The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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Changes to UK Code of Broadcast Advertising relating to unregulated investments
26 March 2025
The Broadcast Committee of Advertising Practice (BCAP), author of the UK Code of Broadcast Advertising (the BCAP Code), has announced that following a consultation, it was introducing changes to Section 14 of the BCAP Code (Financial products, services and investments) to clarify the scope of its restriction of advertisements (ads) for unregulated investments to specialised financial channels and programming. The BCAP Code includes a rule that restricts ads for certain types of complex financial products to specialised financial channels, stations and programming, meaning that such ads cannot be broadcast on mainstream TV or radio to a general audience. The amendment is intended to clarify the scope of the existing restriction on ads for investments unregulated by the FCA, to ensure that it applies in practice to unregulated "investments" that meet the likely consumer understanding of that term. It will remove the risk of what is seen as an inadvertent application of the restriction to unregulated products that technically fall within the definition of investment activity set out within the Financial Services and Markets Act 2000 (as reflected in the Code section), but that are not in line with a layperson's understanding of an investment, and that are not compatible with the type of risky financial products from which restrictions were intended to protect general broadcast audiences. The changes take effect immediately, but BCAP are mindful of the need to avoid unintended consequences of amending the wording of rules and to ensure that changes are effective. As such, the amended rules will be subject to review after 12 months.Topic : Consumer / Retail -
FCA feedback statement on rule review in response to consumer duty
25 March 2025
The Financial Conduct Authority (FCA) has published a feedback statement on immediate areas for action and further plans for reviewing FCA requirements following introduction of the Consumer Duty. It follows the FCA's call for input to which it received 172 responses. Most respondents supported simplification of requirements in principle, but opinions varied on the approach and timeline.
Read more.Topic : Consumer / Retail -
European Commission communication on the Savings and Investments Union
19 March 2025
The European Commission has unveiled its strategy for the Savings and Investments Union (SIU), an initiative to improve the way the EU financial system channels savings to productive investments. Alongside the communication, the Commission also published an accompanying press release and questions and answers. A factsheet includes a summary timetable for key proposed measures. In Q2 2027, the Commission will publish a mid-term review of the overall progress in achieving the Savings and Investments Union.
Implementing the SIU requires a range of policy measures, which are grouped under four headings:- Citizens and savings—encouraging and incentivising retail customers to hold more of their savings in capital market instruments.
- Investments and financing—promoting investment in equity and certain alternative assets, namely venture capital, private equity and infrastructure.
- Integration and Scale—removing sources of fragmentation in EU capital markets, whether regulatory, supervisory or political, to allow for the possibility of market-driven consolidation.
- Efficient Supervision in the Single Market—harmonised supervision is an objective of the SIU. All financial market operators should receive the same supervisory treatment irrespective of their location across the Union.
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Global alert portal launched to help reduce retail investment fraud
18 March 2025
The International Organization of Securities Commissions (IOSCO) has announced the launch of a new alert portal, which is aimed at strengthening the global fight against retail investment fraud. The International Securities & Commodities Alerts Network (I-SCAN) allows investors, online platform providers, banks and institutions to check if a financial regulator has a suspicious activity flag for a particular company or potential investment. I-SCAN is part of IOSCO's roadmap for retail investor online safety, which sets strategic initiatives for safeguarding retail investors worldwide from fraud, excessive risk and misinformation as digital trading and social media reshape the retail financial market. -
UK FCA call for evidence on interest rate 'stress test' rule for mortgage lenders
17 March 2025
The UK's Financial Conduct Authority (FCA) has updated its webpage on the interest rate 'stress test' rule for mortgage lenders, and issued a call for evidence on the impact of the FCA handbook rule on considering the effect of future interest rate rises in the context of mortgage lender affordability assessments. The rule, MCOB 11.6.18R, requires mortgage lenders, when assessing affordability in accordance with MCOB 11.6.5, to take into account the impact of likely future interest rate increases on affordability for at least five years, except in the case of contracts of less than five years (in which case the duration of the contract should be used) and in the case of contracts which have a fixed interest rate for an initial period for at least five years. The rule does not prescribe a specific rate that lenders should use for testing affordability, but does require lenders to assume that interest rates will rise by a minimum of 1% over the first five years. The rule is being reviewed as part of the broader review of the mortgage rules which follows the FCA's letter of 16 January to the UK prime minister, confirming (among other things) that it would simplify responsible lending and advice rules for mortgages. The deadline for responses is 11 April.Topic : Consumer / Retail -
FCA statement on motor finance review next steps
11 March 2025
The UK Financial Conduct Authority (FCA) has published a statement informing firms, consumers and stakeholders of next steps in its review of the past use of motor finance discretionary commission arrangements.
The Court of Appeal handed down its judgement in three related motor finance appeals on 25 October 2024, finding that there was a fiduciary relationship between the dealer and the consumer, raising the prospect of widespread liability among motor finance firms that failed properly to disclose commissions to customers. The Supreme Court will hear an appeal against the Court of Appeal's judgement on 1 to 3 April. The FCA's statement confirms that, if it concludes that motor finance customers have lost out (taking into account the Supreme Court's decision), it is likely to consult on an industry-wide redress scheme. Firms would be responsible for determining whether customers had lost out due to their failings, but the FCA would set rules that firms must follow under the scheme and introduce checks to ensure they do. The FCA will confirm within six weeks of the Supreme Court's decision whether it is proposing a redress scheme and, if so, how that would be taken forward. It may also consult separately on changes to its rules, depending on the Supreme Court's decision.Topic : Consumer / Retail -
FCA publishes review of consumer support outcomes
7 March 2025
The UK Financial Conduct Authority (FCA) has published the findings of its review of firms' approaches to the consumer support outcome of the Consumer Duty. The FCA identified a range of good practices, including keeping customers' needs front and centre, proactively understanding the needs of customers, building a culture that delivers good customer support outcomes and monitoring whether customers are receiving the support they need. The FCA also identified areas for improvement, including the need to: (i) align support processes to the target market; (ii) make post-sale support as accessible and effective as pre-sale support; (iii) embed a culture that is in step with the Consumer Duty; and (iv) monitor a broader range of outcomes about effective customer support.
