UK: Financial Regulatory Developments (FReD) – 02 April 2015

Last Updated: 2 April 2015
Article by Emma Radmore, Michael Wainwright, Luca Salerno and Rosali Pretorius


  • Treasury consults on MiFID 2
  • Treasury makes MCD Order 2015
  • FCA makes Solvency 2 rules
  • FCA consults on approved persons for non-Solvency 2 insurers
  • FCA and PRA consult on approved persons changes for Solvency 2 firms
  • FCA publishes MCD rules
  • PRA consults on SIMR for non-Solvency 2 firms

FReD wishes its readers a Happy Easter


European Parliament (EP)

EP backs benchmark setting rules: MEPs from the Economic and Monetary Affairs Committee have supported proposals for rules to end conflicts of interest in setting "critical" benchmarks, such as LIBOR and EURIBOR, which influence financial instruments and contracts with an average value of at least €500 billion and could thus affect the stability of financial markets across Europe. Under the proposed rules:

  • the setting of critical benchmarks that affect more than one country would be overseen by a "college" of supervisors, including ESMA and other competent authorities;
  • critical benchmark-setting data would have to be verifiable and come from reliable contributors who are bound by a code of conduct for each benchmark;
  • contributors, such as banks contributing data needed to determine a critical benchmark, would have to notify the benchmark administrator and the relevant authority if they wished to cease doing so, but would nonetheless have to continue doing so until a replacement were found;
  • critical benchmark administrators would have to have a clear organisational structure to prevent conflicts of interest, and be subject to effective control procedures;
  • the final decision on whether a benchmark is "critical" would be up to ESMA and national authorities, but a national authority could also deem a benchmark administered within its territory to be critical if it had a "significant" impact on the national market; and
  • all benchmark administrators would have to be registered with ESMA and would have to publish a "benchmark statement" defining precisely what their benchmark measures and to what extent it is reliable. They would also have to publish or disclose existing and potential conflicts of interest and meet accountability, record keeping, audit and review requirements.

The draft text will be put to a vote by EP as a whole to consolidate its position before its three-way negotiations with EU Member States and the Commission. (Source: Economic Affairs MEPs Target Conflicts of Interest in Benchmark Setting)

Contact: Rosali Pretorius or Michael Wainwright

Financial Stability Board (FSB)

FSB publishes meeting minutes: FSB has published a report on its meeting in Frankfurt on 26 March. The meeting addressed:

  • welcoming the ministries of finance for Argentina, Indonesia, Saudi Arabia and Turkey and the South African Reserve Bank as new FSB members;
  • a discussion of issues related to implementation, home-host issues, proportionality and sequencing raised by emerging market and developing economies;
  • a range of the vulnerabilities in the financial system;
  • a work plan to identify financial stability risks associated with market liquidity in fixed income markets and asset management activities and longer-term structural financial stability issues that may arise;
  • the responses received on the proposed application of numerical haircut floors to non-bank-to-non-bank securities financing transactions;
  • the responses to its public consultation on policy proposals to enhance the total loss-absorbing capacity of global systemically important banks (G-SIBs) in resolution and reviewed progress of impact assessment studies under way;
  • next steps to finalise FSB's guidance on statutory and contractual approaches to the cross-border recognition of resolution actions, following the recent public consultation;
  • a work plan to promote central counterparty (CCP) resilience, recovery planning and resolvability;
  • a work plan to address misconduct in financial institutions which have the potential to create systemic risks by undermining trust in financial institutions and markets;
  • the draft outline of the consolidated annual report to the G20 on the implementation and effects of financial regulatory reforms;
  • the draft thematic peer review report on supervisory frameworks and approaches for systemically important banks; and
  • a proposal for the third and final phase in the implementation of its initiative to collect data on G-SIB exposures and funding through a common data template.

FSB also heard reports from the co-chairs of its six regional consultative groups, which cover the Americas, Asia, the Commonwealth of Independent States, Europe, Middle East & North Africa, and Sub-Saharan Africa. (Source: Meeting of the FSB in Frankfurt on 26 March)

Contact: Rosali Pretorius or Michael Wainwright

European Banking Authority (EBA)

EBA updates Q&As: EBA has updated its single rulebook Q&As. Five new items have been added. (Source: EBA Single Rulebook Q&As)

Contact: Rosali Pretorius or Michael Wainwright

European Insurance and Occupational Pensions Authority (EIOPA)

EIOPA consults on information exchange: EIOPA has published a consultation paper inviting views on the draft Implementing Technical Standards (ITS) on the procedures and templates for submitting information to the group supervisor and exchange of information between supervisory authorities especially within colleges of supervisors. Consultation ends on 22 May. (Source: EIOPA Consults on the ITS on Information Exchange Between Supervisors)

Contact: Rosali Pretorius or Michael Wainwright

EIOPA board signs coordination arrangements: EIOPA's Board of Supervisors has signed coordination arrangements for all colleges of supervisors of insurance groups with internal models. These arrangements set down the basis for future cooperation within colleges including their decision-making procedures. (Source: Coordination Arrangements Signed for Colleges of Supervisors of Insurance Groups with Internal Models)

Contact: Michael Wainwright or Juan Jose Manchado

EIOPA seeks views on infrastructure investments: EIOPA has published a discussion paper on infrastructure investments by insurers. The paper sets out initial ideas on:

  • definition of infrastructure investments that offer predictable long-term cashflows and whose risks can be properly identified, managed and monitored by insurers;
  • possible criteria for this new category of infrastructure investments covering issues such as standardisation and transparency;
  • prudentially sound treatment of the identified investments within a risk-based supervisory system, focusing on their specific risk profile; and
  • effectiveness of the current Solvency 2 risk management requirements in ensuring that the risks of this complex and, for insurers, relatively new asset class are properly managed.

