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PIMFA WEEKLY NEWS BULLETIN | 24 July 2020 Welcome to your Weekly PIMFA Bulletin Grab a coffee and take 10 minutes to read this week's highlights and key issues affecting you and your firm
WE ARE IN THIS TOGETHER Dear << Test First Name >>,
We hope you and your loved ones are safe and well during this difficult time. Due to the virus, PIMFA is continuing to work remotely, and we remain committed to representing our members and providing as much useful information as possible.
In addition to the latest industry news, Bulletin contains information on the impact of the virus and other key issues PIMFA are working on for our members. If there is anything we
can help you with, please contact us at enquiries@pimfa.co.uk.
Best wishes The Team at PIMFA
COVID-19 & What's happening in PIMFA
Brexit: UK – EU negotiations
Brexit: No-deal Readiness
The fifth round of negotiations on the
EU leaders have agreed a 5 billion Euro
terms of the future UK – EU relationship
instrument (Brexit Adjustment Reserve) to
concluded this week in London with both
counter unforeseen and adverse
sides admitting they are still a long way
consequences in Member States and
apart. UK’s Chief Negotiator David Frost
sectors that are worst affected by Brexit.
said in a statement that “it is unfortunately
There will be broad and far-reaching
clear that we will not reach in July the
consequences for public administrations,
early understanding on the principles
businesses and citizens as of 1 January
underlying any agreement that was set as
2021, regardless of the outcome of the UK
an aim at the high-level meeting on June
– EU negotiations.
15.” While the UK would like to agree several mini-deals with the EU, each with
To assist, over 70 sector-specific notices
their own governance structure, the EU’s
have been published by the EU to explain
preference is for a single, overarching
in detail what actions have to be taken
agreement that would cover all areas of
ahead of the end of the transition period.
cooperation with a single governance structure.
Brexit: UK – EFTA negotiations
According to Frost, the UK is now willing to find a compromise, if the two sides can
The UK government has moved into
agree on the dispute settlement
formal negotiations with the European
mechanism and governance. Frost added
Free Trade Area (EFTA) countries
that “considerable gaps remain in the
(Iceland, Liechtenstein and Norway) that
most difficult areas”, the so-called level
are in the EEA (European Economic
playing field and on fisheries. He
Area). On the UK side, the Strategic
reiterated that the UK’s stance in these
Relationship Lead in the Foreign and
areas is not a simple negotiating position
Commonwealth Office has responsibility
but “an expression of the reality that we
for coordinating across the negotiations,
will be a fully independent country at the
working closely with No 10’s Task Force
end of the transition period”. The UK Chief
Europe to ensure coordination with
Negotiator also said that a deal could still
ongoing UK-EU negotiations. The parties
be done in September but the two sides
are open to discussing a range of areas,
must “face the possibility” that an
either as a group, or as bilateral
agreement will not be reached.
discussions, including a Free Trade Agreement, Social Security Coordination,
David Frost’s EU counterpart Michel
Internal Security, Mobility, Transport,
Barnier held a press conference after this
Education, Research, Civil Judicial
round of talks ended and said that, “over
Cooperation, and Energy. Some of these
the past few weeks, the UK has not shown
areas will be prioritised for agreement by
the same level of engagement and
the end of the Brexit transition period.
readiness to find solutions respecting the EU's fundamental principles and
This is in addition to fisheries negotiations,
interests.” Barnier added that some of the
which are already advanced with Norway,
discussions the two sides held were useful
and fisheries cooperation which is being
but they still remain “far away” from
negotiated bilaterally with Iceland.
reaching a deal. He confirmed that there is a lack of progress on two important
The scope of the discussions between the
elements of the future relationship – level
parties may evolve over time, particularly
playing field, including state aid and
in areas where discussions are dependent
standards, and fisheries.
on other negotiations or processes.
