Mini bonds and crypto-assets among key issues in Treasury Committee’s report on FCA’s regulatory perimeter

Maria Nikolova

The Committee has considered numerous topics that exist in a grey area, including SME lending, mortgage prisoners, mini bonds, and crypto-assets.

London

The Treasury Committee has earlier today published a report on the Financial Conduct Authority’s perimeter of regulation.

The report draws upon the Treasury Committee’s ongoing scrutiny of the work of the Financial Conduct Authority (FCA) to make a series of recommendations to HM Treasury on the remit and powers of the FCA. One of the Committee’s main area of concern is the perimeter of regulation, which determines what the FCA can and can’t regulate, and is defined by Parliament.

The Chair of the FCA has told the Committee that he is “personally very unhappy […] with the complexity of the perimeter of regulation”, adding that “bad people” may wish to exploit the grey area between where a consumer leaves protection and where they remain in it.

The Committee has considered numerous topics that exist in this grey area, including SME lending (e.g. RBS’ Global Restructuring Group (GRG)), mortgage prisoners, so-called mini bonds (e.g. London Capital and Finance), and crypto-assets.

The Treasury Committee is worried that some firms may seek to take advantage of this grey area. Where regulated financial institutions undertake unregulated activity, clear and explicit warnings should be provided.

The FCA has no formal power to request the Treasury to make changes to the perimeter. Rather, an informal relationship exists between HM Treasury and the FCA. This is insufficient, the Treasury Committee’s report states. According to the Committee, the FCA should be given the formal power to recommend to the Treasury changes to the perimeter of regulation, with all recommendations publicly disclosed, providing greater transparency and focus to the process.

The FCA must not be, or feel, constrained from providing warnings on financial products that sit outside the perimeter but may cause consumer detriment, such as crypto-assets, the Committee notes.

The FCA should be given the remit to highlight the potential risks to consumers of an unregulated activity.

In January 2019, the FCA consulted on Guidance on Cryptoassets to clarify what types of cryptoassets fall within its current regulatory perimeter, which closed on April 5, 2019. The FCA expects to publish its final Guidance on Cryptoassets later in the summer, and has reflected feedback to that consultation in its proposals for crypto-derivatives.

The FCA’s current inability to gather information on the risks to consumers both at and beyond the perimeter means that it will always be reactive, the Committee warns. The Treasury should undertake research on enabling the FCA to determine whether it should gather data from non-regulated entities.

If it is not content to implement the changes as recommended by the Committee, HM Treasury must acknowledge that it has itself fully retained these responsibilities, and should report annually on the work it will do to monitor the perimeter of regulation.

Read this next

Digital Assets

SEC bypassed commission vote in approving Ethereum ETFs

The Securities and Exchange Commission’s (SEC) Trading and Markets Division has approved several spot Ethereum exchange-traded funds (ETFs) using delegated authority, rather than a vote by the full commission.

blockdag

BlockDAG Presale Draws Massive $32.4M Hinting At its 30,000x ROI Potential, Overshadowing Retik Finance at Bitmart

Learn why BlockDAG’s innovative strategies and $32.4M presale success are making millionaires, overshadowing Retik Finance’s struggle on Bitmart.

Institutional FX

Malaysia’s exchange launches API for onboarding retail investors

“The Exchange actively listens to the evolving needs of our customers. This initiative is key in delivering on our commitment towards greater customer-centricity. We will continue to work closely with our POs and introduce service innovations to attract more investors, bolstering the competitiveness of our market.”

Fintech, Uncategorized

LiquidityBook welcomes JonesTrading to LBX Post-Trade Hub

“As we near the T+1 deadline, we are excited to continue helping firms achieve straight-through processing in addition to delivering new enhancements to our comprehensive range of cloud-native buy- and sell-side trading solutions.”

blockdag

Should I Invest Today? Which Altcoins Could Make 2-5X Profits Amid the Latest News?

Investing in cryptocurrencies can be a journey full of surprises, given their volatile nature.

Executive Moves

Bakkt promotes Ray Kamrath to CCO of Crypto

Bakkt has promoted Ray Kamrath to Chief Commercial Officer of the company providing custody, trading, and onramps to the crypto space.

Industry News, Uncategorized

HSBC relocates US headquarters to The Spiral, New York

HSBC has opened its new U.S. headquarters at The Spiral, a renowned office building in New York City’s Hudson Yards neighborhood.

blockdag

Best Cryptos to Buy Before the Real Bull Run Kicks Off

With the bull run of 2024 already underway, investors are eager to identify cryptocurrencies that promise significant growth.

Market News

This time is different – is it?

The stock market wants lower interest rates – or rather, it has been expecting them for months. Justified? The US economy looks very robust, so higher interest rates would actually be the order of the day.

<