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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Government publishes White Paper on Brexit
The government has published a White Paper, which provides an overview of the government's intentions for the effects of the forthcoming Great Repeal Bill (GRB), in particular that it will: (i) repeal the European Communities Act 1972; (ii) convert EU law into UK law as it stands at the moment of the UK's withdrawal from the EU, wherever practical; and (iii) delegate powers to the government to make secondary legislation that will make necessary "corrections" and other amendments to domestic primary and secondary legislation. In the meantime, the remaining 27 Member States adopted draft negotiation guidelines on 31 March 2017, which intend to set out the overall positions and principles in light of which the EU, represented by the European Commission, will negotiate EU exit conditions with the UK.
MiFID II: FCA policy statement on implementation
The FCA has published its first policy statement on the implementation of MiFID II. The policy statement sets out the FCA's near final rules in in relation to markets issues, systems and controls, client assets and commodity position limits, in addition to an update on its proposals for recording telephone conversations, in response to comments received on ts various consultations in these areas. Issues consulted on but which are not addressed in the policy statement will be included in the FCA's second policy statement on MiFID II implementation, which it plans to publish at the end of June 2017. The FCA plans to finalise all of its rules at that time.
MiFID II: FCA consultation on implementation
The FCA has published its fifth consultation paper on the implementation of MiFID II. The consultation covers three areas: (i) occupational pension scheme firms; (ii) Decision Procedure and Penalties manual (DEPP) and Enforcement guide (EG); and (iii) consequential changes to the Handbook and reporting financial instrument reference data and positions in commodity derivatives. Comments on (i) are requested by 23 June 2017 and by 12 May 2017 for (ii) and (iii).
MiFID II: FCA updates webpage on waiver deadline
The FCA has updated its MiFID II webpage to notify firms of the deadline for submitting waiver applications for bonds and derivatives under MiFID II. Waiver applications must be submitted to the FCA by 1 June 2017 at the latest in order to allow the FCA and ESMA sufficient time to process waiver applications in time for 3 January 2018. The FCA requires all waiver applications to be complete and for any queries regarding the process or the proposals that applicants intend to make to be raised and discussed with it in advance of the 1 June 2017 deadline.
MiFID II: FCA publishes notification form for structured deposits
The FCA has published a notification form for use by firms to notify the FCA that they want to carry on certain regulated activities in relation to structured deposits after 3 January 2018. The notification form should be used by firms which are currently authorised to carry on one or more of the following regulated activities: dealing in investments as agent, arranging deals in investments, making arrangements with a view to transactions in investments, managing investments and advising on investments. FCA-authorised firms that do not currently have permissions to carry out these activities that wish to carry out any of them in relation to structured deposits should not use the notification form. These firms will need to submit a variation of permission application instead.
MiFID II: ESMA final report on non-equity consolidated tape RTS
ESMA has published its final report on draft RTS specifying the scope of the consolidated tape for non-equity financial instruments under MiFID II. The draft RTS specify the scope of the non-equity tape, namely the possibility for CT providers to specialise in one or some asset classes and the approved publication arrangements and trading venues that have to be included in the CT based on a coverage ratio of 80% of all transactions published in an asset class in the EU that the consolidated tape provider has to meet.
ESMA updates various Q&As
ESMA has updated its Q&As on the following: (i) MiFiD - application of MiFID to the marketing and sale of financial contracts for difference (CFDs) and other speculative products (such as binary options and rolling spot forex) to retail clients; (ii) MiFID II – (a) investor protection topics, including best execution and inducements, (b) data reporting under MiFIR, and (c) guidance on market structures, commodity derivatives and transparency; (iii) CSDR – including Q&As on organisational and record keeping requirements; and (iv) EMIR - due to revised RTS and ITS on the implementation of EMIR, a number of the current Q&As have become obsolete and the new Q&As include updated versions of the relevant questions and answers, which will become applicable from 1 November 2017.
ESMA has published draft RTS and draft ITS implementing the Regulation on reporting and transparency of securities financing transactions (SFT Regulation). Under the SFTR market, participants must report details of SFTs to an approved EU trade repository (TR). In addition to the draft technical standards under the SFT Regulation, ESMA consulted on amendments to existing technical standards implementing requirements relating to TRs under EMIR to ensure a level playing field for market participants relating to registration and access rules. The SFT Regulation implementing measures are expected to enter into force by the end of 2017. Firms will have to start reporting their SFTs to TRs twelve months after publication in the Official Journal of the European Union (OJ). The reporting obligation itself will be phased-in over nine months.
Regulatory innovation plan
The government has published a regulatory innovation plan for the financial services sector in response to comments received to the Treasury’s draft plan published in April 2016. The plan outlines how each of the UK regulators plans to support and promote innovation, facilitating the development of new technologies and disruptive business models in financial services, while breaking down barriers to entry and boosting productivity in financial services. HM Treasury's priority is to ensure that regulation is proportionate and promotes innovation, rather than constraining or inhibiting.
Private Fund Limited Partnerships introduced
The Limited Partnerships Act 1907 has been amended to introduce a new type of limited partnership, namely the private fund limited partnership. The Legislative Reform (Private Fund Limited Partnerships) Order 2017came into force on 6 April 2017 with the aim of reducing some of the financial and administrative burdens on private funds and to make the limited partnership structure a more attractive option for asset managers.
High Court restrains publication of hedge fund information
In the recent case of Brevan Howard Asset Management LLP and others v Reuters Ltd and others  EWHC 644 (QB), the High Court granted an interim non-disclosure order restraining the use of confidential documents provided by a hedge fund manager to potential investors or the use of information derived from the documents. The decision gives an illustration of the factors the court will take into account when considering the defence of the public interest in an application for an interim injunction to restrain an alleged breach of confidence by a media outlet in a financial services context.
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7 April 2017