作者

Charlotte Hill

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Daniel Hirschfield

Senior Counsel – Knowledge

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作者

Charlotte Hill

合伙人

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Daniel Hirschfield

Senior Counsel – Knowledge

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2023年12月7日

Financial services update – 3 / 50 观点

Financial services matters - December 2023

  • In-depth analysis

In this month's update: 

  • FCA publishes new webpages on Consumer Duty.
  • FCA and BoE discussion papers on fiat-backed stablecoins regulation.
  • Industry report on fund tokenisation.
  • FCA publishes final details of its sustainability disclosure and labelling regime.
  • HMT publishes report on Future of Payments Review.
  • FCA publishes multi-firm review on APP scams.
General financial services regulation

November Regulatory Initiatives Grid published 

On 30 November 2023, the Financial Services Regulatory Initiatives Forum published the November 2023 Regulatory Initiatives Grid. The next Grid is due to be published in the first half of 2024.

FCA and PRA publish consultation on prudential assessment of acquisitions and increases in control

On 23 November 2023, the FCA, alongside the PRA, published a joint consultation on proposals to replace the EU guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (3L3 Guidelines) with a PRA supervisory statement and FCA guidance. The PRA also plans to delete its current supervisory statement on the aggregation of holdings for the purpose of prudential assessment of controllers, and remove references to the 3L3 Guidelines in the PRA's statement of policy. 

The consultation closes to comments on 23 February 2024. The FCA and PRA propose to implement the new supervisory statement and FCA guidance at some point during summer 2024. 

European Commission seeks feedback on two draft delegated acts under DORA 

On 16 November 2023, the European Commission (Commission) published on its website two draft delegated acts supplementing the regulation on digital operational resilience for the financial sector (DORA). The first supplements DORA by determining the amount of the oversight fees to be charged by the Lead Overseer to critical ICT third-party service providers and the way in which those fees are to be paid. The second covers specifying the criteria for the designation of ICT third-party service providers as critical for financial entities. The draft acts are open for feedback until 14 December 2023.  Any feedback will be considered when finalising the acts. The Commission then plans to adopt these acts in the second quarter of 2024. 

ECB publishes speech on the ESRB's first general warning one year on  

On 16 November 2023, the European Central Bank (ECB) published a speech by the ECB President and European Systemic Risk Board (ESRB) Chair, which was given at the ESRB's seventh annual conference. The first general warning on vulnerabilities in the EU financial system was issued by the ESRB on 22 September 2022. The speech explores two topics, the first being how the risks the ESRB described have materialised so far, and second, how impactful the general warning has been in increasing the financial system's resilience. The ESRB notes that while some risks have partially materialised, the worst case scenario the ESRB predicted has so far not come to pass. The ESRB urges all relevant institutions to continue to take action to prevent risks from materialising over the medium term. The ESRB believes that the general warning has been impactful over the past year in inducing policymakers to implement macroprudential policies. 

House of Lords Liaison Committee recommends a new Financial Services Regulation Committee

On 15 November 2023, the sixth report of the 2022-23 session of the House of Lords Liaison Committee was published, alongside a press release detailing the Liaison Committee's recommendation to the House of Lords to create a new Financial Services Regulation Committee. The report notes that following the transfer of responsibility of large parts of financial services regulation from the EU to the UK, the importance of parliamentary scrutiny of financial services regulation should be emphasised. The Liaison Committee recommends that the new Financial Services Regulation Committee scrutinises consultations under FSMA 2023 as well as consider financial services regulation more broadly. The Liaison Committee believes that a freestanding committee will enable a clearer focus on financial services regulation. The recommendation will soon go to the floor of the House for approval. 

Financial Stability Board publishes press release summarising plenary meeting discussions

On 14 November 2023, the Financial Stability Board (FSB) published a press release summarising its discussions at the plenary meeting in Basel held on 13 and 14 November 2023. The FSB discussed the outlook for financial stability, noting that the banking system as a whole remains resilient. Members of the plenary noted that they were looking forward to the finalisation of the FSB's policy recommendations to address structural vulnerabilities from liquidity mismatch in open-ended funds. The FSB also discussed the vulnerabilities affecting emerging markets and developing economies, implementation of resolution reforms, and the implementation of cryptoassets recommendations. The press release concludes with a summary of the FSB's work programme for 2024, which includes enhancing the resilience of the NBFI sector; advancing work on the global regulatory framework for cryptoassets; addressing financial risks from climate change; enhancing cross-border payments; strengthening cyber and operational resilience; and financial innovation. 

Changes to financial promotion exemptions for high net worth individuals and sophisticated investors

On 7 November 2023, HM Treasury published its response to its earlier proposals to amend the financial promotion exemptions for "high net worth individuals" and "self-certified sophisticated investors" (Exemptions). Businesses looking to rely on the Exemptions should ensure that they are aware of and compliant with the updated requirements, which are due to come into force at the end of January 2024. For more information, please see our article.

