Legal development

Financial Services SpeedRead: 9 May 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. BoE: Speech: Building operational resilience of FMIs

    On 30 April 2024, the BoE published a speech by Sasha Mills, the BoE's Executive Director of Financial Market Infrastructure, in relation to operational resilience and outlining the BoE's key expectations for financial market infrastructures (FMIs) ahead of the March 2025 deadline for FMIs to meet the BoE's Operational Resilience Policy.

    The speech provides details on the importance of FMIs, the BoE's definition of "operational resilience", the priorities for FMI operational resilience, the BoE's expectations on what FMIs should be doing ahead of the March 2025 deadline and the broader operational resilience picture.

    The five key messages from the speech are:

    • FMIs are important to financial stability;
    • operational disruption will happen and FMIs must therefore be able to respond and recover from incidents;
    • FMIs need to think deeply about and test their business' impact on both their participants and on the wider financial system;
    • FMIs must ensure their testing of scenarios is sufficiently mature, incorporating granular and consistent testing approaches; and
    • FMIs are to also consider the "unlikely" (i.e. extreme but plausible) scenarios.

    2. BoE: Consultation Paper Responses: Codes of Practice for wholesale cash distribution market oversight

    On 24 April 2024, the BoE published responses to its consultation paper on the Codes of Practice (CoPs) for wholesale cash distribution (WCD) market oversight.

    The BoE noted that respondents were broadly supportive of the proposed regime for WCD market oversight. Further, the BoE issued the final three CoPs on WCD market oversight, which are: (1) information gathering; (2) third-party arrangements; and (3) cash centre closure and market exit. Under the CoPs, recognised persons are required to submit certain information to the BoE. To assist, the BoE published the final WCD Data Catalogue which sets out how this should be undertaken.

    The BoE also published guidance on the CoPs which sets out a non-exhaustive list of the steps that a recognised person may take in order to comply with the CoPs.

    The CoPs came into force on 24 April 2024 and will come into effect for recognised firms following their recognition by HM Treasury as having "market significance" in respect of their WCD functions and activities.

    For more information on the consultation paper, please see our summary here.

    Banking and Prudential

    3. Basel Committee on Banking Supervision: Consultation Paper: Guidelines for counterparty credit risk management

    On 30 April 2024, the Basel Committee on Banking Supervision published a consultation on guidelines for counterparty credit risk management.

    The proposed guidelines have been published following recent counterparty credit risk management failings. Relevantly, they place significance on key practices which are critical to resolving long-standing industry weaknesses in counterparty credit risk management, including:

    • conducting comprehensive due diligence on an initial and ongoing basis;
    • developing a comprehensive credit risk mitigation strategy to manage counterparty exposures;
    • measuring, controlling and limiting counterparty credit risk using a wide variety of complementary metrics; and
    • building a strong counterparty credit risk governance framework.

    The deadline to provide comments on the guidelines is 28 August 2024.

    4. HM Treasury: Legislation: The Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024 (No. 539)

    On 18 April 2024, HM Treasury published the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024 (Regulation), as well as an accompanying Explanatory Memorandum.

    The Regulation, which is made under new section 138BA of FSMA, grants the PRA the flexibility to disapply or modify the application of any rule it has made under FSMA where a firm has applied for permission for such rules to be disapplied or modified. The instrument permits the PRA to exercise this flexibility where it consider this to be appropriate, having regard to the circumstances and business model of the applicant firm. It also introduces certain procedural requirements that must be followed by the PRA in relation to such decisions, including that it must:

    • issue decision notices to applicant firms which either grant a permission to disapply or modify specified rules or which explain why the application was refused;
    • issue a decision to applicant firms explaining any decision to vary or revoke an existing permission; and
    • publish the decision notice where a permission to disapply or modify specified rules is granted.

    Affected firms may also challenge a decision made by the PRA by referring it to the Upper Tribunal (Tax and Chancery Chamber).

    The Regulation comes into force on 30 June 2024.

    Fund Management

    5. FCA and HM Treasury: Roadmap: Implementing the Overseas Funds Regime

    On 1 May 2024, the FCA and HM Treasury published a roadmap for implementing the Overseas Funds Regime (OFR Roadmap).

    The OFR Roadmap explains how the OFR is intended to be opened to European Economic Area funds authorised under the UCITS Directive, following the Government's decision to grant equivalence in relation to those funds (excluding money markets). For more information on this decision, please see our earlier update on the OFR here.

