CP15/11: Implementing the TDAD and Transparency Rule Changes

21 03 2015

Directive 2004/109/EC or the Transparency Directive (TD) operates principally to harmonise the requirements on companies regarding information disclosure. The TD (i) focuses on what information companies must disclose periodically, how they handle investor disclosures and how they distribute regulated information and; (ii) ensures that investors disclose their stakes in companies. Directive 2013/50/EU or the Transparency Directive Amending Directive (TDAD) amends the TD. It also amends Directive 2007/14/EC (the Transparency Directive Implementing Directive (TDID)) and Directive 2003/71/EC (the Prospectus Directive (PD)). The implementation of the TDAD is a responsibility that is shared between HM Treasury and the Financial Conduct Authority (FCA). Consultation Paper CP15/11 concerns the implementation of the TDAD and other Disclosure Rule and Transparency Rule changes. The European Commission reviewed the TD and the TDAD came into force on 26 November 2013. It undertakes a revision of the regime for notification of major holdings of voting rights, introducing the rule of aggregation of holdings of shares with holdings of financial instruments and harmonising the calculation of notification thresholds and exemptions from the notification requirements.

It is required that each Member State must implement the TDAD within 24 months of that date. At the Treasury’s request, the FCA implemented the new requirement to report on payments to governments, which is effective for financial years beginning on or after 1 January 2015. Moreover, the FCA has already removed the requirement to publish interim management statements from the DTRs. Both changes are reflected in the Disclosure Rules and Transparency Rules (DTRs) contained in the FCA Handbook. The implementation of the remaining provisions of the TDAD are addressed in this consultation. It is a joint consultation between HM Treasury and the FCA Read the rest of this entry »

Supreme Court: Widow’s Contractual Claim Against BP Upheld

20 03 2015

Braganza (Appellant) v BP Shipping Limited and another (Respondents) [2015] UKSC 17 (18 March 2015) 

This case was heard on appeal from a decision of Longmore, Rimer and Tomlinson LJJ, see [2013] EWCA Civ 230, and it threw up two connected questions of principle: first of all, the meaning of the general requirement that the decision of a contractual fact-finder must be a reasonable one; and secondly, the proper approach of a contractual fact-finder who is considering whether a person may have committed suicide. On 11 May 2009, Braganza disappeared between 1am and 7am, while on duty as the chief engineer on the British Unity (an oil tanker in the mid-North Atlantic managed by BP). The Court of Appeal was of the view that Braganza, an Indian national, had thrown himself overboard to commit suicide. Consequently, his widow, Mrs Niloufer Braganza, was precluded from receiving death benefits under her husband’s contract of employment, which contained a clause that compensation would not be payable if “in the opinion of the Company or its insurers, the death … resulted from … the Officer’s wilful act, default or misconduct”.

The question for Lord Neuberger PSC, Lady Hale DPSC and Lord Kerr, Lord Wilson and Lord Hodge JJSC concerned the proper test for the court to apply when deciding whether BP was entitled to reach the opinion it did. BP’s own inquiry about the disappearance, to improve its systems, identified six factors supportive of suicide and concluded that the most likely scenario was that Braganza deliberately jumped overboard. The six points related to (i) his behaviour being notably different on this voyage than on previous voyages; (ii) the shoes and sandals he usually wore on board were found in his cabin after his disappearance; (iii) e-mail messages received from his immediate family suggested that he had some family and/or financial difficulties that were causing him concern; (iv) he was not aware, before joining the ship, of its status and reputation and was reported to be unhappy about this Read the rest of this entry »

FEMR Consultation: How Fair and Effective are the FICC Markets?

1 11 2014

In its important consultation document published on 27 October 2014, How fair and effective are the fixed income, foreign exchange and commodities markets?, the Fair and Effective Markets Review (FEMR), has asked no less than 49 questions to restore trust in the wholesale markets which, as exposed by recent events, have been susceptible to abuse and cheating: see earlier post here. Headed by Nemat (Minouche) Shafik, the Bank of England’s Deputy Governor for Markets and Banking, Martin Wheatley (Chief Executive Officer, Financial Conduct Authority) and Charles Roxburgh (Director General, Financial Services, HM Treasury) as co-chairs, the FEMR, which was created by the Chancellor in June 2014 – see terms of reference – is expected to present its final recommendations in June 2015.

The FEMR intends to conduct an exhaustive and dynamic evaluation of the manner in which wholesale financial markets operate and over and above helping to restore trust in the Fixed Income, Currency and Commodities (FICC) markets the FEMR also aims to influence the international debate on trading practices. Earlier in the year (August 2014), the FEMR recommended and consulted on bringing another seven major UK-based FICC benchmarks into the regulatory perimeter originally rolled-out to regulate LIBOR. Read the rest of this entry »

Roger McCormick: We can’t have big, unruly banks that are out of control

26 10 2014

Ever-larger fines for bank misconduct have made headlines around the world, leading the London School of Economics and Political Science‘s Conduct Costs Project to estimate total costs between 2009 and 2013 for 10 major global banks at nearly £100 billion, plus a further £58 billion put aside in provisions at 2013-end. Roger McCormick of the LSE led the project, and he set up and now runs the CCP Research Foundation to build on its efforts. A former partner at law firm Freshfields Bruckhaus Deringer, he spoke with SNL Financial on the sidelines of the British Bankers’ Association annual conference in London about the purpose of fines.

