News

Jun19

FCA’s Review of Client Assets Regime for Investment Business CP 13/5 and PS 14/9

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With the CASS Policy Statement now published the industry is turning its attention to the practicalities of implementation. Alongside our note on FCA’s decisions as set out in the PS, we are providing support to firms that are starting to plan their implementation programme. The phasing of the introduction of the CASS measures provides a useful basis for the planning timeframe, but, as FCA makes clear, aspects such as re-papering clients and banks are, in many cases, major projects in their own right and will need to start early in order to be concluded comfortably before the regulatory deadlines.

Immediately before the FCA took over from its predecessor, City surveys showed considerable concern in the industry that the new regulator was not committed to consultation, but that European regulators were. That was a surprise. There is some likelihood that the comments were coloured by a degree of fear of the unknown or even represented a tactical response to apply pressure to FCA to demonstrate its commitment. Now, 15 months into FCA’s life, we have another PS by which to assess FCA’s position. As with all regulatory consultations, in PS 14/9 FCA has stuck to its intentions pretty rigidly, but not right across the board. Notable here is its decision to defer all work on the strategic redesign of the client money distribution regime, pending the government’s review of the SAR. Likewise it has deferred sine die its plans for an annual statement to clients on the protection provided to their assets. These are clear responses to consultation. Furthermore, the regulator has significantly qualified its requirements for separate registration of customers’ v firms’ assets. The result is a significant dilution of the intention. Another example of material restructuring of proposals is the shrinkage of the multiple pools plan, which now fills just a small of corner of its original canvas. And then there is the important modification of the proposed closure of the DvP window – another substantial concession to industry concerns. Other examples abound.

But, for all of that, the FCA is still no push-over. Where concerns and objections have taken a generic form, lacking any specific examples, FCA has rejected the representations. They were unpersuaded by the objections to their plan to remove the concession relating to bank acknowledgement letters for accounts at overseas banks. Here, as in other places, they have pointed out that they have not received specific examples of the problems cited. They are not going to be blagged out of their plans, it seems. Our note on a selection of the changes is attached.

Whether firms find these measures reasonable will depend on many factors of which cost will of course be the most persuasive. Certainly it is hard to complain that FCA simply does not listen. Either way, there is work to be done. As ever, we advocate extensive involvement of those in the firm who will be most affected, we strongly recommend thorough training and updating at all levels, especially senior management and Board, and we support early adoption to provide time for new procedures to bed in before the firm is dependent on them.

Firms wishing to discuss plans should contact Oliver Lodge on 020.7389.7028 or Oliver.Lodge@owlrc.co.uk

June 2014

 

 

 

Posted in: CASS, FCA
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May9

CASS: Anticipation of another Policy Statement

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Despite the elapse of nine months since the publication of the bulky CASS consultation paper (CP13/5), memories of the FCA’s proposals may not have faded totally. That is just as well, given that the Policy Statement is now imminent and implementation will therefore need to get underway pretty soon.

We remain of the view that the CP draft rules contain a number of weaknesses which we hope will have been tackled prior to the publication of the PS. It is, for instance, very difficult to see how FCA believes consumers will benefit from the proposed changes associated with interest on client money. It is a surprise to see that they did not propose to review the definitions of designated client bank accounts and designated client fund accounts, both of which present worryingly fragile regimes with potential losses to consumers arising from minor, one-off administrative oversights which could have a dramatic and widespread impact on the distribution of client money following an insolvency, compromising the very object of the client money rules. Add to that the regulator’s undeclared (and possibly unintended, as the charitably-minded might suggest) escalation in liability for CASS firms providing custody services and there is clearly some work to be done even before deciding what sort of transitional provisions to apply to the replacement of existing bank acknowledgement letters. (For OWL comments on the CP13/5 proposals, see the News section on our website.)

For investment firms labouring under the burden of implementation of AIFMD, CRD, EMIR and FATCA, to name but a few, this is going to be strikingly unwelcome. And yet, as this measure is an example of that almost extinct beast, a national proposal, we should expect to see FCA pursue it with enthusiasm and determination.

We will be reviewing the new rules when published.

 

 

 

 

 

Posted in: CASS, FCA
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Feb18

OWL launches new AIFMD Helpline

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In response to evidence of frustration among affected firms, OWL has launched a new AIFMD Helpline to guide the industry through the array of new rules, regulations and guidance. The Helpline is to be accessed on 020.7389.7028.

Most firms have been heavily committed in recent months, dealing with the implementation of CRD and EMIR; getting to grips with AIFMD as well has seriously stretched the ability of the industry to cope with new requirements, spread across countless sourcebooks and European documents. Recent experience has shown that the guidance most commonly sought is either navigational or involves help with determining where to pitch a response to a subjective requirement.

In launching the new service, Oliver Lodge, director of OWL, said: “AIFMD is a very good example of the problems associated with European regulation. Broad brush directives affecting such a wide range of types of investment fund lead to interminable rules to mould the European intention to the structure of the national and international industry. Having spent several years involved in monitoring the gradual construction of these obligations, we have absorbed the purpose and details and can help firms to cut to the chase.” The Helpline opens with immediate effect.

In response to criticism of the transposition of AIFMD by FSA and FCA, he went on to say, “It is easy to shoot the messenger, but this is a case of the UK regulator working hard to provide practical solutions to aspects of the Directive that were poorly thought through. It is quite clear that they have tried hard to minimise the burden of these requirements. AIFMD may seem hard work, but having seen the structure of EMIR and the ambiguous and contorted drafting of that European Regulation, it is hard to imagine that there is anyone left in the UK who seriously wants a Single European Rulebook.”

17 February 2014

Notes:

1. AIFMD Helpline is reached on 020.7389.7028. It is open with immediate effect.

2. Affected firms are required to apply for permission to become an AIFM by 22 July 2014. By that date they are also obliged to be in compliance with the AIFMD rules.

3. OWL Regulatory Consulting advises and supports investment firms on matters of regulation.

 

 

Posted in: AIFMD
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