September Regulatory Update

By Simon Hill | Uncategorized | 0 Comments

FCA publishes new webpage on Digital Sandbox – 2 September 2020

The FCA has published a new webpage containing information about the FCA DataSprint, a three week event held in July and August 2020 which brought together a wide range of participants from regulated firms, start-ups, academia, professional services and others. Participants collaborated on developing synthetic financial datasets to be used by participants in the FCA’s forthcoming digital sandbox pilot.

The digital sandbox will enable firms to test and develop proofs of concept in a digital testing environment around three use cases related to COVID-19:

(i) detecting and preventing fraud;

(ii) supporting the financial resilience of vulnerable consumers; and

(iii) improving access to finance for small and medium-sized enterprises (SMEs).

The FCA stated that in the coming weeks applications for the Digital Sandbox will open.

FCA webpage on DataSprint and its digital sandbox pilot

Conduct and culture – FCA publishes feedback for 2019/20 for wholesale banking supervision – 3 September 2020

The FCA has published its annual industry feedback report on conduct and culture within wholesale banks, ‘Messages from the engine room: 5 conduct questions’. Key messages in the latest report include:

  • Conduct and culture change programmes are having a positive effect.
  • While awareness of conduct risk is higher, skills to identify these risks must improve. This is especially important in the evolving Work from Home operating model predominately in use.
  • Psychological safety for day-to-day speaking up and challenge still needs attention from staff at all levels.
  • Remuneration strategies that focus on the ‘how’ as well as the ‘what’ are a positive development but more can be done to fully harness strategic benefits.
  • Corporate purpose and principles have become confused. CEOs and line managers can help clarify how these terms link to individual roles and responsibilities.

FCA report ‘Messages from the Engine Room: 5 Conduct Questions’ Industry Feedback for 2019/20

OFSI publishes guidance on frozen assets reporting – 3 September 2020

HM Treasury Office of Financial Sanctions Implementation (OFSI) has published an updated notice of guidance on frozen assets reporting. The notice explains that all persons holding or controlling funds or economic resources belonging to, owned, held or controlled by a designated person must complete and submit a report to OFSI by 16 October 2020.

The report must include details of all funds or economic resources frozen in the UK, as well as overseas funds or economic resources that are subject to UK financial sanctions legislation. Furthermore, the report must also include the value of such assets as at close of business on 30 September 2020.

HM Treasury financial sanctions notice: frozen assets reporting

FCA publishes consultation on miscellaneous proposed amendments to the FCA Handbook – 4 September 2020

The FCA has published Quarterly Consultation No. 29 on proposed changes to the FCA Handbook. The proposed changes include:

  • consequential changes to the Listing Rules (Chapter 8) to align with provisions for ‘exempted documents’ under the Prospectus Regulation
  • changes to Article 34 of the UK-RTS
  • onshoring changes to the FCA Handbook for legislative provisions and/or relevant technical changes needed to our rules as a result of onshoring over the transition period for EU withdrawal

Comments should reach the FCA by 5 October 2020 for Chapter 3, and 4 November 2020 for Chapter 2 and 4, except for the Fees (Credit Rating Agencies, Trade Repositories and Securitisation Repositories) Instrument 2020, which closes on 5 October 2020.

Quarterly Consultation No. 29

Feedback form

FCA publishes ‘Dear CEO’ letter outlining supervision strategy for personal and commercial lines insurance intermediaries – 4 September 2020

The FCA has sent a ‘Dear CEO’ letter to firms in the Personal and Commercial lines Insurance Intermediaries portfolio, which include general insurance intermediaries, loss assessors and firms carrying on insurance broking as an ancillary activity to their primary business.

The letter highlights the FCA’s view of the key risks Personal and Commercial Lines insurance intermediaries could pose to their consumers or market. The letter also identifies what the regulator views as the significant drivers of harm:

  • ineffective governance and oversight of businesses
  • incentive arrangements that do not support a positive conduct culture
  • business models which provide poor control over sales and renewals and conflicts of interest including through Appointed Representatives

The FCA asks firms to consider these risks and make an assessment as to whether their strategies effectively reduce these risks. The authority plans to provide an updated view in 2021 along with an assessment of the extent these risk are being mitigated and its updated supervisory plans as a result.

