Financial Crime Summary: December 2021 (Q4 Edition)


FCA launches initiatives to enhance protection for retail investors

Throughout the last quarter, the FCA doubled its efforts to promote consumer awareness regarding misleading and misrepresenting financial promotions. The £11m InvestSmart campaign marked the regulator’s debut on social media, in an attempt to warn younger audiences against advice on investments issued namely by online influencers.

At the end 2021, the FCA reported having issued more than 1,300 public warnings. The regulator further disclosed that it prevented an overall sum of £4m from being lost to scammers and further secured a disgorgement which could potentially equate up to £33.5m, subject to final adjudication. Additional initiatives have been launched to protect consumer mortgage and retail insurance.

To expediate the enforcement of its Handbook, the FCA has reformed its internal decision-making process. Rather than relying on the Regulatory Decision Committee, henceforth, senior managers of the FCA will now be able issue decisions on authorisations, variation of permissions, and proceedings against regulated entities.

The FCA expects to release a new. set of rules regarding consumer protection duty sometime in July 2022.

FCA to publish new rules on crypto-asset trading in the UK

There are currently more than 2.3 million of crypto-asset investors throughout the country. Despite the ongoing trend, the Crypto-asset Taskforce had previously concluded that promotions for crypto-asset currencies often overstated benefits and rarely warned customers about the inherent risks associated with investment deals.

In an attempt to tackle misleading advertising, the government has announced that “qualifying crypto-assets” will be subject to the FCA Handbook. Under the new regulatory framework, firms approving financial promotion for crypto-assets must have relevant expertise and understanding of the type of investment and the inherent risks associated with the product.

Communications targeted towards consumers will also need to abide by the principle of clear, fair, and non-misleading pursuant to COBS 4. Further, advertisements for crypto-assets will henceforth be prohibited from offering incentives to consumers, including any types of referral or new client bonuses.

The last quarter further market a sudden spike in the transaction of non-fungible tokens such as NFTs which are used as a way to trade digital arts or “collectibles”. However, this latter category of commodities will not come under the purview of FCA regulations.

UK government to introduce new mandatory disclosure framework relating to ESG investment

The spike in demand for sustainable investments and guidance to help investors select ESG-conscious products is causing the European market to undertake a structural reboot. According to PwC, the aggregate value for private market assets relating to ESG will reach anywhere between €776bn to €1.2tn by 2025. As reference, ESG investments have reached a value of €253bn in 2020.  

In December, the UK Taskforce Climate-related Disclosure announced a set of new regulatory provisions aimed towards asset managers. This coincides with the EU SDFR and Taxonomy Regulations.

Both frameworks will necessitate asset management companies to categorize their managed assets following sustainability-related performance indicators, and disclose the ratio of “green” investments that they are managing out of their entity-wide held assets. In addition, firms will be required to conduct an assessment of their ESG performance concerning the entity’s activities, and each asset fund. 

The UK government plans on replacing its current ‘comply or explain’ disclosure format for ESG indicators by 2025.

How can we help?

At Laven, our consultants are on hand to help identify the actions your firm needs to take to ensure you comply with new regulations and are aware of all the risks outlined in this report. Whether this is through assisting with new policies and procedures that need to be put in place or providing online/in-person training for staff to make them fully aware of the regulatory burden.

Laven has also built Laven Tech, a unique Regulatory Technology (RegTech) solution that leverages advanced technology combined with our vast subject matter expertise. Our RegTech solution is designed to assist fund managers, service providers and investors to meet today’s growing demands.

If you would like to find out more give our London office a call on +44 (0)20 7838 0010 or fill up our contact form. 

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