1. finance
2. bank

18 DECEMBER 2014
ISSUE 792
Financial Regulation
Weekly Bulletin
Major UK and European regulatory developments of interest to banks, insurers and reinsurers,
asset managers and other market participants
QUICK LINKS:
Selected Headlines
General
Banking and Finance
Insurance
Asset Management
Securities and Markets
Financial Crime
Enforcement
If you have any comments
or questions, contact
Elizabeth Prentice.
Slaughter and May also
produces a periodical
Insurance Newsletter. If
you would like to go on
the distribution list, please
contact Beth Dobson.
The next edition of the Financial Regulation Weekly Bulletin will be on
8 January 2015.
Selected Headlines
BANKING AND FINANCE
CRD IV - various items
3.1, 4.1, 5.2,
7.2, 7.3, 7.4,
7.5, 7.6, 10.1,
11.2
Risks and vulnerabilities of the EU banking sector - EBA publishes risk
dashboard for Q3 2014
7.1
Bail-in powers implementation - HM Treasury publishes summary of
responses and regulators clarify timetable
8.1
Financial stability - Bank of England publishes Financial Stability Report,
systemic risk survey and results of UK stress test
9.1
Supervisory Statement SS17/13: Credit risk mitigation - PRA publishes
update regarding netting of liabilities that may be subject to bail-in
11.1
INSURANCE
Global insurance capital standard - IAIS launches first consultation
Financial Stability Report - published by EIOPA
Solvency II - PRA publishes feedback for general insurance firms on
standardised risk information data collection exercise
Solvency II - PRA will review the appropriateness of the standard formula
Legacy defined contribution workplace pensions - FCA publishes IPB
report
Retirement Adviser Directory - MAS independent Panel sets criteria for
directory
ASSET MANAGEMENT
KIDs for PRIIPs - Corrigendum published in the Official Journal
AIFMD - European Commission adopts delegated regulation on information
to be provided to ESMA
SECURITIES AND MARKETS
CRR and EMIR - Publication of Implementing Regulation
13.1
14.1
16.1
16.2
17.2
18.1
20.1
22.1
24.1
FINANCIAL REGULATION
18 December 2014
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
Insurance
Enforcement
Transparency Directive - European Commission adopts Delegated
Regulation containing RTS on major shareholdings
25.1
CSDR - ESMA consults on implementing measures
26.4
RDR - FCA publishes Phase 1 of post-implementation review
28.1
FCA Thematic Review TR14/21: Retail investment advice: Adviser
charging and services
28.2
FINANCIAL CRIME
Fourth Money Laundering Directive and Funds Transfer Regulation European Parliament and Council negotiators reach agreement
ENFORCEMENT
Regulators’ enforcement decisions - HM Treasury publishes
recommendations
Personal honesty and integrity - FCA bans former managing director of
asset management firm
Angela Burns v The Financial Conduct Authority
31.1
33.1
34.1
35.1
General
1.
Financial Conduct Authority
1.1
FCA Consultation Paper CP14/30: Improving Complaints Handling - December 2014 - Last month, the
FCA published the results of its thematic review into ‘Complaint handling’ (TR14/18) at major retail financial
services firms, and indicated that it hoped to consult “soon”. The FCA has now published Consultation Paper
CP14/30: Improving Complaints Handling. Among other things, it proposes a limit on the cost of calls that
consumers make to firms when complaining (as well as for other post-contractual calls), and improvements
to the reporting and publication of complaints, and discusses the implementation of the Alternative Dispute
Resolution (ADR) Directive (2013/11/EU).
The paper includes the following:
•
chapter 2 contains proposals to:
––
extend the time period to three business days for dealing with complaints less formally;
––
require firms to send a written communication to all consumers whose complaints are handled
by the end of this period (explaining their right to refer to the ombudsman service);
––
ensure firms report and publish all complaints to the FCA (not just complaints resolved after
the close of the next business day, as at present);
•
chapter 3 contains proposals to make general improvements to the ‘complaints return’;
•
chapter 4 contains new rules to limit the cost of call of financial services firms; and
•
chapter 5 contains proposals by the FCA and the ombudsman service to implement the ADR
Directive and to implement the Mortgage Credit Directive (2014/17/EU).
The consultation period closes on 13 March 2014.
02
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
CP14/30 is here.
The holding page is here.
The press release is here.
TR14/18 is here.
1.2
FCA Handbook Notice No. 17 - December 2014 - The FCA has published Handbook Notice No. 17 outlining
changes made to the Handbook by six instruments made by the FCA Board on 6 and 28 November and 11
December 2014.
In brief:
•
Consumer Credit (Cost Cap) Instrument 2014 (FCA 2014/56) comes into force on 2 January 2015;
•
Consumer Credit (Credit Broking) Instrument 2014 (FCA 2014/58) also comes into force on 2 January
2015;
•
Handbook Administration (No. 36) Instrument 2014 (FCA 2014/59) makes what the FCA describes
as “minor administrative changes” to the FCA Handbook, including to MAR in relation to the lapse
of section 118(4) FSMA 2000 on 31 December 2014. The changes come into force in two stages: on 1
January 2015 and 1 June 2015;
•
Client Assets Sourcebook (Amendment No. 7) Instrument 2014 (FCA 2014/60) makes changes to
CASS in relation to alternative investment funds and alternative investment fund managers. It comes
into force on 1 April 2015;
•
Immigration Regulations Instrument 2014 (FCA 2014/61) concerns the implementation of section 40
of the Immigration Act 2014, and it came into force on 12 December 2014; and
•
Supervision Manual (Direction and Determination Process) (Amendment) Instrument 2014 (FCA
2014/62) concerns consumer credit waivers and also came into force on 12 December 2014.
