COMPLIANCE
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compliance programme against corruption) have been built on by the EU Whistleblowing Directive. David describes the move in the UK
towards making senior managers take responsibility for unregulated as well as regulated activity as a positive development. “The CISI has led from the front in this area and its Speak Up campaign (
cisi.org/speakup) was well received, although employees are still reluctant to speak out for fear of negative consequences,” he says. “In addition, the introduction of the conduct rules was long overdue and means the FCA is now more aligned with the values of the CISI and firms.”
// REGULATORS WILL BE FOCUSING CAREFULLY ON DATA AND THE TECHNOLOGY THAT ENABLES IT //
International consumer protection In 2011, the G20 released its High-level principles on financial consumer protection, which begins with the following statement: “Financial consumer protection should be an integral part of the legal, regulatory and supervisory framework, and should reflect the diversity of national circumstances and global market and regulatory developments within the international financial sector.” The World Bank’s Good practices for
financial consumer protection, published in 2012, highlights the importance of consumers receiving information to allow them to make informed decisions, and having access to recourse mechanisms to resolve disputes while being protected from unfair or deceptive practices.
Adapting to technology Recognising the increasingly digital environment for financial products and services, in 2018 the G20/OECD Task Force on Financial Consumer Protection published policy guidance focusing on the role of oversight bodies and the importance of disclosure and transparency. Technology and technological
developments, such as the impact of blockchain on settlements (highlighted in the 25th anniversary edition of The Review – see
cisi.org/25th) are also becoming increasingly important. Yesha Yadav, professor of law at Vanderbilt Law School in the US, refers to the challenge facing policymakers tasked with overseeing fintechs in encouraging innovation while protecting investors and markets – and doing so in a way that is clear and predictable.
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She suggests that while post-2008
rulemaking has resulted in a robust and well-used system of standard-setting, surveillance, and soft enforcement of global standards, it has to adapt to markets that are in varying stages of disintermediation from banks and traditional financial firms.
Keeping up the pace Looking ahead, David expects the pace of regulation to remain high with a focus on consumers and customer outcomes. But he highlights the risk of regulation becoming too protective and consumers expecting someone else to pay when things go wrong, as a result of “increased protection after the 2008 financial crisis where very few consumers lost money and were paid out over and above the amount due from the Financial Services Compensation Scheme”. The increasing shift to digital and
demand for self-service will require greater use of personal data and open finance. According to Matt Burton, chief risk officer at Quilter, this presents significant risks as well as opportunities. “For example, it could increase the risk of fraud, cyber-misuse and even mis-selling given there may be an absence of personalised advice,” he says. “Regulators will be focusing carefully on data and the technology that enables it.”
Impact of Brexit A report published by the European Central Bank in 2020 recognises that Europe’s future financial architecture would be significantly affected by the extent to which regulatory and supervisory frameworks in the UK diverge since alignment is a precondition for recognising the UK as an equivalent jurisdiction under the EU’s third country regime. Brexit is likely to prompt changes to
regulation in certain areas. “We have seen the UK government announce its intention to tweak Solvency II regulations and it is expected that there will be further changes in the years ahead to better tailor regulation to the UK sector’s circumstances,” says Matt. In conclusion, David believes all areas
of firms need to understand and take responsibility for complying with the regulations. “A strong focus on delivering good client outcomes will be essential,” he adds.
THE REVIEW SEPTEMBER 2022
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