UK: Financial Regulatory Developments (FReD) - 24 January 2014

Last Updated: 24 January 2014

UK Government and Parliament


Parliament publishes financial stability evidence: The House of Commons Treasury Committee has published the oral evidence from its meeting on the BoE's November 2013 Financial Stability Report. The meeting focused on the BoE's opinion of the Basel Agreements, the markets and competition. (Source: Parliament Publishes Financial Stability Evidence)

HM Treasury

Treasury updates on Iran: Treasury has published an updated note following the partial lifting of sanctions against Iran. The note explains when transfers of funds require notification or authorisation from Treasury. It has also explained the alterations to the restrictions on certain dealings relating to Iran, specifically:

  • the removal of the restriction on insurance and reinsurance of Iranian crude oil, petroleum products and petrochemical products;
  • the licensing grounds for transfers of funds and economic resources to the Ministry of Petroleum; and
  • the threshold levels for transactions requiring prior authorisation.

(Source: Treasury Updates on Iran Notifications and Treasury Explains Iranian Sanction Changes)

Bank of England (BoE)

BoE launches new market operations: BoE is introducing the Indexed Long-Term Repo operations and Contingent Term Repo Facility, as part of the changes to its approach to liquidity insurance that it announced last year (see FReD 1 November 2013). The latter allows BoE, in response to market-wide stress, to provide liquidity against the full range of eligible collateral at any time, term and price it chooses. (Source: Indexed Long-Term Repo Operations and Contingent Term Repo Facility)

UK Financial Services and Markets Regulators

Financial Conduct Authority (FCA)

FCA finalises inducements guidance: FCA has published its finalised guidance on inducements for product providers and advisers. FCA had been concerned that, even following implementation of the Retail Distribution Review (RDR), some payments were still being made in a way that could have the effect of making advisers favour a particular product provider. Since FCA started consulting on its guidance, it has become aware of practices which indicated that some payments to advisory firms seemed to be linked to securing sales of a provider's products or potentially incentivised firms to promote particular products to their advisers. It also found evidence of joint ventures between providers and advisers that gave rise to potential conflicts of interest. Key points of the guidance include:

  • a firm that wants to avoid the risk of a payment between providers and advisers breaching RDR principles should not make or receive any payment;
  • firms must consider both actual and potential conflicts when assessing whether a payment is acceptable;
  • the basic principle is that firms must remove any risk that they may put their interests ahead of those of their customers, and advisers must ensure that accepting a payment will not impair their duty to act in the best interests of their customers;
  • except where permitted in FCA rules, payments from providers to advisory firms should be based on reasonable reimbursement for the costs incurred by the advisory firms;
  • any payment should enhance the quality of services to customers;
  • inclusion of a provider on an advisory firm's panel must not be influenced by the provider's willingness and ability to buy services from or provide benefits to the firm;
  • terms in service and distribution agreements should not influence personal recommendations. FCA gives examples of terms it thinks could create unmanageable conflicts;
  • firms must comply with FCA's disclosure requirements;
  • firms must ensure that providers give help to firms (whether in cash or otherwise) to develop IT necessary to operate the provider's software only where it will generate equivalent costs savings to itself or clients;
  • training and participation in conferences and seminars must be provided only on a fair basis;
  • providers may give and advisory firms may accept gifts and hospitality only of a reasonable value;
  • providers may assist advisory firms with promotional activity only where it will enhance the quality of service to clients.

The guidance includes several examples of good and poor practice, including examples of where distribution agreements demonstrate firms have in place good systems and controls. FCA now expects firms to review their agreements and make necessary changes within the next three months. (Source: FCA Finalises Inducements Guidance)

FCA confirms skilled persons appointment: FCA has confirmed it has appointed a skilled person to conduct an independent report on RBS' treatment of customers in financial difficulty. It notes that, while commercial lending falls outside the Financial Services and Markets Act, if the review reveals issues within FCA's remit, it will consider what measures it should take. It expects to report on the findings in the third quarter of 2014. (Source: FCA Confirms Skilled Persons Appointment)

FCA updates on AIFMD: FCA has updated its Alternative Investment Fund Managers Directive (AIFMD) pages on its website to include some additional FAQs for depositaries. (Source: FCA Updates on AIFMD)

