Legal development

Financial Services Speedread 24 August 2022 edition

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    IN THIS EDITION OF THE FINANCIAL SERVICES SPEEDREAD WE COVER THE FOLLOWING 25 UPDATES:

    Financial Markets

    1. House of Commons (Treasury Committee): Letter from the Governor of the Bank of England on the Financial Services and Markets Bill

    2. FCA: Policy Statement (PS22/11): Improvements to the Appointed Representatives regime

    3. FCA: Policy Statement (PS22/10): Strengthening financial promotion rules for high risk investments

    4. ESMA: Call for Evidence: Pre-Hedging

    Banking and Prudential 

    5. FCA: Statement on IFPR and eligibility for enhanced SMCR status as a Significant SYSC firm

    Fund Management

    6. FCA: Portfolio Letter: Alternatives Supervisory Strategy

    7. European Central Bank (ECB): Opinion on a proposal for a directive regarding delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds (CON/2022/26)

    8. FCA: Consultation Paper (CP22/14): Broadening retail access to Long-Term Asset Funds

    Financial Crime

    9. FCA: Final Notice: Citigroup Global Markets Limited

    10. FCA: Statement: Larry Barreto pleads guilty to carrying on regulated activities without authorisation

    11. FCA: Final Notice: Sir Christopher Gent

    Retail Services

    12. FCA: Press Release: Dear CEO Letter and letter to British retail consumers warning Buy Now Pay Later firms about misleading adverts

    13. FCA: Updated webpages relating to authorisation and the consumer duty

    14. FCA: Authorisation webpage updated to include the Consumer Duty

    15. FCA: Policy Statement (PS 22/9): A New Consumer Duty (Final Rules)

    16. FCA: Data on Retail Intermediary Market 2021

    Payments

    17. European Commission: PSD2: Commission Delegated Regulation amending the regulatory technical standards in Delegated Regulation (EU) 2018/389 as regards the 90-day exemption for account access

     Digital Finance and Fintech

    18. UK Jurisdiction Taskforce: Public Consultation: The issuance and transfer of digital securities under English private law

    19. Law Commission: Consultation Paper on Digital Assets

    ESG

    20. Glasgow Financial Alliance for Net Zero (GFANZ): Consultation on Measuring Portfolio Alignment, Enhancement, Convergence and Adoption

    21. FCA: Multi-firm review of TCFD-aligned disclosures

    Brexit and Divergence

    22. FCA: Updated Webpage: Temporary Permissions Regime (TPR) and landing slots for firms in the TPR

    Other

    23. FCA: Updated webpage: CP21/34: Improving the Authorised Representatives regime

    24. FCA: Updated webpage on change in control requirements for cryptoasset providers

    25. FMLC Report: "Contract of insurance" definition in the Regulated Activities Order

    Financial Markets

    1. House of Commons (Treasury Committee): Letter from the Governor of the Bank of England on the Financial Services and Markets Bill

    On 11 August 2022, the House of Commons Treasury Committee published a letter (dated 27 July 2022) sent by Andrew Bailey, the Governor of the Bank of England, in respect of the Financial Services and Markets Bill 2022-23 (the Bill).

    The letter refers to Mr Bailey's recent appearance at the Treasury Committee, and states that the Bank supports measures in the Bill concerning implementing aspects of the Future Regulatory Framework review, particularly those aimed at providing regulators with increased responsibility for setting regulatory requirements.

    Mr Bailey also expresses support for the provisions in the Bill aimed at increasing accountability. The PRA states that it expects to publish a discussion paper in September 2022 in respect of the regulatory framework and this will include a discussion of accountability, responsiveness and accessibility.

    2. FCA: Policy Statement (PS22/11): Improvements to the Appointed Representatives regime

    On 3 August 2022, the FCA published a Policy Statement on the regulatory regime concerning Appointed Representatives (ARs), following its December 2021 Consultation Paper (CP 21/34) (see entry 7 in Ashurst Financial Services Speedread 9 December 2021 edition). The Appointed Representatives regime is set out in primary legislation and allows Appointed Representatives to offer certain financial services or products under the responsibility of and within the scope of permission of authorised firms (known as Principals). The new rules within amended Appointed Representatives regime is in response to concerns that many Principals are not providing adequate oversight of the activities of their ARs.

    Under the new rules, Principals will need to:

    • apply enhanced oversight of their ARs, including ensuring they have adequate systems, controls and resources to do so;
    • assess and monitor the risk that their ARs pose to consumers and markets, providing similar oversight as they would to their own business;
    • review information on their ARs' activities, business and senior management annually, and be clear on the circumstances when they should terminate an AR relationship;
    • notify the FCA of the future appointment of an AR 30 calendar days before this takes effect; and
    • provide complaints and revenue information for each AR to the FCA on an annual basis.

    The FCA is working with HM Treasury to consider whether any legislative changes are needed to the AR regime.

    For more information, please see our briefing.

    3. FCA: Policy Statement (PS22/10): Strengthening financial promotion rules for high risk investments

    On 1 August 2022, the FCA published a policy statement on financial promotion rules for high risk investments and introducing rules to strengthen the role of authorised person who approve financial promotions for unauthorised persons.

    The FCA intends to rationalise the current classifications of high risk investments under two categories of 'Restricted Mass Market Investments' and 'Non‑Mass Market Investments'. The FCA is concerned that too many consumers are accessing high risk investments which do not suit their needs, and intends to introduce new measures to strengthen risk warnings, inducements and positive friction and stronger categorisation and appropriateness tests in the consumer journey.

    Additionally, the FCA wishes to strengthen the Section 21 FSMA approval regime, as authorised firms which approve unauthorised firms' financial promotions act as an important gateway. The FCA intends to introduce measure to ensure that approving firms have the relevant expertise in the promotions they approve and the quality of financial promotions in the market is high.

    4. ESMA: Call for Evidence: Pre-Hedging

    On 29 July 2022, the European Securities and Markets Authority (ESMA) published a call for evidence on pre-hedging. ESMA sets out the arguments in favour and against the practice of pre-hedging, noting that that in the context of the Market Abuse Regulation, stakeholders have diverging views on the practice of pre-hedging. Some stakeholders were of the view that pre-hedging is essential for risk management and the correct functioning of markets, whereas others consider that pre-hedging may amount to insider dealing. ESMA is undertaking further analysis of the practice of pre-hedging in order to develop appropriate guidance.

    Banking and Prudential
    5. FCA: Statement on IFPR and eligibility for enhanced SMCR status as a Significant SYSC firm

    On 16 August 2022, the FCA issued a statement on the Investment Firms Prudential Regime (IFPR) and firms' categorisation for enhanced status under the Senior Managers and Certification Regime (SMCR) as a significant SYSC firm. The implementation of the IFPR resulted in the FCA deleting the Prudential sourcebook for Investment Firms (IFPRU), including the replacement of "significant IFPRU firm" with the term "significant SYSC firm".

    Whether a firms is a "significant SYSC firm" is one of the criteria for determining whether a firm is an Enhanced Scope SMCR firm. A number of stakeholders argued that the new definition of "significant SYSC firm" following the implementation of the IFPR could result in more firms falling within the scope of the Enhanced Scope SMCR regime than under the previous definition as it had been understood and applied.

    The FCA confirmed plans for a consultation to clarify that only firms that would have been both Significant IFPRU firms and IFPRU investment firms under the pre-IFPR arrangements will fall within the new definition of "significant SYSC firm" for the purposes of the Enhanced Scope SMCR regime. Firms that have unintentionally come under the Enhanced Scope SMCR Regime under the new new definition of "significant SYSC firm" are advised to take no action.

    Fund Management

    6. FCA: Portfolio Letter: Alternatives Supervisory Strategy

    On 9 August 2022, the FCA issued a letter on its alternatives supervision strategy. The letter provides an update on the FCA's views of the key risks for the alternatives sector as set out in its January 2020 portfolio letter.

