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PIMFA WEEKLY NEWS BULLETIN | 9 October 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
Dear Nigel,
In this edition of Bulletin, you will find the latest industry news, information on the impact of Covid-19 and other key issues PIMFA are working on for our members. We remain committed to representing our members, effecting meaningful change and being a key point of useful information. If there is anything in this newsletter, or in general that you have questions on, or that we can help you with, please contact us at enquiries@pimfa.co.uk.
LATEST NEWS
New PIMFA Member Firm
We are delighted to welcome our latest new member firm to the association:
Whitman Asset Management – Private Client Investment Manager
We look forward to working with you.
Brexit: PIMFA firms' preparedness
The UK is due to exit the EU Single Market when the Brexit transition period ends on 31 December 2020. The negotiations on the terms of the future relationship between the UK and EU are ongoing but regardless of the outcome of the talks, firms with EU footprint will need to adjust to operating from a third country in relation to the EU and decide how to access and operate on behalf of clients living in the EU. Retail financial services firms cannot rely on pan-European set of rules for servicing customers in the EU and with passporting lost and no equivalence available in the retail investment sector, the options for PIMFA firms to continue cross border trade with the EU are limited, and mostly dependent on the approaches adopted by national regulators in the EU Member States. The rules that Member States will apply to cross border trade post Brexit are mostly third country rules, not specific Brexit rules. The FCA advises firms in the retail financial services sector, who wish to continue to serve clients in the EU, to speak to local regulators and ensure they understand the national regulator’s approach and the impact it will have on their business post Brexit transition.
We would like to hear from firms if they would like to obtain legal advice from a law firm on
options available to them for servicing clients in the EU once the UK has left the Brexit transition period on 31 December 2020. The cost of such advice would be shared among firms participating in the project. At this stage we would be grateful if you could indicate your interest to us by emailing Maja Erceg.
Brexit negotiations
ECJ ruling: a set-back for post Brexit data deal
Prime Minister Boris Johnson and European Commission President Ursula
A ruling by the European Court of Justice
von der Leyen spoke last Saturday about
(ECJ) on 6 October 2020 has thrown fresh
the state of play of the UK – EU
doubt on the UK’s prospects of obtaining a
negotiations. They agreed in a joint
data adequacy decision from the
statement that “significant gaps” remained
European Commission (EC) from 1
between the two sides and instructed the
January 2021. The ECJ said that
negotiators to work intensively to bridge
legislation like UK’s Investigatory Powers
those gaps. The joint statement
Act, which allows national security
mentioned the level playing field,
agencies to access people’s information,
governance and fisheries as the main
interferes with fundamental rights to
obstacles to making progress in the talks.
privacy, data protection and freedom of expression. The ruling does not concern
Prior to speaking to the UK PM, von der
just the UK but also Belgium and France,
Leyen spoke about Brexit with EU leaders
and it will be of interest to other EU
at the European Council meeting. She
governments who argue that data
said that the EU wants a deal with the UK
retention is linked to national security and
because “it is better to have a deal as
it should be the competence of Member
neighbours”, but she also added, “not at
States.
any price”. She also noted that the EU had started legal proceedings against the UK
The ECJ’s view is that national
over the Internal Market Bill, which would
governments cannot pass laws that
allow the UK to unpick some elements of
restrict the scope of EU privacy rules. The
the Withdrawal Agreement.
UK is hoping to be granted the adequacy decision by the EC in order to keep the data flowing between the UK and EU at the end of the Brexit transition period. However, the EU is concerned about the
UK security agencies’ access to EU data Brexit – House of Lords EU Committee hearing
after Brexit and whether they will share it with other countries, notably the United States. The two sides have been talking about the data adequacy since March but
Speaking before the House of Lords European Union Committee this week, UK Chief Negotiator David Frost said that the two sides were beginning a discussion on including the state aid principles into the text of a trade deal. From the start of the Brexit negotiations, the UK has insisted on
the EU will not start the formal assessment procedure until the Brexit transition period has expired at the end of December 2020. In the absence of the data adequacy decision, firms will have to rely on standard contractual clauses to transfer personal data.
having its own rules on state aid post Brexit transition period while the EU wanted the UK to continue to align with
PIMFA Compare My Allocations report
the current rules. It seems that there has been some movement on the issue as Frost said that the two sides were discussing whether it was possible “to go
“What evidence do we have that our asset
further than you normally do in an FTA
allocations are different or unique to our
and agree some provisions that shape
competitors?” Find out with the PIMFA
and condition the subsidy policy on both
Compare My Allocations report, FREE to
sides.” Frost said that the UK could be as
PIMFA members.
ready to use a dispute resolution process to challenge state aid decisions as the EU,
Contact indices@pimfa.co.uk for more
because of the impact such decisions
information.
could have on the UK.
Speaking about the issue of fisheries, which has been another big stumbling block in the negotiations, Frost said that
New EU Commissioners approved by European Parliament
the UK insists that negotiations on access to the UK waters must be annual but hinted that quota shares could be agreed for a longer period. The UK Government is
The European Parliament has confirmed
looking to agree quotas based on waters
Mairead McGuinness and Valdis
where fish stocks originate – the so called
Dombrovskis to new positions in the
“zonal attachment”. The EU’s approach is
European Commission. McGuinness, who
to continue with the so called “relative
has been Vice President of the EP, won
stability key” arrangement, which means
the support of MEPs to become Financial
that for each stock a different allocation
Services Commissioner, in a 583-75 vote
percentage per EU country is applied for
with 37 abstentions. Dombrovskis will add
the sharing out of the quotas. The draft
to his existing portfolio as Executive Vice
technical standards have been submitted
President of the European Commission,
to the European Commission who has
the role of Trade Commissioner, as MEPs
three months to decide whether to adopt
voted 515-110 in favor, with 70
them or not. Once adopted, the texts will
abstentions. The change in the College of
proceed through the scrutiny procedure in
Commissioners was the result of the
the European Parliament and Council.
resignation of the former Irish trade commissioner, Phil Hogan, who broke coronavirus restrictions in Ireland. The
Equivalence latest
only remaining step is for the Council to formally approve the two appointments in a written procedure.
Equivalence will affect around 40 areas of UK financial services at the end of the transition period. The UK government has produced 2,500 pages of detailed EU
Global Cyber Alliance updated Toolkit
questionnaires in an attempt to be granted equivalence decisions and access to the EU Single Market for the financial services
Did you know that 59% of all cyber attacks
industry from 1 January 2021. However, in
target SMEs? For many SMEs a cyber
July the Commission unexpectedly said it
attack can be devastating: financial loss,
had not initiated an assessment in the
ceased operations, sensitive information
most important areas of equivalence
stolen, supply chains compromised.
because its own rules were changing and were still a work in progress.
Securing your business’s digital ecosystem should be part of your
The EU’s recent deregulation of financial
operational procedures so the Global
markets in the wake of the coronavirus
Cyber Alliance has released an updated
crisis has made the UK rules stronger but
version of their Cybersecurity Toolkit to
the situation raises the prospect that UK
help SMEs address cyber risk. The toolkit
investment firms will have to rely on
contains tools and resources to help
agreements between the UK and national
SMEs understand and implement
supervisors in the EU Member States.
important steps in defending their
Andrew Bailey, Governor of the Bank of
business against cyber threats, fraud,
England, said in a recent British Chamber
intellectual property theft, and theft of
of Commerce Webinar that “the process of
employee and customer information.
trying to agree equivalence has not gone very far” and that “equivalence is not on
Access the toolkit here.
the table in the biggest areas”. Bailey said that the UK will not modify its rules to obtain equivalence making it clear that
Forthcoming PIMFA Committee
“rule-taking is not going to happen. To be
Meetings
blunt, this is going to take a different approach if we are going to get there because that is not a price we should pay The following committee meetings will be
for this.”
taking place in the coming weeks: Week commencing 12th October PIMFA Members Guide: Operational Resilience
13th October – Regulatory Committee 15th October – Strategic Advisory Group Week commencing 19th October
PIMFA's operational resilience paper,
22nd October – Indices Committee
“Wealth Managers and Financial Planners – A Resilient Bunch”, is available for download here.
25% Off All Harriman Books For PIMFA Members Only
The paper is the result of our conversations with a number of firms and explores how they have reacted to lockdown restrictions and adapted their operations to reach a “new BAU”. A compelling message comes through from the feedback we received: the importance of empathy and good business culture.
In partnership with Harriman House, PIMFA is delighted to offer members an exclusive 25% discount on high quality books from over 300+ titles in print, eBook and audio form. To order, please click here.
ESMA final report on RTS standards on provisions of investment services by third country firms
Last week, the European Securities and Markets Authority (ESMA) published its final draft regulatory and implementing standards (RTS & ITS) on the provision of investment services and activities in the EU by third country firms, as mandated under the Prudential Regime for Investment Firms (PRIF) legislative framework. The standards pertain to changes made to MiFID II and MiFIR, introduced by PRIF.
Overall, these changes propose new annual reporting requirements for third-country firms to ESMA, give ESMA the power to ask for data on all orders and transactions made in the EU, and propose annual reporting requirements for branches of third country firms to national competent authorities (NCA). The draft technical standards have been submitted to the Commission who has three months to decide whether to adopt them or not. Once adopted, the texts will proceed through the scrutiny procedure in the European Parliament and Council.
Latest PIMFA Blogs & Press Releases
PIMFA urges Regulator to work more closely with industry to rebuild levels of trust in fair FSCS outcomes PIMFA welcomes FCA analysis of regulatory perimeter but calls for swifter action to protect consumers Mitigo joins as latest PIMFA Plus partner to help members combat alarming new trend in ransomware attacks Scams and FSCS issues are symptomatic of supervisory failings says PIMFA at Select Committee inquiry PIMFA welcomes FCA call for evidence on how to improve the consumer investment market PIMFA launches online ESG Academy to help advisers meet soaring investor demand
PIMFA welcomes Work and Pensions Select Committee investigation into pension scams and wider inquiry into pension freedoms Blog: ESG and Covid 19
EVENTS & LEARNING
The PIMFA ESG Academy, which launched on 15th September 2020, is a self-paced online programme that is definitely NOT your traditional online class! As you learn at your own pace and in your own time, you will have access to an evergreen library of ESG content that you can engage and interact with on your tablet, computer and mobile – all free for PIMFA members! The PIMFA ESG Academy, supported by Morningstar, is our response to the growing demands by advisers for an immersive, engaging, CPD-approved learning experience that supports them in making the most of the growing ESG opportunity by having more effective ESG conversations with their clients.
Please click here to find out more.
PIMFA Training Getting the DB Pension transfer advice process right 24 November In this online session we will help you: •
Understand what’s going wrong with DB pension advice, and how you can get it right
•
Grasp the FCA’s expectations as to how to act and treat customers
•
Identify weaknesses and poor practices in your existing advice process
•
Learn how to test whether your DB pension transfer advice is likely to stand up to FCA scrutiny
•
Receive tips on how to ensure you capture the right “know your customer” information from clients
•
Recognise how you can improve (and shorten!) your suitability reports
For more info and to book your place, please click here.
PIMFA Training Is your approach to vulnerability fit for purpose? 5 November
This practical live online learning session underpinned by PIMFA member guidance on vulnerability and delivered by an experienced senior practioner will help your firm review your current approach to vulnerability in light of COVID-19 and recent regulatory announcements. By attending this live online learning session, you will learn how to: • Interpret what the FCA latest guidance on vulnerability means for your firm. • Grasp the full extent of your regulatory obligations on vulnerability in light of COVID-19 • Adopt the strategies and approaches leading firms take to developing and embedding a vulnerable-centric approach. • Embed a culture that consistently supports vulnerable clients better than you do today..and more... For more info and to book your place, please click here.
