Issue 94 - July 2022

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.


Other Newsletters & Updates

Boris Johnson announced his resignation as leader of the Tory party on 07 July 2022, while confirming that he would continue to serve as prime minister until the autumn to allow for a new Tory leader to be determined.
The Ukrainian crisis continued throughout July. To stay up to date with the latest Russian sanctions,  firms should ensure they are signed up to the OFSI’s sanctions alerts, which they can do here.
The FCA published its July regulation round-up and the PRA’s July regulatory digest has been published. Newsletters no.172 and no. 173 have also been issued by the Financial Services Ombudsman at the end of June and July respectively. The FCA May Board Minutes have also been published.
The FCA has also reminded firms that where an application is being completed via Connect and which involves downloading a word document to complete, firms should ensure that they always use the most up to date version of the form from Connect, rather than previously saved versions.
We would also like to welcome Agie Mackay back from her maternity leave. 

Main Features

1.  The FCA Annual Report and Accounts 2021/22

The FCA published their Annual Report and Accounts for the year ended 31 March 2022. The report starts with a foreword from the FCA interim chair and an introduction from the CEO highlighting the positive changes and achievements that happened in the previous financial year.
Some of the highlights below:
Consumer protection

  • Following the FCA intervention, half a million customers are paying less in credit card fees. This is the result of the regulator changing the rules to stop card providers overcharging loyal customers. Millions of customers are now also being offered better deals, with the average cost of renewing motor insurance down £55.
  • Engaging with Google, so that firms that are not authorised by the FCA can’t advertise financial products with them, helping to protect consumers from scams.
  • Alerting the public to the growing number of scams, issuing a record of over 1,400 warnings over the past year. In 2021, the Supervision Hub has prevented at least £4m being lost to scams. The FCA also secured £5m to pay back people who invested in companies that were not authorised to undertake financial activity.
  • Tougher approach to authorisation: one in five applicants weren’t authorised, compared to one in 14 previously. Moreover, 80% of crypto firms applying to be registered for anti-money laundering purposes either dropped their application or were declined after the FCA reviewed their anti-financial crime systems and controls and found them insufficient.
Protect and enhance market integrity
  • New rules seek to ensure that primary markets have high standards of investor protection and work effectively for both companies and investors.
  • Imposing financial penalties of over £313m in the 2021/22 financial year and bringing FCA’s first successful criminal prosecution under the Money Laundering Regulations offences, resulting in a financial penalty of over £264m against a firm.
Promote effective competition
  • Introducing an alternative approach for special purpose acquisition companies (SPACs), allowing a targeted form of dual class shares, reducing the level of publicly held shares required for an initial listing and increasing the required minimum market capitalisation when companies list shares. This will ensure the UK remains a trusted and attractive place to list successful companies.
  • New general insurance pricing practices rules will save motor and home insurance customers an estimated £4.2bn over 10 years.
  • The FCA’s pioneering Always Open Regulatory Sandbox, which allows firms to safely test innovative products, has seen 60 applications since its launch in August 2021, with an increase in those using Open Banking and AI technology.
The report also highlights changes to the Appointed Representative Regime as the regulator has committed to improving the data they receive from principal firms, as well as increasing the scrutiny of new authorisation applications. The change to the system includes principal firms needing to submit the Approved Persons forms at the same time as the Add AR notification form. This ensures the FCA can target their activities on those principal firms and ARs that can cause the most harm, which may have been a contributing factor to over 300 AR notifications being withdrawn last year (being a 1% increase on withdrawals compared to the previous year).
The FCA has also formed a dedicated new supervisory department to lead and co-ordinate their cross organisational work on ARs. It is hoped that these new measures will continue to limit harm to consumers and increase market integrity.
The FCA will continue to build on this progress and the recent three-year strategy sets out how the Regulator will be more focussed on results and tougher on their own performance.
At the same time as the issue of the Annual Report, the FCA issued a number of additional annual or corporate reports including specifically:

Click here to register to the virtual Annual Public Meeting on 15 September 2022 to discuss the report. The full report can be found here.

