The UK and Switzerland have signed an agreement on the mutual recognition of their respective regulatory and supervisory frameworks for financial services. The agreement will remove specific regulatory barriers to cross-border business between the UK and Switzerland, stabilise the existing basis on which UK and Swiss firms provide cross-border services and provide a framework for supervisory and regulatory cooperation and the future expansion of mutual recognition to additional cross-border services.
The new UK regulatory framework for critical third parties – proposed rules and next steps (January 2024)
We continue to see an increase in financial sector firms' and financial market infrastructures (FMIs)' reliance on outsourcing and other arrangements with third parties such as ICT providers, a trend that was accelerated by Covid-19. Arrangements with often unregulated third parties can and do bring many benefits, but disruption or failure of services provided by certain 'critical' third parties (CTPs) can pose risks to multiple firms or the wider sector.
On 4 December 2023, the UK's Financial Conduct Authority (the FCA) published its consultation paper (CP 23/26) "Implementing the Overseas Funds Regime", which sets out how overseas funds (schemes) will be able to be "recognised" in the UK (i.e. permitted to be marketed to UK retail investors) (the CP). Such recognition depends on whether the UK Government decides to make any equivalence determinations under the Overseas Fund Regime (OFR) in respect of any jurisdictions. The CP focuses on how the FCA intends to make new rules, guidance, and amendments to its Handbook, should any equivalent determinations be made.
The UK's HM Treasury has published a policy response and draft legislation to update and recalibrate the High Net Worth and Self-Certified Sophisticated Investor exemptions from the UK's financial promotions rules. These changes take effect from 31 January 2024 and no transitional arrangements will apply. In this blog we look at how the changes will refocus the availability of the exemptions and the actions firms will need to take to prepare and implement such changes.
A multi-pronged approach to boosting investment research in the UK: the recommendations of the Investment Research Review (July 2023)
The Investment Research Review (IRR) launched in March 2023 has published its report. Tasked with exploring how the UK's research landscape can be improved to boost the UK's attractiveness for listing and capital-raising, the review has made seven key recommendations for the short to medium term. A key recommendation is a loosening of the EU-derived MiFID II rules to provide more flexibility in how investment research is paid for, through the reintroduction of bundled payments. An important effect of this change will be to align the UK approach with that of the US and with current legislative reform proposals in the EU. In this blog, we take a closer look at the seven recommendations, the likely timeframes for changes and the impact on buy-side and sell-side firms.
Following from a consultation in October 2022, the Monetary Authority of Singapore (MAS) has announced that it will impose requirements for digital payment token (DPT) service providers (DPTSPs) in Singapore to safekeep customer assets under a statutory trust before the end of the year. DPTSPs will also be restricted from facilitating lending and staking of their retail customers' DPTs. Further measures to address market integrity risks and unfair trading practices in the DPT market are also being proposed. In this blogpost, we give an overview of the key proposals that will have a major impact on the DPT (or cryptocurrency) industry in Singapore in the coming months.
The Financial Conduct Authority (FCA) has published a consultation (CP23/15) on its proposals for the development of a consolidated tape in the UK, as well as other significant changes in the financial industry. The consultation runs until 15 September 2023, and the FCA expects to finalise its policy by the end of the year, with a view to the introduction of the tape in 2024. In this blog post, we give an overview of the key points discussed in the consultation paper and shed light on what these proposals will mean for UK market participants.
UK Retained EU Law (Revocation and Reform) Act 2023 – Key changes on the way to Royal Assent (June 2023)
The Retained EU Law (Revocation and Reform) Bill gained Royal Assent on 29 June 2023, becoming the Retained EU Law (Revocation and Reform) Act 2023. The 'REUL Act' as adopted retains many key features of the original 'Brexit Freedoms Bill', including the provisions that apply to retained EU law relating to financial services and markets, with limited changes. But the scope of the controversial 'sunset' provisions set out in the original Bill has been significantly limited. In this blog, we outline the key changes that have been made to the REUL Act as it passed through the legislative process.
The Financial Services and Markets Bill gained Royal Assent on 29 June 2023, becoming the Financial Services and Markets Act 2023.
Following the introduction of UK legislation to bring cryptoassets within the UK's financial promotions regime, the UK's Financial Conduct Authority (FCA) is introducing new rules from 8 October 2023 meaning that cryptoassets will only be able to be marketed to UK consumers (by UK or overseas firms) subject to certain restrictions. All firms promoting cryptoasset products or services to UK consumers should be preparing for the new framework, as the consequences of non-compliance can be significant.
HM Treasury has proposed a comprehensive regulatory regime for firms engaging in certain cryptoasset activities. It is enabled by the addition of a new Clause 65 into the Financial Services and Markets Bill (FSMB), which will allow HM Treasury to expand the UK's regulated activities framework to encompass cryptoasset related activities. This latest consultation on wider (non-stablecoin) cryptoassets builds on previous discussion papers and consultations, and complements other proposals in the FSMB to introduce a regime that will allow for the regulation of fiat-backed stablecoins which are used for payments (termed "Digital Settlement Assets").
Following two previous consultations over the past 18 months, the Basel Committee on Banking Supervision (BCBS) has published its finalised prudential standard on banks' cryptoasset exposures (. The new prudential standard (the Cryptoassets Standard) applies to banks' exposures to digital assets, including tokenized traditional assets, stablecoins, and unbacked cryptocurrencies. The Cryptoasset Standard sets the prudential framework for such exposures, by imposing capital charges depending on the type of asset and activity. The finalised framework has more flexibility than the version consulted on in June 2022, which had been criticised by the industry for its potential to render banks' crypto holdings commercially unviable.. We look at what the final proposals say and the impact for market participants.
Hong Kong has passed legislation introducing a new licensing regime for virtual asset service providers. The timeline for the commencement of this regime has also been postponed. In this blog post, we outline key concepts under the new regime and summarise the revised timeline for its commencement.
The UK is proposing to overhaul the disclosures that must be provided to UK retail investors in financial products by repealing the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation and replacing it with a more flexible disclosure regime administered by the UK's Financial Conduct Authority (FCA).
Hong Kong to allow retail access to virtual asset exchange traded funds and considering legalising retail virtual asset exchanges (November 2022)
Hong Kong has announced several fundamental virtual asset-friendly changes to the city's regulatory stance towards virtual assets, including the relaxation of rules surrounding retail access. This RegTalk blog post summarises the proposed changes and their impact.
On 20 July 2022, HM Treasury laid the UK's new Financial Services and Markets Bill before Parliament. This major piece of post-EU legislation makes significant changes to the structure and content of UK financial services regulation. Here are our top five takeaways.
Since Brexit and the end of the transition period, UK and EU financial services regulation has begun to evolve and, in several cases, diverge.
New Omnibus Act for Singapore's financial sector – Financial Services and Markets Act 2022 (April 2022)
A new financial-sector wide legislation, the Financial Services and Markets Act 2022, will be introduced in Singapore to enhance the regulator's effectiveness in addressing financial sector-wide risks. The new Act potentially impacts financial institutions (FIs) and virtual asset service providers (VASPs), for the reasons explained below.
Trialogues relating to the proposed Regulation on markets in crypto-assets (MiCA) are underway between the European Commission, Council and Parliament. We examine the overlaps and potential outcomes of these discussions.
Increased custody liability – proposed reforms to EU funds legislation and new rules for crypto-asset markets (April 2022)
Under the European Commission's proposed reforms to AIFMD and UCITS V and the various drafts of the EU Markets in Crypto-assets Regulation ("MiCA"), including the latest European Parliament version, depositaries and custodians of funds and custodians providing services regarding crypto-assets could become subject to increased liability and other obligations.
The Capital Requirements Directive (or CRD) is the principal EU banking directive. It covers not only capital requirements but also remuneration, governance, licensing and more. It has been amended several times over the years, and in November 2021, the Commission published a proposal for its first post-Brexit overhaul: CRD6.
The European Commission published its legislative proposal for AIFMD2 on 25 November 2021 (the "Proposal")]. The Proposal is a mixed bag, with some potentially problematic provisions (for example, new rules on liquidity risk management) but also some potential opportunities (for example, in respect of pan-EEA loan origination). The Proposal will be modified further as it progresses through the legislative process, as a result of input from the European Parliament and European Council.
Are we still allowed to talk crypto? New proposals for the regulation of cryptoasset promotions (February 2022)
In January 2022, both HM Treasury (HMT) and the FCA published new proposals for the regulation of the promotion of certain cryptoassets.
The Markets in Financial Instruments Regulation (MiFIR) introduced transparency requirements for non-equity asset classes such as bonds and derivatives and introduced a derivatives trading obligation (DTO) requiring the most liquid derivatives to be traded on EU trading venues or equivalent non-EU venues. Similar requirements have been retained in the UK as part of the onshoring of EU law following the UK's exit from the EU.
EU: Guidelines on marketing communications relating to the cross-border distribution of funds coming into force (January 2022)
ESMA's guidelines on marketing communications under Regulation on cross-border distribution of funds (EU 2019/1156) dated 2 August 2021 will apply from next week, 2 February 2022.
The European Securities and Markets Authority (ESMA) has published its long-awaited forbearance statement asking competent authorities "not to prioritise supervisory actions" with respect to mandatory buy-in (MBI) requirements under the EU Central Securities Depositories Regulation (CSDR), pending a formal delay of the rules.