If you have any comments or questions, please contact Elizabeth Prentice. Slaughter and May also produces a periodical Insurance Newsletter. If you would like to go on the distribution list, please contact Beth Dobson.

Selected Headlines

General

Brexit

Banking and Finance

Securities and Markets

Asset Management

Insurance

Financial Crime

Enforcement

Financial Regulation

Weekly Bulletin 27 October 2016 / Issue 884

Major UK and European regulatory developments of interest to banks, insurers and reinsurers, asset managers and other market participants

Selected Headlines General

Review of consumer policy - speech by European Commissioner, Věra Jourová

1.1

Director General, Financial Services - Treasury appoints Katharine Braddick

2.1

Post-crisis regulatory standards – first Mansion House speech by PRA CEO, Sam Woods

3.1

The FCA’s Mission - FCA launches consultation 4.1

Brexit

Exiting the European Union Committee – Commons Select Committee established and elects Chair

7.1

Joint Ministerial Committee on EU Negotiations - established with leaders from Scotland, Wales and Northern Ireland

8.1

Banking and Finance

CRD IV - Commission publishes Delegated Regulation on benchmarking portfolio assessment standards and sharing procedures

9.1

Review of large exposures framework under the CRR - EBA responds to European Commission Call for Advice

10.1

FCA Guidance Consultation GC16/7 - Revised proposed guidance on guarantor loans

11.1

Securities and Markets

MAR - Corrigendum published in the Official Journal 13.1

EMIR - Commission publishes Delegated Regulation on trade reports to trade repositories

14.1

PRIIPs Regulation - European Parliament does not object to Commission Regulation on product intervention

15.1

MAR - ESMA publishes translations of Guidelines on market soundings and inside information

16.1

MAR - ESMA publishes updated Q&As 16.2

PRA Policy Statement PS29/16: MiFID II: Response to CP9/16 17.1

Quick Links

Financial Regulation / 27 October 2016 / Issue 884 2

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

EMIR - FCA signs MoU with US CTFC 18.2

Insurance

Solvency II - Commission Implementing Regulation correcting Regulation on templates for information submission to supervisory authorities published in the Official Journal

21.1

Solvency II - HM Treasury consults on new definition of life insurers’ distributable profits in Companies Act 2006

22.1

PRA Supervisory Statement SS15/16: Solvency II: Monitoring model drift and standard formula SCR reporting for firms with an approved internal model

23.1

(1) PRA Consultation Paper CP37/16: Solvency II: Reporting of National Specific Templates (2) Modification by Consent

23.2

Financial Crime

Correspondent banking services - FATF publishes Guidance 24.1

Directive on criminalisation of money laundering - Commission publishes Roadmap

25.1

Criminal Finances Bill - second reading 26.1

Enforcement

Tariq Carrimjee v FCA, [2016] UKUT 0447 (TCC) – powers of the Tribunal in non-disciplinary cases

28.1

General 1. European Commission

1.1 Review of consumer policy - speech by European Commissioner, Věra Jourová - 17 October

2016 - The European Commissioner for Justice, Consumers and Gender Equality, Věra Jourová, has

delivered a speech on the Commission’s ongoing review of consumer policy, intended to prepare

the ground for future reform proposals. The speech included discussion of streamlining EU

Directives, and the possible introduction of: an EU consumer rights code; specific transparency

requirements for online comparison platforms; an EU-wide consumer right to contractual remedies

and to compensation for unfair consumer practices; an EU-wide ‘black list’ of unfair contract

terms; and protections for consumers in distinguishing traders and consumers on collaborative

economy platforms. She also discussed the availability of injunctions being extended to all EU

consumer Directives, and the extension of protection into business-to-business (B2B) relations.

The speech is here.

1.2 Commission Work Programme 2017 - financial services aspects - 25 October 2016 - The

European Commission has published its Work Programme for 2017, containing several Annexes

listing planned Commission Initiatives, regulatory fitness and performance review (REFIT)

initiatives, priority proposals, pending proposals and legislation the Commission plans to repeal.

Among the key initiatives for 2017 for the internal market (starting at page 7) are the continued

implementation of the Capital Markets Union Action Plan (with a mid-term review expected in the

Financial Regulation / 27 October 2016 / Issue 884 3

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

second quarter of 2017), a proposed EU personal pension product, a REFIT revision of EMIR

(648/2012/EU), a strategy on sustainable finance, measures to facilitate funding of infrastructure

corporates, an action plan for retail financial services (including on FinTech), and following up on

the call for evidence on the cumulative impact of financial legislation.

Initiatives on the Economic and Monetary Union (page 10) include a review of the European System

of Financial Supervision to strengthen macro- and micro-prudential oversight, completion of the

Banking Union (including a common European Deposit Insurance Scheme), amendments to CRD IV

(2013/36/EU and 575/2013/EU) and the Bank Recovery and Resolution Directive (2014/59/EU),

and the adoption of pending proposals on securitisation and prospectuses.

On trade (page 11), the Work Programme states that a reasonable and balanced Free Trade

Agreement with the US is a priority. Regarding justice (starting at page 11), the Work Programme

outlines the further implementation of the Commission’s agenda on terrorist financing (see further

an item in the Financial Crime section below).

The Work Programme is here.

Annex 1 (key initiatives for 2017) is here.

Annex 2 (planned REFIT initiatives) is here.

Annex 3 (priority pending proposals) is here.

Annex 4 (planned legislative withdrawals) is here.

Annex 5 (panned repeals) is here.

A REFIT Scoreboard summary is here.

The REFIT Scoreboard for 2016 is here.

A list of legislation that becomes applicable in 2017 is here.

A Commission Work Programme infographic is here.

