Financial services update – 4 / 37 观点
In this month's update:
On 27 September 2022, Sarah Pritchard, Executive Director for Markets at the FCA, gave a speech on how regulators should prepare for economic growth. She addressed the following points:
On 23 September 2022, the Chancellor, Kwasi Kwarteng, announced the 2022 Autumn Statement (Growth Plan), which included:
On 12 September 2022, the FCA published a decision notice explaining its conditional approval of the acquisition of Link Fund Solutions Ltd (LFS), a subsidiary of Link Group, by Dye and Durham. LFS managed the LF Woodford Equity Income Fund (WEIF). Since June 2019, the FCA has been investigating the circumstances relating to the suspension of the WEIF. Having concluded that it was likely that LFS could be required to pay a redress payment of up to £306 million, the FCA has required the proposed controllers to agree to make available funds not exceeding £306 million to meet any shortfall within LFS to cover the redress payments it may be required to make. In our Enforcement section (see below), we discuss a subsequent FCA statement on potential enforcement action against LFS.
On 7 September 2022, the House of Commons Treasury Committee published the responses of HM Treasury, the FCA and the PRA to its report on its Future Regulatory Framework (FRF) Review, which we covered in our July 2022 update.
A summary of the key responses to each of the Treasury Committee's requests is set out below:
On 7 September 2022, the Financial Services and Markets Bill 2022-23 (Bill) had its second reading in the House of Commons, during which it was confirmed by Richard Fuller, Economic Secretary to the Treasury, that the government intends to introduce an "intervention power" to permit HM Treasury to direct a regulator to change, make or revoke rules where there are matters of significant public interest. The Minister also noted that there are no plans to merge the FCA and PRA.
To assist it in its scrutiny of the Bill, the House of Commons Public Bill Committee is calling for the submission of written evidence. The Committee is due to have its first sitting on 19 October and is scheduled to report by 3 November.
On 13 September 2022, CAT received an application for collective proceedings by UK based holders of the cryptocurrency Bitcoin Satoshi Vision (BSV) Claims Limited (the Proposed Class Representative) against Bittylicious Limited & Others (the Proposed Defendants). This is because of the alleged damages caused by the Proposed Defendants colluding to de-list BSV, a fellow cryptocurrency exchange, thus infringing Article 101 TFEU and the Chapter I Prohibition.
Following a meeting on 13 September 2022 of the Group of Central Bank Governors and Head of Supervision (GHOS), the Basel Committee on Banking Supervision (BCBS) published a press release, in which it was noted that the GHOS confirmed the relevance of designing a robust and prudent regulatory framework for banks' exposures to cryptoassets that promotes responsible innovation whilst preserving financial stability and finalising the framework by the end of 2022. The BCBS consultation on prudential treatment of cryptoassets exposures closed on 30 September 2022.
On 7 September 2022, the Financial Ombudsman Service (FOS) released its quarterly complaints data on financial products and services for the first quarter of the 2022 financial year. This highlights that there were 35,029 new complaints, and a trend of complaints from victims of frauds and scams, with more than half the complaints relating to investment scams being connected to cryptocurrencies. The FOS predicts that the volume of new complaints will increase because of the cost-of-living crisis.
On 5 September 2022, the Competition and Markets Authority (CMA) published the terms of reference of the Digital Regulation Cooperation Forum (DRCF). These explain:
On 31 August 2022, Dietrich Domanski, the secretary general of the Financial Stability Board (FSB) delivered a speech, in which he said that the recent crypto market turbulence demonstrated that there is a strong need for a consistent regulatory approach to deal with the potential financial stability risks caused by cryptoassets. The "crypto-winter" had brought to prominence a number of financial stability issues:
Domanski noted that there are a number of challenges to developing a "holistic approach", which include the largely unregulated nature of cryptoassets activities and markets and the fact that a number of participants combine different sectoral activities.