Barnier explained that on climate, environment, labour or social law, “the UK refuses effective means to avoid
HM Treasury consults on financial promotions
undercutting by lowering standards.” He added that the EU respects the UK’s
The government is proposing to establish
future regulatory autonomy, but it fears
a regulatory gateway for firms to pass
that this may lead to unfair competition.
through in order for it to approve financial
On fisheries, Barnier said the UK is
promotions of unauthorised firms. Any firm
“effectively asking for a near total
wishing to approve the financial
exclusion of EU fishing vessels from UK
promotions of unauthorised firms would
waters”. He concluded that, while the EU
first need to obtain consent from the FCA.
fully respects that the UK will be an
independent coastal state, common
This is, in our view, an extremely welcome
stocks need to be managed jointly and in
intervention from the Government and
accordance with international law. The
speaks to concerns we have repeatedly
talks continue informally in London next
raised with them. Should you wish to feed
week, with the next formal round of
in any thoughts on these proposals,
negotiations taking place from 17 August
please contact Simon Harrington.
to 21 August in Brussels. Pensions tax relief administration PIMFA seeks views on FSCS & PII HM Treasury is consulting on the We recently sent out a survey to firms to
administration of pension tax relief given
help PIMFA build its evidence base in
the significant discrepancy in outcome
support of its representations to
afforded to savers on low incomes who
government and the regulator on issues of
save into a net pay scheme rather than a
the FSCS levy and PII. The survey can be
relief at source scheme.
accessed here and should take no more than 10 minutes to complete.
Should you have any queries, please contact Simon Harrington.
Should you wish to feed in any thoughts on either of these issues directly, please contact Simon Harrington.
PIMFA Website: COVID-19 Information
PIMFA Podcasts
Don't forget to access the latest freely available PIMFA podcasts on topics such as Wellbeing, Cyber Resilience & SM&CR etc, all in our online learning library.
Visit our members only COVID-19 web area for the latest information on the virus, to access webinar recordings, download briefing notes, and view the latest global response tracker.
Click here if you have forgotten your password or to create a user account.
The public COVID-19 page can be accessed here.
Request to Firms: Evidence gathering for PIMFA Guide on Scams & Investment Fraud
PIMFA are planning to produce a useful guide for firms on scams and investment frauds. The guide will collate on an anonymised basis different types of scams and frauds experienced by firms and hopefully be a useful tool in combating this type of criminal activity.
At this stage we are carrying out an evidence-gathering exercise in order to collect as much information as we can on what fraud and current scams ‘look like’. We would therefore be very grateful if you could provide us with as much detail as possible on scams and frauds 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.
We need your help and input in order to collect a sufficient amount of good quality information to put together in a user-friendly guide to fraud prevention for our firms.
If you are able to help, please get in touch with Alexandra Roberts or Giulia Lupato.
Facebook & Instagram Scams
We have been alerted to a series of recent Instagram scams in which fraudsters are either cloning legitimate firms’ websites or wrongly linking firms’ actual websites to scam adverts in order to gain legitimacy. We would greatly appreciate any screen shots of Facebook/Instagram scams to aid us with our discussions with Facebook so that they can understand the extent of the problem and what steps can be taken to make social media a safer environment.
Without your input we cannot progress on this matter so please do send any scam post you find on social media to Alexandra Roberts or Giulia Lupato.
Economic Crime Levy – Consultation
HM Treasury has published a consultation on the new Economic Crime Levy. The consultation invites views on the design principles of the levy, and how this levy could operate in practice, to ensure that it is proportionate and effective. It also seeks views on what the levy will pay for, how it should be calculated and distributed across the antimoney laundering (AML) regulated sector and how the levy should be collected.
You can read the consultation in full here. It closes on the 13th October 2020.
PIMFA will be responding to this so, if you have any comments, please get in touch with Alexandra Roberts or Giulia Lupato.
Environmental, Social and Governance (ESG) & Sustainable Finance
The issue of Sustainable Finance remains high on the agenda of governments and regulators. Embedding the consideration of ESG factors into the finance sector was driven by market forces, but these efforts are on track to shortly become part of the regulatory framework. The EU is pushing on with its reforms and asset managers and financial advisers are central to the changes being implemented.
