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Selected Headlines
General
Brexit
Banking and Finance
Securities and Markets
Asset Management
Insurance
Financial Crime
Enforcement
Financial Regulation
Weekly Bulletin 15 March 2018 / Issue 953
Major UK and European regulatory developments of interest to banks, insurers and reinsurers, asset managers and other market participants
Selected Headlines General
Sound compensation practices - FSB publishes supplementary guidance to address misconduct risk
1.1
Big Data – ESAs publish final report 2.1
FCA Discussion Paper DP18/2: Transforming culture in financial services
3.1
Brexit
CRD V, CRR II and BRRD II - House of Commons European Scrutiny Committee retains proposals for scrutiny, and asks Brexit-related questions
6.2
EEA firms and funds passporting into the UK – FCA launches survey in connection with temporary permission scheme
7.1
How insurance communications should deal with Brexit – FCA publishes correspondence with the ABI
7.2
Framework of future EU-UK relations - European Parliament adopts resolution
9.1
Banking and Finance
BRRD – two Delegated Regulations setting out RTS on valuation published in the Official Journal
12.1
PSD2 – Delegated Regulation on customer authentication and standards of communication published in the Official Journal
12.2
CRD V, CRR II, BRRD II and SRM II – Council publishes note on outstanding issues and Presidency compromise texts
13.1
Non-performing loans – European Commission publishes a package of measures
14.1
CRR – Commission adopts Delegated Regulation on assessment methodologies for the use of advanced measurement approaches for operational risk
14.2
Draft Guidelines on managing non-performing exposures – EBA launches consultation
15.1
Quick Links
Financial Regulation / 15 March 2018 / Issue 953 2
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
Non-performing loans – EBA publishes advice to the European Commission on the use of prudential backstops
15.2
FinTech roadmap – published by the EBA 15.3
Guidance to banks on non-performing loans – addendum published by ECB
17.1
Cash and digital payments in the new economy – HM Treasury publishes call for evidence
18.1
PSR CP18/1: Review of PSR Directions made in 2015 – Directions on access, governance and participants’ relationships with the PSR (General Directions 1 to 6 and Specific Direction 1)
20.1
Statement of Principles for strengthening professionalism – published by BSB
21.1
Securities and Markets
Capital Markets Union – European Commission publishes further legislative proposals on covered bonds, investment funds, and assignment of claims
23.1
New euro unsecured overnight interest rate – ECB launches second consultation
24.4
FCA Policy Statement PS18/5: Powers in relation to LIBOR contributions
26.1
Asset Management
Closet tracker funds - FCA publishes information 27.1
Insurance
IDD delay – amending Directive and Delegated Regulation awaiting publication in the Official Journal
28.1
Financial Crime
Senior investor vulnerability – IOSCO publishes report 30.1
Sanctions and Anti-Money Laundering Bill – Prime Minister May announces Magnitsky amendment
32.1
AML and CTF – JMLSG consults on revisions to guidance on asset finance and syndicated lending
34.1
Enforcement
Peverting the course of justice in respect of confiscation order – individual pleads guilty, and is banned by the FCA for operating an unauthorised CIS, even though he was never an approved person
36.1
General 1. Financial Stability Board
1.1 Sound compensation practices - FSB publishes supplementary guidance to address misconduct
risk – 9 March 2018 – The Financial Stability Board (FSB) has published a ‘Supplementary Guidance
to the FSB Principles and Standards on Sound Compensation Practices’ (April 2009). The guidance
Financial Regulation / 15 March 2018 / Issue 953 3
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
provides firms and supervisors with a framework to consider how compensation practices and
tools, such as in-year bonus adjustments, malus or clawback, can be used to reduce misconduct
risk and address misconduct incidents. It consists of eight recommendations for firms and
supervisors and is structured in three parts: (i) governance of compensation and misconduct risk,
(ii) effective alignment of compensation with misconduct risk and (iii) supervision of compensation
and misconduct risk.
The Supplementary Guidance is here.
The webpage is here.
The original Principles and Standards are here.
The press release is here.
2. European Supervisory Authorities
2.1 Big Data – ESAs publish final report – 15 March 2018 - The Joint Committee of the European
Supervisory Authorities (ESAs) (comprising the European Banking Authority (EBA), the European
Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets
Authority (ESMA) has published its final report on the use of Big Data by financial institutions. The
report concludes that, though the development of Big Data poses some potential risks to financial
services consumers, the benefits of this innovation currently outweigh the risks, many of which
are mitigated by existing legislation. The report includes a feedback statement to its December
2016 discussion paper.
The report is here.
A consumer factsheet is here.
The December 2016 discussion paper is here, and related FAQs are here.
ESMA’s press release is here.
3. Financial Conduct Authority
3.1 FCA Discussion Paper DP18/2: Transforming culture in financial services – March 2018 - The
Financial Conduct Authority (FCA) has published a Discussion Paper (DP18/2) on transforming
culture in financial services. The paper includes 28 essays from academics, industry leaders,
international regulators and change practitioners (which do not necessarily reflect the views of
the FCA). Each essay addresses one of the following four themes: a) ‘is there is a ‘right’ culture?’;
b) ‘the role of regulation’; c) ‘the role of reward, capabilities and environment in driving
behaviours’; and d) ‘leading culture change’.
In the foreword to DP18/2, Jonathan Davidson, FCA Director of Supervision − Retail and
Authorisations, states:
“Culture in financial services is widely accepted as a key root cause of the major conduct
failings that have occurred within the industry in recent history, causing harm to both
consumers and markets.
Financial Regulation / 15 March 2018 / Issue 953 4
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Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
…Given its impact and the role it needs to play in re-building trust in financial services,
firms’ culture is a priority for the FCA”.
The FCA is not requesting formal feedback on this paper. However, it asks those with an interest
in financial services to consider the issues in the paper and to engage in the debate about what
constitutes a healthy culture and how to promote it.
DP18/2 is here.
The webpage is here.
The press release is here.
3.2 Accomplishments of the FCA and future challenges – speech by outgoing FCA Chairman, John
Griffith-Jones – 14 March 2018 – The FCA’s outgoing Chairman, John Griffith-Jones, has delivered
a speech on what the FCA has achieved over the last five years and the challenges it faces in the
next five years. Mr Griffith-Jones identifies four major challenges: Brexit; the perimeter between
policy, regulation and unregulated activity; the relationship between the legal and regulatory
process; and the relationship between the FCA and those it regulates.
Charles Randell CBE will replace Mr Griffith Jones as Chair of the FCA from 1 April 2018.
The speech is here.
3.3 The FCA’s approach to authorisation – speech by Sarah Rapson, FCA Director, Authorisations –
14 March 2018 – FCA Director, Authorisations, Sarah Rapson, has delivered a speech on the FCA’s
approach to authorisation. In the speech, Ms Rapson discusses: a) how the FCA uses authorisation
to deliver its mission; b) how the FCA helps firms to meet its minimum standards; and c) how the
FCA is improving its approach and becoming more transparent. The December 2017 consultation
on the FCA’s approach to authorisation has recently closed, and the FCA is analysing responses.
