Kyte Ekstrom
8 Sept 2022
Each month we publish a round-up of the latest regulatory updates, covering only the salient points, including links to relevant documents and webpages.
FCA Announce Webinars - Consumer Duty Guidance
On the 27th of July 2022 the FCA published the final rules and guidance for a new Consumer Duty, these rules set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.
The FCA are hosting a series of sector-based webinars for industry in October and November 2022 on the new Consumer Duty rules and guidance, to help firms understand the FCA’s expectations and prepare for implementation.
The FCA require all applicable firms to have an ‘Implementation Plan’ in place by the end of October 2022. The ‘Implementation Plan’ as set out in the Finalised Guidance (FG22/5) states that Boards (or equivalent management body) should have agreed their implementation plans in place and be able to show they have scrutinised and challenged these plans to ensure they are deliverable and robust to meet the new standards. The FCA also stated that firms should expect to be asked to share implementation plans, Board papers and minutes with supervisors and be challenged on their contents.
The October deadline reflects that firms will need clear plans in order to implement the Duty properly and on time. The FCA do not expect firms to have necessarily fully scoped all work required to embed the Duty by the October deadline, but they do expect firms to have set out how they will do so in time to ensure timely implementation. Firms’ plans should, by the October deadline, be sufficiently developed to provide both firms’ governing bodies and the FCA with assurance that the expectations set out in the Duty have been carefully considered and will be implemented for new and existing products by 31 July 2023.
Firms should also consider any work needed with other parties to prepare for the Duty and ensure their plan allows enough time for this.
The rules and guidance will come into force on a phased basis (see below):
for new and existing products or services that are open to sale or renewal the rules come into force on 31 July 2023
for closed products or services, the rules come into force on 31 July 2024
The webinars will cover the following sectors:
Insurance on 18 October at 10:00Â (register for this webinar)
Consumer investments, pensions and asset management on 18 October at 14:00Â (register for this webinar)
Banking and payments on 1 November at 10:00Â (register for this webinar)
Retail lending on 1 November at 14:00 (register for this webinar)
During the sessions, focus will be on the following areas:
The FCA’s expectations for firms under the Consumer Duty and key milestones during the implementation period.
What is outcomes-based regulation?
What the Consumer Duty means for your sector.
You will be able to submit questions when you register or during the event.
Registration is required for each webinar. You may choose to attend more than one if applicable.
The webinars form part of a series of communications and engagement activities the FCA have planned during the implementation period. If you’re not sure which webinar would be of most relevance to your sector, all the webinars will cover some non-sector specific information as well.
Also, all webinars will be available on-demand following the live event.
Policy Statement PS22/9 - Final Rules and Guidance on Consumer Duty
House of Commons Treasury Committee Publishes Responses - The Future of UK Financial Services Regulation
The House of Commons Treasury Committee (the Committee) has published responses from HM Treasury, the PRA and the FCA on the Committee’s report on the Future of UK Financial Services Regulation.
A number of recommendations on the Treasury's Future Regulatory Framework (FRF) Review were included in the Report, ahead of the publication of the Financial Services and Markets Bill 2022-23 (FSMB), and the Treasury's response to their final consultation on the FRF Review. The FSMB and Treasury's consultation response contained the following conclusions and recommendations:
The Treasury should respect the principle of regulatory independence, and must not pressure the regulators to weaken or water down regulatory standards.
There should be a secondary objective for the FCA and the PRA to promote long-term economic growth.
The Treasury should continue to reject any calls for a growth and/or competitiveness objective to become a primary objective. This would increase any pressure on regulators to trade off competitiveness against resilience, and would undermine the regulators' ability to deliver on their core functions. There is a danger that as memories of the financial crisis fade, its lessons are forgotten.
The Treasury should require the FCA to have regard for financial inclusion in its rule-making.
Regulatory independence is critical for the competitiveness and effectiveness of UK financial services regulation. The host of new accountability mechanisms proposed by the Treasury must be carefully reviewed in this light, to ensure that regulatory independence is not compromised.
The FCA should consider how to improve its engagement with the poorest consumers, and must seek data on the issues vulnerable consumers experience directly.
PRA Publishes Discussion Paper (DP4/22) – Future Approach to Policy
Discussion Paper (DP4/22) sets out the PRA’s proposed approach to policy-making as they undertake wider rulemaking responsibilities following the UK’s departure from the EU, and also through the reforms identified by the government as part of the Future Regulatory Framework (FRF) Review - which is currently being implemented through the Financial Services and Markets Bill 2022-23 (FSMB).
In the Discussion Paper, the PRA sets out their ambition to be a strong, accountable, responsive and accessible policymaker. Highlighting that the PRA will:
Continue to be driven by the pursuit of strong standards, which underpin UK financial stability and support its status as a world leading financial centre.
Assume broader rule-making responsibilities. The ability to update rules directly in the PRA Rulebook will allow the PRA to respond quickly to changes in the external environment. The PRA will have more scope to adapt rules to account for new risks, and to calibrate their approach in a way that better reflects the characteristics of their regulated firms and the UK financial system.
Be proactive in their approach to the secondary competitiveness and growth objective and look for opportunities to advance it. This means looking more broadly at the ways in which the PRA can facilitate competitiveness and growth and also taking advantage of the additional opportunities the PRA will have to review in areas of policy that have previously been fixed in UK legislation.
The PRA will act within a strong policy and accountability framework set and overseen by Parliament, advancing the objectives given by Parliament and the government. As the PRA takes on wider responsibilities they will continue to engage with HM Treasury, and will enhance engagement in certain areas in response to reforms introduced in the FSM Bill, such as HM Treasury’s power to require regulators to review their rules.
The PRA welcomes comments on the Discussion Paper until 8 December 2022, and indicates that responses received will inform a future consultation on the PRA’s approach to policy.
PRA Discussion Paper: The Prudential Authority’s approach to policy (DP4/22)
FCA Publishes Speech – Fighting Financial Crime
The speech, given by Sarah Pritchard, Executive Director of Markets at the FCA, at the Financial Crime Summit regarding current issues for the financial services industry and the FCA to consider in the fight against financial crime. Apart from discussing financial crime generally, Ms Pritchard focused on sanctions and the financial crime risks arising from cryptoassets and the cost of living crisis.
In the speech Ms Pritchard reiterated the benefit of firms and agencies working together quickly when responding to evolving threats of financial crime. She also referred to the ‘force multiplier effect’ where professionals in firms are scanning and remaining alert to ‘red flags’, using technology available to identify unusual patterns of activity and sharing information with regulators, as well as law enforcement. In relation to this, Ms Prichard recommended that financial crime checks should be embedded into systems and should evolve as the threats evolve.
On sanctions, Ms Prichard explained how the FCA is using data and intelligence to identify firms with potential weaknesses in controls and test the effectiveness of screening systems. The FCA cautions that if firms are using vendor solutions for their sanction screening processes, they should be tailored and suitable for their customer and business profiles.
the FCA sets robust anti-money laundering standards regarding cryptoassets, reflecting the sector’s ‘potential weak link’ and possible abuse by criminals. 37 firms have so far met those standards and will need to maintain their compliance standards in order to retain their registrations. The FCA has also taken action to close cryptoasset ATMs opened without registration.
Lastly, the FCA is asking firms how they plan to respond to the cost of living crisis in the context of financial crime. With the recent rise of scams, including loan fee fraud, ghost broking and false access to rebates from utility companies, the FCA expects firms to consider how their customers will be affected and whether their methods raise customers awareness of the associated crimes.
Speech by Sarah Pritchard, Executive Director, Markets to the Financial Crime Summit