Key Regulatory Topics: 7 - 13 December 2018

Allen & Overy LLP

Allen & Overy LLP


Please see the Consumer/Retail and Markets and Markets Infrastructure section for updates on various draft SIs published this week in anticipation of a hard Brexit and Trade associations' letter on temporary equivalence and recognition of UK CCPs.
FCA updates webpage on preparing your firm for Brexit
On 13 December, the FCA advised that it has updated its webpage on preparing your firm for Brexit to follow up on certain key areas: (i) contract continuity: the FCA reminds firms doing business in the EEA under a passport that they need to consider how they will continue to service customers with existing contracts after Brexit; (ii) execution of firms' contingency plans: the FCA reminds firms they should consider their clients' best interests when executing their plans; (iii) data sharing: the FCA reminds firms of the importance of considering whether they transfer personal data between the UK and EEA. The FCA expects firms to consider what contingency plans may be necessary; and (iv) customer communications: the FCA reminds firms of the importance of considering what communications to customers will be necessary to explain how Brexit might affect them.
Draft Financial Services (Distance Marketing) (Amendment and Savings Provision) (EU Exit) Regulations 2019 published
On 12 December 2018, HMT published a draft version of the Financial Services (Distance Marketing) (Amendment and Savings Provision) (EU Exit) Regulations 2019. The Regulations will make amendments to the Financial Services (Distance Marketing) Regulations 2004 to ensure that they continue to operate effectively in the UK once the UK has left the EU. Among other things, provisions in the draft Regulations will delete references to EU and EEA bodies, territories and instruments where necessary. They will also replace references to the European consumer credit information form with references to the pre-contract credit information (overdrafts) form. HMT will lay the Regulations before Parliament before exit day. The Regulations will come into force on exit day, aside from Part 1 (Introduction) and Part 2 (Amendment of the 2004 Regulations), which will come into force on the day after the day on which the Regulations are made.
Treasury Committee report on Government and BoE withdrawal agreement analyses: financial services aspects
On 11 December, the House of Commons Treasury Committee published a report on the analyses carried out by the UK Government and the BoE on the Brexit withdrawal agreement. In the report, the committee considers work carried out by HMT, the BoE and the FCA to analyse the economic effects of the withdrawal agreement and political declaration for the future EU-UK relationship, as well as the consequences of leaving the EU without a withdrawal agreement. In chapter 6 of the report, the committee summarises the evidence that it received on the impact of Brexit on the financial services sector from the FCA chief executive and the PRA CEO. In particular, the report covers: (i) the potential economic impact on the financial services sectors in a number of Brexit scenarios; (ii) equivalence mechanisms, including the problems with the current EU equivalence regimes and the potential for improvement – the committee notes the Chancellor of the Exchequer's call for a set of operational rules to ensure that equivalence decisions are not applied in an arbitrary way and that a certain period of notice must be given if an equivalence decision is to be withdrawn; (iii) the UK's potential status as a rule-taker – the committee notes that the FCA chief executive and the PRA CEO were relatively relaxed at the prospect of the UK being a rule-taker in the short term during a transition period, but that the FCA chief executive had concerns at the long-term implications of the UK as a rule-taker; and (iv) preparations for a no-deal Brexit. The committee notes comments made by the BoE Deputy Governor for Financial Stability, on measures taken to address the potential impact on cross-border financial services contracts, particularly insurance and derivatives contracts. The committee makes no specific recommendations or conclusions relating to financial services, although in a press release it highlights the BoE's confidence that the sector can withstand a no-deal scenario.
Draft Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2018
On 10 December, the draft Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2018 (Regulations) were published, together with an explanatory memorandum. The Regulations address deficiencies in retained EU law (including Rome I and Rome II) so that the rules will continue to operate effectively in domestic law when the UK leaves the EU. The majority of the corrections made in relation to Rome I and Rome II concern matters such as deleting certain provisions which will no longer be relevant (for example, provisions requiring member states to notify the EC of certain matters), and replacing references to "member state" with "relevant state". The Regulations also make amendments to the Contracts (Applicable Law) Act 1990, which incorporated the 1980 Rome Convention on the law applicable to contractual obligations (Rome Convention) into domestic law. These amendments are necessary to ensure that the Rome Convention's substantive rules will continue to apply after Brexit to existing contracts entered into between 1 April 1991 (the date the Rome Convention entered force) and 16 December 2009 (after which Rome I replaced the Rome Convention in the relevant member states).


FCA and PRA consult on changes to mortgage reporting requirements
On 13 December, the FCA and the PRA jointly published a consultation paper on changes to mortgage reporting requirements. The FCA and PRA have identified a number of areas where they believe further data is needed from mortgage lenders and administrators. In the consultation paper, the FCA and PRA propose to amend home finance reporting requirements to address the gaps and problems it has identified so that: (i) mortgage administrators submit PSD performance reports on mortgages owned by entities that are not authorised home finance lenders; (ii) mortgage lenders submit additional PSD sales reports; (iii) second charge administrators submit an additional form in the MLAR on the number and value of loans they administer; and (iv) home finance administrators have more clarity regarding their requirements to submit data in the MLAR on mortgages sold on. The proposed rules are set out in the draft Mortgages (Regulatory Reporting) Instrument 2019 and the draft PRA Rulebook: CRR Firms: Regulatory Reporting Amendment Instrument 2018, which are in the appendices to the consultation paper. The proposed PRA amendments to its notes for completion of the MLAR are in appendix 3. Comments can be made on the consultation paper until 22 March 2019. The regulators plan to publish a policy statement and final rules in summer 2019. They intend to offer firms a one-year implementation period following its publication.
FCA consults on changes to permitted links rules to facilitate investment in patient capital
On 12 December, the FCA published a consultation paper on changes to the permitted links rules in its COBS. The FCA wants to address any unjustified barriers these rules may present to retail investors' investment in a broader range of long-term assets in unit-linked funds, while continuing to offer an appropriate degree of investor protection. The FCA proposes changes to the COBS 21.3 permitted links rules and related rules in four areas: (i) existing permitted links requirements to clarify its expectations where the interpretation of its rules is perceived as a barrier to patient capital investment; (ii) for insurers able to meet conditions providing greater investor protection, additional conditional permitted links categories that supplement the existing range of permitted links; (iii) a new limit requiring that overall investments in illiquid assets in a linked fund should comprise no more than 50% of total assets for firms meeting the new conditions. For firms that do not meet the investor protection conditions, the current limits will not change; and (iv) risk warnings to help consumers understand the investment and liquidity risks involved. The FCA also published a discussion paper which explores the impact of the regulatory regime on investment in patient capital assets through UK authorised funds and specialised funds. The FCA is seeking stakeholders' views on whether the existing regime provides investors and fund managers with appropriate access to patient capital investments while maintaining the right level of consumer protection. It asks whether the current limits on investments in patient capital for some types of fund are appropriate, and, for example, whether it should amend the rules to make it easier to make direct investments in infrastructure projects. It also asks whether there is demand for a new type of authorised retail fund that can invest all its capital directly into patient capital assets. The deadline for responses is 28 February 2019, following which the FCA will publish a policy statement, a feedback statement and next steps.
