The FCA has updated its Perimeter Report. The report highlights the FCA’s remit and powers, including the new Designated Activities Regime, and then lists the key areas of harm linked to the perimeter and some key challenges the FCA faces. Among the issues the report focuses on are:
- the debt advice landscape, which has been on the regulatory radar since late 2020 with the FCA’s latest significant action being its 2023 ban on debt packagers from receiving referral fees;
- appointed representatives, also raised as a concern in 2020 and addressed by changes on the FCA’s expectations of principal firms that took effect at the end of 2022 but which is also ongoing as the FCA continues to engage with the Treasury’s review of whether any further legislative changes are called for;
- outsourcing and third party providers, again raised in 2020 and now addressed by the changes in expectations on operational resilience and the Critical Third Parties regime;
- deposit aggregators, an issue raised in 2021 and addressed by a letter that year to banks and building societies, which the FCA still looks to these credit institutions to consider and address;
- the general insurance perimeter, a live issue since 2019. The FCA is still considering on whether guidance on when arrangements constitute contracts of insurance would be useful;
- overseas insurers and what amounts to carrying on insurance business in the UK – an issue which has come more to the forefront of regulatory concern since Brexit, and which the FCA is keeping an eye on to see whether guidance on its approach to this would be useful;
- use of group policies as a way to avoid authorisation and lead to consumers losing access to regulatory protections;
- improving effectiveness of the MLRs;
- aspects of the lending market, in particular BNPL and SME lending;
- consumer investments and the risks of investment scams and unregulated funds, as well as the new overseas funds regime and recent FCA action on disclosure of costs and the introduction of the Consumer Composite Investment regime and the 2022 strengthening of restrictions on marketing high risk investments.
- also on financial promotion, the FCA clearly states its displeasure that the changes to the FPO thresholds for high net worth and self-certified sophisticated investors that were introduced in January 2024 were swiftly reversed. It believes the HNWI threshold should be raised significantly and that self-certification should not be allowed. It also mentions the still relatively new financial promotions gateway and how it is scrutinising applications and assessing approval activity, and on marketing of CFDs and other high risk derivative products;
- a new issue is whether certain exclusions are working properly – in particular whether the exclusion for trustees has caused consumers to lose money when their trusts have been invested in structures that have failed;
- technological changes, with specific focus on online harms, financial promotions on social media, digital markets, payments, open banking, open finance and smart data, access to cash and cryptoassets;
- wholesale markets, specifically looking at ESG, whether FMIs should be brought within the SMCR and whether the overseas persons exclusion is causing risks. It also notes its work on investment consultants and calls for clarification from the Treasury on where the perimeter should lie in relation to sports and non-financial spread betting.