PIMFA Fortnightly News Bulletin - 21 December 2020

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PIMFA WEEKLY NEWS BULLETIN | 21 December 2020 Dear Nigel Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read this week's latest industry news impacting you and your firm.

The Latest on Brexit

Brexit Negotiations

The chances of an agreement between the UK and EU remain in the balance. The two sides continue to be deadlocked in negotiations on the level playing field issues and the control of fish stock. Prime Minister Boris Johnson said on Friday that the UK will not leave the negotiating table but confirmed that the talks were difficult and there are still gaps that needed to be bridged. He called on the EU “to see sense” and make concessions. He also insisted that the UK was prepared to exit the Brexit transition period on January 1 without a trade deal. Such an outcome “may be difficult at first” but the country would “prosper mightily on any terms”, he said.

With time for ratification of a UK – EU deal before the end of the Brexit transition period running out fast, the option now seems to be for the EU leaders to sign off on a deal agreed at any point by 31 December provisionally, with formal ratification taking place in the new year. EU Chief Negotiator Michel Barnier, said in a speech in the European parliament on Friday that “we have very little time remaining, adding that “there is a chance of getting an agreement, but the path to such an agreement is very narrow.”

Committee on the Future Relationship with the EU on UK Brexit preparedness

A cross-party report, by the Committee on the Future Relationship with the European Union, assessing UK preparedness for the end of the transition period, warns of a potentially challenging start to 2021 as businesses and citizens adjust to life outside the Single Market and Customs Union. The Committee expresses concerns about the overall state of readiness and says that it is important that the Government engages fully with the devolved governments and has robust contingency plans to deal with whatever happens after 1 January.

The Committee welcomes the agreement on the implementation of the Northern Ireland Protocol, but its members said they were worried about the consequences of trucks not having the right paperwork, traffic disruption around ports, and the UK’s security being affected by loss of access to EU law enforcement databases. Hilary Benn MP who chairs the Committee, said that “at this late stage, the Government

must be ready to implement contingency plans where necessary to mitigate the effects of any disruption. Failure to do so would mean the worst possible start to the new year for many people and businesses who are already experiencing the toughest of times."

Third-Country Markets

UK - Mexico Trade Deal

Considered as Equivalent

The UK and Mexico have signed

The FCA has updated the list of the

a Trade Continuity Agreement,

third country markets considered to

which rolls over the deal the UK had

be equivalent to a UK regulated

with Mexico while inside the EU.

market in accordance with article 2a of UK EMIR.

The deal ensures ÂŁ5 billion in twoway trade will continues after the

BRP Guide on Cross Border

end of the Brexit transition period on

Activity

December 31.

BRP has kindly agreed to share the latest update of their Guide on cross

The two countries have agreed to

border activity from the UK into the

start negotiations on a new deal in

EU27 with other PIMFA members

2021. So far the UK has secured

firms. The Guide will hopefully assist

deals with seven out of eleven

members in understanding the

members of the Comprehensive and

different approaches Member States

Progressive Agreement for Trans-

take to cross border retail

Pacific Partnership (CPTPP) trade

investments and can be found in

bloc.

the members’ area of the PIMFA website. Click here for a password reminder or create an account here.

Brexit Preparedness for PIMFA Firms

The Brexit transition period ends at 11pm on 31 December 2020 and PIMFA firms need to make sure they have completed their preparations for leaving the EU Single

Market. For PIMFA firms, the situation regarding servicing clients in the EU is little affected by the developments in the UK – EU negotiations. A deal and a no deal outcome of the talks are the same as passporting will be lost at the end of the transition period and equivalence does not exist for retail investments sector. Firms must decide how to handle their EU-based clients after Brexit - establishing in the EU via a passporting subsidiary or local office, merging with an EU-based firm, relinquishing clients and withdrawing from the market, or using the risky reverse solicitation exemption from the establishment requirement.

We remind firms that different EU Member States take different approaches to cross border trade in retail financial services. Reverse solicitation in particular is not a reliable option and depends on the national regulators’ approaches in the EU Member States. We strongly advise firms to consult local regulators or seek legal advice before deciding on the most suitable business model.

*** The FCA has published links to dedicated Brexit websites hosted by financial regulators in EEA member states. ***

FCA Supervisory Statement on MiFIR Transparency

The FCA has published a supervisory statement explaining how they will take over ESMA’s duties on MiFIR transparency. It is worth noting that after the end of the transition period the definition of Traded on a Trading Venue (ToTV) from a transparency perspective will be limited to UK venues and those EEA venues subject to the temporary permission regime. This is narrower than the concept used in transaction reporting, which will continue to include EEA venues.

Two important points to note for equities:

1. In the event there is not mutual equivalence for the purpose of the share trading obligation from 1 January, and the EU authorities prohibit EU market participants from trading in the UK the shares of many EU issuers, the FCA will until further notice regard the shares of EU issuers who have not sought admission to trading in

the UK as illiquid.

2. Shares of EU issuers who have sought admission to trading in the UK and whose shares are traded here in euro will be regarded as illiquid. This is because EU authorities have also prohibited EU market participants from trading these shares in the UK.

