Met Facilities

A message from Met Facilities CEO – Danny Kessler

Bethany Klarmann — Fri, 17 Apr 2020 09:00:48 +0000

Dear all,

Following our previous communications, I felt it the right time to remind you that you remain front of mind for us and to give you an update on what we at Met Facilities are doing to ensure there continues to be minimal disruption to your normal service.

We are living in uncertain and worrying times with a crisis that is affecting our lives in a manner none of us has experienced before. Above all my priority is the health and well-being of all my colleagues, AR’s, clients and friends of the Firm. Beyond that I want you to know that we are here for you and remain determined to carry on giving you the best advice and service that we can in the context of these unchartered waters.

The safety of both our people and our AR’s, and their clients is of absolute importance and we remain committed to respecting the advice outlined by the government. To help with the nation’s social distancing measures, as we all must, we have taken the step to temporarily close our office but our systems are able to operate remotely and we are pleased to say it has been a seamless transition. We are now encouraging our colleagues to work from home wherever possible and, whilst we love welcoming you into our home in Newman Street, we also think it is best to keep face to face meetings to a minimum. However, if meetings are essential we will be observing social distancing guidelines. Our remote working facilities, including video calls and conferencing have enabled us all to work together, whilst working apart very effectively. I want to reassure you that after many years of significant investment in technology you will continue to experience the same high levels of service from us. Our robust IT systems ensure that we are able to monitor and supervise regulatory activities to the highest levels providing the necessary on-going reporting to the Regulator and ensuring we all meet our obligations together.

One thing is for sure is that we are all becoming experts at telephone and video conferencing…

We are of course regularly communicating with our staff and AR’s, secondees, and their clients to ensure they all have the ongoing support they need, whether it be business critical information or simply a friendly catch-up. Please do let us know if you are having any challenges with which we can help in meeting your Firm’s obligations or just want some advice. Please just reach out to your normal contact in the Met Facilities team who will do everything they can to help.

I have also attached the latest news and guidance from the APCC (The Association of Professional Compliance Consultants for professionals who advise firms regulated by the FCA and the PRA in the UK) from their most recent meeting with the FCA. They have raised the delays many Firms are experiencing with matters that are with the Regulator, who has assured them that they are doing everything possible to prioritise matters appropriately. We will continue to lobby them accordingly.

However long this situation continues, you can be sure that we will remain fully committed to providing you with the best quality service possible and are here for you in any way we are able to help.

On behalf of all of us here we wish you all the best and hope that you, your family and friends stay safe and well.

Warmest regards,

Danny

Further information:
To read more, please follow this link:

APCC Meeting with FCA

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Financial Conduct Authority Statement on Assessing Suitability Review 2

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Financial Conduct Authority Statement on Assessing Suitability Review 2

Bethany Klarmann — Mon, 16 Mar 2020 12:02:33 +0000

The Financial Conduct Authority published a statement on its second review of the market for pensions and market advice.

The review will focus on consumer advice on retirement income. Due to an increasing number of alternatives available in retirement planning, the FCA deems it vital that consumers receive good advice when they gain access to their pension savings. The review will involve a representative sample to help better understand the retirement income advice market.

The FCA considers this review a key element in their wider strategy for the financial advice sector. The FCA’s other priorities in the sector include their ongoing work on defined benefit pension transfer advice, activities targeting pension and ‘investment scams’, and their focus on firms holding adequate financial resources and professional indemnity insurance. The FCA will also be focusing on how firms have implemented the Senior Managers and Certificate Regime.

The FCA aims to publish a report setting out the results of this review during 2020.

Firms should monitor further updates and developments in this area and ensure that Senior Management/Executive Product Management, Risk / Compliance, Sales and Marketing Teams are aware and consider the potential impact for existing processes, policies and procedures.

Firms should also appraise Board Members, Risk/Compliance, Audit and Finance Committees, enabling these forums to maintain oversight in accordance with internal
governance protocols.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/news/statements/fca-statement-assessing-suitability-review-2

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European Systemic Risk Board letter on issues raised with Alternative Investment Fund Managers Directive

Bethany Klarmann — Fri, 13 Mar 2020 14:00:12 +0000

The European Systemic Risk Board published a letter to the Director General for Financial Stability, Financial Services and Capital Markets Union to the EU Commission.

The letter consisted of the shortcomings of the current framework of the Alternative Investment Fund Managers Directive.

One noticeable feature was the statistic that the ESRB estimates that half of all funds reporting under AIFMD do not report, or possess a Legal Entity Identifier. It states that an LEI is crucial in analysing interconnected-ness, understanding group structures and linking AIFMD data with other data sources.

