Financial Regulatory Newsletter | March 2021

Written on 31 Mar 2021

Financial Regulatory Newsletter | March 2021

Welcome to the first edition of our Financial Regulatory Newsletter. In this publication we will be looking at legal and financial regulatory developments affecting firms operating in the financial services sector, in particular those within the banking, investment, wealth and fintech sectors.

As the UK finds its feet outside of the EU and seeks to rebuild from the Covid-19 pandemic, 2021 is likely to be a year of reform. The UK's proposals for a new and more streamlined prudential regime for investment firms represents a major change for Financial Conduct Authority (FCA) solo-regulated Markets in Financial Instruments Directive authorised investment firms. We have also been promised more clarity around the regulation of cryptoassets and stablecoins as HM Treasury aims to strike the right balance between encouraging innovation whilst managing financial stability and consumer risk. However, amid these proposals for new regulation, and given all of the preparations required from firms in the run up to Brexit, changes to the Remuneration Code at the end of last year may have creeped under the radar of many.

Finally, from an enforcement perspective, while there was a noticeable slowdown in FCA enforcement activity (bar urgent matters) last year during the pandemic, the FCA is now seeking to recover ground. As we hope for a return to some form of "normality" later this year, firms can be sure that the regulator will not show any let up or leniency towards inappropriate behaviour that comes to light.

New UK prudential regime for MiFID firms

The FCA's first consultation on the proposed rules to introduce the UK's Investment Firm Prudential Regime closed on 5 February 2021. Specifically designed for investment firms for the first time, the new regime will represent a significant overhaul of the current rules, both in terms of the way investment firms are categorised from a prudential perspective and in terms of the requirements to which they are subject. In this article we look the main features of the changed prudential landscape which UK investment firms will need to learn to navigate.

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Tethering cryptoassets - HM Treasury proposes to regulate cryptoassets and stablecoins

HM Treasury published its consultation paper on a proposed regulatory framework for cryptoassets and stablecoins on 7 January 2021. The consultation follows the Treasury's commitment in the March 2020 Budget to consult on the broader regulatory approach to cryptoassets, and promises to deliver an agile, risk-led approach to regulation in this area. In this article we look at the scope of the proposed regulatory framework and what the requirements will be for regulated firms.

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CRD V - Recent changes to the Remuneration Code

As one of the last pieces of EU law the UK was subject to before it left the single market, the Capital Requirements Directive V (EU) 2019/878 makes a number of changes to the Remuneration Code for UK banks and designated (that is, dual regulated) investment firms. In this article we look at some of the crucial changes for firms.

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Financial Conduct Authority enforcement uptick as it looks beyond the pandemic

The UK financial watchdog is renewing its enforcement activity and recovering ground after a year of focus on business, market and consumer support. In this article, we look at the FCA's enforcement activity over the past 18 months or so and identify the emerging trends from the FCA's current focus. With the vaccine roll-out and the hope we all hold of getting back to some form of normality soon, the FCA will not show any let up or leniency towards inappropriate behaviour that comes to light.

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