The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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UK Financial Conduct Authority Publishes Proposals to Revamp its Decision-Making Process
07/29/2021
The U.K. Financial Conduct Authority has published a consultation paper on proposals to change its decision-making process. The objective of these proposals is to make the FCA a nimbler regulator that can make faster and more effective decisions. Responses to the consultation may be submitted until September 17, 2021. The FCA intends to publish a Policy Statement before the end of the year, likely in November, and envisages that the revised decision-making framework would start in November, too. Any cases that are being considered by the Regulatory Decisions Committee would remain with the RDC under the existing processes.
Read more.TOPIC : Financial Services -
UK Listings Regulator Consults on Tightening Diversity Requirements for Listed Companies
07/28/2021
The U.K. Financial Conduct Authority has opened a consultation on proposals to amend the requirements on diversity and inclusion on listed company boards and executive committees. The proposals include changes to the Listing Rules and the Disclosure and Transparency Rules, including guidance. The consultation closes on October 20, 2021. The FCA intends to publish final rules before the end of 2021 and for the new requirements to apply to accounting periods starting on or after January 1, 2022. This means that annual financial reports published for 2022 in spring 2023 would include the reporting changes.
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UK Conduct Regulator Consults on Changes to Listing Rules For SPACs
07/27/2021
Following its consultation earlier this year, the U.K. Financial Conduct Authority has published final changes to its listing rules for special purpose acquisition companies that will come into effect on August 10, 2021. SPACs are companies set up for the purpose of raising money from investors to fund the acquisition of an operating business. They have attracted much attention over the last year as an alternative way for target companies to go public without going through the traditional initial public offering process. The initial decision to adjust the U.K. approach to SPACs was one of the recommendations made by Lord Hill in the U.K. Listings Review.
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Bank of England Publishes MREL Consultation and Operational Guide to Bail-In
07/22/2021
The Bank of England has published two documents on the U.K.’s bank recovery and resolution regime: a consultation on its approach to setting minimum requirements for own funds and eligible liabilities and an operational guide to the execution of bail-in in the U.K. In a statement on the publications, the BoE’s Deputy Governor for Markets and Banking explained that, while progress has been made in ensuring the resolvability of U.K. firms, there is more work to do to address resolvability risks. The consultation paper and operational guide form part of the U.K.’s maturing recovery and resolution regime.
Read more.TOPIC : Recovery & Resolution -
UK Government Launches Review of UK’s Anti-Money Laundering and Counter Terrorist Financing Regime
07/22/2021
The U.K. government has launched a review of the U.K.’s anti-money laundering and counter terrorist financing regulatory and supervisory regime with the publication of a call for evidence. The government is assessing the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime. On the same day, the government also published a consultation on proposed targeted changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, referred to as the MLRs. That consultation is focused on the changes needed to ensure the U.K. regime meets international standards. Responses to the call for evidence may be submitted until October 14, 2021. A final report on the findings of the review and, where relevant, possible reform will be published no later than June 26, 2022, in line with the review requirement in the MLRs.
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UK Government Consults on Targeted Amendments to the Money Laundering Regulations
07/22/2021
The U.K. government has opened a consultation on proposed targeted changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, referred to as the MLRs. The consultation focuses on the time-sensitive changes that are needed to ensure that the U.K. requirements meet international standards set by the Financial Action Task Force and to strengthen the overall requirements. The government has also opened a call for evidence on the U.K.’s anti-money laundering and counter terrorist financing regulatory and supervisory regime, which is considering the overall effectiveness and extent of the regime, whether key elements operate as intended, and the structure of the supervisory regime. Responses to the MLRs’ consultation may be submitted until October 14, 2021. These MLR amendments will be implemented through secondary legislation due to be laid in Spring 2022.
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UK Regulator Consults on Scope of PRIIPs
07/20/2021
The U.K. Financial Conduct Authority has published proposals to amend the scope of the rules governing packaged retail and insurance-based investment products (or PRIIPs). The FCA's proposals are designed to bring legal certainty to the scope of the PRIIPs regime, as it applies to corporate bonds. The consultation also addresses issues of misleading performance scenarios and summary risk indicators and concerns about the transaction costs calculation methodology. It is hoped that the amendments will promote liquidity and improve choice in the retail corporate bond market and also reduce the complexity of key information documents (or KIDs), the key information disclosure documents that must accompany PRIIPs when they are made available to retail investors.
Responses to the FCA's PRIIPs consultation should be submitted by September 30, 2021. The FCA is aiming to finalize the amendments by the end of this year and for the changes to take effect on January 1, 2022.
