Financial services regulation round-up - January 2019

Quick links for this month:

Regulation round-up

FCA publishes Sector Views 2019

The Financial Conduct Authority (FCA) has published its Sector Views for 2019, providing an analysis of the factors that are driving change across the financial system. It provides an overall view of the key issues and developments within the seven sectors the FCA regulates, and how each sector is performing based on the data available. This publication helps inform the regulator’s Business Plan for 2019/20 – which is due to be published in April 2019.

The Sector Views cover:

  • cross-sector themes;
  • retail banking and payments;
  • retail lending;
  • general insurance and protection;
  • pensions saving and retirement income;
  • retail investments;
  • investment management; and
  • wholesale financial markets.

FCA Sector Views 2019 

FCA press release 

Dear CEO Letter – financial promotions

The FCA published a letter addressed to the CEOs of all regulated firms concerning financial promotions. In particular, the FCA highlighted its concerns over financial promotions that falsely implied that all of a firm's activities were regulated by the FCA or the Prudential Regulation Authority (PRA), when in fact they were not.

The letter reminds firms’ senior managers and boards:

  • of what constitutes fair, clear and unambiguous financial promotions;
  • of the rule in GEN 4.5.4R that requires firms not to indicate or imply that they are regulated or otherwise supervised by the FCA in respect of business for which they are not regulated by the FCA;
  • of the FCA's power under FSMA to direct a firm to withdraw an advert or its approval of an advert, or to prevent an advert from being used in the first place.

Read the Dear CEO Letter 

FCA press release 

FCA opens registration for temporary permissions for CMCs

The FCA has announced that claims management companies (CMCs) can now register for the temporary permission to allow them to operate when the FCA takes over regulation from April 2019. CMCs have until 31 March 2019 to register for temporary permission. Once registered, CMCs must comply with FCA standards and must apply for authorisation during one of two application periods between April and the end of July.

FCA CMC webpage 

FCA press release 

FCA Consultation Paper CP19/3 - Guidance on cryptoassets

The FCA has published a Consultation Paper (CP19/3) on guidance for cryptoassets. This consultation paper follows the Cryptoasset Taskforce Report published in October 2018.

The guidance aims to help firms understand whether their cryptoasset activities fall under FCA regulation and clarifies the FCA’s expectations for firms carrying on cryptoasset activities within the UK.  In brief, certain cryptoassets are within the FCA’s regulatory perimeter if they are:

  • specified investments under the Financial Services and Markets Act 200 (Regulated Activities) Order 2001;
  • financial instruments under the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II);
  • e-money under the Electronic Money Regulations 2011; or
  • captured under the Payment Services Regulations 2017.

The FCA states that it will consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors later this year.

HM Treasury intends to publish a Consultation Paper in early 2019 on broadening the FCA’s regulatory remit to include further types of cryptoassets.

The consultation period closes on 5 April 2019.

Read CP19/3 

FCA webpage 

FCA press release 

FCA Consultation Paper CP19/4 - Optimising the SMCR and feedback to DP16/4

The FCA has published a Consultation Paper (CP19/4) entitled ‘Optimising the Senior Managers & Certification Regime and feedback to DP16/4 Overall responsibility and legal function’.  CP19/4 proposes certain changes and clarifications, which were identified by the as necessary following publication of the near-final rules on the SMCR extension to FCA solo-regulated firms in July 2018 and final rules for insurers in September 2018.

CP19/4 will primarily be of interest to banking firms, Solvency II and large non-directive insurers, and Enhanced solo-regulated firms.

The consultation period ends on 23 April 2019.

Read CP19/4 

FCA webpage 

FCA Policy Statement PS19/2: Previously rejected PPI complaints and further mailing requirements and final rules and guidance

The FCA has published Policy Statement (PS19/2) on previously rejected PPI complaints and further mailing requirements, with feedback to Consultation Paper CP18/33, as well as final rules and guidance, which are largely unchanged from the consultation.

Under the new rules, the FCA estimates that firms will need to write to a further 150,000 previously rejected complainants. The letters should make consumers aware that they can make a new complaint and remind them of the FCA’s deadline of 29 August 2019 for complaining about PPI.