The consultation ends on 26 April. (Source: EIOPA Publishes the Discussion Paper on Infrastructure Investments by Insurers)

Contact: Michael Wainwright or Juan Jose Manchado

EIOPA advises on Solvency 2: EIOPA has published its Technical Advice to the European Commission (Commission) on the Regulatory Technical Standards (RTS) on the recovery plans and finance schemes to be provided by insurers in case of non-compliance with Solvency and Minimum Capital Requirements (SCR, MCR) under Solvency 2. In its advice EIOPA:

  • describes in detail the information required from companies when they do not comply with SCR or MCR;
  • advocates the submission of one combined recovery plan and finance scheme where there is simultaneous non-compliance with both SCR and MCR;
  • highlights the criteria for the supervisory approval of the submitted recovery plan or finance scheme;
  • provides a non-exhaustive list of the measures that supervisors can take where an insurer's solvency position deteriorates further; and
  • describes the circumstances supervisors must take into account when deciding on the measures to be adopted.

(Source: EIOPA Delivers Advice on Recovery Plan, Finance Scheme and Supervisory Powers in Deteriorating Financial Conditions Under Solvency 2)

Contact: Michael Wainwright or Juan Jose Manchado

European Securities and Markets Authority (ESMA)

ESMA information regulation published in OJEU: The Commission Delegated Regulation on the information supervisors must provide to ESMA under the Alternative Investment Fund Managers Directive (AIFMD) has appeared in the OJEU. (Source: Delegated Regulation on the Information to be Provided by Competent Authorities to the ESMA Pursuant to Article 67(3) of Directive 2011/61/EU)

Contact: Rosali Pretorius or Michael Wainwright

ESMA issues qualifying holdings final report: ESMA has published draft technical standards under the current Markets in Financial Instruments Directive (MiFID) on the assessment of acquisitions and increases in qualifying holdings in investment firms. (Source: Draft Technical Standards Under Article 10a(8) of MiFID on the Assessment of Acquisitions and Increases in Qualifying Holdings in Investment Firms)

Contact: Emma Radmore or Josie Day

ESMA updates UCITS KIID FAQs: ESMA has updated its FAQs on the Key Investor Information Document (KIID) for UCITS. There is a new section on past performance. (Source: ESMA Updates UCITS KIID)

Contact: Rosali Pretorius or Kam Dhillon

ESMA updates AIFMD FAQs: ESMA has updated its FAQs on application of the AIFMD. New additions relate to reporting frequencies and amounts, and notification for managing new Alternative Investment Funds (AIFs) in host states. There is a new section on additional own funds and advice on calculating AIF exposures. (Source: ESMA Updates AIFMD FAQs)

Contact: Rosali Pretorius or Kam Dhillon

ESMA updates EMIR FAQs: ESMA has updated its FAQs on the European Market Infrastructure Regulation (EMIR). New content addresses:

  • intragroup transactions;
  • status of non-EU entities, and questions relating to application of RTS on clearing and third country contracts;
  • the clearing exemption for pension funds;
  • front-loading requirement for the clearing obligation;
  • authorisation of CCPs; and
  • segregation and portability.

(Source: ESMA Updates EMIR FAQs)

Contact: Luca Salerno or Tom Harkus

ESMA publishes MiFID 2 addendum responses: ESMA has published the responses it received on the addendum to its consultation on transparency in relation to certain derivatives in the context of the revised Markets in Financial Instruments Directive and Regulation (MiFID 2 and MiFIR). Consultation closed on 20 March. (Source: ESMA Publishes MiFID 2 Addendum Responses)

Contact: Luca Salerno or Tom Harkus

ESMA updates CCP list: ESMA has updated its list of CCPs authorised under EMIR, to reflect that LCH.Clearnet can now clear OTC inflation swaps. (Source: ESMA Updates CCP List)

Contact: Luca Salerno or Tom Harkus

European Systemic Risk Board (ESRB)

ESRB issues risk dashboard: ESRB has published its latest risk dashboard, issue 11. (Source: ESRB Risk Dashboard, Issue 11)

Contact: Rosali Pretorius or Michael Wainwright

European Central Bank (ECB)

ECB publishes supervisory information regulation: ECB has published its regulation on reporting of supervisory financial information. Alongside this, it has also published a feedback report to its consultation. (Source: Regulation on Reporting of Supervisory Financial Information and ECB Feedback Statement on Regulation on Reporting of Supervisory Financial Information)

Contact: Rosali Pretorius or Michael Wainwright

ECB issues supervisory report: ECB has published its first Annual Report on Supervisory Activities covering the period from 4 November 2013 to 31 December 2014. The report contains:

  • an overview of the Single Supervisory Mechanism (SSM), set up to provide harmonised supervision of the EU's banks;
  • details of the way in which ECB has gone about laying the foundations of the SSM during the period covered by the report;
  • the actions that ECB has taken, and those it will prioritise for 2015, to put the SSM into practice; and
  • reporting on its budgetry consumption.

Annexed to the report is a list of all the legal instruments concerning the general framework of supervision that ECB has adopted. (Source: Annual Report on Supervisory Activities)

Contact: Rosali Pretorius or Michael Wainwright


House of Commons European Scrutiny Committee (ESC)

ESC publishes 37th session report: ESC has published its 37th report of the 2014-15 session. The report includes all the documents considered by ESC on 18 March, including the following recommended for debate:

  • financial services, taxation and financial assistance to Member States;
  • broad guidelines for economic policies; and
  • the European Police College.

The report contains ESC's comments and notes on each document considered during the meeting on 18 March. (Source: ESC Thirty-seventh Report of Session 2014–15)

Contact: Emma Radmore or Josie Day

Treasury Select Committee (Treasury Committee)

Treasury Committee comments on pre-briefing incident: Following the publication of the Davis report into FCA's mishandling of a pre-briefing of its Life Insurance Review in March 2014, the Treasury Committee has called for FCA to do more to satisfy Parliament and the public that it has learned the lessons from this incident. The Treasury Committee statement comes to a number of key conclusions regarding the incident and makes recommendations for FCA. (Source: FCA Pre-briefing Incident in March 2014)

Contact: Emma Radmore or Josie Day

Bank of England (BoE)

BoE and ECB agree enhanced stability measures: BoE and ECB have agreed a set of measures aimed at enhancing financial stability in relation to centrally cleared markets within the EU. The measures are:

  • enhanced arrangements for information exchange and cooperation regarding UK CCPs with significant euro-denominated business; and
  • extending the scope of their standing swap line so it could if necessary facilitate multi-currency liquidity support by central banks to CCPs established in the UK and the euro area respectively. CCP liquidity risk management should still be the CCPs' own responsibility.

(Source: BoE and ECB Agree Enhanced Stability Measures)

Contact: Michael Wainwright or Tom Harkus

BoE publishes stress test details: BoE has published details of the 2015 stress test for the UK's largest banks and building societies. On 30 March BoE published the scenario for the stress test which has been agreed by FPC and the PRA Board. Banks' performance in the stress scenario will be reviewed against two key capital adequacy thresholds: a 4.5% CET1 risk-weighted capital ratio and a 3% Tier 1 leverage ratio. Up to 25% of Tier 1 capital can be met using relevant additional Tier 1 (AT1) instruments. If the exercise reveals inadequate resilience at the level of the system, FPC will consider a variety of actions, depending on the sources of potential risks, including recommendations to PRA and FCA. BoE will publish the results of the 2015 stress test alongside the Financial Stability Report in December. (Source: BoE Publishes Details of 2015 Stress Test for Largest UK Banks and Building Societies)

Contact: Rosali Pretorius or Michael Wainwright

BoE notes market practice and global principles codes: BoE has noted the publication of the revised "Global Preamble: Codes of best market practice and shared global principles" document. This has been endorsed by the eight committees at the annual global foreign exchange committees meeting, held in Tokyo on 23 March, and updates the original version published in 2013. The eight committees have worked together closely since the 2014 global foreign exchange committee meeting in Sydney to draft the revised document, which features more detailed, globally harmonised, guidance. The document covers topics such as personal conduct, confidentiality and market conduct, and policies for execution practices, and reflects a number of the FSB's Foreign Exchange Benchmark recommendations. (Source: Global Preamble: Codes of Best Market Practice and Shared Global Principles)

Contact: Luca Salerno or Tom Harkus

Financial Policy Committee (FPC)

FPC responds on remit and recommendations: Mark Carney, in his capacity as Chairman of FPC, has written to George Osborne responding to a letter outlining FPC's remit and other government recommendations. In addition to attaching FPC's formal response to the remit and recommendations, Mark Carney stated that:

  • in FPC's view global risks to the outlook for financial stability in the UK remained elevated over the past year, and this year's stress test scenario, which will be published on 30 March, will reflect this;
  • FPC has two medium-term objectives linked to bank capital: establishing the medium-term capital framework and ending too-big-to-fail, which it will address in light of the Bank Recovery and Resolution Directive (BRRD);
  • FPC's third medium-term objective is to ensure diverse and resilient market-based finance and so it will carry out its annual assessment of financial stability risks and regulation beyond the core banking system later this year;
  • FPC remains concerned about the risk that market liquidity could prove fragile in stressed conditions, and judges that there is a need for market participants to be aware of these risks;
  • FPC agrees with the Chancellor's view on the importance of ensuring the resilience of the core UK financial system and its infrastructure to cyber threat;
  • FPC has set out its views on the powers of direction necessary to manage financial stability risks from leverage and the housing market in 2014, and welcomes that, following Parliamentary debate, instruments granting FPC powers of direction related to the leverage ratio framework and owner-occupied residential mortgage lending will now come into force with effect from 6 April;
  • FPC welcomes the Government's intention to consult on tools related to buy-to-let lending later in 2015;
  • to enhance information sharing further, BoE announced in response to the Warsh Review that four joint briefing meetings of FPC and the Monetary Policy Committee would be scheduled in 2016; and
  • FPC has continued to develop its working relationships with PRA and FCA.

