Greg Kilminster
Head of Product - Content
FCA issues PS24/10 on DAS expansion
The Financial Conduct Authority (FCA) has issued policy statement (PS) 24/10, which includes rules for the second phase of the expansion of the dormant assets scheme (DAS).
Some context
Under the DAS, bank accounts are classified as dormant if they have been inactive for at least 15 years and the bank or building society has been unable to locate the account owner. Banks and building societies can choose to transfer funds from dormant accounts to the DAS through an Authorised Reclaim Fund (ARF) or dormant asset fund operator. There is currently one ARF – Reclaim Fund Ltd (RFL).
The Dormant Assets Act 2022 (DAA 2022) has broadened the existing DAS to include assets from new sectors: insurance, pensions, securities, investment assets, and client money. The first phase of the expansion included insurance, pensions, and securities. The second phase, covered in this policy statement, includes investment assets and client money.
Key takeaways
The new rules will:
- Enable firms that become participants in the DAS to transfer dormant investment assets and client money, including unwanted assets (assets that the account owner authorises to be transferred to an ARF).
- Amend the Glossary of Definitions, Fees Manual (FEES), Client Assets Sourcebook (CASS), Dispute Resolution: Complaints Sourcebook (DISP), and Collective Investment Schemes Sourcebook (COLL).
Next steps
The rule changes will take effect on 2 August 2024. After this date, RFL will be able to receive contributions from the investment assets and client money sectors. Before any transfers can occur, RFL will need to establish contractual agreements with participants and announce a start date for these expanded sectors.
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Mercer Superannuation ordered to pay AU$11.3 million for greenwashing
The Australian Securities and Investments Commission (ASIC) has announced that the Federal Court has ordered Mercer Superannuation (Australia) Limited to pay a $11.3 million penalty after it admitted it made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
When delivering the decision, Justice Horan said: "The contraventions admitted by Mercer are serious [...]. It is vital that consumers in the financial services industry can have confidence in ESG claims made by providers of financial products and services."
ASIC has two other greenwashing cases before the Federal Court—one against Vanguard Investments Australia and the other against Active Super.
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EIOPA seeks feedback on new proportionality framework under Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) has launched a consultation on the forthcoming implementation of the new proportionality framework under Solvency II.
Some context
On 23 April 2024, the European Parliament approved the amendments to the Solvency II Directive. This new framework aims to address concerns about the limited and inconsistent application of proportionality in the initial years of Solvency II implementation. It introduces objective criteria to identify small and non-complex undertakings (and groups) relative to the nature, scale, and complexity of their risks, allowing them to apply specific proportionality measures.
On 30 April 2024, the European Commission requested EIOPA's technical advice on the following:
- The methodology for classifying undertakings/groups as small and non-complex.
- The conditions for granting or withdrawing supervisory approval for proportionality measures for undertakings not classified as small and non-complex undertakings/groups.
Key takeaways
The consultation addresses two main aspects:
- Refining the methodology for classifying insurance undertakings as small and non-complex.
- Establishing conditions for granting similar proportionality measures to insurers not falling into the small and non-complex category by default.
Identification of small and non-complex entities: EIOPA believes that the proposed methodology for classifying undertakings and groups as small and non-complex is clear and comprehensive, requiring no further specifications at this point.
Conditions for proportionality measures: EIOPA considered three options and suggests a hybrid approach based on both quantitative and qualitative elements. This approach would filter out the largest undertakings while granting supervisors enough discretion in allowing proportionality measures. EIOPA's draft advice proposes specific conditions for each of the eight proportionality measures envisaged by the new framework.
Next Steps
The feedback deadline is 25 October 2024. After the consultation, EIOPA will review stakeholders' input and prepare final advice to be submitted to the European Commission by 31 January 2025.
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SEC releases proposed joint data standards under FDTA
The Securities and Exchange Commission (SEC) has released proposed joint data standards under the Financial Data Transparency Act of 2022 (FDTA), which will set technical standards for data submitted to specific financial regulatory agencies.
Some context
The FDTA, signed into law on 23 December 2022, directs nine federal agencies to promote the interoperability of financial regulatory data.
