Thornbridge Regulatory Update – March 2020

Welcome to the March 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.

Covid-19 (coronavirus)

The FCA is closely monitoring the Coronavirus (Covid-19) pandemic. They are taking precautions to make sure customers are protected and that markets continue to function. They have significant resource across the FCA dealing with the Coronavirus, both for the firms they regulate and for their staff. Dedicated teams have been set-up and their Executive Committee is overseeing the situation.

The FCA is working closely with the Government, the Bank of England, the Payment Systems Regulator and firms as the situation continues to develop.

They are in regular contact with firms to assess their current position. They expect them to be taking reasonable steps to ensure they are prepared to meet the challenges coronavirus could pose to customers and staff, particularly through their business continuity plans. They expect firms to provide strong support and service to customers during this period. They should be clear and transparent and provide support as consumers and small businesses face challenges at this time. They also expect firms to manage their financial resilience and actively manage their liquidity. Firms should report to us immediately if they believe they will be in difficulty.

The FCA have published detailed information for firms on their website and encouraging all firms to monitor their website as they will publish further information in the coming weeks.

Discussion Paper on driving purposeful cultures

On 5 March, the FCA published a Discussion Paper on driving purposeful cultures. The paper is a set of essays which present a range of views from industry leaders, professional bodies and culture experts to help firms embed healthy purposeful cultures.

The paper makes the case for these cultures in firms, leading to good outcomes for their customers, employees and investors. The FCA describe purpose as what a firm and its employees is trying to achieve – the definition of what constitutes success. A firm’s individual purpose is their own responsibility and, as with culture, they do not prescribe what this should be. However, there are common elements of a healthy culture:

• a meaningful purpose
• an inclusive environment where it’s safe to speak up
• effective leadership and governance
• employees that have the necessary capabilities and are motivated by appropriate incentives

Culture transformation takes time and consistency, but small changes can make a big difference. They want firms to realise the benefits of having purposeful cultures. They hope that everyone who reads these essays will be inspired to take at least one idea back to their organisation to try for themselves – a step towards creating more purposeful cultures in financial services.

Adjusting Financial Ombudsman Service award limit

On 1 April 2019, the FCA increased the Financial Ombudsman Service’s award limit from £150,000 to £350,000. This applies to complaints referred to the Ombudsman service on or after 1 April 2019 about firms’ acts or omission on or after that date. They increased the award limit for complaints referred to the service on or after 1 April 2019 about pre-1 April acts or omissions, to £160,000. In the accompanying policy statement (PS19/8) they said that, from 1 April 2020, they would adjust both award limits each year to ensure they keep pace with inflation. In line with DISP 3.7.4R, they will do this by applying the percentage increase in the Consumer Prices Index (CPI) between January 2019 and January of that year, and rounding the adjusted figure down to the nearest £5,000. Following the publication of the CPI figures for January 2020, they have increased the award limit for complaints referred to the Ombudsman service on or after 1 April 2020 to £355,000 for complaints about acts or omissions on or after 1 April 2019. There will be no changes to the other limits.

Appointed Representatives currently fall outside the Senior Managers and Certification Regime (SM&CR) – but please be aware of the following:

The SM&CR is a catalyst for driving cultural transformation and sets a new standard of personal conduct in financial services.

By 9 December 2020 solo-regulated firms will need to ensure:

• all relevant staff are trained on the 5 Conduct Rules and understand how these rules apply to their roles
• all staff in certified roles are fit and proper to perform that role and are issued with a certificate
• you submit data to us for directory persons working in financial services

Read their SM&CR guide for solo-regulated firms for more information.

Fostering Innovation through collaboration

On 3 March the FCA published ‘Fostering innovation through collaboration: the evolution of the FCA TechSprint approach’. This explores the lessons they have learned from hosting 7 TechSprints across a range of subjects. As part of their commitment to continue to foster innovative global financial markets, they want to share their wide experience and help other organisations to address key industry problems.

Brexit

The UK left the EU on 31 January 2020 and has entered a transition period, which is due to end on 31 December 2020. Find out what this means for firms and consumers on the FCA’s Brexit pages.

Cyber Insights

The FCA have published their second annual industry insights, capturing the cyber threat landscape across financial services. Since 2017, they have run industry Cyber Coordination Groups to help improve members’ cyber security practices. This is part of their efforts to manage systemic risk and strengthen the UK financial sector’s resilience. The groups have shared insights on key cyber threats including identity and access management, third parties and supply chains, and malicious e-mails. They encourage all firms to consider these insights.

OPBAS publishes its second annual report

Today, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) published its second annual report. OPBAS is housed by the FCA and supervises the 22 legal and accountancy professional body supervisors (PBSs). Its report covers progress and themes from its supervision in 2019. It finds that, while there has been strong improvement in PBS AML supervision across both sectors, some PBSs are still lagging behind their peers and must raise their standards. In 2020, OPBAS will be testing how effectively firms are implementing PBS’s AML strategy plans, drawn up as a result of its findings.

Cyber Security Podcast

Listen to the FCA’s latest Inside FCA podcast in which their cyber security expert, Robin Jones, shares his insights on cyber security practices and how you can help keep your firm safe from attack. The podcast includes his predictions on the future of cyber in this fast-changing environment.

Asset management firms: prepare now for the end of LIBOR

The FCA have published a Dear CEO letter on LIBOR transition to set out their expectations for asset managers as they prepare for the end of LIBOR.

Transition should be underway at firms with LIBOR exposures or dependencies. If firms have not yet started their transition efforts, they expect them to take immediate action to develop and to begin to execute an appropriate plan.

They expect firms to take all reasonable steps to ensure the end of LIBOR does not lead to market disruption or harm to consumers. They expect firms to support industry initiatives to ensure a smooth transition.

Click on the link if you would like to read our most recent, May COVID regulation updates, previous regulation update can be found at:

January 2020 Regulation Update

Disclaimer

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