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As 2020 comes into view, what can we expect to be at the top of regulators’ agendas? Key themes that are new from last year are ESG and an increased focus on operational resilience. Both EU and UK authorities are looking at how buy and sell-side firms should embed ESG considerations into their organisational and customer-facing processes. Whilst legal reforms are under discussion, we expect that institutional investors and market adaptations, such as the rise of green bonds, will continue to drive the debate, perhaps faster than the regulators and legislators can catch up. Much of the EU-level reform work being undertaken at present is dependent on the finalisation of an EU-wide ESG “taxonomy” (stemming from a proposed Taxonomy Regulation), which has proven to be particularly contentious, with the categorisation of “sustainable” activities a sticking point.

Operational resilience will form an important work-stream for UK regulators. The PRA is seeking to embed operational resilience into the UK’s prudential framework by the end of 2020 so that this forms a pillar of prudential supervision that is equally important as the financial resilience pillar, and the FCA is increasingly focused on this area from a conduct as well as a prudential perspective. The regulators’ response in this area is likely to reflect the political scrutiny that they are currently under, as exemplified by the recent Treasury Select Committee report on IT failures in financial services. The Committee’s report raised questions in particular over whether the current enforcement regime is ineffective in addressing operational failures, and the absence of any successful enforcement cases under the SMCR was specifically highlighted as evidence that the current approach may not be sufficiently robust. As a result, we may see increased enforcement action against firms and individuals for prolonged IT failures.

Technological innovation will continue to be a major theme in 2020, with regulators and firms alike continuing to grapple with digital disruption. Open Banking and Open Finance, and the risks of data ethics and machine learning are just some of the innovation topics on the FCA’s agenda. The debate over regulation of cryptoassets is also likely to continue. Whilst the implementation of 5MLD will bring some cryptocurrency service providers within scope of AML supervision, the wider debate on regulation of crypto looks set to rumble on, with products like Libra adding further impetus to global regulatory discussion. More broadly, the UK’s approach to FinTech will continue to set trends internationally, as the FCA seeks to enhance its burgeoning reputation in the space and focus on global engagement beyond the EU post-Brexit. We expect to see the FCA driving the Global Financial Innovation Network (GFIN) – including by assisting firms in the GFIN’s cross-border pilot scheme – as well as supporting the 6th cohort of UK firms in its Regulatory Sandbox.

The FCA will continue to embrace its role as a consumer and competition-focussed regulator. Following the super-complaint to the CMA regarding unfair treatment in the insurance, mortgage and cash savings sectors, fair treatment of existing customers is a key priority for 2020, with pricing intervention a possibility. The theme of ‘review, refit and renewal’ will also continue in 2020 as the FCA continues to review its previous work in the retail investment advice sector, and on MiFID II and SMCR implementation.

Finally, enforcement continues to trend upward with the number of cases opened by the FCA rising throughout 2019. Given the significant number of large cases settled in 2019, fines may not continue to rise in 2020 but firms should expect an ongoing focus on investigation and enforcement action including, potentially, some SMCR cases.

Whatever 2020 may bring and the accuracy of our predictions, we look forward to working with you.

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Philip Annett is a partner with the Financial Services Regulatory team in Baker McKenzie's London office. He has an in-depth knowledge of working with the UK regulators, having previously been a senior lawyer in the Enforcement Division at the Financial Conduct Authority (FCA), where he led some of the regulator's highest-profile enforcement cases, and was recently seconded to the Bribery and Corruption Division at the Serious Fraud Office.

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Caitlin McErlane advises asset managers, banks, major corporates, exchanges, clearing houses and payment institutions on navigating UK and EU financial services regulation. She has particular experience in advising clients on operating in compliance with ongoing regulatory developments, including MiFID II, EMIR, the Investment Firms Regulation, ESG reforms, AIFMD and the Market Abuse Regulation.

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Richard Powell is a knowledge lawyer in Baker McKenzie's global financial services regulatory group where he is responsible for supporting and developing the group's legal and technical knowledge. Previously he was a member of the UK Financial Conduct Authority's Enforcement Division where he advised on regulatory cases. He has also been an editor of Bloomberg Law's UK Financial Services Law Journal.

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Julian Hui is an Associate in Baker McKenzie's London office.

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Guy Stevenson is an Associate in Baker McKenzie's London office.

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Shaneil Shah is an Associate in the Financial Services & Regulatory Group in the London office. Shaneil has experience advising FinTechs, funds, banks, asset managers and payment institutions on compliance with their regulatory obligations and has spent time on secondment to Baker McKenzie in Hong Kong.

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David Halliday is a partner in the IT/Communications Practice Group in Baker McKenzie's London office. His practice spans a broad range of contentious and non-contentious work in the IT/telecoms area, with particular focus on dispute resolution.

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Sue McLean is a partner in the IT/Commercial Practice Group in Baker McKenzie's London office. Sue advises clients on technology, sourcing and digital media business models and deals, as well as the legal issues relating to the implementation of new technologies. Sue has been included in the Women In FinTech Power List for three successive years. She is on the editorial board of the Journal of Digital Banking and is a member of the techUK working group on DLT/blockchain. Sue is an active member of Baker Women and leads Baker Women in Tech, an initiative to encourage the development and promotion of women in the tech sector. In 2017, Sue won the Rising Star Award at the Variety Catherine Awards.

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Steve Holmes leads Baker McKenzie's Global Information Technology & Communications practice based in London, and focuses on major technology, sourcing, communications and digital media transactions. In addition to leading the London sourcing team, Steve is co-lead of the London media team, and is on the steering committee of the European technology practice. Since 2006, he has been consistently ranked by Chambers UK and Legal 500 as a leading practitioner in the fields of technology, outsourcing, communications and digital media. Steve is one of the partners who leads the Firm's social mobility committee, BakerOpportunity. Steve has spoken and written extensively on a wide range of topics relevant to his field, including cloud computing, risk/reward in major services agreements, content licensing for new technologies, key issues in MVNO agreements and various other technology, communications and digital media topics.

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Matthew Dening is the Chair of the Firm's Global Derivatives Practice and a member of the Firm’s Structured Capital Markets Group in the London office. He focuses his practice primarily on cross-border structured finance transactions involving derivatives, repos and securities lending, as well as the regulation of financial products under the European Market Infrastructure Regulation (EMIR), MiFID II and the Securities Financing Transactions Regulation (SFTR). Matthew has received acknowledgement from numerous legal industry guides. He has been ranked as a leading expert by Chambers & Partners since 2005, and is currently ranked Band 1 in Structured Finance & Derivatives in the most recent Global edition. They highlight that he "understands complex problems very well, and is able to think about business issues in conjunction with legal requirements," as well as being "incredibly responsive and client-friendly." He regularly acts for buy-side derivatives firms. The UK Legal 500 note him as "a true expert in this area of law, a pleasant person who can explain very difficult matters clearly." Matthew is a member of the Editorial Board of Butterworths Journal of International Banking and Finance Law. He is a frequent speaker and guest panellist at conferences in both the derivative and structured product area, as well as law firm management. He was recently a guest panellist at Thomson Reuters Transforming Women’s Leadership in the Law in 2019.

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Iolie Calochristos is an Associate in Baker McKenzie's London office.