PIMFA Training SM&CR conduct rules train the trainer programme 19 November As the regulator expects firms to have role-specific training in place that provides a high degree of confidence that conduct rule breaches will be identified, a new and different approach to Conduct Rules training is required. But creating your own SM&CR Conduct Rules training in line with the FCA expectations stipulated in COCON 2.3 FCA Handbook takes time. Firms will need to plan, research, design, write, create and deliver practical sessions, with an emphasis on job rolespecific training by 31st March 2021! That’s why PIMFA has partnered with City HR to create a cost effective, ‘Train the Trainer’ workshop and toolkit that takes all the hard work away from you – allowing you to focus on delivery only. For more info and to book your place, please click here. PIMFA Online Learning Authentic Leadership: How to thrive as a female leader in wealth and finance 24 November Early Bird Fee: £2,500 member | £3,000 non-members
Break through the barriers and get what you want from your career. This six month programme is for any woman seeking to reach her true leadership potential and for
anyone — man or woman — looking to create a more gender-balanced workforce. Find out more about this ground breaking programme here.
PIMFA Online Event The Financial Adviser Virtual Forum 25 November The IFA Virtual Forum will be an opportunity for IFA professionals to hear from experts and the PIMFA Policy teams on a variety of topics such as: •
Pension Transfer
•
What to Look out for in 2021
•
Regulatory Updates
•
The Opportunities of ESG
•
And more…
The Forum will also enable attendees to earn CPD hours and to connect with fellow colleagues. This event is free for PIMFA IFA members. For more info and to book your place, please click here.
PIMFA In the Press
Compliance Matters: PIMFA keeps pressure up on FSCS New Model Adviser: FSCS defends levy as 64% of advisers say they don't trust it FT Adviser: FSCS to work with Pimfa on levy cost Professional Adviser: PIMFA survey highlights soaring FSCS fees and adviser distrust in scheme FT Adviser: Achieving a diverse portfolio FT Adviser: Advisers must have an ESG process in place for clients
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
FCA assists innovative companies in tackling coronavirus challenges
The FCA has opened application windows for two ‘sandbox’ services to support innovative firms tackling challenges caused by the coronavirus (Covid-19) pandemic.
Application windows for Cohort 7 of the Regulatory Sandbox and the pilot of a new Digital Sandbox initiative opened on 5th October, with an emphasis on supporting products and solutions that will assist consumers and firms affected by the pandemic. Three key areas - preventing fraud and scams, supporting the financial resilience of vulnerable consumers, and improving access to finance for small and medium sized enterprises - have been identified as particular areas of importance for the FCA.
Find out more about the regulatory sandbox and digital sandbox pilot.
FCA bans sale of cryptoassets to retail consumers
The FCA has published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets to retail consumers. The FCA considers these products to be ill-suited for retail consumers and that they cannot be reliably valued because of the inherent nature of the underlying assets, which means they have no reliable basis for valuation. Further concerns are; prevalence of market abuse and financial crime in the secondary market (e.g. cyber theft); extreme volatility in cryptoasset
price movements; inadequate understanding of cryptoassets by retail consumers and a lack of legitimate investment need for retail consumers to invest in these products .
The FCA estimates that retail consumers will save around £53m from the ban on these products. The ban will come into effect on 6 January 2021.
ESMA 2021 Work Programme
ESMA has published its 2021 Work Programme, outlining its priorities and areas of focus for the next 12 months. The key themes across the work programme are the continuous development of the CMU, the consideration of ESG factors in the EU financial services environment, and digital transformation. The four key pillars for ESMA’s work in 2021 will be promoting supervisory convergence, assessing risks to investors, markets and financial stability, completing a single rulebook, and directly supervising certain financial entities. ESMA states that it will, if required, contribute to the development of a single rulebook for the AIFMD in line with the upcoming review. In any case ESMA will likely continue to push the Commission to adopt its recommendations made in August.
UK’s Financial Reporting Council (FRC) proposals on ‘non-financial’ reporting
The FRC has proposed that ‘non-financial’ (ie ESG) reporting should be placed on a similar statutory footing as financial reporting.
In its paper A Matter of Principles, the FRC refers to a lack of an overarching reporting framework covering financial and ‘non-financial’ reporting that meets the expectations and needs of all stakeholders beyond investors. Specifically, it proposes a ‘Public Interest Report’ to report information on environmental, human rights, anti-corruption and antibribery matters, which are part of the EU’s Non-financial Reporting Directive (NFRD). The FRC said its thinking is at an early stage and the consultation is open until 5 February 2021.
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