Headlines
ESMA proposes delay to EMIR reporting
FCA fines again for AML breaches
FCA fines and bans for market abuse
Save the dates!
European Union and International
Financial Stability Board (FSB)
FSB consults on NBFI resolution: FSB is consulting on applying its Key Attributes of Effective Resolution Regimes for Financial Institutions (Key Attributes) to non-bank financial institutions (NBFI). It proposes incorporating three annexes into the Key Attributes, which would set out a methodology for applying the Key Attributes appropriately to:
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resolution of financial market infrastructures (FMI) and systemically important FMI participants;
- resolution of insurers; and
- client asset protection in resolution.
Consultation closes on 15 October. (Source: FSB Consults on NBFI Resolution)
Contact: Rosali Pretorius or Andrew Barber
European Commission (Commission)
Commission makes Prospectus Disclosure Regulation: The Commission made a Delegated Regulation on 30 April, amending requirements under the Prospectus Regulation relating to disclosure and convertible and exchangeable debt securities. The Delegated Regulation was published in the Official Journal on 8 August and takes effect 20 days later. (Source: Prospectus Amending Regulation)
Contact: David Cohen or Laura Cansdale
European Securities and Markets Authority (ESMA)
ESMA proposes delay to EMIR reporting: ESMA has written to the Commission proposing an amendment to the Commission Implementing Technical Standard on reporting on the format and frequency of reporting to trade repositories under the European Market Infrastructure Regulation (EMIR). ESMA wants to delay the reporting of exchange traded derivatives by one year to January 2015 so ESMA can develop necessary guidelines and for the guidelines to be implemented. The Commission has three months to make a decision. (Source: ESMA Proposes Delay to EMIR Reporting)
Contact: Rosali Pretorius or James Brennan
ESMA publishes AIFMD key concepts translations: ESMA has published the official translations of its document on key concepts in the Alternative Investment Fund Managers Directive (AIFMD). It finalised the English version in May (see FReD 31 May). (Source: ESMA Publishes AIFMD Key Concepts Translations)
Contact: Rosali Pretorius or Kam Dhillon
UK Government and Parliament
Competition Commission
Competition Commission issues payday lending statement: The Competition Commission has published an issues statement relating to its investigation into payday lending. It notes that the focus of its market investigation is how competition works in the payday lending market and discusses whether there are features of payday loans that prevent, restrict or distort competition in the UK. The investigation is not about compliance with regulatory standards or affordability issues unless these affect competition. The issues statement explains that the Competition Commission will consider the market, its regulation and the providers of the product. It has identified and will analyse potential areas of consumer harm, and whether any prevention, restriction or distortion of competition has an adverse effect on competition. It asks for comments by 20 September. (Source: Payday Lending Issues Statement)
Contact: Andrew Barber or Howard Cohen
HM Revenue and Customs (HMRC)
HMRC updates FATCA pages: HMRC has updated its website page on the UK Foreign Account Tax Compliance Act (FATCA) to take account of the most recent UK regulations. The International Tax Compliance (United States of America) Regulations 2013 come into force on 1 September and set out obligations of reporting financial institutions in relation to US reportable accounts under FATCA. HMRC has produced guidance notes for institutions to help them work out how to comply with FATCA's requirements. (Source: HMRC Updates FATCA Pages)
Contact: Rosali Pretorius or Josie Day
HM Treasury (Treasury)
Treasury publishes sanctions FAQs: Treasury has published a guide to the application of the financial sanctions regime. The guide summarises current sanctions laws and where to find them, explains who they apply to and how, and gives details of the licensing regime. It also lists sources of guidance, and recommends all businesses read FCA's Financial Crime Guide. (Source: Treasury Publishes Sanctions FAQs)
Contact: Emma Radmore or Andrew Barber
Treasury updates licences: Treasury has published updates of general licences in relation to insurance under the terrorist finance and Al-Qaida sanctions. (Source: Treasury Updates Licences)
Contact: Emma Radmore or Andrew Barber
Information Commissioner's Office (ICO)
ICO publishes SAR guidance: ICO has published guidance for companies receiving subject access requests (SARs). The guidance explains the relevant parts of data protection legislation and how to handle requests correctly. One sixth of complaints ICO receives about SARs relate to banks, credit reference agencies and other money lenders. (Source: ICO Publishes SAR Guidance)
Contact: Andrew Barber or Josie Day
UK Financial Services and Markets Regulators
Financial Conduct Authority (FCA)
FCA fines again for AML breaches: FCA has fined Guaranty Trust Bank (UK) Limited £525,000 for failings in anti-money laundering (AML) systems and controls. It visited the bank, a UK-authorised subsidiary of a Nigerian bank, as part of a thematic review. It found a number of failings which had occurred over the bank's first two years of operations. 70% of the bank's retail customers were high risk, largely because of where they lived. FCA's review found:
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no evidence that the money laundering risk assessment the bank's procedures required was carried out in the vast majority of files it reviewed;
- most files on Politically Exposed Person (PEP) clients were not signed off at an appropriately senior level;
- nearly half the files did not show, adequately or at all, the purpose and nature of the customer's relationship with the bank;
- the bank did not follow up information it received on source of customer funds;
- the bank did not record the results of sanction screening results unless there was a match, and many files were opened some time before the screening took place; and
- a failure to monitor relationships enough or adequately.
