A&O Shearman | FinReg

ESMA report on the quality and use of data

30 April 2025

The European Securities and Markets Authority (ESMA) has published its 2024 report, along with a press release, on the quality and use of data, showcasing significant increase in data use by authorities. The report covers datasets from the European Market Infrastructure Regulation (648/2012) (EMIR), the Securities Financing Transactions Regulation ((EU) 2015/2365) (SFTR), the Markets in Financial Instruments Regulation (600/2014) (MiFIR), the Securitisation Regulation (2017/2402/EU), the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) and the Money Market Funds Regulation ((EU) 2017/1131) (MMF Regulation). This edition also expands the scope to include the European Single Electronic Format (ESEF) data and short-selling data. The report is divided into different sections.

Read more.

Topics : Derivatives, Financial Market Infrastructure, FinTech, Fund Regulation, MiFID II, Other Developments, Securities

EC launches channel for reporting financial market integration barriers in the EU

24 April 2025

The European Commission (EC) has launched a dedicated channel for reporting barriers to financial market integration within the EU Single Market. This initiative, which announced in the Savings and Investments Union (SIU) Communication adopted in March, invites market participants, individuals or businesses to provide information on any existing obstacles that affect the functioning of the single market for savings and investments. This includes issues that affect the seamless flow of cross-border capital, reduce the ease of doing business across the EU or impose excessive red tape and complex regulatory settings. Issues that may be reported include, but are not limited to, market fragmentation, divergent supervisory practices, licensing and freedom of doing business (including discriminatory practices) and overly burdensome or repetitive reporting requirements. Feedback is invited via a designated email and the EC commits to regularly monitor the feedback and use it to tackle existing obstacles to financial market integration and free movement of capital, with the aim of further advancing the SIU. The EC notes that this channel is not a formal complaint submission mechanism and stakeholders should not expect to receive an individual reply or feedback from the EC.

Topic : Other Developments

FSB Chair Letter to G20 Finance Ministers

23 April 2025

The Financial Stability Board (FSB) has published a letter, along with a press release and webpage, from its Chair, Klaas Knot, to G20 finance ministers and central bank governors ahead of their meeting on 23-24 April. The letter addresses the progress made in tackling global challenges to financial stability and outlines priorities for the future to prevent instability, enhance the resilience of the global financial system and support growth. The key areas of progress are:

Ensuring financial stability through periods of turmoil. The FSB will continue to learn from vulnerabilities caused by previous events such as the banking stress of March 2023 and the COVID-induced market turmoil of March 2020, to ensure effective monitoring of the financial system. The FSB recognises the importance of strengthening the resilience non-bank financial intermediation (NBFI) and aims to deliver policy recommendations in July to the G20, to address financial stability risks arising from leverage in NBFI.

Topic : Other Developments

FCA publishes consultation on streamlining data collection requirements

16 April 2025

The UK Financial Conduct Authority (FCA) has published a consultation paper (CP) proposing the removal of reporting and notification requirements as part of its strategy to prevent unnecessary collection of data to reduce regulatory burden and costs. The consultation paper is accompanied by a press release and an updated webpage. The FCA seeks feedback on the proposals, which include:

eliminating the requirement to provide data relating to: (i) FSA039 – Client money Assets; (ii) Section F of the RMAR; and (iii) Form G – The Retail Investment Adviser Complaints Notifications Form;
simplifying the FCA Handbook to remove guidance about data collections that have already been decommissioned; and
entirely removing forms that are already included in the Annexes to SUP 16.

As the FCA is using a shortened consultation period of four weeks, the deadline for responses is 14 May. The FCA is currently reviewing other data collections and expects to be able to consult on the removal of further returns later in 2025.

Topic : Other Developments

FCA expansion in the United States and Asia-Pacific

15 April 2025

The UK Financial Conduct Authority (FCA) has announced its first-ever establishment of a presence in the United States (US) and Asia-Pacific (APAC) region as part of its new strategy to support growth. The FCA representatives will be based in Washington DC in the US and Australia in APAC. The aim of the expanded presence is to support the export of UK financial services internationally and attract more inward investment from third countries into the UK.

Topic : Other Developments

UK 2025 Regulatory Initiatives Grid published

14 April 2025

The Financial Services Regulatory Initiatives Forum (the Forum) has published the Regulatory Initiatives Forum Grid (the Grid), with the UK Financial Conduct Authority (FCA) also updating its webpage. The previous Grid was due to be published in May 2024 but was postponed due to the General Election, meaning the Forum published only an interim update in October 2024.

