Key Regulatory Topics: Weekly Update 26 Nov to 2 December 2021
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Capital markets
FCA policy statement on primary market effectiveness review
On 2 December, the FCA published a policy statement setting out new rules to make primary markets work more effectively for both companies and investors. The FCA is introducing the following changes to its Listing Rules: (i) a targeted form of dual class share structure within premium listing; (ii) a reduced level of shares required to be in public hands at listing to 10% from the current requirement of 25%; (iii) an increased MMC threshold for listing to £30 million, for shares in companies other than funds; and (iv) minor modernisation to the Listing Rules, Disclosure Guidance and Transparency Rules (DTRs), and Prospectus Regulation Rules (PRR). The new rules come into force on 3 December, except for the more minor changes to modernise and streamline the FCA’s primary markets rule books, which will come into force on 10 January 2022. The FCA will provide feedback on the broader consideration of the listing regime’s purpose and structure in the first half of 2022.
Commission Delegated Regulation on RTS on ESEF
On 30 November, the EC published a delegated regulation on regulatory technical standards (RTS) on the specification of a single electronic reporting format (European Single Electronic Format – ESEF). This amendment to the RTS on ESEF provides for purely technical updates to the taxonomy according to which issuers whose securities are admitted to trading on EU regulated markets are legally obliged to use for marking-up the IFRS consolidated financial statements within the annual financial reports.
Consumer/Retail
FCA mortgage prisoners review
On 29 November, the FCA published its mortgage prisoners review. The FCA estimates that within the inactive firm closed book population (195,000), there are 47,000 mortgage prisoners who are unable to switch to a new mortgage deal, despite being up to date with payments, and who could benefit from switching if they met lender risk appetite. The FCA reviewed the effects of its regulatory interventions to remove barriers to switching for mortgage borrowers who cannot otherwise. The FCA welcomes practical and proportionate initiatives from industry or others to provide these borrowers with tools or materials to help them do this. The FCA makes clear that it will continue to focus on areas in the market where it identifies the greatest harm which could affect mortgage prisoners and other borrowers. In particular, the FCA will: (i) continue to monitor firms to make sure they provide all borrowers – in both closed and active books – with the support they need when they get into financial difficulty; (ii) take action as necessary to address harms it finds; (iii) carry out work to understand the issues facing borrowers who have interest-only, or part repayment mortgages, and who do not have a credible strategy to repay the capital borrowed at the end of the mortgage term; and (iv) supervise and enforce its Guidance for firms on the fair treatment of vulnerable customers to help ensure fair outcomes for customers with characteristics of vulnerability. The HMT states that it will now use the findings of the review to determine if there are any further practical and proportionate solutions that can be found for affected borrowers.
FCA policy statement on restricting CMC charges for financial products and services claims
On 29 November, the FCA published a policy statement on restricting the fees charged by claims management companies (CMCs) for managing claims about non-PPI financial products and services. The fees cap will not apply to pre-existing contracts unless the contracts are varied to increase fees or add new fees and except where new claims are added to the contract or the customer did not authorise or instruct the firm to act in relation to the claim until after the rules came into force. The new rules also: (i) amend pre-contract disclosure requirements for CMCs; and (ii) make minor changes to the FCA’s rules for CMCs in the Claims Management Conduct of Business Sourcebook (CMCOB) and other sections of the FCA Handbook that apply to CMCs. The final rules and guidance will come into force on 1 March 2022. The FCA will monitor the fee cap’s effects on the CMC market and its consumers through regulatory returns and ongoing supervisory work.