It also found that approximately 60% of Investment Funds’ Net Asset Values are classified as ‘Other’. It argues that systemic risk analysis would benefit from a revision to this fund classification approach.

The letter additionally speaks of the ongoing developing macro-prudential framework being created at EU level. The EU Commission plans to report its review of AIFMD in early 2020.

Fund Managers should continue to monitor developments in this area and review their current arrangements in respect of an LEI and the associated analysis and fund classification.

Firms should appraise Senior Management/Executive, Operations, Product Management, Sales and Marketing, Risk/Compliance, Fund Management Teams, with co-ordination by Change Management, ensuring that Board Members, Risk/Compliance, Audit and Product Management Committees are aware and maintain oversight, in accordance with internal governance protocols.

Further information:
To read more, please follow this link:
https://www.esrb.europa.eu/pub/pdf/other/esrb.letter_200205_AIFMD_framework~4ac870326f.en.pdf

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ESMA Consultation on Systematic Internalisers in Non-Equity Instruments Under MiFIR

Bethany Klarmann — Thu, 12 Mar 2020 11:00:49 +0000

The European Securities and Markets Authority published a Consultation Paper outlining proposed changes to the Markets in Financial Instruments Regulation regime for Equity Exchange-Traded Funds and related instruments.

The proposed changes are based on the analysis of the impact of the current regime, which came into effect in January 2018. Under MiFIR, Competent Authorities and ESMA should monitor the application of the pre-trade transparency obligations, which are applicable to Systematic Internalisers on Bonds, Emission Allowances, Structured Financial Instruments and Derivatives (Non-Equity Instruments). Monitoring should focus on size at which quotes are made to Investment Firm clients and to other market participants relative to any other trading activity of the firm, and how well these quotes reflect prevailing market conditions.

This Consultation Paper will explain the legal framework and a general overview on the European SIs. In addition, it will provide an assessment on the effectiveness of the regime for SIs and propose recommendations to address possible inefficiencies. The Consultation Paper also includes a summary of the questions, the legal mandate and other information in connection to the data that was used for monitoring.

This Consultation Paper intends to collect stakeholders’ views on ESMA’s findings and proposals. ESMA expects to publish a final report and submit it to the European Commission (EC) by July 2020.

Firms are advised to review the Consultation Paper and submit their comments by the deadline of 17 March 2020, with input from Risk/Compliance, Operations, Legal, Product Management and Trading Teams, with co-ordination by Change Management, ensuring that Senior Management / Executive Teams, Risk and Compliance Functions are overseeing, with Board Members, Finance, Audit and Risk Committees appraised and maintain oversight, in accordance with internal governance protocols.

Further information:
To read more, please follow this link:
https://www.esma.europa.eu/sites/default/files/library/esma70-156-1757_consultation_paper_-_mifir_report_on_si.pdf

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ESMA launches a Common Supervisory Action, with National Competent Authorities on Undertakings for the Collective Investment in Transferable Securities Liquidity Risk Management

Bethany Klarmann — Wed, 11 Mar 2020 11:40:18 +0000

The European Securities and Markets Authority issued a press release, launching a Common Supervisory Action with National Competent Authorities on the supervision of Undertakings for the Collective Investment in Transferable Securities Managers’ liquidity risk management across the European Union.

NCAs have agreed to simultaneously assess whether market participants in their jurisdictions adhere to the rules during their day-to-day activities. This will be based upon a common methodology, jointly developed with ESMA.

The initial stage of the CSA will require NCAs to request quantitative data from a majority of UCITS Managers, based in their respective jurisdictions in order to get an overview on the supervisory risks encountered.

In the next stage, NCAs will focus on a sample of UCITS Managers and UCITS to carry out a more detailed supervisory analysis. Throughout 2020, NCAs will share knowledge and experiences, via ESMA to ensure supervisory harmony on the approaches taken to supervise liquidity risk management.

The CSA will be conducted during 2020 and firms are advised to monitor further updates and developments in this area, with input from Risk Management/Compliance, Operations, Finance, Treasury, Product Management and Legal Teams, focusing on existing policies, processes, procedures, business models and terms and conditions, with co-ordination by Change Management.

Firms should ensure that Senior Management/Executive Teams, Board Members, Risk/Compliance, Finance, Audit Committees are appraised and maintain oversight in accordance with internal governance protocols.

Further information:
To read more, please follow this link:
https://www.esma.europa.eu/press-news/esma-news/esma-launches-common-supervisory-action-ncas-ucits-liquidity-risk-management

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FCA confirms TPR Notification Window Will Reopen

Bethany Klarmann — Tue, 10 Mar 2020 10:45:04 +0000

The Financial Conduct Authority published a press release on the information relevant to firms during the Brexit implementation period.

