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Hogan Lovells Brexit resources
As the UK-EU Brexit transition period draws to an end, take a look at our various "Beyond Brexit transition" bulletins on the Hogan Lovells Brexit Hub.
European Union Withdrawal (Consequential Modifications) (EU Exit) Regulations 2020
The European Union Withdrawal (Consequential Modifications) (EU Exit) Regulations 2020 (SI 2020/1447) have been published, together with an explanatory memorandum. The purpose of SI 2020/1447 is to ensure that the UK statute book works coherently and effectively following the end of the transition period. For example, among other things it clarifies how certain terms, including EU-related definitions, should be interpreted in domestic legislation on or after IP completion day, and makes technical repeals to redundant provisions within primary legislation arising from the European Union (Withdrawal) Act 2018 to tidy up the statute book.
SI 2020/1447 comes into force on IP completion day other than regulations 1 (Citation, commencement, extent and interpretation) and 10 (Revocations), which come into force immediately before IP completion day.
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FCA Brexit FAQs
The UK Financial Conduct Authority (FCA) has published a new webpage containing a set of FAQs addressing key questions about Brexit and the temporary permissions regime (TPR) to help firms prepare for the end of the Brexit transition period. The transition period is due to end on 31 December 2020. Questions addressed include:
- What is the TPR and what happens with the TPR after the transition period?
- What if I want to make changes to my TPR submission?
- When passporting ends who will it affect, what do I need to do next, and what has the FCA done to make sure firms can continue to do business in the EEA?
- How has EU law been onshored?
- What is the temporary transitional power?
- What impact will the end of the transition period have on transaction reporting?
The FCA also provides details of a dedicated telephone helpline it has made available to firms in need of help considering the implications of a no-deal exit.
Financial Services Bill 2019-21
Parliament has published a revised version of the Financial Services Bill 2019-21, as amended in the committee stage, together with a document containing details of all proceedings at the committee stage. This document lists those amendments to the Bill that were made in the committee stage, which is now complete. A letter John Glen, Economic Secretary to the Treasury, to Pat McFadden MP, has also been published which clarifies certain issues raised in the House of Commons committee stage debate.
The date for the House of Commons report stage for the Bill will appear on the Bill's webpage when scheduled.
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LIBOR cessation: BoE speech
The Bank of England (BoE) has published a speech by Andrew Hauser, BoE Executive Director for Markets, on firms' preparations for LIBOR cessation at the end of 2021. Mr Hauser identifies three key actions for market participants over the coming months:
- move all new business off LIBOR;
- adopt the ISDA fallbacks for existing derivatives; and
- reduce the legacy of post-2021 LIBOR-linked contracts.
FCA quarterly consultation No 30: CP20/23
The FCA has published its 30th quarterly consultation paper, CP20/23. CP20/23 proposes to:
- clarify, in a joint FCA and Prudential Regulation Authority (PRA) consultation, the regulators' expectations where a senior manager takes temporary, long-term (longer than 12 week) absences. The FCA is also proposing to make these changes in relation to approved persons at appointed representatives (in SUP 10A), but not with regards to statements of responsibilities, as these do not apply to approved persons at appointed representatives;
- remove references to collective investment schemes being able to issue bearer certificates, in line with draft Government legislation banning the use of bearer certificates;
- amend the rules in the FCA Handbook, COBS 4.5.12R to COBS 4.5.15R, to narrow the scope of their application to communications which could influence a retail investor's investment decision;
- make changes to the minimum levels of professional indemnity insurance (PII) cover to align FCA rules with the revised limits as published in Commission Delegated Regulation (EU) 2019/1935 amending the Insurance Distribution Directive (IDD);
- make changes to the cancellation form in the FCA Handbook, SUP 6 Annex 6, to improve the cancellation application process; and
- transpose Article 1(16) of the Bank Recovery and Resolution Directive II ((EU) 2019/879) into FCA rules.
In addition, the FCA seeks views from interested stakeholders about whether it should recognise the Global Precious Metals Code.
The deadline for comments is 4 January 2021, except for the proposals to make changes to the cancellation form, which is 4 February 2021.
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Approach of insolvency practitioners to regulated firms: FCA GC20/5
The FCA has published a guidance consultation, GC20/5, on proposed guidance for insolvency practitioners on how to approach regulated firms. GC20/5 sets out the FCA's view on how an insolvency practitioner should ensure regulated firms meet their ongoing financial services regulatory obligations following appointment. The proposed guidance is aimed at insolvency practitioners appointed over firms solely authorised or registered by the FCA but may also be relevant to firms that are dual regulated by the FCA and PRA.
The FCA is not the regulatory authority for insolvency practitioners but has engaged with the recognised professional bodies who licence and regulate insolvency practitioners on the proposed guidance.
The consultation period ends on 18 January 2021.
FCA policy development update
The FCA has updated its policy development update webpage for December 2020, setting out information on recent and future FCA publications. Newly added to the update this month is a consultation on amendments to accommodate Breathing Space Regulations, due for publication in Q4 2020.
