UK: Financial Regulatory Developments (FReD) - 29 November 2013

Last Updated: 2 December 2013

UK Government and Parliament


Government and regulators to examine Co-op: Treasury has announced the Government, PRA and FCA intend to use their powers under the Financial Services Act 2012 to investigate activities at the Co-operative Bank. (Source: Government and Regulators to Examine Co-op)


Parliament to cap payday loans: The Government is introducing a further amendment to the Financial Services (Banking Reform) Bill that will introduce a cap on the overall cost of payday loans. The Bill has continued its Parliamentary process and is still in the Report stage in the House of Lords. (Source: Parliament to Cap Payday Loans and Bill Continues Parliamentary Process)

HM Treasury (Treasury)

Treasury renews terrorist designation: Treasury has renewed a designation under the Terrorist Asset Freezing etc Act 2010. (Source: Treasury Renews Terrorist Designation)

RBS Independent Lending Review publishes report: The Independent Lending Review into RBS's lending to small and medium enterprises (SMEs) has finished. Its final report makes nine recommendations to remove impediments to lending to SMEs and meet stakeholder expectations. (Source: Independent Lending Review Report)

FPC to review use of leverage ratio: Mark Carney, governor of the Bank of England (BoE), has confirmed, in a letter replying to a request by the Chancellor of the Exchequer, that BoE's Financial Policy Committee (FPC) will carry out a review of its powers of direction over the leverage ratio once the Basel Committee, in early 2014, has completed the relevant final global standards. Carney finds that FPC should be able to vary the leverage ratio in line with changes to standards on risk weighting. He also confirmed that the review will assess how the leverage ratio should apply to ring-fenced banks. The Chancellor has also asked that, should the review recommend an earlier or stricter implementation of the leverage ratio, evidence be provided on how this would contribute to financial stability in the UK. (Source: FPC to Conduct Review into Leverage Ratio)

Office of Fair Trading (OFT)

OFT updates on payday lending review: OFT's latest update on the payday compliance review confirms that 19 of the leading 50 payday lenders have now left the market. Three firms had their licences revoked and four surrendered theirs. OFT is investigating another six and is reviewing detailed evidence on a further 15. (Source: OFT Updates on Payday Lending Review)

UK Financial Services and Markets Regulators

Financial Conduct Authority (FCA)

FCA fines for client money breaches: FCA has fined SEI Investments (Europe) Limited £900,200 for breaches of the client money rules over a five-year period. It found numerous failings which indicated the firm had failed to arrange adequate protection for client money, including:

  • failure to perform internal reconciliations;
  • failure to deal promptly or properly with shortfalls or excesses it identified;
  • not submitting accurate client money and assets returns;
  • not training employees adequately; and
  • failing to ensure it kept accurate records and accounts.

FCA was concerned at the breadth of the failings and the length of time they lasted. SEI itself did not identify the problem, despite the high levels of industry awareness at the time of the importance of complying with client money requirements. (Source: FCA Fines for Client Money Breaches)

FCA publishes banking application information: Following publication of a new set of forms for applicants for a banking licence (see FReD 22 November), FCA and PRA have published further information for applicants. (Source: FCA Publishes Banking Application Information)

FCA to carry out comparison website review: FCA has announced it will carry out a thematic review of price comparison websites for motor, home and travel insurance products. The survey will cover 14 websites, and the review will include considering:

  • what consumers want from price comparison websites;
  • how information is presented and whether it is clear;
  • whether there is too much focus on price;
  • whether consumers are at the heart of the firms' business models;
  • conflicts of interest; and
  • use of customer data.

