作者
Charlotte Hill

Charlotte Hill

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作者
Charlotte Hill

Charlotte Hill

合伙人

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2019年8月12日

Financial services update - August 2019

Included in this month's update are the collaborative efforts between EU banks and third party providers on implementing the final elements of PSD2, the FCA's policy statement on cryptoassets, and the publication of the final rules on the Senior Managers and Certification Regime.

Payment services

General financial services regulation

Wealth management and investment funds

Financial crime

Enforcement and investigations

Banking

FS trivia

Payment services

PSR publishes detailed research on access to cash and calls for views

On 24 July 2019, the Payment Services Regulator (PSR) published a Call for Views paper (CP19/6). In the paper, the PSR shared research undertaken by BritainThinks on how people use cash and its acceptance in different small businesses in the UK.

The PSR also sought stakeholders' views on the issues raised by the research, including the role of, and barriers to, the alternatives to ATMs for accessing cash and possible future options for ensuring access to cash.

Responses are requested by Friday 6 September 2019.

ECSAs and TPPs issue joint statement on PSD2 RTS

The three European Credit Sector Associations (ECSAs) and the two European Third Party Providers (TPPs) issued an action plan on 26 July 2019. The plan aims to ensure a smooth implementation of the final phase of PSD2 relating to new security and communication regulatory technical standards that will apply from 14 September 2019.

In the plan, the parties commit to do "everything reasonably possible to avoid 'customer detriment' of their mutual customers" within the applicable legal framework. They also recognise the need for neutral communication to payment services users about the changes brought by the introduction of new methods for Strong Customer Authentication.

The European Commission welcomed the joint statement.

General financial services regulation

FCA policy statement and final guidance on cryptoassets

On 31 July 2019, the FCA published policy statement PS19/22, which contains its Final Guidance on the regulatory perimeter relating to cryptoasset activities, and which follows its earlier consultation paper on the same topic (CP19/3).

The Final Guidance, replete with case studies (including two Sandbox case studies), explains how tokens may be unregulated or subject to the various FSMA and non-FSMA regimes (such as the E-Money and Payment Services regimes).

FCA final rules on SMCR

Published on 26 July 2019, the FCA's policy statement PS19/20 contains the final rules on the extension of the Senior Managers and Certification Regime (SMCR) to FCA solo-regulated firms.

These rules confirm the proposals set out in CP19/4, including:

  • the exclusion of the legal function from the overall responsibility function
  • amendments to the scope of the Client Dealing Function
  • the introduction of a new Certification Function
  • the extension of Senior Manager Conduct Rule 4 to all directors at UK Limited Scope firms.

The SMCR goes live for almost all FCA solo-regulated firms on 9 December 2019; benchmark administrators will become subject to the regime from 7 December 2020.

Wealth management and investment funds

FCA "Dear CEO" letter on wealth management and stockbroking strategy

On 23 July 2019, the FCA published a "Dear CEO" letter (dated 13 June 2019) which reminds firms in the wealth management and stockbroking sector to consider the key risks of harm their firms pose to customers or the markets in which they operate, and strategies for mitigating such risks.

The FCA's supervision strategy for wealth management and stockbroking covers a two year period, which started in April 2019. It is centred on the following areas:

  • fraud
  • investment scams and market abuse
  • best execution
  • costs and charges disclosures
  • SMCR.

The FCA also remains committed to ensuring the process for switching investment platforms is improved.

Regulation and Directive on cross-border distribution of collective investment funds published in OJ

On 12 July 2019, the following funds-related legislation was published in the Official Journal of the European Union:

  • Directive (EU) 2019/1160, which amends UCITS Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU) with regard to cross-border distribution of collective investment undertakings.
  • Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings and amending the European Venture Capital Funds Regulation (345/2013), the European Social Enterpreneurship Funds Regulation (346/2013) and the Regulation on key information documents for packaged and retail and insurance-based investment products (1286/2014).

The Directive and Regulation entered into force on 1 August 2019, from which date most of the Regulation applied (Articles 4(1) to (5), Articles 5(1) and (2), Article 15 and Article 16, apply from 2 August 2021). Member States have until 2 August 2021 to fully transpose the Directive into their national laws.

The Directive introduces a new pre-marketing regime for EU managers of EU Alternative Investment Funds. It is not yet clear how Member States will apply the new rules to non-EU managers, which post-Brexit, will include UK managers.

