UK Financial Conduct Authority Publishes First Annual Perimeter Report
06/19/2019The U.K. Financial Conduct Authority has published its first annual perimeter report, which (i) describes the boundaries of the FCA's regulatory oversight, (ii) considers challenges to the regulatory perimeter and (iii) sets out its aims for the future. The motivations behind the report include recent high profile controversies involving firms on the periphery of the FCA's regulatory perimeter (including London Capital & Finance which issued non-transferable bonds to consumers), innovations in technology that test the boundaries of the perimeter and the post-Brexit future of U.K. financial regulation.
The report describes the FCA's perimeter, which is primarily set out in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The FCA also has regulatory powers as the UK's listing authority, responsibility for administering the Payment Services Regulations and Money Laundering Regulations and concurrent competition powers which it shares with the Competition and Markets Authority.
Challenging areas of the regulatory perimeter that are currently on the FCA's radar include:
- Unregulated introducer firms that offer free pension reviews to consumers, but have been instrumental in the decisions of some consumers transferring out of highly beneficial pension scheme arrangements; the FCA has recently introduced a pensions cold calling ban that came into force on January 9, 2019;
- Investment consultants and proxy advisors that provide unregulated advice and other services to asset managers and asset owners; HM Treasury is planning a consultation to bring some investment consultancy and fiduciary management activities within the FCA's regulatory perimeter;
- The challenges presented by cryptoassets; HM Treasury will consult this year on cryptoassets that are currently outside the regulatory perimeter while the FCA intends to publish finalized guidance on cryptoassets in summer 2019;
- Certain issues raised by the London Capital & Finance scandal, in particular the situation of financial firms whose business is to issue investment products such as non-transferable bonds to consumers and which of their activities are regulated; and
- Technology companies (including social media platforms and online retailers) that are looking to provide financial services; the FCA is monitoring the development of these companies carefully and will publish a call for input on "Open Finance" in 2019.
Looking to the future, the FCA will provide an update in its 2020 annual perimeter report on:
- The extent to which the FCA is able to regulate all financial services activities undertaken by an authorized firm;
- The extent to which the FCA's regulatory perimeter is aligned with the Financial Ombudsman Service and the FSCS; and
- The distinction between what is covered by the FCA's regulatory perimeter and what is not.
View the FCA's 2018-2019 Annual Perimeter Report.
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