FCA

FCA Issues Consultation Paper on Proposed Changes to the Senior Managers and Certification Regime

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The FCA has launched a consultation paper setting out a number of technical rule changes to the Senior Managers and Certification Regime (SM&CR). The changes are being made as a result of HM Treasury’s announcement in October 2015 that it would be amending the current SM&CR legislation as it applies to the banking sector. This included the repeal of section 64B(5) of the Financial Services and Markets Act 2000 (FSMA), which required firms to report to the FCA known and suspected breaches of the FCA Rules of Conduct, before the SM&CR regime enters into force on 7 March 2016.

The FCA proposes to remove references to notifications of known and suspected rule breaches in the associated forms, thereby streamlining reporting requirements so that the forms only require firms to inform the FCA of disciplinary action taken against staff as a result of a breach of one or more Rules of Conduct. The pre-existing obligation to report material breaches will, however, remain in place.

The Consultation Paper sets out how the FCA intends to implement the consequential changes to rules and forms that will be required prior to commencement of the regime, as well as examining the likely impact the changes will have on the industry and on consumers.

Markets in Financial Instruments Directive II and Markets in Financial Instruments Regulation

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March 10, 2015 – the FCA published an updated timetable relating to the implementation of the Markets in Financial Instruments Directive II (MiFID II”) and Markets in Financial Instruments Regulation (“MiFIR”). The timetable sets out the key dates for the implementation and transposition of the Directive and Regulation into domestic law. The deadline for transposing MiFID II into domestic law is July 3, 2016. MiFID II and MiFIR enter into force on January 3, 2017. The FCA aims to publish its main consultation paper on the implementation of MiFID II and MiFIR in December 2015. The final rules are to be published in June 2016. The FCA’s timetable is available on its dedicated webpage here.

Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2015

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On February 25, 2015, the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2015 (SI 2015/369) was published with an explanatory memorandum.

The Order comes into force on April 1, 2015, and implements the recommendations of the Fair and Effective Markets Review (set out in a report dated August 2014) to extend the existing UK regulatory and legislative framework for benchmarks to include the additional benchmarks, which are used in the fixed income, commodity and currency markets .The order therefore amends:

  • Schedule 5 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) by extending the existing UK regulatory and legislative framework, in addition to governing the London Interbank Offered Rate (LIBOR), to apply also to ISDAFIX, Sterling Overnight Index Average (SONIA), Repurchase Overnight Index Average (RONIA), WM/Reuters (WMR) 4pm London Closing Spot Rate, London Gold Fixing, LMBA Silver Price and ICE Brent Index; and
  • The Financial Services Act 2012 (Misleading Statements and Impressions) Order 2013 (SI 2013/637), which specifies the relevant activities, investments and benchmarks for the purposes of a criminal offence in section 91 of the Financial Services Act 2012 (that is, making false or misleading statements in relation to benchmarks), to bring the additional benchmarks into its scope.

The FCA has consulted on bringing the additional benchmarks into its regulatory and supervisory regime and intends to publish a policy statement and final Handbook text in the first quarter of 2015 with a view to the relevant provisions being in force when the Order takes effect.

Q&As and FAQs Updated by the Basel Committee, the FCA, the European Commission and the European Banking Authority

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On October 7, the Basel Committee on Banking Supervision issued frequently asked questions on the Basel III leverage ratio framework.

On October 6, the Financial Conduct Authority (FCA) published a Q&A paper for alternative investment fund managers (AIFM) on reporting transparency information to the FCA.

On October 3, the European Commission published a frequently asked questions paper on the Regulation on improving securities settlement and regulating central securities depositories (CSDR).

On October 3, the European Banking Authority updated its Q&As on the single rulebook, publishing 16 new answers to questions largely relating to supervisory reporting and credit risk. Basel FAQs. FCA Q&As. European Commission FAQs. EBA Q&As.

UK FCA Policy Statement on Sponsor Competence and Consultations on Joint Sponsors and Sponsor Conflicts

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On September 26, the Financial Conduct Authority (FCA) published consultation paper CP14/21, incorporating its policy statement CP14/02 (sponsor competence) and other changes into the Listing Rules and Prospectus Rules. CP14/21 also includes details of a consultation on joint sponsors and invited views on sponsor conflicts.

The main change is that the FCA has removed the competency framework against which sponsors should assess themselves. LR 8.6.12R(9) now requires sponsors to have effective systems and controls for compliance with each of the five competencies found in LR 8.6.7R(2)(b).

The amendments to LR 8, LR 11 and Appendix 1.1 of LR, set out in the Listing Rules (Sponsors) (Amendment No 5) Instrument 2014 (FCA 2014/54) come into force on February 1, 2015. Amendments to LR 5 and LR13, together with the changes to the Prospectus Rules, each set out in that same instrument, come into force on October 1.  Consultation Paper.

UK PRA and FCA Publish Final Policy on Implementing the FPC’s LTI Ratios

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On October 1, the Prudential Regulation Authority (PRA) issued PS9/14 and the FCA published FG14/8 setting out their final policies on implementing the Financial Policy Committee’s (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.

The policies were published after the FPC noted that acting against the excessive indebtedness caused by a high number of mortgages with high LTI ratios will make the financial system more stable.

The FPC made its recommendation on LTI ratios in June. The FPC recommended that the PRA and the FCA should ensure that mortgage lenders limit the proportion of mortgages at LTI multiples of 4.5 and above to no more than 15% of their new residential mortgages. The final policies of the PRA and FCA include permitting the application of the LTI limit to be at a group level rather than at the level of each regulated entity.  PRA Policy Statement.  FCA Finalized Guidance.

PRA and FCA Issue Consultation on Data Collection on Remuneration Practices under CRD

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On September 22, the UK Prudential Regulation Authority (PRA) issued a joint consultation paper with the Financial Conduct Authority (FCA) on data collection on remuneration practices under the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation.

The consultation sets out the PRA and FCA’s proposals to amend their current approach to data collection of remuneration practices and the reporting requirements for banks, building societies, PRA-designated investment firms, IFPRU investment firms and other types of firms to the extent they are to be included in the scope of consolidation of an institution for which data is to be collected in accordance with CRD IV. The proposals concern the remuneration benchmarking information report and the high earners’ report. Consultation Paper.

 

PRA and FCA Issue Consultation on Data Collection on Remuneration Practices under CRD

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On September 22, the UK Prudential Regulation Authority (PRA) issued a joint consultation paper with the Financial Conduct Authority (FCA) on data collection on remuneration practices under the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation.

The consultation sets out the PRA and FCA’s proposals to amend their current approach to data collection of remuneration practices and the reporting requirements for banks, building societies, PRA-designated investment firms, IFPRU investment firms and other types of firms to the extent they are to be included in the scope of consolidation of an institution for which data is to be collected in accordance with CRD IV. The proposals concern the remuneration benchmarking information report and the high earners’ report.  Consultation Paper.

FCA Publishes Regulation Round-Up

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On May 27, the Financial Conduct Authority (FCA) published its May issue of regulation round-up, a newsletter providing details of the FCA’s recent activity.

One issue identified in the regulation round-up is the weakness of many smaller banks’ anti-money laundering safeguards, in particular with regard to the identification and management of high-risk customers and the monitoring of transactions.  Regulation Round-Up.