The FCA’s proposed interpretation of the safeguarding obligation is causing serious concern in the industry. Under the new guidance, payment and e-money institutions will be expected to match the value of payments they make on behalf of their clients from their own funds because they will have to both keep the value in a safeguarding account and remit it to the payee.
For years, the UK charted a lonely but pragmatic course with its interpretation that deliverable FX forwards are not investment instruments. UK payment and e-money institutions can offer such products without requiring authorisation under the Financial Services and Markets Act 2000 (FSMA) while counterparts elsewhere in the EEA had to be regulated. The implementation of MiFID II in January 2018 will, among other things, confirm the UK’s position but the new definition is a little tighter than what we are used to in the UK and payment and e-money institutions must consider whether they want to remain unregulated.
The technical glitch that left thousands of customers of high profile fintech start-ups without access to their money last month should act as a major wake up call to payment services providers across the UK.