What were May's highlights?
Extension of the Senior Managers and Certification Regime to Investment Managers
The Senior Managers and Certification Regime was formally extended to investment managers and other non-bank and insurance entities with the Bank of England and Financial Services Bill 2015-2016 receiving Royal Assent on 4 May 2016.
The Bank of England and Financial Services Act 2016 amends the Financial Services and Markets Act 2000 and imposes the following requirements: regulatory pre-approval for specified "senior managers"; statements of responsibility for senior managers; enhanced individual accountability; a requirement to identify and certify the fitness and propriety of individuals with the potential to pose significant harm to the firm or customers; new conduct rules; and new notification, training and record-keeping obligations.
The FCA is likely to make further rules governing “responsibility maps”, “handover” requirements for departing senior managers, regulatory references and whistleblowing requirements.
The Regulation on Indices used as Benchmarks in Financial Instruments and Financial Contracts, commonly referred to as the “Benchmark Regulation,” was formally adopted by the Council of the EU on 17 May 2016. The Benchmark Regulation will cover the providers of benchmarks, those who contribute input data to a benchmark and the users of benchmarks.
The Regulation defines a benchmark as “any index by reference to which the amount payable under a financial instrument or a financial contract, or the value of financial instrument is determined, or an index that is used to measure the performance of an investment fund with the purpose of tracking the return of such index or of defining the asset allocation of portfolio or of computing the performance fees”.
Various issues are likely to arise under the Regulation for investment managers, including whether and how managers determine that those who provide them with benchmarks will satisfy the requirements for authorisation, the requirement to make clear prospectus disclosures on benchmarks, and whether, in combining benchmarks, an investment manager could become a benchmark administrator.
UCITS V Level 2 and the Securities Financing Transactions Regulation: the FCA Consultation
On 19 May 2016, the FCA published CP16/14 setting out its proposals to amend parts of its Handbook of Rules and Guidance. CP16/4 is a response to two European Commission Regulations:
- The UCITS V Level 2 Regulation (UCITS Regulation) on 24 March 2016. The UCITS Regulation will apply to UCITS firms from 13 October 2016. It introduces new requirements for depositaries and trustees of UCITS (UCITS depositaries).
- The Regulation on Reporting and Transparency of Securities Financing Transactions (SFTR). The SFTR came into force on 12 January 2016. It introduces a number of measures including new requirements on: transactions, such as Repos; total return swaps; and the re-use of financial instruments received under a collateral arrangement.
Comments can be made until 19 July 2016. The FCA intends to publish a policy statement in the third quarter of 2016. See our briefing on UCITS V Level 2 and the Securities Financing Transactions Regulation for more information.
UK Offshore Reporting Funds Regime
As at 3 May 2016 the UK reporting fund regime, first introduced in 2009, now has nearly 40,000 share classes in offshore funds that are currently registered with HMRC as reporting funds. This would seem to suggest that the UK reporting requirements have not proved to be nearly as burdensome as some other jurisdiction’s tax requirements.
The government website provides an updated list of offshore reporting funds .
Operation Tabernula Insider Trading Case
In a case brought by the FCA and following a three-month trial at Southwark Crown Court, two defendants - a senior investment banker and a Chartered Accountant - have been convicted of conspiring to insider deal between November 2006 and March 2010. This investigation was conducted in partnership with the National Crime Agency and has been the FCA’s largest and most complex insider dealing investigation.
According to the FCA, the offending in this case was highly sophisticated and took place over a number of years.
Mark Steward, Director of Enforcement and Market Oversight at the FCA, said: “This was an extraordinary and complex case of a type not prosecuted in this country before. The message is loud and clear that the FCA will not tolerate sophisticated predatory criminals abusing our markets.