Issue 61 - October 2019

Welcome to the latest edition of Gem Compliance’s monthly regulation newsletter. The aim of the newsletter is to present industry news in an easily digestible format. As such, not all sources of industry information and FCA publications (and no PRA publications unless specified) will be covered. Therefore, clients and associates of Gem Compliance should periodically check the FCA’s and PRA’s websites for regulatory developments. We hope you find this newsletter useful and should you have any compliance queries or require advice on any of these topics, please do not hesitate to contact us.

In advance of the forthcoming SM&CR firms should have or will be receiving notifications from the FCA regarding their firm’s categorisation under the SM&CR. Some firms have identified that these emails have gone to spam folders. Therefore, if you have not received such a notification, to ensure that the firm’s nominated contact for FCA communications checks their emails/spam folders for this. If it looks like no notification has been received, they may wish to contact the FCA to confirm the position. 

The UK’s exit from the EU has been delayed with a flexible extension until the end of January 2020. Please see feature 1 below for further updates from the FCA.  


  1. FCA Brexit updates  
  2. Climate Change and Green Finance: summary of responses and next steps 
Other Newsletters & Updates 
The latest edition of the FCA Regulation Round-up was issued on 16 October. Firms are encouraged to subscribe to the Round-up directly. 
The latest edition of the FCA Policy Development Update was issued on 4 October. 
  1. FCA Brexit updates
Following the delay to the UK’s departure from the EU, the FCA has issued updates:
  • The date by which firms and funds should notify the FCA for entry into the temporary permissions regime (TPR) has been extended to 30 January 2020. 
  • Fund managers now have until 15 January 2020 to inform the FCA if they want to make changes to their existing notification.
  • The arrangements described in the FCA’s press release of 11 October are suspended and firms are to continue to report as normal. 
There have also been separate updates to FCA’s February 2019 directions under the Temporary Transitional Power, with the draft directions currently being published. The main updates are:
  • Extension of the directions under the TTP from 30 June 2020 to 31 December 2020.
  • Update of provisions relating to prudential requirements to reflect new HM Treasury legislation and FCA exit instruments published since 29 March 2019. 
  • Revocation of certain directions in relation to payment services, provided by EEA credit institutions in the financial services contracts regime. 
  • Application of a standstill direction to allow EEA Central Banks and the European Central Bank to continue to rely upon their status as exempt persons until 31 December 2020.
The FCA also updated their ‘preparing your firm for Brexit’ page. 
As soon as there is more clarity about Brexit, it is also worth reviewing the ICO’s Brexit guidance. 

  1. Climate Change and Green Finance: summary of responses and next steps 
Following Discussion Paper 18/8, the FCA has now published Feedback Statement 19/6. The FCA acknowledges the impact of climate change and legislative responses thereto on the UK financial services on one hand, and rising demand for green investment and finance products on the other. The regulator has set itself three outcomes:
  1. Issuers provide markets with readily available, reliable and consistent information on their exposure to material climate change risks and opportunities. 
  2. Regulated financial services firms integrate consideration of material climate change risks and opportunities into their business, risk and investment decisions. 
  3. Consumers have access to green finance products and services, which meet their needs and preferences, and receive appropriate information and advice to support their investment decisions.  
The statement summarises feedback over the following five categories: Climate-related disclosures by securities issuers; Climate-related disclosures by regulated firms; Common metrics and standards on sustainability; Stakeholders’ concerns, commercial priorities and barriers to growth and Industry engagement.
The FCA is planning to take the following steps:
  • Publish a consultation paper in early 2020 on issuers’ climate change disclosures.
  • Publish a feedback statement on firms’ integration of climate change risk. 
  • The FCA also has expectations around green financial products and services from firms and will challenge firms who engage in greenwashing.
  • The regulator will continue collaboration on the matter with other bodies, such as the Fair and Effective Markets Review working group.

