Retail Distribution Review Interim Report

The FSA hope to encourage consumers to get more confidence in using the retail financial products market.  As part of their project to achieve this, today the FSA have published the Retail Distribution Review Interim Report. 

There is more commentary on my employer’s site. Note this frank declaration of interest; access is free but you might need to register.  At its briefest, the FSA propose a “simpler landscape”:

• Independent advisers to help consumers distinguish between sales and advice.  Is this likely to be acceptable to providers?
• Sellers, who do not give advice.
• Money Guidance - generic advice to help the general population improve their financial awareness.

The FSA will publish a feedback statement in October 2008.  They will report industry responses, outline changes to rules and provide a timetable.

FSA is regulator under Payment Services Directive

The Government have announced the Financial Services Authority will be the UK regulator for the provision of payment services under the Payment Services Directive.

The Payment Services Directive must be implemented in all EU Member States by November 2009.  Bank Law Blogger posted on this last month. The aim of the Payment Services Directive is to support the Single Market in financial services and create a harmonised legal framework for payment services such as direct debits, card payments, and remittances.  It opens up the payments market to greater competition and there will be a new licencing regime for non-bank payment service providers such as money transfer operators, which will allow them to operate throughout the EU. 

This means that the money transfer sector, along with other payment service providers, will become subject to regulation under the Directive. The sector is already under regulation by HMRC in respect of money laundering law: and in what may prove to be an interesting balancing act, the Government have confirmed HMRC will retain responsibility for supervising the anti-money laundering requirements on money service businesses.  They will have enhanced supervisory powers under the Money Laundering Regulations 2007 which implement the Third Money Laundering Directive and come into effect on 15 December of this year.

How the Payment Services Directive will be implemented into UK law is now being considered, and the Treasury will publish a consultation document on implementation later this year. 

MiFID - in with a bang

The FSA has announced the new implementation date for MiFID’s transaction reporting regime.  It is 5 November 2007 (not 1 November).  Apparently the significance is not to celebrate MiFID with fireworks on Guy Fawkes’ Day, but it’s because the 5th is a Monday. This is to give everyone the chance to work hard over the weekend to ensure smooth transition, or according to the FSA: it “will significantly reduce the implementation risk associated with the transition to the new reporting regime.” Project implementation dates nowadays are - on a quick scoot around Google - described as “cutover” dates - I suppose the word has the benefit of brevity but is it elegant? Will it make it into the next edition of the Oxford English Dictionary?

Liquidity risk management

Technical advice on liquidity risk management for the European Commission has been published by the Committee of European Banking Supervisors (CEBS).  It takes the form of a report published on 15 August 2007 in response to the EC’s call for advice in March this year on the regulatory frameworks for supervising liquidity risk adopted in the EEA.  The EC is interested in the reasons for different approaches being adopted. The report notes that only a few countries have made major changes to their regulatory frameworks, there is broad agreement on the aims of liquidity supervision and the effect of growth of the EU had led to more tensions in regulatory requirements experience by domestic banks owned by foreign parent banks. CEBS will continue work on a number of issues in the report and this work is due by the end of January 2008.

Clearing and settlement guidelines

The three main trade associations for the clearing and settlement industry earlier this month published the Access and Interoperability Guidelines  (3 July).  They contain detailed definitions and principles that trading platforms, central counterparties and settlement systems have agreed use in relation to each other. The Guidelines also provide for a mediation mechanism to resolve potential disputes between organisations. 

The trade associations are the Federation of European Securities Exchange, the European Association of Central Counterparty Clearing Houses and the European Central Securities Depositories Association.  The guidelines are partly driven by the Markets in Financial Instruments Directive and provide the basis for the development of new links between these associations which would offer market participants the freedom to choose their preferred settlement provider.

Financial Services Lawyers Association

A new group has been set up for financial services lawyers.  The FSLA “provides a forum for the open exchange of views and the dissemination of knowledge and ideas in financial services law and regulation.”

Joining will clearly be a bit of a rave: “Members include solicitors, barristers, academics, judges and non-lawyers working in the industry … We believe that this diversity of expertise benefits our members by allowing contact and discussion with parts of the industry that is not always possible in the normal course of day-to-day work. ” Good luck, all: anything which helps the financial industry (as well as all those solicitors, barristers, academics, etc) to understand the massive burden of regulation it groans under is to be welcomed.Some background comments from the Law Society.

Hedge funds guide

The second edition of the Guide to Sound Practices for European Hedge Fund Managers has been published today (22 May 2007), by the Alternative Investment Management Association.   The guide is a weighty 64 pages long and covers the legal structure of a hedge fund, administration and controls, the investment process and raising capital.  The FT has been covering this heavily remarking on the reluctance of UK and US hedge funds to accept German calls for a full voluntary code of conduct.   The Guide takes into account the recommendations and principles of the Report and Agreement, below.

Links:

The report of the Counterparty Risk Management Policy Group II July 2005

The Agreement Among the President’s Working Group and US Agency Principals in Principles and Guidelines Regarding Private Pools of Capital 22 Feb 2007

EC’s policy on retail financial services

The EC have published a Green Paper giving their policy objectives in retail financial services in the single market.  Not surprisingly, these are to:

• reduce prices, increase choice and empower consumers.

The policy follows on from the White Paper on Financial Services 2005-2010 and on its sector enquiry into retail banking.  Feedback from interested parties is sought by 16 July 2007 and there will be a public hearing in September.  The results will go in the EC’s Single Market Review  due in autumn 2007.

The Markets in Financial Instruments Directive

The Markets in Financial Instruments Directive  is Directive 2004/39/EC and fondly known as MiFID.  It was adopted in April 2004 after a lengthy legislative process.  The Directive and its two implementing measures (Commission Regulation No. 1287/2006 (the “implementing Regulation) and Commission Directive 2007/73/EC (the “Implementing Directive”), both of 10 August 2006) are required to be transposed by Member States by 31 January 2007 and will come into effect on 1 November 2007. 

Public consultation

The Committee of European Securities Regulators has (December 2006) launched a consultation on the “passport” for MiFID, presenting proposals and questions for a common approach on the notification procedures set out in Art.31 and Art.32 of MiFID and on the future collaboration between the home and host authorities.

Copies are available   

House of Lords select committee issues call for evidence on the role of UK regulators

On 14 December 2006 the House of Lords Select Committee on Regulators published a public call for evidence to assist its investigation on the role of regulators in the UK. The Select Committee, chaired by Lord McIntosh of Haringey, is mandated to investigate: regulators’ working methods and their effectiveness; the public interest and the interests of consumers; regulators’ impact on competition within domestic industries and the UK; the economy’s international competitiveness; and regulators’ use of regulatory impact assessments.

The call for evidence sets out a range of questions covering the above topics. Responses are invited by 9 February 2007 at the latest, but earlier responses will be welcome