Claims Management Instrument 2021
Claims Management (Fees Rules) Instrument 2021
Financial crime
Council of the EU negotiating mandate and ECB opinion on proposed Regulation on transparency of crypto-asset transfers
On 1 December, the Council of the EU announced that EU ambassadors agreed on a mandate to negotiate with the EP on a proposal to update existing rules on information accompanying transfers of funds and certain cryptoassets. This aims to introduce an obligation for crypto-asset service providers to collect and make accessible full information about the sender and beneficiary of the transfers of virtual or crypto assets they operate. This is proposed to ensure the traceability of crypto-asset transfers, so as to be able to better identify possible suspicious transactions and if necessary block them. The Council explains that the modifications introduced streamline and clarify the EC’s proposal by: (i) introducing requirements for crypto-asset transfers between crypto-asset service providers and un-hosted wallets; and (ii) requiring that the full set of originator information travel with the crypto-asset transfer, regardless of the transaction amount. The Council also aims to synchronise the application of the proposal on transfer of funds and the market in crypto-assets regulation. On the same date, the ECB also published an opinion on the proposal. The ECB welcomes the proposed regulation as a means of levelling the playing field for crypto-asset service providers, but calls for revisions to the proposed regulation on the following: (a) definitions. The proposed regulation should be clarified to avoid any doubt that transactions between hosted and unhosted wallets are covered, with the effect that exactly the same information as for other crypto-asset transfers must to be collected and stored; (b) monitoring. Market developments and money laundering activities involving crypto-assets without the use of service providers or in decentralised peer-to-peer exchanges should also be closely monitored by the EC and relevant national authorities; (c) scope of the proposed regulation. The ECB understands that it is not intended to cover crypto-assets issued by central banks acting in their monetary authority capacity. However, for the sake of legal certainty and in order to fully align the scope of the proposed regulation with that of the proposed MiCA regulation, the ECB proposes to explicitly indicate this in the recitals and provisions of the proposed regulation; (d) reference to currencies. It is not appropriate to make reference in a Union legal text to ‘fiat currencies’. Rather, the proposed regulation should refer instead to ‘official currencies’; and (e) the Regulation should apply from the same date as MiCA. This would be helpful from a systemic and financial stability perspective in order to ensure that the proposed regulation applies to crypto-asset transfers sooner rather than later, instead of waiting for the coming into operation of the rest of the AML package.
FinTech
Please see the Financial Crime section for developments from the Council of the EU and the EC on the proposal to update existing rules on information accompanying transfers of funds and certain cryptoassets.
Fund regulation
Great Fund Insights: AIFMD Review Proposal Published: What are the key takeaways for asset managers?
On 25 November, the European Commission published its long awaited AIFMD Review package including a proposal amending the AIFMD and the UCITS Directive on delegation, liquidity risk management, provision of depositary and custody services and loan origination.
The key areas include the depositary and custody services, delegation and substance, loan origination, liquidity management tools (LMTs), supervisory reporting regime with an overall focus for improved interaction between the AIFMD and UCITS Directive.
In this Great Fund Insights alert, we highlight the key takeaways of this proposal for asset managers.
ESMA updates Q&As on application of UCITS Directive
On 26 November, ESMA published an updated version of its Q&As on the application of the UCITS Directive. A new question on fee rebate arrangements has been added to section XII (Costs and fees).
Markets and markets infrastructure
ESMA announces upcoming data publication aimed at CSDs
On 1 December, ESMA announced that it will start publishing information on trading venues with the highest turnover for bonds. This information is needed by central securities depositories (CSDs) in order to apply cash penalties under the Central Securities Depositories Regulation (CSDR). ESMA aims to publish this data for the first time by 1 February 2022 and will update it on a quarterly basis. This will enable CSDs to access centralised and transparent information for the application of cash penalties for bonds.
FCA policy statement on changes to UK MIFID’s conduct and organisational requirements
On 30 November, the FCA published a policy statement on changes to the UK MIFID’s conduct and organisational requirements. The new rules set out in the policy statement are: (i) From 1 December 2021, firms will no longer be required to prepare RTS 27 and RTS 28 reports; and (ii) From 1 March 2022, asset managers and research firms will be able to exercise the options on exempting the following from the FCA’s inducement rules on research: (a) research on SMEs below a market capitalisation of £200m, (b) FICC research, (c) research provided by research providers who do not provide execution services and are not part of a group that includes a firm offering execution services and openly available research.
IOSCO/CPMI discussion paper on access to CCP clearing and client-position portability
On 29 November, IOSCO and the CPMI published a discussion paper on access to clearing and client-position portability. This discussion paper concerns issues in relation to client clearing, and considers the potential benefits and challenges of new access models developed by CCPs, as well as good practices to facilitate porting of client positions. The report aims to increase the common understanding of new access models, which enable clients to directly access CCP services, and effective porting practices. It also seeks to identify potential issues for follow-up work from the industry. Comments and feedback are welcome by 24 January 2022.
