legal headwinds q1 2020 · 2017/2402 introduces a single uniform regulatory framework for...

Legal Headwinds: Quarterly Report – Q1 2020

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Legal Headwinds focuses on key legal and regulatory developments relevant to clients operating in the FI, asset management and insurance sectors in the UK, Ireland, the Netherlands, Hong Kong, Singapore and China. We also cover significant developments more generally within the EU.

Rather than being a retrospective analysis, the report looks at future developments this quarter and beyond (based on information available as at 31 December 2019) and it is not intended to be exhaustive.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice in any of the jurisdictions covered. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

This document has been created using the following criteria: Priority: Red; Amber and Green. Region: UK; EU; Ireland and Global Relevant Sectors: Asset Managers. Relevant Subsectors: Asset Managers: Hedge funds; Institutional managers; Private equity; Sovereign wealth; Service Providers and Private Clients.

Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

AIFMD

Imposes EU wide regime for oversight of alternative investment funds and managers

Annex IV reporting period for quarterly reporting AIFMs with information to report ended on 31 December 2019 - reports must be submitted to regulators by 31 January 2020

01 April 2020 - Delegated Regulation amending safe keeping duties of depositaries of AIFs and UCITS to apply

Asset managers

All

G

AIFMD

Cross border distribution of collective investment funds

ESMA expected to open consultations on Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 - new legislation on cross-border distribution of collective investment funds to apply

Asset managers

All

A

http://www.elexica.com/en/Resources/Microsite/AIFMD-toolkit





Priority

AIFMD

Integrating sustainability risks and factors

European Commission to continue consideration of ESMA Final Report on technical advice in respect of integration of sustainability risks and sustainability factors in UCITS Directive and AIFMD

European Commission to adopt measures in due course in light of ESMA advice

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

AIFMD

Liquidity stress testing 20 September 2020 – ESMA guidelines on liquidity stress testing in UCITS and AIFs to apply


Asset managers

Wholesale banks


Hedge funds


Service providers

A

AIFMD

Review of working of AIFMD 2020 - European Commission expected to start publishing reports and consultations on its work to review AIFMD


Asset managers

Wholesale banks


Hedge funds


Service providers

A


https://www.esma.europa.eu/sites/default/files/library/esma34-45-688_final_report_on_integrating_sustainability_risks_and_factors_in_the_ucits_directive_and_the_aifmd.pdf






Priority

AML Directives 4+5

The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 implement Article 30 of the AMLD4 into Irish law and requires all Irish companies, as well as industrial and provident societies, to maintain a register of their beneficial owners. Entities will be required to report this information to the central register from 22 June 2019

Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (the “RBO”) opens

By 10 March 2021 - central registers of Member States required by AMLD5 to be interconnected

All All

R

AML Directives 4+5

The EU (Anti-Money Laundering: Beneficial Ownership of Trusts) Regulations 2019 implement Article 31 of the AMLD4 into Irish law and require all Irish trustees to maintain a register of trust beneficial ownership

Further information is available at: http://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/050319-ireland-trust-beneficial-ownership-information

Irish trustees to put procedures in place to collect beneficial ownership information

By 10 March 2020 - central register of beneficial ownership for trusts to be set up

By 10 March 2021 - Member States’ registers required to be interconnected

All All

R

Anti-Money laundering

Fifth Money Laundering Directive (5MLD)

Following publication of final text in Official Journal on 19 June 2018, European governments to start preparations for implementation

By 10 January 2020 - EU Member States to have implemented 5MLD

All All

R


Sixth Money Laundering Directive (6MLD)

Directive 2018/1673 (6MLD) was published in the Official Journal of the EU on 12 November 2018

Following publication, 6MLD came into force on 2 December 2018

EU Member States to start preparations for implementation of 6MLD

By 3 December 2020 - EU Member States to have implemented 6MLD

All All

G

http://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/050319-ireland-trust-beneficial-ownership-information





http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/01-money-laundering


http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/080118-cfi-fifth-money-laundering-directive

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/080118-cfi-fifth-money-laundering-directive

https://ec.europa.eu/home-affairs/sites/homeaffairs/files/what-we-do/policies/european-agenda-security/20180417_directive-proposal-facilitating-use-information-prevention-detection-investigation-prosecution-criminal-offences_en.pdf






Priority


Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2019

If UK exits EU, these Regulations to come into force, amending UK AML law

Changes include removing requirements of MLRs to report to EU institutions, increasing remit of FCA and removing requirements to have regard to guidelines issued by European Supervisory Authorities

Further amendments to legislation likely post-exit day as issues with application of retained EU law arise

All All

R


Law Commission Consultation on the SARS regime

Government to consider recommendations made by Law Commission

Current SARS regime likely to be overhauled to eliminate over-defensive reporting, reduce number of reports and increase their usefulness to law enforcement agencies

Law Commission recommends creation of Advisory Board including private sector representatives to create standard form SAR and monitor effectiveness

All All

A


Guidance on use of SAR glossary codes and reporting routes

AMLROs to start using new glossary codes in accordance with the guidance

New codes now in place for crimes involving modern slavery/human trafficking, illegal lotteries and virtual assets, as well as crimes involving less than £3000 and returning money to victims of crime

All Regulated sector

R

Base Erosion and Profit Shifting (BEPS)

(See also “BEPS 2.0”)

Modernisation of aspects of international tax rules intended, in part, to limit opportunities for cross-border strategies to reduce taxation by multinationals

BEPS 2.0 is now looking at further changes to the international tax landscape. See “BEPS 2.0”

Work continues to implement the OECD’s recommendations of October 2015, including implementation of tax treaty related aspects via the Multilateral Convention

All All

R





https://www.lawcom.gov.uk/document/anti-money-laundering-the-sars-regime/

https://www.lawcom.gov.uk/document/anti-money-laundering-the-sars-regime/

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/190619-suspicious-activity-reports-law-commission-publishes-report

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/190619-suspicious-activity-reports-law-commission-publishes-report



https://www.nationalcrimeagency.gov.uk/who-we-are/publications/388-glossary-codes-and-reporting-routes-new/file




http://www.elexica.com/en/legal-topics/tax/18-the-oecds-beps-action-plan






Priority

Benchmarks Regulation following LIBOR rate-setting revelations

EU Benchmarks Regulation establishing legislative framework regulating production and use of indices serving as benchmarks

01 January 2020 - transitional period for existing benchmark administrators ends

Financial Institutions

Asset managers

Wholesale Banks

Retail Banks and other consumer credit providers

Insurance

Hedge funds


Service providers

G

Benchmarks Regulation following LIBOR rate-setting revelations

Regulation of benchmarks in UK following LIBOR misconduct investigation

01 January 2020 – All administrators to apply for authorisation or registration

28 February 2020 – FCA consultation period on SMCR for benchmark administrators ends

02 March 2020 - Market makers to switch convention for sterling interest rate swaps from LIBOR to SONIA

01 May 2020 - Benchmarks Regulations 2018 transition period ends: (i) Article 63S RAO activity to become only regulated activity relating to benchmarks; (ii) Articles 63O to 63R of Regulated Activities Order (current regulated activities relating to benchmarks) to be revoked; and (iii) Section 22(1A)(b) and (6) of FSMA to be repealed

By end-Q3 2020 –issuance of cash products linked to sterling LIBOR to lease

07 December 2020 – SMCR to apply to benchmark administrators

2020 –steps to be taken to demonstrate that compounded SONIA is easily accessible and usable

By Q1 2021 – framework to be established for transition of legacy LIBOR products, to significantly reduce stock of LIBOR referencing contracts

To end of 2021 - LIBOR to be sustained

Asset managers

Hedge funds


Service providers

G

http://www.elexica.com/~/media/Files/Articles/2015/Asset%20management/Legislative%20trackers/Benchmark%20Legislative%20Tracker.pdf













Priority

BEPS 2.0

The OECD is progressing further proposals to address concerns over taxation of MNEs

Pillar One puts forward a proposed “Unified Approach” to international taxation of digital economy covering scope of rules, a new tax nexus rule and a new profit allocation rule

Pillar Two is seeking solutions to ongoing risks from structures which allow MNEs to shift profits to low tax jurisdictions through additional global anti-base erosion proposals, including a minimum rate of tax for MNEs

Further announcements are expected from the OECD during early 2020

The OECD hopes to finalise proposals for Pillar One and implement any changes by the end of 2020

There is no official timeline for the changes proposed by Pillar Two

All All

G

Capital Markets Union

Prospectus Regulation (EU) 2017/1129 a new Regulation to modernise and overhaul Prospectus regime – applies from 21 July 2019

Q2 2020 – final version of ESMA guidelines on disclosure requirements expected

August 2020 – ESMA expected to submit technical advice as set out in Part II of the European Commission's mandate on equivalence criteria for third country prospectuses


Asset Managers

All

All

All issuers of, investors in and other market participants in relation to capital markets products, in particular equities, corporate bonds and securitisations

A

http://www.elexica.com/en/legal-topics/capital-markets/03-capital-markets-union-knowledge-centre


http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R1129&from=EN


https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/prospectus-regulation-esma-mandate_en.pdf






Priority


Amendments to UK legislation to reflect the implementation of the new Prospectus Regulation (EU) 2017/1129

21 July 2018 - The Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018 entered into force

21 July 2019: The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019 enter into force

Exit day - The Official Listing of Securities, Prospectus and Transparency (Amendment etc) (EU Exit) Regulations 2019 (SI 2019/707) enters into force


Asset Managers

All

All

R


Securitisation Regulation (EU) 2017/2402 introduces a single uniform regulatory framework for securitisation and also creates a new class of simple, transparent and standardised (STS) securitisation

Securitisation Regulation (EU) 2017/2402 of 12 December 2017 apply from 01 January 2019 (SR)

Capital Requirements Amending Regulation (CRR Amending Regulation) (EU) 2017/2401 recalibrates calculation of risk weights for securitisation positions and introduces lower risk weights for STS securitisations

CRR Amending Regulation (EU) 2017/2401 of 12 December 2017 apply from 01 January 2019

Level 2 measures continue to be developed

Q1 2021: Joint Committee of ESAs to publish report on a) implementation of STS requirements (b) actions that Competent Authorities have undertaken (c) functioning of due diligence and transparency requirements and level of transparency of securitisation market in European Union, and (d) risk retention requirements


Asset Managers

Wholesale Banks


Fin-tech

Wealth

All

All originators and sponsors of, investors in and other market participants in relation to securitisations

A

CCP - Central Counterparty Clearing Houses -

In November 2016, the European Commission adopted a proposal for new rules for Central Clearing

Q1 2020 - trilogues are expected to take place Trilogues to continue but date of application currently unclear


All

G



http://www.legislation.gov.uk/uksi/2018/786/contents/made





















Priority

Recovery and Resolution Regulation

Counterparties (CCPs) Recovery & Resolution

The European Parliament has adopted a first reading position and on 27 November 2019 Council adopted a political compromise text for a mandate to commence negotiations with the European Parliament

Asset Managers

All

Central Securities Depositories

Regulation on improving securities settlement and regulating central securities depositories (CSDR)

CSDR officially entered into force on 17 September 2014

Level 2 measures for CSD requirements (except technical standards on settlement discipline) published in the Official Journal and apply from 30 March 2017

13 September 2020 - Commission Delegated Regulation (EU) 2018/1229 with regard to technical standards on settlement discipline applies

01 January 2023 - Article 3(1) of Regulation, under which relevant issuers must arrange for relevant securities to be represented in book-entry form, to apply to transferable securities issued after that date

01 January 2025 – Article 3(1) to apply to all other transferable securities


Asset Managers

All

All

All

Issuers of, holders of, and those entering into transactions regarding, securities held in settlement systems

G

Central Securities Depositories

Amendments to domestic legislation through the Central Securities Depositories Regulations 2014 (SI 2014/2879)

28 November 2017 - The Central Securities Depositories Regulations 2017 (SI 2017/1064) entered into force

Exit day - The Central Securities Depositories (Amendment) (EU Exit) Regulations 2018 (SI 2018/1320) enters into force

03 April 2020 - Closing date for responses to Bank of England's consultation setting out proposals for an operational resilience framework for CSDs


Asset Managers

All

All

CSDs, CCPs, trading venues and any entities that provide internalised settlement

R

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2019-0300+0+DOC+PDF+V0//EN

https://www.consilium.europa.eu/media/41614/st14540-ad01-en19.pdf

https://www.consilium.europa.eu/media/41614/st14540-ad01-en19.pdf





https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R1229&from=EN





http://www.legislation.gov.uk/uksi/2017/1064/pdfs/uksi_20171064_en.pdf



http://www.legislation.gov.uk/uksi/2018/1320/introduction/made



https://www.bankofengland.co.uk/-/media/boe/files/paper/2019/operational-resilience-central-securities-depositories.pdf?la=en&hash=9DF4590296B1475E4F03CEB3C8D186F51889C1DE




Priority

CMA - bond market investigation

CMA investigating four banks in relation to suspected cartel in bond-trading market

CMA has not yet reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to any of the parties under investigation

CMA to decide whether there are sufficient grounds to issue statement of objections


Asset Managers

All

R

Competition - Market study into audit sector

CMA launched a market study into the statutory audit sector in October 2018. CMA published final report in April 2019, which identified significant shortcomings in audit quality and issues with market entry. CMA recommends to government that it make significant changes, including mandatory joint audit requirements and operational splits between the Big Four

Close to 60 stakeholders responded to the final report (available on CMA’s website)

Department of Business Energy & Industrial Strategy (BEIS) launched an initial consultation on recommendations by CMA in July 2019, which closed on 13 September 2019

BEIS to consider CMA’s recommendations and enact new legislation or regulation if appropriate

Plans to reform the audit sector by introducing joint audits look increasingly likely to be scrapped as incumbent Conservative party believed to be abandoning its support


Asset Managers

All

R

Competition - Market study into investment platforms

FCA published its Investment Platforms Market Study final report and accompanying Consultation Paper 19/12 on 14 March 2019

Report set out FCA’s findings and package of measures to help consumers who invest through investment platforms more easily find and switch to the right one for them

Q1 2020 exit fees, FCA to consider responses to consultation and may issue formal consultation later this quarter

Q1 2020 - simpler transfers, FCA to consider feedback before issuing Policy Statement and finalising rules

Potential new rules on simpler transfers, and deadline to reply to consultation on exit fees

Asset Managers

All

R




Priority

Consumer credit Regulatory responsibility for consumer credit was transferred to FCA in April 2014. Some CCA provisions were repealed, and others replaced by FCA rules. Current review is aimed at simplifying regime

Spring 2020 - Interim Report following MS19/1 due to be published

6 April 2020 - new rules on publication of pricing information under PS19/25 come into force

6 April 2020 – pricing rules under PS19/16 come into force

H1 2020 – FCA to publish response to GC19/3


Asset Managers

All

All

R

Consumer protection

Fitness Check of six major EU consumer protection laws, including Unfair Terms Directive and Unfair Commercial Practices Directive

The review found the Directives fit for purpose overall, but that they should also be better applied

On 11 April 2018, European Commission adopted New Deal for Consumers package, including two Proposals for Directives

Trilogue negotiations for Directive on collective redress to take place.

