Financial Regulation: What's on the minds of legal, risk and compliance professionals this year?


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Summary: What regulatory issues are UK financial firms currently facing? Earlier this year, over 300 risk, legal and compliance professionals answered the survey question, “What do you expect to be your top regulatory challenge in 2016?”, and the results are in. Our research has identified MiFID II, Financial Crime and the new Senior Managers and Certification Regime (SMCR) as the top three…

In January 2016, BLP’s financial regulation team held its annual ‘Emerging Themes’ event and launched its associated report - ‘Financial Regulation: Emerging Themes in 2016’. The publication offered insights into over 30 of the key regulatory issues facing financial institutions in 2016.

If you would like help with identifying and responding to the potential risks that you or your firm may face in the coming year, download a copy of the report.

We asked all those who registered to attend the event or downloaded the report to answer a survey question, “What do you expect to be your top regulatory challenge in 2016?”, to assist us in identifying the key issues that firms are currently facing. Over 300 legal, risk and compliance staff from a range of financial services firms (including banks, insurers, asset management firms) responded. As shown in the pie chart below, the top three regulatory challenges for 2016 were:

  1. MiFID II (24%);
  2. Financial Crime (16%); and
  3. The new Senior Managers and Certification Regime (10%).

Are You MiFID II Ready?

It is perhaps not surprising that MiFID II leads the way as the challenges of being ‘MiFID II ready’ continue to be at the forefront of people’s minds as firms prepare for implementation. Despite the fact that the implementation date has been pushed back a year, the task remains huge for firms, involving major technology build and operational and organisational change, as well as a wholesale re-write of the rules governing firms’ businesses.

Uncertainty around decision-making is accentuated by the fact that the Level 2 rules are yet to be finalised. We are continuing to work with a range of firms, whose MiFID II requirements all need to be tailored to their own individual business models.

Fighting Financial Crime

Financial crime comes in at number two, which is no doubt driven, at least in in part, by the FCA’s continued focus on it. The FCA’s Business Plan for 2015/2016 included financial crime as a key area of risk and highlighted that “During 2015/16 we will continue to focus on both anti-money laundering (including terrorist financing and sanctions) and anti-bribery and corruption measures”. 

Strengthening Accountability

The new Senior Managers and Certification Regime (for banks and PRA-authorised investment firms) takes the final spot on the podium, as personal accountability soars to the top of the FCA and PRA’s agenda in the wake of the various conduct-related breaches over the past few years. The new regime comes into force on 7 March 2016. Although the scope of the regime is focused on banks, other firms are also now taking a keen interest in the challenges it presents in light of the extension of the rules to cover all authorised firms by 2018 (see the Bank of England and Financial Services Bill).

We had hoped that the regulators would use the opportunity of reforming the personal accountability regime to make it a lot clearer to people what their personal regulatory duties required in practice. However, under the new regime, there is still no single place that Senior Managers can look and understand exactly what’s expected of them. Therefore, to help explain where the risks lie and most importantly, what Senior Managers are required to do – in practical terms - by the regulators with effect from 7 March, our Financial Regulation Group have produced a Senior Managers and Certification Regime Survival Guide.

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