Regulation round-up July 2018

Regulation round-up is our monthly email to all regulated firms, updating you on the latest news that affects your sector.

July 2018 Quick Links


Introduction: Jonathan Davidson, Executive Director, Supervision Retail and Authorisations

Firms’ culture and governance is a priority for us. Culture in financial services is widely accepted as the root cause of major conduct failings in the industry in recent history.

On 4 July, we published rules for extending the Senior Managers and Certification Regime to 47,500 firms. These rules will apply from:

These rules represent another step towards the transformation of culture across financial services. Our aim is to encourage cultures where behaviours are driven by what is the right thing to do – not just by what you need to do to be compliant.

To prepare, firms need to:

  • make sure Senior Managers have clear responsibilities,
  • check and confirm certified staff are fit and proper annually
  • ensure financial services staff understand how the Five Conduct Rules apply to them

We’ve published a video overview and user-friendly guides to explain the rules and the principles of the Regime.

We have also published our proposals for introducing a Directory of financial services workers. We’ve listened to feedback that it’s important for firms and consumers to be able to check the status of financial services staff. We want to make it easier for people to be confident they can find the right people to deal with.

These publications help to encourage confidence in the industry. They set clear standards of behaviour and make it easier to verify information about individuals working in financial services.


Hot topics

Retirement Outcomes Review final report

On 28 June, we published the final report of our Retirement Outcomes Review. We found that the freedom and choice introduced by the pensions freedoms have been popular, but have also required people to make more complicated decisions about retirement than previously. Our review focused on consumers who do not take advice and found that some of them are at risk of harm. 

We proposed a range of remedies to address the harms we identified and put the market on a good footing for the future. These are focused on three stages – providing better communications, support and guidance before consumers access their pensions savings; at the point of entering drawdown or buying an annuity; and once a consumer has entered drawdown. These remedies range from improving wake-up packs to requiring that providers offer ready-made drawdown investment solutions. 

We are consulting on some of these remedies now, and will do further work on others before consulting again. We are requesting comments on our proposals for discussion (questions 1-33 and 47-49) by 9 August, and comments on our proposals for consultation (questions 34-46) by 6 September.

FCA and Practitioner Panel survey: 2018 report

We and the Practitioner Panel have published the findings from our 2018 joint survey of FCA-regulated firms. The survey gives views across the financial services sector of our performance as a regulator. It is carried out on our behalf by Kantar Public, an independent market research organisation, who sent the survey to a sample of firms. This gives firms an opportunity to provide their views on how we regulate industry.

The results are the highest positive indicators since the survey began. The scores which we use to track for overall satisfaction and effectiveness have continued to increase. There is an increase in confidence that our oversight of the industry will deliver on all three of our operational objectives:

  • securing an appropriate degree of protection for consumers
  • protecting and enhancing the integrity of the UK financial system
  • promoting effective competition in the interests of consumers

In particular, confidence around our competition objective (promoting effective competition in the interests of consumers) is up significantly from 60% to 72%. 

The analysis of the findings has also identified areas for improvement, which we will continue to address over the coming year:

  • facilitating innovation within UK financial services
  • transparency of regulation
  • more forward-looking regulation

We will use the results to better understand the issues affecting all firms and help improve how we work. The results have been presented to the Practitioner Panel and the FCA Board. You can read the report on our website and also find out more about the Practitioner Panels.

Operational Resilience

Addressing the industry’s operational resilience is a cross–sector priority in the FCA’s 2018/19 Business Plan. The interconnectedness of the industry and increasing reliance on complex technology and shared infrastructure creates risks as well as benefits.  

Operational resilience failures, including those caused by cyber-attacks and technology failures, pose a risk to the supply of business services provided by firms, and can cause harm to consumers and other market participants. Disruptive events will happen so all firms need to plan for these eventualities, be able to absorb the shocks, and maintain or quickly resume the business services they provide to consumers or  other market participants. 

We will strengthen supervisory assessments of the highest impact firms to better understand their current and planned use of technology, resilience to cyber-attacks and staff expertise; review how governance, strategy, systems architecture, risk management and culture contribute to firms’ data security. We will also conduct focused thematic work with ‘lower impact’ firms, based on harms identified in each sector. 

On 5 July we published a Discussion Paper jointly with the PRA and Bank of England. Operational resilience affects all the supervisory authorities’ objectives (safety and soundness of firms, harm to consumers/market participants, and UK financial stability). The Discussion Paper explains why operational resilience is relevant to the supervisory authorities’ objectives, why it should matter to firms and their senior management, and how current supervisory approaches could be developed.  We encourage you to read the Discussion Paper and give your feedback.

Annual Report and Accounts 2017/18

On Thursday 19 July, we published our Annual Report and Accounts 2017/18.  

We also published our Annual Diversity Report, Annual AML report, Annual Competition Report and Annual Enforcement Performance Report.  

Our Annual Report and Accounts looks back on key pieces of work we undertook throughout 2017/18. 

Highlights from this year include:

  • our work to prepare for EU withdrawal
  • our continued work to implement EU and domestic legislation affecting financial services including the implementation of MiFID II and PSD2
  • extending the Senior Managers and Certification Regime to non-executive directors and preparing for the extension to all financial services firms
  • our work on high cost credit and consumer debt
  • launching a campaign to alert PPI customers to the deadline for complaints about mis-selling

The FCA’s Annual Public Meeting will be held on 11 September at the Queen Elizabeth II Conference Centre in London. Register your place via our event website

Back to top


Banks and Building Societies

Strategic Review of Retail Banking Business Models progress report published

On 27 June we published a progress report on our Strategic Review of Retail Banking Business Models. The report looks at the different sources of competitive advantage that have helped major banks to retain their market shares despite progress made by challenger banks. The review also shows that most Personal Current Accounts customers contribute to their bank’s profits, but a small proportion pay significantly more than others.

We are keen to continue engaging with participants across the industry to discuss our work and are now asking for responses to this update by 7 September 2018.

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, as well as an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Cash Savings discussion paper

We have published a Discussion Paper on price discrimination in the cash savings market. We are concerned that the interest rates that longstanding customers receive on easy access cash savings products are generally lower than those on accounts opened more recently. So we are opening a discussion on the harm and options to address the harm, including the introduction of a basic savings rate (BSR) to improve outcomes for longstanding customers.

We welcome feedback by 25 October 2018.

Outsourcing to the cloud

The European Banking Authority (EBA) has issued Recommendations on outsourcing to cloud services providers. We have also updated our own cloud guidance to reflect changes to relevant legislation. Our guidance will be relevant to all firms interested in outsourcing to the cloud, apart from banks, building societies, designated investment firms or IFPRU investment firms who should refer to the EBA’s recommendations in the future.

Back to top


Financial Advisers

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Back to top


Mortgage Advisers and Lenders

Digital Regulatory Reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Live & Local 2018/19 events

We have announced the first set of UK-wide events in the 2018/19 Live & Local programme.  

We are continuing the popular monthly Q&A roundtable discussions where mortgage firms engage with a panel of FCA and industry representatives in an open, informal setting. Registration is now open for the roundtables taking place from September to December 2018. Visit our Live & Local webpages for more information.

Back to top


General Insurance Intermediaries and Insurers

Insurance Distribution Directive (IDD)

Our final rules were confirmed in May and are substantively the same as the near-final rules we published in PS18/1 in January. They will apply to firms from 1 October 2018. Firms should be well underway with their preparations to implement IDD. Our IDD material can be found on our dedicated IDD web page.

Alpha Insurance A/S declared bankrupt

Alpha Insurance A/S (Alpha) is an insurance firm authorised and regulated by the Danish Financial Supervisory Authority. The Danish FSA has announced that Alpha has been declared bankrupt. Existing Alpha insurance policyholders should immediately contact their insurance broker or the firm that sold them their policy  to seek new insurance cover.

Speech: The FCA's Business Plan and Priorities

Andrew Bailey, our Chief Executive, delivered the keynote speech at the BIBA 2018 Annual Conference and Exhibition.  In his speech Andrew talked about the 7 cross-sector priority areas  we have identified, based on assessments of where our intervention can have the greatest impact, or where there is the greatest harm or potential for harm to our objectives.

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Live & Local 2018/19 events

We have announced the first set of UK-wide events in the 2018/19 Live & Local programme. 

For general insurance firms, we are offering these events:

  • interactive workshop on the extension of the Senior Managers and Certification Regime (SM&CR) and the Insurance Distribution Directive (IDD)
  • Q&A roundtable discussions where general insurance firms engage with a panel of FCA and industry representatives in an open, informal setting 

Registration is now open for these events, which take place from September to December 2018. Visit our Live & Local webpages for more information.

Back to top


Life insurance & Pension Providers

Non-advised drawdown project

On 28 March we published the findings of our review into sales of non-advised drawdown pensions. We found that firms did not always adequately inform customers about guarantees such as Guaranteed Annuity Rates or other special features. It is essential that customers have full disclosure of guarantees to be able to make informed choices. To remind firms of their obligations, we recently wrote to those within our life insurer portfolio highlighting the revised Safeguarded Benefits regulations which the Department of Work and Pensions (DWP) introduced in April this year. We expect firms to comply with both our rules and the DWP regulations.

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Back to top


Wealth Managers & Private Banks

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Back to top


Investment Managers & Stockbrokers

Investment Platforms Market Study

We have published an Interim Report for the Investment Platforms Market Study. It sets out our provisional findings on the way competition works in the investment platform market, and how we would like the market to develop.

