Shearman & Sterling LLP | Financial Regulatory Developments Focus
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.

  • US State Regulators Sue Office of the Comptroller of the Currency Over FinTech Charter
    10/25/2018

    The Conference of State Bank Supervisors has sued the U.S. Office of the Comptroller of the Currency to prevent it from granting charters for special purpose national banks to non-depository FinTech companies. The CSBS is the nationwide organization of state banking regulators in the United States.

    The CSBS filed the lawsuit upon the OCC’s announcement on July 31, 2018 that it would begin accepting these applications. The CSBS previously sued the OCC over its ability to provide SPNB charters in April 2017. The federal district court in D.C., however, dismissed the first suit for lack of subject matter jurisdiction and ripeness, stating that the OCC had not decided whether to grant SPNB charters to FinTech firms at that time.

    Read more.
  • European Commission Announces Work Plan for 2019
    10/23/2018

    The European Commission has published a Communication, outlining its work plan for 2019. The Communication is addressed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The Communication discusses the ongoing challenges for the EU in the run-up to the European Parliamentary elections and the post-Brexit Summit in Sibiu at which a new multi-annual framework for the EU27 will be finalized.

    Separately published Annexes to the Communication relating to: (i) new initiatives; (ii) REFIT initiatives; (iii) priority pending proposals; (iv) legislative initiatives that have been withdrawn; and (v) a list of envisaged repeals. Priority pending proposals of particular relevance to financial institutions include legislative proposals relating to the forthcoming sustainable finance package, cross-border distribution of collective investment schemes, crowdfunding, amendments to the European Market Infrastructure Regulation, prudential regulation and supervision of investment firms and a proposed amending regulation relating to minimum loss coverage for non-performing exposures.

    Read more.
  • European Securities and Markets Authority Publishes Its 2019 Priorities
    10/01/2018

    The European Securities and Markets Authority has published its Annual Work Programme for 2019, dated September 26, 2018. ESMA sets out its focus areas for 2019 and provides details of expected outputs within each of the areas. ESMA also indicates that a number of pieces of EU legislation may be reviewed. These include the Market Abuse Regulation and the clearing obligation under the European Market Infrastructure Regulation, in addition to the reviews that have already been announced.

    Read more.
  • US-UK Financial Regulatory Working Group Holds Inaugural Meeting
    09/18/2018

    The U.S.-U.K. Financial Regulatory Working Group has issued a statement following its inaugural meeting held on September 12, 2018 in London. Participants discussed the outlook for financial regulatory reforms and future priorities, including possible areas for deeper regulatory cooperation to facilitate further financial services activity between U.S. and U.K. markets. Participants also discussed Brexit-related issues, including: (i)  U.S.-U.K. financial regulatory issues resulting from the U.K.’s exit from the EU;  and (ii) the implications of Brexit for financial stability and cross-border financial regulation, including contractual continuity and potential cliff-edge risks.

    The Working Group was established in April 2018 to serve as a forum for staff from the U.S. Department of the Treasury and HM Treasury and financial regulatory authorities to exchange views on the regulatory relationship between the U.S. and the U.K. Its objectives are to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.

    The next meeting of the Working Group will be held in the first half of 2019 in Washington, D.C.

    View the statement
  • Financial Stability Board Consults on Implementation of the Legal Entity Identifier
    08/16/2018

    The Financial Stability Board has launched a thematic peer review on implementation of the Legal Entity Identifier and is inviting feedback on implementation of the LEI at the same time. The objective of the LEI system is for unique identifiers to be held by all legal entities participating in financial markets across the globe. It is envisaged that the LEI system will lead to better data aggregation, enhance systemic risk monitoring and reduce costs to market participants.

    Using the peer review, the FSB will: (i) consider the approaches and strategies used by FSB members to implement the LEI, including its adoption for regulatory requirements; (ii) assess whether current levels and rates of LEI adoption are sufficient to support the ongoing and anticipated needs of FSB member authorities; (iii) identify the challenges in further advancing the implementation and use of the LEI; and (iv) if appropriate, make recommendations for addressing any challenges.

    Read more.
  • 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 Draft Regulations Restricting the Assignment of Receivables Published
    07/06/2018

    The draft Business Contract Terms (Assignment of Receivables) Regulations 2018 have been laid before Parliament. The draft Regulations will invalidate terms in business contracts that prohibit or restrict the assignment of receivables, including terms that prevent the enforcement of a receivable. A receivable in this context is a right to be paid under a contract for the supply of goods, services or intangible assets. The Regulations will not apply if the person to whom the receivable is owed is a large enterprise or a special purpose vehicle.

    Read more.
  • UK Financial Conduct Authority Consults on a New Directory For Financial Services Workers
    07/04/2018

    The Financial Conduct Authority has published a consultation paper setting out proposals to introduce a new directory of financial services workers.

