Navigating FCA's New Landscape

Unknown Speaker

Alright, let’s dive into what’s happening with the FCA and their plans to shake up the general insurance rulebook. The goal is to strip away outdated and duplicated rules, you know, to make life a bit easier for firms and, ultimately, improve things for consumers.

Rachel MacRae

Outdated rules? Honestly, that sounds like a dream. sadly though, this is only for the insurance rule book isn't it; we are still waiting on the FCA's consultation into the simplification of the investment rule book, aren't we?

Unknown Speaker

we are, Rach! However, this is a step in the right direction. The proposals will mean that insurers won’t have to review product value every twelve months. Instead, they’ll assess based on the product’s risk and characteristics. Essentially, it’s more flexible.

Rachel MacRae

More flexibility sounds amazing for firms, anything to move away from tick box exercises done for the sake of it. Because, seriously, reviewing everything like clockwork doesn’t always make sense, does it?

Unknown Speaker

Exactly. Plus, they’re introducing flexibility with lead insurers. If there’s more than one party involved in designing a product, firms can now appoint just one lead insurer to ensure compliance. Cuts down on duplication, you see.

Rachel MacRae

Makes total sense. Why have two or three people checking the same thing, right?

Unknown Speaker

And wait, there's more. They want to broaden bespoke contract exclusions, making it easier for all insurers and brokers to use these contracts. Bespoke contracts already have built-in protections, so simplifying those rules should make things much more efficient.

Rachel MacRae

Oh, bespoke contracts are like the posh tailored suits of insurance policies, right? Custom-made based on exactly what the customer needs?

Unknown Speaker

That’s one way to put it! And they’ve really thought about cutting unnecessary processes. For instance, they’re planning to scrap duplicate annual reporting and those employer liability notification requirements.

Rachel MacRae

I mean, that sounds like a lot of red tape coming off—

Unknown Speaker

Exactly! And, Rachel, they’re even looking at removing those minimum hours of training for insurance employees. It doesn’t mean firms won’t have to train their staff, but they get to decide how much is necessary based on the role.

Rachel MacRae

Oh wow, that’s proper trust in the firms, isn’t it? Like, “Hey, you’re the experts. You know what training your team needs.” Makes sense.

Unknown Speaker

Absolutely, and all of this fits with their broader goal of thinning out the rulebook—over 100 pages of guidance, gone. It’s meant to take some pressure off businesses while still improving outcomes for consumers now that we have the Consumer Duty in place.

Rachel MacRae

So, not just less stress for businesses, but it could mean a smoother process for customers too?

Unknown Speaker

Spot on. And they’re asking for feedback on these proposals by July 2025, so the industry has a chance to weigh in before it’s finalized. It’s a big step forward.

Rachel MacRae

Hopefully this is a sign of things to come, and a move to the principle based regulation the FCA has been promising us.

Unknown Speaker

Speaking of challenges businesses face, ransomware attacks like those on Marks Spencer and Co-op can be absolutely crippling. We've been reading in the news this week that M&S is reportedly facing losses of £43 million a week. And Rachel, some operations might take months to fully recover.

Rachel MacRae

Oh, ouch! That’s gotta hurt. But hang on, isn’t ransomware basically like holding a company hostage? What do these hackers even get out of it?

Unknown Speaker

You’re right—it’s like a digital ransom note. Hackers encrypt the systems and withhold access unless the company coughs up large sums of money. And they’re often after sensitive data too, which they can threaten to release unless paid.

Rachel MacRae

And that’s personal data, like your bank details, right? I mean, no wonder the costs spiral if customers lose trust.

Unknown Speaker

Exactly. It’s not just recovery expenses and fines to think about—losing client trust can cripple a business. That’s why the FCA has been pushing firms to make cybersecurity a priority. They mentioned this explicitly back in March.

Rachel MacRae

So, what can firms actually do? I mean, it’s not like they can just stick a digital padlock on everything, right?

Unknown Speaker

It’s not quite that simple, but there are critical steps to take. Having a qualified IT team or working with a reputable cyber security firm is a must. And let’s not forget the Cyber Essentials accreditation—it’s a government-backed scheme that verifies if your security controls are robust enough.

Rachel MacRae

Oh right, like a seal of approval? That’s gotta give firms some peace of mind.

Unknown Speaker

Absolutely. Other proactive measures include penetration testing, where you simulate an attack to see where vulnerabilities lie, and training your staff to spot things like phishing scams. Education really is key here.

Rachel MacRae

I mean, it’s scary how convincing phishing emails can be these days. You’d have to be eagle-eyed to catch some of them!

Unknown Speaker

True—and it’s not just email scams. Firms also need robust policies on software updates and security measures. And Rachel, many are now considering specialized cyber insurance to cover costs from data breaches or attacks.

Rachel MacRae

Cyber insurance? I didn’t even know that was a thing. But, actually, it kinda makes sense, doesn’t it?

Unknown Speaker

It does. And it helps organizations recover faster without immense financial stress. The ultimate goal is to strengthen resilience—something the FCA keeps reminding firms about. Prevention and preparation are always better than scrambling for a fix after an attack.

Unknown Speaker

Building on the importance of regulations in safeguarding industries, let’s turn to the FCA’s Policy Statement PS25/4 and the changes it’s bringing to investment research payments. The main idea is to align these rules with MiFID II reforms, making the process more efficient for fund managers, especially smaller firms.

Rachel MacRae

Oh, this is the one about combining research and execution costs, isn’t it? That’s got to make life a little easier for those smaller guys who struggle with budgets.

Unknown Speaker

Exactly. Previously, under MiFID II, fund managers had to separate—or unbundle—research costs from execution services. Now, with these new rules, they can use a joint payment option, which simplifies the whole process. This could make access to high-quality research much more attainable.

Rachel MacRae

Right, because with unbundling, weren’t a lot of niche areas kinda left out? I mean, researchers couldn’t fund their work, so less research got done, yeah?

Unknown Speaker

You’re absolutely right. That reduction in niche or specialist research was one of the unintended consequences of unbundling. This new approach could encourage more innovation and competition by ensuring that even smaller and specialized firms can afford and access valuable insights.

Rachel MacRae

I really like it when we see steps being taken to support smaller companies like this. Because the big guys usually have the resources to just plough through, don’t they?

Unknown Speaker

They do, and that’s why these rules are a big win for smaller, growing firms. Making research accessible levels the playing field, which supports competition. Plus, it strengthens the UK’s asset management sector overall—we stay competitive globally, and that’s crucial.

Rachel MacRae

Totally. So, when do these changes actually kick in? Is this something firms need to start preparing for now?

Unknown Speaker

Good question. The new rules came into force immediately, so are effective now.

Rachel MacRae

So, are these rules going to benefit all investment managers, who needs to be taking action?

Unknown Speaker

Well, the rule change is going to primarily impact collective investment schemes, so not all investment managers. The COLL Sourcebook has been updated to include governance, budgeting, disclosure arrangements— Ultimately, it’s all about enhancing consumer protection while opening doors for innovation. A win-win, really.

Rachel MacRae

Sounds like a smart move. You know, it’s another change that shows us that compliance isn’t just about box-ticking—it’s about actually making things better for everyone involved.

Unknown Speaker

Absolutely, and on that note, I think that’s all for today. It’s been a pleasure talking through these changes and what they mean for everyone—listeners, keep an eye out for updates and prepare ahead. Rachel, as always, thanks for the fantastic chat!

Rachel MacRae

Oh, anytime! This stuff is always interesting when you dive into it properly. See you all next time!