PIMFA Weekly News Bulletin - 21 March 2022

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PIMFA WEEKLY NEWS BULLETIN | 21 March 2022 Dear Nigel,

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

Russian invasion of Ukraine: Latest Updates

Chancellor calls on firms to stop investing in Russia The Chancellor and Economic Secretary to the Treasury met with asset managers and owners last week to discuss UK investment in Russia and welcomed the consensus on the need to economically isolate Putin and his regime.

Chancellor Rishi Sunak has called on firms to “think very carefully” about any investments that would in any way support the barbaric Putin regime. His call is part of the government’s strategy to hold Putin to account and to send a clear message that the invasion will come at a huge economic cost to Russia. The UK government recognises that some firms may find winding down their positions is a long-term process, given market conditions and the ability to sell assets due to global sanctions.

However, the Chancellor has been clear about the value of the strong signal of intent made by many firms to date and said the government would do all it could to stand behind and support businesses who want to divest. He welcomed commitments from firms such as

BP, Shell, Aviva, M&G and Vanguard, who have announced their intention to reduce or sell holdings in Russia in recent days.

In a bid to ensure Putin and his regime feel the maximum economic consequences, the Chancellor said there was no argument for new investment in the Russian economy from UK firms. The UK has worked with allies to impose sweeping sanctions on Russia, including designating more than 300 individuals and entities at the heart of Putin’s regime, freezing tens of billions of pounds in assets, and working at pace to sanction more oligarchs with close links to the Kremlin.

In response to the Chancellor’s call, the FCA has set out its guidance on this issue. PIMFA members can also access our useful Sanctions Compendium on our website (https://www.pimfa.co.uk/members/comms-publications/guides-for-members/) please note this is for members only and log in is required.

UK suspends tax co-operation with Russia The UK has suspended all exchange of tax information with Russia and Belarus under the UK’s exchange of information agreements. The tax information is exchanged as part of global collaboration to address tax compliance risks. However, the decision to suspend tax information exchange will ensure the UK is not supplying Putin’s regime with information that could lead to an increased tax benefit or yield for Russia.

Suspending exchange of tax information, which came into effect on 17 March, means that Russia will no longer receive information under any of the UK’s exchange of information agreements: Exchange of Information on Request, Common Reporting Standard or Country-by-country Reporting. These suspensions are one of a number of tax measures being taken by HMRC and the Treasury to support Ukraine and inflict economic pain on Putin’s regime.

Joint statement from UK financial regulatory authorities on sanctions and the crypto-asset sector The UK, in partnership with allies across the globe, has imposed an unprecedented package of economic sanctions on Russia and Belarus, in response to Russia’s invasion of Ukraine on 24 February.

The UK financial regulatory authorities reiterate that all UK financial services firms, including the crypto-asset sector, are expected to play their part in ensuring that sanctions

are complied with. The UK financial regulatory authorities are working closely with partners in government and law enforcement both in the UK and abroad, including regulatory authorities, to share intelligence and act to prevent sanctions evasion, including through crypto-assets.

The full statement can be accessed here.

FCA to consult on use of 'side pockets' for retail funds with exposure to sanctioned and suspended Russian assets The FCA has begun discussions with stakeholders about options to allow UK authorised retail funds to make exceptional use of 'side pockets' given the significant practical challenges in disposing of Russian and Belarussian assets in the context of suspensions and extensive global sanctions.

Side pockets would potentially give authorised fund managers the option to separate Russian and Belarussian assets that are difficult to sell and/or hard to value, from the fund’s other core investments. Side pockets could allow new investors to enter the fund without getting exposure to Russian assets, existing investors to redeem the rest of their investment, while illiquid Russian assets remain in the separate side pocket (and in many cases marked to zero), while retaining rights to any eventual value, some funds to end their current suspension of dealing.

The FCA will consult on proposals with the aim of ensuring that any side pockets that are introduced, and the date on which the side pocket takes effect, treat existing, redeeming and subscribing investors fairly, and do not encourage speculative new investment at the expense of existing investors. The use of side pockets by the authorised fund manager would be optional, based on acting in the best interests of each fund it manages. The side pocket proposals would be limited in scope to assets that are illiquid as a result of the Russia/Ukraine war. The precise scope would be determined as part of the consultation.

