The review is of interest to:
To ensure life insurers meet the requirements in the existing rules and guidance, they are encouraged to consider whether the findings and examples set out in this paper are relevant to them, and to review their systems and controls where appropriate.
While no evidence of widespread failure and risks to customers, arising from outsourcing, was found, there are areas for improvement.
The FCA encourages firms to review their current systems and controls in light of the regulator’s findings and good and poor practice examples, where relevant to their particular characteristics and the nature, scale and complexity of their activities. Where firms identify shortcomings, they should take prompt remediation action. More information the case studies could be found on the FCA page here.
This Policy Statement (PS) sets out FCA’s response to the feedback received to Consultation Paper (CP) 18/40, Consultation on proposed amendment of COBS 21.3 permitted links rules in Conduct of Business (COBS) sourcebook. It also sets out the final rules and guidance FCA are publishing following the consultation. The new rules seek to address any unjustified barriers to retail investors investing in a broader range of long-term assets in unit-linked funds, while maintaining an appropriate degree of investor protection. They follow recommendations by the Law Commission and engagement with the Treasury’s Pension Scheme Investments Taskforce regarding potential regulatory barriers to investment in some less liquid or illiquid assets. This includes, for example, investment in infrastructure, loans secured on infrastructure assets and some less liquid securities. This PS will affect those who have an interest in investing in illiquid or higher risk assets via unit-linked funds. It will therefore be of interest to:
Proposed amendments to COBS 21.3:
The FCA Handbook specifies (in COBS 21.3) 12 categories of assets in which firms may invest to provide linked benefits in unit-linked life policies sold to retail customers. The relevant rules are known as the ‘permitted links’ rules. They are designed to ensure that, where a natural person is holding the investment risk, the assets underlying unit linked life policies are appropriate for retail investors. There are five existing categories of permitted links most relevant to long-term capital investment in illiquid assets:
FCA are proposing on the following:
This CP applies to the groups which the above refers to. The CP closes on 1 October 2020 and comments should be submitted by the same date. One can submit opinion in the Online Response Form.
FCA are asking for firms’ input as they explore the changing use and value of data in wholesale financial markets. The Call for Input (CFI) looks at the change this has brought to wholesale markets and will continue to bring, transforming business models, competitive dynamics, and even how financial markets function.
The CFI is focusing on 2 areas:
FCA consider the use and supply of market data, with a particular focus on trading data, benchmarks and market data vendors. Firms use these data to trade, make investment decisions, to evaluate positions and to provide other products and services.
Given the importance of market data, the regulator aims to understand whether users have concerns with the way these data are being sold.
FCA also invite comments about the access to and changing use of data and analytical techniques across all wholesale financial markets. This will help to understand where this is having – or may in the future have – an impact on wholesale markets.
FCA want to identify possible issues caused by the changing use and value of data and decide whether they need to do further work to assess or address harm.
The UK watchdog also wants to understand any benefits these changes may bring, to ensure that their regulation does not impede beneficial innovation.
Who this applies to:
The CFI will be of interest to stakeholders across the wholesale sector, in particular:
Market participants are invited to share opinion by 1 October 2020. This can be done by the online response form.
This consultation sets out how the regulator proposes to make the necessary changes to the Listing Rules, to create a more proportionate listing regime for OEICs in standard listing, whilst ensuring existing investor protections are maintained.
This consultation paper is of interest to:
The FCA propose to change the Listing Rules applicable to OEICs to dis-apply or amend existing requirements that:
The regulator also wants to make consequential changes which will align the FCA’s listing requirements for OEICs more closely with standard listing for shares in LR14 Standard listing (shares). The CP closes on 9 June 2020 and comments should be submitted by the same date.
The FCA published on its website on 11 March 2020 the latest insights from its cyber co-ordination groups that were first introduced back in 2017. These groups meet every quarter and allow firms to share knowledge and experience, and discuss best practices in their approach to cyber security.
Each quarter the CCGs discuss various topics of cyber risks. In 2019, these sub-sector groups came from: Insurance, Fund Management, Investment Management, Retail Banking, Retail Investments and Lending, Brokers and Principal Trading firms, and Trading Venues and Benchmark Administrators. Firm participation has grown from 175 in 2018, to over 185 firms in 2019.
The regulator aims to outline and share output from these conversations to a wider financial industry audience. The insights cover broad cyber risks, that span sector priorities, in addition to 4 themes (cyber risk, identity and access management, malicious emails, third parties and supply chains) that were discussed in depth by some or all of the CCG groups.
This is not an FCA Guidance. It does not set out expectations for systems and controls that firms should have in place to comply with the regulatory requirements.
As announced in July 2019, FCA are improving the way they collect data from firms and will move to a new platform for data collection, which will replace Gabriel. As part of the move to the new platform, the regulator is simplifying how firms will access it. In the future, companies will use the same login credentials for the new data collection platform and Connect. From 2 April, when users next log into Gabriel, they will be asked to register for the new platform. Once registered, they will continue to use Gabriel with their existing Gabriel username and password until they have been moved to the new platform.
This user guide provides a step-by-step instructions on how to register for the new data collection platform via Gabriel.
The FCA announced on 22 March 2020 that it would be sending a letter to companies, it was aware, that were going to publish preliminary financial statements in the next few days to delay their planned publications. The FCA strongly request all listed companies to observe a moratorium on the publication of preliminary financial statements for at least two weeks.