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HM Treasury Consults on Extension of Senior Managers’ Regime to Financial Market Infrastructures
07/20/2021
HM Treasury has published a consultation paper seeking feedback on its proposals for the extension of the Senior Managers’ and Certification Regime to certain U.K. financial market infrastructures. The SMCR was originally implemented for U.K. banks in 2016, extended to all U.K. authorized firms in December 2019, and further extended to U.K. benchmark administrators in December 2020. The government is seeking views on whether and, if so, how the SMCR should be extended to FMIs as well as the proportionate application of it to FMIs. Responses to the consultation on the SMR for FMIs should be submitted by October 22, 2021.
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European Commission Consultation on Improving the EU Secondary Markets for Markets for Non-Performing Loans
07/16/2021
The European Commission is consulting on improving transparency and efficiency in the EU secondary markets for non-performing loans. The objective is to provide a more liquid market by improving the quantity, quality and comparability of NPL data. The consultation was announced in December 2020 as part of the Commission’s Strategy for post-Covid-19 NPLs. Responses to the consultation may be submitted until September 8, 2021.
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UK has established a new Green Technical Advisory Group
07/09/2021
HM Treasury has announced a new independent group, called the Green Technical Advisory Group, to help tackle “greenwashing” and create a U.K. green taxonomy. “Greenwashing” refers to unsubstantiated or exaggerated claims that an investment is environmentally friendly. GTAG’s main remit is to advise HM Treasury on developing and implementing a U.K. green taxonomy, comprising technical screening criteria. GTAG consists of financial services industry representatives, non-financial services representatives, taxonomy and climate experts. HM Treasury, the U.K. Financial Conduct Authority and the Bank of England will be observers. GTAG is expected to provide initial recommendations to HM Treasury as early as September of this year.
View the GTAG Terms of Reference. -
UK Regulators Open Discussion on Accelerating Diversity and Inclusion in the Financial Services Sector
07/07/2021
The U.K. Financial Conduct Authority, Prudential Regulation Authority and the Bank of England (as regulator for financial market infrastructure) have published a discussion paper on diversity and inclusion in the financial sector. Feedback to the discussion paper may be submitted until September 30, 2021. It is expected that the FCA and PRA will consult on detailed proposals in Q1 2022 and aim to issue final Policy Statements in Q3 2022. The regulators aim to develop policy, rules and guidance that set clear minimum expectations and note that they will be prepared to use their regulatory powers where a firm fails to meet those expectations. The regulators intend to introduce any new requirements proportionately.
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UK Listing Regulator Proposes Changes to UK Listings Regime
07/05/2021
The U.K. Financial Conduct Authority has launched a consultation on changes to the U.K. listing regime. This consultation follows the recommendations made by Lord Hill in the U.K. Listing Review as well as the Kalifa Review of FinTech. Responses to the consultation may be submitted until September 14, 2021.
The U.K. government is currently consulting on changes to the U.K. prospectus regime, having launched the U.K. Prospectus Review last week.
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UK Prospectus Review: Proposed Reforms to Boost London's Capital Markets
07/02/2021
The U.K. government has begun a consultation on proposals to reform the U.K. prospectus regime. This much anticipated consultation sets out proposals based on the important recommendations made in the U.K. Listing Review, which was chaired by Lord Hill. Responses to the consultation should be submitted by September 24, 2021.
The final changes to the prospectus regime will be made through legislation and the rules of the Financial Conduct Authority, following consultation. The existing U.K. Prospectus Regulation will be replaced, in whole or part, by FCA rules.
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UK Wholesale Market Review
07/01/2021
The U.K. government has launched a consultation, the Wholesale Markets Review, on proposals to amend the U.K.'s Markets in Financial Instruments regime. This regime is based upon the Markets in Financial Instruments Directive and related Regulation, as well as several pieces of delegated legislation thereunder, collectively and colloquially known as MiFID II, which the U.K. on-shored with minor amendments following its exit from the European Union. HM Treasury is now seeking feedback on how the U.K.’s approach to regulating secondary markets should be adapted now that the U.K. has left the EU. The intention is to amend the regime to reflect that the U.K. market is one of the largest capital markets globally. Changes are also proposed where it is clear that the rules have had unintended outcomes, are duplicative or excessive or have curbed innovation. The consultation is open until September 24, 2021.
Read more.TOPIC : MiFID II -
UK Government Proposes Measures to Protect Direct Access to Cash
07/01/2021
HM Treasury has opened a consultation on policy proposals for geographic access requirements upon designated firms to protect access to cash across the U.K. The consultation follows the Access to Cash: Call for Evidence, published in October 2020, which sought views on the considerations on how to maintain a sustainable network of retail cash infrastructure in the U.K. and support the use of cash by people and businesses over time. Responses to the consultation may be submitted until September 23, 2021.
