作者
Charlotte Hill

Charlotte Hill

合伙人

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Daniel Hirschfield

Daniel Hirschfield

高级专业支持律师

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作者
Charlotte Hill

Charlotte Hill

合伙人

Read More
Daniel Hirschfield

Daniel Hirschfield

高级专业支持律师

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2020年9月3日

Financial services update – 9 / 10 观点

Financial services update - September 2020

  • IN-DEPTH ANALYSIS

The topics covered in this month's update include:

  • updated temporary permissions regime information from the FCA
  • the PSR's new future strategy
  • the FCA's views on Employer Salary Advance Schemes
  • HM Treasury's letter on EU crowdfunding service provider proposals
  • the EBA's response to the AML and CTF Action Plan.

Please also see our articles COVID-19: how the UK financial regulators are responding and COVID-19: how the European financial regulators are responding for the latest regulatory updates concerning the coronavirus pandemic.

General financial services regulation

New Supervisory correspondence webpage

On 20 August 2020, the Financial Conduct Authority (FCA) published its Regulation round-up newsletter for August 2020, in which they announced that on 24 July 2020 they published a new Supervisory correspondence webpage. The new webpage provides further information on the FCA's approach to portfolio supervision, provides a webpage to locate all published portfolio letters in one place, includes a list of its portfolios displayed by sector to help firms locate letters that are relevant to their main business or other portfolios they operate in and directs users to the FCA's Dear CEO letters.

Temporary permissions regime

The FCA updated its webpage on the temporary permissions regime (TPR) on 20 August 2020. The FCA stated that the TPR will now take effect from the end of the Brexit transition period, and the notification window for firms and fund managers to notify the FCA that they want to use the TPR will re-open on 30 September 2020. When the window re-opens, fund managers will also be given the opportunity to update their previously submitted notifications, if necessary.

SMCR Conduct Rules reporting for solo-regulated firms

On 13 August 2020, the FCA published a new webpage discussing the new annual Conduct Rules reporting requirements (REP008) under the Senior Managers and Certification Regime (SMCR). Pursuant to the reporting requirement, firms should report when they have taken disciplinary action against individuals who are not Senior Managers for breaches of the Conduct Rules and any related details of the breach. The FCA, on 14 August 2020, also updated its SMCR webpage for solo-regulated firms to provide good and bad practice indicators in relation assessing the fitness and propriety of Senior Managers and Certificate Staff and related training on the Conduct Rules.

Payment Services and Systems

Outcomes for victims of APP scams

The Payment Services Regulator (PSR) published a paper on 6 August 2020 by Genevieve Marjoribanks, Head of Policy, discussing the PSR's commitment to getting the right outcomes for the victims of authorised push payment (APP) scams and protecting customers. Ms Marjoribanks stated that reimbursing the innocent victims remains a top priority for the PSR. While the introduction of the Contingent Reimbursement Model (CRM) Code has led to positive steps being taken, the PSR wants to see improvements made such that, repatriation or reimbursement should occur in the vast majority of APP scam cases and a sustainable, long-term model for reimbursement to protect customers is established. Further, Ms Marjoribanks discussed the funding options (i.e. self-funding and shared funding) and welcomes the recent Lending Standards Board consultation, which includes a discussion on the future funding of reimbursement.

Driving innovation and competition in real-time payments

On 4 August 2020, the PSR published a document by Ms Marjoribanks setting out the PSR's views on driving innovation and competition in real-time payments. The PSR wants consumers to have choice when it comes to making payments, including real-time payment services, and the best way to deliver this is through competition and innovation. Ms Marjoribanks noted that in the coming months the PSR will work with the industry to identify new ways of driving competition and innovation while ensuring it serves the best interests of everyone who uses them and considers the concerns and ideas of the industry. The PSR will also work with HM Treasury and the Open Banking Implementation Entity to ensure there is a cohesive approach.

PSR's new future strategy

On 29 July 2020, the PSR published a webpage launching the development of its first ever future strategy, and requesting input, before it formally consults on a full draft strategy before the end of the year. The purpose of the strategy is to define clear outcomes for the payments sector and guide how the PSR prioritises its work. The PSR will focus on the following three key themes that are particularly relevant to current issues in payments and that will drive future change: innovation and future payment methods, competition, and choice and availability of payment methods.