Climate Financial Risk Forum: PRA summary of November 2020 meeting
The PRA has published a short summary of the fifth meeting of the Climate Financial Risk Forum (CFRF), which it co-hosts with the FCA. The meeting was held in November 2020. Among other things:
- the PRA and FCA welcomed a new member organisation, the Universities Superannuation Scheme (USS), and two new observers, The Pensions Regulator (TPR) and the Financial Reporting Council (FRC);
- since the publication of the CFRF guide in June 2020 and the last CFRF meeting in July 2020, the working group chairs, members and secretariats have been considering how they can further their respective topics of risk management, scenario analysis, disclosure and innovation. The CFRF noted the importance of progress in the development and understanding of climate data and metrics. Given this, it was decided that data and metrics should be a thematic topic that is addressed by all CFRF working groups in the next phase of work;
- the CFRF discussed each working group's plans and the progress made to date;
- the CFRF noted the importance of the 26th UN Climate Change Conference of the Parties (COP26), the major international climate summit being hosted by the UK in November 2021. It was agreed the CFRF should explore ways it can support the COP26 aims; and
- the next CFRF meeting will take place in Q1 2021 where a programme of deliverables will be agreed and next steps to engage with external stakeholders ahead of COP26 will be discussed.
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Counter-Terrorism (Sanctions) (EU Exit) (Commencement) Regulations 2020
The Counter-Terrorism (Sanctions) (EU Exit) (Commencement) Regulations 2020 (SI 2020/1416) bring the power to designate a person as subject to the regime of the Counter-Terrorism (Sanctions) (EU Exit) Regulations 2019 (SI 2019/577) (Sanctions Regulations ) into force from 7 December 2020. All other provisions of the Sanctions Regulations are brought into force on IP completion day.
The Sanctions Regulations were made under section 1 of the Sanctions and Anti-Money Laundering Act 2018.
Data localisation impact on financial services sector: IRSG report
The International Regulatory Strategy Group (IRSG) has published a report on how the trend for data localisation is affecting the financial services sector. The IRSG explains that "data localisation" is a term used to describe a variety of different types of restrictions and requirements imposed by national governments and regulators, which require (or have as a consequence) that data, with an increasing trend toward personal data, originating within a jurisdiction remains in that jurisdiction.
In its report, the IRSG provides an overview of the types of restrictions applied by jurisdictions throughout the world to the extra-territorial transfer of data. It considers the consequences of such restrictions on the financial services sector and highlights some related key concerns. The report includes recommendations on how alternative measures could potentially better address the concerns of both national governments and regulators that have resulted in data localisation.
MLD4: European Commission draft Delegated Regulation removing Mongolia from high-risk third countries
The European Commission has adopted a Delegated Regulation which deletes Mongolia from the list of high-risk third countries with strategic anti-money laundering (AML) and counter-terrorist financing (CTF) deficiencies the Annex to Delegated Regulation (EU) 2016/1675 (which is produced under Article 9(2) of the Fourth Money Laundering Directive (MLD4)).
The next step will be for the Council of the EU and the European Parliament to consider the Delegated Regulation. If neither the Council nor the Parliament object, it will be published in the OJ and will enter into force 20 days after its publication.
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Islamic financial services: IFSB to adopt two new standards
The Islamic Finance Standards Board (IFSB) has announced that its Council has resolved to approve the adoption of the following new standards:
- IFSB-24: Guiding Principles on Investor Protection in Islamic Capital Markets; and
- IFSB-25: Disclosures to Promote Transparency and Market Discipline for Takāful/Retakāful Undertakings.
Softcopies of IFSB-24 and IFSB-25 will be made available on the IFSB website in due course.
Digital trust and identity for legal entities: GLEIF development programme
The Global LEI Foundation (GLEIF) has announced plans to launch a cryptographically verifiable Legal Entity Identifier (LEI) development programme, in response to demand from the financial services, pharmaceutical, healthcare, telecom and automotive sectors.
The GLEIF is extending the global LEI system to create a fully digitised LEI service capable of enabling instant and automated identity verification between counterparties operating across all industry sectors, globally. It has started exploring technical approaches across several industry sectors, with the aim of identifying an open and universally interoperable model.
The GLEIF is already engaged in research partnerships and technical trials with stakeholders in the financial services, pharmaceutical, healthcare, telecom and automotive sectors. A range of blockchain, self-sovereign identity and other decentralised key management propositions are currently being explored. It is now inviting stakeholders from across the digital economy to engage in a cross-industry development program to create an ecosystem and credential governance framework, together with a technical supporting infrastructure, for a verifiable LEI (vLEI).
The vLEI will be a digitally verifiable credential containing the LEI. The GLEIF explains that by embedding new and existing LEIs in verifiable credentials, the vLEI will create a cryptographically secure chain of trust that replaces the existing manual processes required to access and confirm an entity's LEI data.
The vLEI will give government organisations, companies and other legal entities around the world the capacity to use non-repudiable identification data pertaining to their legal status, ownership structure and authorised representatives in a growing number of digital business activities, including approving business transactions and contracts, onboarding customers, transacting within import and export and supply chain business networks, and submitting regulatory filings and reports.
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Authored by Yvonne Clapham
