General

Financial Stability Board

Cryptoasset activities – FSB publishes finalised global regulatory framework – 17 July 2023

The FSB has published its finalised global regulatory framework for cryptoasset activities (the Framework) to promote the comprehensiveness and international consistency of regulatory and supervisory approaches. This builds on lessons learnt from events in 2023 which exposed the intrinsic volatility and structural vulnerabilities of cryptoassets and related players.

The Framework, which is based on the principle of ‘same activity, same risk, same regulation’, consists of two distinct sets of recommendations:

• high-level recommendations for the regulation, supervision and oversight of cryptoasset activities and markets; and

• revised high-level recommendations for the regulation, supervision, and oversight of ‘global stablecoin’ arrangements.

Alongside the Framework, the FSB also published an overview of responses to its consultation launched in October 2022. Following these responses, the FSB has strengthened both sets of high-level recommendations in three areas: safeguarding of client assets, conflicts of interest and cross-border cooperation.

The FSB will conduct a review of the implementation of the recommendations by the end of 2025, which may help determine whether further action to promote implementation or a further review of the recommendations may be necessary.

FSB Final report: High-level Recommendations for the Regulation, Supervision and Oversight of Crypto-Asset Activities and Markets

FSB Final Report: High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements

FSB: Overview of responses to October 2022 consultation

FSB: Umbrella public note to accompany final framework

Press release

Treasury Select Committee

Sexism in the City – Treasury Select Committee launches inquiry – 14 July 2023 

The Treasury Select Committee has launched an inquiry into sexism in the City and the barriers facing women in financial services. The Treasury Select Committee plans to review the progress made generally in removing the gender pay gap, as well as the role of both the government and regulators in combatting sexual harassment and misogyny.

In addition to the announcement, the Treasury Select Committee also published a call for evidence inviting comments on a number of topics including:

• the progress in removing the barriers to women entering and progressing their careers across the financial services industry at all levels;

• the role of the government and financial regulators in acting as role models for good gender diversity practices; and

• the role of, and progress of, firms, government and financial regulators in combatting sexual harassment and misogyny in financial services, and offering effective ways to escalate concerns about sexual harassment.

The deadline for responses is 1 September 2023.

Treasury Select Committee inquiry: Sexism in the City

Call for evidence

Press release

Cryptoasset regulation – Treasury Committee publishes government’s response to its ‘Regulating Crypto’ report – 20 July 2023 

The Treasury Select Committee (the Committee) has published HM Treasury’s response to its May 2023 report, Regulating Crypto. The original report focused on the premise that retail trading and investment activity in unbacked cryptoassets, such as Bitcoin, should be regulated as gambling rather than as financial services. It also argued that regulating consumer cryptoasset trading as financial services would serve to legitimise the activity and lead consumers to believe that it is safe via a ‘halo’ effect.

Although HM Treasury acknowledges the volatility of cryptoassets and the risks they pose, it disagrees with this central premise. HM Treasury explains that adopting the Treasury Select Committee’s recommendation would run counter to the approaches taken by other international bodies, such as the International Organization of Securities Commissions (IOSCO), which conform to the ‘same activity, same risk, same regulatory outcome’ principle.

Additionally, following the risk of creating misalignment with international standards and approaches from other major jurisdictions, including the EU, the HM Treasury argues that the Committee’s approach could potentially create unclear and overlapping mandates between financial regulators and the Gambling Commission.

Finally, it is argued that a system of gambling regulation could fail to appropriately mitigate many of the critical risks that were discussed in HM Treasury’s recent consultation on cryptoasset regulation in February 2023, and a financial services regulatory framework is more appropriate for addressing these risks. This will come with a set of robust measures to mitigate consumer risks mentioned in the Committee’s report, including the risks of consumers getting misinformed.

Regulating Crypto: Government Response to the Committee’s Fifteenth Report

Webpage

Financial Conduct Authority

International competitiveness and growth objective – FCA publishes statement – 14 July 2023

The FCA has published a statement introducing its new secondary international competitiveness and growth objective. This forms part of the new regulatory framework ushered in by the Financial Services and Markets Act 2023 (FSMA 2023), which recently received royal assent.

