Financial institutions general regulatory news, 1 February 2021

Contents

• Download the full regulatory news bulletin
• UK SMCR forms: PRA PS1/21
• FCA-SEC MoU on financial services supervision
• COVID-19: FCA and FRC statement on extended financial information timelines
• FSCS 2021/22 management expenses levy limit: PRA and FCA consultation
• FSCS 2021/22 plan and budget
• NCA SAR Reporter Booklet
• Financial services: European Commissioner speech
• Complaint handling and redress system for retail investors: IOSCO report

UK SMCR forms: PRA PS1/21

Following consultation, the UK Prudential Regulation Authority (PRA) has published a policy statement, PS1/21, on updates to forms relating to the Senior Managers and Certification Regime (SMCR or SM&CR). The updates relate to:

• amending the Notification Form to reflect the new Financial Conduct Authority (FCA) address following their move to new premises and the new FCA logo. The PRA also proposed to make minor consequential amendments to the Notification Form. These amendments  deleted an incorrect reference to the PRA as a limited company, updating references to the PRA Rulebook, and updating the General Data Protection Regulation notification; and
• updating SM&CR Form L to reinstate question 3.05, which requests that firms making a notification are to provide details of any disciplinary action taken.

The appendices to the policy statement also include the instrument that makes consequential amendments to the Notifications Part of the PRA Rulebook: CRR Firms, Non-CRR Firms, Solvency II Firms, Non-Solvency II Firms: Forms Amendment Instrument 2021 (PRA2021/1).

The final rules and the updated versions of the forms applied from 22 January 2021.

FCA-SEC MoU on financial services supervision

The FCA has published an amended and restated memorandum of understanding (MoU) it has entered into with the US Securities and Exchange Commission (SEC) relating to consultation, cooperation and the exchange of information relating to market oversight and the supervision of financial services firms. Among other things, the MoU reflects the departure of the UK from the EU. The MoU is a statement of intent to consult, cooperate and exchange information and covers:

• scope of information exchange, with the FCA and SEC stating they intend to consult regularly on general supervisory developments and issues relevant to firms;
• access to information in the UK and on-site visits;
• requests for assistance; and
• confidentiality of information.

COVID-19: FCA and FRC statement on extended financial information timelines

On 27 January 2021, the FCA and Financial Reporting Council (FRC) have published a joint statement reminding companies of certain continuing temporary reliefs for reporting published financial information. Such measures are summarised by the FCA and include:

• temporary relief for corporate reporting by listed companies, being an additional 2 months to publish annual financial reports (within 6 rather than 4 months of the financial year end date) and an additional month to publish half yearly financial reports (within 4 rather than 3 months of the financial half year end date). It is reiterated that this will remain in place until the disruption abates (at a minimum, for financial periods ending before April 2021) and plenty of notice will be given when it is decided to end it;
• the automatic extension for filing any accounts with Companies House by three months. While this expires on 5 April, companies will be granted a 3-month extension where they cite coronavirus as a factor affecting timely completion or audit of accounts;
• certain measures in the Corporate Insolvency and Governance Act 2020 to provide flexibilities around the conduct of AGMs, which have been extended to 30 March. While the Act provides no scope to extend them further, it is stated that the Department for Business, Energy and Industrial Strategy is working on further guidance; and
• the FCA has also put temporary measures in place to ease challenges for certain corporate transactions, summarised in issue 27, issue 28 and issue 31 of its Primary Market Bulletin.

The statement encourages stakeholders, particularly listed company boards, to re-familiarise themselves with the measures and use them to ensure the quality of reporting is not compromised. It is also intended to alert investors and other users of financial information, including lenders assessing covenant breaches, that reporting timetables for companies might be extended and view those changes in the context of current events.

Companies are also reminded of their obligations under MAR, including that they must continue to assess carefully what constitutes inside information, recognising that the pandemic and policy responses may alter the nature of information material to a business's prospects. They are also reminded of the FRC's guidance for companies on corporate governance and reporting during the pandemic, and it is suggested that audit committees consider disclosing in their annual reports the measures taken to ensure high-quality reporting and audit for the period affected.

The FCA has also updated its related Q&A.