Read PS19/2 

FCA webpage 


SMCR and the temporary permissions regime

The PRA has published a note that clarifies the interaction between the PRA and FCA proposals for applying the Senior Managers and Certification Regime (SMCR) to firms in the temporary permissions regime (TPR). The published document also includes a set of frequently asked questions on how the proposals would apply to dual-regulated, European Economic Area firms operating in the UK via an establishment passport through a branch.

Read the PRA note 

Bank of England webpage 

FCA opens notification window for temporary permission regime

On 7 January, the FCA announced that the that the notification window for the temporary permissions regime is now open. Firms must notify the regulator that they wish to enter the temporary permissions regime using the FCA Connect system. Fund managers will also need to notify the FCA of which of their passported funds they wish to continue to market in the UK temporarily via Connect. The notification window closes on 28 March 2019.

FCA press release 

Temporary permission regime for inbound passporting EEA firms: How to notify 

Temporary permission regime for inbound passporting EEA investment funds: How to notify 

Consumer finance

FCA letter to Treasury Select Committee on Mortgage Prisoners

On 9 January 2019, the FCA published a letter from its Chief Executive, Andrew Bailey, to the Chair of the Treasury Select Committee, Nicky Morgan MP, on the issue of ‘mortgage prisoners’. 

'Mortgage prisoners' are customers on reversion interest rate who would benefit from switching but are unable to do so, despite being up to date with payments on their existing mortgage.

The FCA found that this issue affects:

  • 10,000 customers with active, authorised lenders;
  • 20,000 customer with firms that are no longer lending commercially despite being authorised to do so (inactive lenders); and
  • 120,000 customers of firms that are not authorised to lend (unregulated firms).

In relation to the FCA's approach to customers with active lenders, the letter refers to the FCA's work in its Mortgage Market Study Interim Report.  The FCA suggested customers with active lenders should be able to switch to a cheaper deal where they are up to date with payments. It also made reference to the subsequent industry agreement (UK Finance, the Building Societies’ Association and the Intermediary Mortgage Lenders’ Association).

In relation to customers with inactive lenders or unregulated firms, the FCA suggested that the best option would be for them to switch to an active lender.  The main challenge of this approach is the need to pass affordability assessments even where customers are not borrowing a larger amount. The FCA plans to remove the barriers in the current rules to assist these customers to switch to a cheaper mortgage and this will be achieved through a more proportionate affordability assessment, outline in further detail in the letter.

Read the letter 

FOS Strategic Plan and Budget 2019/2020

The Financial Ombudsman Service (FOS) has consulted on its Strategic Plan and Budget for 2019/20, which set out forecasts for complaints for the current financial year, as well as future projections once the FCA’s PPI complaint deadline has passed and the implications this will have for how the service is funded. The deadline for response was 31 January 2019.

The Strategic Report also provides an initial response to the Richard Lloyd Review. This only relates to what FOS has been able to do so far in response to the report. It is expected that a more detailed consultation will be published in spring this year.

Read the Strategic Plan and Budget 

Read the Richard Lloyd Review 

Payment services

PSR market study into card-acquiring services

The Payment Systems Regulator (PSR) has published the final terms of reference (MS18/1.2) for its market review into the supply of card-acquiring services. This follows the PSR’s consultation on the draft terms of reference in July 2018.

The final terms of reference set out the PSR’s approach to conducting the market review, which includes considering:

  • the nature and characteristics of card-acquiring services;
  • how merchants buy card-acquiring services;
  • who provides card-acquiring services and how their market shares have developed historically;
  • whether there are credible alternatives to card-acquiring services for some or all merchants; and
  • what the market is delivering for merchants and consumers, including the fees merchants pay and the quality of service they receive.

The PSR intends to publish an interim report at the end of 2019.

