July 2019
Regulatory Round-up - Q2 2019

In this edition we cover:

United Kingdom

  • Senior Managers and Certification Regime ("SM&CR")
  • Shareholder Rights Directive
  • Extension of Temporary Permission Regime deadline
  • FCA publishes annual report on the perimeter
  • Review of principal firms in the investment management sector
  • Restriction of investment products that reference Cryptoassets to retail clients

Senior Managers and Certification Regime

The FCA has updated the content on its website and published a 60 minute Q&A session to further assist firms with practical implementation of the Senior Managers Certification Regime (“SM& As previously reported on by Portman, the SM&CR is due for implementation on 9 December 2019 and will replace the existing Approved Persons regime. 


Portman will continue to assist firms with timely implementation of the new regime in order to ensure that firms meet their regulatory obligations on 9 December. 

Shareholder Rights Directive

Firms are reminded that the FCA introduced new requirements on 10 June 2019 requiring asset managers to disclose and make publicly available their policies on how they engage with the publicly listed companies they invest in as well as how their strategies create long term value. 


These new requirements implement the provisions of the amended Shareholders Rights Directive (“SRD II”) and the FCA has set out its requirements in Chapter 2 2 B of its Conduct of Business Sourcebook (“COBS")


Portman remains on hand to assist firms to ensure that they meet their obligations under the new requirements

Extension of Temporary Permission Regime deadline

The FCA has confirmed that it has extended its deadline for notifications under the temporary permissions regime (“ to the end of 30 October 2019. 


As previously reported by Portman, the TPR allows EEA based firms passporting their services into the UK, and EEA domiciled investment funds (such as EEA UCITS, EEA AIFs, EuVECAs and EuSEFs marketed into the UK under a passport, to continue to do so post ‘exit day’, for a limited period, in the event of a no deal Brexit, so long as a TPR notification has been submitted to the FCA. 


TPR notifications should be submitted to the FCA using Connect. 

FCA publishes annual report on the perimeter

On 19 June, the FCA published its first annual report on ‘the perimeter’ which focuses on matters that fall both within and outside of the FCA’s regulatory regime and whether any issues require legislative or other changes. 


Most notably, the FCA commented on:


• Investment consultants and proxy advisors

The FCA raised competition concerns relating to investment consultants firms which advise pension fund trustees on issues such as asset manager selection and are currently unregulated. As a result, the FCA will shortly consult on bringing these services within its regulatory regime. 


Further, the Regulator noted that concerns have been raised relating to the conduct of, and conflicts of interests relating to proxy advisors firms which issue voting advice and recommendations. The FCA note that the recently revised SRD II (see above) aims to address these issues by imposing new disclosure requirements on these advisors. 


• Digital Financial Promotions

The FCA note that digital channels (such as the internet and social media) has enabled firms to market and sell financial products very quickly However, this also increased the speed in which unfair or misleading financial promotions can cause harm. 

As a result, the FCA is developing and deploying automated tools for detecting online marketing developments that pose potential risks to its objective. 

Review of principal firms in the investment management sector

In May, the FCA published its findings following its review of how principal firms (i e firms which have appointed representatives (“ in the investment management sector understood and complied with their regulatory responsibilities in respect of their ARs. 


Concerns were raised by the FCA around principals’ having weak or under developed governance arrangements in place, including a lack of effective risk frameworks, internal controls and resources Specifically, it was noted that most principals were not assessing the risks these activities posed to their firms and that some were not holding adequate regulatory capital and liquidity resources nor appropriately identifying potential conflicts of interest. 


As a result, the FCA has written a ‘Dear CEO’ letter to the CEO’s of principal firms setting out its expectations

Restriction of investment products that reference Cryptoassets to retail clients

On 3 July, the FCA published its Consultation Paper (CP 19 22 proposing the banning of the sale, marketing and distribution of derivatives and exchange traded products referencing cryptoassets to all retail clients. 


In the FCA’s opinion, retail clients are unable to reliably assess the value and risk associated with investing in such products and could receive harm from potential sudden and unexpected losses. In particular, the Regulator referenced the extreme volatility in cryptoasset prices as well as the nature of the underlying assets which have no inherent value and so differ from other assets that have physical uses, promise future cash flows or are legally accepted as money In addition, the FCA has grave concerns around the presence of market abuse and financial crime (including cyberthefts from cryptoasset platforms) in the secondary market for cryptoassets. 


The FCA is seeking feedback on its proposals and requests that any comments be provided by 3 October 2019.