CACEIS December 2020


CONTENT

CACEIS

EUROPEAN UNION

Alternative investment fund managers Directive (AIFMD)

EC publishes roadmap on the review of EU rules on alternative investment fund managers

CACEIS

  • On 10 December 2020, the European Commission published the roadmap following the consultation on the review of AIFMD. 

    Roadmaps describe the problem to be tackled and objectives to be met, explain why EU action is needed, outline policy options and describe the main features of the consultation strategy.

    In this regard, the Roadmap on AIFMD describes the problems the proposal for  a Directive amending Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers aims to tackle :

    • The AIFMD regulatory architecture is missing a number of important regulatory elements.
    • From the macro-prudential perspective, the Commission will also assess potential enhancements to ESMA’s supervisory powers particularly in relation to third country AIFMs.
    • There are also a number of overlaps with other Union laws, such as reporting to the ECB for statistical purposes.
    • There are a number of technical clarifications necessary to improve legal certainty for an effective application of the Directive.

    The overall objective of the initiative is to address the issues identified in the AIFMD report to improve the effectiveness of the Directive and contribute to the building of the CMU. This will be done in line with the current and future sustainable finance strategies integrating further environmental, social and governance-related sustainability considerations into the decision-making process of the financial sector.

    An impact assessment, which will contain a back-to-back evaluation, is being prepared to support the preparation of this initiative and to inform the Commission's decision. The European Commission report and the Commission Staff working Document with a detailed analysis on the AIFMD functioning has been already submitted to the European Parliament and the Council.

    Given that the AIFMD is a Directive, adoption of any amendments will be accompanied by an implementation plan, which should include implementation workshops.

    The feedback period is from 10 December 2020 to 7 January 2021.

  • Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    EBA explains how it will use its new power to carry out risk assessments in the fight against money laundering and terrorist financing

    CACEIS

  • On 17 December 2020, the European Banking Authority (EBA) published the methodology for carrying out risk assessments under Article 9a of the revised EBA Regulation. These risk assessments are part of the EBA’s new role to lead, coordinate and monitor the fight against money laundering and terrorist financing (ML/TF) in all EU Member States.

    The main objective of a risk assessment under Article 9a is to establish how well equipped competent authorities are to tackle emerging ML/TF risks, in terms of their capabilities and resources to respond to future risks that may arise as well as to intervene early and in a coordinated manner to manage those risks across the single market. 

    This methodology sets out how the EBA will identify emerging ML/TF risks, and how it will carry out the risk assessment. The methodology also explains the review and publication process of the outcome of each risk assessment.

    Going forward, the EBA will use this methodology to assess whether the use of its powers under Article 9a is warranted.

  • Brexit

    EFAMA publishes joint letter on the Equivalence of UK derivatives regulated markets under EMIR Article 2a

    CACEIS

  • On 1 December 2020, the European fund and Asset Management Association (EFAMA) published a joint letter on Equivalence of UK derivatives regulated markets under EMIR Article 2a, dated 30 November 2020.

    FIA, ISDA, AFME, ICI, AIMA, EBF and EFAMA welcome the European Commission's (the Commission) timely and temporary equivalence decision from 21 September 2020 with respect to UK central counterparties (CCPs) and subsequent recognition decisions by ESMA of CCPs and the recent temporary equivalence decision for UK Central Securities Depositories  (CSDs) under CSDR. Together, these steps have provided much needed certainty for continued and uninterrupted access to these CCPs and CSDs by EU clearing members and EU firms. 

    However, equivalence decisions are still outstanding in other critical areas of financial services, including in relation to UK regulated markets under EMIR Article 2a. 

    The failure to grant equivalence determinations for UK regulated markets for the purpose of EMIR Article 2a before the end of the transition period will result in negative impacts for EU market participants and EU derivatives markets, create an uneven playing field and operational challenges for EU banks and investments firms and will ultimately impact corporate end-users and the real economy in the EU.  

  • ESMA announces recognition of Euroclear UK and Ireland Limited (EUI) after Brexit transition period

    CACEIS

  • On 11 December 2020, the European Securities and Markets Authority (ESMA) announced that Euroclear UK & Ireland Limited (EUI), the central securities depository (CSD) established in the United Kingdom (UK), will be recognised as a third-country CSD (TC-CSD) after the end of the UK’s transition from the European Union (EU) on 31 December 2020.

    ESMA’s decision to recognise EUI as a third-country CSD after the end of the transition period will allow EUI to continue providing the following services in the EU:

    • notary and central maintenance services in respect of securities constituted under the law of Ireland; and
    • central maintenance services in respect of underlying securities constituted under the laws of Cyprus, Luxembourg and the Netherlands, which are represented in the EUI CREST system by means of depository interests

    ESMA’s recognition decision will apply from 1 January until 30 June 2021. This time period should give concerned EU issuers sufficient time to transfer their securities to EU CSDs.

  • European Union publishes the EU-UK Trade and Cooperation Agreement

    CACEIS

  • On 31 December 2020, the European Union published the EU-UK Trade and Cooperation Agreement.

    The EU-UK Trade and Cooperation Agreement concluded between the EU and the UK sets out preferential arrangements in areas such as trade in goods and in services, digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in Union programmes. It is underpinned by provisions ensuring a level playing field and respect for fundamental rights.

    While it will by no means match the level of economic integration that existed while the UK was an EU Member State, the Trade and Cooperation Agreement goes beyond traditional free trade agreements and provides a solid basis for preserving our longstanding friendship and cooperation.

    The Trade and Cooperation Agreement is provisionally applicable since 1 January 2021, after having been agreed by EU and UK negotiators on 24 December 2020.

    Finally, the Agreement does not cover any decisions relating to equivalences for financial services or the adequacy of the UK data protection regime. Indeed, these are unilateral decisions of the EU and are not subject to negotiation.

  • Capital Markets Union (CMU) Action Plan

    Council of the EU approves conclusions on the Commission's new action plan on the Capital Markets Union

    CACEIS

  • On 4 December 2020, the Council approved a set of conclusions on the Commission's new action plan on the Capital Markets Union (CMU).

    The conclusions stress that, at this juncture, the highest priority should be given to those actions that are important for improving the funding of the economy and particularly of SMEs and that have the potential to support a swift economic recovery in the context of the COVID-19 pandemic. These actions should be delivered as soon as possible and no later than the end of 2021. The measures that are considered to be the most important for mobilizing private capital should also be delivered as soon as possible. These should be followed by measures that are deemed to be of major importance for progressing towards a more vibrant and globally competitive capital market in the short and medium term.

    Among other things, the Council highlights the following measures as the most urgent:

    • facilitating access by corporations, in particular SMEs, to financing on capital markets
    • creating a single access point to financial and non-financial company data for investors
    • supporting the role of insurers, banks and other institutional investors as long-term investors in EU businesses
    • enhancing financial literacy to promote well-educated investment decisions
    • enhancing the cross-border activities of post-trading infrastructures and settlement
    • promoting further supervisory convergence and working towards a more harmonized legal framework for regulated capital market activities in the EU.

    The Council encourages the Commission to work on more complex and time-consuming initiatives as well. These include:

    • increasing the convergence of the outcomes of insolvency procedures
    • strengthening the confidence of investors and facilitating cross-border investments by evaluating possible deficits in the rules on enforcement of financial reporting of listed companies
  • Cybersecurity

    European Commission presents a new EU Cybersecurity Strategy

    CACEIS

  • On 16 December 2020, the European Commission presented a new EU Cybersecurity Strategy. As a key component of Shaping Europe's Digital Future, the Recovery Plan for Europe  and the EU Security Union Strategy, the Strategy will bolster Europe's collective resilience against cyber threats and help to ensure that all citizens and businesses can fully benefit from trustworthy and reliable services and digital tools. Whether it is the connected devices, the electricity grid, or the banks, planes, public administrations and hospitals Europeans use or frequent, they deserve to do so with the assurance that they will be shielded from cyber threats.

    The new Cybersecurity Strategy also allows the EU to step up leadership on international norms and standards in cyberspace, and to strengthen cooperation with partners around the world to promote a global, open, stable and secure cyberspace, grounded in the rule of law, human rights, fundamental freedoms and democratic values.    

    Furthermore, the Commission is making proposals to address both cyber and physical resilience of critical entities and networks: a Directive on measures for high common level of cybersecurity across the Union (revised NIS Directive or ‘NIS 2'), and a new Directive on the resilience of critical entities. They cover a wide range of sectors and aim to address current and future online and offline risks, from cyberattacks to crime or natural disasters, in a coherent and complementary way.

  • European Market Infrastructure Regulation (EMIR)

    ESMA publishes Final Report on technical standards (RTS and ITS) under the EMIR REFIT Regulation

    CACEIS

  • On 17 December 2020, the European Securities and Markets Authority (ESMA) published Final Report on technical standards (RTS and ITS) under the EMIR REFIT Regulation. 

    The report covers data reporting to Trade Repositories (TRs), procedures to reconcile and validate the data, access by the relevant authorities to data and registration of the TRs. 

    This final report and draft RTS and ITS largely reflect the original proposals included in the consultation paper and focuses on further harmonization of the reporting requirements as well as enhancements in the counterparties’ and TRs’ procedures on ensuring data quality.

  • EC publishes Commission Delegated Regulation amending technical standards laid down in Delegated Regulation (EU) 2016/2251 on the timing of when certain risk management procedures will start to apply for the purpose of the exchange of collateral

    CACEIS

  • On 21 December 2020, the European Commission published the text of Commission Delegated Regulation amending technical standards laid down in Delegated Regulation (EU) 2016/2251 as regards to the timing of when certain risk management procedures will start to apply for the purpose of the exchange of collateral.

    A new Article 31a is introduced, giving concerning the exemption to posting and collecting variation margin for physically settled foreign exchange forward contracts and physically settled foreign exchange swap contracts. 

    The amendments also allow the contracts with a counterparty established in the United Kingdom currently subject to risk-management procedures established prior to the relevant dates of application of that Regulation to be novated for a fixed period of 12 months as long as the sole purpose of the novation is to replace the counterparty established in the United Kingdom with a counterparty established in a Member State. 

    In accordance with the internationally agreed modified calendar a new implementation phase is introduced for counterparties with an aggregate average notional amount of non-centrally cleared derivatives that is above EUR 50 billion threshold. The new phase will therefore apply from 1 September 2021 and the last phase from 1 September 2022.

    The exemption for cross-border intragroup transactions is extended to 20 June 2022 for jurisdictions where no equivalence has been adopted by the Commission.

    The exemption for non-centrally cleared OTC derivatives which are single-stock equity options or index options is extended to 4 January 2024.

  • EC publishes Commission Delegated Regulation amending RTS laid down in Delegated Regulations (EU) 2015/2205, (EU) 2016/592 and (EU) 2016/1178 as regards the date at which the clearing obligation takes effect for certain types of contracts

    CACEIS

  • On 21 December 2020, the EC published the text Commission delegated Regulation amending regulatory technical standards laid down in Delegated Regulations (EU) 2015/2205, (EU) 2016/592 and (EU) 2016/1178 as regards the date at which the clearing obligation takes effect for certain types of contracts.

    The delegated act introduces a modification to the three existing RTS on the clearing obligation: 

    • extending the deferred date of application of the clearing obligation for intragroup transactions with a third-country group entity until 30 June 2022.
    • allowing contracts with a counterparty established in the United Kingdom currently exempted from the clearing obligation to be novated for a fixed period of 12 months as long as the sole purpose of the novation is to replace the counterparty established in the United Kingdom with a counterparty established in a Member State.
  • ESMA updates EMIR Q&As

    CACEIS

  • On 21 December 2020, the European Securities and Markets Authority (ESMA) updated its Questions and Answers on OTC requirements and reporting issues under the European Markets Infrastructure Regulation (EMIR).

    The Q&A document clarifies the status after the post-Brexit transition period of legacy derivative transactions executed on UK markets and is relevant for EU counterparties in order to determine applicable EMIR requirements, and for position calculations against clearing thresholds.

    In addition, Parts IV and V were amended to clarify the reporting technique for derivatives executed on a third country venue and cleared on the same day.

  • ESMA recommends more time to implement a mix of solutions for PSAs to clear

    CACEIS

  • On 17 December 2020, the European Securities and Markets Authority (ESMA) published a second report on the clearing solutions for Pension Scheme Arrangements (PSAs) under the European Market Infrastructure Regulation (EMIR).

    The  report reaffirms ESMA’s strong commitment to a broad implementation of the clearing obligation, including by PSAs, while at the same time recognising that more time is needed to make sufficient progress on the various solutions that would collectively enable PSAs to clear their derivative contracts.

    Last year, EMIR Refit further extended the temporary exemption from the clearing obligation for PSAs until June 2021. To monitor the progress made by the different actors involved towards possible clearing solutions for PSAs by that date, ESMA has been mandated to draft an annual report as input to the European Commission’s report on the clearing solutions for PSAs.

    ESMA issued a first report and ran a public consultation in April 2020 while the Commission published its first report in September 2020. Considering the work and the discussions of the Expert Group of the Commission and taking into account the responses to the public consultation, ESMA prepared its second report, in cooperation with the EBA, EIOPA and ESRB.

