October Regulatory Update

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FCA publishes perimeter report 2019/20 – 29 September 2020

The FCA has published its second annual perimeter report, which determines which activities require authorisation and what level of protection consumers can expect for the financial services and products they purchase.

The report aims to provide clarity to stakeholders on the FCA’s role and sets out specific issues that have arisen, most notably those facing consumers in the retail investment sector.

This year’s report also gives updates on the issues discussed in last year’s report, namely, the issuing of a temporary product intervention in January to ban the mass-marketing of speculative illiquid debt securities and preference shares to retail investors for 12 months.

As well as this, the report also identifies where businesses such as big tech firms like Google, can do more to protect consumers in areas on the edge of the perimeter and also sets out other areas where progress has been made or where there is continued harm to consumers and market users around the perimeter.

Perimeter report 2019/20

FCA updates webpages on Temporary Permissions Regime and publishes revised direction – 30 September 2020

The FCA has updated its webpages on the temporary permissions regime (TPR) to include procedural information for EEA firms and fund managers.

The FCA has also updated its webpages on the notification processes for EEA firms and fund managers respectively. The EEA firm-specific webpage includes several directions that firms wishing to use the TPR should be aware of and the process for withdrawing a notification. The webpage for fund managers provides information on updating previously submitted notifications, the deadline for doing so and the process for submitting such notifications.

Alongside the updated webpages, the FCA has also published related revised directions for:

  • EEA and Treaty firms
  • EEA operators of collective investment schemes (CISs)
  • EEA alternative fund managers (AIFMs), managers of European Venture Capital Funds (EuVECAs) and managers of European Social Entrepreneurship Funds (EuSEFs)
  • Authorised payment institutions (APIs) and registered account information service providers (RAISPs)
  • e-money institutions (EMIs)

FCA updated webpage on the temporary permissions regime

FCA updated webpage on the notification process for fund managers

FCA updated webpage on the notification process for EEA firms

Revised direction for EEA and Treaty firms

Revised direction for EEA operators of collective investment schemes (CISs)

Revised direction for EEA alternative investment fund managers (AIFMs), managers of European Venture Capital Funds (EuVECAs) and managers of European Social Entrepreneurship Funds (EuSEFs)

Revised direction for authorised payment institutions (APIs) and registered account information service providers (RAISPs)

Revised direction for e-money institutions (EMIs)

FCA updates webpage on client money and custody assets – 30 September 2020

The FCA has updated its webpage on considerations for UK firms after the transition period to include information on holding client money and custody assets. The FCA explains that firms are required to carry out periodic due diligence reviews on third parties holding client money or custody assets and if these third parties are EEA institutions, firms should review their due diligence to ensure there will be no increased risks at the end of the transition period. The FCA also reminds firms to ensure that existing safeguards and protections for client assets, particularly in the event of insolvency, remain effective at the end of the transition period.

FCA updated webpage

COVID-19 – FCA publishes finalised guidance on consumer credit and overdrafts – 30 September 2020

The FCA has published measures to ensure that users of certain consumer credit and overdraft products who continue to face payment difficulties due to COVID-19 are provided tailored support by firms. The guidance will cover a range of credit products, including credit cards, personal loans, overdrafts, car loans, buy-now pay-later (BNPL), rent-to-own, pawnbroking and high-cost short-term credit (HCSTC) products.

A summary of what the FCA expects from firms is below.

The FCA expects firms to:

  • Recognise the uncertainties and challenges that many customers will face in the coming months as the crisis develops, 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 and minimise stress and anxiety experienced by customers in financial difficulty.
  • Give customers time and opportunity to repay and do not pressurise them into repaying their debt within an unreasonably short period of time.
  • 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.
  • Prevent customers’ balances from escalating once they have put in place a repayment arrangement 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.

The FCA will review the guidance in 6 months after it has monitored how firms are applying it, determining whether it remains relevant given COVID-19.

The new guidance comes into effect on 2 October 2020.

Consumer credit and Coronavirus: Additional Guidance for Firms

Overdrafts and coronavirus: additional guidance for firms

FCA Press release

FCA publishes statement on temporary transitional power – 1 October 2020

The FCA has published a statement setting out how it intends to use the TTP and the areas of regulation to which the TTP will not apply, as well as links to further guidance. The FCA has also published updated draft directions that it intends to make, together with an explanatory note on the changes made.

The FCA intends to apply the TTP on a broad basis from the end of the transition period until 31 March 2022, meaning that regulated entities do not generally need to prepare now to meet the changes to their UK regulatory obligations brought about by onshoring.

There are a number of key areas where it would not be consistent with the FCA’s statutory objectives to grant transitional relief or where it would not otherwise be appropriate to do so. These areas include:

  • MIFID II transaction reporting
  • EMIR reporting obligations
  • SFTR reporting obligations
  • Certain requirements under MAR
  • Issuer rules
  • Contractual recognition of bail-in
  • Client Assets Sourcebook requirements (CASS)
  • Market-making exemption under the Short Selling Regulation
  • Use of credit ratings for regulatory purposes
  • Securitisation
  • Electronic commerce EEA firms
  • Mortgage lending after the transition period against land in the EEA
  • Payment Services – strong customer authentication and secure communication

Firms and other regulated persons need to be prepared to comply with the changed obligations under the onshored regime by 31 December 2020.