The 2025 Grid sets out the regulatory pipeline for the next 24 months and reflects the reprioritisation that has taken place since the new government came into power. Notable initiatives include:

motor finance commission review: the FCA intends to confirm, within six weeks of the Supreme Court's decision on past use of discretionary commission arrangements by motor finance firms, whether it will propose a redress scheme;
liquidity risk management in funds: the FCA will consult on refined proposals regarding liquidity risk management in funds to implement FSB and IOSCO guidelines;
Consumer Composite Investments (CCI) Regulation: the FCA published a second consultation paper on the new CCI regime on 16 April (see our update) and plans to issue a Policy Statement with final rules in late 2025;

Topics : Client Asset Protection, Conduct and Culture, Consumer / Retail, Financial Crime and Sanctions, Financial Market Infrastructure, FinTech, Fund Regulation, MiFID II, Operational Resilience, Other Developments, Payment Services and Payment Systems, Prudential Regulation, Recovery and Resolution, Securities

New FCA work programme for 2025/26

8 April 2025

The UK Financial Conduct Authority (FCA) has published its work programme for 2025/26, alongside a press release summarising its approach to supporting the testing of innovative products and new firms. The work programme sets out how the FCA will deliver its four strategic priorities of being a smarter regulator, supporting growth, helping consumers navigate their financial lives and fighting financial crime, as set out in the FCA's five year strategy.

Read more.

Topics : Other Developments, Payment Services and Payment Systems

UK CMA review of the SME Banking Undertakings 2002

2 April 2025

The UK's Competition and Markets Authority (CMA) has confirmed its decision to review the remaining SME Banking Undertakings 2002 and has launched its consultation seeking views on whether the undertakings need to be updated. In 2002, certain banks signed up a set of legal obligations to target specific features of the SME banking markets which were barriers to competition. This included the provisions referred to as the limitation on bundling provisions, which restricted the banks from requiring an SME customer to open or maintain a business current account in order to access business loans or deposit accounts. Although most of the undertakings were released by the CMA in 2016, the limitation on bundling provisions still remains. The CMA is therefore looking for views and evidence on changes to the structure and competitiveness of SME banking markets since 2016 and whether the limitation on bundling provisions is still appropriate. The deadline for comments is 7 May. In terms of next steps, the CMA expects to consult on its provisional decision in summer, with a final decision published in autumn.

Topic : Other Developments

ICO reports findings of children's data protection in financial services

1 April 2025

The Information Commissioner's Office (ICO) has published its report alongside a press release following a review into the gathering and use of children's data in financial services, particularly from services supplying them with current accounts, savings accounts, trust accounts, ISAs and prepaid cards. The report, part of the ICO's strategic ICO25 plan, highlights areas of good practice, while identifying key areas requiring improvement such as: (i) governance – while most organisations have data protection policies in place, there is limited monitoring of compliance with these policies, with only a small percentage providing specific training; (ii) transparency – many organisations lack age-appropriate privacy information and rely on parents or guardians to convey terms to children, creating a risk of children either misunderstanding or not understanding information at all; (iii) consent – some organisations are failing to review and refresh parental consent received on behalf of a child, as the child matures, making original consent likely void until it is obtained from the child; and (iv) contact including marketing – most organisations do not consider the challenges which arise in distinguishing parents and children when communications are provided, thereby increasing non-compliance risks. The ICO's findings highlight an urgent call for organisations, particularly in the financial services sector offering products for children, to align UK GDPR standards in practice, to mitigate risks and advance in compliance efforts.

Topic : Other Developments

UK Treasury policy paper on ensuring regulators and regulation support growth updated

31 March 2025

The HM Treasury (HMT) has updated its policy paper on its new approach to ensure regulators and regulations support growth. The paper was originally published on 17 March. The update includes an amendment in relation to action 2 of the paper, which seeks to reduce uncertainty across the UK regulatory system by working with regulators to achieve clarity on their roles, approach and processes. The amendment confirms that HMT will review the Financial Conduct Authority and Prudential Regulation Authority key performance indicators to ensure they are as ambitious as possible, to provide faster, more proportionate authorisations.

Topic : Other Developments

The UK FCA new five-year strategy

25 March 2025

The Financial Conduct Authority (FCA) has published its new five-year strategy, focusing on the following key priorities with the stated objectives of deepening trust and rebalancing risk, to support growth and improve lives:

to be a smarter regulator; predictable, purposeful and proportionate. The FCA will improve its processes and embrace technology to become more efficient and effective.
to support sustained economic growth, by enabling investment, innovation and ensuring the continued competitiveness of the UK's world-leading financial services.
to help consumers navigate their financial lives by working with industry to boost trust, product innovation and ensuring the right information and support is available for people to take financial decisions.
to fight financial crime, focusing on those who seek to use the fact they are regulated to do harm. It will go further to disrupt criminals and support firms to be an effective line of defence.