The Handbook Notice is here.
Recent FCA instruments can be accessed from here.
2.
UK Regulators Network
2.1
Consumer engagement and switching - UKRN publishes statement - 17 December 2014 - The UK
Regulators Network (UKRN), which includes the FCA and the Payment Systems Regulator, among other
regulators, has published for comment a statement on consumer engagement and switching, produced by
the FCA, Ofcom and Ofgem.
The comment period closes on 30 January 2015.
The statement is here.
03
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
Banking and Finance
3.
Official Journal
3.1
CRR - European Commission Implementing Decision on equivalence published in the Official Journal
- 16 December 2014 - The Commission Implementing Decision of 12 December 2014 on the equivalence of
the supervisory and regulatory requirements of certain third countries and territories for the purpose of the
treatment of exposures according to the Capital Requirements Regulation (575/2013/EU) has been published
in the Official Journal of the EU and comes into force on 1 January 2015. This is the first such equivalence
decision under the CRR.
The decision is here.
The press release is here.
FAQs are here.
3.2
Statistics on the money markets - ECB Regulation published in the Official Journal - 16 December 2014
- The Regulation (EU/1333/2014) of the European Central Bank of 26 November 2014, concerning statistics
on the money markets (ECB/2014/48), has been published in the Official Journal of the EU and comes into
force on 1 January 2015.
The Regulation is here.
4.
Council of the European Union
4.1
CRD IV - Council decides not to object to Delegated Regulations on methodology for determination
of LCR requirement and for calculation of leverage ratio – 15 & 16 December 2014 - The Council of the
European Union has decided not to object to the two resolutions supplementing Capital Requirements
Directive (2013/36/EU) (CRD IV) concerning:
•
the methodology for the determination of liquidity coverage requirements (LCR) for credit
institutions; and
•
the calculation of the leverage ratio.
Unless the European Parliament objects, the Regulations will be published in the Official Journal.
See an item below concerning two related European Banking Authority (EBA) consultations on supervisory
reporting.
Commission Delegated Regulation of 10 October 2014 on the LCR is here.
Commission Delegated Regulation of 10 October 2014 on the leverage ratio is here.
The Council press release (at page 42) is here.
04
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
5.
European Commission
5.1
Work Programme for 2015 - adopted by European Commission - 16 December 2014 - The European
Commission has published its work programme for 2015 setting out the Commission’s action plan for jobs,
growth and investment.
The work programme is here.
Annex 1: New Initiatives is here.
Annex 2: Withdrawals or Modification of Pending Proposals is here.
Annex 3: REFIT actions is here.
Annex 4: Legislation that becomes applicable in 2015 is here.
The holding webpage is here.
5.2
CRR - European Commission adopts Delegated Regulation on RTS for the specification of margin
periods of risk - 18 December 2014 - The European Commission has adopted a Delegated Regulation of 18
December 2014 supplementing the Capital Requirements Regulation (575/2013/EU) (CRR) in relation to
regulatory technical standards (RTS) for the specification of margin periods of risk. Provided the European
Parliament and Council of the EU do not object within the relevant period, it will be published in the Official
Journal of the EU and come into force 20 days after publication.
The Delegated Regulation is here.
6.
European Parliament
6.1
Interchange fees Regulation - European Parliament and Council reach political agreement - 17 December
2014 - The European Parliament and the Council of the EU have reached a political agreement on the
Regulation on interchange fees for card-based payment transactions.
The European Parliament press release is here.
The European Commission press release is here.
The procedure file is here.
7.
European Banking Authority
7.1
Risks and vulnerabilities of the EU banking sector - EBA publishes risk dashboard for Q3 2014 - 11
December 2014 - The EBA has published its risk dashboard for Q3 2014 summarising the main risks and
vulnerabilities of the banking sector in the European Union.
The risk dashboard is here.
The aggregated disclosure of EU banks’ risk parameters is here.
The press release is here.
05
QUICK LINKS:
Selected Headlines
Asset Management
7.2
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
CRD IV - EBA publishes final guidelines defining criteria to assess O-SIIs - 16 December 2014 - The EBA
has published final guidelines defining criteria that EU competent authorities will use to identify institutions
at are systemically important either at EU or Member State level, the so-called ”other systemically
important institutions” (O-SIIs). Competent authorities can require O-SIIs to hold an additional buffer of up
to 2 percentage points of Common Equity Tier 1.
Competent authorities must notify the EBA as to whether they comply or intend to comply with these
guidelines, or explain reasons for non-compliance, by 17 February 2015.
The final guidelines are here.
The holding page is here.
The press release is here.
7.3
CRD IV - EBA publishes two consultation papers on draft ITS concerning supervisory reporting with
regard to the Liquidity Coverage Ratio and the Leverage Ratio - 16 December 2014 - The EBA has published
two consultation papers concerning supervisory reporting on Liquidity Coverage and the Leverage ratios:
•
draft Implementing Technical Standards (ITS) amending the Commission Implementing Regulation
(EU) No 680/2014 (ITS on supervisory reporting) in relation to the Leverage Ratio (LR); and
•
draft Implementing Technical Standards amending the ITS on supervisory reporting on Liquidity
Coverage Ratio (LCR).
A public hearing is to take place on 15 January 2015.
The consultation period for the draft ITS relating to LR closes on 27 January 2015. The consultation period
for the draft ITS relating to LCR closes on 10 February 2015.
