Legal Headwinds: Quarterly Report Q2 2020€¦ · Legal Headwinds: Quarterly Report – Q2 2020...

Legal Headwinds: Quarterly Report – Q2 2020

Legal Headwinds focuses on key legal and regulatory developments relevant to clients operating in the FI sector in the UK and Ireland. We also cover significant developments more generally within the EU.

Rather than being a retrospective analysis, the report looks at future developments this quarter and beyond (based on information available as at 31 March 2020) and it is not intended to be exhaustive.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice in any of the jurisdictions covered. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

This document has been created using the following criteria: Priority: Red; Amber and Green. Region: UK; EU; Ireland and Global Relevant Sectors: Financial Institutions. Relevant Subsectors: Financial Institutions: Wholesale Banks; Retail Banks and other consumer credit providers; Fin-tech; Wealth and Insurance..

Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

AIFMD

Integrating sustainability risks and factors

European Commission to continue consideration of ESMA Final Report on technical advice in respect of integration of sustainability risks and sustainability factors in UCITS Directive and AIFMD

European Commission to adopt measures in due course in light of ESMA advice

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

//180-40/AM05 JOPO(LDNL38083) 1 STANDARDS:5005v11

http://www.elexica.com/en/Resources/Microsite/AIFMD-toolkit

https://www.esma.europa.eu/sites/default/files/library/esma34-45-688_final_report_on_integrating_sustainability_risks_and_factors_in_the_ucits_directive_and_the_aifmd.pdf

Legal Headwinds: Quarterly Report – Q2 2020 Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant

Subsector Priority

AIFMD

Liquidity stress testing 30 September 2020 – ESMA guidelines on

liquidity stress testing in UCITS and AIFs to apply Financial institutions

Asset managers

Wholesale banks


Hedge funds


Service providers

A

AIFMD

Review of working of AIFMD Late Q3 or early Q4 2020 - European Commission report and consultation on review of AIFMD expected to be published – delayed as result of COVID-19 pandemic


Asset managers

Wholesale banks


Hedge funds


Service providers

A

AML Directives 4+5

Irish implementation of the AMLD4’s requirements on beneficial owners of corporate entities

Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (the “RBO”) is open

By 10 March 2021 - central registers of Member States required by AMLD5 to be interconnected

All All

R

AML Directives 4+5

Irish implementation of the AMLD4’s requirements on beneficial owners of trusts

Irish trustees to put procedures in place to collect beneficial ownership information.

Central register of beneficial ownership for trusts to be set up by 10 March 2020, but this has been delayed

By 10 March 2021 - Member States’ registers required to be interconnected

All All

R





Subsector Priority

Anti-Money laundering

Fifth Money Laundering Directive (5MLD)

Following publication of final text in Official Journal on 19 June 2018, European governments to start preparations for implementation

By 10 January 2020 - EU Member States to have implemented 5MLD

All All

R


Sixth Money Laundering Directive (6MLD)

Directive 2018/1673 (6MLD) was published in the Official Journal of the EU on 12 November 2018

Following publication, 6MLD came into force on 2 December 2018

EU Member States to start preparations for implementation of 6MLD

By 3 December 2020 - EU Member States to have implemented 6MLD

All All

G


COVID-19 risks Authorities emphasising need to be vigilant of new AML risks. The European Banking Authority has issued Guidance on mitigating financial crime risks during the pandemic.

Financial Institutions, Asset Managers

Financial Institutions, Wholesale Banks, Retail Banks, Fintech, Institutional Managers, Service providers and

R


Law Commission Consultation on the SARS regime

Government to consider recommendations made by Law Commission

Current SARS regime likely to be overhauled to eliminate over-defensive reporting, reduce number of reports and increase their usefulness to law enforcement agencies

Law Commission recommends creation of Advisory Board including private sector representatives to create standard form SAR and monitor effectiveness

All All

A


http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/01-money-laundering


http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/080118-cfi-fifth-money-laundering-directive

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/080118-cfi-fifth-money-laundering-directive

https://ec.europa.eu/home-affairs/sites/homeaffairs/files/what-we-do/policies/european-agenda-security/20180417_directive-proposal-facilitating-use-information-prevention-detection-investigation-prosecution-criminal-offences_en.pdf





https://eba.europa.eu/sites/default/documents/files/document_library/News%20and%20Press/Press%20Room/Press%20Releases/2020/EBA%20provides%20additional%20clarity%20on%20measures%20to%20mitigate%20the%20impact%20of%20COVID-19%20on%20the%20EU%20banking%20sector/Statement%20on%20actions%20to%20mitigate%20financial%20crime%20risks%20in%20the%20COVID-19%20pandemic.pdf





https://www.lawcom.gov.uk/document/anti-money-laundering-the-sars-regime/

https://www.lawcom.gov.uk/document/anti-money-laundering-the-sars-regime/

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/190619-suspicious-activity-reports-law-commission-publishes-report

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/190619-suspicious-activity-reports-law-commission-publishes-report



Priority

Bank crisis management and resolution

Directive 2014/59/EU establishing framework for recovery and resolution of credit institutions and investment firms (Bank Recovery and Resolution Directive (BRRD))

Directive (EU) 2019/879 of 20 May 2019 amending Directive 2014/59/EU as regards the loss- absorbing and recapitalisation capacity of credit institutions and investment firms and Directive 98/26/EC (BRRD2)

28 June 2020 – EBA to develop and submit various draft technical and implementing standards to European Commission

28 December 2020 - Member States must transpose BRRD2 into their national laws

December 2020 – EBA deadline for EBA to deliver mandates under BRRD2 including setting minimum requirement for own funds and eligible liabilities (MREL). Previous deadline of December 2019 amended by EBA’s risk reduction packages roadmap (Nov 2019)

Financial Institutions

Wholesale Banks

Retail Banks and other consumer credit providers

Fin-tech

Wealth

R

Bank crisis management and resolution

Amendments to UK bank crisis management regime to ensure that it functions effectively after Brexit

Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018 (SI 2018/1394)


All

A

Banking - Ownership of land by overseas companies

UK Government proposals requiring overseas entities which own land in the UK to register at Companies House and submit specified information in relation to their beneficial owners on an annual basis

Summary of (i) draft Registration of Overseas Entities Bill (ii) Joint Committee Report from a lender perspective

UK government has highlighted intention to progress draft Registration of Overseas Entities Bill


All

G


http://www.elexica.com/en/legal-topics/banking/13-bank-crisis-management-and-resolution




https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0059&from=EN



https://eba.europa.eu/sites/default/documents/files/document_library/EBA%20Risk%20Reduction%20Package%20Roadmaps.docx.pdf

https://eba.europa.eu/sites/default/documents/files/document_library/EBA%20Risk%20Reduction%20Package%20Roadmaps.docx.pdf

http://www.legislation.gov.uk/uksi/2018/1394/contents/made




http://www.elexica.com/en/legal-topics/banking/060818-overseas-owning-uk-property-will-required-to-reveal-beneficial-owners-new-public-register

http://www.elexica.com/en/legal-topics/banking/060818-overseas-owning-uk-property-will-required-to-reveal-beneficial-owners-new-public-register

http://www.elexica.com/en/legal-topics/banking/190619-joint-committee-report-on-the-draft-registration-of-overseas-entities-bill-lender-perspective

http://www.elexica.com/en/legal-topics/banking/190619-joint-committee-report-on-the-draft-registration-of-overseas-entities-bill-lender-perspective


Subsector Priority

Banking – Assignments of claims – third- party effects

Proposed regulation sets out rules for determining the law that governs perfection of assignments of claims

The European Parliament has passed a legislative resolution amending aspects of the European Commission's proposal.

The UK announced on 30 July 2018 its intention to opt out of the proposed regulation

12 March 2020 - The Council of the EU published an update stressing its intention to work towards reaching a general approach on the proposal


All

G

Benchmarks Regulation following LIBOR rate-setting revelations

EU Benchmarks Regulation establishing legislative framework regulating production and use of indices serving as benchmarks


Asset managers

Wholesale Banks


Insurance

Hedge funds


Service providers

G

Brexit - Cross- border insurance contracts between the UK and EEA in event of ‘no deal’ Brexit

Continuity of contracts between the UK and EEA after Brexit in the event of a ‘no deal’ Brexit

Insurers to inform affected policyholders about relevant contingency measures insurer is taking and impact on contractual relationships and services


Insurance

R

Brexit - France – no deal guidance - insurers

France has published emergency no deal Brexit guidance for insurers

Ordonnance n°2019-75 published on 6 February 2019 will come into force in the event of a no deal Brexit. Post Brexit, no renewal will be


Insurance

R


https://ec.europa.eu/info/law/better-regulation/initiatives/com-2018-96_en

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2019-0086+0+DOC+PDF+V0//EN

http://fmlc.org/wp-content/uploads/2018/07/11697709-v1-_FMLC_-Letter-on-the-proposed-regulation-for-the-assignment-of-claims-WorkSite-Acrobat-Integration.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=consil:ST_6664_2020_INIT

http://www.elexica.com/~/media/Files/Articles/2015/Asset%20management/Legislative%20trackers/Benchmark%20Legislative%20Tracker.pdf






Subsector Priority

allowed by non-EU licensed entity, but premiums and claims may still be paid under contracts concluded pre-Brexit

Brexit - Passporting rights

In Germany, preliminary legislative provisions to authorise the regulator to temporarily extend passporting rights of UK financial institutions including insurers in the event of a no-deal Brexit

Steuerbegleitgesetz – allows extension of passporting rights post-Brexit for up to 21 months


Insurance

R

Brexit - UK-Swiss Direct Insurance Agreement

Arrangements applicable to insurance sectors of the UK and Switzerland post-Brexit

HM Treasury has entered into agreement with Switzerland to replicate existing agreement between EU and Switzerland


Insurance

G

Capital Markets Union

Prospectus Regulation (EU) 2017/1129 a new Regulation to modernise and overhaul Prospectus regime – applies from 21 July 2019

Q2 2020 – final version of ESMA guidelines on disclosure requirements expected


Asset Managers

All

All

All issuers of, investors in and other market participants in relation to capital markets products, in particular equities, corporate bonds and securitisation s

A


http://www.elexica.com/en/legal-topics/capital-markets/03-capital-markets-union-knowledge-centre



http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R1129&from=EN




Priority

Capital Markets Amendments to UK legislation to Financial All Union reflect the implementation of the

new Prospectus Regulation (EU) Institutions

2017/1129 Asset All Managers 21 July 2018 - The Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018 entered

into force

G 21 July 2019: The Financial

Services and Markets Act 2000 (Prospectus) Regulations 2019

enter into force

The Official Listing of Securities, Prospectus and Transparency

(Amendment etc) (EU Exit) Regulations 2019 (SI 2019/707) Capital Markets The Securitisation Regulations Financial Wholesale Union 2018 (SI 2018/1288) entered into

force on 01 January 2019 and amend the Financial Services and Markets Act 2000 (FSMA) to reflect the application of the Securitisation Regulation (EU) 2017/2402) in the

Institutions Banks


UK. The Regulations designate the Financial Conduct Authority (FCA) and the Prudential Regulation

Fin-tech

Wealth

Authority (PRA) as competent authorities under the Securitisation

G Regulation

The Securitisation (Amendment)

(EU Exit) Regulations 2019 (SI 2019/660)

Capital Requirements

(Amendment) (EU Exit) Regulations 2018 (SI 2018/1401)

















http://www.legislation.gov.uk/uksi/2018/1288/made











Priority

CCP - Central

In November 2016, the European Trilogues expected to take place Trilogues to continue but date of application Financial All

Counterparty Clearing Houses -

Commission adopted a proposal for new rules for Central Clearing

currently unclear Institutions

Recovery and Counterparties (CCPs) Recovery & Resolution Resolution Asset All

Regulation Managers

The European Parliament has adopted a first reading position and on 27 November 2019 Council adopted a political compromise text for a mandate to commence negotiations with the European

G

Parliament Central Securities

Regulation on improving ESMA has published a proposal to delay the date Financial All

Depositories securities settlement and regulating central securities depositories (CSDR)

of entry into force of Commission Delegated Regulation (EU) 2018/1229 on settlement discipline to 01 February 2021 (currently 13

Institutions

September 2020) Asset All Managers CSDR officially entered into

force on 17 September 2014

01 January 2023 - Article 3(1) of Regulation, under which relevant issuers must arrange for relevant

All

Level 2 measures for CSD requirements (except technical standards on settlement discipline) published in Official Journal and apply from 30 March 2017

securities to be represented in book-entry form, to apply to transferable securities issued after that date

01 January 2025 – Article 3(1) to apply to all other transferable securities

Issuers of, holders of, and those entering into transactions regarding, securities held in settlement systems

G


http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2019-0300+0+DOC+PDF+V0//EN

https://www.consilium.europa.eu/media/41614/st14540-ad01-en19.pdf

https://www.consilium.europa.eu/media/41614/st14540-ad01-en19.pdf


https://www.esma.europa.eu/sites/default/files/library/esma70-151-2895_final_report_-rts_settlement_discipline_postponement.pdf




https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R1229&from=EN




Priority

Central Securities Depositories

Amendments to domestic legislation through the Central Securities Depositories Regulations 2014 (SI 2014/2879)

28 November 2017 - The Central Securities Depositories Regulations 2017 (SI 2017/1064) entered into force

The Central Securities Depositories (Amendment) (EU Exit) Regulations 2018 (SI 2018/1320)

03 April 2020 - Closing date for responses to Bank of England's consultation setting out proposals for an operational resilience framework for CSDs


Asset Managers

All

All

CSDs, CCPs, trading venues and any entities that provide internalised settlement

R

CMA - bond market investigation

CMA investigating four banks in relation to suspected cartel in bond-trading market

CMA has not yet reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to any of the parties under investigation

CMA to decide whether there are sufficient grounds to issue statement of objections


Asset Managers

All

R

Competition - Market study into audit sector

CMA launched a market study into the statutory audit sector in October 2018. CMA published final report in April 2019, which identified significant shortcomings in audit quality and issues with market entry. CMA recommends to government that it make significant changes, including mandatory joint audit requirements and operational splits between the Big Four

Department of Business Energy & Industrial Strategy (BEIS) launched an initial consultation on recommendations by CMA in July 2019, which closed on 13 September 2019

BEIS to consider CMA’s recommendations and enact new legislation or regulation if appropriate

Plans to reform the audit sector by introducing joint audits look increasingly likely to be scrapped as incumbent Conservative party believed to be abandoning its support


Asset Managers

All

R





http://www.legislation.gov.uk/uksi/2017/1064/pdfs/uksi_20171064_en.pdf



http://www.legislation.gov.uk/uksi/2018/1320/introduction/made




https://www.bankofengland.co.uk/-/media/boe/files/paper/2019/operational-resilience-central-securities-depositories.pdf?la=en&hash=9DF4590296B1475E4F03CEB3C8D186F51889C1DE



Priority

Competition - The Payment Systems Regulator PSR planning to publish interim report by June Financial Retail Banks Market study into (PSR) launched a market review to 2020 (rather than by end of 2019 as originally set Institutions and other card-acquiring services

ensure that the supply of card- acquiring services is competitive and works in the interests of merchants and ultimately consumers

out in Terms of Reference) consumer credit providers

R

Final Terms of Reference published 24 January 2019

Consumers ' Treasury Select Committee (TSC) FCA to consider feedback to consultation on Financial Retail Banks access to financial inquiry into consumers’ access to “Guidance for firms on the fair treatment of Institutions and other services - financial services identified that vulnerable customers” (closed 04 October 2019) consumer Treasury Select Committee inquiry

groups of consumers are excluded from financial services and make a package of recommendations to increase financial inclusion, compliance with the Equality Act, helping vulnerable consumers and reducing loyalty penalty

and to issue response in H1 2020 credit providers

A FCA responded in June 2019

outlining its ongoing work

Lending Standards Board (LSB) published Access to Banking

Standard review and its application in February 2020. It also published

Standards of Lending Practice to drive fair outcomes for consumers


https://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/news-parliament-2017/consumer-access-to-financial-services--inquiry-launch-17-19/





Priority

Consumer credit Regulatory responsibility for consumer credit was transferred to FCA in April 2014. Consumer Credit Act provisions were repealed, and others replaced by FCA rules. Current review is aimed at simplifying the regime

Spring 2020 - Interim Report following MS19/1: Credit Information Market Study due to be published

6 April 2020 - new rules on publication of pricing information under the Overdraft Pricing and Competition Remedies (PS19/25) come into force

6 April 2020 – pricing rules under High-cost Credit Review: Overdrafts (PS19/16) come into force

H1 2020 – FCA to publish response to GC19/3


Asset Managers

All

All

R

Consumer credit Consumer Credit (Temporary Covid-19 Support Measures) Order 2020

Firms are expected to offer a temporary freeze of payment for up to three months on loans, credit cards, a 0% interest rate on overdrafts up to £500 and to ensure that the credit rating of consumers, using these services, is not affected

Q2 2020 - FCA measures to support consumer credit products under financial stress due to the COVID-19 pandemic to take effect

Relief measures to be withdrawn as COVID-19 related financial issues overcome


Asset Managers

All

All

R

Consumer credit FCA letter to credit brokers on key risks and supervision strategy.

April 2020 - FCA to write to credit brokers with update on key risks they pose and its future plans for supervising them

March 2022 – end date of FCA’s supervision strategy for credit brokers


All

R


https://www.fca.org.uk/publication/market-studies/ms19-1-1.pdf

https://www.fca.org.uk/publication/market-studies/ms19-1-1.pdf

https://www.fca.org.uk/news/press-releases/fca-proposes-temporary-financial-relief-customers-impacted-coronavirus

https://www.fca.org.uk/publication/policy/ps19-16.pdf

https://www.fca.org.uk/publication/guidance-consultation/gc19-03.pdf

https://www.fca.org.uk/publication/guidance-consultation/coronavirus-covid-19-credit-card-instrument-2020.pdf

https://www.fca.org.uk/publication/correspondence/credit-brokers-portfolio-letter.pdf


Subsector Priority

Consumer protection

Fitness Check of six major EU consumer protection laws, including Unfair Terms Directive and Unfair Commercial Practices Directive

The review found the Directives fit for purpose overall, but that they should also be better applied

On 11 April 2018, European Commission adopted New Deal for Consumers package, including two Proposals for Directives

17 January 2020 - Regulation on cooperation between national authorities responsible for enforcement of consumer protection laws to apply

Trilogue negotiations for Directive on collective redress to take place

28 November 2021 – Deadline for EU member states to adopt measures complying with Enforcement and Modernisation Directive

28 May 2022 – Deadline for application of measures implementing Enforcement and Modernisation Directive


Asset Managers

All

All

A

Consumer protection

Department for Business, Energy and Industrial Strategy (BEIS) review of terms and conditions, including civil fining powers for unfair terms


Asset Managers

All

G

Corporate governance

Women on Boards Draft Directive

European Commission proposal for draft directive on gender equality on boards of listed companies in EU, published on 14 November 2012

Timetable unknown All All

EU listed companies G


http://www.elexica.com/en/resources/microsite/corporate-governance/uk-corporate-governance-reforms




Priority


Directive which amends EU Shareholder Rights Directive (SRDII)

4 September 2018, European Commission published final implementing regulation on minimum requirements and standardised formats to be used when an issuer asks for information to identify its shareholders and for sending information between issuer and its shareholders through intermediaries, with a view to harmonising practices across Member States

Member States to implement most provisions of SRDII into national law by 10 June 2019

See UK implementation and Narrative reporting below

10 September 2020 - SRD II provisions on identification of shareholders and communication with shareholders to apply

3 September 2020 - Implementing regulation to apply

All All

R


UK Implementation of SRD II.

