Auteurs

Charlotte Hill

Associé

Read More

Daniel Hirschfield

Senior Counsel – Knowledge

Read More
Auteurs

Charlotte Hill

Associé

Read More

Daniel Hirschfield

Senior Counsel – Knowledge

Read More

6 mars 2023

Financial services update – 15 de 53 Publications

Financial services matters - March 2023

In this month's update:

  • The regulators publish the sixth edition of the Regulatory Initiatives Grid.
  • BoE and HM Treasury consult on the case for a retail central bank digital currency.
  • The FCA issues a statement on the new UK financial promotions regime for cryptoasset firms.
  • The FCA issues portfolio letters to firms on implementing the Consumer Duty.
  • Our brand new ESG Collection.
  • HM Treasury consults on draft legislation and regulation of BNPL credit products.
 
General financial services regulation

Regulatory Initiatives Grid

On 28 February 2023, the Financial Services Regulatory Initiatives Forum published the sixth edition of the Regulatory Initiatives Grid, which provides an outline of upcoming regulatory work. Among the new initiatives included in the Grid is the review of the Senior Managers & Certification Regime, which is due to commence in Q1 2023 and will take the form of a Call for Evidence from the government and a joint discussion paper from the FCA and PRA. The next edition of the Grid will be published towards the end of 2023.    

FOS quarterly complaints data on financial products and services: October to December 2022

On 15 February 2023, the Financial Ombudsman Service (FOS) published its quarterly complaints data and a webpage on financial products and services for October to December 2022 (Q3 2022/23).

In Q3 2022/23, the FOS received 68,342 new enquiries and 41,303 new complaints about financial products. On average it upheld 35% of the complaints resolved in the period. Current accounts, credit cards, hire purchase (motor), car or motorcycle insurance and personal loans were the most complained about products in that period. 

ECON-commissioned study on recent trends in UK financial sector regulation and potential implications for EU

On 9 February 2023, the European Parliament's Committee on Economic and Monetary Affairs (ECON) published a study entitled "Recent trends in UK financial sector regulation and possible implications for the EU, including its approach to equivalence". The study:

  • Assesses the equivalence policy and strategy of the EU towards the UK and options to strengthen regulatory co-operation while ensuring financial stability, supervisory co-operation, market integrity and competitiveness. 
  • Clarifies that the granting of equivalence to the UK is feasible for only a few financial sector parts and is dependent on the political relationship between the EU and the UK since equivalence is not always "fit for every purpose."
  • Highlights that there appears to be "limited concerns" regarding an easing of the UK's tax evasion and anti-money laundering (AML) framework.

FCA analysis of 2022 financial promotions data

On 3 February 2023, the FCA published a webpage on financial promotions data for 2022. It has increased its intervention activity against authorised firms being the financial promotion rules and referrals and investigations into unregulated activity. In particular:

  • The FCA had 8,582 promotions amended or withdrawn in 2022 after interventions in relation to authorised firms.
  • The FCA issued 1,882 alerts in 2022 relating to unauthorised firms and individuals, despite a decrease of 24% of total reports received in 2022.

The FCA also published a webpage containing its financial promotions quarterly data for Q4 2022, which showed that:

  • The retail lending, retail investments and general insurance sectors have the highest amend or withdraw outcomes. 
  • The most common breaches involved credit brokers, life insurance providers and certain investment providers.

FCA Dear CEO letters to firms on implementing the Consumer Duty

The FCA has sent Dear CEO letters on how firms should implement the Consumer Duty to various portfolios and sectors, including:

  • Asset management, custody and fund services and alternatives.*
  • Consumer investments.*
  • Credit reference agencies and credit information service providers.
  • General insurance and pure protection.*
  • Life insurance.
  • Mainstream consumer credit lending.*
  • Mortgage lending (including administration).*
  • Payment services and e-money.*
  • Retail banks and building societies.*
  • Credit brokers.*
  • Mortgage intermediaries.*
  • Motor finance providers.*
  • Retail finance providers.*

We have summarised those marked with an asterisk in the relevant sections below. 

The Consumer Duty will come into force on 31 July 2023 for new and existing products or services that are open to sale or renewal, and 31 July 2024 for closed products or services.

Consumer Duty and innovation

On 22 February 2023, Sheldon Mills, Executive Director, Consumers and Competition, FCA, gave a speech entitled "Call of Duty: How putting customers front and centre will help industry innovate", in which he reminded firms of the practical requirements and key milestones of the Consumer Duty and explained how by improving their processes and developing new approaches, firms will innovate.