    The OFR Roadmap also provides an overview of the process for applying for recognition under the OFR as well as outlining other requirements, such as operational rules for the OFR, application of the retail disclosure rules, the Government's intentions on the application of the UK’s Sustainability Disclosure Requirements and labelling regime and ongoing data collection.

    Alongside the roadmap, the FCA also published a new webpage which contains some key dates and initial information about how certain investment funds can apply.

    The timeline for the implementation of the OFR is set out in the OFR Roadmap. This timeline is, however, subject to change, with any changes to be provided on the Government's and FCA's websites.

    Senior Managers and Governance

    No new entries

    Financial Crime

    6. JMLSG: Consultation: Part II Section 18 (Wholesale Markets)

    On 29 April 2024, the Joint Money Laundering Steering Group (JMLSG) published its proposed amendments to Sector 18 (Wholesale markets) in Part II of its AML/CTF guidance for firms in the UK financial services sector.

    The key changes proposed by the JMLSG include:

    • a new subsection in the 'Customer due diligence, including simplified and enhanced due diligence' section, which sets out specific guidance relating to circumstances where authorised personnel are acting on behalf of the customer; and
    • a new section on 'Wholesale Subscription Finance in Private Capital Funds' which provides guidance on the product specific risks that may arise in respect of subscription finance facilities and details how customer due diligence ought be undertaken where these facilities are offered.

    The JMSLG has not issued any accompanying explanatory materials which explain the proposed changes or the rationale for why they are being made. The deadline for feedback on the proposed revisions is 1 July 2024, with comments to be sent to

    7. FCA: Letter: Response to Financial Services Regulation Committee on Consultation Paper CP24/2: Our Enforcement Guide and publicising enforcement investigations – a new approach

    On 25 April 2024, the FCA published a letter of reply to Lord Forsyth's response to the FCA's proposed changes to publicising enforcement investigations.

    Of particular relevance, the letter reaffirms the FCA's intention to move away from a presumption against public disclosure of an investigation to a public interest framework for deciding whether the facts of an investigation should be announced. It is also noted in the letter that the FCA considers that:

    • the current approach no longer adequately serves its primary statutory objectives or supports an appropriate degree of transparency and accountability in the context of regulatory enforcement;
    • a public interest framework would not undermine either the competitiveness of the financial sector, particularly given the approach taken by other regulators in the UK (e.g. OFCOM and the CMA), or the fundamental legal principle of "innocent until proven guilty"; and
    • publicly naming firms is not likely to impact their share price or client confidence, while simultaneously confirming that it will take into account the impact of disclosure on the firm subject to an investigation when assessing whether to publicise that investigation.

    The FCA's consultation on the 'naming and shaming' proposals closes on 30 April 2024. For more information in respect of these proposals, please see our update here.

    8. FCA: Consultation paper: Financial Crime Guide updates (CP24/9)

    On 25 April 2024, the FCA published a consultation paper (CP24/9) on its proposed changes to its Financial Crime Guide (FCG). These changes are intended to assist firms with understanding the FCA's expectations and assessing the adequacy of their financial crime systems and controls, as well as with remedying any deficiencies in these systems and controls.

    The key proposed changes to the FCG can be summarised as follows:

    • Sanctions: increasing the focus on firms' sanctions systems and controls, particularly in light of the sanctions imposed following Russia's invasion of Ukraine. This includes introducing reporting requirements for firms to report sanctions breaches or if a firm is directly or indirectly subject to sanctions, as well as enhanced governance arrangements to oversee sanctions systems and controls;
    • Proliferation financing: reflecting the requirement for firms to identify and assess the risks of proliferation financing to their business;
    • Transaction monitoring: providing additional guidance to help firms in adopting and maintaining automated monitoring systems, including new self-assessment questions and examples of good and poor practice; and
    • Cryptoassets: setting an expectation for firms registered with the FCA as cryptoasset businesses under The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to take into account the FCG when designing their financial crime systems and controls.

    The FCA also proposes to include text in the FCG which reminds firms to consider if their systems and controls are consistent with their obligations under the Consumer Duty.

    The consultation period closes on 27 June 2024, following which the FCA plans to publish the feedback received and the final amended text of the Guide in a Policy Statement.

