The US Department of Labor announced final rules that will, for the first time, subject investment advice to IRA and other non-ERISA plan clients to ERISA’s fiduciary standards and remedies. Currently, brokers and dealers and other advisers to retail retirement clients are required to adhere to a “suitability” standard with respect to their investment advice. Under the new rule and related prohibited transaction exemptions, which will be applicable beginning in April 2017, these financial professionals must act in the “best interests” of their client in order to continue receiving common forms of compensation (such as commissions, third party payments and other forms of variable remuneration). In eliminating certain compliance requirements, the final rule is less stringent than the proposed rule issued in April 2015, but it still represents a major departure from the status quo.

View Shearman & Sterling's client memorandum discussing the new rule and related exemptions. 

View the final rule.

View the fact sheet released by the White House.

The US Internal Revenue Service issued a proposal under Section 385 of the Internal Revenue Code with respect to the treatment of instruments issued by corporations in related-party transactions as debt or equity for federal tax purposes. On the same day, the US Treasury Department also took action to limit US corporate “inversions” and to restrict earnings stripping aspects of such transactions.

Specifically, the US Treasury regulations would, among other things, limit corporate inversions by disregarding foreign parent stock attributable to certain prior inversions or acquisitions of US companies. Additionally, debt issued by a US subsidiary to its foreign parent would be treated as equity under certain circumstances. The proposals have raised concerns with respect to the impact on US subsidiaries of foreign banking organizations, specifically intermediate holding companies subject to the Federal Reserve Board’s total loss absorbing capacity (TLAC) requirements. These new proposals add further complexity regarding the tax treatment of TLAC debt.

View the IRS proposed regulations.

View the Treasury Department press release. 

The UK House of Commons Treasury Committee wrote to the Chancellor of the Exchequer informing him that it had commissioned a report into the Maxwellisation process. Maxwellisation allows those who are going to be criticized in a public report an opportunity to respond to such criticisms and comment on relevant texts prior to their publication. The Treasury Committee's view is that one of the reasons for the delay in the publication of the UK regulators report into the collapse of HBOS was that Maxwellisation was applied, which took some 14 months. The HBOS report was published in December 2015 - seven years after HBOS failed. The Treasury Committee has asked Andrew Green QC to prepare a report on the legal requirements for, the issues that arise in the application of, Maxwellisation and to make recommendations on how Maxwellisation can be applied in a fair and proportionate manner in future public financial enquiries. The report will focus on the financial services sector only. 

View the Treasury Committee's letter.

View the Terms of Reference of the Maxwellisation Review.

US Federal Reserve Bank of New York President William Dudley addressed the role of the US Board of Governors of the Federal Reserve System and its structure and governance. He provided a detailed overview of the history of the creation and evolution of the Federal Reserve through the 20th century. He defended the Federal Reserve's actions during the financial crisis, noting that critiques of regulators should focus on shortcomings that led to the economic and financial instability of the crisis and not the Federal Reserve's intervening actions to mitigate the consequences. Dudley discussed the significant changes the Federal Reserve has taken since the financial crisis, including establishing the Large Institution Supervision Coordination Committee to look at the largest institutions and the Office of Financial Stability Policy Research to focus on the financial system at a holistic level. He also noted that the Federal Reserve has taken steps to improve transparency, including more speeches by FOMC members, regular testimony, press conferences and public notices after FOMC meetings. He cautioned against making changes to the structure of the Federal Reserve and the implementation of a formal rule for the Federal Reserve to adhere to in setting monetary policy.

View President Dudley's speech. 

A new “Office of Financial Sanctions Implementation” (OFSI) was established within Her Majesty’s Treasury, with responsibility for ensuring that sanctions are “properly understood, implemented and enforced in the UK”.  Despite an expansion in the number of sanctions programmes in the EU in recent years, as well as increasingly complex rules, there have not been any significant enforcement actions in the UK, a situation which contrasts with the enthusiastic enforcement practices of US sanctions enforcement agencies. OFSI is expected to work closely with other regulatory authorities, such as the FCA, to apply a more effective sanctions enforcement regime than has previously been the case. To this end, the government is also legislating to ensure that suitable remedies are available for sanctions enforcement.  Provisions in the Policing and Crime Bill outline new administrative penalties, monetary penalties and an increase in the maximum custodial sentence for breaching financial sanctions to seven years on conviction on indictment (or six months imprisonment on summary conviction).
 

