Regulatory Update: UK Edition – July 2021
This edition includes – FCA agreements with overseas regulators, PRA proposal to make changes to policy on designated investment firms, ESMA consults on remuneration requirements on MiFID II, Wolfsberg Group statement on demonstrating effectiveness in AML, and FCA fines LBGI £90 million for failures in communications.
The FCA has published a webpage setting out its agreements with overseas regulators. The agreements signed with enabled the FCA to cooperate and exchange information with other regulators.
The FCA has published a webpage setting out examples of good and bad practice case studies when promoting financial services and its expectations for promotions to be clear, fair and not misleading.
The examples are set out in videos and cover consumer credit and claims management companies.
CCL can provide advice and help to review financial promotions, for more information please contact us.
The FCA has published its business plan 2021/22 outlining its key areas of work in the following year. The FCA highlights two key tasks on its role in the market: to make markets work better and to stop and prevent serious misconduct leading to harm.
In general, the priorities across all markets include the following:
- Diversity and inclusion
- Environmental, Social and Governance (ESG)
- Financial resilience and resolution
- Operational resilience
The plan also sets out the FCA’s intention to improve the asset management sector by:
- Increasing supervision of the fair and clear presentation of ESG information
- Identifying funds that are outliers to peers
- Implementing the long‑term asset fund (LTAF) infrastructure for less liquid funds
- Considering regulatory framework changes for money market funds
The Plan will set out how the FCA will measure its success in achieving these outcomes.
To discuss how the business plan impacts your business, please contact us.
The FCA has released a statement of information for firms who use certain exemptions to the Financial Promotions Order (FPO).
Following onshoring changes made to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, the definition of Relevant Market no longer includes relevant UK markets. Certain exemptions therefore do not cover financial promotions relating to relevant UK markets or investments traded on such markets. These exemptions will be restored by Government Statutory Instrument (SI).
Until the implementation of the SI, the FCA does not propose to take enforcement action against persons for breach of the restriction if the breach only came about because the relevant exemption no longer applied on this occasion.
The FCA has published a policy statement 21/9 about the UK Investment Firm Prudential Regime (IFPR). The statement summarises the feedback received from consultation paper 21/7.
The IFPR is a new prudential regime that will apply to any MiFID investment firms subject to any part of the capital requirements directive and the capital requirements regulation.
The IFPR is due to come into force on 1 January 2022.
Where you need guidance or support in relation to the changing prudential regulation, please contact us as CCL can provide advice and help to assess the impact of the IFPR. For more information please contact us.
The PRA has published a consultation paper setting out its proposals to make minor changes to its policy on designated investment firms. The proposal includes an increase to the base capital resources requirement to align with firms undertaking the same type of business but only regulated by the FCA.
The proposals would make amendments to:
- The statement of policy ‘designation of investment firms for prudential supervision by the PRA’
- The definition of capital part of the PRA rulebook
The changes are proposed to take effect on 1 January 2022.
The European Securities and Markets Authority (ESMA) has updated its Q&As relating to:
- The application of AIFMD regarding performance fees on overperformance during a reference period and crystallisation data of performance fees.
ESMA has issued a consultation paper on draft guidelines for certain areas of MiFID II’s remuneration requirements. The paper aims to enhance clarify and encourage convergence on the implementation of the new remuneration rules, replacing the existing guidelines published in 2013.
The paper builds on the 2013 guidelines and additionally includes:
- New requirements under MiFID II
- Expansion of details on the 2013 guideline
- Incorporation of the results from supervisory activity conducted by national competent authorities
The Wolfsberg Group has published a statement setting out how financial institutions can assess risk in certain priority areas and demonstrate the effectiveness in their anti-money laundering and combatting terrorist financing programmes.
The statement builds on previous works by the Group and underlines the starting point should be the priority risks identified by countries or supra-national bodies.
To discuss the implementation of risk assessments that can help your business understand and manage its risk to financial crime, please contact us.
The Financial Action Task Force (‘FATF’) has published a report setting out the opportunities and challenges of new technologies for Anti-Money Laundering (‘AML’)/Combatting Terrorist Financing (‘CTF’).
The report highlights the necessary conditions, policies and practices that need to be in place to effectively adopt new technologies to improve efficiency of AML/CTF. The report also examines obstacles faced during implementation of new technology.
HM Treasury has published an advisory notice on risks posed by jurisdictions with unsatisfactory money laundering and terrorist financing controls.
The Money Laundering and Terrorist Financing (Amendment) (No.2) (High-Risk Countries) Regulations 2021 will come into force on the 13th July 2021 and will amend the list of High-Risk Third Countries specified in Schedule 3ZA.
This list replicates those countries listed by the FATF as high risk, or under increased monitoring.
The Treasury has published a consultation inviting views and evidence on the steps the government proposed to amend the Money Laundering Regulations. The amendments are required to ensure the UK continues to meet international standards set by the Financial Action Task Force (FATF).
The consultation is open until October 2021.
The FCA has fined Lloyds Bank General Insurance Limited, St Andrew’s Insurance Plc, Lloyds Bank Insurance Services Limited and Halifax General Insurance Services Limited (LGBI) for failing to ensure that language contained within communication to home insurance renewal communications was clear, fair and not misleading.
Due to the failed communication, millions of customers received letters that claimed they were being quoted a competitive price which was unsubstantiated and risked serious consumer harm. The firm was found to have breached principle 3 and 7 of the FCA’s principle of business.
The firm has voluntarily made payments approximately £13.5 million to customers. Due to the firm’s failure, they were fined £90,688,400.
ESMA has published a report on the use of sanctions and measures by National Competent Authorities (NCA) under MiFID II. NCA activity was found to be increased in 2020 compared to previous years in the number of sanctions and total amount of fines.
Overall, NCAs have imposed a total of 613 sanctions and measures in 2020 for an aggregate value of €8.4 Million compared to 371 sanctions and measures about €1.8 million in 2019.