The following posts provide a snapshot of selected UK, EU and global wholesale financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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New UK Requirements for Payment Account Contract Terminations
04/04/2024
HM Treasury has published a policy note and a draft statutory instrument—The Payment Services and Payment Accounts (Contract Terminations) (Amendment) Regulations 2024—on strengthening requirements in the Payment Services Regulations 2017 on contract terminations. These policy changes follow the furore over the de-banking by NatWest Bank of the prominent U.K. politician Nigel Farage, which led to the resignation of its CEO.
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Draft UK Legislation to Address Push Payment Fraud
04/04/2024
HM Treasury has published a policy note and a draft statutory instrument—The Payment Services (Amendment) Regulations 2024—on a risk-based approach to payments to mitigate against authorized push payment fraud. HM Treasury confirms its policy for allowing payment service providers to delay payments processing when there are reasonable grounds to suspect fraud or dishonesty. The draft statutory instrument amends the Payment Services Regulations 2017 to allow PSPs to delay executing an outbound payment transaction by up to four business days from receipt of the order where there are reasonable grounds to suspect fraud or dishonesty by someone other than the payer and the payer's PSP requires the time to contact the payer (its customer) or a third party (e.g., law enforcement) to determine whether to execute the payment.
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UK Public Offers and Admissions to Trading Regulations Published
03/06/2024
On January 29, 2024, the Public Offers and Admissions to Trading Regulations 2024 (SI 2024/105) were published. The Regulations implement the new Public Offers and Admission to Trading Regime, part of the new designated activities regime, and revise the existing prospectus regime inherited from the EU that currently sits in the U.K. Prospectus Regulation. The designated activities regime (DAR) is a new U.K. concept to give the Financial Conduct Authority rulemaking powers over financial sector activities, such as public offers and listing, which are not necessarily carried out by regulated firms such as banks (we discussed the DAR in our client note, "A Boost For UK Financial Services"). The new Regulations introduce a general prohibition on public offers of securities, coupled with a collection of exceptions from this prohibition. Many of the existing exemptions in the U.K. Prospectus Regulation, such as offers solely to qualified investors and offers made to fewer than 150 persons, are retained. Certain provisions, such as those establishing the new designated activities and provisions enabling the FCA to make rules, came into force on January 30, 2024. Most of the other provisions will enter into force once the U.K. Prospectus Regulation is revoked using powers under the Financial Services and Markets Act 2023. The FCA has engaged with stakeholders regarding many of the changes that will be housed in its rulebook in the future. It is expected to publish a consultation paper in Summer 2024 on its detailed proposals.
Read more.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : Consumer Protection, Financial Market Infrastructure, Securities -
UK Finalizes Amendments to Financial Promotions Regime High-Net-Worth and Sophisticated Investors Exemptions
01/08/2024
The Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No. 2) Order 2023 implements the governments' policy to reform the high-net-worth and sophisticated investor exemptions under the financial promotions regime. The changes are brought in to mitigate the misuse of the exemptions by some firms marketing inappropriate products to ordinary retail customers and to update certain aspects that were introduced about 20 years ago. The Treasury Select Committee's report on the failure of London Capital & Finance recommended that the exemptions be rethought to ensure greater consumer protection.
The Financial Services and Markets Act 2000 restricts the communication of an "invitation or inducement to engage in investment activity" either in the U.K. or in a way that could have an effect in the U.K., such that these can be made only by regulated firms, subject to certain exemptions. The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 provides for exemptions from the restriction, including exemptions for financial promotions of unlisted companies to be made to high-net-worth individuals and self-certified sophisticated investors. The Order makes several changes to the FPO exemptions, including increasing the financial thresholds for high-net-worth individuals, amending the eligibility criteria for the self-certified sophisticated investor exemption and requiring businesses to provide details of themselves in communications made in reliance on the exemptions.
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New UK Retail Disclosure Framework for Consumer Composite Investments
12/13/2023
Following its July response to its consultation, HM Treasury has published a draft of the statutory instrument that will implement the U.K.'s revised retail disclosure framework. The draft Consumer Composite Investments (Designated Activities) Regulations 2024 will replace the existing onshored Packaged Retail and Insurance-Based Investment Products Regulation which contains rules on disclosures for complex retail investment and insurance products. The PRIIPs Regulation is often cited as an example sine qua non of poorly conceived, poorly drafted, ill-thought through EU legislation with unintended consequences. In particular, it is aimed at packaged retail products, such as FTSE-trackers and insurance-wrapped investments, but was drafted so as to impose onerous and unnecessary disclosure rules on bonds and other standardized securities, effectively foreclosing retail activity in a broad range of "vanilla" investments in the EU (and, when it was in the EU, the U.K.), as well as largely frustrating the EU's "capital markets union" project. These issues are discussed in our client note, "PRIIPS and Capital Markets Transactions: A Better Way Forward?". Replacing the PRIIPs Regulation was therefore identified as a post-Brexit U.K. priority under HM Treasury's Smarter Regulatory Framework. The new rules will allow for a revised U.K. retail disclosure regime that is applicable only to more complex products, suitable to the U.K.'s capital markets and encourages informed retail investor participation in those markets.
