FCA response to the independent panels’ 2022/23 annual reports

Our response

We agree with the Panel that close engagement between regulators, consumers and industry on the increased cost of living is essential. As well as working closely with the Consumer Panel, we regularly engage with consumer organisations and charities to improve our understanding of the cost-of-living challenges facing consumers. Over the last year we have acted where we have seen increased risk of harm to consumers from high inflation and rising interest rates and continue to monitor how cost-of-living pressures are developing.

Some of the work we have done:

• set out our expectations to lenders, debt advice firms and insurers on how they need to support their customers during increased cost-of-living pressures   
• set out our plans to implement permanent Tailored Support Guidance (TSG) for firms to support borrowers in financial difficulty, originally introduced during the pandemic   
• continued to work with debt advice firms to ensure they can maintain high quality debt advice given increased demand   
• outlined how firms should keep customers informed to make decisions in their interest and raised awareness of the available support     
• worked with Ofgem, Ofcom and Ofwat on cross-sector cost-of-living pressures and wrote a joint letter to regulated firm CEOs setting out our expectations on supporting customers in financial difficulty    
• held an event with debt advice charities on the impact that increased cost pressures are having on consumers’ mental health

Our response

Many consumers are dealing with debt, including debts in other regulated sectors like energy. We have worked with these sector regulators to develop common and complementary approaches on how firms should treat customers in debt and payment arrears.

We have also worked with partner regulators in financial services, including The Pensions Regulator, Financial Services Compensation Scheme, Financial Ombudsman Service and The Money and Pensions Service to ensure a joined-up approach to the wider implications of the increased cost of living.

Cost-of-living pressures may lead to some savers stopping or reducing pension contributions. While some consumers may have few other options or find this the right option for them in specific circumstances, it is also important that consumers understand their options and the risks and consequences of their decision. We set out our expectations on how firms should support their customers in a Dear CEO letter[2] to life insurers. We continue to monitor data closely by working with the Department for Work and Pensions (DWP), The Pensions Regulator (TPR), firms and trade bodies. We also regularly monitor key indicative data of how cost-of-living pressures are developing in the short and longer term. 

Our response

We have raised public awareness on fraud and scams via our ScamSmart[3] and InvestSmart[4] campaigns to better equip consumers to avoid falling victim to pension and investment scams.

As fraud and scam cases have increased over the last year, we have strengthened our intelligence and enforcement response, increased supervisory focus on firms’ anti-fraud systems and used campaigns to raise public awareness of scams.

We understand the pressures firms are under due to the increased cost of living and take this into account when developing policy or taking supervisory action. The Consumer Finance sector has been significantly affected by increased cost-of-living pressures. For this sector, we have undertaken an exercise to understand the impact of changing consumer risk profiles on business models and firms’ ability to compete. This exercise also looked at firms’ ability to raise funding amid increased wholesale borrowing costs and to remain operationally sound. This work has helped shape our supervisory approach and how we respond to reducing both market risks and risks for individual consumers.    

In some cases, we are limited in our ability to respond to pressures on firms, for example, funding for debt advice provision is determined by the Government’s debt advice levy. 

Our response

Cost-of-living pressures over the last year have had a significant impact on both consumers and small and medium-sized enterprise customers. We have set out our expectations to firms to ensure customers are treated fairly, are aware of the forbearance measures and available support.

We speak regularly with the debt advice firms we regulate to understand how they are maintaining good quality debt advice and sound operational resilience amid increased demand. This is to ensure fair outcomes for customers facing problem debt. We have acted where we have seen poor quality advice driven by harmful business models. For example, we recently set out new rules banning debt packagers[5] from receiving referral fees, which remove a strong incentive for packagers to offer advice which does not consider the customer’s best interest.

We continue to monitor consumers’ investment in high-risk investments. We have introduced rules for promotions for cryptoassets, which restrict the way they can be marketed to retail investors. On 8 October 2023, we extended the restriction on unauthorised persons communicating financial promotions to most cryptoassets. We issued 146 alerts about cryptoasset promotions on the first day of the new regime.

We have also published more information on our website on cryptoassets[6]. 

