Shearman & Sterling LLP | FinReg | Blog | MiFID II
Financial Regulatory Developments Focus
This links to the home page
FILTERS

The following posts provide a snapshot of the principal U.S., European and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.

  • US Securities and Exchange Commission Extends No-Action Relief for MiFID II Inducements and Research
    11/08/2019

    The U.K. Financial Conduct Authority has welcomed the U.S. Securities and Exchange Commission’s extension of no-action relief addressing a potential conflict between U.S. regulation and the inducements and research provisions of the revised Markets in Financial Instruments Directive. One of MiFID II’s objectives is to give investors transparency into the cost of both research and trading commissions by requiring payments for these elements to be unbundled. 

    Read more.
    TOPIC: MiFID II
  • EU Consultation on Changes to Position Limits for Commodity Derivatives
    11/05/2019

    Following its Call for Evidence issued in May this year, the European Securities and Markets Authority has launched a consultation on proposed revisions to the legal framework for position limits and position management in commodity derivatives. The position limits regime was introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA must provide the Commission with advice regarding this new regime to support the Commission's preparation of the report, including any recommendations for changing the legislative requirements. Responses to ESMA's consultation should be submitted by January 8, 2020.

    Read more.
    TOPICS: DerivativesMiFID II
  • UK Conduct Regulator Postpones Implementation Date for Brexit Contingency Plans
    10/30/2019

    The U.K. Financial Conduct Authority has extended the date by which firms must implement Brexit contingency plans following the extension of the Brexit deadline from October 31, 2019 to January 31, 2020. Firms and funds should now notify the FCA for entry into the temporary permissions regime by January 30, 2020 and fund managers have until January 15, 2020 to notify the FCA if they wish to change their existing notification. Firms should continue to comply with transaction and trade reporting requirements under the Markets in Financial Instruments Directive and European Market Infrastructure Directive, respectively.
     
    View the FCA's statement on contingency planning deadlines.
  • European Securities and Markets Authority Issues Public Statements on No-Deal Brexit Preparations
    10/07/2019

    The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019. 

    Read more.
  • European Securities and Markets Authority Consults on Alignment of EU Trading and Clearing Obligations
    10/04/2019

    The European Securities and Markets Authority has published a consultation paper on aligning the trading obligation under the Markets in Financial Instruments Regulation with the recent changes made to the clearing obligation under the European Markets Infrastructure Regulation by the EMIR Refit Regulation. Responses to the consultation should be submitted by November 22, 2019. ESMA intends to submit its final report to the European Commission in early 2020, with the Commission’s report to the European Parliament and Council expected by December 18, 2020.

    Read more.
  • European Securities and Markets Authority Publishes Opinion on MiFID II Frequent Batch Auctions and Double Volume Cap
    10/04/2019

    The European Securities and Markets Authority has published an opinion on frequent batch auctions and the double volume cap mechanism. The opinion follows ESMA’s report, published in June this year, reviewing firms’ use of frequent batch auctions and their potential as a means of circumventing the double volume cap and transparency requirements under the Markets in Financial Instruments Regulation and Markets in Financial Instruments Directive II.

    Read more.
    TOPIC: MiFID II
  • European Securities and Markets Authority Publishes 2020 Work Priorities
    10/01/2019

    The European Securities and Markets Authority has published its Annual Work Programme for 2020. The Work Programme sets out ESMA’s focus areas for 2020 and provides details of expected outputs within each of the areas. In 2019, the European Council, Parliament and Commission agreed on new tasks for ESMA, meaning that ESMA will take on an enhanced role in areas including direct supervision, supervisory convergence and investor protection. The final Regulations amending the scope of the European Supervisory Authorities’ work mandates are expected to be published in the second half of 2019.

    Read more.
  • European Securities and Markets Authority Issues Call for Evidence on Product Intervention Measures
    09/30/2019

    The European Securities and Markets Authority has issued a call for evidence on the impact of its product intervention powers prohibiting the marketing, distribution and sale of binary options to retail clients and imposing restrictions upon contracts for difference that were marketed, distributed or sold to retail clients. ESMA is seeking feedback from all interested stakeholders, in particular investment firms and banks providing investment services (particularly those that provide CfDs or binary options captured by the product intervention measures) and consumer groups and investors. Responses should be submitted by November 4, 2019.

