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Selected Headlines
General
Brexit
Banking and Finance
Securities and Markets
Asset Management
Insurance
Financial Crime
Enforcement
Financial Regulation
Weekly Bulletin 27 October 2016 / Issue 884
Major UK and European regulatory developments of interest to banks, insurers and reinsurers, asset managers and other market participants
Selected Headlines General
Review of consumer policy - speech by European Commissioner, Věra Jourová
1.1
Director General, Financial Services - Treasury appoints Katharine Braddick
2.1
Post-crisis regulatory standards – first Mansion House speech by PRA CEO, Sam Woods
3.1
The FCA’s Mission - FCA launches consultation 4.1
Brexit
Exiting the European Union Committee – Commons Select Committee established and elects Chair
7.1
Joint Ministerial Committee on EU Negotiations - established with leaders from Scotland, Wales and Northern Ireland
8.1
Banking and Finance
CRD IV - Commission publishes Delegated Regulation on benchmarking portfolio assessment standards and sharing procedures
9.1
Review of large exposures framework under the CRR - EBA responds to European Commission Call for Advice
10.1
FCA Guidance Consultation GC16/7 - Revised proposed guidance on guarantor loans
11.1
Securities and Markets
MAR - Corrigendum published in the Official Journal 13.1
EMIR - Commission publishes Delegated Regulation on trade reports to trade repositories
14.1
PRIIPs Regulation - European Parliament does not object to Commission Regulation on product intervention
15.1
MAR - ESMA publishes translations of Guidelines on market soundings and inside information
16.1
MAR - ESMA publishes updated Q&As 16.2
PRA Policy Statement PS29/16: MiFID II: Response to CP9/16 17.1
Quick Links
Financial Regulation / 27 October 2016 / Issue 884 2
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EMIR - FCA signs MoU with US CTFC 18.2
Insurance
Solvency II - Commission Implementing Regulation correcting Regulation on templates for information submission to supervisory authorities published in the Official Journal
21.1
Solvency II - HM Treasury consults on new definition of life insurers’ distributable profits in Companies Act 2006
22.1
PRA Supervisory Statement SS15/16: Solvency II: Monitoring model drift and standard formula SCR reporting for firms with an approved internal model
23.1
(1) PRA Consultation Paper CP37/16: Solvency II: Reporting of National Specific Templates (2) Modification by Consent
23.2
Financial Crime
Correspondent banking services - FATF publishes Guidance 24.1
Directive on criminalisation of money laundering - Commission publishes Roadmap
25.1
Criminal Finances Bill - second reading 26.1
Enforcement
Tariq Carrimjee v FCA, [2016] UKUT 0447 (TCC) – powers of the Tribunal in non-disciplinary cases
28.1
General 1. European Commission
1.1 Review of consumer policy - speech by European Commissioner, Věra Jourová - 17 October
2016 - The European Commissioner for Justice, Consumers and Gender Equality, Věra Jourová, has
delivered a speech on the Commission’s ongoing review of consumer policy, intended to prepare
the ground for future reform proposals. The speech included discussion of streamlining EU
Directives, and the possible introduction of: an EU consumer rights code; specific transparency
requirements for online comparison platforms; an EU-wide consumer right to contractual remedies
and to compensation for unfair consumer practices; an EU-wide ‘black list’ of unfair contract
terms; and protections for consumers in distinguishing traders and consumers on collaborative
economy platforms. She also discussed the availability of injunctions being extended to all EU
consumer Directives, and the extension of protection into business-to-business (B2B) relations.
The speech is here.
1.2 Commission Work Programme 2017 - financial services aspects - 25 October 2016 - The
European Commission has published its Work Programme for 2017, containing several Annexes
listing planned Commission Initiatives, regulatory fitness and performance review (REFIT)
initiatives, priority proposals, pending proposals and legislation the Commission plans to repeal.
Among the key initiatives for 2017 for the internal market (starting at page 7) are the continued
implementation of the Capital Markets Union Action Plan (with a mid-term review expected in the
Financial Regulation / 27 October 2016 / Issue 884 3
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second quarter of 2017), a proposed EU personal pension product, a REFIT revision of EMIR
(648/2012/EU), a strategy on sustainable finance, measures to facilitate funding of infrastructure
corporates, an action plan for retail financial services (including on FinTech), and following up on
the call for evidence on the cumulative impact of financial legislation.
Initiatives on the Economic and Monetary Union (page 10) include a review of the European System
of Financial Supervision to strengthen macro- and micro-prudential oversight, completion of the
Banking Union (including a common European Deposit Insurance Scheme), amendments to CRD IV
(2013/36/EU and 575/2013/EU) and the Bank Recovery and Resolution Directive (2014/59/EU),
and the adoption of pending proposals on securitisation and prospectuses.
On trade (page 11), the Work Programme states that a reasonable and balanced Free Trade
Agreement with the US is a priority. Regarding justice (starting at page 11), the Work Programme
outlines the further implementation of the Commission’s agenda on terrorist financing (see further
an item in the Financial Crime section below).
The Work Programme is here.
Annex 1 (key initiatives for 2017) is here.
Annex 2 (planned REFIT initiatives) is here.
Annex 3 (priority pending proposals) is here.
Annex 4 (planned legislative withdrawals) is here.
Annex 5 (panned repeals) is here.
A REFIT Scoreboard summary is here.
The REFIT Scoreboard for 2016 is here.
A list of legislation that becomes applicable in 2017 is here.
A Commission Work Programme infographic is here.
Q&As on the Work Programme are here.