(Source: FPC's Formal Response to the Chancellor of the Exchequer's Letter on FPC's Remit and Recommendations)

Contact: Michael Wainwright or Luca Salerno

FPC publishes policy meeting statement: FPC identified several policy issues for action, including:

  • market liquidity risks, which include concerns that investment allocations and pricing of some securities may presume that asset sales can be performed in an environment of continuous market liquidity, although liquidity in some markets may have become more fragile - on this issue FPC has issued a list of matters on which it suggests BoE and FCA work together; and
  • cyber risk, in particular the need for core firms and financial market infrastructures to address their resilience to cyber attack.

In light of its assessment of the outlook for financial stability, and the progress by UK banks in meeting new capital standards in advance of regulatory requirements, FPC is maintaining the countercyclical capital buffer (CCB) rate for UK exposures at 0%. Hong Kong's recently-announced CCB rate of 0.625% on its banks' domestic exposures will be reciprocated automatically from 27 January 2016. (Source: Financial Policy Committee statement from its Policy Meeting, 24 March 2015)

Contact: Rosali Pretorius or Michael Wainwright

HM Treasury (Treasury)

Treasury issues Banking Reform Act MoU: Treasury has issued a Memorandum of Understanding (MoU) between BoE, FCA, PSR and PRA as required by the Banking Reform Act. The MoU describes the role of each Authority in relation to the exercise of relevant functions which relate to matters of common regulatory interest, and how the Authorities intend to coordinate the exercise of their relevant functions. (Source: Financial Services (Banking Reform) Act 2013: MoU Between BoE, FCA, PSR and PRA)

Contact: Emma Radmore or Josie Day

Treasury issues FSMA MoU: Treasury has issued an MoU between FCA and BoE, including PRA, setting out the high-level framework that FCA and BoE, and where appropriate PRA, will use to cooperate with one another in relation to the supervision of markets and market infrastructure. (Source: FSMA: MoU between FCA and BoE, including PRA)

Contact: Emma Radmore or Josie Day

Treasury consults on MiFID 2: Treasury is consulting on the principles it will use when implementing MiFID 2 into UK law. Overall, it will:

  • make changes to existing legislation to maintain consistency;
  • use the copy-out approach wherever possible; and
  • consult on changes as early as possible.

It is now consulting on a set of secondary legislation:

  • the Financial Services and Markets Act 2000 (FSMA) (Markets in Financial Instruments) Regulations 2016 will designate FCA, PRA and BoE as competent authorities for the purposes of MiFID 2 and MiFIR (acknowledging that most responsibilities will be FCA's); provides for the article 3 exemptions; creates the position limit regime; imposes obligations on unauthorised persons in respect of algorithmic trading, provision of direct electronic access services, acting as a general clearing member and synchronising business clocks; provides for necessary changes in the recognition requirements; and makes other consequential amendments;
  • the FSMA (Data Reporting Services) Regulations 2016, which will set the UK regime for regulating data reporting services operators;
  • the FSMA (Regulated Activities) (RAO) (Amendment) Order, which:

    • makes operating an organised trading facility (OTF) a regulated activity;
    • brings structured deposits within the scope of certain activities;
    • makes emission allowances a specified investment;
    • makes options and futures specified investments in certain circumstances involving Alternative Investment Fund Managers (AIFMs); and
    • transposes the Article 2 exemptions; and
  • the FSMA (Qualifying EU Provisions) (Amendment) Order, which gives PRA and FCA appropriate powers to perform their roles arising from MiFIR.

A separate draft amendment to the RAO proposes transferring certain binary options to be regulated under FSMA rather than the current gambling legislation.

The consultation also covers:

  • third countries: the UK is not minded to apply the option MiFID 2 allows to require third country firms that wish to provide investment services to retail or elective professional clients to do so by setting up a branch. MiFID 2 allows Member States not to exercise this option so long as they do not act in such a way as to give preference to third country firms over firms from elsewhere in the EU. Treasury sees many consequences if it used the option, including narrowing the current overseas persons exclusion and making firms use the branch when dealing with retail and elective professional clients. It acknowledges there are advantages to the option, such as, ultimately, the ability to passport a third country branch. It seeks views on its preference to maintain the current position, making only necessary changes;
  • data reporting services: as well as publishing the draft legislation, Treasury is consulting on the key definitions of the entities that will fall within them and the requirements the regulations will place on them. It seeks views on several points, including whether respondents agree it is reasonable and proportionate to create a separate regulation for these providers;
  • position limits and reporting: Treasury believes this is best treated as a standalone regime applicable equally to authorised and non-authorised persons. It also proposes that the position reporting and management regime for investment firms and credit institutions operating trading venues should be in FCA's rules;
  • unauthorised persons: Treasury is consulting on its plans to apply certain aspects of MiFID 2, such as those on algorithmic trading, to firms that are otherwise exempt from MiFID under article 2. It also looks at whether FCA has adequate powers over those involved in benchmarks to satisfy MiFID 2;
  • structured deposits: Treasury proposes to introduce a definition for structured deposit into the RAO and provide that the regulated activities of dealing as agent in, arranging deals in, making arrangements with a view to transactions in, managing and advising on investments will catch activities related to structured deposits. It is also changing the FSMA (Financial Promotion) Order;
  • power to remove board members: Treasury seeks views on whether PRA and FCA's existing powers over approved persons are enough to meet MiFID 2 requirements or whether to introduce a standalone power to apply to MiFID investment firms and operators of recognised investment exchanges (RIEs);
  • OTFs: Treasury has proposed relevant amendments to existing legislation to allow appropriate credit institutions, investment firms and RIEs to operate OTFs. It says FCA will look at how to identify firms with an OTF permission that conduct matched principal trading and principal trading in illiquid sovereign bonds. Inviting or inducing a person to participate in an OTF will also be subject to the financial promotion restriction; and
  • binary options: the UK currently treats these options, which pay a fixed sum if the option is exercised or expires in the money, and nothing at all otherwise, as bets rather than financial instruments. Member States diverge on whether these would better be treated as financial instruments and Treasury now proposes to do so where the binary option is a derivative in relation to which an investment firm or credit institution is providing or performing investment services and activities on a professional basis.

