HM Treasury
FinTech Strategic Review - HM Treasury announces launch - July 2020
HM Treasury has announced the launch of an independent FinTech Strategic Review, to be led by Ron Kalifa OBE, to identify priority areas to support the ongoing success of the UK FinTech sector. The review was announced in the Spring Budget.
HM Treasury has published the terms of reference for the review, which will comprise the following five workstreams: (i) skills and talent; (ii) investment; (iii) national connectivity; (iv) policy; and (v) international attractiveness and competitiveness.
The review will aim to report back to HM Treasury at the start of 2021.
Press release: HM Treasury announces launch of FinTech Strategic Review
FinTech Strategic Review terms of reference
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FCA authorisation - HM Treasury publishes Policy Statement on changes to the FCA’s cancellation process - July 2020
HM Treasury has published a Policy Statement outlining proposed amendments to the FCA’s process for cancelling firms’ authorisation. HM Treasury explains that the current process, as set out in FSMA 2000, is “no longer sufficient to allow the FCA to quickly remove a firm’s authorisation where they suspect they are no longer carrying out authorised activity and reflect that in the Financial Services Register”, thus posing significant risks to consumers.
The existing process for cancelling authorisations will sit alongside an additional streamlined process, which will allow the FCA to cancel the authorisation of firms it suspects may no longer be carrying out FCA-regulated activities, if certain grounds are met. Where agreed with the firm, the FCA will be able to commence the new process by serving a first notice by letter or electronic means. If the firm does not respond within 28 days, including after a second notice is sent, the FCA will publish a notice on its website and on the firm’s Register entry stating that “action has been commenced with a view to removing the firm’s authorisation on the basis that it appears they are no longer carrying on a regulated activity”. After one month of the publication of this notice, the FCA will cancel the firm’s authorisation. At any stage of the procedure, up until cancellation, the firm in question can notify the FCA in writing that it is carrying on a regulated activity. The FCA will then end the procedure and can remove any public notice it has placed.
To mitigate any risk that a firm might unknowingly have its authorisation cancelled, the process will allow for authorisation to be restored where appropriate. The process will apply only to FCA solo-regulated firms.
While not a formal consultation, HM Treasury welcomes views on the proposed changes.
HM Treasury Policy Statement on changes to the FCA’s process for cancelling firms’ authorisation
Webpage
Regulatory framework for approval of financial promotions - HM Treasury publishes consultation - July 2020
HM Treasury has published a Consultation Paper setting out proposed reforms to the regulatory framework for the approval of financial promotions. Under the existing regulatory framework, a person is not permitted to communicate a financial promotion unless that person is, or the content of the promotion is, approved by an authorised firm. The FCA sets binding rules that authorised firms must comply with when communicating or approving financial promotions.
According to HM Treasury, “experience in recent years … suggests that the regime needs additional safeguards to ensure that approval by an authorised person is a genuinely effective means of ensuring that consumers are protected from deficient or potentially harmful financial promotions”. The government proposes to amend FSMA 2000 so that firms wishing to approve financial promotions to be communicated by unauthorised firms will first have to obtain the consent of the FCA. The government does not intend for this “new gateway” to apply for firms approving the financial promotions of an unauthorised person within the same group, or to the approval of authorised firms’ own promotions for communication by unauthorised persons.
To achieve this, one option outlined would involve amending section 21(2)(b) of FSMA 2000 to remove the general ability to communicate financial promotions which have been approved by authorised firms and restricting approval of the financial promotions of unauthorised firms through the imposition of requirements, which could then be varied or cancelled. A second option would involve amending the FSMA 2000 (Regulated Activities) Order 2001 to make the approval of financial promotions of unauthorised persons a regulated activity, with firms requiring a Part 4A permission to carry on that activity.
The consultation period closes on 25 October 2020.