Each priority is accompanied by intended markers of success by 2030.

Topic : Other Developments

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.

Topics : Consumer / Retail, Financial Market Infrastructure, Fund Regulation, Other Developments

European Parliament draft report on facilitating the financing of investments and reforms to boost European competitiveness and create Capital Markets Union

17 March 2025

The European Parliament Committee on Economic and Monetary Affairs has published a draft report (dated 12 March) on facilitating investments and reforms to boost European competitiveness and creating a Capital Markets Union. The report identifies challenges facing the EU, including the risk of economic decline and its perceived inability to protect itself from territorial threats highlighted by the Russia-Ukraine war as well as the strategic realignment of the U.S. The EU is therefore exploring ways to improve its budgetary headroom and mobilise private capital for investment to provide financing for defence capacities, while continuing to support the green reindustrialisation and to invest in education and research. It is noted that businesses are turning outside the EU to gain access to finance and resources and often scale up in foreign markets.

Read more.

Topic : Other Developments

ESMA publishes overview of planned consultations for 2025

13 March 2025

The European Securities and Markets Authority has published an overview of its planned consultations for 2025. The consultations relate to workstreams under the EU Listing Act, the Markets in Financial Instruments package, the latest European Market Infrastructure Regulation (known as EMIR 3), the review of the Alternative Investment Fund Managers Directive, sustainable finance and investor protection. ESMA states that it will update the list regularly.

Topics : Financial Market Infrastructure, FinTech, Fund Regulation, Other Developments, Sustainable Finance

Eurosystem update on settling DLT transactions in central bank money

20 February 2025

The European Central Bank (ECB) has published a press release confirming its decision to expand its initiative to settle transactions recorded on distributed ledger technology (DLT) in central bank money. The press release confirms that the Eurosystem will develop a settlement platform that is interoperable with trans-European automated real-time gross settlement express transfer system (referred to as TARGET) services, and will also consider a more integrated, long-term solution for settling DLT transactions in central bank money which will include international considerations. This expansion follows the Eurosystem's work last year on new technologies for wholesale central bank money settlement, which comprised various settlement experiments and included bank, financial market and DLT platform participants.

Topics : FinTech, Other Developments

European Commission 2025 work programme

11 February 2025

The European Commission (EC) has published a communication outlining its 2025 work programme. The EC also published the annexes to the 2025 work programme which include:

Annex I – new initiatives. The table in this annex lists the new initiatives the EC intends to adopt in 2025 to deliver on its priorities;
Annex II – annual plan on evaluations and fitness checks. The EC's annual plan of evaluations and fitness checks is designed to ensure continuity of the simplification and burden reduction exercise;

Topic : Other Developments

UK Prudential Regulation Authority responds to Government on enhancing sustainable economic growth

January 20, 2025

The Prudential Regulation Authority has published a letter (dated January 15, 2025) from Sam Woods, PRA Deputy Governor and CEO, to the Government setting out the actions the PRA has taken, and will take, with a view to enhancing economic growth. Actions already addressed by the PRA include:

simplifying the prudential regime for small banks;
proposing further amendments to remuneration requirements to enhance competitiveness; and
simplifying regulatory data-reporting from banks.

The PRA also considers that broader changes could simplify and rationalize the U.K. regulatory regime in other ways, such as identifying potential overlaps between PRA's governance and disclosure requirements and those of legislation or other regulators. In the PRA's view, rationalizing the U.K. financial services regulators' "have regards" principles could lead to a simplification of the length and complexity of the analysis underpinning new regulations with consequential benefits for the cost of regulatory engagement by firms and efficient use of resources by the PRA. The principles relate to the number of principles regulators are required to "have regard" to and to which they are held to account for when exercising their powers.

Topics : Other Developments, Prudential Regulation

UK Chancellor announces engagement with financial services leaders to bolster growth plans

January 20, 2025

HM Treasury has announced that the Chancellor will increase engagement with financial services leaders to strengthen plans to grow the economy. Over the coming months, the Chancellor plans to host a series of Industry Forums with key sub-sector leaders in banking, insurance, and asset management to elicit views on delivering long-term growth. HMT explains that the Industry Forums, alongside extensive further engagement at official and ministerial levels, will ensure that industry and senior stakeholders are closely involved in the development of the upcoming Financial Services Growth and Competitiveness Strategy so that it tackles the key issues that matter most to the industry. The first meetings of the Industry Forums will run throughout January and February, reconvening ahead of the Government's publication of the Financial Services Growth and Competitiveness Strategy as part of the Industrial Strategy later this year. The Government will continue to work closely with industry following the publication of the Strategy, to ensure that it is implemented effectively. The Strategy, set to be published in the spring, aims to develop policies that foster growth in the financial services sector.