The final document is due in the summer.
The speech is here.
The consultation webpage is here.
4. House of Commons Treasury Committee
4.1 Financial Ombudsman Service - Chair of Treasury Committee asks questions about findings of
‘Dispatches’ programme – 13 March 2018 – Nicky Morgan, Chair of the House of Commons
Treasury Committee, has written to Caroline Wayman, Chief Ombudsman and Chief Executive of
the FOS, asking questions concerning the FOS decision making process and potential biases within
the FOS, following the findings of a ‘Dispatches’ broadcast of 12 March 2018 in which journalists
went undercover at the FOS.
An item in the Enforcement section below reports on R (on the application of TenetConnect
Services Limited) v Financial Ombudsman and another [2018] EWHC 459 (Admin), concerning the
jurisdiction of the FOS over regulated advice leading to the purchase of unregulated investments
with the proceeds of sale.
The letter is here.
Financial Regulation / 15 March 2018 / Issue 953 5
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
The parliamentary press release is here.
See also the Banking and Finance section above for an item on the BSB Statement of Principles for
strengthening professionalism.
Brexit 5. UK government
5.1 UK’s position on ‘other separation issues’ – DExEU publishes technical note – 6 March 2018 -
The Department for Exiting the European Union (DExEU) has published a technical note on the
UK’s position on ‘other separation issues’. These are issues (other than citizens’ rights, Northern
Ireland, and the financial settlement) that the UK and the EU agreed, in their December 2017
joint report, would require further discussion to reach agreement. This technical note includes the
UK’s proposed approach on: ongoing EU judicial and administrative proceedings; EU institutions,
agencies and bodies; ongoing police and judicial cooperation; customs, VAT and excise matters;
and the use of data and protection of information obtained or processed before Brexit, among
other things.
The technical note is here.
The webpage is here.
The December 2017 joint report is here.
The draft withdrawal agreement can be found here.
5.2 Statutory instruments to correct inoperabilities or deficiencies in retained EU law after Brexit
– UK government publishes further illustrative samples – 8 March 2018 - The European Union
(Withdrawal) Bill creates powers to make secondary legislation, including temporary powers, to
enable corrections to be made to laws that would otherwise no longer operate appropriately once
the UK has left the EU. The government previously published two sample statutory instruments
and has now published five further sample statutory instruments as illustrative examples of how
these powers may be used.
The sample statutory instruments can be found here.
The covering note for the sample statutory instruments is here.
5.3 Areas of EU law that intersect with devolved competence in Scotland, Wales and Northern
Ireland – government publishes provisional analysis – 9 March 2018 – The government has
published a provisional analysis of the returning EU powers that it states will result in the
devolved administrations of the UK receiving extensive new powers on Brexit. The analysis covers
153 areas where EU laws intersect with devolved competence. The government states that 24
policy areas are subject to more detailed discussion to explore whether legislative common
framework arrangements might be needed, in whole or in part.
The provisional analysis is here.
The holding page is here.
Financial Regulation / 15 March 2018 / Issue 953 6
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Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
The press release is here.
6. UK Parliament
6.1 Continuing application of EU trade agreements after Brexit – House of Commons International
Trade Committee publishes report – 7 March 2018 – The House of Commons International Trade
Committee has published a report on the continuing application of EU trade agreements after
Brexit. The report covers: a) EU trade-related agreements; b) the government’s approach to
rolling over EU trade agreements; c) the post-Brexit ‘implementation’ period; d) the terms of
rolled over trade agreements; e) the implementation of rolled-over agreements; and f) cross-
departmental issues. It includes a number of recommendations.
The report is here.
The press release is here.
6.2 CRD V, CRR II and BRRD II - House of Commons European Scrutiny Committee retains proposals
for scrutiny, and asks Brexit-related questions – 13 March 2018 – During its meeting on 8 March
2018, the House of Commons European Scrutiny Committee has retained under scrutiny, and
drawn to the attention of the Treasury Committee, the following legislative proposals:
BRRD II: the proposal for a Directive (2016/0362 (COD)) amending the Bank Recovery and
Resolution Directive (2014/59/EU) (BRRD) on loss-absorbing and recapitalisation capacity of
credit institutions and investment firms;
CRD V: the proposed Directive (2016/0364 (COD)) amending the Capital Requirements Directive
(2013/36/EU) (CRD IV) regarding exempted entities, financial holding companies, mixed
financial holding companies, remuneration, supervisory measures, and powers and capital
conservation measures; and
CRR II: the proposal for a Regulation (2016/0360 (COD)) amending the Capital Requirements
Regulation (575/2013/EU) (CRR) as regards the leverage ratio, the net stable funding ratio,
requirements for own funds and eligible liabilities, counterparty credit risk, market risk,
exposures to central counterparties, exposures to collective investment undertakings, large
exposures, reporting and disclosure requirements, and amending EMIR (648/2012/EU).
Among other things, the Committee states that it cannot yet be certain about whether the
proposed changes to the prudential framework would apply directly in the UK (which would be the
case if they become applicable during the post-Brexit transitional period, during which EU law
would continue to apply).
The Committee has listed (in paragraph 2.10) a number of Brexit-related questions for HM
Treasury.
In a separate development, the Presidency of the Council has suggested an approach on the
outstanding issues, and published compromise texts.
The Committee’s seventeenth report of the session 2017-19 (which considers the measures in
section 2, starting at page 11) is here.
The Presidency note is here.
Financial Regulation / 15 March 2018 / Issue 953 7
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Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
The procedure file for BRRD II is here.
The procedure file for CRD V is here.
The procedure file for CRR II is here.
7. Financial Conduct Authority
7.1 EEA firms and funds passporting into the UK – FCA launches survey in connection with
temporary permission scheme – 9 March 2018 – The Financial Conduct Authority (FCA) has
launched an online survey of EEA firms and fund managers that passport into the UK in connection
with the proposed temporary permission scheme post-Brexit. The FCA is seeking to establish: a)
contact details; b) the Directives under which firms are passporting in to the UK; and c) firms’
intentions around accessing the UK market following Brexit. In December 2017, the UK
government announced that it was prepared to legislate for a temporary permission scheme for
EEA inbound passported firms and funds, and the FCA published initial details of how it intended
to use the scheme. Further details are expected to follow.
The survey closes on 11 May 2018.
Firms which would be authorised by the PRA are told to contact the PRA.
The survey is here.
HM Treasury’s December 2017 announcement is here.
Initial details on how the FCA intends to use this scheme are here.
The FCA’s webpage on its role in leaving the EU is here.
