Episode 59: Regulatory update - FCA regulation updates and challenges
May 30, 2024
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Regulatory experts David Morrey and Ben Farmer discuss FCA updates like naming and shaming firms, PRA Business Plan focus on international policy, AI regulation, anti-greenwashing guidance. Also, consultations on extending sustainability disclosure, enforcement action against Link Financial Services for Woodford funds oversight failures.
FCA proposes naming firms under investigation, facing opposition from industry for potential negative impact on UK business attractiveness.
PRA's business plan emphasizes international policy, AI regulation, and managing deposit liquidity risks to ensure safety and soundness of banks.
FCA updates guidance on sustainability disclosure, extending labels to wealth managers, and enhancing financial crime focus on data asymmetry and big tech collaborations.
Deep dives
Potential Naming and Shaming of Organizations Under Investigation by FCA Faces Opposition
Organizations under investigation, not yet found guilty, may be named and shamed, proposed by FCA. Industry groups, including UK finance and PIMFA, oppose this move. Chancellor's intervention urged due to potential negative impact on UK's business attractiveness and investor confidence. FCA faced critique for this approach, drawing concerns from politicians and industry players.
Review of PRA Business Plan Highlights Standard Initiatives, Including AI Integration
PRA's business plan emphasizes crucial sectors like safety soundness of banks and developing international policies. Specific focus on AI integration and measures for managing deposit liquidity risks. Highlights areas of innovation in regulatory frameworks to balance risks and benefits, ensuring effective implementation of plans.
Consultation Papers on Investment Management Rules and Sustainability Disclosures
FCA's consultation papers discuss extending sustainability labels to wealth managers and offering optional bundling of investment research. Sustainability disclosure labels to be mandatory for related funds, extending to discretionary portfolio managers. Objective: aligning with sustainability standards and ensuring fair, accurate disclosure in investment management practices.
Assessment of Financial Crime Guidance and Post-Implementation Review on Travel Insurance Signposting Rules
FCA updates financial crime guidance, emphasizing risk areas related to data asymmetry in financial services and big tech collaboration. Post-implementation review of travel insurance signposting rules shows positive impact on market but lower policy sales than anticipated. FCA to evaluate criteria for inclusion on directories and potential threshold adjustments for customer referrals.
Enforcement Actions and Financial Oversight in Investment Management
Link Financial's enforcement notice highlights failure in supervising fund liquidity. Review traces inaccuracies and mismanagement in fund liquidity, impacting investor losses. Link's business assets transferred to redress scheme, avoiding any fines but signaling significant operational weaknesses in fund management. Ongoing scrutiny on Neil Woodford's involvement in investment management operations.
Reflection on Regulatory Developments and Future Focus Areas in Financial Services
Podcast concludes with reflection on regulatory updates and future focus in financial services. Highlights include vulnerability assessments under consumer duty and risks of data asymmetry in big tech collaborations. Regulatory interventions anticipated in critical infrastructure designations and sustainable finance disclosures. Continual monitoring of industry practices and compliance standards emphasized for upcoming regulatory reviews.
The controversy over the FCA’s proposal to name and shame firms under investigation and the political and industry opposition to it, PRA Business Plan and its focus on international policy, growth and AI regulation and the FCA’s finalised guidance on anti-greenwashing are just some of the key topics discussed by David Morrey and Ben Farmer in this episode. Other developments discussed include; FCA’s consultations on extending the sustainability disclosure regime to portfolio managers and FCA’s enforcement action against Link Financial Services for its failures in overseeing the Woodford funds.
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