An updated version of the supervisory statement was released and took effect on 23 January 2020, following PS2/20 ‘Pillar 2 capital: Updates to the framework’.
In CP5/13, the Prudential Regulation Authority (PRA) set out proposals for implementing the Capital Requirements Directive (CRD IV) provisions on capital buffers. The PRA’s rules on the CRD IV buffers were not included in its statement, Strengthening capital standards: implementing CRD IV, feedback and final rules – PS7/13 as Her Majesty’s Treasury first needed to designate the authorities responsible for each buffer.
The designation is now made so the PRA publishes its rules and supervisory statements to implement the CRD IV provisions on capital buffers in the UK for banks, building societies and PRA designated investment firms. The PRA’s rules and supervisory statement do not apply to investment firms supervised by the Financial Conduct Authority (FCA).
HM Treasury responded to the feedback on the Fifth Money-Laundering Directive. The points which are important to note:
The legislation currently requires the trustee of any express trust that is liable to pay one or more of six specified taxes to register that trust on TRS.
For trusts created on or after 1 April 2020, the government proposes that the trust should be registered within 30 days of its creation.
The government will be implementing HMT’s proposed deadline of 31 March 2021 for existing unregistered trusts to be registered on the Trust Registration Service (TRS).
Christopher Woolard took on the Chief Executive role on 24 January 2020, following Andrew Bailey’s departure to become Governor of the Bank of England. Chris is currently the FCA’s Executive Director of Strategy and Competition and an Executive member of the FCA’s Board.
The Payment Systems Regulator (PSR) published a speech by Chris Hemsley on 23 January 2020, Managing Director of the PSR, laying out his views on ensuring that victims of authorised push payment (APP) fraud are reimbursed.
In order to prevent the APP scams, the PSR has required the introduction of Confirmation of Payee by the end of March 2020. This means that banks have to check the following credentials: name on the account of the beneficiary, as well as the account number and sort code, so that customers can confirm that they are paying the right account, this way incorrect instructions will be eliminated.
The PSR welcomed the voluntary Contingent Reimbursement Model Code (CRM) that a significant proportion of the industry signed up to in May 2019. The code, which is governed by the Lending Standards Board, is intended to ensure customers who fall victim to an APP scam will be reimbursed for their losses, provided they’ve taken the right precautions when making payments.
More banks and building societies are encouraged to sign up to the code, or at least apply equivalent standards of protection.
The guidance they SFO published is for internal use, which was shared with the public for the interests of transparency. It is basically setting standards and giving directions about the information a CMP should contain.
It outlines the stages at which the SFO will examine a company’s compliance in case there are allegations and when a decision has to be made whether the company is to charged of offense or not.
A compliance programme’ is an organisation’s internal systems and procedures for helping to ensure that the organisation – and those working for it – comply with legal requirements and internal policies and procedures. Generally, there has been an increased focus on compliance’ over recent years as organisations recognise the importance of effective compliance procedures in helping reduce the risks of regulatory breaches and the resulting financial and reputational harm.
The new guidance outlines and is based around the six principles detailed in the Bribery Act guidance published in 2011 by the Ministry of Justice.
The guidelines are not as prescriptive as the firms would want them to be, but the main point is that an effective compliance programme, one which will be in a position to defend an organization is not a ‘paper exercise’. A compliance programme must be specific for each organization to its size, and organisations need to determine what is appropriate for the field in which it operates. It is critical that the compliance programme is proportionate, risk based and regularly reviewed.
The European Securities and Markets Authority (ESMA) published a statement on the 31 January 2020 to clarify issues relating to its governance and the reporting obligations for UK entities from 1 February 2020 following the United Kingdom’s (UK) withdrawal from the European Union (EU).
The terms of the Withdrawal Agreement (WA) stipulate that UK representatives will no longer be permitted to participate in the EU institutions, agencies, or other bodies, and their governance structures, except where exceptionally justified, under the conditions set out in Article 128(5) of the WA. Therefore, from 1 February:
By virtue of the WA, EU law will continue to apply to the UK, as if it were a Member State, during the transition period from 1 February 2020 to 31 December 2020. This means for instance that:
ESMA will continue monitoring by the end of 2020 the application of EU law to/in the UK and will closely monitor developments in preparation for the end of the transition period. ESMA will also engage and provide input as necessary with/to the European Commission.
This paper sets out for consultation draft technical standards on the provision of investment services and activities in the Union by third-country firms.
Regulation (EU) No 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (the “IFR”) introduces changes to, inter alia, the existing MiFIR regime for third country firms that intend to provide investment services and activities to eligible counterparties and per se professional clients. These changes include a significant reporting flow from third-country firms to ESMA, on an annual basis.
