Eva Dauberton
News Editor
UK Government and FCA to reform retail disclosure rules
The UK Government and Financial Conduct Authority (FCA) have announced plans to reform UK retail disclosure rules and an immediate temporary exemption for investment trusts from EU law retail disclosure requirements.
- Replacing EU-inherited law with a tailored UK framework
In the announcement, the Government and FCA outline their intention to replace the EU-inherited Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new framework for Consumer Composite Investments (CCIs) to provide more tailored and flexible rules addressing industry concerns with current disclosure requirements, including for costs.
- Statement of forbearance in relation to investment trust disclosure requirements
In parallel, the FCA and Government have decided to exempt closed-ended UK-listed investment funds from the current PRIIPs Regulation and parts of Articles 50 and 51 of the MiFID Org Regulation from 19 September, based on feedback from the sector. This means the FCA will not take supervisory or enforcement action if an investment trust chooses not to follow those requirements. This is an interim measure pending longer-term reform.
Next steps
HM Treasury is expected to lay legislation in H2 2024 to provide the FCA with additional powers to deliver the UK retail disclosure reform. The FCA intends to consult on proposed rules for the CCI regime this autumn, and the UK’s new retail disclosure regime is expected to be in place in H1 2025. The FCA’s consultation process will allow a full range of stakeholders to provide feedback on the new regime to ensure it works as intended.
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FCA 2023 cash savings market review update
The Financial Conduct Authority (FCA) has issued an update on the multi-firm review on cash savings, which was first released in July 2023. This update aims to assist firms that offer cash savings products and highlights areas where the FCA expects improvements.
Some context
In July 2023, the FCA published the Cash Savings Market Review, which outlined a 14-point action plan. The plan aimed to ensure that banks and building societies are: passing on interest rate rises to savers appropriately, communicating with customers more effectively, and offering better savings rate deals to customers.
The update covers eight FCA-specific actions that were outlined in the plan.
Key takeaways
The report includes:
- Detailed findings of the FCA Fair Value Assessments (FVAs) review, which examined whether retail banks and building societies properly assessed if their savings accounts provide fair value under the Consumer Duty.
- Cash savings practices identified by the FCA as being at greater risk of not meeting Consumer Duty standards.
- A data update and profitability analysis, with further details provided separately.
- Findings from the FCA’s ongoing review of customer communications.
- An update on FCA work related to financial resilience.
Next steps
The FCA will continue to monitor the operation of the savings market. However, the FCA does not anticipate providing further updates on savings unless there are additional market-wide concerns that are not addressed in this publication.
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FCA shares good and poor practice update on value assessment
The Financial Conduct Authority (FCA) has released a report consolidating insights from the first year of the implementation of the price and value outcome as part of the Consumer Duty (Duty).
Some context
The insights shared in the publication result from the FCA’s supervisory activity in three priority areas: cash savings, guaranteed asset protection (GAP) insurance, and platform cash, where the FCA has longstanding concerns about value and effective competition in the interests of consumers. The conclusions, however, apply to all sectors, even though the FCA acknowledges specific challenges may exist for certain sectors in assessing the value of their products and services.
Key takeaways
In the publication, the FCA provides insights on these key themes: assessment of value, benchmarking, differential outcomes, customers with characteristics of vulnerability, contextual factor, taking appropriate action and data, governance, and outcomes monitoring.
It specifically addresses:
- How firms are evaluating fair value for consumers
- How firms are integrating fair value assessments into their efforts to achieve positive outcomes
- Examples of good and poor practices for firms to consider and incorporate into their approach, particularly when producing fair value assessments
- Specific guidance for small firms is also included.
Next steps
The FCA expects firms to consider the findings to enhance their approach to fair value assessments. The FCA plans to continue providing further insights in this area as part of its ongoing efforts to uphold the Duty.
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CP 24/12: PSR consults on its approach to cost-benefit analysis
The Payment Systems Regulator (PSR) has released consultation paper (CP) 24/12 to gather input on the draft statement of policy outlining the PSR's approach to cost-benefit analysis (CBA).
Some context
The PSR is required by law to produce and disclose CBA documents before implementing a generally applicable requirement or in other cases as deemed appropriate and proportionate.
Key takeaways
The draft statement of policy being consulted on covers the following key aspects as mandated by law:
- The methodology employed in preparing CBAs.
- What the PSR considers in deciding that costs or benefits cannot be reasonably estimated or that it is not reasonably practicable to make an estimate.
- What the PSR considers in deciding that the delay involved in publishing a CBA would prejudice the interests of actual or potential users of services provided by regulated payment systems.
- How the PSR consider any representations we receive from the CBA Panel about a CBA.
- Any cases in which the requirement to consult the CBA Panel does not apply.
Next steps
The deadline for feedback is 3 November 2024, and the PSR intends to publish a final statement by the end of the year.
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ASIC welcomes new Financial Market Infrastructure Bill
The Australian Securities and Investments Commission (ASIC) has released a statement welcoming the recently passed Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024.
The Bill, which was passed by Parliament on 9 September 2024 and received Royal Assent on 17 September 2024, will bring about the following changes:
- Introduction of a crisis management and resolution regime.
- Enhancement of ASIC and the Reserve Bank of Australia (RBA)’s licensing, supervisory and enforcement powers, allowing ASIC to more effectively monitor the ongoing conduct of Financial Market Infrastructure (FMI) entities, identify emerging risks, and take appropriate action to prevent escalation of these risks.
- Streamlining and transfer of roles and responsibilities between the Minister, ASIC, and the RBA.