In October 2022, the FSB will send to the G20 ministers and central bank governors a review of recommendations to encourage international consistency of regulatory and supervisory approaches to cryptoassets, stablecoins and the market in general.
On 30 August 2022, the FCA published occasional paper 61, which reports on the results of a randomised control trial, where some representative UK consumers made hypothetical borrower repayment choices based on robo-advice. The key findings were:
On 26 September 2022, ESMA published a table updating the timeline for the implementation of its sustainable finance legislation, covering the Sustainable Finance Disclosure Regulation (SFDR), the Taxonomy Regulation (TR), the Corporate Sustainability Reporting Directive (CSRD), the Markets in Financial Instrument Directive (MiFID II), the Insurance Distribution Directive (IDD), the Undertakings for Collective Investment in Transferable Securities Directive (UCITS), and the Alternative Investment Fund Managers Directive (AIFMD).
On 21 September 2022, the Financial Services Skills Commission (FSSC) published an insight paper on collecting socioeconomic background data, as part of its work on diversity and inclusion (D&I), particularly its access and D&I commitment setting out good practice actions for CEOs and its inclusion measurement guide for UK financial services.
The regulators are due to consult on policy proposals that aim to improve D&I across the financial sector in Q3 2022, following the publication of their joint discussion paper (DP21/2) last year (see our August 2021 update). A policy statement is expected in 2023.
On 13 September 2022, the BCBS's statement referred to above also noted that the GHOS had reviewed the BCBS's work on climate-related financial risks and that it supported its approach to the development and testing of measures related to disclosure, supervision and regulation.
On 9 September 2022, the ESAs sent eight additional questions to the European Commission regarding the SFDR. The questions cover:
On 7 September 2022, the Network for Greening the Financial System (NGFS) published the changes it made to the climate scenarios for central banks and supervisors, to reflect:
On 31 August 2022, the International Organization of Securities Commissions (IOSCO) published its final report on retail investor education in the context of sustainable finance markets and products. Examples of educational activities that regulators should consider include:
On 29 September 2022, the Payment Systems Regulator (PSR) published a consultation paper (CP22/4) on the reimbursement of authorised push payment (APP) scams.
The PSR is proposing to:
As part of its reimbursement measures, the PSR is proposing that the costs of reimbursement are allocated equally between sending and receiving PSPs (at the moment, sending PSPs bear the vast majority of the costs of reimbursement under the Contingent Reimbursement Model Code).
The PSR is holding a virtual roundtable on its proposals on 13 October 2022. The consultation paper closes for comments on 25 November 2022.
On 9 September 2022, the Committee on Payments and Market Infrastructures (CPMI) published an article defining harmonised requirements for the use of ISO 20022 in multi-jurisdictional payments, which it hopes will come into effect in 2025, when SWIFT discontinues its support of the current Message Types (MT) standard for cross-border payments.
CPMI together with the SWIFT Payment Market Practice Group (PMPG), collectively known as the taskforce, would like to harmonise:
On 16 September 2022, the European Parliament's Internal Market and Consumer Protection Committee (IMCO) published a comparison table of the negotiating positions taken by the European Commission, the Council of the EU and the European Parliament on the proposed Directive on Consumer Credits to revise and replace the Consumer Credit Directive (2008/48/EC).
On 21 September 2022, the PRA published a consultation paper on changes to the regulatory regime for credit unions (CP7/22).
The PRA's proposals are intended to address the risks that are posed by larger, more complex credit unions and include:
Responses to the consultation paper are requested by 21 December 2022.
On 21 September 2022, the FCA set out potential interventions to reform to give leaseholders more protections from high prices and ensure the buildings insurance market operates better for leaseholders, in light of the increase in insurance costs following the 2017 Grenfell tragedy. These include:
In six months, the FCA will provide an update on progress towards potential remedies.
