotion Order
…
8.11.5 G … If the indication is given enough prominence, taking account of the
medium through which it is communicated, to ensure that the recipient will be aware of it and able to consider it before deciding whether to engage in investment activity or to engage in claims management activity, the FCA would regard article 9 as being satisfied. …

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8.12 Exemptions applying to all controlled activities
…
Financial promotions to overseas recipients (article 12)
8.12.2 G This exemption concerns financial promotions which are made to or
directed only at overseas persons (except in the circumstances referred to in PERG 8.12.8G). But this exemption does not apply to communications in respect of controlled claims management activity. … Financial promotions from customers and potential customers (article 13)
8.12.9 G Financial promotions made by a prospective customer to a person who
supplies a controlled investment or services comprising controlled activities or controlled claims management activities with a view to his acquiring the investment, or receiving the services or receiving information about those investments or services, are exempted. This exemption will only be of relevance to corporate customers or others who are acting in the course of business. Other types of customers will not be subject to section 21 to begin with. … Introductions (article 15) … 8.12.11B G This exemption also does not apply to any financial promotion that is made with a view to, or for the purpose of, an introduction to a person who carries on a controlled claims management activity. Exempt persons (article 16)
8.12.12 G … Article 16(1) applies to all exempt persons where they make financial
promotions for the purpose of their exempt activities. …. So, it allows exempt persons both to promote that they have expertise in certain controlled activities or controlled claims management activities and to make financial promotions in the course of carrying them on. … Generic promotions (article 17)
8.12.14 G Under this exemption, the financial promotion itself must not relate to a
controlled investment provided by a person who is identified in it, nor must it identify any person as someone who carries on any controlled activity or controlled claims management activity. So, it will apply where there is a financial promotion of a class of products. For example ‘ISAs are great’ or ‘buy into an investment trust and help the economy’. Such financial

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FOS 2018/6 promotions may be made by a person such as a trade association which is not itself carrying on a controlled activity or a controlled claims management activity. … …
8.12.16 G Other persons may be able to take advantage of the exemption. For
example, a person making a generic financial promotion may identify himself, whether he may carry on a controlled activity or controlled claims management activity, or not. This is provided that the financial promotion does not (directly or indirectly) identify him as someone who carries on a controlled activity or a controlled claims management activity. … Investment professionals (article 19) … 8.12.22 A G This exemption does not apply to communications in respect of controlled claims management activity. Journalists (article 20)
8.12.23 G The broad scope of the restriction in section 21 of the Act will inevitably
mean that it will, from time to time, apply to journalists and others who make their living from commenting on news including financial affairs (such as broadcasters). This is liable to happen when such persons offer share tips or recommend the use of a particular firm for investment purposes or claims management services. Such tips or recommendations are likely to amount to inducements to engage in investment activity or to engage in claims management activity. …
8.12.26 G Provided the conditions in PERG 8.12.25G are met, the exemption in article
20 applies to any non-real time financial promotion. However, there is an additional condition where the subject matter of the financial promotion is shares or options, futures or contracts for differences relating to shares and the financial promotion identifies directly a person who issues or provides such an investment, or the subject matter of the financial promotion is a controlled claims management activity and the financial promotion directly identifies a person who undertakes that activity. In such cases, the exemption is subject to a disclosure requirement which is itself subject to certain exceptions (see PERG 8.12.27G). … …
8.14 Other financial promotions
…

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8.14.2A G The exemptions in Part 6 of the Financial Promotions Order apply to communications which relate to “controlled claims management activity” except where stated otherwise in that Part (article 27). One-off financial promotions (articles 28 and 28A)
8.14.3 G Article 28 exempts financial promotions, other than unsolicited real time
financial promotions, which are one-off in nature. Whether or not any particular financial promotion is one-off in nature will depend upon the individual circumstances in which it is made. Article 28(3) sets out conditions which, if all are met, are conclusive. Otherwise they are indicative. Even if none are met the exemption may still apply. This makes it clear that the overriding issue is whether the financial promotion is, in fact, a one-off. The conditions are that:
(1) the financial promotion is made only to one recipient or to a group of recipients in the expectation that they would engage in investment activity or engage in claims management activity jointly; …
8.14.4 G The FCA considers the effect of each of the conditions in PERG 8.14.3G(1)
to PERG 8.14.3G(3) to be as follows.
(1) … If the financial promotion is addressed to more than one person they must be proposing to engage in investment activity or engage in claims management activity jointly (see PERG 8.14.6G). …
8.14.6 G In the FCA’s view, a group of recipients who may be engaging in
investment activity or engaging in claims management activity jointly could include:
…
8.14.7 G A financial promotion may fail to satisfy all of the indicators referred to in
PERG 8.14.4G because it is addressed to more than one recipient and they are not persons who will engage in investment activity or engage in claims management activity jointly. … … 8.14.13 A G The article 28A exemption does not apply to communications in respect of controlled claims management activity. … Overseas communicators (articles 30-33)
8.14.14 G There are a number of exemptions in the Financial Promotion Order
relating to financial promotions sent into the United Kingdom by an