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UK Future of Payments Review Report Published
11/29/2023
HM Treasury has published the Future of Payments Review report, setting out the Review's recommendations for HM Treasury, the regulators and industry that aim to improve the U.K.'s existing payments landscape for consumers. The report follows the July 2023 call for evidence. The main recommendation is for the government to develop a National Payments Vision and Strategy, which will provide high-level guidance on priorities and define guiding principles on safety, simplification, coordination, responsiveness, inclusivity and accountability.
The Review makes several other recommendations.
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HM Treasury Publishes Consultation Response on Financial Promotions Regime High Net Worth and Sophisticated Investors Exemptions
11/08/2023
HM Treasury has published a consultation response and draft statutory instrument on reforms to the high net worth and sophisticated investor exemptions under the financial promotions regime. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for UK Financial Services") made amendments to the Financial Promotion Restriction, banning authorized firms from approving the financial promotions of unauthorized firms unless they have received approval from the FCA to have the prohibition removed in whole or in part. The gateway will apply from February 7, 2024. However, the restriction does not apply where exemptions exist, such as those for high net worth or sophisticated investors.
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HM Treasury Publishes Response to Cryptoasset Regulatory Regime Consultation
11/03/2023
HM Treasury has published a response to its consultation on cryptoasset regulation, setting out its final proposals for the U.K.'s cryptoasset regulatory regime. The U.K. plans to make cryptoassets a new category of "specified investment" under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and regulate certain activities conducted in relation to them. Under the new regime:- Firms conducting relevant activities and offering their services in or to the U.K. by way of business would need to apply for authorization by the U.K. Financial Conduct Authority. The relevant activities are: issuing or admitting cryptoassets to trading; operating cryptoasset trading venues; dealing as principal or arranging deals in cryptoassets; operating a cryptoasset lending platform; and safeguarding or safeguarding and administering cryptoassets (or arranging the same). Overseas firms offering their services into the U.K. may need to obtain FCA permission (although HM Treasury envisages equivalence/deference-type arrangements in the future and is considering alternative approaches to full authorization in the interim).
- Firms that are already authorized to conduct other activities will need to apply for a Variation of Permission if they wish to conduct regulated cryptoasset activities.
- Authorization under the new regime will not be automatically granted to cryptoasset firms registered with the U.K. Financial Conduct Authority for money laundering purposes, although the FCA will consider applicants' regulatory history when determining authorization applications.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Consumer Protection, Financial Market Infrastructure, FinTech, MiFID II, Payment Services -
HM Treasury Publishes Plan for Regulation of Fiat-backed Stablecoins
11/03/2023
HM Treasury has published a Policy Paper on Plans for the Regulation of Fiat-backed Stablecoins, setting out the next steps for the implementation of stablecoin regulation in the U.K. Fiat-backed stablecoins are (under HM Treasury's proposed definition) those which seek or purport to maintain a stable value by reference to a fiat currency, and hold that currency, in whole or in part, as backing.
The Financial Services and Markets Act 2023 (discussed in our client note, A Boost for UK Financial Services) empowers HM Treasury to bring certain activities related to the use of "digital settlement assets" (which may include fiat-backed stablecoins), within the regulatory perimeter and to establish a regime for the supervision of stablecoin issuers. DSAs are defined broadly under the FSM Act as digital assets that can be used for payment, can be transferred, stored or traded electronically and use technology (e.g., distributed ledger technology) to record or store data. HM Treasury plans to bring certain activities related to fiat-backed stablecoins within the scope of regulation ahead of other types of cryptoasset, due to their potential to become a widespread means of retail payment.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Consumer Protection, Financial Market Infrastructure, FinTech, Payment Services -
Draft UK Legislation on Revised Payment Service Contract Termination Rules Expected Before 2024
10/13/2023
HM Treasury has published a further policy statement on payment service contract termination rule changes, setting out its approach to implementation, timing and next steps. This latest policy statement follows the government's July policy statement in which it confirmed that it would bring forward legislation to enhance the requirements governing payment account terminations. This issue has become topical in light of the "de-banking" of higher risk or less profitable clients by several institutions and recent scandals in the U.K. involving account terminations of some politicians. The main changes being brought forward are:- A requirement for payment account providers to provide clear and tailored explanatory reasons to an account user for the termination. The requirement would not apply where it would be unlawful to provide such information, for example, under U.K. financial crime and anti-money laundering legislation.
