Issue 1223 / 21 September 2023

Prudential Regulation Authority

Growth and competitiveness objective - PRA publishes speech - 19 September 2023

The Prudential Regulation Authority (PRA) has published a speech given by Victoria Saporta, Executive Director, Prudential Policy, on its new growth and competitiveness objective under the Financial Services and Markets Act 2023. The speech refers to the results of the PRA’s pilot survey which sought views from the industry on the extent to which the PRA’s regulatory framework is, and can in the future, advance this objective.

The speech goes on to consider the regulatory foundations needed to harness the UK’s strengths as a global financial centre. These are:

  • maintaining trust in the PRA and the UK prudential regulatory framework: one finding from the survey is that stakeholders care about the reputation of the PRA to preside over a stable and predictable regulatory framework that can endure financial stress. While capturing data that measures this is challenging, the speech highlights a number of metrics which may be used to do so going forward;

  • ensuring effective regulatory processes and engagement are in place: the operational cost of doing business in a jurisdiction inevitably affects its competitiveness. The PRA welcomes suggestions as to how it can reduce the regulatory burden, and therefore operational costs, for firms, including in relation to regulatory transactions and authorisations; and

  • having a responsive regulatory approach to UK risks and opportunities: in order to take a more responsive approach, the PRA’s rulemaking framework will need to be adapted to respond to risks and opportunities specific to the UK financial sector, while maintaining compliance with global standards. The speech indicates that the survey suggests the PRA can improve in this area. The PRA is intending to set up working groups and other stakeholder platforms to receive industry feedback, including on fostering safe innovation.

PRA Speech: Competitiveness and growth: continuing the conversation

Pilot Survey: Secondary Competitiveness and Growth Objective

Financial Conduct Authority

Funeral plans sector priorities - FCA publishes portfolio letter - 20 September 2023

The FCA has published a portfolio letter setting out its supervisory strategy for firms in the funeral plan sector. It is the first portfolio letter issued to the sector and sets out the FCA’s priorities for the sector in the period 2023-25, as well as specific risks it is concerned about and the action it expects firms to take in relation to them.

The FCA’s priorities for firms include:

  • Consumer Duty: embedding the Consumer Duty to ensure firms are delivering a fair price and value for funeral planning products to their customers. This applies to both open and closed products;

  • customer support: ensuring firms are proving a good level of consumer support and have systems and controls in place to analyse complaints and respond appropriately to them;

  • vulnerable customers: ensuring firms are supporting vulnerable customers, particularly where their circumstances change due to the increased cost of living. This includes ensuring flexibility of payments and cancellation charges that are not disproportionate;

  • governance and culture: firms should ensure appropriate governance, controls and oversight, reflecting the size and scale of their business. This is particularly important given the role of governance and culture in recent major conduct failings;

  • operational resilience: firms need to have credible plans in place to mitigate and recover from risks, take remedial action where required and notify the FCA, and other regulators, promptly;

  • appointed representatives (ARs): all principal firms should have effective oversight of their ARs and ensure they are competent, financially stable and deliver good outcomes for consumers. The FCA expects principal firms to take assertive action with ARs that fall below the standards that principal firms set for them, including restricting their regulated activities and cancelling their AR status; and

  • regulatory returns: firms need to ensure they are providing accurate information to the FCA to improve the quality of their regulatory returns. The FCA intends to hold roundtable discussions over the coming months to help firms know what is expected of them.

The letter concludes with action for firms, including ensuring they meet the FCA standards and the priorities outlined in the letter. Over the next two years the FCA will test firms against the priorities outlined in the letter and cautions that where firms are not meeting its rules and expectations, the FCA will take action.

FCA Portfolio Letter

Cryptoasset financial promotion regime - FCA publishes letter - 21 September 2023

The FCA has published a letter from Lucy Castledine, Director of Consumer Investments, and Matthew Long, Director of Payments & Digital Assets, addressed to cryptoasset firms marketing to UK consumers and those supporting them. The letter issues a final warning to these firms to be ready for the financial promotion regime, which is due to come into effect on 8 October 2023.

The FCA notes a significant lack of cooperation from unregistered overseas cryptoasset firms with UK customers. The FCA is, therefore, concerned that many firms will not be ready for the financial promotion regime. Firms are strongly urged to consider whether they risk breaching the regime and take relevant action to stop or block illegal promotions.

The FCA makes clear that it will take action against that those found to be failing to comply with the financial promotion regime, including criminal proceedings for illegal promotions if necessary. It also reminds intermediaries who help unregistered firms to market cryptoassets to UK consumers, such as social media platforms and domain name registrars, to consider their activities.

The FCA explains that unregistered cryptoasset firms can legally communicate financial promotions to UK consumers if those promotions are approved by an authorised firm. The FCA expects authorised firms that are considering approving cryptoasset financial promotions to notify it under Principle 11 and SUP 15 of the FCA Handbook before doing so.

FCA letter: Final warning for cryptoasset firms marketing to UK consumers and those supporting them to get ready for the financial promotion regime

Official Journal Of The European Union

NIS 2 - guidelines published in OJEU - 18 September 2023

Guidelines on the application of the Network and Information Security Directive 2 ((EU) 2022/2555) (NIS 2) to financial entities that fall within the scope of the Regulation on the digital operational resilience for the EU financial sector ((EU) 2022/2554) (DORA) have been published in the Official Journal of the European Union.

The guidelines clarify the application of certain provisions which concern the relationship between NIS 2 and DORA, which address cybersecurity risk management measures or incident reporting requirements. The guidelines highlight that, for financial entities in scope of DORA, several of its provisions will take precedence over those in NIS 2. These include those relating to information and communication technology (ICT) risk management, management of ICT-related incidents, major ICT-related incident reporting, digital operational resilience testing, information-sharing arrangements and ICT third-party risk.

Communication from the Commission: Commission Guidelines on the application of Article 4 (1) and (2) of Directive (EU) 2022/2555 (NIS 2 Directive)