Regulators are focusing on expanding existing rules and picking up the pace on new regulation. The sector will need to consider several topics on a firm-wide level due to upcoming trends in regulation. We are already seeing primary focuses being put on areas such as ESG, Consumer Duty, the Appointed Representative (AR) regime and the Future Regulatory Framework (FRF). 

Regulatory change will put an increased compliance workload on organisations, as they navigate complex issues such as ESG initiatives and an increased focus on sustainability. It is important to act now to address these challenges head on.

While there will be a need for adaptation and organisational restructuring to meet the demands of the regulatory framework, these changes also bring new opportunities.

ESG

Establishing an effective environmental, social and governance (ESG) framework will be necessary to meet regulatory expectations and incorporate sustainability measures into firms? operating models. In order to allow for an inevitable evolution of rising standards in this area, firms should take care to allow for sufficient flexibility in these frameworks so that they remain fit for purpose.

Additionally, firms should review their current strategies to influence their client base to establish their own ESG frameworks and prepare for future requirements.

Consumer Duty

A key priority for the Financial Conduct Authority (FCA) this year is the planned implementation of a new Consumer Duty. The aim is to communicate consumer priorities and to improve consumer outcomes. These priorities are:

• Deliver fair value in a digital age
• Make payments safe and accessible
• Effective investment decisions for consumers
• Ensure consumer credit markets work well

Appointed Representative (?AR?) regime

Changes are being proposed to the AR regime this year, and firms are being asked to amend their regulatory reporting, onboarding and due diligence practices.

The consultation proposes a range of possible enhancements to the AR regime through new requirements and guidance from the FCA, and firms should consider all possible outcomes. It will be important to engage with ARs to deliver effective compliance arrangements, and appropriate focus should be placed on the effectiveness of existing governance and oversight frameworks in order to ensure they will meet regulatory expectations.

FRF

The final consultation on the post-Brexit regulatory framework has now closed, the proposed new arrangements would delegate considerable responsibility to the Prudential Regulatory Authority (PRA) and the FCA.

In addition, the FRF proposes a new secondary objective a new regulatory principle for both regulators, these are around growth & competitiveness and climate change and net zero respectively. A Bill is due before the summer, with the Act likely to be passed next year.

Although implementation may not start until 2024, firms should keep an eye on the passage of the proposals through Parliament and consider how they may have to adapt to the changes.

Staying up to date

With numerous changes likely, firms will need to recognise and comply with regulatory changes and reflect new trends. Regulators will require financial service firms to adapt to embed the new rules into their infrastructure, so it is important that organisations review their current service offerings and question how they can improve the way they react to key developments.

To stay up to date with developments in the regulatory landscape and more information on what to expect this year, download the Grant Thornton Regulatory Handbook 2022.