UK: Weekly Financial Services Regulatory Update - Week To 02.11.12

This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FSA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.

We hope that you will find this update useful. If you have any queries about any of the information in this update or financial services regulatory matters generally, please contact one of the individuals listed in the 'Contacts' section of this publication.

If you have any comments on the content or format of the update or if you no longer wish to receive it, or have a colleague who would like to receive it, please email

Consultation papers:

1 November: Personal pensions – feedback to CP12/5 and final rules on disclosures by SIPP operators, and consultation on inflation-adjusted illustrations.

The FSA has published a Consultation Paper on personal pensions (CP12/29). The FSA provides feedback on the responses received to chapter 5 of its March 2012 quarterly consultation (no 32) (CP12/5) and sets out the final disclosure rules for operators of self-invested personal pension schemes (SIPPs). The Handbook amendments have been made by way of the Conduct of Business Sourcebook (Pension Scheme Disclosure) Instrument 2012, which will come into force on 6 April 2013. The FSA originally proposed an implementation date of 31 December 2012. However, it has allowed further time in response to industry concerns.

Comments can be made on the proposals in chapters 3 and 4 until 1 February 2013. The FSA advises that, if adopted, the new illustration requirements would come into force on 6 April 2014, with a transitional period allowing firms to start using the new illustrations from 6 April 2013. The guidance, if adopted, would come into force on 6 April 2013, although firms could use it earlier if they wished.

29 October: Regulatory fees and levies: policy proposals for 2013/14.

The FSA has published a Consultation Paper on regulatory fees and levies for 2013/14 (CP12/28). The FSA is consulting on the substantive changes to its fees methodology that are necessary to adapt the methodology for the PRA and the FCA. The FSA advises that most of the provisions in the existing Fees Manual will be carried forward to the new regulators in their respective Fees Manuals. The FSA also sets out the fees governing principles that it proposes the FCA will for raising fees. It gives notice that a review of the current fees methodology, as adapted by the FCA, will be carried out during 2013/14.

In addition, the FSA is consulting on other proposed changes that are not related to regulatory reform. These include removing the current 30% fees discount for firms in the A.1 fee-block who only accept deposits from wholesale depositors. Drafts of the Fees Legal Cutover Instrument 2013 and the Fees (Miscellaneous Amendments) (No 5) Instrument 2013 are set out in Appendices 1 and 2 to CP12/28.

Comments on the proposals can be made until 7 January 2013.

Discussion papers:

No new developments this week.

Policy statements:

2 November: Large exposures regime – groups of connected clients and connected counterparties.

The FSA has published a Policy Statement in response to the issues arising from the Large Exposure Regime Consultation Paper in January this year (CP12/1). The FSA has amended its rules to the Handbook definition of connected counterparties when applying large exposure limits, new guidance on the treatment of large exposure limits to structured finance vehicles and a change to the Handbook guidance in BIPRU 10.6.33G on the institutional exemption.

The FSA expects the final rule changes to come into immediate effect without use of transitional arrangements. This is because the rule changes are effectively relaxing existing rules. The FSA has stated that it encourages firms to engage with their supervisory relationship managers to discuss reasonable timeframes to full compliance.

1 November: Client assets firm classification, oversight, reporting and the mandate rules.

The FSA has published a Policy Statement on its Client Assets sourcebook (CASS) including the CASS firm classification and operational oversight regime, client money and assets return (CMAR) and mandate rules (PS12/20).

Most of the rules set out in PS12/20 will come into force on 1 January 2013, affecting both regulated firms and their auditors. The technical changes to the CMAR and related guidance notes will come into force on 28 February 2013, so will be visible on all monthly returns starting with the return for the February 2013 reporting period (due 21 March 2013).

1 November: Short selling: amendments to FSA Handbook confirmed.

The FSA has published a Policy Statement (PS12/19) setting out the final amendments to the FSA Handbook to implement the EU Short Selling Regulation. The amendments to the FSA Handbook do not differ significantly from the changes proposed by the FSA in its Consultation Paper CP12/21.

The amendments to the FSA Handbook will come into effect on 1 November 2012.

1 November: Data collection on remuneration practices.

The FSA has published a Policy Statement relating to data collection on remuneration practices (PS12/18). The FSA sets out its responses to the feedback to CP12/18 and explains the decisions it has made about its approach to data collection on remuneration practices, and the reporting requirements for firms. PS12/18 also sets out the final remuneration data reporting rules that the FSA has made. PS12/18 provides information on how the FSA expects firms in scope of one or both of the Remuneration Benchmarking Information Report or the High Earners Report to comply with the requirements. It also explains the process these firms should follow to submit data.

Handbook rules on remuneration reporting come into effect on 1 November 2012. The FSA advises that, at the start of November 2012, it will send an e-mail to firms with instructions on how to submit the data. Relevant firms must send the FSA the first reports electronically by 31 December 2012.

1 November: Product projections and transfer value analysis.

The FSA has published a Policy Statement on product projections and transfer value analysis (PS12/17). The FSA has amended the introduction of a separate Consumer Prices Index assumption (CPI) for pension transfer value analysis (TVA). The FSA has amended its finalised rules to ensure that CPI-linked benefits cannot appear to be more valuable than retail price index-linked (RPI) benefits.

