Financial Conduct Authority (FCA)

The FCA Reclassifies Cryptoassets, But Is It Moving Away From Its Technology Neutral Approach?


On August 5, the Financial Conduct Authority (FCA) released final guidance on cryptoassets in a policy statement that includes feedback from their January consultation paper. It is important to note that the policy statement is of a limited scope and focuses on whether different types of cryptoassets fall within the regulatory perimeter of the Financial Services and Markets Act 2000 (FSMA) and Electronic Money Regulations 2011 (EMRs). While the policy statement does touch upon the use of cryptoassets for payment services, prospectus requirements and anti-money laundering issues, it does not provide much new guidance on these areas. Read the full Orrick-authored article here.

LIBOR Discontinuance and the Derivatives Market


On July 27, 2017, the Chief Executive of the UK Financial Conduct Authority (“FCA“) announced that, after the end of 2021, the FCA would no longer use its power to persuade or compel panel banks to submit rate information used to determine the London Interbank Offered Rate, known as “LIBOR.” LIBOR serves as a benchmark rate for hundreds of trillions of dollars of securities, loans and transactions, including over-the-counter and exchange-traded derivatives. The potential permanent discontinuance of LIBOR has significant implications for the derivatives market, especially for legacy transactions. Read more here.

FCA Publishes Structured Products Review

The UK Financial Conduct Authority (“FCA”) has published a review of structured product governance, in which it has criticized the ways in which instruments are developed and sold. The review contained six key points:

  1. Retail consumers generally struggle to understand the relative merits of structured products and the factors driving potential returns, finding it difficult to compare alternatives and to make full use of analytical information. The FCA has claimed that it is up to firms to remedy this.
  2. Firms’ senior management must do more to put customers at the forefront of their approach to product performance, identifying a key target market during product design, which should then inform each subsequent part of product development and distribution.
  3. Structured products should have a reasonable prospect of delivering economic value to customers in the target market, to be determined and evidenced by robust stress testing as part of product approval.
  4. Firms need to provide customers with clear and balanced information on each product and any risks.
  5. Manufacturers need to strengthen the monitoring of their products, including ensuring distributors have enough information about the manufacturer’s product to sell it appropriately.
  6. Firms need to do more to ensure fair treatment of customers throughout the lifecycle of a structured product.

While these points are quite broad, the FCA has warned that failure by firms to improve in respect of the above may lead to new binding rules.

FCA Launches Consultation on Competition Powers

The Financial Conduct Authority (FCA) obtains concurrent competition powers on April 1, 2015, enabling it to enforce the prohibitions on anti-competitive behaviour in the Competition Act 1998 (CA98) and the Treaty on the Functioning of the European Union (TFEU) in relation to the provision of financial services. The FCA will also have powers to carry out market studies, and make market investigation references to the Competition and Markets Authority (CMA) under the Enterprise Act 2002 (EA02), in relation to the provision of financial services.

 On January 15, 2015, the FCA launched a consultation seeking views on draft guidance papers and amendments to the FCA handbook in relation to their exercise of these powers. Consultation closes on March 13, 2015.  Consultation.

Journey to the FCA

On October 16, the FSA published a paper that sets out how the UK’s new financial conduct regulator, the Financial Conduct Authority (FCA), will operate, entitled “Journey to the FCA.”  The paper was accompanied by a summary of key points.  Amongst other things, the paper sets out:

  • how the FCA intends to use some its new powers, including those that allow it to ban products that pose unacceptable risks to consumers and misleading financial promotions;
  • that the FCA intends to consult in November 2012 on its new Business Model threshold condition, whereby firms will be required to make clear to the FCA how their business model is sustainable, and meets the needs of clients and customers;
  • the supervision model that the FCA intends to adopt;
  • that the FCA will continue the FSA’s policy of credible deterrence; and
  • how the FCA intends to use its new Policy, Risk and Research Division to identify risks in the financial markets.

The paper was accompanied by a speech by Martin Wheatley, Managing Director, FSA, and CEO Designate, FCA, entitled “Launch of the Journey to the FCA.”  The FSA invites comments on the paper by December 14.