Hear the 2013 Co-op Fortnight Lecture and Discussion

Here is a recording of the Co-op Fortnight Law Lecture and Discussion in mp3 form for you to download if you have an hour to spare or trouble sleeping.....If you look at the slides while listening, it may make more sense.
Thanks to the UK Society for Co-operative Studies, DWF LLP and Co-operatives UK for the support and to the audience for good questions and a vigorous discussion in the finest traditions of Co-op Debate.
© Ian Snaith 2013 This work is licensed under the
This work is licensed under a Creative Commons Attribution-ShareAlike 2.0 UK: England & Wales License.

FSA/FCA Mutuals Registration Team: Job Advert & 01.04.13 Changes

Jonathan Bromberger Manager - e-Money, Mutuals & PSD Teams at the FSA writes in a widely circulated email:

"I am writing to update you on several current (or upcoming) changes for the Mutuals Registration Team (“the team”) as these will influence the way we interact with your organisation and the mutual sector more generally.

The team is in the midst of delivering significant change which will cover:

• Actively considering how to implement the Draft Mutual Societies Order and how our role as registrar changes as a consequence;
•   Reviewing our processes, systems and ways of working;
•   Up-skilling the team;
•    How we engage with the co-operative and mutual sector more generally &
•    Planning for succession.

There is also a restructuring in the wider FSA, as we approach 01 April 2013 when FSA legally separates into the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).  However the registrar function will operate as part of the FCA and provide all the services required by societies whatever their society type.

In recognition of the importance FSA places on the successful delivery of these challenges the manager of the team will now have solo responsibility for the team, rather than managing a multiple portfolio.  The team will be located in the Approved Persons Passporting & Mutuals (“APPM”) department in Authorisations.  At 01 April, I will step down as the manager of the team and Beverley Walker will run the team on an interim basis.  Beverley will do so while the FSA seeks to recruit a permanent replacement and she will report to Graeme McLean who is the experienced Head of Department for APPM.  I will be in the FSA for a period after 01 April and will ensure an orderly handover of my mutual responsibilities.

I have attached a draft copy of the Mutuals manager job advert, if you are aware of any candidates this might suit or interest, please forward the advert to them (Job ad template Auth (6) (4) (4) (2) (3) (4) ).

If they wish to discuss the role, I am happy to do so with potential applicants and they can submit their applications via the following hyperlink:

http://www.careersatfsa.com/how-to-apply.aspx ...........................

Looking to the future I would also like to introduce Ian Adderley.  Ian joined my team this month as a Senior Associate and comes to us with a background of involvement in the co-operative movement. He previously worked for Co-operatives Yorkshire and the Humber- a regional co-operative council, representing, promoting and connecting co-operatives in that region. Whilst there he successfully organised and deliveredFutures North- an event bringing together co-operators across the north of the UK; and frequently spoke at events explaining and advocating the role of co-operatives and the co-operative economy. Ian has been active in the co-operative movement in various other ways including as a director of a national co-operative and previously as an elected member on committees of The Co-operative Group. Prior to working in the co-operative movement Ian read Law with Politics and was later called to the Bar at Lincoln’s Inn.  Most recently, Ian worked for the public services trade union, UNISON. There he worked as the national Ballots Manager, responsible for ensuring legal compliance in the running of industrial action ballots. His work also involved reviewing ballot processes, project managing the creation of new systems, writing guidance and delivering training.

I know Ian is keen to speak with people from across the co-operative and mutual sector. He will be in touch with you once he has completed his initial period in the team, however if you would like to contact him sooner, his contact details are:

Email: Ian.Adderley@fsa.gov.uk"

Changes for Co-ops and Bencoms from April 1st

Among co-ops, the Financial Services Act 2012 will have the biggest impact on credit unions. Most of their regulation moves to the Prudential Regulation Authority on 1st April 2013 - see my last post.

However, other industrial and provident societies may see some changes on or after 1st April 2013. That may happen for two reasons:

• the move of the registration role to the Financial Conduct Authority (FCA) on 1st April 2013 and
• the implementation (whenever that happens) of section 1 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010.