Draft Mortgage Credit (Amendment) (EU Exit) Regulations 2019 published by HMT
On 12 December, HMT published a draft version of the Mortgage Credit (Amendment) (EU Exit) Regulations 2019. The Regulations address deficiencies in the Mortgage Credit Directive Order 2015, which transposed the MCD in the UK, that arise as a result of the UK leaving the EU. Among other things, the Regulations: (i) amend the territorial scope of regulated CBTL mortgages – the FCA's supervisory responsibility for this lending, when entered into post-Brexit, will be confined to loans relating to UK property; (ii) amend the rules for CBTL foreign currency mortgages – the Regulations introduce amendments that mean lenders will be able to allow borrowers to convert a foreign currency loan into pounds sterling instead of an EEA currency. However, the Regulations maintain the option of the lender allowing the borrower to convert loans into the currency in which they primarily receive income or hold assets. This approach ensures that EU currencies are treated equally to other third countries; (iii) revoke Commission Delegated Regulation 2014/1125 with regard to regulatory technical standards on the minimum monetary amount of the professional indemnity insurance or comparable guarantee to be held by credit intermediaries; and (iv) amend the formula for calculating the annual percentage rate of charge for CBTL mortgages. HMT will be given the power to make regulations modifying the remarks and assumptions that accompany the formula (a standardised calculation of cost of credit) where they are out-of-date or do not create a uniform result. HMT will lay the Regulations before Parliament before exit day. The Regulations will come into force on exit day.
FCA consults on product intervention measures for retail binary options
On 7 December, the FCA published a consultation paper on product intervention measures for retail binary options. The FCA is proposing to prohibit the sale, marketing and distribution of binary options in, or from, the UK, to retail consumers, by creating new rules in its COBS. In particular, the prohibition will cover "securitised binary options", which are binary options that are listed on a formal trading venue, are subject to a prospectus, and have minimum contract periods from the point of entry to the expiry of the binary option. The FCA is of the view that these products have a similar, binary pay-off structure and are just as difficult for retail consumers to value as other types of binary options, and so raise similar, significant concerns about investor protection. These binary options also present possible means of arbitrage for firms seeking to avoid the prohibition by manufacturing alternative binary products. The prohibition is due to the FCA having significant concerns about investor protection from the sale of binary options to UK retail consumers. It follows ESMA's product intervention measures and a December 2016 FCA consultation on approaches to binary options. Appendix 1 to the consultation paper contains the draft Conduct of Business (Binary Options) Instrument 2019, which will make changes to COBS 22. The consultation paper closes to comments on 7 February 2019. The FCA will aim to publish a policy statement by March 2019. In the meantime, the FCA reminds firms that they need to continue to comply with ESMA's intervention measures as directly applicable provisions for as long as ESMA's decision notice is in force in the UK.
FCA consults on restricting CFD products sold to retail clients
On 7 December, the FCA published a consultation paper on restricting CFD products sold to retail clients and a discussion of other retail derivative products. In the consultation paper, the FCA proposes permanent rules that will require firms to: (i) limit leverage by collecting minimum margin as a percentage of the overall exposure that a CFD provides; (ii) close out a customer's position when their funds fall to 50% of the margin needed to maintain their open positions on their CFD account; (iii) provide protections that guarantee a client cannot lose more than the total funds in their CFD account; (iv) stop offering monetary and non-monetary inducements to encourage trading; and (v) provide a standardised risk warning, which requires firms to tell potential customers the percentage of their retail client accounts that make losses. The FCA is also seeking feedback on whether exchange-traded futures and similar OTC products present similar risks of harm to retail consumers. The FCA is intervening to address poor conduct by UK and EEA firms who offer CFDs to retail consumers, and to limit the sale of CFDs and similar products with excessive risk features. It follows ESMA's product intervention measures and a December 2016 FCA consultation on approaches to binary options. The FCA's proposed rules have a wider scope than ESMA's intervention. They extend to closely substitutable products (including "turbo-certificates") and include 30:1 leverage limits for CFDs referencing certain government bonds. Appendix 1 to the consultation paper contains the draft Conduct of Business (Contracts for Difference) Instrument 2019, which will make changes to the COBS 22. The consultation paper closes to comments on 7 February 2019 for the CFD proposals and 7 March 2019 for feedback on other retail derivative products. The FCA will aim to publish a policy statement by March 2019. If the FCA considers extending the scope of its rules for other retail derivative products, it will consult on this later in 2019. The FCA will also consult separately in early 2019 on banning the sale, marketing and distribution of derivatives that reference cryptocurrencies to consumers treated as retail clients.
FCA finalised guidance on financial crime systems and controls: insider dealing and market manipulation
On 13 December, the FCA published finalised guidance on financial crime systems and controls: insider dealing and market manipulation. Amendments to FC part of the Handbook are set out in the Financial Crime Guide (Insider Dealing and Redesignation) Instrument 2018 and take into account feedback received to the FCA’s March consultation. The instrument was made by the FCA's Policy Development Committee on 2 November and came into force on 13 December. Among other things: (i) FC Part 1: A firm's guide to preventing financial crime, is renamed as the Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG); and (ii) FC Part 2: Financial crime thematic reviews, is renamed as the Financial Crime Thematic Reviews (FCTR).
EBA consults on draft Guidelines on ICT and security risk management
On 13 December, the EBA published a consultation paper on its draft Guidelines on ICT and security risk management which establishes the requirements for credit institutions, investment firms and PSPs on the mitigation and management of their ICT risks. The consultation runs until 13 March 2019.
