Kyte Ekstrom
2 May 2024
The latest FinTech news and regulation in bite-size bits with links to relevant articles and documents. Your one-stop-shop for everything FinTech and compliance - don't be complacent, be compliant!
GENERAL
Bank of England and FCA share future strategy - transforming data collection in the UK financial sector
The Bank of England (BOE) and FCA are leading a joint transformation programme with industry to transform data collection from the UK financial sector. They have published a future strategy for achieving this, encompassing the regulator’s response to industry’s recommendations.
Building on the learning from the joint transformation programme, the BOE and FCA are now planning several projects over the next 18 months to improve data collections. They contribute to five outcomes:
data collections meet and are proportionate to regulators’ needs;
effective and efficient internal processes for creating data collections;
efficient processes and support for meeting regulatory obligations;
clear and consistent data definitions; and
modern systems to underpin data collections.
FCA publishes speech and launches AI and Digital Hub - Navigating the UK's digital regulation landscape
The FCA has published a speech by Nikhil Rathi, FCA Chief Executive, on navigating the UK's digital regulation landscape, delivered at the Digital Regulation Co-operation Forum (DRCF).
The Digital Regulation Cooperation Forum (DRCF) has announced the launch of the AI and Digital Hub (“the Hub”) pilot, an ambitious new service. This Government-funded Hub will support innovators working on AI or digital products by providing informal advice on complex regulatory questions that cross more than one DRCF regulator’s remit. This free service will make it easier to get support from two or more regulators at once, via the DRCF website, rather than having to approach each one separately.
Speech on navigating the UK's digital regulation landscape
Bank of England, PRA and FCA respond to government paper - approach to AI
The FCA has published an update following the publication in February 2024 of the government’s paper on a pro-innovation approach to AI regulation, which set out five general principles to guide the regulation of AI in the UK.
FCA publishes final guidance (FG24/3) and launches consultation (CP24/8) - Anti-greenwashing rule and extension of SDR and labelling regime
The final guidance (FG24/3) on the FCA's new anti-greenwashing rule in the ESG sourcebook will come into force on 31 May 2024. The new rule is designed to protect consumers by ensuring sustainable products and services they are sold are accurately described.
The FCA has also separately published a consultation paper (CP24/8) on the possibility of extending the SDR regime to portfolio management. The proposals are aimed primarily at wealth management services for individuals and model portfolios for retail investors.
CP24/8 closes to comments on 14 June 2024. The FCA intends to publish its final rules in the second half of 2024.
FCA Finalised non‑handbook guidance on the Anti‑Greenwashing Rule (FG24/3)
FCA consultation paper: Extending the SDR regime to Portfolio Management (CP24/80
FCA publishes feedback statement on impact on competition (FS24/1) - data asymmetry between Big Tech and financial services firms
The FCA has published a feedback statement (FS24/1) to its November 2023 call for input on data asymmetry between Big Tech firms and financial services firms.
As part of the FCA's 3-year strategy, they are committed to identifying potential competition benefits and harms from the Big Tech firms’ growing presence in financial services.
One area of concern was that the asymmetry of data between Big Tech firms and financial services firms could have significant adverse implications for how competition develops in financial services in the future.
The FCA aim to mitigate the risk of competition in retail financial markets evolving in a way that results in some Big Tech firms gaining market power while enabling the potential competition benefits (from Big Tech entry and expansion).
PRA publishes Consultation Paper on rates proposals for 2024/2025 - fees and levies
The PRA has published a Consultation Paper (CP4/24) on its rates proposals for its regulatory fees and levies for 2024/25. The deadline for responses is 10 May 2024. The PRA proposes that the implementation date for the changes resulting from this consultation would be 3 July 2024.
PRA Consultation Paper: Regulated fees and levies: Rates proposals for 2024/25 (CP4/24)
FCA publishes Consultation Paper - payment optionality for investment research
Consultation Paper (CP24/7) puts forward plans for a new way of paying for investment research. These plans build on recommendations made by the UK Investment Research Review which were published back in July 2023, they represent part of the UK government’s ‘Edinburgh Reforms’ package, which seeks to drive growth and international competitiveness in UK financial services.
The FCA has proposed giving asset managers greater freedom in how they pay for research, supporting their investment decisions. This greater choice should suit firms of varying business models and sizes, helping to promote competition. It will allow the ‘bundling’ of payments for third-party research and trade execution, and would exist alongside those already available, such as payment from an asset manager's own resources or from a dedicated account.
The new plans are also compatible with rules governing research payments in certain other major jurisdictions, making it easier for asset managers to buy research in the same way, across borders.
The consultation closes on 5 June 2024, and the FCA aims to produce final rules in the first half of 2025.
FCA Consultation Paper: UK Investment Research Review (CP24/7)
FCA highlights good practice and improvement areas - ARs undertaking credit broking
The FCA has published a webpage setting out 'good practice and areas for improvement for appointed representatives' (ARs) and introducer appointed representatives (IARs) undertaking credit broking.
The FCA want to improve principals’ oversight of their Appointed Representatives (ARs). The webpage gives examples of good practices and areas for improvement seen in principal firms’ due diligence checks when appointing ARs, and in their ongoing monitoring of ARs.
