CONCISE MONTHLY BULLETIN, December 2023
January 15, 2024 by Clare Curtis
Guidance On The Anti-Green Washing Rule
The Financial Conduct Authority (FCA) are consulting on new guidance regarding their expectations for FCA authorised firms offering sustainable products or services.
With consumers seeking opportunities to invest in more sustainable ways, products and services claiming to provide this have seen a rapidly steepening curve of consumer interest and investment. This increase in demand has led to more firms claiming to provide such products and services. However, FCA has raised the concern that that some of these claims are not always entirely valid and in fact some have been discovered to be exaggerated and misleading. This is what has been labelled as ‘Greenwashing’.
Each and every sustainability related statement made by FCA authorised firms regarding their products and/or services must be ‘fair, clear and not misleading’, as laid down in the regulators ‘Anti-Greenwashing’ rule. This in itself is not a new requirement but given the increased popularity for investing in products claiming to be sustainable the FCA are concerned that the commitments made in written documents to clients may overstate their position causing investors to believe they are investing in a product that does not in fact provide the stated investment objectives.
The FCA are entertaining input and views on the proposed guidance until 26/01/2024
Access To Cash
The FCA have published a consultation paper (CP), on how they propose to support access to cash in today’s society that appears to be exponentially reliant upon digital finance.
The regulator believes there is most definitely still a need for cash and intend to assist in ensuring consumers continue to readily have access to physical cash where required. There are still more than 3 million consumers that continue to rely on cash, especially vulnerable people and small businesses.
The proposals set out involve a new regulatory regime, requiring banks and building societies designated by the UK Government, to assess and plug potential gaps in the availability of access to cash, which can have a significant impact on consumers and businesses alike.
The proposals have arisen due to the FCA being tasked by Parliament with ‘Seeking to ensure reasonable provision’ of cash deposit and withdrawal services for both personal and business account holders countrywide. It is suggested that this is to be both for notes and coins and also to be free of charge for consumers holding personal current accounts.
Operational Resilience: Critical Third Parties To The UK Financial Sector
The FCA in co-operation with the Prudential Regulation Authority (PRA) and the Bank of England, are consulting on the matter of proposed requirements and expectations for Critical Third Parties (CTPs), in connection with firms Operational Resilience (OR).
Their goal is of managing risks which may impact the stability of the UKs financial system in the event of an emergency potentially being triggered by failures or disturbances to a CTPs service. CTPs can include the like of IT outsourcing by principal firms for example.
These proposals have arisen following the group seeking views on possible policy measures to manage systemic risks posed by certain CTPs that are, or maybe, employed within the UK financial sector.
Ultimately, the regulators are seeking to gain the ability to intervene, when necessary, in order to increase resilience against any prospective damages that may be incurred due to a CTP’s actions.
Responses to the proposals are invited until the closing date of 15/03/2024
Advice Guidance Boundary Review
The FCA, along with the Government, are seeking feedback from their initial proposals for narrowing the gap between financial advice and other modes of consumer support.
The ultimate aim of the review is to identify if there is a regime which would allow Firms to offer a range of commercially viable, high-quality models of customer support which would enable consumers to have access to improved and superior support than is currently available, without the need to receive advice and pay the relevant fees associated with this service. This requires the FCA to look at the regulatory boundary between advice and other forms of support.
This would read that the FCA are looking to eradicate inferior financial advice being given to consumers by parties with insufficient knowledge and/or qualifications in the area they are offering the advice in. The Review gives an opportunity to rethink the way advice and support are delivered to consumers and take advantage of new and emerging technologies to enhance consumer experiences and outcomes. FCA aims to use this feedback to design a regulatory system where commercially viable models of advice and support can emerge so consumers can make effective and cost-effective financial decisions.
FCA Review Of The Appointed Representative Regime
In recent years the FCA have highlighted that the Appointed Representative (AR) regime has become an area of concern. As such the regulator has introduced new requirements for firms to confirm and/or amend details of each and every AR and Introducer Appointed Representative (IAR), that they use. These details can include the AR’s staff changes, revenue, place of business address and so forth
The FCA has emphasised that any actions an AR/IAR executes on the firm’s behalf will be treated as though it was performed by the firm itself.
The difference between an IAR and an AR are simply that the IAR can only effect introductions to the principal firm and distribute non-real time promotions. An AR can act as if it were a principal firm itself under the principal’s umbrella.
Firms are expected to undergo an in-depth review and comprehensive due diligence on any new AR they intend to appoint, ensuring they are 100% fit and proper for the role. The AR must be essentially financially robust, and its entire staff are to be competent and able throughout.
The FCA have specifically stated that they do not want firms relying on information supplied by a previous Principal Firm if the AR is being transferred
Within the application to appoint a new AR, firms are obliged to impart information as to why they want to appoint the AR, what activities they will be permitting them to do and whether the AR will be servicing retail clients, among other stipulations. The FCA also expect to be notified as to the nature of the financial arrangements between the firm and the AR.
As well as the aforementioned, firms must also inform the regulator of any financial misgivings attributed to any director of the AR and if they have had any historical involvement in insolvent businesses. The FCA also expects to be notified regarding any and all complaints against the AR in the past.
If, once having reviewed the application, the FCA believe that the firm’s assessment of the AR has not been rigorous enough, and/or there appears to be missing information, the regulator will immediately ask the Firm to withdraw the application and require the firm to undertake further due diligence and re-submit.
These new requirements came into effect on 01/12/2023.