The Financial Stability Board announced that it would publish proposed policy recommendations to address structural vulnerabilities in asset management activities. The recommendations will aim to address several risks that such activities present: funds' liquidity mismatch, leverage within funds, operational risk and challenges in transferring investment mandates in a stressed situation and securities lending activities of asset managers and funds. The FSB intends to finalize the recommendations by the end of 2016. The announcement was included in a press release which summarizes the outcomes of the FSB's recent meeting in Tokyo. The FSB will also be focusing on CCP resolution this year and intends to publish guidance on CCP resolution by September and consult on standards or guidance on issues relating to CCP resolution before the end of the year. 

View the FSB announcement.

The European Commission launched a consultation seeking views on key insolvency principles and standards which could ensure that national insolvency frameworks work in a cross-border context. The consultation is part of the Commission's Capital Markets Union Action Plan which aims to remove barriers to the free flow of capital. Responses will be used to identify which aspects could be included in a legislative initiative or other related actions. It takes the form of various multiple choice questions and one open question, which seem to be aimed at initial framing of how this initiative should be taken forwards. The consultation is open until June 14, 2016.

View the consultation website.

The European Banking Authority published translations of its final guidelines on product oversight and governance arrangements for retail banking products. The retail banking products included are mortgages, personal loans, deposits, payment accounts, payment services and electronic money. The guidelines are addressed to EU national regulators and financial institutions and require the establishment of product oversight and governance arrangements for the design, bringing to market and review of retail banking products over their lifecycle. The guidelines will apply from January 3, 2017, to all products brought to market after that date as well as to existing products that are significantly changed after that (the EBA has not provided clarification on the meaning of "significantly changed").

View the Translated Guidelines. 

Thomas C. Baxter, general counsel and executive vice president of the Federal Reserve Bank of New York, announced his decision to retire from the New York Fed in September, 2016, after 36 years of service. Mr. Baxter also serves on the New York Fed’s Management Committee and as deputy general counsel for the Federal Open Market Committee. Mr. Baxter will step down in June, but will continue to advise the New York Fed president and assist in the legal group’s transition until September. The New York Fed will immediately begin the search for Mr. Baxter’s successor.

View the New York Fed press release.   

Comptroller of the Currency Thomas J. Curry announced the appointment of Grace Dailey as Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner. Comptroller Curry also announced that Grovetta Gardineer will fill the newly created position of Senior Deputy Comptroller for Compliance and Community Affairs. Ms. Dailey will succeed Jennifer Kelly, who is retiring at the end of April after 37 years of service to the OCC. Ms. Gardineer assumes her new title and responsibilities immediately.

View the OCC press release.    

The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2016 was made. The Order amends legislation relating to the regulation of activities connected with lending, primarily the Financial Services Act and Markets Act (2000). The Order extends the scope of regulated activities for certain types of activities which previously did not qualify as a regulated activity, for the purpose of the FSMA, are now deemed a regulated activity. For example, it provides amendments to the regulated activity of operating electronic systems in relation to lending. The amend states that the activity is regulated whether the operation collects interest or not under the lending agreement, and where a person carrying on that activity, facilitating another person transferring their rights under an agreement to a third party, is a regulated activity. The Order also serves partly to implement the Mortgage Credit Directive Order. For example, the Order extends the scope of the regulated activities of arranging and advising on regulated mortgage contracts so that mortgages entered into before October 31, 2004 (which are regulated as consumer credit agreements before March 21, 2016) are included within the activities from that date. The Order came into force on March 17, 2016.

View the Order. 

The US Financial Industry Regulatory Authority released a report evaluating the NASD Rule 1010 Series which rules govern FINRA’s Membership Application Program (MAP). The MAP rules are used by FINRA to evaluate the proposed business activities of member firms, including the applicant’s financial, operational, supervisory and compliance systems. FINRA staff conducted a comprehensive assessment of the rules, including seeking input from, and conducting a survey of, firms that are subject to the rules and non-member firms that assist in MAP submissions. FINRA staff concluded that the rules are generally effective in achieving their objectives of protecting investors. The report notes areas for improvement or clarification that FINRA will consider addressing through a combination of guidance, proposed rule modifications, process and administrative changes and technological updates to enhance the effectiveness and efficiency of the rules.

