Update to the steps you need to take on Brexit
The regulator and firms are preparing for the UK to leave the EU on 31st October without a deal, and the FCA has issued an update on the steps to take.
Given that the deadline day will be a Thursday, a midweek departure from the EU could present operational challenges for firms. While the FCA will take a proportionate and pragmatic approach to supervise reporting around exit day, firms still need to take reasonable steps to be prepared to comply with post-exit MiFID transaction and EMIR trade reporting requirements.
In a no-deal scenario, passporting will end. Any EEA passporting firm that wants to continue to operate in the UK will need to tell the FCA that it wishes to enter the Temporary Permissions Regime (TPR) by the 30th October 2019.
The regulator included further details on the reporting requirements and steps post-Brexit in its update.
Consultation launched on fees for cryptoasset businesses
The FCA has launched a consultation paper setting out its proposed fees to cover its new role as anti-money laundering and counter terrorist financing supervisor for cryptoasset businesses.
The regulator will adopt the new role from 10th January 2020, and will regulate cryptoasset businesses only in relation to anti-money laundering (AML) and counter terrorist financing (CTF) registration and supervision.
Though the definitions of what will constitute a cryptoasset business required to pay these fees are not yet confirmed, the consultation is taking place now to allow enough time before the new regime begins in January. The FCA has published a list of activities, and any firms that carry out anything on the list should assume they’ll be under FCA supervision, required to pay the proposed fees.
The proposed fees include a registration fee of £5,000 and further annual periodic fees based on income.
The regulator has asked for responses to the consultation paper by 11th November 2019 for the registration fee, and 10th December 2019 for the periodic fees.
Why does diversity matter?
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, gave a speech on diversity at the UBS Hedge Fund COO Conference. In it, he explained that the regulator sees diversity and inclusion as a significant business issue, connected to a firm’s culture and conduct.
Woolard said the investment management sector relies on understanding the markets and clients. The success of the industry is also dependent on attracting business from clients of all backgrounds, income levels and demographics. This, he explained, is a challenge considering the makeup of leaders in asset management.
Woolard articulated why diversity matters:
- Commercially – good decision-making is based on challenge, and challenge requires different voices ‘around the table’.
- Organisationally – strong diversity policies attract potential employees, and encourages people to stick around.
- Morally – regulators and firms have a duty to represent the society they serve.
- Materially – asset managers can’t competently choose the right assets to invest in if they have knowledge gaps about how their clients and other actors behave in the real economy.
The FCA has ambitious targets to encourage diversity in its highest levels, accepting that finding the best way to do so has been a learning curve. But given the importance of the issue, Woolard said, the journey would be worth it.
What’s next for green finance and climate change?
The FCA has released a new feedback statement, detailing its proposals to improve climate change disclosures and the information available to consumers on green financial products and services.
The priorities include:
- Issuers’ climate change disclosures
- Regulated firms’ consideration of climate change risk and opportunities in their decision-making
- Consumers’ access to green financial products and services.
In the feedback statement, the FCA explains the action it will take to address these key areas. The next steps include:
- Consulting on new rules to improve disclosures related to the climate by firms, plus clarification on existing requirements
- Finalising rule changes requiring Independent Governance Committees (IGCs) to manage and report on the environmental, social and governance stewardship policies
- Rule changes to allow investment in patient capital opportunities
- Clarifying expectations of consumer access to green financial products and services, with action to prevent consumers from being misled.
Improving customer outcomes in the investment industry
FCA Chair Charles Randell gave a speech at the Investment Association annual dinner, discussing the world-leading position of the UK investment industry and the potential for further improvement.
As part of its work on this, the regulator is upping the management of liquidity and disclosure for non-UCITS funds and undertaking a joint review with the Bank of England. To address the potential detriment UK customers experience compared to others in Europe, the FCA is stepping in to strengthen fund governance with independent directors and requiring annual assessments of fund value. It is also reviewing the weaknesses in unit-linked funds, plus the Senior Managers Regime makes individuals accountable for what firms deliver.
Randell stressed that, while we should celebrate the UK’s position at the second largest investment management location in the world, the industry should innovate to become number one.
FCA fines inter-dealer broker £15.4 million for various failings
The regulator has fined an inter-dealer broker acting for institutional clients in the wholesale markets, typically investment banks. The FCA fined the company £15.4 million for failings related to broker conduct and lack of co-operation with a regulatory investigation