8 June 2023
Financial services update – 4 of 45 Insights
In this month's update:
On 19 May 2023, the FCA updated its webpage on reforms to the regulatory framework to provide information about its new secondary international competitiveness and growth objective, which is being introduced through the Financial Services and Markets Bill 2022-23.
In the updated webpage, the FCA describes seven drivers of productivity that will shape its work to embed and facilitate the secondary objective of facilitating the international competitiveness of the UK economy (in particular, the financial services sector) with its primary objectives of protecting consumers, ensuring market integrity and promoting effective competition. The drivers are:
The update follows letters published by HM Treasury in December 2022 which stated that the FCA and PRA should have regard to the government's strategy to promote competitiveness (including through the secondary objective) and its growth in the medium to long term.
The FCA will report annually on how it has delivered against the new objective, with the first reporting expected to be published around July 2024.
The FCA has noted that it will take account of responses to HM Treasury's call for proposals on measuring success in relation to the new secondary growth and competitiveness objectives announced on 9 May 2023. The call for proposals aims to help determine what further metrics the regulators should publish to support scrutiny of the regulators' work. It closes to responses on 4 July 2023. HM Treasury will then discuss the proposals with the FCA and the PRA, including consideration of whether the regulators should publish proposals, or whether publication by someone else such as the government would be more appropriate.
On 19 May 2023, HM Treasury published the text of the draft version of the memorandum of understanding (MoU) on UK-EU regulatory co-operation in financial services.
The MoU sets out the framework for voluntary regulatory co-operation in financial services between the EU and UK following Brexit, which are based on a shared objective of preserving financial stability, market integrity and protecting investors and consumers. It also outlines arrangements that will provide for transparency and appropriate dialogue in the process of adoption, suspension and withdrawal of equivalence decisions, bilateral exchanges of views and analysis relating to regulatory and market developments and financial stability issues, and enhanced co-operation and co-ordination including in international bodies.
In addition, the MoU establishes the Joint UK-EU Financial Regulatory Forum (Forum) and sets out the general operational objectives of the Forum. The Forum will act as a platform to facilitate dialogue on financial services issues and participants will be able discuss any issue relevant to regulatory co-operation concerning financial services.
On 17 May 2023, the European Commission published a press release announcing that it has adopted the draft MoU. The next stage is final political endorsement of the MoU by the Council of the EU. Once this stage is completed, HM Treasury and the European Commission will sign the MoU.
On 17 May 2023, the Financial Ombudsman Service (FOS) published a guidance note for financial businesses about its general approach to complaints involving discrimination.
The guidance includes information on:
On 17 May 2023, the FCA published a research note containing selected statistics from its Financial Lives cost of living recontact survey. Following the main Financial Lives 2022 survey, the FCA ran the recontact survey with respondents from 6 December 2022 to 16 January 2023. The recontact survey intended to provide insights for the FCA, lenders, insurance firms and other interested parties about the significant financial impact of the rising cost of living.
The research note contains:
The FCA plans to publish the full Financial Lives 2022 survey report later in 2023, including full results and more detailed analysis from the recontact survey.
On 16 May 2023, the FCA published a speech on meeting the challenge in changing global markets by Sarah Pritchard, FCA Executive Director of Markets and Executive Directive of International.
Highlights of the speech include:
On 10 May 2023, the FCA published a speech on the new Consumer Duty given by Sheldon Mills, Executive Director of Competition and Consumers.
Mills used the speech to remind firms that the new Consumer Duty comes into force for open products and services on 31 July 2023. Further points of interest include:
On 10 May 2023, the FCA published a webpage detailing the findings following its review of firms' fair value assessment frameworks under the Consumer Duty.
Under the new Consumer Duty firms will need to deliver and assess four outcomes, including price and value. Firms will need to undertake fair value assessments in order to show the price a consumer pays for a product or service is reasonable compared to the overall benefits they can expect to receive.