Q&As on the Work Programme are here.

2. HM Treasury

2.1 Director General, Financial Services - Treasury appoints Katharine Braddick - 24 October 2016 -

HM Treasury has announced that Katharine Braddick, current Treasury Director for Financial

Services (International and EU), has replaced Charles Roxburgh as Director General, Financial

Services, with immediate effect.

The role of Director General, Financial Services, includes responsibility for all issues relating to

financial services, the financial system and financial stability at the Treasury, and is expected to

play a role in the Treasury’s contribution to negotiations on Brexit.

Ms Braddick was previously Director of Prudential Policy at the PRA between 2012 and 2014, Head

of Prudential Banking Policy at the FSA (2011 to 2012), and Head of Department in the

Financial Regulation / 27 October 2016 / Issue 884 4

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

International Division of the FSA (2008 to 2011). She joined the FSA in 2003 from the Association of

British Insurers.

The press release is here.

2.2 Financial Services Trade and Investment Board - HM Treasury announces two new

appointments - 24 October 2016 - The Chancellor of the Exchequer confirmed the appointment of

the Chief Executive of TheCityUK, Miles Celic, and International Trade Minister, Mark Garnier MP,

to the Financial Services Trade and Investment Board (FSTIB). The FSTIB, launched at the Budget

in 2013, is tasked with strengthening the UK’s position at the centre of global finance, as well as

enabling the financial services sector to deliver jobs and growth across the country.

The press release is here.

3. Prudential Regulation Authority

3.1 Post-crisis regulatory standards – first Mansion House speech by PRA CEO, Sam Woods - 26

October 2016 - Sam Woods, has given his first speech as Deputy Governor for Prudential Regulation

at the Bank of England and Chief Executive of the Prudential Regulation Authority (PRA), at the

Mansion House Banquet. He spoke on the PRA’s goals, and its implementation of post-crisis

regulatory reforms.

Among other things, Mr Woods made the following points:

his approach to running the PRA — was “more of the same. That means supervision

which is firm but fair, using all of the latest analytical tools and techniques, together

with a healthy dose of common sense”. He also indicated that he would focus on the

PRA’s statutory objectives, and that he approved of the judgement-based, forward-looking

supervisory model adopted by the PRA;

we have reached the end of the post-crisis revolutionary period — so far as prudential

standards are concerned, although they have to be implemented;

ring-fencing — ideally we would not restructure our banking system and extricate

ourselves from the EU at the same time, but the benefits are worth pursuing;

bail in — the PRA will issue its final policy shortly;

supervision — the PRA will continue to ask searching questions about the quality of a

firm’s assets, the rigour of its risk management, the experience of its board, the

plausibility of its resolution plan, etc.;

greater transparency around the capital adequacy of the banking system — next week

the Bank of England will launch a new quarterly statistical release which will show levels

of capital and risk-weighted assets for the UK banking sector, with breakdowns of the

movements in different tiers of capital and risk exposure types. The first set of data (for

Q1 2014 to Q2 2016) will be published on 16 December 2016;

disclosure framework for banks’ and insurers’ regulatory data — the regulator will

publish a Discussion Paper on this in summer 2017;

Financial Regulation / 27 October 2016 / Issue 884 5

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

Solvency II — Mr Woods welcomed the European Commission’s request for the European

Insurance and Occupational Pensions Authority to review the role of the risk margin; and

internal models for smaller firms — the PRA will bring forward proposals under the Pillar

2 regime which should reduce the risk that its capital standards are overly prudent for

smaller firms using the standardised approach to credit risk to calculate their

requirements.

The speech is here.

The speech webpage is here.

The press release is here.

4. Financial Conduct Authority

4.1 The FCA’s Mission - FCA launches consultation - October 2016 - The FCA has launched a

consultation on its mission, with a view to the establishment of a set of guiding principles which

explain how the FCA pursues its statutory objectives, decides on its priorities, and the tools used

to deliver on its objectives.

The key themes include:

protecting consumers — seeking views on the right level of consumer protection, and the

balance of responsibility between firms and customers;

vulnerable consumers — whether the FCA should prioritise the protection of vulnerable

consumers, and how;

delivering consumer redress — the FCA’s role in redress schemes, particularly those dealing

with activity outside the FCA’s remit;

FCA intervention — how the FCA identifies harm, its approach in addressing it, and how the

FCA can be clearer to consumers and firms on its interventions;

the scope of regulation — explaining its remit around policing the perimeter;

the interaction between regulation and public policy — including on access to financial

services and price discrimination;

competition, supervision and enforcement — views are sought on the FCA’s current approach

to using its different regulatory powers and tools; and

the FCA Handbook — seeking suggestions on a proposed review.

In Chapter 13 (‘Our approach to enforcement’), the FCA is reviewing the use of the term ‘referred

to Enforcement’, which it believes is often misinterpreted as meaning it has decided to initiate

enforcement proceedings, when it has simply decided to investigate. The FCA proposes a more

neutral term, such as ‘referral for investigation of a suspected contravention or breach’. The FCA

is also reviewing its use of ‘private warnings’, and whether they are consistent with the FCA’s

Financial Regulation / 27 October 2016 / Issue 884 6

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

desire to be more transparent, but noting their benefits in providing a quick and clear resolution

to concerns.

In Chapter 14 (‘Looking ahead’), the FCA talks about data science, indicating that its initial focus

is on sifting a large amount of data to target firms with a higher risk of having problems. Its next

focus will be on financial crime (detecting insider trading, market manipulation and anti-money

laundering).

FCA Chief Executive, Andrew Bailey, delivered a speech at Mansion House on 26 October 2016,

setting out in further detail the FCA’s approach, and the rationale behind the FCA’s future

mission.