View press release.

View report.

US Board of Governors of the Federal Reserve System Governor Lael Brainard provided an outlook on US economic conditions, an overview of the importance of financial market liquidity and the resilience and resolvability of large interconnected banks. With respect to liquidity, Brainard noted that day-to-day liquidity has not declined notably but that there have been changes to the characteristics of liquidity, including increased segmentation. She also noted the importance of recent proposals by the Commodity Futures Trading Commission and the Securities and Exchange Commission to understand the use of algorithmic trading and its impact on trading markets. With respect to improving the resilience and resolvability of systemic banking organizations, she noted that as a result of capital and liquidity regulations and stress tests, US banking organizations are now holding $800 billion more in high-quality liquid assets than they were in 2011. She noted the capital surcharge for global systemically important banks and that she would hope to see it eventually integrated into the Federal Reserve’s Comprehensive Capital Analysis and Review. Governor Brainard noted that the Federal Reserve will be reviewing comments to its proposed rule on total loss-absorbing capacity, and that the long-term debt requirement in the proposed rule is a critical component of ending “too big to fail.”

View speech.

The Financial Conduct Authority issued a discussion paper on client money rules (CASS 7) and the Special Administration Regime Review. The discussion paper is relevant to all regulated firms that hold client assets or money for investment business. Client money rules govern how client assets are to be distributed by an insolvency practitioner managing a failed investment firm. The discussion paper is in response to the recommendations made in the Bloxham Final Report which aims to improve the speed of return of client assets and minimize the market impact of a failed firm's entry into special administration.

Read More. 

James J. McAndrews, executive vice president of the Research and Statistics Group and Director of Research of the Federal Reserve Bank of New York, announced that he will be retiring from the FRBNY in June after 28 years at the Federal Reserve System. The FRBNY noted that it will immediately begin the search for McAndrew’s successor.

A Delegated Regulation on regulatory technical standards for publication of prospectuses and the dissemination of advertisements was published in the Official Journal of the European Union.  The RTS stipulates amendments to the EU Prospectus Regime, including: (i) arrangements for approval of prospectus by a regulator; (ii) arrangements for publication of a prospectus; (iii) the dissemination of advertisements relating to a public offering of securities or an admission to trading on a regulated market; and (iv) requirements regarding the consistency between information disclosed about an offer to the public, or admission to trading on a regulated market, and the information contained in the relevant prospectus.  The RTS enter into force on the March 24, 2016.

View the Delegated Regulation. 

President Obama sent nominations to the US Senate to fill the two vacant Commissioner seats at the US Commodity Futures Trading Commission. The nominees are Brian Quintenz, founder and managing principal of Saeculum Capital Management LLC and a former aide to Representative Deborah Pryce (R-OH), and Christopher Brummer, a professor at Georgetown University Law Center.

The Financial Conduct Authority published a consultation paper on proposed changes to the FCA Handbook following the implementation of the EU Payment Accounts Regulation. The consultation is aimed at entities that provide payment account services in the UK, such as banks and building societies. The EU Payments Directive was implemented in the UK through the UK Payment Accounts Regulations which come into effect on September 18, 2016. The FCA is obliged, under the PAR, to submit data to HM Treasury relating to payment accounts. The consultation outlines the draft changes that the FCA has proposed to enable it to carry out its obligations under the PAR.  Proposals include: (i) issuance of guidance on the definition of a 'payment account' within the context of PAR; (ii) issuance of guidance on the implementation of the provisions on packaged accounts; (iii) the introduction of new regulatory requirements in relation to switching and payment accounts with basic features; and (iv) minor changes to the FCA Handbook to reflect the new PAR provisions regarding packaged accounts and switching of payment accounts. Responses to the consultation are due by May 3, 2016. The FCA aims to publish final guidance and changes to the FCA Handbook by the end of August 2016.

View the consultation paper.

View the response form. 