17 January 2020 - Regulation on cooperation between national authorities responsible for enforcement of consumer protection laws to apply

28 November 2021 – Deadline for EU member states to adopt measures complying with Enforcement and Modernisation Directive

28 May 2022 – Deadline for application of measures implementing Enforcement and Modernisation Directive


Asset Managers

All

All

A

Consumer protection

Department for Business, Energy and Industrial Strategy (BEIS) review of terms and conditions, including civil fining powers for unfair terms


Asset Managers

All

G

Corporate governance

Women on Boards Draft Directive

European Commission proposal for draft directive on gender equality on boards of listed companies in EU, published on 14 November 2012

Timetable unknown All All

EU listed companies G

http://www.elexica.com/en/resources/microsite/corporate-governance/uk-corporate-governance-reforms





Priority


Directive which amends EU Shareholder Rights Directive (SRDII)

4 September 2018, European Commission published final implementing regulation on minimum requirements and standardised formats to be used when an issuer asks for information to identify its shareholders and for sending information between issuer and its shareholders through intermediaries, with a view to harmonising practices across Member States

Member States to implement most provisions of SRDII into national law by 10 June 2019

See UK implementation and Narrative reporting below

10 September 2020 - SRD II provisions on identification of shareholders and communication with shareholders to apply

3 September 2020 - Implementing regulation to apply

All All

R


UK Implementation of SRD II.

Some of the changes applied from 10 June 2019 and some for the financial year beginning on or after 10 June 2019. See:

“SRD2 - are you ready?” for the new obligations on, among others, MiFID firms, AIFMs, UCITS ManCos and self-managed UCITS.

“SRD II: UK implementation: new related party transaction regime” for an overview of the new related party transaction regime.

“SRD II: UK implementation of remuneration changes” for the directors’ remuneration changes.

All All

R


New corporate governance reporting rules.

New regulations apply to financial years beginning on or after 1 January 2019 and

All All R



http://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/280219-lets-get-more-engaged





https://www.simmons-simmons.com/en/publications/ck0b4gb5tnw2w0b36rbdon4o8/050619-srd2-are-you-ready

https://www.simmons-simmons.com/en/publications/ck0beoja47hva0b947yei58qm/050619-srd-ii-uk-implementation-new-related-party-transaction-regime

https://www.simmons-simmons.com/en/publications/ck0beoja47hva0b947yei58qm/050619-srd-ii-uk-implementation-new-related-party-transaction-regime

https://www.simmons-simmons.com/en/publications/ck0a24c1gmx930b36ywwgyl1e/030719-srd-ii-uk-implementation-of-remuneration-changes

https://www.simmons-simmons.com/en/publications/ck0a24c1gmx930b36ywwgyl1e/030719-srd-ii-uk-implementation-of-remuneration-changes






Priority

17 July 2018, UK Government published new corporate governance reporting requirements (Companies (Miscellaneous Reporting) Regulations 2018) to implement its well-publicised corporate governance reforms to make directors more accountable

UK Government has also published guidance on these regulations in the form of Q&A which were updated in November 2018

22 October 2018, GC100 published guidance on directors’ duties under section 172 Companies Act 2006 and stakeholder consideration

7 December 2018, GC100 and Investor Group published an updated version of the Directors’ Remuneration Reporting Regulations Guidance to reflect these regulations. A further revised version was published on 22 July 2019 that replaces the 2018 version

companies will have to report on these regulations in 2020. One exception is that the requirement for companies to illustrate impact of share price increases on executive pay outcomes applies to any new remuneration policy introduced from 1 January 2019.

New regulations require disclosure of::

UK incorporated quoted companies with more than 250 UK employees - ratio of CEO’s total remuneration to median (50th), 25th and 75th percentile of full time equivalent remuneration of company’s UK employees, together with certain supporting information

All UK incorporated quoted companies:

i. effect of future share price growth on executive pay outcomes

Large companies:

i. statement explaining how directors have complied with duty to have regard to matters in s.172(1)(a) to (f) Companies Act 2006 and

ii. statement summarising (in more detail) how directors had regard to need to foster business relationships with suppliers, customers and others.

UK incorporated companies with more than 250 UK employees:

i. summary of how directors have engaged with employees.




Priority


Revised UK Corporate Governance Code

16 July 2018, revised UK Corporate Governance Code and FRC Guidance on Board Effectiveness published

27 November 2018, FRC published FAQs on the 2018 Code

05 March 2019, Stephen Haddrill, CEO of FRC stated in a speech that FRC plans to review how effectively the Code is being implemented by companies at end of 2019 with a more detailed review in 2020 when reporting is fully effective

2018 Code applies to financial years beginning on or after 01 January 2019 so first reporting against revised Code in 2020 unless adopted earlier or one of provisions companies were expected to follow in 2019. The FRC expected companies to follow the new provisions on explanations during 2019 where significant votes were cast against resolutions and to develop future remuneration policies and changes to existing ones by reference to new version of the Code and the Guidance on Board Effectiveness

FRC expected to update Guidance on Audit Committees to reflect 2018 Code in due course. FRC will also make consequential changes to Guidance on Risk Management and Internal Control and Related and Financial Business Reporting and will consider whether further changes are needed in light of various investigations following Carillion’s collapse

All All

Main Market companies

R


Insolvency and corporate governance.

26 August 2018, Government response to its consultation paper setting out proposals to improve corporate governance of firms in or approaching insolvency published

4 November 2019, the House of Commons' Business, Energy and Industrial Strategy (BEIS) Committee published a letter to the Secretary of State for the Department of BEIS setting out a series of recommendations concerning, among other things, corporate governance, audit reform and executive pay and bonuses following its inquiry into the collapse of Thomas Cook

Further consultation awaited All All

A








Priority


Dividend payments.

25 May 2019, IA published a report on the extent to which UK listed companies seek shareholder approval for dividend payments (“Shareholder Votes on Dividend Distributions in UK Listed Companies: The case for a Distribution Policy”). As a result of its findings (which showed that more than 22% did not hold annual votes on payment of dividends) the IA recommends that all listed companies should publish a ‘distribution policy’ to enable shareholders to engage on their approach. This policy should set out their long-term approach to returns to shareholders, including dividends, share buybacks and other capital distributions

IA to establish a working group to develop best practice guidance on this distribution policy, which had been expected to be published in Autumn 2019

All All

A


Board evaluations 5 July 2019 - The Chartered Governance Institute consultation on the effectiveness of the independent board evaluation process closed. This review is being carried out at BEIS’ request following its response to its consultation on insolvency and corporate governance referred to above. Response awaited

All All

A








Priority


Corporate governance for large private companies

New corporate governance reporting regulations (see above) require certain large private companies to state:

i. which corporate governance code (if any) they have applied in a relevant financial year

ii. how they applied it; and

iii. any aspects they departed from and the reasons for doing so.

If no corporate governance code has been applied for the financial year, then the company must instead explain the reasons for that decision and what corporate governance arrangements were applied

10 December 2018, The Wates Corporate Governance Principles for Large Private Companies published (following consultation in June 2018). The Wates Principles can be applied to meet this requirement

Regulations apply to financial years beginning on or after 1 January 2019 so first reporting in 2020

All All

Large private companies

R


IA Public Register

The 2018 Corporate Governance Code provides that, when 20% or more of votes are cast against the board recommendation for a resolution, a company should:

i. when announcing results, explain what actions it intends to take to consult shareholders to understand reasons for result;

Register to be updated on ongoing basis throughout year

All All

Listed companies

R








Priority

ii. publish an update on views received from shareholders and actions taken no later than six months after vote;

iii. provide final summary in annual report, or explanatory notes to resolutions, on whether the board has taken any action or proposed new resolutions as a result of feedback.

The IA, which maintains public register, has published guidance setting out what investors expect to see in any update statement


Kingman Review.

18 December 2018, BEIS published final report of independent review of FRC led by Sir John Kingman

11 March 2019, BEIS published a press release and initial consultation on recommendations in the Kingman review report. As recommended, the government proposed replacing the FRC with a new independent regulator, the Audit, Reporting and Governance Authority (ARGA) with stronger powers

18 December 2019, the Kingman Review final report was published. It includes 83 recommendations, including that the FRC be replaced as soon as possible with a new independent regulator, the Audit, Reporting and Governance Authority that would be accountable to Parliament

All All

A






Priority

19 December 2019, the Queen’s speech set out the government’s proposals to develop a stronger regulator with powers to reform corporate reporting and audit sector


Executive Remuneration.

In 2019, IA expecting pension contributions to current directors to be reduced over time to equal rate that workforce receive; and investors to “red top” companies who pay new directors pension contributions not in line with contributions to majority of company’s employees

1 November 2019, the Investment Association (IA) published updated Principles of Remuneration and a letter to the remuneration committee chairs of FTSE 350 companies

The Principles have been updated to reflect current best practice and evolving views of IA members including the impact of remuneration on wider stakeholders, the approach to leavers, long term incentives and alignment of performance conditions with the company strategy

The letter highlights the areas of focus for 2020 AGMs: alternative remuneration structures, discretion on vesting outcomes, pensions, post-employment shareholding requirements, levels of remuneration and pay for performance.

For companies with financial year ends on or after 31 December 2019, IA’s IVIS will from start of 2020 AGM season:

i. ‘amber top’ any company when an existing director has a pension contribution of 25% of salary or more provided there is a credible plan;

ii. ‘red top’ any company with an existing director who has pension contribution of 25% of salary or more, and there is no credible plan;

iii. ‘red top’ any company who appoints a new executive director or a director changes role with pension contribution out of line with majority of workforce, or seeks approval for new remuneration policy which does not explicitly state that any new director will have their pension contribution set in line with majority of workforce.

Companies are also expected to disclose, in their remuneration report, the pension contribution rate that they consider is given to the majority of the workforce

By end of 2022 - IA members expect remuneration committees to set out a credible action plan to reduce pension contributions of all executive directors to same level of contributions as majority of workforce receive

All All

R






Priority


Executive Remuneration New requirement for certain companies to report ratio of CEO’s remuneration to UK employees’ remuneration applies to financial years beginning on or after 1 January 2019 so reporting in 2020. (See New corporate governance reporting regulations above.)

All All

R


Executive Remuneration – share buybacks

19 July 2019, the UK Government published a research paper (Share repurchases, Executive Pay and Investment), prepared by PwC, on the findings of the buyback review that it had been asked to carry out. The research looked at any connections between executive pay incentives and share buybacks, and between share buybacks and investment levels. The research found no significant relationship between share repurchases and either the existence of an EPS condition or the proportion of an incentive award linked to that condition within executive pay incentives and share repurchases. It also did not find a systematic relationship between share repurchases and corporate investment

Report will now be followed by research into the potential for a direct link (rather than through the use of buybacks) between the existence of executive pay targets and investment levels in companies. This research will investigate the extent to which pay incentives and performance targets can result in short-termist executive decision-making. Research awaited

All All

A


UK Stewardship Code

24 October 2019, 2020 Stewardship Code published. Key changes for asset managers are:

i. a clear benchmark for stewardship - stewardship is now defined as “the responsible allocation, management and oversight of capital to create long-term value for clients and

The 2020 Code takes effect on 01 January 2020 and applies to reporting years beginning on or after 01 January 2020. The Code continues to be voluntary and asset managers and asset owners wanting to be signatories must publish their first Stewardship Report by 31 March 2021. (The FRC has removed the requirement for a Policy and Practice Statement on signing up to the 2020 Code.)

Read Stewardship & Sustainability: the revised UK Stewardship Code for more information

All All

R







https://www.simmons-simmons.com/en/publications/ck2m5eymbwcry0b71b2g972ze/stewardship-sustainability-the-revised-uk-stewardship-code

https://www.simmons-simmons.com/en/publications/ck2m5eymbwcry0b71b2g972ze/stewardship-sustainability-the-revised-uk-stewardship-code




Priority

beneficiaries leading to sustainable benefits for the economy, the environment and society”

ii. extended scope – the 2020 Code now covers asset owners (such as pension funds and insurance companies) and service providers as well as asset managers

iii. annual reporting – asset managers will have to report annually on their stewardship activities in the previous year and what the outcome was, including how they engaged with the assets they invested in (Stewardship Report)

iv. ESG factors (including climate change) – environmental, social and governance factors must be taken into account in all stewardship activities and signatories must ensure their investment decisions are aligned with the needs of their clients

v. stewardship across all asset classes – signatories are now expected to explain how they exercised stewardship across all asset classes (not just listed equity). Other asset classes include fixed income, private equity and infrastructure and investments outside the UK

vi. organisation’s purpose, investment beliefs,




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strategy and culture required – signatories are required to explain what these are and how their governance, resourcing and staff incentives help with them. This aligns the 2020 Code with the UK Corporate Governance Code.


FCA/FRC stewardship discussion paper

Feedback Statement (FS19/7) published in response to the FCA and FRC discussion paper (DP19/1)

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Stakeholder engagement

12 April 2019, PIRC published UK Shareowner Voting Guidelines 2019 which apply now.

December 2018, updated ISS Voting Guidelines published. To be applied to shareholder meetings on or after 01 February 2019

29 January 2019, PLSA published revised version of its Corporate Governance and Voting Guidelines. Updated to reflect the 2018 UK Corporate Governance Code and highlight some key developments in corporate governance policy and practice

PLSA also published its 2018 AGM Review which highlights some key themes and developments for 2019 voting season

19 November 2019, Institutional Shareholder Services (ISS) published its updated UK and Ireland Voting Guidelines for the 2020 proxy season, which apply to shareholder meetings on or after 01 February 2020

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Corporate directors

Provisions on prohibition of corporate directors under Small Business, Enterprise and Employment Act 2015

Provisions originally expected to come into effect in October 2016 - implementation delayed and timing unknown

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Transparency

2 August 2019, UK Government published a research paper on the review of the implementation of the PSC register. The research paper explores the costs, benefits, and overall effectiveness of the PSC register in promoting transparency. It was commissioned to inform the government’s post-implementation review of the PSC regulations

30 October 2019, UK Government published its report on post-implementation review of the PSC regulations. The report concludes that the PSC register is meeting its objectives and that the costs to business have been proportionate and in line with the original estimates. The register is widely used, has a positive economic effect and contributes to the fight against criminal use of companies

The report notes the importance of ensuring the reliability of the PSC Register information. This is being considered and will be addressed as part of the wider review of the corporate transparency and register reform

The PSC Regulations will, therefore, remain in their current form and the next statutory post-

Response awaited to BEIS consultation on proposals to reform company law to increase the accuracy and usefulness of information available at Companies House

Most measures will need primary legislation and significant changes to systems and processes at Companies House so will take several years to deliver

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implementation review will be carried out within the next 5 years


Board diversity: Hampton Alexander annual Review.

21 February 2019, IA announce that IVIS will (i) ‘red top’ FTSE 350 companies that have no women or a single woman on their board; and (ii) ‘amber top’ FTSE 350 companies not on course to meet Hampton-Alexander review requirements by 2020.