These findings are intended to help firms understand FCA expectations around consumer support outcomes under the Consumer Duty so that they can continue evolving their approach accordingly.Topic : Consumer / Retail -
FCA publishes findings from review of firms' treatment of vulnerable customers alongside good practice and areas for improvement
7 March 2025
The UK Financial Conduct Authority (FCA) has published the findings from its review of the treatment of customers in vulnerable circumstances. Drawing on several sources, including research commissioned by the FCA (and published for the first time with this review), the FCA has evaluated how firms are supporting vulnerable customers, as well as the appropriateness of the FCA's existing FG21/1: "Guidance for firms on the fair treatment of vulnerable customers" in light of the Consumer Duty. The FCA found that FG21/1 is still useful and important under the Consumer Duty and is not revising its guidance or introducing new requirements. It noted that the Consumer Duty had driven a renewed focus on delivering good outcomes for vulnerable customers but that some areas for improvement remain.
In response to industry feedback that more case studies would help support firms, the FCA has published a series of examples to highlight good practice and areas for improvement. Going forward, the FCA encourages firms to make use of the good practice and areas of improvement and will continue to engage with industry to support ongoing improvement especially in areas that firms find more challenging.Topic : Consumer / Retail -
UK FCA speech on supporting economic growth
27 February 2025
The UK Financial Conduct Authority (FCA) has published a speech by Nikhil Rathi, chief executive, on supporting economic growth. Mr Rathi notes that from 27 February, the FCA no longer expects firms to have a consumer duty board champion, meaning boards can decide for themselves whether or not to have one. To reflect the same, the FCA has also updated its webpage on consumer duty information for firms. Separately, the FCA will move efficiently on the 50 or so growth proposals it made to the Prime Minister its response to the call to support growth. The FCA will also focus on their joint Call for Input with the Financial Ombudsman Service published in November 2024 on how complaints and redress mechanisms work, by reviewing the framework to ensure even tighter alignment, and clearer early warnings when significant issues are emerging.
Read more.Topic : Consumer / Retail -
UK FCA multi-firm review findings on suitability reviews
24 February 2025
The UK Financial Conduct Authority (FCA) has published a new webpage setting out their findings of whether financial advisers are delivering the ongoing advice services that consumers have paid for. The review focused on delivery of suitability reviews as firms generally included these as part of their ongoing advice service. The FCA found that in 83% of the cases where suitability reviews were promised, they were delivered. Firms reported that in a further 15% of cases, clients had either declined the review or not engaged with the firm's request for the information needed to conduct a review. There were fewer than 2% of cases where firms reported they had made no effort to deliver the suitability review to clients. However, the FCA notes that there were differences in the results across the firms surveyed and the population surveyed was not a representative sample. Additionally, a small subset of firms was not readily able to provide data for all of the years the FCA requested.
Read more.Topic : Consumer / Retail -
Financial Ombudsman Service policy statement on charging fees to claims management companies and other professional representatives
7 February 2025
The Financial Ombudsman Service (FOS) has published a policy statement on its new fee rules regarding complaints that are referred to it by certain claims management companies (CMCs) and other professional representatives acting on behalf of complainants. The rules are aimed at encouraging CMCs to consider the merits of complaints more diligently before referring them to the FOS. The FOS will introduce a maximum £250 case fee for each complaint a CMC refers to it exceeding the annual free case provision of ten per financial year. This is to reflect a proportionate contribution to the costs incurred by the FOS, ensuring adequate resources continue to be available to resolve disputes quickly. However, there will be a £75 minimum case fee for all cases referred by CMCs, regardless of the outcome of the complaint, in the interest of proportionality and fairness. If the complaint is upheld in favour of the complainant, the CMC will receive £175 credit. However, if the case outcome is not in favour of the complainant, then the respondent firm's case fee will be reduced to £475, from £650 for the current financial year. Under the new rules, this will mean that the overall aggregate charge from both parties will be £725 for a single complaint, whatever the outcome of the case. In relation to late payment of case fees, which was previously a £250 fixed fee plus interest, this will be replaced with a variable charge up to 25% of the outstanding debt, based on the cost and effort required to recover it. The rules will come into force on 1 April and will apply in relation to complaints referred to the FOS on behalf of complainants on, or after, this date.Topic : Consumer / Retail -
UK Financial Conduct Authority portfolio letter on strategy for mortgage intermediaries
January 30, 2025
The UK Financial Conduct Authority has published a portfolio letter on its strategy for mortgage intermediaries setting out the areas of regulatory focus for the next two years. The FCA's overarching focus is on embedding the Consumer Duty. Several key areas where this is most relevant for mortgage intermediaries are identified, including: (i) quality of advice and unsuitable products – particularly in the context of customers facing financial circumstances or vulnerability, meaning firms must do more to consider customers' personal and financial circumstances and financial objectives; (ii) high pressure selling and ancillary products – the FCA intends to assess how firms are identifying and managing conflicts of interest that may arise; (iii) excessive fees and fair value – in particular, the FCA highlights the relevance of its Consumer Duty guidance and recent update on good and poor practice in fair value assessments; and (iv) financial promotions – the letter emphasizes the importance of featuring the risks of secured lending prominently alongside the promoted benefits. The letter also notes the FCA's other expectations in relation to dormant appointed representatives, trading names and conditional selling.Topic : Consumer / Retail -
Permission to appeal granted against Financial Ombudsman Service decision concerning motor finance discretionary commission arrangements
January 27, 2025
Barclays Partner Finance has been granted permission to appeal against the Administrative Court's judgment in R (Clydesdale Financial Services Ltd) v Financial Ombudsman Service Ltd [2024] EWHC 3237 (Admin). Permission was granted by the Administrative Court on the order of Kerr J dated December 24, 2024, and the Court of Appeal will hear the appeal by December 8, 2025. In the judgment under appeal, the Administrative Court found in favor of the FOS and dismissed a claim brought by Clydesdale Financial Services Ltd (which trades as Barclays Partner Finance) for judicial review of an ombudsman's decision to uphold a complaint in relation to a discretionary commission arrangement in a motor finance agreement.Topic : Consumer / Retail -
UK Financial Conduct Authority responds to Government call for regulators to support growth
January 17, 2025
The Financial Conduct Authority has published a letter (dated January 16, 2025) from Nikhil Rathi, FCA Chief Executive, sent to the Government, setting out its work to ensure that it is supporting the Government's U.K. growth mission. The letter responds to Government's December call for regulators to support growth. In the letter, the FCA explains that to achieve the vast reforms, the FCA will need to take greater risks and prioritize resources. The Government's support and acceptance of this approach is required, including an acceptance that there will be failures because it will not be possible to prevent all harm under an approach based on risk-based choices. The FCA emphasizes that this acceptance needs to be shared across all accountability mechanisms, including in Parliament, and states that metrics for "tolerable failures" within the overall system would assist.
