Regulatory Developments - June 17, 2015

SENIOR MANAGERS REGIME

The FCA and the PRA have published further material in relation to the implementation of the new provisions relating to individual accountability in banking, including the Senior Managers regime, the certification regime, and the conduct rules. The initial consultation paper was published by both regulators in July 2014, with a further consultation in relation to forms and transitional provisions in December 2014.

In the first half of this year, the FCA and the PRA have published:

Approach to non-executive directors in banking and Solvency II firms & Application of the presumption of responsibility to Senior Managers in banking firms

FCA CP15/5 and PRA CP7/15, February 2015

In this Consultation paper, the FCA and the PRA set out their revised approach to the application of the Senior Managers regime to non-executive directors. The PRA also consulted in relation to its approach to the presumption of responsibility.

Feedback on FCA CP14/13 and PRA CP14/14 and consultation on additional guidance

FCA CP15/9, March 2015

In this Consultation Paper, the FCA provided its comments on the feedback it had received to its original consultation of July 2014. It provided "near-final" text of some of the new Handbook content it will introduce, much of which was substantially reworked as compared with the version attached to the July 2014 CP. The FCA also provided draft guidance in relation to its approach to the presumption of responsibility.

UK branches of foreign banks

FCA CP 15/10, March 2015

In this Consultation Paper, the FCA set out its proposals for how the new regime for individual accountability would apply to the UK branches of foreign banks, including those based inside the EEA.

Strengthening accountability in banking and insurance: Responses to CP14/14 and CP26/14

PRA PS 3/15, March 2015

This Policy Statement contains the PRA's final rules in relation to much of the Senior Managers regime and certification regime. Importantly, the Policy Statement does not include some remaining aspects on which it needs to co-ordinate with the FCA, as well as issues in relation to which it is still considering the responses to its consultation. The latter category includes: transitional provisions and forms; non-executive directors; the presumption of responsibility; and application of the new regime to UK branches of foreign banks.

Corporate governance: Board responsibilities

PRA CP 18/15, May 2015

While not strictly part of the Senior Managers regime, this consultation by the PRA is expressly stated to complement it. In the consultation paper, the PRA seeks views on a draft supervisory statement setting out its expectations in relation to a wide range of issues, including the respective roles of executive and non-executive directors. This is a distinction which has been under some scrutiny in relation to the application of the Senior Managers regime to non-executive directors (it will now apply to a much smaller number than originally proposed). The short draft supervisory statement makes it clear that the PRA expects firms to provide non-executive directors with adequate training and practical resources, and that they must have unrestricted access to employees and information, in order to discharge their duties. The quality of management information has recently been a recurring theme from regulators, and the PRA sets out its expectation that boards insist on receiving neither too little nor too much management information.

FINALISED GUIDANCE 15/1

Retail investment advice: Clarifying the boundaries and exploring the barriers to market development

FCA FG 15/1, January 2015

The FCA published FG15/1 in order to consolidate existing sources of guidance on retail investment advice, and to clarify what does and does not amount to advice or a personal recommendation (which must comply with COBS 9) in that context. While the Guidance is helpful in many respects, particularly in terms of consolidating existing guidance, it leaves some difficult questions unanswered. It also serves, at times, to highlight some potentially significant differences in approach between the FCA and the common law approach to sales of financial products to retail customers.

HOLMCROFT PROPERTIES LIMITED

Holmcroft Properties Limited was held to have a sufficiently arguable case to be granted permission to bring judicial review proceedings against KPMG. KPMG is the skilled person appointed by Barclays pursuant to section 166 of FSMA in relation to its review of sales of interest rate hedging products. A transcript of the court's judgment at the permission stage does not appear to have been produced, but reports from...