Welcome to the first edition of our Financial Regulatory Newsletter. In this publication we will be looking at legal and financial regulatory developments affecting firms operating in the financial services sector, in particular those within the banking, investment, wealth and fintech sectors. 

As the UK finds its feet outside of the EU and seeks to rebuild from the Covid-19 pandemic, 2021 is likely to be a year of reform. The UK's proposals for a new and more streamlined prudential regime for investment firms represents a major change for Financial Conduct Authority (FCA) solo-regulated Markets in Financial Instruments Directive authorised investment firms. We have also been promised more clarity around the regulation of cryptoassets and stablecoins as HM Treasury aims to strike the right balance between encouraging innovation whilst managing financial stability and consumer risk. However, amid these proposals for new regulation, and given all of the preparations required from firms in the run up to Brexit, changes to the Remuneration Code at the end of last year may have creeped under the radar of many. 

Finally, from an enforcement perspective, while there was a noticeable slowdown in FCA enforcement activity (bar urgent matters) last year during the pandemic, the FCA is now seeking to recover ground. As we hope for a return to some form of "normality" later this year, firms can be sure that the regulator will not show any let up or leniency towards inappropriate behaviour that comes to light.    

New UK prudential regime for MiFID firms

The FCA's first consultation on the proposed rules to introduce the UK's Investment Firm Prudential Regime closed on 5 February 2021. Specifically designed for investment firms for the first time, the new regime will represent a significant overhaul of the current rules, both in terms of the way investment firms are categorised from a prudential perspective and in terms of the requirements to which they are subject. In this article we look the main features of the changed prudential landscape which UK investment firms will need to learn to navigate.