Legal shorts 07.03.14 including key dates coming up and FCA updates CRD IV webpage


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Legal shorts 07.03.14 including key dates coming up and FCA updates CRD IV webpage

  1. 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 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 Key dates coming up The 2014 Budget will be delivered on 19 March 2014. Following this, as announced by the Treasury last week, the Finance Bill 2014 and accompanying explanatory notes will be published on 27 March 2014. Draft legislation for this Bill was published in December last year. Key financial measures included in the Bill are provisions relating to offshore non-UCITS funds, which will provide greater certainty on the tax residence of AIFs, a code of practice on taxation for banks, a bank levy review and real estate investment trusts (REITs). FCA updates CRD IV webpage The FCA has updated its webpage on CRD IV harmonised reporting to announce that a CRD IV reporting test environment is available. The FCA states that all firms affected by CRD IV can register with the FCA, though, to take advantage of the test environment for their reports. The purpose of the test environment is to ensure that the
  2. 2. technical construction and the software used by firms are compatible with the FCA's systems. CRD IV delegated Regulation on remuneration The European Commission has published the text of the delegated Regulation setting out RTS on criteria to identify ‘material risk takers’. Material risk takers are staff whose professional activities have a material impact on an institution's risk profile and are subject to CRD IV requirements on variable remuneration, including bonuses. The criteria include a set of 15 standard qualitative criteria relating to the role and decision-making power of staff members and standard quantitative criteria relating to the level of total remuneration of the staff member concerned, in absolute or relative terms. Michel Barnier has said that the Commission will "remain vigilant to ensure the new rules are applied in full". FCA guide on commodity markets The FCA has published a guide to regulating the commodity markets. The guide explains the regulatory framework and role of the FCA in relation to the commodity markets and considers how the regulatory framework has evolved since the last overview in 2007. The guide covers a number of issues, such as the scope of UK and EU regulation of commodity instruments, RIEs, MTFs, the FCA’s approach to supervising commodities firms and new EU legislation having an impact on the framework, such as MiFID II, EMIR, the new Benchmark Regulation and MAR. FCA review on implementation of new platform rules The FCA has published the results of its thematic review of how firms are preparing for the implementation of the new platform rules. The rules will come into force in April 2014. The FCA's findings are that, overall, platforms seem well prepared for the introduction of the rules. One area its review focused on was whether or not platforms had given enough consideration to the impact of the changes on their consumers. It found that firms have put significant effort into trying to understand what the changes will mean for their consumers, while still considering the impact on their own business models.
  3. 3. Benchmark Regulation The European Commission has responded to the House of Commons opinion on its subsidiarity concerns regarding the proposed Benchmark Regulation. In response to the House of Commons’ opinion that certain aspects of the Regulation do not comply with the principle of subsidiarity, the Commission states that it considers it has provided sufficient reasons for concluding that the proposed regulation can be better achieved at EU level. The Commission concludes that a European framework for the provision and use of benchmarks is necessary to ensure the robustness and reliability of benchmarks provided and used in the EU and to prevent manipulation. Derivative exposure risk under CRR The European Banking Authority is consulting on draft RTS on the minimum margin periods for risk (MPOR) used for the treatment of clearing members' exposures to clients under the Capital Requirements Regulation. The draft RTS specify the level of MPOR that clearing members may use to calculate the regulatory requirements for counterparty credit risk. The proposed methodology aims at capturing the risk arising from derivatives exposures to clients adding very limited operational burden on institutions. This is done by identifying the liquidation periods estimated by CCPs for margin purposes as proxies for the margin periods of risk. Comments are invited until 9 May 2014. CLLS concerns on FCA new dealing commission rules The City of London Law Society has published its response to the FCA’s consultation on the use of dealing commission for investment managers. The response sets out the CLLS’ significant concerns on certain aspects of the FCA’s proposals, including querying: (i) the FCA’s presentation of the proposals as a ‘clarification’, whereas the CLLS’ view is that they are substantive; (ii) the necessity of introducing a new definition of research; and (iii) the definition of corporate access, which CLLS considers to be too broad and unnecessary. The FCA intends to publish a policy statement on the consultation in the second quarter of 2014.
  4. 4. HMRC publishes guidance on UK FATCA implementing regulations HMRC has published updated guidance notes for the International Tax Compliance (United States of America) Regulations 2013. The updated guidance is stated to supersede that published in August 2013 but not to reflect the final US Treasury FATCA regulations published on 20 February 2014, so further changes to the guidance will be required. The update guidance relates to financial institutions (section 2), financial accounts (section 3) and due diligence (section 4). The guidance states that significant changes will be published as stand-alone updates and that, every six months, HMRC will publish consolidated guidance, with the next edition due to be published in August 2014. GUEST SHORTS This week, David Heathfield, partner and general counsel at Baronsmead Partners LLP, reports on tax exposures for funds, as follows: “Tax liability policies can help to deal with a range of scenarios concerning the potential tax exposures of a fund. The real extent of a fund’s exposure to tax liabilities often becomes clear at the time of the annual audit. The exposure becomes an even greater cause for concern in a scenario where the fund is shrinking and, as a result, the relative tax exposure increasing. The exposure to funds that trade and realise gains on listed securities is not a new principle; however, the recent uptick in obtaining insurance solutions for tax exposures seems to be driven by the frustration of managers who have grown tired of keeping back large reserves to deal with uncertain and extremely long-term tax liabilities. The motivation for taking out insurance can come from a number of different factors; the need to improve fund cash flow by releasing reserves, to gain certainty around the operation of a statute of limitations and the desire to allow for the full distribution of assets to complete the liquidation process.” If you would like to discuss the above or receive further information regarding tax exposures for funds, please contact David Heathfield at
  5. 5. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 6 March 2014