The areas addressed in the letter include:- unlocking capital investment and liquidity: in addition to the planned reforms for the wholesale markets, the FCA will fast-track a review of capital requirements for specialized trading firms to improve liquidity;
- accelerating digital innovation to enhance productivity: the FCA makes a number of suggestions on how to do this including introducing a new open banking payment method and developing open finance, the removal of the £100 contactless payment limit to enhance consumer flexibility and level the playing field with digital wallets. The FCA also suggests that government action could help by introducing digital identity authentication, enhancing the quality of the Companies House database to reduce costs for business, and digitalizing court systems to reduce delays;
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UK Financial Conduct Authority responds on motor finance judgment
January 17, 2025
The Financial Conduct Authority has published a letter addressed to the House of Lords Financial Services Regulation Committee on motor finance commission specifically addressing the court of appeal judgement in Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) [2024] EWCA Civ 1282. The letter responds to a letter the FCA received from the Committee in December.
In the letter, the FCA sets out the relevant FCA rules and principles concerning both discretionary and fixed commissions, both prior to and following the amendments introduced in 2021. The FCA also confirms that it did not seek legal advice on the specific issue of the relevance of disinterested or fiduciary duties with regard to formulating (and amending) the rules providing for commission disclosure and the ban on discretionary commission arrangements. The FCA concludes by explaining that once the Supreme Court has settled the law in this area, it will consider if any intervention is needed, which will include reviewing its rules to take account of the court's judgment.Topic : Consumer / Retail -
New UK Financial Conduct Authority webpages on consumer redress liabilities
January 14, 2025
The U.K. Financial Conduct Authority has published two new webpages relating to consumer redress liabilities. The first webpage provides an update for firms on what they should and should not do to tackle polluting behavior and how to meet their redress liabilities. Polluter behavior is described as when a firm or individual takes steps that leave behind potential or actual redress liabilities generated in the course of their regulated activities. To prevent and address this behavior, the FCA expects firms to have adequate financial resources to be able to provide redress as part of complying with Principle 4 (Financial prudence) and the threshold conditions. While there will be occasions when firms are genuinely unable to meet their liabilities, they should not seek to leave their liabilities behind and should provide robust reasons for the actions and decisions they intend to take and be prepared to evidence those. The webpage provides further information on what firms should expect from the FCA if they are required to provide consumer redress, which includes having to take further action to avoid polluter behavior or seek a voluntary requirement that aims to mitigate ongoing harm to consumers or markets. The second webpage explains how to identify and report polluting behavior. The FCA provides six main examples of polluting behavior: (i) basic phoenixing; (ii) lifeboating; (iii) fronting; (iv) sales at an undervalue; (v) restructuring; and (vi) proceeds of sale not being applied to redress. Regulated firms, financial advisers, compliance firms and other financial advice organizations are encouraged to speak out and report to the FCA any firm or individual suspected of providing poor advice, products or services, or attempting to phoenix to avoid their liabilities to consumers. Firms are also expected to carry out thorough due diligence and compliance checks on all advisers they recruit to ensure no poor advice has been given previously.Topic : Consumer / Retail -
Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2025 published
January 14, 2025
The Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2025 have been published, alongside an explanatory memorandum. The Regulations amend the Financial Services and Markets Act 2000 to provide for the U.K. Financial Conduct Authority's supervision and enforcement of requirements imposed by the designated activity regime. The Regulations enable the FCA to supervise designated activities by gathering information and launching investigations into persons carrying out designated activities, and to enforce its designated activity rules by publicly censuring or imposing financial penalties on persons that breach them. It also sets out the procedures that will apply to the giving of directions by the FCA relating to designated activities. In the first instance, the Regulations apply this supervision and enforcement framework to the Consumer Composite Investments (Designated Activities) Regulations 2024 and the Short Selling Regulations 2025. The stated intention is that the framework would also be extended to any future designated activities. The Regulations were made on January 13, 2025, and came into effect on January 14, 2025. -
UK Financial Conduct Authority portfolio letter for credit reference agencies and credit information service providers
January 10, 2025
The U.K. Financial Conduct Authority published a portfolio letter setting out its supervisory strategy for credit reference agencies and credit information service providers. In the letter, the FCA sets out its priority areas for the next two years, which relate to:- embedding the consumer duty—the FCA has concerns that the process of raising a data dispute or complaint can be difficult for consumers to navigate. As such the FCA intends to undertake work to understand complaint practices across the portfolio and what actions firms have taken under the duty to improve outcomes. The FCA will also continue to assess how firms are meeting the price and value outcome;
- cyber resilience—firms should have a forward-looking outlook and remain vigilant to technological advances and emerging threats to be able to anticipate potential system vulnerabilities. Firms should review the systems and controls, oversight, and monitoring arrangements that they currently have in place to ensure they are sufficient to identify weaknesses and vulnerabilities;
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UK Financial Conduct Authority publishes policy statement on further temporary changes to handling rules for motor finance complaints
December 19, 2024
The U.K. Financial Conduct Authority has published a policy statement on further temporary changes to handling rules for motor finance complaints. The FCA has extended the time motor finance firms have to respond to motor finance complaints not involving a discretionary commission arrangement. Firms now have until after December 4, 2025, to provide a final response to such complaints received on or after October 26, 2024. Consumers who receive a final response to these complaints have until the later of either 15 months from when the final response is sent, or July 29, 2026, to decide whether to refer their complaint to the Financial Ombudsman Service. The rules broadly mirror those for motor finance DCA commission complaints, which were made in January and subsequently extended in September.
