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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.

  • FICC Market Standards Board Publishes Report on Data Management
    05/11/2020

    The FICC Market Standards Board has published a report on the critical role of data management in the financial system. The Report is part of the FMSB's Spotlight Reviews, which highlight significant emerging issues in the FICC markets. The Report discusses the principal areas of data risk, which are business continuity, data confidentiality, trading, aggregate exposure, regulatory enforcement, ownership rights and security risks relating to misconduct. The Report also outlines the work of regulators on data governance and analyzes eight key components of data governance, being the data lifecycle, data policies, data taxonomy, mapping data sources, data movement and lineage, data classification, data leakage detection and data quality.

    View the FMSB's report on data management in the financial system.
  • UK Conduct Regulator Publishes Guidance on Senior Managers and Certification Regime for Solo-Regulated Firms in Response to COVID-19
    04/03/2020

    The U.K. Financial Conduct Authority has published guidance for solo-regulated firms on adherence to the Senior Managers and Certification Regime in light of COVID-19. The FCA has separately issued joint Guidance with the Prudential Regulation Authority on the SM&CR for dual-regulated firms.

    Read more.
  • UK Regulators Publish Guidance on Senior Managers and Certification Regime for Dual-Regulated Firms in Response to COVID-19
    04/03/2020

    The U.K. Financial Conduct Authority and Prudential Regulation Authority have published joint guidance for dual-regulated firms on adherence to the Senior Managers and Certification Regime in light of COVID-19. The U.K. regulators intend to be flexible in enforcing SM&CR requirements given the disruption to personnel and operations triggered by the pandemic. The FCA has issued separate guidance for solo-regulated firms subject to the SM&CR.

    Read more.
  • European Securities and Markets Authority Grants Regulatory Forbearance for Financial Reporting in Wake of COVID-19
    03/27/2020

    The European Securities and Markets Authority has published guidance for issuers on compliance with their financial reporting requirements in light of the challenges presented by the coronavirus (COVID-19) pandemic. Under the EU Transparency Directive, issuers of debt securities or shares must publish annual and half-yearly financial reports within four months and three months, respectively, of the end of the relevant reporting period.

    Read more.
  • UK Regulator Highlights Board Diversity Expectations for Banks and Investment Firms
    03/04/2020

    The U.K. Prudential Regulation Authority has published a letter addressed to the chairpersons of banks, large investment firms and insurance companies on board diversity. The letter is intended to remind firms of the importance of board diversity in achieving effective challenge and improving decision-making and of the need to comply with the PRA's rules. The European Banking Authority published a report on benchmarking of diversity practices in February 2020. The report shows a huge improvement in board diversity in banks and investment firms since 2015. However, the PRA notes that compliance is not comprehensive.

    The PRA asks chairs of all firms subject to its diversity requirements to ensure that their firm is in compliance and to take remedial action if not.

    View the PRA's letter on board diversity.
  • European Banking Authority Publishes Report on Diversity Practices in Banks and Investment Firms
    02/03/2020

    The European Banking Authority has issued a report on diversity practices in credit institutions and investment firms. The report is based on diversity data collected by national regulators under the Capital Requirements Directive. CRD requires banks (known as “credit institutions”) and investment firms to adopt policies promoting diversity in their management bodies. The report finds that 41% of institutions still do not have a diversity policy, despite a CRD obligation to implement one. Even amongst institutions that have implemented a policy, not all promote gender diversity. The EBA is calling on institutions and Member States to consider additional measures to promote a more balanced gender representation and to ensure compliance with diversity policy requirements. It intends to continue monitoring diversity in management bodies and to issue further benchmark studies in the future.
     
    View the EBA's report on diversity practices
  • European Commission Seeks Feedback on Changes to Non-Financial Reporting Regime
    01/30/2020

    The European Commission is seeking feedback on a roadmap for its proposed changes to the Non-Financial Reporting Directive. The Directive specifies the non-financial information (e.g., regarding the environment, social issues and bribery and corruption) that large listed companies, banks and insurance companies must report on annually. The Commission has committed to review the Directive in order to strengthen firms’ reporting in this area, particularly with respect to the adequacy of reporting on sustainable investment. Policy options include: (i) revising the existing non-binding guidelines on reporting under the Directive; (ii) endorsing existing or future voluntary standards on non-financial reporting; and (iii) revising and strengthening the provisions of the Directive itself. Feedback on the roadmap should be submitted by February 27, 2020. The Commission intends to launch a further consultation on the possible revision of the Directive in Q1 2020.