15 March 2019, IA and Hampton-Alexander Review press release announces that they have written to 69 FTSE 350 companies which have no women on their board asking them to outline the action they are taking to ensure they meet the Hampton-Alexander targets by 2020

13 November 2019, the fourth report into progress with the Hampton Alexander Review’s recommendations was published

Recommendations of Hampton-Alexander third report (November 2018) to be followed now

Recommendations are that FTSE 350 companies’ targets are:

33% of board positions to be held by women by end of 2020, and;

33% of women on FTSE 350 executive committees and direct reports to executive committees by 2020

FTSE 350 to increase number of women in role of chair, senior independent director and executive positions on board by 2020

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Board diversity. Parker Review encourages FTSE 350 companies to adopt the recommendations on a voluntary basis

Final report published October 2017, includes Questions for Directors and The Directors Resource Toolkit to help boards increase board diversity now

Recommendations are: FTSE 100 to have at least one director of colour by 2021 and FTSE 250 by 2024

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Cross-border payments - regulation

European Commission’s Consumer Financial Services Action Plan (March 2017) proposed variety of measures intended to help break down cross-border barriers preventing consumer access to products from other member states, resulting in high fees on foreign transactions, switching and comparisons, and lessen benefits of digitisation

In March 2018, European Commission adopted a proposed Regulation amending the Regulation on cross-border payments with aim of reducing charges for cross-border transactions in Member States

On 04 March 2019, the European Commission adopted the Level 1 text of the Regulation on cross-border payments. The Regulation was published in the OJ on 29 March 2019, and applied from 15 December 2019

19 April 2020 – providers of currency conversion services at ATMs and point of sale to disclose information about cost of transaction and offer customer choice of paying in payee's currency

19 April 2021 – card issuers to send electronic messages to payers informing them of currency conversion charges

19 April 2021 – payment service providers to inform payer about cost of currency conversions in connection with online-initiated credit transfers

19 April 2022 – European Commission to submit report to European Parliament, Council of the EU, ECB and European Economic and Social Committee a report on application and impact of Regulation


Asset Managers

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Cybersecurity

"Directive on Security of Network and Information Systems" ("NIS Directive") entered into force on 08 August 2016

In the UK, the Directive has been implemented via the Network and Information Systems Regulations 2018 (the “NIS Regulations”) which came into force on 10 May 2018

NIS Regulations apply to critical organisations within society (Operators of Essential Services (“OESs”)) as well as online marketplaces, online search engines and cloud computing

UK Government guidance issued for DSPs indicates that in a “no deal” Brexit scenario EU’s NIS Directive would continue to apply post-Brexit (including the NIS Regulations in UK) and advises DSPs to prepare for eventuality that they may be required to designate representatives in EU Member States where they offer services

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http://www.elexica.com/en/legal-topics/data-protection-and-privacy/01-cybersecurity




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services (Digital Service Providers, “DSPs”). The NIS Regulations are designed to ensure the availability of systems and networks for such organisations

NIS Regulations describe OESs as providers of essential services only in the following subsectors: electricity, oil, gas, air transport, water transport, road transport, healthcare, drinking water supply and distribution, and digital infrastructure. Threshold requirements further limit the entities that are likely to be in scope of the NIS Regulations to only the most significant service providers in those sectors

Main points for UK organisations to consider are as follows:

(i) Overlap with the EU’s General Data Protection Regulation – Notification requirements, provisions on security and data protection responsibilities of OESs and DSP’s.

(ii)

(ii) Security provisions that a DSP must have in place when interacting with any organisations ranging from business continuity, audit provisions and incident handling processes

(iii)

(iii) Incident notification requirements for DSPs where interruption exceeds set thresholds. All incident reports should be submitted to the relevant Competent Authority




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within 72 hours

(iv) Under NIS Regulations penalties of up to £17 million could be imposed for non-compliance relating to security and incident reporting requirements

ICO (the designated relevant Competent Authority for DSPs) has generally limited its approach to post-incident oversight and attempted to ensure that there is no “double jeopardy” in relation to acts that may also lead to a fine under GDPR

ICO Guidance states that ICO does regulate OESs and DPSs, but only in the context of data protection law where they are acting as data controllers (under GDPR)

ICO has clarified that as the NIS and GDPR are separate laws it is possible to be fined twice for regulatory action under both. However, ICO states that any action it takes will be proportionate and in line with sentiment of avoiding “double jeopardy” where possible

Political Declaration on UK’s withdrawal from the EU (published on 22 November 2018) provides for thematic co-operation with EU in areas of cyber-security, but is subject to ratification by the UK Parliament and any conclusion of a withdrawal agreement between the UK and the EU (a “deal” Brexit)




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Data protection - GDPR

EU General Data Protection Regulation (“GDPR”) came into force on 25 May 2018. On the same day, the Data Protection Act 2018 (“DPA 2018”) also came into force in the UK. DPA 2018 supplements the GDPR in the UK, adding some exemptions to the rights of data subjects, and additional lawful bases for processing special categories of personal data

In November 2018, Information Commissioner’s Office (“ICO”) issued guidance on encryption to provide further understanding of its approach towards assessing the interpretation of appropriate technical and organisational measures to protect personal data that is held by data processors or controllers. As well as summarising the different forms of encryption currently available, the guidance outlines possible risks, and details some recommendations for storing and transmitting personal data

In December 2018, ICO published further guidance including:

(i) Updated guidance on some of the basic concepts forming the foundations of the GDPR (e.g. transparency and implementing “privacy by design”)

(ii) How the DPA 2018 works

(iii) Which regime within the DPA 2018 applies (i.e. the provisions relating to all data controllers and/or

UK and other EU businesses to seek to follow local data protection guidance (either via national implementing laws or guidance issued by national data protection supervisory authorities) in relation to implementation of GDPR within different EU Member States

Businesses should continue to assess and evaluate their data processing activities to ensure compliance with the principles set out within the GDPR, in particular including those that relate to the lawful processing of personal data, data minimization and fair processing information requirements

Businesses should also consider relevant enforcement action taken under the GDPR by their “lead supervisory authority” or data protection regulators within the EU that are relevant to their business to ensure that they adequately assess the risk of enforcement in relation to specific data processing activities

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http://www.elexica.com/en/legal-topics/data-protection-and-privacy/01-data-protection




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processors or those relating exclusively to law enforcement processing)

In January 2019, ICO published updated guidance on data protection impact assessments (“DPIAs”). Guidance sets out the circumstances in which a DPIA is mandatory and confirmed that, when determining whether there is a high risk in relation to processing, the controller should carry out a DPIA if it is in any doubt about level of risk. In March 2019, ICO also updated its guidance on the “right to be informed” (i.e. the right to receive certain “fair processing information” set out under Articles 13 and 14 GDPR)

ICO also expanded its guidance on contracts, controllers and processors and contracts and liabilities

Data protection - Brexit

In a “no deal” Brexit scenario, the UK Government has clarified that it will continue to allow the free flow of personal data in “outbound” transfers from the UK to the EEA (or any other country that has already received a European Commission “adequacy” decision)

On Brexit, “inbound” personal data transfers from the EEA-UK will trigger the GDPR’s requirement to provide “adequate safeguards” when transferring personal data to a third country outside the EEA. In practice, these can be secured by the entry into European Commission approved standard contractual clauses.

UK businesses should begin to prepare for potential necessary implementation of standard contractual clauses or other forms of legitimizing non-EEA data transfers under the GDPR, in event of a “no deal” Brexit

Following protracted negotiations, the UK’s withdrawal from the EU has been delayed and Brexit is currently expected to take place on 31 January 2020

UK and EU to continue Brexit negotiations up until the official date that UK is due to leave EU (31 January 2020), at which point adequacy talks between UK government and EU Commission can feasibly begin, provided that no agreement is reached on UK-EU free standing data protection trade agreement in advance of that date and there is no extension to Article 50

Businesses should continue to monitor Brexit negotiations up to the upcoming deadline of 31 January 2020 in order to assess and manage any uncertainties contemplated by a “no deal” Brexit scenario

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European Commission approved standard contractual clauses for transfers by a processor to a controller do not currently exist. As such, how transfers from an EEA processor to a UK controller can be legally secured following a “no deal” Brexit is a key area of ongoing uncertainty

Existing Binding Corporate Rules (“BCRs”) authorised by the ICO will continue to be recognised in UK domestic law, but the ICO will no longer have a role in the EU BCR community. Once the UK leaves the European Union, the ICO will continue to be able to authorise new BCRs under UK domestic law, but UK entities may need to identify an alternative EU supervisory authority to authorise the use of BCRs within the EU

In a “deal” Brexit scenario, the UK will be treated as part of the EU for data protection purposes until, at the earliest, 31 December 2020 (unless the transition period as agreed within the withdrawal agreement is extended any further than currently envisaged, given that the negotiation timetable has been extended). The Political Declaration (published 22 November 2018) issued as part of the proposed negotiated withdrawal agreement between the UK and the EU states that the parties are committed to ensuring a high level of personal data protection to facilitate the flow of information between them. It suggests:

UK/EU businesses should continue to monitor developments of negotiations on the UK’s withdrawal from the EU (currently expected on 31 January 2020) in relation to the regulation of EU-UK personal data transfers following 31 December 2020, when UK will become a “third country” for purposes of personal data transfers under GDPR




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i. UK will be establishing its own international transfer regime;

ii. European Commission is due to start the adequacy assessment as soon as possible after the UK’s withdrawal; and

iii. both parties will endeavour to complete these activities by 2020.

EDPB Guidance has been issued in February 2019 in relation to the regulation of non-EEA data transfers in a “no deal” Brexit scenario. Guidance notes that EU Commission approved standard contractual clauses will remain a valid method of transfer from EEA to the UK once UK becomes a “third country” post-Brexit. Such clauses should not be modified, and where any “tailored” standard contractual clauses are used, these must be authorised by a competent national authority, following an opinion of the EDPB. The guidance also reconfirms the UK government’s approach in continuing to permit the free flow of personal data from the UK to the EEA post-Brexit

Data protection The Online Harms White Paper, published in April 2019, sets out the UK government’s plans for a world-leading package of online safety measures

The White Paper proposes establishing in law a new duty of care towards users, which will be overseen by an independent

A consultation, which ran from 8 April 2019 to 1 July 2019, aimed to gather views on various aspects of government’s plans for regulation and tackling online harms, including:

i. the online services in scope of the regulatory framework;

ii. options for appointing an independent regulatory body to implement, oversee and enforce the new regulatory framework;

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regulator. UK businesses will be held to account for tackling a comprehensive set of online harms, ranging from illegal activity and content to behaviours which are harmful but not necessarily illegal

The White Paper aims to set clear expectations of businesses and particularly, social media companies. The new regulatory framework that the Paper describes will set clear standards to help organisations ensure safety of users while protecting freedom of expression, especially in context of harmful content or activity that can be particularly damaging to children and other vulnerable users. Businesses will be encouraged to develop and share new technological solutions rather than complying with minimum requirements

It proposes that the regulatory framework should apply to businesses that allow users to share or discover user-generated content or interact with each other online. This encompasses a wide range of companies of all sizes.

Every organisation within the scope will be required to:

i. fulfil their duty of care;

ii. comply with information requests from the regulator; and

iii. where appropriate establish and maintain a complaints and appeals function which meets the requirements set

iii. the enforcement powers of an independent regulatory body;

iv. potential redress mechanisms for online users; and

v. measures to ensure regulation is targeted and proportionate for industry.

Now that the consultation period has ended, the Government is in the process of deliberating how best to incorporate the White Paper’s proposals into legislation, which we expect to see in 2020




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out by the regulator.

Data protection

ICO published guidance on 3 July 2019 to provide greater clarity to organisations making use of cookies and similar tracking technologies

Updated ICO guidance helps to clarify exactly how companies should apply robust consent requirement under the GDPR to collection of cookies and similar tracking tools. New guidance makes it clear that under GDPR, consents cannot be default or blind setting, and consents cannot be bundled

It has been made clear by the ICO that consent to cookies should fulfil all of the GDPR criteria. Guidance assesses whether a variety of mechanisms, such as cookie walls, browser settings and message boxes are sufficient for obtaining valid consent

As a general rule, the mechanism must provide clear, unbundled acceptance of the cookie or similar technology. For example, the ICO advises that:

i. website terms and conditions and privacy notices cannot be used for cookie consent, as consent must be separate rather than bundled with other matters.

ii. Cookie walls that require a user to consent to access the services will be inappropriate, as such consent will not be freely

UK and EU businesses subject to the ICO jurisdiction will want to pay immediate attention to this guidance. This will be particularly relevant to online service providers

Organisations should adopt the definition for consent provided in GDPR Article 4(11) when assessing consent to cookies in the UK

As next steps, businesses should consider cookie audits where necessary, review and update cookie policies, and benchmark consent collection practices against recommendations in guidance

As ICO guidance only relates to the UK, businesses may want to consider IP-gating websites when applying ICO recommendations if they do not wish, from a commercial perspective, to roll them out on an EU-wide basis

Other supervisory authorities will likely follow in the ICO’s footsteps with similar guidance

As next steps, businesses should consider cookie audits where necessary, review and update cookie policies, and benchmark consent collection practices against recommendations in the guidance

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given.

iii. Relying on default settings, both on the site and in the user’s browser, is not sufficient unless coupled with a clear explanation that such settings require the use of cookies.

Data protection

ICO published guidance on 14 November 2019 to provide greater clarity to organisations processing special category data

New guidance provides greater clarity on what the special categories of data are, the rules that apply to these categories, and the conditions for processing such data

Guidance picks up on the following:

i. Genetic data: A genetic sample is not itself personal data unless it is analysed to produce actual data, however results of genetic analysis may be considered personal data if used to intentionally identify an individual.

ii. Biometric data: Similarly, biometric data is only classified as personal data when it is used to uniquely identify a natural person. However, it remains clear that identification techniques including fingerprint verification and facial/ voice recognition will constitute a means of identification.

iii. Health data: This includes specific medical conditions, but also any related data that

Businesses should ensure that they implement stricter compliance measures when processing “special category” personal data given the lawful bases for processing such data are more limited under the GDPR

Businesses should incorporate datasets discussed in the guidance where necessary into such measures to ensure that any processing of special category data is treated appropriately

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provides indications about an individual’s health.

iv. Inferences and ‘educated guesses’: When seeking to identify special categories of personal data, ‘educated guesses or inferences’ about an individual are likely to include personal data where it is possible to infer relevant information about the individual with a reasonable degree of certainty.

Data protection

On 19 December 2019, the Advocate General issued his opinion in relation to Schrems 2.0, a case brought by Max Schrems that seeks to challenge the validity of Standard Contractual Clauses (SCCs) and the EU-US Privacy Shield (two of the most commonly used mechanisms used to legitimise the transfer of data from the EEA to a country that is outside the EEA)

The Advocate General has confirmed SCCs continue to be a valid mechanism to legitimise the transfer of data, but he has added that whilst the SCCs provide sufficient data protection safeguards for data subjects, data controllers must ensure that the laws of the destination country will not prevent the enforcement or validity of the SCCs. The Advocate General has decided to not make a formal decision as to whether the Privacy Shield offers adequate protection but has stated that he has “doubts” about its validity

The European Court of Justice is

At present, SCCs will continue to be a valid mechanism to support the transfer of personal data from jurisdictions within the EEA to those outside of the EEA. However, the “direction of travel” from the AG’s opinion in the Schrems 2.0 case indicates that any data exporter seeking to use the SCCs to legitimize non-EEA data transfers to a country that has not received an EU Commission based adequacy decision must take measures to assess whether the law of the destination country present an obstacle to the practical implementation of the SCCs for the relevant individual

Organisations should monitor the opinions of relevant “Supervisory Authorities” within the EEA about whether specific countries have data protection legislative regimes capable of implementing the rights permitted to individuals under the SCCs. Overall, as the AG’s opinion may not be followed by the ECJ, businesses would be best to adopt a “wait and see” approach at this stage

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not bound to follow the Advocate General’s opinion and we can expect a final decision in relation to this case within the next six months

Data protection

The Presidency of the Council of the EU published a revised draft of the Regulation on Privacy and Electronic Communications on 13 March 2019

Originally, the Regulation was intended to apply from 25 May 2018 together with the GDPR. Unlike with the GDPR, however, the EU states have not yet been able to agree on the draft legislation, and negotiations on the Regulation are still ongoing in 2019

The material scope of the Regulation is wide-ranging. It applies to:

i. the processing of information relating to end-user terminal equipment or processed by end-user terminal equipment (such as cookies);

ii. the placing on the market of software enabling electronic communication, including the retrieval and presentation of information from the Internet (browsers and apps);

iii. the provision of publicly accessible directories of users of electronic communications and;

iv. the transmission of direct marketing to end-users by means of electronic communications.