2. HM Treasury
2.1 Director General, Financial Services - Treasury appoints Katharine Braddick - 24 October 2016 -
HM Treasury has announced that Katharine Braddick, current Treasury Director for Financial
Services (International and EU), has replaced Charles Roxburgh as Director General, Financial
Services, with immediate effect.
The role of Director General, Financial Services, includes responsibility for all issues relating to
financial services, the financial system and financial stability at the Treasury, and is expected to
play a role in the Treasury’s contribution to negotiations on Brexit.
Ms Braddick was previously Director of Prudential Policy at the PRA between 2012 and 2014, Head
of Prudential Banking Policy at the FSA (2011 to 2012), and Head of Department in the
Financial Regulation / 27 October 2016 / Issue 884 4
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International Division of the FSA (2008 to 2011). She joined the FSA in 2003 from the Association of
British Insurers.
The press release is here.
2.2 Financial Services Trade and Investment Board - HM Treasury announces two new
appointments - 24 October 2016 - The Chancellor of the Exchequer confirmed the appointment of
the Chief Executive of TheCityUK, Miles Celic, and International Trade Minister, Mark Garnier MP,
to the Financial Services Trade and Investment Board (FSTIB). The FSTIB, launched at the Budget
in 2013, is tasked with strengthening the UK’s position at the centre of global finance, as well as
enabling the financial services sector to deliver jobs and growth across the country.
The press release is here.
3. Prudential Regulation Authority
3.1 Post-crisis regulatory standards – first Mansion House speech by PRA CEO, Sam Woods - 26
October 2016 - Sam Woods, has given his first speech as Deputy Governor for Prudential Regulation
at the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at the
Mansion House Banquet. He spoke on the PRA’s goals, and its implementation of post-crisis
regulatory reforms.
Among other things, Mr Woods made the following points:
his approach to running the PRA — was “more of the same. That means supervision
which is firm but fair, using all of the latest analytical tools and techniques, together
with a healthy dose of common sense”. He also indicated that he would focus on the
PRA’s statutory objectives, and that he approved of the judgement-based, forward-looking
supervisory model adopted by the PRA;
we have reached the end of the post-crisis revolutionary period — so far as prudential
standards are concerned, although they have to be implemented;
ring-fencing — ideally we would not restructure our banking system and extricate
ourselves from the EU at the same time, but the benefits are worth pursuing;
bail in — the PRA will issue its final policy shortly;
supervision — the PRA will continue to ask searching questions about the quality of a
firm’s assets, the rigour of its risk management, the experience of its board, the
plausibility of its resolution plan, etc.;
greater transparency around the capital adequacy of the banking system — next week
the Bank of England will launch a new quarterly statistical release which will show levels
of capital and risk-weighted assets for the UK banking sector, with breakdowns of the
movements in different tiers of capital and risk exposure types. The first set of data (for
Q1 2014 to Q2 2016) will be published on 16 December 2016;
disclosure framework for banks’ and insurers’ regulatory data — the regulator will
publish a Discussion Paper on this in summer 2017;
Financial Regulation / 27 October 2016 / Issue 884 5
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Solvency II — Mr Woods welcomed the European Commission’s request for the European
Insurance and Occupational Pensions Authority to review the role of the risk margin; and
internal models for smaller firms — the PRA will bring forward proposals under the Pillar
2 regime which should reduce the risk that its capital standards are overly prudent for
smaller firms using the standardised approach to credit risk to calculate their
requirements.
The speech is here.
The speech webpage is here.
The press release is here.
4. Financial Conduct Authority
4.1 The FCA’s Mission - FCA launches consultation - October 2016 - The FCA has launched a
consultation on its mission, with a view to the establishment of a set of guiding principles which
explain how the FCA pursues its statutory objectives, decides on its priorities, and the tools used
to deliver on its objectives.
The key themes include:
protecting consumers — seeking views on the right level of consumer protection, and the
balance of responsibility between firms and customers;
vulnerable consumers — whether the FCA should prioritise the protection of vulnerable
consumers, and how;
delivering consumer redress — the FCA’s role in redress schemes, particularly those dealing
with activity outside the FCA’s remit;
FCA intervention — how the FCA identifies harm, its approach in addressing it, and how the
FCA can be clearer to consumers and firms on its interventions;
the scope of regulation — explaining its remit around policing the perimeter;
the interaction between regulation and public policy — including on access to financial
services and price discrimination;
competition, supervision and enforcement — views are sought on the FCA’s current approach
to using its different regulatory powers and tools; and
the FCA Handbook — seeking suggestions on a proposed review.
In Chapter 13 (‘Our approach to enforcement’), the FCA is reviewing the use of the term ‘referred
to Enforcement’, which it believes is often misinterpreted as meaning it has decided to initiate
enforcement proceedings, when it has simply decided to investigate. The FCA proposes a more
neutral term, such as ‘referral for investigation of a suspected contravention or breach’. The FCA
is also reviewing its use of ‘private warnings’, and whether they are consistent with the FCA’s
Financial Regulation / 27 October 2016 / Issue 884 6
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desire to be more transparent, but noting their benefits in providing a quick and clear resolution
to concerns.
In Chapter 14 (‘Looking ahead’), the FCA talks about data science, indicating that its initial focus
is on sifting a large amount of data to target firms with a higher risk of having problems. Its next
focus will be on financial crime (detecting insider trading, market manipulation and anti-money
laundering).
FCA Chief Executive, Andrew Bailey, delivered a speech at Mansion House on 26 October 2016,
setting out in further detail the FCA’s approach, and the rationale behind the FCA’s future
mission.
