REGULATORY EXPERTISE
REGULATORY HORIZON SCANNER
Alexander McGregor Head of Policy SimplyBiz
As we near the end of 2023 , there are a number of significant regulatory challenges on the horizon for firms on which it ’ s worth keeping a watchful eye . Our Regulatory Scanner , pictured below , has been designed to give a forward view of some of these changes and the regulatory obligations they may place upon authorised firms , and we ’ ve expanded on some of these points below :
Regulatory Reporting A key challenge continues to be ongoing reporting obligations . We are seeing more and more returns being generated by the FCA , whether that is the insurance reporting obligations at the start of each year , the new economic crime levy , annual conduct rules reporting , new returns for firms with appointed representatives , or the quarterly baseline financial resources return which will go live from 2024 onwards . We know the FCA has committed to becoming a data-driven regulator so keeping on top of reporting requirements will be more important than ever to ensure your firm stays out of the spotlight .
Capital Adequacy We also know that the FCA has a suite of consultation papers pending which will be of interest to intermediary firms . Potentially the most noteworthy for investment firms is a review of capital adequacy requirements with a publication setting out proposals for reform due imminently . This consultation process will take time to play out , and any proposed increases will likely be fiercely contested by the industry . In line with the shift to outcomes-based regulation , I would expect the FCA to place more emphasis on a risk based , rather than a rules-based , approach going forward .
FSCS Reform There is also a consultation expected in relation to reform of the FSCS , with the current levy widely acknowledged as being unsustainable . Again , there is an indication that the FCA wants intermediary firms to be able to show more resilience , however it will also re-open the debate in other areas , like whether the level of product provider contributions remain at an appropriate level . We know the FCA wants to incentivise product providers to take a greater responsibility for the conduct of intermediaries with which they work .
Sustainable investment advice Finally , we have a FCA consultation pending specifically for financial advisers as distributors of information to retail investors on sustainable investments . This consultation will sit alongside and support wider reforms for product manufacturers in this area including the proposed new ‘ label regime ’ to make it easier to distinguish investment products according to the assets in which they invest . To use a label , a product will be expected to have an explicit sustainability objective in relation to a sustainable characteristic , i . e ., environmental , social or governance . The three new labels are expected to be as follows :
• Sustainable Focus – invests in assets that could reasonably be considered ‘ sustainable ’ or that align with a sustainability theme .
• Sustainable Improvers – invests in assets that are on a path to becoming more sustainable over time .
• Sustainable Impact – products that aim to achieve a positive , measurable real-world impact . These labels will be underpinned by a set of clear , objective criteria . There will be no hierarchy between the labels ; each is designed to deliver a different profile of assets and consumer preferences . Where a product has no label , this will indicate it invests in assets that do not meet the criteria for a sustainable classification . New information requirements under the proposed sustainable investment regime should make it easier for advisers and investors to easily access better quality product-level disclosures on the key sustainability related features of a product , and new rules will restrict the use of certain sustainability-related terms in product names and marketing material unless the product satisfies the requirement to use a label . We know that the current rules and guidance in this area are vague in terms of the level of detail that advisers are expected to go to when discussing sustainable investment strategies . We expect the implementation of the new label regime and the new consultation on how best to take sustainability matters into account and understand investors ’ preferences on sustainability when giving advice will provide increased clarity to intermediary firms . The great thing about consultation papers is that they offer firms like SimplyBiz a chance to have a voice and convey our beliefs in favour of the advisers we serve . We will be doing so , and we would
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