The main proposal is the introduction of geographic requirements based on cash access (e.g. ATM) facilities being available within maximum distances of a minimum percentage of the population. Geographic parameters are already used in cash provision - LINK's ATM scheme, for example, has committed to protecting free-to-use ATMs more than 1km away from the next nearest free-to-use source of cash and protecting free access to cash on high streets that do not have a free-to-use source of cash within 1 km. The Post Office Network is obliged to ensure that 99% of the total population must be within 3 miles of their nearest Post Office and 95% must be within 1 mile. HMT's proposals for designated firms would impose minimum requirements that ensure reasonable access to withdrawal and deposit facilities for individuals and reasonable access to deposit facilities for SMEs. The government does not intend to consider further factors, such as local needs, deprivation, vulnerability, and service levels, which will be for the industry to address. Flexibility would be built in to the legislative provisions to allow the government to adjust the requirements over time.
Read more.TOPIC : Payment Services -
UK Government Opens Review of Securitization Regulation
06/24/2021
HM Treasury has opened a Review of the U.K. Securitization Regulation with the issue of a call for evidence. The Review is required under the Regulation, and HM Treasury must report to Parliament on its findings by January 2022. Responses to the consultation may be submitted until September 2, 2021. HM Treasury also asks respondents to consider whether any changes are needed that are time-sensitive so that consideration can be given to whether a change is implemented through legislation or regulator rules. In the context of the Future Regulatory Framework Review, the responsibility for making and implementing rules will be transferred to the regulators. The FRF Review is ongoing, with a second consultation expected later this year.
The Securitization Regulation provides the criteria for identifying which securitizations will be designated as "simple, transparent and standardized" (STS) securitizations, a system to monitor the application of those criteria as well as common requirements on risk retention, due diligence and disclosure. Related provisions under the Capital Requirements Regulation set out the regulatory treatment of exposures to securitizations that are deemed to be STS securitizations.
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UK Conduct Regulator Consults on Enhancing Climate-Related Disclosures for Listed Companies and Certain Regulated Firms
06/22/2021
The U.K. Financial Conduct Authority has published two consultation papers that set out new proposals on climate-related disclosure rules for listed companies and certain regulated firms. The proposals follow the introduction of climate-related disclosure rules for the most prominent listed commercial companies in December 2020 that are aligned with the recommendations of the global Taskforce on Climate-related Financial Disclosures. Responses to the consultations may be submitted until September 10, 2021. The FCA is aiming to publish its final rules and policy statements for these proposals by the end of the year.
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UK Taskforce on Innovation, Growth and Regulatory Reform Publishes Recommendations
06/16/2021
The Taskforce on Innovation, Growth and Regulatory Reform has published its report, making several recommendations for reforming the U.K.'s approach to regulation as well as practical suggestions for implementing the reforms. The main recommendation tasks the government with building a U.K. regulatory framework that has proportionality at its core and that is based on the principles of the common law. The report also provides specific proposals for regulatory reforms across several sectors, identified as high growth sectors, including the financial services sector. The TIGRR recommendations will be progressed by the newly established Brexit Opportunities Unit, which is being led by Lord Frost, Minister of State at the Cabinet Office. Consultations on proposals to implement these ambitious recommendations are expected later this year.
The TIGRR report recommends the approach to regulation is reformed along traditional common law lines, moving away from the EU codified system. The report suggests that the government reconsiders the approach to regulation with the aim of enhancing productivity, encouraging competition and invigorating innovation.
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Basel Committee on Banking Supervision Proposes Capital Requirements for Banks' Exposures to Crypto-Assets
06/10/2021
The Basel Committee on Banking Supervision has launched a consultation on bank prudential requirements for exposures to crypto-assets. The consultation follows the Basel Committee's 2019 discussion paper on the prudential treatment of crypto-assets. This latest consultation sets out a preliminary proposal for the prudential treatment of crypto-assets, based on feedback to the discussion paper and other input from stakeholders. The Basel Committee believes that setting the policy will be an iterative process and that a further consultation will be needed. Responses to this consultation may be submitted until September 10, 2021.
The Basel Committee considers that the increasing growth of crypto-assets raises financial stability concerns and is increasing the risks encountered by banks. Certain crypto-assets are highly volatile and may pose risks for banks as exposures increase, including liquidity risk, credit risk, market risk, operational risk, money laundering/terrorist financing risk, and legal and reputation risks.
