UK: Weekly Financial Services Regulatory Update - Week To 09.11.12

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.

Consultation papers:

8 November: FSA consults on changes to BIPRU liquidity regime. The FSA has published a consultation paper (CP12/31) setting out proposals to amend BIPRU Transitional Provision 29 (BIPRU TP29) to remove the automatic increase to a 70% simplified buffer requirement, which is due to come into effect on 1 July 2013 and all subsequent scheduled increases. Minor changes to the liquidity rules and guidance in BIPRU 12 and SUP 16 are also proposed. The proposals specifically include:

  • Amendments to the BIPRU 12.7 liquid assets buffer 8 eligibility restrictions
  • Amendments to correct three drafting errors in the SUP 16 10 annex 25 reporting guidance

Comments can be made on the proposals in CP12/31 until 8 December 2012.

6 November: FSA consults on complaints scheme for the new regulatory structure. The FSA has published a consultation paper on the proposed scheme for complaints against the FCA, the PRA and the Bank of England. CP12/30 proposes that the scheme will only apply to complaints made about the way the regulators carry out their functions under the Financial Services Bill (FS Bill) and transitional arrangements will apply to: complaints already underway at legal cutover (that is, the date that the new regulatory structure becomes fully established, expected on 1 April 2013); and, complaints about the FSA received after implementation of the FS Bill.

Comments on the proposals can be submitted to the FSA until 6 February 2013.

Discussion papers:

No new developments this week.

Policy statements:

No new developments this week.

Press releases:

No new developments this week.


7 November: The FCA and mortgage regulation - time to be different. The FSA has published a speech by Martin Wheatley at the CML Conference, 'Time to be different'. He covers three main themes:

  • The mortgage market – how the market is changing and how it can move to a more sustainable future
  • The FSA's regulation, and how it will change as it moves into the Financial Conduct Authority
  • How the regulators can work with the financial services industry to make sure that both the mortgage market, and the regulation that supports it, work well

6 November: The challenges in assessing capital requirements for banks. The FSA has published a speech by Andrew Bailey, MD of the PRU at the Bank of America Merrill Lynch Conference. The speech focuses on the challenges facing banks in respect of assessing their required capital and the way in which supervisors assess that capital. He calls for a simplification of the regulatory process. Mr Bailey sets out his preference to: "start with a risk-based approach to assessing capital needs and then back that up with other risk-based approaches and a simple non-risk based approach, like a leverage ratio". He discusses previous approaches to banking regulation and weighs up their various merits and also highlights the lessons to learn from.

Bulletins and newsletters:

No new developments this week.

Final notices:

9 November: Final Notice – Malcolm Green. The FSA has published a Final Notice against Malcolm Green prohibiting him from carrying out any regulated activities. The FSA has decided that Mr Green is no longer a fit and proper person as he has been convicted of 20 counts of obtaining a money transfer by deception, 19 counts of fraud by abuse of position and 3 counts of false accounting, for which he was sentenced on 24 February 2012 to 5 years and 6 months' imprisonment.

8 November: Final Notice - The Pentecostal Credit Union Limited. The FSA has published a public censure against The Pentecostal Credit Union Limited (TPCU). The TPCU breached Principle 1 of the FSA's Principles for Businesses (integrity) in that it issued £1.2m of loans, purportedly to individuals, but where the money was in fact advanced to a corporate entity and in doing so put its members' assets at risk. The FSA has also issued a Final Notice against Reverend Carmel Jones, a director at TPCU who was largely responsible for TPCU's failings.

8 November: Final Notice - Reverend Carmel Jones. The FSA has published a statement of misconduct to Reverend Jones prohibiting him from carrying on any regulated activities. The FSA has stated that the circumstances of Reverend Jones' conduct would ordinarily attract a financial penalty of £60,000 but that such a penalty would cause Reverend Jones significant financial hardship and as such, the FSA has decided to publish a statement of his misconduct. Reverend Jones permitted The Pentecostal Credit Union Limited, of which he was a director, to make a series of loans purported to be to individuals but which were in fact to a corporate entity.