Read MS18/1.2 

PSR webpage 

PSR press release 

General insurance

FCA Retirement Outcomes Review

The FCA has published a Policy Statement (PS19/1) titled 'Retirement Outcomes Review: feedback on CP18/17 and our final rules and guidance’ and a Consultation Paper (CP19/5) titled ‘Retirement Outcomes Review: Investment pathways and other proposed changes to our rules and guidance’.

PS19/1 outlines the new rules and guidance on the FCA’s first package of remedies from the Retirement Outcomes Review (ROR) following an earlier consultation paper. CP19/5 sets out the FCA's second proposed package of remedies from the ROR, in which the regulator consults on investment pathways and other proposed changes to rules and guidance.

The closing date for responses to CP19/5 is 5 April 2019.

Read PS19/1 

FCA webpage on PS19/1 

Read CP19/5 

FCA webpage on CP19/5 

FCA consults on General Insurance value measures data (CP19/8)

The FCA has published a Consultation Paper (CP19/8) proposing new rules requiring firms to report General Insurance (GI) value measures data to the FCA for publication. The FCA also proposes additional requirements for firms to use the value measures data as part of the monitoring and governance of their insurance products. These proposals are aimed at addressing poor product value and quality, and reducing the risk of unsuitable GI products being bought or sold.

Feedback is requested by 30 April 2019.

Read CP19/8 

FCA webpage 

Financial crime

Wolfsberg Group publishes guidance on sanctions screening

The Wolfsberg Group, an association of thirteen global banks aiming to develop frameworks and guidance for the management of financial crime risks, has published new guidance on how financial institutions should carry out sanctions screening.

The guidance is intended to assist financial institutions as they assess the effectiveness of their sanctions screening controls and is derived from legal and regulatory requirements, regulatory expectations and global industry best practice. It includes sections on the definition of sanctions screening, the fundamental elements of a sanctions screening programme, consideration of a risk based approach, technology, alert generation and handling, reference data, transaction screening, list management and lookbacks.

Read the Wolfsberg Group Guidance on Sanctions Screening 

Key themes 

Wolfsberg Group press release 

SFO v Tesco Stores Ltd - DPA and statement of facts published

The Serious Fraud office has now published its Deferred Prosecution Agreement (DPA) with Tesco Stores Ltd alongside the accompanying statement of facts. The publication follows the collapse of attempts to prosecute three of Tesco's directors on charges of fraud by abuse of position and false accounting. Under the terms of the DPA, Tesco Stores Ltd accepted responsibility for false accounting practices and agreed to pay a fine of £129 million and costs of £3 million, and to undertake and implement an ongoing compliance programme during the DPA’s three-year term.

Read the DPA with Tesco Stores Ltd 

Read the statement of facts 

SFO webpage 

Fines and enforcement

FCA imposes fines on Keydata directors

The FCA has published final notices against Mark Owen and Stewart Ford, former directors of Keydata Investments Services Ltd (Keydata), stating that both men acted without integrity and failed to deal with the regulator in an open and cooperative way. Mark Owen and Stewart Ford were fined £3,240,787 and £76 million respectively and have both been banned from performing any function in relation to any regulated activity.

The fines follow the FCA enforcement action, upheld on appeal by the Upper Tribunal at the end of last year.

Read the FCA Final Notice for Mark Owen 

Read the FCA Final Notice for Stewart Ford 


LIBOR transition and contractual fallbacks

Edwin Schooling Latter, director of markets and wholesale policy at the FCA, gave a speech on LIBOR transition and contractual fallbacks at the International Swaps and Derivatives Association (ISDA) Annual Legal Forum.

Mr Schooling Latter said that there is now wide recognition that LIBOR will come to an end and that he wished to explore in more detail how it will end. Mr Schooling Latter further stated that the issue will entail important implications for contractual design. It is relevant, in particular, to how fallback language in outstanding contracts that continue to reference LIBOR will and should work. The best and smoothest transition from LIBOR will be one in which contracts that reference LIBOR are replaced or amended before fallback provisions are triggered, and market participants should not rely on the availability of an option to use LIBOR for legacy contracts.

Read the full speech

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2019. Specific advice should be sought for specific cases. For more information see our terms & conditions.


Date published

06 February 2019


View all