Financial institutions general regulatory news 2021:
Recent regulatory developments in the UK and the EU are relevant to most financial institutions. Read our additional industry-specific updates on links to related material.
Financial Financial institutions Services Law 2021 (start No. 2) Regulation 2021
The Financial Services Law 2021 (entry into force No. 2), Regulation 2021 (SI 2021/739) is in force. The regulation contains effective dates for a number of provisions of the Financial Services Act 2021 (FS Act). Regulation 2 will enter into force on 28 June 2021. Sections 10 to 21 of Annex 12 to the FS Act, applicable to Northern Ireland, refer to the attachment powers extended to accounts with payment institutions and electronic money.
Regulation 3 enters into force on 1 July 2021, the following provisions of the FS law:
• paragraphs 8 to 21 and annex 5 regarding the criteria;
• Article 27 and Annex 10 on access to financial services markets;
• Article 28 and Annex 11 which modify or revoke the authorization to carry out regulated activities at the initiative of the Financial Conduct Authority (FCA);
• Section 29 of the FCA Regulations on the Level of Consumer Assistance by Qualified Persons;
• Article 34 on the application of the anti-money laundering legislation to foreign drivers;
• Section 37 relating to regulated activities and the application of the Consumer Credit Act 1974;
• Article 38 on changes in retail investments and prepackaged products (PRIIPs);
• Section 39 on retention of personal data under the UK Market Abuse Regulations;
• paragraph 40 on the procedures for a cleanup and reporting of derivatives; IS
• Article 43 on subordinate legislation implemented in direct Community law.
Regulatory framework for approval of financial progress: response to the UK Treasury
HM Treasury announced a response to its July 2020 consultation on the regulatory framework for approving financial promotions. Her Majesty’s Treasury in its reply summarizes the responses to the consultation document and indicates the steps to follow.
Most respondents support the creation of a regulatory portal, with a slight preference for option 1 (establish FCA requirements for limiting approvals for financial promotion – summarized in section 1.6 of the answer). HM Treasury agrees with the need to create a portal for the approval of unauthorized financial promotions via option 1.
All new and existing licensed companies are prohibited from authorizing unauthorized financial promotions based on their consent requirement – the “financial promotion requirement”. Both new and existing companies seeking to approve financial promotions must ask the FCA to lift the ban completely (so they can approve all forms of financial promotions) or partially (so they can approve certain types of financial promotions).
Companies do this by submitting a Requirements Change Request (VREQ) to the FCA. The FCA will review and accept or reject an application in accordance with the powers of Part 4A of the Financial Services and Markets Act 2000 (FSMA). The FCA may reject an application if it deems it necessary to achieve its operational objectives.
The Treasury explains that permissions to approve financial promotions may be limited to a particular type or type of product or service, depending on the company’s experience. He says the proposed port is not intended to force FCA to license the promotion, which reduces the additional administrative burden for businesses.
There are three exceptions to the new regime:
• companies that approve the financial promotion of an unauthorized person within the same group;
• approval of the promotion by companies authorized for unauthorized communications; IS
• Clients approving financial promotions for their appointed representatives in connection with regulated activities for which the client agrees to take responsibility.
HM Treasury has also developed proposals to introduce a transition period (with three distinct phases, as described in Graph 1.C in the answer) that will allow for an orderly transition between the two regimes. Unauthorized persons may republish approved financial promotions prior to the implementation of this port, as long as the promotion remains unchanged and complies with FCA rules.