Treasury asks for comments by 18 June. (Source: Treasury Consults on MiFID 2)

Contact: Rosali Pretorius or Michael Wainwright

Treasury publishes BRRD responses: Treasury has published its response to its consultation on implementing the BRRD. It explains how respondents reacted to Treasury's proposals and any changes it made to the draft legislation. The final sets of laws implementing the BRRD came into force on 10 January. (Source: Treasury Publishes BRRD Responses)

Contact: Michael Wainwright or Josie Day

Treasury publishes AML advisory: Treasury has published an anti-money laundering (AML) advisory note advising firms:

  • to apply appropriate enhanced due diligence in any dealings involving Algeria, North Korea, Ecuador, Iran or Myanmar;
  • to take appropriate actions to minimise risk, which may include enhanced due diligence, in respect of dealings with Afghanistan, Angola, Guyana, Indonesia, Iraq, Lao PDR, Panama, Papua New Guinea, Sudan, Syria, Uganda and Yemen.

It notes several of these jurisdictions also have sanctions regimes that relate to them. (Source: Treasury Publishes AML Advisory)

Contact: Emma Radmore or Tom Harkus

Treasury updates sanctions: Treasury has updated the sanctions lists in respect of Belarus, Al Qaida, and terrorism. (Source: Treasury Updates Sanctions)

Contact: Emma Radmore or Tom Harkus


Small Business, Enterprise and Employment Act 2015 gets Royal Assent: The Small Business, Enterprise and Employment Act 2015 has received Royal Assent. It includes several provisions relevant to financial services, including:

  • paying in cheques electronically;
  • the powers of the payment systems regulator; and
  • the registers of significant control (PSC registers).

(Source: Small Business, Enterprise and Employment Act Gets Royal Assent)

Contact: Emma Radmore or Anna Janik

Consumer Rights Act 2015 gets Royal Assent: The Consumer Rights Act 2015, which includes a repeal and redraft of the requirements on unfair terms in consumer contracts, has received Royal Assent. See our separate article.(Source: Consumer Rights Act 2015 Gets Royal Assent)

Contact: Rebecca Owen-Howes or Josie Day

Macro-Prudential Measures Amendments Orders made: Two Orders come into force mainly on 6 April and allow FPC to give directions. (Source: BoE Act 1998 (Macro-Prudential Measures) Order 2015 and BoE Act 1998 (Macro-Prudential Measures) (No 2) Order 2015)

Contact: Rosali Pretorius or Michael Wainwright

Treasury Makes MCD Order 2015: The Mortgage Credit Directive (MCD) Order 2015 was made on 25 March and takes effect on various dates from 6 April. It:

  • amends existing legislation in line with the MCD, including significant amendments to the RAO;
  • introduces a regulatory regime for consumer buy-to-let (CBTL) mortgages, predicated on a registration regime; and
  • sets transitional provisions for persons and agreements already in effect before key dates, and outlines the appointed representatives regime applicable to MCD activities.

(Source: Treasury Makes MCD Order 2015)

Contact: Josie Day or Duncan Scott


Financial Conduct Authority (FCA)

FCA makes Solvency 2 rules: FCA has published its policy statement and its made rules arising from four consultation papers on Solvency 2. The changes, and made rules, cover:

  • transposition of Solvency 2: the key items relate to FCA's decision to keep the list of assets for permitted links, require incoming EEA firms to appoint a claims representative and amend the rules on information for policyholders;
  • changes to the Conduct of Business Rules: with-profits and unit-linked business: FCA has clarified some of its proposed changes in response to feedback, especially as they apply to mutual firms;
  • other consequential changes to the Handbook, mainly to prudential and systems and controls requirements but also to the Supervision manual; and
  • governance in insurance firms: FCA is introducing revised guidance on the fit and proper test for approved persons in Solvency 2 firms as originally proposed.

