Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry. Listen to this week's Legal Shorts on CLTV by going to http://vimeo.com/cummingslaw If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.

1. ]
Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services
industry.
Listen to this week's Legal Shorts on CLTV by going to http://vimeo.com/cummingslaw
If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
SM&CR authorised person definition for incoming EEA branches
The Financial Services and Markets Act 2000 (Relevant Authorised Persons) Order 2015 comes
into force on 9 November 2015. The effect of the Order will be to extend the definition of an
authorised person to include foreign financial services firms that have a branch in the UK and are
credit institutions or PRA-designated investment firms for the purposes of the senior managers
and certification regime. The new regime applies to individuals performing a senior management
function and introduces into FSMA several provisions designed to promote a clear allocation of
responsibilities to senior managers and enhance their individual accountability.
MiFID II: FCA webpage
The FCA has published a new webpage containing information relating to its MiFID II
conference for wholesale firms, which was held in London on 19 October 2015. The webpage
contains links to videos of each of the conference sessions, which covered topics including
MIFID II implementation across Europe, trading venues, post-trade, micro-structural issues, best
execution, non-equity transparency, transaction reporting and conduct of business. The FCA
notes that the video content is based on its best understanding of the legislation at the time of the
conference, and does not constitute formal FCA guidance. The aims of the conference were to: (i)
help wholesale investment firms understand the remaining steps in the legislative process in the
EU and how domestic implementation will work; (ii) explain and outline the key Level 2
provisions following the publication of ESMA's draft RTS and ITS; and (iii) describe how the
FCA proposes to work with market participants during the implementation process..

2. MiFID II: Minutes of implementation roundtable
The FCA has published the minutes of its MiFID II implementation roundtable, which was held
on 22 October 2015. Points of interest include: (i) MiFID II Delegated Acts, which are likely to
be adopted towards the end of 2015; (ii) draft RTS and ITS, which have so far focused on non-
equity transparency, position limits, the ancillary exemption for commercial firms trading
commodity derivatives, position limits and best execution; and (iii) FCA confirmation that it
plans to publish a consultation paper in December 2015 on markets issues. This will include a
draft Handbook Guide to MiFID II, which is designed to explain how various parts of the UK's
implementation of MiFID II fit together. Its second consultation (expected in March 2016) will
cover, among other things, conduct issues, client assets, systems and controls, enforcement,
commodities and the definition of a financial instrument.
MiFID II: Responses to ESMA draft ITS
ESMA has published a list of responses to its consultation paper on draft implementing technical
standards (ITS) under MiFID II, which it released in September 2015. Respondents include The
Investment Association, Deutsche Boerse and CME Europe Limited.
FSB review on OTC trade reporting
The Financial Stability Board has published a report of its thematic peer review on OTC
derivatives trade reporting. The aim of the report is to review the extent of trade reporting across
jurisdictions, to identify any legal barriers that prevent or hinder reporting of complete transaction
information to trade repositories (TRs) or that limit authorities' access to information held in TRs,
and to identify other challenges to effective reporting to TRs. The report concludes that most
jurisdictions have made, and are making, substantial reforms to their regulatory regimes to meet
the G20 commitment and good progress in implementation is underway.
FSB tenth progress report on OTC reforms
The FSB has also published its tenth progress report reviewing progress made by regulatory and
market participants towards meeting the G20 commitments for reforms to global OTC derivatives
markets by 12 November 2015. The FSB states that, since July 2015 and publication of its ninth
progress report, some additional steps have been taken in a small number of jurisdictions to
implement frameworks for promoting central clearing of standardised transactions, and for
exchange or platform trading of standardised transactions, where appropriate. The FSB will
continue to monitor and report on OTC derivatives reform implementation progress, including the
effects of OTC derivatives reforms over time.
Benchmark Regulation update
The House of Commons European Scrutiny Committee has published an update on the proposed
Benchmark Regulation, including an extract from a letter from Harriett Baldwin, Economic
Secretary to HM Treasury, on the legislative progress of the Regulation. Ms Baldwin reports that
proportionality remains an active area in the ongoing negotiations. A three-tier categorisation
framework with diminishing restrictions applying to less significant benchmarks has been agreed
and the UK is working to ensure that the Benchmark Regulation will apply in a proportionate
manner and fully accommodates and reflects the diverse nature of benchmarks.

3. SFT Regulation update
The EU Council has published COREPER’s information note concerning the outcome of the
European Parliament's first reading of the proposed Regulation on reporting and transparency of
securities financing transactions (SFT Regulation). According to the note, the Parliament has
voted in plenary to adopt the SFT Regulation at first reading, reflecting the position which had
been previously agreed between the institutions and that the Council should therefore be in a
position to approve the Parliament's position. The SFT Regulation can then be formally adopted
in the wording corresponding to this position.
New UK Debt Forum Market
Tracey McDermott, FCA Acting Chief Executive, has announced that the FCA will be creating
and chairing a UK Debt Market Forum. The announcement was mentioned in the context of the
European Commission's recent launch of the action plan for capital markets union (CMU), and the
need to assess the UK domestic market to ensure that it is able to support the wider aims of the
CMU. Ms McDermott explains that the FCA is keen to explore, alongside industry, the
effectiveness of the UK's primary markets. The forum will bring together a broad range of parties
including industry, government and the FCA, and will look for practical measures to enhance
primary debt markets in the UK.
PRA speech on corporate governance
Andrew Bailey, PRA Chief Executive, has given a speech on governance and the role of boards in
banks, insurers and major investment firms. The speech considers the role of boards in the
broader setting of firms' executive senior management, boards with non-executive directors in the
majority, and supervisors. According to Mr Bailey, the PRA expects boards to exercise good
judgement in overseeing the running of a firm and to do so on a forward-looking basis and the
firm's culture should promote discussion, debate and honest challenge. The PRA also expects
non-executive directors, under the leadership of the chair, to challenge executives in all aspects of
the firm's strategy, including the viability and sustainability of the business model and the
establishment, maintenance and use of the risk appetite and management framework. It also relies
on them to mentor and coach executives.
GUEST SHORTS
This week, Simon Broch, founder and CEO of Alpha Dealing, an outsourced buy-side execution
desk, discusses locum CF30 services for investment managers, as follows:
“A prominent area of thought has to be given to whether an investment manager has sufficient
controlled function cover. Indeed, during the FCA application, one will be asked to demonstrate
that sufficient relevant staff are approved to carry out controlled functions. Many emerging
managers are setting up with a CIO/PM and a COO only, as they can outsource many of the back
office functions. Whilst this is usually sufficient in the day to day operation of the business,
should one of the team be either on vacation or become incapacitated, then there may be
insufficient capacity at the firm. It is now possible to employ services of an approved firm that
can provide locum CF30 services on demand or provide outsourced front office services
(encompassing all functions with the exception of investment management decisions). This can
be a good solution for managers to ensure they have sufficient oversight and functional cover
during any headcount shortfall. Having this service in place could satisfy the FCA requirements
and could be beneficial from an operational due diligence perspective during capital raising.”

4. http://safemailer.safeserve.com/admin/index.php?Page=Newsletters&Action=View&id=4819[09/11/2015 10:16:56]
If you would like to discuss the above or receive any further information regarding investment
management services, please contact Simon Broch at simon@alphadealing.com.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
6 November 2015