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Podcast: Short Selling Regulation: FCA Final Notice

In this Ropes & Gray podcast, asset management partner Anna Lawry and litigation partner Judith Seddon discuss the Short Selling Regulation (SSR) and the recent enforcement action taken by the Financial Conduct Authority (FCA). They provide a brief explanation of the SSR and its requirements, followed by a discussion of the FCA’s first enforcement action under the SSR in October 2020.

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Podcast: COVID-19: European Regulatory Update for Asset Managers: 13 July 2020

Time to Listen: 15:56 Practices: Asset Management, Government Enforcement / White Collar Criminal Defense, Private Funds, Regulatory Compliance for Private Funds, Hedge Funds

Welcome to the fifth installment of Ropes & Gray’s European regulatory podcast for asset managers. These podcasts and accompanying speaker notes are intended to provide an overview of updates relevant to GCs, CCOs and other compliance professionals to help you navigate both COVID-19 and other developments relevant to your business. The speakers on today’s podcast are Eve Ellis, a partner in Ropes & Gray’s asset management group specialising in fund regulation, Rosemarie Paul, a partner in the firm’s litigation & enforcement group specialising in regulatory enforcement matters, and Paige Berges, litigation & enforcement counsel specializing in sanctions rules.

This update covers topics relating to the extension of aspects of the Senior Managers and Certificate Regime (“SMCR”) as a result of COVID-19, the Climate Financial Risk Forum (“CFRF”) guide for banks, insurers and asset managers on the integration of climate change risks, the UK’s global human rights sanctions regulations , capital rules for investment firms and Brexit developments.

COVID-19 Insights

COVID-19 updates

SMCR deadline extension

The UK’s Financial Conduct Authority (“FCA”) has announced further support to solo regulated firms by delaying the deadline for such firms to have undertaken the first assessment of the fitness and propriety of their Certified Persons from 9 December 2020 to 31 March 2021. This will give time to firms who are particularly hard hit by the COVID-19 crisis to make the changes they need.

The FCA will also consult on extending the deadline for the following requirements from 9 December 2020 to 31 March 2021:

  • the date the Conduct Rules come into force;
  • the deadline for submission of information about Directory Persons to the Register; and
  • references in the FCA rules to the deadline for assessing Certified Persons as fit and proper (which has been agreed by the Treasury).

The FCA notes that Senior Managers must ensure that Conduct Rules training is effective, so that staff are aware of the Conduct Rules and understand how they apply to them in their jobs. These programmes will require planning, time and effort to be delivered effectively and the FCA is planning to produce further communications about its expectations in this area.

Firms should continue with their programmes of work in these areas and, the regulator has said that if firms are able to certify staff earlier than March 2021, they should do so. Firms should not wait to remove staff who are not fit and proper from certified roles.

The FCA will still publish details of certified employees of solo firms starting from 9 December 2020 on the Financial Services Register.

The Certification Regime and reporting of Directory Persons do not apply to benchmark administrators, so the FCA does not intend to move the deadline for benchmark administrators.

Benchmark administrators have until December 2021 to train non-Senior Manager staff in the Conduct Rules and the FCA is not planning to extend this deadline.

Non-COVID-19 updates


On 29 June 2020, the CFRF published its guide for banks, insurers and asset managers of all sizes on the integration of climate change risks into their risk management and decision-making processes. The guide provides practical recommendations and guidance along four key priority chapters:

  • risk management – practical recommendations for embedding climate-related risks into governance and risk management processes through good practice, implementation steps and risk management frameworks;
  • scenario analysis – how firms can identify potential exposures to climate-related financial risks, develop suitable climate-related scenarios, and assess the financial impact of such scenarios on their business;
  • disclosures – practical recommendations (based upon the Task Force on Climate-related Financial Disclosures’ 7 principles for effective climate-related disclosures) for proper transparency to address climate risks and help the market assess the true value of assets; and
  • innovation – highlighting how capital can be mobilised for climate solutions via new financial, data innovation, and internal policies such as staff training and incentives.

The CFRF is co-chaired by the FCA and Prudential Regulation Authority (“PRA”) and includes banks, insurers and asset managers, and the Green Finance Institute and LSE Group. These recommendations emphasise the importance of ensuring climate change risks are considered by asset managers and reiterate that ESG issues are high up the regulatory agenda. The guide will also be useful in the context of the implementation of the EU Sustainable Finance Disclosure Regulations.

UK Global Human Rights Sanctions Regulations

The Global Human Rights Sanctions Regulations (the “Regulations”) came into force on 6 July 2020. These regulations are the first exercise of the UK’s independent sanctions jurisdiction put in place by the Sanctions and Money Laundering Act (“SAMLA”). First a bit of background – SAMLA was passed in 2018 in contemplation of the UK’s departure from the EU and granted the UK powers to implement UN sanctions as well as autonomous sanctions programmes. SAMLA provided the potential to implement what are known as “Magnitsky-style” sanctions in order to, among other things, “provide accountability for or be a deterrent to gross violations of human rights”, and “promote respect for democracy, the rule of law and good governance.” Taking this step now is indicative firstly that the UK is willing to implement autonomous sanctions regimes post-Brexit, and second, as expressed by Foreign Secretary Dominic Raab, the UK is committed to standing up against human rights violations.