Home Office Report: United Kingdom Anti-Corruption Strategy 2017-2022 Year 1 Update
On 11 December, the UK Government published the UK anti-corruption strategy 2017 to 2022. In 2017, the Government launched a first UK Anti-Corruption Strategy 2017-2022 to provide a framework to guide HM Government anti-corruption policies and actions. This Update highlights the action the Government has taken since the launch. The Executive Summary states that the Strategy “details the significant progress we have made across many of our extensive commitments and demonstrates how we have largely fulfilled our commitments that were due by the end of 2018.” The Update also states that as the Government plans for the UK’s departure from the EU the Government will prioritise strengthening international cooperation and continue to work with partners to bolster global efforts to tackle corruption.
FCA wholesale banks and asset management cyber multi-firm review findings
On 10 December, the FCA published a webpage setting out the findings from its cyber multi-firm review of 20 firms in the asset management and wholesale banking sectors. The review was carried out in late 2017 and early 2018, and followed on from the FCA's technology and cyber resilience questionnaire exercise in these sectors. Its aim was to help assess how wholesale banking and asset management firms oversee and manage their cyber security, how far they identify and mitigate relevant risks and their current capability to respond to and recover from incidents and successful attacks. Key findings include: (i) firms generally lacked board members with strong familiarity or specific technical cyber-expertise. Many firms need to do more to ensure that board and management committee cyber security decisions are based on careful consideration of the cyber risks arising from the nature, scale and complexity of the firm's activities and risk profile; (ii) firms should take pro-active steps to foster a security-centric culture that transforms cyber from an IT issue to an organisation-wide priority; (iii) firms' second line of defence after the board, the risk and compliance functions, can have limited technical cyber-expertise. The lack of in-house cyber knowledge results in a high level of reliance, potentially overreliance, on third-party advisors to supplement the firm's cyber capabilities; (iv) many firms did not actively consider how and how far they should or could incorporate cyber and cyber security risks into their broader approach to conduct risk; (v) the FCA saw a wide variety of approaches to testing cyber security, with it appearing to have the most value where it is part of a considered strategy for managing cyber risks; and (vi) incident management plans did not always appear to reflect the likely impacts of a successful cyber-attack in a variety of ways. These included the impact on customers, on other market participants, and on markets more generally, not simply the implications for the firm's systems and technology. The FCA encourages firms to review its findings and how they apply to their own organisations. It sets out a series of questions that board and management committee members should consider as they review their cyber security and how to manage cyber risk.
FATF mutual evaluation report of the UK
On 7 December, the FATF has published its mutual evaluation report of the UK. The report summarises the AML/CTF measures in place in the UK, analysing the level of compliance with the FATF 40 Recommendations and the effectiveness of the UK's AML/CTF system, and provides recommendations on how the system could be strengthened. The report was generally positive, identifying: (i) the UK has a robust understanding of its ML/TF risks which is reflected in its public national risk assessments. National co-ordination has improved significantly since the last evaluation; (ii) the UK proactively investigates, prosecutes and convicts a range of TF activity, in line with its identified risks in this area. A particularly positive feature of the system is the strong public/private partnership on TF matters; and (iii) all entities within the FATF definition of financial institutions and all DNFBPs are subject to comprehensive AML/CTF requirements and subject to supervision. However, it also identified a few concerns: (a) it is not clear whether the level of prosecutions and convictions of high-end ML is fully consistent with the UK's threats, risk profile and national AML/CTF policies; (b) there are weaknesses in the risk-based approach to supervision even among the statutory supervisors; (c) minor improvements are required in relation to applying penalties for sanctions breaches; (d) the SAR regime requires a significant overhaul to improve the quality of financial intelligence available to the competent authorities; (e) the UK Government's press release, UK takes top spot in fight against dirty money, seeks to accentuate the positives – the report is certainly positive, but also recognises there are weaknesses with the UK's efforts to tackle money laundering, and provides seven priority actions for the UK; and (f) the UK has already taken steps to mitigate any effects of Brexit by passing the Sanctions and Anti-Money Laundering Act 2018, which enables the UK to set appropriate regulations. A press release by the OFSI also stated, “FATF have just given the UK the highest possible rating for its measures in promoting the global use of financial sanctions against terrorism and proliferation of weapons of mass destruction […] On counter-terrorism, we demonstrated to FATF how financial sanctions are a key part of the UK’s counter-terrorism tool kit. Implementing the UN’s sanctions list for ISIL (Da’esh) and Al-Qaida (UNSCR 1267) has caused significant disruption to those groups. Freezing their assets in the UK has deprived them of resources and constrained their malign behaviour. We have also effectively enforced the counter-proliferation finance elements of the Iran and DPRK UN sanctions. The UK was uniquely placed to tell another positive story here as we’ve taken a leading role in the implementation of both these regimes for many years. The UK has defined counter-proliferation as a national security issue and created the Counter-Proliferation and Arms Control Centre, which coordinates all counter-proliferation and arms control activity across government.”
ESFS reform: ECB opinion on amended proposal for Omnibus Regulation
On 7 December, the ECB published an opinion on the amended proposal for an Omnibus Regulation on reforms to the ESFS. The ECB focuses in its opinion on the new elements contained in the amended proposal (having previously submitted an opinion on the original proposal). Among other things, the ECB: (i) fully supports the goal of reinforcing the EBA's mandate in the prevention of the use of the financial system for the purpose of ML and TF; (ii) suggests clarification that the new reporting requirement captures any material weaknesses that increase the risk that the financial system could be used for ML or TF and requires the EBA to develop guidance for competent authorities regarding what constitutes such material weaknesses; (iii) recommends clarification that reporting to the EBA, and the subsequent dissemination of information by the EBA, does not replace the direct exchange of information among competent authorities; (iv) suggests that, where dedicated reports to the EBA are necessary, the EBA should develop guidelines, including templates to facilitate reporting; (v) notes that the proposals relating to the EBA's co-ordination with FIUs, concerning the provision of information to the EBA, should be clearer and more specific; and (vi) requests explicit clarification that the EBA's task of promoting the convergence of supervisory processes referred to in MLD4, including by conducting periodic reviews, only concerns AML and CFT supervisors and not prudential supervisors. The opinion includes a technical working document setting out the ECB's specific drafting proposals.


Please see the Consumer/Retail section for an update on the FCA consultation on changes to permitted links rules to facilitate investment in patient capital
ECON reports on proposed Regulation and Directive on cross-border distribution of collective investment funds
On 7 December, ECON published the following reports, both dated 6 December 2018: (i) Report on the proposal for a Directive on the cross-border distribution of collective investment funds; and (ii) Report on the proposal for a Regulation on facilitating cross-border distribution of collective investment funds. ECON voted to adopt the reports on 5 December. The next step will be for Parliament to consider the report in plenary. The proposed Regulation sets out a harmonised framework concerning certain aspects of the cross-border distribution of funds, such as marketing communications and member states' marketing requirements. The proposed Directive contains amendments to the UCITS Directive and AIFMD relating to, among other things, pre-marketing and the discontinuation of marketing.


