Issue 139 of Butterworths Financial Regulation Service has now been published. I’ve reviewed and revised Chapters 1 to 4 (covering the introduction, and CONC 1 to 3) and Chapters 10 to 16 (covering CONC 9 to CONC 15) of Division H of Volume 4. This commentary is up to date as at October 2024.
The changes include:
– re-writing the existing commentary in Chapter 1 to consider some key areas of focus for the Financial Conduct Authority including (a) financial promotions and (b) supporting borrowers in financial difficulties;
– updating the commentary on CONC 3 to deal with the FCA’s recent social media guidance;
– revising the guidance on CONC 14 to explain the background which led to those provisions; and
– updating the text to consider the impact of the consumer duty.
On 17 March 2025, HM Treasury published a policy paper and a news story setting out a new approach to ensure regulators, and regulation, support growth.
HM Treasury says it will overhaul the regulatory system so that it:
– supports growth;
– is targeted and proportionate;
– is transparent and predictable; and
– adapts to keep pace with innovation.
HM Treasury says that its reforms “will apply to all bodies exercising regulatory powers and functions“. This will therefore include the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
The proposed actions are:
– action 1: tackling complexity and the burden of regulation (which includes consolidating the Payment Systems Regulator mainly within the FCA);
– action 2: reducing uncertainty across the regulatory system (HM Treasury will look to review the number of the PRA’s and FCA’s “have regards” to identify opportunities to rationalise them and ensure a focus on their priorities; it will ensure the Financial Ombudsman Service is “set up in such a way that it works well for consumers, small businesses and for financial services firms” and reviewing some of the key criticisms of the Ombudsman); and
– action 3: challenging and shifting excessive risk aversion in the system (the review will hold regulators to account for their performance and reduce administrative costs; the aim is to strike the right balance between consumer protection and growth).
There are some key regulator pledges at Annex A. The FCA’s pledges, and the PRA’s pledges, are:
FCA
Provide a dedicated case officer to every firm within the FCA’s regulatory sandbox.
FCA
Provide 50% more dedicated supervisors to early and high growth firms, to help them navigate the regulatory system and support their growth.
FCA
Extend pre-application support to all wholesale payments, and crypto firms.
FCA
Indicate more often that the FCA is ‘minded to approve’ start ups to help them secure funding.
FCA
Simplify its mortgage and advice rules to support greater home ownership.
FCA
Welcome FCA work to review the contactless payment limits, including removing the £100 limit on individual payments.
FCA
Accelerate a review of capital requirements for specialised trading firms.
FCA + PRA
HMT will review the FCA’s and PRA’s ‘have regards’ to rationalise them and ensure a focus on their priorities.
FCA + PRA
Reduce regulatory reporting requirements for firms.
PRA
The PRA will consult this April on a matching adjustment investment accelerator aimed at reducing the time between life insurers identifying a productive investment opportunity and making that investment.
This announcement marks an important step forward in achieving a proportionate financial services regulatory system which works for both firms and for users of the services provided by firms. The devil is, of course, always in the detail and firms will no doubt be keeping a close eye on future annoucements.
Earlier today, on 11 March 2025, the UK Financial Conduct Authority (the FCA) published a statement on its next steps in its motor finance review. The FCA says:
– If, taking into account the Supreme Court’s forthcoming decision on the appeal from the Court of Appeal’s decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282, it concludes motor finance customers have “lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme“;
– Under a redress scheme, “firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do“;
– The FCA no longer plans to make a further announcement in May 2025. Instead, the FCA will confirm its position “within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward“; and
– The FCA’s next steps on non-discretionary commission arrangements will also be informed by the Supreme Court’s decision.
There are some interesting points from this statement:
– The statutory test under Section 404 of the Financial Services and Markets Act 2000 refers to it appearing to the FCA “that there may have been widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity“. The FCA’s statement that it may (depending on the circumstances) consult on such a scheme is therefore a simple re-statement of part of the test for a consumer redress scheme under the statutory provisions.
– It is unsurprising that the FCA will not make an announcement in May 2025: this seemed inevitable once the lenders were given permission to appeal by the Supreme Court in December 2024.
– There is no mention of the appeal to the Court of Appeal from the High Court’s decision in R (Clydesdale Financial Services Limited) v Financial Ombudsman Service [2024] EWHC 3237 (Admin). This has a ‘hear by’ date of 8 December 2025 and the Court’s consideration of the FCA’s rules and guidance in the Consumer Credit Sourcebook must (it is submitted) be part of the FCA’s wider consideration of whether there has been “widespread or regular failure“.
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