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Financial Regulatory Developments Focus
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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.

  • UK Competition and Markets Authority Targets Anti-Competitive Practices in Investment Consultancy and Fiduciary Management Services
    06/10/2019

    The U.K. Competition and Markets Authority has issued the Investment Consultancy and Fiduciary Management Market Investigation Order 2019. This is U.K. secondary legislation intended to combat anti-competitive practices in the supply and acquisition of investment consultancy and fiduciary management services to and by the pension schemes they advise. The Order was made on June 10, 2019 and enters into force on December 10, 2019. It follows the CMA's consultation on a draft version of the Order that was published for review by interested parties on February 12, 2019. In the final Order, the CMA has endeavoured to resolve a number of the issues raised in response to the consultation. These include amending the Competitive Tender Process as originally drafted by imposing a less stringent "reasonable endeavours" obligation on trustees who are required to obtain bids from three or more unrelated Fiduciary Management Providers, and excluding in-house investment advice or fiduciary management functions from the scope of the Order.

    Read more.
  • UK Regulator Publishes Policy Statement on Peer-To-Peer and Investment-Based Crowdfunding Platforms
    06/04/2019

    The U.K. Financial Conduct Authority has published a Policy Statement containing its final changes to the rules and guidance governing loan-based crowdfunding platforms (or "peer-to-peer" platforms). The Policy Statement follows the FCA's July 2018 consultation paper on proposed changes to the regulation of the crowdfunding sector. Peer-to-peer platforms will need to comply with the majority of the changes by December 9, 2019, with the exception of the FCA's Mortgage and Home Finance Conduct of Business rules, which will apply to platforms that offer home finance products from June 4, 2019. The Policy Statement also reflects on the rules applicable to investment-based crowdfunding platforms (i.e. platforms that allow investors to invest in businesses directly, for instance through the purchase of shares or debt securities), in particular surrounding financial promotions for non-readily realized securities and non-mainstream pooled investments. The FCA continues to review responses to its July 2018 consultation paper in relation to these platforms and may issue additional rules and guidance in due course.

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  • UK Financial Conduct Authority Publishes Near Final Changes to Handbook Implementing the EU Prospectus Regulation
    05/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement containing its near final rules implementing the EU Prospectus Regulation, which will be set out in the FCA's new Prospectus Regulation Rules sourcebook. The FCA's new rules are aimed at aligning the U.K. rules with the EU Prospectus Regulation. The changes remain subject to finalization of certain related changes under the Financials Services and Markets Act 2000 and relevant EU legislation. Issuers seeking approval of a draft prospectus on or after July 21, 2019 must ensure their draft is in line with the EU Prospectus Regulation and PRR sourcebook. In the event the U.K. leaves the EU before that date, the proposals will not come into effect, and the U.K. would use the Financial Services (Implementation of Legislation) Bill to permit alignment of U.K. rules with those of the EU. The FCA would, in that situation, expect to issue a further Consultation Paper setting out proposals for replicating the EU Prospectus Regulation in the U.K. domestic regime. The FCA has so far declined to comment on the detail of any such proposals.

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  • European Commission Responds to Uncertainty Regarding Scope of PRIIPs Regulation
    05/14/2019

    The European Commission has issued a response to concerns raised by the European Supervisory Authorities about the market impact of uncertainty around the scope of the Packaged Retail and Insurance-based Investment Products Regulation. In a letter to the Director General of the European Commission dated July 19, 2018, the heads of the ESAs raised the difficulties that manufacturers of financial products face in determining whether their products fall within the requirements of the PRIIPs Regulation. The letter describes the broader market impact that this uncertainty has caused, which includes a reduction in the availability of corporate bonds to retail investors, a reduction in the number and volume of low denomination issuances by non-financial corporates and greater difficulties for retail investors wishing to trade their bonds. In its response, issued on May 14, 2019, the European Commission refused to pass judgement on whether certain categories of products should be deemed to fall within or outside the scope of the PRIIPs Regulation and stressed that the determination of whether an instrument is a packaged retail investment product should be undertaken on a case-by-case basis.