HM Treasury consultation on proposed reforms to the regulatory framework for the approval of financial promotions under FSMA 2000
Webpage
Press release
Crypoasset promotions - HM Treasury publishes consultation on expanding the scope of the financial promotions regime - July 2020
HM Treasury has published a Consultation Paper setting out its proposals to expand the scope of the financial promotions regime under FSMA 2000 to include cryptoasset promotions, to enhance consumer protection while the government continues to consider its approach to the challenges of cryptoasset regulation more generally. To bring the relevant cryptoasset activities into scope, HM Treasury proposes to amend the FSMA 2000 (Financial Promotion) Order 2005 (FPO) to include certain unregulated cryptoassets in the list of controlled investments and to amend a number of the current controlled activities.
In order to prevent the potential stifling of innovation, the proposed definition of “qualifying cryptoassets” (that is, the unregulated cryptoassets to be covered by the FPO as controlled investments) includes only those cryptoassets that are “both fungible and transferable”. The consultation proposes that in-scope controlled activities would include the buying, selling, subscribing for or underwriting of qualifying cryptoassets.
Exemptions from the financial promotion restriction for qualifying cryptoassets would generally be consistent with the approach taken to exemptions for other controlled investments. However, a new FPO exemption is proposed to ensure that vendors merely offering to accept cryptoassets in exchange for goods or services, and buyers merely offering cryptoassets to pay for goods or services, in the same manner as they would accept pound sterling payments, do not fall within scope.
The consultation period closes on 25 October 2020. The government does not propose to introduce a transitional period before the proposed FPO amendments come into force.
HM Treasury consultation on expanding the scope of the financial promotions regime under FSMA 2000 to include cryptoasset promotions
Webpage
Press release
Financial Conduct Authority, Prudential Regulation Authority and the Bank of England
Joint FCA, PRA and Bank of England Consultation Paper: Complaints against the Regulators (The FCA, the PRA and the Bank of England) - July 2020
The FCA, the PRA and the Bank of England have published a joint Consultation Paper (FCA: CP20/11, PRA: CP8/20) setting out their proposals for the introduction of a revised Complaints Scheme. This follows recommendations made recently by the Complaints Commissioner, particularly in relation to the regulators’ approach to compensatory payments.
According to the Consultation Paper, the revised Scheme is more user-friendly, using plain language to make it more accessible to consumers and small businesses, and provides for a more detailed description of the regulators’ approach to ex-gratia compensatory payments. The regulators state that they expect the revised Scheme to help them work more efficiently by reducing the time spent explaining the Scheme and dispelling misunderstandings, but increasing the time spent investigating the merits of complaints.
The consultation period closes on 14 September 2020. The FCA, the PRA and the Bank of England aim to implement the revised Scheme as soon as reasonably practicable.
FCA, PRA and Bank of England Consultation Paper (FCA: CP20/11, PRA: CP8/20): Complaints against the Regulators (The FCA, the PRA and the Bank of England)
Webpage
Financial Conduct Authority
FCA Consultation Paper CP20/10: Extending implementation deadlines for the Certification Regime and Conduct Rules - July 2020
The FCA has published a Consultation Paper (CP20/10) setting out proposed amendments to the FCA Handbook so as to extend the implementation deadlines for the certification regime and conduct rules for FCA solo-regulated firms, that are not benchmark administrators, from 9 December 2020 to 31 March 2021. The FCA proposes to extend the implementation deadlines for claims management companies (CMCs) to the same date. This follows HM Treasury’s agreement, published in June 2020, to delay the deadline for FCA solo-regulated firms to undertake the first assessment of the fitness and propriety of their certified persons under the Senior Managers and Certification Regime (SMCR) in the light of COVID-19.
CP20/10 proposes to extend the deadlines for the following requirements: (i) the coming into force date of the conduct rules for staff who are not senior managers or certification staff, and the date by which relevant employees must have received training on those rules; (ii) the deadline for submission of information about directory persons to the Financial Services Register; and (iii) references in the FCA rules to the deadline for assessing certified persons as fit and proper.
Firms that are able to complete certification assessments, conduct rules training and directory persons reporting by 9 December 2020 are encouraged to do so, provided that this does not compromise the quality of their assessments or training.