At the start of 2023, the FCA reviewed 14 firms' fair value assessment frameworks. While the FCA notes that the sample was not representative, it states that many of the findings will be relevant to the wider population of regulated firms. It has identified four areas for further consideration by firms:
The FCA will continue to monitor firms' approaches to ensuring customers receive fair value. This will include future reviews of firms' fair value assessments of specific products and activities.
On 5 May 2023, the FCA published a webpage containing its financial promotions quarterly data for Q1 2023. The webpage provides a summary of data generated in Q1 2023 from the FCA's actions against firms breaching financial promotion rules, and referrals and investigations into unregulated activity.
On 2 May 2023, the FCA published a policy statement (PS23/3) on the creation of a baseline financial resilience regulatory return. In the policy statement the FCA summarises feedback to its October 2022 consultation paper (CP22/19) on the creation of a baseline financial resilience regulatory return (please see our November 2022 update) and sets out its final policy and rules that introduce a new financial resilience regulatory return for solo-regulated firms: FIN073 – Baseline Financial Resilience Report. This will replace the current FCA Financial Resilience Survey data collection.
Firms within the scope of FIN073 will need to be prepared to submit the return when it is due, from January 2024. Firms will receive an automated reminder via RegData when it is available for submission.
Alongside the policy statement, the FCA has published a consultation paper (CP23/9) on changing the scope of FIN073 to include full permission consumer credit firms. The consultation paper closes to comments on 6 June 2023 and the FCA will publish a policy statement in summer 2023.
On 23 May 2023, the International Organization of Securities Commissions (IOSCO), the global standard setter for securities markets, published a consultation paper on its detailed proposals for the global regulation of crypto and digital assets. Please see our more detailed article.
On 17 May 2023, the House of Commons Treasury Committee published a report on regulating cryptoassets.
The report relates to an inquiry into cryptoassets the committee launched in July 2022 (please see our August 2022 update) and follows on from the government’s consultation on its overarching plan for the regulatory framework for cryptoassets used within financial services published in February 2023 (please see our February 2023 update).
The latest report does not cover all aspects of the committee's inquiry, such as central bank digital currencies, but does cover the government's approach to cryptoassets including its consultation proposals and the implications for businesses and consumers.
The committee's conclusions and recommendations include:
The committee will continue to follow developments as the industry and the government's regulatory approach develop.
On the same day as the report was published, CryptoUK published a press release strongly rejecting the committee's conclusion that unbacked cryptoassets have characteristics more closely resembling gambling than a financial service. CryptoUK states that it is concerned and disappointed by the claims made by the committee, which it regards as "unhelpful, false, fundamentally flawed and unsubstantiated". It also notes that the committee's statement fails to reflect the "true nature, purpose and potential of the crypto industry".
On 16 May 2023, the Council of the EU published a press release announcing that it has adopted the proposed Regulation on markets in cryptoassets (MiCA).
MiCA will now be published in the Official Journal of the European Union and will enter into force 20 days after publication. It will then apply 18 months after the entry into force date, except for the requirements relating to asset-referenced tokens and e-money tokens which will apply 12 months after the entry into force date.
On the same date, the Council of the EU published a press release announcing that it has adopted the proposed Regulation on information accompanying transfers of funds and certain cryptoassets (recast revised WTR).
As with MiCA, the recast revised WTR will now be published in the Official Journal of the European Union and will enter into force 20 days after publication. The recast revised WTR will apply from the date of application of MiCA.
On 10 May 2023, the International Institute for the Unification of Private Law (UNIDROIT) adopted its Principles on Digital Assets and Private Law, following its consultation on the topic (please see our February 2023 update).
The principles aim to provide clear rules for transactions in digital assets and act as legislative guidance providing best practices for issues related to private law in transactions involving digital assets. The principles also aim to increase efficiency while reducing costs and legal uncertainty.