FCA will report next year. (Source: FCA to Carry Out Comparison Website Review)

FCA updates on payday lending: FCA has confirmed the Government plans to introduce a cap on the cost of credit. It commented it also wants to require a mandatory affordability check for each loan, cap rollovers to two and limit the number of times a payday lender can "dip into" bank accounts for payment. (Source: FCA Updates on Payday Lending)

FCA updates on EMIR: FCA has updated its pages on the European Market Infrastructure Regulation (EMIR) to remind firms of new publications, and to stress the need for counterparties to have a legal entity identifier for reporting to trade repositories from 12 February 2014 (Source: FCA Updates on EMIR)

FCA clarifies dealing commission rules: FCA has published a consultation paper that proposes changes to clarify what goods and services an investment manager can acquire bundled in the dealing commission paid to brokers. Its recent thematic review on conflicts of interest between asset managers and their customers found instances of firms using the dealing commission to pay for services that did not meet the criteria for acceptable research, such as corporate access or market data services. When parts of the latter could have qualified as acceptable research, firms did not disaggregate those parts from non-research ones, which should not be paid with the dealing commission.

FCA proposes the following changes to the Handbook:

  • clarifying what constitutes exempt research and introducing a presumption that a good or service is not exempt research, and therefore cannot be paid for as part of the dealing commission;
  • adding corporate access to the list of goods and services that are not exempt; and
  • providing guidance on FCA's expectations where exempt and non-exempt goods or services are purchased together.
  • FCA asks for comments by 25 February 2014. (Source: Consultation on the Use of Dealing Commission Rules CP 13/17)

FCA speaks on retail banking: Clive Adamson spoke on FCA's vision for the future of retail banking. He looked at the new supervisory model and discussed the challenges of:

  • rebuilding customer trust;
  • addressing technological innovations that have the potential to be dangerous (such as the cloud); and
  • distribution strategies to keep up not only with technology but also with customer preferences.

(Source: FCA Speaks on Retail Banking)

FCA updates on broker-operated power trading: FCA has updated on progress on the review that brokers offering trading services in physically settled gas and power forwards are carrying out to establish the appropriate classification of their systems under the Markets in Financial Instruments Directive (MiFID). At the time it announced the review, in September, it said it expected brokers to make the changes necessary to differentiate clearly between their multilateral trading facility (MTF) and non-MTF services, on an appropriate basis, by 16 December 2013. FCA has now decided to give firms until 12 February 2014. (Source: FCA Updates on Broker-Operated Power Trading)

Prudential Regulation Activity (PRA)

PRA warns about insurers' valuation risk: PRA has issued a reminder of the need to comply with requirements on prudent valuation. It has identified insurers where the assessment of valuation uncertainty is not sufficiently robust. This failure is exacerbated by poor governance, inadequate documentation of policies, and poor control over models. (Source: Valuation Risk)

Upper Tribunal (Tribunal)

Tribunal backs FCA on traded endowments: The Tribunal has confirmed FCA's determination that Westwood Independent Financial Planners breached Principle 7 and various Conduct of Business rules in respect of its sales of geared traded endowment policies. It also confirmed FCA's penalty award of £100,000. The firm had tried to argue that FCA's case focused only on gearing, which is not regulated. FCA said, and the Tribunal agreed, that the gearing was an ancillary aspect of business in relation to plans that constituted designated investments. The Tribunal investigated FCA's allegations of rule breach and concluded the firm had not made clear communications to enable customers to understand the product risks. FCA welcomed the decision, noting the firm has now gone out of business. (Source: Tribunal Backs FCA on Traded Endowments and FCA Welcomes Tribunal Decision)

Other Regulators/Authorities/Industry Associations

Finance and Leasing Association (FLA)

FLA publishes good practice guidelines: FLA has published good practice guidelines in respect of customers who get into difficulty paying second charge mortgages. (Source: FLA Publishes Good Practice Guidelines)

Financial Action Task Force (FATF)

CFATF concerned over Guyana and Belize: The Caribbean FATF (CFATF) has called on countries to consider imposing countermeasures on dealings involving Guyana and Belize, following concerns about these jurisdictions' anti-money laundering and prevention of terrorist finance laws. CFATF calls are not officially endorsed by FATF but nevertheless contain important information. (Source: CFATF Concerned Over Guyana and Belize)

