UK: Financial Regulatory Developments (FReD) - 22 August 2013

Last Updated: 28 August 2013

UK Government and Parliament

HM Treasury (Treasury)

Treasury updates licence applications: Treasury has published an updated form for firms wishing to apply for licences under the asset-freezing provisions in non-terrorism-related financial sanctions legislation. Special forms also apply to applications relating to Iran and Libya. (Source: Treasury Updates Licence Applications)

Office of the Complaints Commissioner (OCC)

OCC decides on pensions compensation guidance: The OCC has published a decision sent to a complainant who had lost money as a result of being incorrectly advised to transfer a pension. The complainant raised a complaint about the compensation guidelines of the then Personal Investment Authority (PIA) and the way in which FCA had treated this complaint. The OCC held that, although in the event the compensation was clearly insufficient to put the complainant in the same position as would have been the case had the transfer not happened, this was not the fault of the regulator. The PIA had consulted on the basis on which redress should be made. FCA had also advised the complainant that the law would not allow it to consider the complaint further, and the OCC agreed with this too. The fault was solely that of the financial adviser. (Source: OCC Decides on Pensions Compensation Guidance)

Serious Fraud Office (SFO)

SFO brings Bribery Act charges: SFO has charged four men with conspiracy to commit fraud by false representation and conspiracy to furnish false information under the Criminal Law Act 1977, in connection with its investigation into the promotion and selling of "bio fuel" investment products to UK investors. It has also charged three of the men with bribery and accepting bribes under the Bribery Act 2010. (Source: SFO Brings Bribery Act Charges)

UK Financial Services and Markets Regulators

Financial Conduct Authority (FCA)

FCA updates on AIFMD passporting: FCA has updated its webpages on the Alternative Investment Fund Managers Directive (AIFMD) in respect of passporting. It confirms the passport is available to UK firms wishing to use it throughout the EU, but cannot be used to passport into Norway, Iceland and Liechtenstein until the AIFMD has been brought within the scope of the European Economic Area (EEA) agreement. Similarly, the EEA agreement also needs amending to bring within scope the Regulations on European Venture Capital and Social Entrepreneurship Funds (EUVeCas and EUSEFs). (Source: FCA Updates on AIFMD Passporting)

FCA publishes consumer credit scope guidance: FCA has set out on a new webpage the consumer credit and related activities that will be transferring to FCA's regulatory remit in April 2014. It warns firms of the differences between activities that currently require a licence under the Consumer Credit Act and those which will become regulated activities under the Financial Services and Markets Act. (Source: FCA Publishes Consumer Credit Scope Guidance)

FCA figures show more advisers: FCA has published figures showing that, contrary to fears industry raised, the number of advisers in the financial marketplace has increased since implementation of the Retail Distribution Review (RDR). The latest figures show there are over 32,000 retail investment advisers in the UK. Clive Adamson said this shows advisers have many options open to them after the changes the RDR made to standards of professionalism and independence. (Source: FCA Figures Show More Advisers)

FCA fines and bans for promotion of UCIS to ineligible investors: FCA has banned a director (Jeffrey Bennett) and a partner and compliance officer (John Leslie) at two different independent financial advisory firms (Burlington and Leslie & Nuding) and fined them £28,000 each for failing to identify that their firms were promoting unregulated collective investment schemes (UCIS) to ineligible retail investors. Mr. Bennett, who was responsible for management and compliance with regulations and for Burlington's appointed representative (AR) agreement, allowed another director (Director A) in Burlington to involve the firm in promoting and arranging investments in three UCIS. This was in breach of Burlington's AR agreement. Director A devised a process for selling the UCIS whereby Burlington appeared not to carry out any regulated activity, in order to circumvent statutory restrictions. Mr. Bennett failed to question the process and Burlington's role, which went beyond a purely administrative function. Mr. Leslie, whose firm took responsibility for certifying interested investors' eligibility and for sending them the prospectuses, failed to check that prospectuses were issued only to investors who had certified themselves as eligible. (Source: FCA Bans and Fines Two for Failing to Monitor Promotion of UCIS)

FCA revises CREST regulated activity guidance: FCA has published revised guidance setting out the circumstances in which brokerage and portfolio management firms that hold clients' investments through a nominee company in the same group can use the group exclusion for the CREST regulated activity in article 45 of the Regulated Activities Order. (Source: CREST Regulated Activity Revised Guidance)