- A 90-day notice period before a payment account is terminated by a provider, subject to situations where there is a serious and uncorrected breach by the payment user of the terms applying to the account. It would also be clarified that reasons such as brand protection would not be sufficient justification for a shorter notice period.
Read more.ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : AML/CTF, Insider Trading and Sanctions, Consumer Protection, Payment Services -
UK Financial Conduct Authority Publishes Policy Statement on Financial Promotions Gateway
09/20/2023
The U.K. Financial Conduct Authority published a Policy Statement on 12 September 2023 setting out how it intends to implement the new regulatory gateway for financial promotions. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services") amends the Financial Promotion Restriction, banning authorized firms from approving financial promotions of unauthorized firms unless they have received approval from the FCA to have the prohibition removed in whole or part. The gateway will apply from February 7, 2024, with authorized firms able to apply to the FCA for permission from November 6, 2023 until February 6, 2024. There are exemptions from the gateway, entering into force on September 27, 2023, which permit the approval of financial promotions by authorized firms, for communication by unauthorized firms, in certain circumstances.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : Consumer Protection, Financial Services, FinTech -
FCA Reviews Treatment of Politically Exposed Persons
09/14/2023
The U.K. Financial Conduct Authority has launched a review of the treatment by regulated financial services firms of Politically Exposed Persons based in the U.K. Firms are currently obliged, under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations, to conduct enhanced due diligence when dealing with PEPs. The FCA has existing Guidance on the treatment of PEPs for these purposes, which makes clear (amongst other things) that firms should adopt a proportionate and risk-based approach to the application of the MLRs. The FCA has been mandated to review this guidance under the Financial Services and Markets Act 2023, including an investigation into how firms are applying the guidance and consideration as to whether any amendments are needed. We discuss this mandate and the FSMA 2023 more generally in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman
TOPICS : AML/CTF, Insider Trading and Sanctions, Conduct & Culture, Consumer Protection -
Proposed Global Policy Recommendations for Decentralized Finance
09/13/2023
On September 7, 2023, the International Organisation of Securities Commissions launched a consultation on proposed policy recommendations on market integrity and investor protection issues in decentralized finance (DeFi). IOSCO is proposing that the final recommendations, which it aims to finalize before the end of 2023, will help IOSCO members to establish compliant markets. Responses to the consultation may be submitted until October 19, 2023.
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UK Conduct Regulator Offers Small Reprieve for Cryptoasset Marketing
09/13/2023
The U.K. Financial Conduct Authority announced on September 7, 2023, that firms may avail themselves of a delay to the application of some rules applying to cryptoasset financial promotions. The FCA published rules for cryptoasset financial promotions in June this year, which will apply from October 8, 2023 (the same date that the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 brings the promotion of cryptoassets within scope of the U.K. regulatory regime). The reprieve is available, on application, to:- firms registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 that intend to communicate cryptoasset financial promotions; and
- authorized firms that intend to communicate or approve cryptoasset financial promotions.
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Exemptions from UK Financial Promotions Gateway Published
09/11/2023
The Financial Services and Markets Act 2000 (Exemptions from Financial Promotion General Requirement) Regulations 2023, which come into force on September 27, 2023, set out the exemptions to the new U.K. regulatory gateway for the approval by authorized firms of financial promotions of unauthorized firms. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") amends the Financial Promotion Restriction, banning authorized firms from approving financial promotions of unauthorized firms unless they have received approval from the Financial Conduct Authority to have the prohibition removed in whole or part. The prohibition will apply from February 7, 2024, according to the Financial Services and Markets Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2023, which also set out the following timeline for the new regime to come into effect:- September 6, 2023: provisions will apply that enable the FCA to give directions and guidance and to make rules.
- November 6, 2023: provisions will apply that allow the FCA to receive (but not determine) applications to approve financial promotions that are made during the application period (November 6, 2023 to February 6, 2024).
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HM Treasury Publishes Response on UK Retail Disclosure Consultation
08/07/2023
HM Treasury has published a response to its consultation on the future of U.K. retail disclosures. HM Treasury's consultation (which we discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services") identified various problems with the Packaged Retail and Insurance-Based Investment Products Regulation which currently governs disclosures for complex retail investment products. These included that the PRIIPs regime could be overly prescriptive and potentially misleading in its attempts to make PRIIPs products comparable and that the rules were spread across a mixture of legislation and regulatory rules which led to a complex environment for firms.