    View the Commission's roadmap on revision of the Non-Financial Reporting Directive.
  • UK Regulator Outlines Priorities for Supervising Benchmark Administrators
    01/24/2020

    The U.K. Financial Conduct Authority has written to the CEOs of benchmark administrators that it supervises. In the letter, the FCA sets out its supervisory strategy as well as the potential harms that benchmark administrators pose to their customers and to the financial markets. The FCA is asking all benchmark administrators to consider the harm that their firm may present and to consider how those could be mitigated. The FCA intends to focus over the next two years on the following areas to ensure that its supervision of benchmark administrators mitigates the identified risks:
    • Quality of standards: the quality of an administrator's governance and controls, the information provided in their Benchmark Statement, their recalculation and cessation policies, their outsourcing arrangements and their approach to operational resilience; and
    • Excessive fees and costs: the FCA is concerned that competition may not be working well in the provision of benchmarks following the feedback received to its Wholesale Sector Competition Review and Asset Management Market Study. The FCA intends to carry out a Call for Input on access to data in wholesale markets so that it can gain a better understanding of the issues and determine whether any action is needed.
    Read more.
  • UK Conduct Regulator Wants Asset Management Sector to Reflect on Risks to Customers and Markets
    01/22/2020

    The U.K. Financial Conduct Authority has published two letters addressed to the CEOs of firms in the asset management and funds sectors. The first letter is addressed to CEOs of FCA-authorized firms directly managing mainstream investment vehicles or advising on mainstream investments, excluding wealth managers and financial advisers. The second letter is addressed to CEOs of FCA-authorized firms managing alternative investment vehicles, such as hedge funds or private equity funds, or managing alternative assets directly or advising on these types of investments. The letters follow the FCA's report on its review of how firms in the asset management sector selected and used risk modeling and other portfolio management tools.

    Read more.
  • UK Conduct Authority to Review Suitability of Retirement Income Financial Advice
    01/21/2020

    The U.K. Financial Conduct Authority has announced the focus of its second review assessing suitability - advice received by consumers on retirement income. The FCA intends to publish a report on the outcome of the review in 2020. Alongside the announcement, the FCA has published a letter addressed to the CEOs of financial advice firms describing its approach to tackling key areas of concern with financial advice firms and setting out the action it expects these firms to undertake. The letter covers assessing suitability of advice, defined benefit pension transfer advice, pensions and investment scams, adequate financial resources and professional indemnity insurance, the FCA's recently imposed ban on the promotion of speculative mini-bonds to retail consumers, the Senior Managers and Certification Regime and preparing for the end of the Brexit implementation period.

    View the FCA's statement.

    View the Dear CEO letter.
  • European Central Bank Sets Out Expectations of Eurozone Banks' Dividend and Variable Remuneration Policies
    01/21/2020

    The Banking Supervision arm of the European Central Bank has set out its expectations of Eurozone banks regarding their dividend distribution and variable remuneration policies. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism and has certain powers relating to the supervision by national Eurozone regulators of smaller banks. The ECB has published a letter addressed to significant banks warning them to take a "prudent, forward-looking stance" when setting the banks' remuneration policy and has also published a Recommendation (dated January 17, 2020) on requiring significant banks to "establish dividend policies using conservative and prudent assumptions". The Recommendation will apply directly to significant Eurozone banks. The ECB expects national Eurozone regulators to consider how it might be applied proportionally to the smaller banks. The ECB expects Eurozone banks to consider how their variable remuneration policies and dividend distribution policies will impact their ability to continue to meet their regulatory capital requirements, particularly taking into account the transitional provisions of the Capital Requirements Directive (version IV) and the transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds.

    View the ECB's letter.

    View the ECB's Recommendation.
  • European Banking Authority Launches Consultation on Draft Technical Standards Identifying Material Risk Impact Staff Subject to Compensation Requirements
    12/19/2019

    The European Banking Authority has launched a consultation on its draft Regulatory Technical Standards setting out the criteria for identifying staff whose professional activities have a material impact on credit institutions’ risk profiles. The EBA is required to produce the RTS under the revised Capital Requirements Directive (CRD V), in support of the CRD requirement that remuneration policies for staff whose professional activities have a material impact on the credit institution’s risk profile are appropriate to the size, nature and complexity of the credit institution in question. 