The consultation paper on draft ITS relating to LR is here.
The holding page is here.
The consultation paper on draft ITS relating to LCR is here.
The holding page is here.
The press release is here.
7.4
CRD IV - EBA repeals recommendation on preservation of Core Tier 1 capital - 18 December 2014 - The
EBA has repealed its recommendation (dated 22 July 2013) on the preservation of Core Tier 1 capital of EU
banks during the transition to CRD IV. The recommendation is now no longer in force.
The repealed recommendation is here.
The press release is here.
7.5
CRR - EBA publishes final draft ITS on joint decisions on the approval of internal models - 18 December
2014 - The EBA has published final draft ITS on joint decisions related to the approval of internal models.
06
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
The final draft ITS are here.
The holding page is here.
The press release is here.
7.6
CRD IV - EBA updates single rulebook Q&As - 12 December 2014 - The EBA has updated its Q&As on the
single rulebook relating to the CRD IV reforms and related technical standards and guidelines.
The updated Q&As on the single rulebook are here.
7.7
Mortgage Credit Directive - EBA publishes two consultation papers and a discussion paper - 11 & 12
December 2014 - The EBA has published the following two consultation papers and a discussion paper on
the Mortgage Credit Directive (2014/17/EU):
•
consultation paper on draft Guidelines on Arrears and Foreclosure;
•
consultation paper on draft Guidelines on Creditworthiness Assessment;
•
discussion paper on draft requirements on passport notifications for credit intermediaries
The consultation periods close on 12 February 2015, and the EBA seeks feedback on the discussion paper by
12 March 2015.
The Directive must be transposed by 21 March 2016.
The consultation paper on Guidelines on Arrears and Foreclosure is here.
The consultation page is here.
The consultation paper on Guidelines on Creditworthiness Assessment is here.
The holding page is here.
The press release on the creditworthiness assessment consultation is here.
The discussion paper is here.
The holding page is here.
The press release on the discussion paper is here.
7.8
RRD - EBA launches consultation on draft RTS on supervisory colleges - 18 December 2014 - The EBA has
launched a consultation on draft regulatory technical standards (RTS) on supervisory colleges under Article
88(7) of the Recovery and Resolution Directive (2014/59/EU) (RRD).
The EBA is holding a public hearing on 17 February 2015.
The consultation period closes on 18 March 2015.
The consultation paper is here.
07
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
The holding page is here.
The press release is here.
7.9
ITS validation rules - EBA publishes revised list - 18 December 2014 - The EBA has published a revised list
of validation rules in its implementing technical standards (ITS) on supervisory reporting, highlighting those
that have been deactivated. Data submitted in accordance with these ITS should not be validated against
the set of deactivated rules.
The revised list is here.
The press release is here.
8.
HM Treasury
8.1
Bail-in powers implementation - HM Treasury publishes summary of responses and regulators clarify
timetable - December 2014 - HM Treasury has published a document summarising the responses received
to the consultation ‘Bail-in powers implementation’ (13 March 2014) and setting out the Government’s
position on the points raised. The legislation consulted on is to form part of the Government’s approach to
transposition of the RRD, which the Treasury consulted on in July 2014, and which will come into force on 1
January 2015.
Separately, the FCA has announced that it expects to gain powers in relation to the RRD in early January,
and that it will publish its final rules as soon as practical after that. On 3 December 2014, the PRA made a
similar announcement. It expects to publish final rules in mid-January 2015.
See also an item below on the PRA publishing an update to Supervisory Statement SS17/13: Credit Risk
Mitigation regarding the netting of liabilities that may be subject to bail-in.
The summary document is here.
The consultation webpage is here.
The webpage for the Government’s consultation on transposition of the Bank Recovery and Resolution
Directive is here.
The FCA press release is here.
The PRA announcement is here.
8.2
Basic bank accounts - HM Treasury enters into revised agreement - 15 December 2014 - HM Treasury
has published details of a revised agreement it has entered into with the banking industry concerning the
provision of basic bank accounts.
The revised agreement is here.
The holding page is here.
The press release is here.
08
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
8.3 SME finance - Government publishes draft Regulations - 15 & 18 December 2014 - In December 2013, HM
Treasury published a consultation paper “Competition in Banking: Improving Access to SME Credit Data”.
On 15 December 2014, the Government published a draft of the Small and Medium Sized Business (Credit
Information) Regulations 2015, noting that they are not yet in final form and are subject to further change.
In March 2014, the HM Treasury and the Department for Business, Innovation & Skills published a
consultation paper on helping to match SMEs rejected for finance with alternative lenders. On 18 December
2014, the Government published a draft of the Small and Medium Sized Business (Finance Platforms)
Regulations 2015, noting again that the Regulations are not in final form, and that further changes may be
made. The Government also intends to set out ‘non-legislatively’ further requirements for online platforms
that wish to be designated under these Regulations.
The draft Small and Medium Sized Business (Credit Information) Regulations 2015 are here.
The December 2013 consultation webpage is here.
The draft Small and Medium Sized Business (Finance Platforms) Regulations 2015 are here.
The March 2014 consultation webpage is here.
9.
Bank of England
9.1
Financial stability - Bank of England publishes Financial Stability Report, systemic risk survey and
results of UK stress test - 16 December 2014 - The Bank of England has published the December 2014 issue
of its Financial Stability Report. Alongside the report, the Bank has also published the results of the H2 2014
systemic risk survey (which quantifies and tracks market participants’ perceptions of systemic risks), and the
results of its first concurrent stress testing exercise of the UK banking system.
The Financial Stability Report is here.