Some of the changes applied from 10 June 2019 and some for the financial year beginning on or after 10 June 2019. See:

“SRD2 - are you ready?” for the new obligations on, among others, MiFID firms, AIFMs, UCITS ManCos and self-managed UCITS.

“SRD II: UK implementation: new related party transaction regime” for an overview of the new related party transaction regime.

“SRD II: UK implementation of remuneration changes” for the directors’ remuneration changes.

All All

R


General meetings and board meetings

Companies need to consider how they can hold general meetings given the requirement to social

All All R




http://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/280219-lets-get-more-engaged






https://www.simmons-simmons.com/en/publications/ck0b4gb5tnw2w0b36rbdon4o8/050619-srd2-are-you-ready

https://www.simmons-simmons.com/en/publications/ck0beoja47hva0b947yei58qm/050619-srd-ii-uk-implementation-new-related-party-transaction-regime

https://www.simmons-simmons.com/en/publications/ck0a24c1gmx930b36ywwgyl1e/030719-srd-ii-uk-implementation-of-remuneration-changes





Priority

distance 28 March 2020, UK Government

announced that it intends to introduce legislation to ensure that companies that are required by law to hold AGMs, will be able to do so safely and in a way which is consistent with the restrictions on movement and gatherings that have been introduced to address the spread of COVID-19.

Legislation to introduce these changes will be introduced in Parliament at the earliest opportunity and provisions will be included to enable the changes to be extended if necessary

Companies should also refer to ICSA’s Guidance about AGMs and impact of COVID-19 and its supplemental guidance here

Companies will also temporarily be extended greater flexibility, including in relation to holding

AGMs online or postponing meetings

28 March 2020, ICSA published

Guidance on good practice in the conduct of virtual board and committee meetings


New corporate governance reporting rules.

17 July 2018, UK Government published new corporate governance reporting requirements (Companies (Miscellaneous Reporting) Regulations 2018) to implement its well-publicised corporate governance reforms to

New regulations apply to financial years beginning on or after 1 January 2019 and companies will have to report on these regulations in 2020. One exception is that the requirement for companies to illustrate impact of share price increases on executive pay outcomes applies to any new remuneration policy introduced from 1 January 2019.

New regulations require disclosure of::

All All

make directors more accountable

UK Government has also published guidance on these regulations in the form of Q&A which were updated in November 2018

UK incorporated quoted companies with more than 250 UK employees - ratio of CEO’s total remuneration to median (50th), 25th and 75th percentile of full time equivalent remuneration of company’s UK employees, together with certain supporting information

R

22 October 2018, GC100 published guidance on directors’ duties under section 172 Companies Act 2006 and stakeholder consideration

All UK incorporated quoted companies - effect of future share price growth on executive pay outcomes


https://www.icsa.org.uk/knowledge/resources/agms-and-impact-of-covid-19




https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Flinks.fromcounsel.com%2Fls%2Fclick%3Fupn%3DbQ7ncU6cLD7mn-2B3PJhYqgLmOMBe-2B-2BCIltyT3MZ1lyGov0DZ6g7PsXmkI6mdZKWFLhYmlJXu4zuqwzuB8l6rPI4lp4hec3Ye4TJJa-2BTkuFcp2JBJTuMWlZ-2By7yViZb3Gj78Rc-2BlzRtULCzOtCvJLmmfTGph3gZGXFLaaRH9B24SWxC4OjBnPjFuDLxuG7i3dHDcMk7xZbVbygIHrdHO4Rfg-3D-3DhbSv_vse59GTSsAiBPQlQLah5EnMt5GjQLK4-2BSMvLdCTd3GP9Gzy-2FvM-2FOqQtEQHvUmOTxHL01mqygJXA31icMuLGjKjjNBROv1xgMKu-2FglEdVcIQrlyIkeLcl7XAbw0sR22oJYWm-2FQ4mAoq3wybKb-2F1tjyTxL5DTN9KDC82DSJAD9JAFR5WeRvNtoHCXk40KeQ9oyIbtRM0wt5zUI2vwXh7HyVfg3WytuV6yYGkuLT3z4Ba84ZBhR5QIJ7A1FjASP6yWi&data=02%7C01%7Cjo.weston%40simmons-simmons.com%7C3eb97300ec4043b9688b08d7d4673ed2%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C0%7C637211412211542512&sdata=1EG4FHAOYZociwXiRC4MDmegut6W%2Fjo4XHqyvEeGNFo%3D&reserved=0





Priority

7 December 2018, GC100 and Investor Group published an updated version of the Directors’

Large companies – (i) statement explaining how directors have complied with duty to have regard to matters in s.172(1)(a) to (f) Companies Act

Remuneration Reporting Regulations Guidance to reflect these regulations. A further revised version was published on 22 July

2006 and (ii) statement summarising (in more detail) how directors had regard to need to foster business relationships with suppliers, customers and others.

2019 that replaces the 2018 version

UK incorporated companies with more than 250

UK employees - summary of how directors have engaged with employees.

Corporate Revised UK Corporate Governance 2018 Code applies to financial years beginning FRC expected to update Guidance on Audit All All governance Code

16 July 2018, revised UK Corporate Governance Code and FRC Guidance on Board Effectiveness published

27 November 2018, FRC published

on or after 01 January 2019 so first reporting against revised Code in 2020 unless adopted earlier or one of provisions companies were expected to follow in 2019. (The FRC expected companies to follow the new provisions on explanations during 2019 where significant votes were cast against resolutions and to develop future remuneration policies and changes to existing ones by reference to new version of the

Committees to reflect 2018 Code in due course. FRC will also make consequential changes to Guidance on Risk Management and Internal Control and Related and Financial Business Reporting and will consider whether further changes are needed in light of various investigations following Carillion’s collapse

Main Market companies

FAQs on the 2018 Code Code and the Guidance on Board Effectiveness)

9 January 2020, FRC published its annual review of the Code which assesses reporting against the 2016 UK Corporate Governance

Code as well as early adoption of the 2018 Code. FRC is expecting:

i. companies to be clearer about their R

‘purpose’ and to consider it alongside culture and strategy;

ii. more details on how companies have assessed and monitored culture;

iii. information on the methods used to understand the views of the workforce and how companies have considered and, if appropriate, taken forward matters raised by the workforce;

iv. the section 172(1) statement to cover the concerns raised by stakeholders, how companies understood their issues and how they thought about the impact on the long-term success of the company;

v. for board re-elections, the reasons why




https://www.frc.org.uk/getattachment/53799a2d-824e-4e15-9325-33eb6a30f063/Annual-Review-of-the-UK-Corporate-Governance-Code,-Jan-2020_Final.pdf

https://www.frc.org.uk/getattachment/53799a2d-824e-4e15-9325-33eb6a30f063/Annual-Review-of-the-UK-Corporate-Governance-Code,-Jan-2020_Final.pdf



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the director’s contribution is, and continues to be, important to the longterm success of the company;

vi. more detailed commentary on all aspects of diversity (not just women);

vii. more detail on how the remuneration committee have engaged with the workforce and the effect of that engagement; and

viii. how companies are aligning existing directors’ pension contributions with those of the workforce.


Insolvency and corporate governance.

Further consultation awaited All All

26 August 2018, Government response to its consultation paper setting out proposals to improve corporate governance of firms in or approaching insolvency published

Legislation for these changes will be introduced in Parliament at the earliest opportunity and provisions will be included to enable the changes to be extended if necessary

See Changes to UK insolvency law to protect companies impacted by COVID-19

4 November 2019, the House of Commons' Business, Energy and Industrial Strategy (BEIS) Committee published a letter to the Secretary of State for the Department of BEIS setting out a

series of recommendations concerning, among other things, corporate governance, audit reform and executive pay and bonuses following its inquiry into the collapse of Thomas Cook

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28 March 2020, the Secretary of

State for Business, Energy and Industrial Strategy announced

measures to support businesses following the coronavirus outbreak which include proposed changes to the insolvency rules




https://www.simmons-simmons.com/en/publications/ck8ehngyu0ye7091490jya4b8/changes-to-uk-insolvency-law-to-protect-companies-impacted-by-covid-19

https://www.simmons-simmons.com/en/publications/ck8ehngyu0ye7091490jya4b8/changes-to-uk-insolvency-law-to-protect-companies-impacted-by-covid-19



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Dividend payments.

25 May 2019, IA published a report on the extent to which UK listed companies seek shareholder approval for dividend payments (“Shareholder Votes on Dividend Distributions in UK Listed Companies: The case for a Distribution Policy”). As a result of its findings (which showed that more than 22% did not hold annual votes on payment of dividends) the IA recommends that all listed companies should publish a ‘distribution policy’ to enable shareholders to engage on their approach. This policy should set out their long-term approach to returns to shareholders, including dividends, share buybacks and other capital distributions

IA to establish a working group to develop best practice guidance on this distribution policy, which had been expected to be published in Autumn 2019

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Board evaluations 5 July 2019 - The Chartered Governance Institute consultation on the effectiveness of the independent board evaluation process closed. This review is being carried out at BEIS’ request following its response to its consultation on insolvency and corporate governance referred to above. Response awaited

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Corporate governance for large private companies

New corporate governance reporting regulations (see above) require certain large private companies to state:

i. which corporate governance code (if any) they have applied in a relevant financial year

ii. how they applied it; and

iii. any aspects they departed from and the reasons for doing so.

If no corporate governance code has been applied for the financial year, then the company must instead explain the reasons for that decision and what corporate governance arrangements were applied

10 December 2018, The Wates Corporate Governance Principles for Large Private Companies published (following consultation in June 2018). The Wates Principles can be applied to meet this requirement

Regulations apply to financial years beginning on or after 1 January 2019 so first reporting in 2020

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Large private companies

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IA Public Register

The 2018 Corporate Governance Code provides that, when 20% or more of votes are cast against the board recommendation for a resolution, a company should:

i. when announcing results, explain what actions it intends to take to consult shareholders to understand reasons for result;

Register to be updated on ongoing basis throughout year

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Listed companies

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ii. publish an update on views received from shareholders and actions taken no later than six months after vote;

iii. provide final summary in annual report, or explanatory notes to resolutions, on whether the board has taken any action or proposed new resolutions as a result of feedback.

The IA, which maintains public register, has published guidance setting out what investors expect to see in any update statement


Kingman Review.

18 December 2018, BEIS published final report of independent review of FRC led by

5 February 2020, FRC published a draft plan and budget for 2020-2021 for consultation (with a deadline for comments of 28 February 2020). Response awaited

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Sir John Kingman

11 March 2019, BEIS published a press release and initial consultation on recommendations in the Kingman review report. As recommended, the government proposed replacing the FRC with a new independent regulator, the

The draft plan sets out the FRC's initial response to the Kingman review and the transitional steps it is taking before the Kingman recommendations come into effect

A Audit, Reporting and Governance Authority (ARGA) with stronger

powers

18 December 2019, the Kingman

Review final report was published. It includes 83 recommendations,

including that the FRC be replaced as soon as possible with a new independent regulator, the Audit, Reporting and Governance

Authority that would be accountable to Parliament






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19 December 2019, the Queen’s speech set out the government’s proposals to develop a stronger regulator with powers to reform corporate reporting and audit sector


Guidance for board risk committees and risk functions

Final guidance published. Financial Services

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The Risk Coalition is a network of not-for-profit professional bodies and membership organisations committed to raising standards of risk governance and risk management in the UK

4 December 2019, final principles- based guidance for board risk committees and risk functions in the UK financial services sector published. Part A focuses on what can reasonably be expected of a mature board risk committee by defining a number of key principles and supporting guidance. Part B focuses on the role and responsibilities of the chief risk officer and second line risk function

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Executive Remuneration.

In 2019, IA expecting pension contributions to current directors to be reduced over time to equal rate that workforce receive; and investors to “red top” companies who pay new directors pension contributions not in line with contributions to majority of company’s employees

1 November 2019, the Investment Association (IA) published updated Principles of Remuneration and a letter to the remuneration committee chairs of FTSE 350 companies

The Principles have been updated to reflect current best practice and evolving views of IA members including the impact of remuneration on wider stakeholders, approach to leavers, long term incentives and alignment of performance conditions with the company strategy

The letter highlights the areas of focus for 2020 AGMs: alternative remuneration structures, discretion on vesting outcomes, pensions, post- employment shareholding requirements, levels of remuneration and pay for performance.

For companies with financial year that end on or after 31 December 2019, IA’s IVIS will from start of 2020 AGM season:

i. ‘amber top’ any company when an existing director has a pension contribution of 25% of salary or more provided there is a credible plan;

ii. ‘red top’ any company with an existing director who has pension contribution of 25% of salary or more, and there is no credible plan;

iii. ‘red top’ any company who appoints a new executive director or a director changes role with pension contribution out of line with majority of workforce, or seeks approval for new remuneration policy which does not explicitly state that any new director will have their pension contribution set in line with majority of workforce.

Companies are also expected to disclose, in their remuneration report, the pension contribution rate that they consider is given to the majority of the workforce

By end of 2022 - IA members expect remuneration committees to set out a credible action plan to reduce pension contributions of all executive directors to same level of contributions as majority of workforce receive

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Executive Remuneration New requirement for certain companies to report ratio of CEO’s remuneration to UK employees’ remuneration applies to financial years beginning on or after 1 January 2019 so reporting in 2020. (See New corporate governance reporting regulations above.)

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Executive Remuneration – share buybacks

19 July 2019, the UK Government published a research paper (Share repurchases, Executive Pay and Investment), prepared by PwC, on the findings of the buyback review that it had been asked to carry out. The research looked at any connections between executive pay incentives and share buybacks, and between share buybacks and investment levels. The research found no significant relationship between share repurchases and either the existence of an EPS condition or the proportion of an incentive award linked to that condition within executive pay incentives and share repurchases. It also did not find a systematic relationship between share repurchases and corporate investment

Report will now be followed by research into the potential for a direct link (rather than through the use of buybacks) between the existence of executive pay targets and investment levels in companies. This research will investigate the extent to which pay incentives and performance targets can result in short-termist executive decision-making. Research awaited

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UK Stewardship Code

24 October 2019, 2020 Stewardship Code published. Key changes for asset managers are:

i. a clear benchmark for stewardship - stewardship is now defined as “the responsible allocation, management and oversight of capital to create long- term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society”

ii. extended scope – the 2020 Code now covers asset

The 2020 Code takes effect on 01 January 2020 and applies to reporting years beginning on or after 01 January 2020. The Code continues to be voluntary and asset managers and asset owners wanting to be signatories must publish their first Stewardship Report by 31 March 2021. (The FRC has removed the requirement for a Policy and Practice Statement on signing up to the 2020 Code.)

Read Stewardship & Sustainability: the revised UK Stewardship Code for more information

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https://www.simmons-simmons.com/en/publications/ck2m5eymbwcry0b71b2g972ze/stewardship-sustainability-the-revised-uk-stewardship-code

https://www.simmons-simmons.com/en/publications/ck2m5eymbwcry0b71b2g972ze/stewardship-sustainability-the-revised-uk-stewardship-code


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owners (such as pension funds and insurance companies) and service providers as well as asset managers

iii. annual reporting – asset managers will have to report annually on their stewardship activities in the previous year and what the outcome was, including how they engaged with the assets they invested in

(Stewardship Report) iv. ESG factors (including

climate change) – environmental, social and governance factors must be taken into account in all stewardship activities and signatories must ensure their investment decisions are aligned with the needs of their clients

v. stewardship across all asset classes – signatories are now expected to explain how they exercised stewardship across all asset classes (not just listed equity). Other asset classes include fixed income, private equity and infrastructure and investments outside the UK

vi. organisation’s purpose, investment beliefs, strategy and culture required – signatories are required to explain what these are and how their governance, resourcing and staff incentives help with them. This aligns the 2020




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Code with the UK Corporate Governance Code.


FCA/FRC stewardship discussion paper

Feedback Statement (FS19/7) published in response to the FCA and FRC discussion paper (DP19/1)

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Stakeholder engagement

21 February 2020, PLSA published its Stewardship Guide and Voting Guidelines 2020

19 November 2019, Institutional Shareholder Services (ISS) published its updated UK and Ireland Voting Guidelines for the 2020 proxy season, which apply to shareholder meetings on or after 01 February 2020

PIRC has also published its UK Shareowner Voting Guidelines 2020 which apply now.

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Corporate directors

Provisions on prohibition of corporate directors under Small Business, Enterprise and Employment Act 2015

Provisions originally expected to come into effect in October 2016 - implementation delayed and timing unknown

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Transparency

2 August 2019, UK Government published a research paper on the review of the implementation of the PSC register. The research paper explores the costs, benefits, and overall effectiveness of the PSC register in promoting transparency. It was commissioned to inform the government’s post-implementation review of the PSC regulations

30 October 2019, UK Government published its report on post-implementation review of the PSC regulations. The report concludes that the PSC register is meeting its objectives and that the costs to business have been proportionate and in line with the original estimates. The register is widely used, has a positive economic effect and contributes to the fight against criminal use of companies

The report notes the importance of ensuring the reliability of the PSC Register information. This is being considered and will be addressed as part of the wider review of the corporate transparency and register reform

The PSC Regulations will, therefore, remain in their current form and the next statutory post-implementation review will be carried out within the next 5 years

Response awaited to BEIS consultation on proposals to reform company law to increase the accuracy and usefulness of information available at Companies House

Most measures will need primary legislation and significant changes to systems and processes at Companies House so will take several years to deliver

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Board diversity Investment Association has published its Shareholder Priorities for 2020. The four areas of particular importance for this year, as they are considered to be key drivers to long term value, are responding to climate change, audit quality, stakeholder engagement and employee voice and diversity

On diversity it says that IVIS will red top any FTSE 350 company where:

i. women represent 20% or less of the board;

ii. there is one or less women on the board (unless the one third target is achieved ie a board of three directors); or

iii. women represent 20% or less of the Executive Committees and their direct reports.

For FTSE Small Cap companies, IVIS will amber top any company where women represent 25% or less of the Board; there is one or less women on the Board (unless the one third target is achieved); or women represent 25% or less of the Executive Committees and their direct reports

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Board diversity: Hampton Alexander annual Review.

21 February 2019, IA announce that IVIS will (i) ‘red top’ FTSE 350 companies that have no women or a single woman on their board; and (ii) ‘amber top’ FTSE 350 companies not on course to meet Hampton-Alexander review requirements by 2020.

15 March 2019, IA and Hampton- Alexander Review press release announces that they have written to 69 FTSE 350 companies which have no women on their board

Recommendations of Hampton-Alexander third report (November 2018) to be followed now

Recommendations are that FTSE 350 companies’ targets are:

33% of board positions to be held by women by end of 2020, and;

33% of women on FTSE 350 executive committees and direct reports to executive committees by 2020

FTSE 350 to increase number of women in role of chair, senior independent director and executive positions on board by 2020

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asking them to outline the action they are taking to ensure they meet the Hampton-Alexander targets by

2020

13 November 2019, the fourth report into progress with the

Hampton Alexander Review’s recommendations was published

8 February 2020, government announced that 33% of all FTSE

100 board members are now women, up from 12.5% less than a decade ago and meaning that a key target of the Hampton

Alexander review has been met. But the announcement also notes

that further work is needed for many FTSE 100 companies individually, and for the FTSE 250 overall to meet the 33% target, as it currently sits at 29.5%

FRC, in its response to this announcement, notes that, as part of the strengthened UK Corporate

Governance Code,,FRC expects companies to clearly set out how they plan to develop their diversity pipeline with much improved reporting, including progress towards any measurable targets. It states that its "recent review of early adopters reporting against the

Code found far too many had limited reporting on diversity, which included how they plan to tackle the lack of women in senior leadership positions. Those companies that did report well had clear plans to meet diversity targets

- beyond just gender - and understood the long-term value diversity brings




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Board diversity. Parker Review encourages FTSE 350 companies to adopt the recommendations on a voluntary basis

5 February 2020, Parker Review Committee published an updated report (Ethnic Diversity Enriching Business Leadership) which includes detailed data both on the current profile of FTSE 350 boards and on ethnic diversity reporting.

