| Link(s): | Our Perimeter Report | FCA |
Context
The FCA’s perimeter sets out what it does and doesn’t regulate. This latest Perimeter Report describes specific issues the FCA sees around the perimeter and action it is taking in response. The report is detailed in some areas, with specific commentary on a number of sectors including general insurance and lending.
Key points to note
- The FCA points out that the Financial Services and Markets Act 2023 includes various measures that will affect its remit and responsibilities.
- In relation to the insurance perimeter:
- The Regulated Activities Order does not provide a complete definition of insurance, which means that court decisions about whether particular contracts amount to insurance help to determine where the FCA’s remit applies. This has led to uncertainty, and the FCA has identified two areas of concern (absolute discretion to pay claims, and warranties described as service contracts).
- In relation to overseas insurers and what amounts to ‘carrying on’ insurance business in the UK, the FCA has said that each case needs to be assessed on its own particular facts (unhelpful) because the FCA must take into account “case law setting out the broad tests to apply in assessing whether a firm is ‘effecting’ or ‘carrying out’ insurance contracts in the UK.
- In relation to the use of Group policies, the FCA has seen examples of group general insurance policies being used outside of their normal context (e.g., employment or other genuine affinity group arrangements) by unauthorised firms whose commercial business includes taking out a group policy.
- Those unauthorised firms then offer consumers the benefit of the insurance provided by the Group policy, structured in a way where the consumer does not obtain rights under the policy. The FCA’s concerns in this regard are leading it to consider consulting on Guidance setting out the FCA’s approach, which would be very welcome.
- In relation to lending:
- Deferred payment credit (‘buy now pay later’) remains a focus for the FCA, which is designing a framework for firms applying for authorisation in this regard, and a supervision strategy for when such activity falls under the FCA’s remit.
- In relation to SME lending, the Treasury asked respondents, in its first stage communication, to comment on whether the business lending scope of the Consumer Credit Act 1974 (CCA) should be changed. The FCA will continue to work alongside Government through the legislation reform process (which includes a planned update to the CCA). There will likely be a second stage consultation to invite further comment from stakeholders on more developed policy positions.
- The Report includes commentary in relation to the proposed new ‘Section 21 Gateway’, which will seek to create a regime that requires authorised persons to seek permission from the FCA in order to approve financial promotions for unauthorised persons (the ‘s21 Gateway’).
Next actions
None – for information and awareness.