1. Dezember 2022
In this month’s update:
On 22 November 2022, the FCA published a speech, given by Sheldon Mills, FCA Executive Director, Consumers and Competition, on driving change in diversity and inclusion (D&I) in the financial services industry.
Mills noted that the FCA had received over 180 responses to its July 2021 discussion paper on D&I (see our August 2021 FSR update) and highlighted the following D&I practices that have been observed in several firms through a recent supervisory exercise and pilot data survey:
The complete findings from this work will be published soon and the regulators’ consultation paper on D&I is now expected in 2023.
On 17 November 2022, the FCA Chief Executive, Nikhil Rathi, gave a speech on issues relating to the new Consumer Duty, in which he noted that:
Results of FSCB 2022 employee survey
On 16 November 2022, the Financial Services Culture Board (FSCB) published the results of its 2022 employee survey, together with an overview of the survey to capture employees' perceptions of their firms' organisational cultures.
For the 2022 survey, 23 firms were surveyed and almost 42,000 responses were received. The key findings were:
The FSCB continues to work with researchers at the Bank of England to measure cultural cohesion or fragmentation in firms to establish how this is associated with prudential and business outcomes.
On 4 November 2022, the FCA published a webpage containing its financial promotions quarterly data for Q3 2022, which focused on the FCA action against authorised firms breaching financial promotion rules and referrals and investigations into unregulated activity. As a result of its engagement, the FCA has intervened to amend or withdraw 4,151 financial promotions between July and September 2022.
A related press release highlighted that:
Financial Services and Markets Bill 2022-23: committee stage in House of Commons completed
On 3 November 2022, the Financial Services and Markets Bill 2022-23 (Bill) completed its committee stage in the House of Commons, with Parliament publishing a revised version of the Bill. It will return to the House of Commons for its report stage, where the amended Bill can be debated and further amendments proposed.
On 23 November 2022, Andrew Griffith, Financial Secretary, HM Treasury, announced that the government had decided not to proceed with the controversial "public interest intervention" power in the Bill, which would have enabled HM Treasury to direct a regulator to make, amend or revoke rules if there were matters of significant public interest. He said that the "existing provisions in the [B]ill are currently sufficient" and the government "remain[s] committed to the operational independence of the financial services regulators."
On 21 November 2022, the BoE published a speech by Sir Jon Cunliffe, BoE Deputy Governor, Financial Stability discussing the collapse of cryptocurrency exchange, FTX, and the authorities' ongoing work on the regulation of stablecoins and the potential central bank digital currency (CBDC). The speech covered:
Decentralised autonomous organisations: Law Commission call for evidence
On 16 November 2022, the Law Commission published a call for evidence on decentralised autonomous organisations (DAOs), to produce a scoping study considering how DAOs can operate under the existing English legal system and identify areas in need of reform.
The Commission describes a DAO as a novel type of technology-mediated social structure or organisation of participants made up of several composite elements. The novelty is that many of the actions and functions of organisational structure can be redesigned to use or facilitate the creation, modification and maintenance of open-source software-based systems.
The Law Commission seeks evidence on the following:
European Parliament to consider proposed Regulations on markets in cryptoassets and on information accompanying transfers of funds and certain cryptoassets
On 14 November 2022, the European Parliament updated its procedure file on the proposed Regulation on markets in cryptoassets and its procedure file on the proposed Regulation on information accompanying transfers of funds and certain cryptoassets. The procedure files note that the Parliament will consider the proposed Regulations at its 13 to 16 February 2023 plenary session.
On 10 November 2022, the European Parliament published a press release announcing that it has adopted the Regulation on digital operational resilience for the financial sector (DORA) at first reading, alongside the Amending Directive adopted text, which states that these new rules are designed to harmonise and strengthen digital operational resilience requirements for the EU's financial services sector. The rules will apply to providers of financial services and information and communication technology (ICT) providers. The Council of the EU will need to formally adopt the proposals.
The press release states that DORA and the Amending Directive will enter into force 20 days after publication in the Official Journal of the European Union. DORA will apply on the date 24 months after its entry into force. After adoption of the Amending Directive, member states will have 24 months in which to implement it in their national law.
For further discussion on this topic, please see our article.