The recommendations in the first report remain the key targets

The report also includes 'Questions for Directors' and 'The Directors’ Resource Toolkit' to assist boards

Recommendations are: FTSE 100 to have at least one director of colour by 2021 and FTSE 250 by 2024

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Corporate Governance - insurers

International Association of Insurance Supervisors (IAIS) application paper on proactive supervision of corporate governance

Insurers to take note of IAIS guidance as to good practices to promote proactive supervision of corporate governance


Insurance

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Credit Servicing The Irish Credit Servicing regime requires the owners and servicers of certain Irish loans to hold an authorisation from the Central Bank

All firms seeking authorisation as a Credit Servicing Firm required to demonstrate to Central Bank that they are in a position to meet each Authorisation Requirement and Standard prior to authorisation being granted

Irish credit servicing regime may conflict with requirements of the proposed directive on credit servicers, credit purchasers and recovery of collateral


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Cross-border payments - regulation

Following its Consumer Financial Services Action Plan, in March 2018, the European Commission adopted a proposed Regulation amending the Cross-border Payments Regulation to reduce charges for cross-border transactions in Member States.. The Regulation was published in the OJ on 29 March 2019 and applied from 15 December 2019

19 April 2020 – providers of currency conversion services at ATMs and point of sale to disclose information about cost of transaction and offer customer choice of paying in the payee's currency

In context of review of Payment Accounts Directive:

European Commission to analyse behavioural, legal, and commercial obstacles preventing consumers from switching providers

19 April 2021 – card issuers to send electronic messages to payers informing them of currency conversion charges

19 April 2021 – payment service providers to inform payer about cost of currency conversions in connection with online-initiated credit transfers

19 April 2022 – European Commission to submit to the European Parliament, the Council, the ECB and the European Economic and Social Committee a report on the application and impact of the Regulation

In context of review of Cross-border Payments Regulation:

European Commission to consider:

i. extending the equal charge rule to all Union currencies;

ii. improving transparency and comparability of currency conversion charges; and

iii. disabling and enabling the option of accepting currency conversion by parties other than the payer's payment service provider


Asset Managers

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Cyber risk and insurance

International Association of Insurance Supervisors (IAIS) Application Paper on Supervision of Insurer Cyber Security

EIOPA report on challenges and opportunities for insurers arising from cyber risk. Overview of cyber risk from an operational and underwriting perspective

Insurers encouraged to standardise policy language and underwriting questionnaires, promote data sharing between stakeholders, develop industry standards, build in-house expertise in cyber security, build offerings around information security and privacy regulations, and adopt a sectoral approach to harmonising language

Non-affirmative cyber still a concern


Insurance

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Cybersecurity

"Directive on Security of Network and Information Systems" ("NIS Directive") entered into force on 08 August 2016

In the UK, the Directive has been implemented via the Network and Information Systems Regulations 2018 (the “NIS Regulations”) which came into force on 10 May 2018

NIS Regulations apply to critical organisations within society (Operators of Essential Services (“OESs”)) as well as online marketplaces, online search engines and cloud computing services (Digital Service Providers, “DSPs”). The NIS Regulations are designed to ensure the availability of systems and networks for such organisations

NIS Regulations describe OESs as providers of essential services only in the following subsectors: electricity, oil, gas, air transport, water transport, road transport, healthcare, drinking water supply and distribution, and digital infrastructure. Threshold requirements further limit the entities that are likely to be in scope of the NIS Regulations to only the most significant service providers in those sectors

Main points for UK organisations to consider are as follows:

(i) Overlap with the EU’s General Data Protection Regulation – Notification requirements, provisions on security and

UK Government guidance issued for DSPs indicates that in a “no deal” Brexit scenario EU’s NIS Directive would continue to apply post-Brexit (including the NIS Regulations in UK) and advises DSPs to prepare for eventuality that they may be required to designate representatives in EU Member States where they offer services

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http://www.elexica.com/en/legal-topics/data-protection-and-privacy/01-cybersecurity


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data protection responsibilities of OESs and DSP’s.

(ii) Security provisions that a

DSP must have in place when interacting with any organisations ranging from business continuity, audit provisions and incident handling processes

(iii) Incident notification requirements for DSPs where interruption exceeds set thresholds. All incident reports should be submitted to the relevant Competent Authority within 72 hours

(iv) Under NIS Regulations penalties of up to £17 million could be imposed for non-compliance relating to security and incident reporting requirements

ICO (the designated relevant

Competent Authority for DSPs) has generally limited its approach to post-incident oversight and attempted to ensure that there is no “double jeopardy” in relation to acts that may also lead to a fine under GDPR

ICO Guidance states that ICO does regulate OESs and DPSs, but only in the context of data protection law where they are acting as data controllers (under GDPR)

ICO has clarified that as the NIS and GDPR are separate laws it is




Priority

possible to be fined twice for regulatory action under both.

However, ICO states that any action it takes will be proportionate and in line with sentiment of avoiding “double jeopardy” where possible

Political Declaration on UK’s withdrawal from the EU (published on 22 November 2018) provides for thematic co-operation with EU in areas of cyber-security, but is subject to ratification by the UK

Parliament and any conclusion of a withdrawal agreement between the

UK and the EU (a “deal” Brexit) Data protection -

EU General Data Protection UK and other EU businesses to seek to follow Businesses should continue to assess and All All

GDPR Regulation (“GDPR”) came into force on 25 May 2018. On the same day, the Data Protection Act 2018 (“DPA 2018”) also came into force in the UK. DPA 2018 supplements the GDPR in the UK, adding some exemptions to rights of data subjects, and additional lawful bases for processing special categories of personal data

In November 2018, Information Commissioner’s Office (“ICO”) issued guidance on encryption to provide further understanding of its approach towards assessing interpretation of appropriate technical and organisational measures to protect personal data that is held by data processors or controllers. As well as summarising different forms of encryption currently available, guidance outlines possible risks, and details some recommendations for storing and transmitting personal data

local data protection guidance (either via national implementing laws or guidance issued by national data protection supervisory authorities) in relation to implementation of GDPR within different EU Member States

evaluate their data processing activities to ensure compliance with the principles set out within the GDPR, in particular including those that relate to the lawful processing of personal data, data minimization and fair processing information requirements

Businesses should also consider relevant enforcement action taken under the GDPR by their “lead supervisory authority” or data protection regulators within the EU that are relevant to their business to ensure that they adequately assess the risk of enforcement in relation to specific data processing activities

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http://www.elexica.com/en/legal-topics/data-protection-and-privacy/01-data-protection



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In December 2018, ICO published further guidance including:

(i) Updated guidance on some of the basic concepts forming the foundations of the GDPR (e.g. transparency and implementing “privacy by design”)

(ii) How the DPA 2018 works (iii) Which regime within the DPA 2018 applies (i.e. the

provisions relating to all data controllers and/or processors or those relating exclusively to law enforcement processing)

In January 2019, ICO published updated guidance on data protection impact assessments

(“DPIAs”). Guidance sets out the circumstances in which a DPIA is mandatory and confirmed that, when determining whether there is a high risk in relation to processing, the controller should carry out a

DPIA if it is in any doubt about level of risk. In March 2019, ICO also updated its guidance on the “right to be informed” (i.e. the right to receive certain “fair processing information” set out under Articles

13 and 14 GDPR)

ICO also expanded its guidance on contracts, controllers and processors and contracts and liabilities

Data protection -

In a “no deal” Brexit scenario, the The UK withdrew from the EU on 31 January Businesses should continue to monitor Brexit All All

Brexit UK Government has clarified that it will continue to allow the free flow

2020. There is now a transition period until 31 December 2020 while the UK and EU negotiate

developments up to the end of the transition period in order to assess and manage any uncertainties

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Subsector Priority

of personal data in “outbound” additional arrangements. During this period EU contemplated by a “no deal” Brexit scenario transfers from the UK to the EEA law will continue to apply to and within the UK (or any other country that has At present, there is no indication of any potential already received a European UK/EU businesses should continue to monitor extension to the transition period as a result of the

“adequacy” Commission decision) developments of negotiations on the UK’s current COVID-19 situation, but businesses are withdrawal from the EU in relation to the well-advised to continue to monitor On Brexit, “inbound” personal data regulation of EU-UK personal data transfers announcements from both the UK Government transfers from the EEA-UK will following 31 December 2020, when UK will and the EU Commission on this point trigger the GDPR’s requirement to become a “third country” for purposes of provide “adequate safeguards”

when transferring personal data to a third country outside the EEA. In practice, these can be secured by the entry into European

personal data transfers under GDPR

Commission approved standard contractual clauses

European Commission approved standard contractual clauses for transfers by a processor to a controller do not currently exist. As such, how transfers from an EEA processor to a UK controller can be legally secured following a “no deal” Brexit is a key area of ongoing uncertainty

Existing Binding Corporate Rules

(“BCRs”) authorised by the ICO will continue to be recognised in UK domestic law, but the ICO will no longer have a role in the EU BCR community. Once the UK leaves the European Union, the ICO will continue to be able to authorise new BCRs under UK domestic law, but UK entities may need to identify an alternative EU supervisory authority to authorise the use of

BCRs within the EU

In a “deal” Brexit scenario, the UK will be treated as part of the EU for data protection purposes until, at



Subsector Priority

the earliest, 31 December 2020 (unless the transition period as agreed within the withdrawal agreement is extended any further than currently envisaged, given that the negotiation timetable has been extended). The Political

Declaration (published 22 November 2018) issued as part of

the proposed negotiated withdrawal agreement between the

UK and the EU states that the parties are committed to ensuring a high level of personal data protection to facilitate the flow of information between them. It suggests:

i. UK will be establishing its own international transfer regime;

ii. European Commission is due to start the adequacy assessment as soon as possible after the UK’s withdrawal; and

iii. both parties will endeavour to complete these activities by 2020.

EDPB Guidance has been issued in February 2019 in relation to the regulation of non-EEA data transfers in a “no deal” Brexit scenario. Guidance notes that EU

Commission approved standard contractual clauses will remain a valid method of transfer from EEA to the UK once UK becomes a

“third country” post-Brexit. Such clauses should not be modified, and where any “tailored” standard contractual clauses are used, these must be authorised by a competent national authority, following an



Subsector Priority

opinion of the EDPB. The guidance also reconfirms the UK government’s approach in continuing to permit the free flow of personal data from the UK to the

EEA post-Brexit Data protection The Online Harms White Paper,

published in April 2019, sets out the UK government’s plans for a world-leading package of online safety measures

The White Paper proposes establishing in law a new duty of care towards users, which will be overseen by an independent regulator. UK businesses will be held to account for tackling a comprehensive set of online harms, ranging from illegal activity and content to behaviours which are harmful but not necessarily illegal

Businesses should continue to monitor developments of this consultation. The UK Government intends to publish the full response to the consultation in spring 2020. In the meantime, it intends to publish interim codes of practice over the coming months on tackling online terrorist and child sexual exploitation and abuse. These codes will be voluntary and are intended to bridge the gap until the new regulatory framework becomes operational

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The White Paper aims to set clear expectations of businesses and particularly, social media companies. The new regulatory framework that the Paper describes will set clear standards to help organisations ensure safety of users while protecting freedom of expression, especially in context of harmful content or activity that can be particularly damaging to children and other vulnerable users. Businesses will be encouraged to develop and share new technological solutions rather than complying with minimum requirements

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It proposes that the regulatory framework should apply to




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businesses that allow users to share or discover user-generated content or interact with each other online. This encompasses a wide range of companies of all sizes.

Every organisation within the scope will be required to:

i. fulfil their duty of care;

ii. comply with information requests from the regulator; and

iii. where appropriate establish and maintain a complaints and appeals function which meets the requirements set out by the regulator.

A consultation, which ran from 8

April 2019 to 1 July 2019, aimed to gather views on various aspects of government’s plans for regulation and tackling online harms, including:

i. the online services in scope of the regulatory framework;

ii. options for appointing an independent regulatory body to implement, oversee and enforce the new regulatory framework;

iii. the enforcement powers of an independent regulatory body;

iv. potential redress mechanisms for online users; and

v. measures to ensure regulation is targeted and proportionate for industry.

In February 2020, the government



Subsector Priority

published its initial response to the public consultation on the Online

Harms White Paper.

Whilst there is still some uncertainty in terms of what organisations will be subject to the new regulatory regime, the government’s view is that only a small number of UK businesses will be in scope.

The Online Harms White Paper called for an independent regulator to oversee and enforce the new regime. The UK Government has confirmed that rather than creating a new body (as suggested by some respondents to the consultation) it is minded to appoint Ofcom as the new regulator and expand its existing remit. That said, the response did not address the potential overlap between Ofcom and the ICO. Current organisations may be investigated or fined by both regulators for similar issues, particularly in light of the ICO’s recent publication of the Age

Appropriate Design Code of Practice that sets out standards

organisations should adopt when offering online services that children are likely to access

Data protection On 08 January 2020, the ICO launched a public consultation on a draft direct marketing code of practice. The consultation closed

The ICO is currently analysing the feedback received from the consultation, which will inform the final version of the code

The content of the draft code may be changed, clarified or expanded. Organisations processing data for direct marketing purposes should review the draft code and monitor the ICO’s progress, in

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on 04 March 2020

The code applies to organisations processing personal data for direct marketing purposes. This means any advertising or marketing

Once finalised, the ICO must take the code into account when assessing whether organisations carrying out direct marketing have complied with their obligations under the GDPR and PECR

preparation for the publication of the final version G




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material that is directed to an individual, including the promotion of aims and ideals. It covers all processing activities that lead up to, enable or support direct marketing. However, it does not cover solicited requests, blanket advertising or genuine service messages

The code provides practical guidance on how to carry out direct marketing fairly and lawfully, and how organisations can meet accountability obligations under the

GDPR.

While current ICO guidance in relation to direct marketing primarily focuses on PECR, the code adopts a broader approach in covering compliance with the

GDPR as well

Key points include:

i. Direct marketing purposes: the draft code applies to all processing of personal data for “direct marketing purposes”.

This is not defined in the GDPR or PECR, but the ICO

takes a wide interpretation of it in the draft code.

ii. Legal basis for processing: the draft code states that generally consent or legitimate interest are likely to be the most appropriate legal bases for processing personal data for direct marketing purposes.

Where consent is used as a legal basis for processing, this



Subsector Priority

must meet the GDPR standard for consent. If consent is not required, then legitimate interest may be appropriate.

However, the code stresses that this should not be viewed as an “easy option”.

Data protection The UK Supreme Court has recently handed down its decision in the case of WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12 which has particular implications for the vicarious liability of employers in relation to the acts of their employees under data protection law

The case had been referred on appeal from previous decisions in lower courts, including most recently the Court of Appeal. The case involves actions taken by a Morrisons employee (an internal IT auditor) involving payroll data which resulted in a significant data breach involving such data. The relevant employee removed payroll data through activities related to his role and posted the data on the internet and to three national newspapers

Although the case indicates that for serious employee misconduct such as this, employers may not be held vicariously liable for data breaches arising from the acts of that employee this judgment does not give employers any relief from their existing security obligations under GDPR or the DPA 2018

Employers must continue to pursue the highest possible compliance with such obligations given that data security failings, whether exploiting by disgruntled employees or not, will nevertheless continue to attract direct liability for data controllers under GDPR / the DPA 2018

Based on the Supreme Court’s interpretation of the DPA 1998 in its ruling, it is likely that vicarious liability can still not be expressly excluded under the DPA 2018, meaning that clients should look to consider whether they have sufficient vetting processes in place for employees handling personal data and sufficient training programs to ensure employees handle personal data securely and appropriately at all times

Given that the increasing use of data-drive revenue streams, employees are likely to increasingly use personal data in the context of their day-to-day roles. Employers must therefore continue to pay due regard to the processes and safeguards that they have in place to protect against misuse of personal data by employees to lower the risk of resulting claims under the GDPR / DPA 2018

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The claimants in the case were

9,263 Morrisons’ employees or former employees that claimed damages from Morrisons for misuse of private information, breach of confidence and breach of statutory duty under section 4(4)

Data Protection Act 1998 The Supreme Court has overruled

the Court of Appeal’s previous




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decision that upheld a finding of vicarious liability against Morrisons in respect of the data breach. The decision was principally made on the basis that the actions of the relevant Morrisons employee did not give rise to a vicarious liability scenario. On the particular issue of whether the DPA 1998 could give rise to the vicarious liability of an employer, the Supreme Court ruled that as the DPA 1998 neither

“expressly nor impliedly indicated otherwise”, the principles of vicarious liability applied to the breach of obligations committed by an employee who is a data controller in the course of their employment.

The judgment demonstrates in particular that the Courts will take a common sense approach when presented with data breaches that have been caused maliciously (e.g. by an embittered employee) outside of the course of the relevant employee’s activities in their role. Specifically in relation to data protection law, it is also significant for employers that the

Supreme Court found that the DPA 1998 does not contain any “blanket

exclusion” relating to vicarious liability for breaches of the DPA

1998/misuse of private information/breach of confidence by data controllers under their employment

Although the case was decided under the previous DPA 1998 regime, as the GDPR and the DPA

2018 are based on broadly similar principles, it is likely that both



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statutory regimes will not be obstacles to potential vicarious liability actions in data privacy claims against employers

Data protection On 15 April 2020, the ICO has released guidance on its proposed regulatory approach during the current public health emergency related to the global COVID-19 pandemic

ICO guidance stresses that data protection law in the UK provides flexibility in how it carries out its regulatory role and need for an empathetic and pragmatic approach amidst the current public health emergency

In terms of specific points on the ICO’s proposed approach to regulatory action during the crisis, the following are relevant:

i. Although 72-hour timeline for personal data breach reporting to the ICO will still apply, the ICO acknowledges that the current crisis may impact an organisation’s ability to comply with this timeline and will adopt a proportionate and empathetic approach in the circumstances.

ii. When conducting investigations, the ICO acknowledges that that individual organisations may face specific challenges due to the crisis. As such, the ICO will take into account whether the organisation’s difficutly arise as a result of

Despite ICO’s assurances of flexibility, organisations should take a cautious approach and make best effort to continue to comply with their data protection obligations. Organisations may want to consider whether there are any particular data protection related pressure points in the organisation that are affected by the COVID-19 crisis and how these should be addressed

However, as the data protection requirements referred to by the ICO will not be automatically disapplied organisations should bear in mind that the ICO will be considering each organisation’s individual circumstances, so any change in policy will need to be supported by clear reference to genuine and unavoidable hindrance to operations and attempts to mitigate in line with the principles of data protection

Organisations should continue to monitor any resulting opinions or guidance issued by the ICO during the current COVID-19 public health emergency in order to be adequately prepared for any data protection related incidents that occur during the crisis

Although proposed regulatory approach provides some welcome flexibility and pragmatism for businesses seeking to comply with data protection laws in the current circumstances, organisations should continue to implement its data processing practices and safeguards to the best possible standards in the circumstances

For organisations that do face regulatory action or investigations where there are mitigating or substantiating circumstances arising as a result of COVID-19, these should be emphasised to the ICO at earliest possible opportunity

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the crisis and/or if it has plans to “put things right” at the end of the crisis. This may include giving organisations longer than usual to rectify breaches that predate the crisis.

iii. The ICO will take a strong regulatory approach against any organisation breaching data protection laws to take advantage of the COVID-19 crisis.

iv. When issuing fines, the ICO takes into account the economic impact and affordability, meaning that the level of fines will likely be lower during the current crisis.

v. The ICO will recognise that the reduction in organisation’s resources could impact their ability to respond to Data Subject

Access Requests, where they need to prioritise other work due to current crisis.

