PIMFA Weekly News Bulletin - 19 April 2020

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PIMFA WEEKLY NEWS BULLETIN | 19 April 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.

New PIMFA Member Firm

We are very pleased to welcome Progeny Asset Management to the association.

We look forward to working with you.

The Latest on Brexit

Ratification of the EU-UK Trade and Cooperation Agreement delayed again The European Parliament’s (EP) foreign affairs and trade committees approved the EU-UK Trade and Cooperation Agreement on 15 April but the full ratification in the chamber has been delayed for the second time after being provisionally implemented on 1 January 2021. The delay reflects the ongoing concerns over whether the UK is implementing the post Brexit deal properly. The EP delayed the ratification back in March, after the UK said it

planned to unilaterally extend grace periods on post-Brexit customs checks at Northern Ireland’s ports for at least six months. The EU argued that such a move was a breach of the Withdrawal Agreement and the Protocol on Northern Ireland, designed to maintain an open border on the island of Ireland.

Under the terms of the Protocol, Northern Ireland would still be subject to some EU laws, which means that customs declarations and some checks on goods entering Northern Ireland from mainland Britain are required. The temporary application period of the UK – EU post Brexit deal will end on April 30.

Brussels meeting between Lord Frost and Commission Vice President Šefčovič

The meeting between Lord Frost, Minister of State in the Cabinet Office, and his EU counterpart, European Commission Vice President Maroš Šefčovič, took place on 15 April in Brussels against the backdrop of the EU’s legal threats against the UK over the implementation of the Protocol on Ireland/Northern Ireland. The Government statement following the meeting says that Frost and Šefčovič reviewed the situation as regards the Protocol on Ireland / Northern Ireland in a constructive atmosphere. The intensive discussions between the Co-Chairs of the Specialised Committee on the Protocol on Ireland/Northern Ireland in recent weeks had begun to clarify the outstanding issues, and some positive momentum had been established. However, a number of difficult issues remained and it was important to continue to discuss them.

Lord Frost repeated the UK’s commitment to working through the joint bodies provided for by the Withdrawal Agreement, and underlined that any solutions had to be consistent with the overriding commitment to respecting the Belfast (Good Friday) Agreement in all its dimensions and to ensuring minimum disruption to everyday lives in Northern Ireland.

Finally, Lord Frost and Vice President Šefčovič agreed to further engagement with business groups, civil society and other stakeholders in Northern Ireland shortly.

New Financial Report: Brexit & The City – The Impact So Far

According to the latest report from the think tank New Financial, 'Brexit & The City: The Impact So Far', more than 440 firms in the banking and finance industry in the UK have relocated part of their business post Brexit, moving some staff, or setting up new entities in the EU. Over 420 of them are setting up new hubs for their EU business. Banks have moved, or are moving, more than £900bn in assets from the UK to the EU, and insurance firms and asset managers have transferred more than £100bn in assets and funds. New

Financial also state that the analysis is almost certainly a significant underestimate of the real picture, as many firms will have slipped below the radar, particularly banks and asset managers that are already headquartered in the EU.

Dublin has emerged as the clear winner in terms of attracting business from the UK, with 135 firms choosing the Irish capital as a post-Brexit location. Paris follows with 102 firms, Luxembourg with 93, Frankfurt 62, and Amsterdam 48. In the longer-term, it is expected Frankfurt will be the ‘winner’ in terms of assets, and Paris in terms of jobs. The think tank estimates that around 300 to 500 mainly smaller EU firms may open an office in the UK, much lower than the prevailing forecasts of around 1,000. Despite stark numbers, the report says that London will remain the dominant financial centre in Europe for the foreseeable future. Firms are keen to keep as much of their business in London as possible and even the biggest relocations represent a maximum of 10% of the headcount at individual firms. However, over time, other European cities will chip away at London’s lead.

Regulating the UK as a global financial centre The FCA’s Head of International Affairs Nausicaa Delfas said in a speech this week that the UK’s new position outside the EU allows the FCA to have a new, more nimble approach to domestic policymaking. The FCA can focus on using this new flexibility for the global markets it hosts in the UK, and to better meet consumers’ needs. This, in turn, will make the UK an even more attractive place for global financial services.

Delfas singled out two areas of focus in the coming years; sustainable finance, and the UK’s future regulatory framework. The FCA has been asked to formally integrate the goal of moving to a net zero economy in the UK by 2050, into the way that it regulates.

Financial markets will have a crucial role to play in making the transition to a carbon neutral UK, and as the supervisor of these markets, the FCA will play its part. As for the future regulatory framework, an important building block is HM Treasury’s review into how to adapt the UK’s regulatory and legislative framework.

