Kyte Ekstrom
2 Aug 2024
Each month we publish a round-up of the latest regulatory updates, covering only the salient points, including links to relevant documents and webpages.
GENERAL
FCA Overhauls Listing Rules to Boost Growth and Innovation on UK Stock Markets
The new rules are the biggest changes to the listing regime in over 3 decades. They aim to support a wider range of companies to issue their shares on a UK exchange, increasing opportunities for investors.
FCA Publishes Policy Statement on Final Rules - Access to Cash
Policy statement (PS24/8) sets out final rules for the FCA's new access to cash regime. From 18 September 2024, banks and building societies will need to:
Assess cash access and understand whether additional services are required when changes are being made to local services.
Respond to local residents, community organisations and representative groups, who will be able to request an assessment of whether there are gaps in local access to cash.
Deliver reasonable additional cash services, where significant gaps are found.
Keep facilities, including bank branches and ATMs, open until any additional cash services identified are available.
Research Note - An empirical analysis of characteristics associated with cash reliance in the UK
PSR Policy Statement - Securing compliance: Extensions and Exemptions Guidance
Policy statement (PS24/4) provides firms with greater transparency around how the PSR will make decisions on whether to grant exemptions or extensions to a specific direction or requirement. The PSR maintains that the bar is high for granting an exemption or extension.
Bank of England Publishes Speech - UK Solvency II Regime
The BoE has published a speech by Gareth Truran, PRA Executive Director for Insurance Supervision, on developing the UK Solvency II regime.
In the speech, Mr Truran refers to the matching adjustment (MA) reforms, which came into force on 30 June 2024. The PRA is actively considering an MA 'accelerator', which could allow firms to self-certify eligibility for MA of a limited portion of assets, in advance of seeking formal approval from the PRA. The implications of the rapid growth of 'asset-intensive', or 'funded', reinsurance remains high on the PRA's supervisory and policy agenda. Details on the PRA’s final policy in this context are expected shortly. The PRA is taking forward its plans for the next round of insurance stress testing in 2025.
Mr Truran also noted that the PRA remains on track to complete its work to reform the UK Solvency II regime by the end of 2024.
Solvency UK – time to build − speech by Gareth Truran
PSR and FCA Launch Joint Call for Information - Big Tech and Digital Wallets
It is estimated that more than half of UK adults now use a digital wallet to some extent, and seeks to identify the benefits and risks they bring to people and businesses. Apple Pay, Google Pay and PayPal are three of the most widely used digital wallets in the UK today, digital wallets have become an increasingly important touchpoint between big tech firms and UK consumers.
Among other questions, the call for information asks respondents whether there are any features of digital wallets that mean payments do not work as well as they could for consumers and/or businesses, whether they could unlock the potential of account-to-account payments, and how they could affect competition between payment systems.
The call for information is open until 13 September 2024. The regulators are expected to publish their findings by Q1 2025.
FCA Publishes Policy Statement - Overseas Funds Regime
Policy statement (PS24/7) on implementing the overseas funds regime (OFR) will enable the sale of overseas investment funds to UK retail investors. The policy statement responds to the FCA’s consultation paper (CP 23/26) on the same subject in December 2023.
Under the new rules, funds will be required to apply to the FCA for recognition, and the FCA intends to rely on the government’s overall equivalence determination. In response to concerns raised in consultation responses that the new rules could create barriers to entry to the UK market, the FCA has amended the proposed rules by:
Axing the proposed 30-day waiting period between notifying the FCA of changes and those changes taking effect in the UK.
Providing further guidance on the categories of changes which must be notified.
Providing further guidance on additional disclosures for fund prospectus and point of sale information.
The changes to the Handbook can be found in the Collective Investment Schemes (Schemes Authorised in Approved Countries) Instrument 2024 (FCA 2024/22), and is reproduced in Appendix 1 to PS24/7. The instrument came into force on 31 July 2024, and the OFR gateway for applications is expected to open in late 2024 for EEA UCITS other than money market funds.
FCA Calls on Firms to Improve Treatment of Politically Exposed Persons (PEPs)
Under legislation adopted by Parliament, financial firms are required to do extra checks on so-called politically exposed persons (PEPs). This follows global standards set by the international Financial Action Task Force and implemented by more than 200 jurisdictions.
There have been concerns about how firms in the UK are meeting these requirements and so the FCA has reviewed how firms are treating PEPs.
The FCA found that most firms in its review did not subject PEPs to excessive or disproportionate checks and none would deny them an account based on their status. However all firms could improve. The regulator has told firms that they should:
Ensure their definition of a PEP, family member or close associate is tightened to the minimum required by law and not go beyond that.