Economic Crime (Transparency and Enforcement) Act On the 15th March 2022, the Economic Crime (Transparency and Enforcement) Bill was given the Royal Assent. The new Act is an important development, creating a register of overseas entities, strengthening unexplained wealth orders and introducing a strict civil liability test for monetary penalties regarding breaches of sanctions. Overseas entities will have a 6-month transitional period from Parts 1 and 2 of the Act coming into force to dispose (sell off) their land or register.

You can read the Act in full here.

PIMFA Private Investor Indices Survey

The next Private Investor Indices Survey submissions opens at 9am on 11th April and closes at 5pm on 27th April.

Please visit our website to complete the survey.

PIMFA's Latest Consultation Responses

Our latest Consultation Responses include: •

PIMFA's response the FCA Compensation Framework Review

•

PIMFA’s response to FCA’s Call for Evidence on Improving the Appointed Representatives Regime

•

PIMFA response to A New Consumer Duty – Feedback to CP21/3 and further consultation

Read these and all other PIMFA consultation papers here.

Latest PIMFA Press Releases

Latest PIMFA Press Coverage

FCA sets out aims to increase consumer

Actuarial Post: How British Steel

confidence in investment market at

Pensioners were failed in stark detail

PIMFA’s Virtual Fest 2022 Capa Data: PIMFA urges Govt to use FCA FCA willingness to engage on FSCS is

fines effectively

positive, but real progress sits with the Government

Daily Mirror: Victory! Fraud levels could 'plummet' with new law to tackle online

PIMFA’s Virtual Fest adds Shadow

scam advertising

Economic Secretary to the Treasury Tulip speaker Siddiq as second keynote

Money Marketing: Liz Field: Provide the tools to exercise freedom and choice

PIMFA delighted by Government announcement that it will include paid-for

Citywire New Model Adviser: ‘FCA

Online online adverts within scope of

reforms to AR regime will have detrimental

Safety Bill to tackle fraud

impact on networks’

& PIMFA delighted to welcome Coutts

Professional Adviser: PIMFA adds Coutts

Co’s James Clarry to its Board

& Co's James Clarry to board

PIMFA Events

PIMFA is once again taking the show on the road and the team, along with partners Shoosmiths and Mitigo Cyber Security, will be meeting members and others in Manchester and Birmingham on March 29 and 30 March.

These PIMFA Regional events will offer attendees the opportunity to listen to experts on topics including: •

Consumer Duty

•

Cyber Resilience

•

And a comprehensive regulatory update

At each event there will be networking opportunities to converse with industry colleagues.

Attendees will receive 3 hours of CPD for full attendance.

29 MARCH | MANCHESTER | 10:30 – 15:30 Click here to register 30 MARCH | BIRMINGHAM | 10:30 – 15:30 Click here to register

Book Now

Week 2 of the Virtual Fest 2022 begins today! You can catch up with every session from last week on the platform as well as watching all upcoming sessions this week.

There will be content everyday this week at 10am and 3pm, as well as a session at midday on Wednesday.

Registration is still open - please click here to confirm your place. It is FREE to attend for Members.

Upcoming sessions this week will be delivered by Tulip Siddiq MP, The Shadow Minister for Treasury, The Openwork Partnership, Herbert Smith Freehills, HSBC, Moxtra, Dreams, City of London Police, AxiomHQ and many more.

Read more about the event here.

Read more about the event

PIMFA Learning

PIMFA WEBINAR: EMERGING THEMES: REGULATORY GUIDANCE FOR WEALTH MANAGERS IN 2022 5 April | 11:00 - 12:00 | FREE TO ATTEND In 2022, Wealth Management firms face a daunting schedule of regulatory changes. ESG, Operational Resilience and Consumer Duty are just a few critical areas amongst many others that are competing for your time, limited budgets and finite resources.

In this FREE 60-minute webinar, Worksmart’s Director of Regulation & Market Engagement Julie Pardy and Shoosmith’s Partner in the Dispute Resolution and Litigation team, Daren Allen, make sense of what Risk and Compliance professionals need to know to steer their firms clear of the dangers posed by an increasingly challenging and complex regulatory landscape.