The ICO Guidance also emphasizes that its approach towards its more general regulatory activities will be tempered in the current climate, including the following;

i. Reviewing economic and resource impact of any new guidance it issues, for example, delaying its publication if it would impose a burden on organisation that could result in diverting staff from frontline duties.



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Lastly, the ICO briefly mentioned innovative uses of data (e.g. geolocation and geospatial information) via technologies / measures that may be used to respond to the COVID-19 public health emergency. This was dealt with separately by publishing a series of questions such as:

i. Have you demonstrated how privacy is built in to the processor technology?

ii. Is the planned collection and use of personal data necessary and proportionate?

iii. What control do users have over their data?

iv. How much data needs to be gathered and processed centrally?

v. When in operation, what are the governance and accountability processes in your organisation for ongoing monitoring and evaluation of data processing – to ensure it remains necessary and effective, and to ensure that the safeguards in place are still suitable?

vi. What happens when the processing is no longer necessary?

Data protection

ICO published guidance on 3 July 2019 to provide greater clarity to organisations making use of

UK and EU businesses subject to the ICO jurisdiction will want to pay immediate attention to this guidance. This will be particularly relevant

Other supervisory authorities will likely follow in the ICO’s footsteps with similar guidance

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cookies and similar tracking

technologies

Updated ICO guidance helps to

to online service providers

Organisations should adopt the definition for consent provided in GDPR Article 4(11) when

As next steps, businesses should consider cookie audits where necessary, review and update cookie policies, and benchmark consent collection practices against recommendations in the

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clarify exactly how companies should apply robust consent requirement under the GDPR to

assessing consent to cookies in the UK

As next steps, businesses should consider

guidance

collection of cookies and similar cookie audits where necessary, review and

tracking tools. New guidance update cookie policies, and benchmark consent

makes it clear that under GDPR, consents cannot be default or blind setting, and consents cannot be bundled

collection practices against recommendations in guidance

As ICO guidance only relates to the UK, businesses may want to consider IP-gating

It has been made clear by the ICO websites when applying ICO recommendations if that consent to cookies should fulfil

all of the GDPR criteria. Guidance assesses whether a variety of mechanisms, such as cookie walls, browser settings and message boxes are sufficient for obtaining valid consent

they do not wish, from a commercial perspective, to roll them out on an EU-wide basis

As a general rule, the mechanism must provide clear, unbundled acceptance of the cookie or similar technology. For example, the ICO advises that:

i. website terms and conditions and privacy notices cannot be used for cookie consent, as consent must be separate rather than bundled with other matters.

ii. Cookie walls that require a user to consent to access the services will be inappropriate, as such consent will not be freely given.

iii. Relying on default settings, both on the site and in the user’s browser, is not sufficient unless coupled with a clear explanation that such settings require the use of cookies.



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Data protection

ICO published guidance on 14 November 2019 to provide greater clarity to organisations processing special category data

New guidance provides greater clarity on what the special categories of data are, the rules that apply to these categories, and the conditions for processing such data

Guidance picks up on the following:

i. Genetic data: A genetic sample is not itself personal data unless it is analysed to produce actual data, however results of genetic analysis may be considered personal data if used to intentionally identify an individual.

ii. Biometric data: Similarly, biometric data is only classified as personal data when it is used to uniquely identify a natural person. However, it remains clear that identification techniques including fingerprint verification and facial/ voice recognition will constitute a means of identification.

iii. Health data: This includes specific medical conditions, but also any related data that provides indications about an individual’s health.

iv. Inferences and ‘educated guesses’: When seeking to identify special categories of personal data, ‘educated guesses or inferences’ about an individual are likely to

Businesses should ensure that they implement stricter compliance measures when processing “special category” personal data given the lawful bases for processing such data are more limited under the GDPR

Businesses should incorporate datasets discussed in the guidance where necessary into such measures to ensure that any processing of special category data is treated appropriately

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include personal data where it is possible to infer relevant information about the individual with a reasonable degree of certainty.

Data protection

On 19 December 2019, the Advocate General issued his opinion in relation to Schrems 2.0, a case brought by Max Schrems that seeks to challenge the validity of Standard Contractual Clauses (SCCs) and the EU-US Privacy Shield (two of the most commonly used mechanisms used to legitimise the transfer of data from the EEA to a country that is outside the EEA)

The Advocate General has confirmed SCCs continue to be a valid mechanism to legitimise the transfer of data, but he has added that whilst the SCCs provide sufficient data protection safeguards for data subjects, data controllers must ensure that the laws of the destination country will not prevent the enforcement or validity of the SCCs. The Advocate General has decided to not make a formal decision as to whether the Privacy Shield offers adequate protection but has stated that he has “doubts” about its validity

The European Court of Justice is not bound to follow the Advocate General’s opinion and we can expect a final decision in relation to this case within the next six months

At present, SCCs will continue to be a valid mechanism to support the transfer of personal data from jurisdictions within the EEA to those outside of the EEA. However, the “direction of travel” from the AG’s opinion in the Schrems 2.0 case indicates that any data exporter seeking to use the SCCs to legitimize non-EEA data transfers to a country that has not received an EU Commission based adequacy decision must take measures to assess whether the law of the destination country present an obstacle to the practical implementation of the SCCs for the relevant individual

Organisations should monitor the opinions of relevant “Supervisory Authorities” within the EEA about whether specific countries have data protection legislative regimes capable of implementing the rights permitted to individuals under the SCCs. Overall, as the AG’s opinion may not be followed by the ECJ, businesses would be best to adopt a “wait and see” approach at this stage

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Data protection

The Presidency of the Council of the EU published a revised draft of the Regulation on Privacy and Electronic Communications on 13

Organisations should monitor ongoing developments of the Regulation as discussions continue, as there are likely to be further changes made before a final text is published by

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March 2019 the Council

Originally, the Regulation was An updated draft of the E-Privacy Regulation

intended to apply from 25 May was published in February 2020, however it is 2018 together with the GDPR. unlikely that the E-Privacy Regulation will be Unlike with the GDPR, however,

the EU states have not yet been able to agree on the draft legislation, and negotiations on the

agreed by early 2020, as originally intended. The current E-Privacy Directive continues to apply

Regulation are still ongoing in 2019

The material scope of the

Regulation is wide-ranging. It applies to:

i. the processing of information relating to end-user terminal equipment or processed by end-user terminal equipment (such as cookies);

ii. the placing on the market of software enabling electronic communication, including the retrieval and presentation of information from the Internet (browsers and apps);

iii. the provision of publicly accessible directories of users of electronic communications and;

iv. the transmission of direct marketing to end-users by means of electronic communications.

UK and EU businesses subject to the Regulation should begin to review current compliance frameworks and prepare for regulatory changes to take effect

The Council of the European Union has published a Progress Report highlighting the main areas of




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disagreement with regards to the proposed E-Privacy Regulation – these include disagreements in relation to:

i. requiring the consent of end users to the use of tracking technologies (for example, cookies) as a condition of access to a service or website;

ii. the interaction between the European Data Protection Board (an entity concerned with the consistent application of data protection rules across the EU) and the relevant authorities under the E-Privacy Regulation; and

the ability of Member States to introduce legislation to require the retention of data for certain periods.

Dispute resolution Court closures and remote hearings due to COVID-19

Frequent updates on availability of court hearings, many will be adjourned, others heard remotely. New CPR provisions to deal with effects of COVID-19 crisis likely to be introduced at short notice

Remote hearings to be conducted in accordance with the Judicial protocol on remote hearings published 22 March 2020

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Dispute resolution Difficulties with service of court documents

Home-working means many offices are empty, raising risks of court documents being served but not coming to the attention of the relevant person

New CPR rules may be introduced at short notice to address this

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https://www.judiciary.uk/wp-content/uploads/2020/03/Remote-hearings.Protocol.Civil_.GenerallyApplicableVersion.f-amend-24_03_20-1.pdf

https://www.judiciary.uk/wp-content/uploads/2020/03/Remote-hearings.Protocol.Civil_.GenerallyApplicableVersion.f-amend-24_03_20-1.pdf

https://www.simmons-simmons.com/en/publications/ck85rqzza0vlj09351lqnp4a1/service-of-court-documents-during-the-covid-19-outbreak

https://www.simmons-simmons.com/en/publications/ck85rqzza0vlj09351lqnp4a1/service-of-court-documents-during-the-covid-19-outbreak



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Dispute resolution Disclosure pilot scheme in Business and Property Courts

Publication of interim report on the scheme by Professor Rachael Mulheron. This may lead to changes to this “living pilot scheme”

Court decisions continue to provide clarity on aspects of the new rules

01 January 2021 - Pilot Scheme to apply to most proceedings in Business and Property Courts across England and Wales

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Dispute resolution Proposals to change procedure for witness evidence

Working party led by Mr Justice Andrew Baker to take forward proposals in its Final Report published in December 2019

Draft rule changes likely to be published later this year. Changes unlikely to be radical, but include a statement of best practice for solicitors preparing witness statements, increased use of evidence-in- chief, changes to the statement of truth and some harmonisation of the various Court Guides’ rules on witness statements

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Dispute resolution Possible introduction of new law making commercial organisations criminally liable for failing to prevent economic crimes including fraud, false accounting and money laundering

Consultation period for Call for Evidence closed on 31 March 2017

Response to Call for Evidence still awaited but unlikely this quarter

Proposed new offence to make corporations criminally responsible where they fail to take reasonable steps to prevent economic crimes by their employees or agents. Proposed that offence will apply to foreign as well as UK corporations

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Dispute resolution New regulations for Damages Based Agreements (contingency fee arrangements where lawyers paid out of damages)

Feedback on draft proposals to be considered. Final draft of new regulation may be published

Either Q4 2020 or Q1 2021 - new regulation expected to be in force. Introduction of hybrid DBAs (“no win – low fee”) will increase uptake dramatically. Arrangements also possible for defendants as definition of “financial benefit” includes money saved

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http://www.elexica.com/en/legal-topics/dispute-resolution-commercial/190718-disclosure-pilot-scheme-approved

http://www.elexica.com/en/legal-topics/dispute-resolution-commercial/190718-disclosure-pilot-scheme-approved

https://www.judiciary.uk/wp-content/uploads/2019/12/Witness-statement-working-group-Final-Report-.pdf

http://www.elexica.com/en/legal-topics/crime-fraud-and-investigations/13-a-revival-of-the-offence-of-failure-to-prevent-economic-crime



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Electronic Signatures

The use of electronic platforms to facilitate execution of contracts and deeds under English law

04 September 2019 – The Law Commission published its report on electronic execution of documents which contains recommendations and options for reform (including a proposal for a future consultation on the continued efficacy of deeds)

Remote working - signing legal documents using e-signatures

The use of electronic signatures has assumed importance and urgency as a result of the measures taken by the UK government in response to the COVID-19 pandemic. For details, please see our client insight entitled Remote working - signing legal documents using e-signatures

03 March 2020 - Ministerial statement published setting out the government’s response to Law Commission Report. The government broadly accepts the recommendations and will take forward the numerous proposals


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Employment – impact of Covid-19

As a result of the Covid-19 pandemic, the UK Government has taken a number of important employment-related measures, including:

(i) Statutory sick pay: under new legislation, the Government will temporarily allow SSP to be paid from the first day of sickness absence (SSP is not usually paid for the first three days that somebody is sick) for those who have been advised to self-isolate, as well as people caring for others in their household who are displaying COVID-19 symptoms and have been told to self-isolate.

(ii) Job Retention Scheme: extraordinary financial measures announced to support businesses and discourage redundancies by meeting the cost of salary up to £2,500 per month for furloughed workers. The scheme runs retroactively for

These measures will take effect during the next quarter (although implementation and end dates may differ)

Employers should have a task force (or nominated person) to monitor the Government updates and guidance

Some measures (such as the changes to SSP) are implemented “until further notice”, likely indicating that the Government envisages the situation to continue for a significant period

The measures will be kept under constant review

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https://www.lawcom.gov.uk/electronic-signatures-are-valid-confirms-law-commission/

https://www.simmons-simmons.com/en/publications/ck7nlkseb147d0944wqe4ffv9/remote-working---signing-legal-documents-using-e-signatures





https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-03-03/HCWS143/


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at least 3 months from 1 March 2020. (iii) Strict lock-down: for at least 3

weeks, employees are to travel to work only if

“absolutely necessary”. (iv) Changes to holiday under the WTR: the Government has

announced that it will amend the Working Time

Regulations to allow workers to carry over EU holiday into the next two leave years. This is intended to avoid excess holiday requests at the end of the year.

(v) Changes to right to work checks: the Government has published guidance for employers carrying out right to work checks during the coronavirus pandemic, which introduces temporary changes to a manual right to work checks.

(vi) Emergency volunteering leave: the Government is bringing into place a new

“emergency volunteering leave” scheme where employees can apply to take blocks of unpaid leave of 2, 3 or 4 weeks to volunteer.

(vii) IR35 reforms delayed: the Government confirmed that it

will be postponing the reforms to the off-payroll working rules from 6 April this year to 6 April 2021 (see below for more detail).

(viii) Gender Pay Gap Reporting: the UK’s gender pay gap

reporting deadlines have been suspended for this year.

(ix) Changes to Tribunal and




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Court hearings: court services are providing daily operational updates, recently including that London Central ET is now closed and hearings postponed.

(x) School closures and key workers: the government has issued its list of “key workers” whose children can still attend school, which includes staff working to provide essential financial services.

See here for more information

Employment - Parental Bereavement Leave

From 06 April 2020, employees who lose a child below the age of 18 will have the right to at least two weeks’ leave (irrespective of their length of service) and statutory bereavement pay

6 April 2020 – new rules apply - employers should be aware of new right and review Compassionate Leave policies

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Employment - Pension Fund Industry

The Pension Schemes Bill 2019- 20 (the “Bill”) which was originally published in October 2019 and reintroduced on 7 January 2020 covers six key developments in pensions law, key topics covered by the Bill include:

(i) a new legislative and regulatory framework for collective money purchase schemes - more commonly known as collective defined contribution or (“CDC”) schemes

(ii) additional powers for the Pensions Regulator (“tPR”) including: the power to issue financial penalties of up to £1 million in some circumstances and additional information-

After Easter 2020 - Bill expected be considered in House of Commons having been considered at Committee stage in House of Lords

Summer 2020 - Bill expected to become law although not yet clear what impact COVID-19 may have on timings

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https://www.simmons-simmons.com/en/features/coronavirus-covid-19/ck8a77rei1ska0a04yaseql49/workforce-and-employment-issues



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gathering powers (iii) a framework to support

pensions dashboards, including new powers to compel schemes to provide accurate information to consumers and new powers for tPR to ensure schemes comply

(iv) the introduction of new regulations regarding transfers out to occupational pension schemes, which are designed to hinder pensions scams

(v) providing clarity on scheme funding requirements for

DB schemes, as well as strengthening tPR’s scheme funding powers

(vi) amending legislation for the Pension Protection Fund (“PPF”) compensation rules. The previous incarnation of

the Bill brought forth these changes in light of the High

Court’s ruling in Beaton v PPF and the ECJ’s ruling in PPF v Hampshire Employment - The Chancellor delivered the 6 April 2020 - changes to Lifetime Allowance Q3 / Q4 2020 - draft legislation on CMP Schemes All All Pension Fund Budget to the House of Commons and Annual Allowance come into force., Those and call to evidence on pension schemes tax Industry on 11 March 2020. Key pensions

updates include:

(i) The lifetime allowance for pension savings will increase in line with CPI for

operating cash allowance schemes for high earning staff may wish to review and revise these schemes

administration expected

R 2020/21, rising to £1,073,100 (ii) The income thresholds for

the tapered annual allowance are changing. The

‘threshold income’ level will increase from £110,000 to




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£200,000, and the ‘adjusted income’ level will increase from £150,000 to £240,000.

The minimum level to which the annual allowance can be tapered down to will decrease to £4,000

(iii) Legislation will be brought in to ensure that Collective

Money Purchase Schemes (“CMP Schemes”) can

operate as registered pension schemes for tax purposes.

(iv) There will be a call from evidence with a view to addressing differences on how pension schemes administer tax reliefs affect those who earn around or below the personal allowance save into a pension

(v) Funding will be provided to ensure individuals can derive or inherit a State

Pension from an opposite-sex civil partner, following the Extension to Civil

Partnerships: State Pension – The Civil Partnerships (Opposite-sex Couples) Regulations 2019 Employment - The COVID-19 pandemic is tPR, PPF and PO each providing updates on COVID-19 pandemic likely to continue to impact All All Pension Fund Industry

affecting all business, a fact recognised by the UK pensions authorities

tPR has issued specific guidance in relation to COVID-19 on:

(i) DB scheme funding and investment for trustees

(ii) DB scheme funding for employers

COVID-19

Employers with Defined Benefit (“DB”) schemes should consider whether to engage with scheme’s trustees to see whether adjustments need to be made to their scheme’s schedule of contributions, recovery plan or deficit repair contributions (where applicable). In relation to deficit repair contributions when trustees consider such requests from employers, tPR

pension schemes for some considerable time

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(iii) DB sponsoring employers in corporate distress for trustees

(iv) DC investment guidance for trustees

tPR has also has an update page for trustees, employers and administrators which sets out tPR’s thoughts on the key risks and the expectations of tPR for trustees and employers at this time, including stating that they will take a proportionate and risk- based approach towards enforcement decisions during this time

The PPF also recognises the impact the pandemic may have on schemes and has made changes to its guidance accordingly:

(i) contingent asset documentation should only be sent by email

(v) e-signatures and copy documents by email (as opposed to certified copies) will be accepted in some circumstances

(ii) if levy payers were unable to submit documentation by the deadline (midnight on 31 March 2020) the PPF will consider reasonable reasons for delay e.g. key individuals in self isolation

The Pensions Ombudsman (“PO”) has warned of delays in the processing of cases as their office is shut down and they cannot collect the post

recommends they seek legal and actuarial advice

Other areas for consideration include:

(i) powers of suspension of contributions in the scheme rules (care will need to be taken to ensure that suspension of contributions does not amount to cessation event for purposes of section 75 of the Pensions Act 1995)

(ii) managing scheme portfolios and assessing whether investment triggers are still appropriate

(iii) requesting release of security

For employers with Defined Contribution (“DC”) schemes, contributions will still need to be paid. However, Chancellor has confirmed that UK Government will cover cost of minimum automatic enrolment contributions for furloughed staff under job retention scheme. Employers will, however, need to consider how any “gap” between what can be reclaimed from government and what employees are contractually entitled to can be addressed

For employers receiving requests from employees to suspend employee auto enrolment (“AE”) contributions or to opt-out of their AE schemes, again employers should check contractual arrangements and pension scheme rules and policies before doing so. Care should be taken and legal advice should be sought

Employment – Sexual

Following the Weinstein scandal and #MeToo movement, use of

Employers should continue to monitor developments while further update from UK

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harassment and non-disclosure agreements in an employment law context

confidentiality clauses (often known as NDAs) has come under scrutiny. UK Government now plans to introduce measures, including legislation, to prevent their misuse

Government on proposed new legislation on NDAs is awaited

There have been a number of inquiries and reports from Women and Equalities Select Committee, as well as guidance from Solicitors

Regulation Authority for solicitors on how NDAs should be used

The EHRC published new guidance (October 2019) on the use of NDAs in discrimination/harassment cases, which sets out good practice and aims to significantly limit their use.

Many employers have reviewed their settlement agreement and contract templates in light of this guidance

Since then, Acas (the Advisory, Conciliation and Arbitration

Service) has published new guidance on NDAs (February

2020). The guidance is not a statutory code – and much of it echoes that of the EHRC. NDAs should not be used as a matter of routine and that they “should not be used before alternative options have been explored”

Employment - Redundancy protection for women and new

25 January 2019 - UK Government launched a consultation on improving legal protections for women who are pregnant or on

Further update from UK Government on next steps and timing for its proposals awaited. Further consultation on design of these proposals expected. Likely delayed due to

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that it will:

(i) extend redundancy protection period for 6 months once a new mother has returned to work

(ii) afford same protection to those taking adoption leave

( ) extend redundancy protection for those returning from shared parental leave – and to consult further on the design of this protection over coming months.

Employment – The Good Work Plan

UK Government’s “Good Work Plan” sets out its proposals to reform employment law in various areas based on recommendations set out in Taylor Review of Modern Working Practices, led by Matthew Taylor

UK Government has since confirmed which parts of Taylor Review it will take forward in its Good Work Plan published on 17 December 2018. Further information is available here

UK Government also launched three further consultations based on recommendations in the Good Work Plan, including:

i. establishing a new single enforcement body for employment rights;

ii. one-sided flexibility - addressing unfair flexible working practices; and

iii. proposals to support families.

These consultations closed in

06 April 2020 – following changes to come into force:

i. extending right to written statement of particulars of employment (section 1 statement) to all workers, not just employees

ii. lowering threshold required for employees to request establishment of information and consultation body from 10% to 2% (subject to minimum of 15 employees) and

iii. in relation to agency workers, abolition of Swedish derogation provisions, meaning that all agency workers will have right to pay parity after 12 weeks

See further information about these changes and

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Outcome of outstanding consultations awaited


http://www.elexica.com/en/legal-topics/employment-and-benefits/03012019-the-plan-for-good-work

http://www.elexica.com/en/legal-topics/employment-and-benefits/03012019-the-plan-for-good-work



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October 2019. See here

On 16 March 2020, the Government published its response to part of its consultation on Proposals to support families / Neonatal leave and pay. It has confirmed that it will introduce leave and pay for parents of babies in neonatal care. Further details awaited

Ethnicity Pay Reporting

On 11 October 2018, UK Government published a consultation seeking views on mandatory Ethnicity Pay Reporting (EPR) by employers

Consultation comes in response to the Government’s findings that not enough progress has been made in removing barriers to entry and progression in the labour market for all ethnic groups

Consultation closed on 11 January 2019

UK Government’s response following consultation still awaited. Likely delayed due to ongoing Covid pandemic

Further information – see here

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EU Whistleblowing Directive

On 23 April 2018, European Commission proposed a new directive to strengthen whistleblower protection

The proposal reflects the fact that only 10 EU countries (including France, Netherlands, Italy, UK) currently have comprehensive laws protecting whistleblowers. Others (including Germany, Spain, Portugal, Belgium) have only partial “coverage” – which includes certain coverage in Financial Services sector but leaves gaps in protection across other sectors. The European Commission is

Whether Directive transposed into UK law will depend upon whether transitional period is extended (UK would have to implement Directive if transitional period extends beyond 17 December 2021), and/or whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

17 December 2021 - Members States must comply with EU whistleblowing directive

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http://www.elexica.com/en/resources/microsite/ahead-of-the-curve/the-good-work-plan

http://www.elexica.com/en/resources/microsite/employment-law-reform-in-the-uk/ethnicity-pay-reporting



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concerned that this uneven and fragmented approach undermines whistleblower confidence and EU legal and policy interests

November 2018 - the Legal Affairs

Committee of the European Parliament approved the draft

legislation to guarantee that whistleblowers in the EU can report breaches of EU law in areas of tax evasion, corruption, environmental protection and public health and safety, without fear of retaliation

(link to European Parliament press release here)

On 07 October 2019, the directive received its final approval from the

EU Council. It was then published in the Official Journal on 26

November 2019, triggering the two-year period for Member States to comply. The directive enters into force 20 days after publication on

17 December, meaning that Member States need to comply by 17 December 2021 EU Work-Life

Aim of the EU work-life balance Whether Directive is transposed into UK law will 1 August 2022 - Member States have three years All All

Balance Directive directive is to contribute to achieving equality between men and women with regards to opportunities in the labour market and treatment at work, by enabling parents with caring responsibilities to better balance their work and caring duties through improved access to leave and flexible working arrangements. It is hoped that men will be encouraged to take up family-related leave, helping to increase female labour market participation

depend upon whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

to adopt laws, regulations and administrative provisions necessary to comply with Directive

G


http://www.europarl.europa.eu/news/en/press-room/20181120IPR19504/eu-wide-protection-and-support-for-whistle-blowers


Subsector Priority

Some key provisions of the directive include:

i. allowing fathers or second parents to take a minimum of ten working days of paternity leave around the time of the birth of the child, compensated at a level equal to that currently set for

EU maternity leave

ii. individual right to four months of parental leave

iii. five days of carers’ leave per year, for workers caring for relatives with serious medical conditions, and

iv. extension of right to request flexible working arrangements for all parents and working carers.

See here for further information.

The directive, which was passed by the European Parliament in April

2019, entered into force on 1 August 2019. Member States now

have three years (until August

2022) to adopt the laws, regulations and administrative provisions necessary to comply with the directive


https://www.consilium.europa.eu/en/press/press-releases/2019/06/13/better-work-life-balance-for-parents-and-carers-in-the-eu-council-adopts-new-rules/



Priority

European Commission investigation into bond market

European Commission investigating four banks in relation to suspected cartel (sharing of sensitive information) in bond- trading markets (US$ denominated supra-sovereign, sovereign and agency bonds)

Statements of Objections have been sent to four banks.

Eight banks also received a Statement of Objections in relation to a suspected cartel in trading European government bonds

Individual parties to respond to Statement of Objections (in both cases, ‘in due course’)

European Commission to issue decision following responses from individual parties


Asset Managers

All

A

European Long- Term Investment Funds (ELTIF)

Regulation introducing European Long-Term Investment Fund (ELTIF), a type of private collective investment fund designed to invest only in businesses needing long- term investment

European Commission due to have started review of application of ELTIF Regulation

ESMA to reconsider draft Level 2 measures on costs disclosure and submit draft RTS to European Commission upon finalisation of review of PRIIPs Delegated Regulation

10 March 2021 – most provisions in Disclosures Regulation apply, affecting within scope financial market participants, including ELTIFs

02 August 2021 - new legislation on cross-border distribution of collective investment funds to apply


Asset managers

Insurance

All

A

European System of Financial Supervision (ESFS) reform - ESAs

European Commission Proposal reforming European Supervisory Authorities (ESAs) to improve mandates, governance and funding

01 January 2022 – provisions in Regulation amending powers of ESAs to apply in respect of Benchmarks Regulation and MiFIR


Asset Managers

Wholesale Banks

Retail Banks and other consumer credit providers Insurance

All

A


http://www.elexica.com/en/legal-topics/asset-management/08-eltifs-have-entered-the-building





Priority

FCA - Approach to Vulnerable Consumers

November 2017 - FCA published Future Approach to Consumers consultation paper, discussing with stakeholders on approach to regulating for retail consumers

July 2018 - FCA published its Approach to Customers, aiming to address concerns raised in feedback to consultation

23 July 2019 - FCA launched consultation guiding firms on fair treatment of vulnerable customers. The consultation closed on 04 October 2019

Q2 2020 - FCA considering responses to consultation and possible further consultation on revised Draft Guidance cost-benefit analysis – delayed due to COVID-19

Q2 2020 - Publication of final guidance expected - delayed due to COVID-19



Wealth

Insurance G

FCA - Fair Pricing in financial services review

FCA is reviewing fairness of certain pricing practices and effect on consumers; particularly vulnerable ones. Discussion paper published in October 2018

Feedback Statement on responses to discussion paper published in July 2019

FCA may look to implement changes in pricing practices across firms and products


Retail Banks and other consumer credit providers G

FCA - Market study in the general insurance sector

General Insurance pricing practices market study

FCA report published 4 October 2019 and period for feedback closed 15 November 2019

FCA to publish final report and consultation on remedies, which has been delayed due to COVID-19


Insurance

A

FCA - Mortgages Market Study

Competition in mortgage sector

FCA published its final report in March 2019, concluding that the mortgages market works well in many respects but fell short in some specific ways, leading to harm for some consumers

FCA is now focusing on mortgage switching. It published Occasional

Consultation on FCA mortgage switching report expected – delayed due to COVID-19

By end 2020 - Policy Statement and any rule changes on mortgage switching expected



A


https://www.fca.org.uk/publication/corporate/approach-to-consumers.pdf




Subsector Priority

Papers on brand loyalty and consumers switching in March 2020

FCA - Financial Advice Markets Review (FAMR)

FCA’s FAMR report (14 March 2016) contained 28 recommendations to increase accessibility and affordability of advice and guidance to consumers, and improve transparency about Financial Services Compensation Scheme (FSCS) and Financial Ombudsman Service (FOS)

FCA established Financial Advice Working Group to take forward shortlist of terms to describe guidance and advice (recommendation 17), develop rules of thumb or nudge techniques to encourage engagement by consumers (recommendation 18) and develop guide with employers for employees to improve their financial health (recommendation 12)

Autumn 2020 - FCA and HMT to publish FAMR review outcomes



Wealth

Insurance

G

FCA - Financial Advice Markets Review (FAMR)

In parallel with FAMR, on 16 March 2016, HM Treasury consulted on proposals for public financial guidance for debt, pensions and general financial capability and planning. These include new pensions guidance body (incorporating the functions of Pension Wise and The Pension Advisory Service), and new 'slimmed down' money advice service to replace Money Advice Service

Autumn 2020 - FCA and HMT to publish FAMR review outcomes



Wealth

Insurance G

Fitness + Probity - Individual Accountability Framework

The Central Bank of Ireland has proposed an Individual Accountability Framework extending the existing Fitness and Probity regime

Early 2020 – Legislation expected

Timing of implementation to be confirmed

2020 - Public consultation likely to be held Financial Institutions (initially)

All

R




Priority

Insurance - IAIS 2020-2024 Strategic Plan

International Association of Insurance Supervisors (IAIS) strategic plan for the period 2020 to 2024

IAIS strategic plan sets out revised high-level goals (HLGs) and new strategic themes. Trends such as technological innovation (including its impact on conduct and culture), cyber resilience to address cyber risk, climate risk, and the challenges of financial inclusion and sustainable development will potentially reshape the business of insurance


Insurance

G

Insurance Regulation

FCA Business Plan for 2020/21 The FCA to continue to address unfair pricing practices in general insurance expecting to see clear information, efficient value chains and fair pricing including on renewal


Insurance

R


ABI and BIBA Guidelines on inertia selling

May 2020 - Guidelines expected Financial Institutions

Insurance R Insurance Regulation – Covid 19

EIOPA recommendations on flexibility for supervisory reporting and public disclosure deadlines for insurers, in the light of the COVID-19 pandemic (EIOPA-BoS-20/236)

Supervisory authorities should accept up to 8 weeks’ delay on year end and solvency reporting depending on when due


Insurance

R

Insurance Regulation – Covid 19

ABI statement on closure of businesses and impact of Covid 19 – standard business interruption cover responds to physical damage


Insurance

R


FCA statement of expectations of insurance industry during coronavirus pandemic

Insurance firms to consider needs of customers carefully, in particular where customer relying on renewal for continuity of cover. Policy coverage and exclusions to be clearly communicated at renewal, especially where changes made

Firms seeking to make mid-term adjustments to consider whether contractual right to do so exists, as well as regulatory obligations


Insurance

R


https://www.iaisweb.org/page/about-the-iais/strategic-plan/file/82533/2020-2024-strategic-plan

https://www.eiopa.europa.eu/content/recommendations-supervisory-flexibility-regarding-deadline-supervisory-reporting-and-public_en

https://www.abi.org.uk/news/news-articles/2020/03/statement-on-business-insurance-and-coronavirus/

https://www.fca.org.uk/firms/insurance-and-coronavirus-our-expectations



Priority


PRA Dear CEO letter to UK insurers about distribution of profits

Boards to pay close attention to policyholder needs and financial soundness when making shareholder distributions during COVID-19 crisis


Insurance

R

Insurance Regulation – Solvency II

EIOPA 2020 Solvency II Review June 2020 - Publication of Opinion following

consultation and information requests expected Financial

Institutions Insurance

R


EIOPA’s work programme 2020-22

EIOPA’s single programming document 2020-22 includes its annual work programme 2020. EIOPA will focus on the delivery of its strategic priorities, with two key themes of digitalisation and sustainability and reference to establishing a new relationship between UK and the EU


Insurance

G

Insurance Regulation-Brexit

Publications on supervisory convergence and consistency across the EU in light of United Kingdom withdrawing from European Union

Firms which already have, or are contemplating establishment of, subsidiary in another EU member state as result of Brexit should ensure guidance issued by EIOPA taken into consideration and effective measures implemented to ensure appropriate supervision of new subsidiary

Firms considering Part VII transfers should, if not already done so, make this known to PRA, and consider FCA guidance FG18/4

If diverging from FCA guidance FG18/4 when applying for a Part VII transfer, explanation will be needed

Post-Brexit, firms currently exercising rights to establish branch or provide services into UK (‘inbound firms’) will need to seek PRA authorisation to carry on PRA-regulated activities in UK


Insurance

R

Insurance Law - Brexit

Lloyd’s Market Bulletin Y5211 - grandfathering process for European coverholders

Coverholders wishing to bind risks located in EEA only able to do so under Coverholder Appointment Agreement (CAA) with Lloyd’s Brussels. EEA risks no longer to be permitted under Lloyd’s Binding Authority

LMA bulletin LMA18-044-AC sets out model clauses for guidance


Insurance

R




Priority

Insurance Regulation – Conduct and Culture

PRA “Dear CEO” letter to general insurance firms dated 5 November 2019 identified conduct and culture as a propriety area of focus for 2020.

The FCA sent a “Dear CEO” letter 6 January 2020 - expects general insurance firms to tackle nonfinancial misconduct

FCA and PRA supervisory focus to include conduct and culture

Q2 2020 - FCA “CultureSprint” for insurance


Insurance

A

Insurance - Use of Digital Technology

International Association of Insurance Supervisors (IAIS) Application Paper on the Use of Digital Technology in Inclusive Insurance

IAIS to consider impact of increasing digitalisation in insurance on consumer outcomes and insurance supervision in light of Insurance Core Principle 19 on Conduct of Business


Insurance

G

Legal Entity Identifiers, Unique Transaction Identifiers and Unique Product Identifiers

LEI ROC Policy on Fund Relationships in the Global LEI System (GLEIS)

20 May 2019 – Policy on Fund Relationships and Guidelines for the registration of Investment Funds in the Global LEI System published

November 2020 - Implementation expected Financial Institutions

All

G


http://www.elexica.com/en/legal-topics/asset-management/10-the-global-lei-system-and-you






https://www.leiroc.org/publications/gls/roc_20190520-1.pdf






Priority

Legal Entity Identifiers, Unique Transaction Identifiers and Unique Product Identifiers

The establishment of governance arrangements within the LEI ROC (under the auspices of the Financial Stability Board (FSB), Committee on Payments and Market Infrastructures (CPMI) of Bank for International Settlements and Board of International Organization of Securities Commissions (IOSCO) together the Harmonisation Group) for the adoption of the Unique Transaction Identifiers (UTIs), Unique Product Identifier (UPIs) and other critical OTC derivatives data elements (CDE)

Mid-2020 – LEI ROC to become single international governance body for UPI, UTI and CDE provided LEI ROC makes appropriate adjustments to its existing governance arrangements to make it fit for purpose for these identifiers

End 2020 - FSB recommends jurisdictions implement UTI following its governance arrangements and implementation plan for UTI

End Q3 2022 - FSB recommends jurisdictions implement UPI technical guidance and governance arrangements following its governance arrangements

End Q3-2022 - Harmonisation Group recommends jurisdictions implement governance arrangements following its governance arrangements for CDE


All

G

Market Abuse Regulation (MAR)

Revision of scope of MAD (MAR/CSMAD) (including provisions relating to manipulation of benchmarks)

Q2 2020 - Council of the EU and European Parliament to consider Commission’s Final Report on implementation of CSMAD

Q2 2020 - ESMA to submit Final Report to Commission following its consultation paper, “MAR review report”

Commission to consider amendments to MAR in light of ESMA Final Report on review of MAR


Asset managers

Energy and infrastructure

All

All G

Markets in Financial Instruments Directive (MiFID)

Post-implementation review of MiFID and possible amendments (MiFID2), including introduction of EU regime on recording/ retention of telephone calls and electronic communications (in particular minimum retention period of five years)

3 July 2020 - transition period set out in Article 54(1) of MIFIR on disapplication of access rights to CCPs and trading venues ends

3 September 2020 and 3 July 2021 - deadlines for various reports which Commission must make in relation to various aspects of MIFID2

3 January 2021 - transitional period set out in Article 95 of MIFID 2 Directive on application of clearing obligation and risk mitigation techniques to certain C6 energy derivative contracts ends


Asset Managers

Wholesale Banks

Retail Banks and other consumer credit providers Insurance

All

R








https://www.fsb.org/wp-content/uploads/P291217.pdf






https://www.bis.org/cpmi/publ/d186.pdf

http://www.elexica.com/~/media/Files/Articles/2015/Asset%20management/Legislative%20trackers/MAR%20Legislative%20Tracker.pdf

http://www.elexica.com/~/media/Files/Articles/2015/Asset%20management/Legislative%20trackers/MAR%20Legislative%20Tracker.pdf

https://data.consilium.europa.eu/doc/document/ST-6928-2020-INIT/en/pdf

https://data.consilium.europa.eu/doc/document/ST-6928-2020-INIT/en/pdf

https://www.esma.europa.eu/sites/default/files/library/mar_review_-_cp.pdf

https://www.esma.europa.eu/sites/default/files/library/mar_review_-_cp.pdf

http://www.elexica.com/en/Resources/Microsite/MiFID-2-Tracker






Priority

Markets in Financial Instruments Directive (MiFID)

Brexit If UK leaves EU with “hard Brexit”, UK version of MIFIR and other UK legislation implementing MIFID 2 to be amended

Key SI can be found here and FCA consultations can be found here and here


Asset Managers

Wholesale Banks


Insuranc

e All

R

Money Market Funds (MMF) Regulation

Regulation applicable to Money Market funds (MMFs) established, managed or marketed in EU, imposing requirements in respect of, inter alia, authorisation, investment policies, internal credit quality; risk management; valuation, external support and transparency and reporting requirements

September 2020 – deadline for managers of MMFs to submit quarterly report to NCAs under Article 37 of MMF Regulation (extended from April 2020)


Asset managers

Wholesale banks

All

A

Narrative reporting

EU consultation on public reporting by companies

21 March 2018, European Commission published consultation paper seeking views on whether EU framework for public reporting is fit for its purpose. Consultation closed on 21 July 2018

EU Commission confirmed (in its 2019 Work Programme published on 24 October 2018) that it will carry out this fitness check

11 June 2020 – deadline for responses to European Commission public consultation on review of Non-Financial Reporting Directive

All All

G

Narrative reporting

COVID-19 - impact on UK financial reporting and dividends

See COVID-19 - impact on UK financial reporting and dividends for more information

Companies to consider what disclosures they make about COVID-19 in annual report and accounts

