UK Financial Services Regulatory Developments - September 2008.This edition of London Update covers UK and EU developments from 1 July to 29 August 2008. UK DEVELOPMENTS FSA FSA Financial Services Authority FSA Food Standards Agency (UK) FSA Farm Service Agency (USDA) FSA Financial Services Agency (Japan) Fines IT Employee For Market Abuse On July 1, the Financial Services Authority The Financial Services Authority ("FSA") is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its main office is based in Canary Wharf, London, with another office in Edinburgh. (FSA) announced that it had fined John Shevlin, an IT technician at Body Shop International plc (Body Shop), [pounds]85,000 ($170,000) for market abuse. The FSA found that, based on inside information, Mr. Shevlin had established a short position on January 10, 2006 equivalent to 80,000 Body Shop shares through a Contract for Difference (CFD CFD - Computational Fluid Dynamics ). The position was closed out the next day after Body Shop announced trading results that were below market expectations. Mr. Shevlin obtained the inside information by improperly accessing confidential emails containing details of Body Shop's Christmas trading results and a draft announcement that Body Shop had underperformed expectations. The FSA did not attribute any fault to Body Shop and Mr. Shevlin has ceased to be a Body Shop employee. www.fsa.gov.uk/pubs/final/john_shevlin.pdf FSA Announces Disclosure Regime For CFDs On July 2, the FSA announced its intention to implement a general disclosure regime for long CFD positions. This announcement follows the FSA's CFD Consultation Paper (CP07/20) which closed for comments last February, as reported in the December 2007 edition of London Update. The FSA believes that a general disclosure regime is the most effective way of addressing concerns in relation to market failures linked to voting rights Voting rights The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors. voting rights The type of voting and the amount of control held by the owners of a class of stock. and corporate influence. Final rules are expected to be implemented by February 2009. Under the new regime, any existing share and CFD holdings in the same company over and above 3% must be aggregated for disclosure purposes. The disclosure threshold is in line with the FSA's existing disclosure rules. www.fsa.gov.uk/pubs/cp/cp07_20_update.pdf FSA Consults On Changes To Disclosure And Transparency Rules On July 21, the FSA began a consultation on its proposal to allow financial institutions in receipt of liquidity support from a central bank to delay the public disclosure of such support. This change is designed to address the concern that, in the past, immediate disclosure has led to a loss of confidence which exacerbated liquidity problems and undermined the firm's solvency. Under the EU Market Abuse Directive, which the FSA's Disclosure and Transparency Rules implement, disclosure of price-sensitive information is required, but the Directive allows disclosure of such information to be delayed in certain specific circumstances. The FSA proposals do not grant a financial institution an unconditional or indefinite ability to delay disclosure of it receiving liquidity support. Immediate disclosure may still be required in certain circumstances. Accordingly, the FSA considers that they comply with the Directive. The deadline for comments is September 30. www.fsa.gov.uk/pubs/cp/cp08_13.pdf BVCA BVCA British Private Equity and Venture Capital Association (London, England) Publishes Guidance For Private Equity Firms On FSA Regulatory Reporting On July 24, the British Venture Capital Association (BVCA) published two legal bulletins to help private equity firms understand the new regulatory capital reporting requirements due to be introduced by the FSA with effect from September. The requirements are set out at SUP 16.12 of the FSA's Rules. The bulletins provide an overview of the changes to the FSA's regulatory capital reporting regime related to private equity firms that are not subject to the EU Markets in Financial Instruments Directive The Markets in Financial Instruments Directive (MiFID) will introduce a single market and regulatory regime for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). (MiFID) and private equity firms that are categorised as Exempt CAD firms. www.bvca.co.uk/doc.php?id=913 www.bvca.co.uk/doc.php?id=914 FSA Commences Several Criminal Prosecutions for Insider Dealing On July 24, Malcolm Calvert, a former partner at a major London stockbroker, was charged with 12 separate offences of insider dealing in breach of Section 52 of the Criminal Justice Act 1993. Mr. Calvert pleaded not guilty and the proceedings were adjourned until September Until September is a 1984 romantic drama set in France. It stars Karen Allen as an American tourist in Paris who falls in love with a married Frenchman (Thierry Lhermitte). External links 2008. On July 28, the FSA filed an indictment against Matthew Uberoi and Neel Uberoi charging 17 counts of insider dealing in relation to trading over a four-month period in 2006. The following