The Banking Standards Board announced that Sir Brendan Barber had been appointed as its Deputy Chairman. The Banking Standards Board was established in April 2015 as an industry initiative. It aims to promote higher standards of behavior and competence in banks and building societies operating in the UK.
 
View the press release.

The European Commission adopted a Delegated Regulation, in the form of Regulatory Technical Standards, detailing the content of the financial instrument reference data that must be supplied to regulators. The adopted RTS will be made under the Markets Abuse Regulation and Markets in Financial Instruments Regulation.  They establish requirements for regulated entities to provide instrument reference data to regulators, which are then transmitted by regulators to the European Securities and Markets Association. The adopted RTS details which financial instruments are to be included as part of the reported instrument reference data. The adopted RTS also outlines ESMA's responsibility to review, assess, consolidate and publish the data on its website using automated processes. This adopted RTS will apply from July 3, 2016. 

View the adopted RTS.

View the Annex.

The Financial Stability Board published its letter, dated February 22, 2016, to the G20 Finance Ministers and Central Bank Governors in advance of the G20 meeting in Shanghai. The letter sets out the FSB's priorities for 2016 which are: (i) to support the full and consistent implementation of the agreed regulatory reforms by reporting on progress  and assessing whether reforms result in their intended outcomes; (ii) analyzing structural vulnerabilities in asset management activities, including developing policy responses on liquidity mismatch in funds, leverage within funds, operational risks in transferring investment mandates and securities lending activities of funds and asset managers; (iii) to publish a peer review on the implementation of the shadow banking framework; (iv) reducing misconduct risk, in particular, the role of incentives in preventing misconduct; (v) addressing the decline in correspondent banking (about which the FSB published a four-point plan in 2015); (vi) disclosure of climate-related financial risks; (vii) CCP resilience and recovery; (viii) assessing macro-prudential policy frameworks and tools; (ix) completing the regulatory capital framework for banks; (x) assessing implementation of resolution reforms including the total loss absorbing capacity (TLAC) framework published at the end of 2015; (xi) removing legal and regulatory barriers to reporting of derivatives trades; and (xii) assessing the implications of financial technology for financial stability. The G20 published a Communiqué following the Shanghai meeting which refers to the FSB's work and notes the progress made on implementing financial regulatory reforms.
 
View the FSB letter.

View the G20 Communique.

The Federal Reserve Bank of New York announced the reappointment of William C. Dudley and Michael Strine as president and first vice president of the New York Fed, respectively. Eligible members of the New York Fed’s board of directors voted unanimously to reappoint Mr. Dudley and Mr. Strine, and the Federal Reserve Board approved that decision. Their new five-year terms begin March 1, 2016.

View the New York Fed press release.    

US Securities and Exchange Commission Chairwoman Mary Jo White addressed the annual “SEC Speaks” program, noting the critical role capital markets play in the US economy and the importance of risk-taking as part this process. White argued that regulators should not seek to eliminate risk altogether but rather safeguard the investment and capital raising process from unacceptable risks that dilute, distort or disable the fair playing field that is integral to robust free financial markets.

View the speech. 

The US Board of Governors of the Federal Reserve System approved the reappointment of 10 Federal Reserve Bank presidents and 10 first vice presidents by their respective boards of directors. Each individual has been approved to serve a new five-year term beginning March 1, 2016. The recently named presidents of the Federal Reserve Banks of Minneapolis and Dallas, as well as the recently appointed first vice presidents of the Federal Reserve Banks of Philadelphia and Chicago, were approved for terms through February 28, 2021, at the time of their initial appointments.

View the list of presidents and first vice presidents, by Federal Reserve District.  

The Financial Conduct Authority issued a Call for Input on the retained provisions of the Consumer Credit Act. Responsibility for regulating consumer credit markets was transferred to the FCA in April 2014. The aim of the review is to simplify the regime and provide appropriate protection for consumers without burdening firms disproportionately. The FCA is seeking input on three key areas: (i) whether any specific retained provisions should be prioritized for review; (ii) the timeline of the review; and (iii) the manner in which the review should be undertaken. Responses to the Call for Input are due by May 18, 2016. The FCA is expected to establish a stakeholder's consultative group and to finalize the scope of the review in the next few months. The regulator will publish an update on progress in the fourth quarter of 2016. The FCA is required to report its recommendations to the Treasury by April 1, 2019. The report could outline legislative change and whether repealing any of the retained provisions in the CCA could have an adverse effect on the appropriate level of consumer protection. The report must also consider whether any of the retained provisions of the CCA could be replaced by FCA rules. In making the review the FCA must have regard to the principle that a burden imposed in relation to the carrying on of an activity should be proportionate to the benefits.