Our response

We have undertaken extensive research on PII using publicly available sources and engaged with various stakeholders in the PII market, including members of the Panels. This has deepened our understanding of the impact of cyclical changes in capacity in the PII market. However, following our evidence-based analysis, we do not currently consider a regulatory intervention appropriate, due to the nature of the supply-side issues affecting the PII market. This means we currently have no plan to conduct further discovery work. We are monitoring the situation, but at this point in the cycle we are not undertaking any proactive work. Our Wholesale Insurance portfolio letter[7] gives more detailed information on our insurance market priorities.

Where policy developments might affect the supply or demand for PII, we also proactively engage with firms and/or trade bodies – as in our recently published consultation [8]for personal investment firms, proposing a new capital deduction for redress. These proposals aim to improve personal investment firms’ financial risk management, and we expect that in the longer term this will make it an easier market for PII providers to operate in. Our consultation also includes a specific question on PII. 

Our response

Under the Future Regulatory Framework (for which the file transfer parts are now called the Smarter Regulatory Framework or SRF), we are replacing relevant repealed assimilated law (previously known as retained EU law (REUL)) with Handbook rules.  As part of this, we are considering several factors to determine whether policy changes are needed. This includes the global nature of many markets we regulate, as well as ensuring the regime is right for the UK. And, through our work to embed the new secondary international competitiveness and growth objective, we believe that appropriate regulation is critical to the success of the UK as a place to do business. We agree that the focus must be on delivering the right regulation, not de-regulation. The Markets Practitioner Panel supports an open discussion about risk appetite, which we support.    

We take into account stakeholder feedback to manage the pace of regulatory change, prioritising changes in targeted areas and not pursuing change for its own sake. This is particularly relevant for stakeholders with fewer resources. We are committed to continued engagement. In March 2023, we hosted a webinar[9] for over 500 attendees, also available to watch online. In September 2023, over 40 representatives from trade bodies and professional services firms attended an in-person event, which set out our approach to the replacement of REUL in our Handbook and the principles we have put in place to guide that work, plus a supporting blog[10].

We consult our statutory panels, and regularly update trade associations on progress with the file transfers such as through our quarterly ‘Trade Association Coordination Committee’ meeting. Our Executive Directors have delivered speeches that provided updates on – and our vision for – the SRF. This includes Sarah Pritchard’s speech[11] (Executive Director of Markets) at the UK Finance and EY: Capital Markets insights launch conference in May 2023 and Sheldon Mills’ speech[12] (Executive Director, Consumers and Competition) at the CityUK Annual Conference in June 2023. We have also engaged substantially with stakeholders as we take forward work on specific assimilated law.

We regularly update our ‘Regulatory framework reforms[13]’ webpages with transfer progress, and the November 2023 Regulatory Initiatives Grid[14] included, for the first time, an overview of the file transfers. Together these provide a clear steer on the priority workstreams under the SRF. We are also reflecting the importance of appropriate sequencing of the repeal and replacement of REUL in our planning discussions with the Treasury, the Bank of England and the Prudential Regulation Authority.

Our response     

One of our primary statutory objectives includes securing an appropriate degree of protection for consumers, which we consider in all our decision-making. We are committed to bringing consumer perspectives into our work and finding the most effective ways to do this in addition to our existing engagement. We are in regular contact, and share insight with, our network of 30+ consumer organisations to ensure their voice is heard in our policy development. We partner with consumer organisations to deliver work and carry out large-scale representative consumer research through our Financial Lives and other surveys. This is key for significant change programmes like the SRF, Consumer Duty and Secondary International Competitiveness and Growth Objective (SICGO).

We regularly attend the Panels, to ensure we understand the consumer perspective. We have also sought to use the new SRF Cross-Panel Working Group for items of common interest across the range of panels (such as PRIIPs). This has been useful in ensuring the voice of consumers is heard in wider cross-sectoral discussions. When reviewing responses to our consultations, we also know the importance of giving particular attention to responses from consumer groups since they are typically fewer in number.

