IFB rules changes and why we need them

Our Head of International, Katie Hay, explains the incidental financial business rules changes and why we are holding a SGM on 24 October

At the SGM on 6 September, we brought a couple of practice rule changes to the attention of members that are required as a result of the UK’s departure from the EU. In the event that we leave on 31 October without a deal, these rules will need to be ready to be put in place in order to ensure no disruption to business. One change related to our rules concerning the registration of European lawyers. In practice, this will have very little impact on our operations, and indeed on our members. The other related to our incidental financial business rules, specifically those that were brought in last year to take account of the Insurance Distribution Directive (IDD) that was implemented in the UK in October 2018.

The purpose of the IDD is to ensure that consumers buying insurance products will benefit from:

•  greater transparency in the price and costs of insurance products
• a simple, standardised insurance product information document (IPID) providing clearer information on non-life insurance products, so that consumers can make more informed decisions
• where insurance products are offered in a package with another product or service, consumers will have the choice to buy the main product or service without the insurance policy
• rules on transparency and business conduct to help consumers avoid buying products that do not meet their needs 

The UK’s departure from the EU will have no impact on the practical effect of these provisions in the UK because the Insurance Distribution (Amendment) (EU Exit) Regulations 2019 will ensure that the provisions are fully implemented into UK law. The subsequent rules changes that we require will therefore have no impact on how solicitors carry out relevant business in this area. However, what the UK regulations do is essentially replace some cross references to EU legislation, which will no longer be the relevant authority, with references to the FCA Handbook. The Society’s Incidental Financial Business (IFB) regime, which came into effect on 31 October 2004, allows firms to conduct certain activities under our regulatory remit which would otherwise require Financial Conduct Authority (FCA) authorisation. This means that our rules in this area must comply with the terms of the FCA Handbook and as such, need to be approved by the FCA.

We submitted what we thought were the necessary changes to our IFB rules to take account of Brexit to the FCA in advance of the SGM on 6 September. However, they have since informed us that further changes will be required, which is why – in order to comply with the requirement that members are given the opportunity to consider any practice rule changes at a general meeting – we are convening a further SGM on 24 October. Due to the compressed timescales we are working to we are in a situation where the amended rules that we have posted on our website for consideration may not be in their final form. Should further amendment be required, and we receive notification of this in advance of 24 October, we will issue an update to our members. In the event that we do not have the amended rules in their final form prior to 24 October, the worst case scenario is that we would have to convene a further general meeting. However, it is our hope that because of a common appreciation of the potential significance of 31 October and our need to remain compliant in a post-Brexit environment, we can avoid doing so.

 If you have any questions about this, or any aspect of our work relating to the UK’s departure from the EU, please contact Katie Hay.