    Read more.
  • EU Recommendations to Combat Undue Short-Term Pressure From Financial Sector on Corporates
    12/18/2019

    The European Supervisory Authorities have each published advice to the European Commission on undue short-term pressure from the financial sector on corporations. The ESAs comprise the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The ESAs' advice responds to the European Commission's request in June 2019 for evidence and possible advice on potential undue short-term pressure by financial service participants on corporations. The Commission asked the ESAs to: (i) provide evidence of any short-termism and, if any, the consequences thereof; (ii) assess the drivers of such short-termism, including the effects of regulation on financial market participants, for example, the guidance on remuneration practices; (iii) identify existing regulations that either mitigate or exacerbate short-term pressures; and (iv) evaluate the need for regulatory or policy action and propose specific areas where action is needed. The ESAs' advice, summarized below, may result in the Commission proposing amendments to several pieces of EU legislation, such as the Capital Requirements Directive and related Regulation, the Markets in Financial Instruments package and the Non-Financial Reporting Directive.

    Read more.
  • European Commission Publishes Regulation on Sustainability-Related Disclosures in Financial Services
    12/09/2019

    A new Regulation on sustainability-related disclosures in the financial services sector has been published in the Official Journal of the European Union. The Regulation is intended to encourage the financial services sector to disclose information about their approaches to sustainability risk and consideration of adverse sustainability impacts in the course of their businesses, as part of wider EU efforts to combat climate change and other sustainability-related issues. Climate change and sustainable finance are particular areas of focus for the EU.  

    Read more.
  • European Banking Authority Publishes Action Plan on Sustainable Finance
    12/06/2019

    The European Banking Authority has published an action plan on sustainable finance, setting out how it intends to deliver on its aims to help combat environmental, social and governance risks and providing clarity on the direction of its policy in this area. The EBA has been mandated to contribute to work on ESG risks under various pieces of EU legislation and will focus on environmental factors and climate change in its initial phase of work. The action plan also sets out the EBA’s projected timelines and milestones on sustainable finance.

    Read more.
  • European Securities and Markets Authority Launches Consultation on Credit Ratings Agencies’ Internal Control Functions
    12/05/2019

    The European Securities and Markets Authority has launched a consultation on its proposed guidelines setting out the criteria that Credit Ratings Agencies should have in place to demonstrate that their internal control systems are adequate and effective to maintain the independence of their activities, in line with the EU Credit Ratings Agencies Regulation. Responses to the consultation should be submitted by March 16, 2020. ESMA intends to publish a final report in 2020.

    Read more.
  • New Regulation and Directive Governing Prudential Requirements for EU Investment Firms
    12/05/2019

    The new EU Investment Firms Regulation and Investment Firms Directive have been published in the Official Journal of the European Union. The new legislation aims to create a more tailored regulatory regime for many EU investment firms that reflects the risks inherent in the diverse activities those firms undertake.

    Read more.
  • UK FICC Market Standards Board Consults on Draft Statement of Good Practice for Sovereign and Supranational Fixed Income Markets Auctions
    12/02/2019

    The U.K. FICC Market Standards Board is consulting on its draft Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets. The FMSB is a standards setting body operated by wholesale market participants that was established in 2015. It is mandated to issue Standards that improve conduct in the wholesale Fixed Income, Currencies and Commodities markets. FMSB Member Firms are expected to consider their practices in light of the Standards, but the Standards are not binding and non-compliance will not affect whether a firm is deemed to have met its regulatory obligations.

    Read more.
  • New EU Directive on Protection of Persons Reporting Breaches of Union Law
    11/26/2019

    A new EU Directive, known as the "EU Whistleblowing Directive", that aims to enhance the enforcement of EU law and policies by providing protection for individuals that report breaches has been published in the Official Journal of the European Union. The Directive will apply to whistleblowers working in the private or public sector, whether they are classed as workers, self-employed, shareholders or working under the supervision and direction of contractors, subcontractors and suppliers, as well as those who acquired information in previous employment or through the recruitment process for a job they are yet to begin.

    The Directive will come into force on December 16, 2019. Member States must implement the majority of the provisions into their national laws by December 17, 2021.

    View the Directive.
  • UK Conduct Regulator Publishes Feedback and Final Rules on Proxy Advisors Regulations
    11/25/2019

    The U.K. Financial Conduct Authority has published a Policy Statement incorporating its response to the feedback it received on its proposals for the implementation of the Proxy Advisors (Shareholders' Rights) Regulations 2019, together with the final rules. The final rules make amendments to the FCA's Decision Procedure and Penalties Manual and Enforcement Guide, reflecting the new Regulations that came into force on June 10, 2019.

    The Regulations implemented new obligations imposed upon proxy advisors by the revised EU Shareholder Rights Directive into the U.K. statutory regime. The FCA has the power to discipline and investigate proxy advisors under the Proxy Advisors Regulations and changes were therefore required to the FCA's rules to take account of these powers. The following new provisions have been included in the Decision Procedures and Penalties Manual:
    • the FCA will publish a statement about a proxy advisor who has breached a relevant requirement; it will impose a public censure in contested cases and allow decision makers to use executive powers to decide on settled cases;
    • the FCA will decide when to impose a financial penalty on a proxy advisor; and
    • the FCA will decide when to impose a restitution requirement.

