FCA Board Focuses on AI

By Latham & Watkins on September 13, 2023 Posted in Cryptoassets, Finance and Capital Markets

A new publication from the UK’s financial regulator signals to firms that they should take steps to manage risks in the use of AI.

By Stuart Davis, Fiona M. Maclean, Gabriel Lakeman, and Imaan Nazir

The UK’s Financial Conduct Authority (FCA) has published its latest board minutes highlighting its increasing focus on artificial intelligence (AI), in which it “raised the question of how one could ‘foresee harm’ (under the new Consumer Duty), and also give customers appropriate disclosure, in the context of the operation of AI”. This publication indicates that AI continues to be a key area of attention within the FCA. It also demonstrates that the FCA believes its existing powers and rules already impose substantive requirements on regulated firms considering deploying AI in their services.

Pension Superfunds Return to the De-Risking Menu

By Latham & Watkins on August 29, 2023 Posted in Employment and Benefits

The UK government has signalled the importance of introducing a permanent superfund regulatory regime.

By Victoria Sander

After the excitement around Clara-Pensions’ approval as a “superfund”, or pension consolidator, in late 2021, the market generally expected that other pension superfund structures would soon follow suit. Last year’s mini-budget and the ensuing liability-driven investment (LDI) crisis, which triggered intervention by the Bank of England, no doubt weighed negatively on the development of the pension consolidation market, along with an increased focus on investment strategies for pension schemes generally. The expected pipeline of further approvals failed to deliver new participants in a market which was to provide much-needed de-risking capacity alongside the burgeoning and highly successful insurance bulk annuity transfer market.

Hopes were revived by the Chancellor’s Mansion House speech on 10 July 2023, which commented on the fragmentation of the defined benefit (DB) pension scheme landscape in the UK and the importance of introducing a permanent superfund regulatory regime, presenting a key policy direction by the government.

On 10 August 2023, the Pensions Regulator (TPR) announced revised guidelines for pension superfunds. The original guidance, issued in 2020, established an interim regime for superfunds and set out tests for when a pension scheme would be appropriate to transition to a superfund.

This blog post examines the updated pension superfund guidance and provides a high level overview of the key changes.

FCA Publishes Further Engagement Papers on Prospectus Reforms

By Latham & Watkins on July 18, 2023 Posted in Finance and Capital Markets

The FCA reveals its initial thinking on the regulatory framework for primary multilateral trading facilities and public offer platforms.

By Chris Horton, James Inness, Anna Ngo, and Johannes Poon

On 13 July 2023, the FCA published its fifth and sixth engagement papers to solicit discussion and feedback on the regulation of public offer platforms and primary multilateral trading facilities (MTFs) under the new regime for public offers and admissions to trading.

UK Supreme Court Clarifies the Scope of the Quincecare Duty

By Latham & Watkins on July 14, 2023 Posted in Finance and Capital Markets, Litigation

The Court held that banks do not owe this duty to customers deceived into instructing their banks to transfer money to fraudsters.

By Nell Perks and Callum Rodgers

On 12 July 2023, the UK Supreme Court handed down its highly anticipated judgment in Philipp v. Barclays Bank UK PLC [2023] UKSC 25, allowing the appeal brought by Barclays Bank UK PLC (Barclays).

The Court’s decision, which resolved longstanding questions about the nature of the Quincecare duty, clarified that the Quincecare duty only arises in cases in which there is fraud by an agent acting for the customer. As a result, it cannot apply in circumstances in which the relevant payment was authorised by the bank’s customer directly, so it has no application in APP fraud cases. The Court overturned the decision of the Court of Appeal, which had expressly held that that it is “at least possible in principle” that the Quincecare duty could apply to a “victim of APP fraud” on the basis that the Quincecare duty “does not depend on the fact that the bank is instructed by an agent of the customer of the bank”. [1]

Funded Reinsurance: The PRA Flags Risks From Schematic Review

By Latham & Watkins on June 21, 2023 Posted in Insurance

UK regulator continues to raise concerns that current market practices could lead to systemic risk.

By Victoria Sander

The Prudential Regulation Authority (PRA) has issued another communication, the latest of a series related to reinsurance arrangements for the UK life insurance sector. Charlotte Gerken, Bank of England Executive Director, Insurance Supervision and chair of the PRA’s main executive committee, issued a letter on 15 June to Chief Risk Officers (CROs) communicating the PRA’s insights from its recent schematic review of funded reinsurance.

