Legal Shorts 17.01.20 including EC publishes slides on EU-UK relationship regarding financial services

EC publishes slides on EU-UK relationship regarding financial services

On 10 January 2020, the EC published slides which outlined discussion preparation and negotiation directives in relation to future EU-UK relations in connection with financial services. The EC plans to formally present its directives after the UK formally leaves the EU.

While the slides set out in high level the Commission’s proposed approach to co-operation and equivalence in relation to financial services, one consideration is that if the EU decides to make equivalence decisions in protection of its own interests, it may be that it is restricted by any free trade agreement.

FCA Handbook and cryptoasset businesses

On 13 January 2020, the FCA published a new instrument which sets out the FCA registration fees it requires to be paid by cryptoasset businesses.

The instrument has come about under regulation the Money Laundering, Terrorist Financing and Transfer of Funds Regulations of 2017 and the Money Laundering and Terrorist Financing (Amendment) Regulations of 2019.

All UK cryptoasset businesses carrying on activities in scope of these anti-money laundering regulations need to register with the FCA. The FCA produced guidance o in October 2019 on this issue, which can be found at:https://www.fca.org.uk/firms/financial-crime/cryptoassets-aml-ctf-regime

The FCA’s fees manual sets out those fees which anyone who wants to be to apply to the FCA to be registered as cryptoasset businesses must pay. The fees increase according to revenue size with the instrument creating the two following brackets being:

  • 2,000 for businesses with UK cryptoassets revenue up to and including £250,000.
  • £10,000 for businesses with UK cryptoassets revenue over £250,000.

The instrument comes into force on 13 January 2020.

Findings of FCA review into asset management portfolio management tools

On 13 January 2020 the FCA published a new webpage which sets out how asset managers select and use risk modelling and other portfolio management tools. The findings are a result of an FCA enquiry into how firms not only identify and manage relevant risks, but also how they apply the same processes and thinking to their own capability to respond to system failures or service interruptions.

The results are set out under the following headings:

• The advantages and disadvantages of different approaches.
• Vendor management.
• Model governance.
• Managing change.
• Resilience and recovery.
• Software testing.
• Customer expectations.

The FCA has asked all managers to consider both the findings and how they can apply them to their own organisations. Firms are expected to make sure that their own implementation, oversight and contingency arrangements in respect of portfolio tools enable them to comply with the FCA’s expectations and rules, as set out in the SYSC and elsewhere.

ISDA® publishes IBOR Fallback Rate Adjustments FAQs

ISDA® has published a set of FAQs in relation to the IBOR Fallback Rate Adjustments. The FAQs include information on:

• Which IBOR benchmarks are covered?
• Why is there a need for fallbacks if IBORs are still available?
• What are permanent cessation triggers?
• What is a fallback adjustment?
• Access to Fallback Adjustment Data.

ISDA® whitepaper on the use of smart derivatives contracts on blockchain platforms

On 13 January 2020, ISDA and three other parties published a whitepaper reviewing private international law aspects of derivatives contracts involving distributed ledger (aka blockchain) technology (DLT).

Some of the key legal issues arising from trading derivatives using DLT in some format include the choice of law and enforceability and the use of digital assets for payments or exchanging collateral on DLT platforms.

The conclusion of the paper is a recommendation that parties to a relevant contract could agree on a common “law of the platform”, by which it is meant that a uniform choice of law is made which governs all transactions conducted on the DLT platform

Claire Cummings

Claire practises financial services law with a focus on regulatory issues, cryptocurrencies and tokens, trading and brokerage documentation and advising both existing and start-up funds and fund managers.

If you would like to discuss any of the points we raise, please contact me or one of our other lawyers.

Phone: 0207 585 1406
Email: claire.cummings@cummingsfisher.com

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