Regulatory Update: UK Edition – February 2021

      This UK Regulatory Update includes: FCA Webpage on Regulatory Changes After End of Transition Period, SM&CR Forms Update, ESMA Consults on Appropriateness and Execution-only under MiFID II, FCA on Financial Crime Systems and Controls During COVID-19, FCA Launches High Court Proceedings Against Paul Steel and Jacqueline Foster.

      Have a question about any of the updates below? Get in touch with our UK/EU Compliance Solutions team today.

      FCA Updates & Developments

      The FCA has published a webpage setting out how firms can passport between the UK and Gibraltar until 31 December 2021. Firms in the UK can currently apply for a passport to provide cross-border services or exercise the right of establishment.

      The regulator only intends to maintain this position within the Handbook until 31 December 2021. UK firms may apply via the Connect system.

      The FCA has published a webpage of the changes to financial service businesses after the transition period ends and EU law no longer applies to the UK.

      Passporting between the UK and EEA states has ended and the temporary permissions regime has come into effect for firms who have notified the FCA. The notification allows EEA firms to passport into the UK for a limited period whilst they seek full authorisation.

      The ability of UK firms to provide services to customers in the EEA will now depend on local law and local regulators’ expectations. The FCA expects UK firms to take the steps available to them to make sure they act consistently with local laws and expectations.

      For guidance and advice on the impact of Brexit on your activities, please contact us.


      PRA Updates & Developments

      The PRA has published a policy statement amending available forms under the Senior Managers and Certification Regime (“SM&CR”). The amendment includes:

      • Notifications part of the PRA handbook
      • Notification form (Appendix 2)
      • SM&CR Form L

      For guidance and advice on SM&CR, or if you would like to receive a demo of our SM&CR software solution, please contact us.

      EU Regulatory Updates

      The European Securities and Markets Authority (“ESMA”) has issued a statement reminding firms of the requirements under the Market in Financial Instruments Directive II (“MiFID II”) of investment services to retail or professional clients by firms not established in the EU.

      Since the end of the transition period on 31 December 2020, firms have shown questionable practices around reverse solicitation. This practice involves the inclusion of general clauses in the terms of business to indicate any transactions that were executed on the initiative of the clients.

      ESMA reminds firms of the MiFID II requirements and highlights that the provision of investment services without proper authorisation of the applicable law, may expose service providers to the risk of criminal proceedings or relevant sanctions.

      For guidance and advice on the impact of Brexit or MiFID II on your activities, please contact us.

      ESMA has launched a consultation on guidelines to the application of appropriateness and execution-only requirements under MiFID II.

      The consultation looks to build on relevant parts of existing guidelines of suitability requirements, whilst adjusting these to the appropriateness and execution-only framework.

      ESMA invites feedback from stakeholders by 29 April 2021 and the guidelines are expected to be published in Q3 2021.

      ESMA has updated its Q&A on European Markets Infrastructure Regulation (“EMIR”). The new Q&A clarifies the steps for trade repositories to take regarding the due termination of derivatives when the counterparty ceases to exist. It also specifies how to deal with non-terminated reports of inactive counterparties to ensure accurate information is provided to authorities.

      Financial Crime

      The FCA has previously published a webpage setting out its expectations on how firms should apply their systems and controls to combat and prevent financial crime during the COVID-19 pandemic.

      The FCA has now updated the article to state that the statement will no longer apply from 7 February 2021. Learn more about our AML/CFT and Sanctions Compliance services today.

      Enforcement Actions

      The FCA has commenced civil proceedings in the High Court against Jacqueline Fisher and Paul Steel, director and co-owner of Estate Matters Financial Limited (“EMF”). An interim injunction has been secured to freeze the assets of Mr Steel and Ms Foster.

      The FCA alleges that EMF has contravened requirements under the Financial Services and Markets Act 2000 by providing unsuitable pension transfer advice. Mr Steel was knowingly concerned in these contraventions.

      In addition, Mr Steel is also alleged to have breached the FCA’s requirements by removing EMF’s assets, which resulted in the firm being unable to meet potential liabilities for unsuitable advice. This action allowed Mr Steel to retain significant profits and ongoing fees without compliance.

      The FCA has asked the court to seek a restitution order to compensate customers who have suffered loss as a result of unsuitable pension transfer advice.

      The FCA has secured an interim restitution order of over £676,000 against 5 of 7 defendants accused of carrying on unauthorised deposit taking. This was conducted for forex trading and crypto-assets without FCA authorisation.

      Bright Managment [sic] Solutions Limited’s Mr Hussian, Mr Kahhar and Mr Miah were jointly and severally liable for repaying money to members of the public who invested.

      The proceedings further continue against two defendants, Mr Mohammed Kabir and Soccer League UK Limited, who oppose the FCA’s claims. The defendants’ assets of up to £1.3 million have been frozen.

      The FCA has commenced criminal proceedings against Mohammed Zina and Suhail Zina in relation to 6 offences of insider dealing and 3 offences of fraud.

      The alleged offending took place between 2016 and 2017 and involved the following stocks:

      • ARM Holdings plc
      • Alternative Networks plc
      • Punch Taverns plc
      • Shawbrook plc
      • HSN Inc
      • Snyder’s Lance Inc

      The total profit is allegedly £142,000.

      The fraud charges relate to personal loans obtained from Tesco Bank, which were stated to be for home improvements, but were instead used for funding the alleged insider dealing activity.

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