A central element of the new framework is the proposed transfer of responsibility to the regulators for maintaining the firm-facing requirements that currently sit on the statute book. This will provide for an even more agile and coherent regulatory regime for the UK. Delfas also confirmed that the UK has been working closely with the US to ensure UK firms’ access to US markets continues and is strengthened. The Securities and Exchange Commission (SEC) recently publish a notice and draft order of the UK’s application for

substituted compliance for securities-based swaps dealers. If granted, the UK will be one of the first jurisdictions to be granted this recognition by the SEC. The FCA and Commodity Futures Trading Commission (CFTC) are also working together to ensure the current timelimited relief provided to UK trading venues is put on a permanent footing with a CFTCissued final order. If granted, this recognition will provide UK firms with the certainty they need to conduct their business in the US with confidence.

The European Data Protection Board approves UK data standards During its plenary session on 14 April, the European Data Protection Board adopted two Opinions on the draft UK adequacy decisions. This is the first draft implementing decision on a third country’s adequacy under the LED ever presented by the European Commission and assessed by the EDPB. The EDPB notes that there are key areas of strong alignment between the EU and the UK data protection frameworks on certain core provisions such as; grounds for lawful and fair processing for legitimate purposes; purpose limitation; data quality and proportionality; data retention, security and confidentiality; transparency; special categories of data; and on automated decision making and profiling.

EDPB Chair, Andrea Jelinek said: "The UK data protection framework is largely based on the EU data protection framework. The UK Data Protection Act 2018 further specifies the application of the GDPR in UK law, in addition to transposing the LED, as well as granting powers and imposing duties on the national data protection supervisory authority, the ICO. Therefore, the EDPB recognises that the UK has mirrored, for the most part, the GDPR and LED in its data protection framework and, when analysing its law and practice, the EDPB identified many aspects to be essentially equivalent. However, whilst laws can evolve, this alignment should be maintained. So we welcome the Commission's decision to limit the granted adequacy in time and the intention to closely monitor developments in the UK.”

The EDPB underlines that several items should be further assessed and/or closely monitored by the European Commission in its decision based on the GDPR, such as: immigration exemption and its consequences on restrictions on data subject rights; the application of restrictions to onward transfers of EEA personal data transferred to the UK, on the basis of, for instance, future adequacy decisions adopted by the UK, international agreements concluded between the UK and third countries, or derogations.

PIMFA research on FOS

In line with our broader work looking at the drivers of compensation on this sector and recommendations to government on the state of supervision as well as redress in the sector, we are beginning a project looking at recommendations for the incoming CEO of the Financial Ombudsman Service.

Simon Harrington is leading on this project, and would be very grateful in the first instance for thoughts from member firms as we begin scoping the project.

Latest PIMFA Press Releases

PIMFA warns firms to prepare for the scale and impact of post-Brexit regulations

PIMFA welcomes enhancements to consumer protection laid out in new Work

Latest PIMFA Press Coverage

Money Marketing: New rules must stop the online investment scammers

Wealth Manager: Quilter's Feeney calls on PM to back investment scams amendment

and Pensions Committee Report on pension savers and scams

Mew Model Adviser: Stop the scams: Google on its final warning over bad ads

PIMFA welcomes FCA Feedback Statement on Open Finance

Money Marketing: PIMFA Chief: FCA needs to take responsibility for rising

PIMFA joins Which? and others in call to

FSCS costs

tackle growing threat from online scams Financial Planning Today: FCA takes PIMFA welcomes continued relaxation of

action on 105 financial ads in Q1

10% rule and consultation on permanent change

PIMFA request to firms – Online Scam Dossier

As part of our campaign to get scams and financial harm included in the Online Safety Bill, we are compiling a dossier of online scams to build up an evidence base demonstrating the extent of the problem. We would therefore be very grateful if you could send us any examples of online scams that you have come across.

This could be in the form of case studies, scenarios, screen shots of cloned websites or Instagram ads. Information relating to how a scam was detected and what factors raised any red flags would also be very useful. If you are able to help, please get in touch with Alexandra Roberts.

TCUK new report: 'A roadmap for economic recovery’

On 15 April TheCityUK launched their latest report, 'A Roadmap for Economic Recovery’.

The report sets out wide-ranging proposals for how the UK-based financial and related professional services industry can help drive forward economic recovery and support the UK's return to economic growth, following the global Covid-19 pandemic and post-Brexit.

The report offers several recommendations to deliver sustainable and equitable prosperity across the UK in the decades ahead – ones that the industry can take forward itself and others that require it to work collaboratively with government and regulators. The recommendations are focused across the following key policy areas; levelling-up, industry skills and talent, technology, regulation, international trade and investment, related professional services, sustainability and tax.

A critical moment for RegTech – a new report launched

The advisory firm RegTech Associates has partnered with the City of London Corporation on a comprehensive research report into the UK RegTech market which launched on 16 April. With fieldwork conducted in Q4 2020, the report sheds light on how well the RegTech industry is performing, the impact of COVID-19 and some of the barriers to the adoption of innovative regulatory and compliance technology within the financial services sector.

