ComplyCraft Consulting

Merry Xmas from the FCA - more reading material for the holiday The usual pre Xmas smorgasbord of FCA publications is out (obviously, still time for some more as well)...! ⚠️ There are the more recent papers (the amendments to the Financial Crime Guide, Fees, transaction reporting, MiFID organisational review and enforcement transparency, motor finance complaints)... some have attracted a great deal of public attention already. 🛑 This is not an exhaustive list of course - some items (such as remuneration rules for dual regulated firms or the current IRHP court case following the Swift review) are niche or highly interesting, but not urgent reads for most. ❗Today, there were a flurry of 'portfolio letters' for trading firms, CFD providers any custodians/administrators (amongst a few others). Alongside publications on operational incident reporting and changes to the advice/guidance boundary). ✅ The portfolio letters are always highly insightful, describing where the FCA perceives risks in different business models, and the actions they expect from firms within each respective portfolio. Ignore these letters at your peril - the FCA can often follow up very quickly to review how firms are addressing such letters. A lack of action/awareness would be problematic up to highly costly, given how quickly the FCA can turn to restricting new/current business activities if unsatisfied with actions taken, potentially even with an expensive S166 follow up. Real life consequences - not just for compliance. For those at the very top. There is often a pattern of higher expectations described in such correspondence - often relating to upcoming rule changes or an 'exploration' of current standards (often, a revision upwards). Don't get caught out. Act today. https://lnkd.in/dkT8euCJ

Good news for Investment Trusts and KIDs A decision to make as to whether to renew KIDs 'From 19 September 2024 until legislation to amend the PRIIPs Regulation comes into force, closed-ended investment funds whose ordinary shares (of each class if there is more than one) are admitted to trading on a UK regulated market or a UK multilateral trading facility may choose not to follow the requirements of the PRIIPs Regulation and associated technical standards. They may also choose not to follow the requirements of Article 50(2)(b) and Article 51 of the MiFID Org Regulation. We confirm that we will not take supervisory or enforcement action if a fund chooses not to follow those requirements.' https://lnkd.in/ejqF9_yr

FCA Handbook changes - MiFID becomes Handbook rules This is a very interesting consultation. On the face of it, the express purpose is to simply set out how EU technical rules (EU law largely not in the Handbook) can be added into the Handbook. No, not removing or rationalising. Yet... However, there are strong hints of a future direction given. Particularly on client categorisation and use of the corporate finance contacts regime (and VC contacts). These comments are reflective of risks the FCA have identified i.e., inappropriate 'opting up' and misuse of the contacts regime. The regime for Art.3 firms is also mentioned. As in, the FCA points out there is room for rationalisation, given that much of the MiFID requirements are applied to such firms. A more detailed analysis is required of the paper - and this is just a consultation - but at first glance it could be read as: ➡️ This is a precursor to removal of rules in the Handbook; an overall reduction once the new Handbook rules are integrated. ⚠️ The counterbalance is that this is likely to be driven by the application of higher standards across firms; a greater compliance burden, as more specialised regimes are removed to reduce the Handbook size. 🛑 The FCA appears to be preparing changes it believes are necessary to protect retail customers from 'incorrect' categorisation under elective professional rules/contact regimes - whilst the FCA have referred to concerns in 'Dear CEO' letters there is limited summary of evidence of harm at this stage (complaints, FOS/FSCS findings or actions). 🛎️ Firms which deal in 'higher risk products' may be concerned that in addition to changes to financial promotion rules, they may need to spend more compliance resource dealing with additional changes. 🆕 This appears partly driven by a 'clarification' of current requirements (read: a higher standard is introduced under the guise that this always existed... even if this is a surprise to everyone. See wind down changes, PR applying for 'controlling' client money, defining 'DOFP' and so on). Investment firms and industry bodies will need to review this carefully and provide an appropriate response. https://lnkd.in/ev4AKEAY

All Party Parliamentary Group - FCA criticism Over the next week or so we can expect a fair amount of public criticism of the regulator, following publication of a detailed report which is critical of the FCA (out tomorrow). The APPG group on fraud and financial services has its own webpage, so the current press release sets the scene for the report, in addition to the FT article here. Without commenting on the report itself (the highlights are likely to be made very public in coming days), given the make up of the group, it's suggestions and proposals, it is significant in the potential political pressure that could be welded to cause further upheavals in the world of regulation. With a new government in place, and further criticism of a lack of focus on growth within the Mansion House speech and a new FCA CEO due in 2025... could this report force greater change or scrutiny? Either way, the good ship FCA seems to float in ever turbulent waters... https://lnkd.in/eAsdcJGh