The holding page is here.
The systemic risk survey results are here.
The holding page for the systemic risk survey is here.
The stress test results are here.
The press release is here.
The transcript of the press conference is here.
The governor’s opening remarks at the press conference are here.
10.
Financial Conduct Authority
10.1 CRD IV - FCA publishes notes for compliance on disclosure of encumbered and unencumbered assets
- 18 December 2014 - The FCA has updated its website in the light of EBA Guidelines on the disclosure of
encumbered and unencumbered assets, and decided to exercise its discretion in Article 4, Title II on CRD IV.
It has also published notes for compliance.
09
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
The notes for compliance are here.
The updated webpage on EBA guidelines and recommendations on CRD IV is here.
11.
Prudential Regulation Authority
11.1 Supervisory Statement SS17/13: Credit risk mitigation - PRA publishes update regarding netting of
liabilities that may be subject to bail-in - 12 December 2014 - The PRA has published an update to SS17/13
on credit risk mitigation taking into account the draft statutory instruments to implement the RRD laid by
HM Treasury in November 2014. In particular, The Banking Act 2009 (Restriction of Special Bail-in Provision,
etc) Order 2014 restricts the exercise of the bail-in powers by the Bank of England as a resolution authority.
The updated SS17/13 clarifies that the PRA does not expect that:
•
a netting agreement will be an eligible form of credit risk mitigation under Part Three, Title II, Chapter
4 of the CRR, where a resolution authority has the power to bail-in the liabilities in question on a
gross basis; and
•
the legal effectiveness and enforceability of a netting agreement will be adversely affected by a
resolution authority having a power to bail-in the liabilities in question only on a net basis.
The updated SS17/13 is here.
The announcement concerning the update is here.
The holding page is here.
11.2 CRD IV updates - PRA announces plans to start collecting intraday liquidity data on systematic basis
- 12 December 2014 - The PRA has announced plans to start collecting intraday liquidity data on a more
systematic basis from 1 July 2015.
The announcement is on the PRA CRD IV updates webpage, which is here.
12.
New Legislation
12.1 The Financial Services Act 2012 (Commencement No. 6) Order 2014 (SI 2014/3323) was made on 17
December 2014 and brings into force section 96(1), (2), (5) and (6), and sections 98 and 99 of the Financial
Services Act 2012 (amendments to the Banking Act 2009) on 1 January 2015.
The Order is here.
The explanatory note is here.
12.2 The Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business)
(Amendment) Order 2014 (SI 2014/3340) was made on 17 December 2014 and comes into force on 31
December 2014. The Order ensures that article 5 of the Financial Services and Markets Act 2000 (Carrying
on Regulated Activities by Way of Business) Order 2001 (which provides that a person entering into a
regulated sale and rent back agreement with a person to whom they are not related is to be regarded as
doing so by way of business) does not cease to have effect on 1 January 2015.
The Order is here.
10
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
The explanatory note is here.
12.3 The draft Electronic Commerce Directive (Financial Services and Markets) (Amendment) Order 2015
has been published and is stated to come into force on the day after the day on which it is made. The draft
Order, which amends the Electronic Commerce Directive (Financial Services and Markets) Regulations
2002 (SI 2002/1775), would give the FCA powers to impose new regulatory requirements on consumer
credit firms that direct all or most of their activity towards the UK, but establish themselves in another
EEA Member State to evade FCA regulation. The FCA may also determine that such a person requires
authorisation.
The draft Order is here.
The draft explanatory memorandum is here.
See also the Securities and Markets section below for an item on ESMA publishing a report on a general
investigation into surveillance of structured finance instrument credit ratings.
See further the Securities and Markets section below for an item on the EBA publishing technical advice on
intervention powers under MiFIR in relation to structured deposits.
Insurance
13.
International Association of Insurance Supervisors
13.1 Global insurance capital standard - IAIS launches first consultation - 17 December 2014 - The
International Association of Insurance Supervisors (IAIS) has launched the first of its three planned
consultations on the global insurance capital standard (ICS). The ICS is to be developed to apply to
internationally active insurance groups as part of the IAIS’ common framework for the supervision of such
groups (ComFrame). The consultation, which contains more than 160 specific questions, seeks feedback
from members and stakeholders on elements of the proposed ICS, including valuation, qualifying capital
resources, an example of a standard method for determining the ICS capital requirement and other potential
methods for determining the ICS capital requirement.
The consultation period closes on 16 February 2015.
The consultation paper is here.
The holding page is here.
The press release is here.
14.
European Insurance and Occupational Pensions Authority
14.1 Financial Stability Report - published by EIOPA - December 2014 - The European Insurance and
Occupational Pensions Authority (EIOPA) has published its Financial Stability Report for December 2014.
The report is here.
The press release is here.
11
QUICK LINKS:
Selected Headlines
Asset Management
15.
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
European Central Bank
15.1 Statistical reporting for insurance corporations - ECB publishes Regulation - 28 November 2014 - The
European Central Bank has published a Regulation (ECB/2014/15) on statistical reporting requirements for
insurance corporations. The Regulation will come into force 20 days after it is published in the Official
Journal of the EU. First reporting will begin for Q1 2016 data.
The Regulation is here.
16.
Prudential Regulation Authority
16.1 Solvency II - PRA publishes feedback for general insurance firms on standardised risk information data
collection exercise - 12 December 2014 - The PRA has published feedback for general insurance firms on the
standardised risk information (SRI) data collection exercise carried out in May 2014.
The feedback is here.
Solvency II updates are here.