    Read more.
    TOPICS: DerivativesMiFID II
  • International Organization of Securities Commissions Review of Suitability Requirements for Complex Products
    09/26/2019

    The International Organization of Securities Commissions has published a report, "Thematic Review on Suitability Requirements with respect to the Distribution of Complex Financial Products". The report summarizes the outcome of the review IOSCO undertook of a sample of member jurisdictions' implementation of the IOSCO 2013 Suitability Requirements for the Distribution of Complex Financial Products, which aims to prevent mis-selling of complex products. The Suitability requirements comprise nine principles relating to classification of customers, general duties regardless of customer classification, disclosure requirements, customers protections, incentives and enforcement.

    Read more.
  • No-Deal Brexit Uncertainty Leads EU to Suspend Assessment of Transparency Requirements on Bond Markets
    09/24/2019

    The European Securities and Markets Authority has confirmed in a letter to the European Commission that it considers it inadvisable to conduct an annual review in 2019 of the Regulatory Technical Standards on the transparency requirements for trading venues and investment firms for bonds, structured finance products, emission allowances and derivatives (sometimes referred to as RTS 2). The requirement for an annual review is stipulated in the Markets in Financial Instruments package, and ESMA's report could lead to legislative changes subjecting more bonds and derivatives to the transparency requirements. ESMA's assessment of RTS 2 would be impacted by the uncertainty arising from Brexit, in particular, the potential for a no-deal Brexit, because the outcome would vary depending on whether U.K. data was included or not.

    ESMA intends to conduct its annual review before July 2020 and to determine the impact on bond market liquidity of the U.K.'s departure from the EU.

    View ESMA's letter to the European Commission.
  • UK Conduct Authority Publishes Review Findings for EU Research Unbundling Rules
    09/19/2019

    The U.K. Financial Conduct Authority has published the outcome of its review of the research unbundling reforms implemented in the EU by the revised Markets in Financial Instruments Directive. MiFID II has applied across the EU since January 3, 2018. MiFID II restricts the payment or receipt of all fees, commission and non-monetary benefits ("inducements") unless these enhance the quality of service provided to a client, and do not impair an EU investment firm's duty to act in the best interests of its client. Any inducement that is a minor, non-monetary benefit is exempt from the limitation. Research provided by any third party (regardless of location) to an EU investment firm providing investment services or ancillary services will be regarded as an "inducement" and subject to the inducement prohibition, unless the research is received in return for either direct payment by the investment firm out of its own resources or payment from a separate research payment account (RPA). "Soft dollar" commissions are not allowed, unless these are done through an RPA. The rules have impacted buy-side and sell-side firms in the EU, as well as their non-EU counterparts.

    Read more.
    TOPIC: MiFID II
  • EU Restrictions on Contracts for Difference Lifted in Wake of National Measures
    07/31/2019

    The European Securities and Markets Authority has announced that it will not again renew its product intervention measure for Contracts for Differences. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU. ESMA's first restrictions on the marketing, distribution and sale of CfDs to retail clients applied from August 1, 2018 and was then extended every three months because ESMA did not consider that the consumer protection risk had been addressed. ESMA's view is that because most national regulators in EU member states have now adopted permanent measures, its own temporary restrictions do not need to be extended. The U.K. Financial Conduct Authority has imposed permanent restrictions on the sale, marketing and distribution of CfDs and CfD-like options to retail consumers. The rules will apply to all CfDs entered into from August 1, 2019, and to CfD-like options entered into from September 1, 2019.

    Read more.
  • UK Regulator Provides Guidance on Regulatory Perimeter and Crypto-Assets
    07/31/2019

    The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.

    The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.

    The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.

    Read more
  • EU Call for Evidence on the Impact of the Inducements and Charges Disclosure Requirements Under MiFID II
    07/17/2019

    The European Securities and Markets Authority has launched a call for evidence on the impact of the inducements and costs and charges disclosure requirements under the revised Markets in Financial Instruments Directive. MiFID II restricts the payment or receipt of all fees, commissions and non-monetary benefits (which are defined as so-called "inducements") unless these enhance the quality of service provided to a client and do not impair an EU investment firm's duty to act in the best interests of its client. EU investment firms are obliged to disclose to each client all fees, commissions and non-monetary benefits received by them in connection with any investment service provided by them to that client.

