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Financial Services Update - November 2021
In this article you'll find a summary of recent financial services updates from the FCA as well as the government and the impact of these on regulatory compliance.
On 22 October, the FCA published the final rules for solo-regulated firms authorised under the Markets in Financial Instruments Directive (MiFID). FCA investment firms must start to prepare now as the regime comes into force on 1 January 2022. The Investment Firms Prudential Regime (IFPR) should simplify prudential requirements, with a re-focus away from risks faced by firms to potential harms that firms can pose to consumers and markets.
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The final rules are listed within the legal instruments. However, the FCA has published a summary of updates within Handbook Notice 92. A third policy statement is due by the end of 2021. The rules will form a new Sourcebook – MIFIDPRU.
Major issues include the definitions and requirements around group structures changing – firms should ensure that as a starting point, group maps and charts are up to date, and clearly show the status and activities of each entity. If there are any queries around whether the structure might not fit the new definitions, firms should seek expert advice as soon as possible.
The older prudential categories no longer exist under the new regime, and firms will fall into one of two categories; small and non-interconnected investment firms (SNI) or non-small and non-interconnected investment firms (non-SNI).
Firms will also need to ensure that new liquidity requirements can be met – at least one-third of a firm’s FOR must be held in core liquid assets.
Investment firms should also note the version of remuneration guidance updated in October 2021.
Perimeter Report
The Financial Conduct Authority’s annual Perimeter Report has been published. The report sets out the need for proactivity – recent transformation in both financial services and how people live their lives mean that customers’ needs and engagement with financial services are changing more speedily than ever. New products and new risks mean that the perimeter is less static than previously, and the FCA plans to use technology to identify activity – both within and outside the perimeter – that could cause harm to customers and to the market.
The Perimeter Report will form the basis of discussions with the Economic Secretary to the Treasury, so any resulting steps will likely be published later in the year.
The report highlights a number of issues with the current framework, including the limited ability to take action against unregulated activities – even if the firm is regulated – and the very limited ability to take any action against unauthorised firms conducting unregulated activities, leaving some areas of the industry open to higher risks and harms.
The FCA’s priorities over the coming twelve months are reiterated in the report, particularly enabling consumers to make informed financial decisions through enforcing standards for the information that firms must give to customers, and a goal to improve the information the FCA publishes for customers to explain what is meant by the terms authorised and regulated, and to improve consumers’ understanding of risk. They also plan to publish more data about firms.
The report also acknowledges that – alongside technological advances and changes due to the pandemic – the Government is currently adapting the framework for financial services post-Brexit, and that this may involve the transferal of rule-making responsibilities previously undertaken by EU regulators, to the FCA and PRA.
Autumn Budget 2021
Chancellor Rishi Sunak announced the Budget and Spending Review for Autumn 2021. Whilst there were some good news stories for those on lower incomes, some hoped-for cuts did not materialise, and the benefits are likely to be short-lived, with the prospect of increasing inflation on the horizon. This will place additional strain on those with mortgages, retirement funds, and those struggling with higher fuel prices and rising retail prices, and is set to balance out any rise in the living wage increase.
Rising inflation and prices means that many customers might have to use savings or credit more often than previously to stay afloat. The inevitable outcome of sharp rises in prices and inflation is that more customers will be in more debt than in previous years, and many more will experience financial difficulties. Firms already have an obligation to ensure they treat customers in financial difficulties fairly, and now more than ever, ensuring that financial difficulties are identified at the earliest possible opportunity will help to keep customers afloat and stabilise the market over a likely difficult winter.
Now is the time to ensure that your staff are clear on the identification and support of customers in financial difficulties. Our dedicated course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers.
This online course, priced at just £15, is accessible at the delegate’s convenience, and provides a certificate upon successful completion, allowing firms to track and record each user’s progress. For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.
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