The consultation period closes on 26 January 2017.

The FCA plans to publish its final mission paper alongside its 2017/18 business plan.

The consultation ‘Our Future Mission’ is here.

The FCA’s future mission webpage is here.

A transcript of Andrew Bailey’s introductory video is here.

The Mansion House speech by Andrew Bailey is here.

The press release is here.

5. Financial Ombudsman Service

5.1 FOS voluntary jurisdiction - FOS consults on FCA ‘minor’ amendments - 24 October 2016 - The

Financial Ombudsman Service (FOS) has issued a consultation on proposals by the FCA to make

what the FOS has described as “minor amendments” to make “administrative changes” to the

voluntary jurisdiction of the FOS, as set out in the Dispute Resolution: Complaints sourcebook

(DISP) of the FCA Handbook, to correct “historic drafting discrepancies”. The proposed changes

are set out in a draft Handbook Administration (No. 44) Instrument 2016.

The consultation period closes on 9 November 2016.

The consultation is here.

6. New legislation

6.1 The Financial Services (Banking Reform) Act 2013 (Consequential Amendments) (No. 2) Order

2016 (SI 2016/1023) was made on 21 October 2016 and comes into force on 21 November 2016.

The Order makes consequential amendments to the Financial Services and Markets Act 2000

(Qualifying EU Provisions) Order 2013 (SI 2013/419) and the Financial Services and Markets Act

2000 (Qualifying EU Provisions) (No. 2) Order 2013 (SI 2013/3116), which specify a “qualifying EU

provision” for the purposes of determining whether a person has been knowingly concerned in a

contravention of a relevant conduct requirement by an authorised person under sections 66A and

66B of FSMA 2000, inserted by the Financial Services (Banking Reform) Act 2013.

The Order is here.

Financial Regulation / 27 October 2016 / Issue 884 7

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

The explanatory memorandum is here.

Brexit 7. UK Parliament

7.1 Exiting the European Union Committee – Commons Select Committee established and Chair

elected - 19 October 2016 - The House of Commons has established the Exiting the European

Union Committee and elected Hilary Benn MP as its Chair. It has tweeted that the Committee will

be holding the Department for Exiting the EU to account for policy, spending and administration.

Mr Benn’s nomination statement explained that:

“The Committee will need to scrutinise and offer advice to the Government as we go

about the complex process of leaving the institutions of the European Union. Our aim

should be to minimise the risks and uncertainty for business, protect the things that the

British people value and make the most of the opportunities.”

He went on to say:

“There are a large number of substantive issues that the Committee and the House will

need to deal with as part of this process now that the Government has indicated when it

will trigger Article 50. These will include the Government’s negotiating plan, ensuring

continued access to European markets for all our industries and services, future

arrangements for immigration control from the EU and maintaining cooperation with our

European neighbours in areas like foreign policy, defence and security that are

particularly important to us.”

A large number of other Parliamentary Select Committees are also engaged in work on specific

aspects of Brexit, including, among others, the House of Commons Foreign Affairs Committee on

the transposition of current EU Regulations, and the House of Lords EU Internal Market Sub-

Committee on UK-EU trade in services post-Brexit.

The Exiting the European Union Committee webpage is here.

The press release announcing the election of Hilary Benn is here.

Mr Benn’s nomination statement is here.

The Foreign Affairs Committee Inquiry webpage is here.

The Lords EU Internal Market Sub-Committee Inquiry webpage is here.

8. HM Government

8.1 Joint Ministerial Committee on EU Negotiations - established with leaders from Scotland,

Wales and Northern Ireland - 24 October 2016 - The Prime Minister has met the First Ministers of

each of Scotland, Wales and Northern Ireland at a meeting of the Joint Ministerial Committee to

discuss their potential contributions to negotiations on the UK’s exit from the European Union.

Among other things, the Committee set up a Joint Ministerial Committee on EU Negotiations, to be

chaired by Brexit secretary David Davis. The Committee is expected to hold its first meeting in

November, where it will discuss its work programme. The Joint Ministerial Committee

communiqué of 24 October 2016 contains the new Committee’s terms of reference.

Financial Regulation / 27 October 2016 / Issue 884 8

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

Through the Joint Ministerial Committee on EU Negotiations, the UK government and devolved

administrations will work collaboratively to:

discuss each government’s requirements of the future relationship with the EU;

seek to agree a UK approach to, and objectives for, Article 50 negotiations;

provide oversight of negotiations with the EU, to ensure, as far as possible, that outcomes

agreed by all four governments are secured from these negotiations; and

discuss issues stemming from the negotiation process which may affect or have consequences

for the UK Government, the Scottish Government, the Welsh Government or the Northern

Ireland Executive.

The Joint Ministerial Committee communiqué is here.

The press release is here.

See also the General section above for two items on new appointments, to the post of Director General,

Financial Services at HM Treasury, and to the Financial Services Trade and Investment Board.

See further the General section above for an item on the Mansion House speech by new PRA CEO, Sam

Woods, which mentions the intention to press ahead with ring-fencing, despite the negotiations to leave

the EU.

Banking and Finance 9. European Commission

9.1 CRD IV - Commission publishes Delegated Regulation on benchmarking portfolio assessment

standards and sharing procedures - 24 October 2016 - The European Commission has published a

Delegated Regulation (C(2016) 6703) setting out draft regulatory technical standards (RTS) for

benchmarking portfolio assessment standards and the assessment sharing procedures under Article

78(7) of the Capital Requirements Directive (2013/36/EU) (CRD IV).

The Delegated Regulation is here.