The consultation period closes on 14 August 2020. The FCA will publish a Policy Statement finalising its proposals on an expedited basis, ahead of the existing implementation date of 9 December 2020.
FCA Consultation Paper CP20/10: Extending implementation deadlines for the Certification Regime and Conduct Rules
Webpage
Press release
COVID-19 - FCA highlights difficulties caused by firms using cheques - 16 July 2020
The FCA has published its regulation round-up for July 2020, in which it highlights the difficulties arising from firms making payments by cheque in light of COVID-19. The FCA suggests that relevant firms should consider transferring funds using secure electronic alternative payment methods where possible in order to reduce the need for staff to handle cheques onsite.
The FCA confirms that it does not expect firms to require all customers to stop using cheques and that it is aware that electronic payment methods may not be appropriate for all customers.
FCA Regulation round-up July 2020
FCA Feedback Statement FS20/12: Intergenerational differences - July 2020
The FCA has published a Feedback Statement (FS20/12) on intergenerational differences, which provides a summary of the responses received following the FCA’s Discussion Paper (DP19/2) on the changing financial needs of consumers from different age groups, published in May 2019, as well as the regulator’s intended next steps.
The FCA confirms that, in light of the feedback received in response to DP19/2, it has refined its core understanding of intergenerational financial needs and circumstances and has identified areas in which the financial services industry and policymakers can act to better meet the circumstances and needs of different generations. Among other things, the FCA concludes that consumers need: (i) better support to manage increased responsibility and exposure to risk; (ii) access to more flexible financial products; and (iii) appropriate access to suitable lending products to achieve their financial goals.
Applying these findings, the FCA recently set four external priorities for its work over the next one to three years in its 2020/2021 business plan. The FCA will also use its findings as a benchmark to reassess its understanding of intergenerational differences over time.
FCA Feedback Statement FS20/12: Intergenerational differences
Financial Services Register - FCA publishes statement on fake website - 22 July 2020
The FCA has published a statement confirming that it is aware that that there has been an attempt to reproduce its Financial Services Register on an unofficial, non-FCA website. The FCA states that it is currently working to remove the page and to alert the public.
FCA statement on the publication of a fake Financial Services Register
Remuneration practices - FCA publishes 2020/21 remuneration round letter - 22 July 2020
The FCA has published a letter to the Chairs of firms’ remuneration committees, setting out its findings and observations from the 2019/20 remuneration round and explaining how it plans to assess firms’ remuneration policies and practices throughout 2020/21.
Among other things, the letter states that during 2019/20, firms continued to embed conduct considerations in their remuneration policies and practices through performance assessment measures, including conduct objectives and responding to misconduct by adjusting variable remuneration. The FCA also discusses its expectations of firms in relation to various matters, including: (i) its expectations that firms ensure that remuneration policies and practices remain aligned with their long-term business plans; (ii) its expectations as regards ex-post risk adjustments to remuneration; and (iii) its expectations for firms to address diversity and inclusion inequalities, including assessing pay gaps based on gender and ethnicity.
The FCA will continue to assess how firms’ remuneration policies drive good conduct outcomes and how firms’ remuneration committees can help to deliver those outcomes.
FCA 2020/21 remuneration round letter to the Chair of firms’ remuneration committees
Regulatory sandbox - FCA announces sixth cohort - 23 July 2020
The FCA has published the details of 22 firms that were successful in applying to begin testing in the sixth cohort of its regulatory sandbox. The FCA states that it received 68 applications, with applications coming from firms operating in the UK and overseas. Applications primarily came from firms looking to operate in the retail banking, payments and retail lending sectors.
Examples of propositions that were accepted include financial education platforms, a digitised motor finance proposition, safekeeping and transacting of digital assets using distributed ledger technology and a sustainable finance investment platform, which enables the mobilisation of capital towards green projects.
FCA webpage on the sixth cohort of its regulatory sandbox