2. Review of the UK's AML/CFT regulatory and supervisory regime issued by HM Treasury 

The UK has an extensive and well-established anti-money laundering and countering the financing of terrorism (AML/CFT) regime. The regimes have been strengthened by the creation of new bodies such as the National Economic Crime Centre and the Office for Professional Body AML Supervision (OPBAS), new powers granted to law enforcement, greater levels of beneficial ownership transparency, and heightened levels of action by AML supervisors.
In recent months, the government has also accelerated The Economic Crime (Transparency and Enforcement) Act which introduces a new “Register of Overseas Entities Beneficial Ownership of UK property” to tackle foreign criminals using UK property to launder money. The Act also reforms the Unexplained Wealth Orders regime, to address key barriers faced by law enforcement and help target more corrupt elites.
This review focuses on improving financial crime regulations and centres around Systemic Effectiveness, Regulatory Effectiveness and Supervisory Effectiveness. It explains that the government considers using the National Risk Assessment of Money Laundering and Terrorist Financing (NRA) and existing public-private fora to assess emerging risks and potential changes to the scope of the MLRs following the UK leaving the EU. This review considers a number of other suggestions and topics, which can be found in the full review.
The main conclusions of the review are as follows:

  • Although the UK has some of the strongest AML controls in the world, there is more to be done to make the AML regime more effective.
  • The government will work on improving the implementation of the regulatory framework.
  • The need for a supervision reform is acknowledged by the government.
  • The government is committed to continuing to align with and champion the FATF’s recommendations and work on better understanding areas under consideration.
  • Clear new objectives will be set out by the government in line with the FATF’s methodology.
  • Focus on system-wide effort to improve risk understanding.
  • On wider levers for effectiveness, the government will try to deepen their understanding of the application of new technologies.
  • The government will seek to make the existing guidance more streamlined.

The above are the key areas the government will focus on for the next phase of the development of the MLRs and the wider AML regime.

Other Publications

Consultation Papers

CP22/11: Consultation paper on winding down ‘synthetic’ sterling LIBOR and seeking information on market participants exposure to US dollar LIBOR. Responses requested by 24 August.

CP22/12: Consultation paper titled “Improving Equity Secondary Markets” on rule changes to improve trade execution and post-trade transparency for investors. The FCA is also seeking views on future guidance on outages and the structure of UK markets for retail orders.

CP22/13: Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251.

Policy Statements

PS22/7: Policy Statement and updated rules issued on final 2022/23 periodic regulatory fees and levies including feedback on CP22/07. The policy applies to all FCA fee-payers and any business considering applying for FCA authorisation or registration and covers fees and levies for the FCA,  Financial Ombudsman Service, Money and Pensions Service, Devolved authorities and The Treasury’s expenses in funding the teams that tackle illegal money lending.
PS22/8: Protecting investors in authorised funds following the Russian invasion of Ukraine. The FCA sets out final rules and guidance which allow authorised fund managers to create separate unit classes (side pockets) for retail investment funds affected by the invasion of Ukraine.

Feedback Statements 

FS22/4: A statement has been issued summarising feedback to the FCA’s previous discussion points (in CP21/18) relating to environmental, social and governance (ESG) integration in UK capital markets and sets out the FCA’s potential next steps. This is also linked to the issue of Primary Market Bulletin no. 41 which elaborates on the FCA’s response to stakeholder feedback and clarifies its expectations of issuers of ESG labelled debt instruments.

Discussion Papers

DP22/3: Operational resilience: critical third parties to the UK financial sector. A joint Discussion Paper with the PRA and theBank of England on ways to manage the systemic risk to the regulators’ objectives posed by certain third parties.

Finalised Guidance 

FG22/4: FCA's approach to compromises for UK based regulated firms. Due to the increase of regulated firms proposing compromises to deal with significant liabilities to consumers, the FCA issued this guidance clarifying the Regulator's approach to compromise. 