Read more.Topic : Consumer / Retail -
UK Financial Conduct Authority consults on a new product information framework for consumer composite investments
December 19, 2024
The U.K. Financial Conduct Authority has published a consultation on a new product information framework for Consumer Composite Investments. The regime will apply in respect of a CCI which is or may be distributed to a retail investor in the U.K. and seeks to help consumers understand the products they are buying while giving firms flexibility to innovate. The proposals aim to simplify existing requirements, enable better digital communications, and ensure consistency and comparability across the market. The new regime aligns with the Consumer Duty, prioritizing good consumer outcomes. Through the new regime, the FCA wants consumers to: (i) be presented with information that is accurate, understandable, and broadly comparable; (ii) engage with product information and use it in their decision-making process; and (iii) be able to compare investments more effectively and find the best product for their needs more easily. The deadline for comments is March 20, 2025. The FCA plans to publish a further consultation with draft rules for consequential amendments and transitional provisions in early 2025. The FCA also plans to issue a policy statement and final rules in 2025. -
UK Government responds to Treasury Committee report on SME Finance
December 12, 2024
The U.K. government has published its response to the Treasury Committee on access to financing for small businesses. The report, by the Treasury Select Committee of the previous Parliament, made recommendations related to de-banking and the Business Banking Resolution Service. The government makes a number of commitments such as: (i) continued funding for key business support programs in 2025/26; (ii) continued funding for the Help to Grow: Management programme; (iii) extending the SME Digital Adoption Taskforce by at least six months; and (iv) bringing forward a Small Business Strategy Command Paper next year.
The government also acknowledges the Treasury Committee's concerns about the removal of the SME supporting factor under Basel 3.1 and notes the Prudential Regulation Authority's adjustments in this area, commending the PRA's consideration of feedback and adaptations. On business de-banking, the government agrees that current account closure requirements could be improved and notes that HM Treasury intends to bring forward legislation so customers receive detailed explanations when providers close their accounts and a longer notice period (subject to certain exceptions). It also plans to monitor for evidence of de-banking of legitimate businesses and the work of relevant bodies, including the Financial Conduct Authority. On personal guarantees, the government will take a close interest in the outcomes of the FCA's current investigation into personal guarantees and will continue to monitor for evidence of the effect and proportionality of the use of personal guarantees. On December 9, 2024, the FCA published a webpage on its follow-up work on the Federation of Small Businesses super-complaint concerning the use of personal guarantees by lenders to support loans to small businesses. -
UK Financial Conduct Authority publishes guidance on firms' approaches to Consumer Duty board reports
December 11, 2024
The Financial Conduct Authority has published its findings following a thematic review into firms' approaches to completing the first annual Consumer Duty board report. Under the Duty, a firm must prepare a report for its governing body setting out the results of its monitoring of consumer outcomes and any actions required as a result of the monitoring.
The FCA findings related to four key areas: (i) report governance; (ii) monitoring and outcomes; (iii) actions taken to comply with Duty obligations; and (iv) future business strategy. Overall, the FCA found that the best reports were structured in a way that made it easy to scrutinize the key aspects and highlighted the following elements of good reports: (i) clear outcomes focus; (ii) good quality data to back up conclusions (including good quality management information); (iii) analysis of different customer types including those with characteristics of vulnerability; (iv) clear processes for reviewing, approving and producing reports within the necessary timeframe; and (v) firm focus on culture, noting the role of a positive culture in delivering good outcomes.
On December 9, 2024, the FCA set out its priorities under the Consumer Duty for the remainder of 2024 and for 2025.Topic : Consumer / Retail -
UK Financial Conduct Authority publishes findings of thematic review into firms' approaches to complaints and root cause analysis
December 11, 2024
The Financial Conduct Authority has published the findings of a thematic review into firms' approaches to complaints and root cause analysis. The FCA completed the thematic review to support effective embedding and implementation of the Consumer Duty. Overall, the FCA found that firms have established processes for carrying out root cause analysis of complaints, identifying trends and themes, and that most firms could evidence clear escalation routes and accountability.
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UK Financial Conduct Authority writes to Treasury Committee on the FCA's regulatory perimeter
December 10, 2024
The House of Commons Treasury Committee has published a letter (dated December 6, 2024) from Nikhil Rathi, Chief Executive of the Financial Conduct Authority, regarding the FCA's perimeter report. In the letter, Mr. Rathi explains that he is keen to maintain transparency about the actions the FCA is taking on the perimeter and sees the December report as a refreshed opportunity for the FCA to discuss with both HM Treasury and the Treasury Committee some of the current strategic gaps in the overall U.K. legislative framework.
The letter refers to various longstanding concerns including:- whether investment consultants should be within the perimeter, especially since the liability-driven investment crisis.
- the issue of SME lending and the FCA's keenness to work with the government to reform the Consumer Credit Act 1974.
- the continued risks of harm where principals do not adequately oversee the activities of their appointed representatives.
- where the perimeter should lie in relation to sports and non-financial spread-betting. In the FCA's view, an alternative framework for sports spread-betting could be more tailored to the risks of sports gambling.
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UK Financial Conduct Authority sets out focus areas for Consumer Duty
December 9, 2024
The Financial Conduct Authority has set out its priorities under the Consumer Duty for the remainder of 2024 and for 2025. The FCA's priorities include embedding the Consumer Duty and raising standards, enhancing understanding of the price and value outcome, and realizing the benefits of the Consumer Duty. Expected FCA outputs include:
- By the end of Q1 2025, a review of board/governing body reports and complaints, a review of the treatment of customers in vulnerable circumstances, and a review of the consumer support outcome and supporting informed decision-making.
- H1 2025, publish the findings of a "digital journeys assessment" considering whether firms' digital tools sufficiently help consumers to understand credit agreements.
- H1 2025, consult on rules for better support for consumers in retail investments and pensions as a part of the advice guidance boundary review.
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UK Financial Conduct Authority updates its perimeter report
December 9, 2024
The Financial Conduct Authority has updated its perimeter report. The report describes issues the FCA has identified with its regulatory perimeter and the action it is taking in response.
