Regulation round-up October 2018

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

October 2018 Quick Links


Introduction: Christopher Woolard, Executive Director of Strategy and Competition

Our Pensions Strategy sets out new joint actions with The Pensions Regulator (TPR) to tackle the risk of people having inadequate retirement incomes. It also addresses our approach to recent fundamental changes in the sector such as the pensions freedoms and auto-enrolment.

We have set out 2 new areas of significant work. First how we will work together to review consumers’ experiences at every stage of their pensions journey. This should improve the information and advice pension holders receive from firms so they can make better informed choices. We will also work with TPR to improve value for money in the sector by developing common principles and standards and hold firms to account if they are not delivering value for money to their customers.

We know that regulation can’t solve all the problems in the pensions sector on its own. That’s why this strategy is part of a wider effort. With action also required from the pensions industry, by government and its agencies, and by millions of people across the UK taking responsibility for their retirement plans.

The Strategy builds on other work we’re carrying out in the pensions sector. New rules, designed to improve the quality of pension transfer advice, were published earlier this month, and the final report of our Retirement Outcomes Review was published this summer. We will also continue to address issues in the sector through policy, supervision and enforcement work, as well as running our ScamSmart campaign to help people avoid pension scams.


Hot topics

Brexit consultations

We have published 2 consultation papers ahead of the UK’s exit from the EU. The first consultation paper proposes changes required to our Handbook and binding technical standards, if the UK leaves the EU in March 2019 without an implementation period. It also sets out our approach after Brexit to EU non-legislative material. Most of the changes are consequential to those proposed by the Government under the European Union (Withdrawal) Act 2018. For example, changes include removing references to EU institutions, such as the European Commission or the European Supervisory Authorities, which will be replaced with the relevant UK equivalent.

Temporary permissions regime for inbound passporting EEA firms and funds

Currently, certain EEA firms can provide financial services in or into the UK, and EEA funds can be marketed in the UK, through a passport. Our second consultation paper sets out how these firms and funds can continue to carry on regulated business in or into the UK for a limited period after Brexit while seeking full authorisation in the UK. The regime will only be available from 29 March 2019 if the UK leaves the EU without an implementation period. Find out more about the regime.

We welcome your feedback on our proposals. The closing date for both consultations is 7 December 2018.

Read more about how we are preparing for Brexit.

New resolution data reporting requirements not applicable to FCA firms

Certain €730k firms will have new resolution data reporting templates. However, The Bank of England, as the UK Resolution Authority, anticipates that all UK-headquartered firms that have been notified that their preferred resolution strategy does not involve the use of stabilisation powers, won’t be affected by these new requirements. Currently, this is the case for all FCA solo-regulated firms, which are expected to submit their resolution data as usual.

Firm Feedback Survey

We are asking selected authorisation applicants, to complete a short online survey. If you are selected, it will be sent to you immediately after you receive a decision from us. Applicants will receive this survey no more than once per month. We encourage you to complete the survey, as your feedback helps us to improve the authorisation process.

FCA opens a discussion on the impact of Climate Change and green finance on Financial Services

On Monday, we published a discussion paper on climate change and green finance.

The effects of climate change and the associated transition to a low carbon economy may have a major impact on financial markets and on products that serve those markets. The Discussion Paper sets out how the impacts of climate change are relevant to the FCA’s statutory objectives of protecting consumers, protecting market integrity and promoting competition.

Alongside colleagues at the Bank of England, we will also be establishing a new joint FCA-PRA Climate Risk Forum to help consider climate-related financial risks, share best practice and provide intellectual leadership in this emerging field. The Forum will bring together representatives from industry as well as technical experts and other stakeholders. 

We are now seeking feedback on areas the forum should focus on and the questions set out in this Discussion Paper. All interested stakeholders are invited to consider the issues raised in this paper and provide comments by 31 January 2019. 

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Banks and Building Societies

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

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Financial Advisers

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

Improving the Quality of Pension Transfer Advice

We have published new rules and guidance on improving the quality of pension transfer advice, primarily for when customers are considering transferring from a defined benefit scheme to a defined contribution scheme. This includes:

  • new rules on qualifications
  • guidance on an appropriate triage service
  • clarification on our expectations that advisers should be exploring clients’ attitudes to the general risks associated with a transfer, in addition to their attitude to investment risks

The changes come into force at various times from October 2018 – more information can be found in Policy Statement 18/20.

New Live & Local 2018/19 events

This month, we began the series of UK-wide interactive workshops for representatives of regulated firms who are qualified to give Defined Benefit pension transfer advice. The workshops will:

  • highlight the key points that firms should consider when operating in this market
  • reiterate our expectations when transacting this type of business
  • highlight our updated rules and guidance
  • include an interactive case study to put into practice our expectations

In addition to previously announced dates and locations for 2018, we have now added sessions from January to March 2019. For further details, visit our Live & Local webpage. Additional sessions will be announced in the coming months. Sign up to our Live & Local email updates to be alerted.