UNIDROIT suggests that all states adopt legislation consistent with the principles in order to increase the predictability of digital transactions in domestic and cross-border transactions.
There are 19 principles which are divided into seven chapters. Each principle is accompanied by commentary providing guidance and practical examples.
On 3 May 2023, the International Regulatory Strategy Group (IRSG) published its response to HM Treasury's consultation on the UK regulatory approach to cryptoassets. Please see our February 2023 update for more detail on HM Treasury's consultation.
In the response, IRSG highlights:
The DRCF was formed in 2020 to support regulatory co-ordination in digital markets and co-operation on areas of mutual importance. The FCA joined the Competition and Markets Authority, Ofcom and the Information Commissioner's Office as a member of the DRCF from April 2021.
The annual report sets out the progress that the DRCF has made over the last year in relation to the priority areas contained in the 2022/23 workplan. This includes details of Ofcom and the FCA's continued programme of joint work on online fraud and scams, with a focus on the FCA sharing expertise on illegal online financial promotions with Ofcom.
The workplan builds on the foundation of work in 2022/23 as set out in the annual report and notes that the priorities for 2023/24 set out in the workplan have been developed against a backdrop of change including intense technological innovation, regulatory developments and the government's broad and active digital agenda. DRCF's work priorities over the next year include coherence, collaboration (including the ICO and FCA carrying out joint research into the benefits and harms posed by digital assets such as non-fungible tokens and crypto coins or tokens) and capability.
On 31 May 2023, the Network for Greening the Financial System (NGFS) published their report on financial institutions’ climate transition plans.
The report also assesses the role of central banks and supervisors in relation to those plans. The report identifies six key findings, including that there are multiple definitions of transition plans, that there is merit in distinguishing transition planning (transition strategy) from a transition plan (transparency to a specific audience) and that transition plans could help micro-prudential authorities develop a forward-looking view of whether the risks resulting from an institution’s transition strategy fit with its risk management framework.
NGFS will now undertake phase 2 of its work. This will involve NGFS engaging with relevant international authorities and standard setters such as the FSB, BCBS, IAIS and IOSCO so that they can co-ordinate their work on transition plans and planning. NGFS will also carry out further work to advance the discussion on the relevance of transition plans and planning to micro-prudential authorities’ mandates, supervisory toolkit and the overall prudential framework.
On 18 May 2023, the Joint Committee of the European Supervisory Authorities (ESAs) published a set of consolidated questions and answers on the Sustainable Finance Disclosure Regulation (SFDR) and on Commission Delegated Regulation (EU) 2022/1288, which supplements the SFDR with regard to regulatory technical standards (RTS) on content and presentation of information (SFDR Delegated Regulation).
The Q&A combines responses:
The Q&A published by the Joint Committee follows the European Commission's adoption of new and updated answers to ESAs' questions on the application of the SFDR in April 2023 (please see our May 2023 update). The ESA Joint Committee published a previous set of Q&As on the SFDR Delegated Regulation in November 2022 (please see our December 2022 update).
On 16 May 2023, the European Insurance and Occupational Pensions Authority (EIOPA) published a speech given by Petra Hielkema, EIOPA Chair, on a new tool for catastrophe modelling.
The speech was given at a public event hosted by EIOPA focusing on data and models on climate-related risks and catastrophe modelling. EIOPA committed to the promotion of open-source modelling and data as one of its key areas of activity in its 2022-24 sustainable finance roadmap. The speech outlines EIOPA's decision to step into this space with the aim of making more and better models available.
In collaboration with a Swiss university, EIOPA has developed CLIMADA, a catastrophe model that provides a global coverage of major climate-related extreme weather hazards. The model is available in open-source, but users have to work directly in code to run analyses, which means the model is not straightforward to use. To overcome this barrier and facilitate use of CLIMADA among a wide circle of users, EIOPA launched the CLIMADA app at the public event. The app is free software and brings high-quality, accessible and user-friendly catastrophe modelling.
