HM Treasury has published a response to the July 2020 consultation on the regulatory framework for approval of financial promotions. The original consultation proposed to introduce a new FCA-operated regulatory ‘gateway’ through which authorised firms would need to pass before they are able to approve the financial promotions of unauthorised persons.
As there is currently no specific assessment authorised firms must undergo before they are able to approve financial promotions of unauthorised firms. The government noted three potential risks:
The government identified two policy options to deliver the proposed gateway: restricting the approval of financial promotions through the imposition of FCA requirements (option 1) and specifying the approval of financial promotions as a ‘regulated activity’ (option 2).
HM Treasury agrees that option 1 would be the best way forward. This would strengthen the FCA’s ability to ensure that authorised firms comply with FCA rules without fundamentally altering the overall regulatory architecture of the financial promotion regime.
The consultation proposes that all new and existing authorised firms will be prohibited from approving the financial promotions of unauthorised persons through the imposition of a Financial Promotion Requirement on their permission. Firms that wish to approve financial promotions will be required to apply to the FCA for a ‘variation of requirement’ to have the prohibition removed either entirely (allowing them to approve all types of financial promotions), or partially (allowing them to approve certain types of financial promotions).
A transition period with three distinct phases has been proposed to allow for an timely transition between the current and the future regime. The relevant legislation will be brought before parliament and the FCA will consult on its proposals for implementing the gateway in due course.
The report includes around 100 recommendations and focuses on how the UK can reshape regulation and take advantage of new regulatory freedoms since exiting from the EU. The main objectives of the new proposed regulatory framework is to make a material difference to the UK’s economic growth, competitiveness and productivity, without compromising on protecting consumers, workers and the environment.
The report contains, among others, the following recommendations relating to financial services:
In a letter, written in response to the report, the Prime Minister states that the bold proposals (set out in the report) provide a valuable template, illustrating the sheer level of ambitious thinking needed to usher in a new golden age of growth and innovation right across the UK. In the letter the Prime Minister states that the government intends to publish a formal response to the report as soon as practicable.
The speech by, Victoria Cleland, Executive Director for Banking, Payments and Innovation, sets out, among other things, the Bank of Englands real time gross settlement (RTGS) system and its multi-year programme to review the RTGS service.
The first key milestone will be in June 2022, when the Clearing House Automated Payment System (CHAPS) is set to move to the global standard for financial messaging in payments, ISO 20022 (on a like-for-like basis). The BoE will transition to enhanced ISO 20022 messaging in February 2023 and expects to introduce a state-of-the-art core settlement engine in September 2023.
Ms Cleland also refers in her speech to the BoE’s recent discussion paper on digital money, including the possibility of central bank digital currencies (CBDC) and states that if a CBDC were to be issued by the Bank of England for use by households and businesses, it would co-exist alongside cash, commercial bank deposits, and core payments infrastructure such as RTGS.
The call for evidence pertains to the onshored Securitisation Regulation ((EU) 2017/2402) and seeks views on how the UK’s securitisation market is performing and how the Securitisation Regulation can be tailored to the UK.
The aims of the review are:
The call for evidence notes that HM Treasury is separately conducting a wider Future Regulatory Framework (FRF) Review to determine how the overall framework for financial services will need to adapt to the UK’s position outside of the EU.
HM Treasury is seeking more detailed views on two potential changes:
Responses should be submitted to SecuritisationReview@hmtreasury.gov.uk by 2 September 2021.
This consultation is in response to HM Treasury’s February 2021 consultation paper on Implementing the Investment Firms Prudential Regime (IFPR) and the final Basel III standards exercising powers under the Financial Services Act 2021.
Taking into account the comments received, HM Treasury is changing its approach in several key areas, which include:
(One firm noted that if GBP 750,000 firms were brought into scope, which in their view would not be preferable, exemptions and simplified obligations similar to the current ones available for EUR 730,000 firms should be continued).
The published response also sets out clarifications regarding the operation of equivalence determinations for the purposes of Large Exposures under Article 391 of the UK CRR and the scope of the use of bail-in and resolution stays. In addition, it confirms the government’s intention to replicate the scope of prudential consolidation that applies under Article 18 of the UK CRR.
HM Treasury intends to put legislation in place in order to provide firms with adequate time to prepare ahead of the 1 January 2022 implementation date.
The FCA will publish its third IFPR consultation, and related policy statements, later this year.
The FCA received 58 applications, primarily from firms looking to operate in the retail banking and lending sector. Thirteen firms have been accepted into Cohort 7 and the FCA has published a new webpage providing details of all thirteen firms.
The FCA explains that, in light of COVID-19, they were interested in seeing more innovation and testing from firms developing businesses / products or services intended to detect fraud and scams, support the financial resilience of vulnerable consumers, or improve access to finance for small and medium-sized enterprises (SMEs).
Noting that firms wish to trial and scale innovative products or services across multiple jurisdictions, the webpage links to the Global Financial Innovation Network (GFIN) (Chaired by the FCA with a network of 72 financial regulators and related organisations), the webpage states that The GFIN is working with a select group of firms to agree cross-border testing plans.
The regulatory sandbox is currently run on a cohort basis, with periodic application windows opened throughout the year. However, it is the FCA’s intention is to move to ‘Always Open’ later in 2021, making the regulatory sandbox available throughout the year.
The FCA invites comments on this Consultation Paper. All comments for chapters 3 and 5 need to reach the FCA by 5 July 2021, and all comments for chapters 2 and 4 need to reach the FCA by the 2 August 2021.
Proposed changes to the FCA Handbook are as follows:
The Law Commission is seeking views on whether, and how, the law relating to corporate criminal liability can be improved so that they appropriately capture and punish criminal offences committed by corporations, and their directors or senior management.
In the discussion paper, the Law Commission seeks views from stakeholders on how to achieve this by asking a range of questions concerning topics such as reform of the identification principle, further ‘failure to prevent’ offences and the possibility of additional civil penalties.
Questions posed include:
The Law Commission invite responses from 9 June to 31 August 2021. An options paper is due to be published towards the end of 2021.
The Crown Prosecution Service (CPS) has updated its guidance setting out different types of Money Laundering offences and the approach to be taken when prosecuting the offences.
The updated guidance includes prosecuting standalone ‘failure to disclose’ cases under section 330 of the Proceeds of Crime Act 2002 (POCA). This means that it is now possible to prosecute a section 330 offence, regardless of whether an offence of money laundering has been substantiated, this is to encouraging professionals working in the regulated sector to disclose any suspicion of money laundering to law enforcement.
The Association of British Insurers (ABI) has published a report calling for changes to the FCA rules relating to pensions advice. The report examines how approaches to sustainable pension withdrawal rates could be delivered, and covers the risks customers face when making withdrawals without receiving advice. The report also describes how providers currently help their customers navigate decisions about pension withdrawals and explores how the ‘right regulatory changes’ could help improve provider services in the future.
The report describes the role of regulation, regarding accessing pensions as a ‘special case’, stating that there is a need for an alternative approach to the existing FCA rules concerning advice and guidance. The report notes that changing the advice rules would put the onus on the industry to show that it has the appropriate level of support in place and on individual firms to show that they are meeting their responsibility to treat customers fairly.
Consultation paper (EBA/CP/2021/22) on draft regulatory technical standards (RTS) sets out, among other things, the EBA’s proposals on requirements that are relevant to crowdfunding service providers (CSPs) offering individual portfolio management loans.
Issues raised include:
Comments must be received before the 4 September 2021. A public hearing on the consultation paper will be held on 20 July 2021. The EBA intends to submit the final draft RTS to the European Commission in October 2021.
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