Input from consumer groups is invaluable in helping us to target policy accordingly. For example, the Consumer Duty addresses poorly designed products and sludge practices which can cause consumer harm. It also requires firms to monitor relevant data and insight – including customer feedback – and act on this appropriately to deliver good outcomes.

Our new SICGO objective only applies when advancing our primary objectives. It cannot be advanced on its own. The new secondary objective is important for consumers. By enabling the drivers of productivity[15], we can facilitate medium to long-term growth and competitiveness in a way that can secure better outcomes for all consumers, including through greater variety, price and quality of products and services.

Our response

We share the Panels’ view that maintaining high standards instils trust and confidence in UK financial services which underpins competitiveness. We welcome the Panels’ commitment to this.

Our longstanding commitment to delivering effective competition in the interests of consumers is a key driver of sustainable growth and international competitiveness.   

We consider international competitiveness to be a measure of how attractive the UK is for businesses, consumers and investors. It measures how well the UK economy achieves sustainable, positive economic outcomes, attracts international businesses to the UK and enables UK-based firms to compete effectively in international markets.  Apart from the quality of regulation, competitiveness also depends on a range of factors affecting the wider financial ecosystem such as tax, valuations and access to talent.

Competition involves how firms within a market thrive by attracting and keeping customers and winning business from rivals by innovating, improving the quality of their products and services or lowering prices. Effective competition also means markets are open to new firms, which can offer better deals and products, while firms that cannot keep up either change or exit the market. We welcome further discussion on how advancing our competition objective can further contribute to economic growth and how we can ensure the market overall supports the risk appetite the UK economy needs.

Our response

The secondary objective builds on our longstanding work to improve the attractiveness of our wholesale markets. We agree with the Panel that maintaining high standards is a cornerstone of the UK’s international competitiveness. 

Complementary to this is one of the FCA’s cross cutting commitments to strengthen the UK’s position in global wholesale markets. We want a UK wholesale market which supports both the domestic economy and growth and is open to innovation, underpinned by high standards of market integrity and consumer protection. This will be achieved if the UK continues to be seen as one of the leading global markets of choice for international issuers, intermediaries and investors, when compared to other high-quality markets.

We appreciate the Panel’s concerns around the pace of change, and we are working closely with the Treasury, industry and others to ensure that the prioritisation, speed and sequencing of implementing regulatory reform meet the desire for change at a manageable pace. We are also engaging in new ways to work with stakeholders in our policy formulation process, with a focus on outcomes and early testing.  To deal with these increased demands, we have significantly increased our headcount to nearly 5000 staff employees.

We valued our discussion with the Panel on the list of metrics, which the Treasury has now published ahead of our first report on how we have advanced the secondary objective, which we will publish in summer 2024.

Our response

We are grateful for the Panels’ support of our ongoing work to deliver the ESG programme.     

Supporting the transition to a more sustainable future is a crucial cornerstone of our ESG programme and furthers each of our objectives. 

We welcomed the Government’s consultation on whether and how to bring ESG ratings providers into our regulatory perimeter. The Government’s consultation closed in June 2023, but should the Government decide to extend our perimeter, setting up a new regulatory regime would take time. That is why, in November 2022, we announced the formation of an industry group to develop a voluntary Code of Conduct for ESG data and ratings providers. The final Code was published in December 2023. We expect this will help to encourage the development of consistent global standards in what is currently an unregulated environment.

Our response    

Our SDR and investment labels regime has been designed to improve transparency and trust. As part of this regime, we have introduced new disclosure requirements[16] including accessible consumer-facing information, as well as product and firm-level disclosures. We have also introduced an ‘anti-greenwashing’ rule that will apply to all FCA-authorised firms, reiterating that sustainability-related claims must be clear, fair, and not misleading. We are consulting[17] on guidance to help firms understand this rule.

Our SDR and investment labels consultation[18] closed in January 2023, with around 240 written responses. We carefully considered the feedback and the Panels’ comments. As part of our extensive engagement, we engaged with a Cross-Panel subgroup, bringing together members of the statutory panels to discuss our SDR and investment labels proposals and the Panels’ comments in more detail. We also engaged directly with industry, consumer groups and other stakeholders. And to help ensure the regime works for consumers we also carried out further testing.  