On 9 November 2022, the FCA published a speech, given by Jessica Rusu, FCA Chief Data, Information and Intelligence Officer, reminding firms of the following things they need to consider when using AI:
On 4 November 2022, the DCMS Committee announced that it will hold an inquiry into the operation, risks, and benefits of NFTs and the wider blockchain. MPs are expected to consider whether NFT investors, especially vulnerable speculators, are put at risk by the market. The inquiry may also look into the wider benefits that NFTs and the blockchain could provide the UK economy. NFT regulation in the UK is largely non-existent, which puts investors at risk, therefore it will examine whether more regulation is needed to protect consumers from this volatile market, ahead of a Treasury review.
On 22 November 2022, the FCA published:
The group will:
The group will meet before the end of 2022, with a view to consulting on a draft Code within six months of that meeting and publishing the final Code within approximately four months of the start of the consultation.
On 17 November 2022, the Joint Committee of the ESAs published a new set of Q&A on Commission Delegated Regulation (EU) 2022/1288, which supplements the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (SFDR) with regard to regulatory technical standards (RTS) on content and presentation of information (SFDR Delegated Regulation) whilst covering the following:
The SFDR Delegated Regulation applies from 1 January 2023. The European Parliament and Council of the EU are currently scrutinising proposed amendments to the SFDR Delegated Regulation relating to the content and presentation of information in pre-contractual documents and periodic reports for financial products investing in environmentally sustainable economic activities.
On 15 November 2022, the ESAs published a call for evidence (CfE) on greenwashing, requesting:
The deadline for commenting on the CfE is 10 January 2023.
On 9 November 2022, the Investment association (IA) wrote a letter to chairs of remuneration committees of FTSE 350 companies with an updated version of the IA principles of remuneration, setting out investor ESG expectations on the following topics:
Climate transition plans: TPT consultation on disclosure framework and implementation guidance
On 8 November 2022, the UK Transition Plan Taskforce (TPT) published for consultation its proposed disclosure framework for private sector climate transition plans and accompanying implementation guidance. A transition plan should cover:
The accompanying draft implementation guidance also recommends that entities publish standalone TPs at least every three years. The deadline for responses is 28 February 2023.
On 4 November 2022, the Task Force on Nature-related Financial Disclosures (TNFD) published the third beta version of its disclosure framework for consultation. The TNFD framework will provide guidance for organisations to report and act on evolving nature-related risks, to support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcome, including:
The TNFD also published two discussion papers on scenarios and societal dimensions of nature-related risk management and disclosure.
The final draft version of the TNFD framework is due to be published in March 2023 and the final recommendations will be published in September 2023.
On 1 November 2022, the Glasgow Financial Alliance for Net Zero (GFANZ) published a final report containing recommendations and guidance on financial institution net zero transition plans.
The report outlines how to develop a transition plan as a set of strategic goals, implementing actions and accountability mechanisms with a framework centred on the following aspects of transition finance:
Alongside the report, GFANZ has produced a supplemental information document setting out more examples and has also published a report on measuring portfolio alignment.
Ahead of COP27 in Sharm el-Sheikh, GFANZ published a report detailing actions to mobilise capital to emerging markets and developing economies and a call to action report, which recommends the policies the G20 governments should consider in order to meet their climate commitments.
On 17 November 2022, the Financial Stability Board (FSB) published a final report on the approach for monitoring progress towards meeting the targets for the G20 roadmap for enhancing cross-border payments. The FSB:
On 14 November 2022, the Lending Standards Board (LSB) published a memorandum of understanding (MoU), dated 28 October 2022, between it and the Payment Systems Regulator (PSR) on their respective roles relating to authorised push payment (APP) scams.
In the MoU, the LSB and the PSR summarise their duties and functions as governing body for the contingent reimbursement model code (CRM code) and under Part 5 of the Financial Services (Banking Reform) Act 2013 respectively. They also consider areas of overlap between them concerning APP scams.
Their objectives are to:
On 2 November 2022, the LSB published the ninth edition of its LSBulletin in which, among other things, it refers to its 2022 review of firms' adherence to the CRM code for authorised push payment (APP) scams.