Read more.ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Consumer Protection, Securities -
UK Regulators Publish Revised Complaints Scheme
08/04/2023
The U.K. Financial Conduct Authority, Prudential Regulation Authority and Bank of England have jointly published their revised Complaints Scheme, which governs how complaints against the U.K. regulators should be made and handled. The changes include:- The introduction of specific discretionary compensation bands for non-financial loss arising from the regulators' actions or inactions. The bands range from £100 for a relatively low level of stress or inconvenience, up to over £2,500 in exceptional circumstances, for example, where the consequences of the regulators' failings are particularly severe.
ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Conduct & Culture, Consumer Protection, Financial Services -
HM Treasury Consults on UK Future of Payments Review
08/04/2023
HM Treasury has published a Call for Input on the U.K. Future of Payments Review, an investigation into how future payments are likely to be made and how the U.K. can offer world-leading retail payments. The review is focused on consumer needs — specifically, those of individuals and businesses processing retail payments. Input is sought on the following issues:- What are the most important consumer retail payment journeys, both today and in the next five years?
- How does the experience of these journeys by U.K. consumers (individuals and businesses) compare with those of other leading countries?
- How likely are the existing plans and initiatives across the payments landscape to deliver world-leading payment journeys for U.K. consumers?
ATTORNEYS: Barnabas W.B. Reynolds, Chloe Barrowman
TOPICS : Brexit for Financial Services, Consumer Protection, Payment Services -
UK Statutory Instrument Published to Bring Cryptoassets Within Financial Promotions Regime
06/12/2023
On June 7, 2023, the U.K. government published a statutory instrument (the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 (FP (Amendment) Order) and related explanatory memorandum) amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO). The amendments broadly reflect HM Treasury's final proposals on cryptoasset financial promotions, published in January 2022. The expanded financial promotions regime will apply from October 8, 2023, an implementation period of four months as opposed to the originally proposed six, given recent market volatility. The new regime will capture promotions for "qualifying cryptoassets" with respect to the following (existing) controlled activities:- dealing in securities and contractually based investments;
- arranging deals in investments;
- managing investments;
- advising on investments; and
- agreeing to carry on any of the above activities.
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman, Sandy Collins
TOPICS : Consumer Protection, FinTech, Securities -
UK Financial Conduct Authority Publishes Final Rules on Cryptoasset Financial Promotions
06/12/2023
On June 8, 2023, the U.K. Financial Conduct Authority published its final Policy Statement setting out detailed rules for the U.K.'s cryptoasset financial promotions regime. The Policy Statement follows the publication on June 7, 2023 of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 (FP (Amendment) Order), which will bring the promotion of certain cryptoasset activities within the U.K.'s financial promotions regime. The FCA's rules will apply from October 8, 2023 (the same date that cryptoassets are brought within the financial promotions regime under the FP (Amendment) Order).
Read more.ATTORNEYS: Thomas Donegan, Chloe Barrowman, Sandy Collins
TOPICS : Consumer Protection, FinTech, Securities -
European Commission Publishes Retail Investment Strategy
06/05/2023
On May 24, 2023, the European Commission published a Retail Investment Strategy package aimed at enhancing retail investor protections across the EU and encouraging participation in the EU capital markets. The package comprises an amending Directive, which makes changes across a range of EU legislation, and an amending Regulation, which revises the EU's Packaged Retail and Insurance-based Investment Products Regulation.
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UK Government Publishes its Proposals for Cryptoasset Regulation
02/14/2023
The U.K. government has published its much-anticipated proposals for regulating the cryptoasset industry. These proposals, currently in the form of a consultation, will see many (but not all) cryptoasset-related activities being brought within the regulatory perimeter for financial services in the U.K. The consultation is extensive, covering the main elements of a new regime for cryptoasset issuance and disclosure, trading, custody and lending, as well as a proposed market abuse framework for cryptoassets.
The consultation closes on 30 April 2023. The government will publish its response once it has analysed the feedback, which will be followed by legislation being put before Parliament. The Financial Conduct Authority will consult on its proposed detailed rules once the legislation has been published.
The government has also announced a significant change to its earlier communicated approach to the regulation of cryptoasset financial promotions. Previously, such promotions could be issued only by regulated financial institutions. The changes will mean that those cryptoasset businesses that are registered with the FCA for the purposes of anti-money laundering compliance will be able to communicate their own financial promotions in relation to qualifying cryptoassets.
We discuss these proposals in detail in our client note, "UK Proposals for Cryptoasset Regulation". -
FCA Publishes Consultation Paper on Sustainability Disclosure Requirements
10/25/2022
Following its 2021 Discussion Paper, the FCA has published a consultation paper setting out proposals to enhance sustainability disclosure and labeling requirements for sustainability-linked investment products. The majority of the rules will apply only to fund and asset managers, although the FCA is considering expanding this to FCA-regulated asset owners in relation to their investment products and for certain rules to apply to distributors of investment products to U.K. retail investors. The proposals are directed at fund and asset managers and portfolio managers based in the U.K. The FCA will consult separately on how these proposals apply to overseas fund and asset managers. The FCA already has climate-related disclosure rules for premium listed issuers, as well as rules for standard listed issuers and certain FCA-regulated firms (asset managers, life insurers, pure reinsurers and FCA-regulated pension providers).
