The speed read

  • Fees and levies for 2019/20 published
  • FCA permanently restricts sale of CFDs to retail consumers and responds to ESMA opinion
  • Review of the credit information market launched
  • Don’t wait to be pushed on open finance
  • Two found guilty of insider dealing
  • FCA responds to EBA’s opinion on SCA
  • FCA confirms its recognition of the FX global and UK money markets codes
  • Amending the DEPP manual and EG to implement new obligations for proxy advisors
  • New Chairs of the FCA Practitioner Panel and Markets Practitioner Panel announced
  • FCA statement on the joint declaration on climate change

Fees and levies for 2019/20 published

The FCA has published the 2019/20 fees and levies required to fund the FCA, Financial Ombudsman Service (FOS), the Money and Pensions Service (formerly the Single Financial Guidance Body), devolved authorities and the illegal money lending (IML) expenses of HM Treasury.

The total annual funding requirement (AFR) is unchanged from the proposals published in April 2019, which sees the budget increased by 2.7% to £558.5m. The AFR includes the ongoing regulatory activities (ORA) budget. This budget has seen an increase of 2%, to £537.7m, and covers scope change and costs related to the EU withdrawal.

As was stated in the April proposal, the regulator is increasing 2019/20 minimum and flat fees by 2% for authorised firms, to link the fees with movements in its ORA budget. It will also keep the variable fee rates for the consumer credit firms in the CC1 and CC2 fee-blocks unchanged in 2019/20.

 

FCA permanently restricts sale of CFDs to retail consumers and responds to ESMA opinion

Following consultation feedback, the FCA has confirmed new rules restricting the sale, marketing and distribution of contracts for difference (CFDs) and similar options to retail customers. This follows the European Securities and Market Authority’s (ESMA) temporary restrictions of CFDs to retail clients. The FCA has addressed the potential for harm to retail consumers by making these temporary restrictions permanent, and by including CFD-like options, which it says pose similar risk of harm.

In response to feedback, the FCA has clarified the scope of the restrictions to CFD-like options. The scope excludes:

  • Firms that sell CFD-like options in other jurisdictions, where the product is sold through an intermediary outside the UK
  • The sales and distribution activities of EEA firms outside the UK. These firms are still prohibited from actively marketing unrestricted CFD-like options to UK retail customers.

The rules apply from 1stAugust 2019 for CFDs and 1stSeptember 2019 for CFD-like options.

The FCA also responded to an opinion from the ESMA on its final rules. The ESMA concluded overall that the FCA’s proposed national measures were justified and appropriate. The ESMA does not agree with the decision to exclude EEA firms outside the UK from the restrictions.

Nor does it agree with the leverage limits the FCA has set for CFDs referencing certain government bonds. The regulator’s response details its reasoning for proceeding with its proposals.

 

Review of the credit information market launched

The regulator has launched a market study looking at how the credit information market operates, and what impact it has on consumers. It has identified a number of concerns about coverage and quality of credit information, the effectiveness of competition between credit reference agencies, and the extent of consumer engagement. The study will focus on the following themes:

  • The purpose, quality and accessibility of credit information
  • Market structure, business models and competition
  • Consumers’ engagement and understanding of credit information and how it impacts their behaviour.

The FCA will gather evidence from multiple sources including credit reference agencies, consumer organisations and providers and users of credit information.

 

Don’t wait to be pushed on open finance

In this article for FCA Insight, FCA adviser Magnus Falk argues that, while Open Banking has transformed how consumers deal with their bank finances and improved their financial literacy, other sectors must follow suit. Falk suggests that the lessons learned from Open Banking are relevant to the entire financial sector and beyond.

The article ends by proposing that, off the back of insights hard won from implementing Open Banking, leaders in other sectors shouldn’t wait for others to drive the process. Instead they should be eagerly investigating how to develop new standards for their own sectors.

 

Two found guilty of insider dealing

A senior compliance officer at an investment bank and their family friend, an experienced day trader of financial securities, have each been sentenced to three years imprisonment for five offences of insider dealing in a trial brought by the FCA.

The senior compliance officer was trusted with access to information about potential mergers and acquisitions in which their employer bank was involved. They performed unauthorised searches of this system, gathering information relating to proposed takeovers of five companies in 2013 and 2014.

Communicating by pay-as-you-go mobile phones, the compliance officer disclosed this information to the day trader, who made a profit of approximately £1.4 million from the subsequent dealings. The FCA, assisted by National Crime Agency (NCA), searched both business and residential premises connected to the defendants in September 2015. Both were arrested.

 

FCA responds to EBA’s opinion on SCA

The FCA has responded following the publication of the European Banking Authority’s (EBA) opinion on strong customer authentication (SCA) under the second Payment Services Directive (PSD2). The regulator has said the opinion allows it to give some firms more time to implement SCA, subject to certain conditions. The implementation date for the SCA measures is 14thSeptember 2019.

The FCA will agree a plan with stakeholders from around the industry, setting out milestones, targets and a final delivery date. It won’t take enforcement action against firms that fail to meet SCA requirements by the deadline in those areas covered by the plan, provided there is evidence firms have taken the necessary steps to comply with the plan.

 

FCA confirms its recognition of the FX global and UK money markets codes

Following feedback from their consultation that took place in December 2018, the FCA has confirmed that it is recognising two voluntary market codes of best practice. This comes as a result of the regulator’s codes recognition scheme. All responses to the consultation agreed that both the FX global code and the UK money markets code met the criteria and should be recognised.

 

Amending the DEPP manual and EG to implement new obligations for proxy advisors

Following the revised Shareholder Rights Directive (SRD II), which set out new obligations for proxy advisors, the FCA has published a consultation paper to amend the decision procedure and penalties manual (DEPP) and enforcement guide (EG). The new obligations in SRD II aim to encourage greater transparency, accuracy and accountability in how proxy advisors work.

To implement SRD II, the Proxy Advisors (Shareholders’ Rights) Regulations 2019 (PA Regulations) were brought into force on 10thJune 2019. The PA regulations give the FCA new powers over proxy advisors. These changes in the regulations mean that the DEPP and EG need to be amended. The amendments relate to the FCA’s new powers to:

  • Remove an advisor from the public list of proxy advisors
  • Investigate a proxy advisor for contravening the PA regulations
  • Imposing a censure or a financial penalty on a proxy advisor.

The FCA is asking for comments on the proposed changes by 26thJuly 2019. It will then consider feedback and publish a policy statement in autumn of this year.

 

New Chairs of the FCA Practitioner Panel and Markets Practitioner Panel announced

FCA Chair Charles Randell has announced the appointments of two new Chairs for the independent Practitioner Panel and Markets Practitioner Panel, agreed by the FCA Board and approved by HM Treasury. Tulsi Naidu, Chief Executive of Zurich in the UK, becomes Chair of the Practitioner Panel from 1stAugust 2019.

She has been a member of the panel since 2017 and takes over the position from Anne Richards, Chief Executive of Fidelity International. Nikhil Rathi, Chief Executive Officer of London Stock Exchange plc, will become Chair of the FCA Markets Practitioner Panel from 1stJuly 2019. He has been a member of the panel since 2015 and is also a member of the Practitioner Panel. He succeeds John Trundle, Chief Executive Officer of Euroclear UK & Ireland.

 

FCA statement on the joint declaration on climate change

The FCA has published a joint declaration with the Prudential Regulation Authority (PRA), the Pensions Regulator (TPR) and Financial Reporting Council (FRC) on climate change. The declaration welcomes the action being taken as part of the UK’s green finance strategy.

The four bodies shared their understanding of the financial risks and opportunities related to climate change. In the accompanying statement the FCA outlined that it is acting on climate change issues by:

  • Publishing a discussion paper on climate change and green finance
  • Introducing new requirements to improve shareholder engagement and increase transparency around stewardship
  • Reviewing responses to a discussion paper on building a regulatory framework for effective stewardship, published jointly with the FRC
  • Consulting on environmental, social and governance disclosures for independent governance committees (IGCs), expecting to publish final rules later this year
  • Launching the Green FinTech Challenge in 2018, encouraging firms to develop solutions to assist the UK’s transition to a low carbon economy.