Payment services and payment systems
PSR consultation paper on ending dual running for CoP
On 2 December, the PSR published a consultation paper on ending dual running in a timely and coordinated manner for Confirmation of Payee (CoP). This consultation paper sets out the next steps for the wider implementation of CoP including the next steps through Phase 2. The PSR sets out a draft direction to ensure that the migration to the Phase 2 environment is completed in a timely and coordinated manner by April 2022. Specifically, the PSR proposes giving a direction that: (i) requires Pay.UK to terminate the terms and conditions for participating in Phase 1, withdraw each PSP’s CoP Phase 1 accreditation, and retire the Phase 1 rules and standards by 30 April 2022; (ii) requires Pay.UK to notify the Open Banking Implementation Entity (OBIE) of this action, so OBIE can close the Phase 1 technical environment, and prevents Phase 1 PSPs from using that environment after 30 April 2022; (iii) requires relevant PSPs to regularly report to Pay.UK on their progress migrating CoP traffic to the Phase 2 Open Banking environment by 1 April 2022, and requires Pay.UK to relay that information and its own assessment of risks to migration to the PSR; (iv) requires relevant PSPs to undergo enhanced reporting to both Pay.UK and the PSR if they are at significant risk of failing to migrate by 1 April 2022, with an obligation to implement a remediation plan; and (v) revokes SD10 on 30 April 2022. The PSR will consider all responses to this consultation in deciding on next steps. If it decides to proceed with giving the proposed direction, the PSR plans to do so by early February 2022. The consultation closes by 5pm on 17 December.
EPC publishes second version of SRTP scheme rulebook
On 30 November, the EPC published the second version of the SEPA Request-to-Pay (SRTP) scheme rulebook. The SRTP scheme rulebook consists of a set of rules, practices and standards that makes it possible for any eligible SEPA RTP Service Provider to join, participate and operate in the SRTP scheme. This scheme allows a Payee to request the initiation of a payment from a Payer in a wide range of physical or online use cases. This new version includes enhanced functionalities such as the possibility to populate an URL, the currency agnosticism principle and the request for payment guarantee. The related Implementation Guidelines will be published by 24 December. The effective date of this second release is set to 1 June 2022. The obligation to at the minimum exchange SRTP messages based on API to ensure full reachability will become effective at a later date, to be determined and communicated in due course.
FCA amends RTS on SCA, AD and PERG
On 29 November, the FCA published a policy statement setting out the final rules for Regulatory Technical Standards on Strong Customer Authentication and Secure Communication (SCA-RTS), as well as amendments to ‘Payment Services and Electronic Money – Our Approach’ (Approach Document, AD) and the Perimeter Guidance Manual (PERG). The proposed SCA-RTS amendments will help remove barriers to continued growth, innovation and competition in the payments and e-money sector, in particular for open banking. In addition, amendments to guidance in the FCA’s AD and PERG aim to make the sector more resilient and protect consumers if firms fail. The changes to the SCA-RTS include: (i) creating a new SCA exemption in Article 10A. This would mean customers do not need to re-authenticate with their account servicing payment service provider (ASPSP) every 90 days when accessing their account information through a third-party provider (TPP); (ii) requiring certain ASPSPs to provide dedicated interfaces to enable TPP access to customer account information for retail and SME payment accounts; (iii) amending requirements on providing interface technical specifications, testing interfaces and fall-back interfaces by ASPSPs intended to let ASPSPs innovate and launch products and services more quickly; and (iv) allowing ASPSPs with a deemed authorisation under the Temporary Permissions Regime to rely in the UK on an exemption from setting up a fallback interface granted by a home state competent authority located in the EU. The amendments to SCA-RTS by the Technical Standards on SCA and Common and Secure Methods of Communication (Amendment) (No 2.) Instrument 2021 come into force as follows: (a) Articles 10A, 36(6) and changes to Article 10 on 26 March 2022; (b) amendments to Article 31 on 26 May 2023; and (c) the remainder on 30 November 2021. ASPSPs offering personal payment accounts in the scope of the PARs, equivalent payment accounts held by SMEs and credit card accounts operated for consumers or SMEs will need to have a dedicated interface in place no later than 18 months after 26 May 2023, when the relevant rules come into force. TPPs will need to reconfirm customer consent under Article 36(6) of the SCA-RTS no later than 4 months after 26 March 2022, when the relevant rules come into force. The amendments to PERG, made by the Perimeter Guidance (Payment Services) Instrument 2021 came into force on 30 November.
