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Financial services regulation round-up - May 2019

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Regulator updates

PRA issues new Regulatory Digest

The Prudential Regulation Authority (PRA) issued its Regulatory Digest for April, focused in particular on its business plan for 2019/20, managing financial risks from climate change and equity release mortgages.

Read Digest here

FSCS increases levies for 2019/20

The Financial Services Compensation Scheme (FSCS) announced that it will levy £532m for 2019/20, £16m more than forecast in January, mainly because it expects a rise in the number of claims against self-invested personal pension (SIPP) operators and in costs relating to past insurance failures.

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FCA updates rules on supervision

The Financial Conduct Authority (FCA) issued an instrument amending Chapter 1A of the Supervision Manual (SUP) in its Handbook, to reflect the ‘Approach to supervision’ document published in April.

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FCA publishes policy development update

The FCA issued a policy development update on recent and forthcoming publications. Topics include the new Prospectus Regulation (EU 2017/1129), improving shareholder engagement and loan-based crowdfunding platforms.

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FCA publishes March board minutes

The FCA published the minutes of its board meeting at the end of March. Matters discussed included a Treasury consultation on an anti-money laundering regime for crypto-assets, the 2019/20 business plan, duty of care, price discrimination in cash savings and rules to permanently halt the sale of binary options to retail clients.

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EMIR REFIT regulation published

Regulation (EU) 2019/834 (EMIR REFIT), which amends Regulation 648/2012 on over-the-counter (OTC) derivative transactions, central counterparties and trade repositories (EMIR) in a number of respects, was published in the Official Journal. It aims to improve the regulatory framework for the OTC derivative market.

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ECB publishes paper on crypto-assets 

The ECB issued an occasional paper arguing that while crypto-asset risks in various areas were currently limited or at least manageable, this could change in future.

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ESMA opinion on ancillary activity under MiFID II

ESMA issued an opinion on how to calculate market size to assess whether an activity is 'ancillary' and so outside the scope of Directive 2014/65/EU (MiFID II).

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Brexit

UK Finance concerned at the EU contingency plans

In an article, UK Finance Director of International and Brexit Policy, Conor Lawlor, argued that EU contingency measures for financial services in the event of a no-deal Brexit address only limited elements, so that significant gaps remain for EU customers of UK services.

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FCA extends temporary permissions regime deadline

The FCA extended the deadline for notifications for the temporary permissions regime to 30 October 2019. For EEA e-money and payment services firms, the notification window for temporary permission will re-open on 31 July and also close on 30 October.

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Consumer finance

FCA to revisit retail distribution and financial advice market

The FCA asked for feedback on a proposed approach to revisiting the Retail Distribution Review and Financial Advice Market Review, to assess whether these were successful and how new trends could affect development. The FCA expects to conduct research in the autumn.

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ESMA renews restriction on marketing CFDs to retail clients

ESMA Decision (EU) 2019/679 renewing the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients was published in the Official Journal and applies from 1 May 2019 for three months. ESMA states in the Decision that is still concerned about consumer detriment and a lack of proper protection. Meanwhile, the FCA announced that it has delayed its own final rules on the matter until the summer.

Read decision

Read FCA press release

FCA issues report on fair treatment of with-profits customers

The FCA published a report (TR19/3) following its thematic review of the fair treatment of with-profits customers, along with a Dear CEO letter summarising key findings. These were broadly positive.

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Read letter

FCA publishes paper on intergenerational finance

The FCA published a discussion paper (DP19/2) on the financial needs of different age groups in view of demographic and other trends. It plans to hold a conference in July to discuss the issues raised and responses received.

Read DP19/2

FCA proposes changes to mortgage advice rules

The FCA issued a consultation paper (CP19/17) proposing changes to mortgage advice and selling standards, following its Mortgages Market Study. The deadline for responses is 7 July 2019 and the FCA plans to release final rules in Q4 2019.

Read CP19/17

Preliminary ruling on early repayment under the Consumer Credit Directive

Advocate General Hogan of the European Court of Justice delivered a preliminary ruling that, under Article 16(1) of the Consumer Credit Directive, where a consumer makes an early repayment, the reduction to which he is entitled may relate to costs whose amount does not depend on the length of the credit agreement. This also cannot be limited to expenses saved by the lender as a result of the early repayment.

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Payment services

OBIE issues further version of Open Banking Standard

The Open Banking Implementation Entity (OBIE) issued another update to the Open Banking Standard, version 3.1.2, amending the Customer Experience Guidelines and Operational Guidelines.

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Commission adopts commitments by Mastercard and Visa to lower inter-regional interchange fees

The European Commission announced it had adopted commitments offered by Mastercard and Visa to reduce multilateral interchange fees for payments in the EEA with consumer cards issued outside it, by as much as 40%. These are now legally binding under EU competition law.

