FCA Updates & Developments

The FCA has published a policy statement (PS18/10) that retires the following guidance:

  • Retail Distribution Review: independent and restricted advice (FG 12/15)
  • Supervising retail investment advice: inducements and conflicts of interest (FG 14/1)

The FCA considers the above to have been largely superseded from the recent implementation of the Markets in Financial Instruments Directive II (MiFID II).

The FCA has updated its website and published a new webpage on remuneration. Both are to reflect the requirements in SYSC 19F in relation to the requirement on staff incentives and the remuneration of sales staff and advisers under MiFID II.

The FCA states that all firms subject to SYSC 19F must ensure that their policies and practices:

  • do not remunerate or assess the performance of staff in a way that conflicts with their duty to act in the best interests of the firm’s clients
  • ensure that client interest and the right to be treated fairly are not impaired by the firm’s remuneration practices

The FCA has published Handbook Notice 55 setting out the changes made to its Handbook. The relevant amendments are in relation to the following instrument:

  • Financial Services Compensation Scheme (Funding Review) Instrument 2018
    • To ensure that the Financial Services Compensation Scheme (FSCS) provides the right protections, works effectively and is funded fairly
  • Handbook Administration (Data Protection) Instrument 2018
    • To reflect the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 (DPA 2018)
  • Insurance Distribution Directive Instrument 2018
  • Supervision Manual (Reporting No 8) Instrument 2018
    • To improve on reporting requirements by making text clearer and easier to follow
PRA Updates & Developments

The PRA has published a policy statement updating the pillar 2 reporting requirements.

The policy statement is relevant to banks, building societies and PRA-designated investment firms and will take effect from 1 October 2018.

The PRA has updated its policy statement (PS31/17) to include the reference of the MiFID II passporting implementing technical standard published in the Official Journal of the European Union (OJ).

The instrument came into force on 5 February 2018.

EU Regulatory Updates

The European Securities and Markets Authority (ESMA) has released a new register that will enable investors to seek information on financial service providers who are authorised within the European Union.

The register provides for the following:

  • MiFID investment firms including systematic internalisers
  • MiFID trading venues
  • MiFID data reporting service providers
  • Undertakings for the Collective Investment Of Transferable Securities (UCITS) management companies
  • Alternative Investment Fund Managers Directive (AIFMD) fund managers including funds managed/marketed in the Union

ESMA has published the following updated FAQ on:

  • Transitional transparency calculations (TTCs) for equity and bond instruments under MiFID II
  • Benchmarks Regulation on how prospectuses should include reference to the register of administrators and benchmarks
  • MiFID II on investor protection and intermediaries covering:
    • Best execution
    • Client categorisation
    • Provision of investment services
    • Activities by third country firms
  • MiFID II on transparency and market structure issues

ESMA has adopted two decisions under Article 40 of Regulation (EU) No 600/2014:

  • To restrict the marketing, distribution or sale of contracts for differences (CFDs) to retail clients
  • To prohibit the marketing, distribution or sale of binary options to retail clients

The full text of the decisions is published in the Official Journal of the European Union.

Financial Crime

The UK department for Business, Energy and Industrial Strategy has published a consultation regarding the reform of limited partnership law. This is in light of the growing evidence that Scottish Limited Partnerships (SLPs) have been exploited in complex money laundering schemes.

The proposals include the following:

  • registration of new SLPs through a company formation agent which will subject the frontmen to anti-money laundering checks
  • requirement of a real connection to the UK (maintenance of a service address in Scotland)
  • new annual reporting requirements for limited partnerships
  • new powers for Companies House to remove limited partnerships if they are dissolved or no longer operating

The proposal will apply to all limited partnerships in the UK. The deadline for comments is 23 July 2018.

The Foreign & Commonwealth Office (FCO) has published a policy note on exceptions and licenses in the Sanctions and Anti-Money Laundering Bill. The document sets out the government’s intended approach in the area of exceptions to prohibitions and indicates how this will be used in relation to the most frequent types of sanctions.

The document covers:

  • asset freezes
  • counter terrorism
  • restrictions on financial activity
  • export of goods and services
  • transport
  • travel bans

The Sanctions and Anti-Money Laundering Act 2018 has further received Royal Assent. The Act enables the UK to amend existing legislation to ensure that the UK is able to enact sanctions and money laundering regulations post-Brexit.

The Council of the EU has adopted the 5th Money Laundering Directive (MLD5). This Directive will amend the MLD4 with the main changes involving the following:

  • Broadening access to information on beneficial ownership
  • Addressing risks to prepaid cards and virtual currencies
  • Cooperation between financial intelligence units
  • Improving checks on transactions involving third countries with high-risk

The Joint Money Laundering Steering Group (JMLSG) has published revised versions of two of the sections in Part II of its guidance. The sections are asset finance and syndicated lending.

Enforcement Action

In July 2013, the FCA brought legal action against numerous firms, amongst which were African Land Limited, Reforestation Projects Limited and Capital Alternatives Limited. The FCA believed firms and individuals were promoting and operative collective investment schemes (CIS) without authorisation and making false and misleading statements to investors.

The Court handed down judgement on 26 March 2018 where it found the defendants responsible for setting up and operating the CIS. False and misleading statements to investors were also found to have been made, resulting in the Court’s order for the defendants to pay compensation of £17.9 million.

The FCA and the PRA together have fined the Chief Executive of Barclays Group, Mr James Staley, a total of £642,430. Barclays received an anonymous letter in June 2 016 and Mr Staley undertook action in order to identify the author. Consequently, the Regulators found that he was in breach of the requirement to act with due skill, care and diligence but not in breach of the requirement to act with integrity.

The Regulators had not demanded the CEO to resign, nor did they question his integrity. Barclays is now subject to special requirements in which it must report annually to the Regulators detailing how it handles whistleblowing, with personal attestations required from those Senior Managers responsible for its systems and controls.

The FCA has secured confiscation orders totalling £1.69 million against two convicted insider dealers.

Messrs Dodgson held senior positions at Morgan Stanley, Lehman Brothers and Deutsche Bank which he used, between 1 November 2006 and 23 March 2010, to source inside information which was passed on to his friend Andrew Hind who then placed trades for the benefit of themselves. The FCA found that the actions of Dodgson and Hind amounted to insider dealing. A confiscations order was made in May 2018 requiring £1,074,236 from Martyn Dodgson and £624,521 from Andrew Hind. The two will serve prison time of four and a half years and 3 and a half years respectively.

Share this