However, this first round of designations is perhaps less noteworthy than some expected. 49 names (2 entities and 47 individuals) were added to the UK’s consolidated sanctions target list. These consisted of 25 Russian nationals involved in the killing of Russian lawyer, Sergei Magnitsky, 20 Saudi nationals involved in the killing of journalist Jamal Khashoggi, 2 Myanmar military generals, and 2 organisations involved in forced labor in North Korea. UK persons are required to freeze assets of these persons and they will be prohibited from entering the UK. These initial designations are not particularly controversial, and many of the names are already on U.S. sanctions lists. Indeed, according to the impact assessment of the new regulation, the UK government estimated that a majority of the listed individuals would already be listed under U.S. or Canadian sanctions regimes, and as I’ll talk about in a minute, designation is more likely where other countries have acted or plan to act. Some have said they expected and hope for designations to come related to China, including for the crackdown in Hong Kong and abuses against Uighurs and other minorities in Xinjiang. We are expecting to see more designations in the coming months – but it is as yet unclear who will be named.

We do however have clues from the Regulations and accompanying guidance and statements from the UK government, about the factors which will be considered when deciding whether to designate a person. The Regulations permit a Minister to designate a person if there are reasonable grounds to suspect that the person is “involved” in certain human rights violations, in particular, the violation of (i) the right to life; (ii) the right not to be subject to torture or cruel, inhuman or degrading punishment; and (iii) the right to be free from slavery or forced labour.

“Involved person” means those who are (i) directly involved in these activities; (ii) owned or controlled by someone involved in these activities; or (iii) acting on the direction of someone involved in these activities. The Minister must also be satisfied that the designation is appropriate having regard to the purpose of deterring or providing accountability for such activities, and the likely effects on that person.

Some of the factors the government will consider making designations going forward include:

  • the government’s human rights priorities which include media freedom, combatting modern slavery, preventing sexual violence in or related to conflict, freedom of religion or belief, torture prevention and the protection of human rights defenders;
  • the nature of the victim, particularly if violations are committed against human rights defenders such as journalists, civil society activists, and whistle-blowers;
  • the seriousness of the conduct, that is the scale, impact and nature of the human rights violation, e.g. if the conduct is systematic or part of a pattern of behaviour;
  • international profile and collective action – the government is likely to consider particularly cases where other international actors have acted or planned to act;
  • ·non-state actors – the government is likely to focus on non-state actors who have acquired a significant degree of control, authority and organisation over people or an area;
  • the status and connections of the involved person – in circumstances where there are a range of persons who could be considered for designation by virtue of their involvement in a human rights violation or abuse, the government is likely to consider which designation(s) would have most impact in providing accountability for the violation or abuse in question. This may involve considering, for example, the position of the person in the hierarchy of an organisation, and whether the person has particular links to the UK, including whether such persons would be particularly affected by travel or financial restrictions under the Regulations; and
  • the effectiveness of other measures, including law enforcement – the government is likely to give particular attention to cases where the relevant jurisdiction’s law enforcement authorities have been unable or unwilling to hold those responsible for human rights violations or abuses to account.

Capital regime for investment firms

The last few weeks have seen a couple of developments on the implementation of a UK prudential regime for investment firms as HM Treasury (“HMT”) released a policy statement and the FCA published a discussion paper on the topic. At an EU level, a capital regime for investment firms has been developed (the Investment Firm Regulation and Investment Firm Directive (“IFR/IFD”)). However, these will not be implemented until June next year and therefore after the end of the Brexit transition period. Accordingly, the UK is seeking to implement its own capital regime for investment firms. In the asset management space, the scope of the regime will include all firms subject to MIFID (e.g. investment advisers and portfolio managers) and fund managers (AIFMs and UCITS managers) who also perform MIFID services.

HMT’s policy statement makes it clear that the UK intends to implement the IFR/IFD for UK investment firms but with some adjustments to reflect the number, nature and size of investment firms in the UK and the structure of the UK market and how it operates. The FCA discussion paper has a similar message. The latter is a useful document as it sets out in detail the provisions of the IFR/IFD and the FCA’s views on some of these issues. It also includes various questions it is seeking feedback on, which suggest the areas it may consider deviating from the IFR/IFD on. These include areas such as calculating capital, prudential conciliation, group controls, liquidity, risk management, regulatory reporting, remuneration (and how this applies in group scenarios, remuneration principles and proportionality), ESG and public disclosure.

Feedback on the discussion paper is due by 25 September 2020 and the FCA plans to publish a consultation paper later this year.

The new regime will result in change for all investment firms and the level of change will depend on the type of activities you undertake. It is important firms begin to consider how the new regime will impact them and monitor the new rules as they are published.


The FCA intends to re-open the temporary permission regime (“TPR”) notification window on 30 September 2020 for inbound passporting EEA firms and funds. The FCA will communicate further on this issue in September but this statement provides guidance for EEA firms providing services and/or marketing funds in the UK under passporting arrangements.

Contact us

For more information on the topics we have discussed or other topics of interest, please visit our website at www.ropesgray.com. Also, if Eve, Rosemarie or Paige can help you navigate any of these areas, please do not hesitate to contact us. You can subscribe to this series wherever you regularly listen to podcasts, including on AppleGoogle and Spotify.
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