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FOS 2018/6 overseas communicator who does not carry on certain controlled activities in the United Kingdom. These exemptions apply in addition to any other exemptions which may apply to any particular financial promotion by an overseas communicator. The article 30-33 exemptions do not apply to any communications in respect of controlled claims management activity. … Nationals of EEA States other than the United Kingdom (article 36)
8.14.18 G This exemption allows a person in another EEA State who lawfully carries
on a controlled activity in that State to promote into the United Kingdom. This exemption does not apply to any communication in respect of a controlled claims management activity. … Joint enterprises (article 39)
8.14.19 G … A joint enterprise means, in general terms, arrangements entered into by
two or more persons for commercial purposes related to a business that they carry on. The business must not involve a controlled activity or a controlled claims management activity. …
8.14.20 G … This means that the sponsors or promoters of a company who arrange for
private investors to become shareholders will not be setting up a joint enterprise simply because the company may intend to carry on a relevant business which is not a controlled activity or a controlled claims management activity. … … High net worth companies, unincorporated associations and trusts (article 49) … 8.14.26- A G The article 49 exemption does not apply to communications in respect of controlled claims management activity. … Advice centres (article 73) 8.14.40B G Article 73 exempts any financial promotion made by a person in the course of carrying out his duties as an adviser for, or employee of, an advice centre. This is provided the financial promotion relates to:
(3) …; or
(4) controlled claims management activity.
…
8.15 Financial promotions by members of the professions (articles 55 and 55A)

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…
Non-real time financial promotions by professional firms …
8.15.6 G A financial promotion made under article 55A must contain a statement in
the following terms: “The [firm/company] is not authorised under the Financial Services and Markets Act 2000 but we are able in certain circumstances to offer a limited range of investment and consumer credit￾related and claims-management related services to clients because we are members of [relevant designated professional body]. We can provide these investment and consumer credit-related and claims-management related services if they are an incidental part of the professional services we have been engaged to provide”. … …
8.22 The Internet
…
8.22.2 G The test for whether the contents of a particular website may or may not
involve a financial promotion is no different to any other medium. If a website or part of a website, operated or maintained in the course of business, invites or induces a person to engage in investment activity or to engage in claims management activity, it will be a financial promotion. …
8.22.3 G … The FCA’s views on the position of hypertext links (which should be
read with the remainder of PERG 8, especially PERG 8.4 (Invitation or inducement)) are as follows. … (2) The material on a host website which contains the hypertext link may in itself be a financial promotion. For example, it may contain text which seeks to encourage or incite persons to activate the link with a view to engaging in investment activity or engaging in claims management activity. (3) Website material which represents a directory of website addresses or e-mail addresses will not be a financial promotion in its own right. That is unless the material also contains an inducement to contact a named addressee with a view to engaging in investment activity or engaging in claims management activity. …
8.23 Regulated activities
…

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8.23.6 G Guidance on the distinction between controlled claims management
activity and regulated claims management activity can be found at PERG 8.7A.5G to PERG 8.7A.7G.

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Annex L
Amendments to the Wind-down Planning Guide (WDPG) In this Annex, underlining indicates new text. 3 The concept and process of wind-down planning …
3.6 Impact assessment: who will be affected by a wind-down?
…
3.6.4 G Firms can support their impact assessment of winding down by a risk
assessment of each stakeholder group along with the mitigating actions the firm would consider appropriate. Some factors that a firm may consider include:
(1) How quickly can a firm conclude any outstanding transactions? Will there be any tax or other implications for customers? (2) Can the firm help transfer its customers to another financial institution or, where relevant, firm with a permission to carry on regulated claims management activities? If the firm has many customers to be transferred out, do other firms in the same sector have the capacity to take them on? (3) How quickly can client monies and custody assets be returned? …

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Annex M
Amendments to the Reader’s Guide
In this Annex, underlining indicates new text.
Reader’s Guide: An introduction to the Handbook …
3. Structure of the Handbook
The Handbook is divided into the following blocks. The Handbook also contains a Glossary of definitions https://www.handbook.fca.org.uk/handbook/glossary/ which specifies what the legal meaning is of various phrases and wording used. … Business Standards Day-to-day conduct rules that apply to firms, as specified. …  BCOBS (Banking: Conduct of Business sourcebook) – applies to firms that accept deposits from banking customers  CMCOB (Claims Management: Conduct of Business sourcebook) – applies to firms that provide claims management services …

