Regulators publish fourth edition of the Regulatory Initiatives Grid

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Climate-related initiatives

Currently a hot topic, the Grid includes several important climate-related additions.

  • Sustainability disclosure requirements (SDR) will require corporates, asset managers/owners and investment products to disclose they manage sustainability risks, impacts and opportunities. Alongside SDR requirements, the Financial Conduct Authority (FCA) is working to introduce sustainable investment labels to help consumers navigate investment products based on sustainability characteristics.
  • Net zero transition plans will require UK financial institutions and public listed companies to publish plans detailing how they will reduce the emissions that they are responsible for.
  • Work on environmental, social and governance (ESG) issues in capital markets will include looking at green, social and sustainable debt instruments as well as ESG data and rating providers.

Multi-sector initiatives

Beyond climate-change, the report details numerous proposals spanning the regulatory landscape. For example:

  • The FCA will be reviewing the Appointed Representatives (“ARs”) regime to address current issues and harms with a view to issuing a Policy Statement by the second quarter of 2022.
  • HM Treasury (HMT) plan to publish a report in June 2022 on the review of the UK’s AML/CTF regulatory (the Money Laundering Regulations and OPBAS regulations) and supervisory regimes.
  • The FCA is seeking to make general rules requiring the providers of personal and stakeholder pension schemes to provide specific pensions information to consumers via pension dashboard services.

The FCA’s annual perimeter report

The Regulatory Initiative Grid closely follows the FCA’s annual perimeter report, published in October 2021. The report suggests a series of reforms to protect consumers and evaluates the ‘perimeter’ or boundary of what the FCA does and does not regulate. In this year’s report, the FCA discuss similar reforms to the Grid such as the ARs regime, ESG issues and the transition to a net zero economy.

However, the report also outlines reform to the Financial Promotions Order (FPO) exemptions and the overseas person exclusion (OPE). Regarding the FPO, the FCA is concerned that unauthorised persons are too often relying on exemptions relating to ‘high net worth’ and ‘sophisticated’ investors to market high risk investments (enabling those firms to issue promotions without approval by an authorised firm). Having been reviewed last in 2005, the FCA consider the rules are no longer fit for purpose and require significant change. Similarly the OPE, which allows an overseas person to carry on specified regulated business with UK clients without requiring UK authorisation, was introduced in the 1980s. Given that financial services have evolved significantly, HMT plans to review the exclusion alongside the UK’s regime for overseas firms more widely.

In light of the evolving regulatory environment, it’s important that financial services firms stay up to date with the latest developments and plan for future changes. If you have any questions relating to the Regulatory Initiatives Grid or wish to know what these changes means for your business, please contact us here. Our team will be happy to help.