UK: Financial Regulatory Developments (FReD) - May 10, 2013

Last Updated: 15 May 2013


  • Commission updates work programme
  • Treasury updates on AIFMD
  • FCA reminds of need for disclosure updates
  • FCA updates on UCIS distribution
  • FCA consults on interest-only mortgage repayments


Council of the European Union (Council)

Council publishes CRR: The Council has published the version of the Capital Requirements Regulation (CRR) that was approved by the EP and which the Council confirmed it should adopt. (Source: Council Publishes CRR Text)

Contact: Rosali Pretorius or James Brennan

Council publishes agreed MCD: The Council has published the version of the Mortgage Credit Directive (MCD) provisionally agreed between the Council and EP. (Source: Council Publishes Agreed MCD)

Contact: Andrew Barber or Emma Radmore

European Parliament (EP)

IMCO reports on IMD2 and KID: The Internal Market and Consumer Protection Committee (IMCO) has reported to the Economic and Monetary Affairs Committee (ECON) on the proposals for the revised Insurance Mediation Directive (IMD2) and Key Information Document for investment products Regulation (KID). It thinks the IMD2 proposal is a good starting point, and believes four areas are critical – tying and bundling, remuneration rules, geographical scope and the scope of the insurance mediation perimeter. On the KID, it supports the Commission's initiative to ensure that uniform rules applying to all participants in the investment product markets. It also agrees a Regulation is the correct legislative instrument to address the KID. (Source: IMCO Reports on IMD2 and IMCO Reports on KID)

Contact: Emma Radmore or Andrew Barber

EP updates voting dates: EP has changed the proposed sitting dates for the hearing on the UCITS V proposals between late May and early June a few times, with the plenary fluctuating between 10 June and 1 July. It has also delayed the vote on the KID and IMD2 proposals to 17 June. (Source: OEIL File for UCITS V, OEIL File for KID, and OEIL File for IMD2)

Contact: Emma Radmore or Juan Jose Manchado

European Commission (Commission)

Commission updates work programme: The latest version of the Commission's work programme for 2013 highlights proposals for:

  • regulation of production and use of indices as benchmarks, on 11 June;
  • a follow-up to the green paper on card, internet and mobile payments, on 26 June, with a specific report on the Payment Services Directive (PSD) review, also in June;
  • a follow-up to the green paper on shadow banking, in June;
  • amendments to the UCITS Directive, and addressing money market funds (MMF) and longer-term investment funds, in October, preceded by specific proposals for MMF in June and longer-term investment funds in July;
  • improving the Single Resolution Authority framework for failing credit institutions and investment firms, in July;
  • a Directive or Regulation on EU bank structural reform, in the third quarter of 2013;
  • a crisis management and resolution framework for non-bank financial institutions (NBFI), in November; and
  • implementing measures for Solvency 2, in the fourth quarter of 2013.

(Source: Commission Updates Work Programme)

Contact: Emma Radmore or Juan Jose Manchado

Commission publishes banking roadmap: The Commission has published a roadmap summarising its proposals for structural reform of EU banks. The paper looks at the policy objectives of the proposals and the choices available to address them. It outlines the proposals for activities which should be separated, the nature and extent of the separation and appropriate thresholds and exemptions. It also explains why "soft law" instruments are not appropriate to deal with the policy concerns. (Source: Commission Publishes Banking Roadmap)

Contact: Rosali Pretorius or Andrew Barber

Commission publishes NBFI crisis management roadmap: The Commission has published a roadmap looking at proposals for crisis management and resolution for NBFI. It looks at the aim of allowing these institutions to fail but not at the taxpayer's expense, and notes the options under consideration. The Commission recognises different entities face different risks and so it may be appropriate to use sector-specific tools. (Source: Commission Publishes NBFI Crisis Management Roadmap)

Contact: Rosali Pretorius or Andrew Barber



Part of Crime and Courts Act takes effect: The first commencement order for the Crime and Courts Act 2013 brings a number of provisions into force during May and June. During May, provisions enabling the National Crime Agency to be set up will take effect. There is as yet no commencement date for the provisions on deferred prosecution agreements (DPAs).

(Source: Crime and Courts Act Commencement Order No.1)

Contact: Howard Cohen or Emma Radmore

Treasury updates on AIFMD: Treasury has issued a set of FAQs on the transposition of the Alternative Investment Fund Managers Directive (AIFMD). The questions deal with various issues including:

  • arrangements for Alternative Investment Fund Managers (AIFM) passporting in and out of the UK;
  • which activities a firm should be carrying out before 22 July 2013 to benefit from the transitional arrangements Treasury has proposed;
  • how the transitional provision applies to depositaries;
  • application of the transitional period to marketing; and
  • the requirements for a "single AIFM" and "single depositary".

(Source: Treasury Updates on AIFMD)

Contact: Rosali Pretorius or Tom Harkus


Financial Conduct Authority (FCA)

FCA reminds of need for disclosure updates: FCA has reminded firms that they should review their documents and other materials in which they make status disclosures, to ensure they are up to date and not misleading, since the change to the structure of UK regulation. It notes the transitional period it gave firms to make changes applies only so far as FCA was legally able to allow it. But certain disclosures are required by EU legislation, and FCA is not legally able to allow any transitional periods in respect of these. It says it recognises firms may not have been able to make all the changes immediately, but they should plan to do so as soon as possible. (Source: FCA Reminds of Need for Disclosure Updates)

Contact: Emma Radmore or Andrew Barber

FCA updates on UCIS distribution: FCA has not yet submitted proposals for guidance on marketing of unregulated collective investment schemes (UCIS) and close substitutes to its Board for approval. It says there are important issues it still needs to consider and it will aim to resolve them as soon as possible. (Source: FCA Updates on UCIS Distribution)

