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FCA - Introducing the Directory

I write to respond to CP 18/19, Introducing the Directory, on behalf of the Association of British Credit Unions Limited (ABCUL).  ABCUL is the primary trade body representing credit unions in England, Scotland and Wales with 196 member credit unions across mainland Great Britain.  Credit unions are relatively small, co-operatively-owned depost-taking institutions.  They range from mid-sized organisations with thousands of members and tens of millions in assets to small community-based voluntary organisations.

In the main we are supportive of the introduction of the Directory.  Since credit unions are co-operative societies registered under the FCA’s Mutuals Registry (which has an outdated online portal) credit unions historically have relied more heavily on the financial services register to provide credentials to third parties wishing to conduct due diligence on them than the wider sector who can also rely in most cases upon the records at Companies House.  So with the introduction of the SM&CR and its narrowing of disclosed controlling individuals to those holding an SMF function only (particularly the removal of most credit union directors from the FS register) they have found increased difficulty in verifying director names and details from a trusted third party source resulting in sub-optimal experience in relation to things like opening new bank accounts, for example.

As such, the creation of the Directory with a much wider footprint of individuals listed on it will assist credit unions in supplying information to third parties for their due diligence purposes and address this unintended consequence of the interaction between the SM&CR and the outmoded FCA Mutuals Register.  On which note, we would urge strongly the FCA consider how the Mutuals Register could be brought into line, technologically and in terms of accessibility and digitalisation with the propose Directory and the Companies House equivalent.

The Directory will also benefit credit unions in terms of verifying individuals’ past positions within the financial services industry when seeking to recruit which will be helpful.

Our main concern, on the other hand, relates to the administrative burden of the very-tight, one day window for updating the Directory.  We appreciate the need for the Directory to be updated promptly in order for it to be as accurate as possible but we are concerned that 1 business day is a very tight timetable for a sector of small firms with limited resources and we are concerned that there may be penalties for a failure to update promptly enough due to resource capacity rather than anything more sinister.

As such we would urge the FCA to be more flexible and allow a more reasonable period of say 10 working days for firms to update their Directory entry.  We are particularly confused as to how the Directory update requirement interacts with the turnaround times for applications for SMF status and the fact that individuals may perform these roles in some circumstances for a period of up to 12 weeks without seeking SMF authorisation.  This does not appear to us to be consistent with a new requirement to update the Directory within 1 day.

To summarise, we are supportive of the concept of the Directory which we think redresses a key flaw in the SM&CR regime for credit unions.  However, we would like the FCA Mutuals Register to be improved alongside this process and for the timetable for Directory updates to be relaxed so as to take account of the realities of this administrative process for small organisations. 

We would be happy to discuss this feedback further should you wish.

ABCUL – October 2018