    The FCA has also included a new section in its Enforcement Guide explaining how it will use its powers under the Regulations. The intended approach will broadly mirror that taken by the FCA in conducting investigations, sanctioning and using its regulatory powers under FSMA.

    View the FCA's Feedback and final rules.
  • Financial Action Task Force Consults on Digital Identity in Customer Due Diligence Guidance
    10/31/2019

    The Financial Action Task Force is seeking feedback from private sector stakeholders on its draft guidance on the use of digital identity systems in customer due diligence. The guidance will supplement Recommendation 10 of the FATF's Recommendations regarding customer due diligence and demonstrates how authentication of customer identities in the digital finance and digital ID context supports broader anti-money laundering/counter-terrorism financing efforts. Stakeholders should submit responses to the consultation by November 29, 2019. The FATF intends to make further amendments to its draft guidance at its February 2020 meetings.

    Read more.
  • UK Conduct Regulator Publishes Feedback on Regulatory Framework for Stewardship Discussion Paper
    10/24/2019

    The U.K. Financial Conduct Authority has published a feedback statement on the discussion paper, “Building a regulatory framework for effective stewardship” that it published in January 2019 together with the Financial Reporting Council. The discussion paper called for input on how best to encourage the capital markets community to engage more actively in “stewardship” of the assets in which they invest. 

    Read more.
  • European Securities and Markets Authority Publishes Enforcement Priorities for 2019 Financial Reports
    10/22/2019

    The European Securities and Markets Authority has published its annual Public Statement on European enforcement priorities for listed companies’ 2019 financial reports. The priorities will guide the areas of focus when ESMA and relevant national enforcement authorities assess the reports. 

    Read more.
  • UK Prudential Regulator Finalizes Policy on Resolution Assessments For Senior Managers Regime
    09/27/2019

    The U.K. Prudential Regulation Authority has published a Policy Statement and final rules on resolution assessments and reporting amendments under the Senior Managers and Certification Regime. The PRA also published updated versions of "Strengthening individual accountability in banking" (SS28/15) and "Senior Managers Regime form: Statement of Responsibilities". The changes will take effect on December 9, 2019. The PRA has made minor changes to the drafting to take into account feedback and the measures announced on July 31, 2019 on resolvability assessments for all U.K. banks. The changes to the prescribed responsibility for recovery plans and resolution packs will impact U.K. banks and building societies with £50 billion or more in retail deposits. The changes to the Statement of Responsibilities will affect all PRA-regulated firms, unless they will not be subject to resolvability assessments in future.

    View the Policy Statement.

    View the updated rules and documentation.

    View details of the final resolvability assessment framework for all U.K. banks.
  • Banking Standards Board Publishes Good Practice Guidance on Regulatory References
    09/03/2019

    The Banking Standards Board has published a statement of good practice for firms when providing and requesting regulatory references in accordance with the Senior Managers and Certification Regime. The SM&CR for banks and building societies was established in 2016 to improve management within banking sector firms. The regime includes a requirement for firms to request references when determining whether a candidate is suitable for a senior management function, certification function or non-executive director function. 

    Read more.
  • UK Conduct Regulator Sets Out Approach for Annual Remuneration Round
    08/28/2019

    The U.K. Financial Conduct Authority has published a letter (dated August 19, 2019) addressed to the chairpersons of the remuneration committees of the boards of banks and large investment firms (investment firms with total assets over £50 billion). The letter sets out the FCA's findings from the 2018/19 remuneration round and informs how the FCA intends to assess remuneration policies and practices of firms in 2019/20.

    The FCA observes that firms continue to address conduct issues in their remuneration policies and practices. It reminds the chairpersons of remuneration committees of their accountability as senior managers under the Senior Managers Regime. Noting that firms continue to adjust awards for material poor performance and misconduct, but that some firms still find it difficult to provide appropriate justification for some adjustments, the FCA states that it will work with firms this year on their approach to ex post facto risk adjustment.

    The FCA letter also states that the annual review of submitted Remuneration Policy Statements will again be coordinated with the Prudential Regulation Authority. Firms are asked to submit a short summary addressing the key points raised in the statement, including the key changes made last year and an explanation of how the chairperson has assured himself or herself that the firm's overall remuneration policies drive behavior that reduces potential harm.