The European Commission is currently working on a Renewed Sustainable Finance Strategy, to which PIMFA responded. Following the approval of the Sustainable Finance Disclosure Regulation and the Climate Benchmarks Regulation, and recent political agreement on the Taxonomy Regulation, important objectives have been met.
Many of the proposed rules apply directly to asset managers and financial advisers and others will affect them indirectly as they relate to targeting investors or investees. The new rules are part of a complex mix of regulations and standards that are intended to foster the integration of ESG into the entire investment chain. These include:
•
organising internal processes, risk management and control functions
•
adjusting investment strategies, questions and policies
•
addressing the data gap
•
designing financial products and services that can assess underlying economic activity
•
new contractual terms with investors (investment management agreements, limited
partnership agreements etc) •
disclosures and periodic and incidental reporting
•
active stewardship and priorities to actively engagement
How the EU ESG plans will apply in the UK after the end of the Brexit transition (31 December 2020) is not clear. The UK Government continues to avoid any announcement on the scale of application in the UK of various EU ESG legislative initiatives, especially relating to the Taxonomy Regulation, but it is expected there should be an update on this issue in due course.
We have requested clarity on these issues but as they form part of the governments overall discussion strategy, the government understandable wishes to leave its options open but, as things stand, it would seem prudent to prepare to implement the current proposal, especially as the UK has confirmed to match ‘or exceed’ EU plans to create a sustainable economic model.
European Supervisory Authorities (ESAs) review of the PRIIPs KID - Outcome
The ESAs this week published the outcome of their review of the PRIIPS Delegated Regulation, which would amend the PRIIPS KID. However, in a letter to DG FISMA Director General John Berrigan, the ESA chiefs state that the ESAs will not be formally submitting a Regulatory Technical Standard to the European Commission given that not all three of the Agencies adopted the draft standard. While the EBA and ESMA Board adopted the final report, the EIOPA’s Board failed to reach a qualified majority. The EIOPA Board members, who did not support the RTS, argued that a partial revision of the PRIIPs Delegated Regulation is not appropriate at this stage, prior to a comprehensive review of the PRIIPS Regulation.
A number of Board members also indicated that, for investment funds, they would prefer the past performance graph from the UCITS key investor information document to be included in the PRIIPs KID itself, rather than in a separate publication. It is for the Commission now to decide further steps.
MiFID II ‘Quick Fix’
The European Commission will today unveil its ‘quick-fix’ package to amend MiFID II. The measures will offer relief from securities markets rules in an effort to help hard-hit companies tap investors for funds during the pandemic. The package proposes changes that include: •
Paper-based communication to be gradually phased out with retail clients retaining the ability to opt-in.
•
Eligible counterparties and professional clients are both exempted from the costs and charges requirements in situations where services other than investment advice and portfolio management are being provided.
•
Ex-post reporting requirements are reduced, with end-of-day loss reporting removed (whilst professional clients are still allowed to opt-in).
•
Best execution reports to be suspended.
•
Cost-benefit analysis requirements are alleviated.
•
Bonds with make-whole clauses are exempted from the product governance regime
Measures affecting energy derivatives markets: •
Position limits are amended. Limits are generally removed and only remain on agricultural commodity derivatives and on commodity derivatives designated as significant or critical.
•
‘Same contract’ approach is suspended, and replaced with more cooperation between Competent Authorities.
•
In order to harmonise the management of positions by venues controls are put in place.
•
A narrowly defined hedging exemption is introduced.
Research: •
An exemption where the Article 13 rules (Directive 2017/593) on research don’t apply where the research is strictly on small and mid-cap issuers or on fixed income instruments.
