Funds Legal Update | 1 April 2019

This week, we take a look at proposed revisions to two areas of JMLSG's Anti-Money Laundering guidance.

We report on the recently published PRA consultation setting out proposals for regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework.

We highlight the FCA's long-awaited proposals regarding treatment of the legal function under the Senior Managers and Certification Regime.

On sustainable finance, we take a look at coverage surrounding the European Commission's conference on a global approach and the European Parliament's framework and factsheet on facilitating sustainable investment and financing sustainable growth.

Finally, we highlight key recent Brexit headlines in relation to funds..

General

JMLSG publishes revised sectoral AML guidance

The Joint Money Laundering Steering Group (JMLSG) has published proposed revisions to two areas of the Group's Sector Guidance. These sections relate to credit unions, and brokerage services to funds. Comments can be submitted until 18 April 2019.

PRA: Pillar 2 liquidity consultation

On 19 March 2019, the PRA published a consultation paper (CP6/19) setting out proposals for regulatory reporting amendments and clarifications to the Pillar 2 liquidity framework. This consultation is relevant to banks, building societies, PRA-designated investment firms, and non-EU EEA banks. The consultation closes on 19 April 2019. See the updated webpage on regulatory reporting here.

In or out? Proposed treatment of the legal function under SM&CR

Banks, insurers and enhanced solo-regulated firms that will become subject to the Senior Managers and Certification Regime (SM&CR) will be interested in the FCA's long-awaited proposals regarding treatment of the legal function as set out in CP19/4. The FCA's consultation on CP19/4 closes on 23 April 2019.

Funds

Sustainable finance: knowledge sources

• On 21 March 2019, the European Commission hosted a high-level conference on a global approach to sustainable finance. Vice-President of the European Commission, Valdis Dombrovskis gave a speech at the conference.
• The European Parliament published a framework to facilitate sustainable investment and a factsheet on financing sustainable growth.

Brexit

Third country equivalence in EU banking and financial regulation

Last week, the European Parliament published an updated briefing paper (the original version was published in April 2018) which provides an insight into the latest regulatory developments on equivalence, including elements of the on-going ESA review, the Investment Firm Review, and EMIR 2.2. It also gives an overview on the possible role of equivalence regimes in the context of Brexit.

Statements of Policy: MiFID transparency regime post-Brexit

On 19 March 2019, the FCA published a technical communication on the operation of the MiFID transparency regime which sits alongside the FCA's statement on post-Brexit transparency.

Memorandum of Understanding agreed with EBA

On 20 March 2019, the PRA, FCA and EBA announced that they had agreed a template MoU setting out the expectations for supervisory cooperation and information-sharing between UK and EU/EEA national authorities. It will serve as the basis for bilateral MoUs that are being negotiated and signed by the EU competent authorities and the UK authorities. Read press releases from: the FCA and the joint BoE and FCA.

Clarity on how to withdraw from TPR: new PRA Direction

On 22 March 2019, the PRA published a Direction for EEA firms that have entered the Temporary Permissions Regime but decide to withdraw before exit day. The notification to withdraw must be in writing.

FCA speech: Brexit and beyond

On 21 March 2019, Nausicaa Delfas, Executive Director of International at the FCA, delivered a speech to the 4th UK Financial Services Brexit Summit in London. The speech covers: the FCA's preparations for exit, expectations of firms and implications for consumers; residual risks; and looking beyond 'exit day'.

Thinking ahead: financial services in the WTO?

The Financial Affairs sub-committee heard oral evidence on 13 March 2019 regarding financial services in the World Trade Organisation. Evidence was given by Dr Lorand Bartels, Senior Counsel, Linklaters LLP, and reader in International Law, University of Cambridge; and Eric White, Consultant, Herbert Smith Freehills. Read the uncorrected oral evidence here.

Brexit SIs

• Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019. These Regulations were made on 14 March 2019 under the Sanctions and Anti-money Laundering Act 2018 (SAMLA). They will come into force on such day(s) as appointed by an appropriate minister. The Regulations establish a sanctions regime to further the prevention of terrorism in the United Kingdom and elsewhere and to implement the United Kingdom’s international obligations.
• Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019. These Regulations were made on 15 March 2019 and ensure that authorised firms in Gibraltar are able to provide services and establish branches in the UK after exist day on current terms.
• Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019. This draft Regulation does a number of things to several different Acts and Brexit SIs, including, for example: amending domestic law for continuity purposes, and making minor technical amendments to financial services Brexit SIs. You can find the Hansard to the draft Regulations here.

If you would like to discuss any of these developments, please get in touch with one of the experts listed below.