Threshold conditions and the assessment of adequate financial resources are important components of the FCA’s supervisory work. The FCA aims to reduce the likelihood of market disruption, increase the chances firms can put things right when they go wrong and minimise harm – to consumers and the integrity of the UK financial system – if they fail and exit the market.

CP19/20 aims to provide more clarity to the industry on:

• the role of adequate financial resources in minimising harm
• the practices firms can adopt when assessing adequate financial resources
• how we assess the adequacy of a firm’s financial resources.

The FCA expects a firm’s assessment of adequate financial resources to be proportionate to the nature, scale and complexity of its activities. Firms are required to assess the risks inherent in their business model, the potential harm that can be caused and explain how to close the business in an orderly way.

In particular, the assessment should:

• • • consider a forward-looking approach to risks and how these evolve throughout the economic cycle
    • reflect the risks to which the firm is exposed and the amount of risk it poses
    • be proportionate to the likelihood of the risks occurring
    • ensure they are financially sound while avoiding excessive costs, which could hinder firms from carrying out their business in a viable way
    • happen at least annually, reflecting the fact that the assessment of risk and hard should be dynamic.

The response deadline to CP19/20 is 13 September 2019.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/publication/consultation/cp19-20.pdf

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FCA Handbook Notice 65

FCA publishes latest Business Plan 2019.20

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

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TPR would allow EEA-based firms to continue new and regulated business in the UK for a limited period, while they are seeking full FCA authorisation. EEA investment funds holding a passport will be able to continue temporarily marketing in the UK. The FCA has extended the deadline for applying to the Trade Repository and Credit Ratings Agencies to the same date. For EEA payment services and e-money firms, the notification window for temporary permission will open again under the relevant HM Treasury Regulations on 31 July and end on 30 October.

The FCA has emphasised that the firms should continue preparing for various Brexit scenarios, including a no-deal Brexit. The UK regulators have been given powers to make transitional directions connected to changes in financial services legislation made under the EU (Withdrawal) Act 2018. The FCA intends to use these powers in order to ensure that firms can continue to comply with the regulations after Brexit.

Firms are expected to take reasonable steps to comply with their regulatory obligations in the areas that are not provided with transitional relief. The FCA will not take enforcement action against the firms that have taken reasonable steps to prepare to meet their obligations by exit day.

The FCA has published further information on how firms can be affected by Brexit and intends to continue providing important updates.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/news/press-releases/fca-confirms-extension-temporary-permission-regime-deadline

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FCA extended the notification window for temporary permissions regime to 30 May

FCA issues directions for inbound firms to make temporary permissions notifications

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

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The review identified shortcomings in the control and oversight of appointed representatives (ARs) by their principal firms.

338 principals were reviewed by the FCA, each with between one and 80 ARs. Key findings of the review were:

AR on-boarding process
Many principals lacked effective risk frameworks that would allow them to fully assess their ability to oversee prospective ARs effectively. This led to the possibility of some ARs conducting activities outside their principals’ core areas of expertise.

Ongoing monitoring of ARs
Most principals failed to monitor the activities of their ARs effectively due to a lack of effective risk frameworks.

Capital and liquidity assessment
Most principals were not assessing the risks to their firms arising from the activities of their ARs. Moreover, some were not adequately assessing their risks across all risk types, including liquidity risk and their compliance with the overall liquidity adequacy rule.

Alternative investment fund managers
Evidence was found that some firms had failed to put in place appropriate control and risk management frameworks in order to to oversee the AIFs and the activities of the seconded portfolio managers.

Foreign-owned ARs of contracts for difference providers
The FCA found that several principals that act as contracts for difference providers had recently registered ARs.
Most of these ARs were owned by shareholders based overseas. The majority of the ARs were inactive, while paying relatively high fees to their principals. Some third-country investors were given the impression they were contracting with an FCA-registered entity, when they were potentially contracting with an unregulated thirdcountry entity.

As a result, the FCA sent a dear CEO letter calling for a more rigorous assessment of the firms’ compliance with the FCA’s requirements regarding ARs. The firms are thus considered responsible for monitoring their ARs, resolving any issues and ensuring effective consumer protection. The FCA will be conducting visits to the firms, taking appropriate action where required.

Further information:
To read more, please follow this link:

Review of principal firms in the investment management sector
https://www.fca.org.uk/publications/multi-firm-reviews/review-principal-firms-investment-management-sector

Dear CEO Letter – FCA expectations of principal firms in the investment management sector
https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-expectations-of-principal-firms-in-investment-management.pdf

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FCA dear CEO letter on financial promotions

FCA Dear CEO letter on promotions concerning regulated and unregulated business

PRA Dear CEO letter on exposure to crypto-assets

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

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Supplementing the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4) with regard to regulatory technical standards for the minimum action and the type of additional measures credit and financial institutions must take to mitigate money laundering and terrorist financing risk in certain third countries.