Press Releases
The FCA has appointed six directors to expand the team and achieve its “ambitious” three-year strategy launched in April. The new appointments will add to the almost 500 new members of staff recruited between January and July this year.
Ashley Alder has been appointed a new chair of the FCA for a five-year term. He is expected to take up the position in January.
As part of its work in response to the increased cost of living, the FCA has told banks they must treat small business customers fairly when collecting and recovering debts.

The FCA has started an update on its website to make it easier to navigate. The Regulator has also issued updates to a number of its website pages: summarising its supervisory arrangements in relation to Credit Rating Agencies, setting out its policy approach to exercising its powers over critical benchmarks and updating “fake FCA emails, websites, letters and phone calls” page where the latest scams and fake emails can be found.
The FCA has issued an update regarding current delays in allocating change of control applications over recent months. At present there is a delay of approximately 1.5 months between submission of a complete application and allocation to a case officer.

A reminder has also bee issued by the FCA that from 29 July 2022, any funeral plan provider that isn't authorised by the FCA will be committing a criminal offence if it attempts to sell or administer a funeral plan contract. 

MS19/1: Credit Information Market Study. In 2019, the FCA launched Credit Information Market Study and published Terms of Reference. This was paused in April 2020 because of the pandemic but the work has now resumed. 

Product sales data has been published by the FCA covering 2021 and relating to mortgages, retail investments and pure protection products. 
Three supervisory strategy letters have been issued to the following sectors: Consumer Credit,
Debt Advice, and Lifetime Mortgage Providers.
The FCA hosted its first policy focused CryptoSprints events in May and June 22. The objective of the event is to seek industry views around the current market and the design of an appropriate regulatory regime.
MoneyHelper and the FCA are urging consumers to get help as soon as possible if they are struggling financially because of the rising cost of living. The regulator is urging consumers to contact their lender if struggling to make payments or contact MoneyHelper if worried about money.
The FCA has released the financial promotions quarterly data 2022 Q2 from their action against authorised firms breaching financial promotions rules. Out of 451 cases reviewed, 374 needed amendments/withdrawals. The FCA  issued a Dear CEO letter warning almost 28,000 lenders and brokers to stop using misleading terms in their advertising or face regulatory action.
The FCA has issued Handbook Notice no. 101 which includes changes to Periodic Fees, Collective Investments Source Book, Funeral Plans and Dormant Assets.
The FCA has also published its Annual Perimeter Report, which will be updated quarterly. The report sets out the areas the FCA regulates and the areas it does not regulate which are set by the Government and Parliament through legislation.
The PRA and the FCA published a joint Dear CEO letter to CEOs of regulated firms, updating them on the work both regulators are doing as part of the joint transformation programme to improve the way that data is collected from all regulated firms.

FCA Speeches

Speech by Sarah Pritchard, Executive Director, Markets: Finding opportunity in a world of uncertainty.
How the UK will regulate for the future, Speech by Nikhil Rathi, FCA Chief Executive, delivered at the Peterson Institute for International Economics.

Enforcement Actions and Prosecutions

The FCA has resolved High Court proceedings in relation to unauthorised deposit taking carried out by Bright Management Solution Ltd, which has avoided a trial that was due to start in June 2022. 
A final notice has been issued against Life Protection Centre Ltd, and Samuel Rees Jones, in relation to that individual’s approval as SMF1 Chief Executive. The notice relates to repeated failures to respond to requests for information considered by the FCA to be necessary to allow the application to be determined. As a result of this, the FCA has concerns and has been unable to assess the fitness and propriety of the candidate for the application and therefore conditions of approval have not been satisfied.

The FCA fines TJM Partnership Limited (in liquidation) £2m for serious financial crime control failings in relation to cum-ex trading. TJM was used to facilitate fraudulent trading and money laundering due to lack of adequate procedures and systems and controls and failure to apply its anti-money laundering policies. Trading executed by TJM on behalf of clients of the Solo Group took place between January 2014 and November 2015 to the value of approximately £59bn in Danish equities and £20bn in Belgian equities with TJM's commission amounting to £1.4m. 