    This second report indicates that it is less likely to expect a ‘silver bullet’ to solve the issue to emerge at this stage, after the many efforts from stakeholders and regulators since the start of the exemption. Instead, the situation should improve not due to one single measure but because of a mix of existing solutions. Although some of these existing solutions need to be further developed or might need regulatory consideration, their addition should provide the conditions for PSAs to be able to clear and meet variation margin calls in varied market conditions.

    This second report will also serve as input to the next report of the Commission. In particular, the Commission will also need to decide whether to further extend the current exemption, which is due to expire in June 2021. ESMA’s view is that exemptions, or extensions of exemptions, from the clearing obligation should be carefully considered. However, the additional efforts needed for implementing the mix of solutions described in the report and ensuring a better readiness would still require additional time.

  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    ESMA updates Guidelines on stress tests for MMFs

    CACEIS

  • On 16 December 2020,  the European Securities and Markets Authority (ESMA) published the 2020 update of guidelines on MMF stress tests under the Money Market Funds Regulation (MMFR). The updates take account of MMFs recent experience during March 2020, particularly in relation to redemption scenarios.

    The COVID-19 crisis has been challenging for MMFs. Risks have increased for MMFs and the money market instruments in which they invest. Several EU MMFs faced significant liquidity issues during the period of acute stress in March 2020.  

    In this context, ESMA assessed whether the scenarios envisaged in the existing guidelines, published in 2019, are still appropriate in the current environment. Applying the 2019 scenarios in the current market environment generally leads to absolute levels of stress, similar to the levels observed in March.

    However, for some parameters, the 2019 scenarios have been exceeded by the extreme market movements observed during the COVID-19 crisis and the relevant factors will be updated accordingly. This is notably the case of the redemption scenario, as some funds exceeded the 25% redemption rate for professional investors specified in the guidelines. 

    Therefore the risk parameters will be modified in light of recent market developments. ESMA, in calibrating the new risk parameters, has worked closely with the European Systemic Risk Board and the European Central Bank.

  • ESMA publishes final guidance to address leverage risk in the AIF sector

    CACEIS

  • On 17 December 2020, the European Securities and Markets Authority (ESMA) published its final guidance to address leverage risks in the Alternative Investment Fund (AIF) sector.

    ESMA’s guidelines set out common criteria in order to promote convergence in the way National Competent Authorities (NCAs):

    • assess the extent to which the use of leverage within the AIF sector contributes to the build-up of systemic risk in the financial system; and
    • design, calibrate and implement leverage limits.

    The guidelines follow the 2 steps-approach introduced by IOSCO and translate this approach into the European framework. Furthermore, the guidelines provide NCAs with a set of indicators to be considered when performing their risk assessment and a set of principles that NCAs should take into account when calibrating and imposing leverage limits.

  • Here are two updated ESMA guidelines under the MMFR

    CACEIS

  • Here are two updated ESMA guidelines under the MMFR.

    1. On 4 December 2020, the European Securities and Markets Authority (ESMA) updated its validation rules regarding the Money Market Fund Regulation (MMFR). This relates to the requirements of Article 37 of MMFR that require MMF managers to submit data to National Competent Authorities, who will then transmit this to ESMA.

    The proposed changes are not related to the published XML schemas. The changes only provide clarifications on existing validation rules in order to fix inconsistencies or ease the understanding of the rules. It also extends the Classification of Financial Instruments (CFI) codes for eligible assets.

    2. On 16 December 2020, the European Securities and Markets Authority (ESMA) published the 2020 update of guidelines on MMF stress tests under the Money Market Funds Regulation (MMFR). The updates take account of MMFs recent experience during March 2020, particularly in relation to redemption scenarios.

    The COVID-19 crisis has been challenging for MMFs. Risks have increased for MMFs and the money market instruments in which they invest. Several EU MMFs faced significant liquidity issues during the period of acute stress in March 2020.  

    In this context, ESMA assessed whether the scenarios envisaged in the existing guidelines, published in 2019, are still appropriate in the current environment. Applying the 2019 scenarios in the current market environment generally leads to absolute levels of stress, similar to the levels observed in March.

    However, for some parameters, the 2019 scenarios have been exceeded by the extreme market movements observed during the COVID-19 crisis and the relevant factors will be updated accordingly. This is notably the case of the redemption scenario, as some funds exceeded the 25% redemption rate for professional investors specified in the guidelines. 

    Therefore the risk parameters will be modified in light of recent market developments. ESMA, in calibrating the new risk parameters, has worked closely with the European Systemic Risk Board and the European Central Bank.

  • IT Outsourcing

    ESMA publishes final report on its guidelines on outsourcing to cloud service providers

    CACEIS

  • On 18 December 2020, the European Securities and Markets Authority (ESMA) published final report on its guidelines on outsourcing to cloud service providers (CSPs).

    The Guidelines are intended to help firms identify, address and monitor the risks arising from cloud outsourcing arrangements. They provide guidance to firms on:

    • The risk assessment and due diligence that they should undertake on their CSPs;
    • The governance, organisational and control frameworks that they should put in place to monitor the performance of their CSPs and how to exit their cloud outsourcing arrangements without undue disruption to their business;
    • The contractual elements that their cloud outsourcing agreement should include; and
    • The information to be notified to competent authorities.

    In addition, the Guidelines provide guidance to competent authorities on the supervision of cloud outsourcing arrangements, with a view to fostering a convergent approach in the EU.

  • Markets in financial instruments Directive and Regulation (MiFID II / MiFIR)

    ESMA updates Q&A on costs and charges

    CACEIS

  • On 22 December 2020, the European Securities and Markets Authority (ESMA) updated its Questions and Answers on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

    The Q&As on MiFID II and MiFIR investor protection and intermediaries’ topics includes one new Q&As on ‘Information on costs and charges’ that aim to give guidance on how firms can present ex-post costs and charges information to clients in a fair, clear and not misleading manner.

    In particular, the information should be presented:

    • through a standalone document (which could still be sent together with other periodic documents to clients); or
    • within a document of wider content, provided that it is given the necessary prominence to allow clients to find it easily.
  • ESMA updates guidance on waivers from pre-trade transparency

    CACEIS

  • On 23 December 2020, the European Securities and Markets Authority (ESMA) published an updated opinion providing guidance on pre-trade transparency waivers for equity and non-equity instruments. 

    It covers guidance related to request for quote systems, guidance on how trading venues should apply for a waiver to their national competent authority, and updates on frequently encountered issues when assessing waiver notifications.

  • Prudential Requirements for Investment Firms Directive & Regulation (IFD / IFR)

    ESMA updates Q&As on Prospectus Regulation

    CACEIS

  • On 16 December 2020, the European Banking Authority (EBA) published a package of seven final draft Regulatory Technical Standards (RTS) on the prudential treatment of investment firms. These final draft RTS, which are part of the phase 1 mandates of the EBA roadmap on investment firms, will ensure a proportionate implementation of the new prudential framework for investment firms taking into account the different activities, sizes and complexity of investments firms.

    With the entry into force of the Investment Firms Regulation (IFR) and Directive (IFD), most of the investment firms authorised under the Markets in Financial Instruments Directive (MiFID) will be subject to a new prudential regime, different and independent from the Capital Requirements Regulation (CRR) applicable today. With today’s submission, the EBA is preparing for a smooth introduction of the IFR/IFD, which is due to be applicable by mid-2021.

    The technical standards included in this package set out the main aspects of the new prudential regime in relation to the calculation of the regulatory capital requirements. They provide further technical clarifications on the methodologies to be applied by all types of investment firms, including investment advisors, portfolio managers, execution brokers, firms trading on own account and commodity dealers.

    In addition, certain specific investment firms may be required to apply the banking rules also after the entry into force of the IFR. Therefore, one of the mandates delivered today includes the criteria for the identification of these investment firms on the basis of their systemic importance.

    Finally, under the new framework, large investment firms trading on their own account or underwriting on a firm committed basis may be required to apply for a credit institution authorisation. To support this requirement, the package includes a specification of the information required for such authorisation, consisting of simplified and reduced requirements as to what is expected from a bank holding deposits or providing loans.

  • Regulation on Pan-European Personal Pension Product (PEPP)

    EC publishes Commission Delegated Regulation supplementing Regulation (EU) 2019/1238 with regard to RTS specifying the requirements on information documents, on the costs and fees included in the cost cap and on risk-mitigation techniques for the PEPP

    CACEIS

  • On 18 December 2020, the European Commission published the text of a Delegated Regulation supplementing Regulation (EU) 2019/1238 of the European Parliament and of the Council with regard to regulatory technical standards specifying the requirements on information documents, on the costs and fees included in the cost cap and on risk-mitigation techniques for the pan-European Personal Pension Product.

    In accordance with the PEPP Regulation, the regulatory technical standards laid down in this delegated Regulation aim to achieve the following objectives:  

    • To ensure that consumers are given key information of the PEPP that is easy to read and provided in an understandable way, also in a digital format, which allows pension savers to take informed decisions of investment options that meet their long term pension savings needs. 
    • To ensure that relevant information is provided to consumers in a standardised way that facilitates understanding and comparability between investment options; this concerns comparability, where possible, between PEPP products and packaged retail investment and insurance products (PRIIPS) as well as comparability between different investment options of PEPP.
    • To ensure that risk and possible return are displayed in an accurate, fair, clear and not misleading manner, at all times, so that the prospective PEPP saver is able to rely on the information when deciding on the long-term savings for retirement. 
    • To enable the PEPP savers to easily track and monitor the development of their PEPP savings, notably how they compare to the pre-contractual information given, allowing for continuous evaluation and a possible switch of the PEPP investment option or PEPP provider.
    • To provide clear and enforceable criteria in order to enable the assessment of the effectiveness of any chosen risk-mitigation technique in a consistent way.
    • To specify how costs and fees should be presented and what kind of costs are excluded from the cost cap for the default investment option (basic PEPP) to ensure a level playing field amongst providers offering a distinct additional feature such as guaranteed return on capital.
  • Sustainable Finance / Green Finance

    AFME publishes Report on Climate Finance Markets and the Real Economy

    CACEIS

  • On 3 December 2020, the Association for Financial Markets in Europe (AFME) published a global report outlining the market-wide and sector-specific recommendations necessary to accelerate investment in climate finance, initiated by the Global Financial Markets Association (GFMA).

    The report is a call to action for coordinated and concerted action by the public, social, and private sectors to significantly scale the Climate Finance Market Structure (CFMS) over the next three decades. 

    These include a call for evolving the current market structure to address the advent and needs of climate finance and the creation of financial instruments and structures required to continue to serve the financing, investment and risk management needs for a broad set of market participants, as well as market wide sector, or individual corporate, and region-specific changes necessary to motivate investment. 

    The report also highlights the role that capital markets and other participants must play to support transition pathways at the same time continue to serve their clients, investors, and the societies where they want to do business.

  • Here are three Commission Delegated Regulations on Sustainable Finance

    CACEIS

  • On 3 December 2020, three Commission Delegated Regulations were published on the Official Journal of the European Union (OJ) concerning Sustainable Finance.

    1. Commission Delegated Regulation (EU) 2020/1816 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council was published with the explanation in the benchmark statement of how environmental, social and governance factors are reflected in each benchmark provided and published: 

    • Benchmark administrators shall explain in the benchmark statement, using the template laid down in Annex I, how the environmental, social and governance (ESG) factors listed in Annex II are reflected in each benchmark or family of benchmarks they provide and publish. This provision shall not apply to interest rate and foreign exchange benchmarks.
    • The explanation shall include the score of the ESG factors vis-à-vis the corresponding benchmark and family of benchmark, at an aggregated weighted average value.
    • For individual benchmarks, benchmark administrators may, rather than providing all the information required by the template laid down in Annex I to this Regulation, replace that information by a hyperlink included in the benchmark statement, to a website that contains all that information.
    • Where benchmarks blend different underlying assets, benchmark administrators shall explain how ESG factors are reflected for each of the underlying assets.
    • Benchmark administrators shall include in the explanation provided a reference to the sources of data and standards used for the ESG factors disclosed.
    • Benchmark administrators shall update the explanation provided whenever significant changes relating to the ESG factors occur and in any case on an annual basis. They shall state the reasons for the update.

    2. Commission Delegated Regulation (EU) 2020/1817 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards the minimum content of the explanation on how environmental, social and governance factors are reflected in the benchmark:

    • Benchmark administrators shall explain, using the template laid down in the Annex to this Regulation, which of the environmental, social and governance (ESG) factors that they have taken into account when designing their benchmark methodology. They shall also explain how those factors are reflected in the key elements of that methodology, including for the selection of underlying assets, weighting factors, metrics and proxies. This provision shall not apply to commodity benchmarks.
    • For individual benchmarks, benchmark administrators may, rather than providing all the information required by the template laid down in the Annex to this Regulation, replace that information by a hyperlink in the explanation provided, to a website that contains all that information.
    • Where benchmarks blend different types underlying assets, benchmark administrators shall explain how ESG factors are reflected for each of the relevant underlying asset.
    • Benchmark administrators may include in the explanation provided additional ESG factors and related information.
    • Benchmark administrators shall clearly state in the explanation provided whether they do or do not pursue ESG objectives.
    • Benchmark administrators shall include in the explanation provided a reference to the sources of data and standards used for each ESG factor disclosed.
    • Benchmark administrators shall update the explanation provided whenever the benchmark methodology is changed, and in any case on an annual basis. They shall state the reasons for the update.

