PIMFA Weekly News Bulletin - 4 December 2023 by PIMFA

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PIMFA WEEKLY NEWS BULLETIN 4 December 2023

FCA Consultation CP23/24: Capital Deduction for Redress – Personal Investment Firms The FCA has published a consultation setting out proposals to require personal investment firms (PIFs) to set aside capital for potential redress liabilities at an early stage. The FCA wants to ensure that the firms that generate redress costs are better able to meet them without recourse to the FSCS. The proposals would require PIFs: •

to quantify an amount for their potential redress liabilities

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to set aside capital resources for potential redress liabilities through a new capital deduction, and

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where they are not holding enough capital to meet potential redress liabilities, to comply with an asset retention requirement.

The consultation also includes a Discussion Chapter to look at broader improvements to the prudential regime for PIFs. The consultation closes on the 20th March 2024.

Alongside the consultation, the FCA have also published a Dear CEO letter reminding firms they must not seek to avoid potential redress liabilities. You can read the consultation in full here and the Dear CEO letter here. PIMFA will be responding to the consultation and will be seeking members’ views. If you would like to provide feedback and comments, please get in touch with Alexandra Roberts.

FCA Consumer Duty webinar The FCA is hosting a webinar on 6 December to help firms understand their expectations now the Duty is in force. In the webinar, the FCA will talk about their supervision and enforcement approach, sector specific areas of focus, examples of good practice, and next steps for firms. The webinar will be available on demand.

Big Tech firms and firms in financial services The FCA is looking to gather focused information and evidence on whether the data asymmetry between Big Tech and financial services firms could lead to Big Tech firms gaining entrenched market power in financial services. They also want to better understand the potential benefits that could arise from greater use of Big Tech firms' customer data in financial services. The Call for Input document appears here. The closing date for comments is Monday 22 January 2024.

PIMFA is reviewing the Call for Input and considering a response; any feedback or interest from members or associates should be passed to Kevin Sloane.

SDR and Investment Labels The FCA has published the long-awaited Policy Statement on Sustainability Disclosure Requirements and investment labels regime. The regulator’s final rules and guidance aim to help consumers navigate the market for sustainable investment products. The FCA is introducing: •

An anti-greenwashing rule for all FCA-authorised firms to reinforce that sustainability-related claims must be fair, clear and not misleading. The FCA is also consulting on supporting guidance.

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Naming and marketing rules for investment products, to ensure the use of sustainability-related terms is accurate. The FCA has amended the naming and marketing rules to allow asset managers to promote non-labelled funds with ESG characteristics.

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Four labels to help consumers navigate the investment product landscape and enhance consumer trust. A fourth “Sustainability Mixed Goals” label is for funds that invest across a blend of different sustainability objectives.

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Consumer-facing information to provide consumers with better, more accessible information to help them understand the key sustainability features of a product.

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Detailed information targeted at institutional investors and consumers seeking more information in pre-contractual, ongoing product-level, and entity-level disclosures.

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Requirements for distributors to ensure that product-level information (including the labels) is made available to consumers. Implementation timeline: •

Anti-greenwashing rule and guidance come into force on 31 May 2024.

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Naming and marketing rules come into force, with accompanying disclosures, on 2 December 2024.

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Firms can use labels, with accompanying disclosures, on 31 July 2024.

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Ongoing product-level and entity-level disclosures for firms with AUM of over £50bn apply from 2 December 2025.

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Entity-level disclosure rules apply to firms with AUM of over £5bn from 2 December 2026.

Portfolio management: The FCA has made a number of changes to the original proposals. The regulator has decided to exclude portfolio management from the scope following feedback

that the proposed approach would not be suitable, particularly as most portfolios are diversified and unlikely to invest only in UK funds with labels. The FCA will consult on proposals for portfolio management in early 2024. Financial Advisers: The FCA said that financial advisers have an important role to play in supporting consumers and the choices they make. The regulator plans to set up an independent working group for the advice industry to work together to build on existing capabilities in sustainable finance, including how the SDR and labels support their role.

FCA Regulatory Initiatives Grid The FCA have published the latest version of the Regulatory Initiatives Grid, which sets out the regulatory pipeline allowing firms and other stakeholders to understand – and plan for – the timing of the initiatives that may have a significant operational impact on them.

FCA IFPR Newsletter The FCA has published its latest IFPR Newsletter. Reference is made to its earlier publication of its observations from the multi-firm review into firms’ progress in implementing the internal capital adequacy and risk assessment (ICARA) process and reporting requirements under the Investment Firms Prudential Regime (IFPR). The Newsletter then covers the following topics: investment firm groups, compliance with requirements for issuing CET1 capital instruments, deductions from own funds, matched principal restrictions for firms with permission to deal on own account, IFPR reporting. You can read the newsletter here.