Topics : Fund Regulation, Other Developments, Prudential Regulation

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;

Topics : Artificial Intelligence, Consumer / Retail, Other Developments, Payment Services and Payment Systems, Prudential Regulation

UK Financial Conduct Authority publishes dear CEO letter for custody and fund services

December 13, 2024

The U.K. Financial Conduct Authority has published a Dear CEO Letter setting out its supervision strategy for firms in the custody and fund services sector. The custody and fund services sector broadly covers firms acting as third-party custodians, depositaries for both authorized and non-authorized funds, and third-party administrators who provide services such as fund accounting and transfer agency.

Read more.

Topic : Other Developments

UK Financial Conduct Authority publishes Dear CEO letter for contract for differences providers

December 13, 2024

The U.K. Financial Conduct Authority published a Dear CEO letter setting out its strategy for providers and distributors of contract for differences over the next two years. The FCA's planned work relates to:

Consumer Duty — the FCA will continue to test the embedding of the Consumer Duty and plans to conduct a multi-firm review focusing on the Consumer Duty's 'price and value' outcome;
market abuse — the FCA aims to improve the identification of market abuse in the portfolio, focusing on transaction reporting and continuing its firm-specific targeted reviews of surveillance arrangements;
reducing harm for firm failure — the FCA will continue to assess firms' implementation of the Investment Firms Prudential Regime, using regulatory returns and targeted data requests to identify outliers. The FCA will also oversee the progress of smaller firms on their MIFIDPRU capital glide paths and take action where firms have inadequate plans to increase capital in line with minimum glide path expectations;

Topic : Other Developments

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.

Topics : Consumer / Retail, Other Developments

UK authorities respond to Treasury Committee questions about Sexism in the City inquiry recommendations

December 10, 2024

The House of Commons Treasury Committee has published letters from HM Treasury, the Prudential Regulation Authority and the Financial Conduct Authority setting out progress made to date in relation to the Committee's "Sexism in the City" inquiry. The FCA letter (dated November 29, 2024) explains that the FCA has prioritized work on non-financial misconduct and the FCA rules, and plans to publish a policy statement in early 2025. The FCA is currently working through feedback received on its wider proposals relating to data collection and target-setting, and intends to set out next steps jointly with the PRA in Q2 2025. In 2025, the FCA plans to strengthen its messaging to whistleblowers, including providing clearer guidance for whistleblowers who are impacted by a non-disclosure agreement but wish to report to the FCA.

The PRA letter (dated December 2, 2024) reiterates the PRA's support for work being done in this area and acknowledges that developments in government policy on diversity and inclusion may impact its proposals for moving forward. The PRA letter also notes that following the removal of the bonus cap, both the PRA and the FCA expect firms to take care to avoid adverse impacts on pay gaps, and it plans to review the effect on pay gaps when sufficient evidence is available.

HM Treasury's letter (dated December 9, 2024) focuses on: (i) the HM Treasury Women in Finance Charter; (ii) gender pay gap and sexual harassment in the workplace; and (iii) the Plan to Make Work Pay – the government initiative on labour market reform.

Topics : Conduct and Culture, Other Developments

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.

The FCA published its updated perimeter report on December 9, 2024.

Topics : Consumer / Retail, Other Developments

UK Financial Conduct Authority writes to the Chancellor of the Exchequer on growth, strategy, its international role, and risk

December 9, 2024

The Financial Conduct Authority has published a letter from Nikhil Rathi, FCA Chief Executive, and Ashley Alder, FCA Chair, to Rachel Reeves, Chancellor of the Exchequer. The letter sets out how the FCA is supporting growth, the development of its strategy, the FCA's international role and approach to risk.

Regarding growth, the letter notes upcoming work in relation to PISCES, the new market for private company shares, the ongoing work to streamline the FCA rulebook, and consultations and proposals in relation to pensions and retail investments. On strategy for 2025-2030, the letter highlights the FCA's prioritization of financial crime and operational effectiveness as a regulator. Relating to the U.K.'s international leadership, the letter confirms the FCA's intention to advocate for global co-operation and openness but notes that on some issues it may choose initially to make progress with a smaller group of like-minded jurisdictions. Regarding risk, notably the FCA is seeking to understand the government's perspective on issues of compensation and where liability should fall in the context of the scale of the U.K. financial services sector.

