Shayne Halfpenny-Ray shares update on FCA fund and consumer duty consultation
I t has been a busy period on the regulatory front. Alongside consultations on simplified annual benefit statements and mandatory professional indemnity insurance for tax advisers, the Financial Conduct Authority (FCA) has also announced a flurry of activity.
Regulatory Initiatives Grid
The Regulatory Initiatives Grid, published by the Financial Services Regulatory Initiatives Forum twice a year, includes eight new environmental, social and governance initiatives; the Bank of England and FCA’s work to transform data collection; HM Treasury’s Future Regulatory Framework Review and the Pensions Regulator’s work to introduce a single code of practice to make its expectations simpler and easier to understand.
The Financial Reporting Council has also now joined the forum and will be contributing towards the grid for the first time.
Long-term asset fund
The FCA has launched a consultation on a new type of fund to support investment in long-term assets.
The new long-term asset fund (LTAF) would be open-ended and would be able to invest in assets such as venture capital, private equity, private debt, real estate and infrastructure, often collectively referred to as productive finance.
The aim would be to provide a fund structure through which investors can invest with appropriate confidence in less-liquid assets These illiquid assets can offer attractive expected returns to investors. If successful, the existence of funds investing in these assets can also help businesses and infrastructure projects have greater access to long-term capital to support investment and wider economic growth.
The LTAF would also be aimed at defined contribution schemes, which may be interested in investing part of their assets into an LTAF.
The FCA is keen to hear views from stakeholders on its proposals and the consultation is open for feedback until 25 June 2021.
FCA consumer protection
The FCA has set out plans for a new consumer duty, which will set a higher level of consumer protection in retail financial markets for firms to adhere to.
Firms are already bound by FCA rules and principles to treat customers fairly. The regulator believes that expanding existing rules and principles will ensure firms provide a greater level of consumer protection consistently.
The wording being consulted on is: ‘a firm must act in the best interests of retail clients’, or ‘a firm must act to deliver good outcomes for retail clients’.
It would require three key behaviours from firms: taking all reasonable steps to avoid foreseeable harm to customers; taking all reasonable steps to enable customers to pursue their financial objectives; and to act in good faith.
There will also be a suite of rules and guidance setting detailed expectations in relation to four specific outcomes – communications, products and services, customer service, and price and value.
The consultation is open until 31 July 2021. The FCA expects to consult again on proposed rule changes by the end of 2021 and make any new rules by the end of July 2022.
As always, the PFS will engage with the regulator and government on these issues and keep members informed of any updates.
Shayne Halfpenny-Ray is public affairs manager of the PFS
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