With many of the lang cats converging on London for the adviser event of the year (last-minute link here for the online streaming tomorrow of Home Truths, the next #langcatlive event) it falls to the Glasgow office to bring you this week’s Wednesday update. As the Glasgow office consists of me and the wildlife in my garden, none of which has anything interesting to say about financial services, I thought it best that I take control of the keyboard for this one.
What’s exciting in the world of regulation this week? Well, not the latest gift and hospitality log of the FCA, where the Board and senior executive appear to have been ploughing through a range of dull-sounding dinners and coffees and there appears to be no interesting scandal to be had at all. Although Sarah Pritchard did get a St Andrews Day dinner from Scottish Financial Enterprise, where we can only hope they entertained her with the finest Irn Brus known to humanity.
From my position behind the bird feeder the most interesting development this week has come from the House of Lords Industry and Regulators Committee. Not one of the committees that often makes the headlines it consists of an eclectic mixture of persons including Viscount Chandos, an ex-hereditary peer whose ancestors include an MP convicted of High Treason in 1601. But there are others on the committee who have more direct experience of financial services, such as Lord Terry Burns, former Perm Sec to the Treasury and no stranger to the boardrooms of some of the largest financial services firms, and Baroness Sharon Bowles, ex-Chair of the European Parliament ECON Committee. If they’re agitated, there is therefore very good reason to listen.
What’s currently worrying their Lords and Ladyships is what, exactly, went on after the catastrophic mini-budget in September last year. They’ve written to the government and it’s fair to say they are alarmed at what they found. The title is ‘The use of Liability Driven Investment strategies by pension funds’ but the findings of their inquiry and recommendations go a long way beyond that specific issue. I’ll leave the analysis of the detailed findings to others but there is a broader point that should be making the regulators and legislators sit up and listen.
The killer line in the letter is ‘that none of the regulators have the mandate, the powers and the information to cover pensions investment systemically, suggesting that a regulatory grip on investment strategy has not existed at any level’. That’s pretty strong stuff from a parliamentary committee.
They found that gaping holes existed in the regulatory landscape. The Bank of England was aware of liquidity issues from a financial stability perspective, but has no power or influence over pension schemes, which are directly supervised by The Pensions Regulator. The key point is that TPR was so focused on individual scheme finances and protecting sponsoring employers that it underestimated the potential systemic risks its actions were causing for the wider financial system.
It wouldn’t be a parliamentary committee if it didn’t have its own views on what the solutions might be – one of which is that TPR needs a statutory duty to consider the impacts of pension funds’ actions on that wider financial system. The view here from the gazebo is that regulators (and for that matter parliamentarians) working together more and looking at the big picture rather than their own individual objectives can only be a good thing. Here’s hoping Viscount Chandos doesn’t follow in the footsteps of his ancestor and end up in the Tower for suggesting it.
- If shareholder stewardship, proxy recommendations and pass-through voting are your thing, then a new white paper from investor voting fintech Tumelo (full disclosure: a lang cat client) sits squarely in ‘must read’ territory. Get hold of it here.
- If you still haven’t leapt at the opportunity to see Mr Polson and friends’ Rock for Ukraine gig on 23rd February and to empty your purses/wallets/bank accounts for a good cause, here’s another reminder.
- The FCA has this week announced that it required firms to amend or remove 8,582 misleading promotions during 2022 – 14 times more than 2021. It’s also cracking down on ‘finfluencers’, especially unauthorised individuals flogging investments on their social media channels.
- You thought I’d get through this without mentioning Consumer Duty, but you’d be wrong. The FCA have produced a further podcast, this time on the principles behind the consumer support outcome, and what do they mean, exactly, by ‘sludge’ and ‘appropriate friction’?
- This week’s music selection is from The Magnetics – not because of the tenous link to financial services in the song title but because I found them in a basement in Amsterdam and I think they deserve a wider audience.
Thanks for reading,