Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry.
If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.
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MiFID II: RTS and ITS on acquisition of an investment firm
The European Commission has adopted a Delegated Regulation supplementing MiFID II with regard to RTS for an exhaustive list of information to be included by proposed acquirers in the notification of a proposed acquisition of a qualifying holding in an investment firm. Member States are required to make publicly available a list specifying the information necessary to carry out the assessment by competent authorities of a proposed acquirer of an investment firm. This information must be provided by the proposed acquirer at the time of the initial notification. The European Commission has also adopted an Implementing Regulation laying down ITS with regard to the standard forms, templates and procedures to be used for the consultation process between relevant competent authorities relating to the notification of a proposed acquisition of a qualifying holding in an investment firm.
MiFID II: ESMA updates Q&As
ESMA has updated its MiFID II Q&As to include new Q&As providing guidance on implementation of MiFID II covering the following topics: (i) best execution; (ii) recording of telephone conversations and electronic communications; (iii) market structures; (iv) commodity derivatives; and (v) data reporting. ESMA first published the Q&As in October 2016.
AIFMD and UCITS: ESMA updates Q&As
ESMA has updated its Q&As on the application of both the AIFMD and the UCITS Directive. The AIFMD Q&As include three new questions and answers on the reporting requirements for loans purchased on the secondary market, conversion of the total value of AUM and currency of the NAV. The UCITS Q&As include two new questions and answers on issuer concentration and group links, independence and cooling-off periods. ESMA last updated both sets of Q&As in May 2017.
EMIR: ESMA final report setting out RTS on data reporting
ESMA has published its final report setting out draft RTS on data to be made publicly available by trade repositories under EMIR. ESMA consulted on the draft technical standards in December 2016 and the final report summarises the feedback ESMA received to the consultation. Among other things, the final RTS: (i) establish general rules so as to ensure that the end users are able to aggregate and compare the aggregate position data published by TRs; and (ii) provide further clarifications related to the publication of data by TRs, specifically on the calculation of market activity and outstanding volumes for on and off-venue traded derivatives and the avoidance of double counting across different trade repositories. The draft RTS are set out in Annex II of the final report.
IOSCO consults on CIS liquidity risk management
IOSCO is consulting on recommendations for liquidity risk management for collective investment schemes with a view to amending its principles of liquidity risk management for CIS, which were published in March 2013. IOSCO is consulting on: (i) revisions to the existing recommendations relating to disclosure to investors, alignment between asset portfolio and redemptions terms, availability and effectiveness of liquidity risk management tools, and fund level stress testing; (ii) additional recommendations on contingency planning; and (iii) issues relating to exchange traded funds (ETFs). The consultation does not cover possible gaps in data to support optimal supervision, which IOSCO intends to consider separately. Comments are invited by 18 September 2017.
Update on CMU action plan mid-term review
The EU Council has published its conclusions on the European Commission's June 2017 mid-term review of the CMU action plan. Generally, the Council welcomes the Commission's communication, and underlines its continued strong commitment to the CMU. Among other things, the Council also: (i) supports the inclusion of the new priority initiatives proposed by the Commission, which aim to further strengthen the CMU as it is faced with new challenges; (ii) looks forward to the upcoming legislative proposal regarding the prudential treatment of investment firms; (iii) looks forward to examining the upcoming legislative proposal regarding an EU framework for covered bonds; (iv) encourages the Commission to assess options for a modern EU framework for the effective and binding resolution of investment disputes; and (v) underlines the importance of enhancing the efficiency of EU financial markets as a whole. This implies striking the right balance between harmonised rules and the need to cater for local and regional market characteristics, and to preserve well-functioning markets.
G20 communique from July 2017 summit
The G20 has published a communique and action plan following a meeting of finance ministers and central bank governors in Hamburg last week. Among other things, the G20: (i) reiterates its commitment to support the timely, full and consistent implementation and finalisation of the agreed G20 financial sector reform agenda; (ii) welcomes the FSB policy recommendations to address structural vulnerabilities from asset management activities; (iii) welcomes the FSB's review of the implementation and effects of the reforms to OTC derivatives markets; and (iii) welcomes and agrees with the supervisory and regulatory issues identified in the FSB report on financial stability implications from FinTech, as well as continued FSB monitoring of the evolving financial stability implications of FinTech developments.
EU work programme for 1 July to 31 December 2017
The Estonian Presidency has published its work programme for 1 July to 31 December 2017. Items of interest include: (i) CMU – the Presidency considers it important to progress with the CMU and will carry out the analysis on the mid-term review of the CMU action plan and prepare the conclusions of the plan; (ii) EMIR – the Presidency will work on the proposals resulting from the review of EMIR; and (iii) CCP recovery and resolution framework - the Presidency will advance the negotiations on the regulation on restoring the financial position of CCPs and crisis resolution, and if possible, try to attain the mandate of the Council to start negotiations with the European Parliament.
EU third-country equivalence regime
ESMA has invited the European Commission to widen the scope of its proposal to strengthen the EU third-country equivalence regime in light of Brexit. The Commission's recent suggested improvements in the way the EU deals with third countries in the financial services sector include access to information and the timely identification of changes in third-country legal and regulatory frameworks, practices, infrastructures and supervisory approaches. With the UK leaving the EU, a significant number of market infrastructures, and the corresponding activity, will be located outside the EU, while they will remain important for EU financial markets. This reinforces the need to build the CMU and increases the importance of third-country issues for EU financial markets. ESMA invites the Commission to consider whether similar proposals should be considered for other market infrastructures and key market players, such as third-country regimes for credit rating agencies, trade repositories and benchmarks, and possibly also for trading venues and data providers. ESMA is ready to provide technical advice to the Commission to help define in more detail the criteria to determine the different risk categories for each type of entity, and the corresponding regime for each category.
ESMA publishes guidelines under CSDR
ESMA has published guidelines on co-operation between authorities under the Regulation on improving securities settlement and regulating central securities depositories (CSDR). The aim of the guidelines is to ensure consistent, efficient and effective supervisory practices within the EU in respect of co-operation arrangements between supervisory authorities. ESMA has also published a consultation paper on guidelines on internalised settlement reporting under the CSDR, which clarify the scope of the data to be reported by SIs and the types of transactions and operations that should or should not be included. Responses are invited by 14 September 2017.
Short Selling Regulation
ESMA has published a consultation paper on the evaluation of certain elements of the Short Selling Regulation. The consultation is intended to help ESMA provide technical advice to the European Commission in respect of three main aspects of the Regulation: (i) the scope and functioning of the exemption for market making activities; (ii) the procedure for imposing a short term ban on short selling where there is a significant fall in price of a financial instrument; and (iii) the transparency of net short positions, and related reporting and disclosure requirements. ESMA states that its advice, which is to be delivered by 31 December 2017, should contribute to the follow-up actions announced by the Commission in its November 2016 communication on the call for evidence on the EU regulatory framework for financial services. Responses are requested by 4 September 2017.
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14 July 2017