At Clear Treasury we have implemented the new rules that came into effect on 31st July 2023 for all new and existing retail products and services that are currently on offer to our clients.
Recognising its close alignment to our purpose-led strategy, Clear Treasury views delivering good customer outcomes as an objective shared with all our stakeholders including our regulator. Taking action to identify any gaps that we might have in meeting the new Consumer Duty continues to be a top priority for the organisation. We place importance on achieving good customer outcomes and are supportive of moving from prescriptive consumer conduct rules to principles-based outcomes, which rightly place the onus on firms to ensure their customers are making decisions best suited to their needs.
We have committed significant resource to ensure that any action taken is carefully managed by Clear Treasury and with the different customer journeys considered. As Clear Treasury has products and services in scope of the Duty, we have a single implementation programme, to identify where we need to make changes to provide evidence of compliance with the guidelines. Our approach to implementation in this way is helping to make sure we meet both the letter and spirit of the regulation and that this is reflected not just in our policies and procedures, but culturally across the organisation as well. We will continue to meet regularly with regulatory consultants and industry body to collaborate on our approach to the Duty. Going forward, Consumer Duty will continue to feature in the heart of agenda items on Clear Treasury senior management committees and ensure a retained focus on challenging our approach and delivering good customer outcomes.
What this means for our customers
At a time when our customers need us most, it’s more important than ever that we have the right level of focus on supporting them. Consumer Duty is good news for us and our customers - putting their needs at the heart of what we do and helping them to succeed at all stages of their journey with Clear Treasury. More detail on our customers and products has been provided below.
More detail on the changes that Consumer Duty will bring can be found within the FCA’s website.
Clear Treasury Limited (CTUK) is a manufacturer and distributor of financial products to retail customers and is authorised by the Financial Conduct Authority (“FCA”). As such, CTUK is required by the FCA’s Consumer Duty (the “Consumer Duty”) to identify those groups of customers sharing common features whose characteristics, needs and objectives CTUK’s products are designed to meet (the “Target Market”).
As a product manufacturer, CTUK is required to:
- Identify the Target Market of the products it offers to retail customers, to help avoid sales to customers for whose needs, characteristics and objectives the products are generally incompatible; and
- consider whether the design of its products meets the needs, characteristics and objectives of the Target Market, including those customers with characteristics of vulnerability, and, where the products do not, takes appropriate action to mitigate the situation and prevent any further harm.
As a product distributor, CTUK is required to:
- ensure there is a distribution strategy appropriate for the Target Market, by selling to customers for whose needs, characteristics and objectives its products were designed; and
- ensure that any third-party distributors that CTUK might use distribute the product in the same way.
CTUK has three main categories of customers – private, corporate and institutional.Its products are all designed to serve a requirement, add value and simplify a process for our customers.
CTUK defines Private customers as individual or personal customers that have a personal and non-commercial need to make payments and exchange currencies. Some examples of the reason to transfer include overseas investments, transferring salaries overseas, holiday and other travel payments and payments associated with the costs of emigration. CTUK’s products support customers with a wide range of needs. For the majority of CTUK Private customers, Spot Transfers are the primary product used.
CTUK defines Corporate customers as registered corporations and or businesses (whether micro-enterprises or larger corporates) that have a commercial need to make payments and exchange currencies. CTUK Corporate customers have a predetermined need to transfer money from one country to another in order to make a payment, receive funds in multiple currencies and or have a need to manage currency market volatility risk and foreign exchange exposure. Some examples of the reason to transfer include paying suppliers overseas, paying employee salaries and payment of taxes. CTUK’s products support Corporates with a wide range of needs.
These small and medium businesses include a mix of Private Companies, Partnerships, Sole Traders and Public Companies. CTUK’s products are suitable for both new and established businesses. The majority of CTUK Corporate customers use Spot Transfers as the primary product and also use Forward Contracts.
CTUK defines Institutional customers as customers that are a regulated entity. The requirements of these customers are very similar to a Corporate customer. They will typically have a treasury department, finance director or financial controller who are very familiar with or qualified to manage our products and how they can be used.
