January Monthly Regulatory Highlights

By Kyte Ekstrom | AML, Brexit, communications, Compliance, Consumer Credit, Credit Brokers, Credit Lenders, E Money, FCA Regulation, FinTech, Insurance, Investment, Investment Advisor, Investment Manager, News, Uncategorized | 0 Comments

Don’t have time, or the will, to trawl through endless websites reading long articles about financial news and regulation. We’ve got you covered with our Monthly Regulatory Highlights – snippets of the past months regulatory news and updates (along with links to corresponding webpages and press-releases) – saving you time and making it easy for you to find the permissions, regulations, obligation and news that are relevant to your business.

FCA Reminds Firms to Regularly Review Regulatory Permissions

The Financial Services Bill 2019-2021 – which is currently making its way through parliament – means that the FCA will be able to act more quickly when they consider that firms are no longer carrying out regulated activities.

The statement published on the 18th of January 2021, reminds firms of their obligation to review their regulatory permissions on a regular basis, and to ensure they make the necessary changes in a timely manner. The FCA note that they have the power to cancel a firm’s Part 4A permission if it has not carried on a regulated activity for at least 12 months.

If the FCA believes a firm is not carrying on a regulated activity, it will be able to serve notice on the firm asking for a written response within 14 days. If the firm does not respond, the FCA can then publish a second, public notice explaining that it appears that the firm is not carrying on a regulated activity. The FCA can subsequently vary or cancel the firm’s permissions after only one month.

Firms are required to provide the FCA with an annual attestation that the information held on the Financial Service Register is accurate. Review your permissions and maintain only those you need, this will not only save you the unnecessary fees of paying for unused or out dated permissions, but will also assist the FCA in keeping the Financial Services Register update and help to fight financial crime.

FCA Statement

FCA Statement: Review Your Firms Regulatory Permissions

MiFID II – ESMA Reminds Firms of Rules on ‘Reverse Solicitation’

The European Securities and Markets Authority (ESMA) has published a statement to remind firms of the MiFID II requirements on the provision of investments services to retail or professional clients by firms not established or situated in the European Union (EU).

ESMA notes the emergence of some “questionable practices” regarding reverse solicitation following the end of the Brexit transition period. For example, some firms seem to be attempting to circumvent MiFID II requirements by adding general clauses into their terms of business, or by using online pop-up ‘I agree’ boxes, where clients state that any transaction is executed on the exclusive initiative on the client.

The statement cites that where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client”. This is true “regardless of any contractual clause or disclaimer purporting to state, for example, that the third country firm will be deemed to respond to the exclusive initiative of the client”.

ESMA Public Statement

ESMA Press Release

The Supreme Court Ruling for FCA Business Interruption Insurance Cases

The Supreme Court handed down its judgement (on the 15th of January), substantially allowing the FCA’s appeal and dismissing the Insurers’ appeals. In doing so, the Supreme Court has developed the law of concurrent causation and overturned the Orient Express case; a leading authority on BI insurance claims.

The FCA will publish a set of Q&As for policyholders to assist them and their advisers in understanding the test case, and will also publish a list of BI policy types that are potentially affected by this judgment. The FCA will also keep its dedicated webpage updated in order to keep policyholders informed with updates as they arise.

FCA: Business Interruption Insurance Webpage

Impact of the Supreme Court Ruling

The FCA’s Dear CEO Letter Dated 22nd January 2021 outlines the FCA’s expectations of insurers following the judgment.

FCA publishes Q&As on General Insurance Pricing Practices

Following on from the FCA’s September 2020 report on the pricing of home and motor insurance, the FCA has published a list of Q&As relating to the pricing practices of general Insurance.

Three webinars hosted by the regulators in November 2020 brought in to question concerns that these markets were not working well.

The following Q&As were discussed during these webinars, the scope of the proposed pricing and product governance rules, renewal pricing, discounts and incentives, fair value and reporting.

The regulator will not be in a position to confirm the final rules until the related consultation (CP20/19) has closed on the 25th of Jan 2021.

FCA Q&As on General Insurance Pricing Practices

FCA Publishes Paper on COVID-19 and Recording Communications

In short, the document confirms the FCA’s expectation for firms to continue to comply with the recording obligations in the Senior Management Arrangements, Systems and Controls sourcebook (SYSC 10A).