FCA ‘Dear CEO’ letter

FCA updates webpage on extended deadlines for publishing fund reports and accounts – 9 September 2020

The FCA has updated its webpage regarding the extension of deadlines for publishing fund reports, explaining how it will gradually bring to an end the temporary relaxation of reporting requirements for fund managers in light of COVID-19.

The webpage explains that now that businesses have had time to adjust to the changed environment, the regulator intends to end the temporary relief in stages over the coming months as follows:

  • funds with an annual or half-yearly accounting date on or before 31 August 2020: the temporary relief will remain in place;
  • funds with an annual or half-yearly accounting date after 31 August 2020 but on or before 31 September 2020: one month’s relief will be permitted where necessary; and
  • funds with an annual or half-yearly accounting date after 30 September 2020: the temporary relief will expire and no extra time will be provided

The FCA states it will monitor the situation over the coming months.

Webpage: Extending deadlines to publishing fund reports

FCA updates webpage on its financial resilience survey – 10 September 2020

The FCA has updated its webpage to announce it will be repeating its financial resilience survey to understand how firms’ financial positions and resilience has changed over recent months since the COVID-19 pandemic began.

The initial survey was issued in June and was due to be sent out again in the second half of September. Firms who have received the survey are required to complete it and return.

FCA webpage on the COVID-19 financial resilience survey

The Money laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 laid before Parliament – 15 September 2020

The Money laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 have been laid before Parliament alongside an explanatory memorandum prepared by HM Treasury. The instrument updates the existing UK anti-money laundering (AML) legislation to transpose amendments made by the Fourth Anti-Money Laundering Directive (EU) Directive 2018/843 and makes certain other minor corrections and other amendments.

The Regulations expand the scope of the UK’s register of express trusts and in certain circumstances require the disclosure of information on the register to those with a legitimate interest. Other provisions focus on correspondent banking, reporting of discrepancies in beneficial ownership information, customer due diligence on publicly listed companies, the use of confidential information, registration deadlines for some firms and directions to crypto-asset businesses.

The Money laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020

Explanatory Memorandum

Pay.UK publishes consultation update – 15 September 2020

Pay.UK has published a progress update regarding its consultation on the ‘Next Generation Standard for UK Retail Payments’ which closed in March 2020. The consultation paper set out proposals for the adoption of ISO 20022, the new common global messaging standard for UK payments, and other key standards to enhance the clearing and settlement capabilities of the new payments architecture (NPA).

The update includes:

  • Details of our recommended direction for the adoption of ISO 20022
  • Information regarding the delivery plan for the next generation standard

By the end of the year, Pay.UK plans to publish full conclusions building on this update, detail the technical work plan, and set out the forward plan for the future direction on standards over the coming 12 months.

Pay.UK – Next generation standard for UK retail payments: consultation update

PSR announces provisional findings relating to card acquiring services – 15 September 2020

The Payment Systems Regulator (PSR) has published its interim report on the supply of card acquiring services. The provisional findings indicate that merchants could make savings by switching or negotiating with their current provider, but many small and medium ones don’t.

The interim report includes several suggestions to make it easier to search or switch to a new provider or better deal, including,

  • Requiring all contracts for card-acquiring services to have an end date, providing a prompt for merchants to shop around.
  • Requiring changes to POS terminal contracts to limit their length, ending contracts that auto-renew for successive fixed terms and making it easier to exit POS terminal contracts without incurring exit fees.
  • Making it easier for merchants to research and compare prices and options available to them.