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UK Discussion Paper on Systemic Stablecoins Published
06/07/2021
The Bank of England has published a discussion paper on new forms of digital money that are potentially systemically important, focusing on systemic stablecoins. HM Treasury recently consulted on bringing certain crypto-assets into the U.K. regulatory perimeter and proposed that the BoE would regulate systemic stablecoins (under the Banking Act 2009) and that the Financial Conduct Authority would be responsible for consumer protection and conduct regulation. Feedback to the discussion paper can be submitted until September 7, 2021. The feedback will inform the BoE's next steps and it will consult on a specific regulatory framework for stablecoins, pending the finalization of the anticipated legislation.
According to the BoE, systemic stablecoins would be those that have the potential to scale up and grow rapidly and become widely used for payments by individuals and non-financial businesses. Non-systemic stablecoins would be those that are not widely used for payments and would not be subject to regulation by the BoE. Systemic stablecoins would be: (i) denominated in sterling; (ii) backed by assets that make them stable in value, unlike crypto-assets that have no safeguard, such as Bitcoin; and (iii) would not be created by lending to the real economy, unlike commercial bank money.
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UK Government Proposes Power to Block Listings on National Security Grounds
06/07/2021
Following the commitment by the government in its 2019 Economic Crime Plan to investigate the links between listings and national security, HM Treasury has launched a consultation in which it proposes to introduce a power for it to block listings on national security grounds. The government has assessed that there is a "remote but possible risk" that a company listing in the U.K. could harm the nation's security and that this risk needs to be addressed. Responses to the consultation may be submitted until August 27, 2021.
It is proposed that the scope of this power will include all initial equity listings and admissions on U.K. public markets. The power would not apply to secondary trading and would not include listed debt, other than certain convertible securities. Therefore, the power could be applied to: (i) shares, securities representing equity such as Global Depositary Receipts and convertible securities; (ii) regulated markets and MTFs, including the SME Growth Markets, that allow primary equity listings; and (iii) initial public offerings and non-traditional listings structures, such as introductions and Special Purpose Acquisition Companies (SPACs). The power would also not apply to delisting already listed companies.
Read more.TOPIC : Securities -
UK to Remove Open Access Regime for Exchange-Traded Derivatives
06/05/2021
The U.K. Government has announced that it will permanently remove the open access regime for exchange-traded derivatives. The regime, established under the EU Markets in Financial Instruments Regulation and onshored into U.K. laws in preparation for the end of the Brexit transitional period, requires a trading venue to provide open and non-discriminatory access to a CCP, with a reciprocal requirement for CCPs to provide access for trading venues, when clearing transferable securities, money market instruments and ETDs. In the EU, a temporary opt-out from the regime was made available and then extended for trading venues and CCPs in relation to ETDs, but that is due to expire on July 3, 2021 (having been extended for a period of one year due to difficulties surrounding COVID-19).
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UK Announces Extension of Exemption for UCITS from PRIIPs Disclosure Requirements
06/01/2021
HM Treasury has announced that the current exemption for Undertakings for Collective Investment in Transferable Securities funds from the requirements of the U.K. Packaged Retail Investment and Insurance-based Products Regulation will be extended by five years to December 31, 2026.
The U.K. PRIIPs Regulation, which was on-shored in the U.K. after Brexit and is based upon the corresponding and much-criticized EU regulation, requires "manufacturers" of PRIIPs to produce a standardized "key information document," designed to improve U.K. retail investors' understanding of the financial products they are purchasing. Technical Standards govern the presentation, content, review and revision of KIDs and the conditions for fulfilling the requirement to provide a KID. Under the U.K. PRIIPS Regulation, management companies, investment companies and persons advising on, or selling, units in UCITS are exempt from the requirements of the PRIIPs Regulation until December 31, 2021. UCITS funds still need to prepare a key investor information document (KIID) as required by the UCITS Directive, with different but broadly similar content requirements. The EU PRIIPs regime, which the U.K. has now adopted without material modifications, was intended to improve investor disclosures for more complex retail products such as index-tracking investments and insurance-wrapped products. However, it has resulted in deleterious impacts in other industries and has been widely criticized for its vagueness of scope and wide application, with particularly difficult consequences for bond issuers, listed derivatives and funds. The U.K. has announced that it is undertaking a broader review.
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Financial Stability Board Consults on Global Targets for Addressing the Four Challenges of Cross-Border Payments
05/31/2021
The Financial Stability Board has launched a consultation on proposed global targets for addressing the four challenges to cross-border payments. The G20 is prioritizing the enhancement of cross-border payments and the FSB states that public authorities have an important role to play in leveraging opportunities and addressing challenges in both existing and new arrangements supporting cross-border payments. In November 2020, the G20 endorsed the FSB's Roadmap and the related 19 Building Blocks. The Roadmap presents a high-level plan for tackling the issues and sets both short-term and longer-term goals and milestones. The Building Blocks indicate where further public and private sector work would enhance cross-border payments and address the frictions ascertained by the FSB. The consultation closes on July 16, 2021. The FSB will publish its final recommendations to the G20 in October 2021.
