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Review of pension scheme communications to steel workers and trends in the HCSTC market: This week in regulation

25/01/19

The speed read

  • FCA welcomes review of pension scheme communications to steel workers  
  • Trends in the high-cost short-term credit (HCSTC) market
  • Consultation on further Senior Managers & Certification Regime (SM&CR) changes
  • New consultation on cryptoassets guidance published

FCA welcomes review of pension scheme communications to steel workers  

The FCA, The Pensions Regulator (TPR) and The Single Financial Guidance Body (SFGB) have welcomed an independent review by Caroline Rookes, former CEO of the Money Advice Service, into the communications and support members of the British Steel Pension Scheme (BSPS) received during the 2017-18 pension restructuring exercise and ‘Time to Choose’ campaign.

The review, which was commissioned by TPR, puts forward a number of recommendations to help savers make the right decision when considering transferring their pension from a defined benefit scheme. Her recommendations include:

  • TPR should explore, with the Department for Work and Pensions (DWP), the scope for introducing new legislation to simplify the choices available during a pension scheme restructure
  • TPR, FCA and DWP should explore whether there is scope for a new TPR power to consider how prepared a scheme is to handle the member consultation in the event of a regulated apportionment arrangement (RAA) and stop or delay it if necessary
  • The regulatory bodies should continue to meet quarterly and collaborate with wider partners to ensure a joined-up approach
  • TPR needs to produce and disseminate guidance and case studies to support trustees facing restructure and other major changes
  • TPR should encourage trustees to issue earlier warnings when difficult situations are developing and to seek help from appropriate advisers, particularly the new SFGB
  • Through the TPR codes and guidance, trustees should be obliged to provide appropriate support to members considering a cash transfer.

 

Trends in the high-cost short-term credit (HCSTC) market  

The FCA has published HCSTC market insights and trends, based on Product Sales Data (PSD) and analysis from its Financial Lives survey 2017. This data helps build up a clearer picture of how the market is functioning.

The analysis shows:

  • More than 5.4 million loans were made in the year to 30th June 2018
  • Although lending levels have risen since 2016, they remain well below 2013 levels
  • On average, borrowers are due to repay 1.65 times what they owe
  • The North West has the highest number of loans per head (125 per 1,000) in the UK, while Northern Ireland has the lowest (74 per 1,000)
  • 67% of payday loan users and 49% of short-term instalment borrowers are overindebted, compared with 15% of the UK adult population.

The FCA will use this data to inform its supervision of the sector and its other regulatory functions.

 

Consultation on further Senior Managers & Certification Regime (SM&CR) changes

During the FCA’s consultation process for extending the SM&CR to insurers and solo-regulated firms, the regulator identified a number of areas where changes to the existing regime were needed. These changes are designed to bring additional clarity to the regime and help firms adjust to it.

The proposed changes include:

  • Excluding the legal function from the overall responsibility requirement
  • A notification requirement to bring intermediaries with regulated revenue of more than £35 million, which don’t complete RMA-B, into scope of the enhanced regime
  • Amending the scope of the Client Dealing Function within the certification regime to exclude purely administrative roles
  • Ensuring that the certification regime applies to all individuals performing roles that were previously designated Systems and Controls functions under the Approved Persons Regime, but are no longer approved under SM&CR
  • Applying the Senior Manager Conduct Rule Four (“You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.”) to non-approved executive directors at limited scope firms and non-executive directors at those firms that are subject to equivalent requirements.

In light of these proposed changes, the FCA is also proposing to make minor amendments to its Handbook and regulatory forms to ensure consistency.

 

New consultation on cryptoassets guidance published  

To help firms understand whether their cryptoassets activity falls under FCA regulation, the regulator is consulting on guidance on where different types of cryptoassets sit within the regulatory perimeter. This follows the UK Cryptoassets Taskforce’s commitment to providing extra clarity for industry participants on the regulatory perimeter and the FCA’s expectations.

The FCA has divided cryptoassets into three types of token:

  • Exchange token: designed as a means of exchange and not issued or backed by a central authority
  • Security token: designed with specific characteristics that meet the definition of a Specified Investment, e.g. a share or debt instrument
  • Utility token: provides holders with access to a current or prospective product or service, but does not provide them with the same rights as those offered by Specified Investments.

The guidance is designed to clarify where each of these categories sits in relation to the regulatory perimeter. It also outlines a step-by-step approach for firms to use to determine whether certain cryptoassets come under FCA regulation.

The government intends to consult on whether it is necessary to expand the regulatory perimeter to include a greater proportion of cryptoasset activities. Later this year, the FCA will also consult on banning the sale of derivatives linked to certain cryptoassets to retail investors.

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