GameStopped? Regulators react to the “short squeeze”

While trading frenzies are as old as the markets themselves, the novelty of widespread retail trading in obscure US stocks fueled by Reddit chat forums has prompted recent interventions by regulators on both sides of the Atlantic.

Unfortunately the FCA’s terse 29 January statement on “recent share trading issues” gave little insight into how it viewed these events from a regulatory perspective. The FCA said only that buying shares in volatile markets is “risky“, and “unlikely to be covered” by the FSCS.

Several of the major online securities trading platforms responded to the volatility by stopping orders in affected securities. The FCA was supportive, noting that broking firms “are not obliged to offer trading facilities to clients“, and “may withdraw their services, in line with customer terms and conditions if…they consider it necessary or prudent to do so“.

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FCA Launches Defined Benefit Advice Assessment Tool

FCALast month, the FCA launched its Defined Benefit Advice Assessment Tool (“DBAAT“) as part of its strategy to reduce harm to consumers and improve the suitability of defined benefit (“DB“) transfer advice. The tool will help firms to understand precisely how the FCA assesses the suitability of DB transfer advice.

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Sustainable Finance Disclosure Regulation – new ESG challenges for asset managers

What is SFDR?

The SFDR is part of the European Commission’s package of reforms to implement its sustainable finance strategy. The strategy focuses on three areas:

  • Strengthening the foundations for sustainable investment by creating an enabling framework. The Commission believes many financial (and non-financial) companies still focus excessively on short term financial performance instead of long term development and sustainability-related challenges and opportunities.
  • Increasing opportunities to have a positive impact on sustainability for citizens, financial institutions and corporates – enabling them to “finance green”.
  • Integrating climate, environmental, and social risks into financial institutions and the financial system as a whole.

To that end SDFR introduces a series of disclosure requirements for investment firms to address environmental, social and governance (ESG) concerns. It applies to asset and fund managers (e.g. MiFID investment managers, alternative investment fund managers (AIFMs), and UCITS managers), and investment firms, as well as credit institutions and insurers. The SFDR entered into force in December 2019 and its implementation date is on 10 March 2021.

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FCA Publishes Updated Guidance on the BI Insurance Test Case

FCAThe Financial Conduct Authority (the “FCA”) has published a ‘Dear CEO’ letter to insurers following the recent decision made in the Supreme Court test case on non-physical damage business interruption (“BI”) insurance. The FCA is determined to make the next steps on the recent ruling as clear as possible.

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Findings of the FRC’s Audit Committee research point towards audit sector reform

The Financial Reporting Council (FRC) has just published the outcome of new research into the approach that Audit Committee Chairs (ACCs) take to audit quality. The findings suggest inconsistency among ACCs on what constitutes audit quality, and how it should be approached, which the FRC says “lends weight to the proposals for reforms in the audit sector”.

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BI Insurance Update – FCA publishes draft guidance on proving the presence of COVID-19

FCAAt the end of last week, the FCA announced that it had commenced a consultation exercise on a piece of draft guidance it has prepared to assist policyholders, insurers and insurance intermediaries to prove the presence or otherwise of COVID-19 in a particular area, which is a requirement of some Business Interruption (BI) policies.

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FOS re-confirms commitment to complaints handling during pandemic

ombudsmanLast week, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) released correspondence in which the FCA sought reassurance from the FOS in relation to how it intends to handle complaints about financial firms during the COVID-19 pandemic.

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