Financial Services SpeedRead: 27 March 2025 edition

Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight. Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.

Financial Markets

1. FCA publishes decision to fine the London Metal Exchange in first enforcement action against a Recognised Investment Exchange

On 20 March 2025, the FCA published its decision to fine the London Metal Exchange (LME) £9.2 million for failing to ensure its systems and controls could adequately handle severe market stress. This follows the events that took place between 4 and 8 March 2022, during which the LME's 3-month nickel futures contract more than trebled in price.

The FCA explained that as of early 2022, the LME's policies and training programme had been unable to take into account the risks to market orderliness arising from extreme volatility. In particular, LME's front-line operational staff had not been properly taught to identify situations where intentional trades could indicate a disorderly market, which meant that the significant price rises in the nickel contract in the early hours of 8 March had not been escalated to senior LME managers as intended.

In response to the events, the LME has taken steps to improve its systems and controls, including commissioning an independent review and implementing an action plan based on its recommendations. The FCA acknowledged these efforts but emphasised the seriousness of the LME's failings, which revealed significant weaknesses in its internal controls and gravely undermined overall confidence in the LME market.

The LME, by agreeing to resolve the matter, qualified for a 30% discount under the FCA's executive settlement procedures, reducing the financial penalty from £13,208,400 to £9,245,900.

2. HM Treasury publishes draft statutory instrument amending the MiFID Org Regulation

On 18 March 2025, HM Treasury published a near-final draft of the Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025, which serves to amend the MiFID Organisational Regulation (Commission Delegated Regulation (EU) 2017/565) (MiFID Org) either by: (i) reinstating key definitions relating to the regulatory perimeter; or (ii) commencing the revocation of firm-facing provisions, to ultimately be replaced in the FCA and PRA Rulebooks.

The Treasury is working alongside the FCA and PRA on the rules replacing the firm-facing provisions under MiFID Org, intended to be delivered in H2 2025. Comments on the draft statutory instrument can be made to HM Treasury by 14 April 2025.

3. ESMA temporarily extends recognition decisions to three UK-based CCPS

On 17 March 2025, ESMA announced its decision to temporarily extend the application of its recognition decisions under Article 25 EMIR to three central counterparties (CCPs) established in the UK, namely: ICE Clear Europe Ltd, LCH Ltd (as Tier 2) and LME Clear Ltd (as Tier 1), until 30 June 2028.

ESMA has also signed a revised MoU with the Bank of England regarding information exchange relating to the three CCPs, further to its obligations introduced by EMIR 3.

4. FCA publishes Primary Market Bulletin 54 on strategic leaks of inside information

On 14 March 2025, the FCA published Primary Market Bulletin 54, which highlights an increase in instances of material information deliberately leaked to the press on live M&A transactions ('strategic leaks'), such information often constituting inside information under Article 7 UK MAR.

The FCA is concerned that leaks, which occur either inadvertently or deliberately/strategically, are causing significant movements in share prices and triggering the improper dissemination of information, thereby damaging the smooth operation and integrity of markets. The FCA reminds firms that the unlawful disclosure of inside information is expressly prohibited under Article 14 UK MAR, and that firms are obligated to act with integrity and observe proper standards of market conduct under the FCA Code of Conduct Rules. The Takeover Code also require individuals to minimise the chances of any leak of information prior to a (potential) announcement of an offer.

Firms are also reminded of previous Primary Market Bulletins 42 and 52 (see here and here), which set out the FCA's views on best practice in mitigating unlawful disclosure and market abuse.

Banking and Prudential

5. PRA consults on recognised exchanges and transfer of the main indices list

On 19 March 2025, the PRA published consultation paper (CP3/25), proposing conditions that investment exchanges must meet to fall under the definition of a 'recognised exchange' under Article 4(1)(72)(c) of the assimilated Capital Requirements Regulation (575/2013) (CRR).

