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Legal Shorts 15.09.17 including HMRC: guidance on the office of failing to prevent facilitation of tax evasion

Published: 15 Sep 2017

Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

Claire Cummings

020 7585 1406



HMRC:  guidance on the office of failing to prevent facilitation of tax evasion   

On 1 September, HM Revenue & Customs (HMRC) published government guidance for the corporate offences of failure to prevent the criminal facilitation of tax evasion, which comes into force on 30 September 2017.  The guidance sets down six guiding principles for companies and organisations to follow, these being almost identical to those set out in its previous guidance to the Bribery Act 2010.  Also similar to the Bribery Act 2010, , it will be a defence for a company or organisation to prove that they had prevention procedures in place when the offence was committed. Prevention procedures are defined as procedures designed to prevent persons acting in the capacity of a person associated with the company from committing tax evasion facilitation offences.  The guide is available online at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/642714/Tackling-tax-evasion-corporate-offences.pdf.

ESMA update of MiFID II Q&As on market structures topics:

ESMA has published an updated version Q&A on implementation issues relating to market structures requirements under the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR) (ESMA70-872942901-38).  The new Q&As, which can be found online at https://www.esma.europa.eu/sites/default/files/library/esma70-872942901-38_qas_markets_structures_issues.pdf,  have been updated with four new questions relating to access to central counterparties (CCPs) and trading venues.

ESMA updates FAQs on transitional transparency calculations under MiFID II 

ESMA has published an updated version of its FAQs on transitional transparency calculations (TTC) for non-equity instruments under MiFID II.  This continues for ESMA’s first published the FAQs in July 2017.  ESMA explains that, after the publication of the TTC in July 2017, some trading venues notified ESMA about problems with their As a result, ESMA has corrected and recalculated the TTC for both asset classes.  In the light of the scope and complexity of the calculations, including the various underlying data sources, ESMA expects to continuously supplement and update the FAQs where necessary.  The FAQs can be found online at https://www.esma.europa.eu/sites/default/files/library/esma50-164-677_mifid_ii_itc_faq.pdf.

New FCA webpage on updates to MiFID notifications obligations

The FCA published a new webpage providing an update on MiFID II notifications for firms at https://www.fca.org.uk/markets/update-mifid-ii-notifications-obligation-firms. The webpage provides a summary of updates concerning MiFID II notifications that the FCA has made since it published its MiFID II application and notification user guide in January 2017, focusing on the notifications that should be made by systematic internalisers and by firms that provide direct electronic access (DEA) or that undertake algorithmic trading.  The FCA summarises the notifications that these firms should make and the ways that notifications should be made. The FCA has also published a guide to assist firms submitting systematic internaliser notifications and electronic trading notifications.  The webpage also corrects a mistake in the application and notification user guide, clarifying that firms are not required to inform the FCA if they act as a general clearing member, and provides a reminder that, under MiFID II, firms or individuals that trade in commodity derivatives, emission allowances and derivatives on emission allowances may be able to use their authorisation exemption (the ancillary activity exemption).

FIA due diligence questionnaire for MiFID II firms providing direct electronic access to clients 

The Futures Industry Association (FIA), in co-operation with the Association for Financial Markets in Europe (AFME), the Alternative Investment Management Association (AIMA) and the Managed Funds Association (MFA), published a due diligence questionnaire for MiFID II investment firms providing direct electronic access (DEA) to their clients.  An investment firm that provides DEA is responsible for ensuring that clients using that service comply with the requirements under the MiFID II Directive (2014/65/EU) and the rules of the trading venue, in particular, DEA requirements such as including the due diligence assessment requirements of prospective DEA clients. An investment firm offering DEA is required to carry out a due diligence assessment of its prospective DEA clients to ensure that they meet the requirements set out in RTS 6 and the rules of the trading venue to which it offers access.  The FIA intends to publish additional annexes to the questionnaire for a standardised set of questions regarding other topics, such as algorithmic trading, which are not explicitly required under RTS 6 but investment firms may wish to incorporate into their due diligence processes.  The questionnaire may be found online at https://fia.org/sites/default/files/FIA%20DEA%20DDQ%20Template%20-%20No%20Annexes_FINAL.pdf.

FCA update on notifications from Systematic Internaliser, DEA Providers and Algorithmic Trading

   The FCA has just announced that Systematic Internalisers (SIs), Direct Electronic Access (DEA) providers and firms undertaking algorithmic trading can send it notifications.  Details on the notification requirements can be found on the correct FCA website page at https://www.fca.org.uk/markets/mifid-ii/applications-notifications  and notifications should be made in accordance with the requirements in MiFIR and MiFID II.