Please click here to register.

View Upcoming PIMFA Events & Learning here

Partner Events

18th ANNUAL AML & FINANCIAL CRIME SEMINAR 27 - 28 April Join us at the seminar hosted by Herbert Smith Freehills, providing essential updates from the Home Office, FCA, HMRC, OFSI, FCDO, JMLSG, Companies House, CPS, Met Police and leading cross-industry experts!

The full programme and speaker faculty can be viewed here.

Please click here to register and use code 'PIMFA' to get a 10% discount.

Bank of England confirms rise in interest rates

Interest rates have increased for the third time in four months.

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8-1 to increase Bank Rate by 0.25%, to 0.75%. Based on its current assessment of the economic situation, the Committee judges that some further modest tightening in monetary policy may be appropriate in the coming months. The global economic outlook has deteriorated significantly following Russia’s invasion of Ukraine in late February, and the associated material increase in the prices of energy and raw materials.

Since the MPC’s previous meeting, indicators of financial market volatility have increased and risky asset prices have fallen, reflecting the expected global impact of Russia’s invasion of Ukraine. In the UK the increases in medium-term inflation compensation measures have taken their levels further above their average of the past decade. The sterling effective exchange rate has fallen by 1.7% since the previous MPC meeting, and to a greater extent against the US dollar.

Bank staff now expect GDP to increase by around ¾% in 2022 Q1. Inflation is expected to

rise to around 6% in February and March before rising further, to around 8%, in April, and remaining close to that rate for the rest of the quarter.

FCA Research Note: Do consumers understand the risks associated with different ways of saving?

In a research note published on 18 March, the FCA used the latest Financial Lives survey to explore the extent to which consumers understand the risks and potential returns associated with different ways of saving. This understanding must include being able to make good quantitative assessments of risks and returns, not just whether an outcome is more or less likely.

The FCA’s research focuses on the consumers’ ability to assess the likelihood of future returns using probabilities. The results indicate that 38% of consumers are able to assign probabilities to future outcomes and show a high degree of financial sophistication. 29% are able to assign probabilities and show a moderate degree of financial sophistication.

The remaining 33% are either not able to assign probabilities or show a low degree of financial sophistication.

This work also confirms that a substantial number of consumers with specific characteristics of vulnerability show considerable financial sophistication. This suggests targeting support specifically towards those with low financial sophistication might be more effective at improving saving decisions than focusing exclusively on other characteristics of vulnerability.

IOSCO’s 2022 Sustainable Finance work plan

The International Organization of Securities Commissions (IOSCO) has adopted a farreaching 2022 work plan to develop sustainable finance.

At its meeting on 9 March, the Board stressed the importance of mitigating greenwashing and doing what is necessary to create reliable information on sustainability impacts for investors. IOSCO is planning a timely and thorough review of the soon-to-be-published IFRS International Sustainability Standards Board (ISSB) Exposure Drafts of proposed

climate and general sustainability disclosure requirements, as well as the final standards when they are produced. If IOSCO determines that the IFRS Sustainability Standards are fit for purpose, its decision would provide all 140 IOSCO member jurisdictions with the basis to decide how they might adopt, apply or be informed by the ISSB standards.

In parallel, IOSCO will also push forward work to develop assurance standards. IOSCO has identified independent assurance of the quality of corporate reporting of sustainability information as a key element of building trust in sustainability reporting. In addition, IOSCO will also step up its engagement with both national regulators and market participants to push for the implementation of its recommendations addressed to asset management and ESG ratings and data providers.

JMLSG Guidance is approved by HMT

On the 15th March, JMLSG announced that it had received HM Treasury ministerial approval to the following revisions of its guidance: Part I Chapter 5.7 (Monitoring customer activity) – updated Chapter Part II Sector 15 (Trade Finance) – updated sectorial piece Part II Sector 16 (Correspondent Relationships) – revised first page Part II Sector 17 (Syndicated Lending) – new paragraph 17.29A All revisions may be accessed under the “Revisions” tab under “Guidance”.

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