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Mortgage Advisers and Lenders

Digital Regulatory Reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

New Live & Local 2018/19 events

We have added sessions in January to March 2019 for our series of monthly ‘Ask the regulator’ Q&A roundtable discussions featuring senior FCA representatives and industry experts.

Registration details for UK-wide events taking place to March 2019 can be found on our Live & Local webpage. Additional dates and locations in 2019 will be announced in the coming months. Sign up to our Live & Local email updates to be alerted.

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General Insurance Intermediaries and Insurers

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

General Insurance Value Measures

In March 2018, we published the second set of data in our general insurance value measures pilot. We are now collecting a third set of value measures data across 3 measures: claims frequency; claims acceptance rates; and average claims payout. We intend to publish the data in the new year alongside a consultation on the reporting of GI value measures. Find out more about general insurance value measures.

Insurance Distribution Directive

The Insurance Distribution Directive (IDD) now applies to firms. The IDD is EU legislation which sets regulatory requirements for firms designing and selling insurance products.

IDD replaces the Insurance Mediation Directive (IMD). It aims to enhance consumer protection when buying insurance – including general insurance, life insurance and insurance-based investment products (IBIPs) – and to support competition between insurance distributors by creating a level playing field.

IDD has also introduced requirements in new areas, including product oversight and governance, and enhanced rules for IBIPs.

New Live & Local 2018/19 events for regulated firms

We have added sessions in January to March 2019 to our programme of events for general insurance firms:

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

Registration is open for these events taking place to March 2019. Visit our Live & Local webpage for more information. Additional dates and locations in 2019 will be announced in the coming months. Sign up to our Live & Local email updates to be alerted.

Live & Local events for compliance consultants

Earlier this month in London, we held the first of two interactive workshops designed for compliance consultants on how general insurance firms can identify and prevent harm. The second will take place on 7 November in Manchester. Following the success of these workshops with our regulated firms, we are holding these events for compliance consultants. In these events we will share with you what we have presented to our firms, and provide you with an opportunity to ask us questions and give feedback.

Registration details for the 7 November workshop in Manchester can be found on our website.

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Life insurance & Pension Providers

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

Improving the Quality of Pension Transfer Advice

We have published new rules and guidance on improving the quality of pension transfer advice, primarily for when customers are considering transferring from a defined benefit scheme to a defined contribution scheme. This includes:

  • new rules on qualifications
  • guidance on an appropriate triage service
  • clarification on our expectations that advisers should be exploring clients’ attitudes to the general risks associated with a transfer, in addition to their attitude to investment risks

The changes come into force at times from October 2018 – more information can be found in Policy Statement 18/20.

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Wealth Managers & Private Banks

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

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Investment Managers & Stockbrokers

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

Improving the Quality of Pension Transfer Advice

We have published new rules and guidance on improving the quality of pension transfer advice, primarily for when customers are considering transferring from a defined benefit scheme to a defined contribution scheme. This includes:

  • new rules on qualifications
  • guidance on an appropriate triage service
  • clarification on our expectations that advisers should be exploring clients’ attitudes to the general risks associated with a transfer, in addition to their attitude to investment risks

The changes come into force at various times from October 2018 – more information can be found in Policy Statement 18/20.

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Consumer Credit

Thematic Review - Impact of credit broking remuneration models at the point of sale

On 27 September, we published a thematic review report. This followed a commitment in our 2017 Business Plan to look at whether payments such as commission between lenders and credit brokers drive poor outcomes for consumers. We did not look at motor finance brokers, who are subject to a separate review.

The review did not find evidence that these payments are generally resulting in significant harm to consumers. This does not mean harm is not occurring for reasons unrelated to commission. We will continue to monitor credit broking activity as part of our ongoing supervisory strategy and address harm in individual firms where we see it. The report includes case studies and examples of good and poor practice from interviews conducted with consumers and credit broking firms, and from data on commission arrangements gathered from firms.

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Credit Unions

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

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Fintech & Innovative Businesses

Digital regulatory reporting

We are continuing our work with the Bank of England (BoE) on a 6-month pilot to build upon the proof of concept developed at our November TechSprint on digital regulatory reporting. The pilot is evaluating the feasibility of scaling the work from the TechSprint considering 2 use cases. One is focusing on retail reporting and the other on wholesale reporting. Read the latest update on the progress of the pilot.

