Legal development

Financial Services SpeedRead: 8 March 2024 edition

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    Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight.  Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.

    Financial Markets 

    1. FCA: Market study report: Wholesale Data Market Study

    On 29 February 2024, the FCA published the final report on its Wholesale Data Market Study (MS23/1.5), which examined competition in the three key markets: credit ratings data, the provision of benchmarks and market data vendor services. 

    The study was launched in March 2023 following persistent user concerns about how well wholesale data markets are working. 

    Overall, the FCA found that firms can buy the kind of data they need, and, in most cases, the data they buy is of sufficient quality to meet their needs.

    However, the FCA did identify evidence of, and drivers for, market power across all three markets in scope of the study. This means that users may be paying higher prices for the data they buy than if competition was working more effectively. In particular, the FCA found that: 

    • These markets are concentrated. There are usually no more than three key providers in each market, most of whom have maintained a significant market share.
    • Most key providers are highly profitable. They have maintained high profitability (with operating profit margins of at least 30% and, in some cases, more than 60% in the period 2017-2022).
    • Data from key providers is essential. Users regard sources of data from most key providers as essential as there are limited or no effective alternatives. In some cases, providers have exclusivity over data, for example the unique data held by credit rating agencies. If users need this exclusive data they can only get it from those providers.
    • Key providers face limited competition from challenger firms. There are barriers to challenger firms entering or expanding in these markets. Challenger firms struggle to overcome network effects, compete with well-established brands and access input data needed for creating wholesale data products. 

    The FCA will focus its next steps on two broad areas:  (i) looking at where the issues identified in the market study could be addressed through the Smarter Regulatory Framework (SRF), and (ii) tackling firm-specific issues using other tools such as its powers under the Competition Act 1998.

    The FCA invites any comments on the next steps it will take forward by 12 April 2024, submitted via email to

    2. HM Treasury: Legislation: The Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024

    On 26 February 2024, HM Treasury (HMT) published a draft version of The Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024 (Draft Instrument), with an Explanatory Memorandum

    The Draft Instrument is created under section 138BA of FSMA (introduced by the Financial Services and Markets Act 2023 (FSMA 2023)), which provides a power for HMT to make regulations to grant the financial services regulators the ability to disapply or modify rules made by the regulators under FSMA.

    Accordingly, the Draft Instrument grants the PRA the ability to disapply or modify the application of any of its rules made under FSMA, where appropriate, to take into account the circumstances and business models of individual firms as part of the government's SRF. It also introduces certain procedural requirements that must be followed in relation to PRA decisions on disapplying or modifying PRA rules. For example, the PRA must issue decision notices to applicant firms which either grant a permission to disapply or modify specified rules or explain any decision to refuse such permission.

    The Draft Instrument is intended to come into force on 30 June 2024.

    3. Council of the EU: Press Release: Council adopts new rules to strengthen market data transparency

    On 20 February 2024, the Council of the EU published a press release confirming that it has adopted the proposed Directive amending MiFID II and the proposed Regulation amending MiFIR. 

    The amendments to the EU's trading rules are intended to equip investors with better access to the market data necessary for investing in financial instruments more easily and to increase the global competitiveness of the EU's capital markets and ensure a level playing field.

    In particular, the amendments establish:

    • Consolidated market data: EU-level "consolidated tapes" which bring together market data provided by platforms used to trade financial instruments in the EU. The consolidated tapes will aim to publish the information as close as possible to real time, providing investors with up-to-date transaction information for the whole of the EU;
    • Ban on payment for order flow: a general ban on "payment for order flow" (PFOF). EU member states where PFOF already existed have discretion to allow PFOF until 30 June 2026, by which time it must be phased out; and
    • Commodity derivatives: new rules on commodity derivatives.

    The texts will now be published in the EU’s Official Journal and enter into force 20 days later. The regulation will apply immediately in all EU member states, and member states will have 18 months to incorporate the Directive into their national law. 

    Banking and Prudential

    4. HM Treasury: Legislation: The Bank of England Levy (Amount of Levy Payable) Regulations 2024

    On 29 February 2024, HM Treasury published the Bank of England Levy (Amount of Levy Payable) Regulations 2024 (SI 2024/252) (BoE Levy Regulations), with an accompanying Explanatory Memorandum. The BoE Levy Regulations set out the details of the new BoE levy (which replaces the Cash Ratio Deposits Scheme) on authorised deposit-takers.

    The BoE Levy Regulations specify:

    • the calculation that the BoE must use when determining the amount of the BoE levy that an eligible institution is required to pay for a levy year;
    • that eligible institutions with eligible liabilities up to and including £600 million will not be required to pay the levy;
    • how the total levy will be shared between institutions who are required to pay (firms will be required to contribute to the levy in proportion to the size of their eligible liabilities); and
    • the liabilities that are deemed to be eligible liabilities and how these are to be calculated.

    The BoE Levy Regulations came into force on 1 March 2024. Alongside the BoE Levy Regulations, the relevant provisions of the Financial Services and Markets Act 2023 that relate to the BoE levy also came into force on 1 March 2024 by virtue of the FSMA 2023 (Commencement No. 5) Regulations 2024, which were also published on 29 February 2024.

