8 things Compliance teams need to focus on this year

Puzzle-01-12019 looks to be a year filled with new regulations, changes and challenges.

Nothing unusual there, then.

But with the UK’s departure from the EU, and a raft of upcoming legislative changes, the next 12 months look like being busier than most.

Here we round up the 8 top things that promise to challenge Compliance teams in the coming year.

Brexit

One of the biggest issues – and currently, one of the biggest unknowns – is the way that financial services will pan out after Brexit.

In November, the regulator launched a consultation on its approach, focused principally on a number of amendments to its Handbook and Binding Technical Standards (BTS). This followed two earlier consultation papers published by the Authority in October.

The FCA updated its advice to firms on 13 December. On 7 January, it announced that the notification window for the temporary permissions regime is now open. This regime has been put in place to enable firms to operate for a limited period while they seek full FCA authorisation, if the UK leaves the EU without an implementation period in place.

It will allow EEA-based firms currently passporting into the UK to continue new and existing regulated business, within the scope of their current permissions in the UK. It will also allow EEA-domiciled investment funds that market in the UK under a passport to continue doing so temporarily.

With the clock ticking down rapidly to the 29 March exit date, UK-domiciled firms operating in the EEA and EEA firms that market here have much to do to understand the landscape and ensure they continue to operate in a compliant way.

Claims management companies

The FCA will assume regulation of claims management firms from 1 April. Firms must notify the regulator of their intention to apply for temporary permission to operate by 31 March – the window for this opened on 2 January.

In September we explored how the regulator’s governance aims to improve standards in the sector.

Any claims management firm wishing to continue operating in the UK needs to ensure they apply for temporary permission by the 31 March deadline and familiarise themselves with the FCA’s requirements for compliant operations and financial promotions. Our blog on how claims management firms can prepare for FCA regulation has practical tips for firms wishing to get up to speed with the regulator’s requirements.

PRIIPs

We identified the regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products as one of the main headline events for Compliance teams in 2018.

2019 shows no sign of let-up. Concerns about KIDs were behind many of the negative headlines PRIIPs generated in 2018. In Q1 this year, the European Supervisory Authorities plan to propose specific amendments to the PRIIPs regulation to answer some issues firms have faced in producing compliant KIDS.

Also early in the year, the FCA is expected to publish its feedback statement following its 2018 Call for Input, which sought feedback on specific aspects of complying with the PRIIPs legislation.

By December, the European Commission plans to have reviewed PRIIPs thoroughly. 31 December is the final deadline for all UCITS (the Undertakings for Collective Investment in Transferable Securities Directive 2009) KIDs to be converted to PRIIPs KIDs.

While this discussion continues, firms need to comply with the legislation as it stands, producing KIDs that meet the requirements. You can find out how to do this in our blogs on avoiding the potential pitfalls in preparing your KIDs and creating user-friendly fund factsheets and KIDs.

MiFID II

Another familiar topic that continues into 2019.

New obligations come due in January and March, with firms having been required to publish full ex-post costs and disclosures on charges since 3 January. In March, the application of transitional transparency calculations for equity instruments comes to an end.

Fintech

The move towards increasing automation, whether in service provision or regulation, also continues at speed. We reported last year that the FCA was looking at ways it could introduce greater automation to the regulation process.

The results of the Authority’s automating regulation pilot are due to be published in Q1 and will doubtless bring proposed changes to the way compliance is managed.

General Insurance Market Study

In October, the FCA launched a Market Study, examining how general insurance firms charge their customers for home and motor insurance.

The regulator is seeking feedback on its discussion paper on fair pricing until 31 January. You can respond to this by completing the online response form, emailing dp18-09@fca.org.uk or writing to Chris Gee, Strategy & Competition Division, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.

The interim report on the findings is due to be published in the summer, with a final report due by the end of this year.

Pension transfer advice

New rules on pension transfer advice are due to be published in October.

Work on pension transfers was one of the priorities identified by the regulator in its 2018-19 Business Plan, and we looked in October last year at how you can comply with the new rules set out under its ‘Improving the quality of pension transfer advice rules and guidance’ document.  

If this is an area you want to improve on in 2019, you can read our advice on ensuring your pension transfer advice is up to scratch.

SMCR

In line with an ongoing FCA push towards greater accountability, the Senior Managers and Certification Regime comes into force for solo-regulated firms on 9 December 2019, with rules on prescribed responsibility for managers coming into effect at the same time.

Any firm needing to revisit the SMCR’s requirements or pick up practical tips on compliance can read our blog on preparing for increased individual accountability.

Embrace your changing obligations

Nothing stands still for Compliance teams, and 2019 is shaping up to continue the tradition of constant evolution.

To keep pace with the shifting sands of operating in a UK regulated business, you need to stay aware of new obligations, identify cost- and time-effective ways to tackle evolving challenges, and ensure you can deliver on your requirements, often with reducing teams and budgets.

Our whitepaper, The changing role of the Compliance Officer, explores the challenges you face and how you can embrace them. You can download a free copy here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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