Use it or lose it: FCA accelerates crack down on unused regulatory permissions

The Financial Conduct Authority’s new powers to more swiftly cancel or change firms’ regulatory permissions have now come into effect. These powers are particularly aimed at firms that have permissions they are not using. Firms can be required to prove they are carrying out the regulated activities they have permissions for, or risk losing their permissions. It can be expected that the FCA will be increasingly active in the coming months in looking to strip firms of unused permissions via this new streamlined process. Firms should continue to think carefully about whether they have permissions they are not using and should voluntarily relinquish to avoid incurring the regulator’s ire.

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Banks’ Quincecare duty in APP fraud Cases potentially extended

In March the Court of Appeal overturned an earlier High Court judgment and held that the application of Quincecare duty does not depend on the fact that the bank is instructed by an agent of the customer of the bank. In principle, the Quincecare duty could now arise where a non-corporate customer falls victim to an “authorised push payment” (APP) fraud. Continue Reading

Cryptoasset firms and sanctions

The FCA has stressed recently that it expects the cryptoasset sector to play its part in ensuring that Russian sanctions are complied with, and highlighted that the financial sanctions regulations do not differentiate between cryptoassets and other forms of assets.

The use of cryptoassets to breach or circumvent economic sanctions is a criminal offence under the Money Laundering Regulations 2017 and regulations made under the Sanctions and Anti-Money Laundering Act 2018; most notably the Russia (Sanctions) (EU Exit) Regulations 2019, as amended.

In addition to steps taken to identify customers and monitor transactions under the Money Laundering Regulations 2017, the financial sector, including the cryptoasset sector, will also need to implement additional sanctions specific controls as appropriate. Continue Reading

High-risk investments: FCA consults on strengthening financial promotion rules

FCAThe FCA perceives that since the start of the COVID-pandemic there has been a rapid growth in the proportion of consumers holding high‑risk investments. In response, the FCA is planning a revamp of the financial promotion regime, and has recently released its consultation paper on the proposed changes. Continue Reading

FCA consults on guidance for firms who seek to limit their liabilities

The Financial Conduct Authority has published proposed guidance on the use by firms of compromises to manage their liabilities. Compromises include arrangements with creditors and/or shareholders, such as Schemes of Arrangement, Part 26A Restructuring Plans, and Creditors Voluntary Arrangements (CVAs).

The Guidance is aimed at FCA-regulated firms that seek to limit their liabilities by using these company or insolvency law techniques. The Guidance warns that firms could face assertive action if proposals unfairly benefit them at the expense of their customers. Sarah Pritchard, Executive Director of Markets at the FCA, states:

“Under existing company and insolvency law, firms have options to limit their liabilities. When making use of these, they still have a responsibility to treat their customers fairly. We will take action against firms that don’t meet this obligation”.

The move comes in response to an increase in the number of firms developing proposals to deal with significant liabilities to consumers, particularly redress liabilities. Continue Reading

A ‘Fundamental Shift’ in Financial Regulation – Further FCA Consultation on New Consumer Duty

2022 looks set to be a busy year for regulated firms dealing with retail customers. Following its initial consultation in May 2021, on 7 December 2021 the FCA issued a further consultation (CP21/36), announcing its desire to “fundamentally shift” the mindset of regulated firms, by implementing a new consumer duty later this year.

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The FCA Perimeter Report 2020/21 – Key Points for Firms

The scope of the FCA’s powers and remit is not a simple matter, as the FCA readily acknowledges. The FCA’s regulatory “perimeter” derives primarily from from FSMA and the universe of secondary legislation surrounding it, particularly the Regulated Activities Order (“RAO”). However it also derives powers and responsibilities from various UK and on-shored EU-legislation in relation to areas such as payment services, competition, money laundering, consumer credit, fund management, and so on.

At a time when the UK financial services market place is undergoing profound change due to rapid technological advances, increased digitalisation, the pandemic, Brexit and the drive to a greener economy, the FCA’s perimeter needs to be under constant review and revision.

The FCA’s annual Perimeter Report attempts to clarify some of this complexity and identify where it sees gaps in its remit that could result in consumer harm. While it may seem arcane, the Report forms part of a dialogue with Government that will shape the regulatory landscape in coming years. The perimeter is also important in determining what activities are protected by the Financial Services Compensation Scheme (“FSCS”) and what falls within the compulsory jurisdiction of the Financial Ombudsman Service (“FOS”). The Perimeter Report is keenly watched for these reasons.

Our takeaways from the recently published Perimeter Report 2020/21 are as follows: Continue Reading

PRA increases pressure on firms to improve regulatory reporting processes

The Prudential Regulation Authority (PRA) recently a Dear CEO letter titled “Thematic Findings on the reliability of the regulatory reporting“, outlining the current inadequacy of finance firms’ regulatory reporting procedures and the importance of comprehensive processes. The letter summarizes the PRA’s findings following its investigations carried out since October 2019, and a number of s.166 skilled person reviews on the topic. The investigation focused on governance arrangements, systems and controls to produce returns, schedules of key interpretations and assessing the accuracy of firms’ reporting returns. Overall, the PRA said it was disappointed with firms’ regulatory reporting processes. Whilst the PRA recognises potential historical reasons for the gap between the quality of financial reporting and regulatory reporting, it does not consider that an excuse for inaccurate regulatory reporting. Continue Reading