Issue 77 - February 2021

Welcome to the latest edition of Gem Compliance’s monthly regulation newsletter. The aim of the newsletter is to present a summary of relevant industry news which has occurred during the month in an easily digestible format. As such, not all sources of industry information or FCA publications (and no PRA publications unless specified) may be included.  

Clients and associates of Gem Compliance should periodically check the FCA’s, and where relevant, the PRA’s websites for regulatory developments. We hope you find this newsletter useful and should you have any feedback, compliance queries or require advice on any of these topics, please do not hesitate to contact us.


  1. Other Newsletters and Updates
  2. Main Features:
    1. The FCA sets out its approach to international firms
    2. The FCA publishes key findings from Financial Lives Survey 2020 and COVID-19 panel survey
    3. FCA report outlines practices firms can consider to reduce consumer harm caused by failed technology changes
  3. Other Publications
  4. Speeches
  5. Enforcement Actions and Prosecutions
  6. Industry News:
  7. Regulation 
  8. Financial Crime
  9. Complaints
  10. Data Protection
  11. Scams, fraud and warnings
  12. Pensions and SIPPs
Other Newsletters & Updates

The news for the month of February remains, as has been the case for the last year, dominated by the ongoing pandemic.  This month continued with speculation of the UK lockdown restrictions lifting and saw the UK Prime Minister laying down potential dates for life returning to normality.  Although no plans are set in stone, it offers an optimistic view of the months to come with vaccine distribution ongoing throughout the country. 

The FCA issued its February Regulation round-up which begins with the question: ‘Are you and your firm ready for the Senior Managers and Certification Regime?’. The remaining elements of the regime come into full force on the 31st of March 2021, and the FCA highlighted that firms will need to have certified all relevant staff and delivered Conduct Rules training to all those who haven’t received it.  Firms are also required to update the FCA register for any non-SMF certified staff. 
The FCA has also confirmed that it has been emailing some firms regarding older draft applications on Connect encouraging firms maintain ‘housekeeping’ to ensure applications no longer required are not kept on file unnecessarily.  Firms should be aware this is a genuine request and action accordingly.
January’s PRA Regulatory Digest can be found here.
The ICO’s (Information Commissioner’s Office) most recent newsletter for February is available here
FCA Handbook Notice 84 has been issued.  The latest policy development update can be found here. There were no board minutes published in February.

Main Features

1. The FCA sets out its approach to international firms

The FCA has published its approach to the authorisation and supervision of international firms.  The FCA has considered responses to a consultation published last year (CP20/20) and has also published a feedback statement, FS21/3, alongside the approach document. The publication explains how the FCA will assess international firms when they apply for authorisation to operate in the UK market. The FCA expects firms seeking authorisation to have an active place of business in the UK to enable it to effectively supervise its UK activities. 

This approach is for international firms that:
  • intend to apply for authorisation in the UK 
  • have applied for authorisation in the UK
  • are already authorised in the UK
The FCA advised that International firms serving UK customers can occasionally create different risks of harm compared to UK firms because of the way their businesses are structured and operate. In the approach document, the FCA sets out how these risks may be mitigated, and the factors that will be taken into account when deciding whether it may be more appropriate for an international firm to seek authorisation as a UK incorporated firm for all or part of its business.
The document contains sections on:
  • An overview of the FCA's approach. This includes a summary of the minimum standards for authorisation, issues relating to the choice between a branch and a subsidiary and the risks of harm relevant for international firms. It also explores the decisions the FCA may take following an assessment of an international firm's compliance with the minimum standards.
  • Main considerations in the FCA approach. This section covers the FCA's general expectations for international firms, including their personnel and systems and controls. It also covers the FCA's approach to assessing an international firm's risks of harm, focusing on retail harm, client asset harm and wholesale harm. 
  • Mitigating identified risks. This section discusses the ways that international firms might mitigate the retail, client asset and wholesale harms identified in the FCA's assessment.
Although the approach document is intended for international firms, UK firms applying for authorisation may also find this document useful in general where it outlines the FCA’s approach to authorisation and/or expectations of applicant firms in general.