The findings of the 2022 review are set out in a summary report from September 2022. The review was conducted across the nine firms that were signatories to the CRM code as of 1 February 2022. The findings are as follows:
The LSB will continue to work with firms to formalise success measures for the CRM code, reviewing the balance of responsibilities between sending and receiving firms within the CRM code, revising the guidance based on the evidence gathered from its CRM code reviews and engaging with the PSR as it sets out its next steps regarding APP scams.
The LSBulletin also mentioned that firms must implement the Consumer Duty in line with the FCA's expectations. Therefore, the LSB has undertaken an internal review of the Consumer Duty requirements against its Standards of Lending Practice. The LSB advises that firms adhering to the Standards make a commitment to deliver good customer outcomes and can use them as a key tool to support their implementation of the Consumer Duty.
On 3 November 2022, the Financial Conduct Authority (FCA) published its report on borrowers in financial difficulty (BiFD Report). The BiFD project was launched to assess firms' policies and processes following the implementation of the Tailored Support Guidance (TSG) for mortgages, consumer credit and overdrafts. The TSG was put in place to ensure that lenders appropriately supported those experiencing payment difficulties as a result of the coronavirus pandemic.
For further discussion on this topic, please see our article.
In FCA v London Property Investments (UK) Ltd and others, the High Court considered whether the defendants contravened the general prohibition imposed by section 19 of the Financial Services and Markets Act 2000 (FSMA) and the financial promotion restrictions imposed by section 21 of FSMA and were "knowingly concerned" (within the meaning of sections 380 and 382 of FSMA) in such contraventions.
In summary it was held that:
The FCA press release states that, following the judgment and remedial orders, the defendants will now be required to remove around 22 restrictions registered against affected individuals' properties.
On 17 November 2022, HM Treasury published a response to its consultation on the review of the UK Solvency II prudential regime for insurers, which included:
EIOPA speech on challenging times for insurers
On 16 November 2022, the EIOPA Chair, Petra Hielkema, gave a speech on the following challenges for insurers:
BoE speech on risks from leverage
On 7 November 2022, Sarah Breeden, BoE Executive Director for Financial Stability Strategy and Risk, gave a speech, reflecting on the recent threat to financial stability that resulted in the BoE's intervention in the gilt market, whereby she discusses:
PRA Dear Chief Risk Officer letter to asset finance lenders
On 7 November 2022, the PRA published a letter to chief risk officers (CROs) of asset finance lenders, from Melanie Beaman, PRA Director, and David Bailey, PRA Executive Director, UK Deposit Takers, which summarises the following key areas requiring improvement identified post-administration relating to the Arena Holdings Group of companies:
FOS ombudsman news issue 175
On 2 November 2022, the Financial Ombudsman Service (FOS) published issue 175 of ombudsman news, highlighting a new webpage for businesses on complaints involving mobile phone and gadget insurance. The webpage sets the types of complaints the FOS sees and what it looks at when it considers these complaints, to decide what is fair and reasonable in each case on a factual basis. This includes an assessment of the wording of the mobile phone or gadget insurance and any other relevant documents, such as the policy summary.
The FOS states that consumers' complaints relate to:
On 17 November 2022, HM Treasury published a letter from Jeremy Hunt, Chancellor of the Exchequer, to Andrew Bailey, BoE Governor, setting out the following recommendations for the Financial Policy Committee (FPC) for 2022/23:
The FPC must respond to the government, describing any action it has taken or intends to take in response to a specific recommendation.
On 10 November 2022, HM Treasury published a guidance statement stating that it intends to lay a statutory instrument extending the temporary recognition regime (TRR) for overseas central counterparties (CCPs) and the transitional regime for qualifying central counterparties (QCCPs) by an additional year to 31 December 2024.
HM Treasury has advised that the statutory instrument was made and laid in November 2022 and will come into force before the end of 2022.
On 2 November 2022, the FCA published a speech by Therese Chambers, FCA Director of Consumer Investments, on the following key priorities for the financial advice industry:
On 16 November 2022, the European Parliament updated its procedure file on the proposed Regulation amending the Regulation on European long-term investment funds (ELTIFs) ((EU) 2015/760). The procedure file notes that the Parliament will consider the proposed Regulation during its plenary session to be held from 1 to 2 February 2023.