This interview was published on the Conduct Costs Project Research Foundation website and has been republished here with permission and thanks.

By Christian Wuestner

SNL Financial: New U.K. regulations aim to increase accountability of senior managers at banks for failures, including introducing a new criminal offense. Is this a good idea?

Roger McCormick: I am pretty much on exactly the same ground as [Bank of England Governor] Mark Carney on that. I am sympathetic to the concerns it raises for people who are not used to the new regime, but you have to put it in context. Twenty-five years ago, there was a famous legal case in England called the Hammersmith and Fulham Case, sometimes called the Swaps Case, where a lot of banks entered into swaps contracts with English local authorities. The auditors of those authorities challenged the contracts, took it to the courts and won because the contracts were invalid. So the banks could not enforce those contracts. And they all complained to the Bank of England and other people: “We didn’t know about the legal risks involved in these contracts.” Read the rest of this entry »

Consultation on New Benchmarks entering the Regulatory Perimeter

1 10 2014

images-10The Fair and Effective Financial Markets Review (FEMR or the “review”) – a triumvirate headed by Nemat Minouche Shafik (Bank of England) and co-chaired by Martin Wheatley (FCA) and Charles Roxburgh (HM Treasury) – has the twofold objective of (i) reinforcing confidence in the fairness and effectiveness of wholesale financial market activity conducted in the United Kingdom and (ii) influencing the international debate on trading practices, including highlighting issues that can only be addressed through co-ordinated international action. The review, which is expected to produce a final report by June 2015, focuses on both regulated and unregulated wholesale markets – such as fixed-income, currency and commodity markets, including associated derivatives and benchmarks – in relation to which most of the recent concerns about misconduct have arisen.

However, at the Chancellor of the Exchequer’s invitation, until the delivery of the final report in June 2015, the review has recommended a list of additional major benchmarks across the fixed income, currency and commodity markets (FICC) that should be included in the regulatory framework originally implemented in the wake of the LIBOR scandal. The review considers the Wheatley Review of LIBOR 2012 to be the blueprint for reform and recalls that Mr Wheatley had envisaged adding further benchmarks to the present LIBOR regime (see here). The ambit of the review includes matters such as trading practices, scope of regulation, supervision of firms and markets and the impact of recent and forthcoming regulation. Read the rest of this entry »

Transposing the BRRD

28 09 2014

th-27Directive 2014/59/EU, or the Bank Recovery and Resolution Directive (BRRD), aims to ensure that the European Union (EU) effectively addresses the risks posed by the banking system. The BRRD contains 133 Recitals and stretches 132 Articles and it aims to create a harmonised framework across Europe for dealing with the problem of “too big to fail” through bank recovery and resolution. It entered into force on 2 July 2014 and establishes a common approach within the EU to the recovery and resolution of banks and investment firms. Article 130 (Transposition) exacts that the Member States shall adopt and publish by 31 December 2014 the laws, regulations and administrative provisions necessary to comply with the BRRD and that the text of those measures shall be communicated to the Commission and, save Section 5 (The bail-in tool) of Chapter IV (Resolution tools) which has an implementation deadline of 1 January 2016, the said measures shall apply from 1 January 2015.

As recorded in the initial recitals, the BRRD is firmly embedded in the belief that the financial crisis was of systemic dimension in the sense that it affected the access to funding of a large proportion of credit institutions. Therefore, in order to avoid failure, with consequences for the overall economy, such a crisis necessitates measures aiming to secure access to funding under equivalent conditions for all credit institutions that are otherwise solvent. Read the rest of this entry »

European Supervisory Authorities on Risk in EU Financial Systems

27 09 2014

The bi-annual report of the Joint Committee (JC) of the European Supervisory Authorities (ESAs) – i.e. the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) – has identified a number of risks to financial stability in the EU. These risks include uncertainties in global emerging market economies, an intensified search for yield in a protracted low interest rate environment, prolonged weak economic growth in an environment marked by high indebtedness and the risks related to conduct of business and Information Technologies (IT). Subsequent to the last report in spring 2014, the instant report focuses on the delicate economic recovery within the EU that can be observed in weak balance sheets both in private and public spheres. Presently favourable market conditions may conceal shortcomings in a weak economic environment and the ESAs consider high indebtedness and low private sector credit growth to be particularly testing and they place emphasis on continued structural reforms that drive improvements in competitiveness and revive lending.

On the one hand, the report explains that ongoing asset quality reviews and stress tests in the banking and insurance sector will present a clearer picture of asset quality and help improve the reliability of balance sheets of EU financial institutions. However, on the other hand, the report emphasises that ongoing balance sheet repair and debt restructuring should remain a key priority in moving forward. Read the rest of this entry »


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