    Key points in the letter include the following:

    • Questionnaire on target market and business model: The FCA will issue a questionnaire to all supervised alternatives firms in the coming months, which will request information about firms' business models, products, investor categorisations and associated control frameworks, with follow-up work to be undertaken with firms exhibiting characteristics that increase the potential of consumer harm.
    • Investment strategy and appropriate levels of risk for target clients: The FCA remains concerned about inappropriate distribution and marketing practices by firms targeting retail clients. The FCA states that firms should ensure that alternative investments are only offered to appropriate investor types, and that such investments meet client needs.
    • Market integrity and disruption: The FCA refers to FCA rules requiring that firms’ arrangements must be proportionate to the nature, scale and complexity of the risks inherent in the business model and notes that some firms have overestimated liquidity in some circumstances. It calls for firms' boards to ensure that risk functions are appropriately resourced (among other things).
    • Market abuse: The FCA expects firms to have a strong prevention culture and effective systems and controls, and call for UK MAR controls to be tailored to individual business models.
    • Culture: The FCA will be considering how senior managers and firm policies influence an alternatives firm's culture.
    • ESG: The FCA will be reviewing alternatives firms offering ESG investment products to ensure marketing materials accurately describe the relevant products. The FCA expects firms subject to the disclosure requirements under the Taskforce on Climate-related Financial Disclosures (TCFD) to be looking at steps they will need to take to be able to make these disclosures from 2023 as required.
    7. European Central Bank (ECB): Opinion on a proposal for a directive regarding delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds (CON/2022/26)

    On 9 August 2022, the ECB issued an opinion following the European Commission's publication of legal acts in support of the Capital Markets Union, including a proposal for a directive amending the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS) regarding delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds on 25 November 2021 (the Proposed Directive).

    The ECB observes that it generally welcomes the Proposed Directive and the regulatory gaps in that it attempts to fill, along with the aim to better align AIFMD and UCITS.

    The ECB also makes a number of specific obligations in relation to:

    • the Proposed Directive being relatively light on liquidity management and macroprudential tools, and the ECB's proposal that the proposed review should be expanded to cover developments in macroprudential tools to manage liquidity risk, and how AIFMs of leveraged open-ended AIFs set leverage limits;
    • reporting, and the ECB's willingness to cooperate with ESMA on a report to be delivered to the European Commission on how to avoid areas of duplication and inconsistency in reporting; and
    • ECB access to detailed data on the AIF sector, and the benefits of permitting this.
    8. FCA: Consultation Paper (CP22/14): Broadening retail access to Long-Term Asset Funds

    On 1 August 2022, the FCA issued a consultation paper containing draft rules concerning the marketing of Long Term Asset Funds (LTAFs) to a wider group of retail investors and pension schemes. LTAFs are a type of open-ended authorised fund intended to encourage investment in long-term illiquid assets. The FCA is proposing that units in LTAFs be treated as Restricted Mass Market Investments (RMMI) under the three tier classification introduced by the FCA in its Policy Statement PS22/10 (Strengthening our financial promotion rules for high-risk investments) so that a wider category of retail investors can access them. Currently, this is restricted to sophisticated or high net-worth retail investors.

    The FCA is also proposing to align some LTAF rules with the investor protection rules that apply to other retail authorised funds. The FCA states that that all firms that manufacture, manage or distribute the LTAF to retail investors and retail clients must comply with the Consumer Duty.

    The deadline for responses is 10 October 2022, and the FCA intends to publish a final policy statement and final rules early in 2023.

    Senior Managers and Governance

    No updates for this edition of the FSS.

    Financial Crime

    9. FCA: Final Notice: Citigroup Global Markets Limited

    On 19 August 2022, the FCA issued a Final Notice and accompanying press release to Citigroup Global Markets Limited (Citigroup) for failing to properly implement the Market Abuse Regulation (MAR) trade surveillance requirements for the detection of market abuse.

    Citigroup were found to have improperly implemented the requirements introduced in 2016 to monitor both orders and trades to detect potential and attempted market abuse, taking 18 months to identify and assess the market abuse risks its business may have been exposed to, resulting in gaps in its procedures.

    Citigroup were subject to a fine of £17,934,030 for this failure, but qualified for a 30% discount as a result of its agreement to resolve the case, meaning that the final fine was £12,553,800.

    10. FCA: Statement: Larry Barreto pleads guilty to carrying on regulated activities without authorisation

    On 10 August 2022, the FCA released a statement in relation to Mr Larry Barreto's guilty plea to two counts of carrying on regulated activities without authorisation. The charges relate to advice provided and arrangements made regarding a series of regulated mortgage contracts between June 2014 and March 2018 for which Mr Barreto was not authorised to provide.

