Welcome to The MPAC Group, the UK's leading corporate compliance and regulatory advisory firm.

We have achieved this respect by working closely with our clients to meet their corporate regulatory, financial or legal obligations.

We believe client satisfaction is a function of people, solutions and delivery. At MPAC, our team of experts is comprised of experienced compliance officers, money laundering reporting officers (MLROs), senior regulators, qualified actuaries, lawyers and accountants from the financial sector delivering a wide array of services targeted to help our clients navigate through various corporate landscapes. Please take a look at how MPAC can help your business grow.

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and Money Laundering Reporting Officer Workshop".

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Data Protection Watchdog Plans to Fine Facebook

The data protection watchdog plans to fine Facebook £500,000 over the Cambridge Analytica scandal. If so, this would be the largest fine imposed by the ICO and demonstrates the ICO is getting tough. The fine is pursuant to the (old) Data Protection Act and pales into significance to the fine that may have been imposed had the incident happened under GDPR.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

GDPR & PECR: What is the Difference?

GDPR & PECR. What is the difference between these two topical accronyms? PECR (Privacy and Electronic Communication Regulations) regulates direct marketing whilst GDPR (the General Data Protection Regulations) regulate Personal Data. When you directly market, you normally have a contact name and email address which is Personal Data and hence GDPR will impact on your direct marketing campaign. Remember too, you broadly need prior consent to directly market to an individual (but not to a firm). The personal data you hold to allow you to do so however, will be subject to GDPR and must be managed accordingly. Contact us for more help with this.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

MIFIR Transaction Reporting Obligations

In the event your firm is a) subject to MiFID II/MIFIR and b) is engaged in one or more of the MiFID activities of (i) Reception and Transmission of orders in relation to one or more financial instruments, (ii) Execution of Orders on behalf of clients or (iii) Dealing on Own Account, it is highly likely that your firm will have Transaction Reporting Obligations (TRO) to the FCA via an Authorised Reporting Mechanism (ARM) from the go live date of 3rd January 2018.

Many MiFID investment firms will have been exempted from TRO under the existing MiFID or have been able to delegate this requirement to their clearers or prime brokers. In a MIFIR environment, we understand many clearers/prime brokers are walking away from offering this service.

Furthermore, the scope of the sub asset classes which will constitute financial instruments in a MiFID II/MIFIR environment has been significantly widened, bringing many more firms within the TRO net. Compared to the TRO under the existing MiFID, those under MiFIR are significantly more labour intensive, both in terms of content and data collection/reporting.

The FCA has been at pains to stress that their principal priority for investment firms subject to MiFID II/MIFIR is their Transaction Reporting obligations.

Should you still be unsure as to whether your firm is going to be subject to TRO under MIFIR/MiFID II, please do not hesitate to contact us by e-mail or phone (0203 056 0956) either Nick Andrews (e-mail: nick.andrews@mpacgroup.co.uk) or Philip Buckingham (e-mail: philip.buckingham@mpacgroup.co.uk) at MPAC Group at your earliest convenience for a no charge, no obligation conversation.

Notification Requirements in the Money Laundering Regulations for FSMA Authorised Firms

The FCA has updated its Money Laundering and Terrorist Financing notification requirement on 27th June 2017 to reflect the Money Laundering Regulations 2017 which came into force on 26th June 2017.

Firms are required to inform the FCA if they are undertaking Money Service Business (MSB) or Trust or Company Service (TCSP) activities. For the details of MSC and TCSP activities, please view here.

The reporting requirement only applies to FSMA authorised firms that are also supervised by the FCA under the Money Laundering Regulations 2017. Firms may need to notify the FCA in three situations:

  1. If authorised firms conducted MSB or TCSP activity before 26 June 2017, they must notify the FCA by 26 July 2017.
  2. If authorised firms begin to conduct MSB or TCSP activity after 26 June 2017, they must notify the FCA within 28 days of doing so.
  3. If authorised firms cease to provide either of these services, they must also notify the FCA within 28 days.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

FCA Investigations Under Senior Managers and Certification Regime ("SMCR")

The FCA responded to a Freedom of Information request from Allen & Overy in regards to the number of investigations opened into Senior Managers and Certified Persons under SMCR since 7th March 2016.

The FCA confirmed that:

  1. In the 11 months since the introduction of SMCR Regime, the Regulator has opened investigations into two individuals who are Senior Managers; and
  2. The FCA has opened 11 investigations since 7th March 2016 into individuals who are, or likely to be, certified persons.

The response to the Freedom of Information request is available here.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

PS17/5 Markets in Financial Instruments Directive II Implementation - Policy Statement I

On 31st March the FCA published its first Policy Statement on the implementation of The Markets in Financial Instruments Directive II ("MiFID II"), which covers issues consulted on with regards to 1) market issues; 2) systems and controls, client assets and commodity position limits; and 3) its proposals for recording of telephone conversations of retail financial advisors exempt from MiFID II.

