The Growth and Competitiveness Strategy feeds into a number of substantive changes to the overarching regulatory framework for financial services with the government aiming to
- Have shorter statutory deadlines for regulators to determine key firm applications;
- Impose a requirement for regulators to produce long term strategies with clear goals and priorities; and
- Rationalise how various legislative ‘have regards’ feed into regulatory policymaking.
As part of the Leeds Reforms, the government has set out a number of initiatives of interest to PIMFA and PIMFA members; namely:
- Review of the Financial Ombudsman Service: This consultation sets out findings from the EST’s review of the FOS and proposed reforms. The Treasury is consulting on reforms which include:
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- An adapted ‘fair and reasonable’ test which will require the FOS to find that a firm’s conduct is fair and reasonable where it has complied with FCA rules;
- A requirement for the FOS to seek a view from FCA in instances where there is regulatory uncertainty as well as providing firms with opportunity to request this; and
- The introduction of a 10 year long stop for complaints subject to certain exemptions which the FCA will set out in DISP rules.
There are a number of other provisions related to mass redress events, which are also captured by the FCA’s consultation on Modernising the redress system which builds on its previous Discussion Paper on this matter.
At present, we are very enthusiastic about the reforms put forward. In our representations to HMT on this issue we have stressed the need for any reforms to maintain consumer protection whilst also providing firms with certainty and clarity to invest, grow and innovate. On balance, we believe this package of measures achieved this. We would welcome views from firms on this consultation. Firms are invited to contact Simon Harrington to discuss further.
Financial Conduct Authority CP25/21: Senior Managers and Certification Regime review: In parallel with HM Treasury (HMT), the Financial Conduct Authority (FCA) and the Prudential Regulation Authority have published consultation papers setting out reforms to the Senior Managers and Certification Regime (SM&CR). The reforms aim to reduce the burden on firms and make the requirements clearer and more efficient, e.g.:
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- More time and flexibility to submit applications for approving new senior managers when there has been an unexpected or temporary change.
- Removing duplication where the same individuals are certified for separate functions (to reduce the number of certification roles by 15%).
- Guidance on how to streamline the annual checks firms need to undertake to certify individuals are ‘fit and proper’ to do their role.
- More time for firms to report updates to senior manager responsibilities.
- Increased periods for validity of criminal record checks for senior manager applications, prior to application submission.
- Help firms better understand the definition of certain senior management function roles.
- Give firms more time to update the FCA directory.
Reforming the Senior Managers & Certification Regime: HMT’s consultation proposes to remove the Certification Regime from legislation. Other proposals set out aim to:
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- Reduce the overall number of senior managers through greater flexibility for the regulators in specifying the list of Senior Management Functions requiring regulatory pre-approval.
- Allow firms to appoint certain senior managers without pre-approval by the regulators.
- Remove prescriptive legislative requirements relating to the provision, maintenance and updating of Statement of Responsibilities.
- Industry feedback on whether any requirements in legislation for the Conduct Rules create a disproportionate burden is also requested.
Firms are invited to contact Alex Roberts or Yasmin Ataullah for further information and to feed in your comments.
UK Green Taxonomy Consultation response: The government has concluded that a UK Taxonomy would not be the most effective tool to deliver the green transition and should not be part of its sustainable finance framework. Whilst the government’s ambitions to continue as a global leader remain unchanged, the consultation responses showed that other policies were of higher priority to accelerate investment into the transition to net zero and limit greenwashing. The government will focus on delivering the plans that respondents have said will have the greatest impact and will consider how best to align its ambitious policies to support investors to make investment decisions. This will help the UK accelerate investment into the global transition to net zero and nature restoration. Maja Erceg led on PIMFA’s response to this consultation, which can be found here, and firms are invited to discuss with her further.
The Berne Financial Services Agreement: HMT and the Federal Department of Finance of the Swiss Confederation have signed a ground-breaking agreement to enhance the cross-border market access of financial services between the UK and Switzerland. The Berne Financial Services Agreement will serve to strengthen the long-standing trade and financial services relationship between the UK and Switzerland, whilst simultaneously fortifying their statuses as two of the most important global financial centres. This dynamic new agreement uses outcomes-based mutual recognition of domestic laws and regulations and facilitates cross-border trade in financial services to wholesale and sophisticated clients. It includes a set of safeguard mechanisms to ensure consumers, investors, markets and financial stability are all protected. The Government hopes this agreement will provide a blueprint for future mutual recognition agreements. Please contact Maja Erceg to discuss further.
Targeted Support: In support of FCA proposals set out in its consultation Supporting consumers’ pensions and investment decisions: proposals for targeted support the government has published a policy note setting out proposed changes to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Firms should be aware that we will be discussing the FCA’s proposals at an Advice Guidance Working Group meeting on 22 July. Interested firms should contact Simon Harrington if they wish to attend.
Digitisation Taskforce Final Report: The Digitisation Taskforce has delivered its final recommendations for modernising the UK shareholding framework. A staged approach to removing paper share certificates and ultimately moving to a fully intermediated system of shareholding in the UK is recommended, and the government has accepted it, and set out an implementation plan.
By 31 December 2027, current paper share registers should be replaced by digitised versions – maintaining the services that paper shareholders receive today, but in digital form. An industry Technical Group should finalise the implementation details. Over the course of this Parliament, the government, regulators and the Technical Group will work to improve the intermediated system to ensure shareholders can exercise their rights effectively and efficiently through intermediaries. The report recommends a package of measures to achieve this and the government will set criteria to be met before the final step, which will see all shares transition into the intermediated system. The Technical Group will consider how best to deliver this final stage. Please contact Kevin Sloane for more details.