Fintech and digital assets  

Regulators' Strategic Working Group report on future of open banking

On 15 February 2023, the Joint Regulatory Oversight Committee (The Committee) published a report by the Strategic Working Group (SWG) on the future of open banking. The report focuses on:

  • Understanding the key gaps between open banking as it is now and a "more optimal future state", and how different stakeholders perceive these gaps.
  • Exploring short- and long -term solutions to reduce those gaps to maximise the potential of open banking. 

The Committee expects to lay out its proposals in Q1 2023. 

FCA takes action against unregistered crypto ATM operators in Leeds

On 14 February 2023, the FCA used its powers to enter and inspect several sites in Leeds suspected of hosting illegally operated crypto ATMs (machines that allow customers to buy or convert funds into cryptoassets) issuing warning letters, requesting the operators to cease and desist using the machines and warning that any breach of regulations would result in an investigation under AML regulations. 

In the UK, cryptoasset exchange providers, as well as Crypto ATM operators, must be registered with the FCA and comply with the UK AML Regulations; however at the moment, no crypto ATM operators are registered under the FCA, despite the warnings from the FCA. The FCA will review evidence gathered during these visits before taking further enforcement action against the crypto ATMs. 

FCA feedback statement following call for input on synthetic data to support financial services innovation

On 9 February 2023, the FCA published a feedback statement following its Call for Input on the use of synthetic data to support financial services innovation where the FCA identified the following key themes. The respondents to the Call for Input: 

  • Agreed that there are challenges to accessing and sharing data in financial services.
  • Flagged that data protection regulation places specific difficult conditions on data sharing and access. 
  • Confirmed AML as a key use case for synthetic data.
  • Suggested the FCA could conduct an intermediary role in the provision of synthetic data.
  • Highlighted the need for guidelines to encourage adoption.

The FCA notes that it will host an academic roundtable in early 2023 with the Alan Turing Institute and the Information Commissioner's Office to address the challenge of validating synthetic data. It will follow this up in the coming months with a paper on its principal findings and next steps.

As we mentioned in our February 2023 update, the FCA has launched a Synthetic Data Expert Group to enable collaboration across industry, regulators, academia and wider civil society on synthetic data issues. The group will be a sub-group of the Innovation Advisory Group and will hold its first meeting in April 2023.

Digital securities: UKJT statement on issuance and transfer (corporate aspects)

On 9 February 2023, the UK Jurisdiction Taskforce of the LawtechUK Panel issued a legal statement on the issuance and transfer of equity or debt securities using a system using blockchain or DLT under English law, following its earlier consultation paper, which we covered in our September 2022 update. In summary, the legal statement concluded that digital securities could be issued by UK or foreign companies and governed by English law, using a blockchain or DLT-based system although a fully decentralised and permissionless blockchain or DLT-system would not be acceptable as a register of members.

BoE and HM Treasury consult on case for retail central bank digital currency

On 7 February 2023, the Bank of England (BoE) published a speech, given by Jon Cunliffe, BoE Deputy Governor, in relation to its joint consultation paper with HM Treasury, seeking feedback and setting out their assessment of the case for a retail central bank digital currency (digital pound). BoE also published a technical working paper focusing on technical requirements and design considerations for the digital pound. The consultation paper discusses the following points:

  • A digital pound will be needed in the future, thus preparatory work is necessary. 
  • The digital pound would be a new form of sterling, issued by the BoE. The BoE would provide the central public infrastructure in the form of a "core ledger" (a technology platform).
  • The digital pound would be accessed through digital wallets offered by the private sector through smartphones and smartcards. 
  • The digital pound can lead to market power, which can damage consumer choice, competition and innovation.
  • A digital pound can help ensure interoperability between different platforms.
  • A digital pound may not be best suited for wholesale markets as other routes can allow for new forms of digital representation of central bank money to be used in financial transactions.

The deadline to give views on both papers is 7 June 2023.

FCA statement on new UK financial promotions regime for cryptoasset firms

On 6 February 2023, the FCA published a statement on the new UK financial promotions regime it wants to introduce for firms that provide cryptoassets to UK consumers, referring to the policy statement published by HM Treasury on 1 February 2023 in which HM Treasury set out the government's intention to introduce an exemption in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 for cryptoasset businesses registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) – for further detail please see our insight article on this topic. This would enable cryptoasset businesses that are registered with the FCA under the MLRs, but that are not otherwise authorised persons, to communicate their own cryptoasset financial promotions to UK consumers.

The FCA confirmed that:

  • It will publish its final rules for cryptoasset promotions, encouraging all firms to prepare for the new regime as it will take action where it finds firms promoting cryptoassets to UK consumers in breach of the requirements. The FCA notes that it is prepared to shut down websites, issue public warnings and take enforcement actions.
  • Cryptoasset businesses that are already registered under the MLRs will not have to apply for any further permissions to communicate their own promotions.
ESG  

Our ESG Collection 

We are pleased to announce that we have recently launched our ESG Collection, a series of articles in which our cross-sector ESG team discusses current ESG topics. Part one focuses on the environmental pillar of ESG. In our first article, we review the UK's proposed framework for climate-related transition plans.