Read more.TOPIC : Payment Services -
EU Technical Experts Make Recommendations on Improving Access for SMEs to Capital Markets
05/25/2021
The EU's Technical Expert Stakeholder Group on SMEs has published a report, including a set of recommendations to improve the capacity of SMEs to access the capital markets. It remains to be seen how much of these the Commission and other legislative bodies will take on board. Some of the recommendations echo those of the report by Lord Hill on the U.K. Listings Review, the focus of which was how to amend the U.K.'s listing regime to ensure the continued attractiveness of the U.K. as a capital markets hub (rather than focusing on SME's).
Read more.TOPIC : Securities -
European Securities and Markets Authority Issues Call for Evidence on Digital Finance
05/25/2021
Following the publication by the Commission of its Digital Finance Strategy in September 2020, the Commission has asked the European Supervisory Authorities for technical advice on the regulatory and supervisory challenges of three areas, namely the growing fragmentation of value chains in finance, digital platforms and bundling of various financial services, and groups combining financial and non-financial activities.
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European Securities and Markets Authority Publishes Recommendations to Reform the EU Central Securities Depositories Regulation
05/20/2021
The European Securities and Markets Authority has published a letter addressed to the European Commission making recommendations for inclusion in the Commission's Review of CSDR. The EU Central Securities Depositaries Regulation provides a harmonized regulatory and prudential regime for central securities depositories and increases the robustness and resilience of securities settlement arrangements. There is a single market for CSD services across the EU and a third-country equivalence regime for CSDs. ESMA's recommendations include:
- That the Target2-Securities system, a systemically important common settlement platform, providing settlement services in central bank money for the majority of EEA CSDs, be brought within the scope of CSDR.
- Amendment of the supervision arrangements for T2S. Currently, the European Central Bank oversees T2S, alongside a cooperative framework based on a memorandum of understanding between the ECB, ESMA, the national competent authorities of the CSDs participating in T2S, and the central banks overseeing the CSDs. ESMA considers that CSDR should provide for a cooperative arrangement for supervision/oversight of T2S in the form of a college of supervisors, with clear roles for the participating authorities.
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UK Conduct Regulator Warns E-Money Firms on Misleading Customers
05/18/2021
The U.K. Financial Conduct Authority has written to the CEOs of electronic money firms asking them to ensure that their customers are aware of how their money is protected. According to the FCA, many e-money firms (some of which are start-ups and FinTechs) compare their services to traditional bank accounts and portray in their financial promotions their services as an alternative to a bank account, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, e-money firms do not make it clear enough that Financial Services Compensation Scheme protection does not apply to e-money accounts. The warning follows the FCA's publication in summer last year of a letter to CEOs and guidelines on safeguarding which set out the FCA's expectations of e-money firms in light of the increased use of e-money accounts during the pandemic.
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UK Regulator's Feedback Statement to Consultation on Liquidity Mismatch in Authorized Open-Ended Property Funds
05/07/2021
Following its consultation last year, the U.K. Financial Conduct Authority has published a feedback statement to its consultation on liquidity mismatch in authorized open-ended property funds. In the consultation, the FCA proposed introducing a notice period of up to 180 days for U.K. authorized property funds that are non-UCITS retail schemes (known as NURS) that invest directly in property. The aim is to mitigate the potential for harm arising from the structure of funds that may lead to a mismatch between a fund holding illiquid assets and offering daily redemptions.
The FCA confirms that it will not make a final policy decision until Q3 2021 at the earliest and that if mandatory notice periods for property funds are introduced, there will be an appropriate implementation period before the rules come into force so as to allow firms to make operational changes.
Noting some cross-over between these proposals and the FCA's more recent proposals to introduce a long-term asset fund framework, the FCA also confirms that it will consider feedback to that consultation before finalizing its position. The FCA launched its consultation on proposals on LTAFs on the same day as this feedback was published. The aim of the LTAF framework is to establish a fund that would facilitate authorized funds to be set up to invest efficiently in long-term, illiquid assets. In the feedback statement, the FCA states that if notice periods are introduced then fund managers of LTAFs might have the same operational challenges.
View the FCA's feedback statement (FS21-8).
View details of the FCA's consultation on a LTAF framework.
View details of the FCA's consultation (CP20/15).TOPIC : Funds -
UK Regulator Consults on a New Authorised Fund Regime for Investing in Long Term Assets
05/07/2021
The U.K. Financial Conduct Authority has opened a consultation on proposals to establish a regulatory framework for a new type of authorized open-ended fund called the long-term asset fund. The aim is to establish a fund that would facilitate authorized funds to be set up to invest efficiently in long-term, illiquid assets, such as venture capital, private equity, private debt, real estate and infrastructure. The consultation closes on June 25, 2021.
