Regulatory Update: UK Edition – January 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, as well as the FCA on Financial Crime Systems and Controls During COVID-19.

      If you have questions 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.

      For advice in relation to the impact that Brexit will have on your firm, please contact us.

      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 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 advice in relation to the impact that Brexit will have on your firm, please contact us.

      The FCA has published a newsletter on market conduct and transaction reporting issues. The newsletter sets out the FCA’s expectations to firms on recording telephone conversations and electronic communications when alternative working arrangements are in place.

      Firms are expected to continue to comply with the recording obligations in SYSC 10A, as risk from misconduct may be increased from working from home by, for example, the use of unmonitored and/or encrypted applications, such as WhatsApp, for sharing sensitive information, and firms should ensure these applications can be recorded and audited. Firms are expected to proactively review existing policies and procedures where the environment in which they operate changes, as well as increasing their monitoring regime commensurate to the level of risk in the area.

      Firms should continue to inform staff of new policies or procedures and cover the use of new technologies and any arising conduct risks.

      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
      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 which 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 may expose service providers to risk of criminal proceedings or relevant sanctions.

      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 on suitability requirements whilst adjusting these to the appropriateness and execution-only framework.

      ESMA invites feedback from stakeholders by 29 April 2021. The guideline is expected to be published in Q3 2021.

      ESMA has updated its Q&A on the following topic:

      • European Markets Infrastructure Regulation (“EMIR”), the new Q&A clarifies the steps for trade repositories to take for 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 article was covered during May 2020 in the CCL Regulatory Update.

      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 brought an insider dealing case against a senior compliance officer in investment bank UBS AG. Fabiana Abdel-Malek used her position within the firm to identify inside information, which was passed via pay-as-you-go phones, to her friend – Walid Choucair – who then profited from the arrangement.

      A confiscation order has been made by the court to Choucair totalling £3.9 million. A separate confiscation order has been made to Abdel-Malek in the sum of £34,194.53.

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