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UK Financial Conduct Authority Consults on Regulatory Perimeter Guidance for Trading Venues
09/22/2022
The U.K. Financial Conduct Authority has published a consultation paper on proposed guidance on the regulatory perimeter for multilateral trading facilities and on possible future changes to smaller trading venues' regulatory obligations. The FCA's consultation follows proposals made in HM Treasury's July 2021 U.K. Wholesale Markets Review, the response to which was published in March 2022. Responses to the FCA's consultation should be submitted by November 11, 2022. The FCA plans to finalize the draft guidance and publish a policy statement in Q2 2023.
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UK Conduct Authority Warns Buy Now Pay Later Firms on Compliance with Financial Promotion Requirements
08/19/2022
The U.K. Financial Conduct Authority has issued a warning to Buy Now Pay Later firms about financial promotions that potentially breach the FCA's rules. The Financial Services and Markets Act 2000 prohibits the communication of an "invitation or inducement to engage in investment activity" either in the U.K. or in a way that could have an effect in the U.K. Firms authorized in the U.K. are exempt from this Financial Promotion Restriction; however, they must still comply with the rules governing financial promotions when making any promotion or when approving a financial promotion of an unauthorized firm. All financial promotions must be fair, clear and not misleading.
The FCA is concerned about the promotion of unregulated BNPL agreements where the advert does not include a warning about the risks involved in BNPL products, and that only refer to the benefits. These financial promotions do not satisfy the FCA's rule that a balanced view must be included in all financial promotions (i.e., it must cover the benefits and the risks). The FCA is also concerned that the promotion of certain unregulated BNPL products is being carried out by unauthorized firms that have not sought or obtained the approval of their financial promotion by an authorized firm.
The FCA has written to the CEOs of several BNPL firms raising these concerns and warning the firms that it will act if corrective steps are not taken.
Earlier this year, the FCA secured changes to the contracts of four Buy Now, Pay Later firms —Clearypay, Klarna, Laybuy and Openpay. Certain terms, including contract cancellations, continuous payment authorities and right of set-off terms, were fairer and easier to understand. -
UK Regulator Proposes Extending Long-Term Asset Fund to Certain Retail Investors
08/01/2022
Following the introduction of a regulatory framework for a new type of authorized open-ended fund called the long-term asset fund, the U.K. Financial Conduct Authority has opened a consultation on extending the LTAF to more retail investors. The LTAF enables investors to invest in long term illiquid assets through an authorized fund vehicle. The LTAF may currently only be marketed to professional investors, certified and self-certified sophisticated investors, and certified high net worth individuals. The FCA is proposing to categorize the LTAF as a Restricted Mass Market Investment as per its recent Policy Statement on revising the financial promotion rules for high-risk investments. Opening the LTAF to more retail investors would be accompanied by additional investor protections rules, such as those that apply to other retail authorized funds. Responses to the consultation may be submitted by October 10, 2022. The FCA intends to publish a policy statement and final rules early in 2023.ATTORNEYS: Barnabas W.B. Reynolds, Thomas Donegan, Sandy Collins
TOPICS : Consumer Protection, Funds -
Stricter UK Financial Promotion Rules Going Ahead
08/01/2022
The U.K. Financial Conduct Authority has published its final Policy Statement and Rules on financial promotions of high-risk investments and firms approving financial promotions. Many of these changes address or build upon recommendations of the Gloster Report or are otherwise related to the fallout from the London Capital & Finance plc scandal. The rules on risk warnings for financial promotions of high-risk investments will apply from December 1, 2022, and all other rules will apply from February 1, 2023. The FCA's related guidance (which is included in Annex 2 of the Policy Statement) will also apply from February 2023.
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UK Financial Conduct Authority Publishes Final Rules and Guidance for New Consumer Duty
07/27/2022
The U.K. Financial Conduct Authority has published its final rules and guidance for the new Consumer Duty, which is intended to establish clearer standards for consumer protection across the financial services industry. The FCA conducted two consultations, one in May 2021 and another in December 2021 (following its earlier Discussion paper and Feedback Statement in 2018/2019). The final rules and guidance take account of the feedback received to those consultations.
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Access to Cash Designation Measures Confirmed
05/19/2022
HM Treasury has published a summary of responses it received to its consultation on protecting access to cash across the U.K. In the response, HM Treasury confirms that it will be proceeding with the proposal to designate which firms will have obligations to ensure reasonable access to withdrawal and deposit facilities for individuals and reasonable access to deposit facilities for SMEs. The measures will be provided for in the Financial Services and Markets Bill, which was announced in the Queen's Speech.
