One relatively unknown corner of legislation is how providers of funeral plans are regulated under the financial services and markets act (FSMA)…
From a regulatory point of view, there are three types of provider:
1. FSA Authorised Providers
Because of the ready availability of exemptions to the Regulated Activities Order (RAO) which defines the requirement for FSA authorisation, no funeral plan providers have opted for full regulation. Nonetheless, the starting point for the exemptions is the regulated activity of…
”Entering as provider into a funeral plan contract… under which a person (“the customer”) makes one or more payments to another person (“the provider”); and the provider undertakes to provide, or secure that another person provides, a funeral in the United Kingdom for the customer (or some other person who is living at the date when the contract is entered into) on his death”
2. Plans Secured Against a Contract of Insurance
If the money paid by the customer is used to purchase insurance cover which provides for funeral expenses, the provider of this product is exempt from requiring authorisation as a funeral provider (however, they may well require authorisation as an insurance intermediary).
3. Plans Which Hold Money in Trust
These are by far the most common type of funeral plan but they are also have the most complicated exemption for their providers to avoid having to be FSA authorised. There are five separate tests which must each be met for the use of this exemption. They cover:
i) the form of the trust;
ii) the eligibility of the trustees;
iii) the management of the trust’s funds;
iv) the accounting for the trust; and
v) the valuation of the trust.
Providers will also need to consider the Money Laundering Regulations as they apply to trusts and trust and company service providers.
If you’re a provider of funeral plans and would like to ensure you manage your activities to fit within one of these exemptions, do please contact Simon Webber, StypersonPOPE’s MD, on 07710 260 717 or firstname.lastname@example.org.
If you’re interested in purchasing a funeral plan, this post probably hasn’t been very helpful, but you might want to read this advice from the FSA.