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Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

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Claire Cummings

020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com


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EC adopts Delegated Regulation adding Pakistan to list of high-risk third countries under MLD4

On 22 August 2018, the EC published a Delegated Regulation amending the list of high-risk third countries under MLD4.  Article 9(2) of MLD4 gives the Commission power to adopt delegated acts identifying high-risk third countries. These are countries identified as presenting strategic deficiencies in their AML and CFT regime that pose significant threats to the EU financial system. The amending Delegated Regulation adds Pakistan to the list of high-risk third countries.   The Commission explains that Pakistan has provided a written high-level political commitment to address the identified deficiencies and has developed an action plan with FATF. The Commission will closely monitor implementation of the action plan and will reassess Pakistan's status once implementation is completed.  Under Article 18 of MLD4, firms are required to apply enhanced due diligence when dealing with natural or legal persons established in high-risk third countries identified by the Commission.


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Execution of documents: Law Commission consultation on electronic execution

The Law Commission recently published a consultation paper seeking views on the provisional conclusions of its project to identify and address legal uncertainties concerning electronically executed documents, and to ensure that the law governing this area is sufficiently certain and flexible to remain competitive in a global, digital, environment.

The consultation sets out the Law Commission's provisional view that under current law, an electronic signature is capable of meeting a statutory requirement for signature provided an authenticating intention is demonstrated, and that a legislative statement to confirm this position is unnecessary. The Law Commission does, however, raise the possibility of stakeholders gaining additional certainty by bringing a claim using the test case procedure under the Financial List to seek an authoritative ruling on the use of an electronic signature in certain circumstances.  While the consultation covers a wide range of documents, including deeds, powers or attorney, lasting powers of attorney, consumer contracts and contracts for the sale or other disposition of land, wills and registered dispositions under the Land Registration Act 2002 are expressly excluded from its scope.  The consultation closes on 23 November 2018.


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FCA commences criminal prosecution against individual relating to unauthorised investment scheme

On 21 August 2018, the FCA published a press release announcing that it has commenced criminal proceedings against an individual for three offences relating to unauthorised investment schemes, which are alleged to have been operated between 1 August 2008 and 25 April 2017.  The individual is alleged to have operated schemes that purported to carry out financial futures trading for the benefit of investors. The alleged offences are:

  • Operating, or purporting to operate, a collective investment scheme without authorisation or exemption, contrary to sections 19 and 23 of the Financial Services and Markets Act 2000 (FSMA); and

  • Two counts of fraud, contrary to sections 1 and 2 of the Fraud Act 2006. 

  • The case has been passed to Southwark Crown Court, with the first preliminary hearing scheduled for 18 September 2018.


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IPOs: AFME guidance on providing issuer access for unconnected analysts

On 20 August 2018, AFME and the European Association for Independent Research Providers (Euro IRP) published guidance on how unconnected analysts can participate in the IPO process and access information on prospective issuers. The guidance follows on from changes to the FCA's Conduct of Business Sourcebook which require unconnected analysts (that is, research analysts outside the underwriting syndicate on an IPO) to be given the same access to, and information about, the IPO candidate as connected analysts (that is, analysts in the research divisions of underwriting syndicate members).  Unconnected analysts wishing to communicate with the issuer team must agree to comply with the guidelines set out in Appendix I to the guidance, including obligations to keep the IPO confidential until formal announcement and not to publish their research until the dates that connected analysts are permitted to publish their research under the applicable process.  The guidance also links to a list of unconnected analysts that issuers must notify in each case, and offer the opportunity to receive issuer information about the prospective IPO.  


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Commission Delegated Regulation setting out RTS on central contact points under MLD4 published in OJ

On 10 August 2018, Commission Delegated Regulation setting out regulatory technical standards (RTS) relating to central contact points (CCPs) under MLD4 was published in the OJ.  The Delegated Regulation sets out criteria for determining the circumstances in which the appointment of CCPs for electronic money issuers and payment service providers is appropriate. It also sets out the functions a CCP must have to fulfil its duties.  The Delegated Regulation will enter into force on 30 August 2018 (that is, 20 days after its publication in the OJ).  


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Framework for UK-EU partnership post-Brexit: financial services

The UK government recently published a framework, in the form of a presentation, for the UK-EU partnership with regard to financial services once the UK leaves the EU.  Key features of the UK position are the following:

  • Principle of autonomy. Parties should retain autonomous judgement about access to their market and over legislation. However, it is critical that there is also a bilateral aspect to the relationship to provide certainty and stability. The new bilateral economic and regulatory arrangement would have 3 pillars: common principles for the governance of the relationship, extensive supervisory co-operation and regulatory dialogue, and predictable, transparent and robust processes.

  • Equivalence at the outset. The UK and EU start with the same rulebook and entwined supervision. There should initially be reciprocal recognition for all third country regimes.

  • Expanded scope of activities permitted cross-border. This is currently insufficient given the interconnectedness between the UK and EU markets. The most mutually beneficial activities for the economy should be prioritised to ensure that there are no unintended consequences or arbitrage.

  • Common principles. The UK-EU arrangement should include common objectives to manage shared interests such as financial stability, investor protection, market integrity and the prevention of regulatory arbitrage. 

  • Regulatory and supervisory co-operation. The UK proposes that the UK and the EU would commit to an overall framework that supports extensive collaboration and dialogue. The UK has no desire to water down existing co-operation.

  • Structured withdrawal. There should be consultation and discussion before loss of access to either market, with clear timelines and notice-periods to give time for businesses and supervisors to adapt to change on either side. 

  • The government previously published a white paper on the future UK-EU relationship on 12 July 2018, which included a section on financial services.


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FOS statement on publishing complaints data

On 20 August 2018, the Financial Ombudsman Service (FOS) published a statement following on from its December 2016 feedback statement, which included commitments to explore a new measure of cases received per 100 FCA-reportable complaints, and to report some resolved payment protection insurance (PPI) complaints by volume only for a limited period.  In the light of its feedback statement, the FOS has been exploring whether including a "referral rate" in complaints data is viable. In considering whether to include a referral rate, the FOS has identified further issues that make accurately calculating it more difficult than originally anticipated. Consequently, it has concluded that it is not suitable for inclusion in complaints data published by the FOS.  In the feedback statement the FOS also stated that, for a limited time, it would not publish change in outcome data for certain Plevin-affected PPI complaints, which were already with the FOS when the FCA's guidance came into effect on 29 August 2017 and were resolved by 30 June 2018 (see Legal update, FCA policy statement and final rules and guidance on PPI complaints). Due to the complexity of some of the issues under consideration, 26,070 Plevin or undisclosed high commission affected complaints that were received by the FOS before this date remained open as of 30 June 2018. Therefore, the FOS has decided to extend the exception for reporting the affected PPI complaints. This will provisionally be until 31 December 2018 and will be kept under review.


 

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Cummings

Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

www.cummingslaw.com

14 12 2018

 
 

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