Compliance Bulletin Weekly Regulatory Round-Up

Introduction

Our weekly roundup aims to give you a digestible summary of the hot topics within Financial Services.

The buzz from the B-Hive…

Take note of some important dates for your diary.. we’re now counting down to the Consumer Duty implementation on 31st July 2023 and the manufacturers deadline is 30th April 2023. Whilst we do not anticipate this deadline to require advice firms captured under the regime to provide information to distributors (as they are usually the sole distributor of their service), this deadline should mark the end of the benchmarking/analysis phase of the Implementation period, with firms starting to look in earnest at actions to ensure they are ready for the 31st July 2023 deadline.

In this week’s weekly round up we will also be focusing on important updates from the FCA and we’ve also added in some handy resources for you to consider. As always if you need any Consumer Duty support please get in touch.

Important Updates…

Authorisations crackdown

The FCA published an update on its operating service metrics for authorisations timelines.

Using a ‘Red/Amber/Green’ (RAG) rating system, the update notes that, for 2021/22, there were 8 green metrics, 5 amber and 6 red. In January/February 2023, 12 were green, 5 amber and 2 red. The FCA expects to see further improvement and to be substantially meeting its targets by the end of March 2023.

Increased scrutiny continues to be applied at the authorisation gateway, and in 2022/23, the number of firms not authorised continues to be 1 in 5, up from 1 in 14 in 2020/21. In some sectors the number not authorised is considerably higher.

The FCA highlights the areas which were not meeting authorisations targets in January/February 2023:

• Approved persons (amber in January/ February 2023 but significantly improved compared to 2021/22).
• Change in control applications (now very close to target, 99.1% in January/February 2023. The FCA explains that it has significantly reduced the time to allocate change in control notifications, and now allocates and begins work on change in control notifications within 3 days of receipt on average with the aim of allocating within 24 hours by the end of March 2023).
• New firm authorisations (the FCA expects to meet this metric by the end of March 2023, except where this is not possible for regulatory reasons).
• Payment services and e-money authorisations, registrations and notifications (where the FCA is seeing incomplete and poor-quality applications).

The FCA has proposed that from Q4 2023, it will report operating service metrics performance quarterly and will include more detailed reporting on the time taken to process applications.

#FCA #Allfirms #authorisations #FCAapplications

Award increases for complainants

The Financial Ombudsman Service (FOS) has announced that their award limits for compensation will increase from 1st April 2023.

The FCA, which controls the limits the FOS is able to offer when upholding complaints, has approved an increase to:
£415,000 for complaints referred to FOS on or after 1 April 2023 about acts or omissions by firms on or after 1 April 2019
£190,000 for complaints referred to FOS on or after 1 April 2023 about acts or omissions by firms before 1 April 2019
The increase follows the FCA Consultation (CP18/31) and Policy Statement (PS19/8), which looked to make changes to the limit to ensure more complainants receive fair compensation when the ombudsman service upholds their complaint against a firm. At the time, the regulator estimated that there could be up to 500 complaints upheld by the ombudsman service each year where the amount of compensation the service determines is due is above the previous award limit.

Practically speaking, firms will now need to review their complaints policies and templates to make the relevant amends, as well as ordering new FOS leaflets to accompany final response letters.

#Complaints #FOS #Allfirms

ESG Benchmarks

The FCA have issued a Dear CEO letter to benchmark administrators outlining their supervisory priorities and view of the risks within the sector. The key issues outlined in the FCA’s latest letter include:
Not enough detail on the ESG factors considered in benchmark methodologies.
Not ensuring that the underlying methodologies for ESG data and ratings products used in benchmarks are accessible, clearly presented and explained to users.
Not fully implementing ESG disclosure requirements.
Benchmark administrators failing to implement their ESG benchmarks’ methodologies correctly – for example, using outdated data and ratings or failing to apply ESG exclusion criteria.
Whilst this letter was issued to Benchmark administrators, it will be of interest to firms who are operating and utilising ESG ratings providers as part of their own ESG offerings.

#ESG #FCA #Investmentadvice #Financialadvice

In the news this week…

Simply not good enough

This week has seen Therese Chambers, Director of Consumer Investments at the FCA, deliver feedback on the regulators Core Investment Advice Regime Consultation (CP22/24), which looked to deliver a simplified advice regime.