    3. Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks:

    Benchmark administrators should have the possibility to overweight companies based on the decarbonization objectives set by those companies. Specific rules relating to decarbonization targets reported by individual companies should therefore be set out.

    EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks should demonstrate their ability to decarbonize themselves from one year to the other. That minimum decarbonization trajectory should be calculated using the IPCC scenario. Furthermore, in order to prevent greenwashing, conditions for the deviation from the decarbonization trajectory and for the right to continue to label a benchmark as an EU Climate Transition Benchmark or as an EU Paris-aligned Benchmark should be specified.

    The main parameter to calculate the decarbonization trajectory should be the GHG intensity, because that parameter ensures comparability across sectors and is not biased for or against a particular sector. To calculate the GHG intensity, the market capitalization of the concerned company is necessary. However, where benchmarks apply to fixed-income corporate instruments, the market capitalization might not be available for companies that do not have equity securities listed. It should therefore be laid down that where EU Climate Transition Benchmarks or EU Paris-aligned Benchmarks apply to fixed-income corporate instruments, benchmark administrators should be allowed to use GHG emissions calculated on an absolute basis, rather than on the basis of GHG intensity.

  • BELGIUM

    Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    FSMA publishes communication FSMA_2020_17 addressing the guidelines published by ESMA on performance fees in UCITS and certain types of AIFs

    CACEIS

  • On 4 December 2020, the Financial Services and Markets Authority (FSMA) published communication FSMA_2020_17 addressing the guidelines published by ESMA on performance fees in UCITS and certain types of AIFs.

    The purpose of this communication is to inform supervised entities that FSMA will integrate ESMA guidelines in it's supervisory practice. 

  • FRANCE

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    France publishes Ordinance No. 2020-1544 of 9 December 2020 strengthening the framework for AML/FT applicable to digital assets / La France publie l'ordonnance no.2020-1544 du 9 décembre 2020 renforçant le cadre LBC/FT applicable aux actifs numériques

    CACEIS

  • On 10 December 2020, the Ordinance No. 2020-1544 of 9 December 2020 strengthening the framework for the fight against money laundering and the financing of terrorism applicable to digital assets was published in the Official Journal together with the Report to the President of the Republic.

    It aims to bring the national regulatory framework for digital assets into line with the recommendations of the Financial Action Task Force (FATF) on the fight against money laundering and terrorist financing (LCB-FT) and to strengthen measures to combat anonymity in transactions involving digital assets.

    This Ordinance complies with these recommendations by extending the scope of entities subject to the LCB-FT. In the interests of attractiveness and because the LCB-FT risk appears to be lower on the activities currently covered on an optional basis, it provides for a simple registration, without prior control before exercise, of the so-called "crypto-to-crypto" exchange services and trading platforms. Furthermore, given the great heterogeneity of national procedures in the absence of a European statute, for services that are already subject to mandatory registration under French law, it lightens prior controls by refocusing them on the key obligations in the area of LCB-FT. In order to ensure the overall consistency of the French LCB-FT system, it is also proposed that, as is already the case for most financial activities, digital asset service providers (DASPs) be given the possibility of calling on third parties to implement their due diligence measures. Finally, it is proposed that DASPs belonging to groups be given the possibility of informing within that group of the suspicious transaction reports they file.

    As regards LCB-FT jurisdiction, it will be the responsibility of the Autorité de contrôle prudentiel et de résolution (ACPR) to carry out the prior control and supervision of all registered providers in the area of LCB-FT. The LCB-FT competence is maintained at the Autorité des marchés financiers (AMF) for the prior control and supervision of the services mentioned in the 5o of Article L. 54-10-12 of the Monetary and Financial Code within the framework of the optional authorisation. Finally, outside the scope of the LCB-FT, the AMF remains competent to carry out due diligence and supervision of all providers of services based on digital assets within the framework of the optional authorisation.

    As regards LCB-FT jurisdiction, it will be the responsibility of the Autorité de contrôle prudentiel et de résolution (ACPR) to carry out the due diligence and supervision of all registered providers in the area of LCB-FT. The LCB-FT competence is maintained at the Autorité des marchés financiers (AMF) for the prior control and supervision of the services mentioned in the 5o of Article L. 54-10-12 of the Monetary and Financial Code within the framework of the optional authorisation. Finally, outside the scope of the LCB-FT, the AMF remains competent to carry out due diligence and supervision of all providers of services based on digital assets within the framework of the optional authorisation.

    A ratification bill will have to be tabled before Parliament within six months of publication of this Ordinance.

    Version française

    Le 10 décembre 2020, l'Ordonnance no.2020-1544 du 9 décembre 2020 renforçant le cadre de la lutte contre le blanchiment de capitaux et le financement du terrorisme applicable aux actifs numériques a été publiée au Journal Officiel avec le Rapport au Président de la République.

    Elle vise à mettre en conformité le cadre réglementaire national relatif aux actifs numériques avec les recommandations du Groupe d’Action Financière (GAFI) en matière de lutte contre le blanchiment et le financement du terrorisme (LCB-FT) et à renforcer les mesures de lutte contre l’anonymat dans les transactions en actifs numériques.

    La présente ordonnance procède à cette mise en conformité en étendant le champ des entités assujetties à la LCB-FT. Dans un souci d’attractivité et parce que le risque LCB-FT apparaît moins élevé sur les activités actuellement couvertes à titre facultatif, elle prévoit un simple enregistrement, sans contrôle préalable avant exercice, des services d’échange dits «crypto-to-crypto» et des plateformes de négociation. Par ailleurs, compte tenu de la forte hétérogénéité des procédures nationales en l’absence de statut européen, pour les services déjà assujettis à titre obligatoire en droit français, elle allège les contrôles préalables en les recentrant sur les obligations clefs en matière de LCB-FT. Pour veiller à la cohérence d’ensemble du dispositif français de LCB-FT, il est en outre proposé d’ouvrir aux PSAN, comme cela est déjà le cas pour la plupart des activités financières, la possibilité de recourir à des tiers pour la mise en œuvre de leurs mesures de vigilance. Enfin, il est proposé d’ouvrir aux PSAN appartenant à des groupes la possibilité de procéder à une information au sein de ce groupe des déclarations de soupçon qu’ils réalisent.

    En matière de compétence LCB-FT, il reviendra à l’Autorité de contrôle prudentiel et de résolution (ACPR) de procéder au contrôle préalable et à la supervision en matière de LCB-FT de l’ensemble des prestataires enregistrés. La compétence LCB-FT est maintenue à l’Autorité des marchés financiers (AMF) pour le contrôle préalable et la supervision des services mentionnés au 5o de l’article L. 54-10-12 du code monétaire et financier dans le cadre de l’agrément facultatif.

    Un projet de loi de ratification devra être déposé devant le Parlement dans un délai de six mois à compter de la publication de la présente ordonnance.

  • TRACFIN publishes ML/FT risk trends and analysis in 2019-2020 / TRACFIN publie les tendances et analyse des risques BC-FT en 2019-2020

    CACEIS

  • On 10 December 2020, the Tracfin (Traitement du renseignement et action contre les circuits financiers clandestins) published the ML-FT risk trends and analysis in 2019-2020.

    The report Trends and Analysis of Money Laundering and Terrorist Financing Risks 2019/2020 is the sixth edition of BC/FT's annual trend and risk analysis exercise.

    It presents the characteristic typologies of recurring or emerging money laundering and terrorist financing phenomena and focuses on the development of new risks weighing on the French LCB/FT system.

    Version française

    Le 10 décembre 2020, le Tracfin (Traitement du renseignement et action contre les circuits financiers clandestins) a publié les Tendances et analyse des risques de blanchiment de capitaux et de financement du terrorisme (BC-FT) en 2019-2020.

    Le rapport Tendances et analyse des risques de blanchiment et de financement du terrorisme 2019/2020 constitue la sixième édition de l’exercice annuel d’analyse des tendances et des risques de BC/FT. Il restitue les typologies caractéristiques de phénomènes de BC/FT récurrents ou émergents et s’attache à étudier le développement de nouveaux risques pesant sur le dispositif LCB/FT français.

  • Brexit

    France publishes Ordinance 2020-1595 of 16/12 on Brexit consequences to insurance, collective investments & equity savings schemes / La France publie Ordonnance 2020-1595 du 16/12 sur les conséquences du Brexit en assurances, placements collectifs et PEA

    CACEIS

  • BACKGROUND

    The exit of the United Kingdom has consequences in terms of the supervision of certain financial activities carried out in France by British entities under the freedom to provide services or the freedom of establishment, particularly in the area of insurance. 

    Only securities whose issuing company has its registered office in an EU (or EEA) Member State and units of collective investment undertakings holding at least 75% of their assets invested in securities of companies established in an EU (or EEA) Member State are eligible for the PEA.

    The exit of the United Kingdom from the European Union will therefore result in the loss of PEA eligibility for securities of UK issuers and UK collective investment schemes. It will also impact other collective investment schemes that hold UK securities in the context of the calculation of the 75% quota.

    WHAT'S NEW?

    On 17 December 2020, Ordinance no. 2020-1595 of 16 December 2020 drawing the consequences of the United Kingdom's withdrawal from the European Union with regard to insurance, collective investments and equity savings schemes was published in the Official Journal together with the Report to the President of the Republic.

    The 1. and 2. of Article 1 clarify two elements relating to the supervisory powers of the Autorité de contrôle prudentiel et de résolution (ACPR) vis-à-vis British entities after Brexit. The order specifies that the ACPR's power to impose sanctions continues in respect of acts committed prior to the departure from the United Kingdom by persons falling within its jurisdiction on the date of commission of the breach or offence.

    The order specifies that the ACPR remains responsible for ensuring compliance with the rules of French law applicable to obligations arising from contracts concluded under the freedom to provide services or the freedom of establishment and the performance of which continues after Brexit, taking into account the supervision exercised by the competent authorities of the United Kingdom.

    The Order describes all insurance operations that can no longer be carried out by companies that have lost their European passport as follows: contracts may not be renewed, extended or renewed, nor give rise to any operation that would involve the issue of new premiums.

    Article 3 provides for transitional measures relating to equity savings plans (PEA and PEA-PME) and collective investment schemes (FCPR, FPCI and FIP). Firstly, with regard to PEAs and PEA-SMEs, the Ordinance provides for the continued eligibility for use of PEAs and PEA-SMEs of UK securities acquired before 31 December 2020. 

    The Ordinance provides for the continued eligibility for PEAs and PEA-SMEs of UK securities acquired before or after the end of the transitional period by undertakings for collective investment (UCIs) that are eligible for PEAs or PEA-SMEs on the date of publication of the Ordinance. Article 3 maintains the eligibility of units or shares of UK UCIs acquired before the same date, provided that they continue to comply with the PEA and PEA-SME eligibility rules as adapted by the provisions of II of Article 3. Such continued eligibility is established for a period fixed by order of the Secretary of State for Economic Affairs which may not exceed two years.

    WHAT'S NEXT?

    On 28 December 2020, the Autorité des marchés financiers (AMF) published a communication which aims to support to asset management companies to help them prepare for the consequences of Brexit regarding equity savings plans (PEA) and equity savings plans intended for the financing of SMEs and mid-tier enterprises (PME-ETI PEA): securities eligibility and disclosure requirements and regarding private equity fund.

    Version française

    BACKGROUND

    La sortie du Royaume-Uni a des conséquences en matière de supervision de certaines activités financières effectuées jusqu’ici en France par les entités britanniques en libre prestation de services ou en liberté d’établissement, en particulier en matière d’assurance.

    Seuls sont éligibles au PEA les titres dont la société émettrice a son siège social dans un Etat membre de l’UE (ou de l’EEE), et les parts d’organismes de placement collectif détenant au moins 75 % de leurs actifs investis dans des titres de sociétés établies dans un Etat membre de l’UE (ou de l’EEE).

    La sortie du Royaume-Uni de l’Union européenne entraînera donc la perte de l’éligibilité au PEA des titres d’émetteurs britanniques et des organismes de placement collectif britanniques. Elle impactera également les autres organismes de placements collectifs qui détiennent des titres britanniques dans le cadre du calcul du quota de 75 %.

    WHAT'S NEW?

    Le 17 décembre 2020, l'Ordonnance no 2020-1595 du 16 décembre 2020 tirant les conséquences du retrait du Royaume- Uni de l’Union européenne en matière d’assurances, de placements collectifs et de plans d’épargne en actions a été publiée au Journal Officiel avec le Rapport au Président de la République.

    Les 1o et 2o de l’article 1er permettent de clarifier deux éléments relatifs aux pouvoirs de supervision de l’Autorité de contrôle prudentiel et de résolution (ACPR) vis-à-vis des entités britanniques après le Brexit. L’ordonnance précise que le pouvoir de sanction de l’ACPR perdure vis-à-vis des faits commis avant la sortie du Royaume-Uni par des personnes relevant de son champ de compétence à la date de commission du manquement ou de l’infraction.

