Key regulatory changes expected in 2021 - Thistle Initiatives

Written by Thistle Initiatives - Compliance consultancy | Mar 17, 2021 12:00:00 AM

What is happening?

In this blog, we have researched and summarised some of the key regulatory changes relevant to various types of firms and are expected to be implemented in 2021.

What do you need to do?

Asset management and funds firms

Operational resilience remains a cross-cutting focus in the UK, with the delayed FCA policy statement and final rules on operational resilience requirements now anticipated by early 2021. Implementation of regulatory change to outsourcing and third-party risk management rules is now expected in Q2 of 2021.
In the first half of 2021, HM Treasury will publish a second consultation paper on the post-EU regulatory framework. Following consultations in 2020, a more detailed package of proposals is due in 2021 on a realigned regulatory architecture and objectives, setting the stage for a divergence of approach from the EU.
On 26 June 2021, the Investment Firms Directive (“IFD”) takes effect. 1 January 2022 will then be the target implementation date for the UK Investment Firms Prudential Regime (the IFPR).
On 2 August 2021, the EU Directive 2019/1160 and EU Regulation 2019/1156 on the cross-border distribution of collective investment undertakings take effect; these include the following:

1. A new harmonised “pre-marketing” regime under AIFMD, which will be welcomed by many fund managers as an improvement on the current patchwork approach across Member States,
2. Placement agents and distributors carrying out pre-marketing must be EU regulated firms or tied agents and will be directly subject to the new AIFMD rules on pre-marketing,
3. A new procedure for de-notification of marketing under both the UCITS Directive and AIFMD, including restrictions on pre-marketing successor funds,
4. Similar standards of marketing communications for AIFs and UCITS to ensure they are consistent and fair, clear and not misleading,
5. Changes to information filed for AIF/UCITS marketing passports,
6. Greater transparency and high-level principles for calculating regulatory fees, and
7. Delay to PRIIPs KID application to UCITS.

Following the outcome of its review, the European Commission plans to adopt in late 2021 a proposal for a Directive amending the AIFMD.
31 December 2021 will mark the end of the KID PRIIPS exemption transition period for UCITS funds.
The FCA intends to finalise measures to combat potential ‘greenwashing’ in the funds space, including a set of principles to help firms interpret existing rules requiring that disclosures are ‘fair, clear and not misleading’, which would also apply when firms submit new products to the FCA for authorisation.

Crypto and fintech firms

The ban on retail sales of crypto derivatives takes effect in early 2021, and policy work is due on an expansion of the financial promotions regime to cryptoassets as well as a much broader framework for the regulation of cryptoassets themselves. A much more extensive UK regulatory package is expected to be consulted on later in 2021 or early in 2022, when HM Treasury announces its consultation on the broader regulatory framework for cryptoassets, including stablecoins.
December 2021 is the deadline for national authorities to establish or, as necessary, adjust co-operation arrangements consistent with international principles and the FSB recommendations on global stablecoins.
After March 2021, the BoE and the FCA will work with firms to explore the viability of testing machine-readable and executable regulatory reporting.

Financial advice firms

Q2 2021 is the tentative target for the FCA’s delayed Assessing Suitability Review 2, which will focus on the market for pensions and investment advice. The FCA will publish a report on its findings.

Payments firms

14 September 2021 is the UK implementation date of the Payment Service Directive (PSD2) Strong Customer Authentication requirements, which had been postponed from March.
As part of its Retail Payments Strategy, the European Commission is aiming for the full uptake of instant payments in the EU by the end of 2021, across both online and physical purchases in addition to credit transfers.

Financial crime

The FCA is expected to publish its policy statement and final rules on extending its annual financial crime reporting obligation (REP-CRIM) to more firms.

How can we help you?

If you’d like to know more about how we can help you with any aspect of the regulatory changes outlined above, our expert team can help. We can assist firms that operate in Investments, Payment Services, Fintech and Lending.

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