United States: Regulatory Focus - February 2018

The last few months of 2017 were busy for firms that were working hard on MiFID II, therefore this edition is a round-up of regulatory news issued by the FCA and ESMA for the last quarter of 2017.

We hope that 2018 and the transition to the new MiFID II world has been a smooth one for our readers.

Now MiFID II is here, we can look forward to the next European Directive coming our way and the next big project for firms to grapple with. In the two decades since the UK Data Protection Act 1998 was implemented, technology has developed and systematic personal data processing has increased significantly. In addition, because the Act was a Directive, interpretation by Member states was open to discretion and led to inconsistencies. The General Data Protection Regulation (GDPR) will apply from 25 May 2018, in under four months' time, and will supersede the Data Protection Act. It is a directly binding Regulation and is therefore not open to discretion by Member States. The key implications of GDPR are as follows:

  • Harmonisation of EU rules
  • Enhances the territorial scope of data protection
  • Introduces new supporting principles for processing personal data by a controller or processor
  • Makes consent harder to obtain
  • Strengthens the rights of data subjects
  • Increases the direct compliance obligations for data processors
  • Introduces accountability rules
  • GDPR breaches need to be reported within 72 hours
  • Introduces stronger sanctioning powers to supervisory authorities, including larger fines
  • A requirement to appoint Data Protection Officers for firms processing personal data on a large scale

Firms will therefore need to make sure that they are compliant with GDPR by 25 May to avoid the possibility of significant fines and reputational damage. If you are seeking advice or support with GDPR, please let us know. Duff & Phelps' GDPR team provides a broad range of GDPR solutions, ranging from a comprehensive and cost-effective GDPR Toolkit for firms to undertake their own impact analysis and implementation of GDPR arrangements, to ad-hoc advice, independent assessments and full implementation support. Aside from GDPR, firms will need to also consider the Senior Management and Certification Regime (SMCR). The FCA published additional consultation papers in December 2017 on SMCR and these provided insight on how the regime will be implemented as well as estimated timeframes. Duff & Phelps published an update on this which can be found here.

Additionally, ESMA and FCA released statements on the temporary relief provided to investment firms regarding Legal Entity Identifiers (LEIs). More details on this can be found in Duff & Phelps' update.

Supervision Matters

FCA statement on EU withdrawal

20 December 2017

On 15 December 2017 the European Council agreed that enough progress had been made in Brexit talks to move on to the second phase of negotiations. The negotiations will cover the transition period and the framework for the future relationship between the UK and European Union.

The FCA published a statement on 20 December 2017 on the UK's withdrawal from the EU, welcoming the progress and maintaining its support of open markets, free trade and robust financial regulation.


The FCA stated that whilst an implementation period has not yet been agreed on or finalised, firms are likely to continue to be able to passport into EEA states, both during the implementation period and after the point of exit.

The FCA will keep firms updated on these discussions accordingly.


The FCA also noted HM Treasury's announcement that the government may legislate for a temporary permissions regime which will permit firms and funds to do the following:

  • Conduct new business within the scope of their permissions
  • Carry out their contractual rights and obligations
  • Manage existing business
  • Mitigate risks which could arise from permissions ceasing abruptly

Firms and funds solely regulated by the FCA and wishing to benefit from the temporary regime would need to notify the FCA of this before the UK's withdrawal, however would not be required to apply for authorisation. The FCA advised UK-based firms servicing clients in the EEA to continue preparing for an array of outcomes and discussing the impact of a transition period with the applicable EU regulator.

The FCA confirmed that it would provide more details on its approach to the temporary regime in 2018, maintain its cooperation with home state regulators of EEA firms, review expectations as negotiations progress and keep firms updated accordingly.

Credit Rating Agencies and Trade Repositories

The FCA also noted HM Treasury's announcement that it will provide the FCA with powers and functions in respect of UK and non-UK credit rating agencies and trade repositories.

Finally, the FCA reminded firms that the UK remains a part of the European Union. All firms continue to be subject to and must abide by EU law, whilst continuing to plan for legislation that is yet to come into force.

Full article can be found here.

FCA's approach to authorisation and competition

11 December 2017

The FCA issued a series of documents providing an in-depth explanation of its approach to authorisation and competition. The FCA committed to providing further explanations on its approach to regulation within its 'Mission' document, which sets out the FCA's reasoning, framework for strategic decisions and tools used within its approach.

These publications follow on from the press release and paper on the FCA's approach to consumers (issued in November 2017) and focus on (a) the authorisation process itself, and (b) the FCA's approach to competition.

The purpose of these documents is to create greater transparency around how the FCA regulates and makes decisions. Both provide a reasonably detailed summary of the FCA's approach (for example, at different stages of the authorisation process) and are 28 and 23 pages respectively. The documents are kept refreshingly simple, and provide concrete examples (i.e. applications for authorisation or variation of permission examples) to emphasise points. The document on competition includes (in Annex 2) a list of market studies or reviews conducted by the FCA, flagging the Asset Management Market Study and the Investment and Corporate Banking Market Study.

Both approach documents are open for consultation until 12 March 2018 whilst the FCA collects views on a number of questions about each approach to evaluate its clarity and what else it can be doing. The final approach documents will be published later in the year. This is an opportunity to provide feedback to the FCA on clarity on the 'threshold conditions' and how they deal with applications (all applications, not just authorisations) as well as communication around the FCA's competition powers.

To read the press release, the approach documents or to provide feedback, please click here.

To view the article please click here.

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.

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