Global Financial Regulatory Blog

Organisational Culture and Conduct

Posted in Conduct of Business, Market Misconduct

The role and expectations of bystander employees: the missing piece of the puzzle?

By David Berman, Catherine Drinnan, Joseph B. Farrell, Sarah Gadd, Lilia B. Vazova, and Nell Perks

While much attention continues to be paid to the implementation and maintenance of effective whistleblowing and speak-up frameworks (which tend to focus predominantly on reporting post-event, coupled with safeguarding the ‘reporter’ from any adverse consequences), and to the importance of a creating a ‘psychologically safe’ environment in the workplace, there has to date been relatively little focus on the real-time interventional role of the employee bystander. For example, in a scenario in which an employee observes ‘toxic’ conduct directed at a colleague by a fellow employee, such as bullying, harassment or racism, should the witnessing employee have an obligation to intervene on behalf of the ‘victim’ (in addition to an expectation that they subsequently report the incident)?

Interestingly, there has been even less focus on the role of the employee bystander in misconduct situations involving a perpetrator colleague, when there is no human ‘victim’; or if a client’s best interests are at risk of being compromised.

In our experience, many organisations’ workplace culture frameworks (including, equal opportunities and anti-harassment policies) do not contemplate – whether sufficiently clearly and practically, or at all – active bystander intervention in such invariably tricky situations, in which employees may find themselves, as witnesses.

We explore whether culture-oriented organisations may be missing an important trick by effectively overlooking the potential real-time interventional role of employees who observe a colleague’s inappropriate behaviour – the so-called employee bystander. In the context of this article, “employee bystander” means a member of staff who: (i) observes inappropriate (business or non-business-related) behaviour within the workplace – such as: sexual or racial harassment, bullying, intimidation or exclusion; or conduct which would improperly disadvantage a client; or secure some other form of untoward benefit, to the corresponding detriment of a client; or (ii) happens to witness integrity/reputation-related misconduct by a colleague outside of the office.

Read the full article here. Continue Reading

10 Key Focus Areas for UK-Regulated Financial Services Firms in 2021

Posted in Conduct of Business, Environmental, Social and Governance (ESG), Market Misconduct, Regulatory Reform, Securities Regulation

This annual publication outlines some of the primary focus areas in 2021 for UK-regulated financial services firms. Some of these topics are attracting attention because they are an emerging trend, or because they are at a key stage in the implementation cycle. Other topics are longstanding, but remain at the top of the PRA’s and FCA’s priority lists.

While this publication looks beyond Brexit and COVID-19, inevitably, in the short term, these issues continue to be dominant themes.

We hope you find this publication useful as a checklist to benchmark against your own “to do” list.

Read the publication here.

SEC Staff Issues No-Action Relief to Broker-Dealers From Reg BI and Form CRS Obligations Related to Certain Family Offices

Posted in Markets and Investments, Securities Regulation

The no-action relief applies to family offices with at least US$50 million in total assets (Institutional Family Offices) and requires broker-dealers seeking to rely on the relief to establish and maintain specific additional policies and procedures.

By Dana G. Fleischman, Stephen P. Wink, Naim Culhaci, and Deric Behar

On December 23, 2020, the Staff of the Division of Trading and Markets (Staff) of the US Securities and Exchange Commission (SEC) issued a no-action letter to the Securities Industry and Financial Markets Association (SIFMA) granting relief to broker-dealers from Regulation Best Interest (Reg BI) and Form CRS in relation to recommendations made to Institutional Family Offices under certain circumstances.
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PRA Publishes Findings on Its Evaluation of the SMCR

Posted in Regulatory Reform

The PRA has released a largely positive report, along with nine follow-up actions and recommendations on the SMCR for PRA-regulated firms.

By Rob Moulton, Katy Sanders, and Anna Lewis-Martinez

The PRA reviewed the operation of the Senior Managers and Certification Regime (SMCR) against its original objectives and examined whether there have been any unintended consequences. The evaluation covered the period 2019-2020, included evidence from internal and external sources, and examined each component of the SMCR (including across the life cycle of firm and supervisory activity). Continue Reading

Key Regulatory Developments in Hong Kong and Singapore: November 2020

Posted in Regulatory Reform

Regulators propose new regulations for virtual asset exchanges and enhanced customer identity verification requirements, and launch an innovative commercial data interchange.