Financial crime

HM Treasury AML and CTF supervision report 2017 to 2018

The Treasury's seventh annual report on AML/CTF supervision was published on 8 July 2019 and examines the performance of the UK's AML/CTF supervisors. The report makes a number of recommendations including that:

  • the FCA should consider how to ensure appropriate intensity of supervision for all the different categories of its supervisory population from low to high risk
  • all supervisors should continue to ensure that proportionate, dissuasive and effective sanctions are applied for AMLF/CTF and sanctions violations
  • the FCA should consider the wider use of criminal background checks as part of its processes to ensure that criminals and their associates are prevented from owning or controlling financial institutions.

HM Government Economic Crime Plan 2019-2022

On 12 July 2019, HM Government published the Economic Crime Plan 2019-2022. The plan sets out seven priority areas agreed in January 2019 by the Economic Crime Strategic Board, the ministerial level public-private board responsible for setting the UK's strategic priorities for combatting economic crime.

There are 52 actions contained in the plan, including the consideration of legislative changes to improve the Proceeds of Crime Act and the transposition of the Fifth Money Laundering Directive.

Enforcement and investigations

Protocol and new FCA webpage for independent investigation into LCF

In May 2019, HM Treasury announced that Dame Elizabeth Gloster will lead an independent investigation into the circumstances surrounding the collapse of London Capital & Finance plc (LCF) and how the FCA exercised its powers in relation to it.

On 25 July 2019, the FCA published a protocol setting out the procedures under which the investigation is to be carried out.

The FCA has also added a new webpage on the investigation, which it says will be regularly updated as the investigation continues.

FCA Enforcement annual performance report 2018/2019

The FCA has reported on its enforcement activities during 2018/2019. The report should be read alongside the FCA Annual Report for 2018/2019.

The following items are noteworthy:

  • the FCA issued 265 final notices (243 against firms and individuals trading as firms, and 22 against individuals), secured 288 outcomes using its enforcement powers (276 regulatory/civil, and 12 criminal) and imposed 16 financial penalties (£227.3m in total)
  • 226 firms' permissions were cancelled and seven individuals were prohibited from carrying on a financial services activity (one of whom was fined)
  • as at 31 March 2019, the FCA had 650 open cases (excluding Threshold Conditions cases)
  • the average length of all cases for the reported period was 17.5 months (this refers to resolved cases, cases referred to either the Regulatory Decisions Committee or the Upper Tribunal, and cases closed with no further action).

More information on the FCA's approach to enforcement can be found here.

Standard Life Assurance fined for failures relating to non-advised sales of annuities

The FCA has fined Standard Life Assurance Limited (SLAL) £30,792,500 for breaches of Principles 3 (management and control) and 6 (customers' interests) in connection with its approach to selling non-advised annuities to existing customers.

The FCA found that SLAL had used higher risk incentives that put pressure on its front-line staff to sell. Coupled with poor systems and controls – not to mention the complex nature of the product that was sold to vulnerable customers – this led to some customers being treated unfairly, and created a significant risk of consumer detriment.

Some credit was given for SLAL's voluntary past business review in 2017 and a redress exercise in which SLAL had paid approximately £25.3 million to 15,302 customers.

The FCA's final notice can be found here.

Banking

FCA warns retail banking sector to review business continuity plans

The FCA has published some of its findings following a review of business continuity planning among a number of small and medium-sized retail banks, payment institutions and electronic money institutions. It has also provided examples of good practice and potential areas for enhancement.

The FCA found that firms often take steps to build resilience against the occurrence of an event. However, it also pointed out that anticipating when events will occur and carrying out proper planning and testing will allow firms to be better prepared to respond and recover from events (for example, pre-prepared communication plans).

Firms are encouraged to become familiar with the concepts found in DP18/4, the joint FCA, PRA and Bank of England discussion paper about strengthening the operational resilience of financial services firms, which was published in July 2018.

EBA updates on monitoring of CET1 capital instruments

On 22 July 2019, the European Banking Authority (EBA) published an updated list of Common Equity Tier 1 (CET1) instruments of EU institutions. This was accompanied by an updated CET1 Report, which contains information on the underlying objectives of the monitoring, as well as on the consequences of including or excluding instruments in or from the CET1 list.

FS trivia

In the Bank of England, what is the area where the Governor and senior officials have their offices known as?

  • The Pillars
  • The Parlours
  • The Pallazo

Answer to last month's question: 1,000,000,000,000,000,000,000, corresponding to the 100 million b.pengő banknote, which was issued in 1946 in Hungary during a period of hyperinflation – it is said to have been worth about sixpence at the time.

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