The consultation paper sets out the details of the proposed framework, including increased governance requirements, clear disclosure rules and discusses the proposals on rules on the purpose of an LTAF, borrowing levels, valuation, redemption and subscription, due diligence and reporting. The FCA is proposing to restrict distribution of LTAFs to professional investors and sophisticated retail investors. However, the consultation asks for feedback on whether, and how, future wider retail access to such funds could be safely supported. LTAFs will be an alternative investment fund. As the LTAFs would invest in potentially complex and risky assets, the FCA proposes that only a firm authorized as a full-scope U.K. alternative investment fund manager could manage an LTAF. This will ensure that LTAFs have appropriate resources as well as good systems and controls.
Read more.TOPIC : Funds -
International Bodies Launch Survey on Margin Calls
05/05/2021
The Basel Committee on Banking Supervision, the Committee on Payments and Market Infrastructure and the International Organization of Securities Commissions has published a survey on margin calls as part of an investigation into liquidity shortfalls during the early stages of the COVID-19 pandemic. The combined effect of government measures to contain the pandemic in March 2020, together with market uncertainty, job losses and travel restrictions triggered a pullback in economic activity and stress on market liquidity. The non-bank financial intermediation sector was found to be particularly vulnerable to the liquidity shock.
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European Central Bank Publishes Amendments to Systemically Important Payment Systems Regulation
05/05/2021
An amending Regulation (Regulation (EU) 2021/728) and two amending Decisions (Decision 2021/729 and Decision 2021/730) have been published in the Official Journal of the European Union, introducing certain changes to the SIPS Regulation on oversight requirements for systemically important payment institutions. The SIPS Regulation applies to systemically important large-value and retail payment systems and is designed to improve their safety and efficiency. Draft versions of the amending Regulation and Decisions were consulted on between November 2020 - January 2021 and proposed: (i) changes to the criteria for determining which of the Eurosystem central banks should be the competent authority for oversight of a SIPS; (ii) introduction of an additional methodology for identifying a payment system as a SIPS; and (iii) introduction of a phasing-out period for the reclassification of a SIPS as a non-SIPS.
Read more.TOPIC : Payment Services -
UK Digital Regulation Cooperation Forum Publishes Report on Strengthening Digital Regulatory Cooperation
05/04/2021
The U.K. Digital Regulation Cooperation Forum has published a report on the measures that the U.K. Government may take to strengthen cooperation between digital regulators. The DRCF consists of the Competition and Markets Authority, Ofcom, the Information Commissioner's Office and the U.K. Financial Conduct Authority (although the FCA's views are not represented in this report because it only joined the DRCF in April 2021, after the report was commissioned). The U.K. Government asked the DRCF to produce the report to determine whether further measures were needed to support cooperation between regulators.
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European Banking Authority Publishes Report on EU National Regulators' Mystery Shopping Activities
05/03/2021
The European Banking Authority has published its first report on the "mystery shopping" activities of EU national regulators. In this context, mystery shopping involves national regulators conducting undercover research to measure the quality of customer service and gather information about financial products and services at EU financial institutions. The EBA was mandated to coordinate the mystery shopping activities of national regulators from January 1, 2020. The report is the first stage in fulfilling that mandate. It focuses on activities conducted in relation to retail banking products and services (e.g. consumer credit, mortgage credit, basic payment accounts, payment services and car loans), as these are the products that fall within the EBA’s consumer protection mandate. The EBA will use the information to inform its coordination of mystery shopping activities going forward.
Read more.TOPIC : Consumer Protection -
UK Conduct Regulator Consults on Changes to Listing Rules for SPACs
04/30/2021
The U.K. Financial Conduct Authority has launched a consultation on proposed changes to its listing rules for special purpose acquisition companies. SPACs are companies set up for the purpose of raising money from investors to fund the acquisition of an operating business. They have attracted much attention over the last year as an alternative way for target companies to go public without going through the traditional initial public offering process.
Read more.TOPIC : Securities -
UK Law Commission Consults on Digital Assets and Electronic Trade Documents
04/30/2021
The U.K. Law Commission has launched two consultations, one on digital assets and the other on electronic trade documents. Responses to the consultations can be submitted until July 30, 2021.
Digital Assets
The Law Commission has issued a Call for Evidence on digital assets following a request from the government for recommendations for reforms to U.K. laws that will ensure that the laws can accommodate both cryptoassets and other digital assets. The Call for Evidence will be followed by a consultation at the end of 2021 with proposals for law reforms.
