PIMFA Weekly News Bulletin - 29 March 2021

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PIMFA WEEKLY NEWS BULLETIN | 29 March 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 Latest on Brexit

EU - UK Trade and Cooperation Agreement to be ratified in the EP The European Parliament will finally ratify the EU – UK Trade and Cooperation Agreement (TCA) at a plenary session on 26 April. Ratification is the final step before the agreement legally comes into force both in the UK and EU. The deal has been implemented since 1 January 2021 under provisional application. The vote will come amid tensions between the two sides over the implementation of the Northern Ireland Protocol, as the UK unveiled plans to unilaterally extend grace periods on post-Brexit customs checks at Northern Ireland’s ports for at least six months and the rollout of the Covid 19 vaccine. The EU has launched legal action against the UK for the alleged breach of the Northern Ireland Protocol but wants the ratification to move forward regardless of the ongoing tensions.

ESMA assessing the significance of UK clearinghouses for the EU’s financial system Speaking at the Frankfurt Derivatives Forum on 24 September, Klaus Löber, Chair of the CCP Supervisory Committee at ESMA, said that ESMA’s temporary recognition of the UK

CCPs, ICE Clear Europe and LCH Limited, as third-country CCPs as from 1 January 2021 until 30 June 2022, was done in order to avoid cliff edge effects in the clearing domain and to minimise risks to financial stability at the end of the Brexit transition period. ESMA is currently defining a methodological framework for the assessment of the relevant systemic risks and supervisory implications, also taking into account the costs and benefits that may result from a potential relocation of clearing services.

By mid-2022, the Supervisory Committee will assess whether the services provided by the two CCPs are of a systemic nature that is too substantial to be safely provided from abroad.

EU Service Sub-Committee Report

On 24 March, the House of Lords EU Services Sub-Committee published its report, “Beyond Brexit: Trade in Services”, which examines the future UK-EU relationship on trade in services. The main conclusion of the report is that despite the TCA , the UK and EU still have work to do in overcoming the significant challenges that remain for trade in services.

It is in both sides’ mutual interests to ensure that UK-EU trade in services, which was worth £317 billion in exports, continues to flow as smoothly as possible. The TCA does not include substantive provisions on financial services, and delays to key decisions about the future relationship, particularly on equivalence, mean that the sector is still in a period of uncertainty, the report says.

The UK’s exit from the passporting regime has led to the movement of some activity to the EU and firms facing the challenges involved in navigating different market access requirements in each Member State. The Committee is concerned that, over time, this may lead to a big shift of people and assets out of the UK. The Committee recognises that the UK and the EU will seek to change their regulatory regimes where it is in either party’s interests, but calls on the Government not to disregard the value of a close UK-EU relationship in financial services.

FINANCIAL CRIME & CYBER RESILIENCE CONFERENCE 2021 21-22 April 2021 50% early-bird rates: Member: £75 / Non-Member: £150 (expires 31 March)

Join us next month for this year's 2 day virtual Financial Crime & Cyber Resilience Conference. Attendees will be able to join leading industry debates and hear from Financial Crime

and Cyber Security experts across

enforcement

the across

and

the

regulatory,

provider,

innovation

law

space.

All sessions are eligible for CPD and will have online Q&A's to give you the chance to get involved LIVE, and then be available on demand after the event. We are delighted to announce that our latest keynote speakers are: •

Dr Claudia Natanson, Chair – UK Cyber Security Council

•

Louise Marshall - EU Exit, Governance, Engagement, Operational Policy and Litigation – OFSI

For more info and to book, please click here.

PIMFA Request to Firms – Online Scam Dossier

As part of our campaign to get scams and financial harm included in the Online Safety Bill, we are compiling a dossier of online scams to build up an evidence base demonstrating the extent of the problem. We would therefore be very grateful if you could

send us any examples of online scams that you have come across. This could be in the form of case studies, scenarios, screen shots of cloned websites or social media ads.

Information relating to how a scam was detected and what factors raised any red flags would also be very useful. If you are able to help, please get in touch with Alexandra Roberts.

The US CFTC & FCA agree a Memorandum of Understanding

In view of the growing globalisation of the world's financial markets and the increase in cross-border operations and activities of regulated entities, the United States Commodity Futures Trading Commission and the UK's FCA have reached a Memorandum of Understanding regarding cooperation and the exchange of information in the supervision and oversight of certain regulated firms that operate on a cross-border basis in both the United States and the United Kingdom.

The CFTC and FCA express their willingness to cooperate with each other in the interest of fulfilling their respective regulatory mandates in the context of supervising firms within the scope of the MOU, particularly in the areas of: protecting consumers; fostering the integrity of, and maintaining confidence in, financial markets; and reducing systemic risk.

FCA Launches New Whistleblowing Campaign

The FCA has just started a new campaign to encourage individuals working in financial services to report wrong-doing. In support of the campaign, the FCA has updated its website providing more information for potential whistleblowers and emphasising the confidentiality processes in place. On the website, you can now find materials for firms to share with employees and a digital toolkit for industry bodies, consumer groups and whistleblowing groups to encourage individuals to have confidence to step forward. There is also a whistleblowing infographic showing how to report concerns.

You can access this information here.

Latest PIMFA Press Releases

PIMFA joins Which? and others in call to tackle growing threat from online scams PIMFA welcomes continued relaxation of 10% rule and consultation on permanent change

Latest PIMFA Press Coverage

Citywire: Podcast - Internet giants profiting from gov't inaction on online scams The i newspaper: Government’s Joint Fraud Taskforce quietly taken back under Home Office control

PIMFA backs calls for financial harm to be included in Government’s Online Safety Bill

IFA Magazine: PIMFA welcomes continued relaxation of 10% rule and consultation on permanent change

PIMFA, Which?, UK Finance, FSCS and Work & Pensions Select Committee Chair

WealthBriefing Compliance Matters: FCA champions telltales with new campaign

Rt. Hon. Stephen Timms MP call for economic harm to be included in the Government’s forthcoming Online Safety

FT Adviser: FCA to consult on reforming 10% drop rule

Bill FCA recognises need to ‘up our game’ and admits FSCS levy is ‘unsustainable’

The Herald Scotland: 'Oversight failure': Over 14,000 get 10m compensation over collapse of SIX Scots community banks

at PIMFA Virtual Fest Citywire: FSCS levy would be 'significantly Government committed to UK remaining a

reduced' by harms law, claims MP

global hub for wealth management, Economic Secretary to the Treasury John Glen tells delegates at PIMFA’s Virtual

Money Marketing: Blog - Would a judicial review of FCA failures be worth it?

Fest 2

PIMFA Quarterly Asset Allocation Survey Opens Soon!

The Q2 2021 PIMFA asset allocation survey opens on Tuesday 6th April.

Complimentary peer group comparison reports are available to all participating PIMFA

member firms.

To find out more, email indices@pimfa.co.uk.

EVENTS & LEARNING

PIMFA Webinar PROFESSIONAL INDEMNITY INSURANCE – THE FULL STORY 2021 27 April 2021 FREE to attend This 60 minute webinar will focus on the subject of Professional Indemnity Insurance for Wealth Managers from three perspectives: •

The insurers looking at historic claims trends and losses, underwriting profitability, capital dynamics and the Lloyd’s review.

•

The lawyers examining potential liability trends to come and how they might transpire, regulatory behaviours, litigation & legislation and sector challenges – such as ESG.

•

The brokers exploring practical coverage challenges as insurers look to restrict the coverage scope, market challenges in terms of insurer behaviours and navigating premium increases.

For more info and to book, please click here.

View all other upcoming PIMFA Events and Learning here.

The EU Platform on Sustainable Finance Publishes Transition Finance Report

The European Commission welcomed the advice on financing the transition provided by the EU Platform on Sustainable Finance, an expert group established to advise on the development of the sustainable finance market, with a particular focus on the EU Taxonomy.

