UK: Weekly Financial Services Regulatory Update - Week To 31.01.14

This weekly update from Clyde & Co's financial services regulatory team summarises new developments as reported by the FCA, the PRA, 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:

30 January 2014: FCA CP14/2: Proposed amendments to the Listing Rules in relation to sponsor competence and other amendments to the Listing Rules and Prospectus Rules. The FCA has published Consultation Paper CP14/2, proposing new rules to ensure sponsors (who are typically investment banks and corporate finance specialists who assist issuers by advising them on their listing obligations) have the right skills, knowledge and expertise. The proposals include:

  • Requiring sponsors to have relevant experience within the last three years
  • Setting out minimum requirements on skills, knowledge and expertise for staff
  • Accepting applications from sponsors who wish to specialise in a particular sector, helping to encourage new entrants and greater competition

The FCA is also seeking views on the use of 'joint sponsors' where issuers appoint multiple sponsors to advise on a transaction; and technical changes to existing rules on circulars. The consultation closes on 30 April 2014.

Press release:


Discussion papers:

No new developments this week.

Policy statements:

31 January 2014: FCA PS14/1: Distribution of retail investments: referrals to discretionary investment managers and adviser complaints reporting. The FCA has published Policy Statement PS 14/1 with final rules on the first two of the proposals from Consultation Paper CP13/4. The rules (which are part of the Retail Distribution Review (RDR)):

  • Ban new referral payments by a discretionary investment manager (DIM) to an adviser when the adviser recommends that a client places additional money with the same DIM from whom they receive payments following a pre-RDR referral
  • Ban referral payments where an adviser firm does not provide personal recommendations to particular clients, but provides other services to them

30 January 2014: PRA Responses to CP8/13 - PS6/13 and PS1/14. The PRA has published Policy Statements PS6/13 and PS1/14 in response to Consultation Paper CP8/13 on miscellaneous and minor changes to the PRA rules, including further rule amendments related to CRD IV, and material on the PRA's proposals to create a Rulebook. Policy Statement PS6/13 sets out responses to chapters 1, 2, 4 and 5 of CP8/13 (close links and controllers report, mortgage lenders and administrators return, Interim Prudential sourcebook for Insurers and the Interim Prudential sourcebook for Friendly Societies, and FSCS protection for large unincorporated associations' deposits), whilst Policy Statement PS1/14 sets out responses to chapters 3 and 6 (removal of the designated investment exchange regime, and related party transaction risk).

Press releases:

27 January 2014: GBP 31 million in compensation to be paid out following FCA's Arch cru consumer redress scheme. Compensation has begun to be paid by financial advisers to people who invested in the CF Arch cru Investment and Diversified funds as a result of unsuitable advice. Over GBP 8.26 million has so far been received by consumers. Total redress due under the scheme is calculated to be GBP 31.47 million. The money paid out under the scheme, which was overseen by the FCA, is in addition to any redress investors may have received under a separate process administered by Capita Financial Managers.


No new developments this week.

Final notices:

31 January 2014: FCA Final Notice: State Street. The FCA has published a Final Notice fining State Street UK GBP 22,885,000. State Street UK's Transitions Management (TM) business had developed and executed a deliberate strategy to charge clients substantial mark-ups on certain transitions, in addition to the agreed management fee or commission. These mark-ups had not been agreed by the clients and were concealed from them. Between June 2010 and September 2011 State Street UK's TM business deliberately overcharged six clients a total of USD 20,169,603, which involved breaches of Principle 6 (customers' interests), 7 (communications with clients) and 3 (management and control) of the FCA Principles for Businesses. State Street UK qualified for a 30% discount as it agreed to settle at an early stage, otherwise the fine would have been GBP 32,692,800.

Press release:

Final Notice:

30 January 2014: FCA Final Notice: Ewan King. The FCA has issued a Final Notice fining former retail investment adviser Ewan King GBP 19,900, and banning him from undertaking any regulated activity. Mr King was an appointed representative of an FCA authorised firm. To give the firm the impression that he had met the FCA's post-retail distribution review (RDR) qualification criteria, he supplied the firm with fabricated Statements of Professional Standing. In the circumstances, the FCA found that Mr King was not a fit and proper person, lacked honesty and integrity, and posed a risk to consumers and to confidence in the financial system. Mr King agreed to settle at an early stage qualifying for a 30% discount; had he not, he would have been fined GBP 25,734.