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  • Consultation and Draft Direction on Confirmation of Payee System Issued by UK's Payment Systems Regulator
    05/09/2019

    The Payment Systems Regulator, the regulatory body responsible for monitoring the payment systems industry in the U.K., has published a second consultation paper requesting feedback on its proposals for a mandatory "Confirmation of Payee" service, together with a draft direction setting out deadlines by which the six largest payment services providers should provide such services. The Confirmation of Payee service is being developed to assist in the PSR's fight against "Authorised Push Payment" scams - involving theft of money via fraudulent payment requests made to individuals and businesses - and accidental misdirected payments, which together cause millions of pounds in losses to individuals and businesses annually. Certain payment service providers have committed to introducing a Confirmation of Payee process. However, the PSR considers that progress on doing so has been too slow. The consultation closes on June 05, 2019.

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  • Financial Conduct Authority Calls for Input on its Review of UK Financial Advice Market
    05/01/2019

    The Financial Conduct Authority is seeking input on its evaluation of the Retail Distribution Review and Financial Advice Market Review, two initiatives introduced in 2006 and 2015, respectively, which aimed to enhance the outcomes for retail consumers from financial advice and guidance given by institutions. The evaluation has been launched in line with a commitment by the FCA to conduct a review of the initiatives in 2019. Responses should be submitted by June 3, 2019.

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  • Further Extension of the EU Contracts for Difference Product Intervention Measures
    04/30/2019

    The European Securities and Markets Authority has issued a Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients. This has now been published in the Official Journal of the European Union. ESMA announced on March 27, 2019, that the existing restriction would be extended on the same terms as the previously implemented temporary restrictions. The CfD Decision applies directly across the EU from May 1, 2019, for a period of three months.

    View the decision.
  • UK Regulator Delays Final Product Intervention Measures on Contracts for Difference
    04/26/2019

    The Financial Conduct Authority has published a statement on the delay to publication of final rules for contracts for difference products and CfD-like options. The FCA has consulted on its proposals to make European Securities and Markets Authority's temporary product intervention measures permanent in the U.K. The FCA's proposed interventions are the same in substance as ESMA's, although it is also proposing to apply its rules to closely substitutable products and on extending these measures to exchange-traded derivatives. The consultation closed on February 7, 2019.

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  • UK Regulator Publishes Final Mission Approach Documents for Supervision and Enforcement
    04/24/2019

    The U.K. Financial Conduct Authority has published its finalized Approach to Supervision and Approach to Enforcement, following feedback to its consultation between March 21 and June 21, 2018 on drafts of the two approach documents. The documents should be read alongside the FCA's Mission document which was first published in October 2016 and most recently updated in November 2017. The documents form part of a series of formal approach documents explaining the FCA's approach to regulation in more depth.

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  • EU FOREX Broker Faces Proceedings in Czech Courts Brought by "Consumer" Client Following EU Opinion
    04/24/2019

    Individuals who act outside their trade or profession when instructing brokers to execute FOREX contracts on their behalf must be regarded as "consumers" for the purposes of the Recast Brussels Regulation, according to a recent opinion issued by the Advocate General of the Court of Justice of the European Union. This applies regardless of the expertise of the individual or their active involvement in placing orders. Under the Recast Brussels Regulation (which governs jurisdiction between EU member states), "consumers" are entitled to bring proceedings before the court of the Member State in which they are domiciled, as opposed to being obliged to rely on the courts of the respondent counterparty's Member State.

    In this case, the claimant, a student domiciled in the Czech Republic, had entered into an agreement for the execution of contracts for difference in the FOREX market via Cypriot brokerage company FIBO Group Holdings Ltd. The agreement was expressly subject to the jurisdiction of the Cypriot courts. The claimant brought a claim in the Czech court, alleging that FIBO had been unjustly enriched when the claimant's instructions to close out a position in U.S. dollars were not acted on promptly. The time delay meant exchange rates had changed before the trade was executed, significantly reducing her profit.

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  • UK Conduct Regulator Further Examining Duty of Care Owed by Firms to Consumers
    04/23/2019

    The Financial Conduct Authority has published a Feedback Statement to its July 2018 discussion paper, "A duty of care and potential alternative approaches". In the discussion paper, the FCA raised the possibility of introducing a new duty of care for all financial services firms.

