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February 2024 Regulation Update

Emily Tierney

4 Mar 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



FCA publishes Market Watch No. 76 - Misleading customer communications



The FCA share their observations on 'flying' and 'printing', and how firms can mitigate the risks of misleading the market by their staff engaging in these behaviours.

  • flying’ involves a firm communicating to its clients, or other market participants, via screen, instant message, voice or other method, that it has bids or offers when they are not supported by, or sometimes not even derived from, an order or a trader’s actual instruction; and

  • ‘printing’ involves communicating, by one of the above methods, that a trade has been executed at a specified price or size when no such trade has taken place.

Market Watch No. 76



Pro-innovation approach to AI regulation - UK Government publishes consultation response



The UK government published its response to the artificial intelligence (AI) on the 6th of February. The white paper consultation explains the government's approach to the regulation of AI (including generative AI) in the UK. The response confirms that the government's strategy is to promote innovation.



https://www.gov.uk/government/consultations/ai-regulation-a-pro-innovation-approach-policy-proposals/outcome/a-pro-innovation-approach-to-ai-regulation-government-response



'Urgent reform' needed to improve performance of UK regulators



The Industry and Regulators Committee has raised 'significant concerns' over the role of UK regulators, their ability to operate with independence from government, and how they are held to account.



'Urgent reform' needed to improve performance of UK regulators - FTAdviser




GAP insurers agree to suspend sales following FCA concerns over fair value



The Financial Conduct Authority (FCA) has today announced that multiple insurance firms have agreed to pause sales of Guaranteed Asset Protection (GAP) insurance, following a request from the FCA.



GAP insurers agree to suspend sales following FCA concerns over fair value | FCA



'We do listen to smaller firms', says FCA



The Financial Conduct Authority wants to see healthy competition in financial services and does not want small firms to drop out of the market due to increased regulation.



'We do listen to smaller firms', says FCA - FTAdviser



'Diversity and inclusion is a supply and demand issue'



The Financial Conduct Authority's consultation on a new regulatory framework for diversity and inclusion, announced in January, is welcome recognition of the purposeful action required if the UK’s financial services sector is to meet the needs of our communities and maintain its global competitiveness.



'Diversity and inclusion is a supply and demand issue' - FTAdviser



MPs to examine FCA plans for advice firms to hold more capital



A government committee said it will scrutinise the Financial Conduct Authority’s proposals for advice firms to set aside extra money to deal with compensation claims.



MPs to examine FCA plans for advice firms to hold more capital - FTAdviser



FCA launches survey to get feedback on performance



The Financial Conduct Authority and Practitioner Panel have launched a joint survey to get feedback on how well they are regulating the industry. Feedback given from the survey will be used by the FCA to better understand issues affecting firms and to assess any changes it needs to make to its approach as part of becoming a more "innovative, assertive and adaptive regulator".



FCA launches survey to get feedback on performance - FTAdviser



'I'd like to see the FCA acting fast now'



The Financial Conduct Authority should listen to industry feedback on its advice-guidance consultation and then "act fast" to implement the changes, says Unbiased's Karen Barrett. She says too many people are currently not getting the help they need, so swift implementation is needed.



'I'd like to see the FCA acting fast now' - FTAdviser.com



Conflict of interest row greets new boss of watchdog for City regulators



The Treasury’s decision to appoint the head of the City regulators’ watchdog has been thrown into controversy after campaigners accused the newly installed commissioner of being unfit because of conflicts of interest. Positive Money is concerned that the financial regulators complaints commissioner, Rachel Kent, could struggle to remain independent, given that she will continue to advise the government and financial services bosses on behalf of the City law firm Hogan Lovells.



Conflict of interest row greets new boss of watchdog for City regulators | Regulators | The Guardian



FCA to revamp regulatory database to 'improve user experience'



The Financial Conduct Authority has plans to rebrand and relaunch its database of 3.9mn pieces of regulatory information. Clare Cole, director of market oversight, said the regulator has a commitment to keeping the information freely accessible but wants to make it easier to access.



FCA to revamp regulatory database to 'improve user experience' - FTAdviser



FCA: ‘Our actions reverberate far beyond our borders’



The Financial Conduct Authority has outlined the importance of collaboration with international borders, specifically its relationship with the EU. Speaking at the UK Mission to the European Union this week (February 20), Ashley Alder, chairperson of the FCA, outlined the regulator's priorities when it comes to global cooperation. 



FCA: ‘Our actions reverberate far beyond our borders’ - FTAdviser.com 



Insider trading conviction highlights FCA market abuse crackdown



A recent criminal conviction secured by the Financial Conduct Authority (FCA) in a case of insider trading highlights the UK regulator’s intention to proactively crackdown on cases of market abuse – not just with criminal prosecutions but through the enforcement of regulation too, a former senior market regulator has said. 