Rikki Nicholls and Mark Kelly, who pretended to be financial advisers have been sentenced to six years in prison for running a £22m pension fraud that used SIPPs to place money in unregulated investments paying out high commission. The two men set up PCD Wealth & Pensions Management (PCD) in 2007 and offered pension transfer services. Although the firm was unregulated, between 2008 and 2010, PCD persuaded more than 250 clients to transfer their pensions to SIPPs run by the provider Hornbuckle Mitchell. Transferred monies were then put into risky investments without clients' consent.
An Individual was sentenced to four months imprisonment after the FCA has brought two contempt of court applications before Southwark Crown Court regarding ten breaches by an individual of a restraint order obtained under the Proceeds of Crime Act 2002.

Industry News:


On 20 July 2022, the Financial Services and Markets Bill (the Bill) was introduced into Parliament. The Bill is the largest piece of financial services legislation for over two decades and covers a wide range of topics. The government is planning to give the FCA sweeping new powers, which will include greater responsibility to set requirements for financial services companies and also a requirement to promote growth and competitiveness in the sector.
Following the changes to the FCA systems, the FCA has seen 300 Appointed Representatives (AR) notifications withdrawn over 2021/22. The new changes mean that the principal firms have to submit the approved persons forms at the same time as the AR notification form. Some of the changes that are still to take effect include AR notifications having to take place at least 60 days prior to the arrangement coming into effect. The FCA is making changes to improve principals’ oversight of their ARs and increase information they provide.

Financial Crime

The Financial Action Task Force (FATF) has issued a targeted update on the implementation of its standards on virtual assets and virtual asset services providers. It has also published a report on partnering in the fight against financial crime, which focuses on data protection, technology and private sector information sharing.

Data Protection

The ICO has announced they will now be able to retain up to £7.5m per financial year of funds raised through civil monetary policy notices. Previously, all the income from these fines was passed to the government’s central Consolidated Fund. When issuing a civil monetary policy notice, the ICO will be able to use funds to cover pre-agreed, specific and externally audited litigation costs.

Pensions & SIPPs

Hartley Pensions Limited, a SIPP operator authorised and regulated by the FCA asked the FCA to impose requirements preventing it from accepting ongoing contributions into the SIPPs/SSASs administered by it and temporarily stopping transfers or switches of SIPPs or SSAS until 22nd July at the earliest. This request has been accepted by the FCA and means that any new or ongoing contributions into a SIPP or SSAS, or moving SIPP or SSAS to another provided are not possible at the moment. 

A report into FCA's oversight of advisors targeting British Steel Pension Scheme (BSPS) members has been published. The committee found that the Regulator had 'inadequate oversight' of advisers and was "consistently behind the curve" and "failed to take preventative action to protect consumers".


On 6 July 2022, the Network for Greening the Financial System (NGFS) published its final report on bridging climate-related data gaps. This is based on a cooperation with financial stakeholders on important climate data issues underlining how persistent climate data gaps hindered the achievement of climate objectives. The report makes actionable objectives building on initiatives, regulations, and policies that have emerged over the past months under the COP26 umbrella. The report also highlights that further steps are urgently needed to improve the quality, availability, and comparability of climate-related data through increased reporting requirements, sector-based methodologies, technological innovation, and intensified cooperation among financial regulators, financial institutions, and non-financial sector stakeholder.

Complaints and Compensation 

Claims made against financial planning firm Wellington Court Financial Services in relation to the firm giving unsuitable pension transfer advice are under investigation by the Financial Services Compensation Scheme (FSCS). The FSCS is working with both the Financial Ombudsman Service (FOS) and the FCA, as the firm has also failed to pay awards in respect of 25 complaints upheld by the FOS.

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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