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May 2024 Regulation Update

Kyte Ekstrom

4 Jun 2024

Our monthly updates help you keep abreast of the latest regulation - keeping you in the compliance know! If you want receive our monthly regulation updates straight to your inbox, head over to our homepage to sign up...

FCA publishes webpage on insights and observations for firms - Operational Resilience

The webpage provides insights and observations on the preparations firms have made towards complying with the FCA’s rules on operational resilience (as per policy statement PS23/1) The rules came into force on 31 March 2022, and the transition period ends on 31 March 2025.

The FCA intends for firms to use its observations as they review their approaches to operational resilience. Key observations include:


  • reviews of self-assessments showed limited evidence of the testing of response plans, and firms primarily relied on recovery to understand if they could remain within their impact tolerance.

  • testing of a third party’s resilience can be undertaken by the third parties, but firms need to be satisfied that their methodologies and tested scenarios are appropriate and sufficient for the firm’s requirements.

  • the most effective operational resilience frameworks are embedded within firms' overall enterprise-wide risk frameworks, including change management and strategic planning.


Webpage


House of Lords Financial Services Regulation Committee launches inquiry and call for evidence - FCA and PRA’s secondary competitiveness and growth objective

The Financial Services Regulation Committee is seeking views on the FCA’s and PRA’s secondary objective of facilitating the UK economy’s growth and international competitiveness, how that is being implemented by the regulators and integrated with their other objectives, and what the implementation of those objectives might mean for the financial services sector in the UK.


Questions in the call for evidence include whether current accountability measures are adequate, and the extent to which the regulators are focused on this objective. The Committee encourages anyone with expertise in or experience of the matters under consideration to submit written evidence, and the deadline for responses is 11 July 2024.


House of Lords Financial Services Regulation Committee inquiry: FCA and PRA’s secondary competitiveness and growth objective

Call for evidence


FCA Charges Nine ‘Finfluencers’ - alleged promotion on social media of unauthorised FX trading scheme

The FCA alleges that, between 19 May 2018 and 13 April 2021, Mr Nwanze and Holly Thompson used an Instagram account (@holly_fxtrends) to provide advice on buying and selling contracts for difference (CFDs) when they were not authorised to do so.


The FCA has brought charges against nine individuals in total. One of the individuals has been charged with one count of breaching the general prohibition under section 19 of the Financial Services and Markets Act 2000 (FSMA) for operating an unauthorised investment scheme and one count of unauthorised communications of financial promotions under section 21 of FSMA. The eight other individuals each face one count of issuing unauthorised communications of financial promotions.

The individuals will appear before Westminster Magistrates' Court on 13 June 2024.


In March 2024, the FCA published finalised guidance on financial promotions on social media to clarify its expectations for when firms and influencers use social media to communicate financial promotions. We published a blog in March which details '10 key points' firms should take into consideration before publishing a social media campaign (see link below).


10 Key Points to Stay Compliant - Before Publishing on Social Media

Press release


INSURANCE SERVICES


EIOPA publishes report - digitalisation in the insurance market

The report published by the European Insurance and Occupational Pensions Authority (EIOPA) on the digitalisation of the European insurance sector, concluded the following:


  • Most insurers have active commercial relationships with BigTech firms, with nearly 80% of the respondents using BigTech companies for cloud storage services.

  • AI is used by 50% of the respondents in non-life insurance and 24% in life insurance, with EIOPA expecting that the use of AI will increase considerably in the years to come.


EIOPA report: the Digitalisation of the European Insurance Sector (EIOPA-BoS-24/139)


INVESTMENT SERVICES


ESMA publishes guidance - AI in retail investment services

The advancement of Artificial Intelligence (AI)1 has the potential of transforming the landscape of retail investment services by offering unparalleled opportunities for efficiency, innovation and improved decision-making. While AI holds promise in enhancing investment strategies and client services, it also presents inherent risks, including algorithmic biases2, data quality issues, and (potential) lack of transparency.


The guidance outlines key obligations under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II), and particular emphasis is placed on the need to prioritise clients’ best interests at all times.


ESMA public statement on the use of Artificial Intelligence (AI) in the provision of retail investment services (ESMA35-335435667-5924)


 

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