View the Call for Input.

The European Securities and Markets Authority published a peer review report on the implementation by national regulators of the Committee of European Securities Regulators' Guidelines on a common definition of European Money Market Funds. The Guidelines specify a common definition of MMFs and establish a list of criteria that funds need to comply with should they wish to be categorized as a "Money Market Fund". The Guidelines aim to improve investor protection and apply both to: (i) collective investment undertakings subject to the Undertakings for the Collective Investment of Transferable Securities Directive; and (ii) non-harmonized collective investment undertakings regulated by the national laws of a Member State, which is supervised and complies with risk-spreading rules. The peer review follows the initial peer review published in April 2013 which identified that numerous regulators had at that time failed to implement the Guidelines. This second review updates the first review and covers 8 out of 30 countries which at the time of the previous review had not fully or in part implemented the guidelines. The 8 countries are Bulgaria, the Czech Republic, Hungary, Liechtenstein, Lithuania, Latvia, Malta and Portugal. The review states that the guidelines are or are about to be fully applied in all these jurisdictions apart from Hungary, where some failings have been identified. 
 
View the Guidelines.
 
View the 2013 peer review report.
 
View the 2016 peer review report.

The European Securities and Markets Authority published a discussion paper on the proposed EU Benchmarks Regulation and its technical implementation. ESMA is seeking views on initial proposals it intends to make in the form of draft Regulatory Technical Standards and Technical Advice. This follows on from the European Commission's mandate sent to ESMA on February 11, 2016, requesting technical advice on potential delegated acts on the Benchmark Regulation. The areas on which ESMA is seeking views include: (i) the definition of benchmarks; (ii) what constitutes administering arrangements for determining a benchmark, taking into account different existing business practices; (iii) what constitutes the issuance of a financial instrument for the purposes of defining the use of a benchmark; (iv) the measurement for the nominal amount of financial instruments other than derivatives, the notional amount of derivatives and the net asset value of investment funds for a benchmark within a combination of benchmarks relating to the assessment of benchmarks; and (v) transparency requirements for benchmark methodology. The exact entry into force of the Benchmark Regulation is still unknown, though it is expected to enter into force in June 2016. ESMA has been asked to provide its technical advice four months after the Regulation enters into force. Currently, the Regulation and delegated acts are expected to apply 18 months after the Regulation enters into force. ESMA aims to analyze the responses to the discussion paper before July 2016 and to publish a consultation paper later this year. Comments on the discussion paper are due by March 31, 2016.

View the discussion paper.

The European Banking Authority published its final Guidelines relating to cooperation agreements between Deposit Guarantee Schemes in accordance with the EU Deposit Schemes Directive. The Guidelines provide the minimum content for cooperation agreements between DGSs. The EBA has also provided a multilateral framework cooperation agreement in an attempt to minimize the need for numerous detailed bilateral agreements to be executed between multiple DGSs. The framework offers scope for DGSs to enter multilateral and bilateral agreements with more detailed terms than those provided for in the Guidelines, if necessary. The Guidelines stipulate minimum specifications to be included in cooperation agreements, including the means for: (i) repayment of depositors by the host DGS at branches of banks established in other Member States; (ii) the transfer of contributions from one DGS to another where a bank ceases to be a member of a DGS and joins another DGS; and (iii) mutual lending between DGSs. The EBA has attempted to cater for depositors in EU branches of firms headquartered in other Member States, so that they are treated in a similar fashion to depositors in home Member States by providing direction on the sequence and timing of events when the host DGS pays out depositors on behalf of the home DGS. The Guidelines will come into effect six months after their publication in all official EU languages.

View the Guidelines.