All All

R






https://emea01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fassets.publishing.service.gov.uk%2Fgovernment%2Fuploads%2Fsystem%2Fuploads%2Fattachment_data%2Ffile%2F746247%2FMiFI__Amendment___EU_Exit__Regulations_3-10-18C.PDF&data=02%7C01%7Cmalcolm.smith%40simmons-simmons.com%7C44f2b4b2a50a4d6705f708d66c0ed861%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C1%7C636815208339686432&sdata=RO6CDP7xtAT8Rf1W9PzBFsU3VtSH2zqAa2x9SZ2yBN4%3D&reserved=0

https://www.fca.org.uk/publications/consultation-papers/cp18-28-brexit-proposed-changes-handbook-bts-first-consultation

https://www.fca.org.uk/publications/consultation-papers/cp18-36-brexit-proposed-changes-handbook-and-binding-technical-standards-second-consultation

http://www.elexica.com/en/resources/microsite/corporate-governance/narrative-reporting




https://www.simmons-simmons.com/en/publications/ck8aft4861az1092824hqwxq5/covid-19---impact-on-uk-financial-reporting-and-dividends

https://www.simmons-simmons.com/en/publications/ck8aft4861az1092824hqwxq5/covid-19---impact-on-uk-financial-reporting-and-dividends



Priority

Narrative reporting

UK Implementation of SRD II

20 May 2019, the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations were published which implement the directors’ remuneration provisions in SRD II. These regulations now in force, with some transitional provisions. Government has also published FAQs on these regulations. See SRD II above for information on that directive

4 June 2019, European Commission published a Summary Report of the written comments received in response to its consultation (published in March 2019) on draft non-binding guidelines for the standardised presentation of the remuneration report under SRD II

Final EU guidelines on standardised presentation of remuneration report awaited

All All

R

Narrative reporting

Corporate governance reporting regulations

See “Corporate governance” - “New corporate governance reporting rules” above for a summary

Reporting to start in 2020, subject to exception described

All All

R








Priority

Narrative reporting

Energy and carbon reporting

29 March 2019, BEIS published updated Environmental Reporting Guidelines, which include guidance on the new regime

December 2019, FRC published a taxonomy for these new reporting requirements, to be added to the FRC's Taxonomies Suite that supports annual corporate reporting. The taxonomy is intended to help companies who file their annual reports digitally to be able to report their SECR data in the same way to ensure the same level of transparency is available to external users. It includes tags to facilitate Task Force on Climate-related Financial Disclosures Framework (TCFD) disclosures (which are not mandatory, but their use is increasing)

For financial years beginning on or after 01 April 2019 quoted companies, large private companies and limited liability partnerships must disclose emissions, energy consumption and energy efficiency in a directors’ report or energy and carbon report. (Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018)

All All

R

Narrative reporting

Climate – related financial disclosures

2 July 2019, BEIS published the UK Government’s Green Finance Strategy that sets out the actions that the government will take

2 July 2019, FRC issued a statement emphasising responsibility of UK company boards to consider their company’s impact on the environment and the likely consequences of any business decisions in the longterm. These companies should address and, where relevant, report on the effects of climate change. Reporting should set out

UK Government and UK regulators encouraging companies to disclose climate change risks and opportunities in annual reports

Green Finance Strategy includes UK Government’s expectation that all listed companies and large asset owners will disclose in line with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TFCD) recommendations by 2022

UK Government will publish an interim report by the end of 2020, that will include progress on implementation of TCFD recommendations

1 October 2020 - Responses due to FCA CP 20/3

All All

R








Priority

how the company has taken into account the resilience of the company’s business model and its risks, uncertainties and viability in both the immediate and longer-term in light of climate change. Companies should also reflect current or future impacts of climate change on their financial position, for example in valuation of their assets, assumptions used in impairment testing, depreciation rates, decommissioning, restoration and other similar liabilities and financial risk disclosures

FRC will monitor how companies and their advisers fulfil their responsibilities by reviewing whether companies are complying with disclosure requirements of strategic report (which includes reporting on principal risks and uncertainties) as well as any financial statement implications of climate change

22 October 2019, FRC’s Financial Reporting Lab’s published its report on climate change disclosures. This provides practical guidance on how companies can improve their reporting on climate-related risk and opportunities to meet investors’ expectations

Narrative reporting

Ethnicity pay gap reporting

See “Ethnicity Pay Reporting” for more information

All All

A

Narrative reporting

Modern slavery statement Response to UK Government consultation is awaited

All All A




http://www.elexica.com/en/resources/microsite/employment-law-reform-in-the-uk/ethnicity-pay-reporting





Priority

22 May 2019, Final Report of the Independent Review of the Modern Slavery Act 2015 was laid before Parliament. This report includes a

definitive list of recommendations to ensure compliance with and improvement of the quality of modern slavery statements

9 July 2019, UK Government published a consultation on proposed measures to increase the transparency in and compliance with the supply chain provisions in s.54 Modern Slavery Act 2015, improve reporting quality and extend scope of legislation. UK

Government is seeking views on how to strengthen transparency provisions; whether to make reporting on specific topics mandatory; the introduction of a single reporting deadline by which organisations would have to publish their statements each year; how to improve the process and tools for tackling non-compliance; and extension of the scope of the legislation to certain public sector bodies. UK Government will also develop an online registry where modern slavery statements would have to made public

Consultation closed on 17

September 2019 Narrative reporting

Payment practices All All

19 June 2019, UK Government published its response to its call for evidence on late payment by companies

A

UK Government plans to introduce






Priority

a package of reforms that include: (i) taking a tougher compliance

approach to those companies that do not comply with the regulations and will prosecute and impose fines where necessary; (ii) a requirement on audit committees to review payment practices and report on them in the annual report

(as announced in the 2019 Spring Statement); (iii) asking the FRC to

review how all payment practices are reflected in the first year of reporting on the statement that directors have had regard to the need to foster business relationships with suppliers, customers and others (as required by the new Miscellaneous

Reporting Regulations 2018); and (iv) consult on whether to

strengthen the Small Business

Commissioner’s powers to require large companies to comply with information requests; and impose sanctions

Narrative reporting

FRC letter to Audit Committee Chairs and Finance Directors

16 September 2019, FRC sent a letter to Audit Committee Chairs and Finance Directors to assist with Brexit preparations. The letter sets out a small number of the most critical generic actions companies should consider in advance of Brexit

Companies to provide disclosure which distinguishes between specific and direct challenges to business model and operations from broader economic uncertainties which may be consequence of Brexit, and which may apply when companies report. Where particular challenges posed, the FRC expects these to be clearly identified and for management to describe any actions they are taking, or have taken, to manage potential impact - this may mean recognising or remeasuring certain items in balance sheet

All All

R






Priority

Narrative reporting

FRC Audit & Assurance Lab report on audit committee reporting

18 December 2017, Lab published its report. This is first phase of a project considering how investors’ confidence in an audit is enhanced by audit committee’s external reporting in annual report

Publication of second phase, covering how auditors report to audit committees, awaited

All All

A

Narrative reporting

FRC project on future of corporate reporting.

30 October 2018, FRC called for participants in a new project that will consider how companies should better meet information needs of shareholders and the purpose of corporate reporting and annual report

17 December 2018, FRC announced composition of advisory group for this project

17 October 2019, FRC launched a corporate reporting survey to gather evidence of personal experiences and expectations when using corporate reports. FRC will feed the results into recommendations for improvements to current regulation and practice, and to help it to develop ‘blue sky’ thinking. Survey closed on 15 November 2019

Summary results expected to be published alongside a Future of Corporate Reporting thought leadership paper in 2020

All All

A








Priority

Narrative reporting

Financial Reporting Lab project on climate change and workforce reporting

Climate change report published – see Climate-related financial disclosures above

20 January 2020, FRC's Financial Reporting Lab published its report: 'Workforce-related corporate reporting: Where to next?', summary and questions for companies

All All

A

OTC derivatives

Regulation (EU) No 648/2012 of OTC derivatives, central counterparty clearing and reporting requirements (EMIR)

The European Supervisory Authorities (ESAs) have published a Final Report setting out proposed updates to the Margin RTS. The draft RTS have been submitted for endorsement in the form of a Commission Delegated Regulation. The ESAs expect competent authorities to apply the EU framework in a risk-based and proportionate manner until the amended RTS are in force

16 April 2020 - Commission Delegated Regulation (EU) 2020/447 of 16 December 2019 on specification of criteria for establishing arrangements to adequately mitigate counterparty credit risk associated with covered bonds and securitisations enters into force

16 April 2020 - Commission Delegated Regulation (EU) 2020/448 of 17 December 2019 on specification of treatment of OTC derivatives in connection with certain simple, transparent and standardised securitisations for hedging purposes enters into force

15 June 2020 – ESMA consultation period closes on clearing solutions for pension scheme arrangements

15 June 2020 - ESMA consultation period closes on report on post trade risk reduction services with regards to clearing obligation (EMIR Article 85(3a))

21 December 2020 – temporary exemption from margin requirements for intragroup transactions expires (deferred date under ESAs proposed amendments – originally 04 January 2020)

04 January 2021 – temporary exemption from margin requirements for single-stock equity options or index options expires (deferred date under ESAs proposed amendments – originally 04 January 2020)


Asset Managers

All

All

R




http://www.elexica.com/en/Resources/Microsite/OTC-Derivatives

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:201:0001:0059:EN:PDF




https://www.esma.europa.eu/sites/default/files/library/esas_2019_20_-_final_report_-_bilateral_margin_amendments.pdf

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2020.094.01.0005.01.ENG&toc=OJ:L:2020:094:TOC






https://www.esma.europa.eu/sites/default/files/library/esma70-151-2823_esma_report_to_the_european_commission_on_central_clearing_obligations_for_psa_-_no_1.pdf

https://www.esma.europa.eu/sites/default/files/library/esma70-151-2852_consultation_report_ptrr_services_-_article_853a_of_emir.pdf



Priority

OTC derivatives

17 June 2019: Regulation (EU) 2019/834 amending EMIR Regulation (648/2012) (the EMIR Refit Regulation) entered into force and, with some exceptions, applies from that date

19 June 2020 – ESMA consultation closes on proposed Technical Standards in respect of certain aspects of the reporting obligation

18 June 2020 -'Auto-delegation' of reporting to financial counterparties (if non-financial counterparty and to AIFM or UCITS Manco) applies from this date

18 June 2020 - Validation of risk mitigation procedures applies from this date (but depends on RTS)

18 June 2021 - Clearing services under FRANDT become applicable


Asset Managers

All

All

R

OTC derivatives 01 January 2020: Regulation (EU) 2019/2099 amending EMIR Regulation (648/2012) (EMIR 2.2) to amend EMIR supervisory regime for EU and third country CCPs

01 January 2021 - Adoption of delegated act on systemic third country CCPs

01 July 2022 – ESMA to complete evaluation of the systemic importance of third country CCPs


Asset Managers

All

All

G

OTC derivatives Amendments to UK legislation to ensure that the EMIR Refit Regulation ((EU) 2019/834) is fully effective and enforceable in the UK once the UK leaves the EU

09 July 2019 – The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 entered into force

Proposed secondary legislation ensuring the UK continues to have an effective regulatory framework for OTC derivatives, CCPs and TRs after Brexit

Assuming the Withdrawal Agreement is ratified in the EU and UK, the following Brexit SIs will come into force on IP Completion Day rather than Exit Day, possibly with some further amendment:

i. The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019

ii. The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019(SI 2019/335)

iii. The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1184)

iv. The Trade Repositories (Amendment and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1318)


Asset Managers

All

All

G





































Subsector Priority

Payment Accounts Directive

Payment Accounts Directive (PAD) imposing EU wide regime for payment accounts, including fee comparisons, switching and basic payment accounts, with development of standardised terminology for certain payment services

2020 – European Commission review of PAD has been started, but not yet completed

20 April 2022 – FCA to update linked services list according to Payment Accounts (Amendment) (EU Exit) Regulations 2019, (first review date after UK’s departure from EU) and at least every four years thereafter


Retail Banks and other consumer credit providers R

Payment Services Directive 2, electronic payments, and interchange fee caps in MIF Regulation

The revised Payment Services Directive (PSD2), which updates the EU payment services regime by expanding its geographical and currency scope and enhancing consumer protections came into force on 12 January 2016.

It also caps interchange fees in Multilateral Interchange Fee Regulation (MIF Regulation), which came into force on 09 December 2015

European Commission to adopt Regulatory Technical Standards (RTS) on information provided by competent authorities to EBA under Article 15(5) of PSD2

European Parliament to publish Regulatory Technical Standards (RTS) relating to central contact point under Article 29(4) of PSD2

EBA to publish Regulatory Technical Standards (RTS) on home-host co-operation under Article 29(6) of PSD2

EBA to continue to develop guidelines addressed to payment service providers and competent authorities, aimed at contributing to objective of PSD2 to increase security of retail payments in EU

31 December 2020 – deadline for migration to Strong customer authentication for e-commerce card-based payment transactions

14 March 2021 – Strong customer authentication implementation must be completed

13 January 2021 - European Commission to submit report on application and impact of PSD2


Wholesale Banks


Fin-tech

Wealth

R

Payment Services Directive 2, electronic payments and interchange fee caps in MIF Regulation

As part of the FCA’s implementation of PSD2 in the UK, new rules on reporting complaints about authorised push payment fraud took effect on 1 July 2019

March 2021 - FCA expects all firms to have made necessary changes and undertaken required testing to apply strong customer authentication following implementation on 14 March 2020


Wholesale Banks


Fin-tech

Wealth

R

Prospectus Regulation

Prospectus Regulation (2017/1129)

Repealed and replaced the Prospectus Directive with effect from 21 July 2019

See UK implementation below

See Prospectus Regulation Tracker for more information on

Q2 2020 - ESMA expected to publish final version of disclosure guidance under Prospectus Regulation

All All

A


http://www.elexica.com/en/resources/microsite/prospectus-regime/prospectus-regulation


https://www.simmons-simmons.com/en/features/prospectus-regime

https://www.simmons-simmons.com/en/features/prospectus-regime



Priority

ESMA’s technical advice and standards and the status of EU

Commission delegated legislation under the Prospectus Regulation

On 4 December 2019, ESMA published an updated version of its

Q&As.

On 11 December 2019, the

Regulation amending the Market Abuse Regulation and the Prospectus Regulation regarding

the promotion of the use of SME growth markets was published in the Official Journal.

From 31 December 2019 - amendments to the Prospectus

Regulation apply Prospectus UK implementation of Prospectus All All Regulation Regulation.

On 24 June 2019, Financial

Services and Markets Act 2000 (Prospectus) Regulations 2019

were published. taking effect on 21

July 2019

On 26 April 2019, FCA published new Prospectus Rule checklists and cross-reference lists to be used for submissions on or after 21

R

July 2019

With effect from 21 July 2019: The

Prospectus Rules Sourcebook has been replaced by the Prospectus

Regulation Rules (PRR) sourcebook. The PRR closely follows format of existing

Prospectus Rules. Consequential changes have also been made to a






Priority

number of the DTRs

FCA have published Primary Market Bulletin No 26 with the first stage of its updated changes to the Knowledge Base to reflect the changes to the prospectus regime under the Prospectus Regulation. The FCA is updating its materials in stages due to the volume of technical and procedural notes affected. In the meantime, current guidance should be applied to prospectuses and other listing documents drawn up under Prospectus Regulation Rules to extent that they are compatible with the Prospectus Regulation

5 September 2019, The Prospectus (Amendment etc.) (EU Exit) Regulations 2019 published that amend UK’s prospectus regime so that it continues to operate effectively once UK leaves the EU if there is no deal.

See Prospectus regime after Brexit for more information

Regulatory capital Basel Accord (Basel 3) – finalised in December 2017 with a set of amendments sometimes known informally as “Basel 4”

The BCBS has published guidance and amended standards on COVID-19. As this can change frequently and at short notice, it is not included in Headwinds, but more details can be obtained through your usual Simmons & Simmons contact

01 January 2023: revised standardised approach to credit risk, IRB framework, CVA framework, market risk framework and operational risk framework. End of transitional provisions for capital instruments no longer qualifying as Tier 1 or 2. Output floor set at 50%, rising in steps to 72.5% on 01 January 2028. (Original dates extended by 1 year due to COVID-19).


Wholesale Banks,

Retail Banks

A

Regulatory capital: CRD4

Phased implementation of CRD4

CRD 4 confers power on the European Commission and the ESAs to adopt Level 2 and Level 3 measures respectively

Current state of play on RTS and ITS can be found here and here. In particular, following L2 and L3 in pipeline:

i. RTS on calculation of capital requirements for securitised exposures

Phased implementation

01 January 2018 to 31 December 2022 - transitional arrangements for entry into force of IFRS9 apply in stages


Wholesale Banks

Retail Banks and Investment Firms

R


https://www.simmons-simmons.com/en/publications/ck3symdmpkatg0b48635yzv0b/prospectus-regime-after-brexit

https://www.simmons-simmons.com/en/publications/ck3symdmpkatg0b48635yzv0b/prospectus-regime-after-brexit

http://ec.europa.eu/info/sites/info/files/crd4-rts-overview-table_en.pdf

https://ec.europa.eu/info/sites/info/files/crd4-its-overview-table_en.pdf

https://eba.europa.eu/-/eba-consults-on-the-conditions-to-allow-institutions-to-calculate-capital-requirements-of-securitised-exposures-kirb-in-accordance-with-the-purchased-


Subsector Priority

Possible future amendments in light of December 2017 finalisation of Basel 3 (sometimes called Basel 4)

(KIRB) in accordance with purchased receivables approach in CRR (now with Commission)

ii. RTS on homogeneity of underlying exposures in a securitisation (now with Commission)

iii. ITS amending COREP, COREP LCR and COREP securitisation

iv. ITS amending FINREP regarding NPEs, and amending the reporting of profit or loss items (in particular on expenses) and the reporting on leases due to new IFRS 16.

v. RTS relating to economic downturns and EBA Guidelines related to the estimation of loss given default (LGD) appropriate for conditions of economic downturn. (Now finalised and with Commission for adoption - apply from 01 January 2021)

vi. Guidelines on ICT and security risk management (coming into force 30 June 2020).

vii. RTS on supervisory slotting (EBA agrees Commission amendments)

EBA has also updated its list of O-SBIIs.

EBA has published an Opinion on the treatment of credit insurance in the prudential framework.

EBA has called for improvements to Pillar 3 disclosures.

EBA has called for more diversity in management bodies of institutions.

EBA has issued two reports on consistency in internal model outcomes.

EBA has published guidance on COVID-19. As this can change frequently and at short notice, it

26 June 2021: end of application of transitional arrangements for large exposures for certain derivatives firms.

31 December 2021: Grandfathering of existing capital instruments ends. EBA has announced it will clarify the prudential treatment applicable to these instruments.