Specifically, the FDTA directs the agencies to:
- Propose joint standards for public comment.
- Issue agency-specific rules that implement the final joint standards. The FDTA affords the agencies some flexibility in considering how best to do so.
The other agencies which have proposed or are expected to propose the joint standards are the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission (CFTC), the Consumer Financial Protection Bureau (CFPB), the Department of the Treasury, the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC).
Key takeaways
The proposed joint standards include:
- Eight common identifiers related to entities, geographic locations, dates, and certain products and currencies.
- A principles-based joint standard with respect to transmitting and structuring data.
- Definition of “collections of information” in accordance with the Paperwork Reduction Act of 1995.
Next steps
The public comment period will remain open for 60 days following publication of the notice of proposed rulemaking in the Federal Register.
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32 banks in Hong Kong to introduce enhanced fraud alerts for customers
The Hong Kong Monetary Authority (HKMA), working in partnership with the Hong Kong Police Force and the Hong Kong Association of Banks, has announced that 32 banks and 10 stored value facility (SVF) operators will be expanding the coverage of the Suspicious Account Alert for internet banking and physical branch transactions starting from 4 August 2024. This expansion aims to increase customer protection against the growing fraud risks.
With this extension, customers will receive an alert message indicating high fraud risk if the payee's account number, mobile phone number, email address, or Faster Payment System (FPS) Identifier is labelled as 'High Risk' in the Police's Scameter, which is a scam and pitfall search engine.
This applies to both branch and online transactions. Covered banks include Citibank (Hong Kong) Limited and Standard Chartered Bank (Hong Kong) Limited.
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Singapore market operators granted exemption from CFTC SEF registration
The Commodity Futures Trading Commission (CFTC) has approved an amended order that exempts two recognised market operators (RMOs) authorised within Singapore from CFTC swap execution facility (SEF) registration requirements.
The exempted RMOs are FMX Securities (Singapore) Pte. Limited and LMAX Pte. Ltd. This amendment brings the total number of exempted approved exchanges (AEs) and RMOs to 18.
Under the order, the Monetary Authority of Singapore (MAS) agreed to, on an ongoing basis, request such exemptions for facilities meeting certain legal requirements within Singapore. MAS also agreed to notify the CFTC when an AE or RMO no longer satisfies those requirements and to request the non-compliant facility be removed from exempt status.
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FCA issues feedback on cryptoasset service providers' applications under the AML/CTF regime
The Financial Conduct Authority (FCA) has provided feedback on good and poor quality applications made by cryptoasset service providers under the AML/CTF regime. The feedback from the FCA provides details of expectations and examples of poor quality applications, from preparation to post-application. It is relevant to current and potential cryptoasset applicants, as well as consultants and trade associations.
Some context
Cryptoasset businesses must be registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and comply with the regulations' requirements if they intend to offer certain cryptoasset services as a business in the UK.
The FCA assesses whether an activity is being carried out by way of business in the UK on a case-by-case basis.
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FCA releases 2023 market data for retail intermediaries
The Financial Conduct Authority (FCA) has released market data for retail intermediaries in 2023.
Some context
Retail intermediary firms are required to submit detailed information about their activities to the FCA through the Retail Mediation Activities Return (RMAR). This return, which consists of 11 sections, covers various aspects of a firm's business, such as financials, threshold conditions, conduct of business, training and competence, and retail investment adviser charges.
Key findings
- Reported revenue from retail investment intermediation decreased by 3% to £5.3 billion in 2023 compared to 2022
- Revenue from mortgage broking fell by 13% to £1.37 billion in 2023 compared to £1.58 billion in 2022
- Revenue from non-investment insurance distribution increased by 16% to £24.6 billion in 2023
- The share of retail investment revenue from commission decreased from 13% in 2022 to 12% in 2023
- The reported number of retail investment adviser posts fell to 37,136 in 2023 from 37,381 in 2022
- The reported number of mortgage adviser posts rose to 36,836 in 2023 from 36,441 in 2022
- In 2023, 86% of firms providing retail investment advice offered independent advice, while 12% provided restricted advice, and 2% provided both restricted and independent advice, compared to 1% in 2022.
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