Treasury Sub-Committee's Greenwashing: sustainability disclosure requirements meeting 

On 22 February 2023, the Treasury Sub-Committee on Financial Services Regulations held an inquiry on "Greenwashing: sustainability disclosure requirements". The Committee took evidence from industry (the Investment Association, UK Sustainable Investment and Finance Association and E3G) and the FCA on the FCA's proposed Sustainability Disclosure Requirements and investment labelling regime.

FCA discussion paper on finance for positive sustainable change

On 10 February 2023, the FCA published a discussion paper (DP23/1) on finance for positive sustainable change to kick-start an industry-wide dialogue on firms' sustainability-related governance, incentives and competence. The discussion paper includes 10 commissioned articles from experts and closes for comments on 10 May 2023. The FCA will use the feedback it receives to understand how it can help the financial services industry in reaching an economy wide transition to net zero.

In addition, the FCA has published a blog by Sacha Sadan, the Director of ESG at the FCA, highlighting the importance of starting such discussions.

FCA speech on how to organise a Chief Operating Officer

On 8 February 2023, the FCA published a speech by the FCA Chief Operating Officer (COO) and Executive Director of Authorisations, Emily Shepperd, on how to organise a COO, which discussed the following points:

  • COOs must nurture their organisation's culture, operational resilience plans, and learn how to use soft (open communication) and hard (comprises data and rules to mitigate non-financial risk) power. 
  • Diversity and inclusion are one of the non-financial risks COOs should analyse. 
  • ESG is also a non-financial risk that COOs should focus on, by promoting the government's agenda to make the UK the first net zero aligned financial centre and avoiding greenwashing.
  • COOs should remind their organisations that the consumer duty will come into force is six months.

NGFS launches survey on its climate scenarios

On 6 February 2023, the Network for Greening the Financial System (NGFS) published a user feedback survey to ensure the NGFS climate scenarios are relevant and encouraging users from all sectors to participate in the survey. The survey closed on 27 February 2023. The NGFS expects to publish the key findings in spring 2023.

Payment services and systems

PSR speech on tackling APP scams

On 23 February 2023, the PSR published a speech by its Managing Director, Chris Hemsley, regarding the role of collaboration between relevant authorities (including HM Treasury, the Home Office, the police and Ofcom) in tackling APP scams. In summary, his views are that:

  • Data needs to be collected by social media platforms as victims tend to be recruited there.
  • Payment firms need to manage fraud risks appropriately and proportionately.
  • More needs to be done to inform and empower customers so that they can make good decisions.
  • There needs to be effective law enforcement.

Consumer Duty – portfolio letter for payment services and e-money

On 21 February 2023, the FCA published a portfolio letter to payment services and e-money firms on implementing the new Consumer Duty. Annex 1 of the letter notes that the payments portfolio includes a wide range of business models undertaking a number of activities that impact nearly all consumers and notes that authorised or registered firms will be responsible for ensuring agents or distributors comply with the Duty.

In Annex 2, the FCA flags the following key things payments firms need to consider to deliver good consumer outcomes across the four outcome areas:

  • Ensuring they are delivering good products and services designed to meet the needs of the target market.
  • Ensuring their products and services provide a fair price and value for the consumers.
  • Ensuring their communications lead to good consumer understanding so that consumers can make informed decisions in relation to products.
  • Ensuring they provide good consumer support.

The FCA also highlights the issues with account freezing and fraud reports and bad financial crime controls.

PSR news – 2022 in review

On 10 February 2023, the PSR published its summary of the developments of 2022, which include:

  • Publishing the five-year strategy.
  • Issuing £44 million in penalties. 
  • Protecting customers from scams.
  • Assisting merchants with their card payment services.
  • Engaging with payment firms, consumers and businesses. 

PSR consults on reporting guidance for APP scams

On 9 February 2023, the Payment Systems Regulator (PSR) published a consultation paper containing draft reporting guidance for authorised push payment (APP) scams (Measure 1: data collection and publication) and a draft reporting template. In the consultation paper, the PSR sets out a draft guidance for payment service providers (PSPs) that will have to publish data on their performance on APP scams under Measure 1, which will be reviewed by the PSR every six months. Feedback on the draft guidance closed on 23 February 2023, after which the PSR will publish a policy statement on Measure 1, the reporting guidance and template.  

Treasury Committee report identifies concerns about PSR's proposed approach to introducing mandatory reimbursement for APP fraud

On 6 February 2023, the House of Commons Treasury Committee published a report on its concerns in relation to the PSR proposals to introduce mandatory reimbursement for APP scams to Pay.UK through Faster Payment scheme rules. 

