ENP Newswire -
Release date- 25072014 -
The review was established to gauge the extent to which incentive arrangements were operated in the best interests of consumers in their design, management and monitoring.
The review examined the incentive arrangements to employees under the Consumer Protection Code 2012, and the Conflicts of Interest regulations applicable TO INVESTMENT firms under the Markets in Financial Instruments Directive ('MiFID').
Director of Consumer Protection,
While all firms in the review had a process in place for the design and approval of incentive schemes, there was a failure to recognise the inherent risks in remuneration arrangements and to mitigate those risks accordingly. The key findings of the review included:
A greater emphasis was placed on rewarding higher amounts of sales than achieving suitable consumer outcomes;
bonus payments paid fully or largely on the achievement of sales volumes and targets, with little emphasis on the quality of sales to the consumer;
limited use of penalties or deterrents against poor sales practices;
widespread use of branch targets in the banking sector as a means of focusing on the bank's goals;
incentives earned on an 'all or nothing' basis; and
regular and robust sales quality MONITORING not performed consistently.
Notes for editors:
About the review:
The review examined compliance with provisions 3.31, 3.32 and 3.35 of Consumer Protection Code 2012.
The review consisted of a detailed desk-based analysis of variable remuneration arrangements;
remuneration policies & payments;
conflicts of interest policies;
client files; and
a review of the associated sales quality monitoring process
15 firms - including banks, insurance companies and INVESTMENT FIRMS were subject to the review, with the scope limited to remuneration arrangements in 2012.
Following this, onsite inspections were conducted in 6 firms, consisting of interviews of key staff, including sales staff and Senior Management, involved in the design, review and monitoring of incentive schemes.
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