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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.

  • European Securities and Markets Authority Recommends Regulatory Forbearance for Funds’ Periodic Reporting Obligations
    04/09/2020

    The European Securities and Markets Authority has announced its expectation that national regulators should, where possible, deprioritize supervisory action against certain fund managers for failure to comply with periodic financial reporting deadlines for funds they manage for the periods ending from December 31, 2019 to April 30, 2020 (inclusive). The fund managers covered by ESMA’s statement are: (i) undertakings for the collective investment in transferable securities (UCITS) management companies; (ii) self-managed UCITS investment companies; (iii) authorized alternative investment fund managers; (iv) non-EU AIFMs marketing AIFs; (v) European Venture Capital Fund managers; and (vi) European Social Entrepreneurship managers.

    Read more.
    TOPICS: COVID-19Funds
  • EU Consultation on Standardized Information for Facilitating Cross-Border Distribution of Funds
    03/31/2020

    The European Securities and Markets Authority has launched a consultation on the forms, templates and procedures that national regulators should use to publish information on their websites to facilitate cross-border distribution of funds. The Regulation on facilitating cross-border distribution of funds aims to increase transparency on the rules and procedures applicable to cross-border marketing of investment funds and regulatory fees and charges levied by national regulators. It was brought in at the same time amendments were made to the Directive on Undertakings for Collective Investment in Transferable Securities and the Alternative Investment Fund Managers Directive through an amending Directive. Member states are required to transpose the amending Directive into national laws by, and apply those laws from, August 2, 2021. Certain provisions of the Regulation applied directly across the EU from August 1, 2019, while the remaining provisions will apply from August 2, 2021.

    Read more.
    TOPIC: Funds
  • COVID-19: UK Financial Conduct Authority Confirms No Short Selling Ban (Yet)
    03/23/2020

    The U.K. Financial Conduct Authority has published a statement confirming that, in the wake to the COVID-19 pandemic, it is working with regulators in the U.S., the EU and elsewhere to ensure that the financial markets can remain orderly and open. Noting the recent volatility in the financial markets, the FCA confirms that the U.K. has not imposed a short selling ban and neither has the U.S. or any other major financial market. The EU has however temporarily reduced the threshold for the reporting of short positions. Net short position holders are required to notify the relevant national regulator of any net short position of 0.1% of the issued share capital of a company and of each 0.1% above that threshold. This also applies to listed shares on UK markets.  It is not necessary to notify existing positions above the new lower threshold that were not previously notifiable, until new trading takes place.

    Read more.
    TOPICS: COVID-19FundsSecurities
  • European Commission Confirms Scope of Securities Financing Transactions Regulation for Non-EU Funds
    02/10/2020

    In a letter published by the International Securities Lending Association, the European Commission confirms that the reporting obligations of the EU Securities Financing Transactions Regulation will not apply to non-EU Alternative Investment Funds, even if the manager is an EU AIFM, except for SFTs concluded in the course of the operations of the non-EU AIF’s EU branch.

    View the letter.
    TOPICS: FundsSecurities
  • Macroprudential Weaknesses in EU's Alternative Investment Fund Managers Directive to Be Addressed in AIFMD Review
    02/05/2020

    The European Systemic Risk Board has published a letter (dated February 3, 2020) to the European Commission on the weaknesses of the Alternative Investment Fund Managers Directive. The ESRB is responsible for macro-prudential oversight within the European Union. The AIFMD framework provides the ESRB with data to assist it to analyze systemic risks. The ESRB considers that the AIFMD reporting framework could be improved and wants the Commission to consider these issues as part of the review of the AIFMD. The letter sets out the ESRB's experiences with the scope and application of the AIFMD, in particular considering:
     
    1. The suitability of the reporting framework and access to data for monitoring systemic risk: the ESRB highlights that the AIFMD framework could be improved, particularly with regards to fund identification, fund classification, information on the interconnectedness of funds, information on leverage and liquidity risk, reporting frequency and access to data.

    Read more.
    TOPIC: Funds
  • International Organization of Securities Commissions Priorities for 2020
    01/30/2020

    The International Organization of Securities Commissions has published its annual work program, setting out its priorities for 2020. IOSCO will continue to focus on the five areas identified by its Board in 2019 as well as one new issue. The areas of focus are:
    • Crypto-assets: following its consultation last year, in February 2020, IOSCO will publish a final report on issues, risks and regulatory considerations relating to crypto-asset trading platforms. IOSCO will also publish the outcome of its review of the regulatory risks relating to investment funds exposures to crypto-assets. Finally, a report will be issued in early 2020 on issues relating to Global Stablecoins.
    Read more.
  • EU-Wide Supervisory Focus on UCITS Liquidity Risk Management Announced
    01/30/2020

    The European Securities and Markets Authority has announced an EU-wide common supervisory action on liquidity risk management by managers of Undertakings for the Collective Investment in Transferable Securities will be undertaken in 2020. This would appear to be a response to the Woodford scandal. The EU UCITS Regulation requires UCITS managers to manage a UCITS liquidity risk to ensure, among other things, that investors can redeem their investments on demand. National regulators of EU member states are going to simultaneously assess compliance with the requirements by market participants established in their jurisdictions. The knowledge and experience of the national regulators will be shared through ESMA to enhance the convergence of supervisory practices.

    View ESMA's announcement.
    TOPIC: Funds
  • UK Conduct Regulator Wants Asset Management Sector to Reflect on Risks to Customers and Markets
    01/22/2020

    The U.K. Financial Conduct Authority has published two letters addressed to the CEOs of firms in the asset management and funds sectors. The first letter is addressed to CEOs of FCA-authorized firms directly managing mainstream investment vehicles or advising on mainstream investments, excluding wealth managers and financial advisers. The second letter is addressed to CEOs of FCA-authorized firms managing alternative investment vehicles, such as hedge funds or private equity funds, or managing alternative assets directly or advising on these types of investments. The letters follow the FCA's report on its review of how firms in the asset management sector selected and used risk modeling and other portfolio management tools.

    Read more.
  • EU Recommendations to Combat Undue Short-Term Pressure From Financial Sector on Corporates
    12/18/2019

    The European Supervisory Authorities have each published advice to the European Commission on undue short-term pressure from the financial sector on corporations. The ESAs comprise the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The ESAs' advice responds to the European Commission's request in June 2019 for evidence and possible advice on potential undue short-term pressure by financial service participants on corporations. The Commission asked the ESAs to: (i) provide evidence of any short-termism and, if any, the consequences thereof; (ii) assess the drivers of such short-termism, including the effects of regulation on financial market participants, for example, the guidance on remuneration practices; (iii) identify existing regulations that either mitigate or exacerbate short-term pressures; and (iv) evaluate the need for regulatory or policy action and propose specific areas where action is needed. The ESAs' advice, summarized below, may result in the Commission proposing amendments to several pieces of EU legislation, such as the Capital Requirements Directive and related Regulation, the Markets in Financial Instruments package and the Non-Financial Reporting Directive.

    Read more.
  • International Organization of Securities Commissions Publishes Framework for Monitoring Leverage in Funds
    12/13/2019

    The International Organization of Securities Commissions has published a framework designed to facilitate regulators’ monitoring of leverage in investment funds, assisting regulators in identifying potential risks to financial stability.

    Read more.
    TOPIC: Funds
  • European Securities and Markets Authority Publishes Report on Costs Disclosure Standards for Fund Managers
    12/10/2019

    The European Securities and Markets Authority has published its final report on its proposed Regulatory Technical Standards on costs disclosure requirements for European Long-Term Investment Fund Managers.

    Read more.
    TOPIC: Funds
  • European Commission Publishes EU Delegated Regulation Aligning KID Publication Requirements under PRIIPS Regulation
    11/08/2019

    A Commission Delegated Regulation amending secondary legislation supplementing the Packaged Retail and Insurance-Based Investment Products Regulation has been published in the Official Journal of the European Union. 

    Read more.
    TOPICS: FundsSecurities
  • UK Conduct Regulator Requests Fund Managers to Review Liquidity Management Practices
    11/04/2019

    The U.K. Financial Conduct Regulator has published a “Dear Chairman” letter addressed to Authorized Fund Managers requesting them to review certain aspects of the liquidity management arrangements for the authorized funds that they manage. The letter follows the FCA’s recent policy statement establishing new rules for open-ended funds that invest in inherently illiquid assets and aims to address concerns that open-ended funds may not always be able to liquidate funds fast enough to comply with redemption requests. In its policy statement, the FCA acknowledged that its new rules did not capture open-ended UCITS funds such as the LF Woodford Equity Income Fund. This latest letter urges firms to recognise that effective liquidity management is a core function for all open-ended funds.

    Read more.
    TOPIC: Funds
  • 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.
  • UK Conduct Regulator Finalizes Rules for Funds Investing in Illiquid Assets
    09/30/2019

    The U.K. Financial Conduct Authority has finalized new rules governing certain types of open-ended funds that invest in inherently illiquid assets.

    Read more.
    TOPIC: Funds
  • EU Stress Simulation Framework for Investment Funds Published
    09/05/2019

    The European Securities and Markets Authority has published, in an economic report, a stress simulation framework for investment funds, which is intended for use by national regulators. The report provides an overview of the framework, options available for stress testing and discusses the calibration of redemption shocks for investment funds, methods to assess the resilience of funds to shocks, ways to measure the impact of fund managers' liquidation strategies on financial markets, and possible second-round effects. The report also includes a case study where ESMA applied the stress simulation framework to 6,000 UCITS bond funds, the underlying data for which ESMA has shared with national regulators.

    ESMA intends to use the stress test simulation to assist it in monitoring and identifying risks that may impact the funds industry.

    View the economic report.
    TOPIC: Funds
  • European Securities and Markets Authority Publishes Final Guidance on Liquidity Stress Tests for Investment Funds
    09/02/2019

    The European Securities and Markets Authority has published a report containing its final guidelines on liquidity stress testing in Alternative Investment Funds and Undertakings for Collective Investment in Transferable Securities. The guidelines have been published in accordance with the European Systemic Risk Board's 2018 Recommendation, which was designed to address liquidity and leverage risk in investment funds. ESMA's guidelines will apply from September 30, 2020.

    Read more.
    TOPIC: Funds
  • UK Conduct Regulator Discusses Enhanced Liquidity Requirements for UCITS
    08/06/2019

    Andrew Bailey, the Chief Executive of the U.K. Financial Conduct Authority, has written to Lord Myners of the House of Lords concerning the establishment of U.K. requirements for liquidity standards for Undertakings for Collective Investment in Transferable Securities (UCITS) that are more stringent than existing EU requirements. Andrew Bailey's letter was prompted by Lord Myners' query as to whether the U.K. government has ever formally reviewed the case for imposing more stringent requirements or whether it must abide by the requirements in the EU UCITS Directive.

    Read more.
    TOPIC: Funds
  • UK Conduct Regulator Concludes No Changes Needed to Banking Senior Managers Regime
    08/05/2019

    The U.K. Financial Conduct Authority has published the findings of its review into the implementation of the Senior Managers and Certification Regime for the banking sector. The SM&CR came into force for banking firms in March 2016 with the aim of making individuals in the banking sector more accountable for their conduct. The FCA conducted the review to determine how the SM&CR has been implemented in the three years since its introduction. The review is intended to aid understanding of the impact of the regime and the FCA does not intend to make any policy changes on the basis of its findings. The FCA's review focuses on the implementation of the existing banking SM&CR, but an expanded SM&CR regime will come into force for all FCA solo-regulated firms from December 9, 2019. Firms falling within scope of the expanded regime should, where appropriate, also take the findings of the FCA's review into account in their implementation of the SM&CR.

    Read more.
  • UK Consultation on Draft Law Ensuring Trustee Oversight of Investment Consultants and Fiduciary Managers
    07/29/2019

    The U.K. Department for Work and Pensions has opened a consultation on draft Occupational Pension Schemes (Governance and Registration) (Amendment) Regulations 2019. The consultation runs until September 2, 2019. The draft Regulations are intended to implement into law certain of the remedies made by the U.K. Competition and Markets Authority in its Investment Consultants and Fiduciary Managers Markets Investigation. The CMA published a Final Report in December 2018 that set out its finding of adverse competition in the investment consultants and fiduciary managers markets and the remedies to address that finding. The CMA's final Order to implement the remedies was published on June 10, 2019.

    Read more.
    TOPICS: CompetitionFunds
  • Revised EU Guidelines on Stress Testing of Money Market Funds Published
    07/19/2019

    Following its consultation in late 2018, the European Securities and Markets Authority has published final reports and updated guidelines on stress testing money market funds and the requirements imposed upon MMFs to report information to national regulators under the EU Money Market Funds Regulation.

    The MMF Regulation has applied directly across the EU since July 21, 2018. MMFs are fund vehicles that invest in highly liquid short-term debt instruments, such as government bonds, and are often regarded as a short-term cash management function alternative to bank deposits. The MMF Regulation requires MMFs and MMF managers to measure the impact of the common reference stress test scenarios, as specified by ESMA in guidelines, and to report the outcomes to their national regulators. The first MMF reports are due by the end of Q1 2020.

    Read more.
    TOPIC: Funds
  • International Body Issues Statement on Liquidity Risk Management Recommendations for Investment Funds
    07/18/2019

    The International Organization of Securities Commissions has issued a statement on its Liquidity Risk Management Recommendations for investment funds. The statement is in response to the U.K.'s Financial Policy Committee's Financial Stability report which stated that the IOSCO Liquidity Risk Management Recommendations do not prescribe how it should be ensured that funds' assets and investment strategies are consistent with their redemption terms. IOSCO's statement sets out how the Recommendations provide a comprehensive framework for regulators to address liquidity risks in funds. IOSCO notes that the Recommendations allow some flexibility as to how they are implemented by jurisdiction due to the diversity of the funds sector. IOSCO does not believe that a global prescriptive standard is appropriate and will undertake an exercise in 2020 to assess how the recommendations have been implemented across the globe.

    Read more.
    TOPIC: Funds
  • UK's Expanded Senior Managers and Certification Regimes Enter into Force
    07/17/2019

    The Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 have been made. The Regulations bring into force, from December 9, 2019, the expanded Senior Managers and Certification Regimes for all Financial Conduct Authority solo-regulated firms authorized under the Financial Services and Markets Act 2000, which include asset managers and investment firms carrying out certain activities. These firms need to complete their initial certification assessments for existing certified staff and new hires by December 9, 2020, although they must have identified certification staff by December 9, 2019. A transitional provision states that the regime will only apply to Claims Management Companies that are authorized by the FCA by December 9, 2019 and to other CMCs on the date that they obtain their authorization.

    Read more.
  • EU Consultation on Performance Fees for Retail Funds
    07/16/2019

    The European Securities and Markets Authority has launched a consultation on proposed guidelines on performance fees in Undertakings for Collective Investment in Transferable Securities. The consultation closes on October 31, 2019 and ESMA will publish its final guidelines once it has considered all of the feedback.

    Read more.
    TOPIC: Funds
  • EU Legislative Package for Cross-Border Distribution of Investment Funds Published
    07/12/2019

    A Regulation and a Directive aimed at facilitating the cross-border distribution of investment funds have been published in the Official Journal of the European Union. The Directive amends the Directive on Undertakings for Collective Investment in Transferable Securities and the Alternative Investment Fund Managers Directive by introducing new provisions and amending certain existing provisions of those pieces of legislation. The new Regulation aims to increase transparency on the rules and procedures applicable to cross-border marketing of investment funds and regulatory fees and charges levied by national regulators. Member states are required to transpose the Directive into national laws by, and apply those laws from, August 2, 2021. Certain provisions of the Regulation will apply directly across the EU from 1 August 2019, with the remaining provisions applying from August 2, 2021.

    Read more.
    TOPIC: Funds
  • UK Secondary Legislation Published to Implement Changes under EMIR REFIT
    06/17/2019

    The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 have been made and will come into force on July 9, 2019.

    Read more.
  • Final Investment Consultancy and Fiduciary Management Market Investigation Order Published
    06/10/2019

    The U.K. Competition and Markets Authority has published the final Investment Consultancy and Fiduciary Management Market Investigation Order 2019. The Order imposes legal obligations on pension scheme trustees, investment consultancy firms and fiduciary management providers, implementing the CMA's remedies to its finding of an adverse effect on competition in both the investment consultancy and fiduciary management markets. On February 11, 2019, the CMA published a draft Order for comment, and the responses to the draft Order have been published alongside the Order.

    Read more.
    TOPICS: CompetitionFunds
  • UK Financial Conduct Authority Publishes Policy Statement on Shareholder Engagement
    05/30/2019

    The Financial Conduct Authority has published a Policy Statement containing final Handbook text and guidance on new rules to improve shareholder engagement and increase transparency around stewardship. The FCA consulted on the rules from January to March 2019. The final rules will come into effect on June 10, 2019.

    Read more.
  • EMIR Refit Regulation Published
    05/28/2019

    The Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1, has been published in the Official Journal of the European Union.

    The EMIR Refit amendments aim to introduce a simplified and more proportionate approach to certain aspects of EMIR as part of the EU's broader "Regulatory Fitness and Performance Program".

    Read more.
  • EU Delegated Regulation on Conflicts of Interest Published Under Social Entrepreneurship Fund Regulation
    05/22/2019

    A Commission Delegated Regulation on conflicts of interest arising in relation to European social entrepreneurship funds has been published in the Official Journal of the European Union. The Delegated Regulation sets out the parameters for conflicts of interest policies, which must be introduced by "social entrepreneurship" funds within scope of the European Social Entrepreneurship Fund Regulation. The Delegated Regulation will enter into force on June 11, 2019 and will become directly applicable in all EU Member States on December 11, 2019.

    Read more.
  • EU Delegated Regulation on Conflicts of Interest Published Under European Venture Capital Regulation
    05/22/2019

    A Commission Delegated Regulation on conflicts of interest arising in relation to European venture capital funds has been published in the Official Journal of the European Union. The Delegated Regulation sets out the parameters for conflicts of interest policies, which must be introduced by venture capital funds within scope of the European Venture Capital Regulation. The Delegated Regulation will enter into force on June 11, 2019 and will become directly applicable in all EU Member States on December 11, 2019.

    Read more.
  • UK Conduct Regulator Warns Firms About Supervision of Appointed Representatives
    05/20/2019

    The FCA has published the findings of its review examining how firms in the investment management sector comply with their regulatory obligations in respect of appointed representatives used to carry out activities on their behalf. The FCA has also published a "Dear CEO" letter addressed to the Chief Executive Officers of all FCA-regulated principal firms in the sector, urging them to review their practices in relation to such representatives.

    Read more.
  • 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.
  • European Securities and Markets Authority Consults on Costs Disclosure Standards for Fund Managers
    03/28/2019

    The European Securities and Markets Authority has launched a consultation on its draft Regulatory Technical Standards for costs disclosure requirements under the European Long-Term Investment Fund Regulation. The consultation is relevant to ELTIF managers, alternative investment funds managers and institutional and retail investors investing into ELTIFs. Responses to the consultation should be supplied by June 29, 2019.

    Read more.
    TOPIC: Funds
  • UK Competition Authority Consults on Draft Investment Consultancy and Fiduciary Management Market Investigation Order 2019
    02/11/2019

    The U.K. Competition and Markets Authority has published for consultation a draft Investment Consultancy and Fiduciary Management Market Investigation Order 2019. The draft Order is intended to implement the remedies proposed by the CMA in its Final Report on the Investment Consultancy and Fiduciary Management Market Investigation, published on December 12, 2018. Any feedback on the draft Order should be provided by March 13, 2019.

    View the draft Order.

    View the explanatory note to the draft Order.

    View the notice of an intention to make an Order.

    View details of the CMA's Final Report.
    TOPICS: CompetitionFunds
  • European Supervisory Authorities Recommend Further Risk Warnings for Retail Investors
    02/08/2019

    The Joint Committee of European Supervisory Authorities has published a Final Report following their consultation on targeted amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products. Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts, until December 31, 2019, management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. This is because the UCITS Directive separately requires these entities to provide investors with a Key Investor Information Document, with different but broadly similar contents requirements. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs proposed amending the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

    Read more.
  • EU Agrees Final EMIR Refit
    02/05/2019

    On February 5, 2019, the Council of the European Union and the European Parliament reached a preliminary agreement on the draft Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1. The final text is likely to be published in the Official Journal of the European Union in April or May this year. Subject to a few exceptions, the changes will apply directly in all EU member states 20 days from that publication date. There may be minor drafting changes as the text is vetted by technicians and translated prior to its publication, but the legal position should be unaffected by this.

    Read more.
  • European Securities and Markets Authority Consults on Stress Tests for Investment Funds
    02/05/2019

    The European Securities and Markets Authority has published a consultation paper on its proposed guidelines for liquidity stress testing in Alternative Investment Funds and Undertakings for Collective Investment in Transferable Securities. The paper has been published in response to the European System Risk Board's 2018 Recommendation on mitigating liquidity and leverage risks in investment funds, which requires that ESMA produces guidance on the practice to be followed by managers for the stress testing of liquidity risk for AIFs and UCITS. 

    Read more.
    TOPIC: Funds
  • UK Regulator Consults on Proposed Changes to Handbook to Implement EU Shareholder Rights Directive II
    01/30/2019

    The Financial Conduct Authority has launched a consultation on proposed revisions to the Handbook to implement changes made to the EU Revised Shareholder Rights Directive. The Directive aims to promote shareholder engagement, effective stewardship and long-term investment decision-making through enhancing the transparency of engagement policies and investment strategies across the institutional investment community.

    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 Draft Directions for EEA Funds and Fund Managers Wanting to Continue to Market in the UK Post-Brexit
    01/07/2019

    The U.K. Financial Conduct Authority has published two draft Directives relating to Brexit under the: (1) draft Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019; and (2) Alternative Investment Fund Managers Regulations 2013, as amended by the draft Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2019. These draft regulations will establish a Temporary Permissions Regime enabling EEA funds that currently market in the U.K. under an EEA passport to continue to do so for three years after the U.K. exits the EU.

    Read more.
  • UK Competition Authority Publishes Final Report on the Investment Consultants Market Investigation
    12/12/2018

    The U.K. Competition and Markets Authority has published its Final Report on the Investment Consultants Market Investigation. The Investigation assessed the supply and acquisition of investment consultancy services and fiduciary management services. In its Provisional Decision Report, published on July 18, 2018, the CMA concluded that there is an adverse effect on competition which may result in material detriment to customers in both the investment consultancy and fiduciary management markets, although there are more concerns with the fiduciary management market. This finding is confirmed in the Final Report.

    In investment consultancy, the CMA considers that there is a low level of engagement by some customers in choosing and monitoring their provider. In addition, some customers may have difficulty in accessing and assessing the information needed to evaluate the quality of their existing investment consultant and identifying whether it would be to their advantage to use an alternative provider.

    Read more.
    TOPICS: CompetitionFunds
  • UK Legislation Published to Onshore the European Long-Term Investment Funds Regulation For Brexit
    11/19/2018

    HM Treasury has published a draft version of the Long-term Investment Funds (Amendment) (EU Exit) Regulations 2018. The draft Regulations correct deficiencies in the directly applicable European Long-term Investment Funds Regulation to be retained on Brexit, which governs funds that invest into infrastructure and other long-term projects. The draft Regulations will primarily affect fund managers operating ELTIFs registered in the UK.

    Read more
  • International Body Proposes Framework for Assessing Fund Leverage
    11/14/2018

    The International Organization of Securities Commissions has launched a consultation on a proposed framework to help assess leverage used by investment funds. The consultation follows a recommendation to IOSCO from the Financial Stability Board in its January 2017 report, "Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities." The FSB recommended, among other things, that IOSCO should identify and/or develop consistent measures of leverage in funds to facilitate more meaningful monitoring of leverage for financial stability purposes and help enable direct comparisons across funds and at a global level.