10. European Banking Authority

10.1 Review of large exposures framework under the CRR - EBA responds to European Commission

Call for Advice - 24 October 2016 - The European Banking Authority (EBA) has published its

response to the European Commission’s Call for Advice (26 April 2016) on its review of the Capital

Requirements Regulation’s (575/2013/EU) (CRR) large exposures framework.

The report is here.

The press release is here.

10.2 BRRD - EBA consults on draft ITS on identification and transmission of MREL information to the

EBA - 24 October 2016 - The EBA has issued a Consultation Paper containing draft implementing

technical standards (ITS) on templates and procedures for use by resolution authorities in

Financial Regulation / 27 October 2016 / Issue 884 9

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

reporting to the EBA on the minimum requirements for own funds and eligible liabilities (MREL)

under Article 45(17) of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD).

The consultation period closes on 21 November 2016.

The Consultation Paper is here.

The Annex to the Consultation Paper is here.

The Consultation webpage is here.

The press release is here.

10.3 PSD2 - EBA published responses to consultation on customer authentication and secure

communication - 27 October 2016 - The EBA has published responses to its 12 August 2016

consultation on draft regulatory technical standards (RTS) covering strong consumer

authentication and common and secure communication under the second Payment Services

Directive (EU) 2015/2366 (PSD2). They include a response from the European Payments Council

(EPC).

The EBA’s consultation webpage, which contains a full list of published responses is here.

The EPC’s response is here.

The EPC’s press release is here.

11. Financial Conduct Authority

11.1 FCA Guidance Consultation GC16/7 - Revised proposed guidance on guarantor loans - October

2016 - In February 2016, the FCA published a guidance consultation (GC16/2) which set out how it

would interpret provisions of the Consumer Credit Act 1974 (CCA) regarding the enforcement of

security in the context of guarantor loans and whether this requires a default notice under the

CCA. The FCA has now published a further guidance consultation (GC16/7) in light of the responses

to GC16/2.

The consultation period closes on 25 November 2016.

The FCA anticipates releasing its Finalised Guidance in Q1 2017.

FCA Guidance Consultation GC16/7 is here.

The Guidance Consultation webpage is here.

12. Competition and Markets Authority

12.1 Retail banking market investigation - speech by Investigation Chair, Alasdair Smith, on the

investigation’s impact - 21 October 2016 - The Inquiry Chair of the Competition and Markets

Authority’s (CMA) retail banking market investigation, Alasdair Smith, has delivered a speech on

the impact of the investigation on retail banking and the effect of the CMA’s package of remedies.

In the speech, Mr Smith details:

Financial Regulation / 27 October 2016 / Issue 884 10

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

the main problems affecting competition in retail banking, as raised by the investigation;

the CMA’s remedies package and its impact on the market; and

the reasoning behind actions not taken by the CMA, including the break-up of bigger retail

banks, not banning ‘free if in credit’ banking, and not making any changes that would overlap

with the areas covered by other regulators, such as payment systems and prudential standards.

The speech is here.

See also the General section above for an item on the European Commission Work Programme 2017.

See the Securities and Markets section below for an item on PRA Policy Statement PS29/16: MiFID II:

Response to CP9/16.

See also the Financial Crime section below for an item on the FATF publishing Guidance on correspondent

banking.

See further the Financial Crime section below for an item on the Government proposing to amend the

Privacy and Electronic Communications Regulations to make directors liable to fines for nuisance calls

(sometimes associated with claims management companies and payment protection insurance).

Securities and Markets 13. Official Journal of the European Union

13.1 MAR - Corrigendum published in the Official Journal - 21 October 2016 - A Corrigendum to the

Market Abuse Regulation (596/2014/EU) (MAR), making three corrections, has been published in

the Official Journal of the European Union.

The Corrigendum is here.

14. European Commission

14.1 EMIR - Commission publishes Delegated Regulation on trade reports to trade repositories - 26

October 2016 - The European Commission has adopted a Delegated Regulation (C(2016) 6801)

amending Commission Implementing Regulation 1247/2012/EU, which sets out implementing

technical standards (ITS) on the format and frequency of trade reports to trade repositories under

the European Market Infrastructure Regulation (648/2012/EU) (EMIR).

The Delegated Regulation is subject to a non-objection period from the European Parliament and

the Council of the European Union.

The ITS enter into force nine months after their publication in the Official Journal of the EU, with

the exception of the extension of the deadline for the reporting of historic trades, which will

become applicable immediately upon publication.

The Delegated Regulation is here.

The Annex is here.

The press release is part of the Commission’s 26 October 2016 daily news here.

Financial Regulation / 27 October 2016 / Issue 884 11

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

15. European Parliament

15.1 PRIIPs Regulation - European Parliament does not object to Commission Regulation on product

intervention - 21 October 2016 - The European Parliament has indicated that it does not object to

the European Commission’s Delegated Regulation (C(2016) 4369) on product intervention under

the Packaged Retail and Insurance-based Investment Products Regulation (1286/2014/EU) (PRIIPs

Regulation).

The Council has already indicated that it does not object, so the Commission Delegated Regulation

is now expected to be published in the Official Journal of the European Union. It will enter into

force on the 20th day following publication in the Official Journal of the EU, and will apply from 31

December 2016.

The Delegated Regulation of 17 July 2016 is here.

The procedure file is here.

16. European Securities and Markets Authority

16.1 MAR - ESMA publishes translations of Guidelines on market soundings and inside information -

20 October 2016 - The European Securities and Markets Authority has published official

translations of two sets of Guidelines under the Market Abuse Regulation (596/2014/EU) (MAR): on

persons receiving market soundings, and on the delay and disclosure of inside information.

The Guidelines apply from 20 December 2016.

The Guidelines on persons receiving market soundings is here.