FCA publishes webpage on financial promotions quarterly data for Q3 2023

On 3 November 2023, the FCA published its financial promotions quarterly data for Q3 2023. The page summarises data generated from the FCA's actions against firms breaching financial promotions rules. The data includes information on the FCA's work reviewing authorised firms, unauthorised firms, and examples of FCA work on financial promotions during Q3 2023. Key points from the data show that:

  • The FCA's interventions in Q3 2023 resulted in 5,310 promotions being amended or withdrawn by authorised firms.  
  • The FCA issued 488 alerts on unauthorised firms and individuals, 11% of which were clone scams. 
  • The FCA wrote to 18 firms regarding the marketing and promotions of Enterprise Investment Scheme providers which resulted in 55 promotions being amended or withdrawn. 

The webpage concludes with advice on how to report a scam or financial promotion that could be misleading, unfair, or unclear. 

FCA publishes speech and webpages on next steps for Consumer Duty 

On 1 November 2023, the FCA published a speech by the FCA Director of Cross Cutting Policy and Strategy, and a webpage on the implementation of the Consumer Duty. The FCA has also published a webpage setting out Consumer Duty resources. Key points from the speech include: 

  • The FCA has seen good practices three months on from the Consumer Duty coming into force. Continuing this momentum will lead to more benefits for consumers, firms, and the wider UK. 
  • Good practices that the FCA has seen include firms simplifying their language in letters to customers and ensuring accessible formats for vulnerable customers; being more upfront on their websites about exclusions; and reviewing fees to ensure there is fair value for customers.
  • Firms should ensure they are learning and improving continuously and must be able to evidence this in their annual board report. 
  • The FCA wishes to remind firms with closed products and services to check they will meet the 31 July 2024 Consumer Duty implementation deadline. The FCA does not expect firms to consider the target market and distribution strategy for products that are no longer on sale. It will however expect firms to consider if their closed products or services could lead to foreseeable harm. 

Fintech and digital assets

Investment Association publishes interim report on UK fund tokenisation

On 24 November 2023, the Investment Association (IA) published an interim report on UK Fund Tokenisation, from the Technology Working Group to the Asset Management Taskforce. The report sets out the first phase of its work on harnessing the potential of innovative technologies for the UK asset management industry. The report covers the application of distributed ledger technology (DLT) through investment fund tokenisation, and sets out a number of recommendations for the asset management industry. The FCA has welcomed the report in a letter from the Chair of the Technology Working Group.

ESMA publishes speech on MiCA implementation

On 17 November 2023, the European Securities and Markets Authority (ESMA) published a speech by the ESMA Chair on the next steps of the Regulation on markets in cryptoassets (MiCA) implementation journey. Key points from the speech include: 

  • The ESMA Chair notes that EU member states should designate competent authorities and empower them with resources to carry out the appropriate supervisory and enforcement functions under MiCA ideally by the end of 2023.
  • Although there is a grandfathering clause lasting for up to 18 months, ESMA calls on EU member states to consider limiting the transition to 12 months to avoid risks associated with regulatory fragmentation.
  • ESMA has a broad interpretation of what constitutes the solicitation of EU clients from third country firms. 
  • The ESMA Chair warns that breaches of the reverse solicitation clause in MiCA will be met with stringent enforcement by ESMA and the competent authorities. This is to protect MiCA compliant firms from unfair competition and to protect EU investors.

IOSCO publishes final report on policy recommendations for crypto and digital asset markets 

On 16 November 2023, the International Organization of Securities Commission (IOSCO) published a final report covering policy recommendations for crypto and digital asset markets. The recommendations are made to relevant authorities. The 18 policy recommendations made in the report are designed to support greater consistency with respect to regulatory frameworks and oversight in IOSCO member jurisdictions. They address concerns related to market integrity and investor protection from cryptoassets activities. The recommendations are principles-based and are aimed at cryptoasset service providers' activities. IOSCO recommends enhanced cooperation among regulators, and aims to provide a benchmark for IOSCO members to co-operate, co-ordinate, and respond to cross-border enforcement challenges. The recommendations are not addressed to market participants, however IOSCO encourages participants to consider the expectations and outcomes arising from the recommendations. 

EBA launches consultations on technical standards and guidelines under MiCA

On 8 November 2023, the EBA published five consultations on regulatory technical standards (RTS), implementing technical standards (ITS), and guidelines under MiCA. This follows the October 2023 consultation published by the EBA (please see our November 2023 update) on the same topic. The EBA is consulting on:  

  • Draft RTS on liquidity requirements and on draft guidelines on liquidity stress testing of relevant issuers of tokens, under MiCA, which can be found here.
  • Draft technical standards on own funds requirements and stress testing of issuers under MiCA, which can be found here.
  • Draft guidelines on recovery plans for issuers of asset-referenced tokens and e-money tokens under MiCA, which can be found here
  • The reporting of transactions with asset-referenced tokens and e-money tokens denominated in a non-EU currency under MiCA, which can be found here.
  • Draft technical standards on supervisory colleges under MiCA, which can be found here.

All the consultations close to comments on 8 February 2024. 