7.2 How insurance communications should deal with Brexit – FCA publishes correspondence with
the ABI – 14 March 2018 – The FCA has published correspondence between Huw Evans, Director
General of the Association of British Insurers (ABI), and Andrew Bailey, Chief Executive of the FCA,
regarding how insurance communications should deal with Brexit, in the light of firms’ duty to
treat customers fairly, and other regulatory requirements. The correspondence covers: a)
authorisation of EEA insurance branches passporting in; b) new insurance contracts and renewals
(including travel insurance); and c) UK firms passporting out.
The correspondence is here.
HM Treasury’s December 2017 announcement on temporary permissions is here.
The PRA’s and the FCA’s December 2017 statements on firms’ preparations for Brexit are here and
here.
8. Oliver Wyman
8.1 The ‘red tape’ cost of Brexit – paper published by Oliver Wyman – 12 March 2018 - Management
consulting firm Oliver Wyman has published a paper seeking to estimate the ‘red tape’ costs
across every sector of the economy were the EU27 and UK revert to a World Trade Organization
trading relationship. The report concentrates on the direct impact of new tariff and non-tariff
barriers.
Financial Regulation / 15 March 2018 / Issue 953 8
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
The paper is here.
The holding page is here.
9. European Parliament
9.1 Framework of future EU-UK relations - European Parliament adopts resolution – 14 March 2018
– The European Parliament has adopted a resolution (2018/2573(RSP)) that recommends an
association agreement for future EU-UK relations after Brexit. The resolution states that the
future relationship should be based on: a) trade and economic relations; b) foreign policy, security
cooperation and development cooperation; c) internal security; and d) thematic cooperation. The
European Parliament considers that the current UK position is only compatible with a trade
agreement pursuant to Article 207 TFEU, which could form the trade and economic pillar of an
association agreement. Financial services are mentioned at paragraphs 17 and 64.
Among other things, the resolution welcomes the Commission’s 28 February draft of the
withdrawal agreement and expresses support for the transitional arrangements proposed.
The European Parliament states that any withdrawal agreement and future association or
international agreement with the UK will need to win the approval of the European Parliament.
The provisional version of the resolution is here.
The press release is here.
The European Commission’s draft Withdrawal Agreement is here.
See also the General section above for an item on a speech by outgoing FCA Chairman, John Griffith-
Jones, on the accomplishments of the FCA, which identifies Brexit as one of the four main future
challenges.
See further the Financial Crime section below for an item on the Prime Minister announcing a Magnitsky
amendment to the Sanctions and Anti-Money Laundering Bill.
Banking and Finance 10. Basel Committee on Banking Supervision
10.1 Basel III implementation – Basel Committee publishes follow up reports – 12 March 2018 - The
Basel Committee on Banking Supervision has published reports of follow-up actions taken or
planned by 19 member jurisdictions (including the EU) to address deviations from the Basel
standards identified through assessments under the Regulatory Consistency Assessment Programme
(RCAP). The Basel Committee has also published an updated version of its RCAP Handbook for
jurisdictional assessments.
The reports on follow-up actions can be found here.
A summary of the post-assessment follow-up actions is here.
The updated Handbook is here.
The webpage is here.
Financial Regulation / 15 March 2018 / Issue 953 9
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Asset Management Insurance Financial Crime Enforcement
The RCAP questionnaires can be found here.
The press release is here.
11. Committee on Payments and Markets Infrastructures and the Markets Committee
11.1 Central bank digital currencies – CPMI and the Markets Committee publish report – March 2018 -
The Committee on Payments and Market Infrastructures (CPMI) and the Markets Committee have
published a joint report, ahead of the forthcoming meeting of G20 central bank governors and
finance ministers, on the implications for financial stability and monetary policy of central banks
issuing digital currencies available to the general public. It suggests that the underlying
technologies might hold more promise for wholesale payments, clearing and settlement.
The report is here.
The holding page is here.
The press release is here.
12. Official Journal of the European Union
12.1 BRRD – two Delegated Regulations setting out RTS on valuation published in the Official
Journal – 9 March 2018 – The following Commission Delegated Regulations, supplementing the
Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), have been published in the Official
Journal of the EU:
Commission Delegated Regulation (EU) 2018/344 of 14 November 2017 with regard to
regulatory technical standards (RTS) specifying the criteria relating to the methodologies for
valuation of difference in treatment in resolution; and
Commission Delegated Regulation (EU) 2018/345 of 14 November 2017 with regard to RTS
specifying the criteria relating to the methodology for assessing the value of assets and
liabilities of institutions or entities.
Both Delegated Regulations come into force on 29 March 2018.
Commission Delegated Regulation 2018/344 is here.
Commission Delegated Regulation 2018/345 is here.
12.2 PSD2 – Delegated Regulation on customer authentication and standards of communication
published in the Official Journal – 13 March 2018 – Commission Delegated Regulation (EU)
2018/389 of 27 November 2017, supplementing the revised Payment Services Directive (EU)
2015/2366 (PSD2), regarding regulatory technical standards (RTS) for strong customer
authentication and common and secure open standards of communication has been published in
the Official Journal.
The Delegated Regulation enters into force on 14 March 2018, and applies from 14 September
2019, save for paragraphs 3 and 5 of Article 30, which apply from 14 March 2019.
The Delegated Regulation is here.
Financial Regulation / 15 March 2018 / Issue 953 10
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
13. Council of the European Union
13.1 CRD V, CRR II, BRRD II and SRM II – Council publishes note on outstanding issues and Presidency
compromise texts – 15 March 2018 – The Council of the EU has published a note (dated 9 March
2018) from the Presidency to the Council suggesting an approach to address outstanding issues on
the ‘Banking Package’ of 23 November 2016. On 15 March 2018, the Council of the EU published
Presidency compromise texts (dated 6 March 2018). The ‘Banking Package’ comprises the
following legislative proposals:
BRRD II: the proposal for a Directive (2016/0362 (COD)) amending the Bank Recovery and
Resolution Directive (2014/59/EU) (BRRD) on loss-absorbing and recapitalisation capacity of
credit institutions and investment firms;
CRD V: the proposed Directive (2016/0364 (COD)) amending the Capital Requirements Directive
(2013/36/EU) (CRD IV) regarding exempted entities, financial holding companies, mixed
financial holding companies, remuneration, supervisory measures, and powers and capital
conservation measures; and
CRR II: the proposal for a Regulation (2016/0360 (COD)) amending the Capital Requirements
Regulation (575/2013/EU) (CRR) with regard to the leverage ratio, the net stable funding ratio,
requirements for own funds and eligible liabilities, counterparty credit risk, market risk,
exposures to central counterparties, exposures to collective investment undertakings, large
exposures and reporting and disclosure requirements, as well as amending EMIR (648/2012/EU);
and
SRM II: the proposal for a Regulation (2016/0361 (COD)) amending the Single Resolution
Mechanism Regulation (806/2014/EU) as regards loss-absorbing and recapitalisation capacity
for credit institutions and investment firms.
As reported in the Brexit section above, the House of Commons European Scrutiny Committee has
retained the CRD V, CRR II and BRRD II proposals for scrutiny.