More specifically, FSMA 2023 gives the FCA and the PRA a secondary objective to facilitate the international competitiveness of the UK economy (including the financial services sector), and its medium to long-term growth, in alignment with relevant international standards. As a secondary objective, this shapes how the FCA advances its primary objectives of consumer protection, market integrity and effective competition in the interest of consumers. It will not apply to individual firm or enforcement decisions, but rather to the FCA’s general functions (including rule-making and giving general guidance).

Identifying the relationship between productivity and both international competitiveness and growth, the statement goes on to outline seven key drivers of productivity which will provide a framework for the FCA to deliver this new secondary objective.

The FCA will report each year on how it is complying with this new objective, both in its annual report and on its Outcomes and Metrics webpage. The FCA will also publish reports providing greater detail on its embedding and advancement of the new objective in each of the first two years after commencement. Finally, the FCA will update some key FCA documents to ensure they reflect the secondary objective and other wider changes to the regulatory landscape.

FCA Statement

Rule Review Framework – FCA publishes draft framework – 14 July 2023

The FCA has published its draft Rule Review Framework (the Framework), which outlines how the FCA intends to monitor and review its rules, in line with an obligation introduced by the Financial Services and Markets Act 2023.

Some of the subjects the Framework explains include:

• the FCA’s policy-making cycle, the purpose of rule review and an explanation of what is in scope;

• a summary of the FCA’s approach to reviewing new and existing rules;

• the use of stakeholder feedback;

• immediate priorities for review, including the new Consumer Duty;

• an overview of the challenges to undertaking reviews; and

• what actions and remedies can be implemented after a review to ensure issues are addressed and compliance is maintained.

In addition to the Framework, the FCA has also published an Annex, detailing its work on ex-post impact evaluations. The deadline for providing feedback on the Framework is 15 September 2023.

FCA: Our Rule Review Framework

Annex to Rule Review Framework

Repeal and replacement of retained EU law – FCA publishes webpage – 14 July 2023

The FCA has published a new webpage containing information on the upcoming repeal and replacement of retained EU law with its own rules under the Financial Services and Markets Act 2023.

Where HM Treasury repeals firm-facing requirements in retained EU law, the FCA will make appropriate replacements within its own rules, as set out in the FCA Handbook (the Handbook). The FCA further explains that this will be progressed in accordance with core principles which seek to make the Handbook clear, accessible, and navigable, while reducing regulatory costs. These principles include:

• consolidating requirements as far as possible, making the Handbook the sole source for firm-facing regulatory requirements;

• using the current Handbook structure, only creating new sourcebooks where necessary;

• relying on existing requirements in the Handbook, where relevant, and considering the necessity of reflecting the repealed provision in the Handbook;

• relying on outcomes rather than prescriptive requirements, where appropriate; and

• reducing complexity, both in drafting style and by aligning standards across sectors, where appropriate.

The webpage also sets out next steps for a number of files, including the Insurance Distribution Directive, Markets in Financial Instruments Directive/ Regulation (MiFID/MiFIR) and the Prospectus Regime.

Webpage

Financial promotions on social media – FCA publishes guidance consultation – 17 July 2023

The FCA has published a guidance consultation (GC23/2) (the Consultation) which sets out its proposals for new social media guidance, modernising the information that firms should use when promoting financial products or services online. The FCA will retire its existing guidance on social media and customer communications (FG15/4) when the new guidance is finalised. While many of the key principles of FG15/4 still hold, that guidance is heavily based around character-limited media such as Twitter and, for example, makes no reference to the role of social media influencers is communicating promotions.

As such, the FCA will retain the key principles of FG15/4, including its expectations for financial promotions to be standalone compliant, as well as maintaining the same expectations on the prominence of required information. The new guidance will clarify how the FCA expects these principles to be applied to different social media marketing channels, as well as looking to address specific design features on social media that act to obscure required information. It is further noted that:

• the Consumer Duty will raise the FCA’s expectations of firms communicating financial promotions on social media;

• the FCA will provide guidance on emerging market trends on social media, such as affiliate marketing;

• the FCA will look to address the harm that can occur where UK consumers interact with financial promotions which direct them to a non-UK entity while the UK consumer still believes they are engaging with an FCA regulated firm; and

• the FCA will use the guidance to tackle harm arising from both influencers communicating approved financial promotions and unauthorised influencers communicating illegal financial promotions.