Consumer credit

FCA findings on relending by high-cost lenders

On 7 August 2020, the FCA published its findings from its review of relending by firms in the high-cost lenders portfolio. The FCA findings include: relending and customer outcomes; increasing levels of debt and repayments; relending, profitability and consumer harm; marketing activity and customer behaviour; marketing materials; online account messages; refinancing loans; and early settlement charges. The FCA expects firms to review the findings and their relending operations and make the necessary changes to improve customer outcomes.

Employer Salary Advance Schemes

The FCA published a statement on 30 July 2020 setting out its view of the risks and benefits of Employer Salary Advance Schemes (ESAS) and the considerations for employers and employees using them. The FCA noted that while ESAS do not fall within their regulatory remit, they have a similar effect to high cost credit and raise similar issues. The FCA discussed four key risks that arise in using these schemes:

  • Lack of credit regulation – ESAS operates outside the credit regulation and the regulatory and statutory rights and protections under consumer credit laws do not apply.
  • Lack of transparency about cost – there is a risk that employees might not appreciate the trust cost and how this compares with market credit products.
  • Dependency and repeat use – potentially leads to a cycle of repeat advances and escalating fees.
  • Lack of visibility for credit reference agencies – credit reference agencies do not record the use of the product, so creditors won't generally be aware of the customers using ESAS.

The FCA sets out some suggestions to mitigate the risks and intends to continue to monitor the ESAS market and raise awareness.

Banking and insurance

ECB report on banks' ICAAP practices

The European Central Bank (ECB), on 11 August 2020, published a report on banks' internal capital adequacy assessment process (ICAAP) practices. ICAAP has and remains one of ECB Banking Supervision's top supervisory priorities and this report summarises the results from a structure analysis of ICAAP practices in 2019. The report notes that many banks have made a considerable effort towards improving their ICAAPs and have made clear progress. For instance, the areas of risk identification, capital adequacy statements and conduct stress-testing, are broadly established. However, several areas are less developed, and the ECB explains that these all merit attention as weak practices in these areas could undermine the overall effectiveness of the ICAAP.

High Court sanctions transfer of insurance business transfer (IBT) scheme

In a judgment dated 7 August 2020, the High Court sanctioned an IBT scheme allowing Rothesay Life plc, a UK insurer, to transfer life insurance policies to Monument Life Insurance DAC, an Irish insurer. The policyholders are resident in Ireland, and Rothesay was providing the services on the basis of passporting rights under the Solvency II Directive, which will cease to be available to UK insurers after the Brexit Implementation Period. Accordingly, the key issues considered by the court for approving the transfer were Brexit, loss of Financial Services Compensation Scheme protection and COVID-19.

Data Provision under the Civil Liability Act 2018

In a statement published on 4 August 2020, the FCA informed insurers about the duty imposed by the Civil Liability Act 2018 to provide information to the FCA about the effect that changes to the law under the Act will have on motor insurance premiums. The FCA intends to send out a survey in September 2023 to all insurers in this regard.

FCA consults on Dual-regulated firms Remuneration Code

On 3 August 2020, the FCA published a consultation paper with proposals to update its Dual-regulated firms Remuneration Code (SYSC 19D) and relevant non-Handbook guidance to reflect the changes made by the Capital Requirements Directive V (CRD V). The proposals, in line with the proposals of the Prudential Regulation Authority (PRA) set out in July 2020, amend SYSC 19D and its general guidance on proportionality for dual-regulated firms to reflect CRD V reforms and will take effect from the next performance year that begins on or after 29 December 2020.

The deadline for responses is 30 September 2020 and the FCA intends to publish a policy statement before 28 December 2020.

Funds and Asset Management

ESMA's review of AIFMD

On 18 August 2020, the European Securities and Markets Authority (ESMA) sent a letter to the European Commission highlighting some areas of the Alternative Investment Fund managers Directive (AIFMD) where improvements could be made in light of the European Commission impending review. ESMA notes that since the original Directive was published in 2011, there are many areas of the framework that could be improved based on significant exchanges with national competent authorities on their practical experience in supervising firms. The letter, at Annex I, sets out the key issues in the legislative framework and where ESMA recommends revisions, and Annex II sets out more specifically the key reporting issues where improvements could be made.