EIOPA encourages firms to download and use the CLIMADA app, in the hope this will lead to the further use and development of open-source models to allow climate risk assessments to be conducted.
On 5 May 2023, ESMA published a speech given by Natasha Cazenave, ESMA Executive Director, on ESMA's role in enabling the transition to a low carbon economy.
The speech outlines ESMA's view that to deal with the risk of greenwashing certain criteria should be introduced when naming investment funds that claim to have sustainability characteristics or goals. ESMA argues that there is a need for enhanced investor protection in relation to investment funds that use terms in their name, such as "climate change" and "sustainable", that suggest an investment focus in companies that meet certain ESG standards.
The speech also outlines ESMA's view that the SFDR framework remains complicated and hard to navigate for investors. ESMA argues there could be merit in discussions around whether labels for sustainable financial products would assist with savings being channelled according to investors' needs and preferences, which in turn would support an orderly transition to a low carbon economy.
On 22 May 2023, the Council of the EU published a press release announcing it has adopted a position on the proposed Regulation amending the Single Euro Payments Area Regulation (SEPA Migration Regulation) and the Cross-Border Payments Regulation as regards instant credit transfers in euro.
As highlighted in the press release, instant payments will allow money to be transferred within 10 seconds (including outside business hours and to different member states). Implementation of the legislation will happen faster in member states that are within the euro area, while for payment service providers located in member states outside the euro there will be a phased implementation. Charges applied by payment service providers such as banks for the service of sending and receiving instant payments in euro must not be higher than the charges applied for standard credit transfers.
Now that the Council has agreed its position on the proposed Regulation, it will start trialogue negotiations with the European Parliament with a view to agreeing on a final version of the text.
On 12 May 2023, the European Commission published a report to the European Parliament and the Council of the EU on the application of the Payment Accounts Directive (PAD).
Article 28 of PAD required the Commission to report on PAD's application by 18 September 2019. In the report the Commission explains that its publication has been delayed due to the need to ensure that PAD had applied for a certain amount of time, while also noting the hinderance caused by the lack of available and comparable data.
The report concludes that PAD has helped to create transparency and comparability of payment account fees, but notes that the national and EU regulatory framework has been fragmented due to some member states creating an additional layer of new legislation when transposing PAD, rather than replacing existing legislation. The report further concludes that PAD has enabled all EU consumers to easily switch accounts domestically and has ensured that consumers have access to payment accounts with basic features.
Rather than presenting a legislative proposal alongside the report, the Commission has instead stated that it will consider the potential amendment of PAD in further detail at a later stage and committed to continued monitoring of the implementation and enforcement of PAD in member states.
On 4 May 2023, the European Commission published a statement on measures undertaken by member states to compensate victims of authorised push payment fraud in the context of the revised Payment Services Directive (PSD2). The statement was published in response to a question posed by an MEP.
The Commission sets out that member states are free to introduce measures concerning compensation for APP fraud, and as PSD2 does not contain any measures on APP fraud it is not relevant in this context. The Commission also confirms that payment service providers may establish compensation arrangements on a voluntary basis.
As part of the Commission's review of PSD2, the impact of APP frauds was considered. The Commission is of the view that the application of strong customer authentication under PSD2 has not been sufficient to prevent such frauds. The Commission is considering introducing targeted amendments to the PSD2 provisions relating to liability and refund rules as part of its legislative proposal for revisions to PSD2. The Commission intends to adopt the legislative proposals for revisions in Q2 2023.
On 28 April 2023, the Payment Systems Regulator (PSR) published a policy statement (PS23/2) on changes to its fee allocation policy for 2023/24.
The policy statement follows the PSR's consultation paper (CP22/6) on the same subject, published in December 2022.
The PSR is introducing the following two key changes to the way it allocates regulatory fees:
The changes were set out in the Fees (Payment Systems Regulator) Instrument (No 1), which came into force on 28 April 2023.