The note is here.
The compromise text for BRD II is here.
The procedure file for BRRD II is here.
The compromise text for CRD V is here.
The procedure file for CRD V is here.
The compromise text for CRR II is here.
The procedure file for CRR II is here.
The compromise text for SRM II is here.
The procedure file for SRM II is here.
Financial Regulation / 15 March 2018 / Issue 953 11
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
14. European Commission
14.1 Non-performing loans – European Commission publishes a package of measures – 14 March 2018
– The European Commission has published a package of measures to address the risks relating to
high levels of non-performing loans (NPLs) in Europe, together with its second progress report
(COM(2018) 133). The package of measures now introduced includes:
a proposal for a Regulation amending the Capital Requirements Regulation (575/2013/EU)
(CRR) regarding minimum loss coverage for nonperforming exposures (COM(2018) 134) − the
Commission is accepting feedback on this proposal until 10 May 2018;
a proposal for a Directive on credit servicers, credit purchasers and the recovery of
collateral (COM(2018) 135) – the Commission is accepting feedback on this proposal until 9 May
2018; and
a blueprint on the set up of national asset management companies (SWD(2018) 72).
European Commission Vice-President, Valdis Dombrovskis, explained that the package is hoped to
speed up the ongoing reduction of NPLs in Europe’s banks and prevent them from building up
again in the future.
See also an item below reporting on the European Banking Authority publishing advice for the
European Commission on the use of prudential backstops concerning NPLs.
See further an item below reporting on an ECB addendum to its guidance to banks on NPLs.
The proposed Regulation is here.
The webpage for the Regulation, which includes an impact assessment, a summary of the impact
assessment and an opinion on the impact assessment, is here.
The proposed Directive is here.
The webpage for the Directive, which includes an impact assessment, a summary of the impact
assessment and an opinion on the impact assessment, is here.
The blueprint on how to set up national asset management companies is here.
FAQs on the measures are here.
A factsheet on the proposals is here.
The Commission’s second progress report on the reduction of NPLs is here.
The Council’s conclusions on the action plan to tackle NPLs in Europe are here.
Mr Dombrovskis’ speech is here.
The Commission’s holding page is here.
The Commission’s press release is here.
Financial Regulation / 15 March 2018 / Issue 953 12
Quick Links
Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
14.2 CRR – Commission adopts Delegated Regulation on assessment methodologies for the use of
advanced measurement approaches for operational risk – 14 March 2018 – The European
Commission has adopted a Delegated Regulation (C(2018) 1446), supplementing the Capital
Requirements Regulation (575/2013/EU) (CRR), regarding the specification of the assessment
methodology under which competent authorities permit institutions to use Advanced Measurement
Approaches for operational risk.
Unless objected to by the Council of the EU and the European Parliament, the Delegated
Regulation will enter into force 20 days after its publication in the Official Journal of the EU.
The Delegated Regulation is here.
15. European Banking Authority
15.1 Draft Guidelines on managing non-performing exposures – EBA launches consultation – 8 March
2018 - The European Banking Authority (EBA) has published a Consultation Paper containing draft
Guidelines for credit institutions on how to effectively manage non-performing exposures (NPEs)
and forborne exposures (FBEs). The aim is to reduce NPEs on banks’ balance sheets, and ensure
that consumers, who have taken out loans, are treated fairly at every stage of the loan life cycle.
The Guidelines cover: a) NPE strategy; b) NPE governance and operations; c) forbearance; d) NPE
recognition; e) NPE impairment measurement and write-offs; f) collateral valuation for immovable
and movable property; and g) supervisory evaluation of management of NPEs and FBEs.
A public hearing is to be held on 25 April 2018.
The consultation closes by 8 June 2018.
The intention is that the final Guidelines should be implemented by 1 January 2019.
Please see an item above which reports on the European Commission publishing a package of
measures non-performing loans.
Please see further an item below which reports on an ECB addendum to its guidance to banks on
NPLs.
The Consultation Paper is here.
The consultation webpage is here.
15.2 Non-performing loans – EBA publishes advice to the European Commission on the use of
prudential backstops – 14 March 2018 – The EBA has published its advice for the European
Commission on proposals to introduce statutory prudential backstops on banks' provisioning
practices for new loans that turn non-performing.
An item above reports on the European Commission publishing a package of measures non-
performing loans. An item below reports on an ECB addendum to its guidance to banks on NPLs.
The EBA’s advice is here.
The Commission’s call for advice is here.
The Commission’s consultation document is here and the holding page is here.
Financial Regulation / 15 March 2018 / Issue 953 13
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Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
The EBA’s press release is here.
15.3 FinTech roadmap – published by the EBA – 15 March 2018 – The European Banking Authority (EBA)
has published its FinTech roadmap, describing its priorities for 2018/2019, an indicative timeline
for the completion of these tasks, describing the establishment of a FinTech Knowledge Hub, and
containing a summary of feedback on its August 2017 discussion paper. The roadmap follows the
new mandates for the EBA set out in the European Commission's FinTech Action Plan (March 2018).
The EBA’s priorities include: a) monitoring the regulatory perimeter; b) monitoring emerging
trends and analysing the impact of FinTech; c) promoting best supervisory practices on
cybersecurity; d) addressing consumer issues arising from Fintech; and e) identifying and assessing
the money laundering and terrorist financing risks associated with FinTech.
The FinTech roadmap is here.
Q&As on the roadmap are here.
The holding page is here.
Mr Enria’s speech is here.
The European Commission’s FinTech Action Plan is here.
The EBA’s August 2017 discussion paper is here.
15.4 Supervisory reporting – EBA publishes revised list of ITS validation rules – 9 March 2018 - The
EBA has published a revised list of validation rules in its implementing technical standards (ITS) on
supervisory reporting.
The revised list can be found here.
16. European Systemic Risk Board
16.1 Funding of credit institutions – ESRB publishes summary compliance report – 15 March 2018 –
The European Systemic Risk Board (ESRB) has published a report assessing the implementation of
the ESRB Recommendation on the funding of credit institutions (ESRB/2012/2).
The summary compliance report is here.
Recommendation ESRB/2012/2 is here.
17. European Central Bank
17.1 Guidance to banks on non-performing loans – addendum published by ECB – 15 March 2018 -
The European Central Bank (ECB) has published an addendum to its guidance to banks on non-
performing loans (NPLs). The addendum sets out supervisory expectations for prudent levels of
provisions for new NPLs.
See also an item above reporting on the European Commission publishing a package of measures
on non-performing loans and an item above which reports on the European Banking Authority
publishing advice to the European Commission on the use of prudential backstops concerning NPLs.
The addendum is here.
Financial Regulation / 15 March 2018 / Issue 953 14
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Selected Headlines General Brexit Banking and Finance Securities and Markets
Asset Management Insurance Financial Crime Enforcement
FAQs are here.
A feedback statement is here and the responses to the consultation are here.
An introductory statement by Sharon Donnery is here.