The European Commission published a joint statement following a meeting that took place on February 3, 2016 between the participants of the US-EU Financial Market Regulatory Dialogue. The group met to discuss key regulatory topics including recent developments in bank capital and liquidity measures, bank resolution, cross-border bank supervision, CCP resolution, derivatives reforms and benchmarks reforms. Amongst other things, US and EU participants outlined the progress made on: (i) the common approach on requirements for central clearing counterparties and the equivalence of US trading platforms under the EU Markets in Financial Instruments framework; (ii) the proposed European Benchmark reform; and (iii) resolution frameworks for CCPs. The participants included representatives from the European Commission, European Central Bank, US Treasury, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and the Securities and Exchange Commission. The next meeting will be taking place in Brussels in July 2016.
 
View the joint statement.

The European Commission asked the European Securities and Markets Authority for technical advice on potential delegated acts due under the proposed European Benchmark Regulation. The proposed Benchmark Regulation aims to ensure that benchmarks produced and used in the EU are robust, reliable, fit for purpose and free from manipulation. The Commission's mandate requests technical advice from ESMA on matters including: (i) what constitutes administering arrangements for determining a benchmark, taking into account different existing business practices; (ii) what constitutes the issuance of a financial instrument for the purposes of defining the use of a benchmark; and (iii) the conditions under which a national regulator may decide that there is an objective reason for the provision of a benchmark or family of benchmarks in a third country. In response to the Commission's request, ESMA published a discussion paper on the Regulation and its technical implementation. The proposed Regulation is expected to enter into force in June 2016. ESMA has been asked to provide its technical advice four months after the Regulation's entry into force. Currently, the Benchmark Regulation and delegated acts are expected to apply 18 months after the Regulation enters into force.
 
View the Commission's request for technical advice.
 
View the Commission's covering letter to ESMA.
 
View ESMA's discussion paper.

The Bank of England, Prudential Regulation Authority and Financial Conduct Authority jointly published a consultation paper on how complaints about them are reported and responded to. The regulators operate a Complaints Scheme that investigates complaints against them. The scheme has recently been revised. The revisions require the Complaints Commissioner, which is the investigator of complaints against the regulators, to produce an annual report on such investigations and send a copy of the report to the regulators as well as the Treasury. If the Complaints Commissioner makes recommendations or criticisms about the handling of a complaint against a regulator, the regulator must respond to such recommendations or criticisms and send its response to both the Complaints Commissioner and Treasury. The Regulators are seeking views on the proposed revisions to the Complaints Scheme, following the legislative amendments. The regulators are also obliged to review the operation of the scheme after three years, which may lead to a further consultation in 2016. Responses to the consultation are due by March 8, 2016.
 
View the consultation paper.

The Treasury Select Committee published three of the Financial Conduct Authority's internal audit reports dated October 2014. The Treasury Committee, on behalf of Parliament, has committed to scrutinize the FCA more rigorously since the financial crisis. In 2014, the Committee decided that its scrutiny would also extend to reviewing the FCA’s internal audit reports, to ensure that the audit reports are of a reasonable standard. The Treasury Committee published the FCA's audit reports from the first half of 2014 in October 2015. The latest audit reports are on: (i) the identification, handling and management of market sensitive information; (ii) the FCA’s incident response and crisis management capability; and (iii) the design and effectiveness of the FCA’s external communications strategy. Whilst the Treasury Committee is of the view that the FCA's processes are improving overall, it believes that there is still work to be done.
 
View the Treasury's February 2016 press release.
 
View the Treasury's October 2015 press release.

The New York State Department of Financial Services announced that it is extending the comment period to March 31, 2016, for its proposed anti-terrorism and anti-money laundering regulation, known as the Transaction Monitoring and Filtering Program.
The regulation, proposed on December 1, 2015, requires maintenance by each regulated institution of: (i) a transaction monitoring program for the purpose of monitoring transactions after their execution for potential BSA/AML violations and suspicious activity reporting; and (ii) a watch list filtering program to prevent transactions, before their execution, that are prohibited by applicable sanctions, including OFAC and other sanctions lists, politically exposed persons lists and internal watch lists. The proposed regulation also includes an annual certification requirement under which senior financial executives must certify that their institutions have necessary systems in place to identify and prevent illicit transactions.

