The RICS Designated Professional Body scheme is a UK regulatory programme approved by HM Treasury, the UK’s ministry of finance. It enables us to regulate our members for general insurance distribution activities in the UK, on behalf of the Financial Conduct Authority.
All firms and professionals engaged in insurance distribution activities in the UK should read these rules and their accompanying guidance carefully. It is important to understand and have thorough, detailed knowledge of both documents.
This compliance notice is a reminder of the rules and guidance about commissions earned under the firm's DPB licence to provide general insurance distribution activities. It sets out the key issues and risks which you should be aware of as a DPB licence holder and regulated firm.
DPB Rules and Guidance
Paragraph 49(a)(v) of the Guidance to the Designated Professional Body Rules 2018 requires that firms obtain informed consent in writing from the client before retaining any commission earned from services provided under their DPB licence. Prior to consent being obtained or the monies being remitted to the client, commission should be held in the firm's client bank account.
The full rules and guidance can be found here.
These requirements are set out in the Financial Services and Markets Act 2000 (FSMA)
What concerns are we seeing?
We regularly undertake regulatory review visits at firms to check their compliance with the rules and guidance. On these visits we have seen instances where certain firms have paid commission into their office bank account without having written informed consent from clients. In some cases, thousands of pounds are retained by firms when they are not entitled to the monies. We expect firms who have retained commission without written informed consent to pay the monies into the firm's client bank account and either remit it to the client or obtain consent to retain it.
What are the risks?
There are a number of risks associated with not complying with this requirement:
1. The firm may be placed in financial difficulties when it later decides to comply with the requirements by paying the commissions into the firm's client bank account or remitting them to the client.
2. The firm is likely to be in breach of Rule 3 (failing to act consistently with their professional obligations) and Rule 8 (failing to protect the security of clients' money) of the Rules of Conduct for Firms 2007 and may be liable to disciplinary action.
3. The firm may lose its licence or conditions may be placed on it.
How can firms put things right?
If you are concerned that your firm may not have obtained written informed consent on commission earned under their DPB licence, you should take immediate action to avoid disciplinary action. You should take the following steps:
1. Make a schedule of all commission earned since the firm's licence was granted.
2. Check whether written informed consent has been obtained on each commission. This means that the client must know the amount of commission earned and agree that the firm can retain that commission.
3. On all commissions that have been retained without written informed consent, pay the monies to the firm's client bank account.
4. Either obtain written informed consent to retain the commission or remit it to the client.
It is best practice to keep a record of all commission earned, the amount and the date on which written informed consent was obtained.
If you are unable to complete the steps above, you need to report this to us using the form below.
We recommend that you contact us by email as the Contact Centre is likely to have high volumes of calls due to membership subscriptions being due, and the deadline for completing Continuing Professional Development (CPD) approaches.
There are a number of changes to the DPB rules and guidance you should be aware of if your firm is part of the DPB scheme.
The changes were approved by the Financial Conduct Authority (FCA) in July 2018 and reflect new obligations and requirements under the Insurance Distribution Directive (IDD), which replaces the Insurance Mediation Directive (IMD).
Please note that we have recently further clarified requirements in relation to the Insurance Product Information Document (IPID) for requirements for DPB firms. This is to clarify that commercial clients do not require an IPID. This clarification is made to better reflect the FCA requirements, however it does not mean that there should be a lower standard of information to commercial customers. The changes are made to provide greater flexibility to target and customise information for commercial clients. Commercial clients will still be required to receive appropriate product information.
The minimum PII cover for DPB licensed firms has increased to €1.25m for single cases and €1.85m for the annual aggregate. This applies when the policy is taken out, renewed or extended.
DPB licensed firms are required to obtain and provide their customer clients with an IPID. An IPID must be produced by the manufacturer of the insurance product. The firm is required to issue the IPID together with the demands and needs statement (DNS) which must be presented to the client before the placement of the insurance. Whatever the proposed contract, under the IDD this must be consistent with the demands and needs indicated by the customer in its DNS.
Firms dealing with a commercial customer:
Although DPB licensed firms are not required to fulfil the 15-hour CPD requirement, due to their status of ancillary insurance intermediaries, in line with Rule 6 of the RICS Rules of Conduct for Firms, firms nevertheless need to ensure that relevant staff undertake professional training and development every year relating to insurance distribution activities. DPB licensed firms are required to confirm their compliance with these requirements annually and can be asked to provide evidence.
The new DPB rules provide that when an insurance product is complementing another good or service which is not insurance, as part of a package or as part of the same agreement to the same client, a DPB licensed firm must inform the client about the possibility of buying the different components separately.
Furthermore, the obligation to inform clients about commission received still holds. Though this is not a new requirement in the rules, it is imperative that firms continue to account to clients for all fees, commission and other benefits obtained through general insurance distribution activity. The client must be informed in writing about the commission, which must be remitted to the client, and only if the client gives informed consent, in writing, allowing the firm to retain that amount of commission, can the firm keep the commission received.
In order to join the RICS DPB scheme, you will need to have an RICS regulated firm.
If you need to register your firm, follow the instructions on the Register your firm page where you can complete the DPB application as part of your firm’s registration
If your firm is already 'Regulated by RICS', you will need to complete the DPB Application through the Professional Portal. Log in to your account and select the Regulation section.
You will need to download the 'Shareholders and Close Links' information' and upload it to the Professional portal as part of your application.
At the application stage you will be requested to provide information on:
Once your application has been submitted, a caseworker will review your response to the questions. When the application has been approved an invoice will be issued for the application fee. When this has been paid a licence will be issued to you. You cannot rely on the licence until the fees have been paid.
If you wish to join the DPB scheme and are currently directly authorised by the FCA then you should begin the FCA cancellation process. Once this has been completed with the FCA , you can apply for a DPB licence.
If your firm no longer conducts DPB Regulated Activities, please send a copy of the Designated Professional Body Licence – Surrender Application Form to firstname.lastname@example.org.