September Monthly Regulatory Update

By Kyte Ekstrom | Compliance, Crypto-Assests, FCA Regulation, FinTech, Investment, Investment Advisor, Investment Funds, News, Sustainable Investing, Uncategorized, Variation of Permission | 0 Comments


TheCityUK Publishes Report Setting out Regulatory Strategy – Making the UK the Leading Global Financial Centre

The report outlines an international strategy for the UK-based financial and related professional services industry. The aim is to make the UK the world’s leading international financial centre within five years.

TheCityUK’s strategy takes a three-pronged approach, focusing on:

Securing the UK’s international financial centre ecosystem by making it more globally competitive

In order for the UK to remain an open and competitive market in which to do business and boost its international competitiveness, the report suggests, among other things that the UK needs to, strengthen its capital markets and related infrastructure; remain at the forefront of technology and innovation; ensure that the UK’s regulatory regime is respected and trusted worldwide.This will involve introducing a regular review of the UK’s financial regulatory regime to ensure that it is proportionate, coherent and achieving stated goals in the most efficient way possible, and expediting the process for determining regulatory approvals.

Growing the UK’s share of key global financial and related professional services markets

The UK trade and investment policy should aim to liberalise trade with developed markets such as the US, EU, Japan, Hong Kong and Singapore; conclude regulatory agreements (especially recognition and deference agreements) that enable UK financial institutions to supply products and services across borders and secure investment protection provisions; as well as secure strong market access and investment protection provisions so that the UK is the most attractive place from which to invest in international markets.

Building global market capability in the key areas of future global demand

The report states that business and government have complementary roles in seeking to deepen the UK’s global market capability in the following areas:

  • Making the UK a global hub for data and technology.
  • Putting the UK at the heart of global sustainability markets.
  • Making the UK the world’s leading gateway to international investment opportunities.
  • Position the UK as a world leader in risk expertise and risk management.

The press release states that delivering the strategy will create more high-skilled, high-value UK jobs, and attract more foreign direct investment into businesses in all sectors across the UK. It will put the UK at the forefront of technology and innovation and position the UK as a leader in financing the growth of the green economy.

Publication: Making the UK the leading global finance centre: An international strategy for the UK-based financial and related professional services industry

Press release

FCA Guidance on New Cancellation and Variation Power

The FCA has published draft guidance on a new power that allows for faster action to remove regulatory permissions that are no longer being used by financial services firms.

Consultation paper (CP21/28) proposes changes to the FCA Handbook and Enforcement Guide to reflect the new cancellation and variation power granted under the Financial Services Act 2021.

This power is set out in Schedule 6A to the Financial Services and Markets Act 2000 (FSMA), and allows the FCA to vary or cancel firms’ permissions more quickly and efficiently if they are no longer using them.

Among other things, the FCA proposes:

  • To amend chapters 6 and 7 of the Supervision manual (SUP) to describe the new power and how the FCA will use it.
  • To amend the Enforcement Guide to refer to the FCA’s possible use of the power alongside investigations.
  • To add guidance to the Compensation sourcebook (COMP) and the Dispute Resolution: Complaints sourcebook (DISP) to provide clarity about what happens to Financial Services Compensation Scheme (FSCS) claims and complaints when the FCA annuls a decision to cancel.

The consultation closes on 29 October 2021.

Consultation paper: New cancellation and variation power: Changes to the Handbook and Enforcement Guide (CP21/28)


Press release

Response form

FinTech Start-ups

FCA Updates Webpage to Announce Launch of Second Application Window  Green FinTech challenge

The FCA is taking a more active role in driving innovation in an area where they see clear benefit to UK consumers and markets. With this in mind the FCA has updated their Green FinTech Challenge webpage to announce the launch of a second application window. The Green FinTech Challenge is aimed at firms looking to deliver innovation to aid the transition to a net zero economy.

The FCA encourages applications from firms developing innovative green solutions that require regulatory support to bring their proposition to market. The Green FinTech Challenge is open to start-ups, incumbents and technology providers. The FCA are particularly interested in firms that are developing innovations in the area of Environmental, Social and Governance (ESG) data and disclosure. For example, products and services that will:

  • enable transparency in disclosure and reporting on sustainability by companies along the investment chain
  • help consumers better understand the ESG characteristics of relevant products and providers they engage with, as well as provide visibility around alternatives aligned with their needs and preferences

The FCA state that they are not limited to the above and will consider all proposals in the areas of sustainability and climate change that meet their eligibility criteria.

Successful applicants will benefit from a package of our firm support services (Direct Support, Advice Unit and the regulatory sandbox). In addition, the firms will be offered bespoke support and engagement for this ‘green cohort’, for example, taking part in showcasing and networking events.