FCA statement

Draft main FCA transitional directions

Draft FCA prudential transition direction

Draft explanatory note on draft transition directions

COVID-19 – FCA finalises Guidance on cancellations and refunds – 2 October 2020

Following consultation with firms, trade bodies and consumer organisations, the FCA has issued its Final Guidance to assist credit and debit card providers, as well as insurance providers, when handling enquiries and claims from consumers in a way that minimises inconvenience to the consumer. This follows two earlier FCA statements on the topic (dated 29 June 2020) and a consultation outlining the FCA’s expectations for firms when helping customers who are trying to make claims (published on 31 July 2020).

Most notably, the Final Guidance provides further detail on when it is “unreasonable” for insurers not to pay out when a customer has sought a refund from other sources and confirms that there is no set route for customers to get a refund.

The Guidance will be effective from 2 October 2020 until 2 April 2021. The FCA will evaluate and consider whether it we should make the Guidance permanent before the end of this period.

Finalised Guidance on Cancellations and refunds

New webpage

FCA Policy Statement: Prohibiting the sale to retail clients of investment products that reference cryptoassets (PS20/10) – 6 October 2020

The FCA has published a policy statement and accompanying rules prohibiting the sale to retail clients of investment products referencing cryptoassets, noting that “there is growing evidence that cryptoassets are causing harm to consumers and markets”.

In July 2019 the regulator consulted on on rules to ban the marketing, distribution and sale of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets to retail consumers. Having considered the feedback from that consultation, the policy statement confirms the rules consulted on, with minor technical amendments.

The policy position will directly affect:

  • firms issuing or creating products referencing cryptoassets
  • firms distributing products referencing cryptoassets, including brokers, investment platforms, and financial advisers
  • firms marketing products referencing cryptoassets
  • operators of trading venues and platforms
  • retail consumers and consumer organisations

The FCA is publishing final rules with this Policy Statement. Firms who carry out marketing, distribution or selling activities in, or from, the UK of the relevant products to retail clients, will need to comply with these rules by 6 January 2021.

Policy Statement (PS20/10)

Technical annex

FCA Press release

FCA Handbook 2020/34 Conduct of Business (Cryptoasset Products) Instrument 2020

FCA Handbook 2020/46: Conduct of Business (Cryptoasset Products) (Amendment) and Associated Exiting the European Union Amendments Instrument 2020

FCA updates submissions for certified and assessed persons – 12 October 2020

The FCA has updated its website on its directory of certified and assessed persons, clarifying the data submission arrangements for solo-regulated firms.The directory forms part of the Senior Managers and Certification Regime and enables consumers and professionals to check the details of key individuals working in financial services.

From 14 December 2020, the FCA will begin incrementally display data from solo-regulated firms as it is submitted, with a deadline of 31 March 2021. The website offers user guides to help firms with adding or amending individual directory persons data.

FCA webpage

User guide: Adding or amending individual directory persons data

FCA publishes draft guidance on coronavirus and customers in financial difficulty – 16 October

The FCA has published additional draft guidance for insurance and premium finance firms on coronavirus and customers in financial difficulty, supplementing the temporary guidance published in May 2020.

The proposed guidance sets out how firms should provide tailored support to customers who have already had a payment deferral and those newly in financial difficulty due to changed circumstances relating to coronavirus.

If confirmed, the additional guidance will come into force in November 2020.

FCA Draft guidance: Coronavirus and customers in financial difficulty: additional guidance for insurance and premium finance firms

FCA webpage

FSB publishes final report on Effective Practices for Cyber Incident Response and Recovery – 19 October 2020

Following feedback from a consultation in April 2019, the FSB has produced a toolkit of effective practices for financial institutions’ cyber incident response and recovery. The toolkit lists 49 practices for effective cyber incident response and recovery across the following areas:

  • Governance
  • Planning and Preparation
  • Analysis
  • Mitigation
  • Restoration and recovery
  • Coordination and communication
  • Improvement

Organisations may adopt and adapt from the range of practices in the toolkit to cater to the complexity of their IT environments and changing business models.

FSB’s Final Report: Effective Practices for Cyber Incident Response and Recovery

FSB Press Release

FCA updates webpage on Firm’s handling of complaints – 20 October 2020

The FCA has updated its webpage to clarify its position on firms’ handling of complaints during the coronavirus pandemic. The website states that where firms are experiencing reduced complaint handling capacity as a result of coronavirus, the regulator expect firms to prioritise:

  1. paying promptly complainants who have been offered redress and accepted that offer (this includes compensation awarded by the Financial Ombudsman Service)
  2. the prompt and fair resolution of complaints from:
    • consumers who are likely to be vulnerable to harm if their complaint is not resolved promptly and fairly, and
    • micro-enterprises and small businesses who are likely to face serious financial difficulties if their complaint is not resolved promptly and fairly
  3. sending timely holding responses to those complainants in 2. where their complaints cannot be resolved promptly.