On 14 November 2022, the ESAs updated their Q&As on the Packaged Retail and Insurance-based Investment Product (PRIIPs) Key Information Document (KID), regarding Regulation (EU) 1286/2014 (the EU PRIIPs Regulation) and its Delegated Acts, applicable from 1 January 2023. These Q&As remain relevant until the end of 2022, but may no longer be relevant from 1 January 2023, therefore the document indicates those sections where Q&As will need to be revised. These revisions to the Q&As are aimed for publication before 1 January 2023.
On 18 November 2022, the FCA published the final notice, dated 16 November 2022, it has issued to Mohammed Ataur Rahman Prodhan, former CEO of Sonali Bank (UK) Ltd, banning him for anti-money laundering (AML) failings.
The FCA had published a decision notice in December 2018 fining Mr Prodhan £76,400 for those failings. Mr Prodhan referred the decision notice to the Tax and Chancery Chamber of the Upper Tribunal, but then withdrew the reference. The FCA states in the final notice that were it not for exceptional circumstances, it would have sought to impose that financial penalty. Mr Prodhan's exceptional circumstances are as follows:
FCA and PRA respond to APPG on Fair Business Banking in relation to their decision to take no action following HBOS senior management investigation
On 17 November 2022, the All Party Parliamentary Group on Fair Business Banking (APPG) published a letter, dated 27 October 2022, from Nikhil Rathi, FCA Chief Executive, and Sam Woods, PRA Chief Executive in response to a letter from the APPG wanting more information on the regulators' decision to take no action following their investigations into former senior managers at Halifax Bank of Scotland plc (HBOS).
In their letter, the regulators:
The APPG stated in its letter, that they will file a judicial review application should the regulators decline to give reasons. The FCA and the PRA consider that the explanations provided in their letter suffice to stand as a full and final substantive response.
On 14 November 2022, the FCA published the final notice it has issued to an individual who was the sole director of an authorised consumer credit firm banning them from working in financial services following a conviction for of grievous bodily harm and possession of an offensive weapon, having attacked a security guard at a bar with a machete, which took place while they were approved to carry out a senior management function.
Consequently, the FCA has decided to remove the person's approval for SMF29 (Limited scope function) and prohibit them from performing any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm.
On 1 November 2022, the FCA published a press release announcing it is prosecuting five individuals for their role in a binary option investment scheme, with:
A Crown Court trial has been listed to start in February 2023.
On 14 November 2022, HM Treasury updated its Money Laundering Advisory Notice: High Risk Third Countries, following the 21 October 2022 publication by the Financial Action Task Force (FATF) of two statements identifying jurisdictions with strategic deficiencies in their AML/CTF regimes. These changes were implemented in the Money Laundering and Terrorist Financing (High Risk Countries) (Amendment) (No.3) Regulations 2022.
The advisory notice identifies:
On 12 November 2022, the House of Lord Fraud Act 2006 and Digital Fraud Committee published its report, Fighting Fraud: Breaking the Chain, with various recommendations to tackle fraud, including:
The biggest takeaway from the report is the statistic that fraud makes up 41% of all crime against individuals (not including companies) yet just 1% of law enforcement is focused on tackling economic crime as a result of cuts in funding to the police, to specialist agencies and to the courts, which lead to less fraud cases being detected, investigated, brought before a court and concluded. It notes that the situation will not change unless adequate resourcing is a priority for government.
On 8 November 2022, The Joint Money-Laundering Steering Group (JMLSG) consulted on the proposed amendments to Part II of its guidance, following general reviews of the guidance relevant to each particular sector. The deadline for responses was 20 December 2022.
The following text will be affected and is available in marked up format on the consultation webpage:
On 28 October 2022, the Wolfsberg Group (the Group) published an updated version of its 2014 anti-money laundering principles for correspondent banking principles FAQs, both of which have now been retired. A related press release explains that the updated version of the principles:
The updated version of the principles also provides global guidance on the establishment and maintenance of cross-border correspondent banking relationships.
What does the 30 April 2023 milestone in the implementation timetable of the FCA's Consumer Duty relate to?
The answer to last month's trivia: of the 2,724 supervisory cases involving high-risk investments or investment scams opened by the FCA in 2021/22, 16% of these related to potentially unregistered cryptoasset business.
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von Charlotte Hill und Daniel Hirschfield
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