Following the publication of DP20/2: Prudential Requirements for MiFID Investment Firms in June 2020 (see our blog post), the FCA has now published its consultation on the new UK prudential regime for MiFID investment firms (IFPR) (CP20/24). Continue reading
The Information Commissioner’s Office in the UK (the “ICO”) last week published, for consultation, draft statutory guidance setting out how it will regulate and enforce data protection legislation in the UK. The consultation sets out all of the ICO’s key powers (including information notices, assessment notices, enforcement notices and penalty notices). Continue reading
The FCA has published a consultation (CP20/20) on its general approach to international firms. The consultation and the finalised approach document published after consultation are intended to provide guidance that will help international firms understand the FCA’s expectations as they prepare for their applications for UK authorisation, informing firms’ decision about how they might want to structure their businesses to provide regulated financial services in the UK. The final approach document will supplement the FCA’s existing guidance on its approach to authorisation and supervision. Continue reading
On 15 July 2020, shortly after the first anniversary of its assumption of governorship of the Contingent Reimbursement Model (“CRM”) Code, the Lending Standards Board (LSB) launched a consultation which will form the basis of its post-implementation review of the CRM Code. The LSB’s review also extends to its Practitioners Guide (which is made available only to signatories of the CRM Code) and its Information for Customers document. Continue reading
After highlighting payment services as a priority in its 2020/21 business plan and following “evidence that some firms have not implemented the Electronic Money Regulations 2011 or Payment Services Regulations 2017 as [the FCA] expects”, the FCA has published a short consultation proposing further guidance for Payment Services Providers (PSPs), including Payment Institutions (PIs) and E-Money Institutions (EMIs).
The FCA gives the following as examples of areas where some firms are not fully complying with the safeguarding rules:
- co-mingling of customer and firm funds;
- failure to keep accurate records and accounts; and
- insufficiently effective risk management procedures.
Following the consultation, the FCA plans to publish a “Dear CEO” letter incorporating the guidance (as amended). That guidance is intended to take effect temporarily, until the Approach Document is updated following a full consultation “later in the year”, which will likely include a proposal to incorporate the temporary guidance. The proposed guidance will also outline how firms can put in place more robust wind-down plans.
The FCA notes that payment services is an area that continues to undergo rapid development and that, while innovation is to be welcomed, many new entrants to the market are unprofitable at an early stage. The FCA is concerned, in particular, that these firms will face additional financial pressure as a result of the COVID-19 pandemic, which potentially threatens both customer revenues and the ability to seek external funding where required.
Firms are asked to consider the proposed guidance and send any comments to the FCA by 12 June 2020.
Background and context
The proposed guidance follows an FCA review in H1 2019 of the compliance of 11 non-bank PSPs with the requirements for safeguarding service users’ funds under the Payment Services Regulations (PSRs) 2017 and Electronic Money Regulations (EMRs) 2011. This in turn led to the FCA’s issuance of a “Dear CEO” letter outlining the shortcomings found by the review and requesting non-bank PSPs to review their safeguarding arrangements, promptly remedy any inadequacies and attest to certain matters.
The rapid growth of both the payment services market and some firms in it, is both acknowledged by the FCA in its guidance and clearly reflected in the evolution of the surrounding regulatory landscape, marked by the revised Payment Services Directive (PSD2) which came into force in January 2018, four successive versions of the FCA’s Approach Document since September 2017 and a number of consultation papers by both the FCA and PRA.
Firms should continue to expect this to be an area of increasing regulatory focus, particularly amidst the current COVID-19 crisis. As with the client money regime for investment firms, it is likely that the FCA will view ongoing failures to comply with the safeguarding rules as a particularly serious matter.
In this blog post, we round-up forthcoming developments in the UK and at EU and International levels in financial services regulation which are expected for September 2019.
Authors: Sarah Thomas, Cat Dankos and Hywel Jenkins
At the end of January, the UK Financial Conduct Authority (FCA) issued a further consultation paper (CP19/4, the CP) on the Senior Managers and Certification Regime (SMCR). Responses to the CP are requested by 23 April 2019. Alongside other minor proposed changes which seek to “optimise” the SMCR, the key proposals are:
- For all firms (banks, insurers, and all solo regulated firms), the legal function will not need to have a SMF Manager responsible for it.
- Responsibility still has to be allocated to someone, but that individual does not need to be a SMF Manager.
- The FCA expects the Head of Legal to be a certified function and that the conduct rules will apply to all legal staff.
- Banks and insurers need to think about whether to change their SMF Manager allocations in light of this confirmation (as well as statements of responsibility and responsibilities map), and how to depict the position of the legal function on their responsibilities map.
- For all firms (banks, insurers and solo regulated firms) the certification regime definition of the ‘client dealing’ function has been clarified (with a narrowing effect). It will exclude individuals who have no scope to exercise discretion.
- Insurers and banks may wish to cross-check their existing pool of client dealing staff against the proposed new definition in readiness for the final rules.
- For solo regulated firms, the FCA has expanded the scope of the forthcoming Enhanced regime to cover more intermediaries.
- For limited scope solo regulated firms, Manager Conduct Rule 4 (SC4) will be amended to cover non-approved executive directors.
In this bulletin we cover the following key developments in the payments and fintech space:
- Payment Services Bill: On 14 January 2019, the Payment Services Bill (Bill) was passed by the Singapore Parliament. When it comes into force, the Payment Services Act (as the enacted Bill will be known) will introduce two regulatory frameworks: a designation scheme which enables the Monetary Authority of Singapore (MAS) to designate significant payment systems for financial stability reasons, and a licensing regime which allows MAS to regulate a wider range of payment services, including cryptocurrency dealing and exchange services, in a proportionate manner depending on the scope and scale of the provider’s services.
- Sandbox Express: On 14 November 2018, MAS released a consultation paper on Sandbox Express, which comprises of a set of to pre-defined sandboxes to complement the existing approach of customised sandboxes.
- Digital Token Offerings: On 3 December 2018, MAS updated its Guide to Digital Token Offerings which provides general guidance on the application of the securities laws administered by MAS to offers or issues of digital tokens in Singapore.
For more information on the key developments in the payments and fintech space and the implications of the Payment Services Bill, Sandbox Express and Guide to Digital Token Offerings, please see our full bulletin here.
It is anticipated that in around mid-2019, the Insurance Authority (IA) will take over the regulation of insurance intermediaries from the three self-regulatory organisations (SROs). In preparation for the commencement of the new regime, the IA has launched several public consultations on guidelines and rules. For our full briefing on these developments, please click here.
On 6 December 2018, the Securities and Futures Commission (SFC) published the conclusions to its consultation on proposed amendments to the Code on Unit Trusts and Mutual Funds (UT Code). The proposed amendments are aimed at updating the regulatory regime for SFC-authorised funds and addressing the risks posed by financial innovation and other developments. Continue reading