Capital Markets and Asset Management Regulatory News

Compliancy Services Directors
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ESMA consults on Money Market Funds rules
25th May 2017 - European Securities and Markets Authority

The European Securities and Markets Authority (ESMA) has published a Consultation Paper (CP) on the Money Market Funds Regulation (MMFR).

The CP contains proposals on draft technical advice (TA), draft implementing technical standards (ITS), and guidelines under the MMFR.

The key proposals relate to:

  • Asset liquidity and credit quality

  • The establishment of a reporting template and stress test scenarios

These represent the detailed rules required for the implementation of the new European Union regulatory framework aimed at ensuring the stability and integrity of money market funds.

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Remuneration in CRD IV firms PS 17/10
3rd May 2017 - Financial Conduct Authority

The European Banking Authority (EBA) published Guidelines in December 2015, which set out its views on how the CRD IV rules should be applied. These came into force on 1st January 2017.

To comply with the Guidelines, the FCA needed to make some amendments to its Handbook and guidance. The FCA issued Consultation Paper 16/28 in September 2016, which set out proposed changes to its Handbook, and minor changes to the existing proportionality guidance.

The FCA also consulted on new non-Handbook guidance to address frequently asked questions on remuneration.

This Policy Statement sets out the response to that consultation and the final rules and guidance.

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Implementation of MiFID II – Part 2 (PS9/17)
28th April 2017 - Prudential Regulation Authority

This Prudential Regulation Authority Policy Statement provides final policy as part of the PRA’s transposition of the Markets in Financial Instruments Directive II (MiFID II) following Consultation Paper 43/16 ‘Implementation of MiFID II: Part 2’.

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Matched Principal brokers and Organised Trading Facilities
5th April 2017 - European Securities and Markets Authority

MiFID II created a new type of trading venue, the Organised Trading Facility (OTF).

An OTF is a multilateral system, i.e. “a system or facility in which multiple third-party buying and selling interests in financial instruments are able to interact in the system”.

Depending on how a matched principal broker's system works, it may be deemed to be operating an OTF. This will be the case if the system exercises some discretion in how orders are executed (a key difference between MTFs/RMs and OTFs) and has the three attributes below- 

  • Trading is conducted on a multilateral basis

  • The trading arrangements in place have the characteristics of a system

  • The execution of the transaction is taking place on the system or under the rules of the system

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CP17/8: Markets in Financial Instruments Directive II Implementation – Consultation Paper V
5th April 2017 - CP17/8: Markets in Financial Instruments Directive II Implementation – Consultation Paper V

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

  • This consultation deals with changes to the FCA decision procedure and penalties manual and the enforcement guide. It also sets out FCA proposals for new conduct rules dealing with the non-MiFID business of occupational pension scheme firms

  • This consultation also covers consequential and miscellaneous changes to the FCA Handbook and new guidance on the use of third parties where firms are required to send the FCA financial instrument reference data or commodity derivative position reports

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Markets in Financial Instruments Directive II Implementation – Policy Statement I
31st March 2017 - Financial Conduct Authority

This Policy Statement sets out near final rules in the areas that the FCA consulted on in CP15/43 (mostly on markets issues) and CP16/19 (where the main issues consulted on were systems and controls, client assets and commodity position limits).

It also covers a small number of issues consulted on in CP16/29 and CP16/43 and the FCA also provide an update on its thinking on its proposals for recording of telephone conversations covered in CP16/29.

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FCA publishes near final rules on MiFID II
31st March 2017 - Financial Conduct Authority

The Financial Conduct Authority (FCA) has published near final rules on the implementation of the Markets in Financial Instruments Directive (MiFID) II.

These include changes to the trading of financial instruments including issues affecting trading venues, transparency of trading and algorithmic and high frequency trading.

The FCA is also providing an update on the taping of telephone conversations by retail financial advisers.

Firms impacted by the changes to the activities and instruments covered by MiFID II should now apply for authorisation or for variations of permission, or risk being unable to operate in the UK market after 3rd January 2018, when MiFID II takes effect.

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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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