Prudential regulation
EBA consults on interest rate risk arising from non-trading book activities
On 2 December, the EBA launched three consultations specifying technical aspects of the revised framework capturing interest rate risks for banking book (IRRBB) positions. These consultations relate to: (i) draft Regulatory Technical Standards (RTS) on the IRRBB supervisory outlier test (EBA/CP/2021/36); (ii) draft Guidelines on IRRBB and credit spread risk arising from non-trading book activities (EBA/CP/2021/37); and (iii) draft RTS on the IRRBB standardised approach (EBA/CP/2021/38). The consultations run until 4 April 2022. A public hearing will take place via conference call on 3 March 2022.
EC call for evidence on impact assessment on review of macroprudential rules
On 1 December, the EC published a call for evidence for the evaluation and impact assessment on its review of macroprudential rules to limit systemic risk in the EU banking sector. This initiative’s purpose is to improve the macroprudential rules in the light of lessons learnt from 6 years’ experience of use, including during the major economic crisis caused by COVID-19, and to ensure that appropriate tools are available to deal with emerging systemic risks. The EC sets out details of the problems the initiative aims to tackle, as well as the objectives and policy options for the review. The impact assessment is intended to analyse the following broad policy options: (i) no change of the macroprudential provisions; (ii) streamlining and more transparent use of the current provisions. This would involve clarifying how they should be used to address a particular systemic risk and fostering more transparency and comparability of Member States’ use of macroprudential measures, without defining new tools by law. This will include making better use of data on exposures to a broad range of financial risks; (iii) upgrading the framework. This would involve adding provisions related to macroprudential risks and tools not yet covered in EU legislation or national legislative frameworks, as well as stronger monitoring and coordination mechanisms to achieve a more consistent use of the current macroprudential tools; and (iv) a new macro-prudential framework. This would involve setting up a macroprudential framework that covers the entire financial sector by adopting a new and dedicated legal instrument, designed to address systemic risks in a holistic and cross-sectoral way. The deadline for responses is 18 March 2022.
EC consultation on improving the EU’s macroprudential framework for the banking sector
On 30 November, the EC published a targeted consultation designed to gather evidence on improving on the EU macroprudential framework for the banking sector, in view of the legislative review mandated by Article 513 of CRR. The consultation seeks views on: (i) the overall design and functioning of the buffer framework. Among other things, the EC is reviewing the operation of the buffer framework in a crisis, and its suitability for dealing with structural risks. Particular attention is given to the appropriateness of capital buffers for systemically important institutions, global and other; (ii) whether certain existing tools have become obsolete, whether some need to be strengthened and whether certain tools are missing. The EC seeks views on whether Borrower-Based Measures should be added to the EU macroprudential toolkit, and whether harmonised definitions of those instruments and the reporting of respective data at Union level are a prerequisite for the introduction of such instruments. The EC is also considering the role of macroprudential authorities in imposing restrictions on distributions in exceptional circumstances; (iii) whether the current framework offers the appropriate macroprudential tools to national authorities, whether it ensures their effectiveness in the internal market, and whether it provides for adequate safeguards for the integrity of the internal market and avoids market fragmentation especially within the Banking Union; and (iv) the effectiveness of the framework in the light of emerging risks, including exposure to third countries, cyber-threats and crypto-assets. The deadline for comments is 18 March 2022.
Implementing Regulation amending ITS on benchmarking of internal models under CRD IV
On 26 November, Commission Implementing Regulation (EU) 2021/2017 amending Implementing Regulation (EU) 2016/2070 laying down implementing technical standards (ITS) for benchmark portfolios, reporting templates and reporting instructions to be applied in the Union for the reporting referred to in Article 78(2) of the CRD IV Directive (2013/36/EU), was published in the OJ. It enters into force on 16 December, 20 days after its publication in the OJ.
FCA third policy statement on implementation of IFPR
On 26 November, the FCA published its third policy statement about the UK Investment Firms Prudential Regime (IFPR). This policy statement summarises the feedback received to the FCA’s consultation CP21/26, as well as the FCA’s responses and final rules. This policy statement concerns aspects of the IFPR including: (i) Disclosure; (ii) Own funds – excess drawings by partners and members; (iii) Technical standards; (iv) Depositaries; (v) FCA’s approach to the UK resolution regime; (vi) Enforcement; and (vii) Applications and notifications. The FCA states that, although it made some amendments to its original proposed rules in the consultation paper, as a result of the feedback received, the final rules, taken as a whole, do not differ significantly from the versions upon which it consulted. The appendices to the policy statement contain the final rules on the issues consulted upon. These include: (i) The Investment Firms Prudential Regime (No 2) Instrument 2021; (ii) The Investment Firms Prudential Regime (Consequential Amendments) Instrument 2021; and (iii) The Technical Standards (Financial Conglomerates Directive) (Amendment) Instrument 2021. The new IFPR regime will come into force on 1 January 2022.
