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The Actuary The magazine of the Institute & Faculty of Actuaries

The Designated Professional Body

The chances are, especially if you’ve been on a professionalism course recently, that you’ve heard of the DPB, and it’s probably equally true that you’ve put it to the back of your mind and not considered how your firm could benefit from it. The DPB has often been thought of as some minority activity, but it may surprise you to know that nearly 10% of all actuaries currently employed in the UK work for firms that hold DPB status.

So what is the DPB?
The Institute of Actuaries was granted Designated Professional Body status in 2001 under the Financial Services & Markets Act 2000 (FSMA). There are nine DPBs in total and include the Law Society of England and Wales and the Institute of Chartered Accountants of England and Wales. The status allows the Institute to license actuarial firms to carry out ‘exempt’ regulated activities without the need to be authorised by the Financial Services Authority ((FSA). These activities include advising business clients such as employers or scheme trustees on specific investments. The DPB licence doesn’t allow you to advise individuals. For that you will need to be authorised by the FSA. If you performed these activities without a licence from us, or authorisation from the FSA, you would be in breach of FSMA.
The DPB regulations, set out in the DPB Handbook, amount to about 80 pages. This compares with about 6,000 pages of FSA regulations. The DPB regulations are written with actuarial firms in mind and only apply to them, unlike the FSA regulations which apply across a spectrum of financial services companies. Some firms have found that operating under DPB status provides the right level and focus of regulation for their particular circumstances, where regulated advice is incidental to their main work.
We won’t just issue a licence, however. Firms need to meet certain standards and conditions (these are given in the DPB Handbook). Among these requirements is a need for a firm to be ‘managed or controlled’ by fellows or affiliates. That means that at least 50% of the voting rights or 50% of the board are fellows or affiliates. In addition, the activity must be ‘incidental’ to your work as an actuary, and you can’t hold yourself out as only providing investment advice to your clients.

What’s in it for me?
We’ve already mentioned that a DPB licence will allow you to undertake ‘exempt’ regulated activities, but what does that mean in practical terms? In general it means that you can advise and arrange specific investments for your corporate clients. If you hold the supplementary insurance mediation licence, you can also advise your clients on such products as group life or group health insurance.
Some of the services you can offer to employers or pension trustees include:
– advice on pooled investments and collective investment schemes;
– advice on AVC contracts;
– arranging transfers of assets as part of bulk transfers;
– negotiate settlements under insurance contracts.
While the DPB licence doesn’t allow you to hold client money, it does permit you to ‘control’ it. For example, provided you are properly mandated, funds from a trustee’s bank account can be paid on your instructions to pay annuities.
Further examples of activities you can undertake are given in the DPB Handbook.
We realise that giving investment advice is not always easy. That’s why, as well as being a regulator, we’re here to support firms who have a DPB licence. We issue compliance bulletins, giving further information or explanation of some of the current issues relating to financial services regulation, and arrange education seminars. The seminars give firms the chance to hear firsthand about any issues or changing regulation and discuss these with the DPB Committee. We liaise with the FSA to ensure that our rules, and our member firms, comply with any changes to European or national legislation.

Making a choice
There is a DPB licence fee, based on the number of fellows or affiliates in your firm, in the same way as there is a charge for a licence from the FSA. DPB may, however, be able to offer you more appropriate regulation for your business.
Further details of the DPB can be found on the profession’s website or by calling Robbie McGregor on 0131-240 1328.