Opting up to professional status

The Board working with the LGA, the Investment Association and other industry bodies has assisted in the development of a straightforward and consistent opt up process to enable all LGPS funds to be assessed prior to the 3rd January deadline.  The full suite of documents, including a draft committee report, has been archived, but is available for information.

The committee should be made aware of the retail protections they will be forgoing, a summary of which can be downloaded below:

Summary of protections (PDF 2 pages 74kb) (may also be used as report template APPENDIX 1)

Authorities should submit the application letter and information in the format below.

Post January 2018

The post January 2018 opt up process consists of the same steps as shown on the process flow chart document below.

In addition to opt ups for new client relationships or mandates, authorities should provide their investment managers/advisers with any new information (via the Information template form) that may affect categorisation as a Professional Client, a template covering letter is provided below:

Covering letter for change(s) that could affect client categorisation (pdf 4 pages, 23kb) Post January 2018

The opt up process (Managers)

The opt up process consists of a number of steps as shown on the process document below.

Opt up process flow chart (pdf 1 page, 67kb) (may also be used as report template APPENDIX 3)

Administering authorities should fully complete both the application letter which includes an agreement to forgo the protections listed should the application be successful.

Application letter PDF version Post January 2018

And the information template which also requires the enclosure of or links to a number of authority documents and procedures.

Information template pdf version (8 pages 213KB) (may also be used as report template APPENDIX 5)

Information template Word version (8 pages 40kb)

The notes below are designed to assist in completing the letter and template. These notes will be updated in response to queries and issues raised by authorities during the opt up process:

Opt up notes (pdf 8 pages 235kb) Version 1.2 31/08/2017

Please submit applications as soon as possible after significant changes (i.e. to your committee, officers or other investment staff), in order to ensure the process is completed in good time and that your professional status is maintained.

The opt up process (Advisors)

You may need to opt up with your advisor if they provide you with regulated advice on complex investments and/or do not have retail permissions. Please check with your advisor if that is the case.

The same template as for the manager process should be completed but should be accompanied by the letter below which has been adapted by a representative body of advisory firms.

Application letter (advisor) Word version

Application letter (advisor) Word version Post January 2018

You should commence this process as soon as you can in order to ensure your application is dealt with in good time to allow your advisor to provide an uninterrupted service.

Implementation – Policy Statement II

On 3rd July the FCA published their final policy statement and amendments to the Handbook with regard to the implementation of MiFID II.

Links to documents

Summary of changes to opt up criteria and process (see the highlights document for context)

  1. Firms may take a collective view of the expertise, experience and knowledge of committee members, taking into account any assistance from authority officers and external advisers where it contributes to the expertise, experience and knowledge of those making the decisions
  2. Governance and advice arrangements supporting those individuals can inform and contribute to the firm’s assessment
  3. Adherence to CIPFA Codes or undertaking other relevant training or qualifications may assist in demonstrating knowledge and expertise as part of the qualitative test
  4. Rules will add a fourth criterion that the client is subject to the LGPS Regulation for their pension administration business. Local authorities must continue to meet the size requirement, as well as one of the two previous criteria or the new fourth criterion
  5. Compliance with the LGPS Regulations, including taking proper advice, will contribute to the assessment of knowledge and expertise of the local authority client when making decisions
  6. Retain the 10 transactions on average per quarter test as one of the four available criteria for enabling a local authority body to opt up
  7. Firms may reasonably assess that a professional treasury manager has worked in the financial sector for at least one year, if their role provides knowledge of the provision of services envisaged
  8. Changed the portfolio size threshold to £10m
  9. Proposed transitional arrangements that would allow investment firms to re-assess the categorisation of local authority clients between the 3 July 2017 implementation deadline and 3 January 2018 are being taken forward