UK and EU businesses subject to the Regulation should begin to review current compliance frameworks and prepare for regulatory changes to take effect

The Council of the European Union has published a Progress Report highlighting the main areas of disagreement with regards to the proposed E-Privacy Regulation – these include disagreements in relation to:

i. requiring the consent of end users to the use of tracking technologies (for example, cookies) as a condition of access to a service or website;

ii. the interaction between the European Data Protection Board (an entity concerned with the consistent application of data protection rules across the EU) and the relevant authorities under the E-Privacy Regulation; and

iii. the ability of Member States to introduce legislation to require the retention of data for certain periods.

The debate over the Council’s draft of the Regulation will continue in 2020, with the Croatian Presidency attempting to break the current ‘deadlock’ in negotiations

Organisations should monitor ongoing developments of the Regulation as discussions continue, as there are likely to be further changes made before a final text is published by the Council

An updated draft of the E-Privacy Regulation was published in November 2019 but was rejected later in the same month. It is therefore unlikely that the E-Privacy Regulation will be agreed by early 2020, as originally intended. The current ePrivacy Directive continues to apply

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Dispute resolution Implications of Brexit for dispute resolution

Depending upon whether the UK leaves the EU in this quarter, and on what terms, there will be implications for the future recognition of jurisdiction clauses and cross-border enforcement of judgments

UK Government to seek to join Lugano Convention, which requires consent of all EEA member states

If transition agreement is approved and no sufficient replacement is put in place for recognition of contractual choices of jurisdiction and recognition of judgments, there may be a rush of cases brought before end of any transition arrangements to gain the benefit of the existing Brussels Regulation (Recast) regime

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Dispute resolution Disclosure pilot scheme in Business and Property Courts

Developing caselaw on interpretation of the Practice Direction. See Disclosure- Pilot Scheme applies despite order under old regime

01 January 2021 - Pilot Scheme to apply to most proceedings in Business and Property Courts across England and Wales

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Dispute resolution Proposals to change procedure for witness evidence

Working party led by Mr Justice Andrew Baker to take forward proposals in its Final Report published in December 2019.

Draft rule changes likely to be published later this year. Changes unlikely to be radical, but include a statement of best practice for solicitors preparing witness statements, increased use of evidence-in-chief, changes to the statement of truth and some harmonisation of the various Court Guides’ rules on witness statements

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Dispute resolution House of Lords Committee Report on the Bribery Act

The report may reignite debate on a possible new law making commercial organisations criminally liable for failing to prevent economic crimes including fraud, false accounting and money laundering (see below)

UK Government to consider recommendations in report, include possible revisions to Ministry of Justice Guidance for companies and possible relaxation of approach to corporate hospitality

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http://www.elexica.com/en/Resources/Microsite/Brexit/Dispute-resolution

http://www.elexica.com/en/Resources/Microsite/Brexit/Dispute-resolution

http://www.elexica.com/en/legal-topics/dispute-resolution-commercial/190718-disclosure-pilot-scheme-approved

http://www.elexica.com/en/legal-topics/dispute-resolution-commercial/190718-disclosure-pilot-scheme-approved

http://www.elexica.com/en/legal-topics/dispute-resolution-commercial/180419-disclosure-pilot-scheme-applies-despite-order-under-old-regime



https://www.judiciary.uk/wp-content/uploads/2019/12/Witness-statement-working-group-Final-Report-.pdf

http://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/180319-house-of-lords-committee-report-on-the-bribery-act-2010





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Dispute resolution Possible introduction of new law making commercial organisations criminally liable for failing to prevent economic crimes including fraud, false accounting and money laundering

Mention of this possibility in House of Lords Committee report on the Bribery Act may push this up the UK Government’s agenda

Consultation period for Call for Evidence closed on 31 March 2017

Response to Call for Evidence still awaited Proposed new offence to make corporations criminally responsible where they fail to take reasonable steps to prevent economic crimes by their employees or agents. Proposed that offence will apply to foreign as well as UK corporations

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Dispute resolution New regulations for Damages Based Agreements (contingency fee arrangements where lawyers paid out of damages)

Feedback on draft proposals to be considered. Final draft of new regulation may be published

Either Q4 2020 or Q1 2021 - new regulation expected to be in force. Introduction of hybrid DBAs (“no win – low fee”) will increase uptake dramatically. Arrangements also possible for defendants as definition of “financial benefit” includes money saved

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Employment - Parental Bereavement Leave

The Parental Bereavement (Leave and Pay) Act 2018 has received Royal Assent. It will give employees who lose a child below the age of 18 right to at least two weeks’ leave (irrespective of their length of service) and statutory bereavement pay. The UK Government intends to introduce supporting regulations, setting out the details as to how leave will be taken and how much remuneration will be payable

Employers should monitor progress and may wish to review Compassionate Leave policies in due course

By April 2020 - new rights expected to come into force

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http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/13-a-revival-of-the-offence-of-failure-to-prevent-economic-crime







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Employment - Pension Fund Industry

TPR to consult on proposed changes to DB funding framework

The UK Government’s White Paper (Protecting Defined Benefit Pension Schemes) introduced a proposal for the statutory funding objective to be set in the context of a long-term objective (‘LTO’)

Principle is that trustees should report how they have used the LTO to inform the setting of the scheme's technical provisions and recovery plan in the triennial valuation process

Recommendation is for TPR to set out its view of how an LTO should be formulated in a revised DB scheme funding code

Initial consultation on the DB funding framework was originally expected in the summer of 2019, but was pushed back due to Brexit and the General Election

TPR is planning two consultations on the new DB funding code, the first dealing with the principles of the code and the second to consider the detail

TPR has already announced that it is going to propose a twin track approach to DB funding: “Fast track” and “Bespoke”

Under Fast Track, if a pension scheme’s funding package passes certain compliance tests, then TPR is unlikely to engage with the scheme further

The Bespoke route would allow trustees and employers to agree a more tailored funding package, and is likely to be more suitable for larger pension schemes. Trustees would, however, need to explain how and why they have deviated from the principles of Fast Track – and are likely to come under increased scrutiny from TPR

January 2020 - Consultations are expected

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The Competition and Markets Authority (‘CMA’) made the Investment Consultancy and Fiduciary Management Market Investigation Order 2019 (the ‘Order’) on 10 June 2019

The Order applies to providers of investment consultancy (‘IC’), and fiduciary management (‘FM’) services, as well as to trustees of occupational pension schemes, although certain types of occupational pension schemes are exempt

Key parts of the Order relating to mandatory tendering and investment consultancy “objective setting” are now in force. Pension scheme trustees should ensure compliance with relevant new requirements under the Order

DWP originally aimed to lay the final form of the Regulations (adapting the Order insofar as it applies to pension schemes) before Parliament in either December 2019 or January 2020, with a coming into force date of 6 April 2020. However, this has been delayed following the general election in December 2019 and the new parliamentary session. We will continue to monitor any changes in the timeline

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The Order introduces mandatory tendering when pension scheme trustees first purchase FM services, and, for those existing mandates awarded without a competitive tender, mandatory tendering within five years. IC providers must separate marketing of their FM service from their investment advice

Additional features of Order include fee reporting requirements and performance reporting requirements which are subject to a minimum standard so that pension scheme trustees are better able to evaluate and compare performance across multiple IC and FM providers

July 2019 - DWP issued a consultation on draft amending regulations (The Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2019) (the ‘Regulations’) which would adapt the Order in the context of occupational pension schemes

July 2019 - TPR published a consultation on draft guidance to support trustees in meeting the new duties required under the Order and in engaging with IC and FM providers. Response to consultation, was followed by a suite of guidance published in November 2019 focusing on:

(i) Choosing an investment governance model;

(ii) Tendering for fiduciary management services;




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(iii) Setting objectives for investment consultants; and

(iv) Tendering for investment consultancy services


Duties to disclose pooled fund investment information under The Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018

Trustees of most occupational schemes providing DC benefits are now required to provide specific information relating to pooled funds to any members or recognised trade unions who request it, within two months of request (though only one such request may be made within a six-month period). Annual benefit statements must also explain how this information may be obtained

A separate FCA consultation on publishing and disclosing costs and charges to workplace pension scheme members took place between 28 February 2019 and 28 May 2019

FCA to publish feedback to consultation responses and issue Policy Statement

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Amendments to Trustees’ investment and disclosure duties under The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018

Since 1 October 2019, trustees have been required to set out in a statement of investment principles (‘SIP’) how they take account of ‘financially material considerations’ (which include environmental, social and governance considerations (including climate change)), ‘non-financial matters’ and policy in relation to stewardship of investments

Additional requirements apply for trustees of certain ‘relevant schemes’ (broadly, schemes offering DC benefits, subject to a few exceptions) such as:

(i) publication of their SIP on a publicly available website; and

(ii) inclusion of an implementation statement in annual report (explaining how principles set out in the SIP have been followed) – note, this requirement takes effect from 1 October 2020

The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018 are now in force and should be complied with, save for the requirement for ‘relevant schemes’ to include an implementation statement in the annual report, which takes effect from 1 October 2020

From 1 October 2020 - Further detail will be required in scheme’s SIP (in light of further changes earlier this year to implement the EU’s Shareholder Rights Directive II – see Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019) in relation to arrangements with asset managers

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The Fifth Money Laundering Directive (“MLD5”) must be implemented in the UK by 10 January 2020. MLD5 amends the Forth Money Laundering Directive (“MLD4”)

MLD5 is being implemented in the UK by amendment to the existing Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

The Money Laundering and the Terrorist Financing (Amendment) Regulations 2019 (the “Regulations”) were laid before Parliament on 20 December 2019 and the majority come into force on 10 January 2020. The Regulations not only implement MDL5 but also aim to align with the Financial Action Task Force (“FATF”) recommendations with regard to combatting money laundering and terrorist financing. The Regulations do not, however, cover possible amendments to the Trusts Registration Service regime, which are relevant to occupational pension schemes

There is currently little clarity as to how MLD5 will apply to occupational pension schemes and a technical consultation on the details of implementation is expected in early 2020

Pension schemes will not be exempt from the Regulations and therefore, Trustees must comply

A technical consultation on the trusts elements of MLD5 is expected in early 2020

Draft legislation on the trusts aspects of MLD5 is expected shortly following the consultation and is expected to be implemented during 2020

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The UK Government published a consultation paper on the consolidation of DB schemes

Following proposals outlined by the White Paper (‘Protecting Defined Benefit Pension Schemes’) in March 2018, the DWP published a consultation on consolidation of DB schemes. The consultation ran from 07 December 2018 until 01 February 2019

The consultation paper sought views on proposed legislative framework for regulation of DB ‘superfunds’. These ‘superfunds’ are run by commercial entities who aim to make a profit by pooling multiple DB schemes and benefiting from investment and governance synergies

The UK Government is concerned to ensure that members’ benefits are adequately protected on transfer to a superfund. It is likely that, akin to master trusts in the DC space, the sector will become much more highly regulated in the short to medium term

Publication of UK Government’s response to consultation paper of 07 December 2018 is awaited

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The High Court ruled in Lloyds Banking Group Pensions Trustees v Lloyds Bank and others in October 2018 that pension schemes which provide Guaranteed Minimum Pensions (‘GMPs’) must sex equalise benefits

Court considered which methods of equalising for effects of GMP were permissible

Further hearings awaited on unresolved issues A hearing has been provisionally scheduled for the end of April/beginning of May 2020, to address how trustees should treat past transfers-out for members with GMP

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Priority

There are still a number of questions which remain unanswered – in particular, whether a de minimis easement might be available and the required approach for benefits previously transferred-out of a scheme

DWP published guidance (‘Guidance on the use of Guaranteed Minimum Pensions (GMP) conversion legislation') on 18 April 2019 relating to the GMP conversion method (used by Method D2) and practical considerations relating to conversion process

In September 2019, the GMP Equalisation Working Group published their guidance on GMP equalisation methodology. Guidance goes beyond the High Court’s judgment in Lloyds and suggests ‘good practice’ approaches to deal with a number of common issues not addressed by the Court. Guidance is split into three categories:

(i) correcting past underpayments;

(ii) equalising future benefit payments; and

(iii) “common unanswered issues”, including transfers in (both individual and bulk), split normal retirement ages, revaluation and antifranking, survivors’ pensions, GMP conversion, defined contribution accounts and




Priority

cash balance schemes with GMP underpins, divorce cases, and executive top-up schemes


TPR ran a consultation on ‘Future of trusteeship and governance’ between 2 July 2019 and 24 September 2019. Consultation focusses on improving scheme governance, in particular themes of:

(i) trustee knowledge and understanding, skills and ongoing learning and development

(ii) scheme governance structures for effective decision-making

(iii) driving DC scheme consolidation

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The Pension Schemes Bill 2019-20 (the ‘Bill’) was originally published in October 2019 following its first reading in the House of Lords in the same month. A second reading did not take place owing to the dissolution of Parliament

Following general election, the Bill was reintroduced in the Queen’s Speech delivered in December 2019. From briefing note accompanying the Queen’s Speech it appears that the Bill will still cover the same six key developments in pensions law as when the Bill was first published in October 2019. The draft new Bill (has not yet been published. However, key topics expected to be covered by the Bill include:

A draft of the Bill (as it was reintroduced) is expected to be published

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(i) a new legislative and regulatory framework for collective money purchase schemes - more commonly known as collective defined contribution or “CDC” schemes.

(ii) additional powers for TPR including: the power to issue financial penalties of up to £1 million in some circumstances and additional information-gathering powers.

(iii) a framework to support pensions dashboards, including new powers to compel schemes to provide accurate information to consumers and new powers for TPR to ensure schemes comply.

(iv) the introduction of new regulations regarding transfers out to occupational pension schemes, which are designed to hinder pensions scams.

(v) providing clarity on scheme funding requirements for DB schemes, as well as strengthening TPR’s scheme funding powers.

(vi) amending legislation for the Pension Protection Fund (“PPF”) compensation rules. The previous incarnation of the Bill brought forth these changes in light of the High Court’s ruling in Beaton v PPF and the ECJ’s ruling in PPF v Hampshire




Priority

Employment – Sexual harassment and non-disclosure agreements in an employment law context

Following the Weinstein scandal and #MeToo movement, use of confidentiality clauses (often known as NDAs) has come under scrutiny. UK Government now plans to introduce measures, including legislation, to prevent their misuse

There have been a number of inquiries and reports from Women and Equalities Select Committee, as well as guidance from Solicitors Regulation Authority for solicitors on how NDAs should be used

On 11 July 2019, the UK Government launched a further consultation into sexual harassment in workplace, which considers the introduction of a mandatory duty on employers to protect workers from harassment. Consultation closed on 2 October 2019

On 21 July 2019, the UK Government published its response to a separate consultation on NDAs and confirmed that it will legislate so that limitations in confidentiality clauses are clearly set out and cannot prevent disclosures to the police, regulated health professionals and legal professionals

Most recently, in October 2019, the EHRC published new guidance on the use of NDAs in discrimination/harassment cases, which sets out good practice and aims to significantly limit their use. Many employers have reviewed their settlement agreement and

Employers should continue to monitor developments on this

We await UK Government’s response to its consultation on sexual harassment in workplace

We also await further update from the UK Government regarding the proposed new legislation on NDAs

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contract templates in light of this guidance

Employment - Redundancy protection for women and new parents

25 January 2019 - UK Government launched a consultation on improving legal protections for women who are pregnant or on maternity leave. Consultation closed on 5 April 2019

22 July 2019 - UK Government published its response, confirming that it will:

(i) extend redundancy protection period for 6 months once a new mother has returned to work

(ii) afford same protection to those taking adoption leave

(iii) extend redundancy protection for those returning from shared parental leave – and to consult further on the design of this protection over coming months.

Further update from UK Government on next steps and timing for its proposals awaited. Further consultation on design of these proposals expected

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Employment – The Good Work Plan

UK Government’s “Good Work Plan” sets out its proposals to reform employment law in various areas based on recommendations set out in Taylor Review of Modern Working Practices, led by Matthew Taylor

UK Government has since confirmed which parts of Taylor Review it will take forward in its Good Work Plan published on 17 December 2018. Further information is available here

UK Government also launched three further consultations based on recommendations in the Good Work Plan, including:

i. establishing a new single enforcement body for employment rights;

ii. one-sided flexibility - addressing unfair flexible working practices; and

iii. proposals to support families.

These consultations closed in October 2019. See here

Employers should be preparing for changes due to come into force on 06 April 2020

We await the outcome of the latest consultations

06 April 2020 – the following changes will come into force:

i. extending right to a written statement of particulars of employment (a section 1 statement) to all workers, not just employees

ii. lowering threshold required for employees to request the establishment of an information and consultation body from 10% to 2% (subject to a minimum of 15 employees) and

iii. in relation to agency workers, abolition of Swedish derogation provisions, meaning that all agency workers will have the right to pay parity after 12 weeks

See further information about these changes and implementation dates here.

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http://www.elexica.com/en/legal-topics/employment-and-benefits/03012019-the-plan-for-good-work

http://www.elexica.com/en/resources/microsite/ahead-of-the-curve/the-good-work-plan

http://www.elexica.com/en/legal-topics/employment-and-benefits/03012019-the-plan-for-good-work




Priority

Ethnicity Pay Reporting

On 11 October 2018, UK Government published a consultation seeking views on mandatory Ethnicity Pay Reporting (EPR) by employers

Consultation comes in response to the Government’s findings that not enough progress has been made in removing barriers to entry and progression in the labour market for all ethnic groups

Consultation closed on 11 January 2019

UK Government’s response following consultation still awaited. Likely delayed due to Brexit and General Election.

Further information – see here

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EuVECA

EuVECA Regulation containing new rules to facilitate access by small and medium-sized enterprises (SMEs) to venture capital financing


10 March 2021 – most provisions in Disclosure Regulation apply, affecting within scope financial market participants, including EuVECAs

Asset managers

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EuSEF

EuSEF Regulation sets out framework for a marketing passport to allow fund managers to market qualifying social entrepreneurship funds to wide range of EU investors with EuSEF status


10 March 2021 – most provisions in Disclosure Regulation apply, affecting within scope financial market participants, including EuSEFs

Asset managers

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http://www.elexica.com/en/resources/microsite/employment-law-reform-in-the-uk/ethnicity-pay-reporting

http://www.elexica.com/en/legal-topics/asset-management/05-euvecas-a-new-option-for-european-venture-capital

http://www.elexica.com/en/legal-topics/asset-management/05-european-social-entrepreneurship-funds




Priority

EU Whistleblowing Directive

On 23 April 2018, European Commission proposed a new directive to strengthen whistleblower protection

The proposal reflects the fact that only 10 EU countries (including France, Netherlands, Italy, UK) currently have comprehensive laws protecting whistleblowers. Others (including Germany, Spain, Portugal, Belgium) have only partial “coverage” – which includes certain coverage in Financial Services sector but leaves gaps in protection across other sectors. The European Commission is concerned that this uneven and fragmented approach undermines whistleblower confidence and EU legal and policy interests

November 2018 - the Legal Affairs Committee of the European Parliament approved the draft legislation to guarantee that whistleblowers in the EU can report breaches of EU law in areas of tax evasion, corruption, environmental protection and public health and safety, without fear of retaliation (link to European Parliament press release here)

On 07 October 2019, the directive received its final approval from the EU Council. It was then published in the Official Journal on 26 November 2019, triggering the two-year period for Member States to comply. The directive enters into force 20 days after publication on 17 December, meaning that Member States need to comply by 17 December 2021

It is anticipated that the UK will exit the EU during this quarter on 31 January 2020. It is not yet clear whether the UK will leave the EU with or without a deal. Whether this directive is transposed into UK law would depend upon whether agreement is reached and how long the transition period will be (and if it is extended)

17 December 2021 - Members States must comply with EU whistleblowing directive

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http://www.europarl.europa.eu/news/en/press-room/20181120IPR19504/eu-wide-protection-and-support-for-whistle-blowers




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EU Work-Life Balance Directive

Aim of the EU work-life balance directive is to contribute to achieving equality between men and women with regards to opportunities in the labour market and treatment at work, by enabling parents with caring responsibilities to better balance their work and caring duties through improved access to leave and flexible working arrangements. It is hoped that men will be encouraged to take up family-related leave, helping to increase female labour market participation

Some key provisions of the directive include:

i. allowing fathers or second parents to take a minimum of ten working days of paternity leave around the time of the birth of the child, compensated at a level equal to that currently set for EU maternity leave

ii. individual right to four months of parental leave

iii. five days of carers’ leave per year, for workers caring for relatives with serious medical conditions, and

iv. extension of right to request flexible working arrangements for all parents and working carers.

See here for further information.

The directive, which was passed by the European Parliament in April 2019, entered into force on 1 August 2019. Member States now have three years (until August


1 August 2022 - Member States have three years to adopt the laws, regulations and administrative provisions necessary to comply with the directive

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https://www.consilium.europa.eu/en/press/press-releases/2019/06/13/better-work-life-balance-for-parents-and-carers-in-the-eu-council-adopts-new-rules/




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2022) to adopt the laws, regulations and administrative provisions necessary to comply with the directive

European Commission investigation into bond market

European Commission investigating four banks in relation to suspected cartel (sharing of sensitive information) in bond-trading markets (US$ denominated supra-sovereign, sovereign and agency bonds)

Statements of Objections have been sent to four banks.

Eight banks also received a Statement of Objections in relation to a suspected cartel in trading European government bonds

Individual parties to respond to Statement of Objections in both cases in due course

European Commission to issue decision following responses from individual parties


Asset Managers

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European Long-Term Investment Funds (ELTIF)

Regulation introducing European Long-Term Investment Fund (ELTIF), a type of private collective investment fund designed to invest only in businesses needing long-term investment

European Commission due to have started review of application of ELTIF Regulation

ESMA to reconsider draft Level 2 measures on costs disclosure and submit draft RTS to European Commission upon finalisation of review of PRIIPs Delegated Regulation

10 March 2021 – most provisions in Disclosure Regulation apply, affecting within scope financial market participants, including ELTIFs



Asset managers

Insurance

All

A

European System of Financial Supervision (ESFS) reform - ESAs

European Commission Proposal reforming European Supervisory Authorities (ESAs) to improve mandates, governance and funding

01 January 2020 – main provisions of Regulation amending powers of ESAs to apply

01 January 2020 – Omnibus Directive, amending Solvency II, MiFID2 and MLD4 to apply

01 January 2022 – provisions in Regulation amending powers of ESAs to apply in respect of Benchmarks Regulation and MiFIR


Asset Managers

Wholesale Banks


Insurance

All

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http://www.elexica.com/en/legal-topics/asset-management/08-eltifs-have-entered-the-building






Priority

European System of Financial Supervision (ESFS) reform - ESRB

European Commission review of operation of ESFS, mandate and effectiveness of European Systemic Risk Board (ESRB)

01 January 2020 – Regulation amending powers of ESRB to apply


Asset managers

Insurance

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FCA - Competition initiatives in the financial services markets

CMA market study into investment consultancy advice market

FCA responded to CMA’s final report in February 2019 and selected remedies to be effected through a statutory order. The CMA published the order, known as The Investment Consultancy and Fiduciary Management Market Investigation Order 2019, on 10 June 2019, with some parts having immediate effects, and others taking effect 6 months later

DWP issued the draft Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2019 to transpose duties on trustees into pensions legislation and give the Pensions Regulator the role of compliance monitoring

The Pensions Regulator also issued draft guidance on the Order

The remedies came into effect on 10 December 2019

FCA to consult on introduction of relevant rules for firms offering fiduciary management services

Asset Managers

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Priority

Market Abuse Regulation (MAR)

Revision of scope of MAD (MAR/CSMAD) (including provisions relating to manipulation of benchmarks)

ESMA to submit Final Report to Commission following its consultation “MAR review report” consultation

Commission to consider amendments to MAR in light of ESMA report


Asset managers

Energy and infrastructure

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Markets in Financial Instruments Directive (MiFID)

Post-implementation review of MiFID and possible amendments (MiFID2), including introduction of EU regime on recording/ retention of telephone calls and electronic communications (in particular minimum retention period of five years)

03 January 2020 - obligations in Article 37 of MIFIR on non-discriminatory access to and licensing of benchmarks apply

Commission consultation on proposed amendments to Commission Delegated Regulation (EU) 2017/565 on sustainable finance may lead to further amendments to that DelegatedRegulation

03 July 2020 - transition period set out in Article 54(1) of MIFIR on disapplication of access rights to CCPs and trading venues ends

03 September 2020 and 03 July 2021 - deadlines for various reports which Commission must make in relation to various aspects of MIFID2

03 January 2021 - transitional period set out in Article 95 of the MIFID 2 Directive on application of clearing obligation and risk mitigation techniques to certain C6 energy derivative contracts ends


Asset Managers

Wholesale Banks


Insurance

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Markets in Financial Instruments Directive (MiFID)

Brexit If UK leaves EU with “hard Brexit”, UK version of

MIFIR and other UK legislation implementing MIFID 2 to be amended

Key SI can be found here and FCA consultations can be found here and here


Asset Managers

Wholesale Banks


Insurance

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http://www.elexica.com/~/media/Files/Articles/2015/Asset%20management/Legislative%20trackers/MAR%20Legislative%20Tracker.pdf

http://www.elexica.com/~/media/Files/Articles/2015/Asset%20management/Legislative%20trackers/MAR%20Legislative%20Tracker.pdf

https://www.esma.europa.eu/sites/default/files/library/mar_review_-_cp.pdf

http://www.elexica.com/en/Resources/Microsite/MiFID-2-Tracker








https://emea01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fassets.publishing.service.gov.uk%2Fgovernment%2Fuploads%2Fsystem%2Fuploads%2Fattachment_data%2Ffile%2F746247%2FMiFI__Amendment___EU_Exit__Regulations_3-10-18C.PDF&data=02%7C01%7Cmalcolm.smith%40simmons-simmons.com%7C44f2b4b2a50a4d6705f708d66c0ed861%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C1%7C636815208339686432&sdata=RO6CDP7xtAT8Rf1W9PzBFsU3VtSH2zqAa2x9SZ2yBN4%3D&reserved=0

https://www.fca.org.uk/publications/consultation-papers/cp18-28-brexit-proposed-changes-handbook-bts-first-consultation

https://www.fca.org.uk/publications/consultation-papers/cp18-36-brexit-proposed-changes-handbook-and-binding-technical-standards-second-consultation




Priority

Money Market Funds (MMF) Regulation

Regulation applicable to Money Market funds (MMFs) established, managed or marketed in EU, imposing requirements in respect of, inter alia, authorisation, investment policies, internal credit quality; risk management; valuation, external support and transparency and reporting requirements

Q1 2020 – managers of MMFs to submit quarterly report to NCAs under Article 37 of MMF Regulation


Asset managers

Wholesale banks

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A

Narrative reporting

EU consultation on public reporting by companies

21 March 2018, European Commission published consultation paper seeking views on whether EU framework for public reporting is fit for its purpose. Consultation closed on 21 July 2018

EU Commission confirmed (in its 2019 Work Programme published on 24 October 2018) that it will carry out this fitness check

European Commission Staff Working Document expected to be published

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http://www.elexica.com/en/resources/microsite/corporate-governance/narrative-reporting





Priority

Narrative reporting

UK Implementation of SRD II

20 May 2019, the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations were published which implement the directors’ remuneration provisions in SRD II. These regulations now in force, with some transitional provisions. Government has also published FAQs on these regulations. See SRD II above for information on that directive

4 June 2019, European Commission published a Summary Report of the written comments received in response to its consultation (published in March 2019) on draft non-binding guidelines for the standardised presentation of the remuneration report under SRD II

Final EU guidelines on standardised presentation of remuneration report awaited

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Narrative reporting

Corporate governance reporting regulations.

See “New corporate governance reporting rules” under Corporate governance above for a summary. Apply to financial years beginning on or after 01 January 2019 so reporting will effectively start in 2020, subject to exception described

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Priority

Narrative reporting

Energy and carbon reporting

29 March 2019, BEIS published updated Environmental Reporting Guidelines, which include guidance on the new regime

02 August 2019, FRC opened a consultation on the draft Streamlined Energy & Carbon Reporting (SECR) Taxonomy to reflect these new reporting requirements. Consultation closed on 30th September 2019 and response awaited

For financial years beginning on or after 01 April 2019 quoted companies, large private companies and limited liability partnerships must disclose emissions, energy consumption and energy efficiency in a directors’ report or energy and carbon report. (Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018)

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Narrative reporting

Climate – related financial disclosures

2 July 2019, BEIS published the UK Government’s Green Finance Strategy that sets out the actions that the government will take

UK Government and UK regulators are encouraging companies to disclose their climate change risks and opportunities in their annual reports

2 July 2019, FRC issued a statement emphasising responsibility of UK company boards to consider their company’s impact on the environment and the likely consequences of any business decisions in the long-term. These companies should address and, where relevant, report on the effects of climate change. Reporting should set out how the company has taken into account the resilience of the company’s business model and its risks, uncertainties and viability in both the immediate and longer-term in light of climate change. Companies should also reflect current or future impacts of climate change on their financial position, for example in valuation of their assets, assumptions used in impairment testing, depreciation rates, decommissioning, restoration and other similar liabilities and financial risk disclosures

FRC will monitor how companies and their advisers fulfil their responsibilities by reviewing whether companies are complying with

Green Finance Strategy includes UK Government’s expectation that all listed companies and large asset owners will disclose in line with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TFCD) recommendations by 2022

UK Government will publish an interim report by the end of 2020, that will include progress on implementation of TCFD recommendations

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Priority

disclosure requirements of strategic report (which includes reporting on principal risks and uncertainties) as well as any financial statement implications of climate change

22 October 2019, FRC’s Financial Reporting Lab’s published its report on climate change disclosures. This provides practical guidance on how companies can improve their reporting on climate-related risk and opportunities to meet investors’ expectations

16 October 2019, FCA published its response on Climate Change and Green Finance (FS19/6). This includes that the FCA will:

i. consult early in 2020 on proposed new disclosure rules for certain listed issuers aligned with the TCFD’s recommendations to be applied on a ‘comply or explain’ basis, as well as clarifying existing disclosure obligations relating to climate change risks. This aligns with the government’s expectations set out above, and

ii. consider how best to enhance climate-related disclosures by regulated financial services firms that fall outside the scope of these proposed new rules.

Narrative reporting

Ethnicity pay gap reporting

In October 2018, the UK Government published a consultation seeking views on ethnicity pay reporting by employers

See “Ethnicity Pay Reporting” for more information

Consultation closed on 11 January 2019. Response awaited

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http://www.elexica.com/en/resources/microsite/employment-law-reform-in-the-uk/ethnicity-pay-reporting




Priority

Narrative reporting

Modern slavery statement

22 May 2019, Final Report of the Independent Review of the Modern Slavery Act 2015 was laid before Parliament. This report includes a definitive list of recommendations to ensure compliance with and improvement of the quality of modern slavery statements

9 July 2019, UK Government published a consultation on proposed measures to increase the transparency in and compliance with the supply chain provisions in s.54 Modern Slavery Act 2015, improve reporting quality and extend scope of legislation. UK Government is seeking views on how to strengthen transparency provisions; whether to make reporting on specific topics mandatory; the introduction of a single reporting deadline by which organisations would have to publish their statements each year; how to improve the process and tools for tackling non-compliance; and extension of the scope of the legislation to certain public sector bodies. UK Government will also develop an online registry where modern slavery statements would have to made public

Consultation closed on 17 September 2019

From 31 March 2019 - Home Office to audit all supply chain transparency statements and publish list of non-compliant organisations

Response is awaited

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Narrative reporting

Payment practices

19 June 2019, UK Government published its response to its call for evidence on late payment by

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Priority

companies

UK Government plans to introduce a package of reforms that include: (i) taking a tougher compliance approach to those companies that do not comply with the regulations and will prosecute and impose fines where necessary; (ii) a requirement on audit committees to review payment practices and report on them in the annual report (as announced in the 2019 Spring Statement); (iii) asking the FRC to review how all payment practices are reflected in the first year of reporting on the statement that directors have had regard to the need to foster business relationships with suppliers, customers and others (as required by the new Miscellaneous Reporting Regulations 2018); and (iv) consult on whether to strengthen the Small Business Commissioner’s powers to require large companies to comply with information requests; and impose sanctions

Narrative reporting

FRC letter to Audit Committee Chairs and Finance Directors

16 September 2019, FRC sent a letter to Audit Committee Chairs and Finance Directors to assist with Brexit preparations. The letter sets out a small number of the most critical generic actions companies should consider in advance of Brexit

In respect of corporate reporting, the FRC encourages companies to provide disclosure which distinguishes between the specific and direct challenges to their business model and operations from the broader economic uncertainties which may be a consequence of Brexit, and which may apply when companies report. Where there are particular challenges posed, the FRC expects these to be clearly identified and for management to describe any actions they are taking, or have taken, to manage the potential impact. In some circumstances this may mean recognising or remeasuring certain items in the balance sheet

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Narrative reporting

Government response to Taylor Review (annual reporting aspects) (Published 7 February 2018)

UK Government expects larger companies to be more transparent about their workforce structures under existing disclosure requirements and new s172 statement – see new corporate governance reporting rules above

UK Government proposes:

iii. working with FRC to consider how existing guidance on content of annual reports can be revised to encourage companies to provide a fuller explanation of their workforce model and practices, and

iv. monitoring the impact of corporate governance reforms. If there is no change, it will take further action, which could include a new ‘People Report’.

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Narrative reporting

Directors’ remuneration report

22 July 2019, GC100 and Investor Group published a revised version of its directors' remuneration reporting guidance. Guidance has been updated for the implementation of SRD II and the changes to reporting requirements introduced by the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 which came into force on 10 June 2019 (see above)

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Narrative reporting

FRC Audit & Assurance Lab report on audit committee reporting

18 December 2017, Lab published its report. This is first phase of a project considering how investors’ confidence in an audit is enhanced by audit committee’s external reporting in annual report

Publication of second phase, which will cover how auditors report to audit committees, awaited

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Priority

Narrative reporting

FRC project on future of corporate reporting.

30 October 2018, FRC called for participants in a new project that will consider how companies should better meet information needs of shareholders and the purpose of corporate reporting and annual report

17 December 2018, FRC announced composition of advisory group for this project

17 October 2019, FRC launched a corporate reporting survey to gather evidence of personal experiences and expectations when using corporate reports. FRC will feed the results into recommendations for improvements to current regulation and practice, and to help it to develop ‘blue sky’ thinking. Survey closed on 15 November 2019

Summary results expected to be published alongside a Future of Corporate Reporting thought leadership paper in 2020

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Narrative reporting

Financial Reporting Lab project on climate change and workforce reporting

Climate change report published – see Climate-related financial disclosures above

Report on work-force related corporate reporting expected early 2020

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OTC derivatives

Regulation (EU) No 648/2012 of OTC derivatives, central counterparty clearing and reporting requirements (EMIR)

04 January 2020 – temporary exemption from margin requirements for intragroup transactions expires (likely to be extended to 21 December 2020 under ESAs proposed amendments)

04 January 2020 – temporary exemption from margin requirements for single-stock equity options or index options expires (likely to be extended for 1 year under ESAs proposed

The European Supervisory Authorities (ESAs) has published a Final Report setting out proposed updates to the Margin RTS. The draft RTS have been submitted for endorsement in the form of a Commission Delegated Regulation. The ESAs expect competent authorities to apply the EU framework in a risk-based and proportionate manner until the amended RTS are in force


Asset Managers

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http://www.elexica.com/en/Resources/Microsite/OTC-Derivatives

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:201:0001:0059:EN:PDF




https://www.esma.europa.eu/sites/default/files/library/esas_2019_20_-_final_report_-_bilateral_margin_amendments.pdf




Priority

amendments)

OTC derivatives

Proposals for an amendment regulation that amends certain provisions of EMIR Regulation (EU) No 648/2012

17 June 2019: Regulation (EU) 2019/834 amending EMIR Regulation (648/2012) (the EMIR Refit Regulation) entered into force and, with some exceptions, applies from that date. On 02 December 2019, the consultation period closed for ESMA

01 January 2020: Regulation (EU) 2019/2099 amending EMIR Regulation (648/2012) (EMIR 2.2) to amend EMIR supervisory regime for EU and third country CCPs

01 January 2020 – Regulation (EU) 2019/2099 EMIR 2.2 enters into force

EMIR REFIT:

i. 'Auto-delegation' of reporting to financial counterparties (if non-financial counterparty and to AIFM or UCITS Manco) applies from 18 June 2020.

ii. Validation of risk mitigation procedures applies from June 2020 (but depends on RTS).

iii. FRANDT applies from 18 June 2021

EMIR 2.2:

i. Adoption of delegation act on systemic third-country CCPs by 1 January 2021.

ii. ESMA to complete evaluation of the systemic importance of third-country CCPs by 1 July 2022


Asset Managers

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OTC derivatives Amendments to UK legislation to ensure that the EMIR Refit Regulation ((EU) 2019/834) is fully effective and enforceable in the UK once the UK leaves the EU

09 July 2019 – The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 entered into force

Proposed secondary legislation ensuring the UK continues to have an effective regulatory framework for OTC derivatives, CCPs and TRs after Brexit

Exit day – The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) (No. 2) Regulations 2019 enters into force

Exit day - The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1184) enters into force

Exit day - The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1318) – amendments to EMIR to enter into force on exit day

Assuming the Withdrawal Agreement is ratified in the EU and UK, the following Brexit SIs will come into force on IP Completion Day rather than Exit Day, possibly with some further amendment:

i. The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019

ii. The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019(SI 2019/335)

iii. The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1184)

iv. The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1318)


Asset Managers

All

All

R











http://www.legislation.gov.uk/uksi/2019/1031/made





































Priority

Parallel investments – European Commission

European Commission interested in impact on competition effects of investment firms holding parallel minority shareholding in competing companies

No current action

European Commission holding watching brief. European Parliament also interested in issue and has commissioned a study on common ownership and its effect on competition. German Monopolies Commission also interested in issue

Further announcement by European Commission and European Parliament regarding study findings awaited

Asset Managers

All

A

Prospectus Regulation

Prospectus Regulation (2017/1129)

Repealed and replaced the Prospectus Directive with effect from 21 July 2019

See UK implementation below

See Prospectus Regulation Tracker for more information on ESMA’s technical advice and standards and the status of EU Commission delegated legislation under the Prospectus Regulation

4 December 2019, ESMA published an updated version of its Q&As.

11 December 2019, the Regulation amending the Market Abuse Regulation and the Prospectus Regulation regarding the promotion of the use of SME growth markets was published in the Official Journal.

Q2 2020 - ESMA expected to publish a final version of the disclosure guidance under the Prospectus Regulation

All All

R

http://www.elexica.com/en/resources/microsite/prospectus-regime/prospectus-regulation


https://www.simmons-simmons.com/en/features/prospectus-regime

https://www.simmons-simmons.com/en/features/prospectus-regime




Priority

31 December 2019 - amendments to the Prospectus Regulation apply

Prospectus Regulation

UK implementation of Prospectus Regulation.

24 June 2019, Financial Services and Markets Act 2000 (Prospectus) Regulations 2019 published which took effect on 21 July 2019

PS 19/12 published 31 May 2019 with final changes to Prospectus Rules

26 April 2019, FCA published new Prospectus Rule checklists and cross-reference lists to be used for submissions on or after 21 July 2019

With effect from 21 July 2019: The Prospectus Rules Sourcebook has been replaced by the Prospectus Regulation Rules (PRR) sourcebook. The PRR closely follows format of existing Prospectus Rules. Consequential changes have also been made to a number of the DTRs

FCA have published Primary Market Bulletin No 26 with the first stage of its updated changes to the Knowledge Base to reflect the changes to the prospectus regime under the Prospectus Regulation. The FCA is updating its materials in stages due to the volume of technical and procedural notes affected. In the meantime, current guidance should be applied to prospectuses and other listing

All All

R






Priority

documents drawn up under Prospectus Regulation Rules to extent that they are compatible with the Prospectus Regulation

5 September 2019, The Prospectus (Amendment etc.) (EU Exit) Regulations 2019 published that amend UK’s prospectus regime so that it continues to operate effectively once UK leaves the EU if there is no deal.

See Prospectus regime after Brexit for more information

Regulatory capital: CRD4

Phased implementation of CRD4

CRD 4 confers power on the European Commission and the ESAs to adopt Level 2 and Level 3 measures respectively

Possible future amendments in light of December 2017 finalisation of Basel 3 (sometimes called Basel 4)

Current state of play on RTS and ITS can be found here and here. In particular, following L2 and L3 in pipeline:

i. RTS on calculation of capital requirements for securitised exposures (KIRB) in accordance with purchased receivables approach in CRR (now with Commission)

ii. RTS on homogeneity of underlying exposures in a securitisation (now with Commission)

iii. Draft ITS amending COREP,

Phased implementation

01 January 2018 to 31 December 2022 - transitional arrangements for entry into force of IFRS9 apply in stages

26 June 2021: end of application of transitional arrangements for large exposures for certain derivatives firms.

31 December 2021: Grandfathering of existing capital instruments ends. EBA has announced it will clarify the prudential treatment applicable to these instruments.

L2 and L3 in development

Current state of play on RTS and ITS can be found

here and here. In particular, following L2 and L3 in pipeline:

i. RTS on methods of prudential consolidation

ii. EBA Guidelines on funding plans (apply end 2020).

iii. Draft EBA Guidelines on use of credit risk mitigation in A-IRB approaches to credit


Asset Managers

Wholesale Banks

Retail Banks and Investment Firms

All

R

https://www.simmons-simmons.com/en/publications/ck3symdmpkatg0b48635yzv0b/prospectus-regime-after-brexit

https://www.simmons-simmons.com/en/publications/ck3symdmpkatg0b48635yzv0b/prospectus-regime-after-brexit

http://ec.europa.eu/info/sites/info/files/crd4-rts-overview-table_en.pdf

https://ec.europa.eu/info/sites/info/files/crd4-its-overview-table_en.pdf

https://eba.europa.eu/-/eba-consults-on-the-conditions-to-allow-institutions-to-calculate-capital-requirements-of-securitised-exposures-kirb-in-accordance-with-the-purchased-

https://eba.europa.eu/regulation-and-policy/securitisation-and-covered-bonds/rts-on-the-homogeneity-of-the-underlying-exposures-in-securitisation

https://eba.europa.eu/-/eba-publishes-amended-technical-standards-on-supervisory-and-resolution-reporting-for-eu-institutions-and-the-corresponding-dpm-and-xbrl-taxonomy-2-9

https://eba.europa.eu/eba-will-clarify-the-prudential-treatment-applicable-to-own-funds-instruments-at-the-end-of-the-grandfathering-period-expiring-on-31-december-2021

http://ec.europa.eu/info/sites/info/files/crd4-rts-overview-table_en.pdf

https://ec.europa.eu/info/sites/info/files/crd4-its-overview-table_en.pdf

https://eba.europa.eu/-/eba-launches-consultation-on-technical-standards-specifying-the-methods-of-prudential-consolidation

https://eba.europa.eu/-/eba-launches-consultation-to-update-guidelines-on-harmonised-definitions-and-templates-for-funding-plans-of-credit-institutions

https://eba.europa.eu/-/eba-consults-on-guidelines-on-credit-risk-mitigation-for-institutions-applying-the-irb-approach-with-own-estimates-of-lgd




Priority

COREP LCR and COREP securitisation (now with Commission)

iv. Draft ITS amending FINREP regarding NPEs, prudent valuation and other minor corrections (now with Commission), and operational risk and sovereign exposures.

v. RTS relating to economic downturns and EBA Guidelines related to the estimation of loss given default (LGD) appropriate for conditions of economic downturn. (Now finalised and with Commission for adoption - apply from 01 January 2021)

EBA has also published an updated list of eligible CET1

risk

iv. Draft EBA Guidelines on loan origination and monitoring

v. Draft Guidelines on the weighted average maturity of contractual payments due under a securitisation tranche.

vi. Draft ITS on comprehensive Pillar 3 disclosures

vii. Draft RTS on material risk takers

viii. Consultation on amending Commission’s implementing regulation on benchmarking of internal models.

ix. Guidelines on ICT and security risk management (coming into force 30 June 2020).

x. EBA Roadmap on risk reduction measures package.

xi. Proposed Guidelines on the on the proposed treatment of CVA risk in the SREP.

xii. Draft ITS on conditions for capital requirements for mortgage exposures.

xiii. Draft Guidelines on the treatment of structural FX under 352(2) of the CRR

Future developments

European Commission to consider amendments to CRD4 to reflect December 2017 amendments to Basel framework

Regulatory capital: covered bonds

Regulation and Directive of the European Parliament and of the Council regarding covered bonds

6 January 2020 - Regulation and Directive enter into force

08 July 2022 - Regulation and Directive apply Financial Institutions

Asset Managers

Wholesale Banks


All

R

https://eba.europa.eu/-/eba-consults-on-standards-on-estimation-and-identification-of-an-economic-downturn-in-irb-modelling



https://eba.europa.eu/eba-updates-list-cet1-instruments

https://eba.europa.eu/-/eba-consults-on-draft-guidelines-on-loan-origination-and-monitoring

https://eba.europa.eu/eba-launches-consultation-on-the-methodology-to-determine-the-weighted-average-maturity-of-contractual-payments-due-under-the-tranche-of-a-securitisat

https://eba.europa.eu/eba-launches-consultation-on-comprehensive-pillar-3-disclosures

https://eba.europa.eu/eba-consults-revise-standards-identify-staff-material-impact-institution%E2%80%99s-risk-profile

https://eba.europa.eu/eba-consults-amend-standards-benchmarking-internal-models

https://eba.europa.eu/eba-publishes-its-roadmap-risk-reduction-measures-package

https://eba.europa.eu/regulation-and-policy/supervisory-review-and-evaluation-srep-and-pillar-2/guidelines-on-the-treatment-of-cva-risk-under-srep

https://eba.europa.eu/regulation-and-policy/market-risk/guidelines-on-the-treatment-of-structural-fx-under-352-2-of-the-crr




Priority

Regulatory capital: sovereign-bond backed exposures

Proposed Regulation of the European Parliament and of the Council to enable a market demand-led development of sovereign bond-backed securities. Amends the CRR

Council of the EU to adopt its initial position Financial Institutions

Asset Managers

Wholesale Banks


All

G

Regulatory capital: CRD V and CRR II

Legislative package to amend the CRR and the CRD4 Directive. These reforms comprise amendments to reflect the Basel standards (e.g. a binding leverage ratio) and also EU specific measures (e.g. lending to SMEs)

EBA is consulting on L2 and L3 under CRR2 and CRDV. In particular:

i. EBA is consulting on supervisory reporting changes related to CRR2 and Backstop Regulation (for non-performing loans) (Framework 3.0)

ii. EBA is consulting on draft RTS on the treatment of banking book positions subject to foreign-exchange risk or commodity risk under the FRTB framework.

iii. EBA has published a discussion paper, roadmap and consultation paper on the implementation in the EU of the revised market risk and counterparty credit risk frameworks, i.e. Fundamental Review of the

Implementation of CRR2 and CRD5 progresses in stages until about 2023


Asset Managers

Wholesale Banks


All

R

https://eba.europa.eu/eba-consults-on-supervisory-reporting-changes-related-to-crr2-and-backstop-regulation-framework-3-0-

https://eba.europa.eu/-/eba-publishes-its-roadmap-for-the-new-market-and-counterparty-credit-risk-approaches-and-launches-consultation-on-technical-standards-on-the-ima-under

https://eba.europa.eu/-/eba-publishes-its-roadmap-for-the-new-market-and-counterparty-credit-risk-approaches-and-launches-consultation-on-technical-standards-on-the-ima-under




Priority

Trading Book (FRTB) and Standardised Approach for Counterparty Credit Risk (SA-CCR). European Commission has also published a consultation paper on the alternative standardised approach for market risk.

iv. EBA has published a consultation paper on specific reporting requirements for market risk.

v. EBA has published a package of 11 measures on the IMA under the FRTB.

vi. EBA has submitted final RTS on the SA-CCR to the European Commission.