day, the FSA arrested eight individuals suspected of insider dealing and executed related search warrants across London and the South East of England The East of England is one of the nine official regions of England. It was created in 1994 and was adopted for statistics from 1999. It includes the ceremonial counties of Essex, Hertfordshire, Bedfordshire, Cambridgeshire, Norfolk and Suffolk. in connection with a major ongoing investigation. Among those arrested were junior support personnel at two investment banks The following is a list of investment banks Financial conglomerates Large financial-services conglomerates combine commercial banking and investment banking, and sometimes insurance. . Prior to the three cases mentioned, the FSA had only commenced a single criminal insider dealing prosecution since being given the power to do so in 2001. www.fsa.gov.uk/pages/Library/Communication/PR/2008/078.shtml FSA Concludes HBOS HBOS Halifax Bank of Scotland Investigation On August 1, the FSA announced the results of its investigations into trading in March 2008 in shares of HBOS plc (HBOS). Although no action will be taken against any individuals or firms, the FSA has made a public announcement about its investigation. The FSA's intention was to determine whether a person or persons had spread misleading, false or deceptive information regarding HBOS to profit from a reduction in its share price. FSA staff from its Enforcement, Markets, Supervision and Intelligence departments analysed trading in HBOS and contacted market participants and news organisations to determine whether this had occurred. The FSA concluded that despite the likelihood that the rumours contributed to the fall in HBOS's share price, the investigation did not find sufficient evidence that they were spread as part of any concerted attempt to profit by manipulating the market. The FSA stated that it is following up various wider issues that this rumour case has highlighted through its ongoing thematic and supervisory work. The FSA's Markets Division has launched a review of the systems and controls at regulated firms for dealing with rumours. There will be a particular focus on what policies are in place and how firms ensure compliance with them; whether and how rumours are verified; whether traders are permitted to pass on or trade on rumours; and how firms ensure staff do not initiate or spread false rumours. www.fsa.gov.uk/pages/Library/Communication/PR/2008/086.shtml EU DEVELOPMENTS European Parliament European Parliament, a branch of the governing body of the European Union (EU). It convenes on a monthly basis in Strasbourg, France; most meetings of the separate parliamentary committees are held in Brussels, Belgium, and its Secretariat is located in Luxembourg. Proposes Enhanced EU Regulatory And Supervisory Framework For Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. On June 25, the European Parliament's Committee on Economic and Monetary Affairs The Committee on Economic and Monetary Affairs (ECON) is a committee of the European Parliament. Since Economic and Monetary Union (EMU), the most important function of this Committee (EMAC) has been in relation to the European Central Bank (ECB). published a draft report including detailed recommendations for measures to improve EU regulatory and supervisory arrangements. The report includes recommendations covering capital adequacy, transparency, corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. , financial stability and systemic risk Systemic Risk Risk common to a particular sector or country. Often refers to a risk resulting from a particular "system" that is in place, such as the regulator framework for monitoring of financial_institutions. . The draft report is scheduled for adoption on September 10. www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+COMPARL+PE-407.901+01+DOC+PDF+V0//EN&language=EN UK Government Opposes Greater Role For EU Supervisory Committees In May 2008, the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community launched a consultation on possible amendments to the structures of each of the EU Level Three Committees--the EU Committee of European Securities Regulators (CESR CESR Committee of European Securities Regulators CESR Center for Economic and Social Rights CESR Centre d'Etude Spatiale des Rayonnements CESR Cornell Electron Storage Ring CESR Corporate Environmental and Social Responsibility ), the Committee of European Banking Supervisors (CEBS CEBS Committee of European Banking Supervisors CEBS Certified Employee Benefit Specialist CEBS Chemical Effects in Biological Systems CEBS Church of England Boys Society CEBS Charles Edward Brooke School (UK) ) and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS CEIOPS Committee of European Insurance and Occupational Pensions Supervisors )--as reported in the July 2008 edition of London Update. On July 9, the UK Treasury and the FSA issued a joint response to the European Commission's consultation, which was also agreed to by the Bank of England Bank of England, central bank and note-issuing institution of Great Britain. Popularly known as the Old