Third-country firms providing investment services and activities in the Union will be required to report granular information on such services and activities to ESMA, on an annual basis, and to provide ESMA with access to relevant data.
Third-country firms will have to provide information annually on:
ESMA has the power to ask third-country firms registered in its register to provide the data relating to all orders and all transactions in the Union, whether on own account or on behalf of a client, for a period of five years.
ESMA has the power to conduct on-site inspections.
ESMA may temporarily prohibit or restrict the provision of investment services or activities in the Union by a third-country firm, where the firm has failed to comply with the product intervention measures taken by ESMA or the EBA or the competent authorities
ESMA is mandated to prepare draft technical standards in relation to the revised third-country regime under MiFIR and MiFID II.
ESMA will consider the responses to this consultation when developing the draft Technical Standards for the European Commission. The closing date for responses from stakeholders is 31 March 2020.
The FCA is now the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for businesses carrying out certain cryptoasset activities under the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs).
Any UK business conducting specific cryptoasset activities falls under the new rules of the regulations and will need to comply with their requirements.
Amongst other things, cryptoasset businesses is required to:
For further information on the scope of the cryptoassests, please visit the following pages: https://www.fca.org.uk/firms/financial-crime/cryptoassets-aml-ctf-regime
The review of the market for pensions and investments will focus on the advice that consumers receive in regards to retirement income. With various options now available in retirement planning, it is important that consumers get good advice at the point they access their pension savings and after that.
The FCA review will involve a representative sample, to build a view of the retirement income advice market in 2020.
The review is a key element of FCA’s broader strategy for the financial advice sector. Other key points include ongoing work on defined benefit pension transfer advice, activities targeting pension and investment scams, and focus on firms holding adequate financial resources and professional indemnity insurance. FCA will also conduct a review on how firms have implemented the new senior managers and certification regime (SM&CR).
The regulator has published a Dear CEO Letter for financial advisers, which navigates them though the new requirements.
There will be no changes to the reporting obligations for firms, including those for MiFIR transaction reporting, under EMIR, and for Credit Rating Agencies (CRAs), which will continue in line with existing EU regulatory requirements.
The windows for EEA firms to notify the FCA that they want to use the Temporary Permissions Regime (TPR) was closed on the 30 January 2020. The TPR allows relevant firms and funds, which passport into the UK, to continue operating in the UK when the passporting regime falls away at the end of the implementation period, the end of 2020.
Firms and fund managers that have already submitted a notification do not need to take further actions as of now. FCA will announce its plans for reopening the notification window later this year, which will allow additional notifications to be made by firms and fund managers before the end of the implementation period.
All firms regulated by the FCA (except for those which are exempt under SUP 16.10) are obliged to update and confirm the accuracy of their Firm Details annually, using the FCA’s Connect system. They will need to do this within 60 business days of their Accounting Reference Date (ARD).
Even if the details of the firm have not changed from the previous year, they will still need to be confirmed into the system before the deadline.
If firms do not comply, regulatory enforcement tools will be used.
Persistent debt (PD) rules came into force on 1st March 2018. They are part of a package of remedies to address harms identified in the Credit Card Market Study’s final report in 2016 (MS14/6.3). It is part of the regulator’s ongoing supervision of the implementation of the PD remedies, particularly regarding steps required where a customer has been in PD for a period of 36 months.
The PD rules apply to customers who, over a period of 18 months, have paid more in interest, fees and charges than they have repaid of the principal balance on their card. If a customer meets the definition of being in PD36, FCA require firms to try and help their customers to pay more quickly in a way that does not affect customer’s life adversely. Firms must consider their entire credit card customer portfolio (both performing and non-performing) to identify customers in persistent debt.
The credit card institution/bank should offer period of repayment between 3 and 4 years and only, in exceptional circumstances this period could extend beyond 4 years (but this should not result in additional cost to the customer). Where the repayment options proposed by a firm are not sustainable for the customer, they will be in a better position if they contact the firm as they are entitled to receive forbearance (potentially including the reduction, waiving or cancellation of interest and charges).
The PD rules only require the suspension or cancellation of cards where a customer: either does not respond to the repayment options proposed within the time specified by the firm; or confirms that one or more of the proposed options are affordable but that they will not make increased payments.
There has to be an appropriate written notice to the customer about a suspension/cancelation of a credit card, which should be objectively justified by the creditor.
The FCA made further clarification on changes it made on 12 December 2019, 10 January 2020 and 30 January 2020. All these are included in a Handbook 73: