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UK Business Conduct Regulation
The latest edition of the FSA's Handbook Development newsletter (No 71), indicates, inter alia , that the following consultation papers, discussion papers and feedback statements, which are likely to be of interest to FOA members, are due to be published over the coming months:
* As explained in Handbook Development newsletter No 47, 3 star CPs are “high-profile consultations, and major policy changes affecting a large number of consumers or financial sectors,” 2 star CPs contain “other important policy changes” and 1 star CPs contain “minor changes.” ** timing under review “due to the latest slippage in the delivery of MiFID Level 2 proposals…”
As discussed in the last Update, the FOA submitted a response to CP 05/10: Reviewing the FSA Handbook, which contained proposals for changes to three areas of the Handbook - money laundering, approved persons and training and competence - and discussion of plans to restructure the retail Conduct of Business sourcebook. A copy of the response is available from the FOA website. The FSA has now published feedback on Chapter 2 of CP05/10: Reviewing our Money Laundering Regime (PS06/1). In sum, the FSA “…received overwhelming support to abolish the Money Laundering sourcebook (ML) and replace it with high-level provisions in our Senior Management Arrangements, Systems and Controls sourcebook (SYSC). So we have decided to implement the rules largely as proposed… In respect of implementation, the FSA has stated that "the new SYSC provisions will come into force on 1st March 2006 and we plan to revoke ML with effect from 31st August 2006. This transitional period means that firms who choose to comply with the old ML provisions are deemed to be compliant with the new SYSC provisions.”
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In respect of the feedback on the proposals relating to the Approved Persons and Training and Competence regimes, the FSA states in PS06/1 that: “At the time of writing, there is still a significant amount of uncertainty surrounding the impact that the Markets in Financial Instruments Directive (MiFID) Level 2 provisions (which are not yet finalised) could have on the Approved Persons and Training and Competence regimes. We are very aware of the industry's concern that unnecessary, or untimely, changes would be made at a time when the industry is already facing major and unavoidable change as a result of MiFID implementation. So, until the MiFID Level 2 measures are finalised – and we have had the opportunity to clearly assess the scope and impact of them on these two regimes and our proposed changes to them – we do not think it is prudent to publish our response to the feedback we have received on CP05/10 and our final policy approach. We plan to do so when the MiFID Level 2 measures have been finalised.”
As you may be aware, in December 2005 the FSA issued a 'Dear CEO letter' on 'Transaction Reporting, which states, inter alia, that the FSA will "...take a breach by a firm of its transaction reporting obligations...very seriously" and "...see failure to comply with the transaction reporting requirements as a serious breach..." A copy of the letter is available from the FSA website. In the letter, the FSA "..strongly urge[s] those firms that have not already done so to review their current internal transaction reporting procedures and systems" and "begin preparations to ensure that they can comply with" the MiFID transaction reporting requirements. The February Compliance forum will focus on transaction reporting and will include a workshop that considers, inter alia, the lessons to be learnt from recent enforcement action, common reporting issues (c.f the August edition of the FSA's Market Watch newsletter) and the ‘Dear CEO' letter.
The FOA is currently working on guidance and a set of case studies to assist firms in applying the Market Abuse regime and, as members may remember, is undertaking that work with the support of four law firms, namely, Clifford Chance, Denton Wilde Sapte, Hunton & Williams and Norton Rose. The present position is that draft texts have now been received from all the law firms and the FOA is editing the work after which it will recirculate the revised text to each of the law firms for final comment and review and then post it on the FOA website – probably by the middle or end of March. The FOA is keen to include additional case studies and examples of market abuse to build up a series of practical examples as to how the new requirements will apply in different market situations and different types of dealings, so any member firm coming across any case study or example is asked to send it to Anthony Belchambers (if it is appropriate for inclusion on the FOA website and on the basis that, wherever appropriate and necessary, examples of market abuse will be edited for confidentiality purposes to maintain anonymity).
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