LATEST PIMFA BLOGS & PRESS RELEASES
•
PIMFA welcomes Governement consultation into greater regulatory oversight of financial promotions
•
PIMFA supports TheCityUK report on recapitalising businesses post-Covid19
•
PIMFA welcomes appointment of Nikhil Rathi as Chief Executive of the Financial Conduct Authority
•
PIMFA welcomes proposed permanent FCA marketing ban for mini-bonds
•
PIMFA welcomes FCA Chairman Charles Randell’s comments regarding the FSCS Levy
•
Blog: ESG and Covid 19
EVENTS & LEARNING
VIRTUAL FEST
The inaugural PIMFA Virtual Fest took place on 3 and 4 June 2020. If you missed it, you can still catch up with all the sessions using our on-demand service for 2 months. Simply register your place to gain access. The content is FREE to members, (paid for tickets are also available for non-members). Catch up with sessions from 30+ high profile experts such as Mark Carney, Megan
Butler, John Glen and Baroness Morgan of Cotes (Nicky Morgan) on topical areas which you have identified to us as key priorities for the profession. ALL SESSIONS ARE AVAILABLE ON-DEMAND. BOOK NOW
WEBINAR WEDNESDAY: Opportunities for Wealth Managers and Financial Advisers in China PIMFA is delighted to be joined by the City of London Corporation, FNZ Group and King & Wood Mallesons for the latest instalment of Webinar Wednesday to discuss the opportunities, outlook and challenges for wealth managers and financial advisers in the world's second largest economy, China. In particular, we will closely look at: •
Overview of China’s Wealth Management: Outlook, Regulations and Opportunities by Mike Wang, Partner, King & Wood Mallesons (KWM)
•
Greater Bay Area and Wealth Management Connect: Opportunities & Challenges by William Barkshire, Head of Strategy, Greater China, FNZ Group
•
City of London Corporation’s China Programme by Faye Ye, Head of China and India, City of London Corporation
Book your place here.
PIMFA are delighted to be partnering with WLTH 2020. The event takes place entirely online on 15-16 September.
As a PIMFA member, we are delighted to be able to offer you a FREE ticket to the event. You can book your place here.
PIMFA IN THE PRESS
FT Adviser: What great service looks like Financial Planning Today: Editor’s Column: Festival loss will leave some adrift Money Marketing: Is it time for a Guild of Financial Planners? FT Adviser: Industry welcomes Sunak's Summer Statement FT Adviser: Economists: Sunak's spending spree 'not enough' FT Adviser: How early preparation was key to advisers’ operational resilience
LATEST PIMFA CONSULTATION RESPONSES
PIMFA’s latest consultation response is to HM Treasury regarding their consultation on expanding the Dormant Assets scheme
Read this and all of our other PIMFA consultation papers here.
WHAT'S HAPPENING IN OUR INDUSTRY
New FCA Chief Executive Nikhil Rathi's appearance at the Treasury Select Committee (TSC)
On 22 July the TSC held a pre-appointment hearing with the incoming Chief Executive of the FCA, Nikhil Rathi. In a wide ranging session, Rathi said that under him the FCA will be “tough, assertive, thoughtful and decisive”, working with pace, agility and pro-activity. The FCA will have a “more preventative approach to consumer harms”, undertaking ”strong and prompt enforcement”. Rathi sees the need for a strong analytical and technological capability as “fundamental”, given that the challenges and risks the FCA has to navigate. While the FCA has performed “extremely well” in last few months in light of the COVID-19 crisis, Rathi wants to see a cultural change around collaboration, sharing information, breaking down silos, ensuring the strategic decision-making is “paramount” between supervision, enforcement and competition policy domains. On equivalence, Rathi said that there should not be a problem with mutual equivalence, given the UK and EU starting point of identical rules. He hopes a structure and framework will be put in place allowing the two sides to have a “good and strong” dialogue about standards and supervisory issues. This would also ensure equivalence is not jeopardised if any adjustments are made later because the levels of trust built between the two sides would be sufficient for these changes to not be questioned. Rathi added, however, that a “good degree of freedom” on regulatory matters will be important for the UK post-Brexit. Rathi acknowledged that a “huge amount of preparation” had gone into a no deal scenario at the end of the Brexit transition period, although “inevitably”, there are risks given the big change that Brexit represents, in particular to market liquidity and the servicing of contracts for retail customers.