Under Article 4(1)(72)(c), a recognised exchange is defined as "an investment exchange (other than a recognised overseas investment exchange) that satisfies any conditions specified in the PRA Rulebook for the purpose of identifying recognised exchanges or assets traded on such exchanges".

The PRA proposes to introduce a new Part of the PRA Rulebook entitled "Recognised Exchanges (CRR)" which will specify conditions under Article 4(1)(72)(c) CRR, focussing on exchange and market structure risk and asset liquidity risk. Separately, the PRA proposes to enhance transparency by restating the main indices list into the Glossary Part of the PRA Rulebook, but does not intend to make any policy changes in relation thereto.

The consultation period is set to close on 18 June 2025.

6. EBA consults on draft RTS for prudential risk management requirements under CSDR

On 14 March 2025, the EBA published a consultation paper containing draft regulatory technical standards (RTS) on the threshold of activity below which designated central securities depositories (CSDs) and designated credit institutions providing 'banking-type ancillary services' need to meet, in order to be exempt from the prudential risk management requirements under Article 54(4) and 54(4a) of the Central Securities Depositories Regulation (CSDR).

The draft RTS contain a formula to determine the activity threshold, taking into account various factors such as currency liquidity and settlement agent characteristics. Additionally, the EBA proposes staggered prudential and risk management requirements based on the level of the CSD's activity, to ensure a 'proportionate and risk-sensitive' approach.

Responses to the consultation can be made by 16 June 2025. A public hearing on stakeholder responses will take place on 13 May 2025, registration for which can be made by 9 May 2025. Following the consultation period, the EBA will revise the draft RTS based on feedback and submit the final standards to the European Commission for adoption.

7. European Commission publishes Savings and Investments Union strategy

On 19 March 2025, the European Commission published its strategy for the Savings and Investments Union (SIU), aimed at enhancing the EU financial system's efficiency in channelling savings into productive investments.

This initiative seeks to broaden EU citizens' access to capital markets and improve financing options for companies, thereby fostering wealth creation and boosting economic growth and competitiveness.

Proposed policy measures under the SIU can be categorised under four streams of work:

• Citizens and savings: introducing opportunities for retail savers to hold more of their savings in higher-yielding capital-market instruments, including in view of retirement;
• Investments and financing: introducing various measures to stimulate investment, aimed at improving capital availability and access for all business, including small and medium enterprises;
• Integration and scale: removing regulatory or supervisory barriers to cross-border operations of market infrastructures, asset management and distribution of funds to enable businesses to scale efficiently across the EU. The Commission will set up a dedicated channel in Q2 2025 for market participants to report on encountered barriers within the single market; and
• Efficient supervision in the Single Market: measures to ensure all financial market participants receive similar treatment irrespective of location within the EU, by reinforcing the use of 'convergence tools' between national and EU levels.

The proposed measures will be further developed and deliberated upon between all stakeholders, including the European Parliament and EU Member States, with the key measures to be given priority throughout 2025. The Commission will publish a mid-term review of the overall progress in Q2 2027.

8. FCA publishes multi-firm review of liquidity risk management at wholesale trading firms

On 10 March 2025, the FCA published a multi-firm review of liquidity risk management of a range of wholesale trading (sell-side) firms in scope of the Investment Firms Prudential Regime (IFPR). The FCA found that weaker approaches involved firms:

• failing to identify the range of liquidity risks to which they were exposed;
• under-estimating the quantum of their liquidity risk exposures; and/or
• over-relying on immediate access to liquidity facilities where needed to mitigate urgent liquidity requirements.

Conversely, the FCA observed that firms with well-functioning liquidity risk frameworks tended to, for example:

• regularly calculate their immediate term business-as-usual and liquidity stress liquidity requirements at close of business; and
• promptly identify when a liquidity stress was close to crystallising and assess its likely impact.

The FCA has provided the firms within scope of the review with prompt feedback, and will continue to monitor firms which are not properly managing liquidity risks.

Fund Management

No new entries.