Principal firms who have Credit Broking permissions: Good practice and areas for improvements
FCA commences criminal proceedings against individual - unauthorised investment management activities
The FCA has launched criminal proceedings against Lee Steven Maggs of Sittingbourne, Kent, for 2 counts of fraud and 1 count of breaching the Financial Services and Markets Act 2000 (FSMA).
Mr Maggs is alleged to have operated an unauthorised investment scheme called 'Kube Trading' which received around £2.67m from investors between 1 March 2019 and 22 January 2021.
The case has been sent to Maidstone Crown Court for a plea and trial preparation hearing on 21 May 2024.
PAYMENTS
Bank of England publishes speech - innovation in UK payments
The Bank of England has published a speech by Sarah Breeden, the Bank’s Deputy Governor, on how it can 'deliver trust and support innovation', both as a provider and as a regulator of retail and wholesale money.
Bank of England speech: Modernising the trains and rails of UK payments − speech by Sarah Breeden
UK Finance publishes report - commercial variable recurring payments model clauses
UK Finance, in association with law firm Addleshaw Goddard LLP, has announced a report on the use of model clauses to support the development of the Variable Recurring Payments (VRPs) for commercial applications in the UK.
UK Finance report: Commercial Variable Recurring Payments Model Clauses
PSR launches consultation into reimbursement requirement - authorised push payment scams
The Payment Systems Regulator (PSR) has published a consultation paper (CP24/3) on proposals for compliance and monitoring under the Faster Payments System (FPS) reimbursement requirement to fight authorised push payment (APP) scams. Pay.UK will be responsible for monitoring payment service providers' (PSPs) compliance with the FPS reimbursement requirement, which comes into force on 7 October 2024.
The consultation is open until 5pm on 28 May 2024. Subject to the PSR's approval, the compliance monitoring regime will be published by Pay.UK by 7 June 2024.
CONSUMER CREDIT / MORGAGES
FCA publishes Policy Statement and updated Finalised Guidance - strengthening protections for borrowers in financial difficulty
The FCA has published Policy Statement (PS24/2) on strengthening protections for borrowers in financial difficulty - in relation to consumer credit and mortgages. The Policy Statement incorporates aspects of the FCA’s Tailored Support Guidance (TSG) (established during the COVID-19 pandemic) into its Consumer Credit (CONC) and Mortgages and Home Finance: Conduct of Business (MCOB) sourcebooks. These changes include enhancing the FCA’s expectations around customer engagement and expecting firms to consider a range of forbearance options and take reasonable steps to ensure arrangements remain appropriate.
The new rules (including FG24/2) come into force on 4 November 2024, at this time the FCA will also withdraw the TSG.
TRAVEL INSURANCE
FCA publishes findings from multi-firm review - travel insurance signposting rules for consumers with medical conditions
The FCA have set out findings from its review of rules to improve access to travel insurance for consumers with more serious pre-existing medical conditions (PEMCs). The FCA introduced rules in Policy Statement (PS20/3). These rules required firms to signpost consumers with PEMCs, in some circumstances, to a directory of specialist firms.
The FCA expected to see improved access for some consumers with PEMCs (both for those that did not previously purchase cover as well as those with exclusions for their PEMC) and lower prices for some customers.
MOTOR FINANCE / INSURANCE
FCA publishes statement and Dear CEO letter - motor finance complaints
The FCA has published an update on its review into the historical use of discretionary commission arrangements (DCAs) in the motor finance industry. It has also published a Dear CEO letter sent to motor finance firms.
The FCA states that many firms are struggling to provide the data the FCA requires. This is often due to data being stored on multiple systems or spread between lenders and brokers.
The Dear CEO letter reminds firms that the FCA expects them to assess the adequacy of their financial resources as well as to ensure the accuracy of their financial statements and regulatory reporting. Assessments should be forward looking and must consider the risks, and potential liabilities, that the firm is exposed to, including any potential redress liabilities.
Firms should continue to investigate the complaints they receive involving DCAs and consider the Information Commissioner’s Office (ICO) guidance on responding appropriately to data subject access requests. They should also notify the FCA if they are involved in litigation relating to motor finance commissions that are subject to, or likely to be subject to, appeal to the High Court or Court of Appeal.
The FCA will set out its next steps relating to the review by 24 September 2024.
FCA statement regarding motor finance firms’ financial resources
Updated webpage on motor finance complaints
ABI publishes principles - affordability of motor premium finance
The Association of British Insurers (ABI) have committed to new steps to try and manage the amount that those paying monthly for their motor insurance are charged for the benefit. The Premium Finance Principles underline what fair practice should look like and revolve around five elements: Transparency, affordability, fair value, proportionality and accountability.
ASSET MANAGEMENT
FCA publishes guidance - applying for authorisation in the asset management sector
The FCA has published a new webpage setting out some of the common errors that are made by asset managers when applying for authorisation, which have reduced firms' chances of success or caused delays to applications.
Common pitfalls include failing to meet the FCA's expectations in relation to senior management arrangements. Which is typically due to a lack of competence, expertise or an appropriate level of seniority. Some firms have also misunderstood the ‘location of offices’ threshold condition. Other errors include applicants failing to identify the risks that their business model poses and considering how they might remove or mitigate those risks.