2. The FCA publishes key findings from Financial Lives Survey 2020 and COVID-19 panel survey

The FCA published a report setting out the key findings from its Financial Lives 2020 survey and its October 2020 Covid-19 panel survey.  
The FCA surveyed more than 16,000 UK consumers between August 2019 and February 2020 for its FLS research. It conducted a further survey in October 2020, with over 22,000 respondents, to understand how the COVID-19 had impacted consumers' finances in the first six months of the pandemic. The survey found that 27.7m UK adults were showing signs of vulnerability including poor health, low financial resilience or recent negative life events in October, up 15 per cent since March. The FCA’s findings are a reversal of the trend before Covid-19, when the proportion of vulnerable consumers in the UK was falling.
Among other things, the FCA found that:
  • Over the course of 2020, the number of UK adults with low financial resilience increased from 10.7 million to 14.2 million.
  • In October 2020, one in three adults said they expect their household income to fall during the next six months, while one in four expected to struggle to make ends meet. However, the FCA also identified that 48% of adults have not been affected financially by COVID-19 and 14% have seen an improvement in their financial situation.
  • One in six mortgage holders have taken up a mortgage payment deferral and 40% of them reported that they would have struggled if they had been unable to defer.
Nisha Arora, FCA Director of Consumer and Retail Policy Division, commented that "it is likely the picture will have got worse since we conducted the survey". 

The FCA describes the report as full of important insights on consumers and the severe challenges that consumers face. It will be a significant guide that will inform the FCA's decisions on where and how it intervenes. The FCA has already used some of the data in its consumer work and it has been integral to its COVID-19 response. It actively encourages stakeholders (including financial services firms, consumer bodies, the government and academics) to use the survey results in their own work.

3. FCA report outlines practices firms can consider to reduce consumer harm caused by failed technology changes

A new FCA multi-firm review has been published which looks at how firms implement technology change, the challenges caused when changes fail, and steps firms can take to protect consumers from harm and disruption in the market. 

The FCA analysed over 1m production changes implemented in 2019 by a sample of Financial Services companies leveraging different business models at varying scale. This data was accompanied by a qualitative questionnaire, a confidential board questionnaire and industry workshops to understand firms’ release and deployment methodologies, the effectiveness of the governance arrangements in place, and the role that infrastructure plays in deploying change effectively.

The report highlighted that technology in the financial services is continuously evolving, but when organisations implement changes, they don’t always go to plan.  Due to uncertainty and impact from the pandemic, firms have had to implement change quickly and shift to innovative ways of working.  Although many changes are successful, this review found that failed technology changes were one of the main causes for operational interruption within firms, accounting for a quarter of all high severity incidents that cause harm to consumers and the market.

The FCA found that technology changes that are more successful are often made by firms with strong governance and risk management strategies.  It also found that vigorous testing plays a significant role in the change process, and while testing automation has benefits it also presents challenges. It was also found that to ensure change success, subject matter expertise coupled with a clear understanding of a firm’s strategy is vital.  The report is intended to support discussions on how to reduce the frequency and severity of disruption due to technology change activity. Firms should consider the findings when assessing their future technology changes, this includes investing in technology to protect themselves, consumers and the markets.
The key practices identified as contributing to change success where:
  • Firms with well-established governance arrangements have a higher change success rate
  • Relying on high levels of legacy technology is linked to more failed and emergency changes
  • Firms that allocated a higher proportion of their technology budget to change experienced fewer change related incidents
  • Frequent releases and agile delivery can help firms to reduce the likelihood and impact of change related incidents
  • Effective risk management is an important component of effective change management capabilities
The key practices which contributed to change failure were:
  • Most firms do not have complete visibility of third-party changes
  • Firms’ change management processes are heavily reliant on manual review and actions
  • Legacy technology impacts firms’ ability to implement new technologies and innovative approaches
  • Major changes were twice as likely to result in an incident when compared with standard changes.
Other Publications

FCA Coronavirus Publications
The FCA and FRC have published a joint statement reminding companies that extended financial information timelines continue to apply. Such measures include:
  • Temporary relief for corporate reporting by listed companies, firms will have an additional 2 months to publish annual financial reports (within 6 rather than 4 months of the financial year end date) and an additional month to publish half yearly financial reports (within 4 rather than 3 months of the financial half year end date). This will remain in place until the disruption subsides, at a minimum for financial periods ending before April 2021, and plenty of notice will be given when it is decided to end it.
  • The automatic extension for filing any accounts with Companies House by three months. This expires on 5 April, but companies will be granted a 3-month extension where they cite COVID-19 as a factor affecting timely completion or audit of accounts.
  • Certain measures in the Corporate Insolvency and Governance Act 2020 to provide flexibilities around the conduct of AGMs, which have been extended to 30 March
The FCA and the Bank of England have published a statement updating the Memorandum of Understanding on the supervision of market infrastructure and payment services. In the UK, the Bank of England co-operates with both the FCA and Payment Systems Regulator in relation to supervising market infrastructure and payment systems respectively. The frameworks for co-operation with these authorities are set out in 2 memoranda of understanding which the signatories are required to review annually, including by seeking feedback from supervised firms. Co-operation supports effective supervision and policy making by sharing information between the regulators and promotes efficiency by minimising duplication on the financial market infrastructures.