FSCS 2021/22 management expenses levy limit: PRA and FCA consultation

The PRA and FCA have published a joint consultation paper (PRA CP4/21, FCA CP21/2) on the 2021/22 management expenses levy limit (MELL) for the Financial Services Compensation Scheme (FSCS). The proposed MELL for 2021/22 is £105.5 million. This consists of a management expenses budget of £90.5 million and an unlevied contingency reserve of £15 million.

The consultation closes on 19 February 2021. The proposed MELL will apply from 1 April 2021 (the start of the FSCS' financial year) to 31 March 2022.

FSCS 2021/22 plan and budget

The FSCS has published its plan and budget for 2021/22, which outlines the FSCS' expected management costs and initial levy forecast that firms will pay in 2021/22.

The indicative levy for firms is £1.04 billion, an increase of £339 million from the levies raised in 2020/21. The FSCS explains the increase is mainly due to an expected increase in failures because of the impact of COVID-19, a rise in complex pension advice claims, further failures of self-invested personal pension (SIPP) operators, and an increase in pay-outs for the general insurance provision class. The FSCS will keep this under review and will provide an update during 2021.

To help the FSCS effectively process the expected increase in claims, the management expenses that are being consulted on (see above) are £90.5m, a 9% increase from the FSCS 2020/21 forecast and a 16% increase against its 2020/21 budget. This stems from a forecasted 72% rise in volume of claims compared to our 2020/21 original forecast. Many of these claims are increasingly complex and, therefore, costlier to process.

The FSCS confirms that the supplementary levy for 2020/21 will be £78 million. The plan sets out data on the compensation costs driving the supplementary levy, including claims relating to London Capital & Finance plc (LC&F), return of funds cases, and pension advice compensation. The figures are based on a number of assumptions, including assumptions relating to the volume and cost of claims the FSCS expects to receive during the year.

The final FSCS levy will be confirmed in May 2021.

NCA SAR Reporter Booklet

The National Crime Agency (NCA) has published the SAR Reporter Booklet. The booklet is produced by the United Kingdom Financial Intelligence Unit (UKFIU) which has national responsibility for receiving, analysing and disseminating financial intelligence submitted through the Suspicious Activity Reports (SARs) regime.

The UKFIU receives over 570,000 SARs a year. The booklet summaries the feedback from law enforcement on their use of SARs and is designed to:

• share perspectives on the use of SARs with participants of the regime;
• share and encourage best practice among reporters; and
• provide a feedback mechanism to the UKFIU about the operation of the regime.

The booklet provides examples on how SARs are applied in a variety of circumstances, including defences against money laundering (DAML), fraud, drugs and vulnerable persons.

Financial services: European Commissioner speech

The European Commission has published the opening remarks of Mairead McGuinness, European Commissioner for Financial Services, Financial Stability, and Capital Markets Union (CMU) at a meeting of the European Parliament's Economic and Monetary Affairs Committee (ECON). Commissioner McGuinness gives an overview of the Commission's financial services work, including relating to the future UK-EU relationship.

Commissioner McGuinness also notes that the Commission received over 46,000 replies to its consultation on the first Delegated Regulation on climate change mitigation and adaptation under the Taxonomy Regulation. Given this response, the Commission intends to delay the delegated act so that all responses can be considered.

Complaint handling and redress system for retail investors: IOSCO report

The International Organization of Securities Commissions (IOSCO) has published a report on complaint handling procedures and mechanisms for retail investors. The report is based on analysis of the responses to a survey sent to members and a review of academic and other literature on the subject matter. It presents nine sound practices on:

• establishing a system for handling retail investor complaints;
• taking steps to raise investor awareness of various available complaint handling systems;
• making available as many channels as possible for retail investors to submit complaints;
• taking steps to support complaint handling systems;
• encouraging financial service providers to offer a wide range of resolutions to retail investor complaints.
• using complaint data to identify areas for new or enhanced investor education initiatives and for regulatory and supervisory purposes;
• seeking input from retail investors about their experience with complaints handling systems; and
• making ADR facilities operated by or affiliated with a regulator more accessible for retail investors.

Download the full regulatory news bulletin 

Authored by Yvonne Clapham