The consultation period closes on 26 January 2017.
The FCA plans to publish its final mission paper alongside its 2017/18 business plan.
The consultation ‘Our Future Mission’ is here.
The FCA’s future mission webpage is here.
A transcript of Andrew Bailey’s introductory video is here.
The Mansion House speech by Andrew Bailey is here.
The press release is here.
5. Financial Ombudsman Service
5.1 FOS voluntary jurisdiction - FOS consults on FCA ‘minor’ amendments - 24 October 2016 - The
Financial Ombudsman Service (FOS) has issued a consultation on proposals by the FCA to make
what the FOS has described as “minor amendments” to make “administrative changes” to the
voluntary jurisdiction of the FOS, as set out in the Dispute Resolution: Complaints sourcebook
(DISP) of the FCA Handbook, to correct “historic drafting discrepancies”. The proposed changes
are set out in a draft Handbook Administration (No. 44) Instrument 2016.
The consultation period closes on 9 November 2016.
The consultation is here.
6. New legislation
6.1 The Financial Services (Banking Reform) Act 2013 (Consequential Amendments) (No. 2) Order
2016 (SI 2016/1023) was made on 21 October 2016 and comes into force on 21 November 2016.
The Order makes consequential amendments to the Financial Services and Markets Act 2000
(Qualifying EU Provisions) Order 2013 (SI 2013/419) and the Financial Services and Markets Act
2000 (Qualifying EU Provisions) (No. 2) Order 2013 (SI 2013/3116), which specify a “qualifying EU
provision” for the purposes of determining whether a person has been knowingly concerned in a
contravention of a relevant conduct requirement by an authorised person under sections 66A and
66B of FSMA 2000, inserted by the Financial Services (Banking Reform) Act 2013.
The Order is here.
Financial Regulation / 27 October 2016 / Issue 884 7
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The explanatory memorandum is here.
Brexit 7. UK Parliament
7.1 Exiting the European Union Committee – Commons Select Committee established and Chair
elected - 19 October 2016 - The House of Commons has established the Exiting the European
Union Committee and elected Hilary Benn MP as its Chair. It has tweeted that the Committee will
be holding the Department for Exiting the EU to account for policy, spending and administration.
Mr Benn’s nomination statement explained that:
“The Committee will need to scrutinise and offer advice to the Government as we go
about the complex process of leaving the institutions of the European Union. Our aim
should be to minimise the risks and uncertainty for business, protect the things that the
British people value and make the most of the opportunities.”
He went on to say:
“There are a large number of substantive issues that the Committee and the House will
need to deal with as part of this process now that the Government has indicated when it
will trigger Article 50. These will include the Government’s negotiating plan, ensuring
continued access to European markets for all our industries and services, future
arrangements for immigration control from the EU and maintaining cooperation with our
European neighbours in areas like foreign policy, defence and security that are
particularly important to us.”
A large number of other Parliamentary Select Committees are also engaged in work on specific
aspects of Brexit, including, among others, the House of Commons Foreign Affairs Committee on
the transposition of current EU Regulations, and the House of Lords EU Internal Market Sub-
Committee on UK-EU trade in services post-Brexit.
The Exiting the European Union Committee webpage is here.
The press release announcing the election of Hilary Benn is here.
Mr Benn’s nomination statement is here.
The Foreign Affairs Committee Inquiry webpage is here.
The Lords EU Internal Market Sub-Committee Inquiry webpage is here.
8. HM Government
8.1 Joint Ministerial Committee on EU Negotiations - established with leaders from Scotland,
Wales and Northern Ireland - 24 October 2016 - The Prime Minister has met the First Ministers of
each of Scotland, Wales and Northern Ireland at a meeting of the Joint Ministerial Committee to
discuss their potential contributions to negotiations on the UK’s exit from the European Union.
Among other things, the Committee set up a Joint Ministerial Committee on EU Negotiations, to be
chaired by Brexit secretary David Davis. The Committee is expected to hold its first meeting in
November, where it will discuss its work programme. The Joint Ministerial Committee
communiqué of 24 October 2016 contains the new Committee’s terms of reference.
Financial Regulation / 27 October 2016 / Issue 884 8
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Through the Joint Ministerial Committee on EU Negotiations, the UK government and devolved
administrations will work collaboratively to:
discuss each government’s requirements of the future relationship with the EU;
seek to agree a UK approach to, and objectives for, Article 50 negotiations;
provide oversight of negotiations with the EU, to ensure, as far as possible, that outcomes
agreed by all four governments are secured from these negotiations; and
discuss issues stemming from the negotiation process which may affect or have consequences
for the UK Government, the Scottish Government, the Welsh Government or the Northern
Ireland Executive.
The Joint Ministerial Committee communiqué is here.
The press release is here.
See also the General section above for two items on new appointments, to the post of Director General,
Financial Services at HM Treasury, and to the Financial Services Trade and Investment Board.
See further the General section above for an item on the Mansion House speech by new PRA CEO, Sam
Woods, which mentions the intention to press ahead with ring-fencing, despite the negotiations to leave
the EU.
Banking and Finance 9. European Commission
9.1 CRD IV - Commission publishes Delegated Regulation on benchmarking portfolio assessment
standards and sharing procedures - 24 October 2016 - The European Commission has published a
Delegated Regulation (C(2016) 6703) setting out draft regulatory technical standards (RTS) for
benchmarking portfolio assessment standards and the assessment sharing procedures under Article
78(7) of the Capital Requirements Directive (2013/36/EU) (CRD IV).
The Delegated Regulation is here.