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FCA issues reminder on PSD2 technical standards

The FCA issued a reminder to payment service providers about technical standards under PSD2 that come into effect on 14 September 2019, and its approach, regarding opening up accounts, strong customer authentication and reporting and notification requirements.

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Advocate General says payee cannot make payment under SEPA direct debit dependent on payer’s residence

In an opinion on Verein für Konsumenteninformation v Deutsche Bahn (Case C-28/18), Advocate General Szpunar of the European Court of Justice said that a payee cannot require a payer to have a residence in the same Member State as the payee to make payments by single euro payments area (SEPA) direct debit: if direct debit is available, it must be made accessible in a non-discriminatory way.

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PSR follow-up consultation on confirmation of payee

The Payment Systems Regulator (PSR) issued a consultation paper (CP19/4), following up from a previous one (CP18/4), on general directions for confirmation of payee. The aim is to protect payment service users from authorised push payment scams and prevent payments being sent to the wrong accounts.

Read CP19/4

PSR consults on market review of card-acquiring services 

The PSR opened a consultation (MR18/1.4) on its proposed approach to the merchant survey part of its market review into card-acquiring services. The current proposal is that the PSR will survey small and medium-sized merchants. The deadline for responses is 13 June 2019.

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General insurance

Implementing Regulation under Solvency II published

Commission Implementing Regulation (EU) 2019/699 setting out information for the calculation of technical provisions and basic own funds for reporting under Solvency II was published in the Official Journal and entered into force on 8 May 2019.

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EIOPA reports on big data in car and health insurance

EIOPA published a report on big data in motor and health insurance, noting that traditional sources such as demographic data are increasingly combined with new ones with greater granularity and an increased use of third-party data sellers.

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Financial crime

Regulation on mitigating money laundering and terrorist financing risks in third countries published

Commission Delegated Regulation (EU) 2019/758 supplementing Directive (EU) 2015/849 (MLD4) on measures to mitigate money laundering and terrorist financing risk in certain third countries was published in the Official Journal. The Regulation is relevant to institutions operating in third country which do not allow group-wide policies and procedures.

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Enforcement

ICO fines PPI claims company for unlawful marketing

The Information Commissioner’s Office (ICO) fined a payment protection insurance (PPI) claims management company £120,000 for unlawful direct marketing. The firm had sent over 3.5m text messages about PPI compensation claims in the first half of 2018.

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APPG on fair business banking intervenes in Supreme Court case

The Supreme Court granted permission to a firm acting for the APPG on Fair Business Banking to intervene in the hearing of a case, Marex Financial Ltd v Carlos Sevilleja Garcia, involving the rule against reflective loss. The aim is for the court to be able to take account of the APPG’s experience and public policy considerations. This is the first such intervention.

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New asset-freezing regulations

The Cyber-Attacks (Asset-Freezing) Regulations 2019, which come into force on 11 June, set up domestic enforcement for a new sanctions regime relating to cyber-attacks threatening the EU or its member states.

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FCA to be investigated over London Capital & Finance

An independent investigation into the FCA's supervision of collapsed investment firm London Capital & Finance (LCF) has begun, and will report to HM Treasury. The Treasury will also review the marketing and regulation of the kinds of investment products involved.

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Speeches

FCA speech on fintech and innovation

The FCA’s executive director of strategy and competition, Christopher Woolard, gave a speech on the FCA's fintech unit, Innovate, and on the Global Financial Innovation Network, which brings together regulators for 12 jurisdictions.

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Chancellor and BoE governor give speeches on fintech

Philip Hammond, Chancellor of the Exchequer, and Mark Carney, Governor of the Bank of England (BoE), gave speeches in support of fintech and on the UK's role in the sector.

Read Chancellor's speech

Read Governor's speech

FCA speeches on future of regulation and data

Christopher Woolard gave a speech on the FCA’s business plan and priorities for 2019/20, and more broadly the future of finance and its regulation, with a special focus on innovation and data.

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The FCA's chief economist, Robin Filner, also gave a speech on the value of data.

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BoE speech on operational resilience

The BoE Director of Supervisory Risk Specialists, Nick Strange, gave a speech on operational resilience for firms, including in relation to cybersecurity, setting out the BoE’s expectations and approach.

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PRA speech on post-Brexit regulation

The PRA's CEO, Sam Woods, gave a speech outlining six principles to form the basis for the style of post-Brexit financial regulation: robust prudential standards; responsible openness; proportionality and sensitivity to business models; dynamism and responsiveness; consistency; and accountability.

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This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2019. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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