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  • PRECISE. PROVEN. PERFORMANCE. www.moorestephens.co.uk

    Looking back, looking forward An overview of regulation change in 2016/2017

    23 January 2017

  • Agenda

    Introduction

    Looking back at 2016

    Looking forward at 2017 MiFID II, SM&CR, MLD4

    General Data Protection Regulation

    Insights from a Skilled Person

    Conclusion & questions

  • PRECISE. PROVEN. PERFORMANCE.

    Colour palette for PowerPoint presentations

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    Primary Black

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    Secondary Red

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    Secondary colour palette

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    Secondary Purple

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    Secondary Light Purple

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    Secondary Bright Green

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    Secondary Deep Green

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    Secondary Olive

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    Secondary Deep Yellow

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    Secondary Ecru

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    Secondary Light Blue

    R195 G208 B228 Looking back at 2016

    Lorraine Bay, Partner

  • FCA Business plan 2016/17

    Pension

    Innovation and technology

    Treatment of existing customers

    Wholesale financial markets

    Firms culture and governance

    Advice

    Financial crime and anti-money laundering

  • Themes during 2016

    SMR MAR

    Wealth Management

    review

    UCITS V Prudential concerns

    Pensions

    Consumer Credit

    FAMR

  • What happened in 2016?

    Prudential

    COREP thematic review

    Guidance on wind down planning

    CRD IV Pillar 2 summary & stress testing observations

    Financial crime

    Market Abuse Regulations (MAR) in force from 3 July

    2016

    Broader scope

    New offence

    STORs

    More AML & financial crime s.166s

  • What you should you have done in 2016?

    Reviewed & tailored your risk framework & risk matrix

    Read the wind down planning guide update

    Read the FCA Pillar II & stress testing paper

    Ensured consistency between your ICAAP, RRP & wind down plan.

    Ensured its a document with active senior management engagement.

    Conducted gap analysis of compliance with MAR

    Ensured all your MAR Compliance documents up to date?

    Implemented staff training for MARs requirements

    Completed a VOP for P2P advising activity if not needed

  • PRECISE. PROVEN. PERFORMANCE.

    Colour palette for PowerPoint presentations

    Primary Cyan

    R0 G174 B239

    Primary Black

    R35 G31 B32

    Secondary Red

    R191 G49 B26

    Secondary colour palette

    Primary colour palette

    Secondary Maroon

    R163 G0 B70

    Secondary Purple

    R113 G20 B113

    Secondary Deep Purple

    R96 G82 B112

    Secondary Light Purple

    R147 G151 B203

    Secondary Pastel Green

    R122 G204 B200

    Secondary Bottle Green

    R0 G146 B143

    Secondary Pastel Blue

    R80 G200 B232

    Secondary Blue

    R79 G138 B190

    Secondary Light Green

    R169 G195 B152

    Secondary Bright Green

    R122 G193 B67

    Secondary Deep Green

    R109 G141 B36

    Secondary Olive

    R164 G148 B0

    Secondary Bright Yellow

    R235 G215 B35

    Secondary Deep Yellow

    R229 G181 B59

    Secondary Ecru

    R200 G177 B139

    Secondary Light Blue

    R195 G208 B228 Looking forward at 2017 MiFID II, SM&CR, MLD4 Giovanni Giro, Senior Manager

  • MiFID II

    The Directive (MiFID-2014/65/EU) this revises and

    expands the existing directive

    The Regulation, the Markets in Financial Instruments

    Regulation (MiFIR-2014/600/EU) this is a binding

    legislative act, which directly applies across the EU

    ESMA delegated acts and Regulatory Technical Standards

    To be implemented on 3 January 2018

  • Key areas

    MiFID II

    Commodity Derivatives

    High Frequency

    Trading

    Conduct of Business

    Market Structure

    Organisation

    Transparency and

    Transaction Reporting

  • MiFID II effects

    Extended scope

    More types of firms; new operators; additional investment types

    Increased focus on governance

    Management body under scrutiny; product governance

    Transparency

    Pre-trade and post-trade disclosures; costs and charges

    Transaction reporting

    Increased data reporting; near-real time

    Additional client protection

    Suitability and appropriateness; best execution

  • Organisation

    Additional organisation and governance requirements

    Prohibition on title transfer collateral agreement with retail

    clients

    Remuneration to prevent conflicts of interest

    Management body to ensure corporate governance

    arrangements are overseen and assessed regularly

    Induction and training for senior management

    Stress testing of products and services

  • Conduct of business

    Focus on suitability, appropriateness, conflicts of interest

    Enhanced requirements for the compliance function and

    the handling of complaints

    Changes to rules on inducements for independent advisers

    and portfolio managers

    The definition of personal recommendation will only

    exclude recommendations made to the public at large

    Telephone recording

    Best execution

  • Transparency and transaction reporting

    Clear information on all costs / charges for services and

    products

    Pre-trade and post-trade transparency regime

    Increased data reporting extended to new products, new

    data fields, near-real time submission

    Operators of trading venues to report transactions for firms

    that are not subject to MiFIR

    Compatibility between MiFID II and EMIR reporting

  • Checklist MiFID II

    Determine impact and allocate resource ahead of effective date

    Are your activities and investments in scope?

    Transaction reporting and sufficient IT capability

    Suitability and appropriateness arrangements

    Remove 3rd party payments and TTCA with retail clients

    Review policies (conflicts of interest, remuneration, best ex)

    Update corporate governance arrangements

    Training to management body and all staff

  • Senior Managers & Certification Regime

    Responsibilities map Statement of

    responsibilities

    SM&CR

    Senior Managers

    Certification Regime

    Material risk takers and Approved Persons

    Conduct rules

    All staff

  • Senior Managers Regime

    Responsibilities map describing structure, size and

    complexity of the firm, including management

    arrangements

    Governance arrangements to confirm individual

    accountability

    Responsibilities map to reflect actual business and

    governance

    Individual statement of responsibility from each senior

    manager

    To be extended to all FCA authorised firms

    in 2018

  • Certification Regime

    Certification regime requires firms to assess the fitness

    and propriety of staff in certain roles on inception and

    annually

    Conduct rules

    Firms to inform all staff that they are subject to conduct rules;

    All relevant employees to be given training on conduct rules

    that are specific to their role; and

    Notify the FCA of breaches on conduct rules.

  • Checklist SM&CR

    Identify all Senior Managers to be appointed

    Draft comprehensive responsibilities map

    Review job descriptions

    Ensure all functions and responsibilities can be allocated

    Establish a culture of governance and code of conduct

    Establish regular fit and proper reviews

    Assess impact of conduct risk

    Training to future SMF and Certified Persons

  • 4th Money Laundering Directive

    Fourth Anti-Money Laundering Directive (MLD4)

    Effective from 26 June 2015

    EU Member States to implement by 26 June 2017

    UK to update MLR and POCA

    New JMLSG guidance

  • Key changes

    Enhanced due diligence (EDD)

    Disapplication of EDD to be justified

    Unusual transactions (> 10k)

    Local Politically Exposed Persons (PEP)

    Central register of beneficial ownership

    Emphasis on a risk-based approach

    Expands beyond EU borders

  • Checklist MLD4

    Run Gap analysis and plan implementation of changes

    Financial crime prevention measures in place

    Review client on-boarding, CDD and EDD procedures

    Are your IT systems able to prevent cybercrime?

    Establish risk based approach proportionate to your business

    Extend MLD4 standards to group entities based overseas

    Review financial crime risk appetite and risk assessment

    Training to all staff

  • SM&CR

    All firms

    M