    Read more.
  • UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
    03/29/2019

    Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.

    Read more.
  • EU Contracts for Difference Product Intervention Measures to be Extended
    03/27/2019

    The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.

    View ESMA's announcement.

    View details of the existing decision.
  • EU Product Intervention Measures for Binary Options Extended
    03/27/2019

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.

    View the decision.

    View ESMA's notification.
  • UK Regulator Wants Stronger Wind-Down Plans for Loan-Based Crowdfunding Platforms
    03/07/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

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  • UK Financial Conduct Authority on Onshoring the EU Temporary Product Intervention Measures
    02/22/2019

    The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.

    In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.

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  • EU Product Intervention Measures for Binary Options to be Further Extended
    02/18/2019

    The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.

    View ESMA's announcement.

    View details of the existing product intervention measure for binary options.
  • European Supervisory Authorities Recommend Further Risk Warnings for Retail Investors
    02/08/2019

    The Joint Committee of European Supervisory Authorities has published a Final Report following their consultation on targeted amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products. Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts, until December 31, 2019, management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. This is because the UCITS Directive separately requires these entities to provide investors with a Key Investor Information Document, with different but broadly similar contents requirements. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs proposed amending the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

    Read more.
  • EU Contracts for Difference Product Intervention Measures Extended Again
    01/31/2019

    The European Securities and Markets Authority Decision renewing the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients has been published in the Official Journal of the European Union. ESMA announced on December 19, 2018, that the existing restriction would be extended. The CfD Decision applies directly across the EU from February 1, 2019, for a period of three months.

    View the decision.

    View ESMA's announcement.
  • UK Conduct Regulator Warns Firms About Misleading Financial Promotions
    01/09/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated firms. In the letter, the FCA highlights its concerns over the practice engaged in by some firms of issuing financial promotions which suggest or imply that all of the activities or investments undertaken by the firm are regulated by the FCA and/or Prudential Regulation Authority, when they are not.

    Some regulated firms undertake both regulated and unregulated business. The FCA has identified that some of these firms are issuing financial promotions which do not make clear which aspects of its business are not regulated by the FCA and/or PRA. This breaches the requirement that all financial promotions are fair, clear and not misleading and that a firm cannot indicate or imply that it is regulated or otherwise supervised by the FCA for its unregulated business. The FCA encourages all firms to reflect on the letter and ensure that their actions comply with the FCA's rules relating to financial promotions.

    View the letter
  • EU Product Intervention Measure Banning the Sale of Binary Options is Extended
    12/27/2018

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. This has been published in the Official Journal of the European Union. ESMA announced in November 2018 that the existing restriction would be extended. The binary options Decision applies directly across the EU from January 2, 2019 for a period of three months.

    View the Decision.

    View ESMA's notification.
  • EU Contracts for Difference Product Intervention Measures to be Extended Again
    12/19/2018

    The European Securities and Markets Authority has published a statement announcing that its various restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from February 1, 2019, for a further three months. ESMA has powers under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the European Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire, and it would then fall to member states to impose similar restrictions at a national level, if they so wish.

    ESMA considers that a significant investor protection concern in relation to retail clients still exists. Its statement confirms that the existing restriction, implemented on November 1, 2018, will be extended from February 1, 2019 for a further three months.

    View ESMA's statement.

    View details of the existing CfD restrictions.
  • UK Financial Conduct Authority Publishes Its Final Approach to Authorization
    12/12/2018

    The Financial Conduct Authority has published its final document, entitled "FCA Mission: Approach to Authorisation," explaining the purpose of authorization and the FCA's approach to it. The paper sets out details of the FCA's approach to: (i) evaluating whether firms meet the requisite Threshold Conditions and assessing whether individuals are "fit and proper"; (ii) how the FCA uses authorization to promote competition; and (iii) revoking authorization.