    L’ordonnance précise que l’ACPR demeure en charge de veiller au respect des règles de droit français applicables aux obligations résultant de contrats conclus en libre prestation de service ou libre établissement et dont l’exécution se poursuit après le Brexit, en tenant compte de la surveillance exercée par les autorités compétentes du Royaume-Uni.

    L’ordonnance décrit l’ensemble des opérations d’assurance qui ne peuvent plus être pratiquées par des entreprises ayant perdu leur passeport européen: les contrats ne peuvent ni être renouvelés, ni prorogés, ni reconduits, ni donner lieu à toute opération qui impliquerait l’émission de nouvelles primes.

    L’article 3 prévoit des mesures de transition relatives aux plans d’épargne en actions (PEA et PEA-PME) et aux placements collectifs (FCPR, FPCI et FIP). S’agissant tout d’abord des PEA et PEA-PME, l’ordonnance prévoit le maintien de l’éligibilité à l’emploi du PEA et du PEA-PME des titres britanniques acquis avant le 31 décembre 2020.

    L’ordonnance prévoit le maintien de l’éligibilité à l’emploi du PEA et du PEA-PME des titres britanniques acquis avant ou après la date de fin de la période de transition par des organismes de placement collectif (OPC) qui sont éligibles au PEA ou au PEA-PME à la date de publication de l’ordonnance. L’article 3 maintient l’éligibilité des parts ou actions d’OPC britanniques acquis avant la même date, sous réserve qu’ils continuent de respecter les règles d’éligibilité au PEA et PEA-PME telles qu’adaptées par les dispositions du II de l’article 3. Ce maintien de l’éligibilité est établi pour une durée fixée par arrêté du ministre de l’économie qui ne peut excéder deux ans.

    WHAT'S NEXT?

    Le 28 décembre 2020, l'Autorité des marchés financiers (AMF) a publié une communication qui vise à soutenir les sociétés de gestion d'actifs pour les aider à se préparer aux conséquences de Brexit concernant les plans d'épargne en actions (PEA) et les plans d'épargne en actions destinés au financement des PME et des entreprises moyennes (PEA PME-ETI), en précisant les conditions d'éligibilité des titres et obligations d'information et concernant les fonds de capital-investissement.

  • France informs companies established in France with share capital/voting rights held by persons established in the UK / La France informe les sociétés établies en France avec un capital social/droits de vote détenu par des personnes établies au Royaume-Un

    CACEIS

  • On 17 December 2020, the Ordinance No. 2020-1596 of 16 December 2020 on various measures relating to companies established in France all or part of whose share capital or voting rights are held by persons established in the United Kingdom was published in the Official Journal together with the Report to the President of the Republic.

    Article 1 aims to ensure the continuity of the structures for carrying on activities subject to a legislative or regulatory status in the United Kingdom - in particular, companies operating on a self-employed basis and holding companies as well as companies provided for in the statutory instruments relating to the legal and judicial professions as well as the technical professions (chartered accountants and auditors) and the living environment (architects) and veterinary surgeons. Persons principally established in the United Kingdom may not, however, increase their shareholding in such companies or transfer it to another person established in the same State.

    Article 2 is intended, as a continuation of Article 1, to allow branches under United Kingdom law exercising the profession of solicitor or accountant on the last day of the transitional agreement to continue their activities. No new branches may be established after the withdrawal from the United Kingdom. 

    The effect of Article 3 is to extend the provisions of the Ordinance to the Pacific Territories where the statutory instruments referred to in Article 1 are applicable by operation of law. Since the applicable provisions are within the competence of the State, no consultation is necessary.

    Version française

    Le 17 décembre 2020, l'Ordonnance no.2020-1596 du 16 décembre 2020 portant diverses mesures relatives aux sociétés établies en France dont tout ou partie du capital social ou des droits de vote est détenu par des personnes établies au Royaume-Uni a été publié avec le Rapport au Président de la République.

    L’article 1er vise ainsi à assurer la pérennité des structures d’exercice des activités soumises à un statut législatif ou réglementaire au Royaume-Uni – notamment les sociétés d’exercice libéral (SEL) et les sociétés holdings (SPFPL) ainsi que les sociétés prévues par les textes statutaires relatifs aux professions juridiques et judiciaires ainsi qu’aux professions techniques (experts-comptables et commissaires aux comptes) et du cadre de vie (architectes) ainsi qu’aux vétérinaires. Les personnes établies à titre principal au Royaume-Uni ne pourront toutefois pas augmenter leur participation dans ces sociétés ou la céder à une autre personne établie dans ce même Etat.

    L’article 2 vise, dans la continuité de l’article 1er, à permettre aux succursales de droit britannique exerçant la profession d’avocat ou celle d’expert-comptable au dernier jour de l’accord de transition de poursuivre leurs activités. Aucune nouvelle succursale ne pourra être créée postérieurement au retrait du Royaume-Uni.

    L'effet de l'article 3 est d’étendre aux territoires du Pacifique les dispositions de l’ordonnance dans les cas où les textes statutaires visés par l’article 1er sont applicables de plein droit. Dès lors que les dispositions applicables sont de la compétence de l’Etat, aucune consultation n’est nécessaire.

  • AMF informs on Brexit for asset management sector and fixes the transition period of Art. 3 Ordinance No. 2020-1595 / L'AMF informe sur le Brexit pour le secteur de la gestion d'actifs et fixe la période de transition de l'art. 3 Ordonnance No.2020-1595

    CACEIS

  • BACKGROUND

    As the United Kingdom left the European Union, the Autorité des Marchés Financiers (AMF) provides support to asset management companies to help them prepare for the consequences of this exit.

    Article 59 of Law No. 2020-734 of 17 June 2020 on the various provisions related to the health crisis as well as the withdrawal of the UK from the European Union authorises the French Government to proceed with the publication of decrees in order to "introduce appropriate rules for the management of undertakings for collective investment and equity savings plans, the assets or use of which comply with investment ratios or rules in European entities."

    On this basis, Order n° 2020-1595 of 16th December 2020, specified by Decree of 22 December 2020, provides for a series of transitional measures concerning capital investment funds, equity savings plans (PEA) and equity savings plans intended for the financing of SMEs and mid-tier enterprises (PME-ETI PEA).

    The purpose of these measures is to help market participants who are exposed to regulatory risk after 31 December 2020 carry out their transition without undue haste and in the best interests of investors. The time limits provided should thus allow management companies to adjust their investment strategy and assets under management, where necessary, in order to avoid the risk of non-compliance at the end of the transition period.

    WHAT'S NEW?

    On 28 December 2020, the Autorité des marchés financiers (AMF) published a communication which aims to support to asset management companies to help them prepare for the consequences of Brexit.

    1. Regarding equity savings plans (PEA) and equity savings plans intended for the financing of SMEs and mid-tier enterprises (PME-ETI PEA): securities eligibility and disclosure requirements

    The transitional measures concern securities registered in PEAs and PME-ETI PEAs as well as securities eligible for inclusion in the assets of collective investment undertakings (CIU) that may be registered in these plans. They benefit from a nine-month transition period defined in Article 3 of Order n° 2020-1595 of 16th December 2020, and completed by Article 1 of the decree, i.e. up to 30 September 2021. Until this date, the following securities continue to be eligible:

    • Securities issued by UK companies that have been regularly subscribed or acquired before 31 December 2020;
    • Securities issued by UK companies within the quota of 75% of CIUs, provided that these CIUs were eligible as at 31 December 2020; and
    • Units or shares of UK UCITS regularly subscribed or acquired before 31 December 2020.

    2. Regarding private equity funds

    • for retail private equity investment funds (FCPR): a transition period of 12 months, i.e. until 31 December 2021, during which securities admitted for trading on a UK market and issued by companies with a market capitalisation of under €150 million, subscribed or acquired before 31 December 2020, remain eligible for inclusion in the assets of these funds under the conditions defined in paragraph III of Article L. 214-28 of the Monetary and Financial Code, i.e. within the limit of 20% of the 50% quota of unlisted securities;
    • for retail venture capital and retail local investment funds (FCPI) and local investment funds (FIP): a grandfather clause for securities issued by UK companies held, directly or indirectly, by the above funds as at 31 December 2020. The securities of these companies will continue to be eligible, without a time limit, for inclusion into the assets of retail venture capital and retail local investment funds under the 70% quota. This grandfather clause extends to securities issued by UK companies that the above investment funds are obliged to acquire under an agreement concluded with other shareholders or with the issuer before 31 December 2020. These provisions also apply to overdraft facilities.
    • these transitional measures will also apply to professional private equity investment funds.

    WHAT'S NEXT?

    The AMF reminds the participants concerned of the following consequences, which are not exhaustive.

    - Effects on investments

    Management companies must verify to what extent UK securities and funds will continue to be eligible for inclusion in the assets of UCITS, AIFs or the individual portfolios that they manage, as from the end of the transition period. If necessary, the priority objective of management companies should be to regularise the situation, taking into account the interests of investors.

    The transformation of UK UCITS into third-country AIFs could also have consequences for institutional investors regarding compliance with the relevant investment rules.

    - Cross-border management of UCITS and AIFs

    The expiry of the UK's transition period will end the possibility (i) for asset management companies authorised in France to benefit from the passport system provided by the UCITS and AIFM directives to manage UCITS and AIFs based in the UK and (ii) for management companies authorised in the UK to benefit from the same passport system to manage UCITS and AIFs based in France.

    However, French asset management companies will be able to delegate the management of their French UCITS and AIFs to UK institutions in accordance with a cooperation agreement concluded on 1 February 2019 between the supervisory authorities of EU member countries and the UK regulator, the FCA.

    - Marketing of products and services

    Passports for marketing products and services linked to the UCITS and AIFM Directives will no longer be able to be used by the UK as of 31 December 2020.

    This means that it will no longer be possible (i) for asset management companies authorised in France to benefit from the passport system provided by the UCITS and AIFM directives to provide investment services in the UK and (ii) for management companies authorised in the UK to benefit from the same passport system to provide investment services in France.

    The end of the transition period also means that the current UK-based UCITS will become third-country AIFs on 1 January 2021, since an investment fund must, among other conditions, be established in the European Union or the  European Economic Area (EEA) to qualify as a UCITS. Investors who, before 31 December 2020, had invested in UK-based UCITS, which have become third country AIFs, will nevertheless be able to keep their units or shares, but will no longer benefit from the protective rules stemming from the UCITS directive, in particular as regards information.

    UK AIFs or AIFs managed by UK managers will also no longer benefit from the marketing passport that enabled them to be marketed in France to professional investors. As with the former UK-based UCITS, investors existing as at 31 December 2020 may keep the units or shares of UK AIFs that have become third country AIFs. However, these AIFs will no longer be subject to the regulations derived from the AIFM Directive.

    Version française

    BACKGROUND

    Le Royaume-Uni ayant quitté l'Union européenne, l'Autorité des marchés financiers (AMF) apporte un soutien aux sociétés de gestion d'actifs pour les aider à se préparer aux conséquences de cette sortie.

    La loi n°2020-734 du 17 juin 2020 relative à diverses dispositions liées à la crise sanitaire, à d’autres mesures urgentes ainsi qu’au retrait du Royaume-Uni de l’Union européenne prévoit, en son article 59, une habilitation permettant au gouvernement de légiférer par ordonnance afin d’ « introduire des règles adaptées pour la gestion de placements collectifs et pour les plans d'épargne en actions dont l'actif ou l'emploi respecte des ratios ou règles d'investissement dans des entités européennes ».

    Sur ce fondement, l’ordonnance n° 2020-1595 du 16 décembre 2020, précisée par l’arrêté du 22 décembre 2020, prévoit un ensemble de mesures transitoires concernant les fonds de capital investissement, les plans d’épargne en actions (PEA) et les plans d’épargne en actions destinés au financement des petites et moyennes entreprises et des entreprises de taille intermédiaire (PEA PME-ETI).

    Ces mesures transitoires ont pour objectif d’aider les acteurs exposés à un risque réglementaire, après le 31 décembre 2020, à procéder à une transition sans précipitation et dans le meilleur intérêt des investisseurs. Les délais accordés devraient ainsi permettre, le cas échéant, aux sociétés de gestion d’ajuster leur stratégie d’investissement et les actifs sous gestion afin de prévenir les risques de non-conformité à l’issue de la période de transition.

    WHAT'S NEW?

    Le 28 décembre 2020, l'Autorité des marchés financiers (AMF) a publié une communication qui vise à soutenir les sociétés de gestion d'actifs pour les aider à se préparer aux conséquences de Brexit.

    1. Concernant les PEA et PEA PME-ETI : éligibilité des titres et obligations d’information

    Les mesures transitoires concernent à la fois les titres inscrits sur les PEA et PEA PME-ETI et les titres éligibles à l’actif des organismes de placement collectif (OPC) qui peuvent être inscrits dans ces plans. Ces titres bénéficient d’une période de transition que l’article 3 de l’ordonnance n° 2020-1595 du 16 décembre 2020, complété de l’article 1er de l’arrêté, fixe à 9 mois, soit jusqu’au 30 septembre 2021.

