PIMFA Weekly News Bulletin - 12 July 2021

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PIMFA WEEKLY NEWS BULLETIN | 12 July 2021 Dear Nigel,

Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read this week's latest industry news impacting you and your firm.

The Future Framework for Regulation of Financial Services

The Treasury Committee has published its report on The Future Framework for Regulation of Financial Services, which considers the future of financial services following the Brexit transition period and examines how financial regulations should be set and scrutinised by Parliament. The Committee agrees with the Treasury that the EU financial services rules that were on-shored during the process of leaving the EU should be moved into the regulators' rule books. The Committee also thinks that the independence of regulators from political interference is one of the key aspects of UK financial services regulation and that regulators must be free to choose what they share with the Treasury.

The Committee acknowledges there may be a role for the Government to use ‘activity based’ principles to instruct regulators’ approach to specific business sectors, but it recommends that the Government is sparing in this respect. It recommends that the Treasury consider how the decision-making processes of the Financial Ombudsman Service would interact with the future regulatory framework for the FCA. Regarding

Parliamentary scrutiny, the Committee believes that effective scrutiny of regulatory proposals can be more targeted.

The FRC Statement of Intent on Environmental, Social and Governance challenges

On 7 July The Financial Reporting Council published their Statement of Intent on Environmental, Social and Governance challenges. The paper sets out areas in which there are issues with ESG information if companies are to report in a way that meets the demands of stakeholders, how to address some of these demands and the FRC’s planned activities in this area. There is an ever-increasing amount of regulatory change, and as these changes are implemented, there remain a range of underlying issues with the production, audit and assurance, distribution, consumption, supervision and regulation of ESG information.

Last year the FRC announced an expectation that public interest entities should report against the Task Force on Climate-related Financial Disclosures framework and the Sustainability Accounting Standards Board (SASB) sector-specific metrics relevant to the entity as building blocks towards this international approach and to assist investors to understand material ESG issues at companies. The FRC has assessed UK SASB reporting practice and has also published a snapshot of market practice, showing an increase in uptake, but that more and better reporting is needed.

First UK – India Financial Markets Dialogue

On 8 July, senior officials from HM Treasury and the Indian Ministry of Finance held the 1st UK-India Financial Markets Dialogue. A number of areas was discussed with a view to deepening the financial services relationship - focusing on banking, insurance and capital markets. The Dialogue was established at the 10th Economic and Financial Dialogue (EFD) in October 2020 to deepen bilateral ties in the financial sector. Financial Cooperation is one of the key pillars of the 2030 Roadmap adopted by the two countries during the recent meeting of the two Prime Ministers and the India-UK Financial Market Dialogue is one of the key elements of this Financial Cooperation.

As two services-driven economies, both sides agreed there is significant scope for strengthened financial services cooperation between India and the UK. Both sides agreed to continue to engage bilaterally on these areas in the coming months, in the run up to the next EFD and the beginning of negotiations for a future India-UK FTA, both expected to take place later this year. Participants then welcomed leaders of the India-UK Financial Partnership (IUKFP), noting the significant progress achieved since the last EFD in contributing to policy development, particularly the Partnership’s efforts towards promoting greater links between GIFT City and the UK financial services ecosystem.

Both sides look forward to formally collaborating with the Partnership’s FinTech work stream at the next UK-India FinTech Joint Working Group meeting and to the launch of policy papers on GIFT City, FinTech and cross-border trade and investment at the next EFD and beyond.

Scammers target over £2 million in pension pots in the last five months

The FCA’s new research shows pension holders were nine times more likely to accept advice from someone online than they would from a stranger met in person, and are five times as likely to be interested in a free pension review from a stranger online than someone in their local pub. The FCA is urging anyone saving for retirement to ‘flip the context’ and imagine what they would do if they received pension advice from a stranger while enjoying a quiet pint in their local, or out shopping with friends. A total of £2,241,774 has been reportedly lost to pension scammers since the start of 2021 (January 2021-May 2021). Some victims of pensions scams are reluctant to report that they have been scammed or do not realise they have been scammed until years later, so the total amount lost may be much higher. The average loss this year was £50,949, according to complaints filed with Action Fraud, more than double last year’s average (£23,689).

Scammers target pension pots big and small, with reported losses ranging from under £1,000 to as much as £500,000. Five common warning signs of a pension scam, according to the FCA, include: being offered a free pension review out of the blue; being offered guaranteed higher returns; offered to help to release cash from your pension, even though you’re under 55; high-pressure sales tactics – scammers may try to pressure you with

‘time-limited offers,’ or even send a courier to your door to wait while you sign documents; unusual investments which tend to be unregulated and high risk.