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  • UK Conduct Authority Consults on Permanent Product Intervention Measures
    12/07/2018

    The U.K. Financial Conduct Authority has launched two consultations proposing to prohibit the sale, marketing and distribution of binary options to retail consumers and to restrict the sale, marketing and distribution of contracts for difference and similar products to retail customers. Both CFDs and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000, allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The proposed rules would be permanent and would replace the temporary measures introduced, and subsequently renewed, by the European Securities and Markets Authority earlier this year.

    Read more.
  • UK Parliamentary Committee Launches Inquiry Into Operational Resilience in the Financial Services Sector
    11/23/2018

    The U.K. Treasury Committee has announced the launch of a new Inquiry into IT failures in the financial services sector. The Inquiry has been launched in response to recent IT failures at a number of financial institutions that have led to consumers being unable to access their bank accounts or becoming subject to fraud.

    The Committee will assess the causes and consequences of these recent IT failures. Among other things, the Committee will consider the extent to which such incidents are becoming more frequent, sources of concentration risk in the financial sector, the impact of legacy IT systems, the effect of outsourcing on operational resilience, best practices in responding to operational incidents and whether the U.K. regulators are able to regulate firms' capabilities for responding to such incidents.

    Written submissions can be made to the Committee by January 18, 2019. The Committee will also appoint a special advisor to provide policy advice to the Committee on the issues. Individuals interested in the role should respond to the call for Expressions of Interest.

    View the announcement.
  • EU Supervisory Authority Will Extend Binary Options Ban Into 2019
    11/09/2018

    The European Securities and Markets Authority has announced that it proposes to renew the prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA is renewing the prohibition on binary options because it considers that a significant investor protection concern remains. The measure will be renewed on the same terms as the previous renewal decision that has applied from October 2, 2018 and that will expire on January 1, 2019.

    ESMA's Board of Supervisors agreed on the renewal of intervention measures on November 7, 2018. ESMA will publish an official notice on its website in the coming weeks. The new Decision will then be published in the Official Journal of the European Union and will start to apply from January 2, 2019 for a period of three months.

    View ESMA's announcement.

    View details of the prohibition expiring on January 1, 2019.
  • EU Proposals Aim to Avoid Duplicative Information Requirements on Investment Managers
    11/08/2018

    The Joint Committee of the European Supervisory Authorities have launched a consultation on amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products.

    Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts until December 31, 2019 management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. The UCITS Directive requires these entities to provide investors with a Key Investor Information Document. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs are proposing to amend the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

    Read more.
  • EU Contracts for Differences Product Intervention Measures Extended
    10/31/2018

    The European Securities and Markets Authority Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients has been published in the Official Journal of the European Union. ESMA announced on September 28, 2018 that the existing restriction would be extended and would include an additional reduced character risk warning because CFD providers have experienced technical difficulties in using the risk warnings due to the character limitations imposed by third-party marketing providers. The CFD Decision applies directly across the EU from November 1, 2018 for three months.

    ESMA extended the temporary product intervention prohibiting the marketing, distribution and sale of binary options to retail investors for a further three months from October 2, 2018, although certain types of binary options were excluded from the scope of the prohibition because ESMA considers that those binary options are less likely to present a significant investor protection concern. Both of ESMA's product intervention measures are made using powers under the Markets in Financial Instruments Regulation.

    View the Decision.

    View details of the extension of the ban relating to binary options.
  • UK Regulator Considers Potential Regulatory Refinements for Climate Change
    10/15/2018

    The U.K. Financial Conduct Authority has published a Discussion Paper on climate change and green finance in which it calls for comment on potential changes to its regulatory approach in these areas. The Discussion Paper sets out specific action that the FCA intends to take in the short term in four focus areas - capital markets disclosures, public reporting requirements, green finance and pensions.

    First, the FCA is considering whether the regulatory approach to disclosures by issuers in the capital markets should be amended. In particular, the FCA is asking for comments on: (i) the difficulties that issuers may have in determining materiality of climate-related issues such that a specific disclosure would be warranted; (ii) whether investors would benefit from greater comparability of disclosures; (iii) whether further prescribed requirements on climate-related disclosures should be introduced to facilitate more consistent disclosures by issuers. This final point includes whether the introduction of a "comply or explain" approach to the Task Force on Climate-related Disclosures would facilitate more effective markets.

