Eva Dauberton
News Editor
FCA issues Q1 financial promotion data
The Financial Conduct Authority (FCA) has released the financial promotions quarterly data for Q1 2024, summarising the actions taken against firms that breached financial promotion rules and the investigations carried out into unregulated activities. The data covers the period from 1 January 2024 to 31 March 2024.
The report includes key data on financial promotions from authorised and unauthorised firms, as well as the FCA's findings and focus areas.
Key data
During Q1 of 2024, FCA interventions resulted in 2,211 promotions being amended or withdrawn by authorised firms. The FCA issued 597 alerts on unauthorised firms and individuals, 11% of which were clone scams.
Areas of focus during the period
- Claims Management Companies (CMCs): The FCA has observed increased activity among CMC firms, both authorised and unauthorised. The most common financial promotion breaches the FCA has observed in this area include failure to clearly signpost free options available to consumers, using the term "no win, no fee" without providing fee information, not disclosing that the firm is a claims management company, and not disclosing that the firm receives payments from third parties for referrals made. The FCA has also observed unauthorised firms using social media to promote housing disrepair claims, referring consumers to other fee-charging firms without outlining the free options available to them.
- Monitoring and Oversight of Affiliate Marketers, such as Influencers: The FCA warns firms that they should take responsibility for how their affiliates communicate financial promotions by having appropriate monitoring and oversight systems to ensure that affiliates understand their responsibilities and do not communicate illegal or non-compliant financial promotions. The FCA has identified examples of good and poor practices during reviews of firms' monitoring and oversight efforts. These are included in finalised guidance (FG) 24/1, which sets out finalised guidance on financial promotions on social media.
Impact of new rules
In the report, the FCA draws attention to requirements which came into force during the period:
- The Direct Offer Financial Promotion (DOFP) rules for crypto firms who successfully applied for a modification by consent which came into force on 8 January 2024.
- The financial promotions approval gateway, which came into effect on 7 February 2024.
- The amendments to the ban on incentives to invest in high-risk investments confirmed on 2 April 2024
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FCA consults on Listing Regime procedural and technical notes
The FCA has issued Primary Market Bulletin (PMB) No. 48, which includes a consultation on changes to the guidance in the FCA Knowledge Base regarding the Listing Regime, including rules for sponsors, in conjunction with the recent consultation paper (CP) 23/31 on primary market effectiveness review.
Some context
The Knowledge Base is the FCA’s repository of non-handbook commentary with formal FCA guidance status. It consists of a series of short procedural and technical notes published in PDF form and ordered by topic.
In CP23/31, the FCA consulted on proposed revisions to key technical and procedural notes to reflect the proposed changes to the Listing Regime, including aspects of the sponsor regime. Given the scale of the changes proposed in CP23/31, the FCA is adopting a phased approach to consulting on corresponding changes to the guidance in the Knowledge Base.
Key takeaways
The PMB focuses on existing technical notes that the FCA considers are the most essential in supporting the understanding of the new UK Listing Regime (UKLR) or most frequently used by market participants. The FCA is also proposing amendments to some existing technical notes.
In this PMB, the FCA is:
- Confirming final technical note changes in relation to sponsor competence rules in LR8, which coincides with final rule changes to LR8 confirmed in Handbook Notice 118.
- Consulting on changes to a number of technical notes in the Knowledge Base to reflect the proposed changes to the Listing Regime, including additional aspects of the sponsor regime.
- Consulting on the introduction of a new technical note relating to the role of a sponsor when an issuer, in certain circumstances, is able to transfer its listing using a modified process. This process is described in CP23/31 and in the recently published updated draft instrument , which included proposed transitional provisions.
- Publishing a draft of the new Procedures, Systems and Controls Confirmation Form the FCA proposes to ask applicants for listing to submit with their formal listing application.
- Providing information on the timing of notification to issuers of their expected new listing category should the changes proposed in CP 23/31 go ahead.
Next steps
The deadline for feedback is 26 May 2024
The FCA plans to consult on further technical and procedural notes in future editions of PMB and anticipates consulting on new technical notes relating to sponsors before the proposed UKLR comes into play.
The phased approach means some consultations on amendments to existing technical and procedural notes will take place after the implementation of the new UKLR. Pending these further updates, The FCA expects firms and other market participants to interpret purposively references to the Listing Rules in light of the provisions of the UKLR once these have come into force.
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Handbook Notice 118: FCA implements listing rule sourcebook changes
The Financial Conduct Authority (FCA) has released Handbook Notice 118, including updates from the consultation paper (CP) 23/31 on listing rule reforms.
Some context
In CP23/31, the FCA proposed changes to Chapter 8 of the Listing Rules sourcebook (LR), which outlines the rules for sponsors, including the criteria for approval and the sponsor competence requirements.
Specifically, the FCA proposed to amend the sponsor competence requirements by:
- Extending the requirement for a sponsor to have submitted a sponsor declaration to the FCA from within the previous three years to within the previous five years. For a person applying for approval as a sponsor, this would change to within five years of the date of the application.
- For sponsors and persons applying for approval as a sponsor that are unable to satisfy the above, allowing competence to be demonstrated through experience gained from providing corporate finance advisory services in the previous five years to certain issuers.
The proposals also added a requirement for a firm applying to be a sponsor to disclose matters that would have been required to be notified in the previous five years had the firm been approved as a sponsor.
Finally, the CP included consequential amendments to related technical notes.