Latest PIMFA Press Releases

Latest PIMFA Press Coverage

FCA must come forward with tangible, tested proposals to strengthen the financial promotions rules PIMFA welcomes reduction in proposed FCA fees

IFA Magazine: PIMFA calls for FCA to strengthen the financial promotions rules

Financial Reporter: FCA reduces introducer AR flat fee from £250 to £75 after industry backlash

PIMFA calls for FCA proposals to give stronger nudge to pension savers towards advice International Adviser: Help for UK PIMFA welcomes Treasury Select Committee report recommending change in culture at Financial Conduct Authority

professionals and firms to deliver services overseas

Actuarial Post: Call for FCA proposals to lead savers towards advice

UK releases Presidency programme for COP26 climate summit in Glasgow

The UK’s Presidency Programme for COP26 was unveiled on 7 July to drive forward climate ambition and action against key issues alongside two weeks of intensive climate negotiations in Glasgow. Beginning with the World Leaders Summit on 1 and 2 November, each day will focus on a different theme, from advancing progress on key priorities like clean energy, zero-emission transport and protecting nature, to ensuring the participation of women, girls and young people is at the centre of climate action.

Cross-cutting themes like science, innovation and inclusivity will run throughout the programme, as will the need to mitigate climate change, adapt to its impacts, and mobilise public and private finance. Exhibitions and events in the UK-run zones in Glasgow will also

feature throughout the programme to showcase progress from the whole of society, governments & businesses.

The Presidency programme will run alongside the formal negotiations which sit at the heart of the UN summit and will focus on closing off the outstanding aspects of the Paris Agreement. A detailed programme and negotiations schedule will be published shortly.

The UK Regime for Overseas Firms – a new IRSG report

According to a new report from the International Regulatory Strategy Group (IRSG), in partnership with Hogan Lovells, targeted changes to the UK’s regulatory regime for overseas firms would boost the UK’s attractiveness to international firms, without reducing regulatory standards or introducing risk. The report, ‘The UK regime for overseas firms’, found that the UK’s existing framework for overseas firms was generally considered internationally competitive, being based on the principle of openness to cross-border trade.

However, the IRSG did identify areas for improvement as many rules remain overly complex or poorly signposted.

Currently, firms from countries covered by an existing UK equivalence determination, denoting they have similar rules to the UK, are in a worse position than those operating under the UK’s general Overseas Person Exclusion (OPE). The IRSG urges UK government and regulators to reform the equivalence framework inherited from the EU to make sure it takes into account the UK’s existing competitive overseas regime. They should also take the opportunity to make the UK’s approach to granting market access clearer and more coherent.

EVENTS & LEARNING

Diversity & Inclusion Awards Entries Close: 17 August | Event Date: 20 October 8 Categories 15 Judges 5 weeks remaining to submit your entry FREE to Enter 'There is substantial research to show that diversity brings many advantages to an organisation: increased profitability and creativity, stronger governance and better problem-solving abilities. Employees with diverse backgrounds bring to bear their own perspectives, ideas and experiences, helping to create organizations that are resilient and effective, and which outperform organisations that do not invest in diversity.' [World Economic Forum] The business case for diversity & inclusion (D&I) is clear, and PIMFA believe it is important to demonstrate the fantastic work being carried out across the sector to develop a diverse and inclusive industry.

We are encouraging all organisations - large or small - at whatever point they are on with their D&I Journey to enter. Whether you are just starting out and looking for inspiration and ideas or are further along and can share experiences and insight, we want to hear from you about the work you are doing - all 8 of the categories are available to enter here.

Find out more and start your entry

View upcoming PIMFA Events and Learning here.

PARTNER EVENTS

WEBINAR How to Die Well - A practical guide to death, dying and loss 29 July 2021 | 18:30 - 19:30 In partnership with Royal London, photographer and filmmaker Rankin and host Andrea Fox will be joined by Guardian columnist and bestselling author Rhik Samadder, palliative care expert Dr Kathryn Mannix, and financial expert and broadcaster Sarah Pennells.

Since the outbreak of the COVID-19 pandemic, the subject of death has become more prominent in our daily lives than ever before – and yet we still find it incredibly hard to talk about. This is understandable, but important to overcome if we want to better prepare ourselves and our loved ones.

This livestream event will blend personal stories with emotional, practical, & financial guidance to show that dying well can be a fundamental part of living well.

Find out more and register here.

FCA, PRA and Bank of England set out plan to improve diversity and inclusion in regulated firms

The FCA, Prudential Regulation Authority (PRA) and Bank of England are seeking views on regulatory plans to improve diversity and inclusion in financial services. In a discussion paper, the regulators have set out policy options including, among others, the use of targets for representation, measures to make senior leaders directly accountable for diversity and inclusion in their firms, linking remuneration to diversity and inclusion metrics and the regulators’ approach to considering diversity and inclusion in non-financial misconduct.

The discussion paper also focuses on the importance of data and disclosure in order to enable firms, regulators and other stakeholders to monitor progress. The regulators believe that increased diversity and inclusion will advance their statutory objectives by resulting in improved governance, decision-making and risk management within firms, a more innovative industry, and products and services better suited to the diverse needs of consumers. To assess progress the authorities are proposing collecting data from firms about their workforce. Prior to this there will be a one-off, pilot survey later this year which will help to develop the proposals set out in the discussion paper and test how firms’ can provide data with a view to considering regular reporting in the future.