Senior Managers and Governance

9. FCA publishes decision to fine and ban Crispin Odey of Odey Asset Management LLP

On 17 March 2025, the FCA published its decision to fine Robin Crispin Odey, hedge fund manager and founder of Odey Asset Management LLP (OAM) £1.8 million, and to ban him from the UK financial services industry. This follows the FCA's finding that Mr Odey acted without integrity and regard for OAM's governance by attempting to hinder investigations relating to sexual harassment and assault allegations made against him.

After using his majority shareholding in OAM to remove the company's executive committee (ExCo) members in December 2021, Mr Odey decided, as ExCo's sole member, to indefinitely postpone the disciplinary hearing scheduled to assess his conduct. New ExCo members were appointed in January 2022, and Mr Odey resigned. However, less than three months later, Mr Odey again appointed himself as sole ExCo member following disagreements with the new executives on how to best proceed with the disciplinary hearing.

The FCA found that Mr Odey's choice to remove OAM's ExCo members and appoint himself as its sole member on two separate occasions created a "risk of effective risk management and governance at OAM" and breached various regulatory requirements. The Decision Notice has been referred by Mr Odey to the Upper Tribunal. The proposed fine and ban will have no effect pending the Tribunal's determination of the case.

10. FCA publishes two new webpages on applications for senior management functions

On 12 March 2025, the FCA published two new webpages relating to: (i) the process of applying for approval to perform a senior management function (SMF) (see here); and (ii) providing case study examples on how it will assess an SMF candidate's fitness and propriety in various scenarios, including the evidence that will need to be provided (see here).

11. AFM fines Bux B.V. for breach of inducements ban

On 11 March 2025, the Dutch Authority for the Financial Markets (AFM) announced that retail broker BUX B.V. (Bux) has been fined €1.6 million for breaching the inducements ban under Section 168(a) of the Financial Undertakings (Conduct Supervision) Decree.

The AFM found that the breached stemmed from Bux's 'referral programmes' which provide compensation to customers, and in the AFM's view, thereby compromising their independent investment decisions. Bux's referral programmes include:

• the "friends programme", where existing customers are rewarded with a free share when referring new clients who opened and funded accounts; and
• the "affiliate programme", where 'finfluencers' , comparison websites and existing customers are paid for referring potential clients.

The AFM emphasised its concern that finfluencers are capable of swaying young and inexperienced investors, and that "the very act of engaging finfluencers creates the risk of thwarting the customer's pure choice".

Financial Crime

12. UK Government publishes the Economic Crime and Corporate Transparency Act 2023 (Commencement No. 4) Regulations 2025

On 13 March 2025, the UK Government published the Economic Crime and Corporate Transparency Act 2023 (Commencement No 4) Regulations 2025. This statutory instrument has the effect of bringing into force, on 18 March 2025, various provisions of the Economic Crime and Corporate Transparency Act 2023 (the ECCTA) including:

• section 65 and 66, relating to the procedures for identify verification, and the authorisation of corporate service providers;
• section 68, relating to the allocation of unique identifiers;
• section 70, relating to registrar's power to strike off company registered on a false basis; and
• section 136(2), relating to the register of limited partnerships.

Sections 199 to 20, and Schedule 13 of the ECCTA relating to the failure to prevent fraud will come into force on 1 September 2025.

Retail Services

13. FCA publishes statement on next steps for the motor finance review

On 11 March 2025, the FCA published a statement on its review of motor finance discretionary commission arrangements (DCAs). The review seeks to ensure that firms failing to comply with requirements relating to DCAs have, or will, appropriately compensate affected consumers. The review has been initiated in light of a recent Court of Appeal judgment which has potential to significantly increase liability amongst motor finance firms where commissions are not properly disclosed to customers (see our previous Financial Services SpeedRead publication here, detailing this judgment).

The Supreme Court will hear the appeal of the Court of Appeal's judgment on 1 April 2025. The FCA has been granted permission to intervene in the case, and has accordingly filed its submissions with the Court.