PSR Interim Report on market review into the supply of card acquiring services PSR Press release

FCA proposes the next stage of support for users of consumer credit and overdraft products – 16 September 2020

The FCA has announced proposals to ensure that firms provide tailored support options for consumer credit and overdraft customers facing payment difficulties as a result of the COVID-19 pandemic at the end of the current guidance surrounding temporary payment deferrals. The current guidance is expected to expire on 31 October 2020, though this will be kept under review by the FCA as the situation develops.

The proposals will cover users of credit cards and other revolving credit (store card and catalogue credit), personal loans, overdrafts, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products. If the proposed new measures are confirmed, the FCA will expect that firms:

  • Recognise the uncertainties and challenges that many customers will face in the coming months, and provide tailored support which reflects their individual circumstances.
  • Work with customers approaching the end of a payment deferral to provide support before they miss payments.
  • Be flexible and employ a full range of shorter and longer-term options to support their customers to minimise stress and anxiety experienced by customers in financial difficulty.
  • Put in place sustainable repayment arrangements which are affordable and take account of their customers wider financial situation including their other debts and essential living expenses.
  • Give customers time and opportunity to repay and do not pressurise them into repaying their debt within an unreasonably short period of time.
  • Prevent customers’ balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen.
  • Recognise and respond to the needs of vulnerable customers.

FCA draft guidance – consumer credit and coronavirus: additional guidance for firms

FCA draft guidance – overdrafts and coronavirus: additional guidance for firms

Press release

FCA publishes new webpage on LIBOR transition – 17 September 2020

The FCA has published a new webpage on how firms can prepare for LIBOR transition. It notes that a key consideration in LIBOR transition is balance sheet exposure and “how affected firms can move their stock of LIBOR-linked contracts to alternative risk-free rates”. However, even firms with no balance sheet exposure may be exposed to other risks from LIBOR transition that need to be identified and managed to ensure clients and market operations remain unharmed.

The webpage advises firms to conduct end-to-end inventory of LIBOR exposure that should cover the full range of processes and systems, including pricing, valuation, risk management and booking; as well as contracts with clients, counterparties, creditors, employees, suppliers and others.

The FCA also sets out more specific information for firms based on the activities they undertake, including:

  • Asset management
  • Benchmark administration
  • Corporate finance
  • Custody services provision
  • Principal trading
  • Wholesale brokerage

FCA webpage: LIBOR transition

Regulatory Initiatives Grid – FCA publishes update – 18 September 2020

The FCA has published on its website an updated Regulatory Initiatives Grid, first launched in May this year by the Financial Services Regulatory Initiatives Forum (FSRIF) to assist the financial services industry and other stakeholders in their planning for regulatory initiatives with a significant operational impact. The FSRIF comprises representatives from the Bank, the PRA, the FCA, the Payment Systems Regulator (PSR) and the Competition and Markets Authority (CMA), with HM Treasury as an observer member.

The Grid sets out the planned timetable for major regulatory developments over the next 24 months, and in the updated version, the FSRIF has sought to take a more forward-looking approach for users. The Grid will be published at least twice a year.

FSRIF Regulatory Initiatives Grid

FCA press release

September 2020 FSRIF minutes

FCA publishes ‘Dear CEO’ letter to insurers in light of judgment on business interruption insurance test case – 18 September 2020

The FCA has published a ‘Dear CEO’ letter to insurance firms on the FCA’s expectations in light of the recent High Court judgment in relation to the business interruption insurance test case.

The letter notes the following:

  • the FCA expects insurers to be clear to policyholders on their next steps, whether they plan to conclude claims processes or need to first determine whether a specific point in the judgment will be appealed;
  • where the legal process is complete, or a claim has been accepted, insurers should reassess and settle claims quickly, including making interim payments where possible; and
  • insurers should update the information already provided to the FCA

‘Dear CEO’ letter – September 2020

FCA webpage on business interruption insurance

FCA Policy Statement PS20/9: General insurance value measures reporting and publication – 22 September 2020

Following its Consultation Paper (CP19/8) published in January 2019, the FCA has published a policy statement (PS20/9) setting out new rules applying to the general insurance industry to report and publish data on value measures, alongside product governance requirements.