    Read more.
    TOPIC: MiFID II
  • EU Report on Sanctions and Measures Imposed under MiFID II in 2018
    07/17/2019

    The European Securities and Markets Authority has published a report on enforcement actions taken across the EU for breach of the revised Markets in Financial Instruments package. The report covers administrative sanctions and measures as well as criminal sanctions in aggregated form for 2018. ESMA notes that the data is limited because MiFID II has only applied since January 3, 2018, and some Member States were late in applying the requirements. Therefore, ESMA does not believe that it is possible to detect any trends using the limited data. ESMA will produce the same report annually, based on the submission of information from national regulators.

    View the report.
    TOPICS: EnforcementMiFID II
  • EU Consultation on Guidelines on Compliance Function Requirements under MiFID II
    07/15/2019

    The European Securities and Markets Authority has published a consultation paper on proposed guidelines on the compliance function requirements that are set out in the revised Markets in Financial Instruments package. The consultation closes on October 15, 2019 and ESMA intends to publish its final guidelines in Q2 2020. The final guidelines will replace ESMA's guidelines that were issued in 2012 under MiFID I because some of the 2012 guidelines are now set out in MiFID II or its secondary legislation and so reflect the enhanced role of the compliance function under MiFID II.

    Read more.
    TOPIC: MiFID II
  • EU Evaluates MiFID II's Success in Improving Trade Data Quality, Availability and Costs
    07/12/2019

    The European Securities and Markets Authority has launched a consultation on the development of pre- and post-trade transparency data and the functioning of the consolidated tape for equity instruments under the revised Markets in Financial Instruments package. The consultation paper sets out ESMA's initial views, taking into account feedback received during earlier roundtables and questionnaires. Responses to the consultation should be provided by September 6, 2019. ESMA will consider the feedback it receives in preparing its final report, which it intends to submit to the European Commission in December 2019. The final report will assist the Commission in preparing its review reports to the European Parliament and Council of the European Union, which are expected to be published in 2020.

    Read more.
    TOPIC: MiFID II
  • EMIR Refit: EU Clarification on Derivatives Trading and Clearing Obligations
    07/12/2019

    The European Securities and Markets Authority has issued a Statement clarifying the application and interaction of the EU derivatives clearing and trading obligations following the entry into force of the revised European Market Infrastructure Regulation, known as EMIR Refit.

    EMIR Refit has, subject to limited exceptions, applied directly across the EU since June 17, 2019. EMIR Refit amended the definition of a Financial Counterparty, bringing central securities depositories authorized under the EU Central Securities Depositories Regulation within scope and categorizing all Alternative Investment Funds as FCs (or, for non-EU funds, as third-country entities equivalent to FCs). It also introduced a clearing threshold for FCs, meaning that small FCs are exempt from the clearing obligation. In addition, Non-Financial Counterparties that meet the clearing threshold no longer must clear all derivatives that they enter that are subject to the clearing obligation, but only those derivatives in the asset class for which they have exceeded the threshold.

    Read more.
    TOPICS: DerivativesMiFID II
  • Firms Criticized for Non-Compliance with the EU Contracts For Difference Product Intervention Measures
    07/11/2019

    The European Securities and Markets Authority has published a Statement cautioning contracts for difference providers to comply with its temporary product intervention measure restricting the marketing, distribution or sale of CfDs to retail clients. The measure is due to expire at the end of the day on July 31, 2019, unless ESMA again renews it.

    In its Statement, ESMA states that it has noticed and is concerned that certain firms are not complying with the temporary CfD restriction or any similar permanent national measure. ESMA reminds firms that the temporary CfD restriction does not apply to eligible counterparties or professional clients, including to retail clients who opt to being treated as professional clients, as defined in the revised Markets in Financial Instruments Directive. However, firms must comply with the MiFID II requirements when dealing with a retail client that requests to opt up to being treated as a professional client, including by alerting clients to the loss of protection afforded by the temporary CfD restriction. ESMA also reminds firms that they should not incentivize a retail client to become a professional client by using language that promotes the status or benefits of professional clients.

    Read more.
  • UK Conduct Regulator Proposes Banning the Sale to Retail Clients of Derivatives Referencing Crypto-Assets
    07/03/2019

    The U.K. Financial Conduct Authority has launched a consultation proposing to restrict the sale, marketing and distribution of derivatives and exchange-traded notes that reference certain types of unregulated, transferable crypto-asset to all retail clients by firms in, or from, the U.K. The FCA consultation follows the final report of the U.K. Crypto-Assets Task Force in October 2018. The FCA's view is that although the U.K.'s market in crypto-assets is relatively small, there is still a consumer protection issue that needs to be addressed.

    Read more.
  • UK Regulator Justifies Ignoring EU Opinion on CfD Rules
    07/02/2019

    The U.K. Financial Conduct Authority has published a statement setting out its reasons for failing to act in accordance with the European Securities and Markets Authority's Opinion on the FCA's measures restricting the sale of Contracts for Difference and CfD-like options to retail customers. Where a national regulator takes product intervention measures under the Markets in Financial Instruments Regulation, ESMA must adopt an opinion on whether those measures are justified and proportionate. If ESMA's opinion states that the measures are not justified and proportionate and a national regulator declines to take action on the basis of ESMA's opinion, the national regulator must immediately publish a statement on its website explaining why it has adopted that course of action.

    Read more.
    TOPICS: MiFID IISecurities
  • EU to Lift Temporary Ban on the Sale of Binary Options to Retail Clients in Wake of National Measures
    07/01/2019

    The European Securities and Markets Authority has ended its temporary prohibition on the marketing, distribution or sale of binary options to retail clients. ESMA's product intervention powers under the Markets in Financial Instruments Regulation allow it to impose temporary prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern in the EU.

    Read more.
  • UK Regulator Publishes Rules Restricting Sale of Contracts for Difference and Related Options
    07/01/2019

    The U.K. Financial Conduct Authority has published the Conduct of Business (Contracts for Difference) Instrument 2019, implementing product intervention measures designed to restrict the sale, marketing and distribution of contracts for difference and contract for difference-like options to retail consumers. The rules will affect: (i) retail clients who invest, or may invest, in CFDs and CFD-like options; (ii) investment firms caught by the provisions of the Markets in Financial Instruments Directive (including those caught by the Capital Requirements Directive, where appropriate) that are involved in marketing, distributing or selling CFDs and CFD-like options in, or from, the U.K. to retail clients; and (iii) U.K. branches of third-country investment firms that are involved in marketing, distributing or selling CFDs or CFD-like options to retail clients.

    Read more.
  • European Commission Publishes Commission Delegated Regulation Amending Registration Conditions for SME Growth Markets
    06/21/2019

    An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/565) on requirements for participants in SME growth markets has been published in the Official Journal of the European Union. Regulation 2017/565 supplements related provisions under the Markets in Financial Instruments Directive, which establishes "SME growth markets" as a new type of trading venue for small and medium sized enterprises.

    Read more.
  • UK FICC Markets Standards Board Announces Consultation on Draft Statement of Good Practice
    06/20/2019

    The U.K. FICC Markets Standards Board has published a Transparency Draft of its new Statement of Good Practice on Conflicts of Interest. The Statement aims to provide guidance for participants in the fixed income, currencies and commodities markets on ways to identify and manage risks arising from conflicts of interest in the FICC markets. The guidance is particularly targeted at firms operating in Europe and the conflicts that may arise from the sale and trading of publicly listed or over-the-counter securities or financial instruments. 

    Read more.
  • UK Conduct Regulator Publishes Dear CEO Letter on its Wealth Management and Stockbroking Supervision Strategy
    06/13/2019

    The U.K. Financial Conduct Authority has published a "Dear CEO" letter addressed to wealth management and stockbroking firms, identifying the key areas of focus for its two-year Wealth Management and Stockbroking supervision strategy. In the letter, the FCA identifies the four key types of harm for customers in this sector as: (i) reductions in savings and investments due to fraud, investment scams and inadequate client money or assets controls; (ii) loss of confidence in the industry due to mismanagement of conflicts of interest and market abuse; (iii) reductions in savings and investments due to substandard order handling procedures and execution processes; and (iv) inability to understand the costs of services provided by firms as a result of insufficient or inaccurate disclosure.

    Read more.
  • European Securities and Markets Authority Publishes Final Report on Frequent Batch Auctions
    06/11/2019

    The European Securities and Markets Authority has published a final report presenting the feedback to its November 2018 call for evidence, which sought to improve its understanding of "frequent batch" auction systems and their use in the circumvention of the "double volume cap" imposed under the Markets in Financial Instruments Regulation and transparency requirements under the revised Markets in Financial Instruments Directive (or MiFID II). ESMA intends to produce further guidance on areas highlighted in the report, particularly focusing on price determination and pre-trade transparency, and will review the broader effects of the MiFID II transparency regime.

    Read more.
    TOPIC: MiFID II
  • European Securities and Markets Authority Launches Common Supervisory Action on MiFID II Appropriateness Rules
    06/03/2019

    The European Securities and Markets Authority has announced that it will launch a common supervisory action in the second half of 2019 on the application of the appropriateness requirements under the revised Markets in Financial Instruments Directive. The action will be undertaken as part of ESMA's mandate to build a culture of common supervision among EU national regulators.

    Read more.
  • Revised EU Statement on the Share Trading Obligations in a No-Deal Brexit
    05/29/2019

    Following concerns regarding its March 19, 2019 statement, the European Securities and Markets Authority has published a revised statement on the impact of a no-deal Brexit on the trading obligation for shares where no decision on the U.K.'s equivalence as a third country market has been made. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The U.K. has adopted this requirement in its onshored MiFID II legislation. Similarly, following its exit from the EU, the new U.K. on-shored share trading obligation would restrict trading of shares in the U.K. to trades on U.K. trading venues unless a third-country equivalence decision was made.

    Read more.
  • EU Authority Asks for Feedback on the MiFID II Position Limits Regime for Commodity Derivatives
    05/24/2019

    The European Securities and Markets Authority has published a Call for Evidence on position limits and position management in commodity derivatives introduced by the revised Markets in Financial Instruments Directive. MiFID II requires the European Commission to report to the European Parliament and the Council on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets. ESMA has been asked to provide the Commission with advice regarding this new regime to support the Commission's preparation of the report.

    Read more.
    TOPICS: DerivativesMiFID II
  • European Commission Investigates Anti-Competitive EU Loan Syndication
    05/05/2019

    A report examining competition within the European syndicated loan market has been published, following a call by the European Commission for an examination of the sector. The report was prepared at the request of the Commission by consultancy firm Europe Economics with input from boutique competition law firm Euclid Law.

    Read more.
  • EU Technical Advice on Incorporating Sustainability Factors Into EU Regulation
    05/03/2019

    The European Securities and Markets Authority has published its final report and technical advice to the European Commission on incorporating sustainability risks and factors into European regulation. The European Commission sought advice from ESMA and the European Insurance and Occupational Pensions Authority in July 2018 on the introduction of environmental, social and governance considerations into the Markets in Financial Instruments Directive II, the Insurance Distribution Directive, the Alternative Investment Fund Managers Directive, the Undertakings for Collective Investment in Transferable Securities Directive and the Solvency II Directive. The introduction of sustainability considerations into European regulation sits against the backdrop of the European Commission's Sustainability Action Plan, which aims to encourage sustainable investment and mitigate climate change risk in line with the 2016 Paris Agreement and UN 2030 Agenda for Sustainable Development. In response, ESMA opened consultations seeking input from stakeholders, which closed on February 19, 2019.

    Read more.
  • Further Extension of the EU Contracts for Difference Product Intervention Measures
    04/30/2019

    The European Securities and Markets Authority has issued a Decision renewing and amending the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients. This has now been published in the Official Journal of the European Union. ESMA announced on March 27, 2019, that the existing restriction would be extended on the same terms as the previously implemented temporary restrictions. The CfD Decision applies directly across the EU from May 1, 2019, for a period of three months.

    View the decision.
  • UK Regulator Delays Final Product Intervention Measures on Contracts for Difference
    04/26/2019

    The Financial Conduct Authority has published a statement on the delay to publication of final rules for contracts for difference products and CfD-like options. The FCA has consulted on its proposals to make European Securities and Markets Authority's temporary product intervention measures permanent in the U.K. The FCA's proposed interventions are the same in substance as ESMA's, although it is also proposing to apply its rules to closely substitutable products and on extending these measures to exchange-traded derivatives. The consultation closed on February 7, 2019.

    Read more.
  • EU FOREX Broker Faces Proceedings in Czech Courts Brought by "Consumer" Client Following EU Opinion
    04/24/2019

    Individuals who act outside their trade or profession when instructing brokers to execute FOREX contracts on their behalf must be regarded as "consumers" for the purposes of the Recast Brussels Regulation, according to a recent opinion issued by the Advocate General of the Court of Justice of the European Union. This applies regardless of the expertise of the individual or their active involvement in placing orders. Under the Recast Brussels Regulation (which governs jurisdiction between EU member states), "consumers" are entitled to bring proceedings before the court of the Member State in which they are domiciled, as opposed to being obliged to rely on the courts of the respondent counterparty's Member State.

    In this case, the claimant, a student domiciled in the Czech Republic, had entered into an agreement for the execution of contracts for difference in the FOREX market via Cypriot brokerage company FIBO Group Holdings Ltd. The agreement was expressly subject to the jurisdiction of the Cypriot courts. The claimant brought a claim in the Czech court, alleging that FIBO had been unjustly enriched when the claimant's instructions to close out a position in U.S. dollars were not acted on promptly. The time delay meant exchange rates had changed before the trade was executed, significantly reducing her profit.

    Read more.
  • European Securities and Markets Authority Publishes Supervisory Briefing on MiFID II Appropriateness Rules
    04/04/2019

    The European Securities and Markets Authority has published an updated version of its supervisory briefing on appropriateness. The original appropriateness briefing was published in December 2012 to provide guidance to EU national regulators on the appropriateness requirements under the original Markets in Financial Instruments Directive. The updated appropriateness briefing reflects the amended requirements introduced by the revised Directive or MiFID II and takes into account the new version of ESMA's suitability guidelines published in May 2018 to the extent they are relevant to the appropriateness rules.

    Read more.
  • UK Financial Conduct Authority Implements Permanent Ban of Sale of Binary Options to Retail Consumers
    03/29/2019

    Following its recent consultation, the U.K. Financial Conduct Authority has published a Policy Statement, final rules and a Statement on the new product intervention measure it is introducing for retail binary options. Both contracts for difference and binary options are considered to have given rise to significant investor protection concerns, due to their complexity, the lack of transparent information at the point of sale, the risk of significant loss for investors and the deployment of aggressive marketing techniques by certain providers and distributors of the products. The FCA's product intervention powers under the Markets in Financial Instrument Regulation and, where the FCA has gone beyond those powers, the Financial Services and Markets Act 2000 allow it to impose prohibitions or restrictions on certain financial instruments, financial activities or practices to address a significant investor protection concern. The FCA also consulted on product intervention rules for CfDs and those final rules are expected to be published in April this year.

    Read more.
  • EU Contracts for Difference Product Intervention Measures to be Extended
    03/27/2019

    The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.

    View ESMA's announcement.

    View details of the existing decision.
  • EU Product Intervention Measures for Binary Options Extended
    03/27/2019

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.

    View the decision.

    View ESMA's notification.
  • EU Statement on the Impact of a No-Deal Brexit on the Share Trading Obligation
    03/19/2019

    May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.

    The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.

    Read more.
  • UK Regulator Wants Stronger Wind-Down Plans for Loan-Based Crowdfunding Platforms
    03/07/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

    Read more.
  • Further EU Clarification For Financial Services Firms in a No Deal Brexit
    03/07/2019

    The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.

    Read more.
  • UK Financial Conduct Authority on Onshoring the EU Temporary Product Intervention Measures
    02/22/2019

    The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.

    In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.

    Read more.
  • EU Product Intervention Measures for Binary Options to be Further Extended
    02/18/2019

    The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.

    View ESMA's announcement.

    View details of the existing product intervention measure for binary options.
  • EU Contracts for Difference Product Intervention Measures Extended Again
    01/31/2019

    The European Securities and Markets Authority Decision renewing the temporary restriction on the marketing, distribution or sale of contracts for difference to retail clients has been published in the Official Journal of the European Union. ESMA announced on December 19, 2018, that the existing restriction would be extended. The CfD Decision applies directly across the EU from February 1, 2019, for a period of three months.

    View the decision.