Within six weeks of the Supreme Court's judgment, the FCA will announce whether it will implement an industry-wide redress scheme for consumers who have lost out. The FCA may also consider a separate consultation on changes to the FCA rules as relates to both DCAs, and non-discretionary commission arrangements.

Digital Finance and Fintech

14. ESMA publishes new guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments

On 19 March 2025, ESMA published new guidelines and official translations thereof on the conditions and criteria for the qualification of crypto-assets as financial instruments under MiCA.

The Guidelines intend to ensure common, uniform and consistent application of the provisions in Article 2(4)(a) of MiCA. Additionally, the Guidelines provide clarity on features of NFTs, hybrid tokens and utility tokens, as relates to the scope of MiCA.

The Guidelines will apply 60 days from the date of publication in all official EU languages on ESMA's website (i.e. on 18 May 2025)

15. EU Commission publishes new delegated regulations relating to MiCA

On 14 March 2025, the European Commission published two delegated regulations relating to MiCA:

• Commission Delegated Regulation (EU) 2025/416 of 29 November 2024 with regard to regulatory technical standards specifying the content and format of order book records for crypto-asset service providers operating a trading platform for crypto-assets; and
• Commission Delegated Regulation (EU) 2025/417 of 28 November 2024 with regard to regulatory technical standards specifying the manner in which crypto-asset service providers operating a trading platform for crypto-assets are to present transparency data.

Both sets of regulatory technical standards will enter into force on 3 April 2025.

16. ESMA publishes official translations of the guidelines on explanations and opinions, and the standardised test for crypto-assets under MiCA

On 10 March 2025, ESMA published official translations of the guidelines on templates for explanations, opinions, and the standardised tests for crypto-assets under MiCA. The guidelines have been issued pursuant to ESMA's mandate under Article 97(1) MiCA.

National competent authorities are required to notify the EBA, EIOPA or ESMA (as applicable) whether they intend to comply with the guidelines, or the reasons for non-compliance, within 2 months of the date of publication.

Payments

17. ECB to offer Verification of Payee services for payment service providers under the Instant Payments Regulation

On 10 March 2025, the ECB published a statement announcing it will offer verification of payee (VoP) services for payment service providers (PSPs), to help PSPs in the Single Euro Payments Area (SEPA) comply with their legal obligations for credit transfers in euro under the Instant Payments Regulations (2024/886). Specifically, PSPs in the SEPA region will be able to fulfil their obligation to offer a VoP service to their customers by the 9 October 2025 deadline.

This service is expected to reduce the risk of fraud and payment errors by allowing payers to verify account details of intended recipients before payments are initiated. The service will be available for instant payments, including those settled in TARGET Instant Payment Settlement, as well as for SEPA credit transfers.

18. FCA publishes engagement paper on contactless payment limits

On 14 March 2025, the FCA published an engagement paper reviewing its approach to contactless payment limits. This initiative aims to provide greater flexibility to payment service providers, consumers, and businesses, enhancing the benefits of contactless payments and fostering economic growth.

The paper addresses current risks and limitations of contactless payments and specifically, the £100 cap on individual payments, particularly in light of the impact of inflation on essential goods. The FCA suggests that less prescriptive regulations could empower firms to innovate in fraud prevention.

The paper explores three potential approaches:

• a risk-based exemption: allowing PSPs to set their own contactless limits based on that PSP's ability to maintain low fraud rates;
• amending existing limits: increasing the single transaction limit (e.g., to £200 or higher) and adjusting or removing cumulative and consecutive limits; or
• relying on the Consumer Duty: leveraging firms' existing obligations under the Consumer Duty to ensure good outcomes for retail customers, rather than setting bespoke rules on contactless limits.

Feedback on the proposals can be made by 9 May 2025, and will inform the FCA's approach before consulting on any revised standards, rules or guidance.