Review the status of PEPs and their associates promptly once they leave public office.
Communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible.
Effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks.
Improve the training offered to staff who deal with PEPs.
Some firms have already started to make improvements following the change in January 2024, which made the legal starting point that UK PEPs and their associates present a lower level of risk than foreign PEPs.
The treatment of Politically Exposed Persons – multi-firm review
FCA publishes Final Notice and Imposes Financial Penalty on CB Payments Limited
CB Payments Limited (CBPL), an authorised e-money institution that is part of Coinbase Group and which acts as a gateway for customers to trade cryptoassets via other group entities, has been fined £3,503,546 by the Financial Conduct Authority (FCA) for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers.
This marks the first time the FCA has taken enforcement action using powers under the Electronic Money Regulations 2011. Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA said that 'the money laundering risks associated with crypto are obvious and firms must take them seriously.'
CB Payments LTD - Final Notice
PAYMENTS
BoE Publishes Speech on the use of LEIs for Cross-Border Payments
On 9 July 2024, the Bank of England (BoE) published a speech by its executive director for payments, Victoria Cleland, on ‘A multi-tool for cross-border payments: the power of Legal Entity Identifiers’. In the speech, Ms Cleland discusses the potential benefits of Legal Entity Identifiers (LEIs) for payments, the role that they can play in enhancing cross-border payments, and steps that could be taken to drive their uptake and use.
PSR Publishes Policy Statement on Compliance and Monitoring - APP Scams Reimbursement
The PSR has published a policy statement on compliance and monitoring for the authorised push payments (FPS APP) scams reimbursement requirement (PS24/3) under the Faster Payments Scheme. This requirement starts to apply on 7 October 2024. PS24/3 confirms, for payment service providers (PSPs) that are subject to the requirement:
The requirement to register with Pay.UK by 20 August 2024.
The data that they are required to retain and report to Pay.UK monthly in respect of transactions they have sent.
The PSR’s approach to requiring PSPs to inform consumers of their rights under the policy.
PSR Publishes Consultation Paper - APP Scams Reimbursement Requirement
The consultation paper contains draft guidance on the identification of authorised push payment (APP) scams and civil disputes, after industry feedback made the PSR aware of practical challenges in distinguishing between the two (CP24/10). The start date for the APP scams reimbursement requirement is 7 October 2024.
The consultation is open for responses until 8 August 2024, and the PSR aims to publish its final guidance in mid-September.
INSURANCE
PRA Publishes Statement on Design - Dynamic General Insurance Test
The PRA has published a statement on the design of the 2025 dynamic general insurance stress test (DyGIST 2025). The stress test will comprise three stages:
1. The ‘live’ exercise: During the ‘live’ exercise firms will be presented with a sequential set of adverse events over a three-week period in May 2025 and will be asked to react to these as they would to real events. Firms will be asked to provide initial financial impact assessments following each event, to engage with their supervisory contacts and follow their expected management action plans (in line with their risk management processes).
2. Final firm assessment and reflections: By end of July 2025, firms will be asked to submit a final quantitative template with updated estimates of the impact of the events (this acknowledges that during the ‘live’ exercise loss estimates may be based on scaling up exposures or applying other shortcuts to meet the demands of providing early estimates that would be required in a crisis) and a qualitative questionnaire intended to draw out any risk management learnings.
3. Analysis, publication and integration into supervisory plans: DyGIST will be a core component of 2025 supervisory activity for firms in scope. The PRA intends to publish the findings of the exercise in 2025 Q4, and dependent on conclusions, individual firm findings will also feed into supervisory plans for 2026.
A list of PRA-regulated general insurance firms invited to participate can be found in Annex A to DyGIST 2025.
CRYPTOASSETS
FATF Publishes Update on Implementation Standards - Virtual Assets
The targeted update covers the implementation of standards on virtual assets (VAs) (cryptoassets) and virtual asset service providers (VASPs) (also known as cryptoasset service providers, or CASPs). The update relates to FATF recommendation 15 (R.15) and the related interpretative note (INR.15), as well as recommendation 16 (R.16) (known as the travel rule) and the related interpretative note (INR.16).
The report finds that jurisdictions have not made sufficient progress implementing the travel rule, which is a key anti-money laundering (AML) and counter-terrorist financing (CTF) measure. In the light of the update, the FATF will continue to engage with FATF member countries, the global network, technical assistance providers and the private sector on progress and challenges.
FATF - Targeted Update Publication
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