The FCA is proposing to allow asset managers to rebundle payments for third-party research and trade execution.

By Rob Moulton, Nicola Higgs, and Charlotte Collins

On 10 April 2024, the FCA published its much-anticipated Consultation Paper on payment optionality for investment research (CP24/7). The Investment Research Review made a series of recommendations in the summer of 2023 to help boost the UK investment research market, which the government committed to taking forward (see this Latham blog post).

This annual publication explores some of the core focus areas for UK-regulated financial services firms in the year ahead. 2023 saw significant progress on the regulatory reform agenda, and many measures consulted on or reviewed as part of the Edinburgh Reforms will be finalised and/or implemented in the course of 2024.

We also saw the passing of the Financial Services and Markets Act 2023, many provisions of which have already come into effect and have made important changes to the

Government plans to add more flexibility to the regime, but its long-term future remains undecided.

By Rob Moulton and Charlotte Collins

On 28 September 2023, HM Treasury published further papers in relation to the planned reform of the UK bank ring-fencing regime, which was announced as part of the Edinburgh Reforms (see this Latham article). The ring-fencing regime requires banks over a certain size threshold to separate out their retail deposit-taking operations into a ring-fenced entity.

HM Treasury has published a consultation on short-term reforms to the regime, aiming to implement (and, in some cases, go beyond) recommendations made in 2022 by the independent review of ring-fencing. The proposed reforms include raising the ring-fencing threshold from £25 billion to £35 billion of core deposits, and expanding the activities that a ring-fenced bank may carry on. HM Treasury has also published a response to its Call for Evidence on aligning the ring-fencing and resolution regimes in the longer term.

As the pace of reform increases, we take a look at key developments and the timeline ahead.

Significant progress has been made on the Edinburgh Reforms since they were announced in December 2022, with developments gathering pace before the summer break. Given the breadth and speed of the reforms, now is a good time to take stock of where things stand and what we can expect in the months ahead. In this publication, we highlight some of the key developments and set out expected dates for future progress.

The Review recommends scrapping research unbundling, but also proposes a range of other changes to the UK research landscape.

By Rob Moulton, Chris Horton, Sean Wells, Charlotte Collins, and Johannes Poon

On 10 July 2023, HM Treasury published the final report produced by the independent UK Investment Research Review (Review). The Review was launched on 9 March 2023 to examine the link between levels of research and the UK’s attractiveness as a destination for companies to access capital (please see Latham’s previous blog post for the background to the Review).

The report makes seven recommendations which the government has committed to taking forward. While the recommendation to remove the research unbundling requirements was expected, the Review has taken a more holistic approach and the report puts forward wide-ranging suggestions for improving the UK investment research landscape. The recommendations are summarised below.

Proposals dramatically reduce the regulatory burden on listed companies.

By James Inness, Anna Ngo, and Johannes Poon

On 3 May 2023, the FCA published a consultation paper CP23/10 which sets out a blueprint for changes to the UK listing regime. The key reform proposed is that the existing premium and standard listing segments would be replaced with a single segment for commercial companies.

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 tone of the Call for Evidence indicates the controversial research unbundling rules could be primed for reform.

By Rob Moulton, Gary Whitehead, and Charlotte Collins

On 3 April 2023, HM Treasury published a Call for Evidence as the first step in the independent review of investment research and its contribution to the competitiveness of the UK’s capital markets.

The review has the stated key objectives of:

  • Assessing the link between levels of research and the attractiveness of the UK as a destination to list
  • Evaluating options to improve the UK market for investment research and to provide recommendations to this effect

The review was announced as part of the Edinburgh Reforms in December 2022. The Chancellor noted at the time that “the review is part of the government’s wider commitment to enhance the UK’s ability to attract companies to list and grow”.

The tone of the papers suggests that a fundamental reform of the Regime will be unlikely.

By Rob Moulton, David Berman, Jonathan Ritson-Candler, and Charlotte Collins

On 30 March 2023, the PRA and the FCA published a joint Discussion Paper (FCA DP23/3 and PRA DP1/23) seeking feedback on the Senior Managers and Certification Regime (SMCR). In parallel, HM Treasury published a Call for Evidence on the Regime. The Discussion Paper focuses on the operational aspects of the SMCR, whereas the Call for Evidence looks at the legislative aspects. Together, the papers seek comments on the SMCR’s performance, effectiveness, scope, and proportionality. The closing date for responses is 1 June 2023.

FCA chief executive’s speech indicates an exciting transition to a lighter regime and a true single listing segment.

By James Inness, Anna Ngo, and Johannes Poon

On 29 March 2023, FCA Chief Executive Nikhil Rathi delivered a speech at the Global Investment Management Summit on the topic “Reforming our capital markets ecosystem”.

He announced that the FCA will soon publish a blueprint for further reform of the UK listing regime in which the current standard and premium listing segments for shares in commercial companies would be replaced with a single listing category with a single set of requirements.