FCA consultation: UK Investment

HM Treasury National Risk Assessment 2020

Firm Prudential Regime

HMT have published their 2020 The FCA is consulting on the first

National Risk Assessment (NRA) of

phase of proposed rules to

money laundering and terrorist

introduce the UK Investment Firm

financing risk which they do every

Prudential Regime (IFPR). IFPR is a

three years.

new prudential regime for UK firms authorised under MiFID. The new

The NRA assesses the money

regime will streamline and simplify

laundering and terrorist financing

the prudential requirements for UK

threat for the UK. It also maps risk

solo-regulated investment firms.

across a number of business sectors including the financial sector

It represents a major change for

and is used by Government to set

investment firms. The new rules will

policies that prioritise high risk

extend the framework for prudential

areas.

requirements to consider the potential harm investment firms

Within the financial services industry

pose to clients, consumers, and the

risk assessment, risk levels for

market. This includes the amount of

wealth management and private

capital and liquid assets the FCA

banking remain unchanged from the

investment firm should hold so that

2017 assessment, with the sector

if it does have to wind down, it can

scoring high risk for money

do so in an orderly manner.

laundering and low risk for terrorist financing.

The consultation is open until 5 Feb 2021 and PIMFA will be reviewing it

You can read the whole assessment

in January 2021 at the Prudential

here.

Working Group. If you would like to join this member-only group please contact Giulia Lupato.

UK Immigration System - The MAC Report

The Migration Advisory Committee (MAC), says in a report published on 15 December, that the UK immigration system is facing the most substantial changes in a generation as the country completes its exit from the EU. At the same time, the economic and social effects of the COVID-19 pandemic present enormous challenges. The Committee says that the shortage of skilled workers will continue after the Brexit transition period despite the rise in unemployment. It also claims that the UK will probably limit the use its new visa regime for skilled workers because the Government wants to focus on domestic workers. The MAC says that in order to fill some vacancies, significant training will have to take place first.

The report claims that once the Brexit transition period is over, it will be expensive for UK firms to recruit candidates form the EEA. Also, the authors of the report claim that the coronavirus crisis has reduced the number of migrants from the Eastern European states by 25% and in 2019, and for the first time, there were more non-EU than EU migrants arriving to the UK.

PIMFA in the Press

Latest Press Releases

Press Coverage

PIMFA calls for FCA fines to

FT Adviser - MPs rebuke 'litany of

contribute to FSCS until long term

failings' at FCA

solution to the levy is agreed Professional Adviser - Tim Fassam: PIMFA calls for urgent reform of

Why the FCA should embrace quick

supervision & FSCS levy to protect

FSCS wins

consumers & industry as it sets out a roadmap towards lower FSCS bills

International Adviser - FCA admits ‘mistakes’ in mini-bond and

PIMFA disappointed to learn of

collapsed fund scandals

supplementary costs to be levied on members by FSCS

EU Bankers - PIMFA comments on the independent investigations into

PIMFA sets out priorities for the

the FCA's supervision of LCF &

future as it updates member

Connaught

manifesto Thewealthnet - FCA urged to pay PIMFA hosts first in series of

fine revenue toward ‘ever-

masterclasses to encourage young

increasing’ FSCS levy

women from all backgrounds to consider a career in finance

Wealth Adviser - PIMFA calls for FCA fines to contribute to FSCS until long term solution to the levy is agreed

TheCity UK Report: UK as a Global Financial Centre

The UK had £60.3bn surplus in 2019 with the rest of the world in financial services trade. The CityUK report, Key facts about the UK as an international financial centre 2020, underlines the UK’s strength in financial and related professional services, and its position as a world leader in this area. The UK retains the leading share of trading in many international financial markets such as foreign exchange trading, cross border bank lending and international insurance premium income. The UK’s strength in this area is derived not only from the high volume and value of transactions, but also the breadth of services and expertise available - the ‘ecosystem’ effect. This

ranges from green finance to Islamic finance and is supported by an extensive network of professional services related to financial services: legal, accounting and consulting. It is also spread throughout the country, not just concentrated in London; just under half of the industry’s exports originated in regions and nations outside London.

Latest PIMFA Consultation Response

PIMFA’s response to FCA: Call for Input on the Consumer Investment Market.

Read this and all other PIMFA consultation papers here.

EVENTS & LEARNING

PIMFA Training SM&CR: GETTING YOUR FIT AND PROPER ASSESSMENTS RIGHT FIRST TIME 14 January 2021

In this live online learning sessions (comprising of 2 x 2.5-hour sessions) we will help you: •

Define competence and capability

•

Develop the skills to observe, listen and capture evidence all at the same time!

•

Conduct a feedback session

•

Build a portfolio of evidence to demonstrate an individual’s competence and capability

•

Build a development plan that is SMART

Who should attend?

Anyone who is about to be or has been recently appointed into a role that requires skills in assessing the competence and capability of others. It can also serve as a refresher for those in existing positions.

It is ideal for those caught within the scope of the Certification Regime performing a role of supervisor and/or are responsible for the assessment of another individual’s fitness and propriety.

For more info and to book your place, please click here.

View all other upcoming PIMFA Events and Learning here.

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