Compliance Digest: 19th April 2024

Watch out for exciting news regarding my website and a CPD proposition from 1st May.

This week there has been a little new from the FCA, however, the ABI has published a useful guide for firms who have clients on the autistic spectrum. There is a summary of the FCA enforcement proposals from Womble Bond Dickinson, and a consultation from the Bank of England on the same subject.

A new guide to improve support for autistic customers
Promoting competitiveness is a juggling act
Deep dive into the FCA enforcement proposals
The Bank of England’s approach to enforcement: proposed changes to statements of policy and procedure following the Financial Services and Markets Act 2023
FCA highlights common failings in asset management applications

A new guide to improve support for autistic customers

The ABI has published a press release introducing a good practice guide for the insurance and long-term savings industry on supporting autistic customers. The ABI worked with its members to develop the good practice guide after identifying several barriers autistic people face when trying to access insurance and long-term savings products.

The guide sets out the challenges that autistic people might face when interacting with the industry, such as understanding complex policy documents, financial jargon, or long-term concepts, such as pensions, and having difficulties making decisions.

Alongside case studies, the guide offers a collection of practical actions and recommendations that firms could consider applying, including:

dividing complex documentation into manageable sections and segmenting it into stages to reduce confusion;
signposting to reasonable adjustments or additional support;
providing and abiding by service level agreements, including highlighting response times, and setting out the overall steps of a customer journey;
providing detailed context for why information is needed and how it will be used when asking certain questions or requesting specific information;
sending follow up documentation after conversations or transactions, including summarising key points discussed, agreements made, and any actions needed;
investing in training for employees so that they can recognise diverse communication styles and implement inclusive practices.

With the regulatory focus on support for clients with characteristics of vulnerability, this is a useful reference document to keep in mind when working with clients who are on the autistic spectrum.

Promoting competitiveness is a juggling act

In a speech by Sarah Pritchard, (Executive Director, Markets. at the FCA) at TheCityUK International Conference 2024, she highlighted:

the FCA wants to strike a balance between encouraging competition and innovation and advancing its other operational objectives.
it aims to support beneficial and responsible innovation, ensuring consumers and markets reap the benefits of new technology.
the FCA welcomes international firms but wants them to operate in a way that protects consumers and market integrity.

The speech has a link to a report by the law firm, Freshfields under the title ‘ Advancing international competitiveness and economic growth: how do financial regulators compare?.

Deep dive into the FCA enforcement proposals

At the end of February 2024, the FCA published a consultation paper proposing significant changes to its approach to publicising enforcement investigations. Up to now, publicly available information on ongoing investigations is minimal. Usually, the public would know about an investigation only when the FCA publishes the Final Notice relating to it, or sometimes, where appropriate, a Warning or Decision Notice.

Now, in the interests of transparency, the FCA proposes proactively to publish more information about its enforcement investigations including their opening and progress as well as the identity of the subject of the investigation. Crucially, this means the public will know that some firms are under investigation well before the FCA decides whether the firm in question has in fact breached any rules. Would this transparency come at too much of a cost to regulated firms?

In an article written for Compliance Monitor, Michael Lewis and Emma Radmore of Womble Bond Dickinson look at the drivers, the proposals, the safeguards and the possible consequences.

The Bank of England’s approach to enforcement: proposed changes to statements of policy and procedure following the Financial Services and Markets Act 2023

In addition to the FCA, the Bank of England has begun reviewing its enforcement policy and procedures. In a consultation paper, the Bank of England – which includes the PRA – sets out four proposals that will be of particular interest to dual-regulated firms.

For context, the Financial Services and Markets Act 2023 (FSMA 2023) introduced several important updates to the UK’s regulatory framework for financial services, and certain of these changes create new, or expand existing, enforcement powers of the Bank (including the PRA).

In particular, these enforcement powers arise in connection with the extension of Part 5 of the Banking Act 2009 (BA09) to apply in respect of recognised payment systems (RPS) using digital settlement assets (DSAs) and specified service providers to such RPS, and to apply to a new category of persons, namely DSA service providers (DSA SPs), as well as specified service providers to DSA SPs; the creation of a new Part 5A of the BA09 which confers powers on the Bank over entities involved in the wholesale distribution of cash; and the creation of a new regime for the oversight of critical third parties (CTPs).

The Securitisation Regulations 2024 also contain PRA powers, including certain enforcement powers, in connection with the regulation of individuals and persons not authorised by the PRA involved in securitisations.

FCA highlights common failings in asset management applications

Also from Womble Bond Dickinson, a summary of the common errors asset managers are making in applications for authorisation. For context, in the year to 1 April 2024, 18% of applications were withdrawn as a result of the FCA’s concerns. Of the 310 applications it determined, just over half were determined in under 6 months, and nearly three quarters within 8 months. Even when concerns did not lead to the applicant withdrawing the application, they often led to delays and a longer time between application and approval.

Key areas the FCA highlighted are:

proposed senior management who have not held role that require similar prior experience or who do not have suitable qualifications. The FCA has found that applicants have not been able to explain to the FCA’s satisfaction how their business will work and the regulatory requirements that will apply to it;
firms not understanding that the FCA expects the mind and management of a firm to be in the UK on a day-to-day basis and that it is not enough to have compliance and administration in the UK with those who make business decisions just flying in from time to time;
firms failing to identify the risks their business model poses and how they might remove or mitigate those risks;
firms not considering their responsibilities for activities they outsource and the impact on their business of the outsourcing;
firms failing to consider potential conflicts between the interests of the client, the firm and related parties, adequately or sometimes at all;
firms seeming to structure business in ways that will avoid needing to comply with onerous but appropriate requirements, and seeking exemptions from FOS and FSCS scope when this is not appropriate; and
firms who are not “ready, willing and organised” to start their business – for instance, they have not recruited SMF holders or arranged for sufficient capital to be put in place.