May Regulation Update

By Kyte Ekstrom | Brexit, Compliance, Crypto-Assests, ESG, FCA Inovation Hub, FCA Regulation, FinTech | 0 Comments

FCA Publishes Speech – Learning from Innovation

The speech delivered by Nikhil Rathi, CEO of the FCA, provides the FCA’s perspective on what can be learned from the last 30 years; with a particular focus on innovation. Mr Rathi highlighted, among other things, that:

  • digital skills will be integrated in all future financial services education, including at the FCA, as the boundaries become blurred between tech and the industry.
  • the Digital Regulation Cooperation Forum (DRCF), of which the FCA is a member, is focusing on protecting children online, which is relevant for the FCA as it is seeing ever younger participants (including children) in new financial products like cryptoassets.
  • in one year, the FCA has seen over 2,000 cases of screen sharing scams where victims have lost £25 million. The ‘ScamSmart’ campaign, launched on 5 May 2022, aims to tackle this.

Speech by Nikhil Rathi, FCA CEO at the Chartered Institute for Securities and Investment 30th anniversary dinner: Learning from the last 30 years to face the next

FCA Publishes Speech – Critical Issues in Financial Regulation

The speech delivered at City Week 2022 by Nikhil Rathi, CEO of the FCA, provides the FCA’s perspective on critical issues in financial regulation.

Highlights from the speech include:

  • Cost of living crisis means consumers are more exposed to risk and more reliant on financial services.
  • New consumer duty will ensure firms take into account ‘good outcomes’ for consumers and clear rules will in future cut costs for firms.
  • Supporting innovation to encourage long-term economic growth and international competitiveness:
    • Extending an early oversight scheme to give 300 newly authorised firms guidance on regulatory issues as they grow
    • Over 500 applications to attend our first ever CryptoSprint event in May
  • Post-Brexit, if you are a predominantly UK business, your regulated entity should be here to protect investors and the integrity of the markets.

Relevant key points from the speech include:

Cost of Living Crisis

With inflation set to reach an all time high, the cost of living crisis means consumers are more exposed to risk and more reliant on financial services. The FCA’s focus is to ensure all regulated firms act in their customers’ interests. The FCA’s Three Year Strategy, published in April 2022, sets out market-wide outcomes which the FCA expect all firms to deliver.

New Consumer Duty

In December 2021 the FCA consulted on ‘A New consumer duty’. Final proposals can be expected to be published in July 2022. The ‘New Consumer Duty’, is designed to ensure firms take account of the actual impact of their services and product suitability on consumers.

Significant policy changes will include:

  • action to tackle competitors who drive down standards
  • giving firms greater certainty about how they should treat consumers and flexibility on how they deliver good outcomes
  • supporting future innovation by being clear about the standards required, whatever the product

The FCA envisage fewer future rule changes as a result, which should lower costs to firms

Supporting Innovation

Extending an early oversight scheme to give 300 newly authorised firms guidance on regulatory issues as they grow.

The FCA’s CryptoSprint event being held on the 10th – 11th May 2022 has already received 500 applications wishing to attend. The event is intended to explore how the evolving world of cryptoassets could be regulated within the UK.

The FCA’s pioneering ‘sandbox’, a regulatory safe space to test innovative products, which has, so far, supported the growth and innovation of over 50 blockchain firms.

Environmental, Social and Governance (ESG) reforms: the FCA mandating climate related disclosures which were introduced in January 2022. Including to help firms transition to net zero.

Diversity and Inclusion: the FCA recently confirmed positive diversity targets for listed companies, which firms must comply with or explain to their investors why they are not. These Diversity Inclusions include, that 40% of Board seats should be held by women and at least one position should be held by a minority ethnic director.

Post-Brexit

The FCA remains committed to a system that allows firms to provide cross-border financial services in a way that protects consumers and markets. As the Temporary Permissions Regime comes to an end, businesses focussed predominantly in the UK should set up an FCA authorised subsidiary in order to protect investors and the integrity of the markets.

Facing the Future

The FCA’s new strategy has an overarching focus on:

  • reducing and preventing serious harm
  • setting and testing higher standards
  • promoting competition and positive changes

Speech by Nikhil Rathi, FCA CEO at City Week 2022: Critical issues in financial regulation: The FCA’s perspective


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