According to the statement, ASIC will now focus on planning and implementing the new FMI regulatory regime and updating its website with additional publications and information, including developing updated regulatory guidance to assist industry compliance with the enhanced regulatory framework for FMIs.
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Resilience rules: ASIC provides key observations and expectations
The Australian Securities and Investments Commission (ASIC) has released a letter to market participants outlining observations and guidance from its thematic review of market participants’ arrangements for identifying their critical business services and notifying ASIC of major events in accordance with the Resilience Rules.
Some context
The Resilience Rules, outlined in Chapters 8A and 8B of the ASIC Market Integrity Rules (Securities Markets) 2017 and ASIC Market Integrity Rules (Futures Markets) 2017, came into effect on 10 March 2023. Those rules aim to enhance the technological and operational resilience of market participants.
In 2023, ASIC conducted a thematic review of market participant complaints with the Resilience Rules, focusing on the requirements to identify their critical business services and notify ASIC of major events. The resulting observations are included in the letter.
Key takeaways
The letter covers ASIC’s observations and expectations in the following areas:
- Approach to identifying critical business services
- Improper exclusion of critical business services
- Documenting critical business services
- Reliance on existing frameworks
- Outsourcing critical business services
- Major event notification
In addition to those observations, market participants are encouraged to refer to the guidance provided in Regulatory Guides 265 and 266 and make necessary improvements to their processes.
Next steps
ASIC plans to meet with market participants to discuss and consider questions and requests for further expanded guidance.
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US Treasury official discusses insurance sector related initiatives
The Acting Assistant Secretary for Financial Institutions at the US Treasury, Laurie Schaffer, recently delivered a speech at the Geneva Association’s Programme on Regulation and Supervision (PROGRES) seminar.
During her address, she discussed several Treasury initiatives, including:
- The request for information on the current uses, opportunities, and risks of AI in the financial services sector.
- The work of the Treasury’s Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) in the field of cybersecurity, information sharing, and international cooperation.
- The development of a National Financial Inclusion Strategy.
Notably, the majority of her speech focused on the work of the Federal Insurance Office (FIO) at the US Department of the Treasury in the areas of climate and cyber risk, which is what we covered below.
FIO’s crucial role in assessing climate-related issues in insurance
Schaffer highlighted the FIO’s crucial role in assessing climate-related issues in insurance, particularly in response to President Biden’s Executive Order in May 2021, which leverages a whole-of-government approach to climate-related financial risk.
She covered:
- The report on insurance supervision and regulation of climate-related risks issued in 2023, highlighting initial state regulators’ efforts and providing 20 recommendations for improvement.
- Since March 2024, the launch of a first-of-its-kind collaboration with the National Association of Insurance Commissioners (NAIC) and state insurance regulators to collect ZIP Code level homeowners’ insurance data to assess climate-related financial risks to consumers and provide insights on insurance market challenges. A report is expected by the end of the year.
- The ongoing work to address the interconnectedness of the housing and insurance markets can spill over to other parts of the financial system. An area that Schaffer said: “will only become more important in future years. “
Exploring the possibility of a federal response to catastrophic cyber risk
Shaffer noted that the Treasury and FIO have been collaborating with various organisations and are exploring possible federal insurance responses to catastrophic cyber risk, in line with the 2023 National Cybersecurity Strategy.
She covered initiatives such as:
- With various federal agencies, FIO is conducting an analysis of the potential public-private risk sharing in that area, with federal insurance responding to catastrophic cyber risk being cabined alongside the existing and expanding commercial cyber insurance market.
- FIO has partnered with the National Science Foundation, insurance stakeholders, and the academic community to establish an Industry-University Cooperative Research Center. This collaboration aims to better predict and insure terrorism and catastrophic cyber risks. The centre’s work will also support FIO’s efforts in assessing catastrophic cyber risk and administering the Terrorism Risk Insurance Program.
FIO international reach
Finally, she touched upon FIO’s international involvement, including its leading role at the International Forum of Terrorism Risk (Re) Insurance Pools (IFTRIP) and its statutory role representing the United States in the International Association of Insurance Supervisors (IAIS) and other forums on prudential international insurance measures.
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SEC's first enforcement actions targeting relationship investment scams
The Securities and Exchange Commission (SEC) has filed charges against five entities and three individuals for their involvement in two 'relationship investment scams' related to the fake cryptoasset trading platforms NanoBit and CoinW6. These charges mark the SEC's first enforcement actions targeting these types of scams.
- NanoBit: The SEC's complaint states that participants in the scheme posed as financial industry professionals in WhatsApp groups and fraudulently solicited investments through a fabricated cryptoasset trading platform called NanoBit.
- CoinW6: The SEC's complaint alleges that individuals involved in the scheme, claiming to be affluent young professionals, initiated contact with potential investors through LinkedIn and Instagram, and then fostered romantic relationships via WhatsApp. They persuaded the victims to open accounts on CoinW6 a fake cryptoasset trading platform.
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MAS and ABS announce rollout of Singpass face verification for retail banking customers
The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) have announced that major retail banks in Singapore will progressively implement Singpass Face Verification (SFV) over the next three months to strengthen the digital token (DT) setup process for retail banking customers.
This follows an announcement in July 2024 that major retail banks in Singapore would progressively withdraw one-time passwords (OTPs) to authenticate customers logging on to their bank accounts.
SFV uses a face scan to verify a customer’s identity against national records before the customer’s DT can be activated. This makes it more difficult for a scammer to take over a customer’s DT by setting it up on his own device using phished credentials such as an SMS, one-time passwords (OTPs) and/or bank card information.
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