FCA publishes discussion paper on fiat-backed stablecoins regulation

On 6 November 2023, the FCA published a discussion paper on its proposals for regulating fiat-backed stablecoins, including where they are used for payments. This was published alongside the Bank of England's (BoE) discussion paper on the same topic, a PRA Dear CEO letter, and a cross-authority roadmap on innovation in payments. The FCA's paper follows HM Treasury's update on plans for fiat-backed stablecoins regulation, and its consultation response announcing a future financial services regulatory regime for cryptoassets on 30 October 2023. The discussion paper describes the stablecoin market and outlines the risks and opportunities it poses for UK firms and consumers. The FCA makes a case for regulation and the potential for the regime to set higher standards for stablecoin issuers and custodians. The FCA expects the proposals to enhance consumer and industry confidence in the stablecoin market. It will consider responses to the discussion paper when drafting new handbook rules for consultation, and asks that any comments on the discussion paper are sent by 6 February 2024.  

BoE publishes discussion paper on proposed regulation of systemic payment systems using stablecoins and related service providers 

On 6 November 2023, the BoE published a discussion paper on the regulatory regime for systemic payment systems using stablecoins and related service providers. This was published alongside the FCA's discussion paper on the same topic, a PRA Dear CEO letter, and a cross-authority roadmap on innovation in payments. The BoE's paper focuses on sterling-denominated stablecoins as it considers these to be the most likely digital settlement assets to be used for payments purposes. Under FSMA 2023, the BoE's remit now includes payment systems using new forms of digital money, known as digital settlement assets. The discussion paper sets out the BoE's proposed scope of the regulatory framework. The BoE asks for comments on the paper by 6 February 2024.  

PRA publishes letter on innovations in the use by deposit-takers of deposits, e-money, and regulated stablecoins

On 6 November 2023, the PRA published a Dear CEO letter on innovations in use by deposit-takers of deposits, e-money, and regulated stablecoins. This was published alongside the FCA's discussion paper, the BoE's discussion paper, and a cross-authority roadmap on innovation in payments. Key points from the letter include: 

  • Deposit-takers should read this letter in conjunction with HM Treasury's update on its plan to regulate stablecoins in the future.
  • The PRA welcomes innovation and competition by deposit-takers in this area but is aware of the potential risks to safety posed by them. 
  • The letter aims to clarify the ways in which the PRA expects deposit-takers to address these risks while supporting innovation and competition. In particular, the PRA wishes to focus on the risks that might arise in relation to the availability in parallel of deposits, e-money, and regulated stablecoins to retail customers. 
  • Deposit-takers should ensure that deposit-taking entities only provide digital money innovations to retail customers in deposit form.
  • Where a firm without a deposit-taking permission has issued e-money or regulated stablecoins to retail consumers and seeks a deposit-taking permission, the PRA expects it to transition their UK customers to deposits at the new deposit-taking entity as soon as practicable and to engage with the PRA on its plans.
  • Where a deposit-taker intends to innovate in the way that it takes deposits from retail customers, the PRA expects this innovation to comply with the PRA’s rules of eligibility for depositor protection.

FCA publishes finalised guidance on cryptoassets financial promotions 

On 2 November 2023, the FCA published finalised non-handbook guidance on cryptoassets financial promotions, outlining information on, and setting out the FCA's expectations of, the communication and approval of cryptoassets financial promotions. This follows the FCA's policy statement on cryptoassets financial promotions rules published in June 2023, and the cryptoassets financial promotion regime coming into force on 8 October 2023. The guidance applies to persons involved in communicating cryptoassets financial promotions, such as social media influencers; authorised firms; and firms registered under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The guidance does not create new rules, but relates to existing regulatory obligations. While it does not need to be followed to achieve compliance, the FCA will treat firms that comply with the guidance as having complied with the relevant rule. 

FCA publishes update on Synthetic Data Expert Group

On 1 November 2023, the FCA published a webpage outlining the progress made by the Synthetic Data Expert Group (SDEG) following the first four meetings it held between May and October 2023. The SDEG was set up in March 2023 to explore the use of synthetic data in financial markets and provide synthetic data insights for practitioners and policymakers (please see our February and March 2023 updates for more information). The SDEG has set out to produce a report providing practical experiences of using synthetic data to help practitioners and policymakers. It also aims to create a collaborative framework between the public and private sector which will enable organisations to collaborate on synthetic data use cases. The SDEG will run until November 2024.

IRSG publishes policy paper on a coherent and interoperable international regulatory framework on AI 

On 31 October 2023, the International Regulatory Strategy Group (IRSG) published a policy paper on a coherent and interoperable international regulatory framework on AI. The IRSG notes that following recent technological developments, such as ChatGPT and other large language model-based interfaces, many jurisdictions around the world have accelerated the work on regulating AI. The IRSG underscores the importance of creating a globally coherent regulatory approach, and recommends that the UK government: 

  • Leads the creation of global principles and standards, incorporating shared terminology to facilitate an interoperable international regulatory framework.
  • Strengthens international regulatory coordination to avoid friction between competing and overlapping regulations.
  • Promotes the interoperability of international regulatory regimes when designing the UK’s domestic regime.

FCA joins international regulators on digital asset innovation initiative

On 31 October 2023, the FCA announced that it was partnering with international regulators as part of Project Guardian, an initiative launched by the Monetary Authority of Singapore. Project Guardian is an initiative that brings together financial regulatory institutions to advance digital asset pilot projects in fixed income, foreign exchange, and asset management products. The Project aims to advance international discussions on the benefits, regulatory challenges, and commercial use cases of asset and fund tokenisation. 