    In the consultation paper, the FCA explains that one effect of the extension of the Senior Management and Certification Regimes to all financial services firms will be that the Financial Services Register will contain the details of fewer individuals. Currently the Financial Services Register contains details of individuals who have been approved by the FCA or PRA. This includes individuals in senior management roles, individuals approved to hold controlled functions and individuals who hold customer-facing roles. However, this will change following the extension of SM&CR to all firms, because Individuals in customer functions, for example, will need to be assessed as fit and proper by firms rather than being approved by the regulators. Only individuals in specified senior manager roles will be approved by the relevant regulators and entered on the Register.

    Read more.
  • European Commission Proposes Legislative Package on Sustainable Finance
    05/24/2018

    The European Commission has published a package of legislative reforms on sustainable finance. The aim of the package of reforms, which form part of the Commission's broader Capital Markets Union initiative, is to ensure that environmental, social and governance considerations are consistently integrated into the investment and advisory process across sectors. The proposed measures comprise:

    (i) a proposed Regulation on the establishment of a framework to facilitate sustainable investment. This will establish an EU-wide classification system for environmentally sustainable economic activities and ensure that investment strategies are oriented towards economic activities that genuinely contribute to achieving environmental objectives. The proposed Regulation will empower the European Commission to adopt delegated acts to specify technical screening criteria to assess the contribution of a given economic activity to a particular environmental objective as substantial. A list of six environmental objectives is set out in the proposed regulation, namely: climate change mitigation; climate change adaptation; sustainable use and protection of water and marine resources; transition to a circular economy, waste prevention and recycling; pollution prevention and control; and protection of healthy ecosystems (which includes biodiversity conservation).

    Read more.
  • US Office of the Comptroller of the Currency Encourages Banks to Meet Consumers’ Short-Term, Small-Dollar Credit Needs
    05/23/2018

    The U.S. Office of the Comptroller of the Currency issued a bulletin encouraging banks to offer responsible short-term small-dollar loans to help meet the credit needs of their customers.  The OCC reminded banks, however, that any short-term small-dollar lending should be done in accordance with three core lending principles, including:  (i) that all bank products should be consistent with safe and sound banking, treat customers fairly and comply with applicable laws and regulations, (ii) that banks should effectively manage the risks associated with the products they offer, including credit, operational, compliance and reputational risk, and (iii) that all credit products should be underwritten based upon reasonable policies and practices, including guidelines governing the amounts borrowed, frequency of borrowing and repayment requirements.  The OCC bulletin also lists a number of policies and procedures topics specific to short-term small dollar lending, including with respect to loan pricing and repayment terms, effective management of credit risk, loan servicing and timely reporting of repayment activities to credit bureaus.  In addition, the OCC bulletin encourages banks to discuss their plans to offer short-term small-dollar lending products with their OCC portfolio manager or other OCC supervisory authority, especially if the offering of these products represents a substantial deviation from a bank’s existing business plan.

    View â€‹full text of the OCC bulletin.
  • European Commission Proposes Protective Legislation for Whistleblowers Reporting EU Law Breaches
    04/23/2018

    The European Commission has published a proposal for a Directive on the protection of persons reporting on breaches of Union law. Whistleblowers help prevent damage and detect threat or harm to the public interest that may otherwise remain hidden, but fear of retaliation can often discourage them from reporting concerns.

    The importance of providing effective whistleblower protections for safeguarding the public interest has been acknowledged both at European and international level. At EU level, whistleblower protections are currently provided only for specific sectors and to varying degrees. This means that, in many situations, whistleblowers are not properly protected against retaliation. The proposed Directive will address this fragmentation by encompassing "the broadest possible range of categories of persons, who, by virtue of work-related activities (irrespective of the nature of these activities and whether they are paid or not), have privileged access to information about breaches." Areas covered include financial services, money laundering and terrorist financing.

    Read more.
  • US and UK Establish Financial Regulatory Working Group
    04/19/2018

    The U.S. Treasury Department and HM Treasury have issued a joint statement announcing the establishment of a Financial Regulatory Working Group. The Working Group will be a forum for treasury staff and financial regulatory authorities to exchange views on the regulatory relationship between the United States and the U.K. The objectives of the Working Group will be to further financial regulatory cooperation, improve transparency, reduce regulatory uncertainty, identify possible cross-border implementation issues, address regulatory arbitrage and work towards achieving compatibility of U.S. and U.K. laws and regulations.

    View the statement.
  • UK Financial Conduct Authority Consults on Ex Post Impact Evaluation
    04/09/2018

    The Financial Conduct Authority has published a discussion paper on its proposed approach to using ex post impact evaluation to assess the impact of its work on consumers, firms and markets. The consultation paper sets out what the FCA means by ex post impact evaluation, why it is important to the FCA, the scope of ex post impact evaluations, how the FCA will select which work to evaluate, how such evaluations will be conducted and the key challenges involved in ex post impact evaluations. The FCA is seeking feedback on its proposed approach.