By Farhana Sharmeen, Simon Hawkins, Kenneth Y.F. Hui, and Marc Jia Renn Tan

This blog post summarises key regulatory developments in Hong Kong and Singapore during November 2020, including:

— The Hong Kong FSTB’s consultation proposing a new regulatory framework for virtual asset exchanges
— The HKMA’s new commercial data interchange initiative
— The MAS’ consultation proposing requirements to strengthen financial institutions’ non-face-to-face identity verification process of individuals
— The MAS’ guidance to financial institutions to review security controls amidst COVID-19
— The MAS’ publication of its 2019/2020 enforcement report

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Monetary Authority of Singapore Proposes Stricter Identity Verification Requirements

Posted in Regulatory Reform

The proposal would require financial institutions to use certain categories of information for non-face-to-face verification before undertaking transactions or requests.

By Farhana Sharmeen and Gen Huong Tan

In November 2020, the Monetary Authority of Singapore (the MAS) published a consultation paper proposing to issue a Notice on Identity Verification (the Notice) that would require financial institutions to obtain specific categories of information to verify an individual’s identity for non-face-to-face financial transactions.

The Notice would apply to a broad range of entities regulated by the MAS, including licensed banks, insurers, registered insurance brokers, capital markets services licensees, registered fund management companies, financial advisers, and licensed payment services providers. Continue Reading

Benchmarks: Delegated Acts on ESG Disclosures Published and Transitional Period for Third Country Benchmarks Extended

Posted in Benchmark Regulations

Three delegated acts that supplement the EU Benchmarks Regulation will come into force on 23 December 2020.

By Nicola Higgs, Becky Critchley, Ella McGinn, and Anna Lewis-Martinez

The long-awaited delegated acts (Delegated Acts) required by Regulation (EU) 2019/2089 (the Low Carbon Benchmarks Regulation), which amends the EU Benchmarks Regulation (BMR), have been published in the Official Journal of the European Union (OJ). The Delegated Acts will enter into force on 23 December 2020, 20 days after their publication on 3 December 2020. No substantial changes have been made to the official texts since the Commission adopted the Delegated Acts on 17 July 2020.

The Delegated Acts set out (i) sustainability criteria in order for a benchmark to qualify as an EU Climate Transition Benchmark or EU Paris-aligned Benchmark, and (ii) the environmental, social, and governance (ESG) disclosure requirements for benchmarks provided in accordance with the BMR. Continue Reading

Landmark Judgment Rules in Favour of Latham Client, Rothesay Life Plc

Posted in Conduct of Business, Regulatory Reform

Court of Appeal sets out correct approach to transfer of long-term Insurance.

Victoria Sander, Jon Holland, Alex Cox, and Duncan Graves

Latham & Watkins has won an appeal on behalf of Rothesay Life Plc (Rothesay) in an unprecedented challenge to the High Court’s refusal to sanction the transfer of around 370,000 annuity policies in August 2019 (comprising total policyholder liabilities of approximately £11.2 billion) from The Prudential Assurance Company Limited (PAC) to Rothesay.

The Court of Appeal overturned the High Court’s refusal to sanction the scheme in a judgment[1] handed down on 2 December 2020, and set out the correct approach for a court to adopt when dealing with applications to sanction transfers of insurance business under Part VII of the Financial Services and Markets Act 2000 (FSMA).  The case is the first time an application under Part VII FSMA has been considered in detail by the Court of Appeal.

The Court of Appeal held that the judge was “not justified in making an adverse comparison between the financial strength, record and expectations of PAC and Rothesay”; that his reasoning had been based on a misunderstanding of the applicable financial metrics; and that he did not give adequate weight to the views of the independent actuarial expert or the on-going regulatory role of the PRA.  The Court of Appeal also held that, although non-actuarial factors may be relevant to the assessment of some Part VII applications, the subjective choice of provider by policyholders is not a relevant factor to be considered. Continue Reading