ESG

FCA finalises details of its sustainability disclosure and labelling regime

On 28 November 2023, the FCA published a much awaited policy statement, in which it set out the final rules and guidance for its sustainability disclosure and investment labelling regime. The regime, which is intended to strengthen consumer confidence in the sustainability claims of investment products, comprises a new anti-greenwashing rule, product labels, and naming and marketing requirements. It will come into force in stages from 2024. For further details, see our special article.

Investment Association publishes data on equity, diversity, and inclusion in the investment management industry

On 16 November 2023, the Investment Association (IA) published a report on equity, diversity, and inclusion (EDI) data in the investment management industry. The research in the report provides a snapshot of the demographic composition of the investment management industry and provides insight into how firms are embedding EDI strategies into their businesses. The report sets out the IA's findings under the headings of diversity data collection; industry demographics; recruitment and progression; and culture and accountability. The aim of the report is to allow firms to compare their progress with the wider industry, reflect on good practice, and help companies to ensure they prepare for upcoming regulatory changes by utilising effective data collection and informed EDI strategies.

FCA publishes multi-firm review findings on how Authorised Fund Managers are embedding the Guiding Principles in ESG and sustainable investment funds

On 16 November 2023, the FCA published a webpage outlining its findings from its work looking at how Authorised Fund Managers (AFMs) comply with existing regulatory requirements on the design, delivery, and disclosure of ESG and sustainable investment funds. This follows a letter the FCA sent to the chairs of AFMs in 2021 which provided guidance on existing requirements. The review focused on active and passive authorised retail funds that included a reference to ESG and/or sustainability-related terms in their name. The review examined 12 AFMs of differing sizes and asked them to provide an overview of their ESG and sustainability approaches. The FCA found that:

  • The AFMs generally showed good intent to embed the Guiding Principles. There was evidence of good practice in the design and delivery of ESG and sustainable investments.
  • In some cases, the disclosure principle had not been fully embedded. Key ESG and sustainable funds information was difficult to find, and some disclosures did not include important information that would have helped investors to make more well informed investment choices.
  • Generally, the AFMs' governance arrangements had evolved and were adapting to developing market practice and expectations. 
  • AFMs had some challenges in the oversight of older funds, including those that had incorporated ESG objectives after their launch. 

The FCA notes that it expects AFMs to assess how they are complying with the FCA's rules and guidance on ESG and sustainable investment funds, especially the sustainability disclosure and labelling regime (see above). 

UK Transition Plan Taskforce publishes consultation on sector specific guidance

On 13 November 2023, the Transition Plan Taskforce (TPT) published seven sector "deep dives," providing guidance for preparers to interpret the disclosure framework for their sector. The sectors include electric utilities and power generators; food and beverage; metals and mining; asset managers; asset owners; banks; and oil and gas. This follows soon after the launch of the TPT's final disclosure framework and implementation guidance, which we covered in our November 2023 update. The framework is intended to provide best practice guidance on transition plan disclosures and recommends disclosures in 19 areas. The consultation closed on 29 December 2023.

Network for Greening the Financial System publishes fourth version of long-term climate macro-financial scenarios 

On 7 November 2023, the Network for Greening the Financial System (NGFS) published the fourth version of its climate scenarios for central banks and supervisors, to illustrate how economies might look under different assumptions on transition policies and physical risks. This latest iteration of the scenarios reflects the latest GDP pathways and country-level commitments. It also introduces two new scenarios, one exploring the consequences of delayed, divergent, and overall ineffective climate action, and one Paris Agreement-aligned scenario. These demonstrate the need for change to avoid the worst outcomes from physical risk. The physical risk modelling has also had two more hazards added to it (droughts and heatwaves) and had its geographical granularity increased. The NGFS is keen to enhance the scenarios further in the future by incorporating user feedback and the latest scientific advancements. Alongside the scenarios, the NGFS has published updated technical documentation, a user guide for access to NGFS scenario data, and a technical note on compound risks. An update of the NGFS (Phase IV) scenarios will be published in the course of 2024.

Payment services and systems and e-money

HM Treasury publishes report on the Future of Payments Review 2023 

On 22 November 2023, HM Treasury published a report on the Future of Payments Review 2023, which we covered in our August 2023 update. The report sets out a high-level, strategic view of the digital payments landscape, and provides some recommendations for the UK to become a world leader in payment services. The main piece of feedback received through the review was that the UK's payments landscape lacks vision and clear priorities. The strongest recommendation the report makes is that the Government should develop a national payments vision and strategy, with the aim of simplifying the landscape over time.

Economic and Monetary Affairs Committee publishes draft reports on PSD3 and PSR proposals

On 16 November 2023, the Economic and Monetary Affairs Committee (ECON) of the European Parliament (EP) published two draft reports on the EC's proposals regarding EU payment services regulatory reforms. The first draft report is known as the PSD3 proposal, which is a proposal on a directive of the EP and of the Council on payment services and electronic money services in the internal market amending Directive 98/26/EC and repealing Directives 2015/2366/EU and 2009/110/E. The draft report proposes amendments to the Settlement Finality Directive, central contact points, access to cash, and the opening of accounts by payment institutions. 

