From 1 August, the Financial Conduct Authority will begin to enforce its Principles of Business and certain rules on
marketing and communications against the payment service providers that it regulates.
The FCA explained its approach in a
policy statement earlier this year, but it was likely put off as a summer project, and Brexit will have been a distraction for many. At any rate, chapters 2, 3 and the rules in Annexes A-C are the key parts to read.
Some Key Points
Because many PSPs also provide unregulated services that are allied to their regulated activity (e.g. gateway services and other "technical services" as well as unregulated foreign exchange and e-commerce services), it's important to note that the FCA's high level
Principles will also apply to unregulated activities that are "connected" to regulated e-money or payment services. The FCA is refusing to clarify exactly what that means, since the list is long, and this may lead to 'regulatory creep' to the extent PSPs err on the side of caution.
Equally, a PSP's compliance with the Principles (and even the marketing rules) can be affected by the activities of other group companies - e.g. faulty centralised fraud or risk management systems or other outsourced support services; or misleading ads for an unregulated service that is deemed to be "connected" with the PSP's regulated service.
The FCA is particularly anxious about the misleading
promotion of currency transfer services (and 'connected' foreign
exchange services, even if unregulated).
The FCA does not care that there is overlap with other advertising and communications requirements - as there is for banks (the 'new' rules on marketing and communications are created by applying the
FCA's existing Banking Conduct of Business (BCOB) rules to PSPs). But the FCA does confirm that these rules cannot cut across EU-derived regulations (wither Brexit?).
Next Steps
The extension of the Princples and the marketing rules to PSPs means they will likely need to update various in internal policies and procedures, e.g. those dealing with:
- Governance (reporting lines and responsibilities to control operational risks);
- Marketing and communications (the policy and procedures for sign off on your ads and
communications to ensure they are clear, fair and not misleading) particularly for payment services involving currency transfer services - and any "connected" unregulated activities; and
- Treating Customers Fairly (with appropriate cross references to other policies).
That summer project starts now!