The PSR has indicated that it will conduct a wider review of its fees structure in due course, during which it may look again at the possibility of a broader special project fee mechanism.
On 25 May 2023, the FCA published a consultation paper on strengthening protections for consumer credit and mortgage borrowers in financial difficulty (CP23/13).
The FCA proposes to incorporate aspects of the tailored support guidance (TSG) into its Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebooks and withdraw the TSG. The TSG was put in place to ensure that lenders appropriately supported those experiencing payment difficulties as a result of the coronavirus pandemic.
The FCA's proposals include widening the scope of relevant CONC and MCOB chapters, expecting firms to consider a range of forbearance options, improving expectations around consumer engagement and providing information, and, for consumer credit, excepting firms to take into account the customer's individual circumstances when providing forbearance (which is already the case for mortgage firms).
The FCA also proposes making additional targeted changes to support consumers in financial difficulty beyond the TSG, including specific provisions for consumer credit firms and mortgage providers.
The consultation closes to responses on 13 July 2023, following which the FCA aims to publish a policy statement, final rules and its responses to feedback received in H2 2023. The FCA anticipates that the final rules will come into force in H1 2024, at which time it will withdraw the TSG.
On 2 May 2023, the Council of the EU published a note from its General Secretariat to the Delegations. The note includes the final four-column table containing the results of the political agreement reached with the European Parliament on the proposed Directive on consumer credits to revise and replace the Consumer Credit Directive and of subsequent work done in the technical meetings.
The note follows the Council and Parliament's provisional political agreement announced in December 2022. The text will be finalised during the legal-linguistic revision. The next step will be for each of the Council and Parliament to approve the provisional agreement before going through the formal adoption procedure.
On 27 April 2023, the FCA published a speech given by Roma Pearson, FCA Director of Consumer Finance, on the importance of firms delivering a well-functioning credit market.
The speech outlines that the FCA wants a well-functioning credit market where customers are treated fairly, supported if they get into financial difficulty and are equipped with the information they need to make good decisions. The speech also sets out the FCA's expectation that lenders will work constructively with customers who fall behind on payments, or are at risk of doing so, and provide tailored support including reductions, waivers or cancellations of fees and charges.
Pearson also notes that while the FCA's work on the Consumer Duty predates the cost-of-living crisis, the current economic climate highlights the need for the high standards and protections afforded by the new Duty. Pearson sets out the actions that firms should prioritise in preparation for implementation of the new Duty, which include focusing on the areas that will have the greatest impact on outcomes for customers, ensuring that target markets are clearly identified and that consumers understand the firm's communications.
On 17 May 2023, the PRA published:
The supervisory statement sets out the PRA's expectations for MRM undertaken by banks, building societies and designated investment firms, including five high-level principles intended to address the core disciplines necessary for a robust MRM framework. The PRA aims to support firms to strengthen their policies, procedures and practices to manage the risks associated with the use of all models.
The expectations outlined in the supervisory statement will come into force on 17 May 2024 and will apply only to those UK banks, building societies and designated investment firms that have internal model approval.
In the first year following policy implementation, the PRA intends to assess the overarching MRM frameworks and MRM practices for a sample of firms with internal model approval.
On 16 May 2023, the PRA published a speech on supervisory and firm data by Rebecca Jackson, Director of Authorisations, RegTech and International Supervision.
In the speech, Jackson outlines that the PRA's strategy aims to deliver a step change in how it uses data and that it has begun engaging with firms on which data it collects. Jackson describes in further details the three types of data collected by the PRA (data collected under the PRA Rulebook, "ad hoc" data, and management information) and how the PRA envisages collecting data in the future.
The speech notes that the Bank of England needs to rapidly synthesise information from firms to inform senior management and micro- and macro-economic decision making and action, while also considering the trade-offs involved when requesting standardised data given the cost and burdens to firms.