The Policy Statement ("PS") highlighted the response from the FCA on issues they received the most feedback:

  • Multilateral systems - In the 1st consultation paper the FCA consulted on perimeter guidance on a multilateral system, where they expressed the view that the activities that will be regulated as a trading venue under MiFID II are broader than under MiFID. All of the final perimeter guidance will be in the next PS. On the specific issue of a multilateral system, ESMA is currently considering it and the publication of the FCA's perimeter guidance will depend on it.
  • Post-trade transparency deferrals - In the 1st consultation paper the FCA consulted on allowing trading venues to use the post-trade deferrals which national competent authorities (NCAs) are allowed to provide under MiFID II. The FCA will allow venues to use the maximum permitted deferrals. There will be no harmonised approach to the use of deferrals across the EU because of the national discretion provided in the Markets in Financial Instruments Regulation (MiFIR), but details of the regime in each Member State will be published by ESMA.
  • Transaction reporting and collective portfolio managers and pension funds - In the 1st consultation paper the FCA proposed that transaction reporting rules would only apply to firms required to transaction report under MiFID II. This would mean that the current requirement for collective portfolio managers and pension funds to transaction report will be removed - they will not be required to report transactions under MiFID II.
  • Transaction reporting and third parties - Respondents to the 1st consultation paper raised questions about the use by investment firms of third parties to provide transaction reports to Approved Reporting Mechanisms (ARMs) and the use of ARMs by trading venues, which led the FCA to propose some guidance on these issues in the 4th consultation paper which will be included in the final rules. In addition, investment firms providing transaction reports to the FCA directly can use third parties to assist them but must submit the reports themselves.
  • Handbook guides - In the 1st and 2nd consultation papers the FCA published Handbook guides to the implementation of MiFID II covering the markets provisions and its systems and controls requirements. All were well received by respondents and these guides will be advanced when they make the rules in the second PS. The FCA will provide a link to the eventual UK MiFID II transposition table as a response to the suggestions they received.
  • Taping - In 2rd consultation paper the FCA consulted on rules regarding the recording of telephone conversations and electronic communications ('taping'). In light of the feedback received the FCA intends to amend their approach such that Article 3 retail financial advisers (RFAs) are required either to tape all relevant conversations or to keep a contemporaneous note of all relevant conversations. The taping rules will be included in the June PS.
  • Asset management market study - In November 2016 the interim report on the asset management market study published by the FCA, provisionally proposed a package of remedies to address the issues they had found, as well as having links to issues covered in MiFID II and the Packaged Retail and Insurance based Investment Products Regulation (PRIIPs). The final package of remedies will be assessed to maintain consistency as the FCA finalises their rules for the implementation of MiFID II in the second PS in June.

The FCA will expect all regulated firms to continue with their preparations for the application of MiFID II on 3 January 2018. It is also particularly important that if firms need to make applications for authorisation or variation of permission linked to the changes in MiFID II that they do so as soon as possible. A second PS on MiFID II implementation will be published at the end of June at which point the FCA will make all of their final rules.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

JMLSG Publishes Proposed Revisions to Part I of its Guidance

On 21st March 2017, the Joint Money Laundering Steering Group (JMLSG) published proposed revisions to Part I of its guidance on the prevention of money laundering and the financing of terrorism for the UK financial services industry, which reflects the provisions of the proposed new Money Laundering Regulations published by HM Treasury on 15 March 2017.

JMLSG also made extensive changes to the material on electronic verification in Chapter 5 of Part I of its guidance, in order to address concerns that the present text is not even-handed enough, and does not reflect modern practices in the digital world. A significant part in Chapter 4 (Risk based approach) was reordered to present more clearly the separate text on Risk assessment and the risk based approach.

The revision is also believed to be consistent with the Risk Factor Guidelines which will be issued by the European Supervisory Authorities. The revision reflects what was proposed in the ESA Consultation version published in October 2015.

Comments on the draft Part I of JMLSA guidance are welcomed now. The deadline for comments is 28 April 2017.

The consultation is available here.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

Firms Continual Failure to Meet FCA Expectations on Use of Dealing Commission

Between 2012 to 2015, the FCA carried out an in-depth analysis of dealing commission expenditure across 31 investment managers, namely asset managers, wealth managers and host-authorised corporate director providers.

This has been a focus of the regulator in the past with the FSA publishing a thematic review of conflicts of interest in asset management firms in late 2012. With the FCA publishing a further policy statement on the use of commission dealing rules in 2014. These publications, which support COBS 11.6, outline the changes to the use of commission dealing rules in addition to the regulator's expectation of firms when spending their customers' money.

One of the main concerns arising from the review, included little or no improvements in the way firms are using their customers' money through their dealing commission arrangements. Some firms continue to use their dealing commission to purchase items such as corporate access and market data services - a clear breach of regulatory rules. Using dealing commission in this manner may result in the regulator considering further action, investigating where necessary. Furthermore, several firms were not recording their assessments to demonstrate they are using their customers' money appropriately, as detailed in COBS 11.6.3R.

In its review, the FCA have also assessed other areas such as systems, controls and record keeping as well as research budgets, research polls and voting as well as the ways in which firms are paying for research and conflicts of interest.