The consultation period is now open and will close on 11 September 2023.

FCA Guidance Consultation: Financial promotions on social media

Webpage

Press release

Innovation and early-stage businesses – FCA announces permanent Digital Sandbox – 20 July 2023

The FCA has announced that, following two successful pilot schemes, it will be launching a permanent version of its Digital Sandbox (the Sandbox) on 1 August 2023 to help foster innovation and growth in financial services.

The Sandbox is a testing environment that enables the FCA to support firms at the early stage of product development by enabling experimentation through proof of concepts. Alongside innovators, the permanent Sandbox also welcomes data providers to apply to list their data on the platform and gain traffic and insights on its usage.  

Participants in the Sandbox can expect to receive the following features:

• high-quality datasets and Application Programme Interfaces (APIs);

• robust data security protection;

• a collaborative platform; and

• an observation deck to enable interested parties such as regulators, incumbents and others to observe in-flight testing at a technical level. 

Applications for the Sandbox will open upon its launch on 1 August 2023, and it will take a maximum of four weeks to gain approval. The FCA further provides a list of criteria for approval.

Press release

FCA Perimeter report – FCA publishes updated version – 20 July 2023

The FCA has updated its perimeter report to reflect the regulatory developments that have emerged since the March 2023 update. Of particular importance are updates stemming from the Financial Services and Markets Act 2023, which received royal assent in June 2023. The report contains new materials on issues concerning:

• the promotion of cryptoassets;

• the New Regulatory Gateway for financial promotions;

• open banking, open finance and smart data; and

• ESG ratings and data providers.

FCA perimeter report

Financial Services Regulatory Initiatives Forum

Regulatory Initiatives Grid – Financial Services Regulatory Initiatives Forum publishes update to reflect FSMA 2023 – 17 July 2023

The co-chairs of the Financial Services Regulatory Initiatives Forum - Nikhil Rathi of the FCA and Sam Woods of the Bank of England - have published a “short update” on the Regulatory Initiatives Grid (the Grid) following the Financial Services and Markets Act 2023 (FSMA 2023) receiving Royal Assent.

Points of interest include:

• the PRA intends to publish a consultation paper building on its September 2022 discussion paper regarding its future approach to policy, ensuring that it delivers on its responsibilities under FSMA 2023;

• the FCA and PRA are establishing new cost benefit analysis panels, where recruitment has now started; and

• a policy statement on the FCA’s sustainability disclosure requirements and investment labels will now be published in Q4 2023.

A full update of the Grid is planned for the last quarter of 2023, where a full update on all changes for initiatives will be provided as usual. Following this, the co-chairs expect to return to the usual intervals of publishing the biannual updates to the Grid.

Regulatory Initiatives Grid Update

FCA webpage

Bank of England webpage

Financial Regulators Complaints Commissioner

Reviewing how the financial services regulators consider complaints – Commissioner publishes Annual Report - 13 July 2023

The Financial Regulators Complaints Commissioner has published an annual report on how the financial services regulators considered complaints during the period from 1st April 2022 to 31st March 2023 (the Report). The Commissioner dealt with 421 cases during the year, compared to 492 (excluding complaints in connection with London Capital & Finance plc) the previous year.

Overall, the Commissioner made 62 recommendations, suggestions, or criticisms. In 20 instances the Commissioner’s decision differed from that of the FCA, and the Commissioner did not disagree with the PRA’s decisions.

Notably, FSMA 2023 (which has received Royal Assent since the annual report was written) requires the FCA, PRA and Bank of England to include a summary of instances where they have not complied with the Complaint Commissioner’s recommendations in their response to the Report, including their reasoning for not complying with the recommendations to HM Treasury. This is a change that is welcomed by the Commissioner, who observes that the Complaints Commissioner’s recommendations are not enforceable, limiting “robust scrutiny of the Regulators”.

The FCA and Bank of England (also responding on behalf of the PRA) have since published responses to the report, stressing their commitment to making further improvements.

Annual report

FCA response

Bank of England response