    Finally, the FCA invites chairpersons of remuneration committees to engage in the FCA's work on transforming culture in financial services.

    View the letter.
  • UK Conduct Regulator Concludes No Changes Needed to Banking Senior Managers Regime
    08/05/2019

    The U.K. Financial Conduct Authority has published the findings of its review into the implementation of the Senior Managers and Certification Regime for the banking sector. The SM&CR came into force for banking firms in March 2016 with the aim of making individuals in the banking sector more accountable for their conduct. The FCA conducted the review to determine how the SM&CR has been implemented in the three years since its introduction. The review is intended to aid understanding of the impact of the regime and the FCA does not intend to make any policy changes on the basis of its findings. The FCA's review focuses on the implementation of the existing banking SM&CR, but an expanded SM&CR regime will come into force for all FCA solo-regulated firms from December 9, 2019. Firms falling within scope of the expanded regime should, where appropriate, also take the findings of the FCA's review into account in their implementation of the SM&CR.

    Read more.
  • UK's Expanded Senior Managers and Certification Regimes Enter into Force
    07/17/2019

    The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 have been made. The Regulations bring into force, from December 9, 2019, the expanded Senior Managers and Certification Regimes for all Financial Conduct Authority solo-regulated firms authorized under the Financial Services and Markets Act 2000, which include asset managers and investment firms carrying out certain activities. These firms need to complete their initial certification assessments for existing certified staff and new hires by December 9, 2020, although they must have identified certification staff by December 9, 2019. A transitional provision states that the regime will only apply to Claims Management Companies that are authorized by the FCA by December 9, 2019 and to other CMCs on the date that they obtain their authorization.

    Read more.
  • UK Conduct Regulator Proposes Banning the Sale to Retail Clients of Derivatives Referencing Crypto-Assets
    07/03/2019

    The U.K. Financial Conduct Authority has launched a consultation proposing to restrict the sale, marketing and distribution of derivatives and exchange-traded notes that reference certain types of unregulated, transferable crypto-asset to all retail clients by firms in, or from, the U.K. The FCA consultation follows the final report of the U.K. Crypto-Assets Task Force in October 2018. The FCA's view is that although the U.K.'s market in crypto-assets is relatively small, there is still a consumer protection issue that needs to be addressed.

    Read more.
  • European Securities and Markets Authority Issues Survey on Short-Term Pressure Imposed by the Financial Sector
    06/24/2019

    The European Securities and Markets Authority is seeking responses to its survey examining short-term pressure on corporations from the financial sector. The survey forms part of an investigation prompted by the European Commission into how short-termism in market practices may be inhibiting the EU’s progress towards a sustainable economy. ESMA’s survey is aimed at investors, issuers, management companies of undertakings for the collective investment in transferable securities, self-managed UCITS investment companies, alternative investment fund managers and the trade associations of financial market participants. Responses to the questionnaire must be submitted by July 29, 2019.

    Read more.
  • New EU Guidelines on Disclosure of Climate-Related Information
    06/18/2019

    The European Commission has published new, non-binding Guidelines on reporting climate-related information. The new Guidelines are supplementary to the guidelines issued by the Commission in 2017 on reporting non-financial information. The new Guidelines are intended to assist large public entities (with over 500 employees) to report climate-related information under the EU Non-Financial Reporting Directive. The new Guidelines incorporate the recommendations of the Financial Stability Board's taskforce on climate-related financial disclosures, taking into account the EU's forthcoming taxonomy on sustainable activities. The new Guidelines include guidance on reporting of climate-related information related to business models, key performance indicators, risks and their management. Further guidelines for banks and insurance companies are set out in the annex.

    Read more.
  • UK Prudential Regulator Consults on Resolution Assessments For Senior Managers Regime
    06/07/2019

    The U.K. Prudential Regulation Authority has opened a consultation on resolution assessments and reporting amendments under the Senior Managers and Certification Regime. The PRA is proposing to amend the prescribed responsibility for recovery plans and resolution packs that are a part of the SM&CR. Related changes are also being proposed to "Strengthening individual accountability in banking" (SS28/15) and "Senior Managers Regime form: Statement of Responsibilities". The changes to the prescribed responsibility will impact U.K. banks and building societies with £50 billion or more in retail deposits. The changes to the Statement of Responsibilities will affect all PRA-regulated firms. The consultation closes on August 7, 2019. The PRA intends to publish its final amendments in Q4 2019.