    Read more.
  • European Supervisors Announce 2019 Work Priorities
    10/09/2018

    The Joint Committee of the European Supervisory Authorities (that is, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) has published its 2019 Work Programme. EIOPA will Chair the Joint Committee in 2019. The Work Programme provides details of the Joint Committee's key workstreams for 2019.

    Read more.
  • European Parliament Adopts Resolution on Distributed Ledger Technologies
    10/03/2018

    The European Parliament has adopted a non-legislative resolution entitled "distributed ledger technologies and blockchains: building trust with disintermediation." Of particular relevance to the financial services sector, the European Parliament is requesting that the European Commission and other EU authorities take various steps to maximize the potential of this technology in the EU.

    Read more.
  • EU Ban Relating to Binary Options Extended
    10/01/2018

    Following its announcement in August 2018, the European Securities and Markets Authority has published notice of the extension of the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA is extending the ban because the threat to investor protection has not been addressed yet through a change in EU legislation and national regulators have either taken no action or have taken insufficient action to address the potential harm.

    Read more.
  • EU Contracts for Difference Product Intervention Measures to be Extended
    09/28/2018

    The European Securities and Markets Authority has announced that its various restrictions on the sale, distribution and marketing of Contracts for Difference to retail investors will be extended from November 1, 2018 for a further three months.

    ESMA adopted two temporary product intervention Decisions under the Markets in Financial Instruments Regulation in June this year, one relating to binary options and another to CFDs. ESMA has powers under MiFIR to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire and it would then fall to member states to impose similar restrictions at a national level, if they so wish. The U.K. Financial Conduct Authority is expected to consult before the end of the year on whether to make permanent the EU's temporary prohibition on marketing, distribution and sale of binary options to retail investors. The International Organization of Securities Commissions recently published a report on retail OTC leveraged products, alongside a statement warning retail investors of the risks of investing in illegal or fraudulent binary options.

    Read more.
  • International Standards Body Encourages Regulatory Clampdown on OTC Leveraged Products
    09/19/2018

    The International Organization of Securities Commissions has published a report on retail OTC leveraged products, alongside a statement warning retail investors of the risks of investing in illegal or fraudulent binary options. This step at international level follows the temporary prohibition of the marketing, distribution or sale of binary options and the restrictions on the marketing, distribution or sale of CFDs to retail clients introduced in the EU earlier this year, which the U.K. Financial Conduct Authority fully supported.

    The report covers rolling spot forex contracts, CFDs and binary options offered and sold on a domestic and cross-border basis by intermediaries to retail investors. The report includes three toolkits providing guidance to IOSCO member jurisdictions on methods for mitigating the harm to retail investors investing in these products.

    Read more
  • European Securities and Markets Authority Intends to Extend Product Intervention Measures for Binary Options for a Further Three Months
    08/24/2018

    The European Securities and Markets Authority has announced its intention to adopt a Decision to extend the prohibition on the marketing, distribution and sale of binary options to retail investors for a further three-month period from October 2, 2018. ESMA has previously adopted intervention measures for binary options, with the current Decision set to expire on October 1, 2018.

    ESMA has power under the Markets in Financial Instruments Regulation to impose prohibitions or restrictions on certain financial instruments, financial activities or practices. This may be done when, among other conditions, the exercise of ESMA's power addresses a significant investor protection concern in the Union. Product intervention measures imposed by ESMA under MiFIR must be reviewed at appropriate intervals and at least every three months. If a measure is not renewed after three months, it will expire. In reviewing the current Decision, ESMA has agreed to exclude from the scope of product intervention certain types of binary option that are less likely to lead to a significant investor protection concern.

    Read more.
  • UK Conduct Regulator Reminds Firms of Obligations on Selling High-Risk Products to Retail Clients
    08/01/2018

    The U.K. Financial Conduct Authority has issued a statement on selling high-risk speculative investments to retail clients following the European Securities and Markets Authority's product intervention on contracts for difference products.

    ESMA issued decisions in March and June 2018 to temporarily prohibit the marketing, distribution or sale of binary options and to impose restrictions on the marketing, distribution or sale of CFDs to retail clients. In the CFD decision, ESMA had clarified that turbo certificates were outside the scope of the CFD restrictions. However, in its recently updated Q&A on its product intervention, ESMA acknowledges that turbo certificates have comparable features to CFDs, such as leverage.