For those of you who read our 02/12/2022 Newsletter, you may be aware that B-Compliant were not a fan of the proposals, for their lacked weight in their initial guise; in fact we encouraged all interested and relevant firms to respond to the consultation. For those of you who did take the time to respond, you will be pleased to know that the FCA have conceded that (based on feedback) the proposals may not work for businesses in their current form.

The proposals, which restricted firms looking to participate in the regime to contributions up to the value of the ISA allowance and only in the first year of an investment, lacked commercial viability and the FCA has now vowed to go back to the proverbial drawing board and will be considering the best way to take forward any simplified advice regime as well as the timeline for doing so. Originally, we were expecting a Policy Statement on this to be published in June 2023, and following this announcement, it is unlikely that we will see any kind of policy published on this anytime soon, more likely a further consultation will follow.

#FCA #InvestmentAdvice #Financialadvice #SimplifiedAdvice

Interest Rate Increases

Once again, despite the inference following the last MPC meeting, the Bank of England has once again raised the interest rate. The increase, which was agreed by the committee with a majority of 7-2, will take the rate to 4.25% and represents the 11th increase of the rate since December 2021.
The decision has been taken in light of the unexpected rise of inflation to 10.4% in February, and the developing Banking Crisis with the collapse of two US banks and the rescue of Credit Suisse, earlier this week.

There is however hope, with the BOE also confirming that the UK is no longer heading for a recession, which was a reiteration of what the chancellor had expressed in the Spring Budget last week. Bank governor, Andrew Bailey, was cautious inferring that whilst there was likely to be no recession, the prediction was only for slight growth within the economy.

The BOE’s full statement can be reviewed here.

#UK #BaseRate #InterestRates #Mortgages

Imminent review of SMCR

HM Treasury (HMT) have confirmed this week that it will continue with the publication of their call for evidence on the Senior Managers and Certification regime (SMCR) by the end of Q1 2023. The FCA, in conjunction with the PRA will also be publishing a separate joint discussion paper on the topic.

The review, which forms part of chancellor Jeremy Hunt’s Edinburgh reforms announced last year, will seek feedback on the overall aims of the regime as well as on more specific aspects including its scope and whether it affects the UK’s competitiveness.

The confirmation was made to the Professional Adviser Publication, in response to it’s intentions in light of the recent turmoil in the banking sector, in particular the emergency takeover of Credit Suisse.

#SMCR #Allfirms #FCA #HMT

Breaking News: Strengthening the Criminal Market Abuse Regime

The FCA have published a statement this morning (24/03/23), welcoming the UK Government findings and subsequent recommendation to strengthen the criminal market abuse regime following a review of the current regulatory programme.

The criminal market abuse regime sets out the UK’s criminal sanctions for insider dealing and market manipulation and has not been updated materially since it was introduced. The amendments will support the FCA in delivering their objective to raise standards across the firms they regulate, as market abuse harms confidence and integrity and hinders our work to build market excellence across the UK financial system.

Worth a read…

FOS Complaints Data

For individuals and senior managers who are responsible for dealing with Complaints, the FOS’ half yearly complaints data (for H2 2022) could prove to be interesting reading. Despite an increase in the complaints received (79,921), in comparison to the firms halt of 2022 (72,978), the FOS data revealed an overall reduction in their uphold rate, decreasing from 37% to 34%.

Between July and December 2022, FOS saw:

• 50,346 new banking and credit complaints in H2 2022, compared to 44,200 in H1 2022.
• 19,346 new general insurance/pure protection complaints in H2 2022, compared to 17,530 in H1 2022.
• 4,160 new mortgages and home finance complaints in H2 2022, compared to 3,658 in H1 2022.
• 3,842 new decumulation life and pension complaints in H2 2022, compared to 4,193 in H1 2022
• 2,227 new investment complaints in H2 2022, compared to 2,427 in H1 2022.

For the full data and insight, see the half-yearly complaints data: H2 2022.

#Complaints #FOS #Allfirms

The climate data challenge

The Climate Financial Risk Forum has produced and published several resources this week, which could prove to be of interest to any firms who are required to publish climate related disclosures, or those that include look at portfolio-level climate data for investment research purposes. The resources include:

• Webinars
• A scenario analysis guide for asset managers
• And the climate disclosures dashboard 2.0

#climaterelateddisclosures #disclosures #assetmanagers

As always, if you need any guidance or advice on any of the topics covered in our bulletin, or any topics highlighted in the wider regulatory sphere, please do contact us – we are here to help.