The fine would have been larger, but the bank cooperated with the investigation and benefited from a 30% discount. (Source: FCA Fines Again for AML Breaches)
Contact: Emma Radmore or Andrew Barber
FCA fines and bans for market abuse: FCA has published two final notices and one decision relating to market abuse carried out by a Dubai-based investor, on whom the Financial Services Authority (FSA) imposed a record fine for an individual in 2011. The investor, Rameshkumar Goekna, was introduced by Tariq Carrimjee of Somerset Asset Management to Vandana Parikh, a broker at Schweder Miller & Co, to execute trades in Gazprom and Reliance securities in LSE closing auctions. Goekna asked Parikh various questions, in response to which she provided information that would enable Goekna to manipulate the markets. She did not challenge the reasons for Goekna's questions, and speculated he held an underlying product but did not know this, nor discuss the matter with David Davis, her compliance officer. FCA found:
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Parikh did not act with due skill, care and diligence, in failing to recognise the risks the information she gave to Goekna posed and in not discussing the issue with her compliance officer. It fined her £45,673;
- Parikh made Davis aware of her concerns after a further trade. Davis monitored the account, but did not act on warning signals nor report the trade as suspicious after the event. FCA found he also did not act with due skill, care and diligence. It fined him £70,258, withdrew his significant influence functions and prohibited him from holding those functions in future; and
- Carrimjee, in FCA's view, recklessly assisted Goekna to manipulate the markets, including making the introduction to Parikh when he knew or suspected Goekna's intentions. FCA decided to fine Carrimjee £89,004, withdraw all his individual approvals and ban him. Carrimjee is appealing the decision to the Tribunal.
(Source: FCA Fines and Bans for Market Abuse and FCA Decides to Fine and Ban for Market
Abuse)
Contact: Rosali Pretorius orHoward Cohen
FCA updates EMIR pages: FCA has updated its website pages relating to EMIR in respect of notifications and exemptions. (Source: FCA Updates EMIR Pages)
Contact: Rosali Pretorius or James Brennan
FCA publishes NPPR form guidance: FCA has published guidance to help applicants complete its forms for the National Private Placement Regime (NPPR) under AIFMD. (Source: FCA Publishes NPPR Form Guidance)
Contact: Rosali Pretorius or Kam Dhillon
Other Regulators/Authorities/Industry Associations
Bank for International Settlements (BIS)/Basel Committee on Banking Supervision (Basel Committee)
BIS and IOSCO finalise TR data report: The BIS Committee on Payment and Settlement Systems (CPSS) and the International Organisation of Securities Commissions (IOSCO) have published the final version of their report on authorities' access to trade repository (TR) data. The report notes it is essential for several authorities and financial institutions to have access to certain data held by TRs while complying with confidentiality and data protection laws. The report gives guidance to TRs and authorities on the principles that should guide authorities' access to data held in TRs for typical and non-typical data requests. It also suggests approaches for dealing with procedural and legal constraints to data access and confidentiality concerns. (Source: BIS and IOSCO Finalise TR Data Report)
Contact: Josie Day or James Brennan
BIS and IOSCO consult on FMI recovery planning: CPSS and IOSCO are consulting on proposed guidance for FMIs such as central counterparties (CCPs), payments systems, securities settlement systems, central securities depositors and TRs and their supervisors on how FMIs might develop recovery plans and how supervisors might deal with them. The report follows consultation in 2012 and supplements CPSS and IOSCO's Principles for FMIs. The organisations have also published a report on how members are implementing the Principles for FMIs. Some countries, including the UK, have implemented all the standards. Consultation closes on 11 October 2013. (Source: BIS and IOSCO Consult on FMI Recovery Planning and BIS and IOSCO Report on Principles for FMIs)
Contact: Andrew Barber or Luca Salerno
Council of Mortgage Lenders (CML)
CML responds on MMR regulatory reporting: CML has responded to FCA's consultation on the regulatory reporting requirements arising from the Mortgage Market Review (MMR). It notes how the number of data items contained in a product sales data report could increase, under current proposals, from 31 to 130, and says FCA has underestimated the costs of this increased reporting burden. For that reason, CML says it is important that firms understand better the justification for increased data collection so that they can deliver it efficiently. For example, CML asks for clarification that affordability data will not be used to reproduce individual underwriting decisions, as this could affect firms' flexibility to determine their own approach within the overall responsible lending framework. Consumers also need reassurance that their data will be collected and used for their benefit. (Source: CML Response to CP13/02)