    5. ECB: Publication: ECB guide to internal models

    On 19 February 2024, the European Central Bank (ECB) published its revised guide to internal models for credit risk, market risk and counterparty credit risk. 

    The guide follows the ECB's public consultation on internal models ending in September 2023. Alongside the updated guide, the ECB published a feedback statement in which it sets out comments received on the public consultation and the ECB's responses. 

    In particular, the revisions to the guide include:

    • clarifying how banks should take into account material climate-related and environmental risks in their models;
    • outlining how banks can revert to the standardised approach for calculating risk-weighted assets;
    • in relation to credit risk, helping banks to move towards a common definition of default and consistent treatment of "massive disposals" (i.e. bulk sales of non-performing loans);
    • detailing how to measure default risk in trading book positions; and
    • clarifying issues regarding counterparty credit risk.

    The guide aims to provide transparency for relevant institutions on how the ECB understands and intends to apply the rules around internal models when assessing whether institutions meet the relevant requirements. 

    6. ECB: Publication: Memorandum of cooperation between NCAs in relation to the supervision of third-country groups and third-country branches

    On 19 February 2024, the ECB published a memorandum of cooperation (Memorandum) entered into with Member State NCAs for the performance of their supervisory tasks in relation to the supervision of third-country groups and third-country branches. Under CRD IV, NCAs supervising branches of credit institutions with their head office in a third country and NCAs supervising institutions that are part of the same third-country group are required to cooperate closely to ensure that all activities of the third-country group in the EU are subject to comprehensive supervision. 

    The Memorandum aims to:

    • strengthen and foster the supervisory framework established by CRD IV and CRR that apply to third country groups in the EU;
    • prevent the circumvention of requirements and any detrimental impact on the financial stability of the EU;
    • facilitate the exchange of information between the NCAs on third-country groups and third-country branches, including in emergency situations;
    • facilitate the building of consensus on supervisory approaches taken by NCAs; and
    • establish supervisory fora for NCAs to collaborate and coordinate actions.

    The memorandum was signed on 19 January 2024 and came into effect the following day. 

    Funds Management

    7. FCA: Portfolio letter: Asset Management & Alternatives Supervisory Strategy – interim update

    On 1 March 2024, the FCA published a portfolio letter on its supervisory strategy for the asset management and alternatives sector. This updates the FCA's portfolio letters issued in August 2022 and February 2023 to reflect changes in the external risk environment, work that has since been completed and the FCA's areas of focus for the sector over the next year. 

    The FCA's supervisory priorities over the next year will be:

    • Setting and testing higher standards: The FCA states that good governance is particularly important during periods of market disruption, stressed market conditions and through consolidations occurring in industry. The FCA also provided its intentions and expectations regarding firms with significant assessment of value deficiencies, implementation of the Consumer Duty, the Sustainability Disclosure Requirements and investment labels, valuation practices, and operational resilience.
    • Reducing and preventing serious harm: This includes focusing on market integrity and disruption, and ensuring firms have systems and controls in place to counter financial crime risks.
    • Supporting innovation: This includes work on fund and asset tokenisation.
    • Promoting competition and positive change: This includes work to implement the UK government's SRF, with a focus on MiFID, AIFMD and UCITS. The FCA intends to consult about a replacement regime for PRIIPs and is seeking industry views on how support to customers can be enhanced under the Advice Guidance Boundary Review. The FCA is also working on modernising the fund authorisation process through its enhanced Fund Gateway and enabling cross-border operation, and will continue to develop international standards relating to the sector.

    The FCA expects CEOs of the relevant firms to discuss the letter with their board and executive committee, consider whether the risks of harm identified apply to their business, and adopt strategies to mitigate such risks.

    For more information on the post-Brexit framework for asset managers, please see our briefing here in relation to the February 2023 letter.

    Senior Managers and Governance

    No new entries.

    Financial Crime

    8. Council of the EU: Press release: Frankfurt to host the EU’s new anti-money laundering authority

    On 26 February 2024, the Council of the EU published a press release announcing that it and the European Parliament have agreed that the new Anti-Money Laundering Authority (AMLA) will be based in Frankfurt, beginning operations from July 2025. The location of the AMLA's seat will be included in the regulation establishing the AMLA (AMLA Regulation

    The AMLA will have direct and indirect supervisory powers over obliged entities and power to impose sanctions and other measures. This is part of a wider package of laws to reform the EU's framework against money-laundering and terrorist financing.

    Retail Services

    9. FCA: Webpage: Consumer Duty implementation: good practice and areas for improvement

    On 20 February 2024, the FCA published a webpage providing guidance on good practice and areas for improvement regarding firms' implementation of the Consumer Duty.

    The FCA identifies examples of good practice and areas for improvement in relation to: 

    • culture, governance and monitoring;
    • consumers in vulnerable circumstances; and
    • each of the four Consumer Duty outcomes - price and value, products and services, consumer understanding and consumer support. 

    The FCA notes that firms should continue to make improvements in line with good practice and address any gaps identified. It also notes that the findings may be useful for firms when considering changes they need to make to meet the 31 July 2024 implementation deadline for closed products and services.

    10. HM Treasury: Legislation: The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024

    On 20 February 2024, HMT published The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2024 (Order), with an Explanatory Memorandum.

    This Order amends the regulatory framework under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), to make operating a pension dashboard service which connects to the Money and Pensions Service dashboards digital architecture a regulated activity. Such dashboards will allow individuals to view all of their pensions data, including their state pension, in one place and online.

    Firms that wish to operate a pensions dashboard service will require authorisation from the FCA to undertake this activity.

    The Order comes into force on 11 March 2024. 


    No new entries.

    Digital Services and Fintech

    No new entries.


    11. House of Commons (Environmental Audit Committee): Government response: The financial sector and the UK's net zero transition report

    On 23 February 2024, the Environment Audit Committee (EAC) published the Government's response to the EAC's report on the 'Financial sector and the UK's net zero transition', which was published on 29 November 2023. The report set out the financial sector's role in achieving net zero greenhouse gas emissions by 2050.

    While the Government rejected the EAC's recommendation to introduce quarterly reporting on how it is meeting net zero targets while enhancing energy security, it announced the following (current and future) initiatives with respect to achieving the UK's net zero targets. Specifically, in relation to the financial sector, the Government indicated that:

    • it has commissioned the Transition Finance Market Review to report by July 2024 on how the UK can scale up transition-focused capital raising, develop high integrity transition finance services and position the UK's professional services as a global hub;
    • its upcoming consultation on the UK's approach to transition plans (TPs) will consider the role of the Transition Plan Taskforce's (TPT) disclosure framework and the UK's assessment and endorsement of the International Sustainability Standards Board (ISSB) standards;
    • the FCA has committed to consult on guidance for listed companies' TP disclosures while considering their policy approach to the ISSB standards, with reference to the TPT;
    • it remains committed to implementing Sustainability Disclosure Requirements as set out in the 2023 Green Finance Strategy;
    • it will continue to encourage UK businesses to utilise management disclosure recommendations and guidance launched by the Taskforce on Nature-related Financial Disclosures (TNFD), and will consider the best way to incorporate the TNFD's recommendations into UK policy and legislation to align with global sustainability reporting;
    • it will consult shortly on the UK green taxonomy, noting there will be at least two reporting years of testing of voluntary disclosures before introducing any mandatory obligations;
    • it will consult on specific government and regulatory interventions to grow high-integrity voluntary carbon markets in the UK; and
    • it will consult in 2024 on the UK carbon border adjustment mechanism, which it intends to introduce in 2027.


    12. FCA: New webpage: Preparing your firm's wind-down plan

    On 1 March 2024, the FCA published a webpage with information to assist firms with preparing their wind-down plans where they are required by the FCA to submit this document as part of their application for authorisation. 

    The new webpage specifically provides the guidance on:

    • When firms need to prepare a wind-down plan: the FCA notes that firms should consult the FCA's guidance on authorisation for their sector or business model to confirm whether they need to submit a wind-down plan.
    • How to prepare a wind-down plan: the FCA sets out the key components of a typical wind-down plan and notes that the plan should identify the steps and resources a firm needs to wind down its business, as well as evaluate the risks and impact of a wind-down and consider how to mitigate these risks.
    • Planning for a wind-down: the FCA confirms that in its view, a wind-down period begins when a firm's governing body decides to wind down its regulated business and notifies the FCA to this effect, and ends when the FCA cancels the firm's authorisation or registration. Firms should consider the various scenarios that could lead to a wind-down, and identify and monitor key metrics and warning indicators to help it invoke its wind-down plan in good time.
    • Resources needed in a wind-down scenario: the FCA notes that a firm will need adequate financial and non-financial resources to wind down in an orderly manner, and lists examples of these types of resources.

    13. FCA: Consultation Paper: CP24/2: Our Enforcement Guide and publicising enforcement investigations: a new approach

    On 27 February 2024, the FCA published a consultation paper on its simplified Enforcement Guide (EG) and a new approach to enforcement investigations that will involve publishing the details of investigations. For more information, please see our Ashurst briefing here.

    The FCA's proposed new approach aims to increase transparency over its investigations and the deterrent impact of the action it takes against firms. The FCA considers that publicising investigations will (i) build trust in the system, (ii) help firms and the market to build their understanding of the types of suspected misconduct and other failings investigated by the FCA, and (iii) support FCA accountability around the efficiency and pace of investigations.

    The FCA plans to use a flexible public interest framework to inform its case-by-case decision-making on whether and what to announce. It is proposing that the new policy will apply to both new and ongoing investigations, where the FCA assesses that publishing an announcement or update is in the public interest.

    The FCA has also proposed changes which aim to reduce duplication and make information about its processes more accessible, for example by moving relevant information from the EG to the FCA website.

    The FCA is inviting feedback on the above proposals until 16 April 2024. 

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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