Press release:

Final Notice:

29 January 2014: FCA Final Notice: Anthony Verrier. The FCA has issued a Final Notice banning Anthony Verrier (a former senior executive at BGC) from performing any function in relation to any regulated activity in the financial services industry. The FCA found that Mr Verrier is not a fit and proper person due to concerns over his integrity. The Final Notice is based on High Court judgment in Tullett Prebon plc & Ors v BGC Brokers LP & Ors [2010], in which Mr Verrier was found to have participated in an unlawful means conspiracy.

Press Release:

Final Notice:

Application refusals:

No new developments this week.

Approved person refusals:

No new developments this week.

Research publications:

No new developments this week.

Other FCA and PRA publications:

31 January 2014: FCA FG14/2 - Finalised guidance on the AIFM Remuneration Code (SYSC 19B). The FCA has published Final Guidance FG14/2 on the AIFM remuneration code (SYSC 19B). The guidance explains how an AIFM should:

  • Take into account proportionality
  • Consider payments made to partners if the AIFM is structured as a partnership
  • Pay its relevant staff in units, shares or other instruments

31 January 2014: FCA Handbook Notice 8. The FCA has published Handbook Notice 8, setting out changes made to the FCA Handbook under instruments made by the FCA Board on 12 December 2013 and 30 January 2014 and by its executive committee on 17 January 2014.

30 January 2014: FCA Regulation round-up January 2014. The FCA has published its regulation round-up for January 2014.

30 January 2014: PRA Administration Instruments. The PRA has published a Handbook Administration Instrument, PRA Handbook Administration Instrument (No 3) 2014 (2014/1), making corrections to the glossary, the Senior Management Arrangements, Systems and Controls sourcebook (SYSC), the Interim Prudential sourcebook for Insurers (IPRU (INS)), and the Supervision manual (SUP).

27 January 2014: Temporary restriction in short selling. The FCA issued a notification imposing a temporary restriction on short selling of Banco Popolare shares (ISIN: IT0004231566) which ended on 28 January 2014, following a decision made by another EU Competent Authority.

UKLA publications:

No new developments this week.

Upper Tribunal (Tax and Chancery Chamber):

No new developments this week.

Financial Ombudsman Service (FOS):

28 January 2014: FOS ombudsman news issue 115. The FOS has published issue 115 of ombudsman news. Tony Boorman, FOS Interim Chief Executive and Chief Ombudsman, has highlighted the fact that although the level of payment protection insurance (PPI) complaints is expected to decline in the coming year, the number of complaints is still expected to be substantial. The newsletter includes a focus piece on complaints figures for October to December 2013. Other items of interest in the newsletter include:

  • Case studies on annuities
  • Case studies on insurance claims relating to bad weather

London Stock Exchange (LSE):

No new developments this week.

Legislative updates:

28 January 2014: Council of EU adopts MCD at first reading. The Council of the EU has published a press release announcing that it has adopted the proposed Mortgage Credit Directive (MCD) (also referred to as the proposed Directive on credit agreements relating to residential property (CARRP)). The MCD was adopted by qualified majority at a meeting of the Economic and Financial Affairs Council (ECOFIN) without discussion.

28 January 2014: Insurance Contracts Bill: consultation on draft clauses. As part of a joint review of insurance contract law, the English and Scottish Law Commissions are currently drafting an Insurance Contracts Bill, dealing with, among other things, the business insureds' duty of disclosure. They are seeking views on whether the first available draft clauses and accompanying notes from the Insurance Contracts Bill meet the policy objectives set out in the consultation papers. The draft clauses for consideration are:

  • Fair presentation (disclosure and representations) in business insurance
  • Damages for late payment of claims
  • Insurers' remedies for fraudulent claims
  • Good faith

The consultation closes on 21 February 2014. All responses should be e-mailed to The Law Commissions hope to publish the final report and draft Bill by summer 2014.

Draft clauses:

Accompanying notes:

17 December 2013: Deferred prosecution agreement provisions in Crime and Courts Act 2013 expected to come into force on 24 February 2014. The Criminal Procedure (Amendment No. 2) Rules 2013 have been published on, together with an explanatory memorandum. Among other things, Part 7 of the Rules adds a new Part 12 to the Criminal Procedure Rules 2013 (CrimPR) to set out the procedure governing applications for the approval of deferred prosecution agreements (DPAs) and the associated proceedings, as provided for under Schedule 17 to the Crime and Courts Act 2013. The new Part 12 is set out in a Schedule to the Rules and it comes into force on 24 February 2014.

Explanatory memorandum:

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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