    Responses to the discussion paper should be submitted by July 9, 2018.

    View the discussion paper
  • UK Financial Conduct Authority Elaborates on its Mission and Consults on Approaches to Competition and Authorization
    12/11/2017

    The UK Financial Conduct Authority has published two consultations, seeking feedback on draft documents setting out its regulatory approach to authorization and competition. The two documents, once finalized, will form part of a series of formal approach documents explaining the FCA's approach to regulation in more depth. They should be read alongside the FCA's Mission document, which was first published in October 2016 and most recently updated in November 2017.

    In the consultation on its approach to authorization, the FCA explains the public value and purpose of requiring authorization to conduct regulated financial services activities and the FCA's current approach to authorizing firms and individuals. The FCA seeks feedback on four questions: (i) understanding of the Threshold Conditions that firms and individuals must meet for authorization, and any areas where the FCA might be more specific; (ii) how the FCA might improve its approach to supporting firms and individuals to meet the minimum standards and how the FCA might better promote competition; (iii) whether the FCA has suggested the correct commitments to firms making authorization applications and what other commitments could be made; and (iv) whether the FCA has prioritized the right strategic goals, and, if not, what additional goals could add the most public value to the FCA's work.

    Read more.
  • UK Financial Conduct Authority Publishes Measures to Improve the UK Financial Advice Market
    12/08/2017

    The Financial Conduct Authority has published a Policy Statement setting out new Handbook rules and guidance to implement some of the recommendations arising from the Financial Advice Market Review launched by the FCA jointly with HM Treasury in August 2015.

    Read more.
  • European Commission Consults on Improving Supervisory Reporting
    12/01/2017

    Following its 2015 Call for Evidence on the EU regulatory framework for financial services, the Commission has issued a report on progress on the targeted follow-up measures to the Call for Evidence, which was set out in a November 2016 Communication. Alongside the progress report, the European Commission has launched a consultation on supervisory reporting requirements. Some of the respondents to the Call for Evidence had highlighted overlaps and inconsistencies between reporting requirements in certain pieces of financial legislation, a reportedly excessive number of requirements, as well as, at times, insufficient clarity as to what needs to be reported and an insufficient use of international standards. Other respondents also highlighted the costs (including IT costs) of implementing reporting requirements and a number of respondents had mentioned that many EU Member States gold-plate the requirements.

    The consultation seeks feedback in a number of areas, with the aim of gaining evidence on the cost of compliance with existing EU level supervisory reporting requirements, as well as on the consistency, coherence, effectiveness, efficiency, and added value of those requirements. The feedback from the consultation will provide important guidance to the Commission when preparing, if considered appropriate, a formal Commission proposal.

    Comments on the consultation are invited by February 28, 2018.

    View the Consultation Paper.

    View Progress Report on the Call for Evidence.

    View the November 2016 Communication.

    View Press Release.
  • UK Court of Appeal Grants ENRC Permission to Appeal Widely Criticised Privilege Ruling - and Law Society Seeks to Intervene
    10/11/2017

    On October 11, 2017, Eurasian Natural Resources Corporation was granted permission by the Court of Appeal to appeal the High Court's ruling articulating a significant restriction on the scope of legal professional privilege (in particular, litigation privilege). The Law Society of England & Wales - which has expressed concern about the High Court's ruling and its implication for when and how companies and their employees are protected by privilege - has since announced that it has applied to the Court for permission to intervene in the appeal.

    Although the ENRC case was brought by the UK Serious Fraud Office, the High Court's ruling - and the future decision by the Court of Appeal - will impact upon the way investigations are conducted in the context of (prospective) criminal prosecutions by the UK Financial Conduct Authority as well.

    Read more

  • European Commission Legislative Proposals for Enhanced Powers for European Supervisory Authorities and the European Systemic Risk Board

    09/20/2017

    The European Commission has published legislative proposals designed to strengthen and further integrate the supervisory framework of the European Union. The proposals build on contributions to the Commission's public consultation in autumn 2016 on the European Systemic Risk Board and its public consultation in spring 2017 on the European Supervisory Authorities – the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority.

    Read more.
  • European Commission Launches Consultation on Further Reducing Barriers to Post-Trade Services
    08/23/2017

    The European Commission has launched a consultation seeking views about the current state of post-trade markets, the main trends and challenges faced by post-trade services providers and their users, the existence and scale of remaining or new barriers to post-trade services used in financial transactions, the risks associated with such barriers and the best ways to address them.