One new issue identified is in relation to investment trust cost disclosure. On November 22, 2024, the Packaged Retail and Insurance-based Investment Products (Retail Disclosure) (Amendment) Regulations 2024 (SI 2024/1204) came into force, excluding closed-ended U.K.-listed investment funds from the disclosure requirements in the U.K. Packaged Retail and Insurance-based Investment Products Regulation and U.K. Markets in Financial Instruments Organisation Regulation. The FCA reminds these firms that they remain within the wider regulatory perimeter and are subject to the Consumer Duty and conduct of business requirements to communicate in a manner that is fair, clear and not misleading.
The second issue identified is in relation to an exclusion from the regulatory perimeter for trustees acting in the course of discharging their general obligations. The FCA has identified a number of instances where consumers have lost money when their trusts have been invested in opaque, high-risk investments which have subsequently failed through a trust structure. The FCA welcomes wider consideration about the circumstances when exclusions, including for unregulated trustees, could be disapplied to enable the FCA to have greater oversight. -
UK Financial Conduct Authority Supports Expedition of Appeals of Motor Finance Decisions
December 3, 2024
The U.K. Financial Conduct Authority has published a letter addressed to the Supreme Court regarding the applications for permission to appeal to the SC and requests for expedition in the recent motor finance commission judgments. On October 25, 2024, the Court of Appeal handed down its judgment in three related appeals regarding a lenders' liability to a consumer in the context of a credit broking arrangement—Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) [2024] EWCA Civ 1282. Allowing all three appeals, the CA stated that there was a fiduciary relationship between the dealer and the consumer. In addition, the court stated that there was a conflict of interest and the consumers had not given fully informed consent to the commission to be paid by the lender to the dealer. In two of the cases, the CA found that the commission had not been disclosed to the consumer and was secret, meaning that the lender was liable. In the other case, the CA found that the partial disclosure negated secrecy, meaning that the lender was liable only as an accessory to the breach of the fiduciary relationship. These transparency requirements go further than the FCA's current rules on commission disclosure. Permission to appeal to the SC decision has since been made.
Read more.Topic : Consumer / Retail -
UK Financial Conduct Authority Policy Statement on Changes to Financial Crime Guide
November 29, 2024
The U.K. Financial Conduct Authority has published a policy statement on changes to its financial crime guide, following its consultation in April. The changes cover the following areas: (i) sanctions—to reflect information learnt from assessments of firms' sanctions' systems and controls following Russia's invasion of Ukraine in 2022; (ii) proliferation financing—to ensure that proliferation financing is explicitly referenced throughout the guide, where appropriate. This includes highlighting a 2022 change to the MLRs, which requires firms to conduct proliferation financing risk assessments; (iii) transaction monitoring—to provide further guidance on how firms can implement and monitor transaction monitoring systems. This includes supporting responsible innovation and new technological approaches; (iv) cryptoasset businesses—to make clear that cryptoasset businesses registered under the MLRs should refer to the guide; (v) Consumer Duty—to clarify that firms should consider whether their systems and controls are consistent with their obligations under the Duty; and (vi) consequential changes—includes replacing expired links, updating outdated references to EU rules and refreshing case studies based on more recent FCA enforcement notices.
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UK Financial Conduct Authority Discusses Strategy for 2025 to 2030
November 26, 2024
The U.K. Financial Conduct Authority has published a speech by Emily Shepperd, FCA Chief Operating Officer, on the FCA's strategy for 2025 to 2030. In the speech, Ms. Shepperd sets out the four main themes of the FCA's strategy. Ms. Shepperd emphasises that trust in both the FCA and the financial services sector underpins these themes and will be crucial as the FCA looks to pursue growth, alongside ensuring proportionality in regulation and encouraging innovation. She also explains that the FCA has decided to set its ambitions on 2030, a five-year strategy, learning from its first 3-year strategy that it takes time to deliver and cement change.
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UK Financial Conduct Authority Consults on Further Temporary Changes to Handling Rules for Motor Finance Complaints
November 21, 2024
The U.K. Financial Conduct Authority has published a consultation on further temporary changes to handling rules for motor finance complaints. The FCA explains that following the Court of Appeal's recent judgment on motor finance commission, it is proposing new complaint handling rules. It is likely that the judgment will result in an increase in motor finance non-discretionary-commission-arrangement (non-DCA) commission complaints. This will create additional pressures on firms and the Financial Ombudsman Service. The FCA therefore considers that there is a strong case for introducing complaint handling rules that give firms extra time to deal with motor finance non-DCA commission complaints not currently covered by the DCA complaint handling rules. Extending the time firms have to deal with these complaints will also allow time to see the outcome of any appeals for permission to appeal the Court of Appeal's judgment to the Supreme Court.
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HM Treasury Publishes Consumer Composite Investments (Designated Activities) Regulations 2024
November 21, 2024
HM Treasury has published the Consumer Composite Investments (Designated Activities) Regulations 2024, together with an Explanatory Memorandum.
The Regulations: (i) replace assimilated law in relation to the Packaged Retail and Insurance-based Investment Products Regulation, establishing a new legislative framework for the regulation of Consumer Composite Investments, formerly PRIIPs; (ii) define key concepts including a CCI and retail investor to support interpretation, tailoring definitions established in the PRIIPs Regulation to U.K. markets and law; (iii) specify activities relating to CCIs as designated activities for the purposes of the Financial Services and Markets Act 2000 and provide the U.K. Financial Conduct Authority rule-making and certain supervision and enforcement powers to enable it to set the regulatory provisions that apply to persons carrying out designated activities relating to CCIs; (iv) make transitional provisions and consequential amendments to other legislation to ensure the CCI regime remains operable; and (v) establish civil liability for breaches of FCA rules made under the Regulations. The provisions providing the FCA with the necessary powers to make rules, give directions or guidance, and issue statements of policy come into force on November 22, 2024. The remaining provisions come into force on the day on which the revocation of the U.K. PRIIPs Regulation comes into force. -
International Organization of Securities Commissions Publishes Roadmap to Enhance Retail Investor Online Safety
November 19, 2024
The International Organization of Securities Commissions has launched a new roadmap for retail investor online safety. The strategic initiative aims to safeguard retail investors worldwide from fraud, excessive risk, and misinformation as digital trading and social media reshape the retail financial market.
