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.
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FCA updates Connect webpage on MiFID applications
The FCA has updated its webpage on Connect to include information on applications under MiFID. The webpage states that new application forms relating to MiFID, including the Article 3 exemption, were issued on 30 January 2017, but that any applications that were already being completed in draft using the previous forms on Connect will be accepted until 31 March 2017. The FCA does, however, encourage applicants that have started to draft applications in relation to MiFID using the previous forms to consider whether it is appropriate to switch to the new forms issued on 30 January 2017. All applicants must apply using the new forms after 1 April 2017.
FCA speech on future mission
The FCA has published a speech by Mary Starks, Director of Competition on making choices in uncertain times. In her speech, Ms Starks discussed the FCA's future mission in uncertain times, the FCA's role in enforcing and encouraging competition in financial markets and the preliminary findings from the asset management market study. With regard to the latter, the FCA published its interim report in November 2016 and is currently in the process of reviewing the consultation responses received. Ms Stark noted that the FCA has found that competition is not working particularly well in the UK’s asset management market and has pointed out that the guiding question behind the study was simply to ask how the FCA can make sure that the asset management industry works as well as it can.
OTC derivatives reporting
The Financial Stability Board is consulting on its proposed governance arrangements for the unique transaction identifier (UTI), which is a key data element for reporting OTC derivative transactions. Its primary purpose is to uniquely identify individual financial transactions on reports to trade repositories. In particular, a UTI will help to ensure the consistent aggregation of OTC derivatives transactions by minimising the likelihood that the same transaction will be counted more than once. Comments are invited by 5 May 2017 and the FSB intends to have an industry roundtable on UTI governance on 25 April 2017, with the expectation of final recommendations on UTI governance arrangements for adoption later in 2017.
ESMA Q&As on CSDR
ESMA has published a new set of Q&As relating to the Regulation on improving securities settlement and regulating central securities depositories (CSDR). The Q&As follow the publication of six CSDR legislative acts in the OJ on 10 March 2017, which focus on the CSD requirements provisions, which enter into force on 30 March 2017 and will trigger the CSD authorisation process. Prospective CSD applicants have until the end of September 2017 to apply for authorisation.
FCA enters co-operation framework with Japan on FinTech
The FCA has agreed a co-operation framework with the Financial Services Agency of Japan (JFSA) to support innovative FinTech companies. The FCA explains that the framework provides a regulatory referral system for innovator businesses from Japan and the UK seeking to enter the other's market. The term "innovator business" is defined as meaning an innovative financial business that has been offered support from one of the regulators through its innovation function, or that would qualify for this support. The regulator that receives an innovator business referral will provide support to the innovator business by reducing regulatory uncertainty and the time to market. Although the FCA has already entered into a number of these arrangements, this is apparently the first co-operation framework that the JFSA has entered into.
Payment Systems Regulator
The Payment Systems Regulator (PSR) published its second annual report on access to payment systems and the governance of payment system operators in the UK, together with a factsheet that summarises the PSR's key findings. The report updates stakeholders on the progress of its work to improve access to payment systems and make the governance of payment system operators more inclusive and transparent. It also identifies areas for further improvement on the encouraging progress made in 2016 to ensure fair and open access and the work expected for 2017. Commenting on changes expected this year, the report refers to the implementation of PSD2 and the potential consolidation of three operators (the operators of Bacs, the Faster Payment Scheme and Cheque and Credit).
The European Parliament has published a report on the proposed Fifth Money Laundering Directive (MLD5), which was adopted by the Parliament's Economic and Monetary Affairs Committee (ECON) and its Civil Liberties, Justice and Home Affairs Committee (LIBE) on 28 February 2017. The press release announcing adoption of the report stated that the Parliament must now give the go-ahead in its March plenary session for MEPs to start trialogue discussions with the Council of the EU and the European Commission. The Parliament's procedure file for MLD5 previously indicated that it would consider MLD5 at its 13 to 16 March 2017 plenary session; however, the plenary dates have since been removed from the procedure file, so it is currently unclear when the Parliament will consider MLD5. The Commission published its legislative proposal for MLD5 in July 2016.
The European Parliament has updated its procedure file on the proposed Regulation on Money Market Funds (MMF Regulation). The procedure file previously indicated that the Parliament would consider the proposed Regulation during its plenary session to be held from 13 to 16 March 2017; however, the file has now been amended to delete that date, and no alternative date has been indicated.
The House of Commons Foreign Affairs Committee has published a report on the implications for the UK if no withdrawal agreement is in place by the end of the two-year negotiating period set by Article 50. This week, the EU withdrawal bill was backed by the House of Lords, clearing the way for it to receive Royal Assent and become law, giving the Prime Minister the power to invoke Article 50 and begin formal negotiations, which is expected to happen at the end of March. In its report, the Committee concludes that the possibility of reaching no deal is real enough to justify the government planning for it and explores potential implications for the UK, including: (i) a regulatory gap and legal uncertainty in areas not covered by the Great Repeal Bill; (ii) trading with the EU on WTO terms; (iii) uncertainty over UK participation in the EU's common foreign and security policy; (iv) the sudden return of a customs border between Northern Ireland and the Republic of Ireland; and (v) ongoing disputes over the exit bill.
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17 March 2017