    Jusqu’à cette date les titres suivants restent éligibles :

    • les titres vifs britanniques régulièrement souscrits ou acquis avant le 31 décembre 2020 ;
    • les titres vifs britanniques au quota de 75% des OPC, pour autant que ces OPC étaient éligibles au 31 décembre 2020 ; et
    • les parts ou actions d’OPCVM britanniques régulièrement souscrites ou acquises avant le 31 décembre 2020.

    2. Concernant les fonds de capital investissement

    • pour les fonds communs de placement à risques (FCPR): un délai transitoire de 12 mois, soit jusqu’au 31 décembre 2021, pendant lequel les titres admis aux négociations sur un marché du Royaume-Uni et émis par des sociétés dont la capitalisation boursière est inférieure à 150 millions d’euros, souscrits ou acquis avant le 31 décembre 2020, restent éligibles à l’actif de ces fonds dans les conditions du III de l’article L. 214-28 du code monétaire et financier, c’est-à-dire dans la limite de 20% du quota de 50% de titres non cotés ;
    • pour fonds communs de placement dans l’innovation (FCPI) et les fonds d’investissement de proximité (FIP): une clause de grand-père pour les titres émis par des sociétés britanniques détenus, directement ou indirectement, par les FCPI ou les FIP au 31 décembre 2020. Les titres de ces sociétés demeureront éligibles, sans limite dans le temps, à l’actif des FCPI et des FIP dans le cadre du quota de 70%.Cette clause de grand-père s’étend aux titres émis par des sociétés britanniques que les FCPI ou les FIP sont tenus d’acquérir dans le cadre d’un accord conclu avec d’autres associés ou avec l’émetteur avant le 31 décembre 2020. Ces dispositions sont également applicables aux avances en compte courant.
    • Ces mesures transitoires s’appliqueront également aux fonds professionnels de capital investissement.

    WHAT'S NEXT?

    Sans qu’ils ne soient exhaustifs, l’AMF rappelle aux acteurs concernés les conséquences suivantes.

    - Effets sur les investissements

    Les sociétés de gestion doivent vérifier dans quelle mesure les titres et fonds britanniques seront toujours éligibles à l’actif des OPCVM, des FIA ou des portefeuilles individuels qu’elles gèrent, à partir de la date de la fin de la période de transition. Le cas échéant, les sociétés de gestion devront avoir pour objectif prioritaire de régulariser la situation, en tenant compte de l’intérêt des investisseurs.

    La transformation des OPCVM britanniques en FIA de pays tiers pourrait également avoir des conséquences pour les investisseurs institutionnels quant au respect des règles d’investissement pertinentes.

    - Gestion transfrontalière d’OPCVM et de FIA

    La fin de la période de transition avec le Royaume-Uni mettra fin à la possibilité (i) pour les sociétés de gestion de portefeuille agréées en France de bénéficier du passeport prévu par les directives OPCVM et AIFM pour gérer des OPCVM et des FIA établis au Royaume-Uni et (ii) pour les sociétés de gestion agréées au Royaume-Uni de bénéficier du même passeport pour gérer des OPCVM et des FIA établis en France.

    Toutefois, les sociétés de gestion de portefeuille françaises pourront déléguer la gestion de leurs OPCVM et FIA de droit français à des établissements britanniques conformément à un accord de coopération conclu le 1er février 2019 entre les autorités de supervision des Etats membres de l’Union européenne et la Financial Conduct Authority (FCA), superviseur britannique.

    - Commercialisation de produits et services

    Les passeports de commercialisation de produits ou services liés aux directives OPCVM et AIFM prendront fin vis-à-vis du Royaume-Uni au 31 décembre 2020.

    Cela implique qu’il ne sera plus possible (i) pour les sociétés de gestion de portefeuille agréées en France de bénéficier du passeport prévu par les directives OPCVM et AIFM pour fournir des services d’investissement au Royaume-Uni et (ii) pour les sociétés de gestion agréées au Royaume-Uni de bénéficier du même passeport pour fournir des services d’investissement en France.

    La fin de la période de transition implique également que les actuels OPCVM britanniques deviendront des FIA de pays tiers le 1er janvier 2021, puisqu’un fonds d’investissement doit, entre autres conditions, nécessairement être établi dans l’Union européenne ou l’Espace économique européen (EEE) pour être qualifié d’OPCVM. Les investisseurs existants avant le 31 décembre 2020 dans des OPCVM britanniques, devenus des FIA de pays tiers, pourront toutefois conserver leurs parts ou actions mais ils ne bénéficieront plus des règles protectrices issues de la directive OPCVM, en particulier en matière d’information.

    Les FIA britanniques ou gérés par des gestionnaires britanniques ne pourront plus non plus bénéficier du passeport commercialisation leur permettant d’être commercialisés en France auprès d’investisseurs professionnels. Comme pour les anciens OPCVM britanniques, les investisseurs existants au 31 décembre 2020 pourront conserver leurs parts ou actions de FIA britanniques devenus des FIA de pays tiers, mais ceux-ci ne seront désormais plus soumis à la réglementation issue de la directive AIFM.

  • AMF informs on equity savings plan and Brexit: extension of the transition period for investments in UK securities / L'AMF informe sur les PEA et le Brexit: délai supplémentaire pour investissements en titres britanniques

    CACEIS

  • On 30 December 2020, the Autorité des marchés financiers (AMF) informed on equity savings plan and Brexit: extension of the transition period for your investments in UK securities.

    The United Kingdom officially left the European Union on 31 January and the transition period ends on 31 December 2020. If you have securities issued by UK companies in your equity savings plan (PEA), you can keep them until 30 September 2021, which leaves you with a few months to adjust your portfolio.

    Version française

    Le 30 décembre 2020, l'Autorité des marchés financiers (AMF) a publié une communication sur les PEA et le Brexit: délai supplémentaire pour les investissements en titres britanniques.

    Le Royaume-Uni est officiellement sorti de l’Union européenne le 31 janvier dernier, et la période de transition arrive à son terme le 31 décembre 2020. Si vous détenez des titres britanniques au sein de votre PEA (Plan d’épargne en actions), vous pouvez les conserver jusqu’au 30 septembre 2021, ce qui vous laisse quelques mois pour adapter votre portefeuille.

  • COVID-19 Regulatory Measures

    France amends the State guarantee to credit institutions and finance companies in application of the finance law 2020-289 / La France modifie la garantie de l’Etat aux établissements de crédit et sociétés de financement en application de la loi 2020-289

    CACEIS

  • On 31 December 2020, the Decree of 29 December 2020 amending the decree of 23 March 2020 granting the State guarantee to credit institutions and finance companies in application of article 6 of the amended finance law No. 2020-289 for 2020 was published in the Official Journal.

    State guarantee to credit institutions and finance companies in application of article 6 of the amended finance law No. 2020-289 for 2020 is extended from 31 December 2020 to 30 June 2021.

    Version française

    Le 31 décembre 2020, l'Arrêté du 29 décembre 2020 portant modification de l’arrêté du 23 mars 2020 accordant la garantie de l’Etat aux établissements de crédit et sociétés de financement en application de l’article 6 de la loi no 2020-289 de finances rectificative pour 2020 a été publié au Journal Officiel.

    La garantie de l'État aux établissements de crédit et aux sociétés financières en application de l'article 6 de la loi de finances rectificative n° 2020-289 pour 2020 est prolongée du 31 décembre 2020 au 30 juin 2021.

  • Here are legislative texts published on rules of meeting & deliberation of assemblies and governing bodies / Voici des textes législatifs français publiés sur les règles de réunion et de délibération des assemblées et des organes de direction

    CACEIS

  • Here are French legislative texts published on rules of meeting & deliberation of assemblies and governing bodies.

    1. On 3 December 2020, the Ordinance No. 2020-1497 of 2 December 2020 extending and modifying ordinance No. 2020-321 of 25 March 2020 adapting the rules for the meeting and deliberation of assemblies and governing bodies of legal persons and unincorporated entities under private law due to the COVID-19 epidemic was published in the Official Journal together with the report to the President of the Republic relating to ordinance No. 2020-1497.

    The ordinance extends the following measure to all legal persons and entities without legal personality under private law: "no general meeting shall be declared null and void if a convocation which must be made by post could not be made by that means due to circumstances external to the company".

    Concerning the holding of meetings "à huit clos", it is possible to compensate for the inability of members to participate physically in the meeting by allowing them to participate by means of a telephone or audiovisual conference.

    The ordinance "tightens" the condition for holding meeting "à huis clos" by limiting this possibility to cases in which the restrictive measures in effect on the date the meeting is called or on the date of the meeting effectively and concretely impede the physical presence of its members at the meeting. 

    A new article is introduced reinforcing the rights of shareholders of listed companies (other than open-ended investment companies with variable capital, known as "SICAVs") where the general meeting is held " à huis clos". 

    The ordinance extends the application of the ordinance of 25 March 2020, which will continue to apply to meetings of meetings of the supervisory and management administrative and collegiate bodies held until 1 April 2021. This immediate extension is accompanied by the possibility of further extensions by decree of the Conseil d'Etat up to a deadline of 31 July 2021.

    2. On 19 December 2020, the Decree No. 2020-1614 of 18 December 2020 extending and modifying Decree No. 2020-418 of 10 April 2020 adapting the rules of meeting and deliberation of assemblies and governing bodies of legal persons and entities without legal personality under private law as a result of the COVID-19 epidemic was published in the Official Journal.

    The decree extends until April 1, 2021 the duration of application of Decree No 2020-418 of 10 April 2020.

    The decree specifies the conditions for the application of certain provisions of ordinance n ° 2020-321 of March 25, 2020, as amended. As such, it provides in particular: 

    i) for legal persons and entities without legal personality governed by private law other than listed companies, the conditions under which the members of the meetings can be consulted by written consultation, when these conditions do not are not already determined by the legal or regulatory provisions governing the meeting, the articles of association or the issue contract; 

    ii) for legal persons and entities without legal personality governed by private law, the conditions under which the members of the meetings can vote by correspondence, when these conditions are not already determined by the legal or regulatory provisions governing the meeting, the articles of association or the issuance contract; 

    iii) for limited liability companies, certain joint-stock companies and meetings of holders of certain types of securities, details of the composition of the board of meetings; 

    iv) for listed companies, certain information to be established in the minutes by the body competent to convene the meeting or by its delegate when it decides that the meeting is held without the members of the latter and the others persons having the right to attend participate physically, when the members of the assembly are not able to participate by telephone or audiovisual conference, or when the provisions of the decree relating to the composition of the office of the general assembly are applied, as well as the conditions under which this information is brought to the attention of shareholders; 

    v) the conditions of application of the provisions of the ordinance applicable to listed companies and relating to the rebroadcasting of the general meeting and the strengthening of the system of written questions.

    Version française

    Voici des textes législatifs français publiés sur les règles de réunion et de délibération des assemblées et des organes de direction. 

    1. Le 3 décembre 2020, l'Ordonnance no.2020-1497 du 2 décembre 2020 portant prorogation et modification de l’ordonnance no 2020-321 du 25 mars 2020 portant adaptation des règles de réunion et de délibération des assemblées et organes dirigeants des personnes morales et entités dépourvues de personnalité morale de droit privé en raison de l’épidémie de COVID-19 a été publiée au Journal Officiel avec le Rapport au Président de la République relatif à l’ordonnance no.2020-1497.

    L'ordonnance étend la mesure suivante à toutes les personnes morales et entités sans personnalité juridique de droit privé : "aucune nullité de l’assemblée générale n’est encourue lorsqu’une convocation devant être réalisée par voie postale n’a pas pu être réalisée par cette voie en raison de circonstances extérieures à la société".

    Concernant la tenue des assemblées "à huis clos", il est possible de pallier l’impossibilité pour les membres de participer physiquement à la séance en leur permettant d’y participer par voie de conférence téléphonique ou audiovisuelle.

    L'ordonnance "resserre" la condition pour l’organisation d’une assemblée «à huis clos», en limitant cette possibilité aux cas dans lesquels les mesures restrictives en vigueur à la date de la convocation de l’assemblée ou à la date de sa réunion font effectivement et concrètement obstacle à la présence physique de ses membres à cette dernière.

    Un nouvel article est créé renforçant les droits des actionnaires des sociétés (autres que les sociétés d’investissement à capital variable dites «SICAV») cotées dans le cas où l’assemblée générale est organisée "à huis clos".

    L'ordonnance étend l'application de l’ordonnance du 25 mars 2020 qui continuera de s’appliquer aux réunions des assemblées et organes collégiaux d’administration de surveillance et de direction tenues à compter de l’entrée en vigueur de la présente ordonnance et jusqu’au 1er avril 2021. Cette prorogation immédiate est assortie de la faculté de procéder à de nouvelles prorogations par voie de décret en Conseil d’Etat jusqu’à une date butoir fixée au 31 juillet 2021.

    2. Le 19 décembre 2020, le Décret no.2020-1614 du 18 décembre 2020 portant prorogation et modification du décret no 2020-418 du 10 avril 2020 et du décret no 2020-629 du 25 mai 2020 pour adapter le fonctionnement de certaines instances délibératives au contexte créé par l’épidémie de COVID-19 a été publié au Journal Officiel. 

    Le décret prolonge jusqu’au 1er avril 2021 de la durée d’application du décret no 2020-418 du 10 avril 2020.