We will be holding an open demonstration and Q&A session to give attendees an opportunity to understand the technological, governance and legal decisions made throughout. It is also an opportunity to critique and review the work. The open day is on 9 November. Please email [email protected] if you would like to attend this session.

We have also published a feedback statement on our call for input on smarter regulatory reporting.

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Payment Service Providers

Live & Local event in November

As part of the Live & Local 2018/19 programme, we are holding our second event in London tailored for non-bank payment services firms. The ‘introduction to FCA Payments Supervision’ event will provide clarity on our role and expectations, and our supervisory approach. You will also have the opportunity to ask us questions and meet our Payments Department.

Registration details for the 21 November event are available on the Live & Local webpage.

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Brexit

Consultation on proposed changes to the Handbook and binding technical standards

In this paper, we publish our proposals on how we will amend our Handbook and EU derived binding technical standards if the UK leaves the EU without an implementation period in place. We also set out our proposed approach to EU non-legislative material such as Level 3 Guidelines and Q&As.

We want to know about any significant implementation challenges you would face with the proposed amendments, so that we can work with you to address the challenges you face. We do not expect firms and others subject to our proposals to prepare to make any changes now.

Please send us your comments by 7 December 2018.

Read the Consultation Paper (CP18/28).

Consultation on the temporary permissions regime for inbound passporting EEA firms and funds

The temporary permissions regime will allow EEA firms and funds to continue regulated business in the UK, if the UK leaves the EU in March 2019 without an implementation period in place. This consultation paper sets out how we expect the regime to work in practice, how firms and funds can enter it, how long it will operate for, and the rules we propose should apply to firms and fund marketing activities during the regime.

We want firms and fund managers who may want to enter the temporary permissions regime to give us feedback on our proposals. Please send us your comments by 7 December 2018.

Read the Consultation Paper (CP18/29).

Find out more about the regime.

Temporary authorisation regime for data reporting services providers (DRSPs)

The Treasury will create a temporary authorisation regime to allow EU DRSPs to provide a data reporting service in the UK for a limited period after exit day, in the event there is no implementation period from the end of March 2019.

We have published a statement setting out how the regime will work.

Registration for credit rating agencies and trade repositories

When the UK leaves the EU, we will become the UK regulator of credit rating agencies and trade repositories.

We have published statements outlining how credit rating agencies and trade repositories can register with us.

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News and Publications

EU Securitisation Regulation  (DEPP and EG) Amendments Implements CP

We are consulting on proposed amendments to DEPP (Decision Procedure and Penalties Manual) and EG (Enforcement Guide) due to the new enforcement powers we will receive as part of the implementation of the EU Securitisation Regulation (EU 2017/2402) (EU SR) which comes into force on 1 January 2019.

To implement the EU SR in the UK, Her Majesty’s Treasury will lay an implementing statutory instrument (SI) before Parliament. The SI will give us supervisory, disciplinary and investigatory powers over persons subject to the EU SR. The CP sets out the draft amendments to DEPP and EG we propose to make in light of our current understanding of the SI.

Please comment on our proposals by 2 November 2018. You can use the online response form or email your responses to [email protected].

Proposed guidance on Statements of Responsibilities and Responsibilities Maps for FCA firms

We’re consulting on guidance for FCA solo-regulated firms preparing for the Senior Managers and Certification Regime (SM&CR).

The purpose of the guidance is to give firms practical help and information when preparing SoRs and Responsibilities Maps. It builds on the information in the guides to the SM&CR for solo-regulated firms. The guidance aims to help all FCA firms clearly set out Senior Managers’ responsibilities. ‘Enhanced’ firms will also be able to use it to produce Responsibilities Maps which show how their firm is managed and governed.

To read the guidance and send us feedback, go to our website.

Thematic Review: Money Laundering and Terrorist Financing Risks in the E-Money Sector

On October 3, we published our thematic review on money laundering and terrorist financing risks in the e-money sector. This gives a generally positive overview of systems and controls across the firms surveyed. However, the report warns against complacency - highlighting some weaknesses and poor practice.

Firms must ensure they have effective systems to mitigate the increased risks posed by other activities, including money remittance, not covered in the review which focused on e-money products (prepaid cards and e-wallets). We are currently investigating some cases regarding suspected breaches of Money Laundering Regulations by e-money firms for money remittance.

New Live & Local events announced

In addition to the previously announced events from September to December 2018, we have now released dates and locations for UK-wide events taking place from January to March 2019.

Events within the 2018-19 Live & Local programme are aimed at general insurance, retail investment, mortgage, and non-bank payment service firms. We are also holding a general insurance workshop for compliance consultants.

Dates, locations, and registration details are available on the Live & Local webpage. Additional events in 2019 will be announced in the coming months. Sign up to our Live & Local email updates to be alerted.

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