Following March’s successful Roadshow, the PIMFA team are heading back to Bristol for another Regional on 14th December. This free event will provide attendees with the opportunity to hear rom subject matter experts on relevant industry topics (earn up to 3 hours Of CPD) and network.

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GC23/3: Guidance on the Anti-Greenwashing Rule The FCA is consulting on new guidance on the expectations for FCA-authorised firms making claims about the sustainability of a product or service.

The FCA has delayed the implementation date of the new anti-greenwashing rule and Guidance consultation sets out now that the rule to tackle greenwashing would come into force on May 31, 2024. The guidance is designed to help firms that make sustainability claims about products and services better understand the regulator’s expectations under the anti greenwashing rule and other existing, associated requirements. The consultation is open until 26 January 2024. PIMFA’s Sustainable Finance Working Group will consider a response to this consultation. Members who wish to get involved and contribute should contact Maja Erceg.

FCA Report on IFPR implementation observations The FCA has published its final report on its multifirm review into firms’ progress in implementing the internal capital adequacy and risk assessment (ICARA) process and reporting requirements under the Investment Firms Prudential Regime (IFPR).

The report sets out key observations and examples of good and poor practice and focuses on: •

capital adequacy

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liquidity adequacy

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wind-down planning under the ICARA process

The FCA concluded that the review highlights that most firms reviewed engaged well and showed that they were able to make the transition to the new regulations. However, there were areas for improvement around group ICARA processes, internal intervention points, wind-down assessments, liquidity assessments, operational risk capital assessments and regulatory data submissions. The FCA indicated that firms should act now to consider the findings and assure themselves that they are meeting the rules and are mitigating harm from their operations. You can access the report here.

FCA – New Form A The FCA will be rolling out the improved Form A to more firms in the coming weeks. If you are contacted, please can you use the improved version for new applications and provide feedback. •

The new version of Form A has many benefits including easier navigation, improved guidance and features to help firms fill in the application quicker. Users have described it as “much easier to use”, “excellent” and “a great improvement”.

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More information about using the new Form A can be found on the FCA webpage, including an explainer video and FAQs.

Key Information for Firms •

An email will come from gateway.userresearch@fca.org.uk containing a link to the new Form A

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Firms contacted should use the new form to submit standalone applications going forwards (those not related to an Appointed Representative, New Authorisation or Variation of Permission application)

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Applications related to an Appointed Representative, New Authorisation or Variation of Permission application will be updated in due course

If you have any feedback on the new form, please get in touch with Alexandra Roberts and we will pass it on to the FCA.

PIMFA Regulatory Forum The November Regulatory Forum has now been posted on the PIMFA website here. The recording includes updates on: •

Autumn Statement and Proposals

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FCA review of AFMs Embedding the Guiding Principles in ESG and Sustainable Investment Funds

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Education Committee Inquiry into Strengthening Financial Education

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PIMFA Advice Guidance Research Paper

The PIMFA Forums are open to representatives from all PIMFA Members and Associate firms. If you or any of your colleagues would like to attend the Regulatory Forum and are not currently on our distribution list, please email Heidi Bryant.

PIMFA Operations Forum The November Operations Forum has now been posted on the PIMFA website here. The recording includes: •

Crest update from Charlie Pugh, Programme Office manager and Glenn Cooper, Product Manager at Euroclear.

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A presentation on ‘LSEG: Capital Markets and Regulatory Reform Update' from William Fenna, Head of Retail Intermediaries, Equities, Capital Markets, and Marcus Stuttard, Head of AIM and UK Primary Markets at the London Stock Exchange.

The PIMFA Forums are open to representatives from all PIMFA Members and Associate firms. If you or any of your colleagues would like to attend the Operations Forum and are not currently on our distribution list, please email Heidi Bryant.

PRESS RELEASES

PRESS COVERAGE

PIMFA welcomes FCA proposals

Daily Mail: FCA mulls 'polluter pays'

for Sustainability Disclosure

compensation for shoddy investment

Requirements

firm advice

PIMFA to work with FCA on

Thisismoney.co.uk: FCA mulls

proposed ‘polluter pays’ model for

'polluter pays' compensation for

personal investment firms

shoddy investment firm advice

Greater personalisation may

Reuters: UK investment advisers

encourage greater saving & investing

face capital hike to cover

in UK, although there are limits to

compensation costs

how much, PIMFA research finds Citywire New Model Adviser: FCA’s PIMFA welcomes Financial Services

review should allow for personalised

Compensation Scheme levy forecast

guidance, PIMFA argues

for 2024/25