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Mansion House: UK Financial Conduct Authority and Financial Ombudsman Service Call for Input on Modernizing the Redress System
November 15, 2024
The U.K. Financial Conduct Authority and the Financial Ombudsman Service have launched a joint call for input on modernizing the redress system. The two main concerns of the FCA and the FOS are mass redress events and FCA-FOS cooperation. Mass redress events occur when there are large numbers of complaints about the same issue. If mass redress events involve sudden and unexpected increases in complaints, this creates operational difficulties for both firms and the FOS and delays for the consumers. In some cases, they can lead to disorderly firm failures with costs absorbed by the rest of the industry through the Financial Services Compensation Scheme levy or, if there is no FSCS cover, by consumers in lost redress.
The FCA and the FOS are hoping to better understand: (i) how the current redress framework could be modernized; (ii) the problems that mass redress events and the redress system in general cause firms, consumers, and their representatives; (iii) what changes could be made to the redress framework to enable the FCA and the FOS to better identify and manage mass redress events to ensure better outcomes for consumers, firms, and the market; (iv) what changes could be made to how the FCA and the FOS work together to ensure their views on regulatory requirements are consistent; and (v) if there need to be any changes for complaints brought to the FOS by professional representatives such as complaints management companies. The call for input considers a number of short-, medium-, and long-term options that may address the issues identified. The deadline for responses is January 30, 2025. The FCA and the FOS intend to set out next steps in H1 2025.Topic : Consumer / Retail -
Mansion House: UK Financial Conduct Authority Feedback on Advice Guidance Boundary Review and Next Steps
November 15, 2024
The U.K. Financial Conduct Authority has published feedback to its December 2023 advice guidance boundary review. The review included a number of proposals to improve how people can access help with their pensions and retail investments.
The FCA highlights that: (i) most respondents agreed that the FCA's proposals are a positive step towards improving consumer outcomes and agreed with the proposals outlined in the paper; (ii) the Financial Services Consumer Panel challenged the FCA to realize the full ambition of this review and encouraged the FCA to keep an open mind on what may be needed to achieve the strategic aims of the review; and (iii) there was concern about the risks of developing new forms of regulated help, including the need to ensure people fully understood the support they were being offered and what protections would be provided.
The FCA plans to consult: (a) in December on targeted support for pensions savers; and (b) in H1 2025 on draft FCA rules to apply across retail investments and pensions. The FCA has also issued a joint statement with the Pensions Regulator and the Information Commissioner's Office to provide guidance to firms on communicating with their pensions and retail investments customers.Topic : Consumer / Retail -
UK Financial Ombudsman Service Publishes Feedback to Consultation on Charging Claims Management Companies and other Professional Representatives
November 15, 2024
The U.K. Financial Ombudsman Service published a feedback statement to its consultation on its proposals to charge fees to claims management companies and other professional representatives. The statement summarizes the feedback and provides a high-level summary of the FOS's response to the feedback received.
The FOS proposes to, broadly as consulted on: (i) continue with the option to implement a fee of £250 per case, reducing to £75 where the case is determined in favor of the complainant represented by the CMC; (ii) avoid vested financial interest in the outcome of any individual complaint by reducing the fee payable by the respondent firm by £175 where the complaint is not successfully upheld against them. The FOS would retain £75 in every case, regardless of outcome, as this broadly equates to the cost of setting the case up on its systems; (iii) increase the free case limit from three to ten per financial year for each CMC, so they could test cases raising new issues and learn from them; with a view to this informing their own due diligence for subsequent cases of that type which they may wish to bring; (iv) utilize fees gathered to improve its outreach and engagement; and (v) implement the arrangements as soon as possible, subject to Parliamentary and U.K. Financial Conduct Authority stages, which the FOS now accepts is likely to be early 2025. The recent General Election means that the FOS is still awaiting the necessary secondary legislation to advance proposals. Depending on the outcome of the relevant approvals required, the FOS will publish a separate policy statement in due course, upon further development of the affirmative procedure by Parliament and appropriate final consideration by the FCA. On November 19, 2024 the FOS published a letter sent to the FCA to confirm the FO's position.Topic : Consumer / Retail -
UK High Court Finds London Capital & Finance Plc to be a Ponzi Scheme
November 14, 2024
The U.K. High Court has handed down judgement in the civil case of London Capital & Finance Plc (in administration) and others v Michael Andrew Thomson and others [2024] EWHC 2894 (Ch). London Capital & Finance was an investment firm regulated by the Financial Conduct Authority. It was also registered as an ISA manager with HM Revenue and Customs. LCF collapsed into administration in 2019, resulting in losses of around £237 million to around 11,500 mostly retail investors. LCF and its administrators brought a civil claim against those responsible for running and administering LCF's business, alleging (among other things) that: (i) representations made to LCF bondholders regarding LCF's activities were false; (ii) the defendants misappropriated sums of over £136 million from LCF and/or associated companies; and (iii) LCF was operated as a Ponzi scheme and as a result, the defendants were knowingly party to fraudulent trading and should be liable to compensate the claimants for their losses.
The court found for that: (i) LCF had made misrepresentations which amounted to fraudulent conduct of business; (ii) there had been fraudulent misappropriation of LCF's assets; and (iii) LCF had been operated fraudulently as a Ponzi scheme. As a result, the defendants were liable to LCF for knowing participation in the fraudulent conduct of LCF's business and LCF and its administrators had established equitable proprietary claims against certain of the defendants. A subsequent hearing will be held to decide the level of compensation payable by the defendants.
Read more.Topic : Consumer / Retail -
Mansion House 2024
November 14, 2024
Rachel Reeves, the U.K. Chancellor has set out a package of reforms in her Mansion House speech. The reforms aim to drive growth and competitiveness in financial services. Ms. Reeves stated that the regulatory changes post-financial crisis created a system which sought to eliminate risk-taking that 'has gone too far' and has led to unintended consequences. Ms. Reeves hopes to maintain the U.K.'s high regulatory standards while rebalancing elements of the regulatory system to drive economic growth and competitiveness.
