FCA has published this PS which provides feedback to CP13/5 and final CASS rules affecting all firms that are subject to CASS because they conduct investment business and hold client money, custody assets, collateral and/or mandates in relation to that investment business (or rely on an exemption contained within CASS). This includes loan-based crowdfunding firms who recently became subject to the client money rules in CASS 7, but does not apply to GI intermediaries that only hold client money in accordance with CASS 5 or debt management firms that only hold, or will only hold, client money in accordance with CASS 11. FCA will not proceed at present with the main proposals consulted on around client money distribution rules due to feedback received and implications arising from the Investment Bank Special Administration Regulations 2011 review. It will consult further on the topic later on in the year. FCA further notes that is liaising with HMT about notifying the EC under Article 4 of MiFID, due to the change to the rules which will require firms to provide the same information on safeguarding of client assets, as already required for certain client types, to all clients regardless of is additional to the relevant provisions within that Directive. The EC is also aware that FCA intends to notify it, on a precautionary basis, about three changes being introduced in this PS which might be interpreted as additional. FCA has set out a table at paragraph 2.4 of the PS which provides a summary of the changes being introduced in this PS (also available to download separately via the second link below) and the rule references implementing the changes (rules will come into force over the following dates: 1 July 2014, 1 December 204 and 1 June 2015).

FCA has published details of instruments passed at its Board meeting on 5 June 2014. These are: Retail Distribution Review (Complaints Data) Instrument 2013/35 and Client Assets Sourcebook (Amendment No 5) Instrument 2013/36. In addition, it notes that the Conduct Of Business Sourcebook (Use of Dealing Commission) (Amendment No 2) Instrument 2014/29 was approved at a Board meeting on 5 May 2014 and states that Instrument 2014/34 was approved at the June meeting and will be published at a later date. The Instruments will be available to download via the second link.

FCA has published the texts of three speeches made at the GI seminar on 2 June 2014. Clive Adamson’s speech “Our supervision overview” considers FCA’s achievements in its first year; key aspects of its new approach and how its experiences over the last year have informed its strategy and agenda for the sector over the next period. Items on the agenda include new rules on client assets; a review of key risks in complex distribution chains and the mixed responsibilities in them and work with Lloyd’s on the degree of oversight they can give in respect of managing agents’ conduct obligations. Christopher Woolard’s speech “Competition and insurance” looks at how FCA’s competition remit will influence the relationship between the regulator, industry and consumers, and what this means for the GI sector. Martin Wheatley’s “Good conduct and market integrity” considers wholesale and retail conduct issues.

The PS summarises feedback from CP13/17 on proposed changes to the use of dealing commission rules and includes final changes to COBS 11.6 (Appendix 1). FCA states that it has made small amendments to the final rules and guidance as well as clarifications in the PS as to the intention of the changes, but emphasises that it has decided to proceed with the main elements of the original proposals. It is noted that the PS does not comment on views expressed to it both in meetings and in responses to CP13/17 on the potential need for wider reform to the regime in the medium term – comment from FCA will be included as part of a further update later in 2013. This will also report on the findings of the regulator’s thematic supervisory work and discussions with buy-side and sell-side firms carried out between November 2013 and February 2014. FCA adds that the work is taking place within the context of MiFID II discussions and FCA anticipates that it will have to reflect the final MiFID II proposals in the rulebook to take effect by late 2016 or early 2017.1 If it were to consider any additional changes on a UK-only basis FCA would also seek to introduce this at the same time as applying MiFID II, in order to minimise the burden on firms. Rules come into force on 2 June 2014. The accompanying press release emphasises that FCA expects firms to ensure that they are acting as good agents and taking proper account of investors’ interests; that they spend their clients’ money “as though it was their own, seeking to manage costs with as much tenacity as they pursue returns” and that firms give clients clear information on the risks and costs of the service as well as ensuring that investment decisions reflect stated objectives.

FCA has published the texts of two Warning Notices dated 6 March 2014 which set out the reasons why FCA has given the unnamed inpiduals these Notices. The first of these concerns a CEO and director at an insurance mediation firm, who is said to have failed to act with due skill, care and diligence in relation to the handling of client money at the firm, and failed to ensure that the firm complied with the relevant requirements and standards of the regulatory system. The second concerns a director at an insurance mediation firm, who is said to have failed to take adequate steps to remain informed about the business and financial affairs of the firm, by relying solely on general verbal assurances as to the state of the business; failed to probe or challenge any verbal assurances made about the firm, despite having no reasonable basis to consider that the person making those verbal assurances had the necessary skills and competence to make them; and paid insurance premiums of another entity into a client premium bank account of the firm and received personal payments from the account.

FCA has published details of instruments passed at its Board meeting on 27 March 2014. These are: Handbook Administration (No 33) Instrument 2014/21; Financial Services Compensation Scheme (Management Expenses Levy Limit 2014/2015) (FCA) Instrument 2014/22; Capital Requirements Directive IV (Capital Buffers) Instrument 2014/23; Conduct of Business Sourcebook (Mutuals) Instrument 2014/24; Consumer Credit (Debt Management Client Money Supplementary Amendments) Instrument 2014/25; Client Assets Sourcebook (Amendment No 4) Instrument/26; Supervision Manual (Waiver Process) (Amendment) Instrument 2014/27; Consumer Credit (Statutory Notices) Instrument 2014/28. In addition, it passed FEES Manual (Financial Ombudsman Service Case Fees 2014/15 and notes the passing of three other Instruments which will be detailed at a later date. The Notice also sets out information on Crowdfunding and the Promotion of Non-Readily Realisable Securities Instrument 2014/13 (passed at the 27 February 2014 meeting, but not included in last month’s Handbook) The Instruments will be available to download via the second link.

FCA has now published the text of this speech, given at the American Bar Association Capital Markets Conference. He discusses global regulatory developments in capital markets; how the EU has reflected the trends and the UK perspective, including FCA’s work on enhancing the listing and sponsor regimes, client asset regime reform and broader work on wholesale conduct.

FCA has published the minutes of the Board meeting held on 12 December 2013. Topics discussed include: markets overview; the CASS regime; FCA risk outlook; budget and plans for FOS, FSCS and MAS.

IOSCO has published its final report with regard to the above, which sets out eight principles intended to provide guidance to regulators on how to enhance their supervision of intermediaries holding client assets by clarifying the roles of the intermediary and the regulator in protecting those assets. With regard to the first of these, the report outlines the intermediary’s responsibility to ensure compliance with these rules, including through the development of risk management systems and internal controls to monitor compliance. Where the intermediary places client assets with third parties, the intermediary should reconcile the client´s accounts and records with those of the third party

FMLC has published the text of its response to FCA’s CP. Specific issues raised include: records based distribution; CASS, central clearing and EMIR; client reporting and information; banking exemption; acknowledgement letters and identification of beneficiaries