Our final package of measures[17], which was published on 28 November, is designed to protect consumers and help them navigate the market.

We share the Panels’ view that coherence with other international regimes is important. The UK is a world leading financial centre, and many of the firms in scope of these measures operate internationally. We have sought to achieve international coherence with other regimes – notably the Sustainable Finance Disclosure Regulation (SFDR) in the EU and proposals by the Securities and Exchange Commission in the United States.

Our Policy Statement included an updated mapping to the EU’s current requirements to help those firms that will face obligations under both regimes.

We note the European Commission’s ongoing review of SFDR, and its recent consultation. Among the Commission’s proposals is consideration of a labelling regime to help consumers navigate the market. As our regime is among the first to consider sustainable investment labels, we stand ready to work with the EU authorities on this important issue and will continue our international engagement.

We want to build a world-leading and competitive regime that will help the UK’s asset management sector continue to thrive, by setting standards that improve sustainability information available to consumers. We want our regime to show other jurisdictions that it is possible to introduce robust rules and standards to protect consumers, while also helping the market to grow.

Our response

The Transforming Data Collection programme aims to improve the quality of and simplify data requests. We will seek to improve the entire data collections process by exploring data decommissioning as a component. These improved processes will increase our efficiency and effectiveness, which will have the added benefit of reducing the burden on firms.   

Along with our Authorisations Gateway project, the Transforming Data Collection programme has large ambitions for our data transformation. The programme is designed to show regular value with a combination of quicker improvements, whilst progressing longer term strategic improvements.

Our response

As part of the Transforming Data Collection programme, in January 2023, we launched 2 improved forms for 20,000 consumer credit firms and 2,500 firms with investment management permissions. This has improved the accuracy of their submissions. This should ensure firms annual fees are set correctly, permissions are correct and we can improve our monitoring of the consumer credit and investment management sector. We are now working towards embedding an improved form design process which includes in-built validations, simplified guidance and easier to navigate form design into any new firm collections.

The programme is also working to improve internal processes such as the recent implementation of a Data Front Door service to simplify all data requests.  We have also introduced a pro-active approach to Regulatory Returns Compliance by contacting firms ahead of compliance deadlines.

Our response

We recognise the importance of maintaining open and early communication with industry to explain why we need data to ensure positive engagement.

Since we published an update to our Data Strategy[19] in June 2022, we have improved our ability to identify potential harm through legally-complaint web scraping techniques and creating an in-house tool. This solution relies on a third-party service for the scraping of data from the target websites. This third-party service is integrated into our in-house solution, which has been customised to meet our specific compliance needs. This tool initiates the screening process for around 100,000 websites daily.

We have also improved our data tooling to enable us to make effective decisions on a firm. We have developed our ‘Single View’ analytics tool to bring together key data and indicators about each firm, enabling us to view a firm in relation to others in the same portfolio(s). In 2022, firm compliance to reporting deadlines was increased from 88% to 95% through expert data-led interventions.

Our response    

The Duty delivers considerable benefits to consumers, and for industry. We recognise it has required a significant amount of work for firms to implement. Fully embedding the Duty to realise those benefits is inevitably iterative and we agree it will need continued discussion and feedback.

Our response

Both we and the Ombudsman Service are clear that the Duty does not apply retrospectively. We work on the basis that firms’ conduct should be judged against the rules and standards that prevailed at the time. With the Duty now in force, we are working to ensure a shared understanding of requirements. We will use the Wider Implications Framework to be transparent on these arrangements and give stakeholders continued confidence.

We welcome further engagement where further dialogue would be helpful on how we should develop the longer-term strategy.

Our response   

We recognise the importance of successful implementation of the Duty and continue to engage with firms to support their work.

The Duty raises standards for firms in retail markets. It will be relevant for some firms in institutional markets, to the extent that they are responsible, during their activities, for determining or materially influencing retail customer outcomes. To strike the right balance and avoid inappropriate application of the Duty, there are exemptions for certain activities, including for offers of IPOs of securities meeting specified criteria. In general, where securities are not primarily intended as retail investment vehicles, the Duty would only apply to their distribution to retail customers, where the focus is on appropriate sales standards.

