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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


FCA report on cyber and technology resilience

On 27 November 2018, the FCA published a report on cyber and technology resilience: themes from cross-sector survey 2017-2018. During 2017 and 2018, the FCA surveyed almost 300 firms to assess their technology and cyber capabilities. The survey looked at key areas such as governance, delivery of change management, managing third-party risks and effective cyber defences. Firms self-assessed their capabilities and the FCA then analysed the responses for each firm and across sectors. The report highlights key themes and areas for improvement from the survey, including:

  • Some firms have identified a lack of cyber and technology knowledge at board level, which may limit the effectiveness of board challenge. Board and senior management engagement with cyber and technology resilience is critical to improving firms' wider operational resilience.

  • Firms have identified challenges in identifying and managing their high-risk staff and then educating those employees with access to critical systems or sensitive data, who are more likely to be targeted by cyber criminals.

  • The FCA is of the view that information sharing could be improved, especially the extent to which smaller firms are involved in information sharing networks and platforms.

  • It is increasingly important to manage third parties since they account for 15% of the operational incidents reported to the FCA.


FSB Chair letter to G20 leaders reports on progress made in 2018 and highlights main issues ahead

On 27 November 2018, the Financial Stability Board (FSB) published a letter (dated 26 November 2018) from Mark Carney, FSB Chair, to the G20 leaders.

The G20 leaders are meeting at a summit in Buenos Aires on 30 November and 1 December 2018. In the letter, Dr Carney describes 2018 as a "year of transition" and reports on the FSB's delivery against its four priorities during 2018. He also highlights the key issues on which the FSB will continue to focus and which require attention from the G20 leaders, relating to the following broad areas:

  • Addressing emerging vulnerabilities while harnessing the benefits of innovation.

  • Disciplined completion and implementation of the G20's reform priorities.

  • Pivoting to policy evaluation to ensure reforms are delivering resilience efficiently.

  • Optimising how the FSB works to maximise its effectiveness and transparency


Investment Association publishes principles of remuneration for 2019.

The Investment Association has published a revised version of its principles of remuneration for 2019. The main changes from the November 2017 version are a recommendation of a minimum post-termination shareholding period of at least two years; and new guidance on both specific malus and clawback provisions in share plan rules, and on restricted share plans.


EU Blockchain Industry Roundtable leads to agreement on "association for trusted blockchain applications".

The EU Blockchain Industry Roundtable took place on 20 November 2018. Several of the participants agreed to the establishment of the "International Association for Trusted Blockchain Applications", which will be based in Europe and will be open to any organisation willing to work on the deployment of blockchain and distributed ledger technologies to transform digital services.


Working Group on Sterling Risk-Free Reference Rates communication pack on LIBOR transition

On 26 November 2018, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a communication pack (dated November 2018) entitled "Preparing for 2022: what you need to know about LIBOR transition".

The pack has been prepared by the RFRWG's Communications and Outreach Sub-Group, to provide information on the transition from the London Interbank Offered Rate (LIBOR) to the Sterling Overnight Index Average (SONIA). Areas covered by the pack include:

  • The issues with LIBOR.

  • Why SONIA is the preferred alternative.

  • What firms should be doing.

  • The role of the RFRWG.

  • Transition challenges.

  • RFRWG milestones (see Legal update, Working Group on Sterling Risk-Free Reference Rates agrees timeline with milestones for RFR transition in sterling markets).

  • International developments.


FCA Handbook: second FCA consultation on Brexit changes to Handbook and binding technical standards

On 23 November 2018 the FCA published for consultation its second set of proposed changes to the FCA Handbook and EU derived binding technical standards if the UK leaves the EU without an implementation period. The proposals include, among other things:

  • Amendments to the Disclosure Guidance and Transparency Rules, Listing Rules and Prospectus Rules.

  • Changes to certain BTS in respect of the Market Abuse Regulation, Transparency Directive and Prospectus Directive.

  • The FCA's approach to Handbook forms.

  • Guidance on the FCA's approach to non-Handbook guidance.

  • The consultation closes on 21 December 2018. The FCA intends to give feedback on the consultation paper and publish near final instruments in early 2019.


Listing, Prospectus and Transparency: HM Treasury explanatory note on EU exit regulations

On 21 November 2018, HM Treasury published explanatory information on the draft Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019, which are to be published in due course. The regulations will address deficiencies in the Prospectus Directive and Transparency Directive that arise from Brexit and form part of planning for a no-deal scenario. They will replicate, as far as possible, the current effects of the prospectus regime, the transparency rules and the listing rules but make a number of changes, including:

  • Prospectuses for use in the UK will need to be approved by the FCA even if they have been approved by a competent authority of an EEA member state. Prospectuses passported into the UK before exit day may be used in the UK until their validity expires.

  • Technical assessments of the prospectus regimes of third country jurisdictions will be undertaken by the FCA and equivalence decisions in respect of those regimes will be made by HM Treasury. Existing equivalence decisions regarding the presentation of historical financial information in a prospectus will be domesticated into UK legislation.

  • HM Treasury will be responsible for making equivalence decisions (after consultation with BEIS) in respect of the accounting rules of third-country jurisdictions for the purposes of the prospectus and transparency regimes.

  • HM Treasury intends to issue an equivalence decision (which will be kept under review) in time for exit day determining that EU-adopted IFRS can continue to be used to prepare financial statements for transparency requirements and for the purposes of preparing a prospectus. The government intends to seek equivalence on accounting under the EU's existing third country regimes.

The government intends to domesticate those provisions of the new Prospectus Regulation that are not in application at exit day (only those provisions that apply before exit day will be converted into UK law pursuant to the EU Withdrawal Act).

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25 05 2019

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