Key takeaways
The FCA has proceeded to make the rules and guidance as consulted on in CP23/31, in line with the general support received for the changes, but with minor amendments, as set out below, to address the feedback received
- Clarifications
The FCA has added general clarification to the current rules regarding the relevant sponsor declarations that can be used for the competence criterion for a sponsor to have submitted a sponsor declaration to the FCA within the previous five years.
The FCA has also included guidance under the new competence criterion regarding relevant corporate finance advisory experience to explain that consideration of whether that criterion is satisfied would include.
- Technical amendment to the second criterion
The FCA has made a technical amendment to the second criterion on other corporate finance experience that can be used to demonstrate competence to reflect that the market capitalisation requirement specified in LR 2.2.7R for closed-ended investment funds is different to that for commercial companies and remains at £700,000. In addition, the FCA has clarified that the second criterion includes a market established under the rules of a UK-recognised investment exchange.
- Technical notes
The FCA has finalised the proposed consequential amendments to the technical notes consulted on in CP23/31, published in the Primary Markets Bulletin (PMB 48) and expanded the guidance in Technical Note 715.3 to provide examples of the types of experience will be considered as relevant under the corporate finance advisory criterion.
Next steps
The changes are effective as of 26 April 2024.
The FCA is in the process of analysing the responses to the wider package of proposals as set out in CP23/31, which closed on 22 March 2024 (with an extension to 2 April 2024 for the additional tranche 2 draft instrument material and the consequential changes draft instrument). Due to this, the FCA will consider whether consequential changes may be needed to the new sponsor competence rules as part of any future wider reforms.
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SEBI provides more flexibility to AIFs and their investors to deal with unliquidated investments
The Securities and Exchange Board of India (SEBI) has issued a circular to provide additional flexibility to Alternative Investment Funds (AIFs) and their investors to deal with unliquidated investments of their schemes.
The circular specifies additional specifcations regarding the following:
- The dissolution period
- The mandatory in-specie distribution of unliquidated investments
- The one-time flexibility to schemes of AIFs, whose liquidation period has expired, to deal with unliquidated investments
- The discontinuation of the option of launching a liquidation scheme
The circular also adds requirements around compliance responsibility and is effective as of 26 April 2024.
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RBI consults on rules for web-aggregators of loan products
The Reserve Bank of India (RBI) has released a draft circular for consultation on digital lending, specifically regarding transparency in the aggregation of loan products from multiple lenders.
Some context
The circular is in response to the RBI's acceptance of the working group on digital lending's recommendation to create a regulatory framework for web-aggregators of loan products (WALPs)
Those electronic platforms combine loan offers from multiple lenders, allowing borrowers to compare and choose the best available option to apply for a loan.
Key takeaways
The draft circular aims to bring such loan aggregation services offered by Lending Service Providers (LSPs) under a comprehensive regulatory framework. The framework will focus on enhancing transparency in WALPs' operations, increasing customer centricity, and enabling borrowers to make informed choices.
Next steps
The RBI has invited comments on the draft circular until 31 May 2024.
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HKMA launches inaugural FiNETech to promote fintech adoption
The Hong Kong Monetary Authority (HKMA) has unveiled FiNETech, its new initiative aimed at accelerating fintech integration within the financial services sector. With the participation of more than 100 banks, securities, insurance companies, and technology firms, FiNETech focuses on fostering collaboration in key areas like Wealthtech, Insurtech, Greentech, artificial intelligence (AI), and distributed ledger technology (DLT).
Aligned with HKMA’s Fintech 2025 strategy, FiNETech offers a platform for financial institutions to access the latest fintech solutions collectively provided by the technology community. Supported by regulators, industry associations, and technology experts, FiNETech encourages innovative proposals through HKMA's Fintech Supervisory Chatroom and offers a sandbox for testing and obtaining early feedback.
Over the next six to twelve months, FiNETech will delve deeper into AI, DLT, and Greentech, to facilitate progress in fintech adoption, showcase innovative case studies, and will issue practical guidance aligned with global standards.
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New Zealand’s FMA issues due diligence and beneficial ownership guidance
New Zealand’s financial regulator, the Financial Markets Authority (FMA), has published several due diligence and AML guidelines for companies and limited partnerships.
Among the guidance produced is the Customer Due Diligence: Companies Guideline, which provides help for firms whose customers are companies. The guidance covers the need for beneficial ownership requirements, when enhanced customer due diligence is required and the need for a thorough AML/CFT programme. FMA advises the guidance should be read in conjunction with the Beneficial Ownership Guideline, which considers the definition of a beneficial owner, the requirements to identify the beneficial owner and establishing ownership or control - a section which includes a number of useful examples of entity structure.
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CBI April market update
The Central Bank of Ireland (CBI) has issued a market update that highlights recent regulatory interventions. This month's update includes several important developments:
- The deprioritiation of supervisory actions on the EMIR clearing obligation for third-country pension scheme arrangements due to the agreement on the EMIR review.
- The publication of EBA final guidelines on the application of the group capital test for investment firm groups.
- ESMA joint call for expressions of interest for the Consultative Working Group for CDWG, SMWG, and PTWG.
- MiFIR legislative text came into force on 28 March 2024.
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FDIC releases details of March enforcements
The US Federal Deposit Insurance Corporation (FDIC) has released a list of orders of administrative enforcement actions taken against banks and individuals in March 2024. The month saw enforcement actions proceed against 11 banks, three of whom were assessed for monetary penalties.
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