16.2 Solvency II - PRA will review the appropriateness of the standard formula - 15 December 2014 - The PRA
has announced that it intends to review the appropriateness of the standard formula for all firms intending
to use the standard formula to calculate their solvency capital requirements. It will review priority firms by
the end of Q1 2015, and perform a high level review of all firms by the end of 2015.
The PRA announcement is here.
17.
Financial Conduct Authority
17.1 Guaranteed asset protection insurance - FCA publishes consultation paper - December 2014 - The FCA
has published a consultation paper (CP14/29) on Guaranteed Asset Protection (GAP) insurance, which
is usually offered alongside car sales. The proposals follow the FCA’s market study on general insurance
add-ons (July 2014) and are intended to improve competition in the market and enable consumers to make
better informed decisions. The proposals include a deferred opt-in (or pause in the sale) and a requirement
for add-on GAP distributors to provide information that will encourage consumers to shop around.
The consultation period closes on 13 March 2015.
The PRA intends to publish a Policy Statement in June 2015, with a view to the new rules coming into force
on 1 September 2015.
The consultation paper is here.
The holding page is here.
The press release is here.
17.2 Legacy defined contribution workplace pensions - FCA publishes IPB report - December 2014 - The FCA
has published the final report by the Independent Project Board (IPB) on the audit of charges and benefits in
legacy defined contribution workplace pension schemes.
12
QUICK LINKS:
Selected Headlines
Asset Management
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
The IPB is writing to the providers of schemes where savers are potentially exposed to high charges,
recommending that they should, by 30 June 2015:
•
review data and conduct any further analysis to reflect actions already taken to reduce charges or
qualitative factors that justify high charges;
•
identify what actions could be taken to improve outcomes for savers or to stop new savers joining
poor value schemes; and
•
provide data, further analysis and proposed actions to relevant governance bodies.
The IPB recommends that governance bodies should agree remedial actions and implementation plans with
providers by the end of 2015.
The IPB further recommends that the Department for Work and Pensions and the FCA should jointly review
industry-wide progress in addressing poor value schemes and publish a report by the end of 2016.
The report is here.
The press release is here.
18.
Money Advice Service
18.1 Retirement Adviser Directory - MAS Independent Panel sets criteria for directory - 15 December 2014
- The Money Advice Service (MAS) has announced that an independent panel of consumer and industry
representatives has agreed the requirements for firms wishing to be listed on the MAS Retirement Adviser
Directory.
The criteria are:
•
financial advisers must be able to provide regulated financial advice in either or both of the ‘at
retirement’ or ‘post retirement’ market;
•
financial advisers on the directory must offer, as their primary business model, regulated advice. This
can be full, focused or simplified advice, but must include a personal recommendation appropriate to
the individual client’s needs. Advice must be covered by the Financial Ombudsman Service and the
Financial Services Compensation Scheme;
•
firms with ‘independent’ or ‘restricted’ status will be permitted to enter the directory. Firms with
restricted status will be asked to confirm that their advisers will consider all available providers within
the market they have chosen to focus on.
Firms listed in the directory will be asked to commit to providing an initial, no obligation, meeting for all
customers approaching them through the directory.
The press release is here.
13
QUICK LINKS:
Selected Headlines
Asset Management
19.
General
Securities and Markets
Banking and Finance
Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
Association of British Insurers
19.1 Critical illness insurance - ABI publishes statement of best practice - 17 December 2014 - The Association
of British Insurers (ABI) has published a statement of Best Practice on critical illness insurance.
The statement is here.
The press release is here.
See also the Securities and Markets section below for two items on the Retail Distribution Review, on postimplementation review and TR14/21 on adviser charges and services.
Asset Management
20.
Official Journal
20.1 KIDs for PRIIPs - Corrigendum published in the Official Journal - 13 December 2014 - A Corrigendum to
Regulation (EU/1286/2014) of 26 November 2014 on key information documents (KIDs) for packaged retail
and insurance-based investment products (PRIIPs) has been published in the Official Journal of the EU. The
date on page 13, Article 8(5), third subparagraph, was incorrect. Where it previously read 31 March 2015, it
should now read 31 March 2016.
The corrigendum is here.
The Regulation is here.
21.
Council of the European Union
21.1 MMF - Council of the European Union publishes progress report on proposed regulation on money
market funds - 11 December 2014 - The Council of the EU has published a progress report on the proposed
regulation of money market funds (MMF) and the key issues currently under discussion, including in relation
to MMF eligible assets, eligible securitisations, asset diversification, and credit quality assessment.
The progress report is here.
The presidency compromise text is here.
The procedure file for MMF is here.
22.
European Commission
22.1 AIFMD - European Commission adopts delegated regulation on information to be provided to ESMA 18 December 2014 - The European Commission has adopted a draft delegated regulation on the information
to be provided by national competent authorities (NCAs) to the European Securities and Markets Authority
(ESMA) pursuant to Article 67(3) of the Alternative Investment Fund Managers Directive (2011/61/EU)
(AIFMD). The delegated regulation will be published in the Official Journal unless objected to by the
European Parliament or Council of the European Union.
The delegated regulation is here.
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23.
General
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FINANCIAL REGULATION
18 December 2014
Insurance
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European Securities and Markets Authority
23.1 European Social Entrepreneurship Funds and Venture Capital Funds - ESMA publishes responses to
consultation - 16 December 2014 - The European Securities and Markets Authority has published the
responses to its September 2014 consultation paper on its technical advice to the European Commission on
the implementing measures of the Regulations on European Social Entrepreneurship Funds and European
Venture Capital Funds.
The responses can be found here.