    View the consultation paper.
  • Regulators Issue Recommendations on Sustainable Finance in Emerging Markets
    06/05/2019

    The Growth and Emerging Markets Committee, a committee of the International Organization of Securities Commissions that aims to promote the development and efficiency of emerging securities and futures markets, has published a series of recommendations on the development of sustainable finance in emerging markets and the role that securities regulators play in this arena. The report also contains an overview of sustainability-related regulatory initiatives in emerging markets and market trends arising in the sustainability sector.

    Read more.
  • International Task Force Report Shows Further Progress Needed for Climate-Related Financial Disclosures
    06/05/2019

    The Task Force on Climate-Related Financial Disclosures has issued its 2019 status report outlining progress on adoption of the TCFD disclosure recommendations for improved climate-related financial disclosures by companies. The TCFD was established by the Financial Stability Board in 2015 with the aim of managing climate-related risk in markets. In 2017, it published a set of voluntary disclosure recommendations for companies to provide information on their climate-related financial risks. The recommendations are structured around four areas: (i) governance; (ii) strategy; (iii) risk management; and (iv) metrics and targets.

    Read more.
  • UK Financial Conduct Authority Publishes Policy Statement on Shareholder Engagement
    05/30/2019

    The Financial Conduct Authority has published a Policy Statement containing final Handbook text and guidance on new rules to improve shareholder engagement and increase transparency around stewardship. The FCA consulted on the rules from January to March 2019. The final rules will come into effect on June 10, 2019.

    Read more.
  • EU Technical Advice on Incorporating Sustainability Factors Into EU Regulation
    05/03/2019

    The European Securities and Markets Authority has published its final report and technical advice to the European Commission on incorporating sustainability risks and factors into European regulation. The European Commission sought advice from ESMA and the European Insurance and Occupational Pensions Authority in July 2018 on the introduction of environmental, social and governance considerations into the Markets in Financial Instruments Directive II, the Insurance Distribution Directive, the Alternative Investment Fund Managers Directive, the Undertakings for Collective Investment in Transferable Securities Directive and the Solvency II Directive. The introduction of sustainability considerations into European regulation sits against the backdrop of the European Commission's Sustainability Action Plan, which aims to encourage sustainable investment and mitigate climate change risk in line with the 2016 Paris Agreement and UN 2030 Agenda for Sustainable Development. In response, ESMA opened consultations seeking input from stakeholders, which closed on February 19, 2019.

    Read more.
  • UK Regulator Sets Out Strategy to Manage Risk of Harm from Wholesale Brokers
    04/18/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to wholesale market broking firms highlighting its view of the key risks of harm that such brokerage firms pose for their clients and markets and the FCA's strategy for mitigating those risks. Firms are expected to consider the issues raised and take steps to mitigate risks where applicable.

    The key drivers of harm have been identified as commission-based compensation packages (the "eat what you kill" model), inadequate governance arrangements, potential conflict of interest or compliance issues arising from the variety of workflows performed by such brokerages and risks of market abuse and financial crime, all of which may be linked to cultural issues. In the FCA's view, certain brokers in wholesale markets have failed to keep pace with legislative and regulatory developments and lag behind other sectors in embedding a culture of good conduct.

    Read more.
  • UK Regulator Consults on Proposed Changes to Handbook to Implement EU Shareholder Rights Directive II
    01/30/2019

    The Financial Conduct Authority has launched a consultation on proposed revisions to the Handbook to implement changes made to the EU Revised Shareholder Rights Directive. The Directive aims to promote shareholder engagement, effective stewardship and long-term investment decision-making through enhancing the transparency of engagement policies and investment strategies across the institutional investment community.

    Read more.
  • UK Regulators Discussion Paper on Building a Framework for Effective Stewardship
    01/30/2019

    The Financial Conduct Authority and the Financial Reporting Council have published a discussion paper which calls for input on how best to encourage the capital markets community to engage more actively in stewardship of the assets in which they invest. The aim of the paper is to advance debate about what is meant by effective stewardship, what minimum expectations investors have of the financial services firms which invest on their behalf and what higher standards the U.K. should aspire to.

    Read more.
  • UK Conduct Regulator Wants Improvements to Banks' Whistleblowing Arrangements
    11/14/2018

    The U.K. Financial Conduct Authority has published the outcome of its review of firms' whistleblowing arrangements. The FCA has reviewed how retail and wholesale banks have implemented its whistleblowing rules by looking at firms' policies and procedures, the role of the whistleblowers' champion, firms' whistleblowing annual reports and the relevant training arrangements.

    Both the FCA and the Prudential Regulation Authority published their whistleblowing rules in 2015 and the FCA extended certain of the requirements to U.K. branches of overseas banks in early 2017.

    The FCA has published its findings, including areas of good practices, areas for improvement and the FCA's expectations of firms' whistleblowing arrangements. The FCA urges firms to consider its findings and whether they need to take action to improve their whistleblowing arrangements.