The FCA state that the pandemic means that the basis, on which companies are reporting and planning, is changing rapidly and that companies need to give due consideration to events in preparing their disclosures. Observing timetables, set before the pandemic, may not give companies the necessary time to do this.
In addition, listed companies and the audit profession are facing unprecedented practical challenges during the Coronavirus crisis. The FCA believe the practice of issuing preliminary financial statements in advance of the full audited financial statements is adding unnecessarily to the pressure on companies and the audit profession at this moment.
The regulator reminds companies that the Market Abuse Regulation remains in full force and listed companies are still required to announce inside information to the market as soon as possible unless a valid reason to delay disclosure under the regulation exists.
This statement does not apply to AIM companies. Further information on the scope of the announcement is published on the regulator’s website.
In light of the situation with COVID-19 which develops rapidly, the FCA have published a Dear CEO Letter for those firms which provide services to retail clients.
Highlights of the letter are:
FCA issued a statement on the 26 March 2020 outlining its expectations in terms of financial resilience to solo-regulated firms.
FCA have published instructions on how to create a new Connect user or link an already existing account to Connect.
The FCA published a statement to all FCA-regulated firms across the UK, including in Scotland, Wales and Northern Ireland. This statement clarifies how to prioritise who should travel to the office and the Senior Management’s responsibilities in doing so.
All firms should be clear that coronavirus (Covid-19) constitutes a public health emergency. The regulator strongly supports the UK Government’s efforts to protect the public by ensuring only those workers who cannot work from home, continue to travel to and from work.
Each firm’s designated Senior Manager or equivalent person is responsible for identifying which of their employees are unable to perform their jobs from home and have to travel to the office or business continuity site.
The UK Government has made clear that employers and employees should discuss their working arrangements, and employers should take every possible step to facilitate their employees working from home, including providing suitable IT and equipment to enable remote working. For instance, the following would not be expected to go into work or meet face to face:
The number of exceptions to the above are expected to be minimal.
Firms should continue to follow the Government’s guidance closely and take the recommended steps.
Companies and their auditors currently face unprecedented challenges in preparing audited financial information as a result of the coronavirus pandemic. In response to the current situation, the FCA, FRC and PRA announced on 26 March 2020 series of actions to ensure information continues to flow to investors and support the continued functioning of the UK’s capital markets.
This temporary relief permits listed companies which need the extra time to complete their audited financial statements an additional 2 months in which publish them. Currently, under the Transparency Directive, companies have 4 months from their financial year end in which to publish audited financial statements. Under the temporary relief – the regulator forbears from suspending the listing of companies if they publish financial statements within 6 months of their year-end.
There is a Q&A section available on the FCA’s website.
The statement could be found here. When the disruption abates the FCA will announce how the policy will be ended in a fair, orderly and transparent way.
On the 20 March 2020 FCA published new guidance for mortgage lenders and administrators, and small business lenders, which came as continuation to the announcements made by the Chancellor earlier the same week.
The new guidance makes clear that firms should:
The guidance also sets out the steps firms should take to ensure that the payment holiday does not have a negative impact on the customer’s credit score.
The FCA has also made it clear that in the current circumstances, it does not consider that repossession will be in the best interests of the customer.
Small business lenders
The FCA have issued new guidance to firms participating in the Government’s Coronavirus Business Interruption Loan Scheme.
The Scheme, announced by the Chancellor on Tuesday, supports lending to small and medium-sized enterprises (SMEs) impacted by coronavirus of up to £5 million. However, loans of up to £25,000 to sole traders and unincorporated enterprises can fall within the scope of FCA regulation.
The FCA has issued guidance on the information and circumstances that are relevant when assessing the affordability of such loans. The fact that the customer may, at the time of the application, be temporarily experiencing exceptional financial pressures does not mean that the firm is prevented from making the loan.
The guidance says that:
The FCA will continue to review these measures as the situation develops and update the guidance appropriately.
The FCA provided information on 19 March 2020 on a few topics, including: travel, motor and home, and private medical insurance. It also provides clarification in relation to suspension of products and policy renewals.
Insurance firms should recognise the situation their customers are in and treat them fairly, recognising the circumstances customers may face.
The important points to notice are:
Following the coronavirus (Covid-19) outbreak, the FCA have delayed the publication of the directory of certified and assessed persons, which was due to be published on the FS Register by the end of March, for at least a month. The timing of the launch is now under review, details are to follow.
The FCA published On 27 March 2020 its Handbook Notice 75.
The Board of the Financial Conduct Authority (FCA) made the relevant changes to the Handbook as set out in the instruments listed below:
ESMA reminds firms, of the MiFID II requirements, of call recordings. ESMA also recognises that, considering the exceptional circumstances created by the COVID-19 outbreak, some scenarios may emerge where, notwithstanding steps taken by the firm, the recording of relevant conversations required by MiFID II may not be practicable. If firms, under these exceptional scenarios, are unable to record voice communications, ESMA expects them to consider what alternative steps they could take to mitigate the risks related to the lack of recording.
Firms are expected to deploy all possible efforts to ensure that the above measures remain temporary and that recording of telephone conversations is restored as soon as possible.
ESMA, in coordination with national competent authorities, continues to monitor developments in financial markets, including the application of relevant EU requirements by market participants, as a result of the COVID-19 situation and is prepared to use its powers to ensure financial stability, orderly functioning of EU markets and investor protection.