(News Update) Dormant assets set for a shake-up?
Dormant assets are an issue all firms must deal with. In 2015 TISA, in conjunction with the British Standards Institute (BSI), published a set of good practice standards to help firms deal with unclaimed assets and it was great to see these cited by the Dormant Assets Commission, chaired by Nick O’Donohoe, which published its final report to Government at the beginning of March:
https://www.gov.uk/government/publications/dormant-assets-commission-final-report-to-government
The Commission’s first task was to consider the additional types of dormant asset that might be included in an expanded scheme. It looked at the banking, insurance and pensions, and investment and wealth management industries, as well as a range of assets from non-financial services sectors. Having reviewed these, the Commission decided to concentrate on the financial services sector, because it believed this to hold the greatest value and most readily accessible pool of potentially dormant assets.
They estimate that there is £1 -2bn which could be available to be channelled to good causes. Much more can be done to reduce the amount of money in unclaimed accounts. They are recommending extending the scheme which currently exists for banks and building societies to include the rest of financial services, including unclaimed proceeds from life insurance and pensions products, and non-cash assets such as dormant holdings in investment funds, shares and bonds.
The first priority is to try and repatriate the unclaimed assets. Participation in the expanded scheme will be voluntary, but it will be closely monitored and if it is found that participation is low, then it may become mandatory.
With regards the thorny problem of definition, they recommend that “dormancy should be defined by some or all of: customer inactivity over time, lack of proactive action at a trigger date (e.g. maturity date), and loss of contact with customers over an extended time frame despite a reasonable level of attempted reunification activity by a firm.”
Next steps: “The Commission has now stood down to allow the Government to consider the recommendations made and determine the next steps. The Commission expects that the Government will provide a formal response to this report. It is likely that a legislative framework will not be introduced before 2018 and that it will take a period of time thereafter, which may extend to years, before new dormant assets start to flow into an expanded scheme.”
TISA is delighted that the Commission acknowledged the Standards we published in conjunction with the BSI as a model of good practice – see Chapter 3: Investment and Wealth Management, 3.57. At 3.61 it states:
“In the Commission’s view, this standard represents a good approach to a best practice for tracing and reuniting beneficial owners with their assets. It is therefore disappointing that current adoption of the standard by industry firms has been exceedingly low. Recommendation 5.14 addresses the development of a standardised industry procedure to reunite potentially dormant assets.”
It is also relevant to note that recommendations 5.13; 5.14 and 5.15 cover the development of industry standards backed by FCA – yet another example where the development of standards can evidence the ability of our industry to act appropriately such that regulation is not necessary.
If you haven’t done so already we recommend you read the Report. It’s also worth bearing in mind that it doesn’t cover the fact that European changes (GDPR) to the Data Protection act suggest that firms should be evidencing more the quality of their data. We would expect the final response from the Government to incorporate actions which also met those requirements.
Carol Knight
Chief Operations Officer
Website: www.tisa.uk.com