Summary
FSA is consulting on the need for certain financial services firms to prepare and maintain Recovery and Resolution Plans (RRPs) and in addition for some of these firms, and others, to make further preparations for their investment client money and custody assets (CMA) holdings.
Why now?
FSA has published a guidance consultation on the prudential treatment of liquidity swaps. According to the FSA, a liquidity swap involves a liquidity transformation. Typically they involve transactions between an insurer and a bank whereby high-credit quality, liquid assets (such as gilts) held by an insurer is exchanged with illiquid or less liquid assets (such as asset-backed securities (ABS)) held by a bank. The proposed guidance will apply to all regulated firms transacting liquidity swaps (not just banks and insurers) and the deadline for responses is 21 September 2011.
Yesterday, the United Kingdom’s Commercial Secretary to the Treasury launched a consultation on a new special-resolution regime, Special administration regime for investment firms, to strengthen the government’s ability to handle future insolvencies of failing investment banks to minimize cost and disruption of the overall national financial system.
The U.K. Court of Appeal (the “Court of Appeal”) on Aug. 2, 2010, handed down a long-awaited decision regarding an appeal related to the scope of, and eligibility to receive distributions from, the Lehman Brothers Europe (International) (“LBIE”) pool of client money. Lehman Bros. Int. (Europe) (In Administration) v CRC Credit Fund Ltd. & Ors, [2010] EWCA Civ 917 (appeal taken from the Chancery Division) (U.K.).
FSA has censured a firm in voluntary liquidation for failings in selling and promoting geared traded endowment policies. Integrity Financial Solutions provided and advised on the policies. FSA found the product information it produced was misleading, which may have led IFAs to advise customers to buy an unsuitable product. It also found the firm’s own sales arm did not record information on customers and could not evidence why the product was suitable. FSA would have recommended a £350,000 fine if the firm were not in liquidation.
FSA made five sets of new rules at its March board meeting:
Protecting clients’ money and assets has been a pillar of the UK financial regulatory regime. The obligation on regulated entities to “…arrange adequate protection for clients’ assets when it is responsible for them” is enshrined in Principle 10 of the Principles of Business Sourcebook of the Financial Services Authority (FSA) Handbook. The FSA has made rules to protect client money by requiring FSA regulated entities to hold such money in trust accounts (the Client Money Rules).
Making a will is regarded by most individuals as a necessary irritant ranking in popularity somewhere below a visit to the dentist or doctor. Following the unprecedented instability in the global financial markets since 2007, “systemic” risk (posed by the potential failure of large or complex cross-border financial institutions) was identified by regulators and legislators as one of the key areas requiring better supervision, in order to prevent a similar crisis in the future.
The FSA has released a further update on Keydata Investment Services Limited. The update reads as follows:
"On 18 November 2009 the Luxembourg financial services regulator, the Commission de Surveillance du Secteur Financier (the CSSF) applied to the Luxembourg court for Eric Collard of KPMG ADVISORY s.a.r.l to be appointed as administrateur provisoire (provisional administrator) of Lifemark S.A. (Lifemark).
Today, the U.K. Treasury and Northern Rock plc separatelyannounced that the restructuring of Northern Rock will take place on January 1, 2010 (Transfer Date).