The speech also notes that the PRA's data scientists are making progress developing AI and machine learning tools to apply to the unstructured information it receives from firms in order to extract key highlights for supervisors.
On 12 May 2023, the FCA published a consultation paper (CP23/11) on proposals that aim to ensure that its remuneration rules for small dual-regulated firms are proportionate to the risks these firms pose to consumers and markets in the UK.
The FCA proposes to:
The FCA proposes that firms can apply the amended remuneration rules and guidance in chapter 3 to remuneration awarded in respect of their next performance year that begins on or after publication of the relevant policy statement and that its amended remuneration rules and guidance in chapter 4 would come into force immediately following publication of the relevant policy statement.
The FCA advises that the consultation paper should be read in conjunction with consultation paper (CP5/23), which contains the PRA's proposed changes to enhance proportionality for small firms. The FCA notes that its proposed changes are broadly consistent with the PRA's proposed changes.
Comments can be made on the consultation paper until 9 June 2023. The FCA plans to publish its policy statement and final rules and guidance in Q4 2023.
On 5 May 2023, the Council of the EU published the following from its General Secretariat to the Delegations:
The notes contain tables comparing the negotiating positions taken by the European Commission, the Council of the EU and the European Parliament. The European Parliament published reports it adopted in February 2023 on the proposed legislation, while the Council agreed its general approach on the proposals in November 2022.
On 2 May 2023, the PRA published its Business Plan for 2023/24. The business plan sets out the workplan to support delivery of its strategy for the coming year and also an overview of its budget for 2023/24.
The PRA's strategic priorities for 2023/24 are to:
The PRA's budget for 2023/24 is estimated at £312 million, a 3% decrease on the 2022/23 budget. The PRA explained how it proposes to fund its budget in its consultation paper on regulated fees and levies (CP7/23).
On 26 May 2023, ESMA published an updated version of its Q&As (ESMA35-42-1088) relating to the Regulation on European crowdfunding service providers for business.
ESMA has added new Q&As in section 1 on the use of special purpose vehicles and section 6 on the authorisation and supervision of crowdfunding service providers.
Prior to this update, ESMA last updated the Q&As in March 2023 (please see our April 2023 update).
On 24 May 2023, the European Commission adopted its retail investment package.
The package consists of two "mutually reinforcing" legislative proposals:
As existing investor protection rules are set out across sector specific legislation, applicable rules can differ from one financial instrument to another and there can be inconsistencies. The retail investment package aims to streamline and modernise the rules to place consumers' interests at the centre of retail investing.
The Commission has published a webpage inviting feedback on the legislative proposals by 21 July 2023. The next step is for the European Parliament and the Council of the EU to scrutinise the legislative proposals.
On 18 May 2023, the FCA published a series of engagement papers relating to the new regime for public offers and admissions to trading on UK public markets.
These engagement papers follow the publication of the illustrative statutory instrument by HM Treasury in December 2022, as part of the Edinburgh Reforms. The illustrative statutory instrument shows how the government will make its proposed changes to the existing prospectus and public offers regime using the powers set out in the FSM Bill.
Based on the draft legislation, the FCA has identified a number of areas of focus for its engagement with stakeholders and has published the following engagement papers:
Responses to the questions raised by the engagement papers can be provided until 29 September 2023. The FCA then intends to consult on specific rules in 2024.
On 3 May 2023, the FCA published a consultation paper (CP 23/10) seeking views on significant reform proposals to improve the structure of the UK listing regime, and summarising feedback received in response to discussion paper DP22/2.
For an overview of the proposals, please see our article.
The FCA is not currently consulting on the detail of the rule changes required to implement its proposals, or on specific drafting. The FCA intends to bring forward separately for consultation in autumn 2023 draft handbook rules and wider proposals to address consequential and transitional issues.
The consultation closes on 28 June 2023.