    Le décret porte adaptation du décret du 10 avril 2020 précité afin de préciser les conditions d’application de certaines dispositions de l’ordonnance no 2020-321 du 25 mars 2020 modifiée. A ce titre, il prévoit notamment :

    i) pour les personnes morales et entités dépourvues de personnalité morale de droit privé autres que les sociétés cotées, les conditions dans lesquelles les membres des assemblées peuvent être consultés par voie de consultation écrite, lorsque ces conditions ne sont pas déjà déterminées par les dispositions légales ou réglementaires qui régissent l’assemblée, les statuts ou le contrat d’émission ; 

    ii) pour les personnes morales et entités dépourvues de personnalité morale de droit privé, les conditions dans lesquelles les membres des assemblées peuvent voter par correspondance, lorsque ces conditions ne sont pas déjà déterminées par les dispositions légales ou réglementaires qui régissent l’assemblée, les statuts ou le contrat d’émission ; 

    iii) pour les sociétés à responsabilité limitée, certaines sociétés par actions et les assemblées des porteurs de certains types de valeurs mobilières, des précisions sur la composition du bureau des assemblées ; 

    iv) pour les sociétés cotées, certaines mentions devant être établies au procès-verbal par l’organe compétent pour convoquer l’assemblée ou par son délégataire lorsqu’il décide que l’assemblée se tient sans que les membres de cette dernière et les autres personnes ayant le droit d’y assister n’y participent physiquement, lorsque les membres de l’assemblée n’ont pas la possibilité d’y participer par voie de conférence téléphonique ou audiovisuelle, ou lorsque les dispositions du décret relatives à la composition du bureau de l’assemblée générale sont appliquées, ainsi que les conditions dans lesquelles ces informations sont portées à la connaissance des actionnaires ; 

    v) les conditions d’application des dispositions de l’ordonnance applicables aux sociétés cotées et relatives à la rediffusion de l’assemblée générale et au renforcement du régime des questions écrites.

  • Data protection / General Data Protection Regulation (GDPR) / ePrivacy Regulation (ePR)

    CNIL announces GDPR remains applicable in the United Kingdom until 1 July 2021 / La CNIL annonce que le GDPR reste applicable au Royaume-Uni jusqu'au 1er juillet 2021

    CACEIS

  • On 28 December 2020, the Commission nationale de l'informatique et des libertés (CNIL) announced the GDPR remains applicable in the United Kingdom until 1 July  2021.

    The United Kingdom and the European Union have agreed that the GDPR will remain applicable in the United Kingdom for a maximum period of 6 months, during which time data may continue to be transferred to the United Kingdom. However, the "one-stop shop" will no longer apply in the UK from 1 January 2021.

    Version française

    Le 28 décembre 2020, la Commission nationale de l'informatique et des libertés (CNIL) a annoncé que le GDPR reste applicable au Royaume-Uni jusqu'au 1er juillet 2021.

    Le Royaume-Uni et l’Union Européenne sont convenus que le RGPD restera applicable au Royaume-Uni pour une durée de 6 mois maximum, pendant laquelle les données pourront continuer à y être transférées. En revanche, le « guichet unique » ne sera plus applicable au Royaume-Uni à partir du 1er janvier 2021.

  • Financial Market Amendment Law

    ACPR publishes Decision No. 2020-C-58 amending Decision 2011-C-13 of 23/3/11 establishing the AML/CFT Consultative Commission / L'ACPR publie la décision No.2020-C-58 modifiant la décision 2011-C-13 du 23/3/11 instituant la commission consultative LBC/FT

    CACEIS

  • On 29 December 2020, the Autorité de contrôle prudentiel et de résolution (ACPR) published Decision No. 2020-C-58 amending  Decision 2011-C-13 of 23 March 2011 establishing the Consultative Commission on Combating Money Laundering and Terrorism. 

    The Director of the TRACFIN service with national competence, or the representative designated by him, shall be invited to the meetings of the Commission. The Chairman of the AMF, or the representative he designates, is invited to Commission meetings. The Chairman of the CNIL, or the representative he designates, is invited to participate in the Commission's work in the presence of subjects falling within its remit. The Director General of the Treasury or his representative is invited to the Commission's meetings.

    For matters of interest to the financial sector as a whole, the Chairman of the Consultative Commission and the Chairman of the AMF, or his representative, jointly set the agenda and draw up a list of representatives of industry associations or entities supervised by the AMF mentioned in 2° of I of Article L. 561-36, who are to be invited. The AMF departments and the ACPR General Secretariat shall jointly prepare the notes to be presented at the meeting. They shall jointly draw up a summary report of the meeting.

    Version française

    Le 29 décembre 2020, l'Autorité de contrôle prudentiel et de résolution (ACPR)  a publié la décision No.2020-C-58 modifiant la décision 2011-C-13 du 23/3/11 instituant la Commission consultative Lutte contre le blanchiment du terrorisme.

    Le directeur du service à compétence nationale TRACFIN, ou le représentant qu’il désigne, est invité aux réunions de la Commission. Le Président de l’AMF, ou le représentant qu’il désigne, est invité aux réunions de la Commission. Le Président de la CNIL, ou le représentant qu’il désigne, est invité à participer aux travaux de la Commission en présence de sujets relevant de sa compétence. Le Directeur général du Trésor ou son représentant est invité aux réunions de la Commission.

    Pour des sujets intéressant l’ensemble du secteur financier, le Président de la Commission consultative et le Président de l’AMF, ou son représentant, arrêtent conjointement l’ordre du jour et la liste des représentants d’associations professionnelles ou d’entités supervisées par l’AMF mentionnées au 2° du I de l'article L. 561-36, qui sont à inviter. Les services de l’AMF et le Secrétariat général de l'ACPR préparent conjointement les notes qui seront présentées à la réunion. Ils rédigent conjointement un compte rendu synthétique de la réunion.

  • France publishes Decree no. 2020-1768 of 30 December 2020 relating to contributions due to the Autorité des marchés financiers / La France publie le décret no 2020-1768 du 30 décembre 2020 relatif aux contributions dues à l’AMF

    CACEIS

  • On 31 December 2020, the Decree no. 2020-1768 of 30 December 2020 relating to contributions due to the Autorité des marchés financiers was published in the Official Journal. 

    The purpose of the decree on fees and contributions due to the AMF is to set the precise amount or rate for certain fees and contributions and the dates on which these amounts must be paid to the AMF.

    Target: investment services providers mentioned in Article L. 531-1 of the Monetary and Financial Code, branches of third-country firms mentioned in Article L. 532-48, branches of investment services providers mentioned in Article L. 532-18-1, providers of services on digital assets mentioned in Articles L. 54-10-3 and L. 54-10-5, issuers of tokens mentioned in Article L. 552-1, the foreign collective investment schemes marketed in France mentioned in Articles L. 214-1-1, L. 214-2-2 and L. 214-24-1, the providers of data communication services mentioned in Article L. 549-1, the administrators of benchmark indices mentioned in Article 3 (6)(1) of Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 and the issuers mentioned in Article L. 451-1-2(2)(II) of Regulation (EU) 2016/1011.

    Version française

    Le 31 décembre 2020, le Décret no 2020-1768 du 30 décembre 2020 relatif aux contributions dues à l’Autorité des marchés financiers a été publié au Journal Officiel. 

    L’objectif de ce décret est de fixer le montant ou le taux précis pour certains droits et contributions et les dates auxquelles ces montants doivent être versés à l’AMF.

    Publics concernés : les prestataires de services d’investissement mentionnés à l’article L. 531-1 du code monétaire et financier, les succursales d’entreprises de pays tiers mentionnées à l’article L. 532-48, les succursales de prestataires de services d’investissement mentionnées à l’article L. 532-18-1, les prestataires de services sur actifs numériques mentionnés aux articles L. 54-10-3 et L. 54-10-5, les émetteurs de jetons mentionnés à l’article L. 552-1, les placements collectifs étrangers commercialisés en France mentionnés aux articles L. 214-1-1, L. 214-2-2 et L. 214-24-1, les prestataires de services de communication de données mentionnés à l’article L. 549-1, les administrateurs d’indices de référence mentionnés au 6 du 1 de l’article 3 du règlement (UE) 2016/1011 du Parlement européen et du Conseil du 8 juin 2016 et les émetteurs mentionnés au 2o du II de l’article L. 451-1-2.

  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    AFG publishes Statistical characterization of asset management companies and branches according to the type of assets managed in France / L'AFG publie la caractérisation statistique des SGP et succursales selon la nature des actifs gérés en France

    CACEIS

  • On 15 December 2020, the Association Française de Gestion (AFG) published Statistical characterization of asset management companies and management branches according to the type of assets managed in France - data at the end of December 2019.

    AFG publishes the 2020 edition of its annual statistical overview presenting information characterizing the population of management companies and management branches according to the nature of the assets managed, the market shares according to the type of company, the distribution of management companies. subsidiary and entrepreneurial management by tranche of assets and the breakdown of UCIs under French law according to their legal nature UCITS / AIF).

    Version française

    Le 15 décembre 2020, l'Association Française de Gestion (AFG) a publié un guide sur la caractérisation statistique des SGP et succursales selon la nature des actifs gérés en France.

    L’AFG publie l’édition 2020 de son panorama statistique annuel présentant des informations caractérisant la population des sociétés de gestion et des succursales de gestion selon la nature des actifs gérés, les parts de marché selon le type de société, la répartition des sociétés de gestion filiales et entrepreneuriales par tranches d’encours et la répartition des OPC de droit français selon leur nature juridique (OPCVM/FIA).

  • Market Abuse Directive & Regulation (MAD / MAR)

    AMF extends the Decision No. 2018-01 relating to liquidity contracts under accepted market practice / L'AMF prolonge la Décision AMF n°2018-01 relative aux contrats de liquidité sur titres de capital au titre de pratique de marché admise

    CACEIS

  • On 18 December 2020, the Autorité des marchés financiers (AMF) published its Decision n° 2020-01 of 8 December 2020 concerning the extension of Decision No. 2018-01 relating to liquidity contracts on equity securities under accepted market practice (AMP).

    Under Delegated Regulation (EU) 2016/908, AMF should assess every two years, whether the conditions for establishing the AMP continue to be met.

    Due to COVID-19, it is extended until 30 June 2021 to allow the AMF to finalize its work on the review of AMP.

    Version française

    Le 18 décembre 2020, l'Autorité des marchés financiers (AMF) a publié la Décision AMF n°2018-01 relative aux contrats de liquidité sur titres de capital au titre de pratique de marché admise (PMA).

    En vertu du règlement délégué (UE) 2016/908, l'AMF doit évaluer tous les deux ans si les conditions d'établissement de la PMA continuent d'être remplies.

    En raison de la COVID-19, elle est prolongée jusqu'au 30 juin 2021 pour permettre à l'AMF de finaliser son travail sur la révision de la PMA.

  • Markets in financial instruments Directive and Regulation (MiFID II / MiFIR)

    AFG informs on the mandatory CFI code communication from 1 January 2021 / L'AFG informe sur la communication obligatoire du code CFI à partir du 1er janvier 2021

    CACEIS

  • On 23 December 2020, the Association Française de Gestion (AFG) informed that the obligation to communicate the Codification des Instruments Financiers (CFI) for the admission of funds to Euroclear France becomes effective as of 1 January 2021. This obligation applies to all types of financial instruments.

    Therefore, the Euroclear France asked management companies to collect the relevant attributes allowing it to define this code, which will be provided at the latest on admission of the financial instruments.

    Version française

    Le 23 décembre 2020, l'Association Française de Gestion (AFG) a informé que la communication du code CFI pour l’admission des fonds en Euroclear France devient effective à compter du 1er janvier 2021. Cette communication s’applique à tous les types d’instruments financiers.

    A ce titre, Euroclear France demande aux sociétés de gestion de collecter les attributs pertinents lui permettant de définir ce code, attributs à fournir au plus tard à l’admission de la valeur en question.

  • Prudential Requirements for Investment Firms Directive & Regulation (IFD / IFR)

    France publishes Decree of 23 December 2020 amending the Decree of 5/7/07 relating to other activities of investment firms / La France publie l'arrêté du 23/12/2020 modifiant l’arrêté du 5/9/07 relatif aux autres activités des entreprises d’investissement

    CACEIS

  • On 27 December 2020, the Decree of 23 December 2020 amending the Decree of 5 September 2007 relating to other activities of investment firms was published in the Official Journal.

    This decree expands the scope of activities other than investment services and related services that investment firms can exercise. Investment firms may carry out professional activities other than:

    • the investment services mentioned in Article L. 321-1 of the Code Monétaire et Financier;
    • the related services mentioned in Article L. 321-2 of the Code Monétaire et Financier;
    • the data communication services mentioned in Article L. 323-1 of the Code Monétaire et Financier;
    • those are authorized to exercise under another agreement or another authorization which they may have applied of the provisions of the Code Monétaire et Financier

    Investment firms may provide services which constitute the ancillary use of facilities mainly allocated to the defined activities, including the provision of IT services or the sale of software developed by the firm.

    Income from these activities must appear under specific headings of the income statement sent to the ACPR under conditions set by the ACPR.

    This decree removes the ban on exercising other activities representing, in aggregate, more than 20% of the company's net banking income.