Topics : Conduct and Culture, Other Developments

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.

Topics : Consumer / Retail, Other Developments

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.

Read more.

Topics : Artificial Intelligence, Consumer / Retail, Financial Crime and Sanctions, FinTech, Other Developments

Mansion House: New Remit Letters for UK Financial Conduct Authority and Prudential Regulation Authority to Focus on Growth

November 15, 2024

HM Treasury has published remits and recommendations for the U.K. Financial Conduct Authority and Prudential Regulation Authority, set out in a letter sent from Rachel Reeves, Chancellor of the Exchequer, to Nikhil Rathi, FCA Chief Executive, and in a letter sent by Ms. Reeves to Andrew Bailey, Bank of England Governor.

The letter to Mr. Bailey formally relates to recommendations for the Prudential Regulation Committee, the BoE committee that exercises its functions as the PRA. Ms. Reeves calls for the regulators to fully embed the secondary competitiveness and growth objective and, while pursuing their respective primary objectives, to consider how they can enable informed and responsible risk-taking by authorized firms. Ms. Reeves outlines her priorities, which include ensuring that: (i) innovative new firms are supported to enter the market, and existing firms are enabled to innovate and invest in new technologies, including the safe adoption of AI; (ii) customers can access appropriate advice and products; (iii) U.K. financial services firms are supported to play a significant role in supporting the Net Zero transition globally; and (iv) firms have a positive experience of engaging with the regulators from the point of initial application or inquiry, and that administrative burdens on firms are streamlined as far as possible, while maintaining high regulatory standards and a reputation as responsive and agile regulators.

Topics : Artificial Intelligence, Other Developments, Sustainable Finance

Mansion House: HM Treasury Publishes Remit and Recommendations Letter for Financial Policy Committee

November 15, 2024

HM Treasury has published a letter from Rachel Reeves, Chancellor of the Exchequer, to Andrew Bailey, Governor of the Bank of England, setting out the remit and recommendations for the Financial Policy Committee for 2024/25.

In the letter, Ms. Reeves states that: (i) the FPC should continue to prioritize its work to address systemic vulnerabilities in market-based finance and ensure that the BoE continues to cooperate with relevant authorities and across jurisdictions to increase resilience in a way that is consistent with supporting sustainable economic growth; (ii) the FPC should continue to focus on cyber and operational risks, noting the evolving threat landscape, including how this might increase these risks, and other potential impacts for financial stability; and (iii) the FPC should assess and identify areas where there is potential to increase the ability of the financial system to contribute to sustainable economic growth without undermining financial stability.

The letter sets out: (a) the matters that the FPC should regard as relevant to the BoE's financial stability objective, and the responsibility of the FPC in relation to the achievement of that objective; (b) the responsibility of the FPC in relation to support for the U.K. government's economic policy; and (c) matters to which the FPC should have regard in exercising its functions. The FPC must respond to the government, describing any action it has taken or intends to take in response to a specific recommendation.

Topics : Non-Bank Financial Intermediation, Operational Resilience, Other Developments

Mansion House: HM Treasury Consults on UK Green Taxonomy

November 14, 2024

HM Treasury has published a consultation on developing a U.K. Green Taxonomy to classify sustainable economic activities, with the aim of increasing sustainable investment and reducing greenwashing risk. Responses to the consultation may be submitted until February 6, 2025.

The consultation seeks views on the use cases for a taxonomy, including complementing the U.K.'s other green initiatives, supporting the development of sustainability-focused financial products and the potential application to investment fund and investment portfolio product disclosures. It further seeks input on whether the taxonomy could support the mobilization of transition finance, following the U.K.'s Transition Finance Market Review (discussed in our blog post, "UK Transition Finance Market Review Publishes Recommendations"). The consultation also sets out proposed design features to maximize the usability of any such taxonomy, including: (i) its interoperability with other international taxonomy regimes; (ii) the environmental objectives and sectoral scope of the U.K. Taxonomy; (iii) the best way to incorporate the "do no significant harm" principle; and (iv) the desired level of governance and oversight to ensure credibility of the regime.

Topics : Other Developments, Regulatory Reform Post Brexit, Sustainable Finance

Mansion House: National Payments Vision

November 14, 2024

HM Treasury has published the National Payments Vision, outlining the government's plans for bolstering the U.K. payments sector. The Vision, which is an integral part of the latest Mansion House reforms, responds to the findings of the independent Future of Payments Review 2023, led by Joe Garner, and takes action to address key issues across the landscape.

