Monitoring the progress of the Financial Services and Markets Bill and regulatory divergence between the UK and the EU will continue as a key theme in 2023. 

The Financial Services and Markets Bill leaves a significant amount of the essential regulatory detail to be developed later by HM Treasury (through regulations), followed by development of the specific rules by the regulators. Therefore, firms operating in the financial services sector will face legal and regulatory uncertainty as to the UK’s regime for the next few years.

In addition, the regulators have been adjusting their approaches to deal with the rapid change and emerging issues in the markets they oversee. The FCA has, for example, moved to be an “outcomes focused” regulator, and firms need to adjust to that mindset when considering whether they are meeting their regulatory obligations.

Other key focus areas for 2023 include conduct and culture; consumer protection and the new Consumer Duty (including the outcomes-based nature of the Duty’s rules); diversity and inclusion; financial crime; and the overseas persons exclusion. Further, the topics of climate change and ESG are increasingly significant for financial services firms, along with new developments in the areas of ephemeral messaging and plans for the regulation of critical third parties.

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