Earlier this year, the Financial Conduct Authority published its analysis of its financial promotions data for 2022. That report sheds some interesting light on the FCA’s actions taken against authorised firms, and unauthorised entities and individuals, for breaches of financial promotion rules.
The standout message is clear – the FCA has significantly increased its interventionist activity, in response to what the FCA has said is poor financial promotions compliance.
The Financial Conduct Authority confirmed last month that the limit for compensation that can be awarded by the Financial Ombudsman Service (“FOS”) will be raised from £375,000 to £415,000, for complaints made after 1 April 2023 relating to acts or omissions on or after 1 April 2019 – an increase of over 10%.
A lower limit of £190,000 applies to any complaints made from 1 April 2023 relating to events that occurred prior to 1 April 2019 – again an increase of over 10%, from £170,000 in 2022.
Since July 2022 when the FCA published its rules and guidance to implement the Consumer Duty, much ink has been spilled on what it will mean for affected firms. Now, with the clock ticking down to implementation on 31 July 2023, the FCA has published the findings of its review of a number of larger firms’ plans for complying with the Duty.
“Could do better” is the overall mark on the industry’s homework so far.
What will the Consumer Duty involve?
To recap, the reforms will involve:
In August 2022, the FCA released a policy statement introducing improvements to the appointed representative (“AR“) regime. In its policy statement, the FCA provides feedback on its earlier consultation, and sets out new rules to make authorised financial firms more responsible for their ARs.
In its press release, the FCA says that whilst some principal firms do effectively ensure their ARs comply with rules, “many do not adequately oversee the activities of their ARs“. It says its new rules will “prevent consumers being mis-sold or mis-led by ARs and will prevent misconduct by ARs undermining markets operating fairly and safely“.
In what is widely touted as the first of its kind in the UK, a recent order made in D’Aloia v Persons Unknown & Others by the High Court marks an expansion of the potential methods for service of claims permitted for English proceedings, by allowing proceedings to be served via airdrop of Non-Fungible Token (NFT). The decision marks a useful step forward for victims of fraud in the crypto-asset space.
On 14 July FCA CEO Nikhil Rathi gave a speech at the Peterson Institute for International Economics, setting out a helpful overview of the FCA’s intended future approach to its aspects of its regulatory responsibilities. In addition to emphasising cross-border co-operation, Mr Rathi elaborated the following focus areas:
With a new Consumer Principle, clarified outcomes and phased implementation, the FCA released the final rules and guidance on a new Consumer Duty at the end of July: one of the biggest changes in the retail consumer regulatory landscape in recent years.
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.
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
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.