EIOPA report on structure of European insurance intermediaries markets
On 13 December, EIOPA published a report that sets out an evaluation of the structure of the insurance intermediaries markets in Europe up to 31 December 2017. Alongside the report, it has also published an annex that sets out a country-by-country analysis. EIOPA states that the wide diversity of local distribution channels, different definitions adopted at the national level and variations in registration practices and reporting frameworks all make it hard to draw conclusions at the European level. Despite these challenges, by looking at the aggregate data, EIOPA has identified some key developments across European markets. Not all of these developments concern all member states and the drivers behind the developments are often member state-specific. In summary: (i) there are significant variations in terms of the size (total number of registered intermediaries) of insurance intermediaries markets; (ii) there has been a small decrease in the number of registered intermediaries at the European level (although there has been a slight increase in the UK) – the causes range from more stringent regulatory requirements and the growth of alternative innovative distribution channels to the liquidation of some intermediaries; (iii) in most markets, this decrease has mainly affected intermediaries registered as natural persons and those operating as agents; (iv) there is a significant number of intermediaries operating under member state-specific categories; and (v) for cross-border business, the picture remains patchy due to the quality of existing national reporting frameworks. Notable features include an incremental increase in cross-border notifications by insurance intermediaries between 2013 and 2017 and the significantly high proportion of intermediaries that have notified their home competent authorities of their intention to passport into another member state. EIOPA was mandated to produce the report (which is the first of its kind) under Article 41(5) of the IDD.
ECON responds to EC on priorities of 2018 review of Solvency II Delegated Regulation
On 12 December, ECON published a letter it has sent to the EC on the 2018 review of the Solvency II Delegated Regulation (EU) 2015/35. ECON welcomes the results of the EC’s November consultation on amendments to the Solvency II Delegated Regulation. However, it reiterates its position on the importance of reconsidering the three points mentioned in its previous letter. It believes that the four-week consultation period will enable the EC to collect further input to address its priorities. ECON recognises that some changes have been introduced with the aim of incentivising long-term investments in equity. However, it believes that further efforts are necessary to guarantee the success of this newly created equity class for long-term investments. In particular, it is concerned that the current design of the criteria, such as the 12-month duration and the ring-fencing requirements, can prevent the long-term equity class from working in practice. Furthermore, it does not see sufficient grounds to postpone this matter to the 2020 review of the Solvency II Directive, as the EC proposed in its letter. ECON notes the EC’s acknowledgement of the shortcomings of the way the national component of the VA functions currently. It reiterates its position that a short-term solution needs to be found for this in the 2018 review. Although it prefers the solution proposed in its previous letter, ECON invites the EC to explore other potential solutions. Finally, ECON regrets that the EC considers that most of the suggestions made in its previous letter can only be explored as part of the 2020 review of the Solvency II Directive.
UK-US bilateral agreement on insurance and reinsurance prudential measures
On 11 December, the US Treasury Department published the final text of the bilateral agreement between the US and the UK on insurance and reinsurance prudential measures, together with a press release announcing its intention to sign the agreement. In letters to Congress, the Treasury Department explains that as a member state of the EU, the UK is currently subject to an equivalent agreement between the US and the EU. However, this will no longer be the case after Brexit. The US–UK agreement addresses the same three areas of prudential insurance supervision as the US–EU agreement (group supervision, reinsurance and exchange of information between supervisory authorities).
EIOPA letter to EC on Delegated Regulation amending Solvency II Delegated Regulation
On 10 December, EIOPA published a letter to EC Director-General, DG FISMA, relating to the EC’s consultation paper on a Commission Delegated Regulation amending the Solvency II Delegated Regulation. Among other things, the letter refers to EIOPA's ongoing investigations on the treatment of illiquid liabilities and related investments. It advises the EC to wait and take into account the outcome of EIOPA's analysis before it reduces the capital charge for a portfolio of long-term equity investments backing long-term liabilities. Mr Bernardino also notes the EC’s proposal to modify the general provisions on the relevant risk-free interest rate term structure. It states that the current drafting raises practical issues as the proposed definition of a "substantial change" is too wide for a well-functioning process, and puts at risk the market consistent valuation of technical provisions.
Extension of SM&CR to insurers takes effect
On 10 December, the FCA and the PRA updated a number of webpages and forms to reflect the coming into force of the extension of the SM&CR to dual-regulated insurance and reinsurance firms. The SM&CR now applies to all dual-regulated insurance and reinsurance firms and replaces the SIMR and the revised approved persons regime for these firms. The FCA has published a press release marking the extension, which it describes as a "milestone for insurers" and a "key step in improving culture and governance in the sector". It has also updated its SM&CR: insurers webpage to reflect the extension. In addition, the PRA has updated its strengthening accountability webpage to explain that the extension is being introduced through the application of the BoE and Financial Services Act 2016 (Commencement No 5 and Transitional Provisions) Regulations 2018, which amend FSMA and the BoE and Financial Services Act 2016 accordingly. All references to the SIMR and SIMF have been amended to refer to the SM&CR and SMF respectively.
PRA policy statement, updated supervisory statement and Dear CEO letter on Solvency II: equity release mortgages
On 10 December, the PRA published a policy statement, updated supervisory statement and Dear CEO letter relating to the Solvency II Directive and ERMs. The PRA consulted in CP13/18 on proposed amendments to the updated supervisory statement, to address risks inherent in ERMs and provide insurance and reinsurance firms holding ERMs with greater clarity on how to address these risks. In chapter 2 of the policy statement, the PRA provides feedback on responses to CP13/18. In the Dear CEO letter, the PRA states that, having considered responses to CP13/18, the core of its proposals is unchanged. However, it has made a number of changes which are briefly outlined in paragraph 1.6, and explained in detail in chapter 2, of the policy statement. Two key points are highlighted in the Dear CEO letter: (i) the PRA is not taking forward the proposal to apply an equivalent of the EVT as a single approach to determining the illiquidity premium in the pre-Solvency II ICAS regime for the purposes of the transitional measure on technical provisions; and (ii) the PRA has reflected on the feedback that its new approach may make insurers' balance sheets more sensitive to interest rates. Its current thinking is that the minimum deferment rate should be updated periodically in line with movements in real interest rates, although it would always remain a positive rate. The PRA believes that, currently, a minimum deferment rate of 1% is appropriate. Chapter 2 of the updated supervisory statement clarifies the PRA's expectations where ICAs are used as part of determining the FS, including expectations that are specific to restructured assets, including ERMs. Chapter 3 sets out the principles to be applied when assessing the risks from guarantees embedded within ERMs, for the purposes of verifying the appropriateness of the FS for restructured ERM notes. These expectations come into effect on 31 December 2019. The PRA intends to consult in the first quarter of 2019 on additional proposals relating to the EVT. These proposals are summarised in paragraph 1.9 of the policy statement and include the ongoing assessment of the EVT and how best to address excessive interest rate sensitivity that may arise over time.