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FEES (CLAIMS MANAGEMENT COMPANIES) INSTRUMENT 2018 Powers exercised by the Financial Conduct Authority A. The Financial Conduct Authority makes this instrument in the exercise of:
(1) the following powers and related provisions in or under the Financial Services and Markets Act 2000 (“the Act”):
(a) section 137A (The FCA’s general rules); (b) section 137T (General supplementary powers); (c) section 139A (Power of the FCA to give guidance); (d) section 234 (Industry funding); (e) paragraph 23 (Fees) of Schedule 1ZA (The Financial Conduct Authority); and (2) articles 1(2) and 74 of the Financial Services and Markets Act 2000 (Claims Management Activity) Order 2018; and (3) section 27 of the Financial Guidance and Claims Act 2018. B. The rule-making powers listed above are specified for the purposes of section 138G(2) (Rule-making instruments) of the Act. Powers exercised by the Financial Ombudsman Service D. The Financial Ombudsman Service Limited:
(1) makes and amends the scheme rules relating to the payment of fees under the Compulsory Jurisdiction; (2) fixes and varies the standard terms for Voluntary Jurisdiction participants relating to the payment of fees under the Voluntary Jurisdiction, and (3) fixes and varies the standard terms for the Voluntary Jurisdiction, as set out in the Annex to this instrument in the exercise of the following powers and related provisions in the Financial Services and Markets Act 2000:
(a) section 225 (The scheme and the scheme operator); (b) section 227 (Voluntary jurisdiction); (c) paragraph 14 (The scheme operator’s rules) of Schedule 17; (d) paragraph 15 (Fees) of Schedule 17; and (e) paragraph 18 (Terms of reference to the scheme) of Schedule 17. E. The making and amendment of these scheme rules and fixing and variation of these standard terms by the Financial Ombudsman Service Limited is subject to the consent and approval of the Financial Conduct Authority.

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F. The Financial Ombudsman Service Limited notes that, for the avoidance of doubt, the Transitional Provisions at TP 20 in Annex A below apply equally to the Voluntary Jurisdiction and the Compulsory Jurisdiction of the Financial Ombudsman Service Limited. Approval by the Financial Conduct Authority G. The Financial Conduct Authority consents to the making and amendment of the scheme rules and approves the fixing and variation of the standard terms by the Financial Ombudsman Service Limited. Commencement H. This instrument comes into force on 1 January 2019. Amendments to the Handbook
I. The Glossary of definitions is amended in accordance with Annex A to this
instrument.
J. The Fees manual (FEES) is amended in accordance with Annex B to this instrument. Citation K. This instrument may be cited as the Fees (Claims Management Companies) Instrument 2018. By order of the Board of the Financial Ombudsman Service Limited 7 December 2018 By order of the Board of the Financial Conduct Authority 13 December 2018

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Annex A
Amendments to the Glossary
In this Annex, underlining indicates new text and striking through indicates deleted text. Amend the following definition as shown. participant firm (1) a firm other than:
…
(i) … ; and
(j) … ; and
(k) a claims management company in relation to a regulated claims management activity; …

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Annex B
Amendments to the Fees manual (FEES) unless otherwise stated. 3 Application, Notification and Vetting Fees …
3.2 Obligation to pay fees
…
3.2.7 R Table of application, notification, vetting and other fees payable to the
FCA
Part 1: Application, notification and vetting fees
(1) Fee payer (2) Fee payable (£) Due date … (zzd) applications for claims management companies (1) £1,200 for claims management companies with annual turnover of up to and including £1,000,000; and (2) £10,000 for claims management companies with annual turnover of over £1,000,000. Firms which already have Part 4A permissions and are applying to vary their permissions will receive a 50% reduction in the relevant fee. On the date the application is made.