FCA consults on FSCS management levy: FCA and PRA are consulting on the management exposures levy limit for the Financial Services Compensation Scheme (FSCS) for 2014/15. The proposed levy is £80 million, of which a minimum of £74.7 million will be required with the remainder levied only on demand to meet key contingencies. The levy is less than that for the current financial year. Comments are due by 17 February. FSCS has also published its Plan and Budget 2014/15, in which it announces an annual levy of £313 million. The budget is accompanied by a document setting out FSCS's five year vision, which includes the modernisation of claims handling. (Source: FCA Consults on FSCS Management LevyPlan and Budget 2014/15 and Vision for a Confident Future)

FCA updates on consumer credit rebates: FCA has added to its website a facility for firms to register to the rebate scheme that applies to consumer credit licences. (Source: FCA Updates on Consumer Credit Rebates)

Prudential Regulation Authority (PRA)

PRA consults on Rulebook reform: PRA is consulting on redrafting certain modules of its Handbook to bring it within its new Rulebook format. It plans to bring across several existing modules, redrafted as appropriate:

  • the Principles for Business will become "The Fundamental Rules": Six of the Principles apply to PRA firms and will be the core of PRA's supervisory approach. PRA has redrafted them to be rules that express its general objective and the recommendations of the Parliamentary Commission on Banking Standards and has added a new principle relating to resolution preparation;
  • Chapter 2 of the Supervision Manual (SUP) becomes "Information Gathering";
  • SUP 3 becomes "Auditors";
  • SUP 5 becomes "Use of Skilled Persons";
  • SUP 6 and SUP 8 become "Permissions and Waivers";
  • SUP 15 becomes "Notifications";
  • the Financial Stability and Market Confidence Sourcebook (FINMAR) becomes "Statement of policy on the exercise of the PRA's financial stability information power; and
  • the table in SUP 13A Annex 1 on the application of the Handbook to incoming EEA firms will be moved to the PRA website.

The consultation includes drafts of the new look rules and consequential amendments to parts of the Handbook. Respondents to PRA's consultation about the creation of its Rulebook had been unhappy about the perceived removal of guidance. PRA stresses it will still give guidance, but in supervisory statements as appropriate. PRA asks for comment by 14 March. (Source: PRA Consults on Rulebook Reform)

Exchanges and Markets

Intercontinental Exchange Group (ICE)

ICE company to be LIBOR administrator: ICE Benchmark Administration is to be the LIBOR administrator from 1 February. (Source: ICE Company to be LIBOR Administrator)

Other Regulators/Authorities/Industry Associations

European Banking Federation (EBF)

EBF calls for phase-in of LEI use: EBF has written to ESMA to ask for a reasonable phase-in period for market participants to adopt the legal entity identifier (LEI). Counterparties to derivatives are required to use the LEI when complying with their reporting obligations under the European Market Infrastructure Regulation (EMIR). Considering that the reporting obligation starts on 12 February and many market participants, particularly non-financial counterparties, are not aware of the introduction of the LEI, EBF asks for a transitional period during which failure to use an LEI will not trigger sanctions. In relation to the backloading of legacy transactions which are not outstanding on 12 February, EBF suggests that providing a BIC or client code should be sufficient to meet the reporting obligation. EBF is also seeking clarification on the use of the LEI for entities which are not legal entities, such as partnerships in some jurisdictions. (Source: Implementation of the Legal Entity Identifier)

International Swaps and Derivatives Association (ISDA)

ISDA responds on trading book review: ISDA and other industry associations have responded to the Basel Committee's second consultation on the Fundamental Review of the Trading Book. The response focuses on the boundary between trading and banking books, the model independent approval process, capturing market illiquidity, the treatment of credit, disclosure requirements and floors. (Source: Response to Second Consultation on the Fundamental Review of the Trading Book)

Forthcoming Events and Recent Publications

Forthcoming Events

New: EMIR webinarRosali Pretorius is participating in a Lexis webinar on EMIR on 30 January. The webinar will focus on trade reporting obligations, exchange of collateral for uncleared OTC derivatives and the clearing obligation. To book on to the webinar, please email or call 0845 520 5500.

Investment Funds Breakfast Briefing: In this session on 12 February, Samantha Hutchinson and Liz Soutter, fund finance specialists, will look at the changing landscape for the subscription finance market and highlight some of the issues that are likely to be encountered by funds on these types of facilities.

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

Regulators respond to roar of crowdfundingEmma Radmore and Juan Jose Manchado have written an article for Compliance Monitor on the FCA's views on, and proposals for the regulation of, crowdfunding.

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

It is not a misrepresentation to state interest rate swaps carry no premium: Sam Coulthard, Richard Caird and Thomas Rocher have written an article on the summary in another swap mis-selling claim, Nextia Properties Limited v. National Westminster Bank plc and The Royal Bank of Scotland plc. (December 2013) 

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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