Overall, we found that competition in this market is working well for most consumers. However, we are concerned that competition between platforms is not working well for 5 particular groups of consumers.

We are consulting on our proposed remedies and want to engage with a wide range of market participants. Chapter 9 of the interim report contains our consultation questions. We ask stakeholders to send us their views by 21 September 2018, and will publish our final report in the first quarter of 2019. 

Please send any comments or queries by email to: [email protected] or write to: Investment Platforms Market Study, Strategy & Competition Division, Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Back to top


Consumer Credit

There are no updates this month for this sector.

Back to top


Credit Unions

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Back to top


Fintech & Innovative Businesses

Digital regulatory reporting

We have published the Terms of Reference for the Digital Regulatory Reporting pilot we are running with the Bank of England, and an update from the Steering Committee. Any financial services firm that wants to participate in the pilot will need to help with resourcing. For further information, including on how to participate in the pilots, please email [email protected]

Back to top


Payment Service Providers

PSD2: Guidance and requirements on operational and security risk

Following consultation in our March quarterly consultation paper (CP18/6) we have published new requirements under the Payment Services Regulations 2017 and amended our Approach Document on payment services and electronic money.

We are requiring all payment service providers to comply with EBA Guidelines on operational and security risks under PSD2 and to report to us at least annually on their operational and security risk management frameworks.  We have also made other minor changes to the Approach Document.

All PSPs should review our revised Approach Document, especially the new guidance in chapters 13 and 18.

Regional Live & Local events for payments services firms

As part of the Live & Local 2018/19 programme, we have added events in London, Birmingham and Manchester tailored for non-bank payment services firms. These ‘introduction to FCA Payments Supervision’ events will clarify our role, expectations and supervisory approach. These events will also offer you an opportunity to ask us your questions and meet our Payments Department. 

The events take place from September to November 2018. Find dates, locations and the registration link on our Live & Local webpage.

Back to top


EU Withdrawal

FCA’s Role in Preparing for EU Withdrawal

Following the Treasury’s announcement on 27 June about its approach to amending financial services legislation under the European Union (Withdrawal) Act, we have published a statement with an update on how we are preparing for the UK leaving the European Union.

Preparing your firm for EU Withdrawal

As the UK prepares to leave the EU, FCA solo regulated firms should consider if or how they will be affected and what action they may need to take. We recently published further information on the EU withdrawal section of our website on areas for firms to consider. As more information about what Brexit will mean for financial services emerges, firms need to make sure they understand the implications and plan accordingly.

Keynote Speech on EU Withdrawal

On 19 July Nausicaa Delfas, our Executive Director of International, gave a keynote speech on EU Withdrawal at an event hosted by TheCityUK. The speech set out how the FCA is preparing for a smooth transition, what we expect from firms we regulate and our future vision for the UK-EU relationship in financial services.

Temporary Permissions Regime

The Treasury published the statutory instrument on TPR on 24 July. We have provided more details on our website for firms and funds currently passporting into the UK.

Statutory Instruments

The Treasury set out its approach to amending financial services legislation under the EU (Withdrawal) Act on 27 June. It will use statutory instruments (SIs) to do this, and laid the first of these on 16 July. They covered amendments to the Consumer Credit Act and related legislation, amendments to the Friendly Societies Act, a transfer of responsibility to the FCA for EU Binding Technical Standards (BTS), and powers to amend the FCA Handbook for Brexit. HMT has since published SIs amending the Building Societies Act, CCPs and for the temporary permissions regime.  Firms do not need to prepare to implement this legislation now. Please see the Treasury and FCA statements for more information.

Back to top


News and Publications

Live & Local 2018/19 events programme announced

Continuing our successful Live & Local events programme that began in April 2016, we have launched our 2018/19 programme. From September 2018, we will be travelling across the UK with a new series of events for regulated firms. 

The first set of events will take place from September to December 2018. This year, we have added events for non-bank payment services firms as well as events for general insurance and mortgage firms. 

Visit our Live & Local webpages for dates, locations and registration links.  

Measuring our impact before we intervene

We have published a suite of documents to provide our stakeholders with a clear picture of how we assess the likely impact of our policies:

We welcome views from stakeholders about the approach and techniques we use.

Recognising industry codes: policy statement and final rules published

We have published our policy statement  and final rules for recognising industry codes of conduct. This sets out our approach to recognising industry-written codes for certain unregulated activities. 

This, in combination with the new Senior Managers and Certification Regime (SM&CR) obligations, aims to encourage the take-up of good quality industry codes to raise standards of conduct in financial markets outside our regulation. Firms and individuals subject to the SM&CR that follow a recognised code will tend to meet their obligation to observe ‘proper standards of market conduct’.

Code authors may now submit their codes to us for recognition.

Claims Management consultation open

We are consulting on proposals that outline how we will regulate claims management companies (CMCs) when regulation passes to the FCA on 1 April 2019.

