PIMFA Weekly News Bulletin - 14 December 2020

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PIMFA WEEKLY NEWS BULLETIN | 14 December 2020 Dear Nigel Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read this week's latest industry news impacting you and your firm.

LATEST NEWS

Brexit Preparedness for PIMFA Firms

The Brexit transition period ends at 11pm on 31 December 2020 and PIMFA firms need to make sure they have completed their preparations for leaving the EU Single Market. For

PIMFA firms, the situation regarding servicing clients in the EU is little affected by the developments in the UK – EU negotiations. A deal and a no deal outcome of the talks are the same as passporting will be lost at the end of the transition period and equivalence does not exist for retail investments sector. Firms must decide how to handle their EUbased clients after Brexit - establishing in the EU via a passporting subsidiary or local office, merging with an EU-based firm, relinquishing clients and withdrawing from the market, or using the risky reverse solicitation exemption from the establishment requirement.

We remind firms that different EU Member States take different approaches to cross border trade in retail financial services. Reverse solicitation in particular is not a reliable option and depends on the national regulators’ approaches in the EU Member States. We strongly advise firms to consult local regulators or seek legal advice before deciding on the most suitable buisness model.

*** The FCA has published links to dedicated Brexit websites hosted by financial regulators in EEA member states. ***

Brexit Negotiations

EU contingency legislation in case of a no deal

Last week, Prime Minister Boris Johnson and European Commission President

On 10 December, the EU issued

Ursula von der Leyen agreed at a dinner

contingency legislation to prevent a cliff-

in Brussels that the UK and EU will

edge scenario in case there is a no deal

continue to negotiate until Sunday 13

outcome between the UK and EU at the

December, when a decision should be

end of December. The contingency plans

taken about the future of the talks. The

include three measures to mitigate some

two leaders took stock of the situation in a

of the significant disruptions if a deal were

phone call on Sunday and issued a joint

not in place:

statement saying that the negotiating

aviation safety certificates to be used in

teams will continue in their effort to reach

EU aircraft without disruption to avoid

a deal and that “despite the fact that

grounding; basic connectivity for road

deadlines have been missed over and

freight and passenger transport for six

over, we think it is responsible at this point

months, provided the UK does the same;

to go the extra mile.” The UK is due to

and the possibility of reciprocal fishing

leave the Brexit transition period on 31

access for UK and EU vessels in each

December but time must be allowed for

other's waters for one year, or until an

the UK and European Parliament to vote

agreement is reached. The EU has been

on any deal that is agreed before then.

delaying issuing its contingency planning in case it would be read as a sign that it

Prime Minister Johnson said on Sunday

does not believe in reaching an

that the two sides were still wide apart on

agreement with the UK in the negotiations.

some issues but confirmed that the UK will not walk away from the talks. He added

With just three weeks until the end of the

that “the most likely thing now is of course

year, the EU Member States insisted

that we have to get ready for WTO terms.”

plans had to be published.

For as long as the UK and EU continue to talk, a deal remains possible.

UK – Switzerland Services Mobility Agreement Bank of England – Financial Stability Report The UK and Switzerland have agreed a Services Mobility Agreement which allows The Bank of England says in its Financial

professional workers to travel freely

Stability Report, published on Friday, that

between the two countries and work there

the UK banks have enough capital to

visa-free for up to 90 days a year.

absorb losses resulting from a no-deal Brexit and further coronavirus damage,

The deal will support the services sector,

allowing them to continue to lend. While

including financial services, and “provide

there are a number of risks ahead,

continuity for businesses and paves the

including further disruption from Covid and

way for a more advanced deal with

the transition to new trading arrangements

Switzerland in the future”, said UK Trade

between the UK and the EU, UK banks

Secretary Liz Truss.

are strong enough to support households and businesses through this difficult period.

UK – Singapore Trade Deal

Banks could handle up to £200 billion in credit losses without running out of capital, in a scenario of unemployment reaching 15%. With regards to Brexit, the Bank says that the UK authorities and financial

The UK and Singapore have signed a trade deal that effectively mirrors the

sector firms have made extensive

agreement Singapore already had with the

preparations over the transition period and

EU. This means that trade should

that most risks to UK financial stability

continue as normal from 1 January. Liz

have been mitigated. Some disruption to

Truss, International Trade Secretary said

financial services could arise, but this

the Singapore deal paves the way for a

should not pose a risk to financial stability.

cutting-edge relationship in digital as part of the government’s plan to make the UK a global hub for tech and services trade

Equivalence of UK derivatives

post-Brexit.

regulated markets under EMIR Article 2a

As the UK’s largest trading partner in South-East Asia, the Singapore continuity agreement will provide a gateway to Asia for UK businesses and lock in the benefits

Last week seven financial services associations wrote to EU Financial

of the existing trading relationship, worth ÂŁ17.6 billion last year.

Services Commissioner Mairead McGuinness arguing for equivalence decisions under the EMIR to avoid cutting off EU access to UK exchange-traded derivatives. Without equivalence, UK

PWC Paper on Operational Resilience

ETDs will be treated as over-the-counter trades as of 1 January 2021. The associations say that this will result in

Last Thursday, PIMFA held a meeting of

negative impacts for EU market

our Operational Resilience Working Group

participants and EU derivatives markets,

and discussed how firms are identifying

and create an uneven playing field and

important business services. Our

operational challenges for EU banks and

associate member PWC, who attended

investments firms. They also say that UK

the meeting, has published a paper on this

regulated markets provide market users

topic which you may find useful.

with uniquely deep and liquid markets with global participation and that there is no

You can find the paper here.

direct substitute for some UK ETDs on regulated markets in the EU or in other third countries.