Financial Services Compensation Scheme (FSCS)

FSCS publishes newsletter: The latest edition of FSCS's Outlook newsletter looks at key cases within FSCS's current workload and focuses on bank and building society defaults. It also looks at how it is likely to calculate its 36 month costs and raise levies under new powers. It is currently considering responses to its July consultation on levying firms on an alternative basis, based on the greater of one-third of the next 36 months' expected compensation costs or costs expected (or incurred) over the next 12 months from the date of the levy. (Source: FSCS Publishes Newsletter)

Other Regulators/Authorities/Industry Associations

Bank for International Settlements (BIS)/Basel Committee on Banking Supervision (Basel Committee)

Joint Forum consults on longevity and point of sale disclosure: The Joint Forum of the Basel Committee, the International Organisation of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS) has published two consultation papers looking at:

  • Longevity risk transfer markets: market structure, growth drivers and impediments, and potential risks. This report warns of the increasing awareness that as people live longer, insurers and pension funds are paying out on pensions and annuities longer than anticipated. The financial exposure is significant and pension funds are increasingly looking for ways to hedge or transfer this exposure. The paper is intended to help in setting appropriate policies and to help ensure effective supervision of related activities and risk.
  • Point of Sale (POS) disclosure in the insurance, banking and securities sectors. This paper identifies and assesses differences and gaps in regulatory approaches to POS disclosure for investment and savings products across the insurance, banking and securities sectors. It considers whether there should be greater harmonisation of rules and makes several recommendations to supervisors.

Consultation on both papers closes on 18 October. (Source: Joint Forum Consults on Longevity and Point of Sale Disclosure)

Joint Forum publishes mortgage insurance report: The Joint Forum has published its final report on recommendations for reducing mortgage insurers' vulnerability during tail events. They include aligning originators' and insurers' interests, preventing cross-sectoral arbitrage by requiring insurers to build buffers, and applying the Financial Stability Board's mortgage underwriting principles to insurers too. (Source: Mortgage Insurance: Market Structure, Underwriting Cycle and Policy Implications Issued by The Joint Forum)

British Bankers' Association (BBA)

BBA responds on bonus cap: BBA has responded to the European Banking Authority's (EBA) consultation on draft technical standards on the definition of material risk takers for remuneration purposes. It says that the provision would affect staff earning in excess of €500,000 but who are not material risk takers. It also says the EBA proposals would exacerbate the move to fixed pay, incrementing fixed costs of institutions, and reducing their flexibility to reduce variable pay and reinforce capital in a downturn. (Source: BBA Response on Bonus Cap)

Financial Ombudsman Service (FOS)

FOS publishes ombudsman news: FOS has published a new issue of its bulletin "ombudsman news". This issue focuses on cases brought by older people. (Source: Ombudsman News Issue No. 111)

Lending Standards Board (LSB)

LSB publishes annual report: LSB has published its annual report for 2012/2013. During the year, LSB carried out reviews into lending to micro-enterprises, card fraud and treatment of customers in financial difficulties. Regarding the latter, it found failings at some of the debt collection agencies acting on behalf of subscribers to the Lending Code. Recent changes to the Code require that subscribers undertake routine due diligence and monitoring of firms to whom they sell or outsource debt, to ensure customers are dealt with in a manner consistent with the Code. LSB says that it has already commenced wider follow-up work on this issue. It also plans work on lending to students, provision of data to credit reference agencies and subscribers' analysis of complaints data, as well as policy work on overdrafts. (Source: LSB Annual Report 2012/2013)

Payments Council

Payments Council announces Current Account Switch Service date: The Payments Council has announced the official launch date of the Current Account Switch Service. On 16 September, 33 banks and building societies will deliver the new service, designed to make current account switching easier and faster. (Source: Payments Council Announces Current Account Switch Service Date)

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 AgreementsEmma 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 CrimeEmma 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 contact 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 KoppeleMarc Teitelbaum and Jerome Walker have written an update on the delay in implementing certain elements of FATCA.

Take aim for AIFMD implementationEmma 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 complaintsRichard 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 ProceedingsKatharine 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)

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