See also the Insurance section above for an item on a MAS announcement concerning the Retirement Adviser
Directory.
See also the Securities and Markets section below for two items on the Retail Distribution Review, on postimplementation review and TR14/21 on adviser charges and services.
Securities and Markets
24.
Official Journal of the European Union
24.1 CRR and EMIR - Publication of Implementing Regulation extending transitional periods in relation to
capital requirements for banking group CCP exposures - 12 December 2014 - Following the European
Commission’s adoption of this Implementing Regulation on 11 December 2014, as reported in last week’s
Financial Regulation Weekly Bulletin, EU/1317/2014 has now been published in the Official Journal of the EU
and came into force on 15 December 2014.
The Regulation is here.
25.
European Commission
25.1 Transparency Directive - European Commission adopts Delegated Regulation containing RTS on major
shareholdings - 17 December 2014 - The European Commission has adopted a Delegated Regulation under
the revised Transparency Directive (2004/109/EC) containing regulatory technical standards (RTS) on the
notification requirements in relation to major shareholdings in listed companies. The delegated regulation
follows the European Commission’s final report on 29 September 2014 and is substantially in the same form
as proposed in that report.
If the European Parliament and the Council do not object, it will be published in the Official Journal and will
enter into force 20 days following publication. The regulation will apply from 26 November 2015.
The draft RTS is here.
26.
European Securities and Markets Authority
26.1 CRA Regulation - ESMA publishes report on results of general investigation into structured finance
ratings - 16 December 2014 - The European Securities and Markets Authority has published a report on the
results of its investigation into the way the four largest credit rating agencies (CRAs), which provide credit
ratings on structured finance instrument credit ratings within the EU, conduct surveillance of their structured
finance credit ratings.
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ESMA has not concluded that any of its findings constitutes a breach of the CRA Regulation but has
requested CRAs to put in place remedial plans to ensure compliance with the Regulation’s requirements and
objectives and has indicated that it will continue to follow up with the CRAs covered by the investigation.
The report is here.
The press release is here.
26.2 Investment-based crowdfunding - ESMA publishes opinion and advice on EU-wide common approach
- 18 December 2014 - ESMA has published an opinion and advice on investment-based crowdfunding. The
opinion is addressed to national competent authorities and clarifies the rules applicable to crowdfunding,
including how crowdfunding business models fit within the existing EU regulatory framework. The
advice is addressed to the EU institutions (Commission, Parliament and Council) and highlights issues for
consideration by them, including the introduction of new policy to ensure a regime which protects investors,
as well as being fit for purpose for crowdfunding platforms.
The advice is here.
The opinion is here.
The press release is here.
26.3 High-frequency trading - ESMA reports on activity in EU equity markets - 17 December 2014 - The
European Securities and Markets Authority has published an economic report on the extent of highfrequency trading (HFT) in EU equity markets. This is the first study into HFT across major venues in the
EU. Based on a sample of 100 stocks from nine EU countries in May 2013, the report finds that HFT activity
ranges from 24% to 43% of equity value traded, using alternative methodologies.
The report is here.
The press release is here.
26.4 CSDR - ESMA consults on implementing measures - 18 December 2014 - ESMA has launched three
consultations on proposed technical standards, technical advice and guidelines implementing the Central
Securities Depositories Regulation (909/2014) (CSDR). ESMA seek views on (i) the draft technical standards
on settlement discipline, CSD requirements, and internalised settlement; (ii) the draft technical advice on
penalties for settlement failures and on the substantial importance of a CSD; and (iii) the draft guidelines on
the access to CCPs or trading venues by CSDs.
ESMA intends to organise an open hearing on the consultation papers at its premises on 13 January 2015.
The consultations close on 19 February 2015.
The press release is here.
The consultation paper on the technical standards can be accessed from here.
The consultation paper on the technical advice can be accessed from here.
The consultation paper on the guidelines can be accessed from here.
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General
Securities and Markets
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Financial Crime
FINANCIAL REGULATION
18 December 2014
Insurance
Enforcement
European Banking Authority
27.1 MiFIR - EBA publishes technical advice on intervention powers in relation to structured deposits 11 December 2014 - Following the European Commission’s request for further information, the EBA has
published its final technical advice on its intervention powers in relation to structured deposits under the
Markets in Financial Instruments Regulation (600/2014/EU) (MiFIR). In particular, the advice sets out the
criteria and factors to be taken into account when determining a significant investor protection concern or a
threat to the orderly functioning and integrity of financial markets.
The technical advice is here.
The holding page is here.
The press release is here.
28.
Financial Conduct Authority
28.1 RDR - FCA publishes Phase 1 of post-implementation review - December 2014 - The FCA has published
the findings of the first stage of its post-implementation review of the Retail Distribution Review (RDR).
The FCA intends to publish the next phase of its review, on medium-term impacts, in 2017. A subsequent
third phase will consider the longer-term implications.
The FCA review report is here.
A report on the RDR review by Europe Economics (16 December 2014) is here.
‘Advice Gap Analysis: Report to FCA’ by Towers Watson (5 December 2014) is here.
The FCA webpage on the review is here.
The press release is here.
28.2 FCA Thematic Review TR14/21: Retail investment advice: Adviser charging and services - December
2014 - The FCA has published the results of the third cycle of its RDR thematic review (TR14/21), which
focuses on an assessment of firms’ adviser charging and service disclosure, as well as how firms’ business
models have developed in response to the RDR, particularly in relation to ongoing services. The FCA found
a material improvement in the way firms disclose the cost of their advice, but believes that there is scope
for further disclosure improvements, particularly in the area of ongoing charges. As a result of its thematic
review, the FCA has referred one firm to its Enforcement and Financial Crime Division.