Latest PIMFA Press Releases

•

PIMFA in the Press

PIMFA calls for urgent reform of supervision & FSCS levy to protect consumers & industry as it

Money Marketing: Pimfa chief: FCA must

sets out a roadmap towards lower

accelerate its FSCS intervention

FSCS bills

Financial Adviser: Pandemic created

•

PIMFA disappointed to learn of

'perfect storm' for scammers to hide

supplementary costs to be levied

Professional Adviser: PI cover up for 95%

on members by FSCS •

of advisers with pension transfer

PIMFA sets out priorities for the

permissions

future as it updates member

Investment Week: PIMFA: Treasury and

manifesto

FCA must review FSCS levy to protect

•

PIMFA hosts first in series of

sector and consumers

masterclasses to encourage

Financial Adviser: ‘Bitter pill to swallow’:

young women from all

advisers react to FSCS interim levy

backgrounds to consider a career

Financial Adviser: Pimfa warns industry

in finance

'tarnished' by phoenixing

MiFID II ‘Quick Fix’

The European Parliament’s Economic and Monetary Affairs Committee negotiators agreed a deal with the Council on targeted adjustments to the MiFID II in order to help economic recovery by removing unnecessary administrative burdens. The changes apply mostly to professional clients and eligible counterparties such as insurers, pension funds or public institutions.

The changes include: Professional clients will no longer receive information on costs and charges but will still receive information on investment advice and portfolio management; Ex-post information on costs and charges should be provided over the phone or on paper if requested; Retail clients will be able to receive information in digital format instead of on paper, but should be given at least eight weeks’ notice and the choice to continue receiving information on paper or switch to a digital format; Certain product governance requirements will no longer apply to corporate bonds with “make-whole clauses”.

The Commission will present a proposal for a review of both the MIFID II and the MIFIR by

31 July 2021 at the latest. It should consider issues related to market structure, data, trading and post trading, research rules, rules on payment to advisors and the level of professional qualifications of advisers. The deal between representatives from the European Parliament and the Council of EU governments paves the way for the changes to come into effect over the next year.

EVENTS & LEARNING

FEATURED LEARNING

PIMFA Training SM&CR: GETTING YOUR FIT AND PROPER ASSESSMENTS RIGHT FIRST TIME 14 January 2021 In this live online learning sessions (comprising of 2 x 2.5-hour sessions) we will help you: • Define competence and capability • Develop the skills to observe, listen and capture evidence all at the same time!

• Conduct a feedback session • Build a portfolio of evidence to demonstrate an individual’s competence and capability • Build a development plan that is SMART. Who should attend?

Anyone who is about to be or has been recently appointed into a role that requires skills in assessing the competence and capability of others. It can also serve as a refresher for those in existing positions.

It is ideal for those caught within the scope of the Certification Regime performing a role of supervisor and/or are responsible for the assessment of another individual’s fitness and propriety.

For more info and to book your place, please click here.

View all other upcoming PIMFA Events and Learning here.

WHAT'S HAPPENING IN OUR INDUSTRY

Join PIMFA Plus partner Investor Meet Company at their webinar on 15th December to discuss the important topic of corporate governance. They will be joined by PIMFA Board member & Hawksmoor CEO, Sarah Soar; The Quoted Companies Alliance; The Financial Reporting Council; Wentworth Resources and Michael Woodford MBE.

FCA ban marketing of speculative illiquid securities (including speculative mini-bonds) to retail investors

The FCA has published a Policy Statement that summarises the feedback received to CP20/8 and confirms the final rules to permanently ban the mass-marketing of speculative illiquid securities (SIS) to retail investors. The decision has been made to prevent harm to consumers from investing in complex, higher-risk products that they do not understand and are not suitable for them. Following the introduction of the TPI, the FCA saw evidence that the harm caused by speculative mini-bonds had started migrating to some listed bonds, which were excluded from the TPI. In response, the FCA has brought certain listed bonds, which are not regularly traded under the marketing restrictions, into the permanent rules.

These rules come into force on 1 January 2021.

FCA Systems Outages: Solo-regulated firms update Directory persons data submission

The FCA will incrementally publish Directory Persons data from solo-regulated firms from 14 December. In preparation for this, there will be outages for the following systems between 6pm, 11 December and 8am 14 December 2020.

•

Financial Services Register;

•

The Application Programming Interface (API); and

•

Connect - in addition, they will be restricting Directory Persons submissions via

Connect from 5pm on Thursday, 10 December.

The FCA will be adding outage notification messages to Connect (Log-in page and ‘Latest News’ section in the application), API and the FS Register.

Please see the FCA website for more details and contact them at DirectoryCommunications@fca.org.uk for further information or with any questions.

Latest PIMFA Consultation Response

PIMFA’s latest consultation response is to the FCA on the Liquidity Mismatch in Authorised Open-ended Property Funds.

Read this and all of our other PIMFA consultation papers here.

Find Out More.....

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