July 31, 2023 by Clare Curtis

Periodic regulatory fees & levy rates

The Financial Conduct Authority (FCA) has published its fees and levy rates for the FCA, Financial Ombudsman service and for levies collected on behalf of government departments, along with feedback on responses to the consultation on the fees and rates.

Further reforms to improve markets

The FCA have laid down a series of measures to improve markets and enhance competitiveness. They are proposing initialising a ‘Consolidated Tape’ (CT), to assist all investors in acquiring clear and low-cost trading data. The CT will amalgamate several sources of trading data into one informational stream, which will in turn increase transparency and accessibility to trading data by lowering costs and improving data quality. Bonds will be the first market to use the CT followed by equities.

Asset Managers liquidity management reviews

The FCA, after reviewing liquidity management in asset managers, have come to the conclusion that firms need to increase their focus on liquidity risk. Presently, gaps noted by the FCA in liquidity management could lead to risk of investor harm, which is a major issue being addressed by the new consumer duty.

Financial Services and Markets Act (FSMA)

There is optimism that the FSMA being passed into law last week will be the catalyst for strength and growth in Capital Markets. With the UK being the largest stock market in Europe and the world’s largest, aside from the USA, in IPOs, it is hoped that the legislation will help see billions of pounds of investment in the finance sector, helping the economy to strengthen.

Bank of England considerations re-foreign banks

The BoE (Bank of England) are in contemplation to force foreign banks to switch branches with subsidiaries in the UK, following the collapse earlier this year of Silicon Valley Bank. Subsidiaries as opposed to branches, allow local regulators to take control of failing banks and not leaving their parents’ chiefs to decide their fate. This will not go down well though as subsidiaries are much more expensive than just maintaining branches in the UK.

Cracking down on Crypto ATMs

The FCA, along with other enforcement agencies, have been investigating sites across the country suspected of having unlawful crypto ATMs, disrupting their operations. Further warnings have been issued to the public not to use these machines as they could well be handing their money over to criminals hosting the ATMs’

FCA Probe Retail Investment Platforms

Regulators are investigating Retail Investment Platforms (RIPs) regarding profits generated from customers’ cash. It being of vast importance just prior to the initiation of the new Consumer Duty on 31/07/23, where the Duty will enforce ‘fair value’ outcomes for consumers. 39 firms have been contacted by the FCA requiring information on ‘client interest turn’, this being the difference between the interest paid to customers on their deposits and the profits generated on this money being invested in the money markets. Regulators have warned firms must show due regard for customers’ welfare or face ‘robust action’

Couple jailed for fraud & money laundering

Two directors of a company offering peer-to-peer type investments on their website, ‘Collateral P2P platform’, were sentenced to a combined total of 8 years imprisonment following investigations by the FCA. The company fraudulently claimed to be authorised and regulated by the FCA, encouraging clients to invest in loans on their platform. After swapping details of a separate company for the details of Collateral, they proceeded to embezzle monies and also withdrew £750,000 from Collateral client accounts. Post the regulators intervention, estimations believed that of £17.9million in customer loans outstanding, approximately £11million will never be seen again.

FCA Consulting on Social Media promotions

The regulator is in the process of consulting on guidance on financial promotion requirements applying to promotions on social media. Alongside the new Consumer Duty, which sets out new rules on financial promotions and the approval of, the FCA want to ensure that people are aware that any unauthorised person, such as social media influencers, who promote a regulated financial product or service without FCA approval, will be committing a criminal offence.

Market Watch #74

The FCA are still very concerned about the continuing issues with transaction reporting. Although there has been a recognised improvement in reporting data quality since 2018, several firms are still not paying sufficient attention to the regulator’s warnings re-the seriousness of the report content. There is persistent incomplete, inaccurate and late reporting which remains to be addressed by the culprit firms and the FCA have published some recent supervisory observations. As an instance, in 2018, 383 out of 451 using the Market Data Processor (MDP) Entity Portal submitted breach notifications. In 2022 this number was 346 out of 745. So, obviously that is a percentage improvement but still far short of satisfactory.

Consumer Duty

With the deadline of 31st July this year looming ever closer, there still appears to be many holes in several companies’ processes regarding the new Consumer Duty. Some appear to be quite lackadaisical in their approach, maybe not quite realising just how important and serious the new duty is. Here are some essential guidelines as to a flavour of what the FCA are expecting of firms.

  • New customer principles requiring firms to deliver good outcomes for retail customers. The regulator suggests that firms put themselves in ‘the customer’s shoes’ and evaluate what the best course of action would be.
  • The new 3 cross-cutting rules, being ‘Act in good faith’, ‘Avoid foreseeable harm’ and ‘Enable and support retail customers to pursue their financial objectives’, to provide better clarity and helping firms interpret the 4 outcomes expected from these. The 4 outcomes being ‘products & services’, ‘price & value’, ‘Consumer understanding’ and ‘Consumer Support’
  • Firms also need to address culture, governance and accountability within the firm.
  • Firms need to address monitoring outcomes.

The above simply scratch the surface of requirements stipulated by the regulator but provide a general view of some necessities.

Complaints against the regulators

The FCA, PRA and the Bank of England have laid down the final changes to the Complaints Scheme. They are aiming to make if simpler to understand how the scheme works and what the complainant can expect the result to be. The three key points are 1/ When a complaint can be made, 2/ when the regulator will investigate the complaint and 3/ what will follow in regard to the outcomes. This new scheme will go ‘live’ on 1/11/2023. PS23/12