An FCA report evaluates the chequered implementation of technology change and identifies risks and best practices to help firms better navigate this change.

By Andrew C. Moyle, Alain Traill, and Jagveen S. Tyndall

Of the nearly 1,000 “material incidents” reported to the UK’s Financial Conduct Authority (FCA) in 2019, 17% were caused by change-related activity. It was against this backdrop that, on 5 February 2021, the FCA set out the findings of its review entitled Implementing Technology Change regarding the execution of technology change within the financial services sector (the Report). While the Report focuses on the UK, its findings apply equally to financial services organisations implementing technology change across all geographies.

New resource developed following increased regulatory focus on outsourcing.

Latham & Watkins has partnered with the Association for Financial Markets in Europe (AFME) and law firms Matheson and BSP to develop: Outsourcing – Guidance on the Legal and Regulatory Framework, a pioneering resource examining the key European legislation, rules, and guidance for financial services firms to consider in relation to outsourcing.

In light of the plethora of legislative change and increasing regulatory focus on outsourcing in financial services, as well as the growing range of sources that need to be taken into account to ensure compliance in this area, the Paper is designed to provide compliance, legal, and risk teams within regulated firms with a single reference point of regulatory requirements. The resource also provides a number of practical tools to help firms effectively map out their processes and procedures for legal compliance.

Partners Nicola Higgs, Fiona Maclean, and Andrew Moyle and associates Anne Mainwaring, Jagveen Tyndall, Oscar Bjartell, Sean Wells, and Sidhartha Lal led a team of more than 25 lawyers from five Latham offices and local law firms Matheson (Ireland) and BSP (Luxembourg) to produce the Paper.

The Fintech Strategic Review aims to ensure the ongoing growth and success of UK fintech as a world leader in financial innovation.

By Stuart Davis and Anna Lewis-Martinez

On 20 July 2020, HM Treasury announced the launch of an independent review into the UK’s fintech industry to “identify opportunities to support further growth in the sector”.

The Fintech Strategic Review aims to establish priority areas for industry, policy makers, and regulators to explore in order to support the continuing success of the UK fintech sector. The review will be led by Ron Kalifa OBE, the former CEO of Worldpay and non-executive director of the Court of Directors to the Bank of England. According to Kalifa, “Technology has a vital role to play in the UK’s COVID-19 economic recovery. The fintech review will ensure that we can leverage this innovative technology to help consumers and businesses, through a joined-up strategy that combines investment, skills and policy to deliver it.”

Mobile and desktop reference tool defines nearly 300 industry terms.

We are pleased to announce the launch of The Book of Jargon® – Cryptocurrency & Blockchain Technology, a comprehensive digital glossary of nearly 300 terms developed for the business, academic, and legal community. The easy-to-use reference tool demystifies the often complex legal and regulatory terminology, acronyms, and slang of the cryptocurrency and blockchain industry.

By Stuart Davis and Charlotte Collins

Following on from the Financial Conduct Authority’s (FCA’s) consumer warning on Initial Coin Offerings (ICOs) in September, the FCA has announced a deeper examination of this area in its Feedback Statement on Distributed Ledger Technology (DLT) and related press release. The FCA stated that it will consider whether regulatory action beyond the consumer warning is required.

The earlier Discussion Paper on DLT had asked for feedback on the legal and regulatory risks associated with ICOs (see Latham’s related Client Alert). According to the FCA, many respondents considered ICOs as having the potential to “dynamise innovation”, although others raised concerns about potential risks and possible investor harm.

By Andrew Moyle and Stuart Davis

The Project Stella report, a European Central Bank (ECB) and Bank of Japan (BOJ) joint venture, details the applicability of distributed ledger technology for financial market infrastructure. During a one-month research project, the central banks tested whether distributed ledger technology (DLT) could sustain the liquidity saving mechanisms — a system introduced in 2013 to ensure the liquidity of banking institutions — in their current real-time gross settlement systems (RTGS).

Published in September 2017, the report concluded that DLT solutions have the potential to increase the resilience and reliability of financial transactions and are scalable to meet the needs of large value payment systems, but they have not yet reached the level of maturity needed to replace the RTGS that the ECB and BOJ currently use. The findings on the scalability of DLT are important, because regulators such as ESMA and FCA have previously questioned whether DLT could be scalable enough to meet the needs of the financial market infrastructure.