During the implementation period, ending on 30 December 2020, European Union law will still apply to all UK firms. Therefore, there are no changes to the reporting obligations for firms under the European Market Infrastructure Regulation.

The Temporary Permissions Regime will enable relevant firms and funds, which passport into the UK, to continue operating in the UK, until the end of the implementation period. The window for European Economic Area firms to notify the FCA if they are wish to use the TPR, will close on 30 January 2020. The FCA has decided to re-open the notification window later this year, allowing more firms to make notifications before the end of the implementation period.

Firms should monitor further updates and developments in this area, with input from Risk/Compliance, Legal, Operations, Product Management, Sales/ Marketing, Finance Teams, focusing on existing policies, processes, procedures, Business Model Client documentation, Terms and Conditions, with co-ordination by Change Management.

Senior Management/Executive Teams, Board Members, Audit, Risk/Compliance, Product Development and Legal Committees should be appraised and maintain oversight in accordance with internal governance protocols.

When the FCA reopens the TPR notification window, firms wishing to operate under TPR; but which have not yet submitted a notification, will need to act according to the deadline set by the FCA. Firms and Funds which have already submitted a notification will not need to take further action at that stage.

All firms should monitor further updates from the FCA regarding Brexit, in particular how the end of the implementation period will affect their business and customer relationships and what actions need potentially need to be taken, as a consequence of Brexit.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/news/press-releases/information-firms-during-brexit-implementation-period

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EBA Report on the Benchmarking of Diversity Practices

Bethany Klarmann — Mon, 09 Mar 2020 11:00:09 +0000

The European Banking Authority published a new bench-marking report on diversity practices in Credit Institutions and Investment Firms analysing the development since its 2015 diversity bench-marking exercise.

Despite the Capital Requirements Directive (CRD) introducing a requirement for Institutions to take into account the diversity of the Management Body when recruiting new members and implement a diversity policy, the EBA has identified that the representation of women in Management Bodies is still relatively low and many companies do not have a gender diverse board.

All Institutions are required to adopt a policy promoting diversity within their Management Bodies. However, diversity is not limited to gender, it also involves age, professional and educational background and geographical origin of the members of the Management Body.

In 2018, the EBA analysed whether there was a correlation between the profitability of a Credit Institution and the composition of the Executive Directors within the Management Body. Credit Institutions with Executive Directors of both genders seem to have a higher probability of a return of equity higher than Credit Institutions with Executive Directors of only one gender.

The EBA has also collected data on remuneration for the Management Body, to establish whether a gender pay gap exists. The EBA has identified that female members of the Management Body receive relatively lesser remuneration, and whilst only 8.53% and 9.49% of females hold the position of Chief Executive Officer and Chairperson respectively, the EBA state that the different roles alone cannot explain the observed differences in pay.

The EBA is mandated to benchmark gender-neutral remuneration practices and will continue work in this area.

Firms are should be aware of the EBA’s report on diversity practices, as the EBA will continue to monitor diversity in Management Bodies and issue periodical benchmark studies on diversity, expecting that firms are compliant with the requirement to adopt diversity policies.

Firms should bring this report to Senior Management/Executive Teams, HR, Board Members, Remuneration, Audit Committees to maintain oversight and review existing diversity arrangements, with a potential for changes to existing policies, processes and procedures.

Further information:
To read more, please follow this link:

EBA calls for measures to ensure a more balanced composition of management bodies in institutions
https://eba.europa.eu/eba-calls-measures-ensure-more-balanced-composition-management-bodies-institutions

Visualisation of Report Results
https://tools.eba.europa.eu/interactive-tools/2019/powerbi/bod_2019_visualisation_page.html

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EBA Publishes Final Report on Big Data and Advanced Analytics

Bethany Klarmann — Fri, 28 Feb 2020 11:00:33 +0000

The European Banking Authority published a Final Report on the Development, Implementation, and Adoption of ‘Big Data and Advanced Analytics in the Banking Sector.

The Report identifies recent Trends, Challenges and Possible Approaches in the Regulator’s efforts to maintain Technological Neutrality giving Firms the freedom to choose their own Tools and Technologies when pursuing ‘BD&AA’; the EBA does not wish to impose a single technological standard on all Firms.