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UK Payment Systems Regulator Panel Publishes Report on Digital Payments Initiative
05/10/2022
The U.K. Payment Systems Regulator Panel has published a report on its Digital Payments Initiative, which investigated potential barriers to the take-up of digital payments and possible solutions. The Panel advises the PSR on a continuous basis but undertook the Digital Payments Initiative as a special project to address the issue of consumers failing fully to embrace the benefits of digital payments.
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European Commission Consults on Revised EU Payment Services Directive and Open Finance
05/10/2022
The European Commission has published three consultations on the revised EU Payment Services Directive and on open finance. The results of the consultations will help inform the Commission's review of PSD2 and proposed legislation on a broader open finance framework, as part of plans developed under the 2020 EU Digital Finance Strategy and EU Retail Payments Strategy. The review of PSD2 will take stock of the impact that the Directive has had on the EU payments market and whether its objectives have been achieved. The open finance review will gather evidence on the current state of open finance, its further development and effective consumer protection. The EU is proposing to develop an open finance framework, as outlined under the EU's 2021 communication on the Capital Markets Union.
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European Banking Authority Publishes Report on Non-Bank Lending Sector
05/04/2022
The European Banking Authority has published a report on the EU non-bank lending sector i.e., the growing number of financial intermediaries operating outside the EU financial services regulatory perimeter, including BigTech firms (e..g, Meta, Amazon and Google) and FinTech firms, which develop innovative technology for financial services.
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UK Conduct Regulator Publishes Results of Review of Investment Platforms Market
05/04/2022
The U.K. Financial Conduct Regulator has published a statement on the results of its review of the investment platforms market. The FCA launched its Investment Platforms Market Study in 2017 to investigate whether competition between investment platforms was working in the interests of consumers. Investment platforms enable consumers and financial advisers to review investment opportunities across a range of funds and execute and change their investments. In 2019, the FCA published a Final Report which concluded that consumers should be able to switch more easily between investment platforms, and proposed a series of measures to help achieve this. It also announced that it would review the industry's progress in adopting these measures in 2020/2021. The FCA's statement sets out the results of that review.
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UK Conduct Regulator Commits to Three-year Strategy of Improving Outcomes of Regulation
04/07/2022
The U.K. Financial Conduct Authority has published a three-year Strategy on improving outcomes of regulation and its 2022/23 Business Plan. In the 2022-2025 Strategy, the FCA outlines its expectations of financial services across all sectors, with a view to the overall outcomes that firms should achieve. There are three outcomes for both the wholesale and retail markets, which are fair value, access and confidence. An additional outcome of suitability and treatment applies for the retail markets, to ensure that consumers are treated well and are sold products and services that are suitable for them. The 2022/23 Business Plan sets out the detailed work that the FCA will undertake over the next year to meet the commitments made in its Strategy.
Read more.ATTORNEYS: Sandy Collins, Barnabas W.B. Reynolds
TOPICS : Consumer Protection, Financial Services, FinTech, MiFID II -
European Commission Consults on Potential Digital Euro
04/05/2022
The European Commission has launched a targeted consultation on a possible digital euro. The EU is considering introducing a digital euro for retail payments, which would be available alongside cash. A decision has not yet been made. The European Central Bank, responsible for the design and implementation of the digital euro, launched a project in July 2021 to get ready for the potential issuance of a digital euro. The introduction of a digital euro would require an EU regulation based on a proposal by the European Commission and agreed through the co-legislative process. Legislative changes would also be needed for existing legislation (e.g., under the revised Payment Services Directive). Central banks from non-euro area Member States also envisage issuing digital currencies.
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UK To Bring Stablecoins Used for Payments Under Regulation
04/04/2022
Following the call for evidence issued in January 2021, the U.K. government has confirmed that it will bring the issuing or facilitating the use of stablecoins used as a means of payment into the U.K. regulatory perimeter, in an announcement by John Glen, MP, at U.K. Fintech Week. The details were published in a response to the consultation.
Consistent with the proposals under the Future Regulatory Framework Review, the government will set the regulatory perimeter, objectives and principles and the regulators - the Financial Conduct Authority, the Bank of England and the Payment Systems Regulator - will set out the detailed requirements in rulebooks. The government also confirms that it intends to consult later in 2022 on regulating a wider set of crypto activities, including trading of cryptocurrencies such as Bitcoin and Ether.