The changes take effect on 1 January 2016. (Source: FCA Makes Solvency 2 Rules)

Contact: Michael Wainwright or Juan Jose Manchado

FCA consults on approved persons for non-Solvency 2 insurers: FCA is consulting on changes to its approved persons regime for insurers who fall outside Solvency 2 and hold assets of £25 million or less, including UK branches of third country firms (it will consult separately on larger non-Directive firms). FCA wants to apply a broadly consistent regime across Directive and non-Directive firms, but will do so proportionately. It plans changes to the significant influence functions (SIF), the SIF approval applications, and new conduct rules. The rules will sit alongside PRA's rules (which will require these firms to have at least one approved individual). FCA intends to turn into FCA SIF holders those individuals who are currently in governing roles but will not be pre-approved by PRA under its new regime. It also intends to make all Chairmen, Senior Independent Directors and those who chair the Remuneration, Risk, Audit or Nomination Committee FCA SIF holders. It will apply conduct rules mirroring those for banks and Solvency 2 firms, but will disapply the PRA CF28 and the FCA CF8 functions. FCA asks for comment by 15 May. (Source: FCA Consults on Approved Persons for Non-Solvency 2 Insurers)

Contact: Katharine Harle or Emma Radmore

FCA and PRA consult on approved persons changes for Solvency 2 firms: FCA is consulting on changes to the approved persons regime for Solvency 2 firms, consistent with previous consultations and its joint initiative with PRA. FCA and PRA are consulting on consequential changes, transitional arrangements and forms required following previous consultations. FCA alone is consulting on governance arrangements for Solvency 2 firms. Certain rules will depend on Treasury, so the changes are likely to take effect in stages. It asks for comments by 15 May. (Source: FCA and PRA Consult on Approved Persons Changes for Solvency 2 Firms)

Contact: Katharine Harle or Emma Radmore

FCA publishes consumer credit waiver documents: FCA has published information for firms seeking a waiver or modification of requirements under the Consumer Credit (Agreements) Regulations, where it is not possible to disclose certain information. (Source: FCA Publishes Consumer Credit Waiver Documents)

Contact: Emma Radmore or Juan Jose Manchado

FCA publishes MCD rules: FCA has published its feedback statement and final rules on implementation of the MCD. Overall, respondents agreed with FCA's consultation proposals. However, FCA has had to make a change to its rules so that all consumers who remortgage with a new lender must have an affordability assessment, even if the consumer is not looking to borrow more. Some respondents also asked for more time to adapt to the changes, so FCA has decided to introduce product sales data and performance reporting a year later than originally proposed. FCA has now published its main set of rules implementing the MCD, together with related fees rules. It plans to make its rules on CBTL before the end of June. This will include feedback on the changes to the complaints handling rules. FCA will publish changes to its rules relating to lending that is not secured on residential property but is used to acquire or retain property rights in it by the end of July. It will then consult on how its knowledge and competence requirements will apply to firms that passport into the UK, and on passporting generally. It will await EBA guidelines on creditworthiness and on arrears and foreclosure before assessing whether it needs to change its rules further. The paper also includes an indicative timetable, and FCA says it will work with firms whose approach is to implement the changes while minimising customer disruption. Feedback on the main changes focuses on:

  • how and when MCD requirements apply;
  • implications for the transitional period;
  • the sales pipeline;
  • binding offers;
  • lifetime mortgages;
  • foreign currency mortgages; and
  • the European Standardised Information Sheet language.

FCA has also published supplements to its application form for second charge mortgage brokers, and for second charge mortgage lenders or administrators. (Source: FCA Publishes MCD Rules, Supplement for Second Charge Mortgage Brokers and Supplement for Second Charge Mortgage Lenders and/or Administrators)

Contact: Emma Radmore or Josie Day

FCA consults on ex-post risk adjustment: FCA is consulting on proposals to amend its draft guidance on applying ex-post risk adjustment to variable remuneration. FCA wants to clarify how firms should comply with the dual-regulated firms Remuneration Code requirements. It asks for comment by 7 May. (Source: FCA Consults on Ex-Post Risk Adjustment)

Contact: Rosali Pretorius or Michael Wainwright

FCA consults on fee rates: FCA is consulting on its rates proposals for 2015/16, covering itself, FOS and MAS. It explains:

  • the reasons for the increase in its annual funding rate and how it proposes to allocate the increase;
  • that no consumer credit firm pays a fee while it has only interim permission, so there will not be a full population of consumer credit firms until 2017;
  • the fees incurred in setting up PSR and proposals for recovering its annual funding requirement;
  • the need to raise pensions guidance levies; and
  • the FOS and MAS levies.

The paper looks in detail at the proposals for each type of firm. It asks for comment by 18 May. (Source: FCA Consults on Fee Rates)

Contact: Michael Wainwright or Tom Harkus

FCA makes new rules: FCA's latest Handbook Notice summarises the changes it has made since its last Notice:

  • the Conduct of Business Sourcebook (COBS) (Retirement Guidance Guarantee) Instrument 2015 and the Standards for Designated Guidance Providers Instrument 2015: these amend COBS and the Glossary from (at the latest) 6 April and help individuals in making better choices as to how to use their deferred contribution funds at retirement;
  • the Benchmarks (Amendment) Instrument 2015: this took effect on 1 April and amends the Glossary, Fees Manual (FEES), Market Conduct Sourcebook and the Supervision Manual and brings benchmarks within the scope of regulation;
  • the Handbook Administration (No 37) Instrument 2015 makes minor, insubstantial, amendments to many parts of the rules on various dates;
  • the Fees (Miscellaneous Amendments) (No 8) Instrument 2015: this amends the Glossary and FEES from 1 April in respect of fees for regulating second charge mortgages, approved reporting mechanisms and consumer credit firms, and various other changes;
  • the Fees (Payment Systems Regulator) Instrument 2015 took effect on 1 April and amends the Glossary and FEES in respect of fees to be raised for funding PSR;
  • the Fees (Pensions Guidance) Instrument 2015 also amended the Glossary and FEES from 1 April in respect of arrangements for raising the pensions guidance levy; and
  • the Financial Services Compensation Scheme (FSCS) (Management Expenses Levy Limit 2015/2016) (FCA) Instrument 2015 also took effect on 1 April and amended FEES in respect of management expenses and a contingency reserve for FSCS.

(Source: FCA Makes New Rules)

Contact: Emma Radmore or Tom Harkus

FCA publishes joint sponsor feedback: FCA has published the feedback from its consultation in relation to joint sponsors. Overall, respondents to the consultation were supportive of FCA's proposals, with some minor reservations. As a result FCA is proceeding as proposed in the consultation paper. The Technical Note and the changes to chapter 8 of the Listing Rules it has now made take effect on 1 April. (Source: Joint Sponsor Consultation Feedback and Policy Statement)

Contact: Rosali Pretorius or Michael Wainwright

FCA publishes final retirement income report: FCA has confirmed that the findings from its interim retirement income market report, issued in December 2014, are final. The majority of respondents agreed with the report's findings, and the remedies FCA proposed to deal with the issues raised, at the time. The proposed remedies are:

  • requiring firms to provide an annuity quotation ranking so that consumers can easily identify if they could be getting a better deal by shopping around;
  • redesigning and behaviourally trialling the information that consumers receive from their providers, such as wake-up packs, in the run-up to their retirement;
  • in the longer term, the creation of a pensions dashboard, which will allow consumers to see all their pension pots in one place.

In addition, FCA wants to see firms framing the options available to consumers so as to enable them to make sound decisions, rather than to drive sales of particular products. FCA will monitor the market to track consumer outcomes and the take-up of the Pension Wise service. Further consultation on annuity comparisons and the replacement of the wake-up packs will take place later in 2015. FCA is working with Government to develop a pensions dashboard in the longer term. The final market report also addresses the issues raised by those who responded to the consultation regarding design and implementation of each of the suggested remedies, as well as alternative remedies to those recommended by FCA. (Source: FCA Publishes Final Retirement Income Market Study Report)

Contact: Michael Wainwright or Josie Day

FCA updates benchmarks webpage: FCA has updated its benchmarks webpage to reflect the publication of its Policy Statement "Bringing additional benchmarks into the regulatory and supervisory regime" published on 10 March. (Source: FCA Benchmarks Webpage)

Contact: Emma Radmore or Josie Day

FCA publishes new Market Watch: FCA's latest edition of its Market Watch newsletter looks at:

  • how FCA's new structure impacts on its market operations, specifically how its Market Oversight Division operates and its links to enforcement;
  • Suspicious Transaction Reporting (STR) data, which FCA has now made available; and
  • reminding multilateral trading facility (MTF) operators of their monitoring duties, which FCA has found often to be inadequate. Its update focuses on fixed income securities.

(Source: Market Watch Issue No 47)

Contact: Luca Salerno or Tom Harkus

FCA feeds back on MIPRU simplification: FCA has published its policy statement and feedback on its plans to simplify the Prudential Sourcebook for Mortgage, Home Finance and Insurance Intermediaries (MIPRU). The changes relate specifically to non-bank lenders, and the application of MIPRU 4. FCA's final rules take effect on 26 April, and will import all relevant requirements previously elsewhere in the Handbook into MIPRU 4. (Source: FCA Feeds Back on MIPRU Simplification)

Contact: Rosali Pretorius or Michael Wainwright

FCA publishes complaints data: FCA has published its latest complaints data, which shows financial services firms received 2,183,540 new complaints (including those related to payment protection insurance (PPI)) between July and December 2014. Overall complaints decreased by 7% compared to the previous six months and by 12% from the same period last year. However, excluding PPI, complaints increased by 1% to 1,124,622 between the first and second halves of 2014 and by 2% when compared with the same period in 2013. This was mainly because of an 8% rise in the number of complaints relating to banking and credit cards over the six months to the end of December. All other product categories showed decreases in the period. The total redress paid increased by 4% to £2.44 billion in the second half of 2014, from £2.34 billion in the first half of the year. 88% of this amount (£2.15 billion) related to general insurance and pure protection products, which include PPI. The redress paid in relation to banking and credit card products increased by 64% to £145 million between July and December. This constituted 6% of the total redress paid in the last six months of the year against 4% in the previous period. (Source: Complaints on Banking and Credit Cards Up as Total Complaints Fall by 7%)

Contact: Emma Radmore or Josie Day

FCA agrees to share audits: FCA has agreed to provide the Treasury Committee with copies of internal audit reports given to FCA's Audit Committee one year after the Audit Committee has received them. (Source: Financial Conduct Authority Internal Audit Reports)

Contact: Emma Radmore or Josie Day

FCA updates consumer credit pages: FCA has updated its consumer credit pages on its website to include details of the exemptions for domestic premises suppliers and broking of consumer hire and consumer purchase agreements. (Source: FCA Updates Consumer Credit Pages)

Contact: Emma Radmore or Juan Jose Manchado

FCA publishes Arch final notices: FCA has published final notices:

  • imposing a public censure on Arch Financial Products LLP for breach of three of its Principles and systems and controls and Conduct of Business Rules, mainly in respect of conflicts management. It would have fined the firm £9 million were it not for the firm's financial situation. The final notice follows the Tribunal's decision to uphold FCA's decision, except in respect of a breach of Principle 2;
  • fining its former chief executive, Robin Farrell, £650,000 and banning him; and
  • fining its former senior manager responsible for compliance, Robert Addison, £200,000 and banning him.