The House of Commons Treasury Committee also published:

  • A letter to the BoE, asking whether the BoE is taking similar measures to reduce levels of APP scams using the CHAPS payment system.
  • A letter to the FCA, asking whether the FCA will implement similar measures fraud where the victim and fraudster hold accounts with the same PSP.
  • A letter to the PSR, regarding its proposed £100 minimum threshold and £35 excess for reimbursement.
  • A letter to FOS to enquire if the slow resolution of reimbursement disputes by the FOS could undermine the PSR's proposals.

The PSR published its response to the House of Commons Treasury Committee's report and will publish its final position in May 2023. 

PSR and FCA Chairs

On 1 February 2023, the FCA published a press release to announce the appointment made by the FCA Board with the approval of HM Treasury, of Aidene Walsh as Chair of the PSR for the next three years. Ashley Alder's appointment as the Chair of the FCA also took effect in February 2023.

Consumer credit and mortgages

HM Treasury consults on draft legislation and regulation of BNPL credit products

On 14 February 2023, HM Treasury published a consultation paper on draft legislation and the regulation of buy-now-pay-later (BNPL) credit products, and a draft version of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2023. The consultation will close on 1 April 2023, after which the government plans to lay the legislation. For further detail, please see our article here.

Consumer Duty – portfolio letter for credit brokers

On 3 March 2023, the FCA published a portfolio letter on implementing the Consumer Duty to credit brokers.

Annex 1 of the letter describes how the Consumer Duty applies to credit brokers. Annex 2 of the letter describes the issues for credit brokers to consider, including the following:

  • Products and services. Credit brokers should identify whether harm is foreseeable as a result of their approach to product sales. Firms must then act to prevent such harm from happening.
  • Consumer understanding. Credit brokers should note the FCA's expectations relating to financial promotions as set out in its May 2022 letter on the subject (please see our June 2022 update). Firms should also be conscious to not use their regulated status to suggest that their non-regulated activities may be less risky.
  • Consumer support. Given the current cost of living crisis, credit brokers should encourage customers to contact their lenders for support if they start to experience repayment difficulties and help customers understand the types of help available.
  • Appointed representatives. Credit brokers that are principals must ensure that they effectively oversee their appointed representatives' activities and ensure their appointed representatives' compliance with the Consumer Duty.
  • Change of legal status. Credit brokers that change their legal status must submit a new authorisation application to the FCA and the new entity must sign a Deed Poll accepting responsibility for the former firm's obligations.

Consumer Duty – portfolio letter for motor finance providers 

On 1 March 2023, the FCA published a portfolio letter on implementing the Consumer Duty to motor finance providers.

Annex 1 of the letter describes how the Consumer Duty applies to motor finance providers. Annex 2 of the letter describes the issues for motor finance providers to consider, including the following:

  • Products and services. Product design must meet the needs of the customer and adequate information must be given to customers to allow them to make informed decisions 
  • Price and value. Products must not have features that exploit customers who might have a limited ability to get products or services elsewhere. 
  • Consumer understanding. Providers must have adequate oversight of their dealer-broker networks and must also ensure that appropriate oversight is exercised in order that customers have the right information.
  • Consumer support. Firms must provide support that meets the needs of customers, including those with characteristics of vulnerability.  Firms should assist customers in financial difficulty by helping them to understand what types of debt help or money guidance are available. 

Consumer Duty – portfolio letter for retail finance providers 

On 3 March 2023, the FCA published a portfolio letter on implementing the Consumer Duty to retail finance providers.

Annex 1 of the letter describes how the Consumer Duty applies to retail finance providers. Annex 2 of the letter describes the issues for retail finance providers to consider, including the following:

  • Products and services. Business models and products must be affordable and fit for purpose, including new products being offered to customers for the purchase of essential items in the context of the cost of living crisis. 
  • Price and value. Products should be designed to meet the needs and objectives of a specified target market and should deliver fair value for customers for the duration of the product's lifecycle.
  • Consumer understanding. Firms should ensure that financial promotions are not misleading or inaccurate.
  • Consumer support. Firms must provide appropriate support that meets the needs of customers, including those with characteristics of vulnerability.  For example, some customers may be better supported through telephone channels rather than chatbots. 
  • Change to the regulatory perimeter. The FCA intends to use its existing powers and non-FSMA consumer protection powers ahead of the regulation of BNPL products.
  • Appointed representatives. Retail finance providers that are principals must ensure that they effectively oversee their appointed representatives' activities and ensure their appointed representatives' compliance with the Consumer Duty.

Consumer Duty – portfolio letter for mainstream consumer credit lending

On 3 February 2023, the FCA published a portfolio letter on implementing the Consumer Duty to consumer credit lending firms. 