The new changes means firms will be required to report general insurance value measures data, covering claims frequencies, claims acceptance rates, average claim pay-outs and claims complaints. They will apply to all general insurance products, except no claims bonus protection, private medical insurance, packaged bank accounts and commercial products, and data must be reported annually by calendar year.

Appendix 1 of the Policy Statement sets out the necessary FCA Handbook changes:

  • under SUP 16.27 (General insurance value measures reporting), insurers and insurance intermediaries must report data on value measures to the FCA. The FCA will use this data to publish guidance to promote competition in the general insurance market;
  • under PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures date), firms must have effective procedures to ensure their products offer good value to customers, and must consider value measures information.

The majority of the changes will come into force on 1 July 2021, with the exception of the changes to PROD, which will come into force on 1 January 2021.

General Insurance value measures reporting and publication Policy Statement PS20/9

Value Measures Reporting and Monitoring Instrument 2020

FCA announces that first firms will move away from Gabriel – 23 September 2020

The FCA has announced that a first batch of firms will be moved from Gabriel to the FCA’s new regulatory data collection platform, RegData over the weekend of 17 and 18 October 2020. Over the coming months, firms will continue to be moved over from Gabriel to RegData in stages according to their regulatory requirements.

All firms will receive direct emails from Gabriel advising them of their moving date. These 3 emails will be sent to firms 3 weeks, 5 days and 1 day before they move to RegData. Compliance consultants will receive reminders for every firm their user account is currently associated with in Gabriel.

FCA webpage: RegData

FCA webpage: firms moving to RegData

FCA webpage: RegData resources

FCA launches consultation on regulation of international firms – 23 September 2020

The FCA has launched a consultation on its approach to the authorisation and supervision of international firms operating in the UK. This consultation is relevant to EEA firms that intend to seek authorisation in the UK, including those entering the TPR, as well as firms from non-EEA countries that have applied or intend to apply for authorisation in the UK or are already authorised.

The regulator expects an increase in the number of international firms seeking authorisation at the end of the Brexit transition period, with over 1500 firms currently registered in the Temporary Permissions Regime. The FCA notes that International firms serving UK customers through branches can sometimes create different risks of harm compared to UK firms because of the way their businesses are structured and operate. As part of the consultation, the FCA wants to hear views on how these risks can be mitigated.

The deadline for consultation responses is 27 November 2020.

FCA consultation paper on its approach to international firms

Press release

European Commission announces new package and strategy regarding Digital Finance – 24 September 2020

The European Commission has published a communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on a new digital finance strategy for the EU.

Its general objective is described as ‘embracing digital finance for the good of consumers and businesses’, setting out four key priorities to guide EU actions to promote digital transformation in the next four years:

  • removing fragmentation in the Digital Single Market for financial services, thereby enabling European consumers to access cross-border services and help European financial firms scale up their digital operations;
  • ensuring that the EU regulatory framework facilitates digital innovation in the interests of consumers and market efficiency;
  • creating a European financial data space to promote data-driven innovation, building on the European data strategy, including enhanced access to data and data sharing within the financial sector; and
  • addressing new challenges and risks associated with the digital transformation.

Alongside the new digital finance strategy, a package of proposed legislation has also been announced, including:

  • a Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets and amending Directive (EU) 2019/1937, COM(2020) 593;
  • a Proposal for a Regulation of the European Parliament and of the Council on a pilot regime for market infrastructures based on distributed ledger technology, COM(2020) 594;
  • a Proposal for a Regulation of the European Parliament and of the Council for operational resilience on the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014 and (EU) No 909/2014, COM(2020) 595; and
  • a Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2009/65/EC, 2009/138/EU, 2011/61/EU, EU/2013/36, 2014/65/EU, (EU) 2015/2366 and EU/2016/2341 COM(2020) 596.

European Commission – Digital Finance Strategy

Consultation on a new Digital Finance Strategy