    11. FCA: Final Notice: Sir Christopher Gent

    On 5 August 2022, the FCA issued a Final Notice imposing a fine of £80,000 on Sir Christopher Gent, the former non-executive Chair of ConvaTec Group Plc (ConvaTec), for unlawfully disclosing inside information to senior individuals at ConvaTec's major shareholders otherwise than in the normal exercise of his employment, profession and duties. The disclosure concerned an expected RNS announcement on amendments to ConvaTec's revenue growth guidance (guidance disclosure) and the retirement of the CEO of ConvaTec (retirement disclosure).

    The key points of the Final Notice are as follows:

    • Disclosure of inside information: The FCA concluded that the guidance disclosure and retirement disclosure constituted inside information. The disclosures were specific enough to enable a conclusion to be drawn as to the possible effect of a reasonably expected set of circumstances on the price of ConvaTec shares; contained confidential information that had not been made public; and if made public, the information disclosed by Sir Christopher in the disclosures would have had a significant effect on the price of ConvaTec shares.
    • Disclosure of inside information otherwise than in the normal exercise of employment, profession or duties as Chairman of ConvaTec: The FCA found that the disclosures were not reasonable and it was not necessary for them to be made in order for Sir Christopher to perform his proper functions as Chairman of ConvaTec. The FCA also considered that Sir Christopher’s explanation that he did not want to "surprise shareholders of scale with announcements" was not a legitimate reason for making the disclosures, and that Sir Christopher’s disclosures of inside information were outside the scope of the type of discussion provided for in Recital 19 to EU MAR (discussions of a general nature regarding the business and market developments are permissible between shareholders and management concerning an issuer).

    The FCA considered that Sir Christopher acted negligently in making the disclosures, for the following reasons:

    • Given his training on the Market Abuse Regime, and his own experience and position, Sir Christopher should have realised that the information disclosed constituted, or may have constituted, inside information and that it was not in the normal exercise of his employment, profession or duties to selectively disclose it.
    • Sir Christopher failed to properly consider the specific question of what information, if any, he might properly disclose, as well as when, in what manner and to whom.
    • Sir Christopher did not obtain clear, formal advice regarding the above questions before making the disclosures.

    The FCA considered that Sir Christopher acted negligently notwithstanding the following:

    • At the time of the disclosures, ConvaTec had not yet formally classified the information regarding the expected revision to the financial guidance and the expected retirement of the CEO as inside information.
    • Sir Christopher was told that ConvaTec’s brokers considered that ConvaTec needed to obtain more information in relation to the guidance revision and should not make an announcement until it had sufficiently precise information.
    • A ConvaTec executive and one of ConvaTec's brokers were informed by Sir Christopher that he was intending to call, and/or had called, the major shareholders.

    The FCA found no evidence Sir Christopher traded on the information or intended to make personal gain, or avoid loss, from making the disclosures.

    Retail Services

    12. FCA: Press Release: Dear CEO Letter and letter to British retail consumers warning Buy Now Pay Later firms about misleading adverts

    On 19 August 2022, the FCA issued a press release, a Dear CEO Letter and a letter to British retail consumers clarifying its concerns about misleading financial promotions in connection with the provision of 'Buy-Now-Pay-Later' (BNPL) products.

    The FCA highlights its particular concerns with authorised firms selling unregulated or exempt BNPL products, including that the promotions must be clear, fair and not misleading. The FCA's particular concerns lie around the use of influencers and social media advertising, which emphasise the benefits of the products without clear disclaimers as to the risks, including:

    • the risk of taking on debt that customers cannot afford to repay;
    • the consequences of missed payments;
    • any other adverse consequences such as the impact on the customer's credit file; and
    • information about when charges become payable.

    These letters come in the wake of broader engagement of the FCA with BNPL providers including a roundtable to discuss upcoming regulation and working with BNPL firms to secure changes to potentially unfair and unclear terms in BNPL contracts.

    13. FCA: Updated webpages relating to authorisation and the consumer duty

    On 18 August 2022, the FCA updated its authorisation application webpages ('How to apply for an authorisation' and 'Authorisation: what's involved?') to clarify expectations for compliance with the Consumer Duty.

    The amendments makes clear that firms are not only expected to show that they can comply with the Consumer Duty on an ongoing basis, but that they will be able to comply with the rules due to come into effect next year.