Annex 1 of the letter describes how the Consumer Duty applies to firms in the mainstream consumer credit lender portfolio. Whereas Annex 2 of the letter describes the issues for firms under the four  outcome areas:

  • Products and services. All lending products and services should be fit for purpose for the target market. 
  • Price and value. Firms should remember affordability when considering the consumer duty to avoid customer harm.
  • Consumer understanding. As a result of the current cost of living crisis, firms should consider customers that have repayment difficulties; customers coming towards the end of an incentivised rate (eg, a 0% introductory APR offer); and repeat borrowing.
  • Consumer support. Ensuring that customers in financial difficulty receiving appropriate support remains a key priority and outcome.

Consumer Duty – portfolio letter for mortgage lending 

On 3 February 2023, the FCA published a portfolio letter on implementing the Consumer Duty to mortgage lending firms. Annex 1 describes how the Consumer Duty applies to firms in the mortgage portfolio and gives examples of some distribution chains common among mortgage lenders and administrators.  Annex 2 flags the following key issues that firms should consider:

  • Products and services. In light of the cost-of-living crisis, firms should ensure their products are appropriate for the target market and deliver good outcomes for customers in financial difficulty. 
  • Price and value. Ensuring they are providing fair value to retail customers. 
  • Consumer understanding. Ensuring that the firms' communications allow consumers to make informed decisions about their products and services at the point of sale and through the life of the mortgage. 
  • Consumer support. Ensuring they provide support to customer from the point of sale and through the mortgage lifecycle. 
  • Data. Monitoring outcomes and data analytics as they will be asked by the FCA to provide data on how they are delivering good customer outcomes under the consumer duty. 

Consumer Duty – portfolio letter for mortgage intermediaries

On 3 March 2023, the FCA published a portfolio letter on implementing the Consumer Duty to mortgage intermediaries.

Annex 1 of the letter describes how the Consumer Duty applies to mortgage intermediaries. Annex 2 of the letter describes the issues for mortgage intermediaries to consider, including the following:

  • Products and services. Products must be properly targeted, customers must fully understand the implications of using a long-term product to meet their current needs and customers must receive suitable advice.
  • Price and value. Firms must ensure they are providing customers with the information they need to make informed choices and understand the costs associated with mortgage products.
  • Consumer support. Given the current cost of living crisis, intermediaries should encourage customers to contact their lenders for support if they start to experience repayment difficulties and help customers understand the types of help available.
  • Mortgage fraud. Intermediaries must have appropriate controls in place to protect them from being used for financial crime.
  • Appointed representatives. Mortgage intermediaries that are principals must ensure that they effectively oversee their appointed representatives' activities and ensure their appointed representatives' compliance with the Consumer Duty.
Banking and insurance

PRA policy statement on supervisory expectations on unvested pay, material risk takers and public appointments

On 10 February 2023, the PRA published a policy statement on its supervisory expectations concerning unvested pay, deferred sums awarded to material risk takers (MRTs) and public appointments. The PRA described the final version of the revisions to its supervisory statement of renumeration (SS2/7), clarifying that after an award has been made, unvested and deferred claims of MRTs should not be converted from an equity claim into a claim on other instruments (or the other way round), unless exceptional circumstances apply (eg, potential conflict of interest). Following the July 2022 consultation on the revision to SS2/17, the PRA also published a revised version of SS2/17, which came into force on 10 February 2023.

PRA consults on dealing with insurers in financial difficulties

On 8 February 2023, the PRA published a consultation paper on how it plans to deal with insurers in financial difficulties, as required under the draft clauses of the Financial Service and Markets Bill 2022-23. The PRA proposes:

  • To allow insurers to exit the market safely to avoid the harm caused when an insurer is unable to pay its debts.
  • To use the Financial Services Compensation Scheme (FSCS) top-up payments in order to protect policyholders. 
  • To introduce new rules in the Policyholder Protection Part of the PRA Rulebook in relation to how the FSCS should operate in connection with a write-down.
  • To introduce amendments to the Policyholder Protection Statement of Policy (FSCS SoP).
  • To introduce new rules in relation to notifying the affected persons (eg policyholders) of the making and effect of a write-down order (WDO) by the court.
  • To introduce a new Statement of Policy (PRA SoP) setting out the PRA's consent process for an application to court for a WDO and the appointment of a write-down manager.

Comments on the PRA proposals will close on 31 March 2023, after which the PRA will propose an implementation date in July 2023.