FCA consults on liquidity mismatch in authorised open-ended property funds

The FCA published a consultation paper on 3 August 2020 on liquidity mismatch in authorised open-ended property funds. The paper notes the issues with open-ended property funds given the illiquid nature of property, and the FCA aims to set out a possible way of addressing this structural mismatch through a proposal to require investors to give notice before their investment is redeemed. Notice periods should allow funds to operate in a more stable and sustainable way, with more assets invested in property and less in cash, and ultimately potentially deliver a material increase in returns to property fund investors. The proposed approach is only directly relevant to UK authorised property funds that are non-UCITS retail schemes.

The FCA welcomes feedback on its proposal by 3 November 2020 and will seek to publish a final policy statement and final handbook rules as soon as possible in 2021.

Amendments to the Packaged Retail Investment and Insurance based Products Regulation

HM Treasury, on 31 July 2020, published a policy statement on amendments to the retained EU law version of the Packaged Retail Investment and Insurance-based Products (PRIIPs) Regulation (UK PRIIPs Regulation). HM Treasury intends to make the following changes to the UK PRIIPs Regulation:

  • an amendment enabling the FCA to clarify the scope of the PRIIPs Regulation through their rules
  • an amendment to replace ‘performance scenario’ with ‘appropriate information on performance’ in the PRIIPs Regulation
  • an amendment enabling HM Treasury to further extend the exemption currently in place for Undertakings for the Collective Investment in Transferable Securities (UCITS) funds.

HM Treasury intends to legislate for these amendments when parliamentary time allows.

Securities and Markets

FCA's Primary Market Bulletin Issue No. 30

On 19 August 2020, the FCA published the 30th edition of the Primary Market Bulletin (PMB). The PMB starts with general news and information including, the importance of the person discharging managerial responsibilities regime under the Market Abuse Regulation, the exemptions from the requirement to prepare a prospectus, changes to the prospectus annexes and clarity on the FCA's approach to the Global Depository Receipt Facilities. The PMB also includes the outcome of guidance consultations in PMB 24 and changes to the Knowledge Base, as well as updated technical notes in relation to the Prospectus Regulation.

EU crowdfunding service provider proposals

On 11 August 2020, John Glen, Economic Secretary to HM Treasury, sent a letter to Sir William Cash, Chair of the House of Commons European Scrutiny Committee, providing an update on the European Commission's proposals relating to European crowdfunding service providers for business. Mr Glen states that the Commission's proposals, Regulation on European Crowdfunding Service Providers for Business (2018/0048(COD)) and the related Commission proposal for a Directive making consequential amendments to the MiFID II Directive (2014/65/EU) relating to crowdfunding (2018/0047(COD)), will not come into force during the Brexit transition period and thus the government will consider where similar changes in UK law would enhance the competitiveness of the UK’s crowdfunding and (peer-to-peer) P2P lending sectors in our new trading environment, while also ensuring that consumer investors are adequately protected.

Continuity of Access to FMIs for Firms in Resolution

On 14 August 2020, the Financial Stability Board (FSB) published a questionnaire on the continuity of access to financial market infrastructures (FMIs) for firms in resolution by streamlined information collection, through the use of a common template or questionnaire, to support resolution planning. The questionnaire was developed in consultation with stakeholders and all FMIs are encouraged to complete the questionnaire. The FSB stated that the questionnaire is a living document and, after the first iteration in the course of 2021, FMIs and other stakeholders will be able to provide feedback and suggestions on the questionnaire itself and the process.

Investigations, Enforcement and Dispute Resolution

High Court issues IROs and injunctions relating to unregulated pension introducers

On 7 August 2020, the FCA obtained interim restitution orders (IROs) and injunctions from the High Court relating to two companies, Avacade Ltd and Alexandra Associates (UK) Ltd, and three individuals, Craig Lummis, Lee Lummis and Raymond Fox. The High Court found that the companies were unlawful as they had engaged in the regulated activities of arranging and advising on investments, made unapproved financial promotions through their websites, promotional material and in telephone calls to consumers and made false or misleading statements. The Court also found that the individuals were knowingly concerned in the breaches. In a further hearing, the High Court has ordered them to pay a total of £10,715,000 in restitution to members of the public who were induced to transfer their pensions into self-invested personal pensions.

