FReD: 5 February 2010
Headlines
CEIOPS lists
colleges
BIS updates on CCD
implementation
FMLC explains legal
problems of AIFMD
Industry responds on
derivatives
IMA calls for change
European Union
European Commission
Commission takes action
over Gibraltar MAD implementation: The Commission will send
the UK a reasoned opinion on incorrect implementation of the Market
Abuse Directive in Gibraltar. It says the Gibraltar
authorities do not have the investigative or sanctioning powers
that MAD requires. (Source:
IP/10/81)
Contact: Rosali Pretorius
or Melissa
Thornton.
Commission updates PSD
FAQs: The Commission has updated its FAQs on the Payment
Services Directive. It has added nine new answers on various
provisions of the Directive. (Source:
Your questions on PSD)
Contact: Brett Hillis or
Matthew
Hodgson.
Commission calls for
interest in banking expert group: The Commission is calling
for applications for would-be members of an expert group on banking
issues. It wants applications by 28 February.
(Source: EXME 10 01.02)
Contact: Emma Radmore or
Matthew
Hodgson.
Committee of European Banking Supervisors (CEBS)
CEBS responds on crisis
management: CEBS has responded to the Commission's
communication on cross-border crisis management. Its comments
focus on the definition of the "common minimum toolbox" for
authorities. (Source: Press Release
and CEBS 2009 309 rev2-FINAL)
Contact: Robert Finney or
Rosali
Pretorius.
CEBS publishes new
disclosure guidelines: CEBS has published its revised
guidelines on Supervisory Disclosure and will now, with national
supervisors, implement and populate the new templates by the end of
March. (Source: Press Release and
Revised Guidelines)
Contact: Robert Finney or
Brett
Hillis.
Committee of European Securities Regulators (CESR)
CESR updates on
short-selling: CESR has published an update on current
measures its members take on short-selling. Notably, the
French regulator has extended its measures indefinitely, while the
German ban on naked short selling has expired. (Source: CESR/08-742 (updated))
Contact: Chris Borg or Brett Hillis.
CESR publishes peer
review on UCITS notifications: CESR has published the
results of a peer review on how its members apply CESR's guidelines
to simplify notifications for UCITS. The review found five
members apply the key guidelines fully, and four apply them
partially. The other 20 members did not comply with at least
one of the key guidelines. The UK was rated as non-compliant
on three guidelines. CESR hopes the compliance rate has improved
since the cut-off date for the information it used for its report,
which was April 2008. (Source:
CESR/10-016 and CESR/09-1034)
Contact: Rosali Pretorius
or Emma
Radmore.
CESR consults on OTC
transaction reporting: CESR is consulting on how to report
transactions in OTC derivatives. It wants views on how to
populate various fields in the reports and how prices and spreads
should be reflected. The consultation asks 25 questions,
focusing on specific products. CESR has also published a feedback
statement and its technical decision on its consultation on
classifying and identifying OTC instruments for the purposes of
exchanging transaction reports between CESR members. It wants
comments by 1 April. (Source:
CESR/09-768, CESR/09-987 and CESR/09-1036)
Contact: Robert Finney or
Chris
Borg.
Committee of European Insurance and Occupational Pensions
Supervisors (CEIOPS)
CEIOPS agrees MOU with
Swiss regulators: CEIOPS and the Swiss insurance supervisor
have updated their agreement with the (new) Swiss insurance
supervisor. CEIOPS thinks Swiss regulation of reinsurance is
equivalent to the EU regime. (Source:
Press Release and CEIOPS-Sec-10-2010)
Contact: Robert Finney or
Emma
Radmore.
CEIOPS lists colleges:
CEIOPS has published a list of insurance groups in relation to
which a college of supervisors is in place. There are over
100 groups. Several are lead-regulated in the UK.
(Source: CEIOPS list of groups for which a
College of supervisors is in place)
Contact:
Rosali
Pretorius or Emma Radmore.
CEIOPS publishes final
Solvency II level 2 measures: CEIOPS has published the
third, and final, set of implementing measures for Solvency
II. It is also now consulting on draft level 3 Guidance on a
pre-application process for Internal Models. It wants
comments by 8 March. (Source: Press
Release and CEIOPS-CP-80/10)
Contact: Brett Hillis or
Melissa
Thornton.
CEIOPS sets up QIS5
task force: CEIOPS is setting up a specialised group to
deliver the final quantitative impact study under Solvency
II. (Source: Press Release)
Contact: Brett Hillis or
Melissa
Thornton.
UK Government and Parliament
Department of Business Innovation and Skills (BIS)
BIS updates on CCD
implementation: BIS has confirmed it plans to lay the
legislation implementing the CCD in March. Unfortunately, the
draft regulations currently before Parliament will change and BIS
has published a summary of how it is dealing with comments it
received on the October draft and some changes it has already
planned. However, there are still outstanding points.
It has also published a new version of examples for early repayment
and the Standard European Consumer Credit Information
(SECCI). (Source: Website summary,
update on draft Consumer Credit Directive regulations published in
October 2009, examples illustrating use of formulae for calculating
rebate for full and partial early settlement, and pre-contract
credit information)
Contact: Ian Roberts or Dominic
Gilmore.
Financial Markets Law Committee (FMLC)
FMLC explains legal problems of
AIFMD: The FMLC has published an issues paper that looks at
the legal uncertainties the current compromise draft of the AIFMD
creates. It notes many problems, but lists five major
concerns:
- scope and definitions of central concepts,
specifically "Alternative Investment Fund" and "Alternative
Investment Fund Manager", and uncertainty as to the activities
which should be regulated activities for the purposes of the
Directive;
- the liability regime for depositaries;
- the difficulty of interpreting the
depositary's obligation to verify whether the AIF or the AIFM has
ownership of all other assets in which the AIF invests and the
practical problems of meeting this requirement;
- the delegation restriction on depositaries
and the potential inadvertent effects of it; and
- the inconsistencies and inherent conflicts
between the proposal and existing financial services directives
which create legal uncertainty as to the general application of
Community legislation.
(Source: Issue 145: AIFM Directive: Legal Risks)
Contact: Chris Borg or Rosali
Pretorius.
Serious Fraud Office (SFO)
SFO drops action
against Madoff company: SFO will not carry on its
investigations into the behaviour of Madoff International
Securities Ltd and its directors as it thinks there is insufficient
evidence to provide a realistic chance of conviction. (Source: Press Release)
Contact: Robert Finney or
Rosali
Pretorius.
HM Treasury
Treasury on the
conference circuit: Paul Myners has spoken at two recent
events:
- at the launch of the London Stock Exchange’s
retail bond market: he spoke on the bond markets and the role of
non-bank lending; and
- at a market liquidity conference, on the need
for reforms to strengthen OTC derivatives markets and the use of
CCPs.
(Source: Speeches)
Contact: Robert Finney or
Chris
Borg.
Parliament
FSB to start in
Lords: The Financial Services Bill has finished its readings
in the Commons and will start its process through the House of
Lords on 8 February. (Source:
Parliament website)
Contact: Robert Finney or
Emma
Radmore.
UK Financial Services and Markets Regulator
Financial Services Authority (FSA)
FSA makes new
rules: At FSA's January board meeting, it made four
Instruments:
- the Sale and Rent Back Instrument 2010:
this sets the full regime for regulating the sale and rent back
market and fully replaces the current interim regime from 1 July
2010. The new rules, which mainly amend MCOB but affect other
parts of the Handbook as well, introduce many new consumer
safeguards. They include a ban on cold calling, a cooling-off
period, affordability and suitability test and minimum security of
tenure. FSA published a feedback statement to its
consultation, and is now consulting on reporting requirements for
sale and rent back firms. It wants comments on its proposals
by 30 April;
- the DISP (Publication of Complaints Data)
Instrument 2010: this requires a firm that gets 500 or more
complaints in six months to publish information about them.
The rules take effect from 6 April;
- the COLL (Accounting Amendments)
Instrument 2010: this amends COLL and the Glossary to reflect the
IMA’s 2009 SORP and makes other minor clarifications. The
changes take effect from 6 March; and
- the DISP (Voluntary Jurisdiction and Sale
and Rent Back Amendments) Instrument 2009: these changes to DISP
take effect from 6 February and bring sale and rent back activities
and operation of an MTF within the FOS's Voluntary
Jurisdiction.
(Source: Handbook Notice 96, FSA 2010/1-3, FOS 2009/6,
FSA/PN/016/2010, Consultation Paper 10/4**: Sale and rent back
(full regime): Feedback on CP09/22, made rules and consultation on
reporting, FSA/PN/018/2010 and Policy Statement 10/1: Publication
of Complaints Data including Feedback to CP09/21)
Contact: Emma Radmore or
Matthew
Hodgson.
FSA and SEC meet on
strategy: Lord Turner and Hector Sants met the SEC Chair,
Mary Shapiro, to discuss current matters of mutual interest.
Among the subjects they talked about were corporate governance and
remuneration, regulation of hedge funds and investment advisers,
and customer asset protection and disclosure of client asset
risks. They also discussed market infrastructure and
supervision. The authorities plan to review their existing
MOU to ensure it gives the best opportunities to work
together. (Source:
FSA/PN/021/2010)
Contact: Robert Finney or
Chris
Borg.
FSA warns of share
fraud hit list: FSA and the City of London Police have
written to 6,500 addresses they found on a master list they believe
is being circulated to share boiler rooms. They have warned
the addressees about the list and given advice on what they should
do to protect themselves. (Source: FSA/PN/019/2010)
Contact: Robert Finney or
Chris
Borg.
FSA bans and fines
hedge fund manager for mis-marking: FSA has banned Simon
Treacher, a senior fund manager, and fined him £140,000. It
found he deliberately put false figures in a number of broker
quotes over a period of three months. The deception led to an
uplift in valuation of the relevant funds and investors lost
$650,000. Mr Treacher then misled FSA during its
investigation. FSA found no fault with his then employer,
which had also fully compensated the investors. (Source: FSA/PN/022/2010 and Final Notice)
Contact: Rosali Pretorius
or Robert
Finney.
FSA gets three
insider dealing arrests: Three men were arrested in the
fourth set of arrests carried out by FSA and the City of London
Police over suspected insider dealing. (Source: FSA/PN/017/2010)
Contact: Brett Hillis or
Melissa
Thornton.
FSA on the
conference circuit: Thomas Huertas spoke at the London
School of Economics on bank capital structures. He explained
that when working out the right capital structure for banks, two
popular theories are not true. One cannot determine the value
of a bank solely by the value of its assets, and the market is not
perfect. Because of this, regulators have to consider a
combination of measures to reduce the social impact of a bank
failure. (Source: Speech)
Contact: Robert Finney or
Rosali
Pretorius.
FSA and BoE publish
payment systems MOU: FSA and BoE have published a Memorandum
of Understanding on their respective responsibilities for the
oversight of payment systems. (Source:
Memorandum of Understanding between the Bank of England and the
Financial Services Authority regarding the oversight of payment
systems)
Contact: Robert Finney or
Brett
Hillis.
Up next from
FSA: Among publications FSA plans to issue during the first
quarter of 2010 are:
- consultation on fee rates and
levies;
- feedback on the mortgage review;
- policy statement on the RDR and
consultation on remuneration transparency of pure protection sold
alongside investments; and
- policy statement on the consultation on
assessment and redress of PPI complaints.
(Source: Handbook Development No. 119)
Contact: Emma Radmore or
Matthew
Hodgson.
FSA censures firm
for Appointed Rep failings: FSA has censured a small
stockbroker for numerous failings by its Appointed Representative,
including failing to get enough information to assess suitability,
using pressure sales and failing to disclose inducements. The
firm has varied its permission so it can no longer hold client
assets or give advice. FSA would have fined it, but the firm
is about to go into administration. (Source: FSA/PN/020/2010 and Final Notice)
Contact: Emma Radmore or
Matthew
Hodgson.
Financial Services Compensation Scheme (FSCS)
FSCS announces new
chief: Mark Neale will become the new Chief Executive of
FSCS from May. (Source: Press
Release)
Contact: Emma Radmore or
Jasmin
Khan.
Financial Services Consumer Panel (FSCP)
FSCP pleased with
sale and rent back regime: FSCP said the full sale and rent
back regulatory regime has started not a minute too soon. It
commented the market had been able to lure vulnerable and desperate
people into deals. It said FSA must police the new regime
thoroughly and is worried surprisingly few firms have applied for
FSA authorisation. (Source: Press
Release)
Contact: Rosali Pretorius
or Matthew
Hodgson.
Other Authorities/Regulators/Trade Associations
Association of Independent Financial Advisers
(AIFA)
AIFA not happy with
FSA fees review: AIFA says FSA’s policy proposals for
regulatory fees and levies do not accurately reflect the risks the
intermediary sector poses. It said many areas of the
regulated community were paying disproportionately low fees
compared to intermediaries. (Source:
Media Release and AIFA’s response to CP 09/26: Regulatory fees and
levies: policy proposals for 2010/11)
Contact: Brett Hillis or
Melissa
Thornton.
Bank for International Settlements/Basel Committee
(BIS/Basel)
CPPS to review
clearing and settlement systems: The Committee on
Payment and Settlement Systems and IOSCO are jointly reviewing
their existing standards for financial market infrastructures like
payment systems, securities settlement systems and central
counterparties. They plan to issue new versions of three
current codes for consultation in 2011. (Source: Press Release)
Contact: Robert Finney or
Chris
Borg.
British Bankers Association (BBA)
Industry responds on
derivatives: BBA, ISDA and AFME have published a joint
response to the House of Lords' Call for Evidence on derivatives
markets. The associations do not believe central clearing of
OTC derivatives should be necessary, although they are happy for
more OTC derivatives to be eligible for clearing. But they
say non-cleared derivatives should not suffer punitive capital
charges. They caution that CCPs will become more systemically
important the more contracts they clear, which suggests national
regulation of CCPs will be needed. Their other concerns are
disclosure of individual counterparty information and how the
information might be used and by whom, and about possibly
inappropriate extension of the Market Abuse Directive.
(Source: Joint ISDA, BBA and AFME response
to House of Lords' Call for Evidence on derivatives
markets)
Contact: Robert Finney or
Chris
Borg.
Council of Mortgage Lenders (CML)
CML backs mortgage
review: CML has given its support to FSA's mortgage review
but also thinks any conduct of business reforms must go hand in
hand with a plan to achieve diversified funding for lenders.
(Source: Press Release)
Contact: Rosali Pretorius
or Emma
Radmore.
Investment Management Association (IMA)
IMA calls for change: IMA
has called for two changes to boost the funds industry. It
not only supports abolishing stamp duty on funds but also wants the
UK to introduce a new "contractual" fund. It says this will
help the UK to compete with the rest of Europe when UCITS IV comes
into force. (Source:
Press Release)
Contact: Rosali Pretorius
or Emma
Radmore.
Lending Standards Board (LSB)
LSB publishes first
bulletin and reports on risk-based credit card repricing:
The first bulletin from the LSB since it took over from the BCSB
looks at several aspects of compliance monitoring. It gives
guidance on right of set-off, interest and charges concessions,
interest rate change notifications and financial
difficulties. It explains its immediate plans and has also
published details of a review of compliance with the Lending Code
provisions on risk-based credit card reporting. It found all
firms it surveyed had implemented the relevant parts of the code
but has asked some to make a few improvements to the way they
present information to customers. (Source: LSB Bulletin No. 1 and Themed Review of
Compliance with the Lending Code’s Provisions on Risk-based Credit
Card Reporting)
Contact: Ian Roberts or Dominic
Gilmore.
Recent publications and forthcoming events
NEW:
Bank Notes on new regulatory treatment of sukuk: The latest
edition of our Bank Notes publication includes an article by
Robert
Finney and Matthew Sapte on
the new regulatory treatment of sukuk.
PLC/DWS practice note on Consumer Credit Directive: We
have collaborated with PLC Financial Services on a practice note
looking at key issues in implementation of the Consumer Credit
Directive into UK law. For more information, please contact
Ian Roberts,
Brett Hillis
or Matthew
Hodgson.
Thoughts on the Financial Services
Bill: Robert
Finney spoke to PLC Financial Services about the Financial
Services Bill. His comments were published by PLC on 23 December
2009.
Brett Hillis on the
Financial Services Bill: Brett Hillis spoke
to Complinet's Vox Pop on "Will the Financial Services Bill become
law before the election and would it change Tory policy if it
did?". Brett said: "The Bill will not change Conservative
proposals relating to moving bank supervision to the Bank of
England and setting up a Consumer Protection Agency. It will
be difficult for the Tories to backtrack on these even though they
fully deserve the scepticism they have generated in the City.
Changing the regulators is a distraction that creates
uncertainty and may cause problems with ensuring "joined-up
regulation" between consumer protection and prudential regulation.
Plus, it is still unclear who will act as listing authority
and regulator of markets and exchanges.
"However, I do think the bill contains some
interesting ideas around living wills, collective proceedings and
FSA disciplinary proceedings that the Tories could adopt and yet
still maintain the political stance of arguing regulatory failure
is due to the structure adopted by the current government."
Single Customer View: Time to get your customer data in
shape: John Worthy, a
partner in Denton Wilde Sapte's Technology group, has written an
article for Complinet in which he reviews what FSA's new rules on
the SCV mean, what issues they raise and whether there is good news
for financial institutions.
The Financial Services Bill - after
the hype? We have written an article for Complinet on the
Financial Services Bill. For more information, please contact
Brett Hillis
or Emma
Radmore.
Bedding Down to BCOBS: We have written an article for
Compliance Monitor on FSA's new Banking Conduct of Business Rules.
For more information, please contact Brett Hillis or
Emma
Radmore.
Financial
Markets and Regulation partners' opinions in the
media: You can see the Financial
Markets and Regulation group's national media appearances on the
BBC, in the Financial Times, City AM and other national press and
on CNBC. Recent topics include:
- Brett Hillis in
City AM on bankers' employment
contracts
- Brett Hillis in the
Financial Times and on CNBC on
bank splitting
- Rosali Pretorius in the
Independent on the mortgage review
- Robert Finney on
CNBC on the first anniversary of the UK bank
bail-outs
- Robert Finney on
CNBC and in the Guardian on Tobin
tax
- Brett Hillis on
CNBC on FSA's financial remuneration
code.
Turner Review feedback: a victory for FSA?: We have
written an article for Complinet on FSA's response to the Turner
Review feedback. For more information, contact Robert Finney or
Emma
Radmore.
Perfect har-money?: the new e-money directive: We have
written an article on the new e-money directive and its interaction
with other legislation. For further information, contact
Brett Hillis
or Melissa
Thornton.
Structure of UK financial regulation: fix it or rip it up and start
again?: We have written an article on key reports
analysing flaws in regulation and changes needed. For further
information, contact Robert Finney or
Emma
Radmore.
Reforming financial markets - or not? We have written an
article for Complinet on the views of the Government, the
Conservative Party and the Treasury Select Committee on the
tripartite system, following Robert Finney's appearance on CNBC's
Strictly Money show discussing the Committee's report. For more
information, please contact Robert Finney or
Rosali
Pretorius.
Financial
sanctions and financial institutions: We have
written an article on UK financial sanctions and FSA's expectations
of the regulated community for Financial Regulation
International. For further information, please contact
Robert
Finney, Emma
Radmore or Thomas Dunn.
Social usefulness: The purpose of
regulation?: We have written an article for Complinet on Lord
Turner's recent speech in New York. For further information,
please contact Rosali Pretorius
or Emma
Radmore.
Can you prove your TCF? We have published an
article looking at how a firm can prove it has met FSA's TCF
outcomes. For further information, please contact Brett Hillis,
Emma Radmore
or Dominic
Gilmore.
Know your
contacts: We have written an article on the lessons
from the Aon fine. For further information, please contact
Rosali
Pretorius or Emma Radmore.
New choices for credit card issuers: We have
written an article on how the Payment Services Directive may affect
credit card issuers. For further information, please contact
Ian Roberts,
Brett Hillis
or Dominic
Gilmore.