Regulatory Events at Pinsent Masons

We are running a SM&CR Breakfast Briefing on Thursday 1 February 2018 to explore some of the key issues in the FCA's new SM&CR CP. To attend please click here.

UK Regulatory

FCA publishes policy statement on client money and unbreakable deposits

Following its earlier consultation, the FCA has published a policy statement on depositing client money in unbreakable deposits (UDs) [22.01.2018]. For more on the consultation, see here. The policy statement sets out the FCA's final amendments to the client money 30-Day Rule (CASS 7). The FCA says it will now permit firms to deposit "an appropriate proportion of client money in 95 Day UDS". To do so firms using UDs of more than 30 days are to have a written policy specifying the maximum proportion of client money it is appropriate for them to hold in such UDs and must give each client a written explanation of the risks in doing so.

FCA consults on extending access to the Financial Ombudsman Service for trusts, SMEs and charities.

Following a review of the protections available to small and medium sized enterprises (SMEs), the FCA consults [22.01.2018] on its plan to widen access to the Financial Ombudsman Service. The FCA says its proposal means that approximately 160,000 more SMEs, charities and trusts could refer their complaints to the Ombudsman. The eligibility criteria would extend to businesses with fewer than 50 employees, gross assets below £5 million and annual turnover below £6.5 million. At the moment businesses with 10 or more employees and annual turnover or balance sheet (gross assets) above €2 million are not eligible, nor are charities with income over £1 million and trusts with net assets above that amount. In addition to small businesses the FCA's proposal is for charities with income of up to £6.5 million and trusts with net assets of up to £5 million to be eligible to refer complaints to the FOS. The FCA also proposes to extend eligibility to personal guarantors of corporate loans, if the borrowing business also meets the eligibility criteria.

The FCA requests responses to the consultation by 22 April 2018 and intends to publish a Policy Statement making final rules in summer 2018.

FCA'sregulation round-up for January 2018

The FCA has published its monthly newsletter of regulatory updates and news [18.01.2018]. Highlights include:

  • A Dear CEO letter on Contracts for Difference;
  • A summary of key changes for retail investment advisory firms following MiFID coming into force. (For more on the FCA's updates on MiFID see here); and
  • EBA recommending a new prudential regime for MiFID investment firms.

EU Regulatory 

EIOPA translates guidelines on insurance-based investment products

EIOPA has published the translations of the Guidelines [19.01.2018] under the Insurance Distribution Directive, on Insurance-based Investment Products (IBIPs) that contain a structure that makes it difficult for the customer to understand the risks involved. These Guidelines have now been translated into all the official languages of the European Union. Read more on the Guidelines here. There is a 2 month period from the issue of the translations for Competent Authorities to which the Guidelines apply to confirm to EIOPA if they will comply with them and, if not, to explain why.

Commission publishes its Delegated Act on Money Market Funds Regulation Roadmap

After 4 years of negotiation, the Regulation on Money Market Funds (MMF) was published in the Official Journal on the 30 June 2017. The European Commission has published a Roadmap [15.01.2018] about its work so stakeholders can feed back and become involved in future consultation. Key objectives of the MMF Regulation include reducing future systematic risks and limiting asset-liability mismatch "(i.e. run on the funds)". The MMF Regulation enables the Commission to adopt three delegated acts following technical advice from ESMA: The Commission's Roadmap is open for feedback until 12 February 2018.

Commission publishes Delegated Regulations to the Benchmarks Regulation

The European Commission has published four Delegated Regulations in the Official Journal of the EU to supplement the Benchmarks Regulation [17.01.2018]:

  • Delegated Regulation "specifying how the criteria of Article 20(1)(c)(iii) are to be applied for assessing whether certain events would result in significant and adverse impacts on market integrity, financial stability, consumers, the real economy or the financing of households and businesses in one or more Member States";
  • Delegated Regulation "specifying technical elements of the definitions laid down in paragraph 1 of Article 3 of the [Benchmark] Regulation";
  • Delegated Regulation "specifying how the nominal amount of financial instruments other than derivatives, the notional amount of derivatives and the net asset value of investment funds are to be assessed"; and
  • Delegated Regulation regarding "the establishment of the conditions to assess the impact resulting from the cessation of or change to existing benchmarks."