CMA revokes directions given to HSBC to comply with Retail Banking Market Investigation Order 2017

On 6 August 2020, the Competition and Markets Authority (CMA) announced that it has revoked the directions given to HSBC on 1 April 2019, to ensure compliance with certain provisions of the Retail Banking Market Investigation Order 2017 (the "Order"), on confirmation by the Implementation Trustee that HSBC was compliant with Article 14.1 of the Order with respect to App-to-App Redirection Functionality.

BoE's Enforcement Decision Making Committee report

The Bank of England (BoE) published the first annual report of its Enforcement Decision Making Committee (EDMC) on 23 July 2020. The EDMC was established in August 2018 to decide contested enforcement cases and functions across all regulatory areas where the BoE has enforcement powers. The report sets out various general information on the EDMC as prescribed in its procedures and, importantly, details of the two cases dealt with by the EDMC so far.

Financial crime

FCA consults on extension of annual financial crime reporting obligation

On 24 August, the FCA published a consultation paper setting out its proposals to extend the scope of firms required to provide the FCA with annual financial crime reporting (REP-CRIM) information. The proposed extension will include firms that carry on regulated activities that the FCA consider potentially pose higher money laundering risk and will be irrespective of a firm’s revenue threshold. The FCA estimates that an additional 4,500 firms will need to report annually.

The FCA requests all comments by 23 November 2020 and intends to publish a Policy Statement by Q1 2021.

EBA response on an AML/CTF Action Plan

On 19 August 2020, the European Banking Authority (EBA) published a response to the European Commission's public consultation on an anti-money laundering (AML) and countering terrorist financing (CTF) Action Pan and the establishments of an EU-level AML/CTF supervisor. The EBA supports the Commission's aim to ensure the consistent and effective application of AML/CTF rules throughout the EU. The EBA states that a comprehensive assessment of the current framework is necessary and recommends that the Commission:

  • harmonise the EU’s legal framework to reduce the risk of gaps created by divergent approaches
  • combine an ongoing role for national AML/CTF authorities with an EU-level AML/CTF supervisor in a hub and spoke approach that builds on national AML/CTF authorities’ expertise and resources
  • leverage on the EU’s existing AML/CTF infrastructure, including the EBA’s policy, data and information technology resources.

Developing an effective AML/CTF programme

The Wolfsberg Group published a statement on 12 August 2020 on developing an effective AML and CTF programme. They outline five key steps to take:

  • assessing risk in defined priority areas
  • implementing and enhancing controls
  • prioritising resources
  • engaging with law enforcement
  • demonstrating AML and CTF programme effectiveness.

It also published FAQs on 7 August 2020 on how financial institutions can identify, mitigate and manage money laundering risks by undertaking source of wealth and source of funds checks on relevant customers, when appropriate or required by applicable regulations.

HM Treasury AML and CTF supervision report, 2018/2019

On 6 August 2020, HM Treasury published its annual report for 2018 to 2019 on AML and CTF supervision. The report includes self-reported data about activity undertaken in 2018-19 across the UK’s AML/CTF regime, which supervisors provided to HM Treasury in their annual returns. The report provides transparency about the performance of AML/CTF supervisors, and fulfils the Treasury’s obligation under the Money Laundering Regulations to ask all designated AML/CTF supervisors to provide information on their supervisory activity and publish a consolidated review of this information.

FSR trivia

What is the name of the new activity based capital requirement under the Investment Firm Regulation?

  • X-factor
  • J-factor
  • C-factor
  • K-factor

The answer to last month's question is the Wolfsberg Group.

Senior Managers & Certification Regime Webinar

Join us for our next webinar on 'SMCR in lockdown' at 3pm on Wednesday 9 September.

The webinar will cover:

  • expectations of the regulator
  • delays to certification, conduct rules training and reporting of directory persons
  • managing certification remotely
  • dealing with breaches of the conduct rules
  • maintaining a healthy culture.

本系列内容

金融服务监管

Financial services update - January 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - March 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - April 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

金融服务监管

Financial services update - May 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

金融服务监管

Financial services update - June 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

金融服务监管

Financial services update - July 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

金融服务监管

Financial services update - August 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

金融服务监管

Financial services update - October 2020

IN-DEPTH ANALYSIS

作者 Charlotte Hill, Daniel Hirschfield

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