    Read more.
    TOPICS: FundsShadow Banking
  • EU Supervisory Authority Consults on Proposed Guidelines on Money Market Fund Reporting Requirements
    11/13/2018

    The European Securities and Markets Authority has launched a consultation on proposed Guidelines for Money Market Fund Managers, to assist them in complying with their obligations, under the Money Market Funds Regulation, to report information to the relevant national regulator of each MMF they manage. The reporting obligation applies on at least a quarterly basis (or annually for MMFs with total assets under management not exceeding Euro 100 million). The European Commission adopted Implementing Technical Standards in April 2018, which specify the content of a reporting template that will be developed for the information. The ITS have applied since July 21, 2018 and MMF managers must begin submitting reports under the MMF Regulation in the first quarter of 2020.

    Read more.
    TOPICS: FundsShadow Banking
  • EU Proposals Aim to Avoid Duplicative Information Requirements on Investment Managers
    11/08/2018

    The Joint Committee of the European Supervisory Authorities have launched a consultation on amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products.

    Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts until December 31, 2019 management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. The UCITS Directive requires these entities to provide investors with a Key Investor Information Document. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs are proposing to amend the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

    Read more.
  • UK Legislation Published to Onshore the EU Venture Capital Funds and Social Entrepreneurship Funds Regulations for Brexit
    10/31/2018

    HM Treasury has published the draft Venture Capital Funds (Amendment) (EU Exit) Regulations 2018 and the draft Social Entrepreneurship Funds (Amendment) (EU Exit) Regulations 2018, along with explanatory information. HM Treasury is also preparing draft Long-term Investment Funds (Amendment) (EU Exit) Regulations 2018 and will publish these in due course.

    These draft "onshoring" statutory instruments will amend deficiencies in the retained versions of the following directly applicable EU Regulations:
    • the European Venture Capital Funds (EuVECA) Regulation, which governs funds that invest into small and medium-sized enterprises;
    • the European Social Entrepreneurship Funds (EuSEF) Regulation, which governs funds that invest into social investments; and
    • the European Long-term Investment Funds (ELTIF) Regulation, which governs funds that invest into infrastructure and other long-term projects.
    Read more.
  • EU Amending Legislation Published on Duties of Third-Party Custodians Safe-Keeping Fund Assets
    10/30/2018

    Amending Delegated Regulations on the safe-keeping duties of depositaries, supplementing the Alternative Investment Fund Managers Directive and the Undertakings for Collective Investment in Transferable Securities Directive, have been published in the Official Journal of the European Union.

    The amending Delegated Regulations were adopted by the European Commission in July 2018. They amend existing delegated regulations under AIFMD and UCITS relating to the safekeeping of AIF and UCITS clients' assets respectively, to ensure a more uniform approach is adopted across the EU. The amendments clarify that where a depositary for an AIF or UCITS delegates safe-keeping functions to a third party custodian, the clients' assets must be segregated at the level of the delegate (i.e. from the delegate's own assets but not from those of its other clients). This should prevent interpretation of the segregation obligations as requiring separate accounts per depositary and per type of fund at each level of the custody chain. The respective Delegated Regulations set out how that obligation should be fulfilled to ensure a clear identification of assets belonging to a particular AIF or UCITS and the protection of assets in the event of the depositary or custodian entering insolvency.

    The amending Delegated Regulations enter into force on November 19, 2018 and will apply directly across the EU from April 1, 2020.

    View the amending Delegated Regulation under AIFMD ((EU) 2018/1618).

    View the amending Delegated Regulation under UCITS ((EU) 2018/1619).
    TOPIC: Funds
  • European Commission Announces Work Plan for 2019
    10/23/2018

    The European Commission has published a Communication, outlining its work plan for 2019. The Communication is addressed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. The Communication discusses the ongoing challenges for the EU in the run-up to the European Parliamentary elections and the post-Brexit Summit in Sibiu at which a new multi-annual framework for the EU27 will be finalized.

    Separately published Annexes to the Communication relating to: (i) new initiatives; (ii) REFIT initiatives; (iii) priority pending proposals; (iv) legislative initiatives that have been withdrawn; and (v) a list of envisaged repeals. Priority pending proposals of particular relevance to financial institutions include legislative proposals relating to the forthcoming sustainable finance package, cross-border distribution of collective investment schemes, crowdfunding, amendments to the European Market Infrastructure Regulation, prudential regulation and supervision of investment firms and a proposed amending regulation relating to minimum loss coverage for non-performing exposures.

    Read more.
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