On 26 April 2021, the prosecution by the Serious Fraud Office (the “SFO“) of fraud charges against two former directors of Serco Geografix Limited (“Serco“) collapsed. The SFO offered no evidence against the defendants, and the presiding judge directed the jury to return verdicts of not guilty. This happened after it became apparent that the SFO had failed to disclose to the defendants certain relevant materials, rendering it unsafe for the prosecution to proceed. The SFO’s statement on the matter confirmed that it was “considering how best to undertake an assessment to prevent this from happening in the future”. Continue reading
In this blog post, we round-up forthcoming developments in the UK and at EU and International levels in financial services regulation which are expected for March 2021.
Operational resilience is the next phase in the evolution of financial services regulatory policy.
Regulators’ expectations are increasing – but it’s an evolution rather than a revolution; firms – more specifically firms’ senior managers – must “join the dots” across a range of practical risk management and governance activities.
In a recent decision, the Court of Appeal has confirmed that the terms of an English law facility agreement in respect of Tier 2 Capital, allowed the borrower to withhold payment of interest instalments where there was a risk of secondary sanctions being imposed on the borrower under US law. In the view of the Court of Appeal, this result effectively balanced the competing interests of the lender to be paid timeously against the borrower’s ability to delay making a payment where it would be illegal (in a broad sense of the word, and under a different system of law to the facility agreement) and therefore affect the borrower’s ability to conduct its ordinary business: Lamesa Investments Limited v Cynergy Bank Limited  EWCA Civ 821. Continue reading
The FCA has announced that it will be surveying the financial resilience of around 13,000 firms from across 15 sectors. Between the 4 and 8 June 2020, firms will be sent a short survey by email to complete. In her speech at the PIMFA Virtual Festival, Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists, advised that firms will be given seven days to respond to the survey. The survey is intended to help the FCA better understand the effects that the Covid-19 pandemic is having on the finances of the firms it regulates and better guide its supervisory actions.
Genevieve Marjoribanks, Head of Policy at the Payment Systems Regulator (PSR), delivered an insightful speech to the Westminster Business eForum this week on innovation in payments and the next steps for digital payments in the UK. One of the PSR’s three key objectives is to promote the development of and innovation in payment systems, including the infrastructures that are used for these systems.
The PSR will be issuing a draft policy statement later this year. Businesses which are active in the payments space or rely on Bacs or Faster Payments technology should consider feeding in views on the proposed changes and future regulatory approach.
The New Payments Architecture (NPA) is a key priority for the PSR. The aim is to achieve an ambitious Blueprint plan set out by the Payment Strategy Forum (Forum) of developing a more innovative and competitive interbank payments environment, underpinned by a resilient and sustainable infrastructure. To this end, Faster Payments and Bacs systems will be moved to use central infrastructure that uses the global ISO20022 messaging standard which has or will be adopted for payments in the Single Euro Payments Area (SEPA), USA and Australia. The PSR believes that ISO20022 will bring increased interoperability, competition and richer data capabilities.
Similarly, Pay.UK and the Bank of England (BoE) have been working to define a ‘Common Credit Message’ for domestic payments using the ISO20022 standard which will provide for increased consistency and interoperability across the UK’s wholesale and retail payments systems. By upgrading the UK’s interbank payments services to use the global ISO20022 messaging standard for, and enabling other enhancements contained in the Forum’s Blueprint, such as promoting innovation through the use of Application Programming Interfaces (APIs), the PSR believes the UK’s position as a payments leader will be maintained.
Developing the NPA ecosystem sits with Pay.UK which is consulting existing Bacs and Faster Payments participants, as well as future users. Implementation will require careful consideration, weighing up the potential innovation benefits to users versus costs and risks, particularly as both the industry and wider economy that it serves is facing a period of uncertainty given recent events such as Brexit and the COVID-19 outbreak.
Those national regulators in the EU which had put in place temporary restrictions on any short selling of securities admitted to trading on regulated markets in their jurisdictions have all confirmed that the prohibitions will not be extended. However, firms should be aware that ESMA’s temporary lower net short reporting threshold will remain in force until 16 June.
National regulators – end of temporary bans on short selling
The regulators in France, Belgium, Spain, Austria and Greece have confirmed that the bans on short selling will not be extended and will expire at 11.59 pm on 18 May. The Italian regulator has also confirmed it will end the prohibition one month earlier than its original 18 June deadline at 11.59pm 18 May (in line with the other jurisdictions).
The below summary table sets out the details of each jurisdiction’s prohibition.
|Jurisdiction||Latest national regulator public statement||Date prohibition imposed||Prohibition imposed until|
|France||AMF||18 March||18 May|
|Belgium||FSMA||17 March||18 May|
|Spain||CNMV||17 March||18 May|
|Austria||FMA||18 March||18 May|
|Greece||HCMC||17 March||18 May|
|Italy||CONSOB||18 March||18 May|
ESMA – Lower net short reporting threshold still in place
While local regulators now plan to lift the bans on short selling, ESMA has confirmed that its decision to lower the threshold at which persons who hold net short positions in companies whose shares are admitted to trading on an EU regulated market must report to national regulators to 0.1% of the issued share capital (down from 0.2%) will remain in place until 16 June.
More information about the measures put in place can be found at our previous blogpost available here.
It was confirmed yesterday by HM Treasury (HMT) in a statement to Parliament that it will retain the UK regulators’ “Temporary Transitional Power” (TTP), which was introduced as part of the UK Government’s no-deal contingency planning legislation, and shift its application such that it is available for use by the regulators for a period of two years from the end of the Transition Period.
HMT’s statement reminded Parliament that:
- while, in general, the same laws and rules [as apply presently in relation to financial services] will apply at the end of the Transition Period, HMT recognises it will be important, irrespective of the agreement that is reached between the EU and UK, for the regulators to have the flexibility to smooth any adjustments to the UK’s regulatory regime for financial services at the end of the Transition Period; and
- the purpose of the TTP is to allow the Bank of England (BoE), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to phase in changes to UK regulatory requirements so that firms can adjust to the UK’s post-Transition Period regime in an orderly way, in line with the objectives already set by Parliament.
While this outcome is in line with market expectations, it is nonetheless reassuring for UK firms and other market participants to have confirmation, at a time of particular uncertainty, that the UK regulators will retain this flexibility for the medium term. There is no indication of any extension to the separate Temporary Permissions Regime (TPR) for EU financial institutions currently passported in/into the UK.