View the proposed Transaction Monitoring and Filtering Program regulation. 

 
The European Securities and Markets Authority announced that it appointed Ms. Anneli Tuominen as its Vice Chair, replacing Mr. Carlos Tavares, who has completed his term.
 
View the press release.

 
The Payment Systems Regulator announced that it appointed Mr. Paul Smith as its Head of Policy from February 1, 2016.
 
View the press release.

The Bank of England issued a press release announcing that Mr. Andrew Bailey has been appointed as the new Chief Executive Officer of the Financial Conduct Authority. In his new role at the FCA, Mr. Bailey will be a member of the Prudential Regulation Authority Board and Financial Policy Committee. Mr Bailey will remain in his role at the PRA as CEO and Deputy Governor and will leave his role as Deputy Governor of Prudential Regulation at the BoE only once a successor has been appointed.
 
View the press release.

The Financial Conduct Authority announced that it has appointed four new non-executive FCA Board members as of April 1, 2016. The new members are Mr. Bradley Fried, Ms. Ruth Kelly, Baroness Sarah Hogg and Mr. Tom Wright CBE.
 
View the press release for Mr. Bradley Fried.
 
View the press release for Ms. Ruth Kelly.
 
View the press release for Baroness Sarah Hogg.
 
View the press release for Mr. Tom Wright CBE.

Ms. Maria T. Vullo was nominated by New York Governor Mr. Andrew M. Cuomo to serve as the Superintendent of the New York State Department of Financial Services.

View the press release. 

The Financial Conduct Authority issued a consultation paper on loan-based crowdfunding platforms and the segregation of client money. Current FCA client money rules (CASS 7) require that investor monies held by a firm under a Peer-to-Peer agreement (i.e. money that is to be lent or received in repayments) is segregated from the firm’s own money. Money relating to unregulated Business-to-Business lending (i.e. B2B agreements) must also be segregated from investor monies held by a firm (but not from the firm's own money). The FCA's proposals would allow firms to hold client monies in relation to both P2P and B2B agreements together. This change would be less burdensome to firms, as some do not have systems in place that can distinguish between monies held for P2P and B2B agreement purposes. Firms would then be able to segregate P2P and B2B monies from the firm's money, but keep them together, without breaking the FCA rules. Responses to the consultation are due by February 11, 2016.
 
View the consultation paper.

Two international central bank committees published reports on the structure and liquidity of fixed income markets. The Committee on the Global Financial System's report is on fixed income market liquidity whilst the Markets Committee paper is on electronic trading in fixed income markets. The CGFS report identifies liquidity conditions to be prone to disruptions, with signs of fragility, as fixed income markets are seen to be in a period of transition following the effects of ongoing regulatory, technology and market structure changes. The report states that whilst it is difficult to identify the drivers of such fragility, the changes could be due to: (i) a rise in algorithmic trading in fixed income markets; (ii) banks reducing their trading-related exposures in response to lower risk appetite; and (iii) crowded trades and one-sided risk expectations for market participants. The Markets Committee report focuses on the rise in algorithmic trading, which tends to facilitate the matching of buyers and sellers and in turn usually improves market quality, but can also result in liquidity conditions that are less resilient in times of stress.
 
View the CGFS report.
 
View the Markets Committee report.

The Prudential Regulation Authority and the Financial Conduct Authority announced the launch of their new joint initiative, the New Bank Start-up Unit, which will provide information and support to newly authorized banks and those wishing to become a new bank in the United Kingdom. This initiative will help new banks through the regulatory authorization process via the use of dedicated PRA or FCA staff members, a dedicated website, helpline and email address. Case officers will be allocated to firms during the authorization process. The PRA and FCA have also published a guide on the New Bank Start-up Unit which includes useful information for those aiming to set up a bank.
 
View the Guide.