Credit institutions and financial institutions are required to identify, assess and manage the money laundering and terrorist financing risk to which they are exposed, particularly when they have established branches or majorityowned subsidiaries in third countries or because they are considering whether to establish branches or majorityowned subsidiaries in third countries. Directive (EU) 2015/849 therefore sets standards for the effective assessment and management of money laundering and terrorist financing risk at group level.

The Delegated Regulation sets out:

• Article 1 – Subject matter and scope
• Article 2 – General obligations for each third country
• Article 3 – Individual risk assessments
• Article 4 – Customer data sharing and processing
• Article 5 – Disclosure of information related to suspicious transactions
• Article 6 – Transfer of customer data to Member States
• Article 7 – Record-keeping
• Article 8 – Additional measures
• Article 9 – Entry into force

The Delegated Regulation will enter into force on the twentieth day following that of its publication in the Official Journal of the European Union, 3rd June 2019. It will apply from 3rd September 2019.

Further information:
To read more, please follow this link:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2019.125.01.0004.01.ENG&toc=OJ:L:2019:125:TOC

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EU Commission publish communication on developing the Capital Markets Union (CMU)

EU Commission Updates List of High-Risk Third Countries

EU’s Combating Money Laundering by Criminal Law Directive

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

The post European Commission Delegated Regulation on RTS and measures to mitigate money laundering and terrorist financing risk appeared first on Met Facilities.

The Approach to Supervision and feedback statement explains the FCA’s purpose of, and the approach to, supervising firms and individuals and the public value it delivers.

The document sets out:
• Chapter 1 – Why the FCA supervise

• Chapter 2 – FCA’s supervisory principles

• Chapter 3 – FCA’s priorities and focus
Business models, culture and individuals, and prudential supervision are key areas of focus in the FCA’s supervisory approach.

• Chapter 4 – How the FCA supervise
To help the FCA uses the regulatory tools efficiently and cost-effectively, they have a decision-making framework which includes identification of harm, diagnostic tools, remedy tools and evaluation.

• Annex 1 – Feedback Statement for the FCA’s Approach to Supervision consultation

• Annex 2 – Firm Assessment Model

Further information:
To read more, please follow this link:
https://www.fca.org.uk/publication/corporate/our-approach-supervision-final-report-feedback-statement.pdf

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FCA Handbook Notice 65

FCA dear CEO letter on financial promotions

FCA publishes latest Business Plan 2019.20

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

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This instrument transposes Article 3j of the revised EU Shareholder Rights Directive (SRD II) into UK law. Article 3j of SRD II places requirements on proxy advisors, which primarily offer voting services and/or advice to shareholders in publicly listed companies, to make certain disclosures about the way in which they conduct their business.

One of the aims of SRD II is to improve the stewardship of EEA based corporations. Proxy advisors primarily offer voting services/advice to shareholders in publicly listed companies, and therefore can have a considerable impact on how their clients exercise their voting rights. Article 3j of SRD II, which this instrument transposes into UK law, responds to concerns that there is a lack of transparency in the way in which proxy advisors carry out their work, which could lead to institutional investors purchasing poor quality, inaccurate or unreliable advice, undermining their
ability to fulfil their stewardship role effectively.

Article 3j requires proxy advisors to make certain disclosures about how they conduct their business. Proxy advisors will be required to:

• disclose reference to a code of conduct which they apply, and report on the application of the code. If proxy advisors apply a code of conduct but depart from its recommendations, they must declare the parts of the code from which they depart, why they depart from it and indicate any alternative measures adopted.
Where proxy advisors do not apply a code of conduct at all, they must explain why this is the case.
• disclose information on their research capabilities and how they produce their advice and voting recommendations (e.g., models, methodologies, information sources and resources)
• identify and disclose any actual or potential conflicts of interests or business relationships that may influence the preparation of their research.

The instrument will come into force on 10th June 2019.

Further information:
To read more, please follow this link:
http://www.legislation.gov.uk/uksi/2019/926/contents/made

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FCA Handbook Notice 65

FCA’s feedback statement on Duty of Care

FCA publishes latest Business Plan 2019.20

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

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https://www.youtube.com/watch?v=882q8R2v3Gk

For more interviews with other attendees at the Blockchain Expo, visit the link below:
https://www.youtube.com/channel/UC3kh386LYXQzQWnBrB90qnA

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FCA Handbook Notice 65

FCA’s feedback statement on Duty of Care

FCA publishes latest Business Plan 2019.20

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

The post Blockchain Expo – Paul Lack appeared first on Met Facilities.

Conduct of Business (Binary Options) Instrument 2019 (FCA 2019/15)
It amended COBS 22.
This instrument makes changes to the Handbook by creating rules prohibiting the sale, marketing and distribution of binary options to retail consumers, following evidence of consumer harm from the inherent risks of these products and the poor conduct of the firms selling them. This instrument came into force on 2 April 2019.

Reporting of Information About Directory Persons (Dual-Regulated Firms) Instrument 2019 (FCA 2019/11)
It amended Glossary, SYSC 23,24,27 and SUP 12,16 and TP 1.
This instrument makes changes to the Handbook to establish a Directory to empower customers and other stakeholders to ensure they only deal with those who have been assessed by an authorised firm as fit and proper, or otherwise suitable. This instrument comes into force on 9 September 2019.

