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Welcome to Euro 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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FCA policy statement on retiring FG12/15 and FG14/1

The FCA has published a policy statement (PS18/10) on retiring its finalised guidance relating to inducements and conflicts of interest (FG14/1) and independent and restricted advice (FG12/15).  The statement comes after the FCA’s December 2017 consultation and feedback there to and confirms that the FCA is retiring FG12/15 and FG14/1 with immediate effect.  The guidance has been largely superseded following changes to the FCA's rules, including those  which came into force as a result of MiFID II.  As the FCA's new rules for inducements and the description of advice sevices came into effect on 3 January 2018, firms should already be complying with the requirements.  The new rules caqn be found in Chapter 6.2B of the Conduct of Business sourcebook (COBS).


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GDPR: ICO publishes final version of consent guidance

ICO has published the final version of its guidance on consent. The guidance is intended to sit alongside the ICO's Guide to the GDPR and provides further detail on consent and when it should be relied on as a lawful basis for processing personal data. Of particular note is the ICO's clarification on use of implied consent and suggested time periods for refreshing consent.  The guidance confirms that GDPR sets a higher standard for consent than was previously the case under the Data Protection Act 1998 (DPA) and the changes should give people genuine choice and control over how their data is used. The guidance also emphasises the concept of consent being "dynamic" and an "organic, ongoing and actively managed choice".  The key consent elements remain the same as under the DPA (namely it must be freely given, specific, informed and there must be an indication signifying agreement), however, Article 7 of the GDPR sets out a number of additional conditions for consent which must also be complied with (including the keeping of records concerning consent and the right to withdraw consent).


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GDPR: ICO publishes consultation on its draft Regulatory Action Policy

ICO has published a consultation on its draft Regulatory Action Policy, which sets out how the Information Commissioner intends to regulate the new data protection law, including under the GDPR and the Data Protection Bill.  The draft guidance: (i) focuses on proportionality and the discretion of the ICO to take a selective approach in relation to any enforcement action; (ii) states that a hierarchy of regulatory action exists, meaning that the more serious the breach, the more serious the regulatory action undertaken by the ICO will be; (iii) includes statutory guidance on how the ICO will serve assessment or information notices and apply fines as required by the Data Protection Bill.  The draft guidance also sets out the ICO's regulatory priorities for 2018-19, which include a focus on AI, big data and automated decision making, and facial recognition technology applications.


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ESMA updates MiFID II transitional transparency calculations for equities and bonds

ESMA recently updated its FAQs on transitional transparency calculations for equity and bond instruments required under MiFID II and MiFIR.  MiFID II/MiFIR requires performing various transparency calculations in relation to equity and non-equity instruments. Those calculations have to be performed both for the transition from MiFID to MiFID II/MiFIR as well as on an ongoing basis once MiFID II/MiFIR apply.


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FCA video on hard to value assets  

The FCA has published a new webpage detailing how asset management firms value so-called "hard to value" assets.  The webpage comes in response to the FCA’s review on existing FCA rules and guidance and links to a video describing what the review looked at and its findings, giving examples of good practice and areas for improvement.  Some of the actions which the FCA has set it would like to see are: (i) valuation committees taking responsibility and accountability for the valuation processes on an ongoing process; (ii) independence throughout the process; (iii) adherence to internal policies and evidence thereof.  Firms are encouraged to watch the video and consider their arrangements.


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ISDA® speech on benchmark reform initiatives

ISDA® recently published a speech given by Scott O'Malia, ISDA Chief Executive, on benchmark reform initiatives.In the speech, Mr O'Malia provides an overview of ISDA's work to support a smooth transition from the interbank offered rates (IBORs) to risk-free rates (RFRs):  In June 2018, ISDA will publish its IBOR benchmark transition report This report will include the results of ISDA's global survey of market participants on the transition to RFRs. This work has highlighted market participants' concerns about the fact that the RFRs are only available on an overnight basis. This could pose complications for certain products like floating rate notes that are traded on the basis of known interest payments at the next interest payment date. The RFR working groups are looking at this issue and are considering the feasibility of a forward-looking term fixing for the RFRs.  ISDA will release "very shortly" a market-wide consultation on the credit spread methodology and term fixing adjustments that should apply for derivatives fallbacks. These fallback rates are intended to address concerns about what will happen if an IBOR is permanently discontinued. ISDA is working on an initiative to specify fallbacks that can be written into derivatives contracts that reference certain key IBORs. The consultation will set out several approaches to term RFR fixings, and several methodologies for calculating a credit spread. ISDA also expects to publish a protocol to allow market participants to incorporate the fallbacks into existing trades.  


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OFSI guidance for businesses on sanctions 

The Office of Financial Sanctions Implementation (OFSI) recently published new guidance for businesses on the scheme of trade and financial sanctions and the imposition of monetary penalties where there is a breach.  The guidance takes the form of frequently asked questions for importers and exporters. Importantly the guidance reminds businesses that they must assess their own risk of exposure to dealing with an entity subject to financial sanctions and must put appropriate measures in place to manage such risks. The guidance then reminds businesses that as a very first step they should make themselves aware of the financial sanctions imposed by the UK and other jurisdictions and then determine how they apply to that business. For more information see Practice note, Financial sanctions. The guidance also reminds businesses that self-reporting a breach of a sanction is a factor taken into account in determining what action OFSI will take. The guidance is a useful tool for businesses establishing systems to address the risks posed by the regime of financial and trade sanctions.


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ECON report on sustainable finance

The European Parliament's Economic and Monetary Affairs Committee (ECON) recently published its report on sustainable finance. The report includes the following recommendations: (i) the European Commission should come forward with an ambitious legislative framework, recognising the proposals put forward in its March 2018 action plan on sustainable finance; (ii) the Commission should legislate to establish a "green finance mark" by the end of 2019 to be granted to investment, equity and pension products that have achieved the highest sustainability standards; (iii) the Commission should use its powers under the Regulation on key information documents for PRIIPs to adopt a delegated act specifying the details of procedures for establishing whether a PRIIP targets specific environmental or social objectives; (iv) the European Supervisory Authorities should develop guidelines for model contracts between asset owners and asset managers, including the identification and integration of environmental, social and governance  risks on behalf of the asset manager; (v) ESMA should be mandated to require credit rating agencies to incorporate sustainability risks into their methodologies; and (vi) the Commission should establish a binding labelling system for firms offering retail bank accounts, investment funds, insurance and financial products, indicating the extent to which underlying assets are in conformity with the Paris Agreement and ESG goals.  Parliament will consider the report in its plenary session to be held from 28 May to 31 May 2018.


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Implementing Regulation on ITS under MMF Regulation on templates for reporting to competent authorities published in OJ

The Commission Implementing Regulation which lays down implementing technical standards (ITS) with regard to the template to be used by managers of money market funds (MMFs) when reporting to competent authorities was recently published in the OJ. The Regulation on MMFs (MMF Regulation) requires the manager of the MMF, for each MMF it manages, to report information to the competent authority of the MMF at least on a quarterly basis. ESMA was mandated to develop draft ITS to establish a report template that contains the relevant information. In November 2017, ESMA published the final draft of these ITS and sent them to the Commission for endorsement. The Commission adopted the Implementing Regulation in April 2018. It enters into force on 4 June 2018 (that is, 20 days after publication in the OJ) and applies from 21 July 2018 (that is, the application date for the MMF Regulation).


 

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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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