Institutional customers will be a mix of insurance companies, investment companies, trusts, family offices, wealth managers, accountants and lawyers. The majority of CTUK Institutional customers use Spot Transfers and Forward Contracts.
CTUK Financial Products
Product description and key attributes
Where a customers wants to transfer money immediately, then they will need to enter into a Spot Contract with CTUK. A Spot Contract is an agreement to exchange one currency for another at an agreed exchange rate within 2 days of the transfer being booked. For example, when a customer makes a purchase overseas in a foreign currency, they may have to pay the purchase price straight away. In those circumstances, their only consideration will be the exchange rate at the time of the purchase and booking the transfer. Prior to confirming a transfer and booking the Spot Contract, CTUK will provide a quote using a Spot Rate. Spot Rate means the exchange rate for settlement within 2 business days from the date the transfer was booked including the CTUK margin.
CTUK Spot Rates are calculated by adding a margin on top of the interbank rate which CTUK receives from its banking counterparties.
The underlying features of a Spot Contract mean that it is an uncomplicated product to serve a predetermined need to make a payment. All Spot Contracts are fully deliverable with the exchange rate, which includes the cost of payment, being locked in at the time of booking the transfer. Payment to fulfil the Spot Contract is required straight away (T + 2) and settlement times vary depending on currency and country of recipient.
A Market Order can be requested by a customer where a Spot Contract will be triggered at a predetermined spot rate for a predetermined amount of currency. The exchange rate and the amount of currency to be bought or sold is determined by the customer. If this spot rate is reached, the Market Order is immediately booked and the customer notified. This is a legally binding contract, and the customer is required to make payment under the same terms as a Spot Contract.
How this product is to be distributed
Spot Contracts are issued by CTUK directly either online or over the phone. CTUK employees, known are trained to assist customers to book in the transfer of currency they require. Spot Contracts can only be distributed to customers that have a requirement to make a payment and access to these products only allowed to a customers that have agreed to applicable product terms and conditions.
Product description and key attributes
A Forward Contract is an arrangement that allows customers to transfer money at some time (up to 12 months) in the future at an exchange rate that is agreed at the time of booking the transfer. The key feature is that the customer knows, and is locking in, what the exchange rate will be at the time the exchange of currencies becomes necessary. This allows customers to avoid the risks and uncertainties associated with adverse exchange rate movements.
The purpose of a Forward Contract is primarily to mitigate the risk of adverse exchange rate movements. A Forward Contract enables future exchange risk to be mitigated however if the Forward Contract and is required to be settled on or before the Maturity Date. Forward Contracts are generally used by Corporate and Institutional customers who seek to lock in exchange rates for settlement at a future date in order to protect their foreign currency cash flows.
CTUK Forward Contract rates are determined using the current Spot Rate and the forward rate adjustment. The Forward Rate quoted by CTUK will not be the same as the Spot Rate, because it will take into account the interest costs in holding the money until the maturity date (i.e. the date in the future which the customer has nominated to settle the transfer). It may be better or worse than the prevailing Spot Rate on the day depending on the difference in interest rates between the country of the currency being sent and the country of the currency being received.
The underlying features of a Forward Contract mean that it is a simple product to serve a desire to lock in a current currency exchange rate. All Forward Contracts are fully deliverable with the cost of the transfer, including the exchange rate, being locked in at the time of booking the transfer. Customers may be asked to make a payment of part of the sum that is due to CTUK on the Maturity Date either at the time of booking the transfer or at any time prior to the Maturity Date. CTUK also only offers forward contracts where the customer can demonstrate an accompanying payment to be made, in line with the “payment purpose exemption” under MiFID II.
How this product is to be distributed
Forward Contracts are issued by CTUK directly either online or over the phone. CTUK employees are trained to assist customers to book in the transfer of their choosing. Customers are asked additional questions by CTUK employees to promote awareness of the additional risks associated with booking a Forward Contract compared to booking a Spot Contract to ensure that the customer confirms the product is appropriate for them. The compulsory questions asked and information available to customers when completing a quote and prior to locking in a transfer allow the customer to determine if the product is right for them.
Forward Contracts must be distributed to customers that have a desire to lock in a currency exchange rate for a future transfer and the product will only be issued to a customer that has agreed to applicable product terms and conditions.