European Union: FIG Bulletin, 2 August 2019

Last Updated: 8 August 2019
Article by Hogan Lovells

General: UK

SMCR: FCA PS19/20 - final rules and feedback to CP19/4

Following the publication of a commencement order, reported in the FIG Bulletin last week, the Financial Conduct Authority (FCA) has now published its final rules on the extension of the senior managers and certification regime (SMCR). The FCA made near-final rules on the SMCR in July 2018 (PS18/14) and consulted on some refinement to those rules in January 2019 (CP19/4). The latest policy statement (PS19/20) summarises the feedback it received to CP19/4, the FCA response to the feedback, and sets out its final rules. The final rules may still be amended by subsequent Handbook changes, for example those relating to the UK's exit from the EU.

In general, the FCA has implemented the proposed changes to the SMCR as consulted on in CP19/4. This includes:

  • confirming that the head of legal function is excluded from the requirement to be approved as a senior manager;
  • amending the intermediary revenue criterion for the Enhanced regime;
  • clarifying the requirements and scope of the certification regime; and
  • extending Senior Manager Conduct Rule 4 (SC4) to non-approved executive directors at limited scope firms.

Pension related proposals: FCA PS19/21, CP19/25 and FS19/5

The FCA has published a package of pension related proposals designed to improve the quality of pension transfer advice and to help consumers get better value from their pension. The package includes:

  • CP19/25: Pension transfer advice: contingent charging and other proposed changes - includes a proposed ban on contingent charging for pension transfer advice. The consultation period for this paper closes on 30 October 2019. The FCA plans to publish a policy statement in the first quarter of 2020;
  • FS19/5: Effective competition in non-workplace pensions - an update on the work the FCA has been doing on non-workplace pensions. The FCA sets out questions in this paper and invites stakeholders' comments by 8 October 2019 on these. The FCA aims to issue a consultation paper on simplification and disclosure remedies in the first quarter of 2020. Around the same time, it will issue papers on: (i) Independent Governance Committee effectiveness; and (ii) a proposed value for money framework for pensions (developed with The Pensions Regulator). After considering the responses to these papers, the FCA will consider if further steps on charges are needed and issue a consultation if appropriate; and
  • PS19/21: Retirement Outcomes Review: feedback on CP19/5 and final rules and guidance - this policy statement summarises the feedback received to the FCA's second consultation on remedies from the Retirement Outcomes Review. It sets out final rules on investment pathways and the other remedies suggested in CP19/5. The new rules and guidance set out in PS19/21 will come into force on 1 August 2020.

Cryptoassets: FCA PS19/22 and guidance on regulatory perimeter

Following its consultation on the issue in January 2019, the FCA has published final guidance on the cryptoasset activities it regulates and the regulatory perimeter (PS19/22).

The FCA reports that the majority of respondents to its consultation supported its proposals. Therefore, the FCA makes the final guidance as consulted on, but with some amendments to provide greater clarity on the regulatory perimeter.

FCA Handbook Notice 68

The FCA has published Handbook Notice 68 which describes certain changes to the Handbook, Binding Technical Standards and other material made by the FCA board on 11 July 2019 and 25 July 2019. This notice also contains information about other publications relating to the Handbook. It covers changes made by the following instruments:

  • Prospectus Regulation Rules Instrument 2019;
  • Individual Accountability (FCA-Authorised Firms) Instrument 2019;
  • Fees (Office for Professional Body Anti-money Laundering Supervision) (No 2) Instrument 2019;
  • Conduct of Business Sourcebook (Investment Pathways) Instrument 2019; and
  • Handbook Administration (No 50) Instrument 2019.

Fees for professional body supervisors: FCA CP19/24 and feedback on CP19/13

The FCA has published a consultation paper (CP19/24) in which it gives feedback on the responses it received following an earlier consultation on the structure of fees for recovering the costs of establishing and running the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) and fee rates (CP19/13).

This consultation is of relevance to professional body supervisors listed in Schedule 1 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and any other professional bodies considering applying to be listed. It will also be of interest to designated professional bodies.

The consultation period ends on 25 September 2019.

London Capital and Finance Plc: independent investigation protocol and FCA webpage

On 10 July 2019, Dame Elizabeth Gloster was formally appointed to lead the independent investigation into events relevant to the FCA's regulation of London Capital and Finance plc (LCF), between 1 April 2014 and 30 January 2019, following LCF's failure and placing into administration. This was confirmed in a press release published by the FCA, which also reported Dame Gloster's first announcement of further details about this investigation. In addition, the FCA has published the protocol for the investigation and a new webpage on it, which will be updated when appropriate.

The scope of the investigation is set out in the Direction issued to the FCA on 23 May 2019 by HM Treasury. The Direction therefore stands as the terms of reference for the investigation. The protocol sets out the procedures under which the investigation is to be carried out.

At the conclusion of the investigation the FCA must make a written report to HM Treasury.

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