Retail Markets

Subscribe to Retail Markets via RSS

Form 13F filers will need to file their first Form N-PX covering the period of July 1, 2023, to June 30, 2024, by August 31, 2024.

By Stephen P. Wink, Naim Culhaci, Laura Ferrell, Aaron Gilbride, Matthew Lee, and Jacqueline Marie Rugart

Rule 14Ad1 of the Securities Exchange Act of 1934 (Exchange Act), which was adopted by the US Securities and Exchange Commission (SEC) last fall, and will become effective on July 1, 2024, will institute a new requirement for institutional investment managers that are required to file Form 13F pursuant to Section 13(f) of the Exchange Act (13F Filers) to additionally publicly report how they voted via proxy for certain executive compensation matters on Form N-PX. Previously, the requirement to publicly report proxy voting records through Form N-PX was generally limited to registered investment companies.

As the “most ambitious legislative proposal since the inception of EU financial regulation”, the changes would make significant amendments to MiFID II and PRIIPs.

By Rob Moulton, Nicola Higgs, Becky Critchley, Gary Whitehead, and Charlotte Collins

On 24 May 2023, the European Commission (Commission) published a package of proposals to strengthen protections for retail investors within the European Union (EU) and place “consumers’ interests at the centre of retail investing”. The proposals significantly amend the protections afforded to retail clients under MiFID II, and also impact the institutional markets, as discussed below.

The FCA has published the findings from its review of firms’ fair value assessment frameworks and set out implementation priorities for firms.

By David Berman, Nicola Higgs, Rob Moulton, Becky Critchley, and Charlotte Collins

On 10 May 2023, the FCA published a speech by Sheldon Mills, FCA Executive Director, Consumers and Competition, on the countdown to the Consumer Duty implementation deadline of 31 July 2023. Alongside the speech, the FCA published the findings from its review of 14 firms’ fair value assessment frameworks under the Consumer Duty.

While the FCA’s review found that firms had considered the requirements carefully, it is concerned that some firms’ frameworks may not be effective in practice. Firms in the final stages of their implementation projects will want to ensure they take the FCA’s messaging, and findings from its review, on board.

The Consumer Duty applies to firms that materially influence consumer outcomes.

By Becky Critchley and Effie Stathaki

The Consumer Duty (Duty) (as set out in the FCA’s Policy Statement PS22/9 and guidance document FG22/5) will come into force at the end of July 2023.

The Duty applies across the distribution chain – namely, to all firms involved in the manufacture, provision, sale, and ongoing administration and management of a product or service to the end retail customer.

The Duty applies to all firms that have a material influence over, or determine, retail customer outcomes.

The Future Regulatory Framework and Consumer Duty will be key areas of focus for the coming year.

By Rob Moulton, Nicola Higgs, David Berman, Becky Critchley, and Charlotte Collins

On 5 April 2023, the FCA published its Business Plan for 2023/24. The Business Plan sets out a number of priority areas for the regulator, tied into its three main areas of focus: reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change.

The FCA highlights four of these priority areas that will receive additional emphasis over the coming year. These priority areas indicate a strong focus on developing the Future Regulatory Framework, including consulting on Handbook Rules to replace elements of onshored EU legislation as well as progressing the Edinburgh Reforms; and on consumer protection, including effectively implementing the new Consumer Duty.

The letters ask senior management to prioritise implementing the Duty.

By David Berman, Nicola Higgs, Rob Moulton, Becky Critchley, Ella McGinn, Jaime O’Connell, and Dianne Bell

On 3 February 2023, the FCA published Dear CEO/Director letters underscoring the immediate (i.e., during the implementation period up until 31 July 2023) and longer-term expectations, priorities, and demands under the Consumer Duty. For further information, see Latham’s recent blog on the FCA’s multi-firm review summarising areas of improvement for firms’ implementation plans.

The FCA has reviewed firms’ progress to embed the Duty into their businesses, providing good and poor practice examples for firms to improve and direct their implementation work.

By Nicola Higgs, Becky Critchley, Jaime O’Connell, and Dianne Bell

The Consumer Duty (Duty) rules (as set out under the FCA’s Policy Paper (PS22/9) and guidance document FG22/5) come into force at the end of July 2023. On 25 January 2023, the FCA published feedback on firms’ current implementation progress via its Multi-firm review: Consumer Duty Implementation Plans. While the FCA notes a number of positives, the overall impression is that firms need to do more and do it quickly.

A consultation that will remain open until 11 April 2023 offers further clarity on the proposals to regulate buy-now-pay-later products.

By Rob Moulton, Becky Critchley, Ella McGinn, and Dianne Bell

On 14 February 2023, HM Treasury published its consultation and accompanying draft legislation on the regulation of buy-now-pay-later (BNPL) lending. The consultation follows the proposals in HM Treasury’s prior publications released in October 2021 and June 2022, since the government announced its intention to bring currently unregulated BNPL products within scope of the regulatory perimeter. This latest consultation provides some welcome clarity on the approach to this upcoming sea change for firms operating in the BNPL space.

The key changes will be effected by amending the current fixed-sum interest-free credit exemption in Article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). BNPL lending usually falls within this exemption as such agreements meet the conditions as interest-free loans repayable in under 12 months and in 12 or fewer instalments. Article 60F(3), which provides an exemption for running-account credit, will remain unchanged.

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…

As the FCA’s remit continues to grow, the regulator pledges flexibility in the face of global financial and geopolitical headwinds.

By Rob Moulton, Anne Mainwaring, Jaime O’Connell, and Dianne Bell

On 7 April 2022, the FCA released its new Business Plan as part of a package including  a three-year strategy document setting out the outcomes it expects all firms to deliver across UK markets. In his introductory message, FCA Chief Executive Nikhil Rathi noted that the regulator’s broad and growing remit means “prioritisation is inevitable”. The FCA’s more outcomes-based approach means its commitments for the next three years fall into three stated areas of focus:

  1. Reducing and preventing serious harm: for example, protecting consumers from harm caused by authorised firms, including tackling fraud and poor treatment. The FCA expects to “harness data to assess problems more quickly”, with the aim of preventing harm from happening in the first place.
  2. Setting and testing higher standards: for example, focusing on the impact authorised firms’ actions have on consumers and markets. The FCA expects the new Consumer Duty to give firms greater certainty about how they should treat consumers as well as flexibility on how they deliver good outcomes.
  3. Promoting competition and positive change: greater regulatory open-mindedness, for example, by building on the globally copied “sandbox” and introducing a “scalebox”.