Consultation Papers

The FCA published consultation paper CP21/3 outlining changes to the SCA-RTS and the guidance in Payment Services and Electronic Money. The FCA has identified barriers to the success of open banking and future innovation in UK payments and to tackle these, is recommending revisions to its Technical Standards on Strong Customer Authentication and Common and Secure Methods of Communication. The FCA is also revising its guidance on prudential risk management and safeguarding in its PSR and EMI Approach Document (AD) and it makes general updates to a number of areas and onshoring-related changes. The Perimeter Guidance Manual (PERG) will also be updated. In response to the ongoing coronavirus pandemic, the consultation also includes proposed changes to the contactless payment limit to ensure regulation keeps pace with consumer and merchant expectations.  The section relating to contactless payments closed on 24 February 2021. The rest will close on 30 April 2021.

Guidance Consultation

The FCA published a guidance consultation on cancellations and refunds to help consumers with their rights and routes to refunds and is intended for credit and debit card firms and insurance providers. Due to the ongoing pandemic, there has been an exceptional number of cancellations of trips, holidays, and other events. Consumers are largely eligible to claim a refund from the travel or service provider or one of the travel guarantee schemes in most circumstances. Consumers might also be able to make a claim with their credit or debit card provider or their travel insurer. The guidance should confirm that credit/debit providers and insurance firms will manage claims from consumers in a reasonable timescale, fairly and in a way that minimises inconvenience to the consumer. The guidance was due to expire on 2 April 2021, but the FCA is consulting on extending the guidance due to the ongoing uncertainty around the COVID-19 pandemic. The FCA proposes that the guidance should remain in force during the exceptional circumstances arising out of the COVID-19 pandemic until varied or revoked. The consultation closed on 26 February 2021.

Policy and Guidance Statements
FS21/1: Feedback Statement Bounce Back Loan Scheme: guidance for firms on use of Pay as You Grow options. BBLS is a government scheme that enables smaller businesses to access finance during the COVID-19 pandemic. The guidance provided is designed for firms collecting payments under a Bounce Back Loan where the collection of that debt is a regulated activity. The FCA has clarified the guidance in respect of: 
  • Firms' obligations under CONC 7.3.4 to provide additional support beyond PAYG options where appropriate to customers in financial difficulty or vulnerable customers. 
  • Firms identifying customers in financial difficulty. 
  • Enabling customers to opt out of automated journeys involving the provision of PAYG options.

The FCA has published a report on change and innovation in the unsecured consumer credit marketing following a Review by its former Interim Chief Executive, Christopher Woolard CBE.  This review was commissioned by the FCA board. The report sets out how regulation can better support a healthy market for unsecured lending, taking into account the impact of the COVID-19 pandemic, changing business models and new developments in unregulated buy-now pay-later (BNPL) unsecured lending. It sets out recommendations to the FCA, government and other bodies to make the unsecured credit market fit for the future. The review advises that changes are urgently needed and sets out a series of recommendations for how the FCA can build a better market in the future, which include:
  • The regulation of unregulated buy-now pay-later
  • The expected expansion of demand for free debt advice means that the sector needs a long-term, fair funding settlement
  • The FCA needs to sustain its response to the pandemic through the recovery of the economy
  • Alternatives to high-cost credit
  • Regulation of consumer credit should be outcomes focused.


Edwin Schooling Latter, Director Markets and Wholesale Policy at the FCA, delivered the speech LIBOR – ‘Are you ready for life without LIBOR for end-2021?’ at City & Financial’s Managing LIBOR transition event. He highlighted that users of LIBOR should press ahead with transition plans in their new business and their legacy LIBOR books. He specified that firms should not underestimate the challenges associated with managing other LIBOR outstandings, notably in bond, securitisation loan and mortgage markets. The ICE Benchmark Administration consultation on proposed end-dates for LIBOR has now closed, and Mr Latter said this was opening the way to determining and announcing the future path for all 5 LIBOR currencies simultaneously.