    14. FCA: Authorisation webpage updated to include the Consumer Duty

    On 29 July 2022, the FCA updated is webpage on authorisation for financial activities to include the Consumer Duty. The webpage states that while the implementation period for the Consumer Duty ends on 31 July 2023 for new products and on 31 July 2024 for existing products, assessments of firms and individuals applying for authorisation must demonstrate how Consumer Duty requirements will be met from now onwards.

    15. FCA: Policy Statement (PS 22/9): A New Consumer Duty (Final Rules)

    On 27 July 2022, the FCA published its final guidance on the Consumer Duty. The new Consumer Duty applies to firms engaging in regulated activities in the UK across the retail distribution chain and to UK distributors of non-UK products/services to UK retail clients.

    One of the key developments is the introduction of a new overarching Principle 12 to the FCA Principles for Business, under which "firms must act to deliver good outcomes for retail consumers".

    Further, the policy statement implements various 'outcomes' that firms should seek to achieve, including:

    • the products and services outcome;
    • the price and value outcome;
    • consumer understanding; and
    • consumer support.

    A proposed new rule in COCON will be implemented as part of the Consumer Duty, requiring all conduct rule staff to 'act to deliver good outcomes for retail consumers'.

    The FCA reiterates its focus on prioritising vulnerable customers, particularly in light of the cost of living crisis.
    Firms should be aware of the phased implementation, with the rules coming into force at various dates depending on the services being provided, and the expectations placed on firms.

    For further details, please see our briefing here.

    16. FCA: Data on Retail Intermediary Market 2021

    On 21 July 2022, the FCA published data on the retail intermediary market for 2021. The FCA receives information firms which arrange or provide advice on mortgages, insurance policies or retail investment products about their activities. Key aspects of this data included:

    • reported revenue earned from retail investment intermediation increased by 22%;
    • reported revenue from mortgage broking increased by 16%;
    • revenue from non-investment insurance distribution also rose by 3.9%; and
    • the share of retail investment revenue accounted for by commission continues to fall, down from 14% in 2020 to 13% in 2021.

    Payments

    17. European Commission: PSD2: Commission Delegated Regulation amending the regulatory technical standards in Delegated Regulation (EU) 2018/389 as regards the 90-day exemption for account access

    On 16 August 2022, the European Commission adopted a Delegated Regulation amending the regulatory technical standards set out in Commission Delegated Regulation (EU) 2018/389 (the RTS) in relation to the 90-day exemption for account access.

    The amendments to the RTS:

    • introduce a new mandatory exemption from the requirement to apply strong customer authentication (SCA), whereby account providers must not apply SCA when customers use an account information service provider (AISP) to access their payment account information, if certain conditions are met (e.g. data must be limited in scope, the account service payment service provider has to apply SCA for the first access and periodically renew it);
    • limit the scope of application of the voluntary exemption in Article 10 of Commission Delegated Regulation (EU) 2018/389 to instances where the customer accesses the account information directly; and
    • extend the timeline for the renewal of SCA from every 90 days to every 180 days when the information is accessed through an AISP or directly by the customer.

    The Delegated Regulation will enter into force 20 days after its publication in the Official Journal, and apply seven months after the date of its entry into force.

    Digital Finance and Fintech
    18. UK Jurisdiction Taskforce: Public Consultation: The issuance and transfer of digital securities under English private law

    On 9 August 2022, the UK Jurisdiction Taskforce (UKJT) issued a public consultation to address how English law can support the issue and transfer of equity or debt securities on blockchain and DLT systems.

    Responses should be submitted before 23 September 2022.

    19. Law Commission: Consultation Paper on Digital Assets

    On 28 July 2022, the Law Commission published a consultation paper on digital assets. The consultation paper focuses on principles of private law, particularly property rights and how these relate to digital assets. The Law Commission believes that limited legal reform is required in order to ensure that digital assets benefit form legal recognition and protection in such a way that recognises the nuanced characteristics of digital assets. The suggested reforms include:

    • recognition of 'data objects' as a third category of personal property, which would be distinct from 'things in possession' and 'things in action'. The Law Commission also set out the provisional criteria for this category;
    • the concept of 'control' should be used to describe the relationship between data objects and persons;
    • crypto-tokens would be categorised as data objects for which the rules of derivative transfer of title can be applied to transfers, including in the context of the unauthorised disposition of a crypto-token;
    • the defence of the 'good faith' purchaser for value should apply to crypto-token transactions; and
    • clarifying and simplifying the apportionment of shortfall losses arising out of commingled crypto-token holdings held on trust by an insolvent custodian.