    9. European Parliament: Legislation: Anti-Money Laundering Package adopted

    On 24 April 2024, the European Parliament adopted three legislative instruments, which collectively aim to deliver a stronger and more consistent set of AML/CTF rules at the EU level (together, the Anti-Money Laundering Package).

    The Anti-Money Laundering Package proposes to establish a robust and future-proof enforcement system, which will in turn contribute to improved detection of money laundering and terrorism financing across the EU. It consists of:

    • Anti-Money Laundering and Countering the Financing of Terrorism Authority (AMLA) Regulation: a regulation establishing AMLA, which will act as a decentralised EU agency to coordinate national authorities to ensure the correct and consistent application of the Anti-Money Laundering Package;
    • EU Single Rulebook Regulation: a regulation relating to the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. It contains directly applicable AML/CTF rules, including a revised EU list of entities subject to AML/CTF rules; and
    • AML/CTF Directive: the sixth AML/CTF directive, which replaces existing Directive (EU) 2015/849, contains rules requiring national transposition, including rules in relation to national supervisors and Financial Intelligence Units in Member States.

    The Anti-Money Laundering Package still needs to be formally adopted by the European Council before publication in the EU's Official Journal.

    Retail Services

    10. FCA: Policy Statement: Consumer Credit – Product Sales Data Reporting (PS24/3)

    On 29 April 2024, the FCA published Policy Statement 24/3, Consumer Credit – Product Sales Data Reporting (PS24/3), which includes its final rules and guidance for incorporating three new Product Sales Data (PSD) returns into its Supervision manual.

    The new PSD returns will require firms engaged in consumer credit lending, as well as firms that advise, represent, or provide software to support compliance with regulatory reporting for firms engaged in consumer credit lending, to provide detailed information on the initial sale and ongoing performance of individual agreements. This data will in turn enable the FCA to spot and stop harm faster, including because it will allow the FCA to:

    • better understand how firms operate and gain more insight into the market;
    • authorise and supervise firms more effectively;
    • intervene more quickly and boldly where it identifies risk of harm in the consumer credit market;
    • reduce its reliance on ad hoc requests for more information from firms; and
    • prioritise its work and focus its interventions where they are most needed and where they will have the biggest impact in protecting consumers.

    The final rules and guidance, which are included in an appendix to PS24/3, came into force on 1 May 2024. However, larger affected firms will have 14 months to ensure their reporting processes are compliant with the new requirements, while smaller firms will have 20 months to implement the necessary changes.

    Digital Finance and Fintech

    No new entries. 


    11. EBA: Opinion: New types of payment fraud and proposed measures to mitigate underlying risks and protect consumer from resultant losses

    On 29 April 2024, the EBA published an opinion detailing its assessment of payment fraud data for 2022. The opinion sets out how this data has enabled the EBA to identify new types and patterns of payment fraud, while also outlining how it proposes to mitigate consumer losses relating to such fraud.

    Of particular relevance, the data analysed by the EBA revealed that instant payments feature higher fraud rates than traditional credit transfers, as well as that customers bear a disproportionately large part of fraud losses where they arise in the context of credit transfers. It was also noted in the opinion that, while the mandatory application of Strong Customer Authentication had been successful in preventing fraud, new techniques had allowed fraudsters to engage in fraud of a more complex nature.

    Based on its conclusions, the EBA has determined that, in addition to the measures outlined in the forthcoming Third Payment Services Directive, the Payment Services Regulation and recently adopted Instant Payments Regulation, further security measures are needed to address the risks related to fraud and protect consumers. This includes reinforced security requirements for payment service providers which are aimed at further strengthening the procedure for the authentication of transactions.


    No new entries.


    12. FCA: Webpage: Principal firms who have Credit Broking permissions: Good practice and areas for improvements

    On 23 April 2024, the FCA published a new webpage which sets out good practices and areas for improvement for principal firms which have Credit Broking permissions.

    The FCA's findings follow its assessment of the key harms and drivers of harm caused by Appointed Representatives (ARs) and Introducer ARs who undertake credit broking.

    The FCA's findings involve ensuring that principal firms have appropriate initial and ongoing oversight of ARs. As an example, this can include making enquiries with other principal firms where an AR was, or is currently, appointed to another principal firm and not simply relying on automated checks when undertaking background searches.

    The FCA advises principal firms who have ARs to consider the FCA's findings and address any gaps as part of their initial and ongoing monitoring of ARs.


    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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