Insider trading conviction highlights FCA market abuse crackdown (pinsentmasons.com)



CONSUMER DUTY



Consumer Duty implementation: good practice and areas for improvement



The FCA welcome the improvements made by many firms to deliver better outcomes for their customers. However, some firms are lagging behind.


Under the Duty, firms must act to deliver good outcomes for retail customers. Firms should aim to continuously address issues that risk causing consumer harm.


This publication builds on the FCA's review of firms’ implementation plans and their fair value frameworks and previous communications. It:

  • reminds firms of the consumer outcomes required by the Duty

  • sets out recent good practice, including in response to our early supervisory work, to deliver these outcomes

  • highlights areas for improvement where firms have more to do


FCA webpage on implementation


Survey results


Summary of survey


FCA speech: Consumer Duty: The art of the possible in a year



FCA warns advice firms over high charges



In a statement on Thursday, the Financial Conduct Authority said it had written to about 20 of the largest advice firms, asking for details of their delivery of ongoing services which clients are charged for once advice has been given. The request forms part of the watchdog’s Consumer Duty regulations introduced last year, which require companies to meet higher standards of customer protection. 



FCA warns advice firms over high charges (ft.com)  



PFS identifies adviser training gaps with consumer duty tool 



The Personal Finance Society has launched its Proficiency+ tool, designed to help firms align with the Financial Conduct Authority’s consumer duty and identify training opportunities. According to Don MacIntyre, interim CEO for the PFS, the tool has been developed with practitioners and against real world scenarios to "ensure that all who use it can take tangible steps towards raising industry standards, building public trust, and facilitating the cultural shifts outlined in the FCA’s consumer duty guidelines". 



PFS identifies adviser training gaps with consumer duty tool - FTAdviser  



FCA on Consumer Duty: 'There are areas where firms could do better' 



There are still areas of Consumer Duty where firms could do better, according to Financial Conduct Authority executive director of consumers and competition Sheldon Mills. 



FCA on Consumer Duty: 'There are areas where firms could do better' (investmentweek.co.uk)   



Advisers come out on top with consumer duty implementation



Advisers have come out on top when it came to implementing consumer duty measures, a Financial Conduct Authority review has found. The regulator reviewed more than 600 companies six months on from the introduction of the new rules in July 2023. It found 97 per cent of firms in the advisory and intermediary sector had a named person or team responsible for ensuring it met the requirements of consumer duty. 



Advisers come out on top with consumer duty implementation - FTAdviser



FCA requests information from financial adviser firms about consumer duty



The City regulator is collecting information from financial adviser firms about whether they have assessed their services in response to the new consumer duty, which requires businesses to put customers at the heart of what they do.



FCA requests information from financial adviser firms about consumer duty | The Independent



Consumer duty only spelling out what firms 'should have been doing anyway'



In the six months since the consumer duty came into force, a great deal has been written about the duty and the changes that it seeks to make for consumer protection in this country. Change is something that brings about different reactions in different people and the greater the change, the greater some of those reactions can be. There is no denying that the consumer duty seeks to bring about a significant change, but that is not a bad thing or something to be feared.



Consumer duty only spelling out what firms 'should have been doing anyway' - FTAdviser



CORPORATE GOVERNANCE


 


FCA outlines areas of focus - reducing and preventing financial crime



The FCA has published, what it refers to as a 'corporate document' on reducing and preventing financial crime. The document summarises the work that the FCA has delivered over the last 18 months tackling sanctions evasion, fraud, and money laundering. The document identifies four areas of focus for the coming year where the FCA considers further collaborative effort can help "shift the dial" decisively on reducing and preventing financial crime. The four areas are: data and technology; collaboration; consumer awareness; and metrics. The FCA also includes suggested questions for firms' boards to consider in some of the areas identified above.



FCA: Reducing and preventing financial crime



Global investors warn UK on overhaul of listing rules



Global investors are warning that a proposed overhaul of listing rules to attract more growth companies to the UK market will erode shareholder rights, undermine the country’s reputation for corporate governance and harm its attractiveness as a financial centre.



Global investors warn UK on overhaul of listing rules (ft.com)




FINANCIAL PROMOTIONS



FCA publishes Q4 2023 data alongside 2023 data analysis - misleading advertisements and financial promotions



Over 10,000 financial adverts and other promotions were withdrawn or changed in 2023 following intervention from the Financial Conduct Authority (FCA), an increase of 17%, year-on-year.



As of 7 February 2024, authorised firms need permission from the FCA if they want to approve promotions for unregulated persons. This makes sure firms approving financial promotions have the required competence and expertise for the promotions being offered.