    Version française

    Le 27 décembre 2020, l'Arrêté du 23 décembre 2020 modifiant l’arrêté du 5 septembre 2007 relatif aux autres activités des entreprises d’investissement a été publié au Journal Officiel.

    Cet arrêté élargit le champ des activités autres que les services d’investissement et services connexes que les entreprises d’investissement peuvent exercer. Les entreprises d’investissement peuvent exercer à titre professionnel des activités autres que : 

    • les services d’investissement mentionnés à l’article L. 321-1 du code monétaire et financier ; 
    • les services connexes mentionnés à l’article L. 321-2 du code monétaire et financier ; 
    • les services de communication de données mentionnés à l’article L. 323-1 du code monétaire et financier ;
    • celles qu’elles sont autorisées à exercer au titre d’un autre agrément ou d’une autre autorisation dont elles peuvent disposer en application de dispositions du code monétaire et financier

    Les entreprises d’investissement peuvent fournir des services qui constituent l’utilisation accessoire de moyens principalement affectés aux activités, y compris la prestation de services informatiques ou la vente de logiciels développés par l’entreprise.

    Les produits provenant ces activités doivent figurer sous des rubriques particulières du compte de résultat transmis à l’ACPR.

    Ce décret supprime l'interdiction d'exercer d'autres activités représentant, au total, plus de 20 % du produit net bancaire de la société.

  • Securitisation Regulation

    France amends the Monetary and Financial Code on the lending and borrowing of financial securities (Decree 2020-1732) / La France modifie le code monétaire et financier sur les prêts et emprunts de titres financiers (décret 2020-1732)

    CACEIS

  • On 30 December 2020, the Decree no. 2020-1732 of 29 December 2020 amending the Monetary and Financial Code concerning the lending and borrowing of financial securities was published in the Official Journal. 

    The amendment or deletion of the provisions of Articles L. 211-24 to L. 211-26, which were downgraded by the Constitutional Council following Decision No. 2020-289 L of 21 December 2020, contributes to the reduction of unnecessarily redundant requirements between the Monetary and Financial Code and the regulations of the Accounting Standards Authority relating to securities lending and borrowing transactions.

    Version française

    Le 30 décembre 2020, le Décret no 2020-1732 du 29 décembre 2020 modifiant le code monétaire et financier concernant les prêts et emprunts de titres financiers a été publié au Journal Officiel.

    La modification ou la suppression des dispositions des articles L. 211-24 à L. 211-26, ayant fait l’objet d’un déclassement par le Conseil constitutionnel à la suite de la décision no 2020-289 L du 21 décembre 2020, participe à la réduction de prescriptions inutilement redondantes entre le code monétaire et financier et des règlements de l’Autorité des normes comptables relativement aux opérations de prêts et d’emprunts de titres.

  • Shareholders' Rights Directive (SRD II)

    France lowers control threshold for foreign investments in French companies whose shares are admitted to trading / La France abaisse le seuil de contrôle des investissements étrangers des sociétés françaises dont les actions sont admises aux négociations

    CACEIS

  • On 30 December 2020, the Decree no. 2020-1729 of 28 December 2020 amending Decree no. 2020-892 of 22 July 2020 relating to the temporary lowering of the control threshold for foreign investments in French companies whose shares are admitted to trading on a regulated market was published in the Official Journal.

    The decree extends the measure to lower from 25% to 10% the threshold for the acquisition of voting rights that may trigger control in French companies engaged in sensitive activities and whose shares are admitted to trading on a regulated market under regulations governing the control of foreign investments.

    Target: foreign investors, companies subject to foreign investment.

    Version française

    Le 30 décembre 2020, le Décret no 2020-1729 du 28 décembre 2020 modifiant le décret no 2020-892 du 22 juillet 2020 relatif à l’abaissement temporaire du seuil de contrôle des investissements étrangers dans les sociétés françaises dont les actions sont admises aux négociations sur un marché réglementé a été publié au Journal Officiel. 

    Le décret proroge la mesure d’abaissement de 25 % à 10 % du seuil d’acquisition des droits de vote susceptible de déclencher le contrôle dans les sociétés françaises exerçant des activités sensibles et dont les actions sont admises aux négociations sur un marché réglementé, au titre de la réglementation portant sur le contrôle des investissements étrangers.

    Publics concernés : investisseurs étrangers, sociétés faisant l’objet d’un investissement étranger.

  • Sustainable Finance / Green Finance

    AMF publishes third report on non-financial approaches in collective investment schemes / L'AMF publie le troisième rapport sur les approches extra-financières dans la gestion collective

    CACEIS

  • On 14 December 2020, the Autorité des marchés financiers (AMF) published a report on the major trends in the French market for funds with a non-financial approach. It provides a supplement to Position-Recommendation n°2020-03 on the information to be provided by collective investment schemes incorporating non-financial approaches.

    The report emphasises that it is essential to set up an appropriate control mechanism to ensure data quality and consistency. AMCs generally rely on service providers for the collection of carbon data. However, the AMF considers that it would be necessary to perform more due diligence when selecting service providers. The regulator also recommends the setting up of regular ex-post checks on GHG emission data.

    The following topics were also presented in the report:

    • an overview of the market with a description of the various European labels;
    • initial analyses on the functioning of approaches relating to specific asset classes such as private equity, real estate and money market funds;
    • the inability, in the current context, to communicate in a central way about non-financial aspects for synthetic replication funds;
    • an assessment of the compliance of AMCs with the regulatory requirements of Article 173 on the publication of the implementation of non-financial criteria in their management.

    With a wide variety of national labels that all have different requirements, the AMF supports the introduction of a European label to provide investors with greater clarity. The regulator encourages the development of sustainable finance and stresses that the wide range of approaches requires more investor education, and more particularly for retail investors, in order to establish conditions for trust. To do this, AMCs need to communicate in a balanced manner on their non-financial promises. The AMF’s policy will be updated to include the positions and recommendations presented in this report.

    Version française

    Le 14 décembre 2020, l'Autorité des marchés financiers (AMF) a publié son rapport sur les grandes tendances du marché en France des fonds présentant une approche extra-financière. Il vient compléter la position-recommandation n°2020-03 sur les informations à fournir pour les placements collectifs intégrant ce type d’approches.

    Le rapport souligne que la mise en place d’un dispositif de contrôle approprié est essentiel afin d’assurer la qualité et la cohérence des données. En général, les SGP s’appuient sur les services de prestataires pour la collecte de données carbone mais l’AMF estime qu’il serait nécessaire d’effectuer davantage de diligences dans la sélection d’un prestataire. Le régulateur recommande également la mise en place de contrôles réguliers ex-post pour les données d’émissions de GES.

    Les sujets suivants sont également présentés dans le rapport :

    • l’état des lieux du marché qui inclut un descriptif des différents labels européens ;
    • des premières analyses sur le fonctionnement des approches relatives à des classes d’actifs spécifiques tels que le capital investissement, l’immobilier et les fonds monétaires ;
    • l’impossibilité dans le contexte actuel de communiquer de façon centrale sur les aspects extra-financiers pour des fonds à réplication synthétique ;
    • un bilan de conformité des SGP aux exigences règlementaires de l’article 173 relatives à la publication de la prise en compte des critères extra-financiers dans leur gestion.

    Dans un contexte de grande diversité des labels nationaux qui ont des exigences différentes, l’AMF soutient la mise en place d’un label européen pour instaurer davantage de clarté pour les investisseurs. Le régulateur encourage le développement de la finance durable et souligne que la grande diversité des approches requiert davantage de pédagogie auprès des investisseurs, et plus particulièrement envers les épargnants, afin d’assurer les conditions de la confiance. Pour ce faire, il est nécessaire que les SGP veillent à communiquer de manière équilibrée sur leurs promesses extra-financières. Les positions et recommandations présentées dans ce rapport feront l’objet d’une mise à jour de la doctrine de l’AMF.

  • AMF and AFM call for a European regulation of ESG data, ratings, and related services / L'AMF et l'AFM appellent à la création d’un cadre réglementaire européen pour la fourniture de notations, de données et de services extra-financiers

    CACEIS

  • On 15 December 2020, the Autorité des marchés financiers (AMF) and Dutch financial market authorities called for a European regulation of ESG data, ratings, and related services.

    The AMF and AFM propose a European regulatory framework for providers of sustainability-related services, which could become one of the key measures of the European Commission's renewed sustainable finance strategy. The proposed framework is aimed at preventing misallocation of investments, greenwashing, and ensuring investor protection. It includes requirements on transparency on methodologies, management of conflicts of interest, internal control processes, and enhanced dialogue with companies subject to sustainability ratings. 

    Version française

    Le 15 décembre 2020, l'Autorité des marchés financiers (AMF) et le régulateur de marché néerlandais ont appelés à la création d’un cadre réglementaire européen pour la fourniture de notations, de données et de services extra-financiers.

    L'AMF et AFM proposent un encadrement des fournisseurs de données et de services extra-financiers qui pourrait être l’une des mesures clés de la stratégie renouvelée de la Commission Européenne en matière de finance durable. Le cadre proposé vise à prévenir une mauvaise allocation des investissements, le risque de greenwashing et à assurer la protection des investisseurs. Il prévoit des exigences de transparence sur les méthodologies, de gestion des conflits d’intérêts, des procédures de contrôle interne, et un dialogue renforcé avec les sociétés qui font l’objet d’une notation extra-financière.

  • AFG publishes guide on Sustainable Regulations applicable to management companies / L'AFG publie un guide sur les réglementations de finance durable applicables aux sociétés de gestion

    CACEIS

  • On 15 December 2020, the Association Française de Gestion (AFG) published a guide on Regulations applicable to management companies .

    The aim of this professional guide is to provide management companies with a tool to help them understand and put the various regulations into perspective. Good practices related to these regulations will be published in a second phase.

    Version française

    Le 15 décembre 2020, l'Association Française de Gestion (AFG) a publié un guide sur les réglementations de finance durable applicables aux sociétés de gestion 

    L'objectif de ce guide professionnel est de fournir aux sociétés de gestion un outil pour les aider à comprendre et à mettre en perspective les différentes réglementations. Les bonnes pratiques relatives à ces réglementations seront publiées dans un deuxième temps.

  • Transparency Directive

    France publishes Order of 29 December 2020 approving amendments to the general regulations of the AMF / La France publie l'arrêté du 29 décembre 2020 portant homologation de modifications du règlement général de l’AMF

    CACEIS

  • On 31 December 2020, the Order of 29 December 2020 approving amendments to the general regulations of the AMF was published in the Official Journal. 

    The text approves amendments to the AMF General Regulation pursuant to Article 4 (7o ) of Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 as amended by Directive 2013/50/EU to introduce the requirement for issuers whose securities are admitted to trading on a European regulated market to prepare annual financial reports in a single electronic format, as well as Articles L. 424-2, L. 425-2, L. 440-1 and L. 441-1 of the Monetary and Financial Code in order to define the conditions for using, for certain market infrastructures, a language customary in financial matters other than French. 

    At the same time, pursuant to the Decree of 27 February 2020 on compensation arrangements for members of independent public authorities, the text also approves the amendment to the AMF General Regulation to set the compensation of the Chairman of the High Council of the Financial Services Authority.

    Targets: multilateral trading facilities, organised trading systems, central securities depositories, clearing houses, companies listed on a regulated market, statutory auditors and the high-level market advisory council.

    Version française

    Le 31 décembre 2020, l'Arrêté du 29 décembre 2020 portant homologation de modifications du règlement général de l’Autorité des marchés financiers a été publié au Journal Officiel. 

    Le texte homologue des modifications du règlement général de l’AMF prises en application de l’article 4 (7o ) de la directive no 2004/109/CE du Parlement européen et du Conseil du 15 décembre 2004 modifiée par la directive 2013/50/UE afin d’introduire l’obligation d’établissement des rapports financiers annuels selon un format d’information électronique unique pour les émetteurs dont les titres sont admis aux négociations sur un marché réglementé européen, et des articles L. 424-2, L. 425-2, L. 440-1 et L. 441-1 du code monétaire et financier afin de définir les conditions d’utilisation, pour certaines infrastructures de marché, d’une langue usuelle en matière financière autre que le français. 

    En parallèle, en application du décret du 27 février 2020 relatif aux modalités de rémunération des membres des autorités publiques indépendantes, le texte homologue la modification du règlement général de l’AMF visant à fixer la rémunération du président du haut conseil certificateur de place.

    Publics concernés : systèmes multilatéraux de négociation, systèmes organisés de négociation, dépositaires centraux, chambres de compensation, sociétés cotées sur un marché réglementé, commissaires aux comptes et haut conseil certificateur de place.

  • GERMANY

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    BaFin publishes Circular 06/2020 (GW) on High-risk countries

    CACEIS

  • On 17 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published Circular 06/2020 (GW) on High-risk countries. 

    In the circular, BaFin provides information about third countries that have strategic deficiencies in their systems for combating money laundering and terrorist financing.

  • Brexit

    Here are some publication from the BaFin on Brexit

    CACEIS

  • Here are some publication from the BaFin on Brexit.

    1. On 9 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published  information for MiFID firms making use of EU passport regimes from registered offices in the United Kingdom. 