The Vision aims to "strengthen the foundations of today" by ensuring that the regulatory framework is clear, predictable and proportionate. To support this, the government has outlined its priorities for U.K. payments through a joint remit letter to the Financial Conduct Authority and the Payments Systems Regulator and welcomes the regulators' commitment to revise their existing memorandum of understanding on cooperation in relation to payments regulation. Another significant objective is ensuring infrastructure is resilient. The government has concluded that the New Payments Architecture program is not sufficiently agile. It is therefore establishing a Payments Vision Delivery Committee which will, through work led by the Bank of England and PSR, clarify the upgrades required to the existing Faster Payments System, assess longer-term requirements and the appropriate funding and governance arrangements needed to deliver this—including proposals to reform Pay.UK.

Read more.

Topics : Other Developments, Payment Services and Payment Systems, Regulatory Processes and Procedures

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.

Topics : Consumer / Retail, Other Developments, Regulatory Reform Post Brexit

Mansion House: Response to Consultation on Future Regulatory Regime for ESG Ratings Providers

November 14, 2024

Following its consultation, HM Treasury has published its response to the consultation on the future regulatory regime for ESG ratings providers, along with the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2024. HM Treasury confirms that it will be proceeding with its proposal to bring the provision of ESG ratings within the scope of the U.K. regulatory perimeter. The government welcomes technical comments on the draft regulation by January 14, 2025. The government plans to finalize the legislation in 2025, at which point the Financial Conduct Authority will consult on the specific requirements. HM Treasury expects the overall process of designing, developing and commencing the ESG ratings regulatory regime to take approximately four years.

As part of the design of the future regulatory framework for ESG ratings provision, the FCA is also considering its approach to overseas ESG ratings providers applying for U.K. authorization. This includes exploring whether, according to size, significance, or market impact in the U.K., an ESG ratings provider would be expected to be incorporated in the U.K. HM Treasury is also exploring creating overseas regimes and other access routes into the U.K. market for overseas providers, including a possible market access or overseas regime for ratings issued in overseas jurisdictions.

Topics : Other Developments, Regulatory Reform Post Brexit, Sustainable Finance

Mansion House: Financial Services Growth and Competitiveness Strategy

November 14, 2024

HM Treasury has launched a call for evidence on a proposed Financial Services Growth & Competitiveness Strategy, a key part of the latest Mansion House reforms. Once developed, the Strategy will serve as the central guiding framework for the next ten years through which the government aims to deliver sustainable, inclusive growth for the financial services sector and secure the U.K.'s competitiveness as an international financial center. To meet its objectives, the proposed strategy sets out five core policy pillars central to sustainable growth: innovation and technology, regulatory environment, regional growth, skills and access to talent, and international partnerships and trade. The proposed strategy also identified five priority growth areas within the financial services sector: fintech, sustainable finance, capital markets (including retail investment), insurance and reinsurance markets, and asset management and wholesale services. Responses to the call for evidence may be submitted is December 12, 2024. HM Treasury intends to publish the strategy in Spring 2025.

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Topics : FinTech, MiFID II, Other Developments, Payment Services and Payment Systems, Regulatory Reform Post Brexit, Securities, Sustainable Finance

UK-Switzerland 2024 Joint Statement

October 15, 2024

HM Treasury has published a joint statement issued with the Swiss State Secretariat for International Finance on the first U.K.-Switzerland financial dialogue. The statement summarizes what was discussed at the meeting and the key outcomes. The discussions emphasized close, ongoing U.K. and Swiss cooperation in financial services and focused on several key themes, including the economic outlook and financial stability, the Berne Financial Services Agreement, sustainable finance, AI and technological innovation, capital markets. On the Berne Financial Services Agreement, finance ministries updated on the progress of their respective domestic implementation procedures, with the U.K. and Switzerland noting that the ambition is to complete implementation as soon as possible, by the end of 2025 at the latest, and enter the Agreement into force shortly thereafter. U.K. and Swiss supervisors also noted that negotiations of a supervisory cooperation memorandum of understanding supporting the Berne Financial Services Agreement are progressing with a view to reach their concluding stages soon. U.K. and Swiss representatives agreed to reconvene in the second half of 2025, emphasizing the importance of continued open dialogue on shared priorities.