19. Payment Systems Regulator to be consolidated into the FCA

On 11 March 2025, the UK Government published an announcement stating that the Payment Systems Regulator (PSR) will be abolished, to reduce the burdens imposed on businesses, with its responsibilities being consolidated into the FCA.

The press release highlighted complaints from businesses about the complex regulatory landscape as a motivating factor, as well as the current requirement for payment system firms to engage with three different regulators, consuming time, money, and resources.

MP Emma Reynolds, Chair of the Treasury Committee, set out in a letter that the FCA will promote "innovation and competition" in the payment landscape once the PSR is integrated.

Although the PSR's statutory powers remain unchanged for the time being, legislation to effect this consolidation will be consulted on by the Government over the summer of this year.

20. PSR outlines its approach to publishing data on APP scams

On 11 March 2025, the PSR published a policy statement setting out its approach to publishing data on authorised push payment (APP) scams for 2024, and considerations for future reporting. This follows from the PSR's continuous efforts to tackle fraud by collecting and publishing data on APP scams.

A call for views in expected to be carried out in the following months, whereby the PSR will engage with stakeholders to discuss considerations for future reporting.

ESG

21. FCA publishes statement on its position on sustainability regulations and UK defence

On 11 March 2025, the FCA published a statement setting out its position on sustainability regulations and UK defence. The statement clarifies that the FCA's sustainable finance rules do not prevent investment in companies in the defence sector. Instead, they aim to guarantee that information about purported sustainable investments is trustworthy and to improve the quality of such information in the market.

Other

22. ESAs issue joint guidelines on estimating costs and losses from ICT-related incidents

On 18 March 2025, the EBA, ESMA and EIOPA (together, the ESAs) published joint guidelines on the estimation of and reporting of costs and losses from major ICT-related incidents under DORA.

The guidelines specify the following (among others):

• aggregated annual costs and losses of major ICT-related incidents must be estimated for all such incidents that fall within the relevant reference year, which can be either the completed calendar year or the completed accounting year. Firms should use the template in the Annex of the guidelines to report their estimations;
• firms should estimate the costs of all ICT-related incidents classified as major, regardless of the cause;
• estimations should be determined based on firms' financial statements or their supervisory reporting (where applicable). Where such data is unavailable, firms should use other available data, to the extent possible; and
• firms should include adjustments to previous years' estimations in the current reference year's estimation.

Competent authorities must notify the respective ESA of their intention to comply with the guidelines, or reasons for non-compliance by 19 May 2025.

23. UK Government publishes "Action Plan" to cut regulatory red tape and drive growth

On 17 March 2025, HM Treasury published a policy paper outlining an action plan to ensure the regulatory framework supports economic growth, given the Government's view that the current framework hinders growth and private sector investment.

The policy paper sets out three overarching "Actions", specifying various reforms seeking to ensure a regulatory environment that (i) supports growth; (ii) is targeted and proportionate; (iii) is transparent and predictable; and (iv) is adaptable to innovation. The Actions include:

• Tackling complexity and the burden of regulation: Simplifying regulatory structures and reducing bureaucracy. For example, the Government has committed to cutting administrative costs for businesses by 25%, and has announced its intention for the Payment Systems Regulator to be consolidated within the FCA;
• Reducing uncertainty: Simplifying the duties of key regulators to best support growth and investment. For example, HMT will review the number of the PRA and FCA's "have regards", and review the current structure of the Financial Ombudsman Service to ensure it is delivering its role as quickly and efficiently as possible, such review to be concluded by the summer of this year; and
• Addressing excessive risk aversion: The Government seeks to strengthen the models of accountability and to formalise performance reviews of regulators, to ensure proportionate a balanced approach between consumer protection and growth is maintained. This includes a focus on ensuring a pro-innovation regulatory approach, to AI.

Key regulators, including the FCA and PRA, have committed to developing measures aligning with the above actions, which are implementable within the next 12 months.

Authors: Penny Chamberlain, Associate; Tiegan Cormie, Associate; Roni Fass, Associate; Anjali Naik, Legal Apprentice