Global Financial Regulatory Blog

Staying Inside — FCA’s New Guidance on Market Conduct During COVID-19

Posted in Markets and Investments

New guidance for issuers and market participants on capital raising events and alternative working arrangements, and additional time allowed for filing half-yearly financial reports.

By James Inness, Nicola Higgs, Connor Cahalane, and Anna Lewis-Martinez

On 27 May 2020, the FCA published its Primary Market Bulletin 28, which provides an update for issuers on temporary relief for the timing of the publication of half-yearly financial reports, going concern assessments, and shareholder engagement.

Additionally, the FCA has published its Market Watch 63 newsletter on market conduct and transaction reporting issues, setting out its expectations for issuers and market participants in relation to identifying, handling, and disclosing inside information in the context of increased capital raising events, alternative working arrangements, and the additional challenges created by the pandemic. The FCA has also provided guidance on short selling activities, managing conflicts, and market conduct in relation to credit default swaps. Continue Reading

Singapore: Payment Token Derivatives – to Offer or Not to Offer?

Posted in Fintech and Cryptocurrency, Payments

MAS confirms regulatory approach for derivative contracts on payment tokens.

By Farhana Sharmeen and Marc Jia Renn Tan

On 15 May 2020, the Monetary Authority of Singapore (the MAS) issued its response to feedback about its proposed regulatory approach for derivative contracts that reference payment tokens as underlying assets (Payment Token Derivatives), confirming that it will regulate Payment Token Derivatives offered to Singapore investors through approved exchanges. (See MAS’ current list of approved exchanges.) The MAS considers it crucial that it has effective oversight of products offered on approved exchanges due to the systemic importance of such trading facilities and the risk of contagion to the wider financial system. Continue Reading

UK Firms Should Share Customer Information Cross-Border Intra-Group to Fight Money Laundering and Terrorist Financing

Posted in Regulatory Reform

UK government encourages regulated firms to share customer information within corporate groups, highlighting interaction with firms’ obligations under the Proceeds of Crime Act 2002 and GDPR.

By Rob Moulton, Jonathan Ritson-Candler, Fiona Maclean, and Olga Phillips

The UK government has published a statement endorsing the Financial Action Task Force’s (FATF’s) recommendations that regulated financial institutions should be required to implement group-wide anti-money laundering (AML) and counter-terrorist financing (CTF) programmes that provide a framework for information to be shared within the group for AML and CTF purposes. The statement agrees with the FATF’s position that cross-border information sharing:

  • By the private sector is a key component of a well-functioning AML and CTF regime
  • On a group-wide basis is a useful tool to prevent, recognise, investigate, and ultimately report specific cases of money laundering or terrorist financing
  • Enables firms to perform effective global risk assessments of customer relationships and avoids information being “siloed” within a particular group entity
  • Ensures firms are better able to perform customer due diligence, identify suspicious activity more readily, and file higher quality Suspicious Activity Reports (SARs) that take account of all of a customer’s transactions with group members

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UK Government Publishes Draft UK-EU Free Trade Agreement With Financial Services Chapter

Posted in Conduct of Business, Regulatory Reform

The government sets out a bold and ambitious arrangement for financial services, including free market access and a new Financial Services Committee.

By Rob Moulton and Anna Lewis-Martinez

On 19 May 2020, the UK government published draft legal texts of 12 documents, and an accompanying letter, setting out its approach to the UK’s future relationship with the European Union, including its outline of a UK-EU Free Trade Agreement (FTA). The proposed FTA is nearly 300 pages long and includes a chapter on financial services. The European Commission published its version of an agreement two months ago, and the UK’s draft FTA seems only to highlight the significant differences between the two sides.

The financial services section of the proposed FTA is contained in Chapter 17 and marks the first time that the government has spelt out clearly its expectations for financial services in the UK’s future relationship with the EU. Key financial services elements to note in the draft FTA include: Continue Reading

EU Short-selling Bans Lifted

Posted in Capital and Liquidity, Markets and Investments

While regulators in the EU have lifted the temporary COVID-19-related short-selling bans, they will monitor the markets and impose further restrictions if required.

By Carl Fernandes and Sherryn Buehlmann

Regulators in Austria, Belgium, France, Greece, Italy, and Spain announced that the temporary short-selling bans imposed in those jurisdictions expired on 18 May 2020 at 11.59pm.