Topics : Brexit for Financial Services, Other Developments

Council of the European Union adopts EU Listing Act legislative package

October 8, 2024

The Council of the European Union has adopted the Listing Act legislative package, marking the final step in the decision-making process. The package consists of: (i) a regulation amending the Prospectus Regulation, Market Abuse Regulation, and Markets in Financial Instruments Regulation; (ii) a directive amending the revised Markets in Financial Instruments Directive and repealing the Listing Directive; and (iii) a directive on multiple vote shares. The regulation and directive amending MiFID and repealing the Listing Directive seek to streamline the rules applicable to companies going through a listing process or companies already listed on EU public markets. The aim is to simplify the process for companies, particularly SMEs, by alleviating administrative burdens and costs, while preserving a sufficient degree of transparency, investor protection, and market integrity. The multiple-vote shares directive creates a minimum harmonization at EU level that removes obstacles for the access of SMEs with multiple-vote structures to SME growth markets and any other multilateral trading facility open to trading of SME shares. The directive protects the rights of shareholders with fewer votes per share by introducing safeguards on how key decisions are taken at general meetings and also helps investors to take decisions by mandating transparency measures for companies with multiple-vote share structures.

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Topics : Other Developments, Securities

UK Financial Conduct Authority Publishes Handbook Notice No. 120

June 28, 2024

The U.K. Financial Conduct Authority has published Handbook Notice No. 120. The Notice sets out the changes to the FCA Handbook made by Handbook Administration (No 70) Instrument 2024. The instrument makes only minor changes to the Fees manual, providing clarification and correcting existing provisions. It came into force on June 28, 2024.

Topic : Other Developments

UK Financial Conduct Authority Publishes Expectations for Principals of Overseas Appointed Representatives

June 27, 2024

The Financial Conduct Authority has published guidance on the challenges and expectations for principal firms with overseas appointed representatives. The AR regime allows authorized firms to appoint representatives to conduct certain regulated activities on their behalf. The FCA updated its AR rules and expectations at the end of 2022, which included introducing a requirement for principal firms to report additional information about the business conducted by their ARs and amending its rules and guidance on its expectations of principals and their responsibilities, such as the expectation that principals manage their arrangements with ARs so that there are no conflicts of interest and enhance their monitoring of a delegated task or function, and to specify that the principals' activities should not result in undue risk of harm to consumers or market integrity. The new rules also require principals annually to assess the fitness and propriety and competency and capability of individuals at ARs.

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Topics : Consumer / Retail, Other Developments

Council of the European Union Agrees Mandate on Proposed Regulation on Simpler Financial Reporting Requirements

June 19, 2024

The Council of the European Union agreed its negotiating mandate on the proposed Regulation amending the European Systemic Risk Board (ESRB) Regulation (1092/2010), EBA Regulation (1093/2010), EIOPA Regulation (1094/2010), ESMA Regulation (1095/2010), and InvestEU Regulation ((EU) 2021/523) regarding certain reporting requirements in the fields of financial services and investment support. The proposal updates existing rules on data sharing between the European Supervisory Authorities and other financial sector authorities with the aim of reducing the administrative burden for authorities in the financial sector. Changes to the European Commission proposal highlighted by the Council of the European Union include: (i) clarification that responsibility for the exchange of information should lie with the ESAs and the ESRB, which should share the information received from the national regulators with other ESAs and EU and national authorities and that it should concern only data stemming from reporting requirements under EU, not national, law; and (ii) removing the newly created AML/CTF Authority from the scope of the authorities that are allowed to issue a request for data sharing at this stage, with a reassessment of its inclusion within two years. As the European Parliament adopted its negotiating mandate on March 12, 2024, interinstitutional negotiations may now begin.

Topic : Other Developments

UK Prudential Regulator Granted Power to Disapply Rules

04/19/2024

On April 18, 2024, the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024 were made. The Financial Services and Markets Act of 2023 (discussed in our client note, "A Boost for UK Financial Services") provides a framework for the revocation of retained EU law (now known as "assimilated law") in financial services, much of which will be replaced by rules of the U.K. regulators. Transferring the detailed rules to the U.K. regulator's rulebooks promotes a more nimble approach by the U.K.'s regulators. The FSM Act 2023 gave new delegated power to the U.K.'s regulators for detailed rulemaking, subject to enhanced oversight by Parliament and HM Treasury, and provided various mechanisms for the operation of the regulatory framework, including granting HM Treasury the power to make regulations bestowing on each of the regulators the ability to disapply or modify its rules.

The Regulations also give the Prudential Regulation Authority the ability to disapply or modify the application of any of its rules made under the Financial Services and Markets Act 2000, where appropriate, and in accordance with the procedural requirements set out in the Regulations. The power will allow the PRA to consider the circumstances and business models of individual firms, further enhancing the agile approach to regulation. The Regulations enter into force on June 30, 2024.