Contact: Emma Radmore or Andrew Barber

FCA consults on interest-only mortgage repayments: FCA has published a guidance consultation setting out how it expects firms to ensure they treat customers fairly where the customer cannot repay the capital sum on an interest-only mortgage at the end of the term. The guidance includes examples of good and poor practice, and states FCA expects firms to:

  • have a written policy strategy;
  • consider the reasons for offering (or not offering) various options;
  • ensure front-line staff know the firm's policy and how to implement it, and monitor these staff;
  • make sure management information allows the firm to monitor its back-book;
  • communicate regularly and early enough with customers who may be in danger of failing to repay;
  • give customers time to consider maturity options;
  • assess affordability if variations are likely to significantly increase repayments or extend the loan into retirement; and
  • consider the position of "trapped" customers who cannot transfer their mortgages to another provider.

FCA asks for comments by 3 June. (Source: FCA Consults on Interest-Only Mortgage Repayments)

Contact: Andrew Barber or Emma Radmore

FCA publishes transparency responses: FCA has published the responses it received to its consultation on transparency. (Source: FCA Publishes Transparency Responses)

Contact: Emma Radmore or Juan Jose Manchado

Financial Ombudsman Service (FOS)

FOS consults on VJ extension: FOS is consulting on extending the scope of its voluntary jurisdiction (VJ). The territorial scope of the VJ is wider than that of the compulsory jurisdiction (CJ). FOS is seeking to address confusion over scope by including within its VJ all activities which, had they been carried on elsewhere, would have been covered by the CJ or Consumer Credit Jurisdiction. FOS asks for comment by 29 May. (Source: FOS Consults on VJ Extension)

Contact: Andrew Barber or Emma Radmore


British Bankers' Association (BBA)

Industry writes on FTT: Several key industry associations, including the BBA and the International Capital Markets Association (ICMA) have expressed concern over the impact of the Financial Transaction Tax (FTT). BBA has written to Mervyn King explaining how the perceived "low" rate of FTT ignores the cascading effect of the tax where transactions have several legs and no available exemptions. BBA believes the Commission has seriously underestimated the cascading effect of the tax, and has not properly taken into account its effects on market liquidity, the broader economic effect and the interplay with other key regulatory objectives. ICMA also stresses how the FTT would impact the movement of collateral which would create systemic risks and interrupt the flow of money between banks, to governments and to the real economy. (Source: BBA Writes on FTT and ICMA Writes on FTT)

Contact: Rosali Pretorius or James Brennan

Global Financial Markets Association (GFMA)

Industry responds on REMIT: GFMA and other industry bodies have responded to the Office of Gas and Electricity Markets (OFGEM) open letter on the Regulation on Energy Market Integrity and Transparency (REMIT). The letter comments that the registration process under REMIT is still not clear, specifically the fact that registration is not an approval process. It generally supports transparency but notes that commercially sensitive information should be removed from any extracts of registers that are made publicly available. (Source: GFMA Responds on REMIT)

Contact: Rosali Pretorius or Luca Salerno

International Organisation of Securities Commissions (IOSCO)

IOSCO publishes CIS valuation principles: IOSCO has published its final report setting out principles for valuation of collective investment schemes (CIS). The new principles revise and update the 1999 version and also incorporate IOSCO's 2007 principles for the valuation of hedge fund portfolios. There are 11 principles supported by appendices specific to certain types of CIS. (Source: IOSCO Publishes CIS Valuation Principles)

Contact: Rosali Pretorius or Tom Harkus

Lending Standards Board (LSB)

LSB publishes bulletin: LSB's latest bulletin covers the Government and Financial Services Authority (FSA) consultation on the future regulation of consumer credit. LSB supports a single statutory regulator and is pleased that the consultations recognise the value of industry codes. It notes FCA is likely to place less reliance on the work of LSB than the Office of Fair Trading has done, but LSB believes there would be significant benefits in developing a good working relationship with FCA in accordance with the Memorandum of Understanding already in place. It also says independent monitoring is important, and so long as subscribers continue to support the Lending Code it believes it should have a long-term future.

(Source: LSB Publishes Bulletin, LSB Responds to FCA Consumer Credit Consultation and LSB Responds to Government Consumer Credit Consultation)

Contact: Andrew Barber or Howard Cohen


Infoline AIFMD Level 2 Implementation: Rosali Pretorius is leading a workshop at Infoline's conference on implementation of the AIFMD on 22 May.

Compliance Management and Practice: Emma Radmore and Andrew Barber are speaking at the Compliance Register's training course on Compliance Management and Practice on 6 June. This one-day intensive training course is limited to 12 delegates. Dentons clients and contacts can take advantage of a discounted price of £290 + VAT by quoting "Dentons" in a covering email.


Financial Crime

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.

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.

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 contact Emma Radmore or Dominic Sedghi (London), or Michelle Shapiro (New York).

Financial Crime Podcast: Emma Radmore joined Finance IQ to discuss the FSA's Financial Crime Guide and issues associated with cutting financial crime.

Investment Services and Markets Reform

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.

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.

Treasury Publishes Banking Reform Bill: Read our summary of the Bill implementing the Vickers reforms into FSMA.

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.

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.

Rate Setting and Regulation: In Everyone's Interests?: Rosali Pretorius, Madeleine de Remusat and Katharine Harle wrote an article for Financial Regulation International on the background to LIBOR setting and potential regulatory action.

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.

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).

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.

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.

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.

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.

Another Stable Door?: Emma Radmore and Katharine Harle wrote an article for Thomson Reuters Complinet on IOSCO's proposals for complex product distribution.

Enforcement and Litigation

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.

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.

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.

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.

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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