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

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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Fieldfisher and TeamBlockchain launch Blockchain and Crypto Telephone Surgery to offer rapid bespoke legal advice to businesses in the cryptocurrency and digital payment platforms sector

International law firm Fieldfisher and consultancy TeamBlockchain have launched a Blockchain and Crypto Telephone Surgery for companies looking for expert professional guidance on cryptocurrency and digital payments.   Focusing primarily on issues affecting tokenisation and distributed ledger financial technologies (fintech), the surgery will also offer advice and insights on the wider fintech universe.  Fieldfisher partners and TeamBlockchain consultants will give advice on different regulatory and legal issues in the context of specific industries, supported by relevant, real life examples of how organisations are using blockchain and the increasing role of cryptocurrency in digital business.  Surgery sessions will last up to 40 minutes, in the form of one-on-one appointments or small group discussions, as clients prefer. Sessions will be interactive, enabling participants to gain a better understanding of the subjects under discussion.  Clients will be asked to provide some prior briefing on their sector of interest, objectives and concerns in order to maximise the benefits they receive from surgery appointments.  This type of consultative support has proved helpful for professional advisors and their clients, who want to be more active in the cryptocurrency and blockchain sectors but lack the in-house skills to realise their ambitions. 
 
Fieldfisher and TeamBlockchain's experts are independent advisors who provide clients with honest, pragmatic advice on a range of fintech issues day-to-day.   These surgeries are designed to provide, swift, tailored advice on an as-need, no obligation basis, with follow-up support available as required.  The cost of each surgery is £500 +VAT and includes a pre-briefing, phone consultation and follow-up materials. For more information, please contact one of the Surgery Team: claire.cummings@cummingslaw.com; tim.bird@fieldfisher.com; and jonny.fry@teamblockchain.net.


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CMA/ FCA joint report on lessons learned about consumer facing remedies

On 1 October 2018, the Competition and Markets Authority (CMA) published a paper prepared jointly with the Financial Conduct Authority (FCA) that setting out the lessons which have been learned from the programme of work conducted by the UK Competition Network (UKCN) to examine remedies in consumer markets. 
The paper provides an overview of the ways in which demand-side problems can lead to poor consumer outcomes in markets and discusses types of remedies that can be, and have been, used to try to address these issues and improve competition in consumer markets. The paper also highlights the importance of testing remedies whilst they are being designed and examines different methods for doing so. 

Finally, the paper sets out some high-level principles relating to the development of remedies (understanding the problem, being bold, letting consumers stay in control, leveraging the experience and resources of the private sector, testing, recognising that good analysis is not enough, and reviewing effectiveness). It also notes that the focus of future work in this area will be consumer diversity and vulnerability, and the opportunities and challenges presented by the digital economy.

The FCA has also published a speech by Christopher Woolard, FCA Executive Director of Strategy and Competition, which discusses the FCA's approach to testing its market interventions. Mr Woolard also highlights the importance of collaboration in the design of competition remedies, as identified by the CMA/FCA joint paper.


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FCA fines Tesco Bank for failures during cyber attack

On 1 October 2018, the FCA published the final notice it issued to Tesco Personal Finance plc, fining it £16.4 million.  Tesco Bank was the subject of a cyber attack in November 2016. It appears that the attackers were able to generate Tesco Bank debit card numbers and used these to engage in unauthorised debit card transactions. The incident occurred over 48 hours and netted the attackers £2.26 million.  The FCA found that Tesco Bank breached Principle 2 of the FCA's Principles for Businesses, which requires a firm to conduct its business with due skill, care and diligence. In particular, the FCA highlights the following failures:

  • Design and distribution of debit card. Although Tesco Bank did not intend for its debit cards to be used for contactless transactions, card users could still use that payment method. Tesco Bank also inadvertently issued debit cards with sequential numbers making the cyber attack easier.

  • Poor configuration of authentication and fraud detection rules. 

  • Failure to take appropriate action to prevent the foreseeable risk of the cyber attack. Tesco Bank was warned about the occurrence of fraudulent transactions, but only implemented a rule to block transactions on credit cards (and not debit cards).

  • Failure to respond to the cyber attack with sufficient rigour, skill and urgency. For example, written procedures were not followed and crisis management procedures were not invoked quickly.


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EDPS publishes summary of outcomes of public consultation on digital ethics

On 15 June 2018, the European Data Protection Supervisor (EDPS) launched a public consultation on digital ethics.  
The consultation invited responses on the shift to digital and the ethical challenges faced by organisations and the public. Seventy-six responses were received, including from the private sector, health, education and public sector.
Findings included:

  • Ethics relating to new technologies are, or soon will be, on the agenda of the majority of organisations.

  • GDPR compliance, including fair processing, legitimate interests balancing and consent, is seen as a challenge by many organisations when considering ethics and technology.

  • 86% of participants considered that public authorities should play a role in governing digital ethics.

The EDPS has concluded that there are a range of challenges and risks that require urgent ethical deliberation, such as what data protection means in the age of big data processing and what the right to privacy means in an age of continuous tracking and profiling. Further debate on this topic will take place at the 40th International Conference of Data Protection and Privacy Commissioners in October, with the EDPS noting that "debating digital ethics is ensuring that human beings, not technology, remain our primary consideration in this digital era" and that compliance with data protection rules, whilst important, should not be treated as a mere checklist.


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LMA trade recap template

On 3 October 2018, the Loan Market Association (LMA) published a template document that lenders can use to log the principal terms of a loan trade. The trade recap template is a short, pro forma document comprising 13 fields of standard trade data. Once completed, the document will reflect the salient terms of an agreed trade and facilitate the subsequent drafting of the trade confirmation.

The LMA is encouraging lenders to fill out the template shortly after the trade has been agreed, and preferably on the same day, without the need for further negotiations.

The purpose of the template is to help reduce settlement times by ensuring there is little (if any) negotiation of the trade confirmation. One way of achieving this is by including "Other terms of trade" as one of the template's 13 fields. The aim is to avoid trade confirmations including any other terms of trade that go beyond those already referenced in the trade recap template.


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ISDA® whitepaper on smart derivatives contracts

On 3 October 2018, ISDA® published a whitepaper, Smart Derivatives Contracts: From Concept to Construction. The paper identifies the complex issues and challenges that need to be considered in formulating proposals for a smart derivatives contracts framework. It also acknowledges that legal, commercial, technological and regulatory demands would need to be reconciled for a smart contracts framework to be fully effective.

The paper describes the various steps that are necessary to produce a smart derivatives contract, and addresses some of the legal and technical issues that smart contract give rise to, such as:

  • Which contractual terms are suited to automation?
  • How would such terms be expressed?
  • How would the legal effect of automated contractual terms be validated?

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ISDA and Linklaters Launch Test Version of ISDA Create - IM 

The International Swaps and Derivatives Association, Inc. (ISDA) and law firm Linklaters have launched a test version of a new online tool that will allow firms to electronically negotiate and execute initial margin (IM) documentation. The IM module is the first step in a broader push to make ISDA documentation available online through ISDA Create, ISDA’s new digital documentation platform.  ISDA Create – IM will enable users to produce, deliver, negotiate and execute IM documents with multiple counterparties simultaneously. It will also allow firms to digitally capture, process and store the resulting data, which can be used for commercial, risk management and resource management purposes. The online functionality will make the negotiation process more efficient and less time-consuming, at a time when a wider universe of buy- and sell-side firms is scheduled to come into scope of new IM requirements.


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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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