A deep dive into DPAs: seven takeaways from the new DPA guidance in the SFO’s Operational Handbook

In October 2020 the SFO published guidance regarding Deferred Prosecution Agreements (“DPAs”) in a new chapter of its Operational Handbook. The guidance offers a practical step-by-step map to the route that the SFO, and, therefore, a target company and its advisers, will traverse where seeking to negotiate an outcome that avoids the need for prosecution. Continue reading

FCA finalised guidance for payments firms: safeguarding customer funds and Covid-19

The FCA recently issued its finalised guidance for payments and e-money firms on safeguarding customer funds and Covid-19. The guidance is designed to mitigate, in the short-term, concerns that some firms are not complying with the Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs) safeguarding rules in the way the FCA expects. It is also designed to help prevent potential harm to customers in the event of insolvencies caused by Covid-19.

Continue reading

FCA consultation on proposed guidance for payments firms: COVID-19 and safeguarding customer funds

After highlighting payment services as a priority in its 2020/21 business plan and following “evidence that some firms have not implemented the Electronic Money Regulations 2011 or Payment Services Regulations 2017 as [the FCA] expects”, the FCA has published a short consultation proposing further guidance for Payment Services Providers (PSPs), including Payment Institutions (PIs) and E-Money Institutions (EMIs).

The FCA gives the following as examples of areas where some firms are not fully complying with the safeguarding rules:

  • co-mingling of customer and firm funds;
  • failure to keep accurate records and accounts; and
  • insufficiently effective risk management procedures.

Following the consultation, the FCA plans to publish a “Dear CEO” letter incorporating the guidance (as amended). That guidance is intended to take effect temporarily, until the Approach Document is updated following a full consultation “later in the year”, which will likely include a proposal to incorporate the temporary guidance. The proposed guidance will also outline how firms can put in place more robust wind-down plans.

The FCA notes that payment services is an area that continues to undergo rapid development and that, while innovation is to be welcomed, many new entrants to the market are unprofitable at an early stage. The FCA is concerned, in particular, that these firms will face additional financial pressure as a result of the COVID-19 pandemic, which potentially threatens both customer revenues and the ability to seek external funding where required.

Next steps

Firms are asked to consider the proposed guidance and send any comments to the FCA by 12 June 2020.

Background and context

The proposed guidance follows an FCA review in H1 2019 of the compliance of 11 non-bank PSPs with the requirements for safeguarding service users’ funds under the Payment Services Regulations (PSRs) 2017 and Electronic Money Regulations (EMRs) 2011. This in turn led to the FCA’s issuance of a “Dear CEO” letter outlining the shortcomings found by the review and requesting non-bank PSPs to review their safeguarding arrangements, promptly remedy any inadequacies and attest to certain matters.

The rapid growth of both the payment services market and some firms in it, is both acknowledged by the FCA in its guidance and clearly reflected in the evolution of the surrounding regulatory landscape, marked by the revised Payment Services Directive (PSD2) which came into force in January 2018, four successive versions of the FCA’s Approach Document since September 2017 and a number of consultation papers by both the FCA and PRA.

Firms should continue to expect this to be an area of increasing regulatory focus, particularly amidst the current COVID-19 crisis. As with the client money regime for investment firms, it is likely that the FCA will view ongoing failures to comply with the safeguarding rules as a particularly serious matter.

 

Clive Cunningham

Clive Cunningham
Partner, London
+44 20 7466 2278

Mark Staley

Mark Staley
Senior Associate, London
+44 20 7466 7621

Harry Millerchip

Harry Millerchip
Associate, London
+44 20 7466 6447

HKMA set to turn up the heat on bank culture in 2019

On 19 December 2018, the Hong Kong Monetary Authority (HKMA) announced that it will introduce supervisory measures (Supervisory Measures) focused specifically on measuring authorised institutions’ (AI) progress in implementing reforms to their culture. The Supervisory Measures include requiring AIs to complete and return self-assessment forms regarding their culture to the HKMA, and undertaking on-site reviews focused specifically on culture. For our full briefing on the supervisory measures, please click here

William Hallatt

William Hallatt
Head of Financial Services Regulatory, Asia, Hong Kong
+852 2101 4036

Gareth Thomas

Gareth Thomas
Partner, Hong Kong
+852 2101 4025

Hannah Cassidy

Hannah Cassidy
Partner, Hong Kong
+852 2101 4133

Emily Rumble

Emily Rumble
Associate, Hong Kong
+852 2101 4225

From offline to online: upholding investor protection in sale of complex products

As investment services go digital, Hong Kong regulators have found it necessary to issue tailored guidance to protect investors.

From 6 April and 23 August 2019 respectively, new guidelines from the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority will increase the regulatory requirements for financial institutions offering investment products via online platforms. Continue reading

HKMA endorses benefits of cooperation

The Hong Kong Monetary Authority (HKMA) has recently released its first Guidance Note on Cooperation with the HKMA in Investigations and Enforcement Proceedings.

In releasing the guidance note, the HKMA has expressly signalled its desire to encourage and facilitate cooperation, noting that its benefits include time, cost and resource savings to both the HKMA and institution or individual concerned.  Continue reading

Foreign & Commonwealth Office publishes guidance on sanctions licensing policy after Brexit

The Foreign & Commonwealth Office has published guidance detailing the UK Government’s intended approach to sanctions exceptions and licences after Brexit. Sanctions exceptions and licences are mechanisms through which restrictive measures imposed by sanctions may be relaxed in specific circumstances. The guidance comes as the Sanctions and Anti-Money Laundering Bill (the “Bill“) reaches the final stages of the legislative process. The Bill has passed through both the House of Lords and the House of Commons, and is currently in the “ping pong” stage. Continue reading