The full analysis can be found here.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

Investment Managers Failure to Ensure Effective Oversight of Best Execution

The FCA expects firms to deliver best execution to their clients at all times. In previous months, the regulator has conducted and published a thematic review on best execution and payment order flow and more recently an asset management market study with the aim of emphasising this expectation.

Following supervisory works, the FCA found firms had not addressed the guidance provided in its previous thematic review. Firms commonly lacked a cohesive strategy for improving client outcomes, which meant improvements were generally slow. Additionally, many firms hadn't completed a gap analysis for over 2 years.

Some firms did however carry out best execution during the investment decision making process, with some dealing teams providing regular feedback to portfolio managers on their preferred trading strategies.

On the equity side, there have been improvements with several firms reducing the cost of trading by using low cost trading venues, for example by using broker supplied algorithms and crossing networks for appropriate trades. The FCA also found that an effective governance process helped challenge the costs of execution in addition to identifying trends, improving future execution.

The regulator has highlighted the need for a strategy to be in place, which will enable all parts of the business to be compliant in ensuring best execution. A clear management responsibility and co-ordination between the front office and compliance will also allow for a robust monitoring framework.

The FCA expect all firms to be aware of how to enhance their best execution monitoring, in turn assessing whether the enhancements are suitable and proportionate to their business model. Firms must therefore improve current practices now to ensure they meet the obligations outlined in MiFID II to comply with future legal and regulatory requirements.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

MiFID II/MIFIR - Commodities Derivatives

The existing Markets in Financial Instruments Directive (MiFID) which has been in force since November 2007 is benign for firms engaged in commodities derivatives trading. The great majority of firms so engaged were doing so on an exclusive basis. They were therefore able to remain exempted either completely from the UK regulatory perimeter as unregulated firms or in a very limited way via the implementation of various exemptions from the full effects of MiFID. In the UK, such firms currently enjoy one of the following regulatory statuses - Local, Oil Market Participant, Energy Market Participant, BIPRU exempt Commodities Firm or IFPRU exempt Commodities firm.

Under MIFIR/MiFID II, however, the regulatory treatment of both commodities derivatives as an asset class and firms engaged in their trading will be significantly more onerous.

Spot physical trading will remain outside the scope of MiFID, however forwards, futures, options and CFDs on the following underlying commodities will come into scope:

  • Metals, including precious;
  • Energy products (oil, gas, coal and fuel oil);
  • Agricultural commodities;
  • Emission allowances;
  • All other commodities, such as electricity

Firms which were previously able to rely on exemptions from MiFID for their commodities derivatives activities under either article 2 (1) b), d) or k) or article 3 [Check references] will need to determine where their business will sit after the implementation of MiFID II/MIFIR on 3rd January 2018.

In the event that your firm is active in this asset class and has to date taken little (or no) action to understand a) what the consequences of the implementation of MiFID II/MIFIR are for its regulatory status or b) what the potential options available to you are, we would recommend you start the ball rolling as soon as possible.

Whatever post-BREXIT solution is agreed between the UK and the EU, the implementation date of MiFID II will precede BREXIT by at least twelve months. Inertia is therefore not an option, also because post-BREXIT the UK will be compelled to able to demonstrate superequivalence of its regulatory framework to ensure access to the EU for financial services firms.

MPAC is already assisting in scope firms to prepare for MiFID II. Whatever your state of preparedness for this significant regulatory change, MPAC would welcome an initial conversation to understand where your firm is and where it wishes to end up. We are able to guide you as to the options available to your firm at a strategic, operational and control level.

Please contact Nick Andrews or Philip Buckingham in the first instance either by e-mail (name.surname@mpacgroup.co.uk) or by telephone on 020 3056 0956.

FCA Proposes Stricter Rules for Contract for Difference Products

The FCA has published its proposal of stricter rules for firms selling 'contract for difference' (CFD) products to retail customers to ensure that consumers are appropriately protected.

CFD products are complex financial instruments offered often through online platforms. The FCA has growing concerns that more retail customers are opening and trading CFD products that they do not adequately understand. 82% of clients lost money on CFD products in the FCA's analysis.

The FCA is proposing a package of measures to limit the risks of CFD products and ensure that customers are better informed, including:

  • Introducing standardised risk warnings and mandatory disclosure of profit-loss ratios on client accounts by all providers to better illustrate the risks and historical performance of these products.
  • Setting lower leverage limits for inexperienced retail clients who do not have 12 months or more experience of active trading in CFDs, with a maximum of 25:1.
  • Capping leverage at a maximum level of 50:1 for all retail clients and introducing lower leverage caps across different assets according to their risks. Some levels of leverage currently offered to retail customers exceed 200:1.
  • Preventing providers from using any form of trading or account opening bonuses or benefits to promote CFD products.

Should you need any additional information, advice or assistance, please do not hesitate to contact us on +44 (0) 20 3056 0956 or email us on info@mpacgroup.co.uk

Acquisition Opportunity

We have a client that wishes to sell its regulated business.

It's an institutional broker (thus arranging, advising, agency) in shares and derivatives (including commodities). Company has been operational for a period and has no long term liabilities (legal, accounting or regulatory). If interested in such acquisition, please contact us for further details (NDA's will be needed).