Our response

We are grateful for the Panel’s ongoing contributions on the regulation of debt advice, which has helped us consider how to continue to raise standards in this area and ensure firms react appropriately to customers’ changing circumstances. 

There are ongoing Government consultations on personal insolvency. The future of insolvency regulation[21] is considering how Insolvency Practitioners (IPs) should be regulated. The Government’s Review of the personal insolvency framework[22] is considering whether to make changes to personal insolvency options and how they operate. Although IVAs are not within our direct regulatory responsibilities, we continue to support the Government’s review of the insolvency framework by sharing our insights with the Treasury, in keeping with the Panel’s comments. We have also committed to reviewing our ‘CONC 8’ conduct rules this year, to ensure they set the right framework for good quality debt advice, and this work is well underway. 

IPs are excluded from our regulation when the IP is appointed as an insolvency practitioner or is acting ‘in reasonable contemplation’ of their being appointed. This also includes anything done by the IP’s firm in connection with the IP acting as or in reasonable contemplation of being appointed as an insolvency practitioner. Any changes to this are a matter for the Treasury’s review, but we would work with them to inform that decision.

We have regular and continuous engagement with a range of other regulators, including the Advertising Standards Authority (ASA), The Money and Pensions Service, the Insolvency Service and recognised professional bodies, to exchange intelligence on misconduct and promote a co-ordinated approach to regulation in this area. We continue to act on misleading advertising or use of trading names by FCA authorised firms and on unauthorised business. The ASA considers complaints about advertising, which falls outside our remit, and has published an enforcement notice setting out several misleading practices to improve standards.

Our response

We recognise that to reduce fraud all relevant public and private authorities need to work effectively. We have actively sought to shape the Government’s new Economic Crime Plan and Fraud Strategy, both issued this year. The new plans establish an objective to reduce fraud over the medium term, and our current objectives and work programmes are aligned to contribute to that goal.   

The fraud strategy recognises that one of the key components to reduce the incidence of fraud is raising consumer awareness. Our ScamSmart campaign[23] (which aims to raise consumer awareness of the key warning signs associated with Investment Scams to help prevent them falling victim) guides consumers to use our Warning List[24] as well as other tools such as the Investment Checker. In 2022/23 we ran 4 campaigns focused on loan fee fraud, pensions scams and one on investment fraud. There is evidence that our messages are getting through; 57% of consumers who contacted us about a scam involving activities we regulate, did so before they invested in the product, compared with 51% in 2021. We are also supporting Government efforts to coordinate the various public and private sector consumer awareness programmes so that they better complement each other.

We are driving for better anti-fraud controls by firms. We recently issued findings on multi-firm reviews looking at money mules and APP fraud controls. We are working with the Payment Systems Regulator on their new APP fraud reporting and reimbursement regime to make sure it effectively incentivises firms to improve their controls to reduce the incidents of fraud. 

Our response

The Government continues to review submissions to the consultation on draft legislation and is considering the overall approach to regulation. The future timetable is unclear, but we are ready to act as soon as the Government and Parliament have passed the legislation.

Our view is that these products provide valuable benefits as a payment option and, if repaid on time, can be cheaper than alternative forms of regulated credit. However, we agree with the Panel that there is potential for harm in the way the products can be marketed, the lack of key information and the risk that consumers borrow more than they can afford, which is why we agree that this should be brought into our perimeter. 

While we have limited regulatory oversight at present, we can intervene using our wider consumer protection powers. An example of this can be seen in our work[25] on the fairness and clarity of contract terms. We have also intervened in misleading financial promotions[26] and support for those facing financial difficulties. 

Our response 

Having previously discussed our intentions in this area with the Consumer Panel, we are currently testing a consumer-focused version of the Register. We are currently arranging a return to the Consumer Panel, to provide an update on progress and get their input into the tools’ continuing development. 

