The FCA has published Consultation Paper 17/17: Handbook changes to reflect the application of the EU Benchmarks Regulation (CP17/17).
In CP17/17 the FCA issues proposals that will ensure that its Handbook is consistent with the directly-applicable EU Benchmarks Regulation (BMR). The deadline for comments on CP17/17 is 22 August 2017 and a Policy Statement is expected in October 2017.
Some of the key points in CP17/17 are:
- senior managers and approved persons – benchmark administrators – the senior managers’ regime (SMR) currently applies to banks, building societies, credit unions and investment firms. The FCA proposes that the SMR should continue to apply to them if they become authorised or registered as benchmark administrators. Firms that are currently subject to the SMR are already required to allocate overall responsibility for each of their activities, business areas and management functions to a senior manager. That includes responsibility for benchmark activities. To ensure that the FCA can supervise benchmark administrators effectively, the regulator proposes to retain this requirement in relation to benchmark activities although it will not be defined as a ‘prescribed responsibility’;
- senior managers and approved persons – benchmark administrators – for administrators that are not subject to the SMR at the time they are authorised or registered, the FCA proposes that the Approved Persons Regime (APR) should apply to some extent. Like the SMR the FCA will need to be notified of the senior manager who has been given responsibility for the firm’s benchmark activities, but the FCA proposes to dis-apply those controlled functions that overlap with the BMR;
- senior managers and approved persons – benchmark administrators – the FCA does not propose to apply the certification regime to any roles related specifically to benchmarks. This is on the basis that the BMR contains requirements on administrators to ensure that employees are fit and proper;
- senior managers and approved persons – benchmark administrators – alongside the APR, the FCA proposes that the Handbook Statements of Principle and Code of Practice for Approved Persons will apply to approved persons;
- senior managers and approved persons – benchmark administrators – the FCA proposes that in relation to firms subject to the BMR, the Code of Conduct for Staff (COCON) will apply to all staff other than ancillary staff;
- senior managers and approved persons – benchmark administrators – the FCA proposes to include benchmark administrators in its extension of the SMR;
- senior managers and approved persons – benchmark contributors – the FCA notes that the BMR applies certain rules to supervised contributors to a benchmark, and the relevant draft technical standards will require a supervised contributor to identify the senior personnel responsible for its benchmark contributions. The FCA proposes, under the SMR or APR, to require contributors to notify it of that individual;
- prudential regime – the FCA proposes to maintain the prudential regime in MAR 8.3.13 to 8.3.16 only for those administrators that are responsible for benchmarks designated as ‘critical’ under Article 20 of the BMR. The FCA does not propose to impose any prudential requirements on other administrators;
- UK branches of third-country firms – the FCA proposes to apply the rules that apply to contributors in Article 16 of the BMR to UK branches of third country firms that contribute to a benchmark administered by a UK administrator. As those rules apply only to supervised contributors, the FCA proposes to apply them only to branches that are already regulated by it and that would be supervised contributors if their head office was based in the EU;
- proposed fees for administration and ongoing supervision of benchmark administrators – the FCA proposes to set authorisation fees based on the level of complexity of application, which would amount to £25,000 for critical benchmarks, £5,000 for moderately complex applications (significant benchmarks and all commodity benchmarks) and £1,500 for straightforward applications (non-significant benchmarks and endorsement of third-country benchmarks). The FCA will apply no Variation of Permission discounts to benchmark administrators; and
- information about the upcoming launch of the authorisation gateway – the FCA intends to make draft application forms for EU and third-country benchmark administrators available on 6 July 2017 for a short consultation period (until 6 August 2017).