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…
3 Annex
1R
Authorisation Fees payable
Part 1 - Authorisation fees payable
…
Part 1(a) Authorisation Fees payable to the FCA by FCA-authorised
persons
Application type Amount payable (£)
…
(3) Complexity groupings relating to credit-related regulated activity – see Part … (4) Complexity groupings relating to claims management companies (k) Claims management companies with turnover of up to and including £1,000,000 1,200 (l) Claims management companies with turnover of over £1,000,000 10,000 … 4 Periodic fees …

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4 Annex
1AR
FCA activity groups, tariff bases and valuation dates
Part 1
This table shows how the FCA links the regulated activities for which a firm has permission to activity groups (fee-blocks). A firm can use the table to identify which fee-blocks it falls into based on its permission. Activity group Fee payer falls in the activity group if:
… …
CC2. Credit￾related regulated activities … CMC. it is a claims management company. …
Part 3
This table indicates the tariff base for each fee-block set out in Part 1. The tariff base in this Part is the means by which the FCA measures the amount of business conducted by a firm for the purposes of calculating the annual periodic fees payable to the FCA by that firm. Activity group Tariff base … … CC2. Credit-related regulated activities … CMC. Annual turnover as defined in FEES 4
Annex 11AR.
…
Part 5
This table indicates the valuation date for each fee-block. A firm can calculate

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FOS 2018/8 its tariff data in respect of fees payable to the FCA by applying the tariff bases set out in Part 3 with reference to the valuation dates shown in this table. Activity group Valuation date … … CC2. Credit-related regulated activities … CMC. Annual turnover for the financial year ended in the calendar year ending 31 December. … 4 Annex 2AR FCA Fee rates and EEA/Treaty firm modifications for the period from 1 April 2018 2019 to 31 March 2019 2020
Part 1
This table shows the tariff rates applicable to each of the fee blocks set out in
Part 1 of FEES 4 Annex 1AR.
…
Activity group
Fee payable
… … …
CC2. … …
CMC. Band width (£ thousands of annual turnover) Fee (£) for 2019/20 0-50 500 50-100 1,000 >100 13 per £ thousand or part per £ thousand … …

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4 Annex
11AR
Definition of annual income for the purposes of calculating fees in fee blocks A.13, A.14, A.18, A.19 and B. Service Companies, Recognised Investment Exchanges, and Regulated Benchmark Administrators and Claims Management Companies Annual income definition General definition for all relevant fee-blocks (other than where the firm is an operator of a Recognised Investment Exchange, or a Benchmark Administrator or a Claims Management Company) … Where the relevant fee-block is fee-block A.19 … Where the firm is a Claims Management Company (fee-block claims management company) Income is defined as turnover. “Turnover” means the sum of the amounts paid to, or received by, an authorised claims management company in respect of regulated claims management activities in Great Britain, including:
(j) charges, commission, the share of any compensation, fees and subscriptions; (k) the monetary value of any services received by the claims management company where it makes no payment for those services or where the payment received is worth less than the monetary value of the services; and (l) the monetary value of any advertising in respect of the claims management company that it has not paid for out of funds referred to in sub-paragraphs (j) and (k). … 4 Annex 13G Guidance on the calculation of tariffs set out in FEES 4 Annex 1AR Part 3
Table 1
The following table sets out guidance on how a firm should calculate tariffs for fee blocks A.13, A.14, A.18, A.19 and B. Service Companies, Recognised

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Investment Exchanges, and Regulated Benchmark Administrators and Claims Management Companies. … Reporting period … (4) The Except for claims management companies, the “reporting year” is the firm’s financial year ending during the calendar year prior to the FCA fee year. This fee year starts on 1 April. This is specified in Part 5 of FEES 4
Annex 1A.
…
…
5 Financial Ombudsman Service Funding
…
5.5B Case fees
…
Leaving the Financial Ombudsman Service
5.5B.24 R Where a respondent ceases to be a firm, payment service provider, electronic money issuer, CBTL firm, a designated credit reference agency, a designated finance platform, or VJ participant or claims management company (as the case may be) part way through a financial year it will remain liable to pay case fees under FEES 5.5B in respect of cases within the jurisdiction of the Financial Ombudsman Service. … 5 Annex 1R Annual General Levy Payable in Relation to the Compulsory Jurisdiction for 2018 2019/1920 …

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Compulsory jurisdiction - general levy
Industry block Tariff base General levy payable by firm … … … 24 – claims management companies Annual income £50 plus £3.00 per £1,000 of annual income … After FEES 5 Annex 3R (Case Fees Payable for 2018/19) insert the following new Annex, FEES 5 Annex 4R. The text is not underlined. 5 Annex 4R Definition of annual income for the purposes of the FOS general levy where the firm is a claims management company Annual income definition Income is defined as turnover. “Turnover” means the sum of the amounts paid to, or received by, an authorised claims management company in respect of regulated claims management activities in Great Britain, including:
(a) charges, commission, the share of any compensation, fees and subscriptions; (b) the monetary value of any services received by the claims management company where it makes no payment for those services or where the payment received is worth less than the monetary value of the services; and (c) the monetary value of any advertising in respect of the claims management company that it has not paid for out of funds referred to in sub-paragraphs (a) and (b). … After FEES TP 19 (Transitional provisions relating to statements provided by participant firms before 1 April 2019 with respect to the FSCS 2019/20 financial year) insert the following new transitional provisions. The text is not underlined.