The Guidelines on delay in the disclosure of inside information is here.

The press release is here.

16.2 MAR - ESMA publishes updated Q&As - 26 October 2016 - ESMA has published an updated set of

Q&As on the implementation of MAR. The new Q&As relate to:

manager’s transactions and the exchange rate that should be used to determine if the

threshold in Article 19(8) MAR of EUR 5,000 has been crossed;

whether communications made orally or via electronic means, such as telephone calls and

“chat” functions, or communications labelled e.g. “morning notes” or “sales notes”, constitute

an “investment recommendation” under MAR;

whether communications that do not refer to either one or several financial instruments or

issuers should be considered investment recommendations under MAR;

whether an investment firm which produces an investment recommendation should be

considered to fall within the scope of Article 3(1)(34)(i) of MAR, even though the production of

such a recommendation is not its main business; and

whether material intended for distribution channels or for the public, concerning one or

several financial instruments, which contains statements indicating that the financial

Financial Regulation / 27 October 2016 / Issue 884 12

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

instruments concerned are “undervalued”, “fairly valued” or “overvalued”, falls within the

definition of “investment recommendation” under MAR.

The updated Q&As are here.

The press release is here.

16.3 MiFIR - ESMA publishes new reporting templates and instructions - 27 October 2016 - ESMA has

released a number documents containing reporting instructions under the Markets in Financial

Instruments Regulation (600/2014/EU) (MiFIR).

The technical reporting instructions for MiFIR transaction reporting are here.

The reporting instructions for the double cap volume system is here.

The reporting instructions for the FIRDS transparency system is here.

The reporting instructions for the FIRDS reference data system is here.

ESMA’s MiFIR reporting instructions webpage is here.

17. Prudential Regulation Authority

17.1 PRA Policy Statement PS29/16: MiFID II: Response to CP9/16 - October 2016 - The Prudential

Regulation Authority (PRA) has released a Policy Statement (PS29/16) setting out feedback to the

PRA’s Consultation Paper CP9/16 (March 2016) on the implementation of the Markets in Financial

Instruments Directive (2014/65/EU) (MiFID II) in the UK (Part 1). The Policy Statement also sets

out final rules on:

the extension of scope and harmonisation of the MiFID passporting regime in the Passporting

Part of the PRA Rulebook; and

systems and controls for firms that undertake algorithmic trading and provide direct electronic

access to trade venues in the new Algorithmic Trading Part of the PRA Rulebook, with final

rules set out in the ‘PRA Rulebook: CRR Firms: Algorithmic Trading Instrument 2016’.

The PRA has indicated the main areas where it has made amendments to the rules proposed in

CP9/16 in Chapter 2 of PS29/16 and has stated that these are mainly to aid clarity.

PRA Policy Statement PS29/16 is here.

The PRA Rulebook: CRR Firms: Passporting Instrument 2016 (PRA 2016/42) is here.

The PRA Rulebook: CRR Firms: Algorithmic Trading Instrument 2016 (PRA 2016/41) is here.

The Policy Statement webpage is here.

18. Financial Conduct Authority

18.1 MiFID II - FCA updates firms on authorisation process - 21 October 2016 - The FCA has informed

firms that it intends to start accepting applications for variation of permission and passporting

notifications under MiFID II in early 2017.

Financial Regulation / 27 October 2016 / Issue 884 13

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

Ahead of the FCA accepting applications, it intends to host a series of events and workshops.

In addition, the FCA is developing a new Market Data Processor system, to be used to manage data

submitted by entities under MiFID II. The FCA expects to host technical events for firms and those

submitting market data.

The sign up form for MiFID II workshops is here.

18.2 EMIR - FCA signs MoU with US CTFC - 27 October 2016 - The FCA has published a Memorandum of

Understanding (MoU) (dated 6 October 2016) signed by the FCA and the US Commodities Futures

Trading Commission (CFTC). The MoU sets out the FCA and CFTC’s arrangements on exchange of

information and cooperation in the supervision and oversight of firms under EMIR and equivalent

US legislation, which engage in over-the-counter derivatives trading or swaps.

The MoU is here.

19. Wholesale Market Brokers’ Association

19.1 RONIA - WMBA issue change to benchmark methodology - October 2016 - The Wholesale Market

Brokers’ Association (WMBA) has published a market notice containing a change to the benchmark

methodology of the Repurchase Overnight Index Average (RONIA) following a consultation on 9

August 2016. The new methodology specifies the definition of RONIA, which transactions are

RONIA eligible, and the process by which the index is weighted.

The changes to the methodology take effect from 1 November 2016.

The market notice is here.

See also the General section above for an item on the European Commission Work Programme 2017, which

includes proposed amendments to EMIR.

See also the General section above for an item on the FCA consulting on its mission, in a paper which

indicates, in its chapter on next steps, that its next focus will be on financial crime (detecting insider

trading, market manipulation and anti-money laundering).

Asset Management 20. Council of the European Union

20.1 EuVECA and EuSEF Amending Regulation - Council publishes further Presidency compromise

text - 24 October 2016 - The Council of the European Union has published a further Presidency

compromise text, setting out an amended version of the Proposed Regulation amending the

Regulation on European Venture Capital Funds (345/2013/EU) (EuVECA Regulation) and the

Regulation on European Social Entrepreneurship Funds (346/2013/EU) (EuSEF Regulation). The text

follows previous compromise versions published on 22 September and 11 October 2016, with

changes marked.

The Presidency compromise text is here.

The procedure file is here.

Financial Regulation / 27 October 2016 / Issue 884 14

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

See also the Enforcement section below for an item on the FCA making two total prohibition orders,

following convictions for fraud and forgery in connection with Arck LLP investments.

