CCL Regulatory Update

In this edition we review regulatory events and initiatives for June.

UK Edition - June 2020

1.0 FCA Updates & Developments

1.1 FCA SM&CR Extends to Benchmark Administrators

The FCA has published a policy statement that will affect benchmark administrators authorised in the UK that do not undertake any other regulated activities, as well as Appointed Representatives and their principals.

For firms affected, the statement introduces the application of the Senior Manager Regime (SMR) and the conduct rules.

For advice and support with the any SM&CR matters, please contact us

1.2 FCA Financial Resilience Survey  

The FCA has released a statement regarding the distribution of its financial resilience survey, which was sent between 4th – 8th June 2020. The FCA asked around 13,000 firms to complete a short survey to obtain an accurate view of firms’ financial resilience during the COVID-19 pandemic.

For advice and support with any follow up from the resilience survey, please contact us.

1.3 FCA Guidance on Assessing Adequate Financial Resources    

The FCA has published final guidance on a framework to help firms ensure they have adequate financial measures in place and to take effective steps to minimise harm.

The document sets out the expectations of how firms determine they have adequate financial resources and aims to provide more clarity on:

  • the role of adequate financial resources in minimising harm
  • the practices firms can adopt when assessing adequate financial resources
  • how the FCA assesses the adequacy of a firm’s financial resources

The guidance applies to all FCA solo regulated firms subject to threshold conditions and/or the Principle of Businesses.

If you would like support in determining adequate financial resources, or indeed advice in relation to prudential matters, please contact us.

1.4 FCA to Ban Mini-Bond Marketing

The FCA has announced proposals to make permanent its ban on the mass-marketing of speculative illiquid securities, including speculative mini-bonds, to retail investors.

Earlier in January, the FCA introduced the ban without consultation due to its concern that speculative mini-bonds were being promoted to retail investors who did not understand the risks and could not afford the potential financial losses.

The FCA’s permanent ban will include some changes to the ban introduced in January. This includes bringing listed bonds with features similar to illiquid securities and which are not traded regularly, into the scope of the ban.

The FCA is asking for comments in its consultation paper CP20/8 by 1 October 2020.

1.5 FCA Prepares Phased Move to RegData    

The FCA has announced its new data collection platform - called RegData - and which will replace Gabriel.

Firms will now prepare for a phased move to the new platform. This will be done in groups to minimise the impact caused to firms. The moving dates will be determined by the nature of their reporting obligations and schedules.

Firms will not be able to access RegData until all its users and user data have been moved from Gabriel. Principal and associated users of each firm will be notified three weeks before the moving date with reminders sent intermittently and a day before the transfer.

Compliance consultants will receive reminders for every firm their user account is currently associated with in Gabriel.

In advance of the transfer, firms should:

  • Ensure their contact details in Gabriel are correct
  • Nominate the correct principal user and assign admin rights correctly
  • Ensure active users are correct

Gabriel should continue to be used until the firm has moved to the RegData platform.

1.6 FCA Seeks Industry View on New Prudential Regime    

The FCA has published a discussion paper on a prudential regime for UK investment firms. The regime is a first step to introduce a set of prudential rules that better reflect the business models and risks of harm firms pose to consumers and the market.

The paper will be of interest to all solo regulated firms that are authorised under MiFID II, collective portfolio management investment firms, and firms authorised by the Prudential Regulation Authority.

The deadline for comments is 25 September 2020.

1.7 FCA Extends Implementation Period for the SM&CR Regime for Solo-Regulated Firms    

The FCA has delayed the deadline for solo-regulated firms to undertake the first assessment of the fitness and propriety of its Certified Persons from 9 December 2020 to 31 March 2021.

To ensure the Senior Managers and Certification Regime (SM&CR) deadlines remain consistent, the FCA will consult on extending the deadline of the following from 9 December 2020 to 31 March 2021:

  • the date the Conduct Rules come into force
  • the deadline for submission of information about Directory Persons to the Register
  • references in our rules to the deadline for assessing Certified Persons as fit and proper

The FCA will produce further communications on its expectations of firms to provide an effective conduct rules training.