The press release is here.
18. HM Treasury
18.1 Cash and digital payments in the new economy – HM Treasury publishes call for evidence – 13
March 2018 – HM Treasury has published a call for evidence on the role of cash and digital
payments in the new economy. The call for evidence concentrates on: a) supporting digital
payments; b) the future role of cash; and c) understanding the role of cash in facilitating tax
evasion and money laundering.
The call for evidence closes on 5 June 2018.
The call for evidence is here.
The holding page is here.
19. Financial Conduct Authority
19.1 Motor finance – FCA publishes update on its work – March 2018 – The FCA has published an
update on its review of the motor finance sector. The update sets out the FCA’s findings so far,
and the areas of concern that it will focus on for the remainder of the review, which is to be
completed in September 2018.
The update is here.
The press release is here.
20. Payment Systems Regulator
20.1 PSR CP18/1: Review of PSR Directions made in 2015 – Directions on access, governance and
participants’ relationships with the PSR (General Directions 1 to 6 and Specific Direction 1) –
March 2018 – The Payment Systems Regulator (PSR) has launched a consultation (CP18/1) as part
of its review of the six General Directions and one Specific Direction (Directions), adopted in 2015
under the Financial Services (Banking Reform) Act 2013, as its initial regulatory framework. The
PSR is reviewing these Directions so they remain relevant and proportionate, reflecting market
realities, changes to legislation and potential future developments.
The consultation closes on 8 June 2018.
PSR CP18/1 is here.
The consultation webpage is here.
The press release is here.
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20.2 Access and governance report on payment systems 2018 – published by PSR – March 2018 - The
Payment Systems Regulator (PSR) has published its third annual report on access to payment
systems and the governance of payment system operators in the UK.
The report is here.
A factsheet is here.
The report webpage is here.
The press release is here.
21. Banking Standards Board
21.1 Statement of Principles for strengthening professionalism – published by BSB – 12 March 2018 –
The Banking Standards Board (BSB) has published the ‘BSB Statement of Principles for
Strengthening Professionalism – the role of the firm’. The principles define professionalism in
banking as referring to the “attitudes, judgement and high standards of behaviour, knowledge and
skill expected of individuals working in banking”. The principles cover: 1) customers, clients and
wider society; 2) coverage; 3) regulatory context; 4) learning; 5) a culture of openness, honesty,
challenge and support; and 6) coherence, efficiency and effectiveness. They are designed to apply
all roles in all banks and building societies.
The principles are designed to challenge and support leaders of banks and building societies by
providing a reference point against which they can evaluate their own policies and practices, and
will also be used to help inform the BSB’s future work programme. They do not impose legal or
regulatory obligations on BSB members, nor do they replace regulation. In the event of
inconsistency, applicable laws, rules and regulations should prevail.
The Statement of Principles is here.
The press release is here.
21.2 Annual review 2017/18 – published by BSB – 15 March 2018 - The Banking Standards Board (BSB)
has published its annual review 2017/2018. The review includes the results and insights of its
second annual assessment of culture, behaviour and competence in UK banking.
The review is here.
The press release is here.
22. Recent cases
22.1 In the matter of Barclays Bank plc and Woolwich Plan Managers Limited, [2018] EWHC 472
(Ch), 9 March 2018
Ring-fencing transfer scheme sanctioned − legal principles which the court should consider −
section 111 FSMA 2000
The High Court has sanctioned the Barclays proposed ring-fencing transfer scheme under section
111 of the Financial Services and Markets Act 2000, and approved the ancillary orders sought. This
was the first of the five major banks’ applications to sanction such schemes. Sir Geoffrey Vos
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considered the legal principles which the court should apply in sanctioning such a scheme. He also
considered the answers to the twofold ‘statutory question’ which the skilled person is required to
answer under section 109A(4) of FSMA: namely (1) whether persons other than the transferor
concerned are likely to be adversely affected by the scheme; and (2) if so, whether the adverse
effect is likely to be greater than is reasonably necessary in order to achieve whichever of the
purposes mentioned in section 106B(3) of FSMA is relevant.
Slaughter and May acted for the applicants.
The judgment is here.
See also the General section above for an item on the publication of the ESAs’ final report on Big Data.
See further the General section above for an item on FCA Discussion Paper DP18/2: Transforming culture
in financial services.
See also the Securities and Markets section below for an item on the Capital Markets Union and the
European Commission publishing further legislative proposals on covered bonds, investment funds, and
assignment of claims.
See further the Securities and Markets section below for an item on the first meeting of the working
group on euro risk-free rates.
See further the Securities and Markets section below for an item on the ECB launching a second
consultation on the new euro unsecured overnight interest rate.
See further the Securities and Markets section below for an item on FCA Policy Statement PS18/5: Powers
in relation to LIBOR contributions.
See also the Financial Crime section below for an item on the Joint Money Laundering Steering Group
consulting on revisions to its AML guidance on asset finance and syndicated lending.
See further the Financial Crime section below for an item on the Court of Appeal dismissing the appeal of
Alex Pabon in a LIBOR manipulation case.
Securities and Markets 23. European Commission
23.1 Capital Markets Union – European Commission publishes further legislative proposals on
covered bonds, investment funds, and assignment of claims – 12 March 2018 – Last week we
reported in this Bulletin that the European Commission had published a Communication on
completing Capital Markets Union and adopted a FinTech Action Plan, Sustainable Finance Action
Plan, and a proposal for a Regulation on crowdfunding (with a proposal for a Directive amending
MiFID II). The European Commission has now published:
a framework for covered bonds − consisting of a Directive and a Regulation, with the aim of
enhancing the use of covered bonds as a stable and cost-effective source of funding for credit
institutions. The proposed Directive (COM(2018) 94) provides a common definition of covered
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bonds, defines the structural features of the instrument, defines the tasks and responsibilities
for the supervision of covered bonds, and sets out the rules allowing the use of the ‘European
Covered Bonds' label. The proposed Regulation (COM(2018) 93) amends the Capital
Requirements Regulation (575/2013/EU) (CRR) to complement the proposed Directive. The
proposal will now be discussed by the European Parliament and the Council. Once adopted, an
implementation period of 12 months is envisaged before the new regime starts to apply;
proposals which aim to reduce barriers to cross-border distribution of investment funds −
consisting of a Regulation and a Directive. The proposed Regulation (COM(2018) 110) would
amend the Regulation on European venture capital funds (EU) 345/2013 and the Regulation on
European social entrepreneurship funds (EU) 346/2013, with the aim of aligning national
marketing requirements and regulatory fees, and enabling the European Securities and Markets
Authority (ESMA) better to monitor investment funds. The proposed Directive (COM(2018) 92)
would amend the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) and
the Undertakings for Collective Investment in Transferable Securities Directive (2009/65/EC)
(UCITS IV), by harmonising the conditions under which investment funds may exit a national
market, and containing provisions on pre-marketing activities. The Commission invites
feedback on these proposals until 9 May 2018;
proposals on cross-border transactions in claims and securities − The Commission has
adopted (1) a proposal for a Regulation on the assignments of claims (COM(2018) 96): this
aims to clarify which national law applies when determining who owns a claim after it has been
assigned (for example, by factoring, collateralisation or securitisation) in a cross-border case.