Investment Firms Prudential Regime (No 2) Instrument 2021
Investment Firms Prudential Regime (Consequential Amendments) Instrument 2021
Recovery and resolution
SRB guidance on solvent wind-down of trading books
On 1 December, the SRB published guidance on solvent wind-down (SWD) of derivatives and trading books in resolution, in line with its Expectations for Banks (EfB), published in April 2020. The guidance provides more details to banks on how to demonstrate resolvability in relation to Principle 7.1 of the EfB (“Structure, complexity and interdependencies”), in particular with regard to the size and complexity of the trading books. For certain banks, the size and complexity of their trading books could impede the credible and feasible implementation of their envisaged resolution strategies. SWD is an approach that can be used for exiting trading activities in an orderly manner and avoiding posing risks to financial stability. The guidance sets out the scope and minimum expectations for SWD planning and potential execution, with the main objectives to: (i) adequately prepare, develop and maintain banks’ capabilities (including, but not limited to funding needs in resolution and post resolution) for the planning of a SWD in resolution; and (ii) ensure execution capabilities of the SWD plan in a reasonable timeframe. The application of the guidance is specific to each bank and may be adapted to individual situations in a proportionate manner.
FSB report on good practices for CMGs
On 30 November, the FSB published a report on good practices for Crisis Management Groups (CMGs). The report sets out good practices that have helped CMGs to enhance preparedness for the management and resolution of a cross-border financial crisis affecting a Global Systemically Important Bank (G-SIB) consistent with the FSB Key Attributes of Effective Resolution Regimes for Financial Institutions. The report draws on a stocktake, undertaken in 2020, of how G-SIB home and host authorities use and operate CMGs; and on CMG members’ experience during the COVID-19 pandemic. The focus is on CMG activities that seek to enhance crisis preparedness rather than on cooperation during an actual resolution itself. The good practices identified list 16 desired outcomes that CMGs seek to achieve and relate to: (i) the structure and operation of CMGs; (ii) resolution policy, strategy and resolvability assessments; (iii) coordination on enhancing firm’s resolvability; and (iv) enhancing home-host coordination arrangements for crisis preparedness. As CMGs continue to evolve in performing their activities, the FSB will continue to monitor the development of their practices and consider any future work to promote consistency and effective operation of CMGs.
SRB updates guidance on operational continuity in resolution
On 29 November, the SRB published an updated version of its operational guidance on operational continuity in resolution (OCIR). The guidance was first published in July 2020, and provides clarification to banks on how to implement SRB expectations for operational continuity, as well as an indicative phasing-in timetable. The updated document gives more details on topics related to financial resilience and measures to ensure that relevant roles within a bank are adequately staffed.
SRB’s 2022 work programme
On 26 November, the SRB published its 2022 Annual Work Programme, setting out its objectives and priorities for the year ahead. The SRB priorities lie in the following five strategic areas, in line with the 2021-2023 Multi-Annual Programme: (i) achieving resolvability of SRB banks and less significant institutions. The SRB is committed to making banks resolvable by the end of 2023. In 2022 it will continue the implementation of its expectations for banks, and enhance the internal framework on deep-dives and on-site inspections (OSIs). It will also use the SRB resolvability assessment heat map to track banks' progress towards resolvability; (ii) fostering a robust resolution framework. Key areas for work in 2022 include updating and enhancing minimum requirements for own funds and eligible liabilities policies, deepening the operationalisation of the single point of entry, introducing additional policy enhancements for the public interest assessment, and continuing the development and increasing the consistency of the SRB management information system architecture; (iii) preparing and carrying out effective crisis management. With a view to enhancing crisis preparedness, in 2022 the SRB will conduct a dry-run exercise to test, among others, decision-making procedures and coordination with external stakeholders; (iv) operationalising the single resolution fund (SRF). In early 2022, the common backstop to the SRF will enter into force. This requires the SRB to implement its collateral policy and the methodology for the assessment of its repayment capacity; and (v) establishing the SRB as an organisation. The SRB will continue working towards a ‘digital SRB’, implementing its 2022 ICT strategy and development programme.
