New capital Requirements
In October 2017 we published an article on proposed changes to capital requirements for investment firms. While this is still in the consultation phase, if you have not looked at how this may affect you, please take a look at our article here.
FCA and Distributed Ledger Technology
Distributed Ledger Technology (DLT) is another word for Blockchain and encompasses cryptocurrencies, blockchain applications and initial coin offerings (ICOs). These are explained in more detail in an article on our website called ‘Blockchain, BitCoin and ICOs’ and explains all these in more detail.
The FCA released a discussion paper (17/03) where they asked for feedback from the industry on various issues around DLT.
The FCA acknowledge that the technology has a lot of potential to improve the financial services industry by applying it to traditional areas such as share settlements and banking. The FCA sees regulatory oversight of this space as a positive thing.
The FCA does however caution on ICOs and released a public announcement in September 2017 outlining the risks of investing in them.
For now the FCA are toeing the line and are aiming to ‘strike a proportionate regulatory balance between the risks and opportunities’ that this technology represents. So it appears there are no plans to bring ICOs or cryptocurrencies within the FCA regulatory regime in the near future.
Business undertaking an ICO must be careful however that they are not seen to be issuing a transferable security, which would automatically being it within the scope of the FCA. Legal advice is strongly recommended as a result.
Client money and banking
Some firms have reported to the FCA that they are finding it increasingly difficult to find banking for client money as banks have less appetite for it as a result of their liquidity risk requirements. Current client money rules prevent firms from placing client money in bank accounts with unbreakable terms of longer than 30 days. This has now been increased to 95 days to improve the availability of banking together with some other changes. See PS18/2 for the full statement.
Senior Managers and Certification Regime
The FCA Senior Management Regime has been in place for a little while but only applied to larger firms. The FCA is consulting on moving smaller firms into the regime. The essence of the rules is to improve accountability by holding senior management personally responsible for their actions.
The current plan is to automatically convert those on the Approved Persons Regime to Senior Management functions. Firms will not have to do anything under the current proposals, it will be taken care of by the FCA.
If you undertake AIFMD reporting, the AIF001 and AIF002 forms within GABRIEL have now been updated with extra data validations to align with ESMA guidance. The first submissions of these will be due in February 2018.
The FCA have asked firms to remove the FCA helpline phone number from their website, as apparently large numbers of customers are getting it confused with the firm’s phone number and calling the FCA instead. Firms are still permitted to put the FCA and the address on their website but are encouraged to remove the phone number.
Legal Entity Identifiers (LEIs) – Under MiFID 2 firms subject to transaction reporting obligations will not be able to execute trades on behalf of a client who is eligible for a LEI but does not have one. Firms can obtain an LEI through the Unavista website via the London Stock Exchange group.
Specific advice should be obtained before taking action, or refraining from taking action, on any of the subjects covered above. If you would like advice or further information, please speak to your usual Shipleys contact.