TR14/21 is here.
A quantitative research report ‘Impact of the RDR on consumer interaction with the retail investments
market’ is here.
A research report ‘Retail Investment Advice Assessment of Ongoing Services’ is here.
The FCA webpage on RDR thematic work is here.
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The press release is here.
28.3 EMIR - FCA updates webpage on supervisory priorities - 17 December 2014 - The FCA has updated its
webpage on its supervisory priorities arising from the European Market Infrastructure Regulation (EMIR)
to include its areas of focus for 2015 and firms’ obligations in relation to the EMIR requirements in force
from 2015 onwards. These include firms being able to demonstrate robust and specific plans to meet these
requirements.
The updated webpage is here.
29.
New Legislation
29.1 Transparency and Prospectus Directives - Payments to Governments and Miscellaneous Provisions
Regulations 2014 – 12 December 2014 - The Payments to Governments and Miscellaneous Provisions
Regulations 2014 (SI 2014/3293) were made on 12 December 2014 and (i) provide the FCA (as the UK Listing
Authority) with power to amend its transparency rules to include reporting requirements for extractive firms
to disclose payments to governments; and (ii) inserts new sections 87FA and 87FB into the Financial Services
and Markets Act 2000 regarding final terms issued in relation to a prospectus.
The Regulations and explanatory note are here.
30.
Agency for the Cooperation of Energy Regulators
30.1 REMIT - ACER welcomes adoption of implementing acts - 17 December 2014 - The Agency for the
Cooperation of Energy Regulators (ACER) has welcomed the European Commission’s adoption of
implementing acts on data collection under the EU Regulation on wholesale energy market integrity and
transparency (REMIT). The implementing acts are due to be published in the Official Journal of the EU in
early 2015 and will come into force 20 days after its publication. ACER members will then have:
•
9 months to prepare for the reporting of reportable wholesale energy contracts (admitted to
Organised Market Places) and of fundamental data from the European Network of Transmission
System Operators’ (ENTSOs) central information transparency platforms; and
•
15 months to prepare for the reporting of the remaining reportable wholesale energy contracts and
reportable fundamental data from transmission system operators (TSOs), LNG system operators
(LSOs), and storage system operators (SSOs).
Market participants will be required to register with National Regulatory Authorities before entering into
transactions which are required to be reported.
The statement is here.
Financial Crime
31.
European Parliament
31.1 Fourth Money Laundering Directive and Funds Transfer Regulation - European Parliament and Council
negotiators reach agreement - 17 December 2014 - The European Parliament and the Council of the
European Union negotiators have reached agreement on the proposed Fourth Money Laundering Directive
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and Funds Transfer Regulation. The deal still needs to be endorsed by the Committee of Permanent
Representatives (COREPER) and by Parliament’s Economic and Monetary Affairs and Civil Liberties, Justice
and Home Affairs committees, as well as in a plenary session of the European Parliament.
The press release of the European Parliament is here.
The press release of the Italian Presidency is here.
The procedure file for the Fourth Money Laundering Directive is here.
The procedure file for the Funds Transfer Regulation is here.
32.
The Home Office and the Department for Business, Innovation and Skills
32.1 Anti-Corruption Plan - Home Office and the Department for Business, Innovation and Skills publish
plan - 18 December 2014 - The Home Office and the Department for Business Innovation and Skills have
published the UK Anti-Corruption Plan, which for the first time consolidates in one place all of the UK’s
activities against corruption.
The Anti-Corruption Plan is here.
The holding page is here.
Enforcement
33.
HM Treasury
33.1 Regulators’ enforcement decisions - HM Treasury publishes recommendations - 18 December 2014 Following its May 2014 review of the fairness, transparency and efficiency of PRA and FCA enforcement
procedures, HM Treasury has published a number of recommendations.
The recommendations include:
•
a new independent decision-making committee for the PRA with an independent chair;
•
a new expedited procedure to access the Upper Tribunal;
•
regular independent reviews of regulators’ settlement processes;
•
measures to enhance the accountability of the FCA and PRA’s decision makers, including annual
reports;
•
removal of penalty discounts where those being investigated delay settlement;
•
steps to encourage those under investigation to make early admissions;
•
the PRA and the FCA publishing more information about their criteria for starting investigations, their
approaches to referring cases from supervision to enforcement, and how they co-operate with each
other; and
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more constructive communication between investigators and those being investigated, with greater
involvement of senior regulators.
The final report containing the recommendations can be accessed from here.
The press release is here.
34.
Financial Conduct Authority
34.1 Personal honesty and integrity - FCA bans former managing director of asset management firm - 15
December 2014 - The FCA has made a total prohibition order against Jonathan Paul Burrows, a former
managing director at Blackrock Asset Management Investor Services Limited, on the grounds that “he is
not fit and proper…because he lacks honesty and integrity”. This follows Mr. Burrows’ admission that on “a
number of occasions” he had deliberately failed to purchase a valid ticket to cover his entire train journey to
Cannon Street Station, in the knowledge that this was breaking the law. The FCA took into account that he
did not disclose his behaviour to his employer (although it did not penalise him for this). Mr Burrows agreed
to settle at an early stage of the FCA’s investigation.
The FCA final notice includes the statement that:
“Those individuals who are approved to work within the financial services industry should conduct
themselves with honesty and integrity in both their professional and personal capacities”.
The final notice is here.
The press release is here.
35.