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UK Regulator Finalizes Rules On Scope Of PRIPPs
03/25/2022
Following its consultation last year, the U.K. Financial Conduct Authority has published its final policy and rule amendments on the scope of the rules governing packaged retail and insurance-based investment products (or PRIIPs). The FCA had aimed to bring in the new rules by January 1, 2022. Instead, the final rules and Regulatory Technical Standards will apply from March 25, 2022. Firms will have until December 31, 2022 to apply the new requirements. These changes are designed to bring legal certainty to the scope of the PRIIPs regime, as it applies to corporate bonds, and mitigate risks relating to misleading performance scenarios and summary risk indicators and concerns about the transaction costs calculation methodology. It is hoped that the amendments will promote liquidity and improve choice in the retail corporate bond market, and also reduce the complexity of key information documents (or KIDs), the key information disclosure documents that must accompany PRIIPs when they are made available to retail investors.
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UK Prospectus Review: Government Confirms Policy for Reforms to Boost London's Capital Markets
03/01/2022
Following its consultation last year, HM Treasury has set out its policy approach to amending the U.K. Prospectus regime. The current U.K. Prospectus Regulation will be replaced by legislation when parliamentary time allows. The changes will, among other things, separate the regulation of public offers of securities from the regulation of admissions of securities to trading, as Lord Hill recommended. In addition, the Financial Conduct Authority will be granted greater responsibility for the detail of the new regime through rules. The complete set of reforms will only apply once those rules are implemented. The main changes are set out below.
Read more.ATTORNEYS: Sandy Collins, Thomas Donegan
TOPICS : Consumer Protection, Financial Market Infrastructure, Securities -
HM Treasury Confirms Policy Approach on Wholesale Markets Review
03/01/2022
HM Treasury has published its consultation response to the Wholesale Markets Review, setting out summaries of responses received to its proposals and how changes will be progressed. There are certain areas that HM Treasury will not progress at this stage, and which will be subject to further consideration.
For the proposals that are being taken forward, implementation may be by legislation or pursuant to the Financial Conduct Authority's rules. HM Treasury states that legislation will be brought forward when Parliamentary time allows. In certain instances, where details are currently set out in legislation, but would sit better in regulatory rules, the government intends to legislate to delegate responsibility to the FCA for preparing detailed rules, which it states will be part of the implementation of the Future Regulatory Framework review. The FCA is expected to consult on its proposals for existing rule amendments in the first half of this year.
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UK Complaints Commissioner Upholds Complaints Against UK Financial Conduct Authority's Compensation and Complaints Scheme
02/15/2022
The U.K. Financial Regulators' Complaints Commissioner has published its final report upholding complaints from over 400 complainants concerning: (i) the U.K. Financial Conduct Authority's failures of regulation concerning London Capital & Finance; and (ii) the FCA's subsequent refusal to compensate bondholders for its role in their losses.
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UK Regulator Drives Changes to Terms of Buy Now, Pay Later Firms
02/14/2022
The U.K. Financial Conduct Authority has secured changes to the contracts of four Buy Now, Pay Later firms – Clearypay, Klarna, Laybuy and Openpay. Certain terms, including contract cancellations, continuous payment authorities and right of set-off terms, will be made fairer and easier to understand. This was done under the FCA's powers as an unfair terms regulator under the Consumer Rights Act 2015 to ensure that firms comply with consumer protection legislation. Clearpay, Laybuy and Openpay have also offered voluntarily to refund customers who were inappropriately charged late payment fees (Klarna does not charge late payment fees so no refunds were due).
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UK Conduct Authority Consults on Wide-Ranging Change to Financial Promotion Rules
01/19/2022
The U.K. Financial Conduct Authority has launched a consultation on proposed changes to the financial promotion rules. The proposals range from rules relating to the approval by authorized firms of financial promotions of unauthorized firms and the new regime for qualifying crypto-assets and other high-risk investments. Many of this suite of changes address or build upon recommendations of the Gloster Report or are otherwise related to the fall-out from the London Capital & Finance plc scandal. Responses to the consultation may be submitted until March 23, 2022. The FCA intends to publish its final rules in Summer 2022.
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HM Treasury Confirms Tightening of Rules for Crypto-Asset Financial Promotions
01/18/2022
Following its July 2020 consultation, HM Treasury has published a consultation response on its proposals to amend the U.K.'s financial promotion rules. These include changes to subject unregulated crypto-assets to the financial promotions regime. The response summarizes the feedback to the consultation and outlines how relevant crypto-asset promotions will be regulated. The government is proceeding with its proposal to bring qualifying crypto-assets within the scope of the Financial Promotion Order as controlled investments. Qualifying crypto-assets will be fungible (freely replaceable by another of a similar nature or kind) and transferable (which excludes crypto-assets in closed systems). E-money and central bank digital currencies will be excluded from the definition. In a change from the original proposal, the government has decided to remove the reference to distributed ledger technology from the definition of a qualifying crypto-asset. The aim of this change is to future-proof the definition for technological innovation.