On 8 September 2022,the PRA published a discussion paper (DP4/22) setting out its proposed approach to policy making in the light of its wider rulemaking responsibilities following Brexit, now that the Bill will repeal most EU financial services law, allowing regulators to make new rules. The following points are discussed in the paper:
The PRA has asked for feedback on the topics discussed in the discussed paper by 8 December 2022.
On 8 September 2022, the PRA updated its rules and supervisory expectations regarding the definitions of capital (PS8/22), with the following amendments coming into effect on 1 January 2023:
On 6 September, the PRA sent a letter to the Treasury Sub-Committee on Financial Services Regulations responding to the Sub-Committee's concerns regarding the proposed strong and simple prudential framework for non-systemic domestic banks and building societies:
On 5 September 2022, the Official Journal of the European Union published the Commission Delegated Regulation (EU) 2022/1455 supplementing the Investment Firms Regulation ((EU) 2019/2033) (IFR) concerning RTS on fixed overheads requirements, which entered into force on 25 September 2022.
The RTS set out:
On 5 September 2022, ESMA published its updated Q&As on transparency topics (ESMA70-872942901-35) under the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (600/2014) (MiFIR), regarding the application of transparency or transaction reporting requirements to transfers of financial instruments between two branches of the same legal entity or a branch and its parent company.
On 5 September 2022, in the FCA's portfolio letter on its supervisory strategy for trade repositories (TRs) and securitisation repositories (SRs), describes the key risks posed by TRs and SRs, together with the FCA's expectations of firms and the actions it wishes to take. The risks are grouped in the following way:
On 25 August 2022, the Official Journal of the European Union published a corrigendum (C/2022/5959) to Commission Delegated Regulation (EU) 2022/1159 supplementing the IFR concerning regulatory technical standards (RTS) on the disclosure of firms' investment policies, which adds the following two tables to Annex I to the Delegated Regulation:
As mentioned in the General section above, following its investigation into the involvement of LFS in the suspension of the WEIF, the FCA announced on 21 September 2022 that it will potentially bring enforcement action against LFS. The FCA issued LFS with a warning notice, which LFS has 14 days to respond to. The warning notice includes:
On 16 September 2022, in the Upper Tribunal (Tax and Chancery Chamber) trial of Przemyslaw Soszynski t/a Phenix Consultancy v FCA  UKUT 00247 (TCC), the Tribunal judge agreed with the FCA finding the appellant not compliant with the threshold conditions (Threshold Conditions 2C (effective supervision), 2D (appropriate resources), 2E (sustainability) of section 55A FSMA), as the appellant repeatedly breached the threshold conditions.
On 26 August 2022, the FCA and PRA announced that its joint investigations into certain former senior managers at Halifax Bank of Scotland plc (HBOS) had concluded and that the regulators independent decision-makers had decided to take no enforcement action against the senior managers. The investigations, which commenced in 2016, were in response to Andrew Green KC’s November 2015 report into the reasonableness of the scope of the FSA’s enforcement investigations in relation to the failure of HBOS.
On 22 September 2022, the Department for Business, Energy and Industrial Strategy (BEIS) published the Economic Crime and Corporate Transparency Bill, made of six Parts, two of which relate to cryptoassets and money laundering powers respectively:
On 16 September 2022, The Joint Money Laundering Steering Group (JMLSG) published a consultation proposing amendments to Part I of its anti-money laundering (AML) and counter-terrorist financing (CTF) guidance for the financial services sector, in relation to trusts, high-risk third countries enhanced due diligence, and proliferation financing.
On 7 September 2022, Sarah Pritchard, the Executive Director for Markets at the FCA, discussed the following current issues relating to the FCA's fight against economic crime:
On 1 September 2022, the second EBA report on the functioning of AML and CTF colleges under the Fourth Money Laundering Directive (MLD4), provided the following recommendations that college members should observe to improve the way individual AML/CTF colleges function in the future:
The Financial Services and Markets Bill (2022/2023) will give the financial regulators a new secondary objective. Which of the following best describes this secondary objective?
The answer to last month's trivia: 31 October 2022.