General

FR1201 / 5 April 2023

UK Government

Pro-innovation approach to AI regulation - UK Government publishes White Paper and consultation - 29-31 March 2023

The UK government has published a White Paper and consultation on its “pro-innovation” approach to artificial intelligence (AI) regulation. This follows the government’s National AI Strategy published in July 2022.

The Paper states that the government intends to put in place a new framework to bring “clarity and coherence” to the AI regulatory landscape. The framework will be underpinned by five principles to guide and inform the responsible development and use of AI in all sectors of the economy: (i) safety, security and robustness; (ii) appropriate transparency and explainability; (iii) fairness; (iv) accountability and governance; and (v) contestability and redress.

The government makes clear that, rather than introducing “heavy handed” legislation, which could stifle innovation, and giving responsibility for AI governance to a single regulator, it will empower existing regulators, including the FCA and the Competition and Markets Authority (CMA), to develop tailored and sector-specific approaches which suit the way in which AI is actually being used in their individual sectors, while having regard for the new framework’s principles. When Parliamentary time allows, legislation could be introduced to ensure regulators consider the principles effectively.

As part of this approach, following implementation of the new framework, the government expects to see joint guidance produced collaboratively by relevant regulatory bodies, including the Information Commissioner’s Office, the FCA and the CMA. This is intended to provide greater clarity on the regulatory requirements relevant to AI, as well as guidance on how to satisfy those requirements in the context of specific sectors.

As part of the White Paper and in response to feedback on the government’s consultation in 2022, the government has published a further consultation on new processes to improve co-ordination between regulators, as well as monitor and evaluate the new framework, and make changes to it to improve its efficiency if needed. The government’s proposals include the development of a new sandbox for which £2m of funding will be made available. The sandbox will build on the FCA’s existing regulatory sandbox and allow businesses to test how regulation could be applied to AI products and services in an environment which supports innovation without being restricted by regulatory requirements. The consultation closes on 21 June 2023.

Policy paper: A pro-innovation approach to AI regulation

Webpage

Press release

Department for Business and Trade 

Whistleblowing framework - DBT launches review - 31 March 2023

The Department for Business and Trade (DBT) has launched a review of the UK’s current whistleblowing framework.

]The review will examine the effectiveness of the whistleblowing framework under the Public Interest Disclosure Act 1998 (PIDA) and will provide an up-to-date evidence base to inform the government on policy choices to develop and improve the whistleblowing framework. It will seek evidence from whistleblowers, key employers, regulators and charities on the effectiveness of the current regime in meeting its original objectives, namely: (i) providing a route for workers to make disclosures; (ii) protecting those who do so; and (iii) supporting wider cultural change to recognise the benefits of whistleblowing.

The core research questions are:

  • How has the whistleblowing framework facilitated disclosures?
  • How has the whistleblowing framework protected workers?
  • Is whistleblowing information available and accessible for workers, employers, prescribed persons and others?
  • What have been the wider benefits and impacts of the framework on employers, prescribed persons and others?
  • What does best practice look like in responding to disclosures?

The review will also examine evidence on the definition of ‘worker’ for whistleblowing purposes. It is expected that the research will be concluded by Autumn 2023.

Review of the whistleblowing framework: terms of reference

Press release

Prudential Regulation Authority 

FSCS management expenses levy limit - PRA publishes Policy Statement (PS3/23) - 31 March 2023

The PRA has published a Policy Statement (PS3/23) on the 2023/24 management expenses levy limit (MELL) for the Financial Services Compensation Scheme (FSCS). This follows the PRA’s consultation (CP1/23) on the matter, published jointly with the FCA in 2023. As the consultation received no responses, the policy proposals set out in the Consultation Paper have been implemented and apply from 1 April 2023.

