While this summer holiday season will be anything but typical, one familiar July feature is the traditional high volume of publications just before the regulator heads off on their staycation.
This week several important releases occurred, including guidance to investment funds to prevent 'greenwashing', and the consultation on the rewrite of the heavily criticised Packaged Retail Investment and Insurance-based Products (PRIIPs) disclosure rules.
Both of these are examples of the Financial Conduct Authority (FCA) steering its own course away from the EU rules, as is the Bank of England (BoE) proposing to tweak the rules regarding the composition of capital required to be held in order to meet the costs of resolving a bank.
We also cover below further guidance on the treatment of vulnerable customers, and market study work on 'mortgage prisoners', both topics we expect to be a significant future focus for supervisory activity and potential policy change.
Guiding principles on ESG and sustainable investment funds
The FCA has published a letter to the chairs of authorised fund managers (AFM) setting out its expectations on the design, delivery, and disclosure of environmental, social and governance (ESG) and sustainable investment funds.
The letter includes a set of guiding principles to ensure that any ESG-related claims are clear and not misleading, both at the time of application and on an ongoing basis, so that consumers can make informed choices. This guidance follows a number of authorisation applications that have been of poor quality and fallen below the FCA's expectations.
The guiding principles are relevant where an AFM pursues a responsible or sustainable investment strategy and claims to pursue sustainability characteristics, themes, or outcomes.
The overarching principle is consistency. A fund's ESG or sustainability focus should be reflected consistently in its design, delivery, and disclosure, particularly in its name, stated objectives, documented investment policy and strategy, and holdings.
FCA "dear chair" letter on authorised ESG and sustainable investment funds →
FAQs on fair treatment of vulnerable consumers
The FCA has published answers to frequently asked questions in relation to its finalised guidance for firms on the fair treatment of vulnerable customer published in February. The FCA reiterates that it wants to drive improvements in the way firms treat consumers with vulnerable characteristics, which it hopes will bring about a practical shift in firms' actions and behaviours. It stops short of prescribing exactly how to do this.
The questions themselves show that many firms have some way to go to meet expectations. In our opinion, it is worth firms challenging themselves on how mature their approach to vulnerability is, and whether they have looked holistically at every aspect of how it treats its customers.
A key theme in the FAQs is that it is up to firms to determine how to comply; not for the FCA to specify this. It highlights its timetable to evaluate firms' progress in 2023/24 and that firms falling short of expectations can expect greater supervisory attention or enforcement action.
Guidance for the fair treatment of vulnerable customers FAQs →