Other Publications
Policy Statements
PS19/23: FCA and PRA changes to mortgage reporting requirements. 
PS19/24: Illiquid assets and open-ended funds and feedback to Consultation Paper CP18/27.
PS19/25: Overdraft Pricing and Competition Remedies.
Consultation Papers
CP19/28: Motor finance discretionary commission models and consumer credit commission disclosure. 
CP19/29: Recovery of costs of supervising cryptoasset businesses under the anti-money laundering regulations. 
FCA Market Watch 62: highlight on personal account dealing practices 
FCA quarterly KPIs (published on 30/9).
FCA Press releases 
FCA issues warning to Thomas Cook customers. 
Information for SIPP operators in light of Berkeley Burke administration.
FCA sets out potential remedies to tackle concerns about general insurance pricing.
FCA urges consumers to carefully consider what cover they require when buying travel insurance.
Further details of Independent Investigation of Connaught Income Fund Series 1 announced.
Gabriel users share suggestions for our new data collection platform.
PPI complaints handling update.
Connaught independent review invites individuals to get in touch. 
Update on the LF Woodford Equity Income Fund. 
FCA data shows 4.29m complaints for first half of 2019, with PPI making up almost half. 
Regulating the pensions and retirement income sector: an FCA perspective by Deb Jones, Director of Supervision, Life Insurance and Financial Advice
Stress testing for human beings by Charles Randell, Chair of the FCA
Building better bridges: a world-leading investment industry around outcomes customers need by Charles Randell, Chair of the FCA
Class, cliques and social codes: doing more on diversity by Christopher Woolard, Executive Director of Strategy and Competition at the FCA
Enforcement Actions and Prosecution
The FCA has fined electronic and voice inter-dealer broker Tullet Prebon £15.4m for failing to conduct its business with due skill, care and diligence, failing to have adequate risk management systems and for failing to be open and cooperative with the FCA.
The FCA has fined Prudential almost £24m for failures relating to non-advised annuities sales. The assurance company failed to explain to customers that better deals may be available if they shopped around. 
Industry News: 
FCA & Regulation 

The Financial Services Compensation Scheme has paid out £53.2m for 1,385 claims against IFAs for pension transfer advice related to a Berkeley Burke Sipp. The funds were placed in high-risk, non-standard investments, many of which have now become illiquid. The Sipp provider entered administration on 19 September as it was unable to cover the costs of defending claims made against it in respect of alleged due diligence failings.
Following allegations made against the Financial Ombudsman Service (FOS) by the Dispatches TV programme in March this year on unfair treatment of consumers, the Complaints Commissioner ruled in favour of the FCA. The regulator has however been told to review its monitoring and oversight of FOS. 
Rory Percival, the FCA’s former technical specialist has said that advisors are still not client centric, quoting suitability reports as an exmple. 
The FCA is working with Google and other tech giants to ensure that online financial promotions are not misleading customers. 
A committee’s request to increase FCA powers to act on unregulated business without government approval has been refused by HM Treasury. 
The chairman of the FCA warned that disclosing costs and charges related to funds isn’t enough to evidence true value to customers. 
Fraud and Scams
Southwark Crown Court has issued confiscation orders against a trio of scammers who defrauded retired and vulnerable customers out of £1.4m. The three men ran an unauthorised investment scheme and were previously convicted. The FCA urges victims to come forward. 
The FCA is urging victims of the £8.5m Churchgate Trading Syndicate Ponzi scheme to come forward.
Pensions & SIPPs
Following their entering into administration, Thomas Cook’s defined benefit schemes will soon enter an assessment period with the Pension Protection Fund. 
survey of advisers has shown that there is a concern for underserving when it comes to pensions and that consumers’ understanding of risk hasn’t improved in the last 10 years. 
Meanwhile, FCA figures are showing that nearly half of those who accessed pension pots in the year up to 31 March 2019, did so without seeking regulated advice. 
Experts warn that more pension schemes could fall victim to fraud due to a lack of due diligence ahead of transfers. 
As the invested amount continues to rise, an expert has warned that venture capital trusts (VCTs) are riskier than traditional pension pots. VCTs are a popular option due to their tax efficiency. 
The High Court rejected claims that the increase in state pension age affecting women born in the 1950s was discriminatory. The secretary of state for Work and Pensions will meet with MPs to work on remedies.
The Advertising Standards Authority ordered a pension comparison website to take down a misleading advert which made it look like financial advice was provided.
The FCA has written to 1600 firms with concerns on their defined transfer advice, out of a possible 2500 firms. 
HMRC & Tax
Chancellor Sajid Javid has hinted that the inheritance tax regime will either be amended or scrapped. 
HMRC has reported itself to the police watchdog following four suicides related to the receipt of a loan charge bill. 
Research implies that Brexit uncertainty has forced almost 700,000 individuals and businesses to arrange repayments plans with HMRC. 
Tax evasion prison sentences have increased by 10% in 2018-19. 
Robo-advisors, crypto-assets and innovation 
survey of 1000 investors has shown that more than half of retail investors prefers to speak to a human advisor when it comes to fees and chargers. This percentage drops to less than a quarter when it comes to investment methodology explanation. 
FCA data shows that the amount of investigations into cryptocurrency businesses has nearly doubled in the last year. 
Research shows that while financial services firms are investing in AI and automation, the role of the adviser could become more meaningful. 

This newsletter contains generic information and has been generated for professional clients and associates of Gem Compliance Consulting Limited only and should not be regarded as advice. We will not be liable for loss, however caused by parties acting on the information contained herein.

Copyright © 2019, Gem Compliance Consulting Limited, All rights reserved.

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