EBA has published a consultation paper on reporting requirement under CRR2 (and also the NPE Regulation)

Regulatory capital: new prudential regime for investment firms

Legislative package to amend the CRR and CRD4 to create a dedicated prudential regime for non-systemic investment firms in the EU. Legislation published in Official Journal on 5 December 2019

26 June 2021 – legislation to apply with extensive transitionals


Asset Managers

Wholesale Banks


All

R

Regulatory capital Proposed legislation and changes to PRA handbook to implement CRD 4

Note also letter on the reliability of regulatory returns

PRA

Proposed changes to Pillar 2 capital framework may come into force

01 January 2020 - Pillar 2 liquidity updates (see here)

PRA

01 May 2020 – proposed changes to Pillar 2 liquidity reporting (see here)

Changes to branch returns for international banks


Wholesale Banks

Retail Banks and Investment firms

R

https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Femail.practicallaw.com%2Fc%2F11uoqaiA8HdltFkytjO3QnYvqZ1&data=02%7C01%7CMalcolm.Smith%40Simmons-Simmons.com%7C68b7401148e9495005ab08d7612b9c55%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C0%7C637084712251038332&sdata=JUijnpvC6hPJI0DM8K4kpoK1sBgJGBc%2FjftzQK0Bses%3D&reserved=0

https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Femail.practicallaw.com%2Fc%2F11uoqaiA8HdltFkytjO3QnYvqZ1&data=02%7C01%7CMalcolm.Smith%40Simmons-Simmons.com%7C68b7401148e9495005ab08d7612b9c55%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C0%7C637084712251038332&sdata=JUijnpvC6hPJI0DM8K4kpoK1sBgJGBc%2FjftzQK0Bses%3D&reserved=0

https://eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2020/EBA/CP/2019/13/EBA-CP-2019-13%20%28Consultation%20paper%20on%20specific%20reporting%20requirements%20for%20market%20risk%29.pdf

https://eba.europa.eu/regulation-and-policy/market-risk/draft-technical-standards-on-the-ima-under-the-frtb

https://eba.europa.eu/eba-publishes-final-draft-standards-key-aspects-related-implementation-standardised-approach

https://eba.europa.eu/eba-publishes-final-draft-standards-key-aspects-related-implementation-standardised-approach

https://eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standards-on-supervisory-reporting-changes-related-to-crr2-and-backstop-regulation

https://eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standards-on-supervisory-reporting-changes-related-to-crr2-and-backstop-regulation

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2019/reliability-of-regulatory-returns.pdf?la=en&hash=8F35C11D18231BEC3C4B4AB19F646CFD0E889948

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/pillar-2-capital-updates-to-the-framework

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/pillar-2-liquidity-updates-to-the-framework

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/pillar-2-liquidity-pra110-reporting-frequency-threshold

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/supervising-international-banks-revision-of-the-branch-return




Priority

CP 20/19 sets out proposals for amendments to the Pre-Issuance Notification (PIN) regime applicable to CRR firms

PS 16/19 setting out the final rules updating the PRA reporting requirements Capital+ reporting. See also CP 25/19

CP 21/19 sets out proposed approach to implementing EBA’s recent regulatory products relating to PD and LGD estimation and the treatment of defaulted exposures in the Internal IRB approach to credit risk

Proposed changes to SS 12/13 ‘Counterparty Credit Risk’ to clarify expectations regarding the treatment of model limitations and assumptions under Part Three, Title II, Chapter 6 (counterparty credit risk) of the CRR

PS 16/19 setting out the final rules updating the PRA reporting requirements for ring-fenced bank reporting and the scope of Financial Reporting (FINREP) to be reported by certain firms that are not currently required under the CRR. See also CP 25/19

CP 27/19 sets out proposals to update Supervisory Statement (SS) 24/15 ‘The PRA’s approach to supervising liquidity and funding risk’ (see Appendix) to reflect relevant updates to the Bank of England’s Market Operations Guide (Market Operations Guide) and to reiterate

End 2020 - PRA’s amended expectations for banks and building societies using IRB approach to calculate credit risk capital requirements for residential mortgages and definition of default take effect

FCA

To end 2020 - Transitional arrangements for exemption of certain public sector debt exposures from large exposure limits under Art 493(4)- (7) of CRR apply

Consultation on updating lists of multilateral development banks

Asset Managers

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/regulatory-capital-instruments-update-to-pin-requirements

https://www.bankofengland.co.uk/prudential-regulation/publication/2018/regulatory-reporting-eba-taxonomy-29

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/occasional-consultation-paper-october-2019

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/counterparty-credit-risk-treatment-of-model-limitations-in-banks-internal-models

https://www.bankofengland.co.uk/prudential-regulation/publication/2018/regulatory-reporting-eba-taxonomy-29

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/occasional-consultation-paper-october-2019

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/liquidity-the-pras-approach-to-supervising-liquidity-and-funding-risks

https://www.bankofengland.co.uk/prudential-regulation/publication/2015/the-pras-approach-to-supervising-liquidity-and-funding-risks-ss




https://www.bankofengland.co.uk/markets/bank-of-england-market-operations-guide

https://www.bankofengland.co.uk/markets/bank-of-england-market-operations-guide

https://www.fca.org.uk/news/news-stories/intention-consult-updates-lists-multilateral-development-banks




Priority

relevant expectations set out in SS9/17 ‘Recovery Planning’

CP 28/19 setting out its proposed changes to the capital requirements that apply to credit unions

CP 24/19 on proposed expectations of firms when managing the key prudential risks associated with asset encumbrance

Regulatory capital Assuming the Withdrawal Agreement is ratified by the EU and UK, CRR continues in force throughout 2020 with what is essentially a “hard Brexit” on 31 December 2020. On that date, the CRR will be preserved in UK law, and the UK’s version of the CRR and other UK legislation implementing CRD4 will be amended. The key SIs can be found here and here, the Bank/PRA EU exit page here and the FCA EU exit page here. They may be amended further in the course of 2020

On the regulatory use of credit ratings, the FCA has found the EU regulatory and supervisory regime to be ‘as stringent as’ the UK’s regime for the purposes of allowing UK-registered Credit Rating Agencies (CRAs) to endorse credit ratings from affiliated EU CRAs


Asset Managers

Wholesale Banks

Retail Banks and Investment firms

R

https://www.bankofengland.co.uk/prudential-regulation/publication/2017/recovery-planning-ss

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/asset-encumbrance

https://www.gov.uk/government/publications/draft-capital-requirements-amendment-eu-exit-regulations-2018


https://www.bankofengland.co.uk/eu-withdrawal

https://www.fca.org.uk/brexit




Priority

Retail Distribution Review

Part of FCA’s retail market strategy, seeking to improve consumer trust and confidence in retail investment industry

The RDR Post-implementation Review is to be combined with 2019 Financial Advice Markets Review

2020 – FSA to measure long term indicators as part of Post Implementation Review

2020 – FCA to publish final report on feedback received to its Call for input on evaluation of Retail Distribution Review and Financial Advice Market Review


Asset managers

Insurance

Hedge funds


Service providers

A

Retail structured products

New horizontal legislation to apply to Packaged Retail Insurance-based Investment Products (PRIIPs) with respect to product disclosure (Regulation (EU) 1286/2014)

The PRIIPs Regulation (EU) 2016/2340 of 14 December 2016 apply from 01 January 2018

By 31 December 2019 - European Commission expected to review PRIIPs Regulation (still awaited)

13 January 2020 – Closing date for responses to the Joint Committee of ESAs consultation on amendments to the PRIIPs Delegated Regulation

31 December 2021 - transitional period for UCITS due to end (delayed by two years as amended by Regulation (EU) 2019/1156)

Q2 2020 – Joint Committee of ESAs to submit proposed amendments to Commission Delegated Regulation 2017/653


Asset Managers

All

All

R

Retail structured products

Proposed secondary legislation to ensure that the regime established under the PRIIPs Regulation continues to operate effectively after Brexit

Exit day - The Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019 (SI 2019/403) enter into force


Asset Managers

All

All

A

http://www.elexica.com/en/Resources/Microsite/RDR

http://www.elexica.com/en/Resources/Microsite/RDR

http://www.elexica.com/en/legal-topics/capital-markets/09-retail-structured-products











https://eiopa.europa.eu/Publications/JC-2019-63_Consultation_Paper_amendments_PRIIPs%20KID.pdf












Priority

Securities Financing Transactions Regulations

EU Securities Financing Transactions Regulation (SFT Regulation) establishing a safer and more transparent financial system by placing additional requirements on counterparties to SFTs

Reporting to trade repositories under SFT Regulation commences: (i) 11 April 2020 – for MiFID firms and credit institutions; (ii) 11 July 2020 – for CSDs and CCPs; (iii) 11 October 2020 – for all other financial counterparties incl. UCITS, AIFs, insurance/ re-insurance firms; (iv) 11 January 2021 – for non-financial counterparties and third countries entities

31 July 2020 – ESMA expects trade repositories reporting under its guidelines to start reporting

2020 - European Commission to submit report to European Parliament and Council on effectiveness, efficiency and proportionality of obligations in SFT Regulation

2020 - ESMA to submit report to European Commission on fees charged to trade repositories under SFT Regulation

2020/2021 - European Commission to submit report to European Parliament and Council on the application of supervisory fees


Asset managers

Wholesale banks

All

R

Senior Managers and Certification Regime – extension to all FCA solo-regulated firms

The new regime has replaced Approved Persons Regime for FCA solo-reglulated firms

The final rules were published in July 2019 (PS19/20) and will apply in different ways to four categories of persons:

i. senior managers performing “senior management functions”;

ii. employees covered by the certification regime (“significant harm functions” employees);

iii. other staff who are subject to Conduct Rules; and

iv. specific ancillary roles

Banking firms and insurers can start submitting data on Directory Persons from September 2019 and must have done so by 09 March 2020, when it is expected to go live. All other firms stared submitting data from 09 December 2019 (following the extension of SMCR) and must have done so by 09 December 2020

For further information on the steps firms should be taking to prepare for the new regime, see our SMCR microsite and in particular:

Action List: Senior Managers Regime

Action List: Certification Regime

Action List: Conduct Rules

All All

R

https://www.fca.org.uk/publication/policy/ps19-20.pdf

http://www.elexica.com/en/resources/microsite/smcr-extension

http://www.elexica.com/en/resources/microsite/smcr-extension/smcr-extension-resources/in-practice/action-list-senior-managers-regime

http://www.elexica.com/en/resources/microsite/smcr-extension/smcr-extension-resources/in-practice/action-list-certification-regime

http://www.elexica.com/en/resources/microsite/smcr-extension/smcr-extension-resources/in-practice/action-list-conduct-rules




Priority

excluded from the Conduct Rules.

Conduct Rules (and specific other rules) may also apply to non-executive directors

09 December 2019 – The new rules came into force for FCA solo-regulated firms

Further information - see here.

Note Simmons & Simmons has developed a SMCR Extension Toolkit, to help firms progress implementation of SMCR in a cost effective way

Shadow banking

Possible additional regulation and oversight of credit activity by non-banks (ie provision of sources of funding and alternatives to bank deposits which are not currently subject to the same levels of prudential regulation)

On 17 June 2019, FSB published a compensation progress report

See FSB global-monitoring report on non-bank financial intermediation 2018 (published February 2019)

See also 13th progress report on OTC derivatives market reforms, covering trade reporting of OTC derivatives, central clearing, platforms and capital; and margin requirements

01 January 2022 - Basel III post-crisis reforms to take effect (BCBS issues fourteenth Progress Report on adoption of Basel III)

Final report from BCBS-CPMI-IOSCO Derivatives Assessment Team contains recommendation for future reform, including reforms relating to initial margin and leverage ratio


Asset managers

Wholesale banks

All

G

http://www.elexica.com/en/resources/microsite/smcr-extension

http://www.elexica.com/en/resources/microsite/smcr-toolkit

http://www.elexica.com/en/resources/microsite/smcr-toolkit

https://www.fsb.org/2019/06/fsb-publishes-compensation-progress-report/

https://www.fsb.org/2019/02/fsb-publishes-global-monitoring-report-on-non-bank-financial-intermediation-2018/



http://www.fsb.org/2018/11/otc-derivatives-market-reforms-thirteenth-progress-report-on-implementation/

https://www.bis.org/publ/othp29.pdf




Priority

Short Selling Regulation

Regulation creating pan-European short selling regime

European Commission to consider adoption of Level 2 measures following ESMA Final Report (21 December 2017) on evaluation of certain elements of Short Selling Regulation

European Parliament and Council of the EU to consider Commission report on functioning of SSR


Asset managers

All

All G

Sustainability and ESG

Published in March 2018, the European Commission’s Action Plan on Financing Sustainable Growth sets out objectives and action points to enable the transition to a low-carbon economy and a sustainable financial system

January 2020 - Platform on Sustainable Finance to succeed Technical Expert Group

Institutional agreement and publication of Framework Regulation in OJ

Commission to adopt proposals for delegated acts amending MiFID2, UCITS and AIFMD

Early 2020 - Deadline for TEG to report to Commission on further implementation of EU Taxonomy

MiFID2 and IDD delegated Regulations to be officially adopted

Commission to decide on next steps on an EU-Green Bond Standard

Commission to specify content of prospectus for green bond issuances within framework of Prospectus Regulation

Early 2020 – Delegated acts to be adopted on Climate Benchmarks and Benchmarks’ ESG Disclosures

Commission to carry out comprehensive study on sustainability ratings and research

30 March 2020 – Guidelines on disclosure requirements applicable to credit ratings come into force

H2 2020 - Commission to gather feedback on the use of guidelines on non-financial reporting

Commission to conduct work on improving association between corporate governance and sustainable investments