    Alongside the consultation, the Commission has published the report of the European Post-Trade Forum (EPTF), an expert group established by the Commission in early 2016 to assess the evolution of the EU post-trade landscape and the progress made in removing the "Giovannini barriers" to post-trade services. The EPTF report identifies those Giovannini barriers that have been successfully addressed since 2001 but cites further barriers that have arisen due to technological and market developments in the intervening fifteen years, in particular developments in derivatives markets, securities finance activities, collateral management and post-trade reporting.

    The Commission consultation seeks stakeholders' views on a wide ranging set of questions, including: the relative importance of trends in post-trade in the EU; technological advances (such as distributed ledger technology and other FinTech developments); financial stability concerns arising from the susceptibility of post-trade areas to systemic risk; the means by which EU post-trade markets could become more attractive internationally; the near and longer term strategy for EU post-trade services and the challenges the markets are likely to face.

    Read more.
  • European Securities and Markets Authority Consults on Guidelines on Internalised Settlement Reporting Under the Central Securities Depositaries Regulation
    07/10/2017

    The European Securities Markets Authority has published a consultation on proposed guidelines to ensure common, uniform and consistent application of the provisions of the Central Securities Depositaries Regulation that apply to internalized settlement reporting and to the exchange of information between ESMA and national regulators.

    Read more.
  • G20 Leaders Outline Action Plan Following Hamburg Summit
    07/08/2017

    The G20 Leaders met in Hamburg, Germany on July 7-8, 2017 and have published a Leaders' Declaration and an Action Plan setting out the G20's strategy for achieving strong, sustainable, balanced and inclusive growth. The Action Plan includes ongoing and planned work on financial sector regulation and development.

    Read more.
  • European Commission Consults on Conflicts of Law Rules for Securities Ownership
    04/07/2017

    The European Commission has published a consultation paper on conflicts of law rules for securities ownership, addressing so-called third party effects of transactions in securities and claims. The consultation relates to the Commission's Capital Markets Union and the objective of creating a single market for capital by facilitating cross-border investment.

    Read more.
  • Prime Minster Theresa May Triggers Article 50 Brexit Negotiations
    03/29/2017

    UK Prime Minster Theresa May formally notified the European Council of the UK's intention to withdraw from the European Union in accordance with requirements set out in Article 50 of the Treaty on the European Union. Prime Minister May sent a letter to the President of the Council, Donald Tusk, which sets out the approach the UK Government seeks to take in discussing its exit from the European Union over the next two years.

    View the letter.

    You might like to view our Brexit resource page, which is available here.
  • European Securities and Markets Authority Publishes Research Report on EU Securities Financing Transactions and Haircuts
    03/27/2017

    The European Securities and Markets Authority has published a research Report on securities financing transactions in the European Union and the use of collateral haircuts by firms. The purpose of ESMA's research is to outline the current level and calculation methodologies of haircuts used in the EU by SFT market participants with the overall aim of informing future discussions in the context of global regulatory policy.

    Read more.
  • US Federal Reserve System Publishes Annual Financial Statements
    03/24/2017

    The US Federal Reserve System released the 2016 combined annual audited financial statements for the Federal Reserve Banks, as well as statements for the 12 individual Federal Reserve Banks and the Board of Governors. An independent auditing firm engaged by the Federal Reserve Board has issued unqualified opinions on the financial statements and on the Federal Reserve Board’s and the Federal Reserve Banks’ internal controls over financial reporting.

    The audited financial statements provide a significant amount of information about the assets, liabilities and earnings of the Federal Reserve Banks and the Federal Reserve Board as of December 31, 2016, including information about the composition, fair value and earnings related to the $4.4 trillion of US Treasury securities, government-sponsored enterprise (GSE) debt securities and federal agency and GSE mortgage-backed securities acquired through open market operations.

    View The Federal Reserve System financial statements.
  • G20 Leaders Publish Communique
    03/18/2017

    The G20 Leaders have published a Communique from the Summit held in Germany. The G20 Leaders reiterated their commitment to finalizing the remaining elements of the financial sector reform agenda and to conducting a post-implementation evaluation of the reforms. The G20 Leaders have endorsed the Financial Stability Board's recommendations to address structural vulnerabilities arising from asset management activities and have asked the International Organization of Securities Commissions to prepare measures for timely implementation of those recommendations. Monitoring of those risks is to continue and, for the July 2017 Summit, the FSB is to assess the adequacy of monitoring and policy tools to address risks from shadow banking and to consider whether any further policy is needed. The G20 Leaders have called on their members to complete their implementation of the OTC derivatives reforms. The FSB is due to review the implementation and effects of these reforms.

    Read more.
  • European Commission Launches Portal for Better Regulation

    03/06/2017

    The European Commission launched a new portal through which feedback can be provided on proposed EU legislation and initiatives. The portal is part of the Commission’s Better Regulation agenda. The portal is intended to provide individuals and stakeholders with the opportunity to provide input on new EU legislation from the preparation phase through to proposals for new laws and evaluations of how existing laws are performing.