Most of the bans restricted the increase of “net short positions” in certain shares under the purview of the relevant regulators and were introduced to curb market volatility and manage uncertainties surrounding the economic impact of the COVID-19 pandemic. Article 20 of the Short Selling Regulation (SSR), under which the bans were introduced, permits national competent authorities in the EU a reasonable amount of discretion to implement short-selling bans in respect of shares. As a result, the scope of the various bans differed by jurisdiction (for example, in terms of duration, prohibited activities/outcomes, and exemptions). Market participants faced difficulty understanding and implementing the required changes across their entire global trading operations in the short period between the announcement of the bans and their effective date. Continue Reading

European Commission Publishes Draft Delegated Regulations on ESG Disclosures in Benchmarks

Posted in Benchmark Regulations

The three draft delegated regulations set out sustainability criteria and ESG disclosure requirements for benchmarks provided in accordance with the EU Benchmarks Regulation.

By Nicola Higgs and Becky Critchley

On 8 April 2020, the European Commission published the three draft delegated regulations required by Regulation (EU) 2019/2089, commonly referred to as the Low Carbon Benchmarks Regulation, setting out sustainability criteria in order for a benchmark to qualify as an EU Climate Transition Benchmark (EU CTB) or EU Paris-aligned Benchmark (EU PAB) and setting out the environmental, social, and governance (ESG) disclosure requirements for benchmarks provided in accordance with the European Benchmarks Regulation. Continue Reading

COVID-19: FCA Delays Implementation of SCA Under PSRs 2017

Posted in Retail Markets

By Rob Moulton and Anna Lewis-Martinez

On 30 April 2020, the FCA released a statement announcing a six-month extension to the deadline for firms’ implementation of strong customer authentication (SCA) for e-commerce under the Payment Services Regulations 2017 (PSRs 2017). The FCA states that the extension is due to the COVID-19 pandemic and is set to minimise potential disruption to consumers and merchants.

The new deadline for implementation is 14 September 2021. This replaces the original 14 March 2021 deadline. Continue Reading

SEC and FINRA Take Action to Address COVID-19 Impacts

Posted in Markets and Investments, Securities Regulation

In the wake of COVID-19, the SEC and FINRA are taking steps to support markets and market participants.

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

The US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA) continue to monitor and address ongoing impacts of COVID-19 to US capital markets and securities industry participants. These latest support and regulatory measures include the following:

  • SEC Forms Investor Advisory Committee Focusing on COVID-19: On April 24, 2020, the SEC announced the formation of a COVID-19 Market Monitoring Group comprised of senior-level directors from across a number of SEC divisions. The Group will assist with analysis and actions related to the effects of COVID-19 on markets, issuers, and investors. The group will also respond to requests for information, analysis, and assistance from regulators, financial agencies, and public sector partners, such as the President’s Working Group on Financial Markets, the Financial Stability Oversight Council, and the Financial Stability Board.

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FCA to Apply for Court Declaration on Business Interruption Insurance Policies

Posted in Uncategorized

FCA announces steps to obtain clarity for insurers and policyholders.

By Victoria Sander, Martin Davies, Oliver Middleton, and Duncan Graves

The Financial Conduct Authority (FCA) announced today, 1 May 2020, that it is taking steps to resolve contractual uncertainty in business interruption (BI) insurance cover in light of COVID-19 and intends to apply urgently for a court declaration regarding the scope of BI policies.

The FCA has identified a sample of the most frequently used policy wording in which there remains uncertainty on coverage, and intends for the High Court to provide an authoritative ruling on the correct approach to interpretation of such policies and whether each policy may provide BI insurance coverage as a result of COVID-19. The FCA believes that decisive action is appropriate given the divergent approaches of insurers to BI coverage and the importance of certainty for insurers and policyholders in knowing whether their policy provides for BI coverage in the current circumstances. Continue Reading

Navigating Debt Repurchases in Europe: What You Need to Know

Posted in Capital and Liquidity, Recovery and Resolution Planning

Key issues that typically arise in connection with debt repurchase programs.

By Rob Moulton and Anna Lewis-Martinez

Market shifts often lead companies and their affiliates to actively consider debt repurchases. Important legal considerations include: contractual restrictions; potential disclosure obligations; listing implications; the impact of tender offer rules; consequences of debt purchase transactions; how debt purchase transactions can be structured; potential tax consequences; and jurisdiction-specific considerations.

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