Sustainable finance
Latest RTS for taxonomy and SFDR – detailed product disclosure regime
As the start date for the EU Taxonomy Regulation looms, the ESAs have published their final draft of the RTS for the taxonomy’s product disclosure requirements.
This sets out the detailed disclosures required to be made by firms to indicate how aligned a relevant product is to the taxonomy – i.e. what is green vs what is not. This briefing gives a snapshot on what changes were made in the final RTS.
EC corrigendum to answers to ESA’s questions on SFDR
On 30 November, ESMA published a corrigendum from the EC to answers to a set of questions from the ESAs concerning the application of the Sustainable Finance Disclosure Regulation (SFDR). Two of the answers provided in the Commission Decision, relating to the SFDR, had been paired with the wrong questions. The corrigendum rectifies that error and ensures that each answer is matched with the right question. The correction relates to non-EU alternative investment fund managers and marketing under a national private placement regime.
EC letter to Council of EU and EP on RTS under SFDR
On 29 November, ESMA published a letter dated 25 November from the EC to the Council of the EU and European Parliament's Economic and Monetary Affairs Committee on regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regulation (SFDR). The letter relates to the date of application and status of these RTS. The EC announces that: (i) it could not adopt the RTS within the three-month period, given their length and technical detail, which requires additional time in the adoption process; (ii) it deems necessary to bundle the draft RTS submitted in October 2021 with draft RTS under Articles 2a(3), 4(6) and (7), 8(3), 9(5), 10(2) and 11(4) of the SFDR in a single delegated act; (iii) due to the length and technical detail of those 13 RTS, the time of the submissions to the EC, and to facilitate the smooth implementation of the delegated act by product manufacturers, financial advisers and supervisors, the EC would defer the date of application of the delegated act to 1 January 2023; and (iv) financial market participants, which publish the statement referred in Article 4(1)(a), 4(3) or 4(4) SFDR, will have to comply with the disclosure requirements on principal adverse impacts on sustainability matters laid down in the delegated act the first time by 30 June 2023. Therefore, the first reference period under the RTS will be 1 January 2022 to 31 December 2022.
Taxes / Levies
FCA consults on regulatory fees and levies policy proposals for 2022/23
On 30 November, the FCA published a consultation paper setting out its proposed policy changes to the way it will raise its fees for 2022/23. The main proposals include: (i) a new model for calculating minimum fees in the A fee-blocks, and a proposal to integrate consumer credit firms with the minimum fees and prudential charges of A-block firms. These proposals would increase FCA charges, and when it consults on the fee-rates for 2022/23 next April, it will then consider whether to implement them in full; (ii) reviewing the fees implications of the Investment Firms Prudential Regime (IFPR). The FCA proposes charging special project fees to recover costs directly from firms whose applications for the use of certain risk models will require exceptional supervisory resources, and discusses its approach to periodic fees; (iii) other fees policy proposals, including an uplift to the application fees of recognised overseas investment exchanges which intend to use new and untried IT; and (iv) the FCA’s approach to recovering the costs of projects which bring new types of firm into its regulatory scope following changes in legislation. The consultation paper closes on 31 January 2022. The FCA will consider all feedback received on the consultation, and will publish its feedback and rules in its March 2022 Handbook Notice, or in its consultation paper on fee rates.
Other developments
FOS launches action plan for changing and improving
On 2 December, the Financial Ombudsman Service (FOS) launched an action plan to change and improve the organisation to provide the best service for its customers. The action plan sets out how the FOS will change and improve, how it will deliver for all its customers and provide fair and reasonable financial dispute resolution more quickly. It is being published in response to an independent Periodic Review commissioned by the Board, published on the same day. The action plan focuses on five key themes: (i) a new operating model to meet a changing environment, making it more effective and efficient to resolve cases more quickly; (ii) enhancing technology and digital capabilities, to drive productivity and to make it easier and more efficient for customers to choose how they interact with the FOS; (iii) boosting engagement with the FOS’ stakeholders and taking a robust and proactive approach to prevent complaints and unfairness arising to ensure that it solves problems efficiently; (iv) developing the current strategy to further enhance the FOS, using insights from timely case handling to prevent further harm to consumers; and (v) exploring revisions to its current funding model to ensure a sustainable future.
