UK: FCA Publishes its Regulation Round-up for May 2017 (Investment Management Brief: 1 June 2017)

Updates from the Financial Regulation team at Pinsent Masons.
Last Updated: 1 June 2017
Article by David Heffron, Elizabeth Budd, Michael Lewis and Ian Warner

Originally published 1st June 2017


FCA publishes its regulation round-up for May 2017

In this month's Regulation round-up [18.05.17], the FCA outlines its findings from the Assessing Suitability Review for the financial advice sector. The importance of the provision of suitable advice was a priority in the FCA's 2016/17 Business Plan. In their review the FCA assessed 1,142 individual pieces of advice from 656 firms against the suitability and disclosure rules in COBS. Although issues remain around disclosure, particularly initial disclosure, product disclosure and disclosure of suitability reports, the FCA's findings show that in 93.1% of cases suitable advice was provided which the FCA attributes to the RDR and the FCA's previous supervisory and enforcement activities and which will be a baseline from which the FCA expects the quality of suitability assessments to increase.

The FCA flags there will soon be important changes to advice and disclosure requirements because of MiFID II and PRIIPs which, in some cases, mean increased requirements for financial advisers, so firms must take the new requirements on board and make all changes necessary.  The FCA will repeat the review in 2019 based on advice given in 2018.

The FCA also reminds firms that need to apply for variations of permission following the implementation of MiFID II that they should submit their applications now so that they can continue in business from January 2018.

FCA creates new "Cyber Resilience" webpage

The FCA has published a Cyber Resilience webpage [18.05.2017] to help firms "become more resilient to cyber attacks, while ensuring that consumers are protected and market integrity is upheld." FCA advises firms to:

  • develop their 'security culture' encompassing the board and all employees;
  • protect their "information assets" , ie. hardware, software and people; and
  • evolve continually to meet new threats.

Firms should be reporting material cyber incidents under Principle 11. Examples of reportable incidents include those that:

  • cause significant loss of data, availability of, or control over a firm's IT;
  • impact on a large number of victims;
  • result in unauthorised access to, or malicious software being present on, a firm's information and communication systems.

The page links to a range of materials including The National Cyber Security Centre and FCA materials which include the FCA's speech given by Nausicaa Delfas [April 2017] on the current threat landscape

Financial Stability Board stocktake of efforts to strengthen governance frameworks

The FSB is assessing how governance frameworks reduce risks of misconduct. It published its report [23.05.17] "Stocktake of efforts to strengthen governance frameworks to mitigate misconduct risks" setting out three areas of further work, aiming to put together a "toolkit" for regulators and firms on:

  • Rolling bad apples: when employees dismissed for misconduct or leaving under suspicion of misconduct re-appear at another firm;
  • Responsibility mapping: where supervisory expectations are set for board members and other senior individuals FSB will look at how such responsibility mapping and related tools can mitigate against the  risk of misconduct - including by supervisory examination or enforcement focussing on the legal and regulatory requirements that apply to such individuals; and
  • Culture: can be a major influence on the governance framework so the FSB plans to explore how governance mechanisms such as escalation processes, training and non-financial incentives may mitigate against the risk of misconduct derived from the culture at firms.

FSB will keep in mind as it carries on this work, whether any other steps such as guidance would be useful.  The final report on their work will be published in March 2018.

EU Regulatory

ESMA consultation paper on money market fund rules

ESMA has published [24.05.17] its consultation paper on the new Money Market Fund Regulation (MMF). The CP contains ESMA's proposals on:

  • draft technical advice (TA): liquidity and credit quality requirements for assets received as part of a reverse repurchase; criteria for validating the credit quality assessment methodologies and for quantifying credit risk and the relative default risk of an issuer and the instrument in which the MMF invests; criteria to establish qualitative indicators on the instrument's issuer;
  • draft implementing technical standards (ITS): for a reporting template for MMF managers to send the required information to the MMF's competent authority; and
  • guidelines: on common reference parameters for scenarios to include in the stress tests MMF managers are to carry out.

Responses are to be provided by 7 August 2017.  ESMA will finalise the TA and ITS to submit to the Commission, and issue the guidelines by the end of 2017.