The Report identifies four ‘Key Pillars’ that must be reviewed by Institutions to support the roll-out of BD&AA:

Data Management (i.e. the Control and Security of Data, including issues surrounding Data Protection, Data Quality, and differing Data Types/Sources)
Technological Infrastructure (i.e. The underlying Technology Platforms/Services needed to carry out ‘BD&AA’ activities)
Organisation and Governance (i.e. The appropriateness of Organisational and Governance Structures, including the development of Skills and Knowledge to support responsible ‘BD&AA’)
Analytics Methodology (i.e. The Formal Methodology to facilitate the Development, Implementation, and Adoption of an Advanced Analytics Solution)

Alongside the ‘Four Pillars’, the EBA identifies ‘Areas of Trust’ that must also be addressed:

Ethics: Any solution should adhere to Fundamental Ethical Principles in an ‘Ethical by Design’ approach
Explain-ability and Interpret-ability: A model should either have Internal Logic that can be directly understood by humans, or produce outputs that can be adequately justified to a human – This is a critical aspect of transparency Fairness and avoidance of bias: Models must protect Groups (e.g. Minorities, Vulnerable People) against Direct and Indirect Discrimination – i.e. Models should be free from bias against such Groups
Trace-ability and Audit-ability: Models should be fully auditable, likely facilitated using traceable solutions that enable repeated tracking of all Steps, Processes, and Criterion
Data protection: Data should be adequately protected within a System that complies with Data Protection Regulations (e.g. GDPR)
Data Quality: Data Quality must be considered throughout the ‘BD&AA’ Life cycle
Security: Firms must be aware of new Attack Techniques and ensure that Governance Arrangements and Technical Infrastructure facilitate effective Information and Communications Technology Risk Management
Consumer Protection: Any ‘BD&AA’ should respect Consumers’ Rights and Interests, with Consumers entitled to file a complaint and receive a response in plain English

Firms conducting ‘BD&AA’ activities should review and assess this Report, with input from Information Technology, Operations, Risk and Compliance, Change Management and Internal Audit Functions, ensuring that updates are made to Policies, Procedures and Processes and Business Models in accordance with Internal Governance Procedures, reflecting incorporating changes into their development, implementation, and adoption processes.

Senior Management/Executive Teams, Board Members, Risk/Compliance and Audit Committees should be appraised and maintain oversight.

Firms may wish to review existing controls and procedures to ensure that Data-Driven Initiatives are in alignment with the ‘Four Pillars’ identified by the EBA – e.g. Ensuring that Governance Structures effectively support the responsible use of Big Data, Machine Learning, and Advanced Analytics.

The Report signals a desire from the EBA to achieve a co-ordinated response across Supervisory Agencies. Firms should closely monitor future developments in this space.

Further information:
To read more, please follow this link:
https://www.europeanpaymentscouncil.eu/sites/default/files/kb/file/2019-12/EPC302-19%20v1.0%202019%20Payments%20Threats%20and%20Fraud%20Trends%20Report.pdf

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FCA Publishes Report on Asset Management Portfolio Tools

Bethany Klarmann — Fri, 28 Feb 2020 11:00:21 +0000

The Financial Conduct Authority published a Report on the use of Risk Modelling and other Portfolio Management Tools in the Asset Management Sector, based on interviews from Senior Managers at 10 Asset Management Firms of varying sizes and Operating Models.

The FCA found varied approaches to the use of Portfolio Management Tools:

A Single-Provider approach, where all Tools are provided in an Integrated Package by the same Provider
A Multi-Provider approach, where a Suite of Tools from various Providers are used
An In-house approach, where the Firm builds is own Custom Solution(s).

The Report notes the advantages and the disadvantages associated with these three general approaches, including trade-offs between Costs, Flexibility, and the Concentration of Risk in a Single Provider.

The Report also discusses different approaches across six Thematic Areas:

Vendor Management: The FCA notes that Firms typically took three approaches to managing Vendors, including:
- A Centralised Function to oversee all Providers
- A Decentralised approach, where each Business Line takes oversight of relevant Vendors, and
- A hybrid,where both business managers and a central function take responsibility

The FCA found that Firms have struggled to address issues arising from increasing Cyber Risks and Regulatory Changes, in addition to failing to align Vendor Management Programmes with levels of Risk.