    View ESMA's announcement.
  • UK Conduct Regulator Consults on Guidance on Crypto-Assets and the UK Regulatory Perimeter
    01/23/2019

    The U.K. Financial Conduct Authority has launched a consultation on proposed Guidance on whether certain crypto-assets fall within the U.K.'s regulatory perimeter (CP19/3). The FCA's consultation is in response to one of the commitments made by the U.K. Cryptoasset Taskforce last year in its final Cryptoassets Report. The Taskforce was established in March 2018 and comprises representatives from HM Treasury, the FCA and the Bank of England. The FCA's consultation closes on April 5, 2019. The FCA intends to publish the final Guidance on the existing regulatory perimeter in relation to crypto-assets by summer 2019.

    The FCA's proposed Guidance is intended to help firms determine whether certain crypto-assets fall within the FCA's regulatory perimeter. However, the FCA notes that assessing whether a crypto-asset is within the perimeter can only be done on a case-by-case basis and that the responsibility for ensuring that it has the correct permissions lies with the firm undertaking the activity. A firm that undertakes a regulated activity without the requisite permissions will be in breach of the 'general prohibition' in the Financial Services and Markets Act 2000. Any such breach by a person is a criminal offence and the person may be imprisoned or fined, or both. The consultation is relevant to a wide range of consumers, stakeholders and firms, in particular firms that issue or create crypto-assets, firms that market, sell, buy, hold or store crypto-assets, financial advisors, investment managers and investment exchanges.

    Read more.
  • European Securities and Markets Authority Publishes Recommendations on Crypto-Assets and Initial Coin Offerings
    01/09/2019

    The European Securities and Markets Authority has published a report on the application and suitability of the EU securities regulatory framework to crypto-assets, including Initial Coin Offerings. The report is in response to the European Commission's request in its FinTech Action Plan 2018. Like the European Banking Authority, which published a report on the same day in relation to banking sector issues, ESMA found that EU activities related to crypto-assets are fairly low and do not present any financial stability risks.

    ESMA's report focuses on the legal qualification of crypto-assets under EU financial securities laws and highlights that this may differ across EU member states because it will be subject to the national laws implementing EU legislation. ESMA notes that there is currently no legal definition of crypto-assets and that a key consideration is whether a crypto-asset qualifies as a financial instrument under the revised Markets in Financial Instruments package. Where a crypto-asset qualifies as a MiFID financial instrument, the full requirements under various securities legislation may apply, subject to any applicable exemptions.  According to ESMA, the rules in the Prospectus Directive would apply to an issue of crypto-assets offered to the public, including through an ICO, where the instruments are transferable securities. 

    Read more.
  • UK Conduct Regulator Warns Firms About Misleading Financial Promotions
    01/09/2019

    The Financial Conduct Authority has published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated firms. In the letter, the FCA highlights its concerns over the practice engaged in by some firms of issuing financial promotions which suggest or imply that all of the activities or investments undertaken by the firm are regulated by the FCA and/or Prudential Regulation Authority, when they are not.

    Some regulated firms undertake both regulated and unregulated business. The FCA has identified that some of these firms are issuing financial promotions which do not make clear which aspects of its business are not regulated by the FCA and/or PRA. This breaches the requirement that all financial promotions are fair, clear and not misleading and that a firm cannot indicate or imply that it is regulated or otherwise supervised by the FCA for its unregulated business. The FCA encourages all firms to reflect on the letter and ensure that their actions comply with the FCA's rules relating to financial promotions.

    View the letter
  • EU Product Intervention Measure Banning the Sale of Binary Options is Extended
    12/27/2018

    The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from January 2, 2019. This has been published in the Official Journal of the European Union. ESMA announced in November 2018 that the existing restriction would be extended. The binary options Decision applies directly across the EU from January 2, 2019 for a period of three months.

    View the Decision.

    View ESMA's notification.
  • EU Guidelines on Commodity Derivatives Definition Published
    12/21/2018

    The European Securities and Markets Authority has published amended Guidelines on definitions of commodity derivatives and their classification. The amended Guidelines, which are an update to the guidelines originally adopted under the previous Markets in Financial Instruments Directive (MiFID I), have been adapted to the new MiFID II regulatory framework without amending their substance.

    Read more.
    TOPIC: MiFID II
View All (500+)