HM Treasury and Financial Conduct Authority Regulatory Perimeter Meeting – July 2023
Published 26 October 2023
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Record of meeting between the Economic Secretary to the Treasury and the Chief Executive of the Financial Conduct Authority
1) On 11 July 2023, the Chief Executive (CEO) of the Financial Conduct Authority (FCA) and Economic Secretary to the Treasury (EST) discussed the FCA’s perimeter, which defines the financial services activities that require firms to be authorised by the FCA.
2) The inclusion of activity inside the perimeter is a finely balanced judgement for the government; it is important to support innovation by the UK’s sophisticated financial services industry while also ensuring that retail consumers are appropriately protected, the integrity of the UK financial system is protected, and effective competition in the interest of consumers is promoted.
3) In this context, the CEO raised the following areas for consideration.
Cryptoassets
4) The CEO noted that the FCA is supportive of the direction the Government has taken in legislation to regulate cryptoasset financial promotions, which came into force on 8 June. The CEO noted that the FCA is currently working towards implementation of its marketing rules, as well as clarifying expectations of firms carrying out cryptoasset-related activity more generally.
Buy-Now-Pay-Later
5) The CEO noted the ongoing work on the timing and approach of bringing Buy-Now Pay-Later activities into the perimeter.
6) HM Treasury is considering responses to the consultation which closed in April 2023, and will set out next steps shortly.
Overseas Persons Exclusion
7) The CEO requested an update on work relating to the Overseas Persons Exclusion (OPE). The OPE allows overseas firms to provide financial services in the UK without the need for authorisation from the FCA, and the CEO summarised how it may impact the competitiveness of the UK’s financial services market.
8) HM Treasury is considering whether reform of the OPE is required and if so, what options should be considered.
Investment consultants
9) The CEO noted the merits of bringing investment consultants into the regulatory perimeter, including the recommendation to this effect from the Work and Pensions Committee.
10) HM Treasury will set out timelines for consultation in due course.
High-risk (e.g. sports-related) non-financial betting products
11) The CEO noted that there are a range of products which use financial terminology but are fundamentally gambling products, often based on sport or celebrity performance. He noted that the FCA has clarified that these products are not financial instruments and therefore they are not within its regulatory perimeter. Additionally, the Gambling Commission clarified that products using financial terms would not normally be granted a gambling license. The CEO suggested there should be consideration of how it may be made clearer to customers who buy such products sitting beyond the FCA perimeter that they are not eligible for financial compensation schemes or other financial regulatory protections.
12) The EST noted these points, and agreed to consider all of the issues raised, as part of HM Treasury’s ongoing work in these areas.