For advice and support with the any SM&CR matters, please contact us, or to receive a demo of our compliance platform, CCL C.O.R.E., please request a demo.


2.0 PRA Updates & Developments

2.1 PRA Statement on Electronic Signatures    

The PRA has issued a statement on electronic signatures on forms and documents delivered to the PRA in light of COVID-19.

The PRA states, in the absence of any specific legal provision to the contrary, that firms may use electronic signatures unless specified otherwise. The approach will be reviewed as working practices evolve.

Firm are noted to obtain their own legal advice on the validity of electronic signatures in specific circumstances.

3.0 EU Regulatory Updates

3.1 ESMA Consults on Cloud Outsourcing Guidelines 

The European Securities and Markets Authority (ESMA) has published a consultation paper on guidelines on outsourcing cloud service providers.

The purpose of the document is to provide guidance on outsourcing to cloud service providers and identify, address and monitor any risks and challenges posed to financial market participants that may arise from the arrangement.

The consultation paper is open until 1 September 2020 and seeks feedback from both national competent authorities and financial market participants. ESMA aims to publish its final report by Q1 2020.

3.2 ESMA Guidance on Compliance Function Under MiFID II    

ESMA has published a guidance on the compliance function under the Markets in Financial Instruments Directive II (MiFID II). The guidelines replace the ESMA guidance on the same topic issued in 2012.

The document will include updates to enhance clarity and supervision of MiFID II compliance functions and the associated requirements.

To discuss your compliance arrangements or to commission an independent expert review of your compliance function, please contact us.

4.0 Financial Crime

4.1 JMLSG Publishes Revised Guidance    

The Joint Money Laundering Steering Group (JMLSG) has published a revised guidance taking into account recent consultations including the Money Laundering and Terrorist Financing (Amendment) Regulation 2019. The revised guidance has now been submitted to HM Treasury for approval.

4.2 Official Journal Amended List of High-Risk Third Countries  

The Commission Delegated Regulation (EU) 2020/855 amending Delegation Regulation 2016/1675 has amended the list of high risk third countries. The Regulation has been published in the Official Journal of the EU.

The Delegated Regulation comes into force on the twentieth day following publication in the OJ. New additions in article 2 come into force on 1 October 2020.

5.0 Enforecment Action

5.1 FCA Fines Lloyds Bank Plc, Bank of Scotland Plc and The Mortgage Business Plc    

The FCA has fined Lloyds Bank plc, Bank of Scotland plc and The Mortgage Business plc £64,046,800 for failures relating to the handling of mortgage customers in paying difficulties or arrears.

The banks’ systems and procedures for gathering information from mortgage customers in payment difficulties or arrears, resulted in collecting inconsistent information which was not adequate to assess the customers’ circumstances and affordability. This created a risk that customers were treated unfairly.

The FCA found the banks to have breached Principle 3 and Principle 6 of the FCA Handbook and were fined accordingly. By November 2019, the banks had already made payments of approximately £259.9 million to customers.

Fair and appropriate treatment of customers experiencing financial difficulty remains a focus for the FCA and it works to ensure firms raise their standards in the area.

5.2 FCA Fines Commerzbank London for Anti-Money Laundering Failures

The FCA has fined Commerzbank London £37,805,400 for failing to put in place adequate Anti-money Laundering (AML) systems and controls. The firm was aware of these failings and did not take reasonable and effective steps to fix them despite the FCA raising specific concerns during the period.

The weaknesses persisted during a period where the FCA published guidance on minimising financial crime risks as well as taking enforcement actions against other firms regarding AML controls. Despite these warnings, the failings were not remedied.

The investigation identified a number of failures in the firm including:

  • Failure to conduct timely periodic due diligence on its clients
  • Failure to address weaknesses in its automated tool to monitor money laundering risk on transactions
  • Failure to have adequate policies and procedures in place when undertaking customer due diligence on clients

The firm agreed to resolve the matter at an early stage and therefore qualified for the 30% discount.

If you have remedial work planned in relation to your AML/CTF programme, do not hesitate to proceed with the work. Where you would like guidance, support or resources to deliver this work, please contact us.