    For further details, please see our briefing here.

    ESG
    20. Glasgow Financial Alliance for Net Zero (GFANZ): Consultation on Measuring Portfolio Alignment, Enhancement, Convergence and Adoption

    On 9 August 2022, the GFANZ published a consultation on its proposed new and enhanced guidance on measuring the alignment of financial institutions' investment, lending and underwriting activities with net-zero commitments. The consultation seeks input on enhancements to critical inputs for measuring portfolio alignment.

    The consultation closes on 12 September 2022, and responses should be submitted using this link.

    21. FCA: Multi-firm review of TCFD-aligned disclosures

    On 29 July 2022, the Financial Reporting Council (FRC) and the FCA reported on the improvement in the quality of climate-related information which premium listed companies include in their financial reports.

    Premium listed companies have been required to include a statement in their annual financial report setting out whether they have made disclosures consistent with the Task Force of Climate-related Financial Disclosures' (TCFD) recommendations since 2021. If such companies have not made disclosures, they are required to explain the reasons for not doing so. The FCA found 81% of companies indicated that they had made disclosures consistent with all seven recommended disclosures which the FCA would ordinarily expect a company to comply with. Further, the FRC reported that the number of companies making disclosures that were either partially or mostly consistent with the TCFD framework increased significantly compared with 2020.

    The FCA stated that the findings were encouraging, however reported that there were clear reporting gaps on resilience of strategy, risk management and metrics used to assess risks and targets.

    Brexit and Divergence
    22. FCA: Updated Webpage: Temporary Permissions Regime (TPR) and landing slots for firms in the TPR

    On 12 August 2022, the FCA updated its TPR webpage to clarify that all firms in the TPR which the FCA are expecting to apply for authorisation in the UK should now have received formal direction confirming their 'landing slot'. If any firms are expecting to apply for full UK authorisation (and will be solo-regulated by the FCA), they can still apply to be authorised, but the application must be received by 31 December 2022. Any applications from firms in the TPR after this date will be treated as invalid.

    The FCA has also updated its dedicated landing slot page with the same message.

    Others
    23. FCA: Updated webpage: CP21/34: Improving the Authorised Representatives regime

    On 19 August 2022, the FCA updated its webpage for CP21/34 to clarify that, as part of the FCA's enhanced reporting requirements, Principal firms should expect to receive a request for data thorough a section 165 FSMA request in December 2022, rather than 'later in 2022', as the page previously read.

    24. FCA: Updated webpage on change in control requirements for cryptoasset providers

    On 11 August 2022, the FCA updated its webpage on change in control requirements to reflect that FCA registered cryptoasset firms (i.e. cryptoasset exchange providers and/or a custodian wallet providers) are subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), and will now be required to comply with certain elements of the change of control regime which have been brought into scope through amendments to the MLRs through a statutory instrument.

    As a result, persons acquiring 'control' of FCA registered cryptoasset firms of 25% or more will be required to submit change of control notification forms and receive prior approval from the FCA.

    For further details, please see our briefing here.

    25. FMLC Report: "Contract of insurance" definition in the Regulated Activities Order

    On 9 August 2022, the Financial Markets Law Committee (FMLC) published a report on Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) which extends the meaning of the term "contract of insurance" for regulatory purposes to include "fidelity bonds, performance bonds, administration bonds, bail bonds, customs bonds or similar contracts of guarantee". The FMLC considers the phrase "similar contracts of guarantee" has caused significant uncertainties and recommends factors to mitigate these uncertainties including:

    • legislative reform explicitly to carve out financial guarantees which are guarantees similar to performance bonds from the definition;
    • legislative reform to clarify what is meant by the words "similar" and "guarantee" to confirm that it must be a "guarantee" as a technical legal matter (and not some wider type of contract), and to make it clear that it must relate to substantially the same risks as those protected by the named types of bond or, in the case of performance bonds, have the same features as that type of bond.
    • updates to the FCA guidance to set out the FCA's position and provide practical examples of the application of the RAO in relation to contracts of insurance.
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