March 2023 update: Consumer Duty – portfolio letter for retail banking and building societies 

On 3 February 2023, the FCA published a portfolio letter on implementing the Consumer Duty to firms in the banking and building societies sector. Annex 1 describes how the consumer duty applies to retail banks and building societies. In Annex 2, the FCA flags the issues these firms should consider, including: 

  • Taking the initiative to deliver good outcomes for customers in financial difficulty, particularly in view of the cost-of-living crisis.  
  • Providing fair value to retail customers, including overdraft fees and interest rates.
  • Delivering good outcomes to SMEs, as a large number of SMEs fall within the scope of the Consumer Duty.

Consumer Duty – portfolio letter for general insurance and pure protection 

On 3 February 2023, the FCA published a portfolio letter on implementing the Consumer Duty to general insurance and pure protection firms. Annex 1 discusses how the consumer duty applies to firms in the general insurance and pure protection portfolio, while in Annex 2 the FCA flags the following key issues that firms need to look into:  

  • Ensuring that there are good product governance arrangements in place to ensure customers' needs are met.
  • Ensuring information is shared to consumers in a timely manner with the appropriate format.
  • Ensuring firms deliver good claims processes and outcomes to consumers.  
Securities, investments, and markets  

BoE finalises policy on outsourcing and third party risk management in FMIs

On 8 February 2022, the BoE published a policy statement on outsourcing and third party risk management in financial market infrastructures (FMIs). The policy's Annex sets out the final Supervisory Statements and Code of Practice:

  • Supervisory Statement on outsourcing and third-party risk management: central counterparties (CCPs).
  • Supervisory Statement on outsourcing and third-party risk management: central securities depositories (CSDs).
  • Supervisory Statement on outsourcing and third-party risk management: recognised payment system operators (RPSOs) and specified service providers (SSPs).
  • Part 3 of the outsourcing and third-party risk management part of the BoE's Recognised Payment Systems Code of Practice (CoP). This relates to how the CoP applies to SSPs and RPSOs that are not operated by a recognised clearing house (RCH) or CSD, and also explains how the BoE expects FMIs to comply with the requirements on outsourcing and third-party risk management throughout their outsourcing arrangements' lifecycle.

From 9 February 2023, FMIs must comply with the requirements in the CoP/relevant supervisory statement. Outsourcing arrangements entered into on or after 8 February 2023 must comply with the requirements of the CoP/relevant supervisory statement by 9 February 2024. Outsourcing agreements entered into prior to 8 February 2023 should be revised accordingly as soon as possible.

EU Prospectus Regulation: updated ESMA Q&As (February 2023)

On 3 February 2023, the European Securities and Markets Authority (ESMA) published an updated version of its Q&As on the EU Prospectus Regulation, containing a Q&A (15.10) in relation to the Article 1(4)(d) exemption from the requirement to publish a prospectus, where ESMA clarified that the purchase of securities by a joint account can be considered as "one investor" for the purposes of Article 1(4)(d), as there is no condition regarding the mode of payment. 

ESMA final opinion on MiFID II trading venue perimeter

On 2 February 2023, ESMA published a final report coupled with its opinion on the trading venue perimeter under the MiFID II Directive. The opinion gives guidance on when systems and facilities qualify as multilateral and thus seek authorisation as a trading venue. ESMA wants national competent authorities to ensure:

  • Firms assess their systems against the ESMA's opinion and ensure they are operating under the appropriate authorisation. 
  • Firms do apply for authorisation as a trading venue.

Consumer Duty – letter to firms in the consumer investments sector

On 30 January 2023, the FCA published a portfolio letter to firms in the consumer investment sector on how they should implement the new Consumer Duty. Annex 1 sets out how Consumer Duty applies to firms in consumer investment. Annex 2 flags the following key issues firms should consider against the FCA's desired outcomes:

  • Mainstream investments: Firms need to ensure their products are providing fair value.
  • Higher risk investments: Firms need to ensure their products are designed for the right target market in order to avoid customers investing in unsuitable high-risk investments. 
  • Scams and fraud: Firms need to help customers avoid scams and fraud.
  • Consumer redress: Firms should act in good faith and ensure consumers are provided the right redress. 
Funds and asset management

FCA discussion paper on updating and improving UK asset management regime

On 20 February 2023, the FCA published a discussion paper (DP23/2) on the UK asset management regime in light of the Future Regulatory Framework and the government's proposal that the FCA becomes responsible for retained EU laws that set requirements for firms. The FCA is seeking feedback on how to update and improve the current UK regime for asset managers:

  • Chapters 3 and 4 ask if the FCA could make the structure of the regulatory regime for asset managers clearer and make it work better, for example, by simplifying or restructuring rules.
  • Chapters 5 and 6 look at ways in which technology can lead to change, focusing on the relationship between fund managers, distributors and investors and considering the role of tokenisation. 

Comments will close on 22 May 2023. The FCA expects to publish a feedback statement later in 2023, which may be part of a consultation paper on some of the topics in the discussion paper. 