Model Governance: Firms took varied approaches to oversee the Risk/Investment Models, including the use of Frameworks to assess a sample of Risk Models and the Validation of Models on an Individual Basis. The FCA notes difficulties surrounding Model Governance, partly due to lack of technical expertise on the part of the First and Second ‘Lines of Defence’
Managing Change: Firms are reluctant to change Front-Office Technologies because the process is Complex, Lengthy, and Costly. The FCA notes that Technological Change is often inhibited by Data Migration Issues and an inability to test new Tools effectively
Resilience and Recovery: Firms are not adequately preparing for outages of Service Providers, despite their Critical Operational Importance. The ‘FCA’ found weaknesses in the Frequency, Timing, and Storage of Critical Data Back-ups
Testing of Software: Firms took varied approaches to testing Software Upgrades, including over-reliance on Testing by Software Providers, Phased Roll-outs of Software Updates, and close engagement with Providers to fully scrutinise their Testing Arrangements. The FCA notes tension between the need to quickly implement changes and the desire to Test fully
Customer Expectations: Firms are not adequately managing Customer Expectations surrounding the use of Risk Modelling Tools, especially concerning instances in which Portfolio Managers overrule Model Outputs

Firms in the Asset Management Sector should review and assess the Report with input from Risk / Compliance, Legal, Operations, Information Technology,Front Office / Portfolio Managers, Business Continuity, Change Management and Finance Teams, ensuring that Senior Management / Executive Teams, Board Members, Risk /Compliance and Audit Committees are appraised and maintain oversight.

Firms should consider revisions to existing Processes, Policies and Procedures accordingly with revisions in accordance with Internal Governance Procedures, ensuring their implementation, oversight, and contingency arrangements in respect of these Tools enable them to comply with FCA’s expectations set out in the Systems and Control Handbook (‘SYSC’) and elsewhere. This includes ensuring that they can continue to function and meet Regulatory Obligations in the event of an unforeseen interruption to Risk and other Portfolio Management Tools.

Further information:
To read more, please follow this link:
https://www.fca.org.uk/publications/multi-firm-reviews/asset-management-portfolio-tools

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EBA launches a Consultation on Draft Regulatory Technical Standards on the treatment of Non-Trading Book Positions subject to Foreign Exchange, or Commodity Risk

Bethany Klarmann — Thu, 27 Feb 2020 11:00:43 +0000

The European Banking Authority published a Consultation Paper on draft Regulatory Technical Standards.

The Paper describes how Institutions should calculate Capital Requirements for Market Risks on the Non-Trading Book positions that are subject to Foreign Exchange Risk or Commodity Risk, under the Fundamental Review of the Trading Book.

According to the draft ‘RTS’, Institutions should use either the Last Available Accounting Value, or the Last Available Fair Value for positions that attract ‘FX Risk’. Firms are not required to perform a daily re-evaluation of Non-Trading Book positions attracting ‘FX Risk’. However, in line with International Standards, Firms are required to reflect on changes in the ‘FX’ Component, daily. For positions attracting Commodity Risk, a daily Fair Valuation should be performed.

The EBA expects that the Risk Management of the ‘FX’ Risk stemming from Banking Book Positions is performed consistently with the values that are chosen for computing Capital Requirements.

Items in a Foreign Currency that are held at Historical Cost, are subject to Foreign-Exchange Risks as those items may be impaired due sharp movements in the Exchange Rate.

In general, Non-Monetary items that are booked at Historical Cost, do not change their Balance Sheet Value with the movements in Exchange Rates. However, in case of an Impairment Indication (due to a sharp move of the FX rate and/or due to other circumstances), the Carrying Amount of an Asset, is the lower of its Carrying Amount before considering possible Impairment Losses (with the ‘FX Rate’ of the date of the transaction) and its Recoverable Amount (with the ‘FX Rate’ of the Reporting Date). Thus, in certain instances, a movement of the ‘FX Rate’, may also lead to ‘FX-Related’ Losses with respect to Non-Monetary Items that are booked at historical cost.

Consultation responses will be accepted until 10 April 2020. Firms are advised to review and assess the Paper with input from Finance, Risk/Compliance, Treasury Teams, coordinated by Change Management. Focus should also be given to changes in Policies, Processes and Procedures, ensuring that Senior Management / Executive Teams, Board Members, Risk/Compliance, Audit Committees are appraised and maintain oversight in accordance with Internal Governance Standards.

Senior Management and identify the likely impact on their Capital Requirement calculations and Business Models, while also keeping their Board and Audit Committee appraised.

Firms are advised to review the Paper and submit their comments by the deadline ensuring that Senior Management, Risk and Compliance teams are overseeing it with Board Members, Finance and Audit Committees appraised for governance purposes.

Further information:
To read more, please follow this link:
https://eba.europa.eu/sites/default/documents/files/document_library/Publications/Consultations/2020/Consultation%20Paper%20on%20draft%20RTS%20on%20the%20treatment%20of%20non-trading%20book%20positions%20subject%20to%20foreign-exchange%20risk%20or%20commodity%20risk/CP%20on%20draft%20RTS%20on%20FX%20and%20Commodity%20Risk%20in%20the%20BB.pdf