Read more. -
Mansion House: Call for Evidence on Credit Union Common Bond Reform
November 14, 2024
HM Treasury has published a call for evidence on credit union common bond reform, which is part of the latest Mansion House reforms. The government is seeking views on the merits of and considerations for changing parts of the common bond requirement for membership of a credit union in Great Britain, under the Credit Unions Act 1979. The call for evidence is motivated by a wish to help credit unions grow sustainably and ensure that this aspect of the legislative framework for credit unions is fit for the 21st century. The call for evidence only seeks views on the common bond for credit unions in England, Wales, and Scotland. This is because responsibility for credit unions in Northern Ireland is a devolved matter for the Northern Ireland Executive. Responses may be submitted until March 6, 2025. Following the call for evidence, HM Treasury plans to publish a summary of responses and its proposed next steps, which may include a consultation on specific proposals. -
Mansion House: Report on Mutuals Sector Landscape Requested from FCA and PRA
November 14, 2024
HM Treasury has published two letters from Tulip Siddiq, Economic Secretary to the Treasury sent to the CEOs of the Financial Conduct Authority and the Prudential Regulation Authority requesting a report on the current mutuals landscape before the end of 2025. Ms. Siddiq explains that the request is part of the government's commitment to unlock the full potential of the mutual and cooperative sector in the U.K. and the importance of effective and proportional regulation in supporting this. She explains that the reports will aid the government and regulators' consideration of how best to support the mutuals sector to drive inclusive growth across the U.K., a key part of the latest Mansion House reforms. The letters also request a response from the regulators setting out their next steps in engaging with the request. -
Draft Regulations on the UK Designated Activities Regime
November 11, 2024
A draft version of the Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2024, together with an explanatory memorandum, have been laid before Parliament. The designated activities regime is a new U.K. concept to give the Financial Conduct Authority rulemaking powers over financial sector activities, such as public offers and listing, which are not necessarily carried out by regulated firms such as banks. We discussed the DAR in our bulletin, "Financial Services and Markets Bill: The Designated Activities Regime in the UK".
The Regulations will amend the Financial Services and Markets Act 2000 with regard to the FCA's supervision and enforcement of DAR requirements. They enable the FCA to supervise designated activities by gathering information and launching investigations into persons carrying out designated activities, and to enforce its designated activity rules by publicly censuring or imposing financial penalties on persons that breach them. They also set out the procedures that will apply to the FCA giving directions concerning designated activities. The Regulations have been laid before Parliament and will enter into force on the day after they are made. -
UK Treasury Committee Call for Evidence on Acceptance of Cash
November 5, 2024
The Treasury Committee has launched a call for evidence as it examines whether rules are needed to govern the acceptance of physical cash in the U.K. The Committee explains that the Bank of England has noted that the decline in cash usage is increasing the infrastructure costs of retaining physical cash as a viable payment method, which could lead to disruption for businesses and consumers. Meanwhile, there is a concern that cash is still being used by and is essential for certain vulnerable groups to make payments, and that the U.K. becoming over reliant on digital payments could have an impact on financial stability.
Questions in the call for evidence include:- Whether there are groups in society that disproportionately rely on using cash.
- What practical challenges and costs businesses may face from a requirement to accept cash.
- Whether any sectors would face problems by a decline in cash acceptance.
The deadline for responses is December 2, 2024. -
HM Treasury Post-Implementation Reviews on SME Credit Information and Finance Platforms Regulations
October 30, 2024
Alongside the U.K government's Autumn Budget delivered on October 30, 2024, HM Treasury has published two post-implementation reviews relating to small- and medium-sized enterprise credit.
The first review is of the Small and Medium Sized Business (Credit Information) Regulations 2015. These Regulations established commercial credit data sharing (CCDS), which aimed to lower the barriers to entry in the SME credit market by improving the availability of SMEs' credit data amongst lenders to reduce information asymmetries and therefore enable newer lenders to differentiate high and low risk SME borrowers.
The second review is of the Small and Medium Sized Business (Finance Platforms) Regulations 2015. These regulations established the bank referral scheme, placing an obligation on designated banks to refer SME business customers that they reject for finance to platforms that can match the SME with alternative finance providers.
In both reviews, HMT concludes that the schemes have broadly met their stated objectives, although the reviews identify areas where improvements could be made. In particular, feedback on the CCDS suggests that it may not be sufficiently flexible in responding to market changes such as the introduction of new products and the withdrawal of older products with low take-up. Similarly, feedback on the bank referral scheme suggests that participants in the scheme may experience frictions in the referrals process, which could be the result of significant differences in the way that designated banks have implemented referrals under the bank referral scheme. HMT plans to consult in spring 2025 on how it can further enhance the Credit Information Regulations and the Finance Platforms Regulations.Topic : Consumer / Retail -
FCA Financial Promotions Quarterly Data 2024 Q3
October 25, 2024
The U.K. Financial Conduct Authority has published its financial promotions quarterly data for Q3 2024. The FCA summarizes the data collected between July 1 and September 30, 2024 and the action it took against firms breaching financial promotion rules, and referrals and investigations into unregulated activity. The FCA also shows where it is working to improve standards across the market so that consumers are provided with clear and fair financial promotions which are not misleading.
Key messages include:- the FCA's interventions in Q3 resulted in 10,593 promotions being amended or withdrawn by authorized firms, including one firm who withdrew 6,792 promotions, many of which were historical promotions withdrawn as a precaution;
- the FCA issued 552 alerts on unauthorized firms and individuals, 12% of which were clone scams;
- the cryptoasset financial promotions regime came into force on October 8, 2023 and has now been live for a year. Over the last year the FCA has issued 1,702 consumer alerts about illegal crypto promotions, which has resulted in the take down of over 900 scam crypto websites and the removal of 56 apps from U.K. apps stores. The FCA are continuing to work with social media companies to remove and block illegal content on their platforms; and
- the FCA is actively engaging with firms who appear to be providing and advertising unauthorized debt advice and debt solutions to consumers via online promotions. The FCA continues to observe trends of aggressive sponsored promotions placed by unauthorized firms, particularly through TikTok and paid-for Google advertisements.