The regulators are also asking for views on how any changes could be tailored to specific categories of firms to ensure it is proportionate. The feedback and data received will be used to develop detailed proposals, with a joint consultation planned for Q1 2022. The discussion paper is open until 30 September 2021.

FCA consults on reforms to improve the effectiveness of UK primary markets

On 5 July the FCA launched a consultation on a series of proposed reforms to improve the effectiveness of UK primary markets, alongside a discussion of how it might continue to develop the regime to ensure the UK remains a competitive and dynamic market. The FCA’s suggested reforms seek to address and build on the proposals made by the UK Listing Review, chaired by Lord Jonathan Hill, and the Kalifa Review of UK FinTech, to ensure that the UK remains an attractive place to grow and list successful companies. The changes aim to reduce barriers to listing for companies and, as a consequence, increase the range of investment opportunities for consumers on UK public markets.

The FCA is also proposing measures to ensure the listing regime continues to have high standards of market integrity and to simplify its rulebook. The proposals include allowing a targeted form of dual class share structures in the premium listing segment and reducing the required free float from 25% to 10% in certain circumstances. Alongside this, and as part of the same paper, the FCA has set out a discussion seeking views on the overall structure of its listing regime and whether wider-reaching reforms could improve the longer-term effectiveness of the regime. The discussion paper seeks to understand the

value placed by market participants on different aspects of the FCA’s current regime as well as to gather views on how the regime might be modernised.

The FCA is consulting for 10 weeks on these proposals with a closing date of 14 September 2021. Subject to consultation feedback and FCA Board approval, it will seek to make relevant rules before the end of 2021.

European Commission puts forward new Sustainable Finance Strategy and proposes new European Green Bond Standard

On 6 July, The European Commission adopted an ambitious and comprehensive package of measures to help improve the flow of money towards financing the transition to a sustainable economy. By enabling investors to re-orient investments towards more sustainable technologies and businesses, these measures will be instrumental in reaching the EU’s climate and environmental targets. The new Sustainable Finance Strategy sets out several initiatives to tackle climate change, and other environmental challenges, while increasing investment and the inclusiveness of small and medium-sized enterprises (SMEs) in the EU's transition towards a sustainable economy.

The European Green Bond Standard proposal will create a high-quality voluntary standard for bonds financing sustainable investment. Finally, the Commission adopted a Delegated Act on the information to be disclosed by financial and non-financial companies about how sustainable their activities are, based on Article 8 of the EU Taxonomy.

The Sustainable Finance Strategy includes six sets of actions to extend the existing sustainable finance toolbox to facilitate access to transition finance; improve the inclusiveness of SMEs, and consumers, by giving them the right tools and incentives to access transition finance; enhance the resilience of the economic and financial system to sustainability risks, increase the contribution of the financial sector to sustainability, ensure the integrity of the EU financial system and monitor its orderly transition to sustainability and develop international sustainable finance initiatives and standards, and support EU partner countries.

CBI/PWC Financial Services Survey

Business volumes over Q2 grew across the financial services sector at the fastest pace since June 2017, after stalling in the previous quarter, with volumes set to grow at a similarly strong pace over the next three months, according to the latest CBI/PWC Financial Services Survey.

The survey, conducted in June with 118 respondents, also found that profitability grew at the fastest pace since December 2015, and is set to grow at a slightly slower rate over the next three months. Optimism rose for the fourth consecutive quarter, but to a somewhat lesser extent than the three months to March. Employment grew for the first time since December 2019, after previously falling for five consecutive quarters. All sub sectors saw unchanged or rising headcount except for banking where employment declined. Overall, numbers employed are expected to grow at a faster pace in the quarter to September.

IT spending is set to increase, with expectations at their strongest in nearly two years. The COVID-19 pandemic has created a shift towards remote working, with a large majority of firms also citing changes in employee engagement and reappraisal of office space. More than eight in ten FS firms are planning to implement more hybrid ways of working. Firms expect changes to future ways of working to have a broadly positive impact on productivity, investment in collaboration technology, employee wellbeing, diversity and inclusion and social mobility.

The biggest drivers of disruption for FS businesses over the year ahead remained changes in regulation, followed by accelerations in digital technologies. COVID-19 also remained a prominent driver of disruption. Firms appear to have moved further along in their adoption of the cloud, with a greater proportion in the implementation and transition realisation stages. FS firms expect to invest more in cyber security over the next twelve months, compared to the previous twelve. Nearly nine out of ten financial services businesses anticipate a greater need for skills in technological proficiency.

Eight in ten financial services firms report that Environmental, Social and Governance (ESG) issues form part of their business’ objectives. Nearly nine in ten financial services businesses see diversity and inclusion (D&I) forming part of their business objectives.

Actively increasing diversity at non-management level was cited by firms as an action

taken to boost D&I, followed by actively increasing diversity within management areas of the workforce. Reforming more general recruitment practices also ranked highly.

PIMFA's Consultation Responses

PIMFA’s latest Consultation Response is to the FCA's CP21/9 on the changes to UK MiFID’s conduct and organisational requirements.

Read this and all other PIMFA consultation papers here.

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