(Source: FCA Publishes Arch Final Notices)

Contact: Felicity Ewing or Katharine Harle

Prudential Regulation Authority (PRA)

PRA consults on SIMR for non-Solvency 2 firms: In conjunction with the consultations discussed under FCA above, PRA is consulting on how it intends to apply the Senior Insurance Managers Regime (SIMR) to insurance firms that are outside the scope of Solvency 2. It proposes to:

  • simplify the list of controlled functions so there is a single small insurer senior management function;
  • create a bespoke regime for assessing fitness and propriety of individuals running these firms; and
  • apply conduct standards in an appropriate manner to these firms.

There will be five modules of the PRA Rulebook devoted to these rules. It asks for comment by 15 May. (Source: PRA Consults on SIMR for Non-Solvency 2 Firms)

Contact: Michael Wainwright or Juan Jose Manchado

PRA comments on Solvency 2 matching adjustment: PRA has concluded the pre-application process for the Solvency 2 matching adjustment and is now providing feedback to help firms with their formal applications. The feedback will be particularly important to UK insurers intending to apply to PRA for approval to use the matching adjustment, as it highlights matters to be addressed in formal applications and further details how the eligibility criteria should be applied. This feedback follows on from three previous PRA communications regarding the matching adjustment issued on 15 October 2014, 20 February and 9 March. The application process for matching adjustment approvals opens on 1 April. (Source: PRA Provides Feedback on Solvency 2 Matching Adjustment Pre-application Process)

Contact: Michael Wainwright or Juan Jose Manchado

PRA consults on internal models treatment of sovereign debt: PRA is consulting on the treatment of sovereign debt in internal models under Solvency 2. PRA has produced a short draft supervisory statement aimed at supporting the Solvency 2 requirements and ensuring firms using internal models take proper account of the material risks associated with sovereign debt. It asks for comment by 1 May. (Source: PRA Consults on Internal Models Treatment of Sovereign Debt)

Contact: Michael Wainwright or Juan Jose Manchado

PRA confirms MELL: PRA has confirmed the Management Expenses Levy Limit (MELL) for the FSCS for the coming year will be £74.4 million. (Source: PRA Confirms MELL)

Contact: Michael Wainwright or Kam Dhillon

PRA makes rule changes: PRA has made instruments confirming minor changes to rules within its Rulebook and Handbook. The amendments relate to the Fees and Supervision Manuals within the Handbook, and the Internal Capital Adequacy Assessment, Definition of Capital and Capital Buffers parts of the Rulebook. All changes took effect on 31 March. (Source: PRA Handbook Amendments and PRA Rulebook Amendments)

Contact: Emma Radmore or Tom Harkus

Payment Systems Regulator (PSR)

PSR becomes operational: PSR will be operational from 1 April and its first policy statement will set out:

  • how PSR will work;
  • what it will expect of the payment services industry; and
  • how PSR will deliver its statutory objectives.

The policy statement is to be published by the end of March. (Source: PSR is Up and Running)

Contact: Michael Wainwright or Josie Day

Financial Ombudsman Service (FOS)

Ombudsman News addresses ISAs and savings: The March edition of Ombudsman News contains case studies focusing on disputes arising from ISAs and savings accounts, farming and insurance and powers of attorney. (Source: Ombudsman News, Issue 124, March/April 2015)

Contact: Emma Radmore or Josie Day

Money Advice Service (MAS)

MAS publishes Business Plan: MAS has published its Business Plan for 2015-16. It will continue to help people manage their money better and have access to free debt advice, and will assess where its services might duplicate those that others provide and work to minimise this. (Source: MAS Publishes Business Plan)

Contact: Emma Radmore or Josie Day


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

BIS updates on Basel monitoring: BIS has published an update to its FAQs on monitoring under Basel 3. (Source: BIS Updates on Basel Monitoring)

Contact: Rosali Pretorius or Luca Salerno

Financial Action Task Force (FATF)

FATF consults private sector: FATF has published a press release detailing the outcome of a two-day meeting of the Private Sector Consultative Forum. The main objectives of the forum were to:

  • discuss recent developments related to terrorism and terrorist financing risks;
  • exchange views on "de-risking";
  • seek input and feedback into ongoing FATF work on the risk-based approach;
  • hear about innovations in the financial services sector; and
  • discuss other issues of concern or interest to the private sector relating to the implementation of AML and counter-terrorist financing (CFT) measures, in line with the FATF Recommendations.

Over 160 participants representing the financial sector and other businesses and professions subject to AML/CFT requirements, civil society, and representatives of FATF members and observers attended the meeting. FATF welcomed the open exchange of views and received useful input from the private sector on a range of important issues. (Source: Dialogue with the Private Sector: FATF Private Sector Consultative Forum Meeting, Brussels 26-27 March 2015)

Contact: Emma Radmore or Tom Harkus

Hedge Funds Standards Board (HFSB)

HFSB consults on conflicts management: HFSB is consulting on how to improve disclosure of conflicts of interest to investors. It asks for comments by 12 June. (Source: HFSB Consults on Conflicts Management)

Contact: Rosali Pretorius or Kam Dhillon

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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.

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