    View the European Commission’s portal.
     
  • European Commission Requests Technical Advice for Prospectus Regulation Implementation
    03/02/2017

    The European Commission has published a request to the European Securities and Markets Authority for technical advice on possible delegated acts under the Prospectus Regulation. The Prospectus Regulation has been agreed but is yet to be published in the Official Journal of the European Union. It will enter into force 20 days after publication and apply two years after publication - currently expected to be June 2019. The Prospectus Regulation will replace the existing Prospectus Directive and sets out the requirements for a prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The Prospectus Regulation aims to simplify the rules and administrative obligations for companies wishing to issue shares or debt on the market and reducing the costs of preparing a prospectus, thus fostering cross-border investments in the single market, while at the same time still enabling investors to make informed investment decisions.

    Read more
  • US Department of Labor Proposes Extension to Fiduciary Rule Applicability Date
    03/01/2017

    The US Department of Labor proposed to extend the applicability dates of the fiduciary rule and related exemptions, including the Best Interest Contract Exemption, from April 10, 2017 to June 9, 2017.

    Read more.

     
  • US Securities and Exchange Commission Approves Rules to Ease Investor Access to Exhibits in Company Filings
    03/01/2017

    The SEC adopted rule and form amendments to make it easier for investors and other market participants to find and access exhibits in registration statements and periodic reports that were originally provided in previous filings. The final rules will take effect on September 1, 2017.

    The amendments will require issuers to include a hyperlink to each exhibit in the filing’s exhibit index.  Currently, someone seeking to retrieve and access an exhibit that has been incorporated by reference must review the exhibit index to determine the filing in which the exhibit is included, and then must search through the registrant’s filings to locate the relevant filing.

    View the final rule.
  • US Securities and Exchange Commission Seeks Public Comment on Possible Change to Industry Guide 3 – Statistical Disclosure by Bank Holding Companies
    03/01/2017

    The SEC published a request for public comment on disclosures called for by Industry Guide 3 - Statistical Disclosure by Bank Holding Companies. Stating that the financial services industry has changed drastically since Guide 3 was originally published, the SEC is soliciting public input on whether Guide 3 continues to elicit the information that investors need for informed investment and voting decisions.  The SEC also seeks comment on whether there are new types of disclosures about the activities of bank holding companies that investors would find important.

    The request for comment is published on the SEC website and in the Federal Register.  The comment period will remain open until May 8, 2017.

    View the request for comment.
  • European Commission Publishes White Paper on the Future of Europe
    03/01/2017

    The European Commission published a White Paper on the future of Europe. The White Paper outlines possible drivers of change and scenarios in which the current 27 member states could evolve by 2025. The White Paper reviews possible changes that could occur over the next decade, such as the impacts of new technologies on societies and jobs, doubts about globalization, security concerns and the rise of populism. The White Paper outlines a non-exhaustive list of five possible scenarios by which the EU could evolve, entitled: (i) Carrying On; (ii) Nothing But the Single Market; (iii) Those Who Want More Do More: (iv) Doing Less More Efficiently; and (v) Doing Much More Together. The White Paper forms part of the Commission’s contribution to the Rome Summit. Following the Summit, the Commission, the European Parliament and interested Member States will host a series of “Future of Europe Debates” across Europe.  

    View the press release

    View the Annex summarizing the scenarios.

    View the White Paper.
  • Financial Conduct Authority Proposes Changes to UK Equity IPO Process
    03/01/2017

    The Financial Conduct Authority launched a consultation on proposed changes to the availability of information in the UK equity IPO process. The consultation follows the discussion paper published by the FCA in April 2016. The FCA's view is that diverse and independent information is not available early enough in the IPO process. To address this issue, the FCA is proposing to amend the order in which the approved prospectus and connected research is made available to investors and to ensure that analysts from firms not supporting the IPO are provided with access to the issuer's management. In particular, the FCA is proposing that an approved prospectus or registration be published and unconnected analysts have access to the issuer's management before any connected research is released. In addition, the FCA is proposing to clarify, through supplemental guidance, that it would regard any interaction between analysts and issuers or their representatives to be participation in investment banking pitching efforts until the firm has accepted a mandate to carry out underwriting or placing services for the issuer and the firm's position in the syndicate has been determined.

    The consultation closes on June 1, 2017. The FCA expects to publish a policy statement setting out the final changes, if any, before the end of 2017.

    View the consultation paper.

