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PIMFA WEEKLY BULLETIN | 4 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
The EU – UK Trade and Cooperation Agreement ratified by the European Parliament
The European Parliament finally ratified the EU-UK Trade and Cooperation agreement on 27 April 2021. The post Brexit deal was voted through with an overwhelming majority - 660 MEPs in favour, five against with 32 abstentions. On 24 December 2020, EU and UK negotiators had agreed on the Trade and Cooperation Agreement establishing the terms for future EU-UK cooperation. To minimise disruption, the agreement has been provisionally applied since 1 January 2021 and fully entered into force on 1 May. Prime Minister Boris Johnson welcomed the ratification and said it was a "final step in a long journey". He added that the trade deal provided "stability to our new relationship with the EU as vital trading partners, close allies and sovereign equals".
The vote was also welcomed by European Commission President Ursula von der Leyen. Michel Barnier, the EU's chief Brexit negotiator, addressed the Parliament before the vote and said that Brexit was a "failure of the European Union" and urged the EU institutions
and the Member States’ governments to draw lessons from the UK's departure. He said Brexit was “a divorce, a warning” and added that the reasons why 52% of the British population voted against the EU membership exist in many regions of the EU too. EU proposals on ‘Big Tech’ could have significant impact on UK The parliamentary European Scrutiny Committee has published a report following the Committee’s meeting on 21 April 2021. They considered the European Commission’s proposal on wide-ranging new laws to control the activities of online platforms, including ‘Big Tech’ companies such as Amazon, Apple, Google and Facebook. The new legislation would address market failures arising from the enormous financial power wielded by the largest tech companies, and the need for online platforms to remove illegal content they host more effectively. The laws include potential fines of up to 10% of a company’s annual global turnover if the regulations are not adhered to. The European Scrutiny Committee says that the new EU laws could have a significant impact on the UK, not least because they will apply to companies exporting digital services from the UK into the EU.
In 2019, the UK exported £51.9bn. worth of such services, 40% of which was to the EU. The EU’s actions may also present risks and opportunities for the UK‘s own approach to regulating tech companies through the government’s upcoming legislation under the Online Safety Bill and Digital Markets Unit. The European Scrutiny Committee report says the UK clearly has an interest in seeking to influence the final shape of the EU legislation, and, where appropriate, seek mutually beneficial convergence. The UK government has itself said that different regulatory practices between countries could see companies ‘flip’, or switch between jurisdictions, to take advantage of the differing rules. Historic Trade Act becomes law
On 29 April 2021 the Trade Act, which bestows powers necessary to bring new trade deals into being, was granted Royal Assent and formally become law. The Act allows the UK to put the agreements it strikes as a newly independent 21st-century trading nation on to the statute books. This means the trade deals with 67 countries worth £218 billion we have already signed can become part of UK law permanently. The Act provides certainty vital for British firms to trade successfully overseas and means they will not face additional costs when doing so. It will provide a platform for UK businesses to access new fast-growing markets, which in turn will help create jobs, encourage investment and aid the economic recovery from Covid-19.
The International Trade Secretary, Liz Truss, said: “The passing of this Act into law is a landmark moment for the UK. For the first time in nearly half a century, we are free to pursue an independent trade policy and put the interests of the British people first.”
The Square Mile: Future City
The City of London Corporation, in partnership with Oliver Wyman, has published a fiveyear action plan for the Square Mile. 'The Square Mile: Future City' outlines plans to create 'the world’s most inclusive, innovative and sustainable business ecosystem'.
The five-year action plan aims to ensure the Square Mile offers 'a world class business ecosystem of thriving businesses, benefitting from unmatched innovation and growth opportunities; a vibrant offer with exceptional retail, hospitality, culture, tourism and recreation opportunities; outstanding environments including collaborative, flexible workspaces; safe, attractive public realm, and resilient, sustainable infrastructure'. The City of London’s Recovery Taskforce, with Oliver Wyman, consulted more than 4,500 members of the public, and 250 senior leaders to develop these recommendations.
UK Investment Council
On April 27, Minister for Investment Gerry Grimstone announced the creation of an Investment Council to act as an advisory body to the UK Government on foreign investment, to improve and enhance the UK’s business environment for foreign investors. Made up of private sector senior leaders from around the globe in a variety of industries – from technology and energy to infrastructure and financial services – the Council will cement the investor lens in the Government’s inward investment strategy. The Council, led by Minister Grimstone, will meet twice a year and on an ad hoc basis to provide high-level strategic advice to the Department for International Trade and wider government, operating alongside the recently formed Office for Investment. Members will share their experiences in the UK market and views on UK competitiveness, and advise on policy and regulatory changes that could improve the attractiveness of the UK for foreign investors.
The aim of the council will be to drive investment into priority areas and sectors, levelling up the whole of the UK through an investment-led recovery.
Latest PIMFA Press Releases
PIMFA welcomes proposals set out by the FCA to strengthen financial promotion rules for highrisk investments PIMFA welcomes moves towards greater transparency and control of cost for Claims Management Companies PIMFA welcomes Government compensation for LC&F bondholders Organisations must work together to defend themselves against cyber-attacks, warns Chair of Cyber Security Council PIMFA welcomes intervention from Financial Conduct Authority CEO Nikhil Rathi in debate over online financial harms PIMFA warns firms to prepare for the scale and impact of post-Brexit regulations
Latest PIMFA Press Coverage
Money Marketing: FCA signals crackdown on promotion rules for high-risk investments
FT Adviser: Financial services 'put on notice' by FCA over diversity
FT Adviser: Should the FCA scrap the 10% drop rule?