Insurance 21. Official Journal of the European Union

21.1 Solvency II - Commission Implementing Regulation correcting Regulation on templates for

information submission to supervisory authorities published in the Official Journal - 21 October

2016 - Commission Implementing Regulation (EU) 2016/1868 of 20 October 2016, amending and

correcting Commission Implementing Regulation (EU) 2015/2450 on implementing technical

standards (ITS) on the templates for submission of information to supervisory authorities under

Solvency II (2009/138/EC), has been published in the Official Journal of the European Union.

The Regulation enters into force on 10 November 2016.

The Regulation is here.

22. HM Treasury

22.1 Solvency II - HM Treasury consults on new definition of life insurers’ distributable profits in

Companies Act 2006 - 26 October 2016 - HM Treasury has issued a consultation paper on technical

changes to the legal definition of life insurers’ distributable profits under the Companies Act 2006,

now that the “long-term fund” concept, referenced by the Act in section 843, is no longer used for

Solvency II firms, following changes to the Prudential Regulation Authority (PRA) Rulebook. The

Treasury is proposing a new section 843A, within Part 23 of the Act, and ‘minor’ consequential

changes to sections 830, 843 and 853.

The new section 843A is designed to lay out a methodology to allow firms only to make

distributions out of realised profits, and drawing on the Solvency II regulatory framework. This will

replace the removal of the “long-term fund” concept.

Annex B contains draft Companies Act 2006 (Solvency 2 Consequential Amendments) Regulations

2016.

The consultation period closes on 15 November 2016.

Following this, the Government expects to lay a statutory instrument. Subject to Parliamentary

procedure, the government expects the changes will come into force 21 days after being laid.

‘Distributable profits of long-term (life) insurers: a consultation’ (October 2016) is here.

The consultation webpage is here.

23. Prudential Regulation Authority

23.1 PRA Supervisory Statement SS15/16: Solvency II: Monitoring model drift and standard formula

SCR reporting for firms with an approved internal model - October 2016 - The Prudential

Regulation Authority (PRA) has published a Supervisory Statement (SS15/16) setting out the PRA’s

expectations of firms with an approved internal model, and contains information on the PRA’s

approach to monitoring model drift and the reporting of standard formula Solvency Capital

Financial Regulation / 27 October 2016 / Issue 884 15

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

Requirement (SCR) information. On the holding webpage, the PRA has set out feedback to their

May 2016 Consultation Paper CP22/16.

PRA Supervisory Statement SS15/16 is here.

Standard formula SCR reporting templates for firms with an approved internal model are available

on the Regulatory Reporting webpage (at the bottom of the page) here.

The webpage for SS15/16 is here.

23.2 (1) PRA Consultation Paper CP37/16: Solvency II: Reporting of National Specific Templates (2)

Modification by Consent - October 2016 - The PRA has published a Consultation Paper (CP37/16)

covering proposed changes to National Specific Template file types and reporting formats under

Solvency II, and includes a number of reporting clarifications and technical corrections to related

documents.

The PRA has also published a Modification by Consent to enable firms with a financial year ending

on or after 30 June 2016 but before 19 December 2016 to have time to implement the proposed

changes to the reporting format.

The consultation closes on 6 December 2016.

PRA Consultation Paper CP37/16 is here.

Related documents are available here.

The press release for CP37/16 is here.

The Modification by Consent is here.

A draft Direction for firms wishing to use the Modification by Consent is here.

See also the General section above for an item on the Mansion House speech by new PRA CEO, Sam

Woods, which mentions his approach, Solvency II and the role of risk margin, and the possible disclosure of

insurance regulatory returns.

See further the General section above for an item on the FCA consulting on its mission

See also the Financial Crime section below for an item on the Government proposing to amend the

Privacy and Electronic Communications Regulations to make directors liable to fines for nuisance calls

(sometimes associated with claims management companies and payment protection insurance).

Financial Crime 24. Financial Action Task Force

24.1 Correspondent banking services - FATF publishes Guidance - October 2016 – Following concerns

about ‘de-risking’ (terminating business relationships with customers in entire geographical

regions or classes of customers), the Financial Action Task Force (FATF) has published Guidance on

its requirements in relation to correspondent banking. The FATF clarifies that the FATF

Recommendations do not require correspondent financial institutions to conduct customer due

diligence on each individual customer of their respondent institutions’ customers. It states that

Financial Regulation / 27 October 2016 / Issue 884 16

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

not all correspondent banking relationships carry the same level of money laundering or terrorist

financing risks, meaning that any enhanced due diligence conducted must be commensurate to the

degree of risks identified.

The Guidance is here.

The Guidance webpage is here.

24.2 Criminalising terrorist financing - FATF publishes Guidance - October 2016 - The FATF has

published Guidance for member countries to meet each of the requirements of FATF

Recommendation 5 on criminalising terrorist financing in their national legal systems.

Recommendation 5 contains measures to assist countries to fulfil the legal requirements of the

International Convention for the Suppression of the Financing of Terrorism (1999), and relevant UN

Security Council Resolutions.

The Guidance is here.

The Guidance webpage is here.

25. European Commission

25.1 Directive on criminalisation of money laundering - Commission publishes Roadmap - 25 October

2016 - The European Commission has set out a Roadmap for the possible proposal of a Directive on

the criminalisation of money laundering, a key action from the Action Plan against terrorist

financing (2 February 2016). The Roadmap contains an indicative date of Q4 2016.

The Roadmap is here.

