Legal Shorts 20.12.19 including FCA urges advisers to prepare for Brexit plans

FCA urges advisers to prepare for Brexit plans

Following the Conservative Party’s substantial majority in the recent general election, there is an increased likelihood that the UK will leave the EU on 31 January 2020 with a withdrawal agreement. The FCA has called on advisers to “ensure they are prepared” for the UK’s departure from the EU in light of last week’s election result.

Prime Minister Boris Johnson had continuously promised to “get Brexit done” and, speaking outside Downing Street after the election, pledged to honour that promise by January 31. On Friday, a special European Council meeting of EU27 leaders adopted conclusions on Brexit, calling for the timely ratification and effective implementation of the withdrawal agreement, addressing preparations for the negotiations on the future UK-EU relationship, and emphasising that the future relationship must be based on a balance of rights and obligations and ensure a level playing field.

Reflecting on the government’s intention not to extend the transition period beyond 31 December 2020, European Commission chief negotiator Michel Barnier is reported to have said that it is unrealistic to do a global negotiation that will get everything done in 11 months, but that the EU will do all they can to get the vital minimum to establish a future relationship, if that is the timescale.

FCA and Bank of England statement on joint review of open-ended funds

On 16 December 2020, the Financial Policy Committee (FPC) published its Financial Stability Report setting out initial findings of a joint review by the FCA and the Bank of England on open-ended investment funds and the risks posed by their liquidity.

The FPC has reviewed the progress of the work and identified that, if greater consistency between the liquidity of a fund’s assets and its redemption terms is to be achieved, the following issues should be considered:

  • liquidity of funds’ assets should be assessed by reference to the price discount needed for a quick sale of a representative sample (or vertical slice) of those assets or the time period needed for a sale which avoids a material price discount. In the US, the Securities and Exchange Commission has recently adopted measures of liquidity based on this concept;
  • redeeming investors should receive a price for their units in the fund that reflects the discount needed to sell the required portion of a fund’s assets in the specified redemption notice period, ensuring fair outcomes for redeeming and remaining investors; and
  • redemption notice periods should reflect the time needed to sell the required portion of a fund’s assets without discounts beyond those captured in the price received by redeeming investors.

The FCA commented that it will use the conclusions of the review which will be released in 2020 to inform the development of the FCA’s rules for open-ended funds.

FCA seeks proposals on open finance

On 17 December 2019, the FCA launched a Call for Input to explore the opportunities and risks arising from open finance. The FCA stated that it needs to ensure open finance develops in the best interests of consumers, and what role the FCA should play given the increased use of data and technology which has led to greater innovation as new business models and ways for firms to engage with their customers have emerged.

The UK has led on this with the development of open banking – where consumers and small businesses can give access to their payment account data to third party providers to get new services. Open finance would extend open banking principles to give consumers and businesses more control over a wider range of their financial data, such as savings, insurance, mortgages, investments, pensions and consumer credit. It has the potential to deliver transformative benefits for both consumers and open finance participants.

The FCA has been leading the public debate on open finance and set up an advisory group to help move forward its future strategy. The FCA is seeking feedback to the Call for Input by 17 March 2020 and will publish a feedback statement in summer 2020.

Supervisory intervention on Interest Rate Hedging Projects

An independent review by John Swift QC is in progress in relation to the FSA/FCA’s supervisory intervention on Interest Rate Hedging Products.

The review covers the period from 01 March 2012 to 31 December 2018, looking at both the implementation and operation of the pilot and the subsequently the full Redress Scheme. It will examine the quality and effectiveness of the supervisory intervention including judgements relating to securing redress for SMEs and provide an assessment of the FSA/FCA’s actions relating to the redress exercise and set out the lessons (if any) that should be learned from the Review. The Review is not intended to be a route by which the redress scheme or individual cases can be re-opened; nor is it intended to assess the appropriateness and reasonableness of individual offers.

On 18 December 2019, John Swift QC invited submissions from interested parties in relation to questions including, but not limited to, whether:

  • the FSA’s approach to the intervention, including the potential benefits over alternative options and parameters for the scheme, was a reasonable response to the FSA’s concern about the mis-selling of IRHPs;
  • the criteria for eligibility to benefit from the scheme were appropriate;
  • overall, the scheme delivered fair and consistent outcomes for SMEs within the scope of the scheme in a proportionate and transparent way; and
  • the redress exercise was delivered in an effective and timely way, including whether the effectiveness of the FSA’s and later the FCA’s oversight of the timeliness of redress, and communications about timescale.

John Swift QC invites anyone affected by or involved with the FSA/FCA’s IRHP Redress Scheme by 31 January 2020. For further details see

FCA fines PPC for misleading consumers and banks in first CMC case closed by the regulator

The FCA has fined Professional Personal Claims Limited (PPC) £70,000 for misleading consumers through its websites and printed materials. This decision follows the transfer of regulatory responsibility for claims management companies (CMC) to the FCA on 1 April 2019.

PPC’s websites and printed materials used the logos of five major banks which was liable to mislead consumers into believing they were submitting redress claims for mis-sold payment protection insurance directly to their banks, rather than engaging PPC as a CMC to pursue claims on their behalf in return for payment of a success fee. PPC also failed to present accurate, fully formed, detailed and specific complaints to banks. It had submitted Financial Ombudsman Service (FOS) questionnaires to banks on behalf of different consumers. The questionnaires in part contained identical factual allegations where evidence specific to each client should have been presented.

PPC was originally investigated and fined by the previous regulator for CMCs, the Claims Management Regulator (CMR), under the CMR’s prior regulatory framework applicable before 1 April 2019. PPC’s business focused on claims for redress for mis-sold PPI. The CMR launched an investigation following a number of complaints between October 2015 and March 2017 from clients of PPC and financial firms.

On 5 December 2018, the CMR determined that PPC had breached the previous CMC conduct rules by using websites and marketing materials that were misleading and by submitting misleading material to financial firms in support of its clients’ PPI redress claims. The CMR imposed a £70,000 fine for these failings.

PPC appealed on 21 December 2018 to the First-tier Tribunal against the CMR’s penalty notice. While the appeal was pending, the FCA took over regulation of CMCs from the CMR. The FCA therefore replaced the CMR as the respondent to PPC’s pending appeal.

On 16 September 2019, after reviewing the evidence put forward by the FCA, PPC withdrew its appeal, and the FCA therefore imposed the £70,000 fine on PPC for the failings identified in the CMR’s penalty notice.