    View the discussion paper.
  • UK Regulator Concerned that Loan-Based Crowdfunding Platforms may be Facilitating Loans to Lending Business that are not Properly Authorized
    02/28/2017

    The Financial Conduct Authority has published a letter addressed to the CEOs of firms operating a loan-based crowdfunding platform about concerns that the platforms may be facilitating loans to lending businesses that do not have the requisite regulatory permissions. According to the FCA, a lending business that borrows through a platform and then lends that money to others may be carrying on the regulatory activity of "accepting deposits". If the lending business does not have the regulatory permission to accept deposits, it would be in breach of UK legislation and may be committing a criminal offense. The FCA's view is that a loan-based crowdfunding platform that facilitates this type of behaviour is "acting in a manner inconsistent with [the FCA's] expectations for regulated firms" and may be in breach of regulatory requirements, in particular, breaching the FCA's Principles on treating customers fairly, the threshold conditions and business model requirements. Firms operating loan-based crowdfunding platforms have been asked to assess whether they are facilitating the relevant behaviour, and if so, to desist and consider the appropriate steps that should be taken to avoid facilitating such actions in the future. The FCA also requests the CEOs provide, by March 6, 2017, the details of the firms that they have concluded are accepting deposits without the requisite permission.

    View the FCA's letter.
  • UK Definition of "Financial Advice" Set to Change from 2018
    02/27/2017

    HM Treasury published its response to its late 2016 consultation on amending the definition of regulated advice under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to bring it in line with the definition of "investment advice" set out in the Markets in Financial Instruments Directive. HMT is proceeding with the change as consulted on and will lay draft legislation before Parliament to give effect to the change. The Financial Conduct Authority published a statement about the change, setting out what the change will mean for firms advising on investments or providing a personal recommendation.

    Read more.
  • European Commission Publishes Roadmap for Addressing National Barriers to Capital Flows
    02/27/2017

    The European Commission published a report on accelerating the Capital Markets Union by addressing national barriers to capital flows. The report is addressed to the European Parliament and the Council of the European Union. It focuses on issues that may impede investors' cross-border operations throughout the investment cycle. The report identifies what it sees as the main barriers to investment and sets out a suggested roadmap for Member States to address these barriers, most of which are actionable in 2017. The issues identified in the report include marketing requirements, administrative arrangements, regulatory fees for cross-border marketing, different approaches to crowdfunding, residence requirements, insufficient financial literacy, differences in insolvency regimes and withholding tax relief. Member States are invited to agree on the actions set out in the roadmap although the Commission may also consider whether any legislative proposals are appropriate.

    Member States have also been invited to identify other barriers in CMU-relevant areas, such as national reporting requirements imposed in addition to existing EU legislation, barriers to the online distribution of investment funds, obstacles for smaller institutional investors ineligible for a passport under the Markets in Financial Instruments Directive and challenges involved in the distribution of retail financial products.

    View the Commission's report.
  • US Securities and Exchange Commission Issues Guidance Update and Investor Bulletin on Robo-Advisers
    02/23/2017

    The US SEC published information and guidance for investors and the financial services industry on the use of robo-advisers, which are registered investment advisers that use computer algorithms to provide investment advisory services online. Because of the unique issues raised by robo-advisers, the SEC’s Division of Investment Management issued a Guidance Update for robo-advisers that contains suggestions for how they can meet their disclosure, suitability and compliance obligations under the Investment Advisers Act of 1940. Robo-advisers, as registered investment advisers, are subject to the substantive and fiduciary obligations of the Advisers Act. The Guidance Update notes that there may be a variety of means for a robo-adviser to meet its obligations to clients under the Advisers Act, and that not all of the issues addressed in the Guidance Update will be applicable to every robo-adviser.

    Read more.
  • UK Regulator Proposes Changes to UK Listing Rules
    02/14/2017

    The Financial Conduct Authority has published a consultation paper proposing amendments to the Listing Rules of the FCA's Handbook. The FCA is proposing to, among other matters, (i) clarify the premium listing eligibility requirements and introduce new technical notes and additional guidance to give more context to the rules; (ii) introduce a new concessionary route to premium listing for certain property companies that cannot meet the track record requirements so that a property valuation report may be used to assess the company's eligibility for a premium listing; (iii) introduce new technical notes on the concessionary routes; (iv) amendments to the profit test within the class tests which are used to determine which governance requirements a premium listed issuer must comply with for certain large transactions; and (v) in the context of reverse takeovers, reversing the assumption of insufficient information being available to the market where a target issuer cannot provide that information so that the assumption will be that the market can operate smoothly on the basis of information that listed companies make publicly available as part of their disclosure of inside information requirements under MAR.

    The FCA's discussion paper on the review of the effectiveness of the UK primary markets should be read in conjunction with the consultation paper. Responses to the FCA's proposed rule changes are requested by May 14, 2017. The FCA intends to publish its final rules in a Policy Statement in the second half of 2017.