6 November: Final Notice - Ryan Robert Burnside. The FSA has issued a Final Notice against Ryan Robert Burnside, prohibiting him from performing any function in relation to any regulated activity. The FSA concluded that Mr Burnside was not a fit and proper person to perform regulated functions due to a lack of honesty and integrity. Specifically, Mr Burnside was convicted of one count of fraud for which he was sentenced to two years and four months' imprisonment in January 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:

9 November: FSA requires asset management CEOs to attest to their firm's compliance with FSA conflicts of interest rules. The FSA has published a Dear CEO Letter in the form of a paper on conflicts of interest between asset managers and their customers. The paper sets out the FSA's findings from its thematic review of asset managers' firms conducted between June 2011 and February 2012. The paper summarises the FSA's key findings discussing how firms can:

  • Identify and control conflicts of interest
  • Ensure customers have equal access to all suitable investment opportunities
  • Allocate the cost of errors between themselves and customers
  • Manage the purchase of research and trade execution services
  • Manage gifts and entertainment
  • Manage employees' personal dealings

The FSA has stated that, due to the seriousness of some of the issues identified by the review, in order to ensure compliance with its conflict of interest rules it expects each firm's CEO to complete and return an attestation to the effect that the board has considered the FSA's paper and has resolved that the firm's arrangements are sufficient to ensure that the firm manages conflicts of interest effectively and in compliance with FSA rules. This attestation is attached to the paper as an appendix and must be returned to the FSA by 28 February 2013.

8 November: FSA Factsheet on short selling. The FSA has published a factsheet on notifications and disclosures required under the EU Short Selling Regulation. The factsheet summarises:

  • The procedure for notifying the FSA of a firm's intention to rely on a market maker or authorised primary dealer exemption under the Regulation
  • The procedure for making a notification or disclosure required under the Regulation
  • Thresholds for notifying or disclosing net short positions in shares

7 November: Updated FSA self-assessment template for Solvency II IMAP submissions. The FSA has published an updated webpage and self assessment template (SAT) to assist firms with their submissions for internal model approval under the Solvency II Directive. The FSA's review work will be organised into 15 IMAP review categories, including scope, use test, and validation. In order to obtain internal model approval, firms will need to meet all relevant internal model requirements specified in the Directive and, when finalised, the implementing measures. The webpage states that the 15 IMAP review categories were developed for administrative purposes within the FSA and they have been included in the updated version of the SAT at firms' requests.

5 November: Draft Memorandum of Understanding between FCA and OFT. The FSA has published draft principles of co-operation between the FCA and the OFT on competition issues. The two organisations will have some overlap in their roles to encourage competition in the financial services markets. The draft principles are designed to:

  • Promote co-operation between the FCA and the OFT when dealing with competition issues and super-complaints
  • Facilitate the effective treatment of competition issues and super-complaints within financial markets, while minimising duplication of activity
  • Improve transparency

No link available.

5 November: Draft MoU between FCA and PRA on with-profit policies. The FSA has published a draft Memorandum of Understanding (MoU) between the FCA and the PRA on with-profit policies. Both organisations are responsible for supervising insurance companies, and the co-ordination between the FSA and the PRA for this level of supervision was set out in a MoU published in January 2012. However, the FSA believes that additional co-ordination is required for with-profits policies because the returns on these policies are not well defined, and are at the discretion of the insurance companies. This MoU sets out how the FCA and PRA will work together to protect policyholders' interests.

5 November: New FSA webpage on process-related aspects of product sales data FAQs. The FSA has published a new webpage setting out FAQs on the process-related aspects of reporting product sales data (PSD) under Chapter 16.11 of the Supervision manual (SUP). The FAQs cover general process issues, input and transfer method and transfer acceptance, validation and error handling.

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):

No new developments this week.

London Stock Exchange (LSE):

No new developments this week.

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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