Share

Finalising the SM&CR: This week in regulation

11/07/19

The speed read

  • Finalising the SM&CR
  • Proposed ban on the sale of crypto-derivatives to retail consumers
  • FCA’s annual report and accounts published
  • Unauthorised firms ordered to pay customer restitution
  • [Speech] The FCA’s priorities in a changing pensions market

Finalising the SM&CR

The FCA has published an outline of the work currently underway to finalise the rules around the Senior Managers & Certification Regime (SM&CR). The regulator has been working closely with the Treasury to prepare the Commencement Order required to allow the FCA to publish the final rules. Once this has been agreed and published, the regulator will publish its policy statement setting out the final rules of the regime.

Also due to be announced is the regime commencement date for benchmark administrators, given that a number of sector-specific considerations need to be taken into account when applying the regime to this group of firms.

 

Proposed ban on the sale of crypto-derivatives to retail consumers

The FCA is proposing to ban the sale of derivatives and exchange traded notes (ETNs) which reference certain cryptoassets to retail consumers to prevent harm.

The regulator believes that the sale of these products may lead to consumer harm as they can’t reliably assess the value or risks they pose. This is due, in part, to the extreme price volatility of cryptoassets and the prevalence of market abuse and financial crime in the secondary market.

The proposed ban follows the UK Cryptoasset Taskforce’s final report which recommended that the FCA should explore the merits of a ban.

 

FCA’s annual report and accounts published

The FCA has published its annual report for 2018/19, highlighting the key pieces of work it has undertaken in the past 12 months.

The regulator highlights its actions in the following areas as key positives:

  • Improving levels of protection for high-cost short-term credit users
  • Preparations for Brexit
  • Raising awareness of the forthcoming PPI complaints deadline and financial scams
  • Promoting greater levels of innovation, including the launch of the Global Financial Innovation Network.

Alongside the annual report, the FCA has also published in-depth reports of its activities around competition, diversity, enforcement and anti-money laundering.

 

Unauthorised firms ordered to pay customer restitution 

The High Court has approved an order to make two unauthorised firms and their directors hand over their remaining funds to the FCA in order to compensate consumers for their losses as part of a number of unauthorised investment schemes.

The firms in question raised more than £15 million from 1,000 investors and the FCA took urgent enforcement action to stop the schemes continuing. Of this, £9.25 million was paid out to investors as returns and the recovery order will provide an additional £3.4 million, leaving a shortfall of £2.7 million.

 

[Speech] The FCA’s priorities in a changing pensions market

Edwin Schooling Latter, the FCA’s Director of Markets and Wholesale Policy, recently gave a speech offering a look at the FCA’s priorities in a changing pensions landscape. We bring you the highlights.

The contract-based pension market has grown significantly in the past decade, with 25 million members and approximately £667 billion of assets in accumulation and £116 billion in drawdown. In this time the market has changed significantly, and with it, the FCA’s priorities have too.

With its objective of ensuring the markets work well and deliver appropriate levels of consumer protection, the FCA is concerned with both the accumulation and decumulation phases of the market. Potential for harm comes from the risk that individuals may not have adequate income to see them through retirement.

The FCA’s immediate priority is ensuring those that are being recommended to transfer their pension are being provided with suitable advice. The regulator is focussing its supervisory activity on those firms undertaking high levels of activity in this area as well as developing appropriate policy interventions to develop a clear advice framework.

Another area of focus in the decumulation market is the development of investment pathways for consumers who don’t actively engage in the drawdown process. Following an industry consultation, the FCA will be publishing its final rules for these pathways shortly.

Value for money is one of the regulator’s key strategic priorities and forms part of its joint strategy with The Pensions Regulator (TPR). It has already taken a number of steps to address the issue, including new governance standards, a charge cap on default funds and interventions to cost and charges disclosure from asset managers.

The FCA also believes there should be a debate on whether the regulator should set out stronger views on how firms should assess and report on value for money.

Mr Schooling Latter rounded off his speech announced that the FCA and TPR will undertake a strategic review of the end-to-end consumer journey to identify the tools needed to help them make effective decisions.

Latest Insights

Subscribe

The latest insights and regulatory analysis straight into your inbox

Find out more

How can we help?

Speak to a culture and conduct risk expert today

Contact us

Find out more about our unique RegTech solution at recordsure.com