Topics : Other Developments, Regulatory Reform Post Brexit

UK Financial Conduct Authority Publishes Rule Review Framework

01/16/2024

The U.K. Financial Conduct Authority has published its Rule Review Framework, setting out how it will set, measure and monitor the outcomes of its Handbook rules. The Rule Review Framework was mandated under the Financial Services and Markets Act 2023 (discussed in our client note, A Boost for UK Financial Services). The FSM Act 2023 transferred responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers. To ensure proper oversight of the use of those powers, the FSM Act 2023 provides for an enhanced regulatory accountability framework, which includes requiring the FCA (and the Prudential Regulation Authority, which consulted on its proposed in 2023) to keep their rules under review and publish a statement of policy on how they conduct those reviews.

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Topics : Brexit for Financial Services, Other Developments, Regulatory Reform Post Brexit

UK Government Signs Agreement with Switzerland on Mutual Recognition for Wholesale Financial Services

01/03/2024

The U.K. Government has signed the Berne Financial Services Agreement with Switzerland, confirming mutual recognition of aspects of the financial services regulatory and supervisory regimes in each jurisdiction. The Agreement permits specified financial services providers in one jurisdiction to supply specified services to wholesale or sophisticated clients in the other jurisdiction in various sectors (including asset management, banking, investment services activities and insurance) on the basis of deference, domestic law or other arrangements.

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Topic : Other Developments

HM Treasury Publishes Consultation Response on Financial Promotions Regime High Net Worth and Sophisticated Investors Exemptions

11/08/2023

HM Treasury has published a consultation response and draft statutory instrument on reforms to the high net worth and sophisticated investor exemptions under the financial promotions regime. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for UK Financial Services") made amendments to the Financial Promotion Restriction, banning authorized firms from approving the financial promotions of unauthorized firms unless they have received approval from the FCA to have the prohibition removed in whole or in part. The gateway will apply from February 7, 2024. However, the restriction does not apply where exemptions exist, such as those for high net worth or sophisticated investors.

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Topics : Consumer / Retail, Other Developments

UK Financial Conduct Authority Publishes Policy Statement on Financial Promotions Gateway

09/20/2023

The U.K. Financial Conduct Authority published a Policy Statement on 12 September 2023 setting out how it intends to implement the new regulatory gateway for financial promotions. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services") amends the Financial Promotion Restriction, banning authorized firms from approving financial promotions of unauthorized firms unless they have received approval from the FCA to have the prohibition removed in whole or part. The gateway will apply from February 7, 2024, with authorized firms able to apply to the FCA for permission from November 6, 2023 until February 6, 2024. There are exemptions from the gateway, entering into force on September 27, 2023, which permit the approval of financial promotions by authorized firms, for communication by unauthorized firms, in certain circumstances.

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Topics : Consumer / Retail, FinTech, Other Developments

Revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 is Postponed

09/14/2023

The Financial Services and Markets Act 2023 (Commencement No. 3) (Amendment) Regulations 2023 were made on August 25, 2023, postponing the revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013.

The Commencement No. 3 Regulations amend the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023, which were made on July 10, 2023 and provide for the entry into force of certain provisions of the Financial Services and Markets Act 2023 (which we discuss in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023). This included provisions revoking retained EU legislation relating to financial services, including the CITS Regulations. The CITS Regulations establish a fund vehicle for the U.K. investment management industry which makes U.K. domiciled funds for collective investment in transferable securities more competitive. The CITS Regulations will now be revoked on a day appointed by the Treasury in a later instrument.

Topics : Brexit for Financial Services, Fund Regulation, Other Developments

UK Regulatory Gateway for Financial Promotions Applies from February 2024

08/29/2023

The Financial Services and Markets Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2023, made on August 22, 2023, bring into force certain provisions of the Financial Services and Markets Act 2023 and create a number of transitional regimes. We discuss the FSM Act in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023."

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Topics : Other Developments, Prudential Regulation

UK Regulators Publish Revised Complaints Scheme

08/04/2023

The U.K. Financial Conduct Authority, Prudential Regulation Authority and Bank of England have jointly published their revised Complaints Scheme, which governs how complaints against the U.K. regulators should be made and handled. The changes include:

The introduction of specific discretionary compensation bands for non-financial loss arising from the regulators' actions or inactions. The bands range from £100 for a relatively low level of stress or inconvenience, up to over £2,500 in exceptional circumstances, for example, where the consequences of the regulators' failings are particularly severe.

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.