The FCA states that it is particularly interested in firms that are developing innovations in the area of ESG data and disclosure, such as products and services that will:

The FCA has also published a webpage that explains how its Green FinTech Challenge and digital sandbox are different. The deadline for applications is 15 November 2021.

Updated webpage: Green FinTech Challenge 2021

Green FinTech Challenge and Digital Sandbox: which service to apply for

Investment Services

FCA Consumer Investment Strategy – to Tackle Investment Harm

In early 2022, the FCA will publish their consumer strategy. Ahead of that, the FCA are publishing more details regarding their Consumer Investments Strategy to ensure consumers can invest with confidence. The Consumer Investments Strategy, aims at “giving consumers the confidence to invest, supported by a high-quality, affordable advice market, which should lead to fewer people being scammed or persuaded to invest in products too risky for their needs”.

The FCA has analysed responses to their September 2020 call for input on the Consumer Investments Market, and has supplemented these with their own data and intelligence. The FCA has also published their second Consumer Investments Data Review, summarising the the work carried out to tackle harm between 1 April 2020 and 31 March 2021.

The FCA has committed, by 2025, to:

  • Reducing by 20% the number of consumers who could benefit from investment earnings but are missing out.
  • Halving the number of consumers who are investing in higher risk products that are not aligned to their needs.
  • Reducing the money consumers lose to investment scams perpetrated or facilitated by regulated firms.
  • Stabilising the £833 million compensation bill for the Financial Services Compensation Scheme.

To achieve this, the FCA has set out a package of measures that include the following:

  • Exploring regulatory changes to make it easier for firms to provide more help to consumers who want to invest in relatively straightforward products.
  • Launching a new £11 million investment harm campaign, to help consumers make better-informed investment decisions and to reduce the number of people investing in inappropriate high-risk investments.
  • Being more “assertive and agile in how the FCA detects, disrupts and takes action against scammers”.
  • Strengthening the Appointed Representatives (AR) regime, with a consultation to be launched later this year, which aims to raise the quality of financial advice.
  • Strengthening the financial promotions regime in three areas: the classification of high-risk investments, further segmenting the high-risk market and strengthening the requirements on firms when they approve financial promotions.
  • Reviewing the compensation framework to ensure that it remains proportionate and appropriate, particularly where firms fail leaving behind compensation liabilities for the Financial Services Compensation Scheme (FSCS) to address.

Consumer Investments: Strategy and Feedback Statement

Consumer investments data review 2021

Press release

Investment Association Publishes Guidance on FCA Guiding Principles  ESG and Sustainable Investment Funds

The Investment Association has published guidance on the interpretation of the FCA’s Guiding Principles on ESG and Sustainable Investment Funds. The principles, which were set out in the Annex of a ‘Dear Chair’ letter dated July 2021, addressed to the chairs of authorised fund managers, set out the FCA’s expectations for authorised funds which make specific ESG-related claims. Among other things, the guidance discusses the timing of application of the principles and their interaction with the Sustainable Finance Disclosure Regulation ((EU) 2019/2088).

Guidance on FCA guiding principles on ESG and sustainable investment funds

Updated webpage


Cryptoasset Regulation – FCA Publishes Speech

The FCA has published a speech by Charles Randell, Chair of the FCA, on risks associated with cryptoassets. In his speech, Mr Randell signals that the “tide of regulation is turning” as it has become more generally accepted that “we can’t allow online business to operate in ways we wouldn’t tolerate with any other business”.

Mr Randall warns that while platforms’ efforts to crack down on fraudulent advertisements are welcome, a permanent and consistent solution to the problem of online fraud from paid-for advertising requires legislation. A two-pronged approach will be required, one that involves (a) appropriate regulation (including self-regulation by online platforms) and robust enforcement by the authorities (b) greater consumer awareness about online scams.

Mr Randell pondered the thorny question of whether speculative tokens should be brought within FCA regulation, stating that “it is difficult for regulators around the world to stand by and watch people, sometimes very vulnerable people, putting their financial futures in jeopardy”. He continued to note that, given the decentralised way speculative tokens are created, any effective system of regulation would require a business seeking registration or authorisation with the FCA to bring themselves within reach.

Mr Randell suggested that in regulating digital tokens, legislators need to consider: (a) how to make it harder for digital tokens to be used for financial crime (b) How to support useful innovation. (c) The extent to which consumers should be free to buy unregulated, purely speculative tokens and to take responsibility for their decisions to do so.

Mr Randell concluded the speech by summarising two cases where regulators should be given powers to take action in this space: (a) where cryptoasset promotions mislead consumers that speculative tokens are regulated, and (b) where unregulated activities such as speculative tokens pose risks to FCA-authorised firms in terms of conduct and prudential soundness.

FCA Speech by Charles Randell: The risks of token regulation

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