The US Securities and Exchange Commission reopened the comment period for proposed amendments to rule 13n-4 of the Securities Exchange Act of 1945. The Dodd-Frank Act added sections 13(n)(5)(G) and (H) to the Exchange Act, requiring security-based swap data repositories to make data available to certain regulators and other entities, subject to certain conditions. The SEC proposed rules to implement those data access conditions on September 14, 2015. As part of the Surface Transportation Reauthorization and Reform Act of 2015 (Public Law 114 94) signed into law on December 4, 2015, certain of those conditions were revised, including, most notably, eliminating a requirement that the recipient of such data agree to indemnify the swap data repository and SEC for expenses arising from litigation relating to the information provided. The law also clarified that the data access was limited to security-based swap data, and not all data maintained by the repository, and added “other foreign authorities” to the list of entities that the SEC may determine it is appropriate to provide access to. Comments may be submitted for 30 days, following the publication of the proposed amendments in the Federal Register.

View the proposed amendments. 

The US Securities and Exchange Commission issued its Office of Compliance Inspections and Examinations’ 2016 priorities. Areas of focus for this year include liquidity controls, public pension advisers, product promotion, and two investment products – exchange-traded funds and variable annuities. The priorities also provide for continuing emphasis on protecting investors in ongoing risk areas such as cybersecurity, microcap fraud, fee selection, and reverse churning. The examination priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, and national securities exchanges. The priorities may be adjusted in light of market conditions, industry developments and ongoing risk assessment activities. OCIE selected the priorities in consultation with certain SEC policy divisions and regional offices, the SEC’s Investor Advocate, and other regulators.

View the SEC press release.

View the SEC examination priorities for 2016.

The Consumer Financial Protection Bureau announced that Mr. David Silberman will serve as Acting Deputy Director beginning the week of January 11, 2106, replacing Meredith Fuchs. Mr. Silberman previously served as Associate Director for Research, Markets, and Regulations. Mr. Silberman will serve as Acting Deputy Director while a search for a replacement is conducted.

View the CFPB press release.

The US Securities and Exchange Commission issued (i) an advanced notice of proposed rulemaking, seeking public comment for new requirements for transfer agents and (ii) a concept release on the SEC's broader review of transfer agent regulation. Among other requirements, the ANPR proposes to impose on transfer agents revised registration and annual reporting requirements, and revised requirements relating to the safeguarding of funds and securities, antifraud requirements in connection with the issuance and transfer of restricted securities, and to impose new guidelines relating to cybersecurity and information technology.

The SEC concept release addresses a broader range of other issues and it is possible that the various proposals will be acted on separately by the SEC. Issues addressed in the concept release include the processing of book entry securities, recordkeeping issues, administration of issuer plans, outsourcing, the role of transfer agents to mutual funds, and crowdfunding.Comments on both the ANPR and the concept release must be submitted within 60 days of publication in the Federal Register.

View the SEC ANPR and concept release. 
 

The European Commission launched a consultation which seeks to collect information on how institutional investors, asset managers and other service providers in the investment chain take into account, for the purpose of investment decisions, sustainability information and performance of companies or assets. The consultation is linked to the Commission's Communication on Long-Term Financing of the European Economy as well as the action plan for building a Capital Markets Union. The consultation is open until March 25, 2016.

View the consultation.

The Single Resolution Board announced the first members appointed to its Appeal Panel. The nominated members are: Ms Hélène Vletter Van Dort (Chair), Mr Yves Herinckx (Vice-Chair), Mr Kaarlo Jännäri, Mr Marco Lamandini, Mr Christopher Pleister. Ms Eleni Dendrinou-Louri and Mr Luis Silva Morais have been nominated as alternates to the Appeal Panel. The appointments are for a term of five years, starting on January 1, 2016. The Appeal Panel is established to hear appeals brought by individuals or legal persons, including resolution authorities, against a decision of the SRB that is either addressed, or of direct and individual concern, to that person.

View the announcement.

The International Organization of Securities Commissions announced it appointed Paul Andrews as its new Secretary General, replacing David Wright from March 2016 for a three-year term.

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The UK Chancellor of the Exchequer, George Osborne, announced that Dame Clara Furse and Richard Sharp had been re-appointed as external members to the Financial Policy Committee at the Bank of England. Their terms of appointment will now run until March 31, 2019.

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The European Securities and Markets Authority appointed Mr. Giuseppe Vegas as chair of its Market Integrity Standing Committee for a period of two years, starting on December 10, 2015.
 
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