Regulators and financial institutions share the view that RegTech still has some way to go before achieving a deeper level of market penetration. Significant barriers to adoption exist

with the five most commonly cited classified as internal to the buying organisations (financial institutions) being: long procurement cycles, lack of buyer education and awareness, difficulties of navigating internal decision making processes, constraints imposed by legacy technology and lack of available budget. External barriers to adoption are also present, the most critical being the hesitancy of regulators to promote RegTech solutions, the lack of data standards and interoperability and the lack of a digitally-enabled regulatory framework.

EVENTS & LEARNING

FINANCIAL CRIME & CYBER RESILIENCE CONFERENCE 2021 21-22 April 2021 Join us this week for this year's 2 day virtual Financial Crime & Cyber Resilience Conference. Attendees will be able to join leading industry debates and hear from Financial Crime

and Cyber Security experts across

enforcement

and

the across

the

regulatory,

provider,

innovation

law

space.

All sessions are eligible for CPD and will have online Q&A's to give you the chance to get involved LIVE, and then be available on demand after the event. We are delighted to announce that our keynote speakers are: •

Matthew Redhead, Associate Fellow - RUSI [New to the Speaker Faculty]

•

Dr Claudia Natanson, Chair – UK Cyber Security Council

•

Louise Marshall - EU Exit, Governance, Engagement, Operational Policy and Litigation – OFSI

For more info and to book, please click here.

PIMFA Webinar PROFESSIONAL INDEMNITY INSURANCE – THE FULL STORY 2021 27 April 2021 FREE to attend This 60 minute webinar will focus on the subject of Professional Indemnity Insurance for Wealth Managers from three perspectives: •

The insurers looking at historic claims trends and losses, underwriting profitability, capital dynamics and the Lloyd’s review.

•

The lawyers examining potential liability trends to come and how they might transpire, regulatory behaviours, litigation & legislation and sector challenges – such as ESG.

•

The brokers exploring practical coverage challenges as insurers look to restrict the coverage scope, market challenges in terms of insurer behaviours and navigating premium increases.

For more info and to book, please click here.

View all other upcoming PIMFA Events and Learning here.

Joint FCA and PRA Statement on the FSB Peer Review on remuneration

In a joint statement, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). welcomed the findings of the Financial Stability Board (FSB) report on the Peer Review of the UK published on 14 April. The UK is the first FSB member jurisdiction to undergo a peer assessment of the effectiveness of remuneration reforms in the financial sector. The report highlights that the UK approach is consistent with the FSB Principles and Implementation Standards for Sound Compensation Practices, and notes the effectiveness of the UK domestic framework and the strong collaboration between the PRA and the FCA.

Over the last eighteen months, the PRA, the FCA and HM Treasury have worked together to provide the FSB Peer Review team with comprehensive information on the UK’s regulatory and supervisory approach to remuneration. This has involved regular dialogue with the review team and a number of interviews. The report recognises the emphasis UK authorities place on the importance of remuneration for setting incentives that are consistent with effective risk management and prudent decision making, to support the long-term viability of firms.

As the report notes, in combination with the UK Senior Managers and Certification Regime (SM&CR), the remuneration regime has helped firms to map responsibilities, which has resulted in more consistent and effective implementation of remuneration practices.

ESMA report - Performance and Costs of EU Retail Investment Products

The European Securities and Markets Authority (ESMA), the EU securities regulator, has published its third annual statistical report on the cost and performance of EU retail investment products. In the report, ESMA finds that the costs of investing in key financial products, such as UCITS funds, retail alternative funds, and structured investment products (SRPs) remain high and diminish the investment outcome for final investors.

Clear and understandable information about the impact of costs on the returns that retail investors can expect to receive is key to allowing investors to make informed investment decisions. Ensuring this information is made available is a key element in meeting ESMA’s investor protection objective.

Among the main findings are that UCITS costs only marginally declined over time. For one-

year investments, they were 1.4% in 2019 compared to 1.5% in 2018 on average across asset classes; Retail clients pay on average around 40% more than institutional investors across asset classes; ESG outperformed non-ESG equity UCITS mostly due to sectoral factors; Actively managed ESG funds showed lower costs than non-ESG, not supporting the view that there is systematic greenwashing by ESG funds; Retail AIFs, similar to UCITS, showed high return volatility; There is limited comparability across Member States.

Heterogeneity and data availability issues persisted, as well as lack of harmonisation in national regulation.

The report aims at facilitating increased participation of retail investors in capital markets by providing consistent EU-wide information on cost and performance of retail investment products. It also demonstrates the relevance of disclosure of costs to investors, and the need for asset managers and investment firms to act in the best interest of investors.

PIMFA's Consultation Responses

PIMFA’s latest Consultation Response is to the FCA on their Quarterly Consultation CP21/5. Read this and all other PIMFA consultation papers here.

FCA launches new online invoicing portal

Further to the FCA’s plans to launch a new online invoicing portal, they have confirmed that the new portal has gone live.

As with the previous portal, firms can use this to access their invoices and arrange payment of their fees. The FCA encourage firms to visit their website to access the new portal and find more information on the steps that they will need to take if they are logging into the system for the first time.

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