FCA webpage: Financial promotions data 2023


FCA webpage: Financial promotions quarterly data 2023 Q4


Press release



FCA’s vigilance spurs withdrawal of 10,000 financial adverts



The Financial Conduct Authority (FCA) has exhibited increased vigilance, prompting the withdrawal or modification of over 10,000 financial adverts and promotions during 2023 – an upswing of 17% compared to the previous year. The FCA also published 2,285 alerts to help prevent consumers from losing their money to scams, up from 1,800 in 2022. 



FCA’s vigilance spurs withdrawal of 10,000 financial adverts | Scottish Financial News



FCA bans and fines former LCF director over financial promotions



The Financial Conduct Authority has fined a former director of London Capital & Finance £31,800 and banned him from working in financial services. According to the regulator, Floris Jakobus Huisamen was responsible for compliance at the company but "recklessly" signed off hundreds of financial promotions, which contributed to thousands of investors being misled.



FCA bans and fines former LCF director over financial promotions - FTAdviser





Over 10,000 financial adverts and other promotions were withdrawn or changed in 2023 following intervention from the Financial Conduct Authority (FCA), an increase of 17%, year-on-year. The FCA also published 2,285 alerts to help prevent consumers from losing their money to scams, up from 1,800 in 2022.



Financial watchdog stops thousands of misleading ads and promotions | FCA



FINANCIAL CRIME



FCA update on reducing and preventing financial crime: what you need to know 



The Financial Conduct Authority (FCA) has published an update on its three-year strategy to reduce and prevent financial crime. The update reflects on the FCA's progress since the strategy was published in 2022 and covers achievements as well as challenges. 



FCA update on reducing and preventing financial crime: what you need to know, Lorna Emson, Helen Harvey, Francis Bond, Alex Taylor (macfarlanes.com)


Shifting the dial on financial crime requires a collective push



Financial crime is never victimless. It costs firms and consumers, damages the integrity of our markets and undermines our international competitiveness. That’s why fighting financial crime is a key focus of the FCA’s strategy. The subsequent national Economic Crime Plan 2 and Fraud Strategy establish actions for both public and private sector parties, with an ambition to reduce financial crime.



Shifting the dial on financial crime requires a collective push | FCA



FCA: financial crime not a problem we can enforce our way out of



The Financial Conduct Authority said while it has a strong focus on enforcement investigations and prosecutions to combat financial crime, it is not a problem it can enforce its way out of.



FCA: financial crime not a problem we can enforce our way out of - FTAdviser



FCA update on reducing and preventing financial crime: what you need to know



The Financial Conduct Authority (FCA) has published an update on its three-year strategy to reduce and prevent financial crime. The update reflects on the FCA's progress since the strategy was published in 2022 and covers achievements as well as challenges. 



FCA update on reducing and preventing financial crime: what you need to know, Lorna Emson, Helen Harvey, Francis Bond, Alex Taylor (macfarlanes.com)



INVESTMENT



Deep Dive: FCA private market review a 'wake-up call' for asset managers



The Financial Conduct Authority’s upcoming review into private market valuations will lead to increased scrutiny on firms’ processes for investing in unlisted assets, especially concerning potential conflicts of interest, experts told Investment Week. The lead UK regulator revealed it was preparing to run a full-scale review into private markets valuations in the latter half of 2023 as part of a joint evaluation with international regulators of the risks the non-bank sector could pose to financial stability.



Deep Dive: FCA private market review a 'wake-up call' for asset managers (investmentweek.co.uk)



FCA clarifies drastic UK listing rules reform proposal



The Financial Conduct Authority (FCA) has provided greater clarity on its upcoming UK listing rules reform proposal, stating that its purpose is to give choice back to issuers, investors and markets. The proposed changes include replacing the existing standard and premium listing segments with a single category for equity shares in commercial companies. If applied, the listing reform will also scrap shareholder votes on transactions such as acquisitions to reduce ‘frictions’ for companies.



FCA clarifies drastic UK listing rules reform proposal | IR Magazine



PENSIONS



New Regulated Activity - operating a pensions dashboard service



This Order amends the regulatory framework, to make operating a pension dashboard service which connects to the Money and Pensions Service (MaPS) dashboards digital architecture a regulated activity. Such dashboards will be provided by commercial bodies and when developed, will allow individuals to view all of their pensions data, including their state pension, in one place and online.



The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024 No.169


Webpage


Explanatory memorandum



MORTGAGES



FCA launches industry working group - interest-only mortgages



Whilst the number of interest-only mortgages has reduced faster than expected, the challenge remains for a significant number of borrowers. Any interest-only borrowers who are unsure if their current plan is sufficient, should speak to their lender as soon as possible, to discuss their options.