Clearer Regulatory Role for the FCA and nature of Its Guidance

In general, the draft Mutual Societies Order simply transfers the functions of registering societies under the Industrial and Provident Societies Act 1965 to the FCA with a possible role for the PRA where necessary -see Schedules 2 to 4 of the Draft Order. However, Schedule 1 of the Draft Order makes two interesting changes.

Paragraph 4(1) of the Schedule provides:

"The FCA must maintain arrangements designed to enable it to determine whether persons are complying with requirements imposed on them by or under the mutuals legislation"

That imposes a legal duty on the FCA to have systems in place to police whether or not people (and societies) are complying with  requirements imposed on them by or under the "mutuals legislation". That expression includes the Industrial and Provident Societies Acts - see   para 1 of Schedule 1 of the Draft Order and section 50(2) of the Financial Services Act 2012 (which was the old clause 47(2) when the Draft order was written).

One of the requirements imposed on every society "by or under" that legislation is that, while they are registered, they should be either a bona fide co-operative or a community benefit society.

So, if the Mutuals Order is enacted as drafted, there will be an explicit legal duty for the FCA to "maintain arrangements" to make sure that is the case. That requires systems to ensure that on registration and while registered societies comply with those requirements so that, if they don't, their registration can be cancelled under the mutuals legislation.

Resources will have to be found by the FCA to operate that system and there will no longer be any ambiguity about their role. They are a registrar of co-operatives and bencoms and that involves more  scrutiny than is needed to register a non-CIC company and keep it on the register.

So how will the FCA decide who meets those requirements? They already publish some guidance together with the application form for registration - see pages 8-9 here. They have already taken legal advice and consulted on the advice and its suggested guidance and work continues on that.

While the content of future Guidance will be subject to further work and more consultation, the Draft Order makes it clear beyond doubt that FCA Guidance about mutuals is Guidance under the amended Financial Services and Markets Act 2000 and not just information provided under the mutuals legislation -see paragraph 2(2)(f) of the Draft Order and section 139A of FSMA 2000 to substituted in the 2000 Act by section 24(1) of the Financial Services Act 2012.

This does not impose the full panoply of formal consultation applicable to Guidance given to regulated persons in the financial services sector. But it does give the Guidance a more formal status than the present brief note to an application form. Interestingly, it also places beyond doubt the power of the FCA to pay other persons or organisations to give the guidance on its behalf - see new section 139A(2) of the amended FSMA 2000.

This means that the role of the FCA as the UK body making sure the society structure is only used by bona fide co-operatives or bencoms will have a firmer legal footing from 1st April 2013. It is  legally required carry out that function effectively.

Implementation of ss 1 and 2 of the 2010 Act

It is not clear when this will happen. It ought to happen by 1st April 2013. When it does, two important changes will be put in place.

One is that societies will formally, legally and for all purposes be known as co-operative or community benefit societies and not industrial and provident societies. Section 2 of the Act will achieve that.

The other is that any society which is registered will be registered formally and officially as EITHER a co-operative or a bencom.

Up to now, as long as a society met the criteria for one of these categories, it would be registered and there was room for some uncertainty or ambiguity about which category it was in at the time. Section 1 of the 2010 Act will amend industrial and provident society legislation with effect from the time of the amendment to make the basis of registration in one category or the other clear.

This, like the more formal legal status of Guidance on the criteria for these categories, makes clarity about the nature and role of the organisation vital.

Both of these developments bolster the role of the FCA as registrar and assist in protecting the "brand". The registration of phoney co-operatives or bencoms should be harder. Continued compliance with the registration conditions to avoid cancellation of registration is just as important.

Finally, when will this happen? In March this year, the Law Commission plans to provide a "draft Co-operative and Public (sic) Benefit Societies Bill to HMT" - see page 11 of this business plan. Will the 2010 Bill's implementation have to wait until parliament passes that new consolidating Bill?

Surely, it makes much more sense for sections 1 and 2 of the 2010 Act to be effective  on 1st April 2013 to coincide with the implementation of the Financial Services Act 2012 and a Mutual Societies Order made under it?