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 Release. CFPB Release. Fed Consent Order. OCC Consent Order.
Financial Conduct Authority
FCA Updates AIFMD Webpage with Information on Passporting Arrangements
On August 15, the Financial Conduct Authority (FCA) updated the “latest news” webpage on the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) with information on passporting arrangements under the AIFMD.
The update notes that ESMA recently published an opinion that recognizes the right of firms to be able to exercise passport rights in Member States that have not yet transposed the directive, assuming the firms’ own home Member State has transposed the AIFMD.
As the UK has transposed the AIFMD, UK firms should be able to exercise passporting rights in all EEA states, with the exception of Norway, Liechtenstein and Iceland. UK firms will be able to exercise AIFMD passporting rights in these jurisdictions when the EEA Agreement (to which Norway, Liechtenstein and Iceland are signatories) has been updated to include the AIFMD within its scope. Similarly, UK firms will be able to exercise passport rights in Norway, Liechtenstein and Iceland pursuant to the European Social Entrepreneurship Funds Regulation (Regulation 346/2013) (EuSEF Regulation) and the European Venture Capital Funds Regulation (Regulation 345/2013) (EuVECA Regulation), when the EEA Agreement has been updated to include these regulations within its scope. “Latest News” Webpage. Opinion.
FSMA (OTC Derivatives, CCPs and TRs) (No. 2) Regulations Published
On August 5, the Financial Services and Markets Act 2000 (FSMA) (OTC Derivatives, Central Counterparties (CCPs) and Trade Repositories (TRs)) (No. 2) Regulations 2013 SI 2013/1908 were published. The regulations were made on July 30, and the majority of the regulations will come into force on August 26.
The regulations relate to the clearing of financial transactions through recognized clearing houses. The regulations implement in part Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) and amend the following:
- Supervisory, investigatory and enforcement powers of the Bank of England and the Financial Conduct Authority.
- Companies Act 1989 to facilitate segregation and transfer of indirect clients’ assets and positions.
- Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001(S.I. 2001/995) (the Recognition Requirements Regulations). They impose new requirements on recognized central counterparties and recognized clearing houses, which are not central counterparties. Regulations.
FCA Launches Consultation on Implementation of CRD IV
On July 31, the UK’s Financial Conduct Authority (FCA) published a consultation paper on proposals for implementing CRD IV for investment firms (CP13/6).
CRD IV is a package of reforms intended to address issues arising during the 2007/8 financial crisis and replaces the existing 2006 Capital Requirements Directive. The principal aim of CRD IV is to implement the Basel III reforms but the package contains other prudential requirements for credit institutions and investment firms and CP13/6 includes proposals on capital buffers, common reporting, remuneration and existing FCA rule waivers.
The closing date for responses to CP13/6 is September 30. The Prudential Regulation Authority (PRA) is publishing a separate consultation on CRD IV as it applies to its authorised firms (banks and building societies and designated investment firms). Consultation Paper.
AIFMD Comes Into Force in the UK
On July 22, the UK law implementing the Alternative Investment Fund Managers Directive (AIFMD) came into force. The scope of the AIFMD is broad (with a few exceptions), creating a tighter regulatory framework for alternative investment fund managers (AIFMs), including managers of investment trusts, hedge funds and private equity firms.
On July 23, the Financial Conduct Authority (FCA) published a new webpage to record permissions and passports granted under the AIFMD. The FCA is updating the Financial Services Register to make the necessary changes, and in the meantime, the FCA will publish the details of firms who have been granted the new AIFMD permissions and any associated management passports. Webpage.
AIFMD: Countdown to Compliance
The July 22 deadline for EU Member States to transpose the Alternative Investment Fund Managers Directive (AIFMD) into national law has arrived. While the competent authorities in the UK and Germany have made significant progress in implementing new regulations to transpose the AIFMD into national law, other EU member states, including France and Italy, are currently consulting regarding the relevant implementation rules. It is unclear whether those Member States will be ready in time.
In the UK, the Financial Conduct Authority (FCA) provided clarity by setting out its response to its November 2012 and March 2013 consultation papers and confirmed the FCA’s final rules for implementation of the AIFMD in its June 28 policy statement (PS13/5) (Policy Statement). The rules in the Policy Statement supplement the UK’s Alternative Investment Fund Managers Regulations 2013, which were approved by the Delegated Legislation Committee in the UK on July 3.
For further details on the key provisions of the AIFMD and the specific measures implemented by Member States in an effort to transpose the AIFMD into national laws, please click here.
NYSE Euronext to Become New LIBOR Administrator
On July 9, it was announced that NYSE Euronext Rate Administration Ltd, a new subsidiary of NYSE Euronext, will take over the administration of LIBOR from BBA LIBOR Ltd, a subsidiary of the British Bankers’ Association (BBA), subject to authorization from the Financial Conduct Authority and following a period of transition. BBA LIBOR Ltd is currently the interim administrator of LIBOR. NYSE Euronext Press Release.
UK Financial Services Regulatory Handover
On April 1, the long-awaited handover of power from the FSA to the “twin-peaks system,” consisting of the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), took place. The PRA, a branch of the Bank of England, will supervise 1,700 banks, insurers and large investment firms. Its independent co-regulator, the FCA, will supervise all other financial services firms as well as be the conduct regulator and listing authority. The Financial Prudential Committee, whose members will include the heads of the FCA and PRA as well as the Governor of the Bank of England, has also been formed. It will have the task of monitoring the health of the financial system as a whole and has powers to force the other regulators to implement policies.
FSA Consults on FCA Publication of Warning Notices
On March 18, the FSA published a consultation paper (CP13/8) setting out proposals on how the Financial Conduct Authority (FCA) will use its new power under section 391(1)(c) of the Financial Services and Markets Act 2000 (FSMA) to publish information about the matter to which a warning notice relates.
The consultation paper stated that the FCA will consider each case on its merits but will generally publish a statement where it has issued a warning notice to which the power under section 391(1)(c) applies. When considering whether a publication would be unfair to the person against whom the action is proposed to be taken, the FCA will consider whether the person is an individual or a firm and to what extent they have been made aware of the case against them. Information about the warning notice will be published in a statement by the FCA. The statement will not normally contain details of any proposed sanctions, and if the FCA does intend to publish a warning notice statement, the person to whom the notice is given or copied will be consulted.
OFT Annual Plan for 2013/14: Financial Services Implications
On March 21, the OFT published its annual plan setting out its priorities for 2013/14. The OFT stated that it does not intend to make any fundamental changes to the themes for 2013/14 but that the following financial services-related issues were of importance:
- Consumer credit enforcement. The OFT intends to scrutinize applications from businesses wishing to operate in high risk areas. It also intends to implement its consumer credit enforcement tools where there is an urgent need to protect the interests of consumers.
- Payday lending sector. The OFT has noted the widespread failure of the payday lending sector to comply with the law and OFT guidance and intends to implement a number of actions in response.
- Supporting transition to the Financial Conduct Authority (FCA). The OFT has also announced that the transfer of the OFT’s consumer credit responsibility to the FCA is expected to take effect from April 2014, and that it will be working with the FCA to ensure an effective transition. The OFT will also assist with establishing the FCA’s interim permissions regime and ensure that any OFT-initiated enforcement action can be carried on and concluded by the FCA. The OFT is also developing a memorandum of understanding which will clearly set out the roles of the OFT and FCA.