February 2015

On February 23, 2015, the White House announced that President Obama has directed the Department of Labor (DOL) to move forward with proposed rulemaking to require advisers, including broker-dealers, that provide advice regarding retirement plans that are subject to the Employee Retirement Income Security Act (ERISA), including Individual Retirement Accounts (IRAs), to observe a fiduciary…

On 20 December 2013, the European Commission sought technical advice from the European Banking Authority (EBA) to determine whether or not the definition of ‘eligible capital’ in the Capital Requirements Regulation (CRR) is appropriate for defining ‘large exposures’, setting ‘large exposures’ limits, determining the capital requirements applicable to investment firms with limited investment services and determining the prudential treatment for qualifying holdings outside the financial sector.

The EBA has now published an opinion on the appropriateness of the definition of “eligible capital” in the CRR. In its opinion, the EBA provides general comments on ‘eligible capital’, that are relevant both for the large exposures framework as well as for investment firms and qualifying holdings. In addition, the EBA provides specific comments applicable only to the ‘eligible capital’ definition in the large exposures framework.

The FCA has announced that it plans to launch its first wholesale market study into investment and corporate banking. The planned review follows the FCA’s earlier review of wholesale markets, launched in June 2014.

The FCA’s director of strategy and competition, Christopher Woolard, said: “We have chosen this particular area because the benefits of effective competition in the market could be significant. The UK is a global hub for investment banking, and this sector plays a crucial role in our economy, helping companies raise capital for investment, expansion and funding ongoing operations.”

The FCA has published Feedback Statement 15/1 (FS15/1) which reports on the main issues arising from Discussion Paper 14/3: Discussion on the use of dealing commission regime (DP14/3), and sets out the next steps.

In FS15/1 the FCA provides:

  • a summary of the European Securities and Markets Authority’s (ESMA) final advice to the European Commission on proposals for delegated acts under MiFID II and the FCA’s views on it, including its interpretation of the likely implications of the changes if implemented by the Commission; and
  • feedback on the responses to the questions in DP14/3 that sought views on the FCA’s analysis of two options for change based on ESMA’s draft advice.

The European Commission has published a Green Paper on building a Capital Markets Union (CMU).

The CMU is intended to break down certain barriers that the Commission feels are blocking cross-border investments in the EU and preventing businesses from getting access to finance. The purpose of the Green Paper is to kick-start a debate across the EU over the possible measures needed to create a single market for capital. The deadline for comments on the Green Paper is 13 May 2015. Following the consultation, the Commission will adopt an Action Plan this summer setting out a roadmap and timeline for putting in place the building blocks of a CMU by 2019.

The FCA has published Thematic Review 15/1: Asset management firms and the risk of market abuse (TR15/1). In TR15/1 the FCA sets out its findings following a thematic review into how asset management firms control the risk of insider dealing, improper disclosure and market manipulation, with a primary focus on equities and insider dealing.

The FCA’s key message is that overall it found that firms had put in place some practices and procedures to control the risk of market abuse. However, these were only comprehensive in a small number of firms. The FCA states that many firms need to carry out further work to ensure that practices and procedures operate effectively and cover all material risks. In particular, firms need to pay more attention to the possibility of receiving inside information through all aspects of the investment process and take steps to manage this risk. The FCA also felt that firms generally need to improve the effectiveness of post-trade surveillance as only a minority of firms had appropriate controls for these matters.

On January 29, 2015, the US financial regulators issued additional guidance to the industry on the application of the Volcker Rule on two issues, one providing an extension of time on filing certain reports and the other clarifying whether certain instruments qualify as exempt US government obligations.

The Volcker Rule generally prohibits entities from engaging…

Our Hong Kong office has released a Learning & Development calendar for March – September 2015. Clients are invited to join a range of legal and personal development and business skills sessions. We are holding a session in June on Corporate governance in financial institutions.

The European Parliament has updated its procedure file on the proposed Regulation on banking structural reform. The European Parliament had previously indicated that it would consider the proposed Regulation in plenary session between 27 to 30 April 2015 but this date has now changed to the plenary session between 7 to 10 September 2015.

The European Parliament has updated its procedure file on the proposed Regulation on reporting and transparency of securities financing transactions. The European Parliament had previously indicated that it would consider the proposed Regulation in plenary session between 27 to 30 April 2015 but this date has now changed to the plenary session between 6 to 9 July 2015.