Asset Managers

All

R




Priority

Tax - Capping payable R&D tax credits for SMEs

UK Government has announced that it will introduce a cap on payable tax credit element of R&D tax relief for SMEs based on a multiple of three times the entity’s PAYE and NICs liabilities

It is intended that the cap will apply with effect for accounting periods which commence on or after 01 April 2020

All All

A

Tax – Construction services – VAT reverse charge

UK will implement a VAT reverse charge on certain supplies of construction services

Reverse charge was implemented by Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 (SI 2019/892) but the Government announced in Revenue and Customs Brief 10 (2019) that its implementation would be delayed until 01 October 2020

All All

R

Tax - Disclosure of cross-border tax avoidance arrangements (DAC 6)

Council of the EU has adopted new mandatory rules for disclosure and automatic exchange of information concerning reportable cross-border tax avoidance arrangements

Affected taxpayers and intermediaries should consider their obligation to collect information for disclosure during the transitional period commencing on 25 June 2018

UK Government response to July 2019 consultation document awaited

New rules to be introduced with effect from 01 July 2020, although disclosure of affected transactions during the transitional period is required by 31 August 2020

All All

Lawyers, Accountants, Banks and other Financial Advisers R

Tax - EU Financial Transaction Tax (FTT)

Proposal to use enhanced cooperation procedure (ECP) to introduce multilateral EU tax on certain financial transactions entered into by financial institutions

Reports have suggested that the ten Member States taking part in the ECP may have reached broad agreement on the terms of the FTT and official confirmation is awaited

Remaining ten participating Member States continue to seek to negotiate mutually acceptable form of FTT


Asset Managers

All

All

G

Tax - EU state aid proceedings (UK CFC rules)

European Commission has concluded that the finance company exemption in the UK CFC rules is contrary to EU state aid rules to the extent that it allows a partial exemption where activities are carried out in the UK

The UK has made an application for the decision to be annulled and a number of UK-based multinational companies have made similar applications. If the European Commission succeeds, then UK will be required to recover illegal benefit received from UK multinationals under the rules in place from 2013 to 2018

All All

A

http://www.elexica.com/en/legal-topics/fintech/010419-preventing-abuse-of-r-d-tax-relief-for-smes-consultation



http://www.elexica.com/en/legal-topics/tax/120618-vat-reverse-charge-for-construction-services

http://www.elexica.com/en/legal-topics/tax/220617-mandatory-disclosure-of-eu-cross-border-tax-planning




http://www.elexica.com/en/legal-topics/tax/09-eu-financial-transaction-tax






Priority

Tax - EU infringement proceedings (UK VAT treatment of commodity derivatives)

The European Commission has decided to refer the UK to the CJEU in relation to its infringement proceedings against the UK in relation to the application of zero-rating to certain transactions in commodities and commodity derivatives under the Terminal Markets Order

UK Government expected to defend the UK rules in any proceedings


Asset Managers

All

All G

Tax - Extension of corporation tax to non-resident companies

Proposal to bring non-resident companies in receipt of income and gains in respect of UK property within the charge to corporation tax

From April 2020: Legislation included in the Finance Act 2019 will come into effect

All All

G

Tax/Employment - Personal service companies in the private sector

UK Government will reform the IR35 rules applicable to the use of personal service companies in private sector, including making the engager responsible for operating the rules

Legislation to implement the rules is expected to be published in early 2020

From April 2020 –, changes to be introduced but will only apply to “large and medium-sized” businesses

All All

R

Tax – Making HMRC a preferred creditor

UK Government published a consultation on 26 February 2019 entitled “Protecting your taxes in insolvency” proposing to make HMRC a preferred creditor in circumstances where a business has collected in taxes paid to it by third parties and goes into insolvency before passing on those taxes to HMRC

Draft legislation is expected to be published in early 2020

Legislation to implement the necessary changes is expected to be included in Finance Act 2020. The measure will come into effect on 6 April 2020

All All

A

Tax - Public Country by Country Reporting (CBCR)

EU Commission has proposed making CBCR public for the largest multinationals

EU Parliament has supported adoption of public CBCR

Negotiations continue at an EU level with view to reaching compromise between the European Commission’s and European Parliament’s proposals

All All

G

Tax - Short term business visitors from overseas

UK Government consulted on possibilities for simplifying the administration for businesses where business visitors come to work in the UK from an overseas branch for short periods

October 2018 Budget announced that eligibility for PAYE special arrangements to be widened and deadlines for reporting and paying tax extended, reducing administrative burdens on UK employers with effect from April 2020

All All

G

http://www.elexica.com/en/legal-topics/tax/090318-eu-infringements-proceedings-in-relation-to-uk-vat-treatment-of-commodity-derivatives






http://www.elexica.com/en/legal-topics/tax/071217-bringing-non-resident-companies-within-the-ct-regime-on-uk-property-income-and-gains




http://www.elexica.com/en/legal-topics/tax/310518-short-term-business-visitors-from-overseas






Priority

Tax - Taxation of the digital economy

Increasing pressure for a new approach to the tax treatment of certain digital businesses, including those operating social networking and search engine sites and operators of auction site.

European Commission has proposed measures and OECD is progressing its programme to take forward proposals to address challenges of digital economy as part of BEPS 2.0

Meanwhile, individual countries such as France, Italy and the UK are introducing unilateral measures

Further progress awaited on Pillar One of the OECD’s BEPS 2.0 programme

Agreement at an EU level has proved illusive but OECD is seeking to agree proposals by the end of 2020

All All

G

Tax - Termination payments

Since 6 April 2018, all payments in lieu of notice have been subject to income tax and, from 6 April 2020, will be subject to employee and employer Class 1 National Insurance Contributions (NICs), regardless of whether there is a PILON clause in the employment contract

The new rules require the division of the “termination award” into two elements: post-employment notice pay (PENP) and the balance of the termination award. The PENP is calculated using a specific statutory formula and is taxed as earnings. The balance of the termination award is subject to the usual rules regarding termination payments and may fall within the £30,000 exemption

Autumn 2018 budget announced that employer Class 1A national insurance contributions on termination payments over £30,000 will not be introduced until April 2020

All All

G

http://www.elexica.com/en/legal-topics/tax/250917-taxation-of-the-digital-economy-further-developments






Priority

Tax – UK Residential Property – 1% surcharge

The UK Government announced that it would consult on the introduction of a 1% SDLT surcharge on purchases of UK residential property by non-residents in the October 2018 Budget

The surcharge will be legislated for in a future Finance Bill

All All

G

Tax – VAT and fund management changes

UK Government is expected to introduce changes to the scope of the VAT exemption for fund management with effect from April 2020

Changes were originally introduced by VAT (Finance) (EU Exit) Order 2019 but since revoked so that the changes can be introduced by another instrument which will have effect from a fixed date, expected to be 01 April 2020

Changes are intended to align application of VAT exemption to EU law on VAT treatment of such supplies of management to pension funds and to funds which do not invest “wholly or mainly in securities”

Asset managers

All

A

http://www.elexica.com/en/legal-topics/tax/130219-1-percent-sdlt-surcharge-on-acquisitions-of-uk-residential-property-by-non-residents

http://www.elexica.com/en/legal-topics/tax/170619-vat-and-fund-management-changes






Priority

Transparent and predictable working conditions – EU Directive

The proposed directive provides for revised obligations to inform workers of key terms of their employment relationship and defines a set of minimum rights for those who meet the criteria (including a threshold of at least 3 hours per week). It is intended to benefit workers without fixed or guaranteed hours, such "gig economy" workers for companies like Uber and Deliveroo

Some of the new requirements already form part of the UK Government’s Good Work Plan, such as the right to a section 1 statement, although some further legislation would be required to ensure that UK law fully complies with the directive.

The directive, which was adopted by the EU Council in June 2019, entered into force on 1 August 2019. Member States now have three years (until August 2022) to adopt laws, regulations and administrative provisions necessary to comply with the directive

See here for further information


01 August 2022 - Member States have three years to adopt the laws, regulations and administrative provisions necessary to comply with the directive.

All All

G

https://www.consilium.europa.eu/en/press/press-releases/2019/06/13/better-working-conditions-in-the-eu-council-adopts-a-directive-on-more-transparency-and-predictability-at-work/




Priority

Transparency Directive

European Single Electronic Format (ESEF).

29 May 2019, European Commission published its delegated regulation on technical standards on the specification of the ESEF ((EU) 2019/815) (ESEF RTS regulation) in the Official Journal.

12 July 2019, ESMA published an updated version of its ESEF Reporting Manual

EU issuers must prepare annual financial reports for financial years beginning or after 01 January 2020 in an European single electronic format (as required by the Transparency Directive). The digital format to be used is set out in an EU Delegated Regulation

13 December 2019, FCA published its amendments to the Disclosure Guidance and Transparency Rules (DTRs) to require a single electronic reporting format (as set out in the EU regulatory technical standard) for the annual report (following its consultation in CP19/27 published in September 2019). These apply to annual financial reports for financial years beginning on or after 01 January 2020. These obligations apply to all issuers irrespective of where they are incorporated

16 December 2019, Commission Delegated Regulation (EU) 2019/2100 amending the ESEF RTS Regulation was published in the Official Journal. It enters into force on 5 January 2020 and applies to annual financial reports containing financial statements for financial years beginning on or after 1 January 2020. The core taxonomy used for the ESEF is based on the IFRS taxonomy, which is updated annually. Delegated Regulation (EU) 2019/2100 updates the ESEF RTS Regulation to account for these changes

All All

R

UCITS

Cross border distribution of collective investment funds

ESMA expected to open consultations on Level 2 and Level 3 measures under Cross-border Distribution Regulation



Asset managers

Wholesale banks


Hedge funds


Service providers

A

http://www.elexica.com/en/Resources/Microsite/UCITS




Priority

UCITS

Integrating sustainability risks and factors

European Commission to continue consideration of ESMA Final Report on technical advice in respect of integration of sustainability risks and sustainability factors in UCITS Directive and AIFMD

European Commission to adopt measures in due course in light of ESMA advice


Asset managers

Wholesale banks


Hedge funds


Service providers

A

UCITS

Liquidity stress testing 20 September 2020 – ESMA guidelines on liquidity stress testing in UCITS and AIFs to apply


Asset managers

Wholesale banks


Hedge funds


Service providers

A

UCITS

Performance fees in UCITS Q1 2020, ESMA to consider responses received to its consultation, “Guidelines on performance fees in UCITS” and intends to publish final guidelines thereafter

H1 2020 – ESMA guidelines on performance fees in UCITS likely to apply


Asset managers

Wholesale banks


Hedge funds


Service providers

A


https://www.esma.europa.eu/sites/default/files/library/esma34-45-688_final_report_on_integrating_sustainability_risks_and_factors_in_the_ucits_directive_and_the_aifmd.pdf



https://www.esma.europa.eu/sites/default/files/library/esma34-39-881_cp_on_performance_fees_guidelines_in_ucits.pdf

https://www.esma.europa.eu/sites/default/files/library/esma34-39-881_cp_on_performance_fees_guidelines_in_ucits.pdf




Priority

UK Listing Rules; Disclosure Guidance and Transparency Rules

Quarterly consultation paper No 26 (CP19/33)

6 December 2019, FCA published its Quarterly Consultation Paper 26 (CP19/33), which consults on various proposed minor amendments to the FCA Handbook

These include:

i. removing requirement for an issuer, that enters into a Class 1 transaction, to publish a copy of the sale and purchase agreement on its website. This became a new requirement as a result of changes made to Listing Rules when Prospectus Regulation came into effect.

ii. requiring listed issuers to ensure details of their listed securities are available to public through the National Storage Mechanism (currently operated by Morningstar). This could be done in a variety of ways, including by publishing the prospectus or listing particulars relating to the securities, and

iii. further Brexit-related changes to the FCA Handbook and binding technical standards following the extension of Article 50.

Comments are due by 6 January and 6 February 2020

All All

R




Priority

UK Listing Rules; Disclosure Guidance and Transparency Rules

Quarterly consultation paper No 25 (CP19/27)

13 December 2019, FCA published its amendments to the FCA Handbook to refer to the 2018 Corporate Governance Code. This follows its consultation published in September 2019 (CP19/27). The changes took effect on that date, but the 2016 Code will continue to apply to accounting periods beginning before 01 January 2019

All All

R

UK Listing Rules, Disclosure Guidance and Transparency Rules

Brexit Policy Statement

20 March 2019, FCA published Primary Market Bulletin No. 22 which summarises the key changes to the Listing Rules, the DTRs and the Prospectus Rules that will apply if the UK leaves the EU with no deal

29 March 2019, FCA published the Exiting the European Union: Listing, Prospectus and Disclosure Sourcebooks (Amendments) Instrument 2019 with its proposed amendments to Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules if UK leaves EU with no deal on exit day

11 April 2019, UK Government made an equivalence determination that EU-adopted IFRS is equivalent to UK-adopted international accounting standards (UK-IAS) for the purposes of the Transparency Directive and when preparing a prospectus under the Prospectus Directive. UK government is working on updating


Asset Managers

TMT

All

All

All

A




Priority

the determination to reflect the Prospectus Regulation

5 September 2019, The Prospectus (Amendment etc.) (EU Exit) Regulations 2019 were published. These amend the UK’s prospectus regime so that it continues to operate effectively once the UK leaves the EU

October 2019, FCA published Primary Market Bulletin No 24 that includes an update on Brexit and a brief overview of FCA’s proposals for the European single electronic format requirements

6 September 2019, FCA published its Quarterly Consultation Paper No 25 (CP19/27) which includes Brexit-related changes that would only come into effect if the UK leaves the EU without a deal. Deadline for comments on these changes was 04 October 2019

See No deal Brexit: Listing Rules and DTRs for more information

UK Listing Rules, Disclosure Guidance and Transparency Rules

Primary Market Bulletin No 24

Primary Market Bulletin No 24 was published on 30 October 2019 and includes confirmation of the new technical and procedural notes that have been published in the FCA’s Knowledge Base, following consultation on them in PMB No 20

FCA is also consulting on an amendment to the existing technical note FCA/TN/409.1-Master-feeder structures and on a


Asset Managers

TMT

All

All

All A

https://www.simmons-simmons.com/en/publications/ck3sykl9cax8a0b36om4sbuui/no-deal-exit-listing-rules-and-disclosure-guidance-and-transparency-rules-dtrs

https://www.simmons-simmons.com/en/publications/ck3sykl9cax8a0b36om4sbuui/no-deal-exit-listing-rules-and-disclosure-guidance-and-transparency-rules-dtrs




Priority

new technical note on class testing changes to an investment management agreement where there are quantifiable benefits

Comments on the proposed changes were due by 14 November 2019

UK Takeover Code Amendments to the Code

04 April 2019, Takeover Panel published Instrument 2019/3 with the final changes to be made to the UK Takeover Code when the UK leaves the EU, following its consultation paper (PCP 2018/2) and response statement (RS2018/2)

UK Government has also published The Takeovers (Amendment) (EU Exit) Regulations 2019 (Regulations) (and an explanatory memorandum) which make changes to Part 28 of the Companies Act 2006 which deals with takeovers

These changes are necessary as the EU Takeover Directive will cease to apply in the UK when the UK exits the EU and are being made to ensure that the UK takeovers regime operates effectively after exit

Changes will take effect when the UK leaves the EU

All All

A

Priority–Key

R Red–Requires immediate attention This column reflects the level of attention which will be required to deal with the developments identified

A Amber–Important but not likely to require attention until the second quarter of 2020



G Green–Is not likely to require much attention until beyond the second quarter of 2020

legal headwinds q1 2020 · 2017/2402 introduces a single uniform regulatory framework for...

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