Contact: Andrew Barber or Emma Radmore
Financial Markets Law Committee (FMLC)
FMLC responds to EBA on risk retention RTS: FMLC has responded to the European Banking Authority's (EBA) consultation on draft Regulatory Technical Standards (RTS) on retention requirements when transferring credit risk. It notes that the draft RTS do not reflect the legislative text (the Capital Requirements Regulation (CRR)) on which they are based. When drafting the RTS, EBA would have taken into account unpublished comments made during the negotiation of the CRR, and relied on the fact that the CRR is a Regulation, rather than a Directive. FMLC warns that it is against the jurisprudence of the European Court of Justice to take into account unpublished material when interpreting and developing European legislation. Neither does the fact that a provision is in a Regulation rather than a Directive affect the way it can be interpreted. (Source: FMLC Response to EBA Risk Retention RTS Consultation)
Contact: Rosali Pretorius or Andrew Barber
FMLC raises concerns over FTT: FMLC has written to the heads of the EU DG Internal Market and Services and DG Taxation and Customs Union to comment on the legal uncertainties arising from the proposals for a Financial Transactions Tax (FTT) Directive. In its letter to the latter, it raises issues around the types of transactions affected, the persons liable, enforcement and the application of the anti-avoidance provisions. The letter to the former includes comments on the impact of the FTT on pre-existing contracts which do not contain clauses suited to allocate the risks associated with the FTT. (Source: Letter to DG Internal Market and Services and Letter to DG Taxation and Customs Union)
Contact: Rosali Pretorius or Jeremy Cape
International Swaps and Derivatives Association (ISDA)
ISDA proposes "end of the waterfall" loss allocation rules for CCPs: ISDA has published a paper proposing loss allocation rules when a CCP's safeguards for absorbing losses arising from a clearing member default have been exhausted. It advocates Variation Margin Gains Haircutting, whereby any remaining losses would be distributed by recourse to unpaid gains, accumulated since default, at the beneficial owner level. If this were insufficient to cover losses, and clearing participants did not agree to participate in a voluntary loss-absorption process, the option would be full tear-up of all of the CCP's contracts in the product line that has exhausted its waterfall and variation margin gains. (Source: CCP Loss Allocation at the End of the Waterfall)
Contact: Rosali Pretorius or James Brennan
Forthcoming Events
Save the dates!: Our series of regular
breakfast seminars continues in September. On 11 September Rosali
Pretorius and Josie Day will speak at our Funds Breakfast Seminar
on "Funds Marketing in the UK: the new landscape". On 24
September, our FReD Live Breakfast Seminar will be presented by
Rosali and Adrian Berendt, Regulatory Consultant, formerly of
LCH.Clearnet, and the topic will be "To clear or not to
clear?: Implications of EMIR and CRR". FReD readers will
receive invitations and registration details shortly.
Recent Publications
Financial Crime
Deferred Prosecution Agreements: Emma Radmore has written an article for Financial Regulation International on the introduction of Deferred Prosecution Agreements in the UK. (June 2013)
Anti-Bribery and Corruption Laws in Key Jurisdictions: Lawyers from Dentons offices in six jurisdictions prepared a table comparing key provisions of anti-corruption laws for Thomson Reuters Compliance Complete. (May 2013)
Preventing Financial Crime: Emma Radmore has written an article for Financial Regulation International on recent developments in financial crime prevention. (April 2013)
The Evolving Financial Sanctions Landscape – UK and US Perspectives: Emma Radmore, Thomas Laryea, Michael Zolandz and Peter Feldman have written an article for Financial Regulation International on financial sanctions under the UK and US regimes. (November 2012)
The Bribery Act – Has It Made A Difference?: We have updated our previous overview of the Bribery Act to take into account the Serious Fraud Office's latest guidance. (October 2012)
Dealing with Anti-Corruption Laws – the Bribery Act and FCPA in Context: This article summarises the effects of the Bribery Act and US Foreign Corrupt Practices Act. For further information, please contac Emma Radmore or Dominic Sedghi (London), or Michelle Shapiro (New York). (May 2012)
Investment Services and Markets Reform
US Government announces six-month delay in FATCA rules: John Harrington, Jeffrey Koppele, Marc Teitelbaum and Jerome Walker have written an update on the delay in implementing certain elements of FATCA.
