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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.


Claire Cummings

020 7585 1406


ICO Podcast

Our podcast on ICOs will be available online next week on our website at: This podcast is the first in a two-part series discussing ICOs. If you would like further information about ICOs and the work that Cummings Law are doing in this area, please e-mail Claire Cummings at


BCBS sets out sound practices on implications of FinTech for banks and bank supervisors

The BCBS has published a report setting out sound practices on the implications of FinTech for banks and bank supervisors. In the report, the BCBS assesses how FinTech may affect the banking industry and the activities of supervisors in the near to medium term. It considers five future potential scenarios: the better bank, the new bank, the distributed bank, the relegated bank, and the disintermediated bank. In addition to the banking industry scenarios, the report contains six case studies focussing on specific innovations. Three of the case studies assess enabling technologies (Big Data, distributed ledger technology (DLT) and cloud computing), and three assess FinTech business models (innovative payment services, lending platforms and neo-banks). The BCBS aims to obtain a better understanding of the individual risks and potential opportunities of a specific FinTech development through the different scenarios. The BCBS notes that a common theme across the various scenarios is that banks will find it increasingly difficult to maintain their current operating models, given technological change and customer expectations. It also comments that the adoption of FinTech means the scope and nature of banks' risks and activities are rapidly changing, so the rules governing them may also need to evolve. The BCBS considers that banking standards and supervisory expectations should be adaptive to new innovations, while maintaining appropriate prudential standards.


FCA and CFTC enter into FinTech co-operation agreement

The FCA and the CFTC have entered into a co-operation agreement that focusses on information sharing on FinTech market trends and developments. The agreement also facilitates referrals of UK and US FinTech companies interested in entering the others’ market, and sharing information and insight derived from each regulator’s relevant sandbox (FCA Innovate and LabCFTC), proof of concept, or innovation competitions. The arrangement supports both regulators' efforts to facilitate responsible FinTech innovation and ensure international collaboration on emerging regulatory best practices


Investment Association launches FinTech accelerator for asset management industry

The IA published a press release announcing the launch of a FinTech accelerator for the asset management industry. VeloCity, the FinTech accelerator, will bring together FinTech firms with market-viable technology tailored to the asset management sector, supported by industry practitioners. Potential technology solutions include using machine learning, artificial intelligence (AI), distributed ledger technology (DLT), cloud-based infrastructure and big data to aid mid and back office operations, fund distribution, and marketing.


FCA “Dear CEO” letter on quality of prudential regulatory returns

The FCA published a "Dear CEO" letter it has sent to IFPRU investment firms and BIPRU firms concerning the quality of prudential regulatory returns. The FCA uses these returns to assess prudential risk and the FCA's assessment of the quality of firms' risk management is influenced by the quality of the data submitted in regulatory returns. In the letter, the FCA asks the CEOs of IFPRU and BIPRU firms to review their regulatory reporting practices because a "significant number" of firms submit regulatory returns that contain inaccurate or incomplete data (or both). The FCA notes that, although these errors may appear minor in isolation, they can materially distort data that is aggregated and used to analyse a sector or a group of firms. CEOs of IFPRU investment firms and BIPRU firms should therefore review their firm's regulatory reporting practices to ensure they are fit for purpose, comply with the relevant reporting provisions and produce materially accurate data. With effect from 1 October 2018, the FCA will review a sample of firms' returns. If it finds that firms continue to submit materially inaccurate, incomplete or poor quality data, it will consider taking further steps to improve the standards of returns.


FCA call for input on using technology to achieve smarter regulatory reporting

The FCA published a call for input on how technology can be used to make it easier for firms to meet their regulatory reporting requirements and improve the quality of the information they provide. The FCA regularly explores how technology can make its regulation more efficient (referred to as RegTech). One of the ways it does this is through "TechSprint" events that bring together financial services providers, technology companies and subject matter experts to explore technological innovations. One of the events developed a "proof of concept" that could make regulatory reporting requirements machine-readable and executable. This means that firms could map the reporting requirements directly to the data that they hold, creating the potential for automated, straight-through processing of regulatory returns. The call for input asks for views on how the FCA can improve the process and seeks feedback on some of the broader issues surrounding the role technology can play in regulatory reporting.


Treasury Select Committee SME finance inquiry terms of reference

The House of Commons Treasury Select Committee has published the terms of reference for its inquiry into the state of the SME finance market. This inquiry will take a broad look at the state of the market for SME finance. In particular, it will consider the extent of competition in the market, the various sources of funding available to small businesses, including crowdfunding and peer-to-peer lending, and whether the current regulatory framework provides appropriate protection to SMEs when they borrow money. The inquiry will consider the state of the SME finance market under the following themes: (i) Funding options available to SMEs; (ii) the ability of SMEs to resolve disputes and access fair and reasonable compensation when they borrow money; and (iii) the regulation of SME lending.


HMRC consultation on extending time limits for offshore non-compliance

HMRC has published a consultation inviting views on the design principles for legislation to extend the time limits for assessing offshore non-compliance to 12 years for non-deliberate behaviour. The time limit, of 20 years, for deliberate behaviour, will remain unchanged. The extended time limit reflects the additional time that HMRC needs to establish facts about offshore transactions, particularly where complex structuring is involved. The new time limit will apply to assessments relating to income tax, capital gains tax and inheritance tax. The government is also considering applying the proposals to corporation tax, and is seeking views on this. It is intended that the extended time limit will apply with effect from 1 April 2019 for inheritance tax (and corporation tax, if included), and 6 April 2019 for income tax and capital gains tax, for any year that is still in date for assessment. The new time limit will not apply retrospectively.


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25 05 2019

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