PRA Policy Statement (PS3/23): Financial Services Compensation Scheme - Management expenses levy limit 2023/24

Appendix

Financial Conduct Authority 

FCA Business Plan 2023/24 - FCA sets out priorities and information on delivering its Strategy - 5 April 2023

The FCA has published its Business Plan for 2023/24, which sets out its priorities for that period and information on how it will deliver the commitments made in its 2022-2025 strategy (as published in April 2022) (the Strategy) in order to achieve better outcomes for UK markets and consumers. The focus for 2023/24 includes:

  • increasing the FCA’s headcount to meet its growing remit and to enable it to deliver key aspects of the Strategy, such as the Future Regulatory Framework (FRF) and the Edinburgh reforms;
  • complete a major upgrade to the FCA’s core regulatory system and improve its intelligence capabilities through automated analytics tools. The FCA is also making further investments in cyber security and operational resilience;
  • in preparation for the changes made by HM Treasury to bring cryptoassets within the FCA’s regulatory perimeter, the FCA will be investing in additional skills to enable it to deliver on, and make changes to the systems and procedures needed to supervise relevant firms falling within the scope of, HM Treasury’s proposals; and
  • continuing to put consumers’ needs first. Following the regulator’s support of consumers last year in relation to the rising cost of living, it will continue to prioritise the protection of consumers from unfair treatment, with more staff being allocated to ensure firms support consumers who are struggling financially.

In addition, the Consumer Duty, coming into force in July 2023, will play a leading role in meeting the FCA’s objective of putting consumers’ needs first. It has committed to providing additional resources to make sure the transition is smooth for both consumers and firms, and is aiming to use the Duty to encourage more innovation and competition, as it could lead to a more simplified approach to regulation.

In addition, the FCA is continuing to focus on the key delivery elements it focused on in 2022/23, namely: (i) reducing and preventing serious harm; (ii) setting and testing higher standards; and (iii) promoting competition and positive change.

The FCA has also published the full list of outcome measures and proposed metrics that will be used to measure its progress on each commitment.

FCA Business Plan 2023/24

Business Plan 2023/24: 3 strategic themes

Press release

Financial Ombudsman Service 

Business specific complaints data - FOS publishes Feedback Statement on temporary changes to outcome reporting - 3 April 2023

The Financial Ombudsman Service (FOS) has published a Feedback Statement on temporary changes to outcome reporting in its business-specific complaints data, as consulted on in its March 2023 Consultation Paper.

For the 2023/24 financial year, the FOS will report cases as ‘proactively settled’ where:

  • the business offers to settle a complaint within 21 days of the FOS requesting the respondent's business file;
  • the FOS is clearly informed by the firm within 14 days that it is making an offer to the complainant;
  • the FOS considers that the offer is fair and reasonable; and
  • the complainant accepts the offer.

The temporary changes will be trialled during the financial year 2023-24 in order to determine whether they should be implemented as permanent changes. The FOS will monitor business behaviour during the trial and work with the FCA to share data and insights. It will also end the trial early if it has concerns about any behaviours observed.

The trial will apply only to complaints where the FOS requests the business file on or after 1 April 2023 (and on or before 31 March 2024) or has requested the business file less than 14 days before 1 April 2023.

FOS Feedback Statement: Temporary changes to outcome reporting in our business-specific complaints data

Updated webpage         

Press release

Digital Regulation Cooperation Forum 

New Chair - DRCF appointments new Chair - 4 April 2023

The Digital Regulation Cooperation Forum (DRCF), comprising the FCA, the Competition and Markets Authority, the Office of Communications and the Information Commissioner’s Office, has appointed a new Chair, Kate Jones. This will be effective from 2 May 2023.

Ms Jones is a technology governance expert who has published in several fields, including AI governance; disinformation and foreign interference; technical standards; digital platforms and self-regulation. Ms Jones will support DRCF members in ensuring the digital landscape is regulated effectively, efficiently and coherently. She will also work closely with each organisation to develop joined-up approaches and ensure that regulatory policy is developed in a responsive and holistic way.

Press release