Our response   

We recognise the Panel’s concerns about this sector and are focused on addressing the risks identified. We wrote to firms[27] on 16 March 2023 setting out the outcomes we want to achieve and the areas our supervision will focus on. We have significantly increased our supervisory engagement with payments firms, with a focus on prudential risk management, wind down planning and safeguarding. This work includes prudential reviews of firms identified as higher risk from available data, reviews of wind down plans, imposing safeguarding reviews, enhanced prudential requirements and messaging about the letter to the sector through speaking engagements and ongoing liaison with trade bodies.

We are taking lessons from that engagement and using them to address risk through our work with the Treasury on the repeal and replacement of retained EU law. Within this we have prioritised safeguarding. We will be consulting this year on proposals to close gaps in protection and reduce risks of harm if firms fail. This includes proposals on firms’ systems and controls and improving our oversight through improved reporting and independent audit of firms safeguarding arrangements.   

We have also been working with firms in the payments sector to ensure they have implemented the Consumer Duty, and it is fully embedded following it coming into force on 31 July 2023. This work has included educating firms in the sector through several letters, webinars, events and liaison with trade associations.  We are also undertaking appropriate proactive supervision work with firms to ensure the Duty is embedded and firms are delivering consistently good outcomes. This includes considering issues such as complaints, consumer support, consumer understanding and barriers to exit. Key areas of focus include freezing accounts, financial promotions, consumer support channels and debanking.

Our response 

The Panels provide input into the horizon-scanning exercise that feeds into our annual business planning process. We, and the Panels, have found this exercise useful to help develop prioritisation proposals. We want to understand panel members views on how firms, consumers and markets will respond to anticipated change and how these may in turn influence our commitments. This includes operational strains firms will face in implementing changes and supporting our strategic objectives. 

Our response    

We thank the Panel for the feedback, which is consistent with wider responses we have received to our Discussion Paper[29]. We will take this into account as we progress our work on the Smarter Regulatory Framework, as our Chair set out in a recent speech[30].

Our response

We will be working alongside the Government through their reform process, which we expect to take several years. We are both keen to ensure consumer credit regulation supports a well-functioning and competitive market while maintaining the appropriate degree of consumer protections. 

We see it as an opportunity to update and modernise consumer credit regulation to better align with the Duty, so that it is suitable for the wide array of modern consumer credit products. This includes how firms interact with their customers through digital and technological developments.    

We also support the Government’s objective that the regulatory environment should be flexible enough to facilitate ongoing innovation in the sector as the market evolves. We recognise that if more requirements were placed in our rules and principles, rather than in legislation, this could provide the opportunity for more flexibility in how we respond to future issues as they emerge.    

Our response

We will launch video content on our InvestSmart[31] website to deliver messaging to consumers to reflect the changes to cryptoasset financial promotions rules. Extending the campaign to advice rules is slightly more nuanced, as the core of our target audience does not take professional investment advice. If we were to pivot our campaign to deliver information on advice rules, we would expect it to have limited impact. This is because most of the InvestSmart audience either do not want to take professional investment advice, or feel such advice is not accessible or cost-effective given the amounts they have available to invest. As part of the Advice Guidance Boundary Review, we are currently developing proposals with a view to encouraging industry to broaden access to advice and other support services for retail investors, which may be of particular interest to the InvestSmart target audience. 

Our response

In our Discussion Paper on the Future Disclosure Framework[32], we set out our view of what good disclosure is. This publication, and the responses to it, will allow us to design and deliver a retail disclosure framework that is proportionate, outcomes-led and supports retail investors in their decision making.

We are currently developing our policy ahead of the publication of a Consultation Paper on a new disclosure framework in 2024. As part of this, our disclosure framework reform is taking into account proposed sustainability disclosure changes and upcoming asset management reform, so as to deliver a cohesive disclosure regime.  We have engaged with the industry to identify where there needs to be prescriptive rules to calculate key data, and where we can allow firms to have more flexibility over disclosure. 