10. European Banking Authority
10.1 Review of large exposures framework under the CRR - EBA responds to European Commission
Call for Advice - 24 October 2016 - The European Banking Authority (EBA) has published its
response to the European Commission’s Call for Advice (26 April 2016) on its review of the Capital
Requirements Regulation’s (575/2013/EU) (CRR) large exposures framework.
The report is here.
The press release is here.
10.2 BRRD - EBA consults on draft ITS on identification and transmission of MREL information to the
EBA - 24 October 2016 - The EBA has issued a Consultation Paper containing draft implementing
technical standards (ITS) on templates and procedures for use by resolution authorities in
Financial Regulation / 27 October 2016 / Issue 884 9
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reporting to the EBA on the minimum requirements for own funds and eligible liabilities (MREL)
under Article 45(17) of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD).
The consultation period closes on 21 November 2016.
The Consultation Paper is here.
The Annex to the Consultation Paper is here.
The Consultation webpage is here.
The press release is here.
10.3 PSD2 - EBA published responses to consultation on customer authentication and secure
communication - 27 October 2016 - The EBA has published responses to its 12 August 2016
consultation on draft regulatory technical standards (RTS) covering strong consumer
authentication and common and secure communication under the second Payment Services
Directive (EU) 2015/2366 (PSD2). They include a response from the European Payments Council
(EPC).
The EBA’s consultation webpage, which contains a full list of published responses is here.
The EPC’s response is here.
The EPC’s press release is here.
11. Financial Conduct Authority
11.1 FCA Guidance Consultation GC16/7 - Revised proposed guidance on guarantor loans - October
2016 - In February 2016, the FCA published a guidance consultation (GC16/2) which set out how it
would interpret provisions of the Consumer Credit Act 1974 (CCA) regarding the enforcement of
security in the context of guarantor loans and whether this requires a default notice under the
CCA. The FCA has now published a further guidance consultation (GC16/7) in light of the responses
to GC16/2.
The consultation period closes on 25 November 2016.
The FCA anticipates releasing its Finalised Guidance in Q1 2017.
FCA Guidance Consultation GC16/7 is here.
The Guidance Consultation webpage is here.
12. Competition and Markets Authority
12.1 Retail banking market investigation - speech by Investigation Chair, Alasdair Smith, on the
investigation’s impact - 21 October 2016 - The Inquiry Chair of the Competition and Markets
Authority’s (CMA) retail banking market investigation, Alasdair Smith, has delivered a speech on
the impact of the investigation on retail banking and the effect of the CMA’s package of remedies.
In the speech, Mr Smith details:
Financial Regulation / 27 October 2016 / Issue 884 10
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the main problems affecting competition in retail banking, as raised by the investigation;
the CMA’s remedies package and its impact on the market; and
the reasoning behind actions not taken by the CMA, including the break-up of bigger retail
banks, not banning ‘free if in credit’ banking, and not making any changes that would overlap
with the areas covered by other regulators, such as payment systems and prudential standards.
The speech is here.
See also the General section above for an item on the European Commission Work Programme 2017.
See the Securities and Markets section below for an item on PRA Policy Statement PS29/16: MiFID II:
Response to CP9/16.
See also the Financial Crime section below for an item on the FATF publishing Guidance on correspondent
banking.
See further the Financial Crime section below for an item on the Government proposing to amend the
Privacy and Electronic Communications Regulations to make directors liable to fines for nuisance calls
(sometimes associated with claims management companies and payment protection insurance).
Securities and Markets 13. Official Journal of the European Union
13.1 MAR - Corrigendum published in the Official Journal - 21 October 2016 - A Corrigendum to the
Market Abuse Regulation (596/2014/EU) (MAR), making three corrections, has been published in
the Official Journal of the European Union.
The Corrigendum is here.
14. European Commission
14.1 EMIR - Commission publishes Delegated Regulation on trade reports to trade repositories - 26
October 2016 - The European Commission has adopted a Delegated Regulation (C(2016) 6801)
amending Commission Implementing Regulation 1247/2012/EU, which sets out implementing
technical standards (ITS) on the format and frequency of trade reports to trade repositories under
the European Market Infrastructure Regulation (648/2012/EU) (EMIR).
The Delegated Regulation is subject to a non-objection period from the European Parliament and
the Council of the European Union.
The ITS enter into force nine months after their publication in the Official Journal of the EU, with
the exception of the extension of the deadline for the reporting of historic trades, which will
become applicable immediately upon publication.
The Delegated Regulation is here.
The Annex is here.
The press release is part of the Commission’s 26 October 2016 daily news here.
Financial Regulation / 27 October 2016 / Issue 884 11
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15. European Parliament
15.1 PRIIPs Regulation - European Parliament does not object to Commission Regulation on product
intervention - 21 October 2016 - The European Parliament has indicated that it does not object to
the European Commission’s Delegated Regulation (C(2016) 4369) on product intervention under
the Packaged Retail and Insurance-based Investment Products Regulation (1286/2014/EU) (PRIIPs
Regulation).
The Council has already indicated that it does not object, so the Commission Delegated Regulation
is now expected to be published in the Official Journal of the European Union. It will enter into
force on the 20th day following publication in the Official Journal of the EU, and will apply from 31
December 2016.
The Delegated Regulation of 17 July 2016 is here.
The procedure file is here.
16. European Securities and Markets Authority
16.1 MAR - ESMA publishes translations of Guidelines on market soundings and inside information -
20 October 2016 - The European Securities and Markets Authority has published official
translations of two sets of Guidelines under the Market Abuse Regulation (596/2014/EU) (MAR): on
persons receiving market soundings, and on the delay and disclosure of inside information.