ESMA updates Q&A on AIFMD and UCITS

ESMA published [06.04.17] updated Q&A on AIFMD and UCITS.  It added three responses to the following questions:

  • how AIFMs are to report the breakdown between retail and professional investors to National Competent Authorities on the reporting template for AIF-specific information, when the information is not available;
  • how an AIFM provides information on AIFs it intends to manage that are domiciled in another Member State in the programme of operations;
  • whether an AIF subject to the clearing obligation under Article 4(1) of EMIR can use the intragroup transactions exemption at article 4(2) of EMIR (the same question as applied to UCITS was also added to the UCITS Q&A).

City of London Law Society Regulatory Law Committee writes to FCA regarding ESMA Q&A on AIFMD

The CLLS Regulatory Committee has written a letter to the FCA [16.05.17] in relation to ESMA's response in its  AIFMD Q&A [updated 16.11.17] to new question 2 concerning Delegation. The question asks if an AIFM that does not itself perform the functions in Annex I of the AIFMD, whether it is released it from its responsibility to ensure compliance of the relevant function(s) with the AIFMD.  The Committee is concerned that ESMA's response is based on "an incorrect interpretation of the relevant provisions of AIFMD" which, in its view, "cuts directly across" the approach of the UK funds industry and is not supported by FCA's approach in its Handbook.  The Committee notes that the FCA rules and guidance clarify that an AIFM can only delegate services it is responsible for, and do not see any reason for the FCA to change fundamentally their existing rules which the CLLS Regulatory Committee consider are based on the "plainly correct reading" of the European legislation. 

Directive amending the shareholders rights directive published in the OJ

Directive (EU) 2017/8282 amending the shareholders rights directive (Directive 2007/36/EC) as regards the encouragement of long-term shareholder engagement has been published in the OJ [20.05.17]. Member States must bring in the laws and regulation necessary to comply with the new directive by 10 June 2019. There are a range of amendments to the shareholders rights directive concerning institutional investors, asset managers and proxy investors including:

  • that institutional investors and asset managers develop and publicly disclose an engagement policy to show how they integrate shareholder engagement in their investment strategy and disclose annually how it has been implemented;
  • requirements for institutional investors to disclose publicly specified information on their arrangements with any asset manager investing on its behalf - whether on a discretionary client-by-client basis or through a collective investment undertaking - and reciprocal disclosure by the asset manager to the institutional investor of how their investment strategy and its implementation complies with that arrangement and contributes to the medium to long-term performance of the institutional investor's assets or those of  the fund.


ESMA speech on the adoption of RegTech

Patrick Armstrong, ESMA Senior Risk Analysis Officer, Innovation and Products Team spoke in London [16.05.17] about The Adoption of RegTech within the Financial Services Industry: Ten years from the Start of the 'Great Financial Crisis'. He talked about reasons for the current interest in RegTech; his view of the regulator's role to encourage digitalization of supervisory data; and the role of market participants.

Since the use of technology for compliance monitoring existed before 2007, Patrick Armstrong sees the current interest in doing so more as evolution than revolution. For financial institutions he drew parallels between the adoption of FinTech: the use of innovation for financial products and services, and RegTech: using technology to meet regulatory requirements. While technology assists firms to fulfil their regulatory requirements and regulators to monitor and supervise effectively there are risks:

  • disintermediation: in collaborating with RegTech firms, financial institutions cannot delegate their regulatory responsibilities but there is a risk their full oversight may not extend all the way down the value chain.  Established firms may have expertise in the form of compliance staff to understand their responsibilities but new entrants may not;
  • digital security: arguably increasingly centralized digital data brings increased risk of attack, theft and fraud. "We must develop mind-sets in which client data is viewed with the same level of security as that given to money placed in secure vaults" Armstrong said; and
  • migration risk - the "differential adoption of new technology": failure to "adapt to the newer digitalised infrastructures" may be both a business and compliance risk. In business terms it "may separate winners from losers in coming years"; and leave participants that do not adapt to more automated compliance  processes with platforms that do not work with the current regulatory framework.

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,

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions