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Information Note: CMA Compliance Statements (due by 7th January 2021)

All DB Pension Schemes are required to meet this new regulatory requirement.

The purpose of this information note is to explain what Pension Scheme trustees need to do.

 

 

Background to CMA Certification

The Investment Consultancy and Fiduciary Management Market Investigation Order 2019 set out remedies in 6 part

  • Part 3 - Mandatory tendering for Fiduciary Management (FM)
  • Part 4 - Separation of advice and marketing materials and use of mandatory wording in respect to FM services
  • Part 5 - Fiduciary Management services – Fee information provision requirements
  • Part 6 - Fiduciary Management Services - performance information provision requirements
  • Part 7 - Investment consultancy services objective setting
  • Part 8 - Minimum standards in provisions of information

 

Compliance statements need to be submitted to the Competitions and Market Authority for each of these by the relevant party.  The relevant parts for a Pension Scheme are parts 7 and for those that have appointed a fiduciary manager, part 3.   The first certification for the period from 10th December 2019 to 10th December 2020 is required by 7th January 2021.  Parts 4,5,6 and 8 are not requirements for the Pension scheme - these are for Fiduciary Managers and Investment Consultants.

 

Pension Scheme Compliance

As stated above Pension Schemes only need to comply with Parts 3 and 7

 

Part 3 – Mandatory tendering for Fiduciary Management services

  • As part of the CMA Order, Schemes should have gone through a competitive tender in procuring FM services. Where they have not, then they are required to do so within five years of the date of the appointment or by June 2021 whichever is the later.
  • Competitive Tender Process’ means a process by which Pension Scheme Trustees, or another person appointed by them to act on their behalf, have invited and used reasonable endeavours to obtain Bids for the provision of Fiduciary Management Services from three or more unrelated Fiduciary Management Providers and have evaluated the Bids received; and for these purposes ‘unrelated’ means independent of each other and thereby in a position to compete with each other.
  • Trustees should inform the fiduciary manager that they have carried out a competitive tender or, if not, the date by which they are required to do so.

 

Part 7 – Investment consultancy services objective setting

  • Part 7 of the Order relates to the Strategic Objective which the Trustees had to set for their investment consultant or fiduciary manager before the 10 December 2019 deadline.
  • It is generally expected that the objectives will be reviewed each year.

 

Practicalities of demonstrating compliance

Below is a draft of the compliance statement and certification that the Trustees need to submit to the Competitions and Markets Authority by 7th January 2021.  This can be emailed to the following address once appropriately completed.

 

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

In effect the trustees can self-certify that they have complied with Parts 3 and 7 via the compliance letter, there is no need for additional ‘certificates’ or information to meet the CMA compliance statement requirements.

 

Example A – CMA Compliance Statement letter from trustees with Fiduciary Management

Example B – CMA Compliance Statement letter from trustees with Advisory

 

Following the Mandatory Competitive Tender for Fiduciary Management (Part 3 of Orders) the trustees are required under section 3.7 to provide the fiduciary manager with confirmation that it was a competitive tender process.

 

Example C – Example of letter from Trustees to the Fiduciary Manager

 

Please note that this should not be construed as legal advice regarding whether this fulfils the Scheme’s obligations and Scheme’s should seek legal advice before sending.

 

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Tuesday, 11 May 2021