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PIMFA WEEKLY NEWS BULLETIN | 10 May 2021 Dear Nigel,
Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read this week's latest industry news impacting you and your firm.
The Latest on Brexit
European Commission rejects the UK’s application to join the Lugano Convention The European Commission has rejected the UK’s application to join the Lugano Convention. In a non-binding recommendation, the Commission said that the EU should block the UK’s accession to the Lugano Convention, which sets out which country’s courts may hear cross-border disputes and which decisions can be enforced. The UK stopped being part of Lugano after the end of the Brexit transition period but applied to re-join as an independent member in April 2020. The Commission says that the Lugano Convention represents an essential feature of a common area of justice and is a flanking measure for the EU’s economic relations with the EFTA/EEA countries.
The UK is, since 1 January 2021, a third country with an ordinary Free Trade Agreement facilitating trade but not including any fundamental freedoms and policies of the internal market. The Commission says that the Convention is, in principle, open to accession by any other State upon invitation but it is not the appropriate general framework for judicial
cooperation with any given third country. The final decision rests with the European Council. EFTA states have already said they are willing to support the UK’s application. FCA CEO Nikhil Rathi speaks on the UK regulatory landscape Post-Brexit and beyond In a speech this week Nikhil Rathi, the FCA’s CEO, said that the FCA will continue to be a regulator that supports open, competitive markets with responsible innovation. The regulation of overseas firms is aimed at achieving the same high standards of conduct and behaviour as the regulation of domestic firms, and ensuring a level playing field. International regulatory cooperation with other supervisors and global standard-setting bodies is ever more vital – working towards the same outcomes as other regulators allows us to defer to each other more and avoid duplication of regulatory requirements. Rathi said that the FCA recognises the increased flexibility that is available to the UK following exit from the EU and will use this for the benefit of UK financial markets and consumers.
Other key areas of focus in international regulation include ESG and the sustainability agenda, and dealing with financial crime. Rathi said that one of the consequences of a lack of equivalence between the UK and the EU is reducing choice and competition in the market. The loss of access to liquidity reduces competitive choice in the market for UK and rest of the world clients and it has been reported that some EU banks have lost market share in these market segments. This means higher costs for EU firms, with a direct impact on the prices they can offer to their clients.
The Bank of England’s Monetary Policy Committee
The UK economy is likely to perform better than expected earlier this year, due to the vaccination programme which is proceeding apace and the easing of restrictions on economic activity, the Bank of England said on 6 May. UK GDP is expected to have fallen by around 1½% in 2021 Q1, which is less than was assumed in the February Report. GDP is expected to rise sharply in 2021 Q2, although activity in that quarter is likely to remain on average around 5% below its level in 2019 Q4. GDP is expected to recover strongly to preCovid levels over the remainder of this year in the absence of most restrictions on domestic economic activity.
Demand growth is further boosted by a decline in health risks and a fall in uncertainty, as
well as announced fiscal and monetary stimulus. After 2021, the pace of GDP growth is expected to slow as the boost from some of those factors wanes. The level of activity is higher in each quarter of the forecast than in the February projections.
London’s Equity Capital Markets Ecosystem
The City of London Corporation published a new research report on 7 May 2021. The 'London’s Equity Capital Markets Ecosystem' report details London and the UK's strengths as a listing venue and what the challenges and opportunities are for raising equity in London. Following a turbulent year for capital markets globally, London has demonstrated immense resilience for raising equity. £51.2bn in equity capital was raised on the London Stock Exchange in 2020, representing 6% of global activity. The ability to raise equity is a crucial building block for a vibrant economy, delivering much-needed funding for a range of businesses in the UK and across the world. London has inherent strengths as a listing venue that form a competitive offer for prospective issuers to ensure a successful equity capital-raising journey. The report follows swiftly after the UK Listings Review, at a time when London's ecosystem for raising equity is ready to embrace change. The British government is urged by the financial industry to tailor more competitive policies in order to attract more listings of tech companies to London, and away from the likes of New York, which is currently the top choice among fast-growing digital firms.
Changes to the MSCI PIMFA Index Series
The PIMFA Indices Committee has made changes to the portfolio weights of the MSCI PIMFA Index Series. Changes below will be implemented on Friday 28th May. Private Investor Index Series can be viewed here, and the Equity Risk Index Series can be viewed here.
Latest PIMFA Press Releases
Latest PIMFA Press Coverage
PIMFA launches fraud prevention guide as part of campaign to protect consumers from online fraud
Daily Mirror: Martin Lewis and Which? join forces urging Government to get tough on web scams
Coalition of organisations urges government to use Online Safety Bill to protect people from an avalanche of online scams PIMFA welcomes proposals set out by the FCA to strengthen financial promotion rules for highrisk investments
The Herald: Bid to make Facebook and Amazon pay legal price for online scams as Scots fraud soars during lockdown
FT Adviser: Adviser trade body teams up to push for online scam rules
PIMFA welcomes moves towards greater transparency and control of cost for Claims Management Companies
MoneySavingExpert: Martin Lewis and MSE join coalition of organisations urging
PIMFA welcomes Government compensation for LC&F bondholders
Government to use Online Safety Bill to tackle
Organisations must work together to defend themselves against cyber-attacks, warns Chair of Cyber Security Council
Your Money: Calls for new laws to tackle
scams
online scams
Money Marketing: FCA signals crackdown on promotion rules for high-risk investments
London named a world leader in ESG by global institutional investors
In a major vote of confidence in London’s overall attractiveness as a top investment destination, a poll of global institutional investors shows that the city is leading the world in acceleration and adoption of the ESG agenda. With ESG at the forefront of investors’ and corporates’ minds in the lead-up to COP 26 in Glasgow in November, 66% of investors said London is `world-leading’ or `one of the best’ cities in the world in tackling
sustainability, social and governance issues. Among global institutional investors based in the US, perceptions of London’s ESG record is even stronger, with 71% ranking London as `world-leading’ or `one of the best’ cities in the world on this agenda. The investors polled on March 30 had an average of £40 billion of assets under management, with 39% from North America, 34% from Europe, 16% from Asia and Asia Pacific, 6% from the Middle East and Africa and 5% from Latin America.
The research shows that despite COVID-19, 64% of global institutional investors currently invest in London, with a further 30% considering doing so. London was a close second to New York in terms of `COVID resilience’, with 41% selecting it as the most resilient since the start of the pandemic, compared with 44% selecting New York City, significantly ahead of the 31% backing Paris and 15% for Frankfurt. The global investor poll, conducted by FTI Consulting, also showed that 90% of investors polled agree that `London’s special quality is the ability to mix work and social life’, with the capital now restoring its appeal as it reopens after lockdown restrictions.
G7 ministers on climate finance
In the communique issued after a meeting in London between 3 – 5 May, the G7 foreign ministers asked banks and other institutions to increase financing for climate initiatives, and called for action in risk-management finance in order to help less-developed countries prepare for the effects of climate change. The Ministers reaffirmed their commitment to the collective developed-country goal of jointly mobilising US$100 billion annually through to 2025 and their aim, in line with the Paris Agreement, that the provision of scaled-up financial resources should aim to achieve a balance between adaptation and mitigation, taking into account country driven strategies.
They welcomed the commitments already made by some of the G7 to increase finance contributing to adaptation action and said they looked forward to new commitments from others well ahead of COP 26 in Glasgow. They committed to increase the effectiveness and accessibility of climate finance, including nature-based solutions.
EVENTS & LEARNING
PIMFA Webinar HOW TO BUILD AN INNOVATIVE FINANCIAL ADVISOR IN UNDER SEVEN MONTHS? 19 May 2021 FREE to attend In this FREE 60 minute webinar, join Kidbrooke and Evida as they take you on the successful journey of digitalising a wealth management business. Here they will demystify the process of creating an innovative, modern financial adviser supported by cutting edge technology, proving that you don’t have to be a huge financial institution to afford it and that this journey doesn’t take years but merely a few months! For more info and to book, please click here.
View all other upcoming PIMFA Events and Learning here.
PARTNER EVENTS
Morningstar Investment Conference 29 - 30 June The annual Morningstar Investment Conference will be taking place as a digital event again this year, hosted online on 29-30 June. The conference will be FREE for advisers, wealth managers and paraplanners to attend. On the agenda, there will be a focus on ‘back to growth’ and the importance of ESG. The agenda will include Hortense Bioy, Director, Sustainability Research, Global Manager Research at Morningstar presenting on Greenwashing. We’ll also feature a session from foreign affairs broadcaster, Tim Marshall on Geopolitics as well as the importance of a flexible approach when it comes to Fixed Income Investing with Jim Leaviss, Head of Public Fixed Income and Fund Manager of the M&G Global Macro Bond Fund. Find out more and register here.
Online Event | The Future of UK Fund Management 20 May | 9am-4:15pm PIMFA Discount: 20% | Use code: RAM4PIMFA20 Issues to be covered include: •
What are the key strategic challenges facing fund managers in 2021?
•
What has been the industry response to HM Treasury’s Review, in particular the tax, legal and regulatory hurdles?
•
Preventing an exodus of skills and overcoming immigration challenges in recruitment from overseas
•
Latest developments in transparency, performance and fees
•
Misconduct and mismanagement in the asset management industry: the regulatory response and enforcement action. Find out more and register here.
FCA CP21/11 - Stronger Nudge to Pensions Guidance
The FCA have this week launched a Consultation Paper on proposed rules to give consumers a final opportunity to take Pension Wise guidance at the point they wish to access their pensions savings. The paper sets out that the FCA also want to hear other ideas about how to increase the take-up of Pension Wise beyond their proposed rules for consultation.
They are asking for comments on the Consultation Paper by 29 June 2021.
The FCA's Covid-19 Impact Survey - Tranche 2
The FCA's Covid-19 Impact Survey is being repeated for a fourth time and they are planning to send this survey to the relevant firms in Tranche 2 on one of the following dates:
Batch 1: to be sent on 19 May 2021 - response due by 9 June 2021 Batch 2: to be sent on 20 May 2021 - response due by 10 June 2021 Batch 3: to be sent on 21 May 2021 - response due by 11 June 2021 Batch 4: to be sent on 25 May 2021 - response due by 15 June 2021
They will send an introductory email to all the firms at least 1 day prior to them receiving the survey.
Completion of the survey is mandatory under section 165 of the Financial Services & Markets Act (FSMA) 2000.
PIMFA's Consultation Responses
PIMFA’s latest Consultation Response is to the FCA on restricting CMC charges for financial products and services claims. Read this and all other PIMFA consultation papers here.
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