Despite the impact of COVID-19 disrupting the way in which businesses are run, firms are expected to comply with the following:

  • Ensure that where unmonitored and/or encrypted communication applications are used for in-scope activities on business devices that they are recoded and auditable. in-scope activities include arranging of deals and dealing (as principal or agent) in investments, managing investments, as well as managing a UCITS, an AIF and/or establishing, operating or winding up a collective investment scheme.
  • Recording obligations apply to conversations and communications made with, sent from, or received on, equipment provided or permitted to be used for business purposes.
  • Firms must ensure that their recording policies can identify calls and communications that directly relate to in-scope activities, also identifying communications intended to lead up to these activities, or where there is a reasonable prospect of such activities being performed. Depending on the circumstances, this may also include internal conversations concerning in-scope activities.
  • If new or amended policies, or new technologies are introduced, the FCA expects firms to provide training covering the amendments/ new policies and the use of new technologies and consequent risks which may arise.

FCA Market Watch 66

The FCA has also updated its COVID-19 information page highlighting their expectations for firms to record all relevant communications (including voice calls), when working outside the office. They urge the importance of preventing market abuse risks and note that firms with concerns about meeting obligations, due to coronavirus, should contact the FCA via regular supervisory channels as soon as possible.

FCA Covid-19 Information Page

HM Treasury Consultation on Regulating Cryptoassets

HM Treasury has published a consultation paper calling for evidence and setting out a proposed policy approach to bringing cryptoassets into the UK regulatory perimeter. The main focus being on the responsibilities of financial services regulators.

The 46 page paper seeks views on how the UK can ensure its regulatory framework is equipped to harness the benefits of new technologies

UK Regulatory Approach to Cryproassets & Stablecoins

FCA Publishes Three Statements Regarding the Expectations of SMCR & Approved Persons Regime

The FCA has published three statements updating its expectations around the application of the Senior Managers and Certification Regime (SMCR) and the Approved Persons Regime. These updates follow the publication, in April and June 2020, of statements in which the FCA offered some flexibility in the application of the rules to firms that were impacted by the coronavirus pandemic.

FCA Statement on SMCR Expectations for Solo-Regulated Firms

FCA Statement on SMCR Expectations for Dual Regulated Firms

FCA Statement on the Approved Persons Regime

Post Brexit Compliance Requirements for UK Investment Managers and Advisors

The FCA has published guidance for financial services, including Temporary Transitional Power (TTP), and requires UK firms to follow the TTP directions where applicable. Firms are expected to use the duration of the TTP period to prepare, in order to be fully compliant with the onshored UK regime by the 31st March 2022.

  • During this interim period, managers will be required to adhere to the regulations of each EU state.
  • Until further negotiations have been agreed, cross-boarder investment services, and delegation arrangements either by, or to, UK firms will need to be confirmed on a case-by-case basis for each EU jurisdiction.
  • In accordance with EU ‘passporting’ rights, under AIFMD, UK firms will currently not be able to market funds or the provision of fund management services to EU countries.
  • In order to Enter into derivative transactions with EU counterparties the regulatory compliance requirements for both the UK and EU state will need to be met.

FCA – Transitional Directions

Guide to the FCA Handbook to Post-Brexit transition

What does this mean for regulated firms subject to MLR’s?

UK Regulatory Approach to Cryptoassets and Stablecoins: Consultation and Call for Evidence

HM Treasury has published a consultation paper setting out a proposed policy approach to bringing cryptoassets into the UK regulatory perimeter. The main focus being on the responsibilities of financial services regulators.

HM Treasury – UK Regulatory Approach to Cryptoassets and Stablecoins

Treasury Extends Deadlines to Respond for Future Regulatory Framework Phase II Consultation and Solvency II

In response to the consultation on the second phase of the Future Regulatory Framework Review, HM Treasury has extended the deadline by one month to 19 February 2021 in order to conclude an examination of how the UK should adapt its approach to regulation outside of the EU to build on the strengths of the existing UK framework arrangements. HM Treasury has also extended the deadline to respond to the Review of Solvency II: Call for Evidence.

The review is underpinned by three objectives:

  • to spur a vibrant, innovative, and internationally competitive insurance sector
  • to protect policyholders and ensure the safety and soundness of firms
  • to support insurance firms to provide long-term capital to support growth, including investment in infrastructure, venture capital and growth equity, and other long-term productive assets, as well as investment consistent with the government’s climate change objectives.

Financial Services Future Regulatory Framework Review Phase II Framework Review

Review of Solvency II: Call for Evidence

It’s not all Doom and Gloom!

Find out more about the Top 2021 Trends in Fintech

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