The Guidelines apply from 20 December 2016.
The Guidelines on persons receiving market soundings is here.
The Guidelines on delay in the disclosure of inside information is here.
The press release is here.
16.2 MAR - ESMA publishes updated Q&As - 26 October 2016 - ESMA has published an updated set of
Q&As on the implementation of MAR. The new Q&As relate to:
manager’s transactions and the exchange rate that should be used to determine if the
threshold in Article 19(8) MAR of EUR 5,000 has been crossed;
whether communications made orally or via electronic means, such as telephone calls and
“chat” functions, or communications labelled e.g. “morning notes” or “sales notes”, constitute
an “investment recommendation” under MAR;
whether communications that do not refer to either one or several financial instruments or
issuers should be considered investment recommendations under MAR;
whether an investment firm which produces an investment recommendation should be
considered to fall within the scope of Article 3(1)(34)(i) of MAR, even though the production of
such a recommendation is not its main business; and
whether material intended for distribution channels or for the public, concerning one or
several financial instruments, which contains statements indicating that the financial
Financial Regulation / 27 October 2016 / Issue 884 12
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instruments concerned are “undervalued”, “fairly valued” or “overvalued”, falls within the
definition of “investment recommendation” under MAR.
The updated Q&As are here.
The press release is here.
16.3 MiFIR - ESMA publishes new reporting templates and instructions - 27 October 2016 - ESMA has
released a number documents containing reporting instructions under the Markets in Financial
Instruments Regulation (600/2014/EU) (MiFIR).
The technical reporting instructions for MiFIR transaction reporting are here.
The reporting instructions for the double cap volume system is here.
The reporting instructions for the FIRDS transparency system is here.
The reporting instructions for the FIRDS reference data system is here.
ESMA’s MiFIR reporting instructions webpage is here.
17. Prudential Regulation Authority
17.1 PRA Policy Statement PS29/16: MiFID II: Response to CP9/16 - October 2016 - The Prudential
Regulation Authority (PRA) has released a Policy Statement (PS29/16) setting out feedback to the
PRA’s Consultation Paper CP9/16 (March 2016) on the implementation of the Markets in Financial
Instruments Directive (2014/65/EU) (MiFID II) in the UK (Part 1). The Policy Statement also sets
out final rules on:
the extension of scope and harmonisation of the MiFID passporting regime in the Passporting
Part of the PRA Rulebook; and
systems and controls for firms that undertake algorithmic trading and provide direct electronic
access to trade venues in the new Algorithmic Trading Part of the PRA Rulebook, with final
rules set out in the ‘PRA Rulebook: CRR Firms: Algorithmic Trading Instrument 2016’.
The PRA has indicated the main areas where it has made amendments to the rules proposed in
CP9/16 in Chapter 2 of PS29/16 and has stated that these are mainly to aid clarity.
PRA Policy Statement PS29/16 is here.
The PRA Rulebook: CRR Firms: Passporting Instrument 2016 (PRA 2016/42) is here.
The PRA Rulebook: CRR Firms: Algorithmic Trading Instrument 2016 (PRA 2016/41) is here.
The Policy Statement webpage is here.
18. Financial Conduct Authority
18.1 MiFID II - FCA updates firms on authorisation process - 21 October 2016 - The FCA has informed
firms that it intends to start accepting applications for variation of permission and passporting
notifications under MiFID II in early 2017.
Financial Regulation / 27 October 2016 / Issue 884 13
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Ahead of the FCA accepting applications, it intends to host a series of events and workshops.
In addition, the FCA is developing a new Market Data Processor system, to be used to manage data
submitted by entities under MiFID II. The FCA expects to host technical events for firms and those
submitting market data.
The sign up form for MiFID II workshops is here.
18.2 EMIR - FCA signs MoU with US CTFC - 27 October 2016 - The FCA has published a Memorandum of
Understanding (MoU) (dated 6 October 2016) signed by the FCA and the US Commodities Futures
Trading Commission (CFTC). The MoU sets out the FCA and CFTC’s arrangements on exchange of
information and cooperation in the supervision and oversight of firms under EMIR and equivalent
US legislation, which engage in over-the-counter derivatives trading or swaps.
The MoU is here.
19. Wholesale Market Brokers’ Association
19.1 RONIA - WMBA issue change to benchmark methodology - October 2016 - The Wholesale Market
Brokers’ Association (WMBA) has published a market notice containing a change to the benchmark
methodology of the Repurchase Overnight Index Average (RONIA) following a consultation on 9
August 2016. The new methodology specifies the definition of RONIA, which transactions are
RONIA eligible, and the process by which the index is weighted.
The changes to the methodology take effect from 1 November 2016.
The market notice is here.
See also the General section above for an item on the European Commission Work Programme 2017, which
includes proposed amendments to EMIR.
See also the General section above for an item on the FCA consulting on its mission, in a paper which
indicates, in its chapter on next steps, that its next focus will be on financial crime (detecting insider
trading, market manipulation and anti-money laundering).
Asset Management 20. Council of the European Union
20.1 EuVECA and EuSEF Amending Regulation - Council publishes further Presidency compromise
text - 24 October 2016 - The Council of the European Union has published a further Presidency
compromise text, setting out an amended version of the Proposed Regulation amending the
Regulation on European Venture Capital Funds (345/2013/EU) (EuVECA Regulation) and the
Regulation on European Social Entrepreneurship Funds (346/2013/EU) (EuSEF Regulation). The text
follows previous compromise versions published on 22 September and 11 October 2016, with
changes marked.
