Technical

Your guide to this week in regulation

Gavin Stewart Gavin Stewart

Welcome to our weekly round-up for UK financial services regulation. Read on for a summary of key announcements and developments, and be sure to subscribe to receive our updates in your inbox every week.

This week's update covers:

  • FCA sets out its approach to supervising platforms
  • FCA issues policy statement on signposting to travel insurance for consumers with pre-existing medical conditions
  • FCA issues policy statement on publishing and disclosing costs and charges to workplace pension scheme members
  • FCA makes speech on its strategic and integrated approach to market integrity
  • ESMA publishes strategy on sustainable finance

FCA sets out its approach to supervising platforms

On 6 February the FCA wrote to firms allocated to the ‘platforms’ portfolio to express its expectations, key concerns and strategy for supervision. In outlining its strategy, the FCA is keen to address the following harms:

  • Technology and operational resilience: individuals subjected to SM&CR are to be responsible for investment choices based on their wider impact.
  • Third party outsourcing: firms should review outsourcing arrangements to ensure service providers deliver to a high standard and sufficiently manage risk.
  • Conflicts of interest: firms are expected to identify and manage all potential conflicts of interest.

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FCA issues policy statement on signposting to travel insurance for consumers with pre-existing medical conditions

The FCA has made changes to the Handbook to help consumers with more serious pre-existing medical conditions (PEMCs) better navigate the travel insurance market. Firms that sell travel insurance will have to signpost such consumers to a directory of specialist firms that provide this type of insurance.  

Firms offering retail travel insurance must implement the new requirements by 5 November 2020. Firms will also be required to include the details of the directory on their website within 30 days of becoming aware of the directory going live.

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FCA issues policy statement on publishing and disclosing costs and charges to workplace pension scheme members

On 4 February 2020, the FCA published Policy Statement 20/2: ‘Publishing and disclosing costs and charges to workplace pension scheme members’. The Policy Statement sets out the feedback received to its consultation paper on the same topic, as well as its final rules and guidance including:

  • a requirement for scheme governance bodies to disclose costs and charges reported to them by asset managers to scheme members on an ongoing basis
  • amendments to COBS 19.8 rules concerning how asset managers must calculate transaction costs when reporting costs and charges information.

The final rules will come into force on 1 April 2020 and will affect those involved in regulated relevant schemes in the defined contribution workplace pensions market.

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FCA makes speech on its strategic and integrated approach to market integrity

The FCA has published a speech given by Mark Steward, Executive Director of Enforcement and Market Oversight, detailing its strategic and integrated approach to market integrity.

The key messages are:

  • The FCA works closely and collaboratively with both US regulators and EU authorities on issues that affect markets.
  • The FCA's market cleanliness (MC) metric is currently at its lowest score at approximately 10% and the recently developed abnormal trading volume (ATV) metric produced a lower figure of 6.4% in 2019. The FCA's integrated approach, encompassing enforcement, primary and secondary market oversight and surveillance, and wholesale supervision, may explain these improvements.
  • The FCA can now look for manipulative trading more easily and the proportion of investigation work is currently split 60:40 between insider dealing and manipulation. This is a notable change as previously the FCA’s wholesale investigation caseload was almost exclusively based on suspected insider dealing.

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ESMA publishes strategy on sustainable finance

On 6 February 2020, the European Securities and Markets Authority (ESMA) published its strategy on sustainable finance, which aims to respond to the challenges posed by investor preferences shifting towards financial products that incorporate environmental, social and governance (ESG) factors and support the transition of private capital to more sustainable investments.

The strategy sets out ESMA’s key priorities for achieving sustainable finance, including:

  • completion of the regulatory framework on transparency obligations
  • ensuring ESG guidelines are adhered to in the entities for which it has direct supervision
  • ensuring communication on sustainable finance is a “two-way exchange” and that it seeks external expertise and engages with key stakeholders
  • monitoring market developments and identifying risks to sustainable finance.

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To discuss these or how any other regulations might impact your firm please get in touch

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