Thornbridge Regulatory Update – January 2020

Welcome to the January edition of our monthly regulatory update, which aims to pull together various regulatory developments and their implications for Appointed Representatives and other firms operating in the regulated space.

Brexit Withdrawal Agreement

The UK left the EU on 31 January 2020 and has entered an implementation period until 31 December 2020.

As a result, the FCA are making changes to Brexit implementation activities. They have contacted relevant, affected firms and updated their webpages. More information can be found in the Brexit section of the FCA website.

During the implementation period, there will be continuity because EU law will still apply in the UK, and passporting (the ability of UK authorised firms to conduct particular activities in the EEA without local authorisation) will be maintained. New EU legislation that takes effect before the end of the implementation period will also apply to the UK.

Over the next year, the FCA will work with the Government to ensure that the UK financial services sector is prepared for the end of the implementation period. As things develop during this year, you will need to consider how the end of the implementation period may affect you and your customers, and what action you may need to take to be ready for 1 January 2021.

MiFID Systems

All MiFID systems will remain connected to ESMA during the implementation period.

The FCA’s new Financial Instruments Reference Data System (FCA FIRDS) will continue to publish in parallel to ESMA’s systems but should only be used by firms for testing purposes.

The FCA’s version of ESMA’s Financial Instruments Transparency Reference System (FCA FITRS) will be suspended until further notice. They will resume FCA FITRS, as appropriate, closer to the end of the implementation period.

Extension of the SM&CR to solo-regulated firms

In December, the FCA extended the Senior Managers and Certification Regime (SM&CR) to around 47,000 firms and their senior managers and certification staff. The regime now applies in virtually all FCA authorised firms. Appointed Representatives currently fall outside of this regime.

The SM&CR is a catalyst for driving cultural transformation and sets a new standard of personal conduct in financial services. It is about individuals stepping up and taking accountability every day from here on, not just about ticking the box on implementing the regime. So, the extension is just the starting point for what you need to do, not just to bring the regime to life but also to transform culture.

Data Strategy 

The FCA have published their refreshed Data Strategy that sets out their transformation plan to become a data-driven regulator. The strategy outlines their increased focus on the use of advanced analytics and automation techniques to deepen understanding of how markets function and allow the FCA to efficiently predict, monitor and respond to firm and market issues.

Review of Asset Management portfolio tools

On 13 January, the FCA published a review of how firms in the asset management sector selected and used risk modelling and other portfolio management tools. They wanted to see how firms identify and manage risks and their capability to respond to system failures or service interruptions. While the FCA saw some good practice, they identified problems in firms’ processes and controls, particularly in risk model oversight and contingency planning. The FCA expect firms to ensure that their arrangements for these tools enable them to comply with the expectations as set out in the Systems & Controls handbook and elsewhere.

Disclaimer

The contents of this document are taken from the Financial Conduct Authority’s (“FCA”) January 2020 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 document 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 document 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 document.