July Monthly Regulatory Update

By Kyte Ekstrom | Compliance, Financial Promotions, FinTech | 0 Comments

Treasury Committee publishes PRA letter on Conditions for Assessing a Proposed Change in Control of a Regulated Firm

The House of Commons Treasury Committee has published a letter from the PRA Chief Executive, Sam Woods, on the conditions for assessing a proposed change in control of a regulated firm.

Currently, under the change in control framework set out in Part 12 of FSMA, the appropriate regulator may object to an application for a change in control if there are reasonable grounds for doing so on the basis of the six assessment criteria set out in section 186.

The PRA raises the possibility of reverting to the original approach. The letter notes, ‘(to) allow the regulator to object unless it is satisfied it is appropriate for an acquisition to take place in the light of the relevant criteria. Doing so would strengthen the hand of the regulator where the position is unclear and be conducive in practice to an even more robust approach to the review of acquisitions.

Letter from PRA to Treasury Committee – Conditions for assessing a proposed change in control of a regulated firm

CLLS Responds to FCA Discussion Paper – Strengthening Financial Promotion Rules for High-Risk Investments and Firms Approving Financial Promotions

The CLLS (City of London Law Society) Regulatory committee has published their response to the FCA’s discussion paper (DP21/1) on strengthening financial promotion rules for high-risk investments and firms approving financial promotions.

Concerns, aims, and points raised in the response include the following:

  • Concern that as the restrictive regime for high-risk financial promotions has become a ‘complex patchwork’. The CLLS question whether the FCA has exhausted a more principles-based approach to the regulation of high-risk investments in favour of a relying on detailed technical rules, which can be difficult for the firms to understand. The response also noted a disconnect between the COBS4 rules and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”) regime (applying to unauthorised persons).
  • The main aim should be to set new initiatives to mitigate the risk from scam investment advertisements, and should include:
    • A new dragnet approach to enable the FCA to capture suspicious ads on the same day or within 24 hours after they first appear.
    • The development of Online Safety legislation which will result in a more activist approach from social media companies.

The CLLS stress that making the financial promotion regime more onerous for regulated firms will not address the risk of abuse of the financial promotion perimeter. In fact, imposing limits on the retail investment market could drive more individuals to the unregulated sector. Further concerns were raised that certain measures proposed in DP21/1 could deflect from investors taking responsibility for their own decisions and might add to compliance costs.

CLLS Response: FCA Discussion Paper (DP21/1): Strengthening our financial promotion rules for high-risk investments and firms approving financial promotions

Financial Promotions and the Online Safety Bill

The House of Commission Work and Pensions Committee has published a letter sent by the FCA Chief Executive, Nikhil Rathi. The letter focuses on financial promotions online and calls for reforms to the legislative framework relating to exemptions from the financial promotions regime and the Online Safety Bill.

The letter details the following:

  • Exemptions which were removed when the UK left the EU and the new powers this has granted the FCA in order to tackle online fraud.
  • The lack of resource and lack of finalised regulations or legal ambiguity.
  • Whether there are any current powers which would benefit from further clarity provided through legislation.
  • New powers the FCA want to be included within the Online Safety Bill.
  • The FCA’s latest figures from their ScamSmart pension fraud campaign – which aims to provide consumers with knowledge and tools in order to avoid pension scams.

Mr Rathi calls for the Online Safety Bill to be revised to cover paid-for advertising, as well as user-generated content. It is suggested that online platforms, such as search engines and social media platforms, should be required to identify and remove fraudulent content.

Letter – Financial Promotions Online

Financial promotion – FCA Publishes Good and Bad Practice Case Studies 

With the ever evolving ways to communicate financial services and promotions to consumers, the FCA have published a new website to help businesses understand the financial promotions rules that apply to particular products and services. The website includes two short videos, with accompanying transcripts, highlighting the need for promotions to be clear, fair and not misleading, irrespective of the media used.

The mock scenarios include various social media adverts for car finance and claims management companies.

VIDEO ONE – covers the common mistakes we see for a car finance hire purchase promotion, these include:

  • mentioning weekly/monthly payment without a prominent representative example
  • using an incentive statement without a prominent Representative APR
  • failing to include prominently credit broker statement

VIDEO TWO – includes the common mistakes we see for a claims management promotion, these include:

  • failing to identify as a Claims Management Company
  • failing to prominently include information about consumer’s right to make a claim for themselves for free
  • failing to include the name of the relevant ombudsman or compensation scheme
  • using ‘No-Win-No Fee’ statement or similar statement without disclosing fee/termination fees where applicable

You may also like to view The Perimeter Guidance Manuel from the FCA Handbook and the FCA’s Social Media Guidance

For further reference, see the links below which relate directly to the following product areas:

FCA – Financial Promotions Case Studies

Case Study 1 transcript: Consumer Credit: Car Finance

Case Study 2 transcript: Claims Management Companies: Financial Service Products

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