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TP 20 Transitional provisions relating to the Temporary Permissions regime for Claims Management Companies, taking effect on 1 January 2019 These transitional provisions will only apply to firms that are already trading as claims management companies as at 1 January 2019 and who apply to the FCA for temporary permission, prior to authorisation. (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitional provision:
dates in force
(6)
Handbook provision:
coming into force
Periodic fee transitional provisions
20.1 FEES TP 20 G (1) This transitional provision
applies to claims management companies.
(2) Claims management company is defined in the Glossary as a person carrying on a regulated claims management activity in Great Britain. (3) Regulated claims management activity is in turn defined as comprising various individual regulated activities which are defined in the Glossary by reference to the regulated activities in articles 89G to 89M of the Regulated Activities Order. All of the Glossary definitions above come into force on 1 January 2019. (4) The regulated activities in articles 89G to 89M of the Regulated Activities Order were added to the Regulated Activities Order by the Claims Management Order. That Order comes into force for most purposes on 1 April 2019. However, it came into force on 1 January 1 January

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29 November 2018 for various purposes including:
(a) for the purpose of enabling the FCA to make rules, give guidance, impose requirements, make directions, and approve rules; (b) for the purpose of enabling the scheme operator to do various things including making rules and standard terms. (5) That means that, for the purposes of the definition of claims management company and the related Glossary definitions (including the definitions of regulated claims management activity and the related regulated activities) in this instrument, the references to the Regulated Activities Order are references to that Order as amended by the Claims Management Order.
20.2 FEES 4
Annex 1A
R Claims management companies registering for temporary permission must pay the periodic fee for the 2019/20 year within 14 days of the date of the invoice, which will be issued following registration. The periodic fee for 2019/20 will be calculated from the firm’s annual turnover. “Turnover” means the sum of the amounts paid to, or received by, a claims management company in respect of regulated claims management activities, including:
(a) charges, commission, the
1 January
1 January

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FOS 2018/8 share of any compensation, fees and subscriptions; (b) the monetary value of any services received by the claim management company where it makes no payment for those services or where the payment received is worth less than the monetary value of the services; and (c) the monetary value of any advertising in respect of the claims management company that it has not paid for out of funds referred to in sub￾paragraphs (a) and (b). “Annual turnover” means:
(d) the claims management company’s turnover for the 12 months to 30 November 2017; or (e) if the business did not trade for the full 12 months to 30 November 2017, the estimated turnover for the 12 months to 30 November 2018; or (f) where the application for authorisation by the Claims Management Regulator was made on or after 30 November 2017, the estimated turnover for the 12 months to 30 November 2018. Firms must also notify the FCA of any turnover arising from business in Scotland, or business conducted under section 75 of the CCA. Transitional provision for FOS general levy
20.3 FEES 5.7.1 R Claims management companies
applying for authorisation for the
2019/20 financial year must pay the FOS general levy on or 1 January 1 January

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FOS 2018/8 before the later of 1 April 2019 and 30 calendar days after the date when the invoice is issued by the FCA. The general levy for claims management companies will be calculated at £50 plus £3.00 per £1,000 of annual income. “Income” is defined in FEES 5
Annex 4R and means the sum of
the amounts paid to, or received by, a claims management company in respect of regulated claims management activities, including:
(a) charges, commission, the share of any compensation, fees and subscriptions; (b) the monetary value of any services received by the claims management company where it makes no payment for those services or where the payment received is worth less than the monetary value of the services; and (c) the monetary value of any advertising in respect of the claims management company that it has not paid for out of funds referred to in sub￾paragraphs (a) and (b). “Annual income” means:
(d) the claims management company’s turnover for the 12 months to 30 November 2017; or (e) if the business did not trade for the full 12 months to 30 November 2017, the estimated turnover for the 12 months to 30 November 2018; or (f) where the application for authorisation by the Claims Management Regulator was

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FOS 2018/8 made on or after 30 November
2017, the estimated turnover for the 12 months to 30 November 2018. Firms must also notify the FCA of any turnover arising from business in Scotland, or business conducted under section 75 of the CCA. Joining the Financial Ombudsman Service
20.4 FEES 5.8.1 R For claims management
companies applying for authorisation in the 2018/19 financial year, this rule does not apply to those firms which have paid in full upon registration but are not authorised until part way through the financial year. 1 January 1 January

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