Binding Technical Standards Instruments (FCA 2019/57-59 and 64-66)
The FCA Board has made changes to certain Binding Technical Standards (BTS) relating to the European Market Infrastructure Regulation, the Markets in Financial Instruments Directive, the Bank Recovery and Resolution Directive, the Capital Requirements Directive and Regulation and the Financial Conglomerates Directive.

These instruments make certain BTS that formed part of our Brexit consultations but could not be made with the initial group of BTS which we made and published in March 2019, as the FCA was not in a position to make these until parallel versions were made by the Prudential Regulation Authority. These instruments come into force on Exit Day, as defined in the European Union (Withdrawal) Act 2018.

Supervision Manual (Supervisory Principles Amendment) Instrument 2019
It amended SUP 1A.
This instrument makes changes to the Handbook to update the principles which guide the FCA’s supervisory work and help us to prioritise our interventions in order to deliver our objectives. The supervisory principles are complementary to the Principles for Businesses, which outline our expectations of firms. This instrument comes into force on 24 April 2019.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/publication/consultation/cp19-04.pdf

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FCA Handbook Notice No. 57

FCA releases Policy Statement 18/18 on Industry Codes of Conduct

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Some stakeholders have previously told the FCA that our regulatory framework, including our Principles for Businesses (the Principles), may not be sufficient or applied effectively enough to prevent harm to consumers. Some suggested to introduce a duty of care to reduce harm and ensure that firms avoid conflicts of interest, as well as supporting firms’ longer-term cultural change. However, other stakeholders suggested existing FCA rules already provide sufficient protection for consumers and impose the same requirements on firms as a duty of care would. Given the strength of these conflicting concerns, the FCA published DP18/5 to discuss about the potential merits of a duty of care.

Most respondents, across all our stakeholders, consider that consumer harm in financial services in unacceptably high, and there is a need for change to improve consumer outcomes. Others think that the SM&CR is already bringing about the change needed and that an evaluation of its impact is necessary before assessing whether a New Duty is needed.

The feedback statement summarises the opinions of different options for change include:

• A new duty which could be either as a statutory duty or as a duty expressed within the Principles
• Private right of action for breaches of the Principles
• A fiduciary duty

As a result of the feedback received, the FCA have identified options that are, alone or in combination, most likely to address gaps in consumer protection. They are:

• reviewing how we apply the regulatory framework – particularly how the Principles apply in their authorisations, supervisory and enforcement functions, and how to communicate this to firms
• new/revised Principles to strengthen and clarify firms’ duties to consumers, including consideration of whether a potential private right of action for Principles breaches is appropriate, and what any unintended consequences of this might be

The FCA states that they do not consider that this is a sufficient basis for making changes to primary legislation, which Parliament would need to make. However, they take the view that there are substantive reasons for supporting a statutory duty.

The FCA will publish a further paper in the autumn seeking detailed views on specific options for change, as part of our work on the future of regulation more generally. They have included this commitment in our Business Plan 2019/20.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/publication/feedback/fs19-02.pdf

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FCA dear CEO letter on financial promotions

FCA published final rules on the Directory of financial services workers

FCA publishes Finalised Guidance on Statement of Responsibilities and Responsibility Maps for FCA firms under SMCR

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

The post FCA’s feedback statement on Duty of Care appeared first on Met Facilities.

The main key priorities are:

• Culture and governance: This includes the extension of the Senior Manager’s and Certification Regime to all firms. There are also interesting references to the concept of “harm” and where this could most likely occur. Particular areas of relevance include operational resilience, outsourcing, and business model impacts on customer behaviour.
• Fair treatment of existing customers and information provided to all customers: whilst fair customer treatment is an ongoing theme we are all more than aware of, the focus here is much more on whether existing customers could be getting “penalised” for their loyalty in terms of pricing practices and customer retention verses new customer strategies. This is particularly relevant to insurance clients. There is also a wider commitment to prioritising vulnerable customers.
• Operational resilience: This includes change management, outsourcing, cyber security and resilience. Interestingly, 17% of the incidents firms report were caused by an IT failure at a third party supplier – the second highest root cause of disruption.
• Financial crime: remains a clear priority area and its clear from recent regulator activity that firms must relentlessly focus on getting this right.
• As a final point, the FCA will continue to examine how firms are implementing MiFID II and bringing in the new EU Prospectus Regulation from July 2018.
• In terms of “longer term” priorities including innovation, data and changing customer demographics: these are all very relevant areas, but there is always a risk of how well focussed reviews in these areas will be. So future clarity around scope and outcomes of these reviews is very important, as is understanding customers that could be more vulnerable and changing practices as needed.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/news/press-releases/fca-sets-out-its-priorities-2019-20

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FCA Primary Market Bulletin No.23

FCA extended the notification window for temporary permissions regime to 30 May

FCA dear CEO letter on financial promotions

Please Note: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.

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