Financial Services Regulatory Bulletin - Q2 2010


Reforming the Structure of UK Regulation

The Queen's Speech of 25 May 2010 announced that the Government would restructure the UK's tripartite regulatory system through the Financial Services Regulation Bill (the "FS Regulation Bill"). Under the FS Regulation Bill, responsibility for macro-prudential regulation would be taken away from the FSA and passed to the Bank of England, which would also have "oversight" of micro-prudential regulation.
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Financial Services Act 2010

The Financial Services Act 2010 (the "FS Act") received Royal Assent on 8 April 2010, resulting in a number of new rules and duties being imposed on the FSA. The FS Act was less ambitious than earlier versions of the bill as the out-going government had to make concessions to get it passed. As yet, it is unclear how it will apply to the new CPMA.
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Banks still in the regulatory spotlight

In its budget on 22 June 2010, the Government announced that it will introduce from 1 January 2011 a bank levy based on the balance sheets of UK banking groups and building societies; the aggregated subsidiary and branch balance sheets of foreign banks and banking groups operating in the UK; and the balance sheets of UK banks in non-banking groups. The rate of the levy will be charged at a rate of 0.07%, although there will be a lower rate of 0.04% in 2011. There will also be a reduced rate for wholesale funding with more than one year remaining to maturity of half the main rate (0.02% then 0.035%).
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New UK Corporate Governance rules in force

On 28 May 2010, the UK Corporate Governance Code was published replacing the Combined Code for all companies with a premium listing with reporting years beginning on or after 29 June 2009.
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Retail Distribution Review rules finalised

In a speech on 24 June 2010, Hector Sants stated that the FSA's existing major policy initiatives, including the Retail Distribution Review (RDR), will continue under the new regulatory structure. The impact of the RDR, launched in June 2006, on the independent financial adviser industry will be great: on 19 September 2009 the Financial Times quoted from a report by Ernst & Young predicting that just 10,000 of the existing 35,000 independent financial advisers in the UK would survive the RDR reforms; an additional 10,000 would survive as restricted advisers. The scope of the rules excludes recommendations to professional clients and eligible counterparties.
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Final Negotiations on the Alternative Investment Fund Managers Directive on hold until September 2010

On 17 and 18 May 2010, the European Parliament's Committee on Economic and Monetary Affairs ("ECON") and the Council of the European Union ("the Council") arrived at their respective positions concerning the proposed Alternative Investment Fund Managers Directive ("the Directive"). Trilogues had begun between the Council, the European Parliament and the European Commission, in order to arrive at common agreement before a plenary vote in the European Parliament on a compromise version of the Directive which was anticipated in July (which would have meant that the Directive would be required to be implemented into law by EU Member States by July 2012).
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Agreement near on the powers of the three new European Supervisory Authorities

As a response to perceived weaknesses in the European financial supervisory framework, on 24 September 2009, the European Commission (the "Commission") published draft legislative proposals to replace the existing 'Level 3' committees (that is, the Committee of European Banking Supervisors ("CEBS"), the Committee of European Insurance and Occupational Pensions Supervisors ("CEIOPS") and the Committee of European Securities Regulators ("CESR")) with the following new bodies:
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Enforcement Round-up

Since our last bulletin, the FSA has, albeit with one significant setback, continued to successfully ramp up its enforcement function. The FSA has already levied over £50m in fines in the first 6 months of this year, more than in any previous full year.
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