L2 and L3 in development

Current state of play on RTS and ITS can be

found here and here. In particular, following L2

and L3 in pipeline:

i. RTS on methods of prudential consolidation

ii. EBA Guidelines on funding plans (apply end 2020).

iii. Draft EBA Guidelines on use of credit risk mitigation in A-IRB approaches to credit risk

iv. Draft EBA Guidelines on loan origination and monitoring

v. Draft Guidelines on the weighted average maturity of contractual payments due under a securitisation tranche.

vi. Draft ITS on comprehensive Pillar 3 disclosures

vii. Draft RTS on material risk takers

viii. Consultation on amending Commission’s implementing regulation on benchmarking of internal models.

ix. EBA Roadmap on risk reduction measures package.

x. Proposed Guidelines on the on the proposed treatment of CVA risk in the SREP.

xi. Draft ITS on conditions for capital requirements for mortgage exposures.

xii. Draft Guidelines on the treatment of

Asset Managers All


https://eba.europa.eu/regulation-and-policy/securitisation-and-covered-bonds/rts-on-the-homogeneity-of-the-underlying-exposures-in-securitisation

https://eba.europa.eu/-/eba-publishes-amended-technical-standards-on-supervisory-and-resolution-reporting-for-eu-institutions-and-the-corresponding-dpm-and-xbrl-taxonomy-2-9

https://eba.europa.eu/-/eba-consults-on-standards-on-estimation-and-identification-of-an-economic-downturn-in-irb-modelling

https://eba.europa.eu/-/eba-consults-on-standards-on-estimation-and-identification-of-an-economic-downturn-in-irb-modelling

https://eba.europa.eu/regulation-and-policy/credit-risk/regulatory-technical-standards-on-specialised-lending-exposures

https://eba.europa.eu/eba-agrees-european-commission%E2%80%99s-amendments-standards-risk-weights-specialised-lending-exposures

https://eba.europa.eu/eba-agrees-european-commission%E2%80%99s-amendments-standards-risk-weights-specialised-lending-exposures

https://eba.europa.eu/eba-updates-list-other-systemically-important-institutions-o-siis

https://eba.europa.eu/eba-concludes-no-specific-regulatory-lgd-should-be-set-credit-insurance-claims

https://eba.europa.eu/eba-notes-enhanced-consistency-institutions%E2%80%99-pillar-3-disclosures-calls-improvements-reinforce

https://eba.europa.eu/eba-notes-enhanced-consistency-institutions%E2%80%99-pillar-3-disclosures-calls-improvements-reinforce

https://eba.europa.eu/eba-calls-measures-ensure-more-balanced-composition-management-bodies-institutions

https://eba.europa.eu/eba-releases-its-annual-assessment-consistency-internal-model-outcomes

https://eba.europa.eu/eba-will-clarify-the-prudential-treatment-applicable-to-own-funds-instruments-at-the-end-of-the-grandfathering-period-expiring-on-31-december-2021

http://ec.europa.eu/info/sites/info/files/crd4-rts-overview-table_en.pdf

https://ec.europa.eu/info/sites/info/files/crd4-its-overview-table_en.pdf

https://eba.europa.eu/-/eba-launches-consultation-on-technical-standards-specifying-the-methods-of-prudential-consolidation

https://eba.europa.eu/-/eba-launches-consultation-to-update-guidelines-on-harmonised-definitions-and-templates-for-funding-plans-of-credit-institutions

https://eba.europa.eu/-/eba-consults-on-guidelines-on-credit-risk-mitigation-for-institutions-applying-the-irb-approach-with-own-estimates-of-lgd

https://eba.europa.eu/-/eba-consults-on-draft-guidelines-on-loan-origination-and-monitoring

https://eba.europa.eu/eba-launches-consultation-on-the-methodology-to-determine-the-weighted-average-maturity-of-contractual-payments-due-under-the-tranche-of-a-securitisat

https://eba.europa.eu/eba-launches-consultation-on-comprehensive-pillar-3-disclosures

https://eba.europa.eu/eba-consults-revise-standards-identify-staff-material-impact-institution%E2%80%99s-risk-profile

https://eba.europa.eu/eba-consults-amend-standards-benchmarking-internal-models

https://eba.europa.eu/eba-publishes-its-roadmap-risk-reduction-measures-package

https://eba.europa.eu/regulation-and-policy/supervisory-review-and-evaluation-srep-and-pillar-2/guidelines-on-the-treatment-of-cva-risk-under-srep

https://eba.europa.eu/regulation-and-policy/market-risk/guidelines-on-the-treatment-of-structural-fx-under-352-2-of-the-crr



Priority

is not included in Headwinds, but more details can be obtained through your usual Simmons & Simmons contact

structural FX under 352(2) of the CRR

xiii. EBA publishes reporting framework 2.10.

xiv. EBA consultation on G-SII identification

xv. EBA consultation on the systemic risk buffer

xvi. EBA consultation on the future of stress tests.

Regulatory capital: the SSM

Additional developments from the European Central Bank which are relevant to the Eurozone banks supervised under the SSM

The ECB has also taken steps to mitigate the impact of COVID-19. As this can change frequently and at short notice, it is not included in Headwinds, but more details can be obtained through your usual Simmons & Simmons contact

i. ECB consultation on counterparty credit risk

ii. ECB Guideline on materiality threshold for credit obligations past due for less significant institutions


Asset Managers

Wholesale Banks


All

R

Regulatory capital: covered bonds

Regulation and Directive of the European Parliament and of the Council regarding covered bonds. Regulation and Directive enter into force on 6 January 2020.

08 July 2022 - Regulation and Directive apply Financial Institutions

Asset Managers

Wholesale Banks


All

R

Regulatory capital: sovereign- bond backed exposures

Proposed Regulation of the European Parliament and of the Council to enable a market demand-led development of sovereign bond-backed securities. Amends the CRR

Council of the EU to adopt its initial position Financial Institutions

Wholesale Banks


G


https://eba.europa.eu/eba-publishes-phase-1-its-technical-package-reporting-framework-210

https://eba.europa.eu/eba-launches-consultation-update-methodology-identify-g-siis

https://eba.europa.eu/eba-consults-guidelines-appropriate-subsets-exposures-application-systemic-risk-buffer

https://eba.europa.eu/eba-consults-future-eu-wide-stress-test-framework

https://www.bankingsupervision.europa.eu/press/pr/date/2020/html/ssm.pr200205~f159b99a87.en.html

https://www.bankingsupervision.europa.eu/press/pr/date/2020/html/ssm.pr200120~5b9349823a.en.html



Priority

Asset Managers

All

Regulatory capital: CRD V and CRR II

Legislative package to amend the CRR and the CRD4 Directive. These reforms comprise amendments to reflect the Basel standards (e.g. a binding leverage ratio) and also EU specific measures (e.g. lending to SMEs)

EBA is consulting on L2 and L3 under CRR2 and CRDV. In particular:

i. EBA is consulting on supervisory reporting changes related to CRR2 and Backstop Regulation (for non-performing loans) (Framework 3.0)

ii. EBA has published a discussion paper, roadmap and consultation paper on the implementation in the EU of the revised market risk and counterparty credit risk frameworks, i.e. Fundamental Review of the Trading Book (FRTB) and Standardised Approach for Counterparty Credit Risk (SA-CCR). European Commission has also published a consultation paper on the alternative standardised approach for market risk.

iii. EBA has published a consultation paper on specific reporting requirements for market risk.

iv. EBA has published a package of 11 measures on the IMA under the FRTB.

Implementation of CRR2 and CRD5 progresses in stages until about 2023


Asset Managers

Wholesale Banks


All

R


https://eba.europa.eu/eba-consults-on-supervisory-reporting-changes-related-to-crr2-and-backstop-regulation-framework-3-0-

https://eba.europa.eu/-/eba-publishes-its-roadmap-for-the-new-market-and-counterparty-credit-risk-approaches-and-launches-consultation-on-technical-standards-on-the-ima-under

https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Femail.practicallaw.com%2Fc%2F11uoqaiA8HdltFkytjO3QnYvqZ1&data=02%7C01%7CMalcolm.Smith%40Simmons-Simmons.com%7C68b7401148e9495005ab08d7612b9c55%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C0%7C637084712251038332&sdata=JUijnpvC6hPJI0DM8K4kpoK1sBgJGBc%2FjftzQK0Bses%3D&reserved=0

https://gbr01.safelinks.protection.outlook.com/?url=http%3A%2F%2Femail.practicallaw.com%2Fc%2F11uoqaiA8HdltFkytjO3QnYvqZ1&data=02%7C01%7CMalcolm.Smith%40Simmons-Simmons.com%7C68b7401148e9495005ab08d7612b9c55%7C9c0035ef4799443f8b14c5d60303e8cd%7C0%7C0%7C637084712251038332&sdata=JUijnpvC6hPJI0DM8K4kpoK1sBgJGBc%2FjftzQK0Bses%3D&reserved=0

https://eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2020/EBA/CP/2019/13/EBA-CP-2019-13%20%28Consultation%20paper%20on%20specific%20reporting%20requirements%20for%20market%20risk%29.pdf

https://eba.europa.eu/regulation-and-policy/market-risk/draft-technical-standards-on-the-ima-under-the-frtb



Priority

v. EBA has submitted final RTS on the SA-CCR to the European Commission.

vi. EBA has published final draft standards on the EU implementation of the FRTB.

vii. EBA consultation on treatment of FX or commodity risk in the banking book under the FRTB.

viii. European Commission has adopted a delegated regulation with regard to the alternative standardised approach to market risk.

EBA has published a consultation paper on reporting requirement under CRR2 (and also the NPE Regulation)

Regulatory capital: CRD 6 and CRR 3

EU proposals implementing Basel 4. See here and here for impact assessment and here for the EBA’s Basel 4 monitoring exercise

2021 - likely to be introduced

2023 – Rules likely to come into force


Wholesale Banks


All

A

Regulatory capital: COVID-19 amendment

Legislative proposal to amend CRR and CRR2 in response to COVID- 19 and Commission Interpretative Communication

Possible application of fast track legislative procedure to bring into force as soon as possible


Asset Managers

Wholesale Banks


All

R

Regulatory capital: new

Legislative package to amend the CRR and CRD4 to create a

26 June 2021 – legislation to apply with extensive transitionals


Wholesale Banks R


https://eba.europa.eu/eba-publishes-final-draft-standards-key-aspects-related-implementation-standardised-approach

https://eba.europa.eu/eba-publishes-final-draft-standards-key-aspects-related-implementation-standardised-approach

https://eba.europa.eu/eba-publishes-final-draft-standards-key-areas-eu-implementation-frtb

https://eba.europa.eu/eba-publishes-final-draft-standards-key-areas-eu-implementation-frtb

https://ec.europa.eu/transparency/regdoc/rep/3/2019/EN/C-2019-9068-F1-EN-MAIN-PART-1.PDF

https://ec.europa.eu/transparency/regdoc/rep/3/2019/EN/C-2019-9068-F1-EN-MAIN-PART-1.PDF

https://eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standards-on-supervisory-reporting-changes-related-to-crr2-and-backstop-regulation

https://eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standards-on-supervisory-reporting-changes-related-to-crr2-and-backstop-regulation

https://eba.europa.eu/-/eba-basel-assessment-sees-impact-driven-by-large-banks

https://eba.europa.eu/eba-updates-estimates-impact-implementation-basel-iii-and-provides-assessment-its-effect-eu-economy

https://eba.europa.eu/risk-analysis-and-data/quantitative-impact-study/basel-iii-monitoring-exercise

https://ec.europa.eu/finance/docs/law/200428-banking-package-communication_en.pdf

https://ec.europa.eu/finance/docs/law/200428-banking-package-communication_en.pdf


Subsector Priority

prudential regime for investment firms

dedicated prudential regime for non-systemic investment firms in the EU. Legislation published in

Retail Banks and Investment

Official Journal on 5 December Firms 2019

Asset All

Managers Regulatory capital Proposed legislation and changes

to PRA handbook to implement PRA PRA Financial

Institutions Wholesale Banks

CRD 4 Proposed changes to SS 12/13 ‘Counterparty Credit Risk’ to clarify expectations regarding the

End 2020 - PRA’s amended expectations for banks and building societies using IRB approach

Retail Banks and

Note also letter on the reliability of treatment of model limitations and assumptions to calculate credit risk capital requirements for Investment regulatory returns under Part Three, Title II, Chapter 6

(counterparty credit risk) of the CRR residential mortgages and definition of default take effect

firms

Asset PS 16/19 setting out the final rules updating the

PRA reporting requirements for ring-fenced bank reporting and the scope of Financial Reporting

Consultation on Pillar 2A capital requirements and macroprudential buffers.

Managers

(FINREP) to be reported by certain firms that are not currently required under the CRR.

Letter on enhanced liquidity monitoring by the PRA in the lead up to EU withdrawal.

CP 24/19 on proposed expectations of firms when managing the key prudential risks associated with asset encumbrance

CP 21/19 sets out proposed approach to implementing EBA’s recent regulatory products relating to PD and LGD estimation and the treatment of defaulted exposures in the Internal

R

01 May 2020 – proposed changes to Pillar 2 liquidity reporting (see here)

IRB approach to credit risk. (Delayed as a result of COVID-19).

Changes to branch returns for international banks

FCA

Changes to pre-issue notification requirements for issue of capital instruments.

To end 2020 - Transitional arrangements for exemption of certain public sector debt exposures from large exposure limits under Art 493(4)- (7) of

CRR apply Changes to SS7/13 on quality of capital.

Updates to prudential regulation of credit unions.

Consultation on updating lists of multilateral development banks


https://www.bankofengland.co.uk/prudential-regulation/publication/2019/counterparty-credit-risk-treatment-of-model-limitations-in-banks-internal-models

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2019/reliability-of-regulatory-returns.pdf?la=en&hash=8F35C11D18231BEC3C4B4AB19F646CFD0E889948

https://www.bankofengland.co.uk/prudential-regulation/publication/2018/regulatory-reporting-eba-taxonomy-29

https://www.bankofengland.co.uk/prudential-regulation/publication/2020/pillar-2a-reconciling-capital-requirements-and-macroprudential-buffers

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2020/removal-of-bespoke-liquidity-risk-appetite.pdf?la=en&hash=915382EC80C9E20CEDAD82F6247EA1E71B8094C2

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/asset-encumbrance

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/pillar-2-liquidity-pra110-reporting-frequency-threshold

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/supervising-international-banks-revision-of-the-branch-return

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/regulatory-capital-instruments-update-to-pin-requirements

https://www.bankofengland.co.uk/prudential-regulation/publication/2013/crdiv-and-capital-ss

https://www.bankofengland.co.uk/prudential-regulation/publication/2016/the-prudential-regulation-of-credit-unions-ss

https://www.fca.org.uk/news/news-stories/intention-consult-updates-lists-multilateral-development-banks



Priority

Modification by consent of the calculation of the total exposure measure of the Leverage

Ratio

The PRA and FCA have also taken steps to mitigate the impact of COVID-19. As this can change frequently and at short notice, it is not included in Headwinds, but more details can be obtained through your usual Simmons &

Simmons contact Regulatory capital Assuming the Withdrawal Financial Wholesale

Agreement is ratified by the EU and UK, CRR continues in force throughout 2020 with what is essentially a “hard Brexit” on 31 December 2020. On that date, the

Institutions Banks Retail Banks and Investment firms

CRR will be preserved in UK law, and the UK’s version of the CRR and other UK legislation implementing CRD4 will be amended. The key SIs can be found here and here, the

Asset Managers

Bank/PRA EU exit page here and the FCA EU exit page here. They may be amended further in the course of 2020

R

On the regulatory use of credit ratings, the FCA has found the EU regulatory and supervisory regime to be ‘as stringent as’ the UK’s regime for the purposes of allowing

UK-registered Credit Rating Agencies (CRAs) to endorse credit

ratings from affiliated EU CRAs


https://www.bankofengland.co.uk/prudential-regulation/authorisations/waivers-and-modifications-of-rules



https://www.gov.uk/government/publications/draft-capital-requirements-amendment-eu-exit-regulations-2018


https://www.bankofengland.co.uk/eu-withdrawal

https://www.fca.org.uk/brexit


Subsector Priority

Retail Distribution Review

Part of FCA’s retail market strategy, seeking to improve consumer trust and confidence in retail investment industry

2020 – FSA to measure long term indicators as part of the Post Implementation Review

Autumn 2020 – FCA to publish the final report on its evaluation of the RDR and FAMR

2020 – FCA expected to publish final report on feedback received to Call for input on evaluation of Retail Distribution Review and the Financial Advice Market Review


Asset managers

Insurance

Hedge funds


Service providers

A

Retail structured products

New horizontal legislation to apply to Packaged Retail Insurance-based Investment Products (PRIIPs) with respect to product disclosure (Regulation (EU) 1286/2014)

The PRIIPs Regulation (EU) 2016/2340 of 14 December 2016 apply from 01 January 2018

Q2 2020 – Joint Committee of ESAs to submit proposed amendments to Commission Delegated Regulation

31 December 2021 - transitional period for UCITS due to end (delayed by two years as amended by Regulation (EU) 2019/1156)

European Commission expected to complete review of PRIIPs Regulation during 2020


Asset Managers

All

All

A

Retail structured products

The Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019 (SI 2019/403) enter into force


Asset Managers

All

All

G

Ring-fencing and disclosures to consumers by non-ringfenced bodies

Segregating retail banking activities from investment banking activities

2020 - Bank of England/PRA to examine policies, governance and control arrangements and finalise arrangements to collect and analyse data submitted by banks

2020 - Bank of England/PRA to conduct review of proprietary trading by banks and designated investment firms

Before 01 January 2021 - HM Treasury to have appointed panel to review operation of ring-fencing regime


Wholesale Banks


Wealth

A


http://www.elexica.com/en/Resources/Microsite/RDR

http://www.elexica.com/en/Resources/Microsite/RDR

http://www.elexica.com/en/legal-topics/capital-markets/09-retail-structured-products




















Priority


Implementation of the Ring-fence regime by ring-fenced bodies

2020 - PRA to review whether proprietary trading is being carried out by ‘Relevant Authorised Persons

1 January 2021 – HM Treasury to have appointed panel to review operation of ring-fencing regime


Wholesale Banks


Wealth Ring-

fenced

bodies

G


Financial Services and Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015/547

1 January 2026 - Ring-fenced bodies prohibited from participating in multi-employer pension schemes, or have shared pension liabilities, with parties other than certain members of their groups


Wholesale Banks


Wealth Ring-

fenced

bodies

G

Securities Financing Transactions Regulations

EU Securities Financing Transactions Regulation (SFT Regulation) establishing a safer and more transparent financial system by placing additional requirements on counterparties to SFTs

11 April 2020 - reporting to trade repositories under SFT Regulation commences for MiFID firms and credit institutions (first trading day is 13 April 2020)

However, see here for details about how supervisory actions are delayed

Reporting to trade repositories under SFT Regulation commences: (i) 11 July 2020 – for CSDs and CCPs; (ii) 11 October 2020 – for all other financial counterparties incl. UCITS, AIFs, insurance/ re-insurance firms; (iii) 11 January 2021 – for non-financial counterparties and third countries entities

13 July 2020 - Regulators not to prioritise supervisory actions towards entities subject to SFT reporting obligations until 13 July 2020.

