Financial Regulatory Developments (FReD) - 2 November 2012.

Position::Law overview

European Union and International

Financial Stability Board (FSB)

FSB publishes risk disclosure report: The Enhanced Disclosure Task Force (EDTF) has published its report "Enhancing the Risk Disclosures of Banks", focused on banks that actively access the major public equity or debt markets. FSB facilitated the formation of this task force, which brings together experts from financial institutions, audit firms, investors and supervisors, and so comprises preparers and users of financial reports. The report develops a framework of seven fundamental principles for enhanced risk disclosure, including comparability across banks, and gives examples of recommended disclosures and of leading or best practice disclosures in current bank reporting. The aim is to meet users' needs and improve market confidence in financial institutions. (Source: Report of the Enhanced Disclosure Task Force)

Contact: Rosali Pretorius or Edward Hickman

European Parliament (EP)

EP votes through MiFID 2: EP has approved, almost unanimously, the Ferber Report on the proposals for a Regulation and Directive amending the Markets in Financial Instruments Directive (MiFID 2 and MiFIR). Key points it highlighted are:

it is critical that all trading facilities are subject to rules;

there should be clear rules on high frequency trading;

investment firms must act fairly, honestly and in clients' best interests;

firms selling investment products should not remunerate staff or evaluate their performance in a way that might create conflicts between their interests and those of clients;

all market players and trading venue operators must have transparent rules and procedures for executing orders efficiently and deciding what instruments their systems will trade, and have proper business continuity plans;

organised trading facilities (OTFs) should be reserved for non-equities;

all orders must be valid for at least 500 milliseconds;

trading venues must be able to cope with surges in order and market stresses and must have circuit breakers that can suspend trading if necessary; and

there should be thresholds on maximum net positions on commodity derivatives trading.

(Source: EP Votes Through MiFID 2)

Contact: Rosali Pretorius or Emma Radmore.

EP updates voting dates: The OEIL legislative observatory has updated the voting dates for:

the Regulation and Directive amending the Market Abuse Directive (MAR and CSMAD): the indicative plenary sitting date is 11 March 2013, following the committee reports being tabled for plenary;

the Regulation on Key Investor Information on Packaged Retail Investment Products (PRIPs), which is scheduled for committee vote on 20 March and plenary vote on 22 May 2013; and

Shadow banking: the committee report was tabled for plenary on 25 October, and the debate and vote are scheduled for 19 and 20 November.

(Source: OEIL File for MAR, OEIL File for CSMAD, OEIL File for PRIPs and OEIL file for Shadow Banking)

Contact: Emma Radmore or Juan Jose Manchado.

ECON starts work on IMD2: The Economic and Monetary Affairs Committee (ECON) in EP has published a working document on the proposals to review the Insurance Mediation Directive (IMD2). It raises the following contentious questions:

the industry has opposed a simplified registration procedure for insurance mediation when conducted as ancillary activity, for example in the case of travel agents and car rental companies, as this could create an unlevel playing field;

the administrative burden of disclosing the basis and amount of remuneration could outweigh the likely benefit to customers; and

a system based purely on fees paid by customers can lead to a shortfall in supply of advice - and, where insurance products are PRIPs under the Commission's proposals, this could become a problem.

(Source: Working Document on IMD2)

Contact: Emma Radmore or Andrew Barber.

European Central Bank (ECB)

ECB publishes SEPA factsheet: ECB has published a factsheet setting out the key facts and dates on implementation of the Single Euro Payment Area (SEPA) in Member States. (Source: ECB Publishes SEPA Factsheet)

Contact: Andrew Barber or Juan Jose Manchado.

UK Government and Parliament Parliament

FS Bill finishes Lords Committee stage: The Financial Services Bill (FS Bill) has finished its line-by-line scrutiny at the Lords Committee stage, after nine days of debate. A new version of the FS Bill has been published, and it now moves to Report stage, which will begin on 6 November. The House of Commons Library has published a standard note summarising the Lords Committee proceedings. (Source: FS Bill Finishes Lords Committee Stage and Library Standard Note)

Contact: Rosali Pretorius or Emma Radmore.

Parliament set to investigate HBOS failure: The Parliamentary Commission on Banking Standards will enquire into the collapse of HBOS, with particular interest on what warnings were or were not given and what warnings were ignored. For the first time in a public evidence gathering, Parliament has appointed counsel with power to examine witnesses. (Source: Appointment of Counsel and Establishment of Panel on HBOS)

Contact: Emma Radmore or Andrew Barber.

Treasury Committee publishes HBOS letter: The Treasury Committee has published a letter Adair Turner sent to Andrew Tyrie which confirms that FSA is carrying out an internal review over how details of the Peter Cummings Final Notice appeared in the media before FSA published it. The letter also explains the next step, which is to agree the terms of reference and governance arrangements which will help FSA to complete and publish its report into the failure of HBOS. FSA would like to do this before legal cut-over. (Source: Treasury Committee Publishes HBOS Letter)

Contact: Rosali Pretorius or Emma Radmore.

Government introduces DPA into Crime and Courts Bill: Following last week's endorsement by the Government of Deferred Prosecution Agreements (DPA), this tool has been introduced as an amendment to the Crime and Courts Bill. The Committee stage scrutiny of the Bill in the House of Lords has now finished. (Source: Crime and Courts Bill - Seventh Marshalled List of Amendments and Crime and Courts Bill as Amended in Committee)

Contact: Emma Radmore or Andrew Barber.

HM Treasury (Treasury)

Treasury publishes LIBOR legislative changes: Treasury has published further changes to the FS Bill to implement the conclusions of the Wheatley Review of LIBOR. The changes will:

introduce a definition of "benchmark";

include a new section on regulated activities relating to the setting of benchmarks;

allow the Financial Conduct Authority (FCA) to make rules requiring participation in a benchmark; and

insert new clauses on offences of making misleading statements and impressions relating to benchmarks.

(Source: Treasury Publishes LIBOR Legislative Changes)

Contact: Rosali Pretorius or Emma Radmore.

Treasury looks at Building Societies Mergers Act: Treasury has published a memorandum that will be part of a post-legislative scrutiny of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007. It reviews the successful use of the Act in the cases of Britannia Building Society and Kent Reliance Building Society. (Source: Assessment of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007)

Contact: Rosali Pretorius or Edward Hickman.

Treasury updates sanctions: Treasury has updated the sanctions lists in respect of Al-Qaida. (Source: Treasury Updates Sanctions)

Contact: Emma Radmore or Lauren Donnelly.

Bank of England (BoE)

BoE PRA firms designation: BoE and FSA have issued a draft version of the statement of policy on designation of investment firms for prudential supervision by the Prudential Regulation Authority (PRA). The draft PRA-Regulated Activities Order (see FReD 19 October - "Treasury consults on FSMA SIs") requires this...

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