The second draft report is known as the Payment Services Regulation (PSR) proposal, which is a proposal on a regulation of the EP and of the Council on payment services in the internal market and amending Regulation (EU) No 1093/2010. The draft report sets out proposed amendments to transparency measures, the strengthening of the EBA's role, and enhanced consumer protection from fraud. 

Payment Systems Regulator publishes consultation on draft review framework

On 9 November 2023, the Payment Systems Regulator (PSR) published a consultation on how it reviews its general directions and generally imposed requirements. This follows the amendment of section 104C of the Financial Services (Banking Reform) Act 2013 by FSMA 2023, which requires the PSR to publish a statement of policy relating to its review of requirements. The PSR therefore proposes to publish a review framework explaining: 

  • How it will identify when it should review generally applicable requirements. 
  • How stakeholders can request a review or respond to the PSR's relevant consultations.
  • How it would prioritise a review.
  • The methods it may use.

The PSR sought comments on all elements of the draft framework. The consultation closes on 22 December 2023, and the PSR aims to publish its response in early 2024.

FCA publishes multi-firm review findings on anti-fraud controls and complaints handling

On 7 November 2023, the FCA published its findings from its multi-firm review of how firms mitigate the risks of APP fraud and fraud attacks more broadly. The webpage includes examples of good practice as well as areas for improvement. The review follows a 22% increase in volume of reported APP scam cases in H1 2023, when compared to H1 2022. The FCA chose a mixed sample of 12 current account providers, challenger banks, and payment firms to evaluate. The FCA found that:

Whilst there were examples of effective control frameworks and good practice, there were several common weaknesses in firms' fraud risk management frameworks and customer treatment. 

  • There was evidence of poor complaints handling, with firms taking too long to respond and providing unclear and unhelpful decision letters. 
  • Management information and actions were more concerned with commercial risk appetite than customer treatment. 
  • There was an overall insufficient focus on delivering good consumer outcomes. 

The FCA reminds firms to have effective frameworks in place to comply with the Consumer Duty, the new reimbursement requirement, and the expansion of the confirmation of payee service.

Payment Systems Regulator publishes first performance report on APP scams

On 31 October 2023, the PSR published a news update setting out data it had collected on APP scams in 2022. The report marks the most comprehensive data published to date on APP scams, covering 95% of payments made through Faster Payments in the UK. Faster Payments were used for 98% of APP scam payments in 2022. The PSR collected data on three key areas: 

  • Reimbursement to victims (from the largest 14 banking groups).
  • The amount of money sent from each payment firm because of APP fraud (from the largest 14 banking groups).
  • The amount of money received by each payment firm because of APP fraud (covering all payment firms in the UK).

The PSR found that there were inconsistent outcomes for consumers who reported APP scams to their bank or building society. The voluntary Contingent Reimbursement Model (CRM) produced some good outcomes, however some CRM members still performed poorly. The PSR continues to collect APP scam data and will publish a report covering 2023 next year. The PSR is collaborating with the FCA to explore where improvements may be made to the current system. 

Consumer credit

FCA announces review of approach to secondary credit brokers

On 16 November 2023, the FCA published a webpage outlining that it had reviewed its interpretation of the consumer credit legislation for Limited Permission secondary credit brokers. Specifically, the FCA reviewed how the legislation applies to credit broking firms whose main business activity is the supply of non-financial services. Firms that were previously authorised as a Full Permission credit broker firm may now be eligible to become a Limited Permission firm instead. Firms who are entitled to this as a result of the review may be granted a refund on some of their past regulatory fees. The webpage contains a questionnaire that allows firms to check if they are eligible to apply for a change to their authorisation. The webpage also includes a set of FAQs on the implications of the review.

Supreme Court clarifies meaning of section 32 Limitation Act 1980

On 15 November 2023, the Supreme Court delivered a judgment clarifying the meaning of the phrases “deliberately concealed” in section 32(1)(b) of the Limitation Act 1980 (LA 1980) and “deliberate commission of a breach of duty” in section 32(2) LA 1980. 

Mrs Potter entered into a credit agreement with Canada Square Operations Ltd (Canada Square) in 2006 to borrow £16,953, as well as an additional £3,834.24 for a PPI Policy. The credit agreement ended in 2010. Mrs Potter then discovered in 2018 that 95% of the premium she paid for the PPI Policy was paid to Canada Square as commission on the sale of the policy. Mrs Potter issued a claim in 2018 to recover the amounts she paid to Canada Square for the policy, arguing that the relationship was "unfair" due to Canada Square's failure to disclose their substantial commission. Canada Square argued that the claim had surpassed its six-year limitation period. The Court of Appeal held that sections 32(1)(b) and 32(2) LA 1980 applied to Canada Square's actions, and therefore had the effect of postponing the beginning of the six-year limitation period. The limitation period was held to have commenced when Mrs Potter discovered the commission in 2018, and therefore Mrs Potter's claim could be allowed. Canada Square appealed to the Supreme Court.

