FCA refuses authorisation to two funeral plan providers in 2022
What has happened?
In July 2022, the FCA issued a Decision Notice to One Life Funeral Planning Ltd, refusing the firm’s application for authorisation, since One Life could not demonstrate that it was able to meet or comply with the FCA’s regulatory standards.
In December 2022, an application for authorisation made by Eternal Peace Funeral Plans Ltd was refused by the FCA on similar grounds.
What are the key points of the refusals?
One Life Funeral Planning Ltd
Competency of the firm’s Senior Managers
On 29 June 2022, the FCA had conducted competency interviews with each of the firm’s proposed SMF 3 Sales Director, SMF 3 Chief Technical Officer and SMF 16 Risk and Compliance Director and had assessed that the firm’s proposed SMF 3 Sales Director and SMF 16 Risk and Compliance Director were not demonstrating the required skills to hold the roles applied for. The firm confirmed that the SMF 3 Sales Director and SMF 16 Risk and Compliance Director held ultimate sign-off on the firm’s sales processes, which the Authority assessed as being non-compliant.
Lead Generation
The firm purchases data from one data vendor. The FCA believes that this practice is in breach of the provisions of FPCOB 6.5.2R, which bans funeral plan firms from receiving commission payments.
Sales Processes
The FCA had conducted a review of the sales calls conducted by the firm and had identified concerns, including agents not providing consumers with the full cost of plans prior to commencing the sales process, pressured sales, not assessing whether consumers already had a plan in place, non-disclosure of cancellation fees, overestimating the future cost of funerals, selling plans where the consumer required time to consider their options and not identifying vulnerability markers. These findings impact the firm’s ability to meet the Suitability threshold condition.
Eternal Peace Funeral Plans Ltd
The firm had made three applications for authorisation. All three applications were incomplete and missing vital documents and information that should have been provided by the firm at the point it submitted its application. The FCA made repeated requests during the application process for information from the firm, which in many cases the firm failed to address promptly or at all.
The FCA carried out a competency interview in November 2021 with the proposed sole director, SMF 3 (Executive Director) and holder of the compliance oversight senior management function (SMF 16). This interview, which was conducted in assessing the firm’s second application for authorisation, gave rise to serious concerns about the proposed director’s competence.
The FCA also has concerns about the adequacy of the firm’s trust arrangements and its understanding of the applicable regulatory requirements. The Solvency Assessment Report (SAR) provided for the trust showed a solvency level of 85.5%, meaning that the trust’s resources were not sufficient to meet the costs of funeral plans. Whilst the firm has taken steps to remedy this shortfall, the FCA remains concerned by risks arising from the matters described in the SAR which might impact on the solvency level of the trust.
The FCA cannot ensure that the firm will satisfy, and continue to satisfy, the threshold conditions 2C (Effective Supervision), 2D (Appropriate Resources), and 2E (Suitability).
The FCA considers the funeral planning portfolio and firms that sit within it as high risk due to the increased potential for consumer harm due to the high levels of vulnerable customers these products are predominantly sold to.
How can we help you?
If you’d like to know more about how we can help you with your funeral plan compliance and regulation arrangements, or any other regulatory compliance issues, our specialist team is here to help.
Contact us today on 020 7436 0630 – or email info@thistleinitiatives.co.uk.