This Consultation Paper (CP) sets out the draft rules and guidance we propose to make for claims management activities and the standards we think CMCs regulated by us should have to meet. We also set out why and how we enforce our rules, and the process for CMCs to become authorised by us.

The deadline for providing feedback on our proposals is 3 August 2018. You can respond by completing the online response form or emailing your responses to [email protected]

Approach to Consumers & Duty of Care

Our Approach to Consumers document, published on 17 July 2018, sets out our vision for well-functioning markets for consumers and the conditions we want to see to achieve this. We explain how we use our powers and tools to protect consumers, and commit to review and adapt these to ensure we achieve the greatest impact for consumers.  

To make our expectations of firms clear and ensure good outcomes for consumers, particularly vulnerable consumers, we plan to consult early next year on guidance for firms on the identification and treatment of vulnerable consumers. As part of developing that guidance we are hosting an event looking at how to make financial services work well for consumers in vulnerable circumstance on 18 September 2018. This event will explore what good looks like for vulnerable consumers and the challenges for consumers and firms, to encourage discussion and innovation around the issues.  For information about the event, please email [email protected] 

Alongside the Approach to Consumers, we published a Discussion Paper on a duty of care and the potential alternative approaches. Feedback to our Future Approach to Consumers consultation paper showed differing views and concerns, so  it is important that we have an open discussion and debate about the potential merits of a duty of care. In this Discussion Paper we also consider and seek views on alternative approach  that might address stakeholders’ concerns. This discussion paper is open for consultation until 2 November 2018.Please send us your views by email at [email protected] 

Christopher Woolard speech on pensions and intergenerational differences

On 16 July, FCA Executive Director of Strategy and Competition, Christopher Woolard, gave a speech to the Pensions Policy Institute, entitled ’Intergenerational challenges: what Mike and the Mechanics can teach us about pensions’. 

The speech discussed how demographic shifts and economic trends over the last 30 or so years have remade the social contract across the generations – from the difficulties younger people face getting on the housing ladder, to the need for older people to pay for care for longer. 

Christopher outlined that the question of how to deal with such challenges is not for the regulator to lead, but rather for democratically elected governments. But we do have a role to play. With a broad, complicated remit and finite resources, we have to target in our interventions to yield the best results. So we focus on areas where we can have the biggest impact. 

In particular, the aim which unifies our pensions work, whether it’s the Asset Management Market Study, Retirement Outcomes Review or Investment Platforms Market Study, is to ensure consumers have the best outcomes possible in retirement.

Firms’ use of their authorisation/ regulatory status in a promotional way 

Our Financial Promotions team has intelligence that some firms are using their FCA-authorised status in a promotional way. This which could lead to consumer harm and is against our rules. Firms must not use their authorisation status in that way and, if they are, should cease doing so. 

We have recently conducted a review looking at how firms present their FCA authorisation status on their websites. We remind firms of their obligations 1) when communicating with clients, including details about the extent of their FCA authorisation/regulation, and 2) in relation to the use of the FCA logo. For example:

  • Unclear, unfair and misleading statements by a firm may involve a breach of FCA’s Principles for Businesses, Principle 7.
  • GEN 1.2.2AR (Referring to approval by the FCA), the purpose of which is to prevent clients being misled about the extent to which the FCA has approved a firm’s affairs, and
  • GEN 4.5 (Statements about authorisation and regulation by the appropriate regulator), in particular, GEN 4 Annex 1R sets out the required disclosure statements for FCA authorised persons, with relevant notes. Note 5 (GEN 4 Annex 1R) relates to the presentation of those statements, which includes, for example, the use of images, symbols (such as shields, ticks, padlocks) and wording in addition to the relevant required disclosure statement. Firms are reminded to present and communicate information in a way which is clear, fair and not misleading.

We have previously issued a statement on our website confirming that firms are not allowed to use our logo without our permission. 

Firms must not indicate or imply that they are regulated or otherwise supervised by the FCA in respect of business for which they are not regulated by the FCA (GEN 4.5.4R). 

So we strongly encourage firms to review their websites and financial promotions. Where adverts refer to the FCA and use images or symbols, firms must ensure that these adverts comply with our requirements. Where we identify firms who are in breach of our rules, we will take action.

New prescribed responsibility for deposit takers and dual-regulated investment firms

Our new rules for the Senior Managers and Certification Regime include some changes for banks, building societies, credit unions and dual-regulated investment firms.

These changes include a new prescribed responsibility for making sure staff are trained in the Conduct Rules and that we are notified of any breaches. Firms affected will need to submit a Form J to tell us to whom they have allocated this responsibility by 1 November 2018. The updated form will be available from 10 September.

There are some other changes that firms should be aware of. Please read the Policy Statement for more details.

Back to top