The FCA will review its statement on complaints handling again in April 2021.

FCA updated webpage on complaints handling

FCA consults on changes to Handbook – 21 October 2020

The FCA has published a consultation paper on changes to its Handbook as a result of the Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 (‘Breathing Space Regulations’), a draft version of which was published in July 2020.

The Debt Respite Scheme Regulations 2020 will give people in problem debt the right to legal protections from creditor action for up to 60 days. This gives them time to receive advice and potentially enter an appropriate scheme to resolve their debt.

The FCA states that the consultation is applies particularly to consumer credit lenders and debt collectors, but is relevant to all regulated firms required to comply with the Handbook and regulations.

The deadline for comments is 6 January 2021.

FCA consultation paper on changes to its Handbook as a result on the Breathing Space Regulations

FCA updates webpages on MLRs and Whistleblowing – 21 October 2020

The FCA has updated its webpages on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019) to include further information on the duty to respond to requests for information about accounts and safe-deposit boxes.

The regulator has also published new webpages on whisteblowing, covering how the FCA protects the identity of whistleblowers; when it is appropriate to reach out the FCA with any concerns; and what the FCA will do with any information provided, among others.

FCA updated webpage on money laundering regulations

FCA webpage on making a whistleblowing report

FCA webpage on whistleblowing case studies

FCA webpage on legal advice and whistleblowing

FCA announces new review on unsecured credit market – 23 October 2020

The FCA has published a webpage setting out information on its new review of unsecured credit market regulation, and will consider the current state of the UK unsecured credit market and the regulatory change that the sector has undergone in recent years.

The main focus of the review will be how regulation can better support a healthy unsecured lending market and will take into consideration the effects COVID-19 has had on job security, credit scores, changes in business models and developments in unsecured lending.

The review will seek the views of market participants, including firms, consumers and their representatives, and a call for input will be published in early November 2020, together with information on a number of roundtables.

The FCA has requested the review to report to the FCA board in early 2021.

FCA webpage

Treasury Committee launches new inquiry on Financial Crime – 23 October 2020

Following its earlier inquiry into the UK’s anti-money laundering systems and sanctions implementation system, the Treasury Committee has launched a new inquiry to review the progress made in combatting economic crime.

The inquiry will have 2 main focal points:

  • Anti-money laundering systems and the sanctions regime, including the FinCEN papers and the work of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS)
  • Consumers, including emerging trends as a result of coronavirus and Authorised Push Payment Fraud.

The Committee is welcoming written evidence concerning the following:

  • Concerns regarding or improvements to the UK’s anti-money laundering and the sanctions regimes, including but not limited to:
  • The work of OPBAS and the profession body AML supervisors
  • The impact of the FinCEN papers
  • Corporate liability for economic crime
  • The work of Companies House
  • Consumers and economic crime, including but not limited to:
  • Any emerging trends in consumer facing economic crime as a result of the COVID crisis
  • The operation of the Contingent Reimbursement Model for Authorised Push Payment Fraud
  • The response of financial institutions to economic crime as it affects consumers

The deadline for submitting evidence is 5pm on Friday 27 November.

Treasury Committee’s press release

SMCR – Certification Regime and Conduct Rules – FCA extends deadlines – 28 October 2020

The FCA has published a Policy Statement (PS20/12), which confirms that the deadline for solo-regulated firms (except benchmark administrators), subject to the SMCR, to have undertaken the first fitness and propriety assessments of their certified staff, trained staff on the Conduct Rules and submitted FCA directory information will be extended from 9 December 2020 to 31 March 2021.

This comes after the FCA’s Consultation Paper (CP 20/10), published in July 2020, which consulted on this date change in order to provide firms that have been significantly impacted by COVID-19 with time to properly and fully comply with these requirements. Annex 1 of the Policy Statement contains the instrument which gives effect to the extended deadlines by amending the relevant handbook provisions.

The FCA is, nonetheless, encouraging all firms to meet the original deadline of 9 December 2020 wherever possible.

FCA Policy Statement PS20/12: Extending the implementation deadlines for the Certification Regime and Conduct Rules

FCA and RBI sign co-operation agreement – 28 October 2020

The FCA and the Reserve Bank of India (RBI) have signed a Memorandum of Understanding, entitled ‘Regulatory Co-operation Agreement on FinTech’. The agreement follows a joint statement signed by the Finance Minister of India and the UK’s Chancellor of the Exchequer at the 9th UK-India Economic and Financial Dialogue held in April 2017, where both sides recognised the important role that fintech will play in supporting the development of digitisation in India, particularly following India’s move towards a ‘less cash’ society.

The purpose of the Co-operation Agreement is to provide a framework for collaboration and referrals between the Innovation Functions of each Authority. It also sets out how the Authorities plan to share and use information on innovation in their respective markets.

FCA and RBI: Regulatory Co-operation Agreement on FinTech