Please refer to our bulletin on the PRA policy statement published on the revised EU securitisation framework and significant risk transfer
Please refer to the Other Developments section for an update on the ESRB reports regarding the outcome of the General Board regular meeting
Draft Credit Rating Agencies (Amendments etc) (EU Exit) Regulations 2019 laid before Parliament
On 13 December, a draft version of the Credit Rating Agencies (Amendments etc) (EU Exit) Regulations 2019 was published. The purpose of the draft Regulations is to amend the CRA Regulation, to make it work in a UK context in a no-deal scenario. They also amend retained EU law relating to the CRA Regulation to ensure that it continues to operate effectively once the UK leaves the EU, and substantively modifies existing UK primary and secondary legislation. This is the version that has been laid before Parliament. HMT published a draft of the Regulations on 30 November. Parts 1 (General provision) and 8 (Transitional provisions) of the Regulations come into force on the day after the day on which they are made. The other Parts come into force on exit day.
ECON votes to adopt draft report on Regulation amending BMR on low carbon benchmarks and positive carbon impact benchmarks
On 13 December, the EP updated its procedural file for the proposed Regulation amending the BMR on low carbon benchmarks and positive carbon impact benchmarks to announce that ECON has voted to adopt its draft report on the proposal. The procedure file also indicates that ECON voted to open inter-institutional negotiations on the proposal on the basis of the report.
EC adopts Delegated Regulation amending MiFID II to promote use of SME growth markets
On 13 December, the EC adopted a Delegated Regulation amending Delegated Regulation (EU) 2017/565 as regards certain registration conditions to promote the use of SME growth markets. The Delegated Regulation amends Articles 77 and 78 of Regulation 2017/565 which are considered too restrictive. Article 78(2)(a) of the Delegated Regulation now also sets out that the free float requirement can be expressed either as an absolute value or as a percentage of the total issued share capital (in response to concerns raised in feedback to the EC’s May consultation). In addition, the free float requirement is only applicable to the first admission of the shares to trading (that is, an IPO) and not to subsequent admissions (that is, secondary offerings). Article 77(2) of the draft Delegated Regulation has also been amended, based on consultation responses. It now provides that a non-equity issuer can qualify as an SME if the nominal value of its debt issuances over the previous calendar year, on all trading venues across the EU, does not exceed EUR 50 million. The EC believes this language will avoid any confusion with the notion of outstanding issuances and with any issues of interpretation in the event of a change in value of the new debt issuances over the twelve-month period. The Delegated Regulation will enter into force on the day after its publication in the OJ. It will apply from three months after its entry into force. The next step is for the Delegated Regulation to be considered by the European Parliament and Council.
EC adopts Delegated Regulations under SFTR relating to trade repositories
On 13 December, the EC adopted the following Delegated Regulations under the SFTR: (i) Delegated Regulation supplementing the SFTR with regard to RTS on access to details of SFTs held in trade repositories, together with an annex – the RTS specify the details of the information held by trade repositories that relevant authorities have access to, and the terms and conditions of that access; (ii) Delegated Regulation supplementing the SFTR with regard to RTS specifying the details of the application for registration and extension of registration as a trade repository – the RTS specify the details of procedures to be applied by trade repositories to verify the completeness and correctness of the details reported to them, the application for registration as a trade repository and the simplified application for an extension of registration as a trade repository; (iii) Delegated Regulation amending Delegated Regulation (EU) 151/2013 with regard to access to the data held in trade repositories – the amendments aim to establish adequate levels of access to trade repository data for the authorities added to the list under Article 81 of EMIR; and (iv) Delegated Regulation amending Delegated Regulation (EU) 150/2013 as regards RTS specifying the details of the application for registration as a trade repository. The amendments aim to better specify some of the existing provisions to strengthen the framework for the registration of trade repositories and to ensure consistency with similar provisions developed under the SFTR. The Delegated Regulations will enter into force on the twentieth day following their publication in the OJ. The next step is for the EP and Council to consider the Delegated Regulations.
Draft Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019 laid before Parliament
On 13 December, a draft version of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019 was published, together with an explanatory memorandum. The purpose of the Regulations is to make amendments to correct deficiencies in UK legislation relating to FMI insolvency that reflects EU law, including the SFD and the FCAD. They also establish a temporary designation regime to enable non-UK FMIs to continue to benefit from UK protections currently provided for by the SFD. This is the version that has been laid before Parliament. HMT published a draft of the Regulations in October. The Regulations will come into force on exit day, with the exception of regulation 1 and provisions on the temporary designation regime, which will come into force on the day after the day on which the Regulations are made.
FCA publishes draft registration and conversion forms for CRAs
On 12 December, the FCA updated its webpage on registering as a CRA to provide links to the following draft forms for CRAs: (i) registration form, together with accompanying notes. CRAs intending to apply for full registration and to be included in the temporary registration regime should complete this form; and (ii) conversion form. CRAs wishing to convert their current ESMA-registered status into FCA registration should complete this form. The FCA advises that CRAs will be able to submit the forms to it by email from 7 January 2019. The forms relate to the conversion and temporary registration regimes that will be available to individual CRAs after Brexit. The conversion regime will allow CRAs established in the UK before exit day to convert their ESMA registration into a registration with the FCA. The temporary registration regime will provide temporary registrations for CRAs that apply for registration with the FCA before exit day, provided that they are a UK legal entity and part of the same group as a CRA with an existing ESMA registration. The FCA has published the forms following HMT’s publication of a draft statutory instrument that transfers the regulation of UK CRAs from ESMA to the FCA in the event that the UK leaves the EU without a deal. The FCA published the webpage on registering as a CRA in October.