He also addressed other issues, including: Diversity: Rathi said this was another of his priorities and his aim will be to increase diversity across the FCA as well as for the FCA to have a role in supporting more diverse financial services sector. Diversity “in all dimensions” is going to be “critical”, he said, but this is “multi-year journey” as these are not changes that can happen immediately. Rathi
highlighted a number of ways in which diversity could be improved, pointing to the Women in Finance Charter, but also through improvements in ethnic minority recruitment and more talent coming through, with the FCA “reaching out” to all nations and regions. Consumer protection and, specifically, the protection of vulnerable customers: He said that these will be at the “absolute heart” of the FCA strategy under his leadership. He has met with consumer groups and charities to learn more about the issues they have experienced. In the short term, his core focus will be on how to manage return to normalcy following the COVID-19 crisis which has added pressure onto consumers. International competitiveness: He said that the FCA should have high standards which are well enforced and respected, and play a thought leadership role on international standards. However, he does not think competitiveness should be an objective, because every time a decision is made, it gets challenged over competitiveness grounds. Asked if this was a coded reference to ‘light-touch’ regulation, Rathi said the UK “would never go there” following the experience of the financial crisis. Also, there is no support for it in Parliament, across the industry and among the regulators. On his leadership style and independence: He said he would approach the role with humility and hoped he could be described as “inspirational” and “leading by example”. He also said he would not hesitate to go public with his disagreements on government policy if he thought they were undermining the FCA’s strategic objectives. On tackling economic crime: Rathi suggested that “if markets are not clean, they are not efficient” and the effect is that market participants lose confidence. For this reason, tackling economic crime is absolutely central. He added that the FCA’s ScamSmart website looks to be quite effective, and will be a “central part” of tackling fraud and scams. Pension freedoms: He said that Behavioural Insights Team trials and the Money and Pension Service (MaPS) ‘nudge agenda’ are “important initiatives”, as is the FCA giving stronger guidance to firms to make sure that information is made available to consumers who are thinking of drawing down. Rathi stated his hope that these two initiatives will deliver progress on the topic.
SM&CR certification deadline delayed
The FCA has confirmed that certification requirements under SM&CR have now been delayed by four months.
This is to free up pressure on firms impacted by the consequences of Covid-19 and who need to direct resources to more pressing matters.
It confirmed the timeline for solo-regulated firms to complete the first set of ‘fit and proper’ assessments for certified staff has moved from 9 December 2020 to 31 March 2021. SM&CR requires firms to certify that non-senior managers with a significant impact on customers have the skills to do their jobs and for this to be an annual process.
The FCA confirmed it is still consulting with HM Treasury to perhaps also extend deadlines for other requirements under SM&CR, such as the date of conduct rules, information on the FCA Register, the date when relevant staff need to have training from 9 December to align with the new March 2021 deadline.
The FCA aims to provide further clarity as soon as possible but it did state firms should continue with SM&CR planning and if ‘they are able to certify staff earlier than March 2021, they should do so’ and ‘not wait to remove staff who are not fit and proper from certified roles’
The intention remains to publish details of certified employees on the Financial Services Register starting from 9 December 2020, and firms able to provide information before this date are encouraged to do so.
HM Treasury and HMRC 5MLD Trust Registration Service: Summary of responses and next steps
In January, HMRC/HMT published a technical consultation on the implementation of changes to the Trust Registration Service (TRS) as required by the 5th Money Laundering Directive. The consultation looked at types of trusts that will be required to register, on processes for data collection and sharing, and on penalties. The proposed legislation has been laid for consideration by the European Statutory Instruments Committee in the House of Commons and the Secondary Legislation Scrutiny Committee in the House of Lords.
You can read the paper in full here.
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