Recent cases
35.1 Angela Burns v The Financial Conduct Authority, [2014] UKUT 0509 (TCC), 15 December 2014
Fiduciary duties of non-executive director in relation to outside interests – creation of conflict of interest without
prior consent – failure to disclose conflict of interest – breach of Statement of Principle 1 (acting with integrity) of
APER – not a ‘fit and proper’ person to be an approved CF2
The Upper Tribunal has reached its decision in the case of alleged misconduct by Angela Burns, but has
not yet considered the appropriate sanction. The case concerns whether Ms Burns breached Principle 1 of
the FCA’s Statements of Principle for Approved Persons (integrity) in her actions as a former non-executive
director of two mutuals by seeking outside consultancy work and appointments and, therefore, whether she
is fit and proper to be an approved person.
Ms Burns had referred to the Tribunal an FSA Decision Notice of 28 November 2012, which the FCA
published on 24 May 2013, following an unsuccessful application to the Tribunal for privacy. The Tribunal
reheard the matter and rejected six allegations of misconduct made by the FCA (including declining to find
that a particular e-mail sought a corrupt payment), but accepted three allegations of misconduct in relation
to one mutual, and one allegation of misconduct in relation to the other. The Tribunal found that Ms Burns
had beached Principle 1, and concluded that she is not a fit and proper person for the CF2 function. The
parties have been invited to agree the appropriate sanctions, otherwise the issue will be determined at a
further hearing.
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The allegations of misconduct that were upheld were that, in relation to the first mutual:
•
she had participated in board discussions that had mentioned a possible third-party supplier of asset
management services, but failed to disclose that she was concurrently soliciting a non-executive
position and consulting work with that supplier; and
•
that in two e-mails to the supplier, she had solicited an engagement with the supplier by reference to
her non-executive position with the mutual, which sought to create a situation where she would have
a personal interest which could conflict with the interests of the mutual, without the prior consent of
the mutual.
In relation to the second mutual, the Tribunal found that she had, without prior consent, sent a
solicitation e-mail to the same supplier that sought to create a personal interest that could conflict
with the interests of the second mutual, which was entitled to her impartial advice.
The Tribunal applied the following principles on the duties of directors (at paragraph 76):
•
“Soliciting a benefit, while making reference to a fiduciary position and using it as part of the persuasion,
is not necessarily improper…What would prima facie make it improper would be that the solicitation
creates a situation where the director (in the words of s175(1) [of the Companies Act 2006]) has, or can
have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of Company A.
•
Seeking an inducement for favouring a third party in a proposed transaction is by no means the only way
in which a director may be in breach of fiduciary duty. Irrespective of any inducement, if solicitation would
create a situation where the director has, or can have, a direct or indirect interest that conflicts, or possibly
may conflict, with the interests of Company A, the only way to save such solicitation from being improper
is to make prior disclosure to Company A and obtain Company A’s prior consent…
•
…As soon as a situation arises where the director has, or can have, a direct or indirect interest that
conflicts, or possibly may conflict, with the interests of Company A, disclosure should be made…concerns
which arise about a conflict of interest when a final decision is made at Board level also apply at… earlier
stage[s]…”
The Tribunal also found that Ms Burns’ evidence was “unsatisfactory in a number of respects”, and took into
account that she had omitted relevant material from her CV and her CF2 application forms.
Andrew Bartlett QC, Judge of the Upper Tribunal, stated, at paragraph 121:
“For us the critical point is Ms Burns’ disregard of the standards to be expected of a non-exec. It is a
sensitive function. Non-execs often have wide-ranging business interests. A non-exec position requires
rigorous adherence to the proper standards concerning avoidance of conflicts and the making of
disclosures. Her failure in this respect was compounded by her willingness, with a view to personal gain, to
use materially incomplete CVs and to sign false declarations on her CF2 application forms. Our conclusion
is that she is not fit and proper for the CF2 function”.
The decision is here.
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This Bulletin is prepared by the Financial Regulation Group of Slaughter and May in London. The Group comprises a
team of lawyers with experience and expertise across all sectors in which financial institutions operate.
We advise on regulatory issues affecting, among others, banks, investment firms, insurance and reinsurance
companies, brokers, asset managers and funds, non-bank lenders, exchanges and clearing systems. In addition, our
leading financial regulatory investigations practice is regularly instructed by financial institutions requiring specialist
knowledge of financial services regulation together with experience in high profile and complex investigations and
contentious regulatory matters.
Most of the projects that we are involved in have an extensive international or cross-border element. We work
in seamless integrated teams with leading local counsel who have some of the most highly regarded financial
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regulators.
Our Financial Regulation Group also produces occasional briefing papers and other client publications. The five
most recent issues of this Bulletin and our most recent briefing papers and client publications appear on the
Slaughter and May website here.
The Group’s recent work includes advising:
•
a number of international banking groups on their recovery and resolution plans;
•
Standard Life plc on the proposed acquisition by its global investment management business of Ignis Asset
Management Limited;
•
Deutsche Bank on an EC investigation and generally on investigations relating to LIBOR;
•
Banco Santander on an agreement with leading global private equity firms to boost the global growth of
Santander Asset Management;
•
Brit PLC on its initial public offering;
•
Abbey National Treasury Services on the regulatory aspects of the issue of US $2.5 billion Notes;
•
on the establishment of a number of new banks in the UK since the financial crisis.
If you would like to find out more about our Financial Regulation Group or require advice on a financial regulation
matter, please contact one of the following or your usual Slaughter and May contact:
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Ben Kingsley Michael Sholem
[email protected]
[email protected]
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