Financial Conduct Authority

UK and US Authorities Release Statement on Post-Brexit Continuity of Derivatives Trading and Clearing

 

On February 25, the Bank of England (BoE), the Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC) published a joint statement detailing the measures that will be taken to ensure the continuity of UK-US derivatives trading and clearing activities after Brexit.

The measures address:

UK equivalence for the US: UK authorities have confirmed that US trading venues, firms and central counterparties (CCPs) will be able to continue providing services in the UK. The basis on which these trading venues, firms and CCPs currently provide services in the EU and to EU firms is as a result of various decisions taken by the European Commission in declaring the CFTC regulatory framework equivalent.

Continued supervisory co-operation: The FCA and CFTC will update their memorandums of understanding (MoUs) covering certain firms in the derivatives and the alternative investment fund industry. The BoE and CFTC will update their MoU covering clearing activity, in connection with the UK’s forthcoming recognition of CFTC-registered CCPs.

Extension of existing CFTC relief and comparability for the UK: The CFTC intends that existing regulatory relief granted by the CFTC to EU firms, including UK firms, will be extended to UK firms when the UK leaves the EU.

FCA Publishes Paper on SME Access to the FOS

 

The Financial Conduct Authority (“FCA“) is considering allowing Small and Medium Sized Enterprises (“SMEs“) access to Financial Ombudsman Service (“FOS“). On January 22, 2018, the FCA published a consultation paper, available here, exploring this option.

After speaking with SMEs, the FCA found that SMEs struggle to resolve disputes with financial firms through the courts and have no other means to seek redress.

The paper considers what size of SME should be allowed to use FOS, an “eligible complainant.” This term will be defined as a business that: is too large to be a micro-enterprise, has an annual turnover below £6.5 million, has a balance sheet not exceeding £5 million and has less than 50 employees. The FCA is also considering allowing charities and trusts of a similar size to be eligible complainants.

The FCA is also proposing that guarantors be eligible complainants. This will allow entities who provide security or guarantees to SMEs to be able to lodge a complaint with FOS.

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

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

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.

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

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.

Bank of England Publishes Statement on Enforcement Action Against Lloyds Bank PLC and Bank of Scotland PLC

On July 28, the Bank of England published a statement on Financial Conduct Authority enforcement action against Lloyds Bank PLC and Bank of Scotland PLC.  The statement notes that Lloyds Banking Group has paid the Bank of England £7.76 million as compensation for a reduction in fees received by the Bank of England as a result of the manipulation of submissions to the BBA GBP Repo Rate by Lloyds Bank PLC and Bank of Scotland PLC.  Statement.

Co-Op Bank Subject to Enforcement Investigation by the UK PRA and FCA

On January 6, The UK Regulator, the Prudential Regulation Authority (PRA) published a press release confirming its intention to undertake an enforcement investigation into the Co-Op Bank.  The UK’s other regulator, the Financial Conduct Authority (FCA), has confirmed in a press release that it will also be investigating the bank and events up to June 2013.  The PRA will be considering the role of senior managers at the bank.  Press ReleaseFCA Press Release.

FCA Issues Consultation Paper on Crowdfunding in the UK

The Financial Conduct Authority issued a consultation paper on the regulation of crowdfunding activities in the UK, in advance of assuming the responsibility for regulating consumer credit in the UK (previously the remit of the Office of Fair Trading).

The FCA’s aim in issuing the consultation paper is to make the market more accessible to retail clients to help foster competition and to facilitate access to alternative investment options.  The FCA is keen on ensuring that only investors who understand and can bear the risks of crowdfunding participate in it.

To achieve its aims, the FCA is proposing to restrict direct offer financial promotion of unlisted shares or debt securities by firms to one or more particular types of client (broadly speaking, high net worth, sophisticated investors or those who have taken advice or will limit the percentage of their portfolio invested through crowdfunding).

Following consideration of comments, a Policy Statement is due to be issued by March 2014.  Consultation Paper.

JPMorgan Chase to Pay Penalties for Oversight Deficiencies

On September 19, JPMorgan Chase entered into a consent Order of Assessment of a Civil Money Penalty with the Fed, the OCC, the SEC and the Financial Conduct Authority of the United Kingdom.  The penalties issued by the agencies total approximately $920 million.  The fine resulted from the deficiencies identified by the regulators in JPMorgan Chase’s risk management oversight, model validation, internal financial reporting and internal audit, and failure to elevate certain issues to the attention of the board of directors.  In a separate action, the OCC and CFPB ordered JPMorgan Chase to refund $309 million for illegal credit card practices and to pay $80 million in civil penalties.  Fed ReleaseCFPB ReleaseFed Consent OrderOCC Consent Order.