The advice comes at the request of the Commission, made in January 2021, to provide further input on how the Taxonomy framework can facilitate all companies in their transition towards improving their environmental performance. The Platform provides recommendations on how to strengthen the potential of transition financing through the Taxonomy criteria, highlights the importance of bank lending for the transition towards a green economy and the need to ensure that the forthcoming reporting and disclosure standards are coherent, pragmatic and enable all market participants, from corporates to SMEs, to access green finance for the transition.

Overall, the Platform underlines the importance of the EU Taxonomy to identify the investments that are much needed to reach the Green Deal goals, and its role as a tool for companies to plan and finance transition investments to reach the Green Deal and climate targets. The Commission will consider the advice when finalising the draft delegated act on climate mitigation and climate adaptation, in the context of the Taxonomy Regulation.

The full report is available here.

FCA Warns that Younger Investors are Taking on Big Financial Risks

The FCA has published research findings into better understanding investors who engage in high-risk investments like cryptocurrencies and foreign exchange.

The findings reveal there is a new, younger, more diverse group of consumers getting involved in higher risk investments, potentially prompted in part by the accessibility offered by new investment apps. However, there is evidence that these higher risk products may

not always be suitable for these consumers’ needs as 59% claim that a significant investment loss would have a fundamental impact on their current or future lifestyle. The research found that, for many investors, emotions and feelings such as enjoying the thrill of investing, and social factors like the status that comes from a sense of ownership in the companies they invest in, were key reasons behind their decisions to invest. This is particularly true for those investing in high-risk products for whom the challenge, competition and novelty are more important than conventional, more functional reasons for investing. 38% of those surveyed did not list a single functional reason for investing in their top three.

The FCA advises consumers to consider five important questions before they invest: Am I comfortable with the level of risk?; Do I fully understand the investment being offered to me?; Am I protected if things go wrong?; Are my investments regulated?; Should I get financial advice?

TCUK Report: Key Facts About UK-based Financial & Related Professional Services

TheCityUK’s annual report `Key facts about UK-based financial and related professional services’ shows that in terms of both output and working hours, financial services has suffered less than many other sectors of the economy, partly because of the ability of many industry employees to work remotely, but also a testament to the essential nature of much of the industry’s output and continued and, in some cases increased, demand for its products and services.

According to the latest available data from the Office for National Statistics, across their domestic and international activities, financial and related professional services contributed £194.2bn to UK gross value added in 2020, representing £10 of every £100 of economic output. Financial services sector productivity remains almost twice as high as wholeeconomy productivity in terms of output per hour. UK financial services contributed £75.6bn in tax revenue in 2019/20. This accounted for 10.1% of total UK tax receipts and was equivalent to 3.4% of UK GDP. UK-based financial and related professional services generated a trade surplus of £77.9bn in 2019, based on data from the ONS. This represented 3.5% of GDP.

Statement on the Review of the FCA Approach to the UK’s Derivatives Trading Obligation

On 31 December 2020, the FCA published a statement on the use of the Temporary Transitional Power (TTP) to modify the application of the derivatives trading obligation (DTO). In that statement, the FCA said that it would keep the use of the TTP under review and consider by 31 March 2021 whether market or regulatory developments warrant a review of their approach. On 24 March 2021, the FCA published a statement on the review of the FCA approach to the UK’s derivatives trading obligation and said it has not observed market or regulatory developments in the first quarter of 2021 that justify a change in the approach.

The FCA will continue to use the TTP to modify the application of the DTO as previously set out and it will continue to monitor market and regulatory developments and review the approach if necessary. If there is a case for a change, the FCA will provide sufficient notice to market participants so that any changes can be implemented smoothly.

Latest PIMFA's Consultation Response

PIMFA’s latest Consultation Response is to HM Treasury on the Future Regulatory Framework Review. Read this and all other PIMFA consultation papers here.

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