    Read more.
  • UK Financial Conduct Authority Proposes Changes to Rules Governing Peer-to-Peer Lending Platforms
    07/27/2018

    The Financial Conduct Authority has launched a consultation on new rules for loan-based crowdfunding platforms, also known as peer-to-peer lending platforms. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

    The FCA began a post-implementation review of the crowdfunding sector and the applicable regimes in 2016. In the post-implementation review, the FCA identified that harm may be caused to investors as a result of poor business practices and due to the business models that some platforms have adopted. The consultation paper summarizes the FCA's findings from that review and sets out the FCA's proposals to change certain rules and guidance.

    Read more.
  • UK Regulator Seeks Input on EU Packaged Retail and Insurance-based Investment Products Regulation
    07/26/2018

    The Financial Conduct Authority has issued a call for input on the Packaged Retail and Insurance-based Investment Products Regulation. Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded.

    The FCA is seeking input about the initial experience of: (i) those producing, advising on, or distributing PRIIPs and preparing and providing KIDs; and (ii) consumers using KIDs to decide whether to invest in these investment products. In addition, the FCA is asking for feedback on the scope of the PRIIPs Regulation, in particular, which instruments fall in or out of the scope of the requirements, and on practical aspects of certain cost and risk disclosure requirements.

    Feedback to the call for input should be provided by September 28, 2018. The FCA intends to publish a feedback statement in Q1 2019.

    View the call for input.
  • US Federal Reserve Board Launches New Consumer Protection Bulletin
    07/26/2018

    The U.S. Board of Governors of the Federal Reserve System launched the Consumer Compliance Supervision Bulletin.  The bulletin will be published by the Federal Reserve Board’s Division of Consumer and Community Affairs, and will provide high-level summaries of supervisory issues, highlight violations that have been identified, include practical guidance with respect to the management of consumer compliance risks and enhance transparency with respect to the Federal Reserve Board’s consumer compliance supervisory program.  The current issue of the bulletin includes content with respect to fair lending, unfair or deceptive acts or practices and regulatory and policy developments.

    View full text of the bulletin.
  • UK Conduct Authority Contemplates Introducing a New Duty of Care
    07/17/2018

    The Financial Conduct Authority has published its Approach to Consumers alongside a discussion paper on the potential introduction of a new duty of care and possible alternative approaches. The Approach to Consumers forms part of a series of formal approach documents explaining the FCA's approach to regulation in more depth. It should be read alongside the FCA's Mission document, which was first published in October 2016 and most recently updated in November 2017.

    The Approach to Consumers sets out the FCA's approach to regulating for retail customers. The document sets out the FCA's vision for well-functioning markets that work for consumers, the relevant regulatory and legal framework, when and how the regulator will act to protect consumers, the FCA's policy position on key issues and its strategy for ensuring that its consumer protection objective is advanced with the greatest impact.

    Read more.
  • UK Conduct Regulator Chair Supports New Standards for Data Ethics
    07/11/2018

    Charles Randell, Chair of the Financial Conduct Authority and Payment Systems Regulator,delivered a speech on big data, regulation and data protection entitled, "How can we ensure that big data does not make us prisoners of technology?"

    Discussing the risks associated with big data and artificial intelligence, Mr. Randell highlighted that in order to innovate ethically, thought needs to be given to the questions posed by big data, AI and behavioural science. In particular, the FCA Chair is concerned that technical innovation could increase social exclusion and reduce access to financial services if it was used, for example, to identify the most profitable or most risky customers.

    Read more.
  • European Banking Authority Issues Annual Report for 2017
    06/18/2018

    The European Banking Authority has published its Annual Report for 2017.