The existing laws of England and Wales do not provide legal certainty as to the legal status of digital assets. Providing certainty would encourage the use of the laws of England and Wales and jurisdiction in digital asset transactions. The Call for Evidence requests feedback about, and evidence of, the ways in which digital assets are being used, treated and dealt with by market participants. It also seeks views on the potential consequences of digital assets being "possessable."
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UK Prudential Regulator Consults on "Strong and Simple" Prudential Framework for Small Banks
04/29/2021
In what would be a significant policy change, the U.K. Prudential Regulation Authority has published a discussion paper in which it proposes introducing a "strong and simple" prudential framework for non-systemic banks and building societies that are not internationally active. The aim is to simplify the prudential regulation of these firms, reducing costs for firms, but to maintain their resilience. The consultation closes on July 9, 2021, and will be followed by a consultation with proposals.
The existing regulatory approach broadly applies the same requirements to all banks and building societies, irrespective of their size and activities. Certain prudential rules are simplified for smaller banks and building societies, but to a lesser extent than in some other jurisdictions. The PRA notes that a graduated framework may take years to implement. Therefore, it is starting with the smallest firms and will consider how it might be built out for larger, non-systemic U.K. domestic firms. The plans follow the principles of the Basel Standards and consider how other jurisdictions have implemented similar regimes, such as Australia, Canada and the U.S.
The discussion paper sets out what the simpler regime might look like, including:- the possible approaches to identifying firms that will be in scope by looking at, for example, their activities, cross-border business and risk exposures;
- the possible requirements under the regime; and
- ways in which firms might transition in and out of the regime, such as by using an intermediate stage or PRA waivers.
View the PRA's discussion paper. -
UK Financial Services Act 2021 Published
04/29/2021
The U.K. Financial Services Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the Financial Services Act 2021. Some provisions of the Act came into force on the date of Royal Assent, with a limited number following on June 29, 2021. The majority of the Act will come into force on a date specified in regulations yet to be made by HM Treasury.
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UK Conduct Regulator Publishes Discussion Paper on Strengthening the Financial Promotion Rules for High-Risk Investments
04/29/2021
The U.K. Financial Conduct Authority has published a discussion paper seeking feedback on how the U.K. financial promotion rules might be strengthened to reduce consumer harm arising from investing in inappropriate high-risk investments that do not meet a customer's needs. Feedback to the paper can be submitted until July 1, 2021. The feedback will help the FCA to develop the proposed rules on which it intends to consult later this year.
According to the FCA, one of the main ways a consumer gains an understanding of the risks and regulatory protection associated with an investment is from the information included in a financial promotion. However, although the financial promotion might meet the FCA's requirement to be fair, clear and not misleading, the investment may still be inappropriate for that investor. High-risk investments are those to which marketing restrictions apply under the rules and include non readily realizable securities (NRRSs), peer to peer (P2P) agreements, non mainstream pooled investments (NMPIs) and speculative illiquid securities (SISs). Since January 2020, the marketing of speculative illiquid securities to retail investors has been banned, first under a temporary product intervention measure, then made permanent from January 1, 2021. The measure restricts the mass-marketing of non-transferable bonds (sometimes colloquially termed "mini-bonds") and preference shares to retail investors and requires improved disclosure to be made to high net worth and sophisticated investors.
Read more.TOPIC : Consumer Protection -
UK Proposals to Ease Unbundling of Research and Best Execution Rules
04/28/2021
The U.K. Financial Conduct Authority has launched a consultation on certain proposed changes to the U.K. rules on the unbundling of research and best execution reporting, which are part of the Markets in Financial Instruments Directive (as inherited from the EU). The consultation closes on June 23, 2021, and the FCA is expected to publish its response and final rules in the second half of this year. The proposals are set out in brief below. Some of these are in the same areas covered by the EU MiFID II Quick Fix Regulation, but the FCA is not copying those rules, and it goes further in most areas.
Read more.TOPIC : MiFID II -
UK Chancellor Responds to Kalifa Review of UK FinTech
04/26/2021
The Chancellor of the Exchequer Rishi Sunak has published a written statement on the U.K. Government's response to the Kalifa Review of U.K. FinTech. The Kalifa Review made a series of recommendations to ensure the U.K.'s competitiveness in fintech globally. HM Treasury welcomed the Review at the time. The Chancellor's statement describes the following actions that the U.K. Government has committed to in response.