13 July 2020 - Trade repositories to be registered ahead of this date (but not before 13 April 2020).

31 July 2020 – ESMA expects trade repositories reporting under its guidelines to start reporting

2020 - European Commission to submit report to European Parliament and Council on effectiveness, efficiency and proportionality of obligations in SFT Regulation


Asset managers

Wholesale banks

All

R



https://assets.contentstack.io/v3/assets/blt3de4d56151f717f2/blt834bccf1d0fca88f/5e452536e80afe0d3736bb5c/The%20Securities%20Financing%20Transactions%20Regulation%20(SFTR)19000981v145605023v1.pdf

https://assets.contentstack.io/v3/assets/blt3de4d56151f717f2/blt834bccf1d0fca88f/5e452536e80afe0d3736bb5c/The%20Securities%20Financing%20Transactions%20Regulation%20(SFTR)19000981v145605023v1.pdf

https://www.esma.europa.eu/sites/default/files/library/esma80-191-995_public_statement.pdf



Priority

2020 - ESMA to submit report to European Commission on fees charged to trade repositories under SFT Regulation

11 January 2021 - Reporting obligation for nonfinancial counterparties commences.

2020/2021 - European Commission to submit report to European Parliament and Council on the application of supervisory fees

Shadow banking

Possible additional regulation and oversight of credit activity by non- banks (ie provision of sources of funding and alternatives to bank deposits which are not currently subject to the same levels of prudential regulation)

On 17 June 2019, FSB published a compensation progress report

See FSB global-monitoring report on non-bank financial intermediation 2018 (published February 2019)

See also 13th progress report on OTC derivatives market reforms, covering trade reporting of OTC derivatives, central clearing, platforms and capital; and margin requirements

01 January 2023 - Basel III post-crisis reforms to take effect (BCBS issues fourteenth Progress Report on adoption of Basel III)

Final report from BCBS-CPMI-IOSCO Derivatives Assessment Team contains recommendation for future reform, including reforms relating to initial margin and leverage ratio


Asset managers

Wholesale banks

All

G

Short Selling Regulation

Regulation creating pan-European short selling regime

European Commission to consider adoption of Level 2 measures following ESMA Final Report (21 December 2017) on evaluation of certain elements of Short Selling Regulation

European Parliament and Council of the EU to consider Commission Report on functioning of SSR


Asset managers

All

All G

Super-complaint by Citizens Advice

Citizens Advice has launched a “super-complaint” asking CMA to

July 2020 – CMA update on progress made in taking forward recommendations expected


All A


https://www.fsb.org/2019/06/fsb-publishes-compensation-progress-report/

https://www.fsb.org/2019/02/fsb-publishes-global-monitoring-report-on-non-bank-financial-intermediation-2018/



http://www.fsb.org/2018/11/otc-derivatives-market-reforms-thirteenth-progress-report-on-implementation/

https://www.bis.org/publ/othp29.pdf



Priority

look into the “loyalty penalty” in certain products, including mortgages, cash, savings, insurance, mobile and broadband

CMA has listed issues and tasked sectoral regulators with investigating these issues. CMA has also launched an investigation into anti-virus software sector and online gaming

CMA has set up a working group to oversee the implementation of recommendations made by CMA and published an update in January 2020. Ofcom also published an update at the same time on fairness for customers

Ofcom and FCA to work on issues raised by super- complaint

Technology Media and Telecoms

Sustainability and ESG

Published in March 2018, the European Commission’s Action Plan on Financing Sustainable Growth sets out objectives and action points to enable the transition to a low-carbon economy and a sustainable financial system

H2 2020 - Commission to gather feedback on use of guidelines on non-financial reporting

Commission to conduct work on improving association between corporate governance and sustainable investments


Asset Managers

All

R


27 Feb - Launch of COP26 Private Finance Agenda which aims to incentivize every professional financial decisions to take climate change into account

H2 2020 - FCA to assess resilience of firm’s strategies to net zero transition through stress tests and develop business relevant scenarios for regulators, financial firms and businesses

H2 2020 - FCA to enable investors to make informed decisions on whether companies and portfolios are transition ready and agree metrics to measure net zero alignment of investment portfolios

H2 2020 - Multilateral Development Banks (MDBs) to report own emissions and exposure to climate risks, in line with Task Force Climate-related Financial Disclosures


Asset Managers

All

All

A


ESMA’s Strategy on Sustainable Finance sets out its strategy for

Completion of regulatory framework relating to transparency obligations arising under


All R


https://www.bankofengland.co.uk/news/2020/february/cop26-private-finance-agenda-launched

https://www.esma.europa.eu/sites/default/files/library/esma22-105-1052_sustainable_finance_strategy.pdf

https://www.esma.europa.eu/sites/default/files/library/esma22-105-1052_sustainable_finance_strategy.pdf


Subsector Priority

taking into account sustainable business models and integrating ESG related factors in the areas it oversees

Disclosures Regulation ((EU) 2019/2088)

ESMA to submit advice to Commission on ‘greenwashing’

ESMA to advise, develop tools and build awareness of competent authorities to incorporate ESG factors into local supervisory practices

ESMA to monitor ESG related market developments

H1 2020 – Amendment of ESMA’s Technical Standards procedures to include ESG factors

Asset Managers All

Public Companies

Asset owners/ Investors

NCAs


Capital Requirements Regulation (CRR) II and Capital Requirements Directive (CRD) V Miscellaneous reforms

By 28 June 2021 - EBA to produce report on potential inclusion of ESG risks in SREP and, if deemed appropriate, to issue guidelines on uniform inclusion of ESG risks in SREP

By 28 June 2025 - EBA to produce report examining whether dedicated prudential treatment of exposures related to assets or activities associated substantially with environmental or social objectives (or both) justified


Asset Managers

All

All

Asset owners/ investors

G

Tax - Capping payable R&D tax credits for SMEs

UK Government has announced that it will introduce a cap on payable tax credit element of R&D tax relief for SMEs based on a multiple of three times the entity’s PAYE and NICs liabilities

Budget 2020 announced that the implementation of the cap will be delayed until April 2021

All All

A

Tax – Construction services – VAT reverse charge

UK will implement a VAT reverse charge on certain supplies of construction services

01 October 2020 – delayed implementation of Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 (SI 2019/892)

All All

R


https://www.esma.europa.eu/sites/default/files/library/technical_standards.xlsx

https://www.esma.europa.eu/sites/default/files/library/technical_standards.xlsx

http://www.elexica.com/en/legal-topics/fintech/010419-preventing-abuse-of-r-d-tax-relief-for-smes-consultation



http://www.elexica.com/en/legal-topics/tax/120618-vat-reverse-charge-for-construction-services


Subsector Priority

Tax - Disclosure of cross-border tax avoidance arrangements (DAC 6)

Council of the EU has adopted new mandatory rules for disclosure and automatic exchange of information concerning reportable cross-border tax avoidance arrangements

Affected taxpayers and intermediaries should consider their obligation to collect information for disclosure during the transitional period commencing on 25 June 2018

1 July 2020 - new rules to be introduced, although disclosure of affected transactions during transitional period is required by 31 August 2020

All All

Lawyers, Accountants, Banks and other Financial Advisers R

Tax - EU state aid proceedings (UK CFC rules)

European Commission has concluded that the finance company exemption in the UK CFC rules is contrary to EU state aid rules to the extent that it allows a partial exemption where activities are carried out in the UK

UK has made application for Commission decision to be annulled - number of UK-based multinational companies have made similar applications. If unsuccessful, UK will be required to recover illegal benefit received from UK multinationals under rules in place from 2013 to 2018

All All

A

Tax/Employment - Personal service companies in the private sector

UK Government will reform the IR35 rules applicable to the use of personal service companies in private sector, including making the engager responsible for operating the rules

From April 2021 – delayed implementation of changes but will only apply to “large and medium-sized” businesses

All All

R

Tax – Large business notification of uncertain tax treatment

From April 2021, large businesses will be required to notify HMRC when they take a tax filing position that HMRC is likely to challenge

27 May 2020 - Consultation period closes All All

G

Tax – Making HMRC a preferred creditor

UK Government published a consultation on 26 February 2019 entitled “Protecting your taxes in insolvency” proposing to make HMRC a preferred creditor in circumstances where a business has collected in taxes paid to it by third parties and goes into insolvency before passing on those taxes to HMRC

6 April 2020 - legislation to implement necessary changes to come into effect

All All

A


http://www.elexica.com/en/legal-topics/tax/220617-mandatory-disclosure-of-eu-cross-border-tax-planning




https://www.simmons-simmons.com/en/publications/ck801140l0tpg09702p42sf53/notification-of-uncertain-tax-treatment-by-large-businesses






Subsector Priority

Tax - Public Country by Country Reporting (CBCR)

EU Commission has proposed making CBCR public for the largest multinationals

EU Parliament has supported adoption of public CBCR

Negotiations continue at EU level with view to reaching compromise between the European Commission’s and European Parliament’s proposals

All All

G

Tax - Short term business visitors from overseas

UK Government consulted on possibilities for simplifying the administration for businesses where business visitors come to work in the UK from an overseas branch for short periods

HMRC has published guidance on the special arrangements which will apply to business visitors spending no more than 30 days in the UK in a year

All All

R

Tax - Review of enterprise management incentives

The UK Government has announced that it will review the EMI scheme to ensure it provides support for high‑growth companies to recruit and retain the best talent

Further details of the review awaited All All

G

Tax - Taxation of the digital economy

Increasing pressure for a new approach to the tax treatment of certain digital businesses, including those operating social networking and search engine sites and operators of auction site.

European Commission has proposed measures and OECD is progressing its programme to take forward proposals to address challenges of digital economy as part of BEPS 2.0

Meanwhile, individual countries such as France, Italy and the UK are introducing unilateral measures

Further progress awaited on Pillar One of OECD BEPS 2.0 programme

By end of 2020 - OECD is seeking to agree proposals

All All

G

Tax – UK Residential Property – 1% surcharge

The UK Government to introduce an SDLT surcharge on purchases of UK residential property by non- residents

1 April 2021 - 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland to apply

Surcharge to be legislated for in future Finance Bill

All All

G

Tax - VAT – postponed accounting for imports

From 1 January 2021, postponed accounting for VAT will apply to all imports of goods into the UK, including from the EU

Further details awaited All All

G


http://www.elexica.com/en/legal-topics/tax/310518-short-term-business-visitors-from-overseas



http://www.elexica.com/en/legal-topics/tax/250917-taxation-of-the-digital-economy-further-developments



http://www.elexica.com/en/legal-topics/tax/130219-1-percent-sdlt-surcharge-on-acquisitions-of-uk-residential-property-by-non-residents


Subsector Priority

Tax - VAT and e- publications

The UK Government has committed to a zero-rate of VAT to e-publications from 1 December 2020, covering e-books, e- newspapers, e-magazines and academic e-journals

Further details awaited All All

G

Transparent and predictable working conditions – EU Directive

The proposed directive provides for revised obligations to inform workers of key terms of their employment relationship and defines a set of minimum rights for those who meet the criteria (including a threshold of at least 3 hours per week). It is intended to benefit workers without fixed or guaranteed hours, such "gig economy" workers for companies like Uber and Deliveroo

Some of the new requirements already form part of the UK Government’s Good Work Plan, such as the right to a section 1 statement, although some further legislation would be required to ensure that UK law fully complies with the directive

The directive, which was adopted by the EU Council in June 2019, entered into force on 1 August 2019. Member States now have three years (until August 2022) to adopt laws, regulations and administrative provisions necessary to comply with the directive

See here for further information

01 August 2022 - Member States have three years to adopt the laws, regulations and administrative provisions necessary to comply with the directive

Transposition of Directive into UK law will depend upon whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

All All

G

Transparency Directive

European Single Electronic Format (ESEF).

29 May 2019, European

All All

R


https://www.consilium.europa.eu/en/press/press-releases/2019/06/13/better-working-conditions-in-the-eu-council-adopts-a-directive-on-more-transparency-and-predictability-at-work/


Subsector Priority

Commission published its delegated regulation on technical standards on the specification of the ESEF ((EU) 2019/815) (ESEF

RTS regulation) in the Official Journal.

12 July 2019, ESMA published an updated version of its ESEF

Reporting Manual EU issuers must prepare annual

financial reports for financial years beginning or after 01 January 2020 in an European single electronic format (as required by the

Transparency Directive). The digital format to be used is set out in an EU Delegated Regulation

13 December 2019, FCA published its amendments to the Disclosure

Guidance and Transparency Rules (DTRs) to require a single

electronic reporting format (as set out in the EU regulatory technical standard) for the annual report (following its consultation in

CP19/27 published in September 2019). These apply to annual

financial reports for financial years beginning on or after 01 January

2020. These obligations apply to all issuers irrespective of where they are incorporated

16 December 2019, Commission

Delegated Regulation (EU) 2019/2100 amending the ESEF RTS Regulation was published in

the Official Journal. It enters into force on 5 January 2020 and applies to annual financial reports containing financial statements for financial years beginning on or after 1 January 2020. The core




Priority

taxonomy used for the ESEF is based on the IFRS taxonomy, which is updated annually. Delegated Regulation (EU) 2019/2100 updates the ESEF RTS Regulation to account for these changes

UCITS

Cross border distribution of collective investment funds

30 June 2020 - ESMA consultation on Level 2 measures under Articles 5 and 10 of Cross- border Distribution Regulation to close

H2 2020 - ESMA and Commission to continue work on Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 - new legislation on cross-border distribution of collective investment funds to apply


Asset managers

Wholesale banks


Hedge funds


Service providers

A

UCITS

Integrating sustainability risks and factors

April 2020 – consultation expected on draft delegated acts in respect of integration of sustainability risks and sustainability factors in UCITS Directive and AIFMD

European Commission to adopt measures in due course in light of ESMA advice


Asset managers

Wholesale banks


Hedge funds

Institutional

managers

Service

providers

A


http://www.elexica.com/en/Resources/Microsite/UCITS




Priority

UCITS

Liquidity stress testing 20 September 2020 – ESMA guidelines on

liquidity stress testing in UCITS and AIFs to apply Financial institutions

Asset managers

Wholesale banks


Hedge funds


Service providers

A

UCITS

Performance fees in UCITS H2 2020 – ESMA guidelines on performance fees in UCITS and certain types of AIF likely to be published on website, to apply two months following publication


Asset managers

Wholesale banks


Hedge funds


Service providers

A

UK Listing Rules; Disclosure Guidance and Transparency Rules

Secondary equity issues

1 April 2020, the Pre-Emption Group issued a statement recommending investors consider supporting non-pre-emptive issuances of up to 20% on a case-by-case basis (as opposed to the current 5%+5% set out in their Statement of Principles)

The statement sets out the Pre-Emption Group's expectations of listed corporates if this additional flexibility is being sought

To 30 September 2020 – recommendation in place on temporary basis

All All

Listed and AIM companies

R




https://www.frc.org.uk/getattachment/9d158c89-f0d3-4afe-b360-8fafa22d2b6a/200401-PEG-STATEMENT.pdf



Priority

Investment Association also wrote to Chairs of all FTSE350 companies, on 8 April 2020, expressing their commitment to support British business through these unprecedented times. Whilst welcoming the Pre-Emption Group statement, the letter reminded issuers that IA members believe that the Pre-Emption Group guidelines should be respected, that in exceptional circumstances a cashbox may be the only approach suitable for a company, and that an issuer’s decision to use a cashbox will be scrutinised in the usual way by shareholders at the time of the next AGM

See COVID-19: Secondary equity issue considerations for UK

PLCs UK Listing Rules; Disclosure obligations All All Disclosure Guidance and FCA have published Primary Listed and Transparency Market Bulletin 27 to provide key AIM Rules commentary for issuers and market

participants in light of the Covid-19 pandemic

companies

Whilst the FCA recognises that there might be slight delays, in the short term, in issuers meeting their disclosure obligations, issuers are expected to continue to comply with their obligations under the

R

MAR and relevant FCA rules and to make every effort to meet them in a timely fashion

The FCA is also expecting persons discharging managerial responsibilities and ‘persons (who


https://www.theia.org/media/press-releases/investors-stand-uk-plc-letter-support-ftse-chairs



https://www.simmons-simmons.com/en/publications/ck8sja304166w0914wekzupto/covid-19-secondary-equity-issue-considerations-for-uk-plcs





Priority

are) closely associated’ to continue to meet their notification requirements under MAR within the prescribed time frame

UK Listing Rules; Quarterly consultation paper No 26 All All Disclosure (CP19/33) Guidance and Transparency Rules

6 December 2019, FCA published its Quarterly Consultation Paper 26

(CP19/33), which consulted on various proposed minor amendments to the FCA Handbook

Response was published on 27

March 2020 and states that:

LR 13 Annex 1 (Class 1 circulars) will be amended with effect from 27

April 2020 to provide that, for the purposes of the documents on display required for a class 1 transaction, the sale and purchase agreement (or equivalent document) does not need to be made available online. The issuer must indicate where it is available for physical or electronic inspection

R

LR 9.2, LR 14.3, LR 16.4, LR 17.3, LR 18.4, LR 19.4, LR 20.4 and LR

21.8 will be amended with effect from 27 April 2020 to require issuers with listed securities to keep publicly available in the NSM, at all times whilst the securities remain admitted to the Official List, either the securities' approved prospectus, a document with the securities' terms and conditions, or a description of the securities' rights and how to exercise those rights




Priority

UK Listing Rules; Disclosure

FCA CP20/3 5 June 2020 – consultation period closes All Listed companies

Guidance and Transparency Rules

6 March 2020, FCA published its consultation paper with proposed changes to the Listing Rules to enhance climate-related disclosures by issuers and to clarify

ESG disclosure obligations

A proposed new LR 9.8.6R(8) would require commercial companies with a premium listing to include a statement in their annual financial report setting out certain information about their climate-related disclosures, in particular whether it has made disclosures consistent with the

A

TCDF's recommendations

It also proposes to introduce new

LR 9.8.6BG and LR 9.8.6CG to refer to the materials that are relevant to determine whether disclosures are consistent with the recommendations

UK Listing Rules, Disclosure

Brexit Policy Statement Financial Institutions

All

Guidance and 20 March 2019, FCA published Transparency Rules Primary Market Bulletin No. 22

which summarises the key changes to the Listing Rules, the

Asset Managers

All

DTRs and the Prospectus Rules that will apply if the UK leaves the

TMT All

EU with no deal A 29 March 2019, FCA published the

Exiting the European Union: Listing, Prospectus and Disclosure Sourcebooks (Amendments) Instrument 2019 with its proposed

amendments to Listing Rules, Disclosure Guidance and



Subsector Priority

Transparency Rules and Prospectus Rules if UK leaves EU

with no deal on exit day

11 April 2019, UK Government made an equivalence determination that EU-adopted

IFRS is equivalent to UK-adopted international accounting standards

(UK-IAS) for the purposes of the Transparency Directive and when

preparing a prospectus under the

Prospectus Directive. UK government is working on updating the determination to reflect the

Prospectus Regulation

5 September 2019, The

Prospectus (Amendment etc.) (EU Exit) Regulations 2019 were

published. These amend the UK’s prospectus regime so that it continues to operate effectively once the UK leaves the EU

October 2019, FCA published

Primary Market Bulletin No 24 that includes an update on Brexit and a brief overview of FCA’s proposals for the European single electronic format requirements

6 September 2019, FCA published its Quarterly Consultation Paper No

25 (CP19/27) which includes Brexit-related changes that

would only come into effect if the UK leaves the EU without a deal.

Deadline for comments on these changes was 04 October 2019

See No deal Brexit: Listing Rules and DTRs for more information


https://www.simmons-simmons.com/en/publications/ck3sykl9cax8a0b36om4sbuui/no-deal-exit-listing-rules-and-disclosure-guidance-and-transparency-rules-dtrs

https://www.simmons-simmons.com/en/publications/ck3sykl9cax8a0b36om4sbuui/no-deal-exit-listing-rules-and-disclosure-guidance-and-transparency-rules-dtrs



Priority

UK Listing Rules, Disclosure Guidance and Transparency Rules

Primary Market Bulletin No 24

Primary Market Bulletin No 24 was published on 30 October 2019 and includes confirmation of the new technical and procedural notes that have been published in the FCA’s Knowledge Base, following consultation on them in PMB No 20

FCA is also consulting on an amendment to the existing technical note FCA/TN/409.1-Master-feeder structures and on a new technical note on class testing changes to an investment management agreement where there are quantifiable benefits

Comments on the proposed changes were due by 14 November 2019

FCA response awaited Financial Institutions

Asset Managers

TMT

All

All

All

A




Priority

UK Takeover Code Amendments to the Code

04 April 2019, Takeover Panel published Instrument 2019/3 with the final changes to be made to the UK Takeover Code when the UK leaves the EU, following its consultation paper (PCP 2018/2) and response statement (RS2018/2)

UK Government has also published The Takeovers (Amendment) (EU Exit) Regulations 2019 (Regulations) (and an explanatory memorandum) which make changes to Part 28 of the Companies Act 2006 which deals with takeovers

These changes are necessary as the EU Takeover Directive will cease to apply in the UK when the UK exits the EU and are being made to ensure that the UK takeovers regime operates effectively after exit

All All

A

Priority–Key

R Red–Requires immediate attention

A Amber–Important but not likely to require attention until the third quarter of 2020

This column reflects the level of attention which will be required to deal with the developments identified

G Green–Is not likely to require much attention until beyond the third quarter of 2020


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