26. UK Parliament

26.1 Criminal Finances Bill - second reading - 25 October 2016 - The Criminal Finances Bill (which

contains provisions relevant to anti-money laundering, the funding of terrorism, and the corporate

offence of failing to prevent the facilitation of tax evasion) had its second reading debate in the

House of Commons on 25 October 2016. Among other things, the Minister for Security, Ben

Wallace, mentioned the time limit for a suspicious activity report being potentially extended from

31 days to six months, discussed unexplained wealth orders, and indicated that the corporate

offence would apply to overseas companies as well as UK companies.

Opposition MPs mainly commented that the Bill did not go far enough, both in not applying to

Crown Dependencies and Territories, or requiring them to publish registers of beneficial

ownership, and not creating a corporate offence of failing to prevent economic crime.

The Bill has now been committed to a Public Bill Committee, the dates of which are yet to be

announced, but is to conclude on 24 November 2016.

The second reading debate is here.

The Bill webpage is here.

Financial Regulation / 27 October 2016 / Issue 884 17

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

27. Department of Culture, Media & Sport and Information Commissioner’s Office

27.1 Privacy and Electronic Communications Regulations - Government proposes director liability

for nuisance calls - 23 October 2016 - The Department for Culture, Media & Sport has announced

that it intends to amend the Privacy and Electronic Communications (EC Directive) Regulations

2003 (SI 2003/2426). The amendments would enable the Information Commissioner, from spring

2017, to impose fines of up to £500,000 on directors of firms found to be in breach of the

Regulations, which ban nuisance calls. The problem can be associated with claims management

companies and payment protection insurance.

The Department for Culture, Media & Sport’s press release is here.

A statement by the Information Commissioner, Elizabeth Denham, is here.

A blog post by the Information Commissioner’s Office Enforcement Group Manager, Andy Curry, is

here.

See also the General section above for an item on the European Commission Work Programme 2017.

See also the General section above for an item on the FCA consulting on its mission, in a paper which

indicates, in its chapter on next steps, that its next focus will be on financial crime (detecting insider

trading, market manipulation and anti-money laundering).

See also the Enforcement section below for an item on the FCA making two total prohibition orders,

following convictions for fraud and forgery in connection with Arck LLP investments.

Enforcement 28. Recent cases

28.1 Tariq Carrimjee v FCA, [2016] UKUT 0447 (TCC), 20 October 2016

Partial prohibition order on grounds of competence and capability — powers of the Tribunal in

non-disciplinary cases — whether Tribunal can consider matter which have occurred following

Decision Notice — whether the Tribunal can consider whether individual is ‘fit and proper’ —

Sections 133 (4) and (6A) of FSMA 2000.

The Upper Tribunal (Judge Timothy Herrington, Gary Bottriell and Sandi O’Neill) has dismissed a

reference made by Tariq Carrimjee of Somerset Asset Management LLP regarding a Further

Decision Notice dated 26 November 2015, provisionally prohibiting Mr Carrimjee from performing

the compliance oversight (CF10) and money laundering reporting (CF11) significant influence

functions after a breach of Statement of Principle 2 (exercising due skill, care and diligence). In

reaching its decision, the Tribunal considered the admissibility of evidence of events after the

relevant notice, and the proper conduct of a non-disciplinary reference (including whether the

Tribunal could consider whether an individual is ‘fit and proper’).

Background

In its earlier decision, [2015] UKUT 0079 (TCC), the Tribunal had upheld the £89,004 financial

penalty imposed on Mr Carrimjee for the breach of Statement of Principle 2 (by failing to escalate

the risk that his client, Rameshkumar Goenka, might have been intending to engage in market

manipulation when the risk should have been apparent to him), but did not uphold on the facts

Financial Regulation / 27 October 2016 / Issue 884 18

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

that Mr Carrimjee had breached Statement of Principle 1 (integrity). It remitted the decision to

withdraw his approval, and issue him with a total prohibition order, back to the FCA for

reconsideration in the light of its findings. This had resulted in the making of the Further Decision

Notice, and this, Mr Carrimjee’s second reference.

Mr Carrimjee argued (para [93]) that:

he had the fundamental skill and judgment to discharge the relevant controlled functions

effectively, and that he had learned from his mistake, and would not repeat it (the

competence and capability issue); and

the FCA had erred in law in that it had taken into account improper considerations

regarding sending a deterrent message to the industry when issuing the Further Decision

Notice (the improper considerations issue).

Preliminary issues

The Tribunal decided that:

it was open to the Tribunal, under section 133(4) of FSMA 2000, to consider evidence not

available to the FCA’s Regulatory Decisions Committee (further training undertaken by Mr

Carrimjee after the Further Decision Notice) and make findings of fact on it that are

relevant to the question of Mr Carrimjee’s competence and capability in performing the

significant influence functions of compliance oversight and money laundering reporting;

and

the proper procedure for the Tribunal to follow in relation to non-disciplinary references

under section 133(6A) of FSMA 2000 was as follows: if the Tribunal concludes that the

decision to prohibit is one reasonably open to the FCA, it should dismiss the reference. If

it is not so satisfied, it should remit the matter to the FCA with a direction to reconsider

its decision in the light of its findings. In particular, it should do this if the original findings

have been overtaken by further developments, such as new evidence, that indicated the

applicant’s proficiency in relation to relevant matters. These are findings of fact that

section 133(6A) of FSMA 2000 clearly envisages may be made by the Tribunal. It was not

open to the Tribunal in the case of Timothy Roberts & Andrew Wilkins v FCA [2015] UKUT

0408 (TCC) to make a finding of fitness and propriety, and the Tribunal declined to follow

it.

