2013 in Financial Regulation – What’s Gone and What’s to Come

Thursday, January 30, 2014, 1:00 PM | Leave Comment

The global financial regulatory framework is currently undergoing a period of profound change. New regulatory authorities have been established in the UK amid this turmoil, which has made 2013 a year of uncertainty for the financial services sector.

Many of the changes that have been, or will be implemented are a direct result of the Retail Distribution Review (RDR), implemented by The Financial Conduct Authority (FCA) at the start of the year.

However, others stem from Basel III, CRD IV and Solvency II. Here are some of the key changes:

  • January/February

    The RDR took effect, January 1st – It aims to improve consumer protection from retail investors by banning financial advisors from taking commission from fund managers in exchange for recommending their wares to clients. It has allowed consumers to be much more demanding of their financial advisors and allows them to make better-informed decisions. The RDR has also caused better-prepared firms to ensure their advisors are brought up to the minimum qualification requirements if they had not already done so.

    The European Insurance and Occupational Pensions authority launched an impact assessment concerning the Solvency II capital adequacy package.

  • March/April

    CRD IV – a directive aimed at boosting bank capital and liquidity, and a direct application of Basel III, was approved by the European Parliament. The agreed text is currently undergoing a review of legal drafting and translation into different EU languages. Formal adoption is expected soon but the text will not be implemented before January 2014.

    In an attempt to provide consumers with greater choice and more efficient services, the European Parliament approved the European Markets and Infrastructure Regulation (EMIR). The trading of Over the Counter Derivatives (OTCs) now falls under these guidelines.

  • May/June

    The European Commission publishes the KIIDs proposal. A ‘Key Investor Information Document’ must be provided to anyone who invests in a fund which comes under the EU’s new regulatory directive, UCITS IV.

    The June 30th deadline for Solvency II to be transported into UK law was delayed due to slow legislative process. The implementation date is likely to be delayed until 2016. Solvency II reforms capital requirements for insurers and reinsurers and establishes a more sophisticated, risk-based set of capital requirements across the EU.

  • What’s to come:

    FATCA will come into force in 2014, requiring non-US financial institutions to report on their US clients to the Internal Revenue Service. This aims to combat tax-evasion by US taxpayers with offshore accounts. Failure to adhere to the rules will incur a 30% withholding tax on US-sourced income.

All these changes are likely to cause many fund managers, plan sponsors, and casual traders to think about adjusting their portfolios. UnaVista provides a tool that can help in the management of these changes.

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