Amending the definition of financial advice: consultation response

In response to its consultation on amending the definition of financial advice, the Treasury has decided to change the definition for regulated firms. Regulated firms will therefore be giving advice only where they provide a personal recommendation. The Government will leave the wider Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 definition of advice as "advising on investments" in place for unregulated firms. Treasury, 28 February 2017

PRA and FCA final rules and guidance on LTI ratios in mortgage lending

PRA published a policy statement on rules relating to loan to income (LTI) ratios in mortgage lending. The FCA has also published finalised guidance on LTI ratios in mortgage lending. The publications relate to the regulatory framework introduced by the PRA and the FCA to implement the Financial Policy Committee (FPC) June 2014 recommendation that mortgage lenders should not extend more than 15% of their total number of new residential mortgages at LTI ratios at or greater than 4.5. PRA & FCA, 27 February 2017

FinTech Week 2017: celebrating Britain’s status as global FinTech hub

Chancellor has announced that FinTech Week 2017 will take place in April and showcase the sector’s successes, aim to attract more investment into Britain and share global regulatory expertise. Planned events include:

  • Innovate Finance’s Global Summit (April 10-11)
  • The government’s first International FinTech Conference (April 12)
  • Financial Conduct Authority (FCA) International Innovate Seminar (April 12)

Designed to bring together industry, government and regulators, the second UK FinTech Week will build on the success of last year’s event, and focus of the issues affecting Britain’s world leading sector, including investment, access to skills and business support to FinTech start-ups. 26 February 2017

Note following the PRA IRB seminar for small and mid-tier banks and building societies

PRA published a note stating that it intends to amend its supervisory statement on the internal ratings based (IRB) approaches to encourage small and mid-tier banks and building societies to consider applying for the IRB approach to credit risk. PRA, 24 February 2017



HM Treasury consults on transposing IDD

HM Treasury published a consultation paper on transposing the Insurance Distribution Directive (2016/97/EU) (IDD). The consultation paper sets out HM Treasury's intended approach to transposing the IDD into UK law. It plans to transpose the IDD primarily through the architecture of the Financial Services and Markets Act 2000 (FSMA), in the same way as it transposed the Insurance Mediation Directive. This will involve a combination of legislation and FCA rules. A draft of the proposed Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order 2017 has been published separately, as Annex B to the consultation paper. HM Treasury, 27 February 2017


European Commission CMU report on addressing national barriers to capital flows

European Commission published a report as part of its capital markets union (CMU) initiative on addressing national barriers to capital flows. In the report, the Commission sets out the initial findings of its expert group of representatives of member states on national barriers to cross-border capital flows and the steps that the Commission expects member states to take to address them. The issues highlighted include:

  • Barriers to the cross-border distribution of investment funds.
  • National approaches to crowdfunding.
  • Residence requirements on managers of financial institutions.

EC, 27 February 2017

Delegated Regulation amending Delegated Regulation on RTS on risk mitigation techniques for uncleared OTC derivative contracts under EMIR published in OJ

The Commission Delegated Regulation (EU) correcting Delegated Regulation (EU), which supplemented EMIR with regulatory technical standards (RTS) on risk mitigation techniques for uncleared OTC derivative contracts under Article 11(15) was published in the Official Journal of the EU (OJ). The correcting Delegated Regulation adds two new paragraphs to Article 37. It explains that these paragraphs are analogous to the existing Articles 36(2) and 36(3), with the result that where an intragroup transaction takes place between an EU entity and a third country entity, the exchange of variation margin will not be required until three years after entry into force of the Regulation where there is no equivalence decision for that third country. Where there is an equivalence decision, the requirements will apply on the later of four months after the entry into force of the equivalence decision, or according to the general timeline. OJ, 25 February 2017

FIA, GFMA, ISDA and EFET joint response to ESMA on MiFID II position limits proposals

Futures Industry Association (FIA), the Global Financial Markets Association (GFMA), the International Swaps and Derivatives Association (ISDA) and the European Federation of Energy Traders (EFET) jointly submitted two comment letters to the European Securities and Markets Authority (ESMA) on the position limits regime to be introduced under MiFID II. The first letter relates to the application of position limits to products listed in Annex I, section C.10 of MiFID II. FIA, GFMA, EFET and ISDA argue that position limits should only apply to those products with a link to commodities, ie not inflation swaps. The second letter requests a clarification from ESMA that contracts traded on a third-country (ie non-EU) venue should not be considered OTC for the purposes of the position limits regime.

FIA 22 February 2017