Regulation in focus - the first six months of 2021
9th February 2021
2020 was a year that signalled disruption to all industries, with the COVID-19 pandemic sweeping aside regulatory plans, as the regulator rushed to stabilise the markets and introduce measures to help provide relief to both firms and their customers.
Consequently, 2021 is scheduled to be busy on the regulatory front, with many rule changes that were deferred now due to be implemented in the year ahead. In this update, we will focus on the first half of the year, to see what is coming down the track for advisory firms and what preparation is required.
Firstly, there are a number of new rules that came into force on the 1st February, starting with the deferred final policy statement on the Retirement Outcomes Review PS19/1. Under these rules, firms are required to guide customers towards investment solutions tailored to four broad retirement income behaviours. Although these rules apply to non-advised clients, advisers will need to evidence that they have considered the investment pathways available to the client and the suitability and value for money of any alternative personal recommendation. Our Technical Services & Research Team has provided Tenet advisers with guidance.
This is joined by the deferred policy statement on PS19/29 - Making Platform Transfer Simpler. This is a package of rules for platforms to make it easier for consumers to move from one platform to another without liquidating their assets. These changes should be beneficial for advisers in ensuring that, subject to individual suitability assessments, clients are on the most appropriate platform for their needs. Again, straightforward guidance on these rules has been provided, so our advisers don’t have to spend time interpreting the new rules.
Finally, 1st February also saw the implementation of 13 new rules for providers on costs disclosure for pension decumulation under COBS 16.6.10. This ensures a consistent approach for pension providers to illustrate to policyholders the costs and charges they have paid. This statement will be provided on an annual basis from the provider, so there is no action for advisers, other than an awareness of the charges disclosure.
31st March marks two key deadlines, the end of the Coronavirus Job Retention Scheme and the final date for implementing all outstanding elements of the Senior Managers and Certification Regime (SM&CR) for solo-regulated firms.
In relation to the SM&CR, the following requirements were officially extended from 9th December 2020 to 31st March 2021, by which point firms must have:
- Completed initial fit and proper assessments for certified staff;
- Provided all relevant staff with Conduct Rules training;
- Submitted details of Directory Persons data via Connect or bulk upload spreadsheet.
For support on implementing these requirements, our directly authorised members can refer to our dedicated SM&CR zone on the extranet.
The end of the Coronavirus Job Retention Scheme means that advisers need to be ready for increased enquiries and alert for signs of vulnerability across all sectors of their customer base. Don’t forget that our free Tenet Assistance Programme offers access to counsellors and specialists, to help advisers with issues around anything from debt counselling to HR advice.
There are also a number of pending rules with no set dates, other than the first half of the year. These include:
- Rules implementing EU regulations on Environmental, Social and Governance (ESG) investments;
- A consultation paper on effective competition in non-workplace pensions;
- The FCA GI market study and a policy statement prohibiting the sale to retail clients of investment products that reference crypto assets;
- FCA Finalised Guidance on the fair treatment of vulnerable customers.
Tenet will of course keep its advisers updated as soon as any set dates are announced and provide related guidance and support as required.
Finally, that leaves us with the 6th Anti-Money Laundering Directive, which came into effect on 3rd December 2020, and must be enforced by all regulated financial institutions by 3rd June 2021. This directive includes expanding the list of predicate offences (offences which are part of a larger crime) to include 22 different crimes, which now directly constitute money laundering, brings in changes to criminal liability and sets the minimum prison sentence for anyone found guilty of money laundering to four years – where it had previously been just one year.
Following a year that was largely light on regulation due to the pandemic, the first half of 2021 is scheduled to be a heavier one and advisers need to plan ahead to ensure they are balancing their workloads.
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