International Organisation of Securities Commissions (IOSCO)

IOSCO writes to Commission on CCP recognition: IOSCO's Asia-Pacific Regional Committee has written to the Commission on equivalence assessments for the recognition of non-EU central counterparties (CCPs) under EMIR, noting that:

  • Asia-Pacific jurisdictions have based their regulation of CCPs on the international standards set by the Principles for Financial Market Infrastructures;
  • equivalence assessments should be conducted by reference to outcomes;
  • internationally-consistent solutions should be found to bridge any differences between EU and non-EU CCPs;
  • there is a risk that conditions imposed for recognition may not be relevant for a non-EU CCP. Non-EU CCPs may not operate in the EU markets and may only serve EU institutions in respect of their operations in the CCPs' domestic markets. Conditions that are not relevant to them would have the effect of reducing the service, or increasing its cost, to EU institutions in the Asia-Pacific region; and
  • the Commission should adopt an implementing act to extend the transitional relief from the new capital requirements legislation by a further six months, so that non-EU CCPs continue to qualify as qualifying CCPs while they are still waiting for recognition under EMIR.

(Source: Recognition of Asia-Pacific CCPs under EMIR)

Organisation for Economic Co-operation and Development (OECD)

OECD publishes paper on prudential and structural reform: OECD has published a paper calling for structural separation of banks. It found that business model features are determinant of the riskiness of a bank and that a one-size-fits-all approach to capital rules does not make sense. (Source: Bank Business Models and the Basel System: Complexity and Interconnectedness)

Forthcoming events

FReD Live Consumer Credit: FReD readers should have received their invitations to our breakfast briefing on 3 December. 

A Practical Guide to PRA Regulation for Regulated Firms: Emma Radmore will be speaking at this City & Financial conference on 3 December.

AIFM Directive Implementation conference: Rosali Pretorius will be speaking at this Infoline conference in London in December. Dentons clients and contacts can get a 20% discount by quoting VIP code FKM62678EMSPK when registering. 

Recent Publications

Financial Crime 

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. (updated October 2012)

UK authorities move forward on tougher financial crime prevention: Emma Radmore wrote an article for Financial Regulation International on current consultations on sentencing and deferred prosecution agreements. (August 2013)

Sanctions restrictions do not prevent payment of debtsRichard Caird and Tom Rocher comment on the judgement in DVB Bank SE and others v. Shere Shipping Company Limited and others. (August 2013)

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)

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

Consumer Credit Regulation: Are you ready for the seismic shift?: Please contact Andrew BarberEmma Radmore or Howard Cohen if you have any questions about what you need to do to prepare for the transfer of consumer credit regulation to FCA.

Are you clear on EMIRRosali Pretorius and Emma Radmore have written an article for Compliance Monitor on EMIR's application and recent developments. (October 2013)

Mobile Banking - FCA sets out the risks: Candice ChapmanAndrew Barber and Winston Green comment on FCA's thematic review of mobile banking. (See also FReD 30 August.) (August 2013)

Mobile Network Operator BillingAndrew Barber and Alex Haffner have written an alert on the effects of the Payment Services Directive on the development of direct-to-phone-bill purchases by mobile network operators. (August 2013)

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. (July 2013)

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. (July 2013)

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

Court of Appeal dismisses interest rate swap appeal: Richard Caird and Kattalin Truman have written a briefing on the Court of Appeal judgment in the appeal by Mr Green and Mr Rowley against the decision that RBS had not missold an interest rate swap. (October 2013)

Appeal dismissed in first interest swap case: Richard Caird and Kattalin Truman have written an article on the Court of Appeal's decision in the first interest rate swap case in the English courts. (August 2013)

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)

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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Events from this Firm
28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

4 Oct 2017, Conference, Munich, Germany

Dentons Global Real Estate Group is delighted to be exhibiting once again at EXPO REAL, the International Trade Fair for Property and Investment which takes place on 4-6 October, 2017 in Munich, Germany.

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