The speech ‘Why does the FCA care about diversity and inclusion?’ was delivered by Georgina Philippou, Senior Adviser to the FCA at the Ethnic Diversity in the City and Corporate UK Summit. Ms Philippou said how a firm prioritised and rooted diversity and inclusion was a ‘clear indicator’ of a firm’s culture. Last year the FCA warned that firms which failed to support a good business culture could expect “increased supervisory scrutiny” from the regulator, but she mentioned that it is easy to become overwhelmed by the concept of ‘culture’ as it can seem too ill-defined a notion to manage. She mentioned that The Financial Conduct Authority uses four key categories which it considers to be common elements of a healthy culture:
  • A meaningful purpose
  • An appropriate governance structure to facilitate good decision making
  • Effective leadership including the tone from the top
  • People policies that incentivise behaviours which created an inclusive environment.
Andrew Bailey, Governor of the Bank of England, gave a speech regarding the case for an open financial system. In his speech, Mr Bailey discusses the benefits of a global financial system and explains the UK's current and future role in it. He argues that the benefits are global, not regional, and that global co-operation is needed to ensure a safe and strong financial system. This is why the UK spends so much time and effort on the work of the global standard-setting and oversight bodies. Some of the main points covered the following areas:
  • The open UK financial system.
  • Participation in international standard-setting bodies.
  • The issue of EU equivalence.
  • Why the UK may change its rules.
  • How the rules are applied.
Mr Bailey stressed that now is not the time to have a ‘regional argument’, instead highlighted that countries have an opportunity to move forward and rebuild economies, post COVID-19, supported by their financial systems. 

Enforcement Actions and Prosecutions 

The FCA has commenced criminal proceedings against two individuals for insider dealing. The two individuals, Stuart Bayes and Jonathan Swann, have both been charged with insider dealing. Mr Bayes has also been charged with improperly disclosing inside information, or encouraging another, whilst being an insider, to engage in dealing. The alleged offending took place between 2 May 2016 and 10 June 2016 and involved trading in shares in British Polythene Industries plc (BPI), ahead of an announcement that RPC Group plc was to acquire BPI. During this period, Mr Bayes was employed by RPC Group plc, and Mr Swann worked as a tenancy support officer. The total profit from the insider dealing was approximately £138,700. 
Following an investigation by the Financial Conduct Authority, the FCA has commenced criminal proceedings against two brothers; Mohammed Zina and Suhail Zina. The crimes related to 6 offences of insider dealing which took place between July 2016 and December 2017, and fraud charges related to 3 personal loans obtained from Tesco Bank, totalling £95,000. The loans were stated to be for funding home improvements. Instead, the loans funded the alleged insider dealing where the total profit from the alleged insider dealing was approximately £142,000. Mohammed Zina was employed by Goldman Sachs International as an analyst in the Conflicts Resolution Group in their London office and Suhail Zina was a solicitor at Clifford Chance. 
The FCA has launched High Court proceedings against Paul Steel and Jacqueline Foster.  The FCA alleges that Estate Matters Financial Limited (EMF) has contravened various requirements under the Financial Services and Markets Act 2000 by providing unsuitable defined benefit pension transfer advice, leading consumers to exit defined benefit pension schemes when it was not in their best interests to do so. The FCA believes Mr Steel, who was EMF’s director and co-owner, was knowingly concerned in those contraventions. It will also be alleged that Mr Steel breached FCA requirements by undertaking a course of conduct which resulted in the removal of EMF’s assets, leaving it unable to meet potential liabilities for unsuitable advice, whilst enabling Mr Steel to retain the significant profits that accrued from the provision of that advice, and from ongoing fees.
The FCA published a press release announcing it has secured an interim restitution order in the High Court against illegal deposit takers.  The restitution order, of just over £676,000 against five of the seven defendants, accused the individuals of carrying on unauthorised deposit taking by accepting money for projects, including forex trading and cryptoassets, without FCA authorisation. The judge, Mrs Justice Bacon, ordered that Bright Management Solution Ltd and three individuals were jointly and severally liable for repaying money to members of the public who had invested. A further defendant, Soccer League International Ltd, had its liability capped at just over £137,000 to reflect the short time it was involved in the unauthorised activity. The court also made declarations that the fundraising involved unauthorised deposit taking and ordered permanent injunctions against the five defendants.

Other industry news:


HM Treasury published a call for input on its review of the UK funds regime.  The call for input sets out the scope and objectives of the review and requests stakeholders to offer views on which regulatory and taxation reforms should be taken forward and how these should be prioritised. The primary purpose of the publication is to detect options which will make the UK a more appealing location to set up, manage and administer funds, and which will support a wider range of more efficient investments better suited to investors' needs. The deadline for comments is 20 April 2021. The government will analyse responses and consult on any specific proposals for reform.

