Financial Services Regulation update – March 2019

This month we look at:
Claims Management Companies/claims administration services providers

Capital Law analyses claims management activities as FCA warns CMCs not to delay registration

From April 2019 all claims management companies (CMCs) set up or serving customer in England, Scotland or Wales must be authorised by the FCA to continue operating.  CMCs must register for temporary permission by 31 March 2019.  Applications for authorisation must be made by 31 July 2019.  The FCA will regulate a wide range of CMC sectors relating to claims for loss due to personal injury, financial services and financial products, housing disrepair, claims relating to certain industrial injuries and associated benefits, criminal injuries, and employment related claims.  Particular activities within those sectors are regulated such as “seeking out claims” and “accepting referrals of potential claims” – clearly to mitigate the risks to consumers identified in the Brady report of 2016.  However, activities to be regulated go further where carried on in the identified sectors for and on behalf of the claimant.

Draft amendments to the FCA handbook can be found at, including a new chapter for claims management companies – CMCOB.

Capital Law has carried out analyses of current claims related activities for clients and can advise you whether your current activities amount to claims management services and we can assist you in making applications for authorisation where appropriate.  

Senior Managers & Certificate Regime for FCA solo-regulated firms

SMCR to apply to FCA solo-regulated firms from December 2019

The Senior Managers & Certification Regime (SMCR) replaces the Approved Person Regime from 9 December 2019, applying to FCA solo-regulated firms – including: insurance intermediaries, brokers and MGAs, wealth managers, IFAs and placing agents.

The SMCR places more of an onus on regulated firms to take responsibility for their management team and individual employees carrying on roles relevant to the firms regulated activities. The SMCR requires firms to take a two-pronged approach to supervision of senior staff, managers and decision makers. The regulations are split into the Senior Managers Regime and the Certification Regime, to ensure both managers and staff understand overall allocation of responsibilities and reporting lines within the firm. Additional conduct rules will also be introduced, applying to a wide proportion of staff in regulated firms.

Further information on the SMCR is available at: 

Capital Law can assist your firm with implementation of the SMCR, we offer audit services to understand how the Regime will apply to your business model and can support in development of an internal certification regime and updating your systems & controls in accordance with the FCA’s SMCR rules and guidance. Capital Law also offers specialist workshops on the SMCR and Conduct Rules. 

Brexit - A round up of legislation introduced around Europe that affect the insurance industry

Brexit & the Insurance Industry – a round-up of Europe’s legislative preparations

Unless specific arrangements are made by an individual EU country, as matters stand, the UK insurance industry will be considered third-country business, seriously restricting their activities in the EEA. Here’s a round-up of preparations made by some EEA states:


The FCA and PRA have agreed Memoranda of Understanding that will take effect in the event of a no-deal Brexit which will ensure cooperation relating to insurance prudential and conduct supervision. A multilateral MOU on supervisory cooperation, enforcement and information between regulators of each of the EEA countries and the FCA and PRA has been agreed, plus a bilateral MoU between the European Insurance and Occupational Pensions Authority (EIOPA) and PRA/the FCA on information exchange in the field of insurance and regulation. The FCA say these MoUs will “allow for continued close co-operation in the event the UK leaves the EU without a withdrawal agreement. This of course does not alter the loss of passporting rights into EEA for the insurance industry.


the Belgian government has prepared draft legislation which confirms that as the UK is a third country UK insurance providers (insurers, distributors and re-insurers) must have a local Belgian licence, but the draft act empowers the Belgian government to put in place contingency measures to guarantee contractual continuity in agreements affected by a hard Brexit. Example are given of 1) granting necessary permissions to UK financial institutions, providing a conditional and temporary assimilation to the EU passport system, specifying where in the life-cycle of a contract, a new regulated activity will occur which will require a Belgian licence. None of these measures have yet been implemented.


has put in place a transitional period of 21 months from 29 March to allow UK insurers to continue to underwrite insurance business in Germany in the event of a hard Brexit to ensure existing insurance remains effective, but insurers are expected to wind these up during the interim period. There is currently no provision for UK intermediaries to be able to continue to distribute in Europe without a European licence and no statement has been issued regarding the extension of passporting rights for UK risk carriers.


The Irish government has prepared the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019. Under this draft legislation UK insurers/intermediaries will not be able to write/arrange new business post 29 March. However, there will be a temporary three-year run-off regime for UK and Gibraltar insurers and intermediaries. There is concern that it is not clear from the current wording of the Irish Bill whether the transitional period applies to reinsurance liabilities.


The Italian government says it has drawn up measures necessary for ensuing full continuity of the regulated markets in the event of hard Brexit, however, these measures have not yet been issued. It is rumoured to be a set of rules providing for a 21 month interim period with rules aimed at ensuring the continuity of UK operators in the Italian market, but we have no detail.

MIFID II & the UK what happens post-Brexit with no deal

Having lauded the positive impact of MIFID II on the UK markets (see our article above on Andrew Bailey’s speech), the FCA has applied its mind to how the MIFID transparency regime will be applied if the UK leaves the EU without an implementation period. Currently, the European Securities and Markets Authority (ESMA) validates data on trading across the EU and performs various calculations to set thresholds and make various determinations. UK data collected by the FCA is fed into this process. If the UK leaves without a deal, the FCA will continue to collect data using new powers under the European Union (Withdrawal) Act 2018, and during a four-year transitional period, will build systems necessary to operate the system in the UK, as ESMA currently operates it, which will produce a separate UK-only data set.

Cryptoasset Regulation

FCA Consults on the Regulation of Cryptoassets

In late January 2019, the FCA published Consultation Paper CP19/3 – Guidance on Cryptoassets. 

CP19.3 provides an overview of the types of cryptoassets identified in the UK’s Cryptoasset Task Force Final Report published in October 2018 – exchange tokens; utility tokens; and security tokens. It also gives commentary on stable tokens, cryptoassets in context of e-money and facilitation of payment services. It also provides an overview of the FCA’s existing regulatory perimeter more generally; this includes consideration of when a cryptoasset may be classed as a specified investment under the Regulated Activities Order, or financial instruments under MIFID II. 

CP19/3 makes for an interesting read and is relevant for anyone involved in the blockchain/cryptoasset sector, including: token issuers; exchanges and trading platforms; or advisers and intermediaries in the space. The FCA invites interested parties to respond to the questions set out in CP19/3 by Friday 5 April 2019.

CP19/3 is available at: 

The Cryptoasset Task Force Final Report is available at: 

MIFID II – Investment Firms

MIFID II – FCA maintains strong support for the reforms to the financial service market

The Markets in Financial Services Directive (MIFID II) came into effect on 3 January 2018. In late February 2019, the FCA’s CEO Andrew Bailey delivered a speech focusing on changes to the market post-MIFID II – including: positive impacts since implementation; challenges and concerns in the market; and FCA focus and the evolving competition in the research market. 

Notable shifts since implementation of MIFID II include a move to traditional asset managers funding research from their own revenues, instead of using client funds, and making use of new and emerging technologies to support research requirements. 

The FCA consider future challenges faced by the market will continue to relate to provision of research services; pricing of these services (which remains a sensitive topic); and how restrictions on these services will effect smaller companies and share liquidity in certain instances. 

Overall, the FCA considers MIFID II is having a positive impact. From an investors perspective we can certainly understand why – a reduction in charges incurred in UK-managed equity portfolios amounted to c. £180m in 2018, continued savings may equate to nearly £1bn over the next 5 years. 

More details of the speech is available at: