Capital Markets and Asset Management Regulatory News

Compliancy Services Directors
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Investment managers still failing to ensure effective oversight of best execution
8th March 2017 - Financial Conduct Authority

The FCA expect firms to deliver consistent best execution for their clients. The FCA has completed several pieces of work in this area and published a thematic review on best execution and payment for order flow.

The FCA publish thematic reviews to initiate improvements across the whole sector and expect all firms in the sector to consider the findings in that thematic review and the recent asset management market study.

Firms should have a strategy to ensure that all relevant parts of the business are compliant in ensuring best execution. There should also be clear management responsibility and co-ordination between the front office and compliance to ensure a robust monitoring framework.

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FCA: Dealing commission expectations not met
3rd March 2017 - Financial Conduct Authority

In this review the FCA summarises its findings from a review that analysed dealing commission expenditure across 31 investment managers (covering asset managers, wealth managers and host-authorised corporate director providers) between 2012 and 2015.

This review follows a thematic review of conflicts of interest in asset management firms (PDF) published by the FSA in November 2012 and a policy statement on the use of dealing commission rules published in May 2014. These set out FCA expectation that firms spend customers’ money with as much care and attention as if it were their own and changes to the use of dealing commission rules (COBS 11.6)

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Investment Advice - Changes to the Regulated Activities Order
27th February 2017 - Financial Conduct Authority

The Treasury has published a response to its consultation on ‘Amending the definition of financial advice’, stating its intention to shortly lay before Parliament regulations to change the requirements for advising on investments in Article 53(1) of the Regulated Activities Order.

From 3rd January 2018, the requirements for advising on investments will change following an amendment to Article 53 of the Regulated Activities Order.

The amendment means that most regulated firms will be exempt from the need to hold a permission to advise on investments under Article 53(1) unless the firm is providing a personal recommendation.

This exemption is designed to reduce the risks of firms carrying on a regulated activity without the right permission, giving them more confidence to provide consumers with information to make their own financial decisions.

There is no need for firms to take any action now. Firms will not have to re-apply for existing permissions foradvising on investments or agreeing to do so

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Transposition of MiFID ll: response to the consultation
16th February 2017 - Her Majesty's Treasury

The Treasury published a consultation on the transposition of Directive 2014/65/EU on Markets in Financial Instruments (MiFID II) on 27th March 2015.

The consultation closed on 18th June 2015 and the HMT document gives a summary of the responses submitted and the government’s response to the consultation.

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FCA consults on changes to CASS in light of SAR review
23rd January 2017 - Financial Conduct Authority

Following the failure of Lehman Brothers International (Europe) in 2008, HM Treasury created an insolvency regime for investment firms called the special administration regime (SAR).

The SAR works with the client assets sourcebook (CASS), and in particular the client money distribution rules (CASS 7A), to provide a mechanism under which client assets can be returned to clients in the event of an investment firm failure.

The Treasury has now published amendments to the SAR Regulations and, with that in mind the FCA seeks responses to its proposals and in particular the CASS proposals.

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Regulators’ supervision of MiFID best execution requirements
11th January 2017 - European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) has published a follow-up report to its Peer Review published in 2015 covering national regulators’ supervision of MiFID best execution requirements.

Best execution refers to the obligation under article 21 of MiFID for investment firms to execute orders on terms most favourable to their clients as an investor protection measure.

In its follow-up report, ESMA finds there are clear improvements in the level of attention paid to the supervision of best execution requirements.

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FCA - Applications for intragroup exemption from EMIR margin requirements
4th January 2017 - Financial Conduct Authority

The FCA has updated its European Market Infrastructure Regulation (EMIR) notifications and exemptions webpage and is accepting applications for intragroup exemptions from margin requirements for non-cleared derivatives (Article 11 of EMIR and Commission Delegated Regulation 2016/2551).

Firms will need to apply by completing the relevant form and sending it to the FCA by email to MarginIGT@fca.org.uk along with the relevant supporting documentation, as detailed in the Margin IGT User Guide.

The FCA has provided two types of application form:

  • Single Pair Application Form

  • Multiple Pairs Application Form

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Report by IOSCO on Retail OTC Leveraged Products
21st December 2016 - Other

The International Organization of Securities Commissions (IOSCO) has issued its ‘Report on the IOSCO Survey onRetail OTC Leveraged Products FR14/2016’ (The Report) that identifies various risks related to the marketing and sale of complex OTC leveraged products to retail investors, and describes how some regulators are responding to the challenges these products present.

The Report analyses offers of:

  • Rolling-spot forex contracts

  • Contracts for differences

  • Binary options to retail investors 

The Report is based on a survey of 21 IOSCO members regarding their experiences with leveraged OTC products, the firms that sell them, and current regulatory and supervision frameworks.

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MiFID II Implementation – Consultation Paper IV
16th December 2016 - Financial Conduct Authority

The FCA is consulting on its fourth set of implementation proposals for MiFID II and seeking views on the proposed changes to the FCA Handbook.

Member States of the European Union (EU) have until 3rd July 2017 to bring their laws and regulations into line with the requirements in the Markets in Financial Instruments Directive (MiFID) II which will apply six months later from 3rdJanuary 2018.

This consultation deals with a series of broadly technical Handbook changes that were not covered in previous MiFID II consultations. These relate to a number of areas including specialist conduct of business regimes, tied agents and SME growth markets.

The FCA is also proposing some guidance on transaction reporting, including trading venues’ use of Approved Reporting Mechanisms (ARMs), and proposing a transitional rule for fees relating to draft applications for authorisation in MiFIDII.

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FCA’s Review Feedback - Crowdfunding Rules
9th December 2016 - Financial Conduct Authority

The FCA’s current rules on loan-based and investment-based crowdfunding platforms came into force in April 2014 and aimed to create a proportionate regulatory framework that gave adequate investor protection whilst allowing for innovation and growth in the market.

The call for input in July 2016 launched a post-implementation review of these rules and the FCA has now given an update on the post-implementation review.

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Business Rules - Contract for difference products to retail clients
6th December 2016 - Financial Conduct Authority

This Consultation Paper (CP) outlines FCA concerns about increasing evidence of poor conduct and risks to investor protection from retail contracts for differences (CFDs) and proposes a package of policy measures designed to address those risks.

The FCA has also observed that binary bets are not transparent enough for investors to adequately value them, and have product features which are more akin to gambling products than investments.

The FCA’s proposed measures are intended to ensure an appropriate level of consumer protection and consequently this CP also discusses FCA early policy considerations for the sale and distribution of binary bets (commonly known as binary options) to retail clients.

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Implementation of MiFID II: Part 2 – CP43/16
25th November 2016 - Prudential Regulation Authority

This is the second PRA consultation on implementing MiFID II, and follows CP9/16 ‘Implementation of MiFID II: Part 1’, which consulted on implementation of the MiFID II passporting regime and algorithmic trading. The final rules following CP9/16 were published in Policy Statement 29/16.

In this consultation paper the PRA sets out its proposals for rules to transpose parts of the Markets in Financial Instruments Directive (MiFID II). The consultation paper covers:

  • Enhanced governance through MiFID II management body requirements and key organisational requirements which will apply to MiFID and non-MiFID business.

  • Authorisations

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ESMA Questions and Answers - MiFID and MiFIR
18th November 2016 - European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) has published two Questions and Answers (Q&A) documents regarding implementation issues relating to market structures and transparency topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

The two Q&As cover the follow:
  • Data disaggregation

  • The mandatory tick size regime

  • Article 4(7) of MiFIR, review of waivers granted in accordance with MiFID

  • The procedure for granting a waiver from pre-trade transparency obligations for illiquid non-equity financial instruments

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Asset Management Market Study November 2015
18th November 2016 - Financial Conduct Authority

The FCA have published the interim findings of its asset management market study, which suggests that there is weak price competition in several areas of the asset management industry.

The FCA launched the market study in November 2015 to assess whether competition is working effectively. It looked at whether institutional and retail investors get good value for money when buying asset management services.

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ESMA prepares for new International Financial Reporting Standard 9
10th November 2016 - European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) has published a Public Statement on Issues for consideration in implementing IFRS 9: Financial Instruments (the Statement) which highlights both the need for consistent, high-quality implementation of IFRS 9 and the need for transparency on its impact to users of financial statements.

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