EC adopts Delegated Regulation under MiFIR relating to systematic internalisers' quote obligations
On 12 December, the EC adopted a Delegated Regulation amending Commission Delegated Regulation (EU) 2017/587 (RTS 1) to specify the requirement for prices to reflect prevailing market conditions and to update and correct certain provisions. The next step is for the Delegated Regulation to be considered by the EP and Council.
EBA final guidelines on interpreting STS securitisation criteria
On 12 December, the EBA published final guidelines on the interpretation of the criteria for term and short-term securitisations to be eligible as STS. The STS criteria to which the guidelines refer are housed in Articles 20-26 of the Securitisation Regulation and have been developed further to the mandate given to the EBA under Articles 19(2) and 23(3). The final guidelines, developed for both non asset-backed commercial paper securitisations and ABCP securitisations, were originally published for consultation in draft form in April. The guidelines clarify and ensure a common understanding of all the STS criteria, including those related to the expertise of the originator and servicer, the underwriting of standards, exposures in default and credit impaired debtors, and predominant reliance on the sale of assets. The guidelines will apply from 15 May 2019 but the EBA expects market participants to apply the approach set out in the Guidelines as from 1 January 2019; being the date on which the Securitisation Regulation comes into force.
CMA publishes final report on investment consultancy market investigation
On 12 December, the CMA published the final report on its market investigation into the supply and acquisition of investment consultancy services and fiduciary management services to and by institutional investors and employers in the UK. The CMA has found that investment consultancy and fiduciary management are not highly concentrated markets, that barriers to entry and expansion are low in each and that both markets are growing. Customers have access to a sufficient number of providers in both markets. However, it has also found that there are weaknesses in the demand side based on a low level of engagement by some pension trustees with investment matters. In addition, for those who engage with the market, the information that trustees need to assess the value for money of these services is difficult to access. These two factors reduce the competitive pressure on investment consultants and fiduciary managers. The CMA has stronger concerns about competition in the fiduciary management market as integrated investment consultancy and fiduciary management firms have an incumbency advantage at point of sale. This incumbency advantage could increase as the market shares of the three largest integrated firms are increasing. In addition, switching and ongoing costs are higher. The CMA has concluded that there are feature of both the markets for the supply and acquisition of investment consultancy services and fiduciary management services in the UK to and by pension schemes that restrict or distort competition, and therefore there is an adverse effect on competition in this market. The CMA considers that this adverse effect on competition results in substantial consumer detriment in terms of customers paying higher prices for these services and/or receiving worse outcomes in terms of service quality. The CMA has decided on a package of remedies to address the competition issues identified. These measures aim to promote greater trustee engagement as they will provide trustees with more information on fees and performance of fiduciary managers and investment consultants, and require tendering of fiduciary management services and separation marketing. To support its remedy package, the CMA has made several recommendations to government and regulators. This includes, in particular, a recommendation to HMT to legislate to broaden the FCA’s regulatory scope to include the activities of investment consultants to ensure greater oversight of this sector in the future.
Draft Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019
On 12 December, HMT published the draft Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019. The regulations address deficiencies in the Prospectus Directive and Transparency Directive that arise from the UK leaving the EU.
ECB Regulation amending Regulation on money market statistics
On 11 December, the ECB published a Regulation which it adopt on 7 December amending Regulation (EU) 1333/2014 concerning statistics on the money markets (MMSR Regulation). Its aim is to clarify and simplify some of the existing reporting requirements under the MMSR Regulation and to improve the quality of the data.  The Amending Regulation will enter into force 20 days after it is published in the OJ. It will apply from 15 March 2019.
Trade associations' letter to EC on temporary equivalence and recognition of UK CCPs
On 10 December, a letter was published from the ISDA, the FIA, the AFME and the ICMA, to the EC, asking for clarification on the temporary equivalence and recognition regimes in relation to UK CCPs in the light of Brexit. The trade associations welcome ESMA and the EC’s recent statements regarding temporary equivalence for the purpose of recognition for UK CCPs. However, they have identified certain areas of uncertainty and request clarity on issues relating to the following: (i) will the temporary and conditional equivalence/recognition of UK CCPs only apply to cleared derivatives, or to all asset classes (including repos and cash equities) cleared via UK CCPs? (ii) what conditions does the EC propose to attach to temporary equivalence? (iii) will the temporary recognition cover both new and legacy transactions? (iv) how long will the temporary recognition regime last? (v) when will the temporary recognition be proposed? and (vi) how will the temporary recognition regime be implemented? In addition, the trade associations urgently request that the EC provide legal certainty by publishing its proposed temporary equivalence determination for the UK (together with any conditions) and, in turn, procure that ESMA confirms that the three UK CCPs are each recognised under EMIR. This is on the condition that the UK leaves the EU on 29 March 2019 without a transition period coming into effect, and the proposed temporary regime is implemented.
Central Securities Depositories (Amendment) (EU Exit) Regulations 2018 made
On 7 December, the Central Securities Depositories (Amendment) (EU Exit) Regulations 2018 were published, together with an explanatory memorandum. The Regulations will make technical changes to the CSDR and to the Central Securities Depositories Regulations 2014 and the Central Securities Depositories (Amendments) Regulations 2017, which implemented the CSDR in the UK. The changes to the CSDR include amendments to Article 3 (Book-entry form) (which relates to the requirement to record transactions in transferable securities taking place on a trading venue in book-entry form in a CSD) and Article 5 (Intended settlement date) (which relates to the settlement date for transactions in transferable securities executed on trading venues). The changes are intended to ensure that the UK retains an operative regulatory framework for CSDs in the event of a no deal Brexit. A draft of the Regulations was published on 31 October. No changes appear to have been made. Regulation 1 and Part 5 of the Regulations (Notification requirements) enter into force on 7 December, with the remainder coming into force on exit day.
Short Selling (Amendment) (EU Exit) Regulations 2018 made
On 7 December, the Short Selling (Amendment) (EU Exit) Regulations 2018 were published, together with an explanatory memorandum. The Regulations will amend the SSR, Commission Delegated Regulation 918/2012 supplementing the SSR, and Part 8A of FSMA (which implemented parts of the SSR in the UK), to address failures of retained EU law to operate effectively, and other deficiencies arising from the UK's withdrawal from the EU. A draft of the Regulations was published on 10 October. No changes appear to have been made. The Regulations will come into force on exit day.
Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 made
On 7 December, the Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 were published, together with an explanatory memorandum. The Regulations aim to ensure that the framework for reporting derivatives trades to TRs established by EMIR operates effectively after Brexit. A draft of the Regulations was published on 6 November. No changes appear to have been made. The Regulations came into force on 7 December, with the exception of amendments to EMIR, which will come into force on exit day.


EBA opinion on use of eIDAS certificates under PSD2 RTS on strong customer authentication and common and secure communication
On 11 December, the EBA published an opinion on the use of eIDAS certificates under the RTS on SCA and CSC supplementing PSD2.The aim of the EBA opinion is to clarify specific aspects of the use of QSealCs and QWACs. In the opinion, the EBA considers: (i) the use of eIDAS certificates – the EBA states that ASPSPs should choose whether to use a QSealC or a QWAC for identification purposes. It also recommends that ASPSPs should use both QWACs and QSealCs in parallel; (ii) the roles of PSPs in an eIDAS certificate – Article 34(3)(a) of the RTS distinguishes four roles that can be assigned to a PSP: account servicing, payment initiation, account information and issuing of card-based payment instruments. The EBA clarifies which payment services correspond to each of these roles and the roles that have to be assigned in the certificates to payment institutions, electronic money institutions and credit institutions, including when these institutions act in their capacity as a third-party provider or an ASPSP; and (iii) competent authorities' involvement in the revocation of an eIDAS certificate – the EBA's view is that competent authorities should consider requesting, where necessary, the revocation of an eIDAS certificate issued to a PSP authorised by the competent authority, which has had its authorisation or registration withdrawn or authorisation for a specific payment service revoked. It sets out the steps that competent authorities should follow to establish a standardised process for the exchange of notifications regarding the revocation of eIDAS certificates.


BCBS consults on revisions to leverage ratio disclosure

On 13 December, the BCBS published a consultation paper on revisions to the leverage ratio disclosure requirements. To address leverage ratio window-dressing, the BCBS seeks comments on potential revisions to the disclosure requirements for the leverage ratio. Specifically, the BCBS proposes that banks be required to include in their Pillar 3 disclosures, in addition to current requirements, the amounts of each of the following exposures calculated based on an average of daily values over the quarter: (i) adjusted gross securities financing transaction assets recognised for accounting purposes (as calculated per paragraph 51(i) of the leverage ratio standard); (ii) replacement cost of derivative exposures; and (iii) central bank reserves that are included in on-balance sheet exposures. To align with the date by which Pillar 3 disclosures are to be required based on the revised leverage ratio framework, the BCBS proposes that the potential revisions to Pillar 3 disclosure requirements are implemented no later than 1 January 2022 and apply to all internationally active banks. The proposed revisions are set out in annex 1 to the consultation paper. Comments can be made until 13 March 2019. The BCBS will subsequently publish its conclusion on any revised treatment.
PRA updates statement of policy on systemic risk buffer
On 13 December, the PRA published a policy statement relating to its updated statement of policy on the PRA's approach to the systemic risk buffer. The policy statement is relevant to ring-fenced bodies within the meaning of section 142A of FSMA and large building societies that hold more than £25 billion in deposits (where one or more of the account holders is a small business) and shares (excluding deferred shares). In November, the PRA proposed to make three minor amendments aimed at clarifying the statement of policy and bringing it in line with recent policy developments. It received no responses to its consultation paper and has made the changes as proposed.
BCBS finalises third phase of revisions to Pillar 3 disclosure framework
On 11 December, the BCBS published its final standards on an updated framework for Pillar 3 disclosure requirements (BCBS455). The disclosure requirements relate to: (i) revisions relating to the finalisation of the Basel III reforms. These include revised disclosure requirements for credit risk, operational risk, the leverage ratio, CVA and overview templates on risk management, RWAs and key prudential metrics. The BCBS has also introduced new disclosure requirements to compare RWA outcomes of banks' internal models with RWAs calculated according to the full standardised approaches; (ii) new disclosure requirements on asset encumbrance – the BCBS has introduced disclosure requirements requiring banks to disclose information on their encumbered and unencumbered assets; and (iii) new disclosure requirements on capital distribution constraints – the BCBS has introduced disclosure requirements to provide users of Pillar 3 data with information on the capital ratio of a bank that would result in national supervisors imposing constraints on capital distributions. The implementation deadline for disclosure requirements relating to the finalised Basel III framework is 1 January 2022, to align with the implementation of the framework. The implementation deadline for the disclosure requirements for asset encumbrance, capital distribution constraints and the prudential treatment of problem assets has been extended to the end of 2020. The publication of BCBS455 completes the third and final phase of the BCBS' revisions to the Pillar 3 disclosure requirements.


HMT updates House of Commons EU Scrutiny Committee on progress of proposed Regulation on disclosures relating to sustainable investments and sustainability risks
On 11 December, HMT published a letter from the Economic Secretary to the Treasury, sent to the Chair, House of Commons European Scrutiny Committee, on the EC’s proposed Regulation on disclosures relating to sustainable investments and sustainability risks. In the letter, the Secretary states that the Council is now close to agreeing a compromise text. It expects the file to go to a meeting of COREPER in mid-December and for the general approach to be agreed in January 2019. He expects trialogues to commence in January 2019 and for political agreement to be reached before the end of the current EP term. The Secretary expects that the final Council compromise text will contain the following elements: (i) a clarification that credit institutions offering portfolio management or investment advisory services are within the scope of the Regulation. The UK government's view is that credit institutions' other activities, such as lending, should fall outside the scope of the Regulation; (ii) a broader range of sustainable investment approaches than was envisaged in the EC’s proposals; (iii) periodical reports for products with sustainable investment objectives will now only be required on an annual basis; and (iv) the Article amending the IORP II Directive has been removed. This Article gave the EC the power to adopt delegated acts to specify how IORPs make investment decisions and assess risks to take into account ESG considerations. The UK government has also published a letter from the Secretary to the Chair of the House of Lords European Union Committee, which contains broadly identical material.
EC technical expert group call for feedback on sustainable finance taxonomy
On 7 December, the EC published a webpage on a call for feedback from its TEG on sustainable finance. The call for feedback relates to the taxonomy to be established under the proposed Regulation on the establishment of a framework to facilitate sustainable investment (Taxonomy Regulation). The TEG is mandated to recommend a list of economic activities delivering substantially on climate change mitigation and adaptation objectives to be used by the EC in preparing its first delegated act on a climate taxonomy. On the webpage, the TEG sets out its approach to obtaining feedback on its current thinking on the list of economic activities. It has also published: (i) a taxonomy pack setting out the elements of the draft taxonomy under consideration and how the taxonomy is being developed. The pack also includes specific questions on aspects of the TEG's proposals; and (ii) a spotlight on taxonomy providing details of the background to the TEG's work and the key features of the taxonomy. The deadline for feedback to the questions in the taxonomy pack is 22 February 2019. The TEG intends to publish its final report containing recommendations on the taxonomy in June 2019.