Changing the FOS - mass redress events and consistency of decisions This consultation will be welcome, if for no other reason than allowing industry to 'vent' about the ombudsman. Although the narrow remit (i.e., purely focused on PPI/car finance like issues, and the role of claims management companies, to a lesser degree) means much will be heard, but may remain potentially out of bounds. Perhaps that is purposeful, given the recent Mansion House speech and the need to get on the front foot in some way, in a public fashion. The glimmer of hope is the less definite areas of identifying 'mass redress events' earlier and being more proactive, and facilitating more joined up thinking between the FCA and FOS. Why wait is probably the industry commentary - they've been saying this for some time. It may also provide some nuanced help by providing greater steer on complaints that can be rejected, and on how the FOS make decisions. Those closer to this area will be able to describe the near 'deity like' powers the FOS has to determine best practice and so on. Arguably setting a bar much higher than imagined by industry and the FCA. And accusations of sometimes 'backward looking guidance' being issued by the regulator (no, this was always best practice in our minds... what have you been doing then). It would be remiss of CC not to point out here that such finger pointing is often from firms with an axe to grind over the sheer costs of FOS action in these areas... ...and a potential salutary lesson to all firms that cost cutting in compliance can be the ruination of bonuses and balance sheets. Of course, the FOS serves a highly relevant function here; but it can be understandingly frustrating for firms who genuinely believed themselves compliant. It will be interesting to see just how much the FCA opens the door on such issues, or slam it shut once politics moves on. https://lnkd.in/eMU45StF

Consumer Duty - Software provider, friend, confidant or co-manufacturer? We are going to see more aspects of the duty come into the light in coming months and years. The regulator is likely to have a wider definition than firms themselves; whilst the rules and guidance can be interpreted in different ways, many firms choose to take a blinkered view to reach the outcome they would prefer. It is easier to approach this right, from the start, and document/agree the relationship than play catch up and fail to agree any split of responsibilities. Unless you are fundamentally a product/ service 'taker' from a manufacturer with no input, then do question any decision that co-manufacturer is not for you. Firms can describe their relationships with manufacturers however they like, using whatever sales terms they like; if they have some control over price, fees, service provided, documentation (and so on) then they are influencing consumer outcomes. They might not be a co-pilot, but a voice at the table can count... https://lnkd.in/eQnddPY3

Annex I firms - Money Laundering registration. Has your firm failed to comply with UK law? There are around a thousand firms who have already registered with the FCA, over the seven years since a change in UK law expanded the FCA's remit in this area. It should be noted and understood that registration for money laundering purposes is very different from needing to be authorised (or exempt and such) under the Financial Services and Markets Act. From being 'regulated'. You may not need to be authorised by the FCA - you could still need to be registered for money laundering purposes, based on your activities. Given the number firms involved in lending/credit operations or otherwise involved in financial services (but not otherwise regulated) in the UK, there is a strong chance that some have simply failed to register. Given the unheralded nature of the regime, this is partially understandable. However, those firms registered (and unregistered) should take note. The FCA (as part of its 3 year strategy) is reviewing firms compliance for financial crime - and has found many firms (and applicants) wanting. To find out more, take a look at the FCA webpage and 'Dear CEO' letter in the link below. You can also get in contact with us. ComplyCraft have helped firms apply for registration and review compliance with UK law and best practice. We would be happy to assist you, and explain your next steps. https://lnkd.in/dDUC2SHy

A very quick review of the Mansion House speech by Director Joe Denney.

Annex I firms - Money Laundering registration. Has your firm failed to comply with UK law? There are around a thousand firms who have already registered with the FCA, over the seven years since a change in UK law expanded the FCA's remit in this area. It should be noted and understood that registration for money laundering purposes is very different from needing to be authorised (or exempt and such) under the Financial Services and Markets Act. From being 'regulated'. You may not need to be authorised by the FCA - you could still need to be registered for money laundering purposes, based on your activities. Given the number firms involved in lending/credit operations or otherwise involved in financial services (but not otherwise regulated) in the UK, there is a strong chance that some have simply failed to register. Given the unheralded nature of the regime, this is partially understandable. However, those firms registered (and unregistered) should take note. The FCA (as part of its 3 year strategy) is reviewing firms compliance for financial crime - and has found many firms (and applicants) wanting. To find out more, take a look at the FCA webpage and 'Dear CEO' letter in the link below. You can also get in contact with us. ComplyCraft have helped firms apply for registration and review compliance with UK law and best practice. We would be happy to assist you, and explain your next steps. https://lnkd.in/dDUC2SHy

Is reform of consumer protections on the horizon? Amid the lorry load of comments on car loans and enforcement publication, this is interesting to consider. Changing not only how compensation applies, and the ombudsman works, has wide ranging connotations. Consider how at odds these changes are with consumer duty (it's almost a given the change is in one way, reduction of protection), and we have a new FCA chief executive inbound in 2025... Things can change very quickly in regulation, when government pushes the accelerator. https://lnkd.in/ekq2KZij