Our response

A core part of Our Strategy 2022 to 2025[33] is to shape digital markets to achieve good outcomes. Our thinking in developing our Discussion Paper[34], Feedback Statement[35] and Call for Input[36] (published in November 2023) reflects the potential benefits and harms the Panel has identified. Stakeholders highlighted data access and data sharing as key areas where Big Tech firms may have competitive advantages over financial services firms, which is part of our scope for our upcoming Call for Input.

We continue our work on assessing whether we need a different, more holistic supervisory approach to ensure that products and services continue to meet consumer needs. Our work on the critical third parties regime, artificial intelligence and broader digital markets continues across the FCA, including our participation in the Digital Regulation Cooperation Forum.

Our response

We aim to maintain a collaborative approach to engagement and information-sharing with our international counterparts, both to monitor for emerging risks and to manage crystallised risks as they arise.

Our CEO, Nikhil Rathi, is currently the co-chair of the Financial Stability Engagement Group of IOSCO where emerging risks and potential responses are discussed at board level across all international securities markets' regulators.

Our response

We continue to welcome the Panel’s ongoing support and engagement on the Primary Markets Effectiveness Review and Listing Rule Reforms. We acknowledge the Panel’s views and support for a simplified disclosure-based listing model.

We acknowledge the Panel’s view that the primary markets reforms need to develop at pace to reduce unnecessary complexities and create a more streamlined framework, but that this should not compromise the UK’s high regulatory standards or market integrity. We also acknowledge the Panel’s view that we should clearly articulate the ideal end-state for UK capital markets and continue to focus on exporting thought leadership and consider the international investor base.

In developing our policy thinking, we have carefully considered the Panel’s formal response to our Discussion Paper on the purpose of the listing regime[38]. In this, we set out an initial concept of a single listing segment for commercial company equity listings and encouraged a strong debate on how to optimise our regime to encourage listings, while maintaining market integrity.

We welcomed the additional engagement and feedback the Panel has facilitated to ensure evidenced-based policy development. This seeks the right calibration of rules to make the UK Listing Regime more accessible, effective, easier to understand and competitive, to benefit both issuers and investors.

We published more ambitious proposals in our May 2023 Consultation Paper[39] for a single equity category that is more disclosure-based and seeks to reduce barriers to listing. We carefully considered responses to this and published a further consultation[40] on detailed rules at the end of 2023.

We also recognise the need for broader actions to improve and promote the UK capital market ecosystem, and we encourage the Panel to continue to take an active interest in this wider agenda to complement regulatory change.

Following the publication of detailed proposals, we will continue to update and seek the input from the Panel on the listing rules reforms. This will include how best to ensure the reforms secure an appropriate degree of protection for investors, to ensure well-functioning markets, and which consider international comparisons and changes in global investor behaviour and preferences.

Our response

On operational disruption, where relevant we will work alongside existing governmental and industry fora that stand ready to respond to such events. In circumstances of heightened market risk and/or potential operational disruption, we would seek a regulatory response that is proportionate and avoids placing unnecessary or duplicative burdens on firms, subject to having sufficient engagement and adequate information to fulfil our statutory objectives. 

Our response

We continue to work with domestic and international colleagues on pensions funds, considering their impact on the markets. We worked extensively with those partners on several resolution events in 2023 including SVB UK & Credit Suisse. 

We remain vigilant on broader risks which may affect market stability and our own market integrity objective, and we continue to work collaboratively with other authorities in our approach to this. In addition to international authorities, this includes working closely with the Bank of England on its system-wide exploratory scenario exercise. This aims to understand the behaviours of banks and non-bank financial institutions in stressed market financial conditions, including instances of liquidity stress. 

We have published enhanced liquidity guidance on liquidity management in open ended funds in July 2023, together with guidance on Liability Driven Investments (LDI) in April 2023. These connect risk management and operational arrangements to effective liquidity risk management and are relevant for other asset managers. Together, this enhanced guidance and good practice seeks to strengthen the UK’s wholesale markets’ risk and liquidity management. 

We take a leading role in international standard setting bodies, where emerging risks and potential responses to them are discussed at board level across all international securities markets' regulators. 

In 2023, we worked with domestic and international partners to minimise the disruption caused by the resolution process for Silicon Valley Bank and Credit Suisse. Since then, we have participated in a number of cross-authority exercises focused on responding to such future events and how we would work with partner authorities to do so. 

We and our partners also implemented measures to strengthen the regulatory framework such as ‘look-through’ rules for Payments and E-money firms.

Our response

Following our engagement with the Panel as well as feedback to our Discussion Paper on third party resilience[43] we have been considering the impact to competition from the designation of CTPs. We will identify and designate CTPs based on clear criteria based on the potential for disruption to or failure in their services to threaten the UK financial system. 

In a Consultation Paper[44] with the Bank of England and Prudential Regulation Authority, we proposed measures to address the impact of the regime on competition. This includes:

• rules preventing CTPs from using designation as a mark of regulatory approval  
• policy clarifications that a CTP does not have superior operational resilience standards to a non-designated third party

To inform the designation process, we are analysing the responses from a wide range of firms to an information request we issued in June 2023 for data on outsourcing in parts of the financial sector.

Our response

As discussed with the Panels, we are currently exploring what an effective, proportionate and pro-innovation regulatory framework for complex models (including AI) could look like. We have not yet taken a decision on next steps. We welcome the Panels’ view that the introduction of guidance may be the best way forward. Respondents to the AI Discussion Paper[45] (see also our Feedback Statement[46]). We note that further research may be needed to gain a better understanding of how AI is used across different financial services sectors and what novel and amplified risks it is giving rise to.

Our response

We welcome the Smaller Business Practitioner Panel’s feedback and support to date.

To achieve good outcomes for consumers, supporting savers to make well informed decisions is one of our key strategic focuses, alongside providing good products with value for money and ensuring strong confidence in pensions and consumer protection.

We have several live workstreams to support this, including those mentioned in the Panel’s Annual Report, as well as the Advice Guidance Boundary Review (AGBR). The AGBR aims to ensure that consumers get the help they want, at the time they need it, and at a cost that is affordable, to help them make informed decisions.

We will continue to work with the Panel and industry, including the pensions advisory community, as these workstreams progress to ensure the best possible outcomes for pension savers. 

We will also continue to work closely with Department of Work and Pensions and The Pensions Regulator, so savers achieve the same good outcomes regardless of pension type. It is only by working seamlessly together as one regulatory family, in collaboration with industry, that we can deliver the consistent regulation and outcomes that the public expect.

Our response

We welcome any evidence of unmerited claims the Panel provides.  We continue to clamp down on inappropriate CMC activity. Following 2 significant interventions, we completed multi-firm work targeted on CMCs using authorisation as a ‘halo effect’ to legitimise their unregulated activities. We will shortly publish our findings. More specifically, following our actions 18 CMCs have ceased their unregulated claims activity and 5 are applying to cancel their permissions.

We recognise the risk of regulatory arbitrage and note that the SRA fee cap consultation has closed. We have regular working and senior level engagement with the SRA to ensure that our roles are aligned as far as possible. 

Our response

Our remit for cryptoassets is narrow and limited to an Anti-Money Laundering and Counter Terrorism Financing regime. Since 8 October 2023, our remit includes the financial promotions of qualifying cryptoassets. We have found that consumers who are persuaded by adverts are much more likely to regret their purchase. The new rules and accompanying Guidance ensure firms give consumers the time and the right risk warnings to make an informed choice ahead of buying crypto. We do not want people to be rushed or misled by advertising when making that decision.

We issued 146 alerts about cryptoasset promotions[47] on the first day of the new regime. Consumers should check the Warning List before making any investment in crypto. The list will help consumers understand where firms' promotions may be breaking the law and to consider the promotion with the full information available.

The Treasury has set out its intention to further extend our remit for cryptoassets, starting with stablecoins and subsequently other activities such as operating an exchange. As our remit expands, we will consider our communications to both firms and consumers, which will include continuing to educate and warn consumers of the risks of cryptoassets through our InvestSmart and ScamSmart campaigns.

We are working on the overall approach to cryptoassets, along with other key partners, and have applied a theory of change model to develop a roadmap, outlining our desired strategic ambition and then the pre-conditions required to achieve them.