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UK Financial Conduct Authority Publishes Feedback Statement on Access to Wholesale Data
01/11/2022
The U.K. Financial Conduct Authority has published a feedback statement relating to the call for input on accessing and using wholesale data. In the feedback statement, the FCA summarizes the responses received and the FCA's findings on whether data are being priced and sold competitively. The FCA confirms that it will undertake the following work to gain a deeper understanding of the potential harm and, where appropriate, take steps to mitigate any harm. In particular, the FCA will focus on the following:
- Trading data: in Spring 2022, the FCA will run an information gathering and analysis exercise that concentrates on the pricing of trading data, underlying costs and the terms for the sale of trading data. The FCA's findings will be published later in 2022.
- Benchmarks: in Summer 2022, the FCA will launch a market study into how competition operates between benchmarks, which will include the pricing of benchmarks, contractual terms and obstacles to switching between benchmarks.
- Credit Rating Agencies: by the end of 2022, the FCA will begin a market study on the competition in the sale of credit rating data, including pricing, contractual relationships, difficulties in entry to the credit rating data market and innovation.
- Alternative data and advanced analytics: the FCA has commissioned research on the nature and scale of alternative data.
ATTORNEYS: Thomas Donegan, Sandy Collins
TOPICS : Competition, Consumer Protection, Credit Ratings, Financial Market Infrastructure -
UK Regulator Issues Statement on Extension of Exemption for UCITS From PRIIPs Disclosure Requirements
12/29/2021
The U.K. Financial Conduct Authority has published a statement in which it confirms that it will amend the Technical Standards and related Handbook provisions to align with the extended exemption from the requirements of the U.K. Packaged Retail and Insurance-based Investment Products Regulation for investment companies and persons advising on, or selling, units in UCITS from December 31, 2021, to December 31, 2026. The FCA states that it will not take enforcement action against firms that offer UCITS funds to U.K. retail investors and that provide either a key information document under the PRIIPs Regulation or a UCITS key investor information document. Following the government's announcement in June 2021, the Financial Services Act 2021 extended the exemption for UCITS. -
EU Amending Technical Standards Improve PRIIPs Regulation Requirements
12/20/2021
An EU Commission Delegated Regulation (2021/2268) amending the Regulatory Technical Standards supplementing the EU Packaged Retail Investment and Insurance-based Products Regulation has been published in the Official Journal of the European Union. The amending RTS include provisions to:- Introduce new methodologies to calculate appropriate performance scenarios and a revised presentation of these scenarios.
- Revise the summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs.
- Modify the methodology to calculate transaction costs.
- Clarify the rules for PRIIPs offering a range of options for investment (known as MOPs), in particular, to identify the products' full cost implications.
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FCA Publishes Policy Statements on Climate-Related Disclosures for Standard Listed Companies and FCA-Regulated Firms
12/17/2021
The FCA has published two policy statements introducing new rules and guidance on climate-related disclosures for standard listed issuers and certain other FCA-regulated firms. The Policy Statements mirror the rule imposed under the FCA's Policy Statement on climate-related disclosures for premium listed issuers.
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HM Treasury Proposes Amendments to the UK Financial Promotion Exemptions
12/15/2021
HM Treasury has launched a consultation on proposed changes to the financial promotion exemptions for high net worth individuals and sophisticated investors. The aim of the proposals is to mitigate the misuse of the exemptions by some firms marketing inappropriate products to ordinary retail customers and to update certain aspects that were introduced about 20 years ago. The Treasury Select Committee's report on the failure of London Capital & Finance recommended that the exemptions be rethought to ensure greater consumer protection. The consultation closes on March 9, 2022.
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UK Conduct Regulator Publishes Feedback and Further Consultation on New Consumer Duty
12/01/2021
The U.K. Financial Conduct Authority has published feedback and a further consultation on its new proposed Consumer Duty. The FCA's previous consultation was published in May 2021 and set out the FCA's proposed rules for a new duty of care that firms would owe to retail clients when conducting regulated activities. The proposed duty will consist of an overarching Consumer Principle, three cross-cutting rules and four outcomes that firms should aim to achieve when conducting regulated activities. The latest consultation responds to feedback received on the original consultation and seeks input on the FCA's proposed final version of the rules.
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UK Financial Conduct Authority Announces New Approach to Speed Up Issuing Statutory Notices
11/26/2021
The U.K. Financial Conduct Authority has published a policy statement setting out its new approach to issuing statutory notices, which will take effect from November 26, 2021. The FCA publishes statutory notices when exercising certain enforcement and supervisory powers, such as varying or cancelling a firm’s authorization, refusing an application for authorization or approval of an individual, and imposing requirements on firms.
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