Financial Crime

The National Crime Agency (NCA) published the SAR Reporter Booklet, produced by the United Kingdom Financial Intelligence Unit (UKFIU) which has national responsibility for receiving, analysing and disseminating financial intelligence submitted through the Suspicious Activity Reports (SARs) regime. The UKFIU sits within the NCA receives over 570,000 SARs a year. The booklet summaries the feedback from law enforcement agencies on their use of SARs and is created to:
  • Share perspectives on the use of SARs with participants of the regime.
  • Share and encourage best practice among reporters. 
  • Provide a feedback mechanism to the UKFIU about the operation of the regime.
The booklet provides examples on how SARs are applied in a variety of circumstances, including defences against money laundering (DAML), fraud, drugs and vulnerable persons.


The International Organization of Securities Commissions (IOSCO) published a report setting out nine practices to assist its members in developing and improving their complaint handling procedures and mechanisms for retail investors. The report provides an analysis of informal complaint handling processes used by financial service providers and regulators, alternative dispute resolution (ADR) and formal legal complaint handling for investors pursuing claims for money damages and other remedies. It aims to assist jurisdictions in developing and improving their complaint handling procedures and mechanisms. The nine sound practices cover the following themes:
  1. Establishing a system for handling retail investor complaints.
  2. Taking steps to raise investor awareness of various available complaint handling systems.
  3. Making available as many channels as possible for retail investors to submit complaints.
  4. Taking steps to support complaint handling systems.
  5. Encouraging financial service providers to offer a wide range of resolutions to retail investor complaints.
  6. Using complaints data to identify areas for new or enhanced investor education initiatives.
  7. Using complaint data for regulatory and supervisory purposes.
  8. Seeking input from retail investors about their experience with complaint handling systems.
  9. Making alternative dispute resolution facilities operated by or affiliated with a regulator more accessible for retail investors.
Data Protection

The Information Commissioner’s Office (ICO) has issued fines totalling £480,000 to four separate companies for making unlawful calls to numbers registered with the Telephone Preference Service (TPS). Chameleon Marketing (H.I) Ltd from Leeds; Rancom Security Limited based in Sutton Coldfield; Repair & Assure Limited from Redhill and Solar Style Solutions Limited in Stockton on Tees were found to have made 2.4million illegal calls between them, resulting in over 250 complaints to the ICO and the TPS.

Scams, fraud and warnings

The FCA has issued a warning as ‘clone firm’ investment scams increased by 29% in April 2020 compared to March, when the UK first went into lockdown. More than £78m was stolen from investors over the course of 2020 as clone investment firm scams took advantage of pandemic-induced financial worries, according to new data from Action Fraud. The increased prevalence of these scams has led the FCA to issue a warning to investors as part of its ScamSmart campaign, alongside advice to help investors avoid fake firms and protect their financial interests.
Steve Timms, chairman of the Work and Pensions Committee, has joined calls from the City regulator for internet companies to take responsibility for financial scams promoted on their platforms. Mr Timms said internet companies, for example Google, should share responsibility for hosting fraudulent and misleading adverts. He went on to place importance on the obligation for online giants to prioritise ensuring that they aren’t hosting material that is criminal and could lead to scams or fraudulent and misleading advertisements.

Pensions & SIPPs

The FSCS advised that the collapsed self-invested person pension provider Liberty SIPP has received 1,696 claims against it after being placed in default. Liberty Sipp was advised to enter administration in April last year due to the number of claims it received relating to high-risk non-standard investments.  The Liberty Sipp Limited business and customer assets were sold to EBS Pensions Limited, part of the Embark Group, in October 2018, which then rebranded the Liberty Sipp as the Option Sipp. However, the legal entity Liberty Sipp Limited was not part of the sale and retained its liabilities. It consequently had to pay out against any complaints using the assets it held.
The problem of pension scams could be underestimated by as much as 5000%, Margaret Snowdon, chairwoman of the Pension Scams Industry Group (PSIG), has said. Ms Snowdon mentioned during the first episode of the Pension Regulator’s podcast series, TPR Talks, that the industry is not entirely consistent on what a pension scam is so there are inconsistencies in the collection of statistics about them.  She added that this made it difficult to see the true scale of the problem.  Nicola Parish, TPR’s executive director of frontline regulation, who also appeared on the podcast, said figures for pension scams were being gathered in different mediums and scams were underreported. Both Ms Snowdon and Ms Parish said the industry needed to do more to combat scams, including boosting reporting levels and becoming more innovative in creating ways to battle these scams.


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.

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