ESRB reports on outcome of General Board regular meeting: December
On 13 December, the ESRB published a press release reporting on the outcome of the regular meeting of its General Board on 6 December 2018. At the meeting, the General Board: (i) noted that risks to the stability of the EU financial system remain elevated amid significant political uncertainties globally and within the EU; (ii) discussed financial stability risks that could stem from cyber-incidents – in 2017, the General Board established the European Systemic Cyber Group to consider these risks. The group has developed a conceptual framework to help understand when and how a cyber shock could trigger a systemic crisis. In 2019, the group will build on this framework, using scenario-based analysis, to inform the General Board of whether a systemic crisis is more likely to occur if particular transmission channels are affected, and whether certain cyber-incidents are more likely to exhaust the absorptive capacity of the system. The ESRB intends to publish its findings by the end of next year with the aim of providing guidance to regulatory authorities on how to mitigate cyber-risk and prevent cyber-incidents from becoming systemic; (iii) noted that it has continued to advance on the monitoring of developments in the EU derivatives markets, exploiting the wealth of information made available to the ESRB under EMIR; (iv) considered the role that macroprudential policy can play in preventing system-wide increases in NPLs and in increasing banks' resilience to such an increase, in response to a Council request; (v) concluded that, while no fundamental changes to the existing macroprudential toolkit appear to be required, some refinements should be considered – an ESRB report discussing these issues will be published in January 2019; (vi) discussed the key concepts framing macroprudential stance. The work carried out in this area so far will be translated into a first ESRB report, which will be published in the coming months, providing an initial step towards a common framework for macroprudential stance and outlining one conceptual approach to it; and (vii) exchanged views on the interoperability arrangements of CCPs. An ESRB report, proposing clarification of the treatment of interoperability arrangements in the forthcoming CCP recovery and resolution framework and specifying in EMIR the conditions under which interoperability arrangements for derivatives could be approved and implemented, will be published in the coming weeks.
FCA regulation round-up: December
On 13 December, the FCA published its regulation round-up for December. Among other things, the FCA plans to consult on clarifying the scope of the client dealing function and make final rules before 9 December 2019, which is when the SM&CR is extended to solo-regulated firms. The FCA provides more information and sets out the interim arrangements on a webpage.
Limited partnerships: BEIS response to consultation on reform of limited partnership law
On 10 December, BEIS published a response to its consultation on reforming the law of limited partnerships. The response includes: (i) confirmation of the government's intention to require that presenters of applications to register LPs show their registration with an a AML supervisory body. The government is considering options to ensure applications from overseas are subject to equivalent standards. This may mean limiting applications from overseas to EEA jurisdictions. This approach will end direct registrations of LPs; (ii) in relation to the PPoB of LPs, the government intends to request information on a LP's connection to the UK on application and on an ongoing basis. On application, the LP must give a proposed UK PPoB. To demonstrate an ongoing connection, LPs will have three options: (a) retain their UK PPoB; (b) show continuing legitimate business activity at a UK address; (c) show they engage the services of an agent registered with a UK AML supervisory body. Additionally, LPs will need to notify the Registrar if their method of demonstrating an ongoing UK connection changes; (iii) the government will proceed with the requirement that LPs file a confirmation statement at least every 12 months. Additionally, the information required on application will be expanded and confirmed in the confirmation statement. The government will undertake further work on whether to require beneficial ownership information from corporate partners that do not already hold a PSC register. The government has decided not to require LPs to prepare accounts and reports in line with limited companies; and (iv) the government will proceed with the proposal to give the Registrar powers to strike off LPs that are dissolved or which the Registrar concludes are not in operation. These powers are to be subject to a robust notification procedure and the government will consider the circumstances in which it would be appropriate to restore a LP. The government is also considering how these proposals will apply to existing LPs and transitional arrangements. It will develop legislation to give effect to these proposals and intends to legislate when parliamentary time allows. In 2019, BEIS plans to consult on a broader package of reforms to Companies House.
EC launches review of Distance Marketing Directive
On 7 December, the EC published an evolution and fitness check roadmap relating to the DMD. In its 2019 work programme, the EC announced that it would carry out an evaluation of the DMD, in line with the better regulation principles. Since 2002, the distance marketing of financial services has changed in the light of digitalisation and the commercial practices used by online providers. In parallel, the legal framework for retail financial services has evolved, including through the development of product-specific legislation (relating to consumer credit, mortgages, insurance, investment products and payment services), or specific consumer protection elements. In this context, the EC considers it is necessary to evaluate how the DMD is functioning in the EU, including whether the DMD's requirements are fit for purpose. The EC’s evaluation will assess whether the DMD's original objectives have been achieved, how the DMD is functioning from a cost-benefit, burden-reduction, and simplification perspective, and how the DMD works together with other EU legislation in the retail financial services area. The analysis will assess whether the DMD's tools correspond to the original and current needs. The evaluation will focus on developments since 2002, and the costs and benefits relating to different stakeholders. Comments can be made on the roadmap until 4 January 2019. A public consultation questionnaire will be made available in early 2019 for a minimum of 12 weeks. In parallel, a targeted consultation involving national and regional authorities, retail financial services providers and intermediaries, industry associations and consumer organisations will be carried out. The EC has tentative plans to publish a report of the consultations by September 2019, and is aiming to conclude the evaluation in 2019.
FCA policy development update
On 7 December, the FCA updated its PDU webpage, which sets out information on recent and future FCA publications.
FCA quarterly consultation 23
On 7 December, the FCA has published its 23rd quarterly consultation paper, which invites comments on proposed changes to the FCA Handbook, including: (i) changes to firm details reporting requirements in chapter 16.10 of the SUP; (ii) changes to Appendix 1.4 of the CONC to add the AAT to the list of bodies whose members can provide a statement of high net worth to individuals; and (iii) recognition of two industry codes for unregulated financial markets and activities. The FCA does not propose changes to its Handbook, but seeks views on whether it should recognise the FX Global Code (August 2018) and the UK Money Markets Code (April 2017). The deadline for comments on the proposals is 7 February 2019.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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