European Commission report on temporary exclusion of exchange-traded derivatives from scope of Articles 35 and 36 of MiFIR 

The the European Commission has published a report (COM(2017) 468 final) on the temporary exclusion of exchange-traded derivatives (ETDs) from the scope of Articles 35 and 36 of the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR).   Article 35 requires CCPs to provide access to trading venues on a non-discriminatory basis to clear transactions executed on different trading venues and Article 36 of MiFIR requires trading venues to provide access on a non-discriminatory basis to CCPs that wish to clear transactions executed on these trading venues. In April 2016, ESMA recommended that ETDs should not be temporarily exempted from the scope of Articles 35 and 36.  In this report, the Commission accepts ESMA's recommendation and concludes that it is not necessary to exclude ETDs temporarily from the scope of Articles 35 and 36.  While the report identifies potential risks arising from the implementation of open and non-discriminatory access to ETDs under MiFIR, it considers that the current regulatory framework in MiFIR and EMIR (Regulation 648/2012) appropriately addresses these risks.  The report can be found at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=COM:2017:468:FIN&from=EN.

Responses to ESMA's consultation on evaluation of Short Selling Regulation  

ESMA has published responses to its July 2017 consultation paper (ESMA70-145-127) on the evaluation of certain elements of the Short Selling Regulation (Regulation 236/2012).  Respondents included the Alternative Investment Management Association, the Association for Financial Markets in Europe, and International Swaps and Derivatives Association , the Investment Association, the London Stock Exchange Group and Quoted Companies Alliance.  ESMA expects to publish its final report by 31 December 2017.  The responses can be found online at https://www.esma.europa.eu/press-news/consultations/consultation-evaluation-certain-aspects-short-selling-regulation.

European Commission summary of contributions to its consultation on FinTech 

The European Commission published a summary of the contributions to its consultation on its policy approach to FinTech, incluing detail on the individual responses in an accompanying Annex.  The Commission received 226 responses to the consultation (40 from the UK), the majority of which came from the industry. Many respondents underlined that FinTech, and technological innovation in general, were drivers of financial sector development and that there were huge opportunities in terms of access to finance, operational efficiency, cost-saving and competition. On the risk side, the predominant themes raised by respondents related to cybersecurity, the use and control of data and money laundering.  The Commission has summarised the responses into four categories: (i) fostering access to financial services for consumers and businesses; (ii)  bringing down operational costs and increasing efficiency for the industry; (iii) making the single market more competitive by lowering barriers to entry; and (iv) balancing greater data sharing and transparency with data security and protection needs.   The summary can be found at https://ec.europa.eu/info/sites/info/files/2017-fintech-summary-of-responses_en.pdf.

Expert evidence on derivatives was both admissible and necessary 

 In the case of Dudding and another v Royal Bank of Scotland plc and another [2017] EWHC 2207 (Ch) (21 July 2017), the Court granted the claimant permission to rely on expert evidence from an individual (V) with particular experience of derivative products in a claim against RBS. In this action, both parties accepted that although a number of principles were identified in the cases, the question of whether a party should be allowed to rely on expert evidence is case-specific and fact-specific.  In particular, the judge looked at two issues, these being: (i) whether the expert evidence is necessary for the court to be able to resolve each issue; and (ii) if the evidence is not necessary, whether it would it be of assistance to the court in resolving that issue. If it would be of assistance but not necessary, whether the court would be able to determine the issue without it.  On the facts, the judge concluded that V's evidence was admissible in relation to all but one of the questions that were being asked of him and he was satisfied that V was a derivative expert who could give proper evidence in relation to the issues, both as to what was in the claimant's best interests and as to the range of conduct and products which fell within the appropriate standards of behaviour at the time.  This decision illustrates the approach the court will take when considering whether to allow a party to rely on expert evidence in a claim involving complex financial instruments, particularly where different standards may have applied at different times.

European Parliament adopts Regulation to amend EuVECA Regulation and EuSEF Regulation 

As part if its plan to develop capital markets union (CMU), which involves broadening and easing sources of funding for business in the EU, the European Parliament has voted in plenary to adopt the proposed Regulation amending the European Venture Capital Funds Regulation (Regulation 345/2013) (EuVECA Regulation) and the European Social Entrepreneurship Funds Regulation (Regulation 346/2013) (EuSEF Regulation).  The Regulation needs to be formally adopted by the Council and the text adopted by the Parliament has not yet been published.


Tel: + 44 20 7585 1406

Mob: + 44 7734 057 327


15 September 2017

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

  • 42 Brook Street
    W1K 5DB

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