It is accepting comments on this Regulation until 9 May 2018; and (2) a Communication on the
proprietary effects of transactions in securities (COM(2018) 89): which outlines the
Commission's views on the existing conflict of laws rules relating to securities transactions in
the Financial Collateral Directive (2002/47/EC), the Settlement Finality Directive (98/26/EC)
and the Winding-Up Directive (2001/24/EC).
European Commission Vice-President, Valdis Dombrovskis, has urged the European Parliament and
member states to adopt all 12 legislative proposals tabled to date by 2019.
Legislative proposals on covered bonds
The proposals can be found here.
Legislative proposals on the cross-border distribution of investment funds
The proposed Regulation on the cross-border distribution of investment funds can be found here,
along with an impact assessment and a summary of and an opinion on the impact assessment.
The proposed Directive on the cross-border distribution of investment funds can be found here.
The holding page is here.
Proposals on cross-border transactions of claims and securities
The proposed Regulation on the assignment of claims is here.
The holding page, which contains the impact assessment and a summary of the impact
assessment, is here.
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The Communication on the proprietary effects of transactions in securities can be found here.
General
FAQs on the proposals are here.
A factsheet on the Capital Markets Union, which includes a table on the progress of the 12
legislative proposals on CMU tabled to date, is here.
Mr Dombrovskis’ speech is here.
The press release is here.
24. European Central Bank
24.1 TARGET2 and TARGET2-Securities – ECB announces collective agreement between central
banks and CSDs to enter into force on 20 March 2018 – 9 March 2018 – The European Central
Bank (ECB) has announced that the collective agreement between central banks operating
TARGET2 component systems and the central securities depositories (CSDs) operating on the
TARGET2-Securities platform, concerning the provision of information and liability in the event of
a participant in their systems becoming insolvent, will enter into force on 20 March 2018.
The collective agreement is here.
The explanatory note is here.
24.2 Euro Cyber Resilience Board for pan-European financial infrastructures - speech by ECB
Executive Board member, Benoît Cœuré – 9 March 2018 - European Central Bank Executive Board
Member Benoît Cœuré has given a speech at the first meeting of the Euro Cyber Resilience Board
(ECRB) for pan-European Financial Infrastructures.
The speech is here.
24.3 First meeting of the working group on euro risk-free rates – ECB publishes minutes, and
concluding remarks by Steven Maijoor, Chair of ESMA – 13 March 2018 – The European Central
Bank (ECB) has published the minutes of the first meeting of its working group on euro risk-free
rates, together with the concluding remarks of the Chair of ESMA, Steven Maijoor.
The minutes are here.
Mr Maijoor’s concluding remarks are here.
24.4 New euro unsecured overnight interest rate – ECB launches second consultation – March 2018 –
The European Central Bank (ECB) has launched a second consultation on a new euro unsecured
overnight interest rate. The rate, which would be produced by 2020, would complement existing
benchmark rates produced by the private sector, and would serve as a backstop reference rate.
The ECB is seeking views on the methodology for the new rate, as well as key operational and
technical parameters.
The consultation closes on 20 April 2018.
The second consultation document is here.
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The first consultation document is here.
The webpage is here.
The press release is here.
25. Bank of England and HM Treasury
25.1 BoE/HMT Consultation Paper: Fees regime for financial market infrastructure supervision
2018/19 – 14 March 2018 – The Bank of England (BoE) and HM Treasury (HMT) have published a
second Consultation Paper (CP) on the proposal to introduce a new funding structure for the
supervision of financial market infrastructure.
The consultation closes on 9 May 2018.
BoE currently expects the regime to come into force in the third quarter of 2018.
The Consultation Paper is here.
The holding page is here.
26. Financial Conduct Authority
26.1 FCA Policy Statement PS18/5: Powers in relation to LIBOR contributions – March 2018 – The
Financial Conduct Authority (FCA) has published a Policy Statement (PS18/5) setting out the
approach, criteria and methodology it proposes to apply if it needs to use its powers, under the
Financial Services and Markets Act 2000 or the Benchmarks Regulation (EU) 2016/1011, to compel
banks to contribute to the London Interbank Offered Rate (LIBOR). It also includes the FCA’s
response to the feedback it received on CP17/15 (June 2017), and describes the results of data
gathering.
Following the publication of CP17/15, the FCA announced (in November 2017) that the 20 current
LIBOR panel banks had agreed to continue to submit to LIBOR until the end of 2021. The FCA’s
intention is that, at the end of this period, sufficient progress will have been made on the
transition to alternative benchmarks that it will not be necessary for the FCA to compel
submissions.
PS18/5 is here.
The holding page is here.
The FCA’s statement on LIBOR is here.
See also the General section above for an item on FCA Discussion Paper DP18/2: Transforming culture in
financial services.
See further the Financial Crime section below for an item on IOSCO publishing a report on senior investor
vulnerability and an item on the Court of Appeal dismissing the appeal of Alex Pabon in a LIBOR
manipulation case.
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See also the Enforcement section below for an item on R (on the application of TenetConnect Services
Limited) v Financial Ombudsman and another [2018] EWHC 459 (Admin), concerning the jurisdiction of the
FOS over regulated advice leading to the purchase of unregulated investments with the proceeds of sale.
Asset Management 27. Financial Conduct Authority
27.1 Closet tracker funds - FCA publishes information - 14 March 2018 - The Financial Conduct
Authority (FCA) has published information on its supervision of so-called closet tracker funds and
closet constrained funds.
The information is here.
See also the General section above for an item on FCA Discussion Paper DP18/2: Transforming culture in
financial services.
See the Brexit section above for an item on the FCA launching a survey of EEA inbound passported firms
and funds in connection with the proposed temporary permission scheme post-Brexit.
See also the Securities and Markets section above for an item on Capital Markets Union and the European
Commission publishing further legislative proposals on (among other things) cross-border distribution of
investment funds.
See further the Financial Crime section below for an item on IOSCO publishing a report on senior investor
vulnerability.
See also the Enforcement section below for an item on an individual pleading guilty to perverting the
course of justice in respect of a confiscation order, and being banned by the FCA for operating an
unauthorised CIS, even though he was never an approved person.
Insurance 28. Council of the European Union
28.1 IDD delay – amending Directive and Delegated Regulation awaiting publication in the Official
Journal – 14 March 2018 – The Directive postponing the transposition date of the Insurance
Distribution Directive (EU) 2016/97 (IDD) until 1 July 2018, and its application date to 1 October
2018, has been approved by the Council and the European Parliament and signed. It is now
awaiting publication in the Official Journal.
In addition, the Council and the European Parliament have decided not to object to the
Commission Delegated Regulation of 20 December 2017 amending Delegated Regulation (EU)
2017/2358 and Delegated Regulation (EU) 2017/2359 as regards their dates of application.
The amending Directive is here.
The procedure file is here.
The Council’s press release is here.
The provisional version of the amending Regulation is here.
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The procedure file is here.
29. European Insurance and Occupational Pensions Authority
29.1 Supervisory reporting requirements – EIOPA publishes response to the European Commission’s
consultation on its fitness check – 5 March 2018 – The European Insurance and Occupational
Pensions Authority (EIOPA) has published its response to the European Commission’s consultation
on a fitness check on supervisory reporting, which closed on 14 March 2018.
The EIOPA response is here.
The consultation webpage is here.
See the General section above for an item on FCA Discussion Paper DP18/2: Transforming culture in
financial services, and an item on the publication of the ESAs’ final report on Big Data.
See further the Brexit section above for an item on the FCA publishing correspondence with the ABI on
how insurance communications should deal with Brexit.
See also the Financial Crime section below for an item on IOSCO publishing a report on senior investor
vulnerability.
Financial Crime 30. International Organization of Securities Commissions
30.1 Senior investor vulnerability – IOSCO publishes report – 12 March 2018 – The International
Organization of Securities Commissions (IOSCO) has published a report on the vulnerability of
ageing investors to financial fraud and other risks. The report provides a list of sound practices for
both regulators and financial services providers, and provides details of relevant literature.
IOSCO recommends that regulators: a) deliver educational programs and resources targeting senior
investors; b) foster the development of senior-focused expertise within existing regulatory,
educational or advisory programs; c) conduct research projects better to understand the risks and
issues facing senior investors and the incidence and mechanics of senior investor fraud; and d)
develop guidelines and training programs for employees reviewing transactions conducted with
senior investors. IOSCO also recommends that financial services providers: i) offer support to
senior investors experiencing a life event during the product lifecycle; and ii) provide training and
support for employees of financial services firms.
The report is here.
The press release is here.
31. Council of the European Union
31.1 Transparency rules for tax intermediaries – political agreement reached – 13 March 2018 –
Political agreement has been reached on a proposed Directive on taxation: mandatory automatic
exchange of information in relation to reportable cross-border arrangements. It will impose new
transparency rules for intermediaries − such as tax advisers, accountants, banks and lawyers − who
design and promote tax planning schemes for their clients.
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The new Directive must be transposed by 31 December 2019. The new reporting requirements will
enter into force on 1 July 2020, with EU Member States obliged to exchange information every
three months after that. The first exchange is to take place by 31 October 2020.
The procedure file is here.
Q&As are here.
The European Commission webpage is here.
The Council’s press release is here.
The Commission’s press release is here.
32. UK government
32.1 Sanctions and Anti-Money Laundering Bill – Prime Minister May announces Magnitsky
amendment – 14 March 2018 – Prime Minister Theresa May has announced that the government
will table a ‘Magnitsky’ amendment to the Sanctions and Anti-Money Laundering Bill to strengthen
the UK’s powers to impose sanctions in response to the violation of human rights. The Bill has
completed Committee stage, and will next be considered at third reading and report stage, on a
date to be announced. The announcement was made in a House of Commons statement on the
response of the Russian Government to the recent incident in Salisbury.
Hansard for Theresa May’s statement is here.
The Parliamentary file on the Bill is here.
33. HM Treasury and the Office of Financial Sanctions Implementation
33.1 Financial sanctions guidance – updated by HM Treasury and OFSI – 5 March 2018 - HM Treasury
and the Office of Financial Sanctions Implementation (OFSI) have updated their general guidance
on financial sanctions in respect of FAQs 3.4.1 and 3.4.2 (which concern legal advice to a
designated person).
The updated guidance (dated March 2018) is here.
The holding page is here.
34. Joint Money Laundering Steering Group
34.1 AML and CTF – JMLSG consults on revisions to guidance on asset finance and syndicated
lending – 9 March 2018 - The Joint Money Laundering Steering Group (JMLSG) is consulting on
proposed revisions to sector 12: Asset finance, and sector 17: Syndicated lending, of Part II of its
Guidance on the prevention of money laundering and the financing of terrorism for the UK
financial services industry. The JMLSG states that the amendments do not change the substance of
the guidance provisions, but seek to describe in more current terms the way the sectors work, how
to assess the risks in the sector, and how to identify who the customers are.
The consultation closes on 30 March 2018.
The proposed revised text can be found here.
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35. Recent cases
35.1 R v Alex Julian Pabon, [2018] EWCA Crim 420, 13 March 2018
LIBOR manipulation − conspiracy to defraud − duty of an expert witness to stay within his area of
expertise − appeal against conviction dismissed
The Court of Appeal (Criminal Division) (Lord Justice Gross, Mr Justice Sweeney and Mr Justice
Haddon-Cave) has dismissed Alex Pabon’s appeal against his conviction on a single count of
conspiracy to defraud, in connection with US Dollar LIBOR submissions between June 2005 and
September 2007. The sole focus of the appeal was the conduct of an expert witness, Saul Rowe,
who was called by the Serious Fraud Office at Mr Pabon’s trial. The Court found that although the
expert witness had signally failed to comply with his basic duties as an expert, the conviction was
not unsafe. The Court of Appeal’s conclusion, which was fact sensitive and considered the context
of the trial as a whole, was that the expert witness’ evidence did not impact at all, or sufficiently,
on the key issue in the trial.
In the postscript to the judgment, the Court referred to a letter from the SFO’s General Counsel
(dated 27 November 2017) stating that there had been extensive internal discussions resulting in
the conclusion “…that Rowe’s conduct resulted from a failure of integrity on his part rather than
a failure of SFO policies or procedures”. The Court indicated that the case “stands as a stark
reminder of the need for those instructing expert witnesses to satisfy themselves as to the
witness’ expertise and to engage (difficult though it sometimes may be) an expert of a suitable
calibre.”
The judgment is here.
See also the General section above for an item on FCA Discussion Paper DP18/2: Transforming culture in
financial services.
See also the Banking and Finance section above for an item on the publication of the EBA’s FinTech
roadmap, which includes AML and cybersecurity priorities.
See further the Banking and Finance section above for an item on HM Treasury publishing a call for
evidence on cash and digital payments in the new economy, which includes a section (chapter 4) on
understanding the role of cash in facilitating tax evasion and money laundering.
See also the Securities and Markets section above for an item on a speech by ECB Executive Board
member, Benoît Cœuré, at a meeting of the Euro Cyber Resilience Board for pan-European financial
infrastructures.
See also the Enforcement section below for an item on an individual pleading guilty to perverting the
course of justice in respect of a confiscation order, and being banned by the FCA for operating an
unauthorised CIS, even though he was never an approved person.
See further the Enforcement section below for an item on R (on the application of TenetConnect Services
Limited) v Financial Ombudsman and another [2018] EWHC 459 (Admin), concerning advice given by a
convicted fraudster.
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Enforcement 36. Financial Conduct Authority
36.1 Perverting the course of justice in respect of confiscation order – individual pleads guilty, and
is banned by the FCA for operating an unauthorised CIS, even though he was never an
approved person – 7 March 2018 – The Financial Conduct Authority has announced that Alex Hope
has pleaded guilty to a charge of perverting the course of justice. The charge relates to his
conduct following the imposition of a restraint order in 2012, and a confiscation order in 2016
arising from criminal proceedings brought by the FCA.
On 30 January 2015, Mr Hope was sentenced to seven years’ imprisonment for fraud (by making
representations to investors and prospective investors in a collective investment scheme which
were and which he knew were or might be untrue or misleading) and operating a collective
investment scheme without authorisation. On 27 September 2016, he was sentenced to an
additional 603 days’ imprisonment for failing to pay in full a £166,696 confiscation order under the
Proceeds of Crime Act 2002.
On 30 November 2017, Mr Hope was charged with perverting the course of justice. The FCA
published a Final Notice dated 9 January 2018 containing a total prohibition order against Mr
Hope, even though Mr Hope has never been an approved person. The FCA considers that Mr Hope
is not a fit and proper person to perform any regulated activity. Mr Hope has been remanded in
custody until 15 March 2018, when it is anticipated that a date for sentencing will be set.
The FCA’s press release is here.
The final notice is here.
37. Recent cases
37.1 R (on the application of TenetConnect Services Limited) v Financial Ombudsman and another,
[2018] EWHC 459 (Admin), 13 March 2018
Judicial review − jurisdiction of the Financial Ombudsman Service − regulated advice leading to
purchase of unregulated investments with the proceeds of sale − fraud − DISP 2.3.1R − section 39
FSMA 2000
The High Court has dismissed an application for judicial review against a decision of the Financial
Ombudsman Service (FOS). The application was made by the investment firm (TenetConnect
Services Limited) responsible for the advice of an appointed representative (Mr Dhanda), who
advised Mr & Mrs Thorpe to dispose of specified investments (regulated activity), and invest the
money realised in the purchase of property in Goa, and two loans to his business (both
unregulated investments). The Judge noted that Mr Dhanda is a convicted fraudster, serving a
sentence of imprisonment for defrauding 37 people of some £2.9million in a Ponzi-type fraud. He
misappropriated the money destined for Goa. The FOS decided that it would be fair and
reasonable for TenetConnect Services Limited to compensate Mr & Mrs Thormpe for the loss
caused to them by the fraudulent activities of Mr Dhanda in relation to the regulated activity.
TenetConnect Services Limited claimed that the advice fell outside the scope of the FOS’s
jurisdiction.
Mr Justice Ouseley decided:
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(1) The FOS was entitled to decide on the nature of the complaint by taking into account
more than just the complaint form;
(2) The complaint fell within the compulsory jurisdiction of the FOS, relating to an act or
omission by a firm carrying on regulated activities or ancillary activities, including
advice, in connection with them: DISP 2.3.1R − on the facts, the two aspects of the
advice were entwined, and a ‘bright line’ could not be drawn between them − the
whole advice was regulated activity (the advice to buy the unregulated investments
was not merely ancillary); and
(3) Similarly, under section 39(3) of the Financial Services and Markets Act 2000,
TenetConnect Services Limited, as principal of Mr Dhanda, was responsible for the
advice given by him in relation to the ‘unregulated’ investments, because the
activities were so closely linked that they amounted to ‘regulated activities’. The fact
that Mr Dhanda's acts were fraudulent did not take them outside the scope of section
39(3) of the Financial Services and Markets Act 2000.
In a separate development, the Chair of Treasury Committee has written to the FOS asking
questions about findings of a recent ‘Dispatches’ programme, as reported in the General section
above.
The judgment is here.
See also the General section above for an item on the FSB publishing supplementary guidance on sound
compensation practices to address misconduct risk.
See further the General section above for an item on FCA Discussion Paper DP18/2: Transforming culture
in financial services.
See also the Banking and Finance section above for an item on the BSB Statement of Principles for
strengthening professionalism.
See also the Securities and Markets section above for an item on Capital Markets Union, and the
European Commission publishing further legislative proposals on (among other things) assignment of
claims, and a Communication on the proprietary effects of transactions in securities.
See also the Financial Crime section above for an item on the Court of Appeal dismissing the appeal of
Alex Pabon in a LIBOR manipulation case, including the need to appoint an expert of a suitable calibre.
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Document No
This Bulletin is prepared by the Financial Regulation Group of Slaughter and May in London.
The Group comprises a team of lawyers with expertise and experience across all sectors in which
financial institutions operate.
We advise on regulatory issues affecting firms across the financial services sector, including
banks, investment firms, insurers and reinsurers, brokers, asset managers and funds, non-bank
lenders, payment service providers, e-money issuers, exchanges and clearing systems. We also
advise non-regulated businesses involved in financial regulatory matters. In addition, our leading
financial regulatory investigations practice is regularly instructed by financial institutions
requiring specialist knowledge of financial services regulation together with experience in high
profile and complex investigations and contentious regulatory matters.
Most of the projects that we advise on have an extensive international or cross-border element.
We work in seamless integrated teams with leading independent law firms which offer many of
the most highly regarded financial institutions lawyers in Europe, the US and Asia, as well as
strong and constructive relationships with local regulators.
Our Financial Regulation Group also produces occasional briefing papers and other client
publications. The five most recent issues of this Bulletin and our most recent briefing papers
and client publications appear on the Slaughter and May website here.
The Group’s recent work includes advising:
A number of global banks, insurance and asset management groups on their preparation for
Brexit;
A number of banking groups in relation to banking structural reform, including the
ring-fencing regime;
Standard Life plc on the recommended all-share merger with Aberdeen Asset Management;
RSA Insurance Group on its disposal of £834 million of UK Legacy liabilities to the Enstar Group;
UK Asset Resolution and Bradford & Bingley plc in relation to the disposal of legacy buy-to-let
mortgage assets to Prudential plc and funds managed by Blackstone for a total consideration of
£11.8bn;
Major financial institutions and non-financial corporates on the impact of the MiFID II regime
and related measures;
On the legal implications of developments across a broad Fintech waterfront for clients such as
Euroclear, Bupa, and Stripe, as well as other established businesses through to challengers and
start-ups; and
A number of multi-national clients in relation to the UK, EU, and US economic and trade
sanctions regimes.
If you would like to find out more about our Financial Regulation Group or require advice on a
financial regulation matter, please contact one of the following or your usual Slaughter and May
contact:
Jan Putnis [email protected]
Ben Kingsley [email protected]
Nick Bonsall [email protected]
© Slaughter and May 2017
This material is for general information only and is not intended to provide legal advice.
For further information, please speak to your usual Slaughter and May contact.