MiFID II Delegated Regulation on data reporting RTS

The European Commission has published a MiFID II Delegated Regulation in the Official Journal of the EU amending a previous Delegated Regulation containing regulatory technical standards based on ESMA's recommendations concerning "the authorisation, organisational requirements and the publication of transactions for data reporting services providers" [17.01.2018]. The amendment includes provisions for consolidated tape providers for non-equity instruments.

ESAs publish official translations of final Joint Guidelines under the Wire Transfer Regulations

The joint committee of the ESAs has published final Joint Guidelines under the Wire Transfer Regulations [16.01.2018] in all the official EU languages (except Irish). For more information on the guidelines, please see here.

ESMA publishes guide to national rules on notifications of major holdings under the Transparency Directive

The Practical Guide summarises on a country-by-country basis "the main rules and practices applicable across the European Economic Area" (excluding Liechtenstein) on notifications of major holdings under the Transparency Directive for market participants [16.01.2018]. The guide focuses on on-exchange transactions in Part I and provides "transversal tables" in Part II to allow users to compare the rules in the jurisdictions.

ESMA on fees charged by Credit Rating Agencies and Trade Repositories

ESMA has published a thematic report on fees charged by credit rating agencies and trade repositories [11.01.2018] following a review of the current fee structures used. In the report, ESMA expresses concern over fees, identifying its key concerns as transparency and disclosure, the fee-setting process and interaction with related entities. 

Brexit

Michel Barnier Brexit speech published by the European Commission

In a speech at the Trends Manager of the Year 2017 event in Brussels [09.01.2017], Michel Barnier, the European Chief Negotiator for the United Kingdom exiting the European Union, focuses on the future relationship between the UK and the EU27 following Brexit.

Barnier outlines three questions in the answers to which, he says, "that we will see the form of our future relationship." First he questions whether or not the UK wants "an orderly withdrawal or a disorderly withdrawal" from the EU and whether the UK is prepared "to assume the immediate consequences of its decision to leave the European Union?" He sees a positive answer in the agreement on 8 December 2017 which, he says, is a "significant step" towards an orderly withdrawal - though noting that while "the risk of a disorderly withdrawal has receded" we must "remain prepared for all options."

Barnier next questions the type of relationship the UK wants with the EU. He finds no answer yet but can "proceed by deduction, based on the Union's legal system and the UK's red lines. By officially drawing these red lines, the UK itself is itself closing the doors, one by one." Barnier then refers to the British Government's wish to end the free movement of people, to be independent to negotiate international agreements and to cease to recognise the jurisdiction of the Court of Justice of the European Union. Barnier clarifies that "a free trade agreement, however ambitious, cannot include all the benefits of the Customs Union and the Single Market". He refers to the European Union's regulatory framework noting the single rulebook and greater supervisory integration, saying "A country leaving this very precise framework and the accompanying supervision gains the ability to diverge from it, but by the same token loses the benefits of the Internal Market. Its financial services providers can no longer enjoy the benefits of a passport to the Single Market...". This, he explains, is "not a question of punishment or revenge; we simply want to remain in charge of our own rules and the way in which they are applied."

Finally, Barnier questions whether the UK wants to stay close to the European regulatory model. He emphasises the importance of this decision, as the European framework "is underpinned by key societal choices". He cites a number of these – including "fair and effective financial regulation" and also notes: "There will be no ambitious partnership without common ground" on a range of issues - including competition. 

Recent Pinsent Masons publications

Read the latest edition of our Insurance Briefing and our Banks Briefing here.

Here is our New Year Edition of Financial Services Enforcement Express.

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