On 3 May 2023, the FCA published a policy statement (PS23/4) setting out final rules to improve the functioning of equity secondary markets.
The changes implemented by the final rules will:
In the policy statement the FCA sets out its future direction on work to strengthen trading venues' resilience to outages and on the execution of retail orders under the Retail Service Provider model.
On 26 April 2023, the FCA published issue 73 of Market Watch, its newsletter on market conduct and transaction reporting issues.
The issue contains observations and findings from the FCA's peer review into firms that offer contracts for different (CFDs) and spread bets (CFD providers). The purpose of the review was to improve the FCA's understanding of CFD providers' arrangements to identify and report potential market abuse and raise standards.
CFDs and spread bets are a major source of suspicious transaction and order reports as they are vulnerable to being used for insider dealing due to their speculative and leveraged nature.
Nine firms participated in the review and the FCA visited seven of them. Findings were largely positive, but the main areas for improvement identified by the FCA relate to:
In the issue the FCA set out the next steps for CFD providers, including consideration of the FCA's review findings and observations and taking steps to ensure that their systems and procedures for detecting and reporting potential market abuse are appropriate and proportionate to the scale, size and nature of their business activities. The FCA will continue to visit CFD providers and other firms to ensure they meet their regulatory obligations. The FCA advises firms to read issue 73 in conjunction with issue 69 of Market Watch and the FCA's current portfolio letter for CFD providers.
On 18 May 2023, the Joint Committee of the European Supervisory Authorities (ESAs) published a set of consolidated Q&As (JC 2023 22) on the Regulation on key information document (KID) requirements for packaged retail and insurance-based investment products (PRIIPs) (1286/2014) (the PRIIPs Regulation) and related Delegated Acts.
The consolidated Q&As combine responses:
The Joint Committee of the ESAs last updated the Q&As on the PRIIPs Regulation in December 2022.
On 17 May 2023, ESMA published an opinion to the European Commission on undue costs of UCITS and alternative investment funds (AIFs).
In January 2021 ESMA launched a common supervisory action with national competent authorities relating to the supervision of costs and fees of UCITS across the EEA. The outcome of this action showed divergent market practices about what the funds industry reported as "due" or "undue" costs.
The opinion sets out potential amendments to introduce the concept of undue costs into the legislation and introduce obligations for managers to develop a pricing process. Management companies and AIFMs would be required to act in such a way as to prevent undue costs being charged to a fund and its investors.
The opinion and associated press release note the European Commission is working on its retail investment strategy legislative package and that the opinion will be taken into account.
On 16 May 2023, the FCA published a speech on the drive for data in non-bank financial intermediation (NBFI) given by Ashely Alder, FCA Chair.
In the speech, Alder argues that a global effort to improve the data needed to enable regulators to spot risks in private markets and supervise them credibly should be the priority for NBFI regulation. Alder argues that regulators do not have enough data to measure key risks in private NBFI markets and as a result it is difficult for supervisors to oversee how risk management operates in firms and private markets.
Alder argues that the regulatory framework needs to ensure enhanced reporting from NBFIs and ensure NBFI entities more fully disclose relevant exposures to prime brokers, banks and other regulated firms providing finance or acting as derivative counterparties.
On 16 May 2023, the FCA published the final notice it has issued to Przemyslaw Soszynski, trading as Phenix Consultancy (Phenix). The notice refuses Phenix's application for permission under Part 4A of the Financial Services and Markets Act 2000 to carry on regulated claims management activities.
Phenix applied for permissions relating to all regulated claims management companies claim sectors. However, as detailed in the final notice Phenix has not satisfied the FCA that it is able to meet the requirements of threshold conditions 2C (effective supervision), 2D (appropriate resources) and 2E (suitability).
In May 2021, the FCA issued a decision notice to Phenix setting out its decision to refuse Phenix's application. Phenix referred the decision notice to the Upper Tribunal (Tax and Chancery Chamber), who dismissed the reference in September 2022. The FCA has issued the final notice in light of the tribunal's decision.
On 5 May 2023, the FCA published the decision notice it issued to Banque Havilland SA fining it £10 million for breaching Principle 1 (Integrity) of the FCA's Principles for Business.
The FCA found that between September and November 2017 the firm acted without integrity by creating and disseminating a document that contained improper advice for potential investors by recommending manipulative trading strategies relating to the economy of Qatar. While the FCA did not find that the firm's strategy to harm the economy in Qatar was implemented, such manipulative trading could have been a criminal offence had it taken place in the UK.
The FCA also published the following decision notices relating to former employees of Bank Havilland, banning them from working in financial services and fining them for breaching COCON 2.1.1R:
The FCA found that ER tasked VB to draft the document and DW made a significant contribution to the content. ER and VB then disseminated the document. The FCA highlights that the actions of ER and DW are particularly serious as they both held positions of significant influence and were involved in the creation of the document.
The decision notices and an associated press release emphasise that Bank Havilland, ER and VB have referred their decision notices to the Upper Tribunal. DW, who has been given third party rights, has also referred the decision notices to the tribunal.
On 4 May 2023, the Bank of England (BoE) and PRA published a consultation paper on their approach to enforcement (CP9/23).
The consultation paper sets out proposed changes and clarifications to the BoE and PRA's enforcement policies, in particular the PRA's policies and procedures for making supervisory and other statutory notice decisions and the BoE's Enforcement Decision Making Committee procedures.
The amendments proposed in the consultation paper aim to provide enhanced clarity and to introduce options for more efficient and quicker investigatory outcomes. This includes through the creation of a new route for early co-operation for subjects of an investigation and an enhanced settlement discount of up to 50% for early admissions.
To implement the proposals, the BoE and PRA would establish two new policy documents:
Responses to the consultation paper can be provided until 4 August 2023.
On 26 May 2023, the Joint Money Laundering Steering group (JMLSG) published a press release announcing its consultation on proposed amendments to chapter 5 of Part I of its anti-money laundering (AML) and counter-terrorist financing (CTF) guidance for the financial services sector.
The JMLSG published the relevant paragraphs of the guidance marked up to show the:
Comments on the proposed revisions can be made until 26 June 2023.
On 17 May 2023, the FCA published a speech on how firms need to change in response to changing financial crime threats given by Sarah Pritchard, FCA Executive Director of Markets and Executive Director of International.
In the speech, Pritchard notes that UK firms should be asking themselves how the Consumer Duty applies in the context of financial crime, including how financial crime risk can be reduced when new products are designed and whether they operate their financial crime controls in a sufficiently agile way. Pritchard also notes that firms' financial crime controls are most effective if they are calibrated to current threats and risks and goes on to set out a number of questions that firms should be asking themselves to ensure they effectively adapt to changing financial crime threats.
Pritchard also refers to the FCA's findings that there are gaps in some firms' sanction testing. Gaps include that the governance and oversight of sanctions systems and controls it not clear or effective in some firms and in some cases systems are not able to generate alerts against known names on the sanctions list.
On 3 May 2023, the government published its 2023 fraud strategy setting out how it intends to stop scams and protect the public.
Among other measures, the government intends to:
The strategy promises a commitment of £100 million of new money to bolster law enforcement, as part of a wider £400 million investment in tackling economic grime. The strategy's goal is to cut fraud by 10% from the 2019 pre-COVID levels.
The answer to last month's question: according to the FCA’s 2023/24 Business Plan, £5.3 million is being invested to ensure the Consumer Duty is effectively delivered.
According to the PRA's Business Plan for 2023/24, how many PRA supervised banks were there as at January 2023?
1 December 2022
2 November 2022
7 October 2022
1 September 2022
4 August 2022
3 February 2022
13 January 2022
2 December 2021
4 November 2021
7 October 2021
20 September 2021
5 August 2021