The PRA has identified reinsurance arrangements, which UK annuity providers use extensively, as an area of potential risk, including potential systemic risk due to increasing exposures to a limited number of longevity reinsurance providers to the sector. The latest missive focuses specifically on reinsurance under which the insurer transfers both asset and investment risk as well as the longevity risk to a particular reinsurer — a form of reinsurance increasingly popular for annuity providers writing large amounts of bulk pension annuity business.

Key Differences Between the UK and EU Vertical Block Exemption Regimes

By Latham & Watkins on June 9, 2023 Posted in EU and Competition

Whilst not a sea of difference apart, the two regimes present notable distinctions for companies operating on both sides of the Channel to navigate.

By David Little and Alexandra Luchian

Upon its expiry on 31 May 2022, the 2010 Vertical Block Exemption Regulation was replaced by the 2022 Vertical Block Exemption Regulation (VBER) in the EU and the Vertical Agreements Block Exemption Order (VABEO) in the UK. The European Commission (EC) issued its Vertical Guidelines at the same time whilst the UK Competition and Markets Authority (CMA) published its VABEO guidance in July 2022. Both the EU VBER and the UK VABEO allowed a one-year transitional period for agreements concluded before 1 June 2022 to be brought in line with the new regimes.

With both regimes now applicable to “old” and “new” vertical agreements alike, this blog post provides an overview of the key differences between the EU VBER and the UK VABEO. It follows and updates our previous blog post which included an outline of the main similarities and differences between the draft UK VABEO and the draft EU VBER (as of September 2021).[1]

FCA Commences Dialogue on Prospectus Reforms

By Latham & Watkins on May 22, 2023 Posted in Finance and Capital Markets

FCA takes an innovative approach to obtain feedback from industry and stakeholder groups.

By Chris Horton, James Inness, Anna Ngo, and Johannes Poon

In May 2023, the FCA launched a process of engagement and dialogue on how the UK’s future prospectus regime could operate. The FCA’s first thematic engagement papers, published on 18 May, aim to solicit discussion and feedback on: (i) whether or how to set prospectus requirements for issuers seeking admission to trading on UK regulated markets; (ii) whether or how to set prospectus requirements for issuers raising further capital; and (iii) how forward-looking information should be covered in prospectuses.

UK Government to Consult AI Firms and Creative Sector in Revising Text and Data Mining Exception Proposal

By Latham & Watkins on May 5, 2023 Posted in Copyright, Data Protection

The government has announced it will come up with a new code of practice to replace an earlier approach that faced opposition from the creative sectors.

By Deborah Kirk and Brett Shandler

Latham previously reported on the UK government’s proposal to introduce a new copyright and database exception that allows text and data mining (TDM) for any purpose, provided that the party employing TDM obtains lawful access to the material (June 2022 TDM Proposal). The UK government has now announced that it is abandoning this proposal, and intends to consult with AI firms and rightholders to produce a code of practice to support AI firms to access copyrighted work as an input to their models, whilst ensuring protections on generated output to support rightholders. It has foreshadowed that this code of practice, due by summer 2023, may be followed up with legislation if it is not adopted or agreement is not reached.

FCA Proposes Radical Reforms to Encourage UK Listings: 60-Second Read

By Latham & Watkins on May 3, 2023 Posted in Finance and Capital Markets

Proposals dramatically reduce the regulatory burden on listed companies.

By James Inness, Anna Ngo, and Johannes Poon

On 3 May 2023, the FCA published a consultation paper CP23/10 which sets out a blueprint for changes to the UK listing regime. The key reform proposed is that the existing premium and standard listing segments would be replaced with a single segment for commercial companies.

Court of Appeal Rules on Enforceability of Mandatory ADR Clauses

By Latham & Watkins on May 3, 2023 Posted in Dispute Resolution, Litigation

A recent decision reminds parties about the need to draft dispute resolution clauses that are tailored to the parties’ agreement.

By Oliver E. Browne and Duncan Graves

The Court of Appeal recently ruled that an alternative dispute resolution (ADR) clause in a contract was unenforceable due to lack of clarity. The ruling signals to contracting parties that they should draft ADR clauses carefully, outlining the process to be followed with sufficient detail and clarity so that the clause can be enforced.