Lady of Threadneedle Street, its main office stands on the street of that name in London. and the UK Pensions Regulator. The UK considers that the existing arrangements have made a positive contribution to the EU's regulatory and supervisory framework. The UK supports amendments that reduce unnecessary divergences or duplication in EU markets and their regulation and supervision. However, the UK authorities do not support a wider coordination role for the existing committees nor do they agree that differences in supervision by various supervisors result in a material obstacle to a single EU financial services market. www.hm-treasury.gov.uk/media/2/A/consultation_cesrcebsceiops_response.pdf CESR Consults On Fair Value Measurement And Related Disclosures On July 11, CESR launched a consultation on a draft statement for fair value measurement and related disclosures of financial instruments in illiquid Illiquid An asset or security that cannot be converted into cash very quickly (or near prevailing market prices). Notes: A house is a good example of an illiquid asset. See also: Cash, Liquidity Illiquid In the context of finance. markets. The purpose of the draft statement is to help EU financial services regulators ensure that issuers fulfil all information obligations under the requirements of the EU Transparency Directive and the EU Market Abuse Directive. The consultation will close on September 12. http://www.cesr-eu.org/index.php?page=consultation_details&id=113 European Commission Publishes "UCITS Undertakings for the Collective Investment of Transferable Securities - UCITS A public limited company that coordinates the distribution and management of unit trusts amongst countries within the European Union. IV" Proposals On July 16, the European Commission published its long-awaited legislative proposals for reforming the EU legislative framework for Undertakings for Collective Investment in Transferable Securities (UCITS) funds. The draft "UCITS IV Directive" will replace 10 existing directives with a single text. The Commission intends to establish a more efficient framework by allowing UCITS managers to develop cross-border business to achieve savings consolidation and economies of scale. The proposals also call for improving retail investor Retail Investor Individual investors who buy and sell securities for their personal account, and not for another company or organization. Notes: Retail investors buy in much smaller quantities than larger institutional investors. protection by ensuring that investors in UCITS funds receive clear and easily understandable information. This includes "key investor information" documents that would replace the current simplified prospectuses for UCITS funds. Specific measures are designed to reduce barriers to cross-border marketing by streamlining notification procedures and requirements. Concurrently, the Commission has asked CESR to examine the possibility of establishing an effective management company passport as part of its package of targeted legislative amendments to be included within the UCITS IV Directive. A management company passport would allow a UCITS fund to be managed by a management company authorised and supervised in a Member State other than the Member State in which the fund is established. ec.europa.eu/internal_market/investment/docs/legal_texts/framework/ia_report_en.pdf Commission Clarifies MiFID Exemption Rules On August 7, the European Commission published the latest version of its questions and answers database on MiFID. Among the added questions and answers are clarification that firms providing investment services to non-group as well as group companies are subject to MiFID in relation to their whole business, not just non-group services. There are also clarifications on the treatment of offshore funds, the status of third parties in outsourcing arrangements, best execution obligations and securities lending Securities Lending When a brokerage lends securities owned by its clients to short sellers. Notes: This allows brokers to create additional revenue (commissions) on the short sale transaction. , and the scope of post-trade transaction reporting. The European Commission's database is not formal, legally binding guidance; however, it reflects the "considered views" of the Commission. ec.europa.eu/internal_market/securities/docs/isd/questions/questions_en.pdf The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Mr Martin Cornish Katten Muchin Rosenman Katten Muchin Rosenman LLP is a law firm with offices in Chicago; New York; Los Angeles; Washington, D.C.; Charlotte, North Carolina; Palo Alto, California; and Irving, Texas; and an affiliated entity—Katten Muchin Rosenman Cornish LLP—in London, England. LLP LLP - Lower Layer Protocol 525 West Monroe Street Suite 1600 Chicago IL 60661 UNITED STATES Tel: 3125778469 Fax: 3125774678 E-mail: Claire.slattery@kattenlaw.com URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : www.kattenlaw.com Click Here for related articles (c) Mondaq Ltd, 2008 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com |
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