    View the consultation paper

    View the discussion paper
  • UK Regulator Launches Review of UK Primary Markets
    02/14/2017

    The Financial Conduct Authority launched its review into the effectiveness of primary markets by publishing a discussion paper on the UK primary markets landscape. The FCA is seeking views on how the UK primary capital markets can meet the needs of investors and operate effectively. It includes an overview of the UK's primary markets, how the listing regime fits in, the FCA's regulatory role and key trends in the UK's primary equity markets. 

    Read more.
  • UK Regulator Proposals to Amend Client Money Distribution Rules
    01/23/2017

    The FCA published a consultation paper on proposed changes to the client money distribution rules in the Client Assets Sourcebook of the FCA Handbook - CASS 7A - as a result of the special administration regime review. The client money rules govern how client assets are to be distributed by an insolvency practitioner managing a failed investment firm. The proposals focus on rule changes following the introduction in early January 2017 by the Government of draft regulations to improve the regime in line with the Bloxham Report's recommendations, i.e. The Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017, the Amending SAR Regulations.

    Read more
  • UK Legislation Implementing the Bank of England and Financial Services Act Comes into Force
    01/20/2017

    The Bank of England and Financial Services Act 2016 (Commencement No 4 and Saving Provision) Regulations 2017 came into force. The Regulations set March 1, 2017 as the date on which certain provisions of the Bank of England and Financial Services Act 2016 will apply, including, those provisions which will transfer the functions of the Prudential Regulation Authority to the Bank of England. Those functions will be exercised through the Prudential Regulation Committee. 

    View the Regulations
  • European Commission Holds Public Consultation on the Capital Markets Union Mid-Term Review
    01/20/2017

    The European Commission launched a public consultation on the Capital Markets Union program and how it could be updated and completed, building on the initiatives that the Commission has presented so far, as part of the mid-term review. The mid-term review of the CMU action plan is scheduled for June 2017. The CMU Action Plan was published in September 2015 and set out priorities for putting in place the building blocks of a CMU by 2019. The Commission also published a Communication in September 2016 reaffirming its commitment to the CMU, calling for an acceleration of reform and outlining steps to increase the rate of completion. The Commission has completed 15 of the initiatives set out in the Action Plan (approximately half), including making progress on core legislative initiatives such as the proposed Prospectus Regulation and Securitization Regulation. Several more initiatives are expected to be launched in the coming months, including a proposal for simple efficient and competitive personal pensions, promotion of the FinTech sector with an appropriate regulatory environment and sustainable finance. 

    Read more.
  • US Office of the Comptroller of the Currency Launches Web-Based System for Licensing
    01/17/2017

    The OCC launched the agency’s new web-based Central Application Tracking System (CATS). The system will assist authorized national banks, federal savings associations and federal branches and agencies with drafting, submission and tracking of licensing and public welfare investment applications and notices. CATS also allows OCC analysts to receive, process and manage those applications and notices. CATS replaces e-Corp and CD-1 Invest, the current OCC electronic filing systems.

    The OCC plans to roll out institutions’ access to CATS in three phases. The first phase includes banks that are frequent electronic filers with the OCC. The second and third phases of the roll-out of CATS are scheduled to begin in spring 2017. OCC staff will notify institutions regarding the date of their access to CATS several weeks before such access is available.

    View OCC bulletin regarding the new system.

     
  • US House of Representatives Passes Securities Exchange Act Reform Bill
    01/12/2017

    The US House of Representatives passed H.R. 78, the SEC Regulatory Accountability Act, sponsored by Rep. Ann Wagner (R-MO). The Act would require the US Securities and Exchange Commission to justify the costs and benefits of a proposed regulation prior to its issuance of the same. In addition, before issuing a regulation, the SEC would also be required to do the following: (i) identify the nature and source of the problem its proposed regulation is meant to address; (ii) identify and assess available alternatives; and (iii) ensure that any regulations are consistent and written in plain language. The legislation also contains language requiring the SEC to conduct a retrospective review of its regulations every five years and to perform post-adoption impact assessments of major rules.

    View text of the bill.
  • Draft UK Legislation to Amend the Special Administration Regime for Investment Firms Published
    01/10/2017

    The UK Government published draft legislation to amend the Special Administration Regulations, i.e. The Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017, the Amending SAR Regulations. The purpose of the draft legislation is to improve the return of client money when an investment firm fails. The changes are in line with the Bloxham Report's recommendations which aim to minimize the market impact of a failed firm's entry into special administration. The draft Amending SAR Regulations amend the scope of the SAR Regulations to include firms that manage an alternative investment fund or Undertakings for the Collective Investment of Transferable Securities or who act as a trustee or depositary for an AIF or UCITS. The Amending SAR Regulations will make the transfer of client assets from a failing firm to another financial institution easier because restrictions on transfers will be removed, including removing any restriction affecting what can or cannot be assigned as well as any requirement to obtain client consent. The draft Amending SAR Regulations also improve the bar date mechanism and provide for continuity of services for the safe custody of client assets. The draft Amending SAR Regulations are subject to Parliamentary scrutiny. They are expected to come into force in February 2017.

    View the Amending SAR Regulations.

    View the Bloxham report.
  • Members of EU High-Level Expert Group on Sustainable Finance Appointed
    12/22/2016

    The European Commission announced the membership composition of the High-Level Expert Group on sustainable finance. The purpose of the Expert Group is to provide recommendations for a comprehensive EU strategy on sustainable finance as part of the Capital Markets Union. The Commission will draw on such recommendations when determining how to integrate considerations of sustainability into the EU’s rules for the financial sector. The Group’s advice will outline how the EU should design appropriate and proportionate financial policies, incentives and signals for financial institutions, corporate capital-raisers and markets to direct capital towards sustainable finance and to take operational steps to protect the stability of the financial system from risks related to the environment. The Group will start meeting as of January 2017. An interim report is expected around the middle of the year and a final report in December 2017.
     
    View the announcement.
  • European Banking Authority Recommendations for the EU Covered Bonds Framework
    12/20/2016

    The European Banking Authority published recommendations for harmonizing the EU framework for covered bonds. For banks investing in covered bonds that meet certain criteria, the Capital Requirements Regulation sets preferential risk weights to be applied. The recommendations are set out in a report which builds on the EBA's 2014 Report on EU covered bond frameworks and capital treatment. The aim of the recommendations is to ensure that only financial instruments which comply with certain harmonized structural, credit risk and prudential standards are capable of being covered bonds, and as such have access to the special regulatory and capital treatment provided. Harmonizing the EU framework on covered bonds is part of the Capital Markets Union initiative launched by the European Commission in September 2015

    Read more.
  • Final EU Agreement on Draft Prospectus Rules as Part of Capital Markets Union
    12/20/2016

    The Council of the European Union announced that it had reached an agreement with the European Parliament on prospectuses for the issuing and offering of securities. Finalization of the agreement comes after the provisional agreement reached on December 7, 2016. The draft Prospectus Regulation is part of the EU's Capital Markets Union plan. The proposed Prospectus Regulation will replace the current EU Prospectus Directive, revising the regime for companies to raise money on public markets or by public offer to potential investors. The aim is to simplify the rules and administrative obligations for companies wishing to issue shares or debt on the market and reducing the costs of preparing a prospectus, thus fostering cross-border investments in the single market, while at the same time still enabling investors to make informed investment decisions. Some compromise has been reached in the final agreement, such that no prospectuses will be required for capital raisings and crowdfunding projects up to EUR1 million. It has also been agreed, among other things, that the threshold beyond which the issuance of a prospectus is mandatory be increased from €5 million to €8 million in capital raised. Below that threshold, issuers can raise capital in accordance with rules set for local growth markets. The Council expects Parliament to approve the regulation at first reading, with the final text then to be submitted for adoption by the Council.  

    View the Council's press release.

    You may like to view our client note on the European Commission's proposal for a Prospectus Regulation.
  • European Supervisory Authorities Consult on the Use of Big Data by Financial Institutions
    12/19/2016

    The Joint Committee of the European Supervisory Authorities launched a consultation paper on the use of big data by financial institutions. The ESAs are the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. Big data refers to the collection, processing and use of high volumes of different types of data from various sources, using IT tools and algorithms. Big data is used to reveal patterns or correlations, to generate new ideas or solutions or to more accurately predict future events. The objective of the consultation is for the ESAs to better understand the impact of the increased use of big data on the financial industry and to assess whether any supervisory or regulatory actions are needed. The ESAs do not consider that the existing EU legislation on data protection, competition, consumer protection and sectoral financial services regulations explicitly addresses big data. The discussion paper seeks feedback on whether there is sufficient flexibility in the existing legislation to cover big data, whether there are any gaps and how the existing legislation impacts the use of big data by the financial services sector. Responses to the consultation are requested by March 17, 2017. The ESAs expect to publish their decision on next steps, if any, before the end of 2017. 

    View the Discussion Paper
  • International Organization of Securities Commission Publishes Final Report on Benchmark Regulation 
    12/16/2016

    The International Organization of Securities Commission published its final Report outlining Guidance on reporting in compliance with its Principles for Financial Benchmarks. The purpose of the Guidance is to increase the consistency and quality of reporting by Benchmark Administrators on their compliance with the Principles, which were published in July 2013. The Principles outline a set of recommended practices that should be implemented by Benchmark Administrators and Submitters. The Report follows a survey of 29 benchmarks conducted by IOSCO, to identify any relevant challenges and issues, on topics such as the status of their implementation of the Principles and the number of benchmarks they administered. IOSCO developed the Guidance on the feedback received.  

    View the Report.

    View the Principles
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