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UK Financial Conduct Authority Publishes Portfolio Letters Setting Out Key Concerns and Priorities for 2025
October 25, 2024
The U.K. Financial Conduct Authority has published a series of portfolio letters it has sent to: (i) lifetime mortgage providers, which includes firms that provide lifetime mortgages, home reversion and later life lending products; (ii) non-bank mortgage lenders and mortgage third-party administrators; (iii) retail banks; and (iv) building societies, in each case setting out its key concerns and priorities in respect of each such portfolio in 2025.
The letters explain that the FCA plans to engage with relevant firms on their cultures and controls, focusing on the following consistent priority areas: (a) the Consumer Duty and for non-bank mortgage lenders, mortgage third-party administrators, retail banks and building societies, the treatment of customers in financial difficulty; (b) financial resilience (for non-dual regulated firms); (c) operational resilience; (d) financial crime and fraud; and (e) sustainable finance. For retail banks and building societies, the FCA identifies access as an additional priority; as firms transform their channels, products and services, it is vital that consumers are not unreasonably or unlawfully excluded from payment accounts and banking services.
Read more.Topic : Consumer / Retail -
UK Financial Conduct Authority Speech on Vulnerability in the Wealth Management Sector
October 24, 2024
The U.K. Financial Conduct Authority has published a speech by Graeme Reynolds, director of competition on addressing vulnerability in the wealth management sector. Mr Reynolds discusses the good and bad practices that have been observed through its supervisory work. He sets out the FCA's key expectations for firms with regards to vulnerable customers, which include: (i) to have processes in place to recognize those who may need more help or who are engaging with services which may not meet their needs; (ii) to consider why people are using products and services, what the client's goals are, and how the "client journey" that firms provide supports the realisation of those goals; (iii) to issue clear, easily understood communications and promotions to enable people to make informed decisions, tailoring them where necessary; (iv) to develop well trained, empathetic client service taking account of the fact that vulnerabilities and circumstances may change and that the firm might need to adapt in response; (v) to think pragmatically and proportionately about what a 'good' client outcome is for those using a service; (vi) to use data to test whether clients are, in fact, in the target market, and receiving the service intended; and (vii) to digest FCA publications on how the Consumer Duty and vulnerability guidance is being implemented elsewhere, considering what lessons are relevant.Topic : Consumer / Retail -
UK Financial Conduct Authority Multi-Firm Review of Consumer Credit Firms and Non-Bank Mortgage Lenders
October 23, 2024The U.K. Financial Conduct Authority has published its review of consumer credit firms and other non-bank lenders as the latest chapter in its ongoing supervisory focus on financial resilience. While the review specifically considered financial resilience, it is interesting to note that, where shortcomings were identified, they stem from common systemic issues that can impact a firm’s whole business model, in particular failure to effectively:
- Identify all of the risks to the business;
- Set risk appetite and establish appropriate systems and controls; and
- Undertake adequate stress testing and establish a proper wind down plan.
Topic : Consumer / Retail -
HM Treasury Consults on Regulating Buy Now Pay Later
October 17, 2024
HM Treasury has begun consulting on draft legislation regulating Buy Now Pay Later. HM Treasury is proposing to bring forward secondary legislation that would bring BNPL into Financial Conduct Authority regulation as soon as possible. The consultation sets out HM Treasury's intended policy approach to regulation along with the draft legislation. HM Treasury explains that the proposed legislation aims to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.
Read more. -
UK Financial Ombudsman Service Updates Guidance on Handling Complaints Concerning APP Fraud, Scams and Fraud
October 17, 2024
The Financial Ombudsman Service has published updated versions of its guidance for businesses on: (i) handling complaints concerning Authorized Push Payment fraud and other scams involving authorized payments or withdrawals; and (ii) handling complaints concerning fraud and scams. The FOS's updated guidance reflects the new rules introduced, with effect from October 7, 2024, on Faster Payments and CHAPS APP fraud reimbursement. -
Draft UK Building Societies Act 1986 (Modifications) Order 2024 Published
October 14, 2024
The draft Building Societies Act 1986 (Modifications) Order 2024 has been published, together with an explanatory memorandum. The Order amends Parts 7 and 8 of the Building Societies Act 1986 to assimilate the law relating to building societies and to companies concerning directors' retirement and balance sheet signature following modification of the statutory provisions in force in relation to companies. The draft Order will amend: (i) sections 60 and 61 of the Building Societies Act to remove all references to the normal retirement age or the compulsory retirement age for directors, as stated in the 1986 Act. This will update the 1986 Act in line with the Companies Act 2006, where there are no longer corresponding restrictions for company directors; and (ii) section 80(1) of the 1986 Act so that the current requirement for the balance sheet of a building society to be signed by two directors and the CEO is changed to allow one director to sign the balance sheet on behalf of the board. This amendment aims to modernize the 1986 Act, aligning the provisions with section 414(1) of the Companies Act 2006. This would reduce a small but unnecessary burden for building societies, providing building societies with the equivalent accounts sign-off procedures as to companies. The draft Order will come into force 21 days after the day on which it is made.Topic : Consumer / Retail -
UK Building Societies Act 1986 (Amendment of Small Business Turnover Limit) Order 2024 Published
October 14, 2024
The Building Societies Act 1986 (Amendment of Small Business Turnover Limit) Order 2024 has been published, together with an explanatory memorandum. The Order amends section 7(10) and (11) of the Building Societies Act 1986 to increase the turnover limit in a relevant financial year for the definition of a small business in section 7(10) of the Act from £1 million to £6.5 million. It also makes a corresponding amendment to the reference to the equivalent limit in any other currency in subsection (11)(c). Under section 7(1) and (2) of the Building Societies Act, subject to some exclusions, building societies are required to raise at least 50 per cent of their funding from members' deposits; the rest can be raised from other sources, known as wholesale funding. Deposits by small businesses with a society, or any subsidiary undertaking of the society, are excluded from the wholesale funding limit by section 7(3)(aa). By amending the definition of a small business in section 7(10) of the Building Societies Act, the Order will exclude a larger range of deposits with building societies by small businesses from the funding limit, thereby providing building societies with greater flexibility in their funding sources. This amendment will also help building societies compete more effectively with ring-fenced retail banks for deposits from small businesses. The proposed new small business turnover limit of £6.5 million is already used to classify the smaller businesses whose deposits must be held within the ringfence. The Order comes into force on November 4, 2024.Topic : Consumer / Retail