2020 and 2021
Regulatory Horizon Scan
Upcoming regulatory change in 2020:
- FCA's Temporary Permission Regime
- ESMA Guidelines on liquidity stress testing in UCITS and AIFs
- Fair treatment of vulnerable customers
- Complaint handling and the COVID-19 pandemic
- Remuneration Code for dual-regulated firms
- LIBOR replacement
Upcoming regulatory change in 2021:
- Transaction Reporting and Brexit
- Senior Managers and Certification Regime staff certifications
- Annual Financial Crime Report
- Liquidity mismatch in authorised open-ended property funds
- Packaged Retail Investment and Insurance based Products Regulation
- Environmental Social Governance amendments to AIFMD and UCITS Directive
- New Prudential Regime for investment firms
- European Commission review of the AIFMD
FCA’s Temporary Permissions Regime +
30 September 2020
The TPR enables firms and funds which passport into the UK to continue operating in the UK when the passporting regime falls away at the end of the transition period. Firms that want to use the TPR must notify the FCA when the temporary notification window opens on 30 September 2020. If necessary, firms must also update their previously submitted notifications.
ESMA Guidelines on liquidity stress testing in UCITS and AIFs +
30 September 2020
Firms must establish a liquidity stress testing policy for UCITS and AIFs they manage.
Fair treatment of vulnerable customers +
Q4 2020
The FCA is introducing guidance to make sure firms understand its expectations regarding the fair treatment of vulnerable customers. Firms that deal with retail clients will need to review their policies, processes and internal culture to ensure they meet FCA expectations.
Complaint handling and the COVID-19 pandemic +
Q4 2020
The FCA has published a statement on its website, which is subject to periodic updates, clarifying its expectations of firms when they are handling complaints. The statement takes into account the operational challenges faced by many firms during the COVID-19 pandemic. Firms will need to review their arrangements for handling complaints to ensure they are as effective as possible, taking into account any operational challenges they face.
Remuneration Code for dual-regulated firms +
H2 2020 (date to be finalised)
The FCA remuneration code aims to ensure firms establish remuneration policies that promote effective risk management. The Code is being reviewed to bring it in line with the EU’s Capital Requirements Directive V (“CRD V”). Dual-regulated firms will need to review their remuneration policies and governance arrangements to ensure they meet the new requirements.
LIBOR replacement +
H2 2020 (date to be finalised)
LIBOR, the benchmark referenced in many swaps and other derivative contracts, is being replaced by risk-free-rates (“RFRs”) chosen by the market. The International Swaps and Derivatives Association (“ISDA”) is finalising a protocol and other documentation through which outstanding derivative contracts which reference LIBOR can transform to work on the new RFRs. Firms will need to discuss the transition from LIBOR with their counterparties and sign up to the protocol.
Transaction Reporting and Brexit +
1 January 2021
The FCA expect firms to meet their obligations under UK rules to transaction report at the end of the transitional period. Firms should discuss their transaction reporting arrangements with their third-party service providers.
Senior Managers & Certification Regime staff certifications +
31 March 2021
Under SM&CR, which replaced the Approved Person Regime for solo-regulated firms on 9 December 2019, firms must assess the fitness and propriety of their certified staff before the expiry of the extended deadline of 31 March 2021. Firm’s must notify the FCA of certified persons for upload to the FCA Directory ahead of the deadline.
Annual Financial Crime Report +
Q1 2021
The FCA are requiring more firms to report to them on financial crime matters. Firms that the FCA consider pose a higher money laundering risk, that do not already submit a report, will have to report annually going forward.
Liquidity mismatch in authorised open-ended property funds +
2021 (date to be finalised)
The FCA is consulting on changes to address a perceived mismatch in liquidity in authorised open-ended funds that invest directly in property. Firms will have to require investors to give notice of up to six months before their investment is redeemed in affected funds.
Packaged Retail Investment and Insurance based Products Regulation +
2021 (date to be finalised)
The PRIIPs Regulation requires firms to provide a short Key Information Document (“KID”) to investors covering the key features of PRIIPs they offer. The regulation is being reviewed to improve it. Once the changes are published, firms will need to check which of their products are affected and amend the contents of any KIDs.
Environmental Social Governance amendments to AIFMD and UCITS Directive +
2021 (date to be finalised)
Firms will have to amend organisational procedures, conflicts of interest policies, risk management policies and arrangements for investment due diligence to consider sustainability risks.
New prudential regime for investment firms +
2021 (date to be finalised)
Many investment firms currently follow similar prudential rules to deposit taking credit institutions. The prudential regime for investment firms is being changed to better reflect firm’s business models. Most firms will be subject to higher capital requirements and will have to carry out a new Internal Capital Risk Assessment (“ICARA”) process.
European Commission review of the AIFMD +
H2 2021 (date to be finalised)
The AIFMD is the major piece of legislation setting out the regulatory framework for EU fund managers and the funds they manage. The Directive is being reviewed to identify and address potential shortcomings. Firms will need to monitor the regulatory developments so they can prepare for any potential changes to the legislation in advance.