The Supreme Court upheld that Mrs Potter's claim was not time barred, but clarified that whilst section 31(1)(b) applied on the facts, section 32(2) did not. Claimants wishing to rely on section 31(1)(b) must show that there was intentional concealment of the fact in question. In this case this was proven through Canada Square's decision to withhold the information regarding the commission even after the "unfair relationship" legislation was brought into force. Claimants wishing to rely on section 32(2) must show that the defendant knew it was committing a breach of duty or intended to do so. The Supreme Court clarified that for both sections, the meaning of the word "deliberate" did not include being "reckless" as to whether the defendant knew there was a risk that it might be breaching the duty or concealing the relevant facts. 

FCA publishes buy-now-pay-later (BNPL) research note and announces amendments to potentially unfair and unclear contract terms for two BNPL firms

On 31 October 2023, the FCA published a research note exploring the use of deferred payment credit, also known as unregulated BNPL, by consumers in the UK. The note sets out the FCA's findings from the Financial Lives 2022 survey and Financial Lives costs of living (Jan 2023) recontact survey. The research is intended to inform the FCA's view on how to regulate BNPL. This follows the UK government's consultation on the regulation of BNPL in February 2023, which we covered in our March 2023 update

The FCA has also announced that it has secured changes to contract terms for PayPal and QVC's BNPL customers. Both firms have made voluntary undertakings under the Consumer Rights Act 2015 to amend their continuous payment authority terms to make them easier to understand. This follows the FCA's BNPL terms guidance published on its website in February 2022. The FCA reminds firms to ensure their consumer contracts comply with consumer protection legislation.

Banking and insurance

Charity regulators' CEOs issue open letter to urge UK banks to address issues faced by charities when accessing bank services

On 15 November 2023, the chief executives of the Charity Commission, the Office of the Scottish Charity Regulator, and the Charity Commission for Northern Ireland issued an open letter addressed to the Chief Executives of the UK's main high street banks. The letter requests their urgent action to address issues pertaining to the availability of bank accounts and substandard service from banks. The letter notes that charities are experiencing sudden account closures, experiencing poor customer service, and finding that online banking is not designed to match the way charities operate. The solutions the letter proposes are making the process for setting up a charity bank account more straightforward, and training bank staff to ensure efficiency when dealing with documentation for charities. 

PRA publishes policy statement on the removal of non-performing exposures capital deduction requirements from its Rulebook

On 13 November 2023, the PRA published a policy statement on the removal of the non-performing exposures (NPE) capital deduction requirement and reporting requirements from the PRA Rulebook. The policy statement provides feedback to the March 2023 NPE capital deduction consultation paper, which we covered in our April 2023 update. The PRA received three responses to the consultation paper. The respondents were in favour of the proposals but suggested some changes to the PRA rules and the UK CRR. The PRA has made changes to remove references to the NPE deduction requirement in reporting and disclosure instructions. The rule change to remove the NPE deduction requirement came into force on 14 November 2023. The alterations to reporting requirements also became effective on that date. Firms are no longer required to complete the associated reporting templates. The PRA plans to make any required changes to existing reporting templates and taxonomy at a later time. 

HM Treasury and BoE publish consultations on the implementation of new BoE levy

On 8 November 2023, HM Treasury published a consultation on draft regulations on the implementation of the new BoE levy. The consultation asks for views on the draft statutory instrument that will introduce the new BoE Levy (Amount of Levy Payable) Regulations 2024. The proposed regulations contain provisions on the scope and apportionment of the levy, as well as on the calculation of the average liability base. The BoE has also published a consultation asking for views on a draft framework document for the BoE levy, which explains how the annual levy will be charged and how it will operate.

Both consultations closed to comments on 15 December 2023. 

BCBS publishes document on the finalisation of technical amendments to the Basel framework

On 8 November 2023, the Basel Committee on Banking Supervision (BCBS) published a document outlining the finalisation of various technical amendments to the Basel framework. The document outlines the final versions of technical amendments pertaining to: 

  • The standardised approach to operational risk.
  • The disclosure requirements for credit valuation adjustment risk. 
  • The calculation of the score for the trading volume indicator in the global systemically important banks (G-SIB) framework and relevant disclosure requirements.
  • The new market risk framework on the countercyclical capital buffer and relevant disclosure requirements.
  • The inclusion of insurance subsidiaries in the leverage ratio exposure measure in the G-SIB indicators disclosure requirements.

The BCBS plans to implement the technical amendments within three years. 

PRA publishes discussion paper on FSCS general insurance limit

On 2 November 2023, the PRA published a discussion paper seeking feedback on whether it would be appropriate to increase Financial Services Compensation Scheme (FSCS) limits for some or all the general insurance (GI) policy areas, which are currently protected at 90%. The PRA is considering an increase in coverage for some or all GI areas to achieve a more appropriate degree of policyholder protection. The discussion paper closes to responses on 24 January 2024.

Securities, investments, and markets

Call for evidence issued by HM Treasury on pension fund clearing exemption

On 13 November 2023, HM Treasury issued a call for evidence requesting input from industry stakeholders on pension funds’ exemption from the clearing obligation, which will inform the government’s long-term approach. Earlier in 2023 the exemption was extended to 18 June 2025, and the government announced that it would review the exemption to consider its long-term policy on the matter. The call for evidence closes on 5 January 2024. 

