Consumer warning on Binance Markets Limited and the Binance Group
The FCA has ruled that Binance Markets Limited, an online digital currency exchange cannot undertake any regulated activities without the prior written consent of the FCA. Currently, no other entity in the Binance Group holds any form of UK authorisation, registration, or licence to conduct regulated activity in the UK. As well as forbidding Binance from setting up an exchange in the UK, the regulator is ordering its UK division to stop any form of advertising here by 30 June. More significantly, it must show the FCA that it has stored records of all UK customers by the end of the week and these records should be ready to be handed over if necessary.
Despite the ruling, Binance Group appears to be offering UK customers a range of products and services via a website, Binance.com. Binance said the FCA notice would have no ’direct impact’ on the services it provides from its website. Binance’s existing crypto exchange is not UK-based so despite the FCA ruling, Binance has stated that there will be no impact on UK residents who use the website to purchase and sell cryptocurrencies.
This is not the first time that Binance has come under the scrutiny of regulators. In April, the SEC issued a similar warning to US consumers about the platform. Furthermore, on the 25th of June, Japan’s Financial Services Agency warned Binance for the second time in three years that it is operating in the country without permission.
The FCA ruling is timely amid the latest efforts from regulators around the world against cryptocurrency platforms. However, Binance has predicted that the impact of this pushback will likely be limited, this is a view shared by Mark Walker, a technology entrepreneur who has invested in cryptocurrencies for three and a half years. Mark commented the following: “This ruling probably won’t impact me in the short term, but long term it may push me to using one of the many other less secure exchanges”.
Whilst the actual impact on Binance is in question, the FCA is sending a strong message of its concern for consumers investing in cryptocurrencies. Currently, most firms advertising and selling investments in cryptoassets are not authorised by the FCA. This means that if you invest in certain cryptoassets you will not have access to the protection of the Financial Ombudsman Service or the Financial Services Compensation Scheme.
LCF branded ‘one of largest conduct regulatory failures in decades’
The Treasury Committee has called the Financial Conduct Authority’s (FCA) handling of London Capital and Finance as “one of the largest conduct regulatory failures in decades”. The committee published a report on June 24th, urging the FCA to implement a change in its culture to protect consumers and financial markets. Despite the recent report on the matter, the issue dates back to December 2018, when the regulator directed LCF to withdraw its promotional material for mini-bonds due to it being “misleading, not fair and unclear”. In the following month, LCF entered administration. The matter was raised in Parliament, with MPs stating that it is ‘unjustifiable’ for the FCA to require firms to adhere to the Senior Managers Regime without applying similar principles to the organisation itself.
The report comes following an independent investigation into the FCA’s handling of LCF by Dame Elizabeth Gloster, published in December last year. Gloster reprimanded the regulator for “significant gaps and weaknesses” in its policies and practices and mentioned that its handling of information from third parties regarding the business was “wholly deficient”. Following Gloster’s investigation, the Treasury committee launched its own inquiry in February 2021 to examine the changes made since the publication of her report and make further recommendations.
Also in the report, MPs expressed that it was “disappointing” there was no mention of measures to address fraud via online advertising in the draft Online Safety Bill. The Treasury Committee also commented that it is a ‘missed opportunity’ to help prevent another LCF-type event by not addressing fraud via online advertising.
In the report, it was evident that there are hopes shared amongst the Treasury committee for the FCA to become more ‘interventionist’. Despite this, the report added that the committee supports the current views of the FCA leadership that the organisation needs to become more ‘proactive’, ‘agile’ and ‘decisive’.
FCA consults on further climate-related disclosure rules
The FCA has published new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The proposals are aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
In the consultations the FCA is proposing:
- to extend the application of its TCFD-aligned Listing Rule for premium-listed commercial companies to issuers of standard listed equity shares; and,
- to introduce TCFD-aligned disclosure requirements for asset managers, life insurers, and FCA-regulated pension providers, with a focus on the information needs of clients and consumers.
Sheldon Mills, Executive Director of Consumer and Competition at the FCA has stated that the financial services sector should be playing a ‘leading role’ in addressing climate change. To manage the risks of climate change, information is required on how climate-related risks and opportunities are being managed throughout the investment chain. With this information and the new proposed rules, it is expected that investors and consumers should be better equipped to understand the impact of climate change and make more informed decisions going forwards.
The new proposals are among the first of the FCA’s policy proposals for the UK asset management sector since the end of the EU Withdrawal transition period. Due to the global reach of regulated firms operating in the UK, the FCA has approached the design of the proposals with international consistency in mind. The new proposals are in line with the Chancellor’s expectations in the FCA’s recent remit letter, that the regulator should ‘have regard’ to achieving a ‘net-zero’ economy by 2050.
In addition to the proposals, the FCA is also requesting views on other topical environmental, social and governance issues in capital markets.
The FCA is encouraging feedback to both consultations by 10 September 2021 and intends to confirm its final policy on climate-related disclosures before the end of 2021. The FCA will separately consider stakeholder views on the environmental, social and governance-related discussion topics in capital markets, with a view to publishing a Feedback Statement in the first half of 2022.
