FCA Perimeter Report calls for legislative change to protect consumers
What has happened?
In its latest Perimeter Report, published in October 2021, the FCA has laid out its intended approach to a number of perimeter-related concerns. Below are key points identified in the report around appointed representatives, SMCR compliance and buy-now-pay-later products.
What do you need to do?
The FCA publishes an annual Perimeter Report as part of its accountability to Parliament and to support regular dialogue with the Government on the regulatory regime. This report will form the basis of a formal discussion between Nikhil Rathi and the Economic Secretary to the Treasury before the end of the year, the minutes of which will be published.
Key points identified in the report are as follows.
Appointed Representatives
The FCA intends to carry out targeted and proactive supervision of those aspects of ARs’ interactions with consumers, and of principals’ oversight of their ARs, where it considers that use of the AR regime is a particular driver of harm. It will also intensify scrutiny of all principal firms and applicants which intend to appoint ARs. In a small pilot of this tighter approach, 50% of firms intending to appoint ARs have either withdrawn their applications or the FCA has decided to refuse them.
Alongside this, the FCA will consult this year on specific proposals to address the AR-related harm identified. It will also continue to work with the Treasury, which plans to issue a Call for Evidence on the AR regime, to determine the most effective ways to further reduce opportunities for misuse of the regime. This work will be informed by further data collection and an FCA supervisory programme
Buy-now pay-later products/Deferred Payment Credit
In February 2021, the Woolard Review included a recommendation that unregulated buy-now-pay-later products should be brought into the regulatory perimeter to protect consumers. The Treasury agreed with the report’s findings and announced its intention to bring these products into regulation in a proportionate way. The Treasury has now published a consultation paper setting out potential options on the scope and form of regulation for buy-now-pay-later products. Once its approach is finalised, it intends to bring forward secondary legislation to bring activities relating to DPC products into regulation by amending the exemption in the Regulated Activities Order.
The FCA is starting to plan the design and development of a framework to assess firms applying for authorisation and a supervisory strategy for when these firms fall under its remit. It will consult on its proposed approach and changes to the Handbook in due course. The extent of this will be dependent on the Treasury’s final decision on the scope of firms and activities which will fall under regulation.
SMCR Compliance
The SM&CR does not apply to Recognised Investment Exchanges (RIEs), Credit Ratings Agencies (CRAs) or payments and e-money firms, since they are not authorised under FSMA and are instead subject to a separate process of recognition (for RIEs), registration (for CRAs), or authorisation and regulation (for payment and e-money firms).
Extending the regime to RIEs and CRAs is expected to deliver greater accountability and robust oversight of functions that promote market integrity, and it would also ensure consistency in relation to supervisory expectations of individuals discharging key responsibilities. The FCA sees value in extending the SM&CR to these firms and it will continue to work with the Treasury on this issue.
How can we help you?
If you’d like to know more about how we can help you with your Appointed Representative, buy-now-pay-later or SMCR compliance, or with any other regulatory compliance issues, our expert team is here to help.
Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.