European Parliament adopts proposed Regulation amending ELTIF Regulation

On 15 February 2023, the European Parliament published a press release stating that it has adopted the proposed Regulation amending the Regulation on European long-term investment funds (ELTIFs) (ELTIF Regulation) in order to make ELTIFs easy to invest in.

ECON report on proposed Directive amending AIFMD and UCITS Directive

On 9 February 2023, the European Parliament's Economic and Monetary Affairs Committee (ECON) published the report (published on 2 February 2023) it has adopted on the European Commission's proposal for a Directive amending the UCITS and Alternative Investment Fund Managers Directive (AIFMD) relating to delegation, liquidity risk management, supervisory reporting, provision of depositary and custody services, and loan origination by alternative investment funds.

The Parliament published a legislative procedure file for the proposals of this Directive which states that the report has been tabled for discussion and waiting for a first reading.

On 24 January 2023, ECON voted to adopt the report and to enter into interinstitutional negotiations with the Council of the EU – for further details, please see the funds and asset management section of our February 2023 update

Consumer Duty – portfolio letter for asset management, custody and fund services and alternatives 

On 3 February 2023, the FCA published a portfolio letter to firms in the asset management, custody and fund services and alternatives sectors, on how they should implement the new Consumer Duty, even when they have an indirect relationship with the consumer (discussed in Annex 1). Annex 2 flags the following key issues firms should look into:

  • How the consumer duty interacts with the FCA's existing rules. 
  • How firms should implement and assess their rules with the new consumer duty even when they do not have direct relationships with retail consumers.
  • How distributors and manufacturers' firms need to ensure their products provide fair value. 
  • The examples of good and bad practice when implementing the consumer duty.
  • Ensuring that the firms' appointed representatives comply with the consumer duty.

FCA portfolio letter to asset management firms: February 2023

On 3 February 2023, the FCA published a portfolio letter setting out its supervision strategy for the asset management sector to help firms and CEOs mitigate harm to consumers and markets, particularly in relation to:

  • Product governance.
  • ESG and sustainable investing.
  • Product liquidity management.
  • Investment in operations and resilience.
  • Financial resilience.
FCA enforcement action

FCA statement on potential enforcement action against Link Fund Solutions

On 20 February 2023, the FCA published a short statement in relation to its proposed enforcement action against Link Group's subsidiary, Link Fund Solutions Ltd (LFS). The FCA states that it is in "advanced confidential discussions" with Link Group and LFS "to determine whether its proposed enforcement action can be resolved by agreement." It is focused on ensuring that consumers affected by the suspension of the Woodford Equity Income Fund get redress and will provide a further update as soon as it is able to.

FCA final notice against credit broking firm 

On 15 February 2023, the FCA published its final notice to Stratton Leasing Ltd, a credit broking firm. The FCA removed Stratton's Part 4A permission finding that:

  • the firm had not complied with Principle 11 of the FCA's Principles for Businesses (dealing with regulators in an open and cooperative way) - the firm had failed to respond to the FCA's requests to submit a Form A)
  • the firm had failed to satisfy the suitability Threshold Condition – it had failed to seek approval from the FCA to appoint an individual to perform the senior management function. 

FCA censures Amigo for failing to conduct adequate affordability checks

On 14 February 2023, the FCA published a final notice, censuring Amigo Loans Ltd for failing to conduct adequate affordability checks on borrowers and guarantors, thus breaching Principle 2 (skill, care and diligence), Principle 3 (management and control) and Principle 6 (customers' interests) of the FCA's Principles for Businesses. It breached these principles by: 

  • Failing to consider regulatory requirements causing its systems and controls not to assess customer affordability.
  • Being too focused on profitability and not customers' interests and not identifying issues with systems leading to lending that was unaffordable to customers as the FCA discovered that one in four of Amigo's guarantors were asked to step in and make payments to assist struggling borrowers.
  • Relying on their IT system that processed loan applications in circumstances where it was unaffordable for the customer. 

Amigo would have been fined £72.9million by the FCA, however the FCA decided against doing so because this would have made it difficult for Amigo to meet its commitments to a High Court-sanctioned scheme of arrangement, which aims to pay redress to customers.

FCA commences High Court proceedings to secure restitution order as result of alleged unauthorised investment activity

On 7 February 2023, the FCA published a press release announcing that it had commenced proceedings in the High Court against Argento Wealth Ltd (AWL), an unauthorised firm, and its sole director, to secure restitution due to the following alleged unauthorised investment activities:

  • AWL unlawfully taking £2.8 million as deposits under loan agreements or as part of an unauthorised collective investment scheme (CIS).
  • AWL unlawfully arranging $9 million worth of investments in EMB Fund Limited (EMB).
  • AWL breaching the financial promotion restriction.

The FCA considers that AWL and its director have failed to produce credible evidence that AWL can repay the funds borrowed from both retail investors and EMB (plus the interest due) and that AWL is therefore insolvent.

The FCA has obtained undertakings equivalent to interim orders freezing AWL and its director's remaining assets and is seeking a restitution order compensating 13 lenders who lent money to AWL and anyone else affected. The FCA recognises that investors who lent money to AWL are likely to suffer very significant losses because AWL's remaining assets appear to be below what would be required to return all investors' money.

A date is yet to be set for the High Court trial concerning the restitution order.

Economic crime

Wolfsberg Group updates correspondent banking due diligence questionnaire and supporting materials: February 2023

On 10 February 2023, the Wolfsberg Group issued a press release regarding its publication of the following questionnaire and updated materials: 

HM Treasury issues collection of documents produced by G7 Cyber Expert Group

On 3 February 2023, HM Treasury published a webpage, providing a collection of Fundamental Elements documents created by the G7's Cyber Expert Group in relation to cyber security issues in the finance sector.

BoE, PRA and FCA Dear SMF letter on findings from 2022 CBEST assessments

On 31 January 2023, the BoE, PRA and FCA published a joint Dear Senior Management Function (SMF) letter on the themes from 350 findings from the 2022 annual cycle of CBEST assessments conducted on 14 participating firms and addressed to the SMFs responsible for cyber. The findings found thematic weaknesses, which have been communicated to the SMFs. 

New SARs portal and guidance

On 31 January 2023, the National Crime Agency announced that the new Suspicious Activity Reports (SARs) Portal would soon go live. The National Crime Agency also published the following:

All the firms and individuals submitting SARs through the portal now need to register to do so.

This month's question 

The answer to last month's question: the total amount of FCA fines for the calendar year ending 2022 was £215,834,156. 

In 2022, the Payments Systems Regulator issued 7 specific directions. How many of these related to Confirmation of Payee? 

Dans cette série

Réglementation des services financiers

Financial services matters - May 2024

9 May 2024

par plusieurs auteurs

Réglementation des services financiers

Financial services matters - April 2024

10 April 2024

par plusieurs auteurs

Réglementation des services financiers

Financial services matters - March 2024

13 March 2024

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - February 2024

7 February 2024

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - January 2024

11 January 2024

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - December 2023

7 December 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - November 2023

2 November 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - October 2023

5 October 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - September 2023

4 September 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - August 2023

3 August 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - July 2023

6 July 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - June 2023

8 June 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - May 2023

4 May 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - April 2023

6 April 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - March 2023

6 March 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - February 2023

2 February 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services matters - January 2023

13 January 2023

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - December 2022

1 December 2022

par Daniel Hirschfield, Charlotte Hill

Réglementation des services financiers

Financial services regulatory update - November 2022

2 November 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - October 2022

7 October 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - September 2022

1 September 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - August 2022

4 August 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - July 2022

11 July 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - June 2022

9 June 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - May 2022

12 May 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - April 2022

7 April 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - March 2022

3 March 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - February 2022

3 February 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - January 2022

13 January 2022

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - December 2021

2 December 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - November 2021

4 November 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - October 2021

7 October 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - September 2021

20 September 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - August 2021

5 August 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - July 2021

1 July 2021

par Daniel Hirschfield, Charlotte Hill

Réglementation des services financiers

Financial services regulatory update - June 2021

3 June 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - May 2021

6 May 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - April 2021

1 April 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services regulatory update - March 2021

4 March 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - February 2021

4 February 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - January 2021

14 January 2021

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - December 2020

3 December 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - November 2020

5 November 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - October 2020

1 October 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - September 2020

3 September 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - August 2020

6 August 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - July 2020

2 July 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - June 2020

4 June 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - May 2020

7 May 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - April 2020

2 April 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - March 2020

5 March 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update – February 2020

6 February 2020

par Charlotte Hill, Daniel Hirschfield

Réglementation des services financiers

Financial services update - January 2020

8 January 2020

par Charlotte Hill, Daniel Hirschfield

Call To Action Arrow Image

Latest insights in your inbox

Subscribe to newsletters on topics relevant to you.

Subscribe
Subscribe

Related Insights

Réglementation des services financiers

Financial services matters - May 2024

9 mai 2024
In-depth analysis

par plusieurs auteurs

Cliquer ici pour en savoir plus
Réglementation des services financiers

Financial services matters - April 2024

10 avril 2024
In-depth analysis

par plusieurs auteurs

Cliquer ici pour en savoir plus
Réglementation des services financiers

Financial services matters - March 2024

13 mars 2024
In-depth analysis

par Charlotte Hill et Daniel Hirschfield

Cliquer ici pour en savoir plus