The Presidency compromise text is here.
The procedure file is here.
Financial Regulation / 27 October 2016 / Issue 884 14
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See also the Enforcement section below for an item on the FCA making two total prohibition orders,
following convictions for fraud and forgery in connection with Arck LLP investments.
Insurance 21. Official Journal of the European Union
21.1 Solvency II - Commission Implementing Regulation correcting Regulation on templates for
information submission to supervisory authorities published in the Official Journal - 21 October
2016 - Commission Implementing Regulation (EU) 2016/1868 of 20 October 2016, amending and
correcting Commission Implementing Regulation (EU) 2015/2450 on implementing technical
standards (ITS) on the templates for submission of information to supervisory authorities under
Solvency II (2009/138/EC), has been published in the Official Journal of the European Union.
The Regulation enters into force on 10 November 2016.
The Regulation is here.
22. HM Treasury
22.1 Solvency II - HM Treasury consults on new definition of life insurers’ distributable profits in
Companies Act 2006 - 26 October 2016 - HM Treasury has issued a consultation paper on technical
changes to the legal definition of life insurers’ distributable profits under the Companies Act 2006,
now that the “long-term fund” concept, referenced by the Act in section 843, is no longer used for
Solvency II firms, following changes to the Prudential Regulation Authority (PRA) Rulebook. The
Treasury is proposing a new section 843A, within Part 23 of the Act, and ‘minor’ consequential
changes to sections 830, 843 and 853.
The new section 843A is designed to lay out a methodology to allow firms only to make
distributions out of realised profits, and drawing on the Solvency II regulatory framework. This will
replace the removal of the “long-term fund” concept.
Annex B contains draft Companies Act 2006 (Solvency 2 Consequential Amendments) Regulations
2016.
The consultation period closes on 15 November 2016.
Following this, the Government expects to lay a statutory instrument. Subject to Parliamentary
procedure, the government expects the changes will come into force 21 days after being laid.
‘Distributable profits of long-term (life) insurers: a consultation’ (October 2016) is here.
The consultation webpage is here.
23. Prudential Regulation Authority
23.1 PRA Supervisory Statement SS15/16: Solvency II: Monitoring model drift and standard formula
SCR reporting for firms with an approved internal model - October 2016 - The Prudential
Regulation Authority (PRA) has published a Supervisory Statement (SS15/16) setting out the PRA’s
expectations of firms with an approved internal model, and contains information on the PRA’s
approach to monitoring model drift and the reporting of standard formula Solvency Capital
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Requirement (SCR) information. On the holding webpage, the PRA has set out feedback to their
May 2016 Consultation Paper CP22/16.
PRA Supervisory Statement SS15/16 is here.
Standard formula SCR reporting templates for firms with an approved internal model are available
on the Regulatory Reporting webpage (at the bottom of the page) here.
The webpage for SS15/16 is here.
23.2 (1) PRA Consultation Paper CP37/16: Solvency II: Reporting of National Specific Templates (2)
Modification by Consent - October 2016 - The PRA has published a Consultation Paper (CP37/16)
covering proposed changes to National Specific Template file types and reporting formats under
Solvency II, and includes a number of reporting clarifications and technical corrections to related
documents.
The PRA has also published a Modification by Consent to enable firms with a financial year ending
on or after 30 June 2016 but before 19 December 2016 to have time to implement the proposed
changes to the reporting format.
The consultation closes on 6 December 2016.
PRA Consultation Paper CP37/16 is here.
Related documents are available here.
The press release for CP37/16 is here.
The Modification by Consent is here.
A draft Direction for firms wishing to use the Modification by Consent is here.
See also the General section above for an item on the Mansion House speech by new PRA CEO, Sam
Woods, which mentions his approach, Solvency II and the role of risk margin, and the possible disclosure of
insurance regulatory returns.
See further the General section above for an item on the FCA consulting on its mission
See also the Financial Crime section below for an item on the Government proposing to amend the
Privacy and Electronic Communications Regulations to make directors liable to fines for nuisance calls
(sometimes associated with claims management companies and payment protection insurance).
Financial Crime 24. Financial Action Task Force
24.1 Correspondent banking services - FATF publishes Guidance - October 2016 – Following concerns
about ‘de-risking’ (terminating business relationships with customers in entire geographical
regions or classes of customers), the Financial Action Task Force (FATF) has published Guidance on
its requirements in relation to correspondent banking. The FATF clarifies that the FATF
Recommendations do not require correspondent financial institutions to conduct customer due
diligence on each individual customer of their respondent institutions’ customers. It states that
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not all correspondent banking relationships carry the same level of money laundering or terrorist
financing risks, meaning that any enhanced due diligence conducted must be commensurate to the
degree of risks identified.
The Guidance is here.
The Guidance webpage is here.
24.2 Criminalising terrorist financing - FATF publishes Guidance - October 2016 - The FATF has
published Guidance for member countries to meet each of the requirements of FATF
Recommendation 5 on criminalising terrorist financing in their national legal systems.
Recommendation 5 contains measures to assist countries to fulfil the legal requirements of the
International Convention for the Suppression of the Financing of Terrorism (1999), and relevant UN
Security Council Resolutions.
The Guidance is here.
The Guidance webpage is here.
25. European Commission
25.1 Directive on criminalisation of money laundering - Commission publishes Roadmap - 25 October
2016 - The European Commission has set out a Roadmap for the possible proposal of a Directive on
the criminalisation of money laundering, a key action from the Action Plan against terrorist
financing (2 February 2016). The Roadmap contains an indicative date of Q4 2016.