The new CPI assumptions will come into force on 1 January 2013. The new projection rates will come into force on 6 April 2014, but firms will be able to comply with them at any time from 6 April 2013, so they can change their systems and documentation at the same time as making other changes.

Press releases:

No new developments this week.


2 November: Speech by Adair Turner, FSA Executive Chairman at the South African Reserve Bank.

The FSA has published a speech by Adair Turner given at the South African Reserve Bank. Mr Turner set out the fundamental causes of the financial crisis, described the challenges of deleveraging and suggested how emerging economies could avoid the build up of excessive debt and leverage which produced the developed world's 'Great Recession'. Mr Turner's speech follows these themes which he discusses referencing both financial theory and contemporary examples:

  • First, that optimal regulation of banks and shadow banking must reflect a recognition that the private financial system, left to itself, will tend to create excessive debt contracts, and excessive leverage
  • Second, that if we mistakenly allow excessive debt and leverage to develop, and the inevitable bust follows as it did in 2008, the subsequent challenges of deleveraging are extremely difficult, and are likely to require in response innovative and unconventional policies, and innovative integration of different aspects of policy
  • Third, that there are lessons here for emerging economies, which still have degrees of freedom to avoid the build up of excessive debt and leverage which has produced the developed world's Great Recession

Bulletins and newsletters:

No new developments this week.

Final notices:

29 October: FSA bans and fines partner in advisory firm for UCIS failings.

The FSA has published a final notice (dated 2 October) issued to Martin Rigney, former partner of Topps Rogers Financial Management (Topps), for failings relating to the sale of unregulated collective investment schemes (UCIS). Mr Rigney has been fined £117,330 and has also been banned from carrying out any function relating to any regulated activity. The FSA found that, between May 2004 and June 2010, among other matters, Mr Rigney failed to:

  • Implement adequate compliance arrangements to ensure risk management and the suitability of Topps' advice
  • Act with integrity, as he arranged a transaction in a UCIS despite a requirement imposed by the FSA on Topps not to arrange new UCIS business
  • Obtain and record sufficient financial and personal information about his customers to assess the suitability of his recommendations

The FSA published a final notice issued to Topps and a decision notice issued to Mr Rigney relating to these failings in February 2012.

Application refusals:

No new developments this week.

Approved person refusals:

No new developments this week.

Research publications:

No new developments this week.

Consumer research:

No new developments this week.

Other FSA publications:

2 November: New FSA webpage on remuneration data collection and reporting templates.

The FSA has published a new webpage with links to various templates for firms relating to data collection on remuneration practices. Relevant firms must submit the first reports to the FSA electronically by 31 December 2012.

1 November: Updated FSA financial crime guide.

The FSA has published updated versions of Part 1 and Part 2 of its financial crime guide following two consultations in March and June on the anti-bribery and corruption systems and controls, and banks' defences against investment fraud respectively.

Part 1:

Part 2:

1 November: FSA handbook Notice 124.

The FSA has published Handbook Notice 124 setting out changes made to the FSA Handbook under instruments made by the FSA Board on 27 September 2012 and 31 October 2012.

1 November: New FSA webpage on EU Short Selling Regulation with notification and disclosure forms.

The FSA has published a new webpage containing information on the notification and disclosure regime of net short positions under the EU Short Selling Regulation (Regulation 236/2012), together with related notification and disclosure forms. The webpage also provides links to various forms for notifying and disclosure of net short positions.

30 October: FSA announces approach to implementing CRD IV transitional provisions.

The FSA has published a webpage (dated 26 October) on its approach to implementing transitional provisions in the proposed Capital Requirements framework, under CDR IV, relating to: own funds requirements; the grandfathering of capital instruments; and the application of regulatory adjustments to own funds. The FSA has decided to give advance notice of its approach despite political agreement on the finalised text having not yet been reached.

29 October: FSA modification by consent of certain CREDS provisions.

The FSA has published a webpage announcing a modification by consent of CREDS 7.5.2 R of the Credit Unions New sourcebook (CREDS), together with the related direction. The modification allows Northern Ireland credit unions (NICUs), now subject to CREDS requirements, to adopt an alternative method of provisioning net liabilities for a transitional period.

The modification is valid until 31 October 2015, unless withdrawn by the FSA before this date.

NICUs wanting to take advantage of the modification should e-mail the FSA's central waivers team. The FSA will then write to firms to confirm if they have granted the modification. Each modification granted will be published on the FSA's website.



UKLA publications:

No new developments this week.

Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):

No new developments this week.

Financial Ombudsman Service (FOS):

30 October: Treasury Select Committee.

Chief ombudsman and deputy chief ombudsman answered live questions from the Treasury Select Committee on issues arising from the ombudsman's annual review for 2011/12.

London Stock Exchange (LSE):

1 November: LSE hosts African Investment Summit.

The LSE welcomed Dr. Ngozi Okonjo-Iweala, Minister of Finance of Nigeria as the keynote speaker at its annual African Investment Summit. Dr. Okonjo-Iweala celebrated the launch of the Summit by opening London trading. She was joined by senior executives from some of Africa's leading businesses. The event featured the participation of 13 companies from 7 African countries from sectors including financial services, telecommunications, oil & gas, mining, food production and retail.

30 October: JD Wetherspoon celebrates 20 years on London Stock Exchange.

Founder and Chairman, Tim Martin opened trading at the LSE. The company's share price has risen 1,534% since listing in 1992.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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