Professional Adviser: FCA moves to tackle high-risk investments despite 'limited powers' over issuers
New Model Adviser: FCA CEO: Consumers shouldn’t face greater investment risks online
FT Adviser: Advisers ‘pleasantly surprised’ at modest FCA fee increase
EVENTS & LEARNING
PIMFA Webinar WHAT TYPE OF ESG INVESTOR IS YOUR CLIENT? 5 May 2021 FREE to attend In this FREE 60 minute webinar, Holly Mackay, Boring Money, Ana Georgiou, Morningstar and Robin Keyte, Keyte Chartered Financial Planners unpack the research of 6,000 UK investors to help advisors meet the needs of six identifiable ESG investor types they are most likely to come across. Specifically, we’ll look at: •
What the research tells us about your client ESG preferences
•
How do you identify with confidence your client’s ESG preferences
•
Why advisors must resist the urge to put product sets before client ESG needs.
For more info and to book, please click here.
View all other upcoming PIMFA Events and Learning here.
PARTNER EVENTS
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.
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.
PIMFA PLUS FEATURE
BYOD And Remote Working: A New Threat
The rapid shift to remote working meant some employees had to make do with using their unsecured personal devices in the absence of company-issued devices. The past year has seen many firms successfully navigate the new world of remote working. However, the rush to establish a new distributed workforce, combined with changing working patterns and employee behaviour, means that many of those firms are facing an increased risk of cyberattack. As a consequence Mitigo have seen a worrying increase in cases of email account takeover and ransomware attacks. Common security concerns stemming from remote working now include: •
Data leaking through endpoints
•
Users connecting with unmanaged devices
•
Maintaining compliance with regulatory requirements
•
Remote access to core business apps
•
Loss of visibility over user activity
Read more about the risks and how to mitigate them here.
FCA consults on strengthening investor protections in SPACs
On 30 April the FCA launched a consultation on proposed changes to its Listing Rules for certain special purpose acquisition companies (SPACs) which will last for 4 weeks. The FCA proposes amending rules to allow an alternative approach for listed SPACs that are able to demonstrate the higher levels of investor protection that have developed in certain overseas jurisdictions. Currently, a SPAC listing is typically suspended at the point it identifies an acquisition target. Suspension seeks to preserve market integrity during a period when limited information on a prospective deal could result in disorderly trading in a SPAC’s shares. However, suspension results in investors being locked into a SPAC at the point a target is announced, potentially for many months prior to completion, which is undesirable for investors and issuers. The FCA are proposing that SPACs which comply with higher levels of investor protection should not be subject to this requirement. Clare Cole, Director of Market Oversight at the FCA, commented on the proposals: ‘We would expect our changes to provide a more flexible regime for larger SPACs, while still ensuring investor protections, potentially resulting in a wider range of large SPACs listed in the UK, increased choice for investors and an alternative route to public markets for private companies.”
Launch of FCA and Practitioner Panel Survey
The FCA and Practitioner Panel joint survey for 2021 has launched. They have sent the survey to a sample of regulated firms, so they can share their feedback on how the FCA regulates the industry.
The survey is carried out on their behalf by Kantar Public, an independent social research organisation. Kantar sends the survey to all fixed firms and a sample of 12,000 flexible
firms. If you’re one of the firms selected to complete the survey, please take the time to provide them with your valuable feedback.
FSCS launches Pension Protection Checker
The Financial Services Compensation Scheme (FSCS) has launched an online Pension Protection Checker, which asks a couple of simple questions to help individuals find out how much pension protection FSCS may be able to offer.
You can find the FSCS Pension Protection Checker at: https://www.fscs.org.uk/pensionprotection-checker/
FCA product governance review
In February, the FCA published a product governance review of a number of asset management firms. Although the focus of the review was the asset management sector, PIMFA took an interest in it given how the asset and wealth management/advice sectors closely interact from a distribution chain perspective.
Since the publication of the review, we have been engaging with our asset management colleagues at the Investment Association and TISA, and earlier last week we all met with the FCA to seek clarifications on some of the items included in the review.
The FCA highlighted the following key points: •
There is an expectation that asset managers map PROD rules to the Product lifecycle
and Governance process; •
It is important to always document the thought process and the rationale of each
decision in the product governance space: o
When identifying the Target Market, in particular the Negative Target Market, it is
important that the thought process is documented even if the final decision is that there is no negative target market – how did the firm reach that decision?; and o
When reviewing the distribution network, consider which are the appropriate
distributors for the product/service.
Although the above was directed at asset managers, the FCA continues to consider the importance of demonstrating the thought process when applying PROD and having a robust distribution strategy apply throughout the distribution chain as key to PROD compliance.
In terms of impact on our sector, in the future we may observe a few changes in the way manufacturers interact with their distribution chain – for example, a manufacturer may provide you with more insight on their Negative Target Market identification or seek contact to gain an understanding of how the product reaches the end distributor. However, this is an ongoing debate, and we expect further developments in this space. PIMFA remain committed to ensuring a well-functioning distribution regulatory framework.
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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