PRA discussion paper on planned rulebook website updates
On 29 November, the PRA published a discussion paper (DP) setting out its plans for the next iteration of the PRA Rulebook website, as well as possible future changes on a longer timeframe. The updates will improve the PRA’s flexibility to present in a comprehensive manner the increased volume of policy that the PRA expects from its new rule-making responsibilities. The DP, which focuses only on the website platform and not on the policy content, is part of the wider PRA review of its policy-making approach, on which more information will follow at a later date. The updates that the PRA expects to make in the next iteration of the Rulebook (by Q4 2023) include: (i) expanded scope to include supervisory statements and statements of policy; (ii) exportable content in a machine-readable format; (iii) improved accessibility for users of assistive technology; (iv) easier to use ‘time-travel’ and navigation; and (v) better online help. This DP also sets out a number of possible changes for subsequent iterations. The PRA welcomes feedback from all users of the Rulebook by 28 February 2022.
FCA Handbook Notice No 93
On 26 November, the FCA published Handbook Notice 93, which describes the changes to the FCA Handbook and other material made by the FCA Board on 21 October 2021, 2 November 2021 and 25 November 2021. The document reflects changes made to the Handbook by the following instruments: (i) Long-Term Asset Fund Instrument 2021. This instrument makes changes to the FCA Handbook in order to create an environment where investment in longer-term, less liquid assets by investors who understand the risks, do not need immediate liquidity and have long-term investment horizons can flourish; (ii) Funeral Plans (No. 2) Instrument 2021; (iii) Compensation (London Capital & Finance Compensation Scheme) Instrument 2021. This instrument makes changes to the Handbook to assist the financial services compensation scheme limited in administering the government-funded compensation scheme (the HMT Scheme) for London Capital & Finance (LCF) investors; (iv) Changes to Decision Making for Statutory Notice Procedure
Instrument 2021. This instrument makes changes to the FCA Handbook to streamline its decision-making and governance by enabling more decisions to be taken under the FCA’s Executive Procedures (please see update below); (iv) Money and Pensions Service (Consequential Amendments) Instrument 2021. This instrument makes minor, consequential amendments to the Handbook to reflect branding changes by the Money and Pensions Service; (v) Conduct of Business Sourcebook (Communications in relation to Authorised Fund Benchmarks) (Amendment) Instrument 2021. This instrument makes changes to the Handbook to clarify the scope of rules requiring authorised fund managers to disclose information about a fund’s benchmark in communications to investors; and (vi) Investment Firms Prudential Regime (No. 2) Instrument 2021, which we have covered in the Prudential Regulation section. Additionally, the FCA Board made changes to various FCA Handbook sections. These changes came into force on 26 November. Feedback has been published in Chapter 3 of the Handbook Notice.
FCA’s policy statement on new approach to decision-making process
On 26 November, the FCA published a policy statement on issuing statutory notices and a new approach to decision making. This involves reforming the FCA’s decision-making and governance, to ensure that it can make faster and more effective decisions for consumers, markets and firms. To do so, more decisions will be taken by FCA’s senior managers (under Executive Procedures) rather than by the Regulatory Decisions Committee (RDC). The RDC will still make decisions in relation to enforcement cases where the FCA is proposing a disciplinary sanction or seeking to impose a prohibition order. FCA staff will make certain decisions, including: (i) using the FCA’s own-initiative intervention powers to impose a requirement on a firm, or to vary its permissions; (ii) making a final decision about a firm’s application for authorisation or an individual’s application for approval that is contested; (iii) where the FCA decides to take action in straightforward cancellation cases to remove a firm’s permissions because a firm does not meet its regulatory requirements; and (iv) the decision to begin civil and/or criminal proceedings. The changes are reflected in the Handbook to modify the Executive Procedures framework to provide additional flexibility. The policy statement also shows the responses to the FCA’s previous consultation, as well as the FCA’s response. The vast majority of respondents agreed with the aims of the proposals but did not agree with how the FCA would implement them. There was a concern that speed and efficiency were being emphasised unduly and would increase the potential risk of a lack of fairness and objectivity in decision-making. The FCA carefully considered whether to make any changes in light of the comments received, but still intends to implement its proposals as consulted on. It recognises that the desire to intervene more quickly must be balanced with procedural fairness. However, the FCA believes that its Executive Procedures, through which a number of decisions on authorisations and interventions are already made, do provide a fair process. These changes come into force with immediate effect. The FCA will carry out a 6-month post-implementation review to assess the effectiveness of the reforms.
Handbook