REGULATORY UPDATE
sustainable investment products. The FCA’s proposals include: Classifying and labelling products as different sustainability classes based on FCA definitions, and monitoring the use of sustainable investment labels to assess whether they are meeting the FCA’s criteria. Consumer friendly, accessible disclosures including objectives, investment approach, and performance against the objective. More granular disclosures at product and entity level. A general anti-greenwashing marketing ruling, and restriction on sustainability terms in naming and marketing of products. Requirements for distributors of in-scope investment products to make the sustainable investment label and disclosures available to investors.
IS THE FINANCIAL OMBUDSMAN TAKING THE SAME APPROACH? The Financial Ombudsman Service (FOS) has expressed on its blog support for the new Consumer Duty and all its ramifications, saying “it sets higher and clearer standards of consumer protection across financial services. … We welcome the publication of the new Consumer Duty and the expectations it sets for the standard of care that financial services firms give consumers.” It has
said that it is working closely with the FCA to make sure their approaches are aligned. While the FOS intends to take the same approach as the FCA, an increased focus on consumer outcomes and new, potential vague standards by which to assess firms’ conduct could well lead to unexpected and inconsistent outcomes. These cannot be fully assessed until the FOS’s approach is established.
HOW IS CORPORATE CRIME LAW AND REGULATION CHANGING? The drive towards individual accountability continues across the regulated sector, and the Ministry of Justice (MoJ) is no exception when it comes to criminal responsibility. The MoJ recently conducted a post- legislative assessment of the Fraud Act 2006 and concluded that despite the difficulties in enforcing fraud causes, the Fraud Act is sufficiently broad to catch the various forms that fraud may take and adapt to new technologies. It also considered sentencing guidelines and decided the maximum sentencing for the Fraud Act and sentencing guidelines are perhaps out of kilter with similar offences such as money laundering. The ministry suggests this is an area that could be reviewed. Similarly, the Law Commission has
conducted a review of the law on corporate criminal liability. It presented
options to the government for strengthening the law by reference to current issues. Officials have experienced difficulties in holding individuals to account when decision- making is often dispersed within companies. The options proposed include new offences of ‘failure to prevent’, imposing liability on corporations that would previously have been too diffuse to attract individual liability, on the premise that the company should have had sufficient controls in place to prevent such acts or omissions. Another proposal is to facilitate conduct being attributed to a corporation if the action has stemmed from senior management. There is no certainty yet as to how many, if any, of these proposed reforms will be adopted. The commission states that one of its aims with these proposals is to make sure that strengthening the law does not overburden businesses, and does not increase the administrative process for lawful businesses. Here we can see once again the desire to strike a balance that delivers good outcomes by rethinking regulation.
DWF, Editors, CISI Regulatory Update
Views expressed in this article are those of the authors alone and do not necessarily represent the views of the CISI.
Navigating the world of Fintech
Fintech has transformed the financial landscape in recent years, dramatically changing the way consumers access and use services and products. The breadth of fintech solutions only continues to grow.
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