International competitiveness and growth (new section) - this section of the Report reflects that since August 2023, the FCA has been tasked by Parliament to play their part to facilitate the international competitiveness of the UK economy and its growth in the medium to long term. This is a secondary goal to the FCA’s primary operational objectives.

Investment trust cost disclosure (new section): this section highlights that the FCA are committed to the replacing EU-inherited consumer cost regulation with a new UK framework. Linked to that, it narrates the events from the past few months which saw closed-ended UK-listed investment finds excluded from the PRIIPs and MiFID Org Regulations (however noting that the Consumer Duty and COBS 4 requirements to communicated in a manner that is fair, clear and not misleading, still apply). 

The FCA then refers to the consultation on the proposed Consumer Composite Investments framework (which it published on 19 December 2024).

Exclusions to regulated activities (new section): this short section focuses on the exclusion of trustees acting in the course of discharging their general obligations as trustee from the FCA’s scope. 

As the FCA has identified a number of instances where consumers have lost money when their trusts have been invested in opaque, high-risk investments which have subsequently failed through a trust structure, the FCA welcomes a wider consideration about the circumstances when exclusions (such as unregulated trustees) could be disapplied.

General insurance perimeter: The FCA notes that since Brexit and the end of the temporary permissions regime, they have seen instances where UK based persons are providing services for or on behalf of a non-UK authorised overseas insurer. The FCA acknowledges that while it is for a UK court to decide what may amount to doing insurance business in the UK, the FCA is keeping the need for guidance in this area under review.

The FCA raises concerns in respect of the following insurance matters:

• Two areas where they believe relevant products should be categorised as insurance (and are considering consulting on guidance):  firstly, in contracts where the provider claims to have absolute discretion not to pay out, but the FCA believes the discretion to have no real content or to be an unfair term. Secondly, where the firms claim that their warranties are mainly service contracts providing repair services, with a minor indemnity element that pays benefits if the product is lost or damaged. The FCA believes many of these contracts artificially describe the repair services and, on more detailed analysis, are really contracts of insurance.
•          The use of group insurance policies and considering if it should consult on guidance in this area. The FCA explains their concerns that it has seen examples of general insurance policies being used by commercial entities to provide the benefit of the insurance cover for liabilities their clients may suffer.  However, these unregulated firms are the sole policyholder who then sell to their clients an interest in the policy to share in proceeds of any claim.

Update on HM Treasury’s plans to regulate third-party deferred payment credit (buy now pay later) products, including the FCA noting that they will consult on rules which will supplement the legislation.

Reference added to the Digital Markets, Competition and Consumers Act. This Act will come into force on 1 January 2025 and seeks to promote competition and tackle anti-competitive practices in digital markets by means of a new regulatory regime on certain firms designated with Strategic Market Status.

The FCA notes that they have been designated the lead regulator for open banking and open finance, following the November publication of the National Payments Vision.

The FCA welcomes the Government’s confirmation to bring ESG ratings providers within the FCA’s regulatory perimeter and will consult on proposals for the future regulatory regime in 2025, once the Government has finalised the legislation.