The Roadmap is here.
26. UK Parliament
26.1 Criminal Finances Bill - second reading - 25 October 2016 - The Criminal Finances Bill (which
contains provisions relevant to anti-money laundering, the funding of terrorism, and the corporate
offence of failing to prevent the facilitation of tax evasion) had its second reading debate in the
House of Commons on 25 October 2016. Among other things, the Minister for Security, Ben
Wallace, mentioned the time limit for a suspicious activity report being potentially extended from
31 days to six months, discussed unexplained wealth orders, and indicated that the corporate
offence would apply to overseas companies as well as UK companies.
Opposition MPs mainly commented that the Bill did not go far enough, both in not applying to
Crown Dependencies and Territories, or requiring them to publish registers of beneficial
ownership, and not creating a corporate offence of failing to prevent economic crime.
The Bill has now been committed to a Public Bill Committee, the dates of which are yet to be
announced, but is to conclude on 24 November 2016.
The second reading debate is here.
The Bill webpage is here.
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27. Department of Culture, Media & Sport and Information Commissioner’s Office
27.1 Privacy and Electronic Communications Regulations - Government proposes director liability
for nuisance calls - 23 October 2016 - The Department for Culture, Media & Sport has announced
that it intends to amend the Privacy and Electronic Communications (EC Directive) Regulations
2003 (SI 2003/2426). The amendments would enable the Information Commissioner, from spring
2017, to impose fines of up to £500,000 on directors of firms found to be in breach of the
Regulations, which ban nuisance calls. The problem can be associated with claims management
companies and payment protection insurance.
The Department for Culture, Media & Sport’s press release is here.
A statement by the Information Commissioner, Elizabeth Denham, is here.
A blog post by the Information Commissioner’s Office Enforcement Group Manager, Andy Curry, is
here.
See also the General section above for an item on the European Commission Work Programme 2017.
See also the General section above for an item on the FCA consulting on its mission, in a paper which
indicates, in its chapter on next steps, that its next focus will be on financial crime (detecting insider
trading, market manipulation and anti-money laundering).
See also the Enforcement section below for an item on the FCA making two total prohibition orders,
following convictions for fraud and forgery in connection with Arck LLP investments.
Enforcement 28. Recent cases
28.1 Tariq Carrimjee v FCA, [2016] UKUT 0447 (TCC), 20 October 2016
Partial prohibition order on grounds of competence and capability — powers of the Tribunal in
non-disciplinary cases — whether Tribunal can consider matter which have occurred following
Decision Notice — whether the Tribunal can consider whether individual is ‘fit and proper’ —
Sections 133 (4) and (6A) of FSMA 2000.
The Upper Tribunal (Judge Timothy Herrington, Gary Bottriell and Sandi O’Neill) has dismissed a
reference made by Tariq Carrimjee of Somerset Asset Management LLP regarding a Further
Decision Notice dated 26 November 2015, provisionally prohibiting Mr Carrimjee from performing
the compliance oversight (CF10) and money laundering reporting (CF11) significant influence
functions after a breach of Statement of Principle 2 (exercising due skill, care and diligence). In
reaching its decision, the Tribunal considered the admissibility of evidence of events after the
relevant notice, and the proper conduct of a non-disciplinary reference (including whether the
Tribunal could consider whether an individual is ‘fit and proper’).
Background
In its earlier decision, [2015] UKUT 0079 (TCC), the Tribunal had upheld the £89,004 financial
penalty imposed on Mr Carrimjee for the breach of Statement of Principle 2 (by failing to escalate
the risk that his client, Rameshkumar Goenka, might have been intending to engage in market
manipulation when the risk should have been apparent to him), but did not uphold on the facts
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that Mr Carrimjee had breached Statement of Principle 1 (integrity). It remitted the decision to
withdraw his approval, and issue him with a total prohibition order, back to the FCA for
reconsideration in the light of its findings. This had resulted in the making of the Further Decision
Notice, and this, Mr Carrimjee’s second reference.
Mr Carrimjee argued (para [93]) that:
he had the fundamental skill and judgment to discharge the relevant controlled functions
effectively, and that he had learned from his mistake, and would not repeat it (the
competence and capability issue); and
the FCA had erred in law in that it had taken into account improper considerations
regarding sending a deterrent message to the industry when issuing the Further Decision
Notice (the improper considerations issue).
Preliminary issues
The Tribunal decided that:
it was open to the Tribunal, under section 133(4) of FSMA 2000, to consider evidence not
available to the FCA’s Regulatory Decisions Committee (further training undertaken by Mr
Carrimjee after the Further Decision Notice) and make findings of fact on it that are
relevant to the question of Mr Carrimjee’s competence and capability in performing the
significant influence functions of compliance oversight and money laundering reporting;
and
the proper procedure for the Tribunal to follow in relation to non-disciplinary references
under section 133(6A) of FSMA 2000 was as follows: if the Tribunal concludes that the
decision to prohibit is one reasonably open to the FCA, it should dismiss the reference. If
it is not so satisfied, it should remit the matter to the FCA with a direction to reconsider
its decision in the light of its findings. In particular, it should do this if the original findings
have been overtaken by further developments, such as new evidence, that indicated the
applicant’s proficiency in relation to relevant matters. These are findings of fact that
section 133(6A) of FSMA 2000 clearly envisages may be made by the Tribunal. It was not
open to the Tribunal in the case of Timothy Roberts & Andrew Wilkins v FCA [2015] UKUT
0408 (TCC) to make a finding of fitness and propriety, and the Tribunal declined to follow
it.
