FCA Seeks Feedback On Its Ideas For A Global Sandbox (Investment Management Brief: 22 February 2018)

UK REGULATORY

FCA seeks feedback on its ideas for a global sandbox

The FCA's new webpage contains its ideas for a global sandbox [14.02.02]. Its current sandbox only allows firms to test their ideas in the UK. Although "many aspects of financial markets and FinTech are global" and firms "value being able to work with other regulators and to conduct tests in more than one jurisdiction" says the FCA, it does not offer firms the chance to participate in a "joint sandbox programme with other regulators." Now they are seeking views on doing so.

The FCA notes that a "full multilateral sandbox that allows concurrent testing and launch across multiple jurisdictions, is an ambitious goal." It hopes to open the debate on how a global sandbox might be developed. It highlights three areas:

addressing "pre-identified challenges" in areas known for "regulatory problems that cross jurisdictional boundaries" e.g. AML and KYC on-boarding.; enabling firms wishing to expand in different markets to "bring their ideas to market more quickly and easily, creating more effective competition." The FCA asks for firms who could benefit from testing out their ideas in a number of markets to get in touch; and policy and regulatory challenges - the FCA suggests the sandbox could be used to convene "joint events and papers on emerging trends and challenges" using the experiences of the range of firms and regulators taking part to develop "consistent approaches". The FCA floats the idea for the global sandbox, at the outset, to be an international college of regulators who have innovation or sandbox models. Firms working with them already would then access multiple regulators. The FCA welcomes input on its global sandbox ideas and plans an update in March 2018.

FCA publishes February 2018 regulation round-up

The FCA's February 2018 Regulation Round-up [15.02.18] includes:

Requirements for pension transfer advice: The FCA's letter to all firms permitted to advise on pension transfers and opt-outs reminds them of their obligations in advising on pension transfers. The letter is on the FCA's website. Pensions strategy: The FCA and The Pensions Regulator are working on a pensions regulatory strategy for how they will address the main issues for the pensions sector over the coming 5 - 10 year period. They have planned events for stakeholders to be held in the spring in London, Edinburgh and Manchester. Reminds firms to respond to the FCA's consultation papers on the SM&CR by 21 February 2018 and on its Approach to Authorisation and Approach to Competition by 12 March 2018. Read more on these consultations in our earlier update. FCA and FOS respond to report on culture of social impact investing in the UK

The Gov.UK has updated its page: Supporting Papers - Growing a Culture of Social Impact Investing [13.02.18] and published response letters from the FCA's chief executive Andrew Bailey [08.01.18], and FOS chief executive Caroline Wayman [07.12.17]. Both letters respond to the Advisory Group's report on social impact investing.

In the letter from Andrew Bailey, he welcomes the Advisory Group's work "to encourage the financial services industry to contribute to the development of a stable framework for impact investing in the UK". Following responses to the FCA's Call for Input on regulatory barriers to Social Investments [December 2015] the FCA concluded that regulation does not prevent the social investment market from developing. It published a Feedback Statement [October 2016] which defined social investing "as 'a broad concept, which at its heart combines the idea that an investment can have a social impact as well as some form of financial return'". Bailey reiterated "this remains our understanding" and "it is not product specific and we would expect communications with investors as to the expected degree of social return alongside any potential financial returns to be clear, fair and not misleading..."

The FCA will "support the work of the Advisory Group in seeking to set out and maintain a current terminology within the social impact space" Bailey said. He touched on a number of topics in the letter from Elizabeth Corley, Vice-Chair of Allianz Global Investors, on behalf of the Advisory Group [09.11.17] including:

whether the FCA's liquidity requirements "can be to the detriment of long-term investment because they may preclude the use of long-term and less liquid assets". Bailey noted "the FCA's rules do not require daily pricing and both authorised investment funds and workplace pension schemes using unit-linked structures are already able to manage some element of illiquid investment within their funds"; the emergence of "investment trusts that have an impact investing mandate, as well as a number of charity bonds and traditional open-ended funds" which Bailey's letter says shows "there is space, within the regulatory framework, for investment products with a social angle". The letter also says the FCA will...