Regulatory Update

FCA regulatory update – September 2021

by Thornbridge

Firms reminded about potential financial crime risks linked to Afghanistan

Firms reminded about potential financial crime risks linked to Afghanistan

Developments in Afghanistan have highlighted the continuing need for robust systems and controls that respond to changing risks.

Firms should be aware of the possible impact these events may have on patterns of financial activity when they assess risks related to particular customers and flows of funds.

The FCA expect firms to establish and maintain systems and controls to counter the risk they might be used to further financial crime. Firms must also comply with their legal obligations under the Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLRs’ as amended).

Tackling harm in the consumer investment market

Investors have never had more freedom. Technology has democratised the market, new products have become available and people have more access to their life savings. But that freedom comes with risk.

The FCA want to give consumers greater confidence to invest, and to do so safely, understanding the risks. In turn, this should lead to fewer people being scammed or persuaded to invest in products that are too risky for their needs.

There is no single answer to this so the their approach has to be multifaceted.

The FCA have published their Consumer Investments Strategy to help people invest with confidence.

They will achieve this by drawing on all the tools at their disposal – a tougher gateway, stringent supervision and enforcement action, as well as new rules to make changes where harm is developing.

The FCA’s strategy sets out a package of measures to achieve the following outcomes by 2025 and they will publish metrics to be transparent about how they’re meeting them:

  • reduce by 20% the number of consumers who could benefit from investment earnings but are missing out
  • halve the number of consumers who are investing in higher risk products that are not aligned to their needs
  • reduce the money consumers lose to investment scams perpetrated by regulated firms
  • stabilise the compensation bill for the FSCS, and target a year-on-year reduction in the LDII funding class

The FCA will continue to take assertive action against bad actors that cause consumer harm. But they also need industry to work with them to strengthen standards and address poor practice.

Click here to read the FCA’s Consumer Strategy:

Update on SMR and CF (AR) applications

The FCA communicated in December 2020 about the delays in determining SMR (Senior Manager Regime) and SIF (Significant Influence Function) applications, following the large volume of applications received before the extension of the Senior Managers and Certification Regime (SM&CR).

The FCA increased resourcing to address the delays and made good progress in determining most applications which had breached their statutory deadline and reducing the allocation times for applications.

However, in Q1 2021 the FCA received significantly higher volumes of applications than they forecast. As capacity was down due to Covid-19, the FCA were not able to bring their case volumes and allocation times back to business-as-usual levels by the end of the financial year as planned. Therefore, the FCA are sorry that applicants may still face delays while they increase resources.

Applications to hold a Controlled Function at an Appointed Representative that are both routine and non-routine are dealt with by the same teams as handle Senior Manager applications. Because information about such candidates will be examined in detail, these also take longer to determine.

You can help the FCA to process your application as quickly as possible by:

  • carefully checking the application before submission to ensure that it has been completed in full
  • remembering that for SMR applications you must complete a Disclosure & Barring Service (DBS) check before submission
  • making sure you have conducted, and included, all appropriate due diligence checks, including regulatory references, before submitting a candidate
  • responding promptly and fully if they contact you to seek further information about a submitted application
A chance to reflect on your cyber security

Returning from the summer break is a great time to take stock of your firm’s cyber resilience.

Over the last few years, the FCA have published tips and insights about establishing good cyber security from some of their largest regulated firms. They cover key topics like identity and access management, the importance of robust governance, and third party and supply chain risk. It’s worth reading these and seeing where you can tighten the bolts on your cyber resilience. You don’t want to get caught out.

Click here to find the FCA’s documents covering cyber security insights from 2020, 2019 and 2018:

The contents of this article are taken from the Financial Conduct Authority’s (“FCA”) 16th September 2021 regulation round up communication and are communicated by, and the property of, Thornbridge. Thornbridge is a trading name of Thornbridge Investment Management LLP which is authorised and regulated by the Financial Conduct Authority.

The information and opinions contained in this article are subject to updating and verification and may be subject to amendment. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this article by Thornbridge Investment Management LLP or its directors. No liability is accepted by such persons for the accuracy or completeness of any information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained in this article.

Author: Thornbridge