Take aim for AIFMD implementation: Emma Radmore and Kam Dhillon have written an article for Compliance Monitor on the final steps towards implementation of the AIFMD.
Taking the Credit - the Transfer of Consumer Credit Regulation: Andrew Barber, Emma Radmore and Juan Jose Manchado have written an article for Compliance Monitor on the transfer of consumer credit regulation to FCA. (April 2013)
Last Lap to Legal Cut-Over: Emma Radmore has written an article for Compliance Monitor on FSA's first two consultations on preparing for the new regulatory regime. (January 2013)
A New Handbook for a New Era?: Emma Radmore has written an article for Thomson Reuters Compliance Complete on FSA's proposals to update the General Provisions Sourcebook for legal cut-over. (October 2012)
Treasury Publishes Banking Reform Bill: Read our summary of the Bill implementing the Vickers reforms into FSMA. (October 2012)
RDR: How Long Can it Last?: Emma Radmore and Andrew Barber have written an article for Compliance Monitor on the future of the Retail Distribution Review. (October 2012)
What's next for LIBOR? Summary of the Wheatley Review Recommendations: We have written a summary of the Wheatley 10-point plan for the reform of the LIBOR process. (September 2012)
Rate Setting and Regulation: In Everyone's Interests?: Rosali Pretorius and Katharine Harle wrote an article for Financial Regulation International on the background to LIBOR setting and potential regulatory action. (August 2012)
Money through your mobile – regulation of m-payments: Andrew Barber and Emma Radmore have written an article for Compliance Monitor on the regulatory aspects of mobile payments. (May 2012)
MiFID 2 – Prescription and Change: Emma Radmore wrote an article for Compliance Monitor on the breadth of the proposals to amend the Markets in Financial Instruments Directive (MiFID 2). (January 2012)
Prudential Regulation
UK Treasury Publishes Banking Structure Reform Plans: This article summarises the June 2012 White Paper on implementation of structural change to UK banking (as covered in FReD 15 June). For more information, please contact Rosali Pretorius, Emma Radmore or Andrew Barber. (June 2012)
EU Living Wills Plans – the Key Proposals: This article is the latest in our suite of articles about Living Wills and Recovery and Resolution Plans looks at the European Commission's proposals. For further information, please contact Rosali Pretorius or Andrew Barber. (June 2012)
Living Wills update: We have produced an update on FSA's current plans for Recovery and Resolution Plans. For further information, please contact Rosali Pretorius or Andrew Barber. (May 2012)
Asset management
The Alternative Investment Fund Managers Directive – Theory Becomes Reality: Rosali Pretorius and Emma Radmore wrote an article on implementation of the AIFMD for the Global Asset Management & Servicing Review 2013/14 published by Euromoney Yearbooks.
Product Regulation
More Protection for Retail Markets – the EU's PRIPs Package: We have written a detailed summary of the PRIPS, IMD2 and UCITS V proposals. (July 2012)
Another Stable Door?: Emma Radmore and Katharine Harle wrote an article for Thomson Reuters Complinet on IOSCO's proposals for complex product distribution. (April 2012)
Enforcement and Litigation
It's all in the detail: a cautionary tale for handling complaints: Richard Caird and Felicity Ewing have written an article on the FCA's fine on Policy Administration Services.
Having Your Cake and Eating It: FOS Award is no Bar to Issuing Proceedings: Katharine Harle has written an article for Compliance Monitor on the High Court award in Clark and another v. In Focus Asset Management & Tax Solutions Ltd. (January 2013)
The Not So Remote Risks of Recommendations: Richard Caird, Sam Coulthard and Kattalin Truman have written an article on the case of Rubenstein v. HSBC Bank plc. (September 2012)
The Long Arm of FSA: Overseas Firms and Senior Management Beware: Emma Radmore and Katharine Harle have written an article for Compliance Monitor on the lessons from recent FSA enforcement cases involving overseas firms and their approved persons. (August 2012)
More Confusion on Client Money: Rosali Pretorius and Josie Day have written an article on the Supreme Court decision in the Lehman client money case. (March 2012)