Read more.TOPIC : FinTech -
HM Treasury Publishes Response to Consultation on Insolvency Changes for Payment and Electronic Money Institutions
04/26/2021
HM Treasury has published its response to feedback on its December 2020 consultation on a proposed Special Administration Regime for payment institutions and electronic money institutions that fall within the scope of the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. The SAR is designed to address shortcomings of the existing insolvency regime and would apply alongside Part 24 of the Financial Services and Markets Act 2000, which would also be extended to apply in full to PIs and EMIs. Key objectives of the regime will include returning customer funds as soon as reasonably practicable, facilitating timely cooperation with payment systems and authorities and rescuing the institution as a going concern or winding it up in the best interests of creditors.
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UK Government Announces Boost to UK FinTech and Financial Services
04/19/2021
The U.K. Government has announced plans to boost the U.K.'s fintech and financial services sectors. Chancellor of the Exchequer Rishi Sunak outlined the plans at U.K. FinTech Week, describing the government's vision for a greener and more technologically advanced financial services sector. The Government's announcement builds on the recommendations in the recent Kalifa Review of U.K. Fintech and Lord Hill's Review of the U.K. Listing Regime.
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Bank of England and HM Treasury Announce Central Bank Digital Currency Taskforce
04/19/2021
The Bank of England and HM Treasury have announced a joint central bank digital currency Taskforce. The Taskforce will be chaired by Jon Cunliffe, Deputy Governor for Financial Stability at the Bank of England and Katharine Braddick, Director General of Financial Services at HM Treasury, with other U.K. authorities involved as and when required.
The Taskforce's primary function is to oversee investigations into a possible U.K. CBDC. At present, the U.K. has not yet decided whether to issue a CBDC.
Read more.TOPIC : FinTech -
HM Treasury Statement on UK Listing Review
04/19/2021
Chancellor of the Exchequer Rishi Sunak has published a statement responding to Lord Hill's Review of the U.K. Listing Regime. Lord Hill's U.K. Listings Review was published in March 2021 and assessed how, following Brexit, the existing U.K. listing regime could be reformed to attract more companies, particularly technology and life sciences companies, to raise capital in London. The Review made 14 specific recommendations, including some requiring consultations by the U.K. Financial Conduct Authority and HM Treasury.
Read more.TOPIC : Securities -
HM Treasury Launches Consultation on Regulation of Non-Transferable Debt Securities
04/19/2021
HM Treasury has launched a consultation on the regulation of non-transferable debt securities, colloquially known as "mini-bonds". The consultation was prompted by the collapse of London Capital & Finance PLC, an FCA- regulated issuer of bonds which stated on their face that they were non-transferable, issued primarily to retail investors, which fell into administration in January 2019. An investigation into regulatory failings in the supervision of LC&F was subsequently launched and chaired by Dame Elizabeth Gloster, culminating in a report that was highly critical of the U.K. Financial Conduct Authority's supervision of LC&F and included policy recommendations for HM Treasury. HM Treasury is now consulting on possible changes to the regulatory regime governing NTDS. Responses to the consultation should be submitted by July 12, 2021.
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UK Conduct Regulator Appoints New Leaders for ESG and Technology
04/19/2021
The U.K. Financial Conduct Authority has appointed Sacha Sadan as its Director of Environment, Social and Governance, a new role which will develop the FCA's approach to sustainable finance domestically and internationally. Ms Sadan was formerly Director of Investment Stewardship at Legal and General Investment Management.
Read more.TOPIC : People -
UK Regulators Publish Dear CEO Letter for Banks and Building Societies on Deposit Aggregators
04/14/2021
The U.K. Prudential Regulation Authority and Financial Conduct Authority have published a joint Dear CEO letter addressed to CEOs of U.K. banks and building societies on the risks of accepting deposits from deposit aggregators.
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Financial Stability Board Publishes FAQs on Securities Financing Data Collection and Aggregation
04/12/2021The Financial Stability Board has published a series of FAQs to assist FSB member jurisdictions in their implementation of standards for the handling of securities transactions financing data.
The FSB introduced its SFT Data Standards in 2015 for the collection and aggregation of data on SFTs. The Standards were intended to improve understanding on trends and developments in the SFT markets given the risks they pose to global financial stability. The FAQs offer technical guidance for FSB members on the reporting and collection of information regarding SFTs.
View the FSB's FAQs.TOPIC : Securities -
HM Treasury Published Response to Phase I of UK's Financial Services Future Regulation Framework Review
03/11/2021
HM Treasury has published its response to the call for evidence on Phase I of the U.K. Financial Services Future Regulatory Framework Review. The FRF Review was announced in March 2019 and will assess whether the U.K. financial services regulatory framework is fit for purpose, taking into account the U.K.'s exit from the EU, climate change and other global and technological challenges. The call for evidence on Phase I of the Review focussed on how the Government and regulators work together to ensure the best outcome for the financial services sector.
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