Judge Herrington said ([para 51]):

“Mr Carrimjee invites us to make findings on the question as to whether he has

the fundamental skills and judgment to discharge the relevant controlled

functions effectively, has learned from his mistake, and would not repeat his

mistake. In our view all of those matters relate to the question of the degree of

competence and capability that Mr Carrimjee possesses which is relevant to the

functions in question. The Tribunal may make that assessment and then decide

whether its findings merit the matter being remitted to the Authority for its

further consideration. This approach in no respect strips the standard of review

set out in s 133(6A) FSMA of any effect and to that degree we reject Mr Stanley’s

submissions. The making of that assessment in our view does not result in the

Tribunal deciding how the Authority should exercise its discretion in determining

Financial Regulation / 27 October 2016 / Issue 884 19

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

the question as to whether it appears to the Authority that Mr Carrimjee is not

fit and proper to undertake the relevant functions.”

Decision

The Tribunal noted a lack of evidence about some of the training courses undertaken, and the fact

that in relation to the training about which some information was available, no oral evidence had

been given, so that some questions remained unanswered. In addition, it considered that some of

Mr Carrimjee’s answers were vague, and lacked meaningful examples. Furthermore, it considered

the decision to undertake further training before the Tribunal hearing was tactical and reactive,

whereas the failure to notice the market manipulation issue was “basic, fundamental and

serious”. On the evidence, it was not persuaded of the competence issue, even taking into

account recent training. None of the developments since the Further Decision Notice cast any

doubt on the reasonableness of the FCA’s decision.

The Tribunal sought to allay Mr Carrimjee’s fears about the stigma associated with a prohibition

order affecting his future business, making clear that it related only to two significant functions,

and that there were no allegations of actual money laundering.

On the improper considerations issue, the Tribunal indicated that there was a distinction between

punishment and deterrence, and that publication of a prohibition order is likely to act as a

deterrence. The Tribunal found that there was nothing in the Further Decision Notice that

indicated that the prohibition order was an additional punishment, and that it was not materially

determined by an irrelevant consideration.

The Tribunal therefore dismissed the reference. In its press release, the FCA notes that it remains

open to the parties to appeal the judgment of the Tribunal.

The judgment is here.

The FCA press release is here.

29. Financial Conduct Authority

29.1 Total prohibition orders following convictions for fraud and forgery - FCA bans Richard Aston

Clay and Kathryn Joy Clark - 25 October 2016 - The FCA has made total prohibition orders against

Richard Aston Clay and Kathryn Joy Clark after they pleaded guilty to fraud (and, in the case of Ms

Clark, forgery) offences relating to investments made through Arck LLP and HD Administrators

LLP. Mr Clay was sentenced to ten years and ten months’ imprisonment, and Ms Clark was given a

two year suspended sentence.

The Final Notice for Mr Clay is here.

The Final Notice for Ms Clark is here.

The FCA press release is here.

See also the General section above for an item on the FCA consulting on its mission, in a paper which

includes a chapter on its approach to enforcement (indicating a review of the phrase ‘referred to

enforcement’ and the use of private warnings), and a chapter on its next steps, which indicates that the

Financial Regulation / 27 October 2016 / Issue 884 20

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

FCA’s next focus will be on financial crime (detecting insider trading, market manipulation and anti-

money laundering).

Financial Regulation / 27 October 2016 / Issue 884 21

Quick Links

Selected Headlines General Brexit Banking and Finance Securities and Markets

Asset Management Insurance Financial Crime Enforcement

This Bulletin is prepared by the Financial Regulation Group of Slaughter and May in London.

The Group comprises a team of lawyers with expertise and experience across all sectors in which

financial institutions operate.

We advise on regulatory issues affecting firms across the financial services sector, including

banks, investment firms, insurers and reinsurers, brokers, asset managers and funds, non-bank

lenders, payment service providers, e-money issuers, exchanges and clearing systems. We also

advise non-regulated businesses involved in financial regulatory matters. In addition, our leading

financial regulatory investigations practice is regularly instructed by financial institutions

requiring specialist knowledge of financial services regulation together with experience in high

profile and complex investigations and contentious regulatory matters.

Most of the projects that we advise on have an extensive international or cross-border element.

We work in seamless integrated teams with leading independent law firms which offer many of

the most highly regarded financial institutions lawyers in Europe, the US and Asia, as well as

strong and constructive relationships with local regulators.

Our Financial Regulation Group also produces occasional briefing papers and other client

publications. The five most recent issues of this Bulletin and our most recent briefing papers

and client publications appear on the Slaughter and May website here.

The Group’s recent work includes advising:

A number of banking groups in relation to banking structural reforms, including the

ring-fencing regime;

UK Asset Resolution on the sale of a £13bn asset portfolio to Cerberus Capital Management;

Palamon Capital Partners and Corsair Capital on their joint acquisition of Currencies Direct;

International and specialist insurer and reinsurer, Catlin Group Limited, on the acquisition

of it by global insurer and reinsurer, XL Group plc;

Deutsche Bank in relation to several simultaneous investigations in multiple jurisdictions

relating to LIBOR and a global financial services institution on the investigation by a number

of regulators into foreign exchange trading, including in relation to a settlement involving

the FCA which was announced in November 2014;

Banco Santander on a pan-European and global asset management joint venture with leading

global private equity firms Warburg Pincus and General Atlantic;

A number of multi-national clients in relation to the UK, EU, and US economic and trade

sanctions regimes.

If you would like to find out more about our Financial Regulation Group or require advice on a

financial regulation matter, please contact one of the following or your usual Slaughter and May

contact:

Jan Putnis jan.putnis@slaughterandmay.com

Ben Kingsley ben.kingsley@slaughterandmay.com

Nick Bonsall nick.bonsall@slaughterandmay.com

© Slaughter and May 2016

This material is for general information only and is not intended to provide legal advice.

For further information, please speak to your usual Slaughter and May contact.

Document No