World Securities Law Report informs you of developments in the regulation of transactions involving securities around the world. It provides expert analysis and practical guidance, with...
By Emma Radmore and Catherine Hogg
The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 have been published, among other regulatory and legal developments in the U.K., as outlined below.
FCA has published its policy statement and final rules in relation to proposals it made in response to CMA's previous recommendations on high-cost-short-term-credit (HCSTC). The rules, which apply to price comparison websites comparing HCSTC products, come into force on 1 December. The rules set out, among other things, the prominence with which products are displayed, the search functionality required, and rules for rankings and lender comparisons.
FCA has published an occasional paper, providing an overview of the evolution of and recent innovations in market-based finance. It has been published alongside an insight article which discusses the rise of market-based finance as an alternative to traditional banking. The paper notes the positives as being a diversified type of funding and contributing to the development of new products and services for risk distribution and management. However, the paper also identified risks such as the complexity of the system and its potential instability.
FCA has welcomed the publication of the first part of BIS' global FX code. It is particularly pleased at the recognition that, even where a dealer sets out that it is acting as principal, it still has important responsibilities to its clients when using its discretion on their behalf. It notes firms in the U.K. are already under specific regulatory duties when conducting FX activities, and that it has worked to address several conduct risks that can arise. It says it expects firms and responsible senior managers to ensure their staff satisfy appropriate standards of market practice, and that the code will make an important contribution to such standards. The full code will be published in May 2017. BoE also welcomed the code, and notes that the final version of the code will replace the current Non-Investment Products Code (NIPs Code) in relation to the foreign exchange markets. For non-foreign exchange market products in the U.K. market, there will be a new voluntary code, incorporating revised relevant sections of the NIPs Code, and also a revision and update of the Gilt Repo Code and Securities Borrowing and Lending Code. Publication of the new U.K. Securities Lending, Repo and Money Markets Code is expected in mid-2017. The Bullion element of the NIPs Code is being replaced by a new code which will be established by the London Bullion Markets Association (LBMA).
FCA has created a new page on its website setting out its approach to closed periods and preliminary results under EU MAR. Unless the Commission or ESMA advise otherwise, it will continue to take the view that where an issuer announces preliminary results, the closed period, where dealing is prohibited, is immediately before the preliminary results are announced. The length of the EU MAR closed period will be 30 days. FCA says this applies only where the preliminary announcement contains all inside information expected to be included in the year-end report.
FCA has published a direction making a modification by consent of its Conduct of Business Sourcebook (COBS), rule 14. The modification allows any firm that is required to provide a key investor information document to a client to do so after the transaction has taken place, rather than before, if the client has given instructions by means of distance communication and the firm is not able to provide the document in good time before the transaction is concluded. This modification was previously valid until 30 June 2016, but this has been extended to 31 December 2018, or when the relevant rules are revoked, amended or no longer apply.
FCA has announced that Damian Clarke, a former trader at Schroders Investment Management, has been sentenced to two years' imprisonment for insider dealing. Mr. Clarke used inside information he received in the course of his employment, first as an assistant fund manager and then as an equities broker, to trade on accounts in his own name and those of family members, for which he had passwords. FCA says he made a profit of over £150,000 over nine years. There will also be confiscation proceedings against Mr. Clarke.
FCA has charged five individuals with various offences under FSMA and with conspiracy to defraud. The offences relate to promotion and sale of shares through a succession of boiler room companies. One individual has also been charged with money laundering offences and two with perverting the course of justice.
FCA has published its latest data bulletin, highlighting areas of interest for users. This edition covers:
The latest edition of FCA’s Policy Development Update provides information and links to publications issued since the last edition, recent Handbook developments and an updated timetable for forthcoming publications. Key publications expected over the coming months include:
FCA has made various changes to its Handbook following its Board meetings in April through to June. It made:
The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 have been published together with an explanatory memorandum and impact assessment. They amend the Financial Services and Markets Act 2000 (FSMA), the Financial Services Act 2012 and other legislation to ensure compatibility with the new market abuse regime (EU MAR), and to give effect to those parts of EU MAR which required Member States to put in place implementing legislation. The changes include the deletion of much of the current part 8 of FSMA. The Regulations designate FCA as the U.K.’s competent authority and set out its powers in relation to market abuse issues and the reporting requirements under EU MAR. The Regulations came into force on 3 July along with EU MAR.
Treasury has published its anti-money laundering (AML) and counter terrorist finance (CTF) supervision report for 2014-2015. The report stresses the importance of preparing properly for the U.K.'s FATF assessment in 2017-18 as well as for implementation of the fourth Money Laundering Directive (MLD4). The government says it is clear that money laundering obligations should be carried out in an intelligent way that ensures that businesses can grow and are not weighed down by red tape. It reiterates its commitment to the risk-based approach, and says this means not targeting an entire class of customer in a blanket manner and that this includes proportionately applying anti-money laundering measures when dealing with domestic politically exposed persons. The report concludes:
The Treasury Committee has published a series of letters between Andrew Tyrie and PRA. In December 2016, Mr. Tyrie asked PRA for an assessment of the average capital ratios for incumbents versus new banking entrants. PRA replied there was normally a difference, because long-standing players would use the internal ratings-based approach while new entrants would tend to use the standardised approach. He then wrote further to address the work PRA had been doing to address certain concerns of the Parliamentary Commission on Banking Standards, including on high-quality public disclosure. He was pleased with progress of U.K. banks against international standards and domestic expectations. The Committee has now asked further questions around PRA's views of its bail-in powers in light of EU experience, on the levels of disclosure and on whether PRA is becoming so intrusive a regulator as to risk being a shadow director.
CMA has published its audit report on banks’ compliance with the undertakings they made in 2002 that, in principle, they would not require SMEs to have current accounts with them in order to grant them loans. CMA confirmed that all eight banks met these obligations and have complied with the bundling undertakings. CMA reported that, whilst no breaches of the bundling undertaking were found, the banks should continue to review their processes and procedures to ensure compliance.
CMA has published its response to the government's consultation on proposed options for refining the U.K. competition regime. The proposed reforms are designed to refine the decision-taking system for market and merger cases and make assessments and investigations quicker. There are also proposed changes to CMA's powers to support more effective enforcement. CMA largely welcomes the changes proposed.
In the wake of the referendum vote for the U.K. to leave the EU, regulators and industry associations posted their immediate reactions:
The Law Society and CLLS have jointly written to the Commission raising certain issues concerning the interpretation of EU MAR. The letter requests guidance in relation to:
PRA has published a supervisory statement setting out its expectations for firms subject to the Bank Recovery and Resolution Directive (BRRD) with regard to impracticability in the context of the contractual recognition requirement. It also describes the considerations which BRRD firms could take into account when determining impracticability. These non-exhaustive considerations relate to illegalities, international protocols and membership of non-EU bodies among other things. PRA has also published a policy statement presenting the feedback or its consultation on proposed amendments to PRA rules in relation to the contractual recognition of bail-in. The instrument will come into force on 1 August, and the Rulebook amendments follow a previously published modification by consent.
Emma Radmore is a Managing Associate and Catherine Hogg is an Information Assistant in Denton's UKMEA LLP's Financial Services and Funds Practice in London. Emma Radmore is also a member of the World Securities Law Report Advisory Board. They may be contacted at firstname.lastname@example.org and email@example.com.
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