The group will begin its review of the FCA’s guidance in subsequent meetings. They will also take a deeper look into engagement strategies, as well as the other ways borrowers who cannot repay their mortgage at maturity can be supported.



FCA webpage on interest-only mortgages


Terms of reference for the working group



SUSTAINABILITY 



'Pimfa: We strongly support the FCA's working group on sustainability rules'



The sustainable investment space has become one of the major issues of our time, and one that keeps Pimfa’s membership awake at night, so we welcomed the publication of the Financial Conduct Authority's much-anticipated policy statement (PS23/16) last November on sustainability disclosure requirements and investment labels.



'Pimfa: We strongly support the FCA's working group on sustainability rules' - FTAdviser



ADVICE GUIDANCE BOUNDARY



FCA review could be ‘missing ingredient’ for robo-advice


The digital advice market could flourish under the Financial Conduct Authority’s proposals for reforming the advice-guidance boundary, according to Ross Godlonton. The head of product at Moneyfarm says the proposed reforms could prove to be the “missing ingredient” for a market that has been slow to come off the ground.



FCA review could be ‘missing ingredient’ for robo-advice - FTAdviser



Finfluencers face prosecution for misleading investment advice, says EU watchdog



Influencers promoting financial products on social media were today (6 February) warned by EU finance watchdogs they could face million-euro fines or prosecution. EU rules against financial market abuse require investment advice to come with warnings and caveats – but legislators are struggling to update their rules for a digital age.



Finfluencers face prosecution for misleading investment advice, says EU watchdog | Euronews



FCA review a 'genuine effort to really start to solve the problem'



The Financial Conduct Authority's work on the advice-guidance boundary is not just another attempt at changing things around the edges, says Jamie Jenkins. The director of policy and communications at Royal London says there is a lot of "positivity and pragmatism" in the regulator's latest proposals to more clearly define the boundary and introduce a form of targeted support and simplified advice.



FCA review a 'genuine effort to really start to solve the problem' - FTAdvise



FRAUD



FCA urges Big Tech to crack down on fraud amid rise in unauthorised firms


The Financial Conduct Authority (FCA) has launched a fresh call for social media firms to do more to prevent mass fraud on their platforms, City A.M. can reveal. The City watchdog said in a report on Thursday that it issued 2,286 warnings last year alerting consumers about firms and individuals operating without its authorisation, up 21 per cent from 1,882 in 2022. Latest data from banking trade body UK Finance showed that more than three quarters (77 per cent) of payments fraud in the first half of last year originated online.



FCA issues fresh call for Big Tech to crack down on fraud (cityam.com)1q



'Tips on assessing risk for failure to prevent fraud offence'



On October 26 2023 the Economic Crime and Corporate Transparency Act received royal assent. Notably, the act implements a corporate 'failure to prevent fraud' offence and a rule for the attribution of criminal liability to companies for economic crimes committed by their senior managers.



'Tips on assessing risk for failure to prevent fraud offence' - FTAdviser



ANTI-GREENWASHING



UK Finance Responds to The Financial Conduct Authority’s Anti-Greenwashing Guidance



Their response sets out industry support for the anti-greenwashing intervention and publication of the Guidance, and shares recommendations and suggestions to improve the useability of the guidance.



UK Finance responds to the financial conduct authority’s anti-greenwashing guidance | Policy and Guidance | UK Finance



FCA Proposes Regulation of Investment Firm Sustainability Claims 



The UK’s Financial Conduct Authority (FCA) has announced a proposal for regulating sustainability claims by investment firms. In its accompanying consultation paper, the FCA proposed three sustainable fund labels as part of its wider anti-greenwashing policy. 



UK FCA Regulating Investment Firm Sustainability Claims (natlawreview.com)



NON FINANCIAL MISCONDUCT



Banks and brokers next in line as FCA launches harassment crackdown



Banks and brokers will be hit with a host of questions on how they deal with issues such as sexual harassment, bullying and discrimination next week, Financial News has learned, as the Financial Conduct Authority kicks off its crackdown on so-called non-financial misconduct.



Banks and brokers next in line as FCA launches harassment crackdown (fnlondon.com)



FCA survey hones in on non-financial misconduct



In an effort to bolster transparency and accountability within the financial services sector, the Financial Conduct Authority (FCA) has begun an examination of non-financial misconduct (NFM) among regulated entities. The survey has been sent to regulated Lloyd’s managing agents, London market insurers (including protection and indemnity clubs), and insurance intermediaries, including managing general agents. 



FCA survey hones in on non-financial misconduct | Insights | Ropes & Gray LLP (ropesgray.com)

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