FCA publishes detailed grounds of defence in interest rate hedging product (IRHP) further redress judicial review claim

On 10 November 2023, the FCA published its detailed grounds of defence as part of R (All-Party Parliamentary Group on Fair Business Banking) v FCA (AC-2022-LON-001500). This is the judicial review claim brought by the All-Party Parliamentary Group on Fair Business Banking (APPG) regarding the FCA's decision not to seek use of its powers to mandate any further redress to be paid to IRHP customers. The FCA invites the Administrative Court to refuse the APPG's claim. 

EP adopts EC's proposals for a regulation establishing a European single access point

On 9 November 2023, the EP adopted, with amendments, the EC's set of proposals on a European single access point (ESAP). The proposals include a regulation establishing an ESAP, which would provide centralised access to publicly available information relating to financial services, capital markets, and sustainability about EU companies and financial products. The second proposal is a regulation and directive to amend some existing EU legislation to enable the functioning of the ESAP. 

BoE publishes results of its second public supervisory stress test of UK central counterparties

On 8 November 2023, the BoE published the results report of its 2023 supervisory stress test of UK central counterparties (CCPs). The results confirm the UK CCPs' resilience to market stress scenarios that are of equal and greater severity than the worst-ever historical market stresses. The report notes that CCPs are more comfortably able to absorb default losses and maintain higher liquidity balances. The CCPs are also more able to survive extreme combinations of assumptions which go further than historical precedents and existing regulatory requirements. The BoE will utilise the findings from the stress test to inform its ongoing supervision of UK CCPs.

FCA publishes issue 75 of the Market Watch newsletter

On 31 October 2023, the FCA published issue 75 of its Market Watch newsletter. In this issue, the FCA shares its observations about trading during the market soundings procedure. The newsletter provides background, recent observations, an explanation of the importance of the observations, and covers what firms can do to minimise the risks of insider dealing and unlawful disclosure. 

Funds and asset management

FCA publishes statement on communications in relation to PRIIPs and UCITS 

On 30 November 2023, the FCA published a statement on communications in relation to PRIIPs and UCITS. The statement addresses concerns about costs and charges disclosure in the PRIIPs Key Information Document and MiFID II requirements. The statement sets out the FCA's interim measure pending longer term legislative reforms. Where listed closed ended funds and funds that invest in them are concerned that the costs required to be disclosed in key information documents do not appropriately reflect the ongoing costs, they can provide additional factual information. Listed closed ended funds and other funds that invest in them may also reflect such explanations in other consumer facing communications. The FCA reminds firms that they should keep in mind their Consumer Duty obligations when considering the presentation of the information. 

Treasury Sub-Committee publishes letter on investment companies and cost disclosures 

On 15 November 2023, the Treasury Sub-Committee on Financial Services Regulations published a letter addressed to the Chancellor of the Exchequer to seek clarification on the impact of cost disclosures on investment companies. The Chair of the Treasury Sub-Committee requests that HM Treasury clarifies: 

  • The extent to which cost transparency requirements imposed on investment companies is creating unfairness, or is causing undue problems for the industry.
  • How such cost disclosures are being used by market participants.
  • The origin of any identified problems, including how they came about, and to what extent remediation of the identified problems is needed through changes to regulation. 
  • The timeframe for any permanent remediation.
  • Whether interim relief can be provided before a permanent solution is found.

The Chair requested a reply by 28 November 2023. 

FCA provides update on Woodford Equity Income Fund redress

On 10 November 2023, the FCA published an update on the settlement scheme proposed by Link Fund Solutions Limited in relation to the Woodford Equity Income Fund (WEIF). The Scheme involves creating a settlement fund of up to £230 million for relevant investors holding shares in the WEIF. Scheme creditors were able to vote on the scheme until 5pm on 4 December 2023. The FCA believes that this scheme is the best and quickest way to return as much money as possible to investors. 

Council of the EU publishes final compromise text for the proposed Directive amending AIFMD and UCITS Directive

On 10 November 2023, the Council of the EU published a note setting out the confirmation of the final compromise text for the proposed AIFMD and UCITS Directive. The note is addressed from the General Secretariat of the Council to the Permanent Representatives Committee (COREPER). The final compromise text follows the political agreement reached between the Council and the EP in July 2023, which we covered in our August 2023 update. The Council has also published an additional note dated 3 November 2023 inviting COREPER to approve the compromise text and inform the Chair of the EP's ECON Committee that should the EP adopt the text of the proposal in the exact form as set out in the note, the Council would adopt the proposed Regulation as amended. 

FCA publishes portfolio letter on its expectations for wealth management and stockbroking firms

On 8 November 2023, the FCA published a portfolio letter on its expectations for wealth management and stockbroking firms. The letter outlines the FCA's assessment of the sector's key harms and its updated supervisory priorities. The priorities are preventing financial crime and meeting Consumer Duty outcomes. The letter sets out the FCA's expectations of firms in preventing financial crime, and in delivering products and services that are fairly priced and aligned to consumer risk appetites. The FCA reminds CEOs of their ongoing obligations to notify the FCA of any issue that should be shared with it under Principle 11 immediately. 

Enforcement

FCA announces censure of NMC Health Plc for market abuse

On 17 November 2023, the FCA issued a press release stating that it had censured NMC Health Plc (NMC) for misleading the market about its debt. Between March 2019 and February 2020, NMC published materially inaccurate information about its debt position. The financial statements it disclosed had publicly misled investors when they understated its debt by around USD $4 billion. NMC went into administration in April 2020, and as such the FCA has only imposed a censure, rather than a fine, to avoid reducing the funds available to creditors.

FCA announces successful prosecution against two individuals for fraudulent mortgage applications

On 15 November 2023, the FCA announced that it had successfully prosecuted two individuals for making £3 million worth of fraudulent mortgage applications. Larry Barreto was found guilty of 11 charges of fraud by false representation after dishonestly inflating the mortgage applicants' incomes in their applications to the lender. Mr Barreto charged clients a fee which he paid to Tassib Hussain, a chartered accountant, who would falsify self-employment and employment documentation to support mortgage applications for clients without sufficient income. Mr Barreto would then forward the falsified documents on to the mortgage lenders. As a result of the fraud, mortgage lenders granted mortgages on a false basis which put lenders at risk of loss. Sentencing for both individuals will take place on 23 February 2024. 

FCA publishes update on its investigation into WealthTek LLP

On 15 November 2023, the FCA announced that it had obtained a Restraint Order under the Proceeds of Crime Act 2002 against John Dance, WealthTek LLP's principal partner. WealthTek LLP and Mr Dance are currently under investigation by the FCA for potential regulatory breaches relating to client money and custody assets, as well as the criminal offences of fraud and money laundering.

Economic crime

Financial Action Task Force publishes revised version of recommendations relating to non-profit organisations

On 17 November 2023, the Financial Action Task Force (FATF) published a revised version of its recommendations, which reflects changes made to recommendation 8 of the FATF international standards on combating money laundering and terrorism financing. Recommendation 8 specifically concerns the protection of non-profit organisations from money laundering and terrorism financing abuse. This follows the FATF's June 2023 consultation on amending standards and best practice related to non-profit organisations. The FATF has also published a best practices paper on combating the terrorist financing abuse of non-profit organisations.

Economic Crime and Corporate Transparency Act 2023 (Commencement No.1) Regulations 2023 published

On 16 November 2023, the Economic Crime and Corporate Transparency Act 2023 (Commencement No. 1) Regulations 2023 (SI 2023/1206) were published. The Regulations, made on 13 November 2023, bring into force various sections of the Economic Crime and Corporate Transparency Act 2023. The Economic Crime and Corporate Transparency Act 2023 broadly introduces new disclosure and verification requirements for companies. 

BCBS publishes discussion paper on digital fraud and banking

On 15 November 2023, the BCBS published a discussion paper on digital fraud and banking, which explores supervisory and financial stability implications of digital fraud on the international banking system. The BCBS is seeking feedback from all relevant stakeholders to answer questions on: 

  • How digital fraud should be defined.
  • What the supervisory and financial stability implications are of digital fraud and what has been seen to date. 
  • What is being done to mitigate risks from digital fraud for banks. 

Comments on the discussion paper may be submitted until 16 February 2024. 

European Commission adopts regulation relating to the AML and CFT central database

On 9 November 2023, the European Commission adopted a delegated regulation on RTS that relate to the establishment of an AML/CFT central database, referred to as EuReCA. EuReCA will contain information on the material weaknesses in individual financial institutions within the EU which make them susceptible to money laundering and terrorism financing. The RTS specifies the materiality of weaknesses, the type of information collected, the practical implementation of the information collection, and the analysis and dissemination of the information contained in EuReCA. 

FATF publishes report on crowdfunding for terrorism financing

On 31 October 2023, the FATF published a report on crowdfunding for terrorism financing. The report discusses the ways in which crowdfunding platforms might be abused for terrorism financing purposes. The report outlines how crowdfunding regulations are inconsistent across jurisdictions, and states that donations-based crowdfunding is the most vulnerable to terrorism financing abuse due to it usually falling outside of AML/CFT regulations. The report further explores the difficulties faces by regulators when detecting and deterring terrorism financing and makes recommendations for how stakeholders in the crowdfunding industry can better mitigate the risk of being abused.

This month's question

The answer to last month's question: From 1 December 2023, principal firms should use REP025 for ongoing reporting on their appointed representatives.

The FCA has published its financial promotions quarterly data for Q3 2023.  Which financial services sector had the highest number of amend/withdraw outcomes, totalling 80% of the FCA's interventions with authorised firms?

  • Retail Investments 
  • Retail Lending
  • Pensions & Retirement Income
  • General Insurance & Protection.

本系列内容

金融服务监管

Financial services matters - July 2023

2023年7月6日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services matters - June 2023

2023年6月8日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services matters - May 2023

2023年5月4日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - January 2021

2021年1月14日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - October 2020

2020年10月1日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - July 2020

2020年7月2日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - June 2020

2020年6月4日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - May 2020

2020年5月7日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - April 2020

2020年4月2日

作者 Charlotte Hill, Daniel Hirschfield

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Financial services update - March 2020

2020年3月5日

作者 Charlotte Hill, Daniel Hirschfield

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