Judge Herrington said ([para 51]):
“Mr Carrimjee invites us to make findings on the question as to whether he has
the fundamental skills and judgment to discharge the relevant controlled
functions effectively, has learned from his mistake, and would not repeat his
mistake. In our view all of those matters relate to the question of the degree of
competence and capability that Mr Carrimjee possesses which is relevant to the
functions in question. The Tribunal may make that assessment and then decide
whether its findings merit the matter being remitted to the Authority for its
further consideration. This approach in no respect strips the standard of review
set out in s 133(6A) FSMA of any effect and to that degree we reject Mr Stanley’s
submissions. The making of that assessment in our view does not result in the
Tribunal deciding how the Authority should exercise its discretion in determining
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the question as to whether it appears to the Authority that Mr Carrimjee is not
fit and proper to undertake the relevant functions.”
Decision
The Tribunal noted a lack of evidence about some of the training courses undertaken, and the fact
that in relation to the training about which some information was available, no oral evidence had
been given, so that some questions remained unanswered. In addition, it considered that some of
Mr Carrimjee’s answers were vague, and lacked meaningful examples. Furthermore, it considered
the decision to undertake further training before the Tribunal hearing was tactical and reactive,
whereas the failure to notice the market manipulation issue was “basic, fundamental and
serious”. On the evidence, it was not persuaded of the competence issue, even taking into
account recent training. None of the developments since the Further Decision Notice cast any
doubt on the reasonableness of the FCA’s decision.
The Tribunal sought to allay Mr Carrimjee’s fears about the stigma associated with a prohibition
order affecting his future business, making clear that it related only to two significant functions,
and that there were no allegations of actual money laundering.
On the improper considerations issue, the Tribunal indicated that there was a distinction between
punishment and deterrence, and that publication of a prohibition order is likely to act as a
deterrence. The Tribunal found that there was nothing in the Further Decision Notice that
indicated that the prohibition order was an additional punishment, and that it was not materially
determined by an irrelevant consideration.
The Tribunal therefore dismissed the reference. In its press release, the FCA notes that it remains
open to the parties to appeal the judgment of the Tribunal.
The judgment is here.
The FCA press release is here.
29. Financial Conduct Authority
29.1 Total prohibition orders following convictions for fraud and forgery - FCA bans Richard Aston
Clay and Kathryn Joy Clark - 25 October 2016 - The FCA has made total prohibition orders against
Richard Aston Clay and Kathryn Joy Clark after they pleaded guilty to fraud (and, in the case of Ms
Clark, forgery) offences relating to investments made through Arck LLP and HD Administrators
LLP. Mr Clay was sentenced to ten years and ten months’ imprisonment, and Ms Clark was given a
two year suspended sentence.
The Final Notice for Mr Clay is here.
The Final Notice for Ms Clark is here.
The FCA press release is here.
See also the General section above for an item on the FCA consulting on its mission, in a paper which
includes a chapter on its approach to enforcement (indicating a review of the phrase ‘referred to
enforcement’ and the use of private warnings), and a chapter on its next steps, which indicates that the
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FCA’s next focus will be on financial crime (detecting insider trading, market manipulation and anti-
money laundering).
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This Bulletin is prepared by the Financial Regulation Group of Slaughter and May in London.
The Group comprises a team of lawyers with expertise and experience across all sectors in which
financial institutions operate.
We advise on regulatory issues affecting firms across the financial services sector, including
banks, investment firms, insurers and reinsurers, brokers, asset managers and funds, non-bank
lenders, payment service providers, e-money issuers, exchanges and clearing systems. We also
advise non-regulated businesses involved in financial regulatory matters. In addition, our leading
financial regulatory investigations practice is regularly instructed by financial institutions
requiring specialist knowledge of financial services regulation together with experience in high
profile and complex investigations and contentious regulatory matters.
Most of the projects that we advise on have an extensive international or cross-border element.
We work in seamless integrated teams with leading independent law firms which offer many of
the most highly regarded financial institutions lawyers in Europe, the US and Asia, as well as
strong and constructive relationships with local regulators.
Our Financial Regulation Group also produces occasional briefing papers and other client
publications. The five most recent issues of this Bulletin and our most recent briefing papers
and client publications appear on the Slaughter and May website here.
The Group’s recent work includes advising:
A number of banking groups in relation to banking structural reforms, including the
ring-fencing regime;
UK Asset Resolution on the sale of a £13bn asset portfolio to Cerberus Capital Management;
Palamon Capital Partners and Corsair Capital on their joint acquisition of Currencies Direct;
International and specialist insurer and reinsurer, Catlin Group Limited, on the acquisition
of it by global insurer and reinsurer, XL Group plc;
Deutsche Bank in relation to several simultaneous investigations in multiple jurisdictions
relating to LIBOR and a global financial services institution on the investigation by a number
of regulators into foreign exchange trading, including in relation to a settlement involving
the FCA which was announced in November 2014;
Banco Santander on a pan-European and global asset management joint venture with leading
global private equity firms Warburg Pincus and General Atlantic;
A number of multi-national clients in relation to the UK, EU, and US economic and trade
sanctions regimes.
If you would like to find out more about our Financial Regulation Group or require advice on a
financial regulation matter, please contact one of the following or your usual Slaughter and May
contact:
Jan Putnis [email protected]
Ben Kingsley [email protected]
Nick Bonsall [email protected]
© Slaughter and May 2016
This material is for general information only and is not intended to provide legal advice.
For further information, please speak to your usual Slaughter and May contact.
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