    View the FCA's review webpage.
  • UK Prudential Regulator Fines Senior Managers For Failing to be Open and Cooperative
    11/07/2018

    The Prudential Regulation Authority has announced that it has imposed financial penalties on two senior managers for failing to be open and cooperative about an enforcement action into the U.K. subsidiary of a Japanese bank by the New York Department of Financial Services in 2014. The PRA's enforcement action follows the financial penalties that it imposed in 2017 on this entity and an affiliate for breaching Fundamental Rules 6 and 7 of the PRA Rulebook in that the firms had (i) failed to communicate relevant information about the settlement with the DFS; and (ii) failed to inform the PRA of the potential implications of the DFS matter for certain senior managers.

    The latest fines have been imposed on the former Chair and a former Non-Executive Director for failing to inform the PRA that a senior manager might be restricted from conducting U.S. banking activities as a result of the action by the DFS. The PRA only learnt about the issue after publication of the DFS consent order. This meant that the PRA could not assess the implications or supervise any contingency planning.

    Read more.
  • UK Regulator Highlights Role of Remuneration Committee Chair As a Senior Manager
    11/01/2018

    The U.K. Financial Conduct Authority has published a letter (dated August 20, 2018) addressed to the Chair of the Remuneration Committee of banks and large investment firms (investment firms with total assets over £50 billion). The letter informs the Chair of how the FCA intends to assess the remuneration policies and practices of firms in 2018/19. Moreover, it sets out the impact of that approach for the Chair of the Remuneration Committee as a Senior Manager under the Senior Managers and Certification Regimes. The Chair of the Remuneration Committee of in-scope firms holds FCA Senior Manager Function 12. The FCA notes that its supervisors will be interacting with the Chair of the Remuneration Committee to ascertain how the Chair has determined that their firm's policies and practices promote the right behavior. The discussions will include an assessment of how any issues from the 2017/18 remuneration round have been addressed. The FCA also highlights that a Chair of the Remuneration Committee should be satisfied that the level of ex post adjustments are appropriate and be capable of providing reasons for these adjustments. In addition, the FCA is adopting the same approach as the Prudential Regulation Authority and will no longer provide a non-objection statement to the proposed communication or distribution of variable remuneration awards by banks and large investment firms.

    View the letter.

    View details of the PRA's approach to the latest remuneration round.
  • European Banking Authority Sets Out Its Work Priorities for 2019
    10/23/2018

    The European Banking Authority has published its Work Programme for 2019, setting out details of, and planned main outputs from, 37 separate work streams across the following five key strategic priorities:
     
    1. Leading the Basel III implementation in the EU.
    2. Understanding risks and opportunities arising from financial innovation.
    3. Collecting, disseminating and analyzing banking data.
    4. Ensuring a smooth relocation of the EBA to Paris.
    5. Fostering the increase of the loss-absorbing capacity of the EU banking system.

    The EBA also confirms that work related to Brexit will remain a horizontal priority for the EBA in 2019 and explains that the EBA's other activities may be affected in the future by Brexit-related developments. Should that be the case, any substantial change in the work programme will be communicated in due time, in order to seek steering and approval from its Management Board and Board of Supervisors.

    View the EBA's 2019 Work Programme.
  • UK Prudential Regulator Issues Update to Level One Firms on Supervising Remuneration Compliance
    10/18/2018

    The U.K. Prudential Regulation Authority has published a "Dear Remuneration Committee Chair" letter that it has sent to Remuneration Committee Chairs of proportionality Level One firms (that is, banks, building societies and PRA-designated investment firms with relevant total assets exceeding £50 billion as at the relevant date) ahead of its annual review of remuneration policies and practices.

    In the letter, the PRA explains that, with effect from the 2018/19 remuneration review, the PRA will no longer provide a non-objection statement to the proposed communication or distribution of variable remuneration awards by Level One firms. The PRA states that its oversight of Level One firms' remuneration practices will increasingly draw on the principles for governance set out in the Senior Managers and Certification Regime, placing more emphasis on how the Chairs of firms Remuneration Committees discharge their responsibilities under the SM&CR and on how Remuneration Committees carry out their role of oversight and independent challenge under the PRA's Remuneration Rules.

    Going forward, Level One firms can continue to expect engagement throughout the year from their PRA supervisors on their remuneration policies, practices and processes and, where needed, feedback on issues the firm should address. Level One firms should submit a remuneration policy statement and quantitative data tables three months ahead of the firm's preferred final feedback date (that is, the date previously referred to as the "non-objection date"), and an update to the figures at least two weeks before the final feedback date.

    View the Letter.
  • 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.
  • UK Financial Conduct Authority Consults on Guidance Under the Extended Senior Managers Regime
    10/11/2018

    The Financial Conduct Authority has published a consultation paper on proposed guidance on the Statement of Responsibilities (SoR) and Responsibilities Maps required under the Senior Managers and Certification regimes. The extended SM&CR will apply to all firms authorized under the Financial Services and Markets Act 2000 and regulated by the FCA, as well as EEA and third-country (non-EEA) branches. SM&CR will be extended to FCA solo-regulated firms from December 9, 2019.

    Read more.
  • Commodity Futures Trading Commission Finalizes Amendments to Rules Governing Chief Compliance Officer Duties and Annual Reporting Requirements for Certain Registrants
    08/21/2018

    The Commodity Futures Trading Commission has unanimously approved final amendments to clarify and simplify its regulations governing the duties and annual reporting requirements for chief compliance officers at futures commission merchants, swap dealers and major swap participants. The amendments, first proposed in May 2017, are designed to clarify certain requirements (including as to the annual CCO report) as well as harmonize the CFTC's requirements with similar Securities and Exchange Commission rules that will be applicable to security-based swap dealers.

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  • UK Conduct Regulator Issues Near-Final Rules on Extension of Individual Accountability Regime to All Financial Services Firms
    07/04/2018

    The U.K. Financial Authority has published Policy Statements confirming the rule changes it will apply to extend the application of the Senior Managers & Certification Regimes to all FCA solo-regulated firms (that is, firms for which the FCA is both conduct and prudential regulator). At this stage, the rules are near-final as they are subject to commencement regulations that will be made by HM Treasury and they may also be amended by subsequent changes related to, for example, Brexit or SM&CR optimizations. The FCA also plans to consult separately on rules for benchmark-related activities.

    The extended SM&CR will apply to all firms authorized under the Financial Services and Markets Act 2000 and regulated by the FCA, as well as EEA and third country (non-EEA) branches. SM&CR will be extended to FCA solo-regulated firms from December 9, 2019.

    While insurance intermediaries, which are solo-regulated by the FCA, will fall within the FCA's new rules, the FCA and the Prudential Regulation Authority have separately published policy statements on the extension of the SM&CR to insurers.

    Read more.
  • UK Regulators Finalize Rule Changes For Extending Individual Accountability Regime to Insurers
    07/04/2018

    The U.K. Financial Conduct Authority and Prudential Regulation Authority have published Policy Statements confirming the near-final and final rule changes they will apply to extend the application of the Senior Managers & Certification Regimes to insurers. The Policy Statements do not make an changes to the prudential rules implementing Solvency II or to the wider U.K. regulatory framework for insurers.

    The extended SM&CR will apply from December 10, 2018, subject to commencement regulations being made by HM Treasury. The SM&CR will apply to all insurers and reinsurers regulated by the FCA and the PRA. The Policy Statements will be of specific interest to Solvency II firms (that is, all firms within the scope of the U.K. rules implementing the Solvency II Directive), insurance special purpose vehicles (undertakings with permission to carry on the regulated activity of insurance risk transformation), insurers outside the scope of the Solvency II Directive (so-called Non-Directive Firms) and small run-off firms (all insurers with less than £25 million technical provisions that no longer have permission to write or acquire new business).

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  • European Banking Authority Proposes Updated Guidelines on Outsourcing by Financial Institutions
    06/22/2018

    The European Banking Authority has launched a consultation on draft Guidelines on outsourcing arrangements. The proposed Guidelines are intended to update and replace the outsourcing guidelines issued in 2006 (by the EBA's predecessor, the Committee of European Banking Supervisors) that applied to outsourcing by credit institutions. The proposed Guidelines will have a wider scope, applying to all financial institutions that are within the scope of the EBA's mandate, namely credit institutions and investment firms subject to the Capital Requirements Directive, payment institutions and electronic money institutions. The proposed Guidelines also integrate the recommendation on outsourcing to cloud service providers that was published by the EBA in December 2017.

    The proposed Guidelines set out a definition of outsourcing in line with delegated legislation under the revised Markets in Financial Instruments Directive. They cover: (i) proportionality and group application; (ii) the nature of outsourcing arrangements; (iii) the applicable governance framework; (iv) the outsourcing process; and (v) guidelines on outsourcing addressed to competent authorities. A separate Annex provides an illustrative template that could be used for complying with the requirement in the proposed Guidelines to maintain a register of all outsourcing arrangements at institution and group level where applicable.

    Read more.
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