    The Annual Report summarizes the progress made in a number of workstreams undertaken by the EBA in 2017, including the EBA's work on: (i) developing and maintaining an EU Single Rulebook for banking; (ii) promoting supervisory convergence; (iii) developing resolution policies and promoting common approaches for the resolution of failing financial institutions; (iv) determining and monitoring key risks in the banking sector across Europe; (v) strengthening the EBA's role as EU data hub for the collection, use and dissemination of banking data; (vi) protecting consumers, monitoring financial innovation and contributing to easy retail payments in the EU; (vii) Brexit preparations; (viii) international engagement; and (ix) cross-sectoral work by the European Supervisory Authorities under the Joint Committee.

    Read more.
  • European Securities and Markets Authority Adopts First Product Intervention Measures for Contracts for Difference and Binary Options
    06/01/2018

    The European Securities and Markets Authority has adopted two Decisions on the provision of Contracts for Difference and binary options to retail investors. The effect of the Decisions is to prohibit the marketing, distribution and sale of binary options to retail investors and to impose a number of restrictions on the marketing, distribution and sale of Contracts for Difference to retail investors. Both CFDs and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products.

    Read more.
  • EU Authorities Highlight Importance of Bail-In Risk Disclosures for Retail Investors in Bank Debt Liabilities
    05/30/2018

    The European Banking Authority and the European Securities and Markets Authority have published a joint statement on the treatment of retail holdings of debt financial instruments under the EU Bank Recovery and Resolution Directive and the revised Markets in Financial Instruments Directive. The EBA and ESMA highlight that care is needed when bail-in is implemented in relation to debt liabilities held by retail customers. There have been a number of mis-selling cases as a result of firms not complying with the investor protection requirements at the point of sale of banks' debt liabilities to retail investors.

    The EBA and ESMA emphasize that to ensure that debt instruments are distributed to clients for whom they are suitable, firms must properly implement the MiFID II investor protection requirements. Those requirements oblige firms to, among other things, act honestly, fairly, professionally and in the best interests of clients, disclose certain information to potential and existing clients and conduct suitability assessments. In addition, the product governance framework requires manufacturers and distributors of financial products to act in the client's best interests at all stages of the life-cycle of products or services. In particular, firms must identify the target market for complex products to a greater level of detail than other products. Instruments subject to bail-in must be classified as complex products.

    Read more.
  • US Department of Labor Issues Guidance on Fiduciary Rule Compliance
    05/07/2018

    The U.S. Department of Labor issued a Field Assistance Bulletin regarding an anticipated mandate by the United States Court of Appeals for the Fifth Circuit effectuating its opinion that vacates the Fiduciary Rule and related exemptions and amendments in their entirety.  The DOL guidance notes that fiduciaries may continue to rely on its previously issued temporary enforcement policy, which notes that the DOL will not pursue prohibited transaction claims against fiduciaries who are working in good faith to comply with certain prohibited transaction exemptions issued in connection with the Fiduciary Rule or treat those fiduciaries as violating the applicable prohibited transaction rules.  In addition, the temporary enforcement policy notes that investment advice fiduciaries may also choose to rely upon other available exemptions to the extent applicable after the Fifth Circuit’s decision.

    View full text of the DOL bulletin.
  • UK Financial Conduct Authority Finalizes Rules Enhancing Governance of Authorized Fund Managers
    04/05/2018

    The Financial Conduct Authority has published a Policy Statement and final rules relating to strengthening the governance arrangements of U.K. authorized fund managers. The need to enhance these arrangements was identified by the FCA in the Asset Management Market Study launched in 2015. The final AMMS report was published in June 2017 and set out remedies the FCA intended to implement to address identified issues. At the same time, the FCA published a consultation paper on the first set of proposals.

    The Policy Statement sets out the FCA's response to the feedback on its proposals and the final rules and guidance. The new rules and guidance applies to U.K. AFMs in relation to their management of authorized funds (that is, authorized open-ended collective investment schemes). The rules will apply either on April 1, 2019 or on September 30, 2019, depending on the lead time that the FCA considers the industry needs to implement the required changes.

    Read more for a summary of the FCA's decision on the various consultation points. 
  • UK Financial Conduct Authority Consults on Proposals to Improve Disclosure to Fund Investors by Authorized Fund Managers
    04/05/2018

    The Financial Conduct Authority has published a second consultation paper on remedies arising out of the Asset Management Market Study. This consultation concerns improving disclosure by authorized fund managers to their investors and should be read with the Policy Statement, final rules and revised guidance on enhanced governance arrangements for U.K. AFMs, which were published alongside the consultation paper. The FCA is proposing:
    • new guidance on how AFMs should make fund objectives and investment policies clear and more useful for investors;
    • new rules requiring managers to be clear about why (or why not) a benchmark has been used and how investors should assess the performance of the fund;
    • new rules requiring AFMs that use benchmarks to use and reference them consistently across marketing materials;
    • new rules requiring that where managers present past performance they must do so in an appropriate and consistent manner; and
    • amending the performance fee rules to require that performance fees be calculated on performance net of other fees.
    The proposed rules would apply to AFMs in respect of their management of authorized funds. Responses to the consultation should be submitted by July 5, 2018.

    View the second consultation on remedies arising from the AMMS.

    View details of the Policy Statement and final rules.

    View the AMMS final report and the first consultation paper.
  • US Consumer Financial Protection Bureau Releases Semi-Annual Report
    04/02/2018

    The U.S. Consumer Financial Protection Bureau published its semi-annual report.  The report, which is mandated by the Dodd-Frank Act, highlights and summarizes various topics the CFPB is working on, including a list of rules, orders and initiatives to be undertaken in the upcoming period.  The report notes upcoming proposed and final rules, including reconsideration of certain aspects of Regulation C (Home Mortgage Disclosure), finalization of amendments to Regulation P (Annual Privacy Notice Requirements Under the Gramm-Leach-Bliley Act), and finalizing an amendment to Regulation Z (Federal Mortgage Disclosure Requirements under the Truth in Lending Act).  In his introductory letter to the report, CFPB Acting Director Mick Mulvaney was critical of past actions by the CFPB, contending that the CFPB was too powerful and subject to very little oversight.  Acting Director Mulvaney noted that the CFPB “will continue to execute the law, but will no longer go beyond its statutory mandate.”  In addition, Acting Director Mulvaney requested Congress enact four changes in order to promote and establish CFPB accountability: funding the CFPB through the congressional appropriations process; requiring congressional approval of major CFPB rules; ensuring that the CFPB Director is accountable to the President in the exercise of executive authority; and creating an independent Inspector General for the CFPB.

    View the CFPB report.
  • European Banking Authority Proposes Extending the Scope of the Complaints-Handling Guidelines
    03/28/2018

    The European Banking Authority has published proposals to extend the Joint Committee Guidelines on complaints-handling for the securities and banking sectors to the new institutions established under the revised Payment Service Directive and the Mortgage Credit Directive. The Joint Committee's Guidelines on complaints-handing for the securities and banking sectors, published in June 2014, apply to national regulators responsible for supervising complaints-handling by credit institutions, investment firms, certain fund managers, payment institutions and electronic money institutions where complaints are made by natural or legal persons about the regulated activities carried out by these entities.

    The MCD, which has applied since March 2016, covers non-bank creditors. Similarly, PSD2, in application since January 2018, introduced two new providers of payment services - payment initiation service providers and account information service providers. Complaints-handling by these entities do not currently fall within the scope of the Guidelines.

    The EBA is proposing to extend the scope of the existing Guidelines to these entities to ensure that consumers receive the same level of protection when they interact with these new entities as when they interact with in-scope regulated entities. The extended Guidelines would only apply to security-related complaints for account information services provided by account information service providers under PSD2. The EBA proposes that national regulators should apply the extended Guidelines on a proportionate basis, taking into account the nature, scale and complexity of the business of each entity as well as the nature and range of services they offer.

    The consultation closes on May 27, 2018.

    View the consultation paper.

    View the existing Guidelines.
  • European Securities and Markets Authority Confirms Product Intervention for Contracts for Difference and Binary Options
    03/27/2018

    The European Securities and Markets Authority has confirmed that it will use its product intervention powers under the Markets in Financial Instruments Regulation to prohibit the marketing, distribution and sale of binary options to retail investors. It will also impose a number of restrictions on the marketing, distribution and sale of Contracts for Difference to retail investors. Both CFDs and binary options have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by providers and distributors of the products.

    Read more.
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