    UK entities will no longer have the right to freedom to provide services to existing or new clients in Germany after the end of the transitional period and will be treated as third country entities.

    As a general rule, after the transition period MIFID services by UK investments firms to clients in Germany will require prior permission by BaFin.

    BaFin recommends concerned entities to take the appropriate measures. 

    2. On 9 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published  information for asset management companies making use of EU passport regimes from registered offices in the United Kingdom. 

    UK management companies and UK AIFMs will no longer benefit from the authorization to provide services referred in the AIFMD and UCITS directive in the EU after the end of the transitional period. They will loose the so-called EU management passport and will be treated as third-countries entities.

    BaFin recommends concerned entities to take the appropriate measures. 

  • COVID-19 Regulatory Measures

    BaFin publishes clarifications concerning the payment of variable remuneration in the context of COVID-19

    CACEIS

  • On 11 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published  clarifications concerning the payment of variable remuneration in the context of COVID-19. 

    If financial institutions intend to pay variable remuneration, they should first ensure compliance with requirements of Section 7 of Regulation on the Supervisory Requirements for Institutions’ Remuneration Systems (conditions for determining the total amount of variable remuneration and the vesting of deferred remuneration components).

    If the examination of the criteria mentioned in section 7 of the InstitutsVergV does not give a clearly positive picture, institutions are expected to report their intention to grant or pay out bonuses to BaFin and the Deutsche Bundesbank.

  • Digital economy

    BaFin and the Bundesbank present the digital agenda

    CACEIS

  • On 28 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) presented their strategic objectives in a joint digital agenda – a comprehensive digital upgrade for banking supervision.

    The digital agenda makes the clear that BaFin and the Bundesbank are joining forces to play an active role in shaping digital transition and to build expertise. They are doing this in an ongoing exchange with banks, digitalization initiatives, the research community and, of course, European partners in the field of banking supervision.

  • Directive on the institutions for occupational retirement provision (IORP II)

    BaFin publishes minimum requirements for the own risk assessment of institutions for company pension schemes

    CACEIS

  • On 30 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published a Circular on the regulatory minimum requirements for the own risk assessment (ERB) of institutions for occupational retirement provision ( IORP ). It comes into force upon its publication.

    The circular is aimed at all IORPs (pension funds) that are subject to BaFin supervision . It contains information on the interpretation of the regulations on one's own risk assessment in accordance with Section 234d of the Insurance Supervision Act ( VAG ), which apply directly to pension funds and, based on Section 237 VAG, also to pension funds.

    The circular also explains when IORPs the BaFin must submit a report on its own risk assessment no later than the first time.

  • BaFin publishes a General Administrative Act stating that British insurance undertakings and IORPs lose European passporting rights

    CACEIS

  • On 31 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published  a General Administrative Act stating that insurance undertakings and institutions for occupational retirement provision (IORPs) with their registered office in the United Kingdom of Great Britain and Northern Ireland or in the British overseas territory of Gibraltar will lose their European passporting rights on 1 January 2021 at 00:00 hrs. As a consequence, they will no longer be permitted to carry out cross-border activities in Germany. The General Administrative Act addresses the impact of Brexit on the existing contractual obligations of these insurance undertakings and IORPs.

  • Finanzmarktintegritätsstärkungsgesetz (FISG)

    Bundesregierung publishes draft law to strengthen financial market integrity (FISG)

    CACEIS

  • On 16 December 2020, the Bundesregierung published draft law to strengthen financial market integrity (FISG). 

    The functionality of the German financial market is of central importance for the German economy and for the prosperity of the Federal Republic of Germany. Manipulation of the balance sheets of capital market companies undermines confidence in the German financial market and causes it serious damage. Recent events have shown that, in particular, balance sheet control needs to be strengthened and the audit of the financial statements needs to be further regulated in order to ensure the accuracy of companies' accounting documents. However, there is also room for improvement with regard to the supervisory structures and the powers of the Federal Financial Supervisory Authority ( BaFin) when examining outsourcing by financial services companies. The draft aims to implement the urgent measures to restore and permanently strengthen confidence in the German financial market.

  • Governance

    BaFin issues circular on use of joint SSM IMAS portal with European Central Bank

    CACEIS

  • On 18 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published a circular on the use of the joint SSM IMAS portal with the ECB.

    As of 27 January 2021, the ECB will allow directly supervised institutions, financial holding companies and mixed financial holding companies to electronically submit notifications of the intention to appoint board members via the joint portal.

    This submission option applies in particular to notifications:

    • of the intention to appoint a director to the management board of a significant institution; and
    • concerning the appointment of a director to the supervisory board of a significant institution.

    Therefore, as of the launch of the joint SSM IMAS portal with the ECB, BaFin will, until further notice, refrain from resubmitting notifications in paper form that have been submitted electronically via this portal

  • BaFin publishes updated Guidance Notice on Members of Administrative and Supervisory Bodies pursuant to KWG and KAGB

    CACEIS

  • On 30 December 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published updated Guidance Notice on Members of Administrative and Supervisory Bodies pursuant to KWG and KAGB.

    It this revision, BaFin focused on the adoption of EBA and ESMA Guidelines (Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and EBA Guidelines on internal governance). 

    In addition, BaFin published several forms linked to this publication (suitability matrix,
    Notification of changes to the members of the management body, ...).

  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    Bundesfinanzministerium publishes the draft implementation of the Cross-Border Distribution of Funds Directive

    CACEIS

  • On 3 December 2020, the Bundesfinanzministerium (Federal Ministry of Finance) published the ministerial draft of the act implementing (among other things) the Cross-border Distribution of Funds Directive 2019/1160. The act is referred to as the Act to Promote Germany as a Fund Jurisdiction and includes some changes to improve the regulatory framework for German funds and German fund managers. As to non-EU funds, the Act also provides rules with respect to pre-marketing in implementation of the Directive, making non-EU funds and managers subject to the same rules regarding pre-marketing as EU funds, to the extent marketed in Germany.

  • Investor protection / Consumer protection

    Bundesfinanzministerium publishes draft law to further strengthen investor protection

    CACEIS

  • On 22 December 2020, the Bundesfinanzministerium (Federal Ministry of Finance) published draft law to further strengthen investor protection. It implements the remaining points from the “package of measures to further strengthen investor protection”, which was drawn up by the BMJV and BMF and published in August 2019.

    The draft contains the following provisions in particular:

    • Restriction of the distribution of investments to supervised investment advisers or financial investment brokers;
    • Better ability to audit the accounting of investment issuers;
    • Introduction of a control of the use of funds.
  • HONG KONG

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    SFC publishes AML Circular on Findings from inspections of AML/CFT controls and compliance practices

    CACEIS

  • On 1 December 2020, the Securities and Futures Commission (SFC) published Circular to  licensed corporations (LCs) and associated entities (AEs) about some key observations identified from our routine and thematic inspections of their AML/CFT policies, procedures and controls (AML/CFT systems) carried out in 2019 and 2020. 

    The critical areas to which firms should pay priority attention are as follows. 

    1. Failure to implement comprehensive and up-to-date policies and procedures, and maintain adequate oversight and internal controls for ensuring the proper and effective performance of AML/CFT functions by staff. 

    2. Inadequate consideration of pertinent ML/TF risk factors when conducting institutional risk assessments and customer risk assessments, as well as inadequate follow-up on the assessment results. 

    3. Failure to assess fund deposits by clients to ascertain whether they originate from third party payers in order to apply appropriate due diligence and transaction monitoring measures. 

    4. Inadequate measures to establish source of wealth and source of funds for high-risk customers as required by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) (AML Guideline).  

    5. Failure to perform screening of existing customers as soon as practicable whenever there are updates to sanctions lists; even when existing customers are screened promptly against updated sanctions lists, their beneficial owners and other relevant connected parties may be incorrectly omitted from screening. 

  • SFC concludes consultation on customer due diligence requirements for open-ended fund companies

    CACEIS

  • On 23 December 2020, the Securities and Futures Commission (SFC) released consultation conclusions on proposed customer due diligence requirements for open-ended fund companies (OFCs).

    The SFC will implement the proposal to require OFCs to appoint a responsible person to carry out anti-money laundering and counter financing of terrorism (AML/CFT) functions, in line with the Financial Action Task Force’s principles and requirements as well as to better align the AML/CFT requirements for different investment vehicles for funds in Hong Kong.

    The new requirements will come into effect after a six-month transition period.

  • Clearing obligations

    SFC publishes Notice on Rules regarding designation of financial services providers

    CACEIS

  • On 4 December 2020, the Securities and Futures Commission (SFC) updated on the Government notice regarding Clearing Rules.

    SFC designates each person in the list as a financial services provider for the purposes of the Clearing Rules, and each person (despite any subsequent change of name) continues to be a financial services provider until the SFC revokes the designation of the person.

  • Code of Conduct

    SFC publishes reminder of implementation of regulatory standards for leveraged foreign exchange trading activities

    CACEIS

  • On 14 December 2020, the Securities and Futures Commission (SFC) reminds licensed corporations (LCs) that the expected regulatory standards covering customer due diligence, handling of client orders, conflicts of interest and information for clients in respect of leveraged foreign exchange trading (LFET) activities will come into effect on 1 January 2021.  

    LCs are reminded to ensure that they have internal controls, systems and procedures in place to comply with the expected regulatory standards.

  • SFC updates FAQs on Compliance with Suitability Obligations and Requirements for Complex Products

    CACEIS

  • On 23 December 2020, the Securities and Futures Commission (SFC) updated its frequently asked questions (FAQs) in order to:

    • clarify how to conduct suitability assessments by adding a new Question 5B to the FAQs on Compliance with Suitability Obligations;
    • clarify the obligations of licensed or registered persons to explain product risks to clients with different degrees of financial sophistication by adding a new Question 6B to the FAQs on Compliance with Suitability Obligations; and
    • provide guidance in complying with paragraph 5.5 of the Code of Conduct, particularly on how to perform product due diligence, disclose product information and provide warning statements for the sale of complex products on an unsolicited basis, by adding a new Question 39 to the Complex Products FAQs.

    Intermediaries should note that the SFC will take into account compliance with the guidance in the FAQs when considering whether a licensed or registered person is fit and proper to carry out the relevant regulated activities.

  • SFC updates the Code of Conduct for Persons Licensed by or Registered with the SFC (22nd version)

    CACEIS

  • On 24 December 2020, the Securities and Futures Commission (SFC) updated the Code of Conduct for Persons Licensed by or Registered with the SFC (22nd version). The updates are on Instruments subject to the requirements - the margin requirements apply to all non-centrally cleared OTC derivatives except the following:

    (a) OTC derivative transactions that are cleared by a clearing member on behalf of a non-member or a non-member’s client where:

       (i) the non-member and its client (as appropriate) are subject to the margin requirements of the central counterparty; or

      (ii) the non-member and its client (as appropriate) provide margin consistent with the relevant corresponding central counterparty’s margin requirements.

    (b) physically settled FX forwards and FX swaps, and the “FX transactions” embedded in cross-currency swaps associated with the exchange of principal

    (c) excluded currency contracts within the meaning of section 2 of Securities and Futures (OTC Derivative Transactions – Reporting and Record Keeping Obligations) Rules;

    (d) physically settled commodity forwards; and

    (e) on or before 3 January 2024, non-centrally cleared single-stock options, equity basket options and equity index options. 

  • Cryptoasset / Cryptocurrency / Virtual Currency

    SFC licenses first virtual asset trading platform

    CACEIS

  • On 16 December 2020, the Securities and Futures Commission (SFC) informed that it granted the first license to a virtual asset trading platform in Hong Kong. The platform will only serve professional investors under the close supervision of the SFC and will be subject to tailor-made requirements similar to those which apply to securities brokers and automated trading venues.

    The SFC will continue its efforts to provide a clear and well-defined regulatory environment for the development of the Fintech industry. In a consultation launched in November, the Government proposed a new legislative framework where the SFC would be able to regulate all centralized virtual asset exchanges, including those that only trade types of virtual assets which currently fall outside the SFC’s jurisdiction.

  • Data governance

    SFC provides additional guidance on external electronic data storage

    CACEIS

  • On 10 December 2020, the Securities and Futures Commission (SFC) released additional guidance to market participants on external electronic data storage in response to questions from licensed corporations and other stakeholders.

    The guidance, in the form of frequently asked questions (FAQs), follows the SFC’s 31 October 2019 circular setting out requirements for using external electronic data storage providers (EDSPs) to exclusively keep records or documents required under the Securities and Futures Ordinance (SFO) or the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

    As an alternative means of satisfying the requirements in the circular, the SFC will accept an undertaking from each of the licensed corporation’s two Managers-In-Charge (MICs) of Core Function or, with the SFC’s consent, one MIC or one Responsible Officer.

    The SFC also made consequential changes to its FAQs on premises for business and record keeping.

  • European Market Infrastructure Regulation (EMIR)

    SFC informs on the Deferral of margin requirements for non-centrally cleared OTC derivative transactions

    CACEIS

  • On 23 December 2020, the Securities and Futures Commission (SFC) published a circular to inform licensed corporations (LCs) that SFC will defer the effective date of its margin requirements for non-centrally cleared single-stock options, equity basket options and equity index options by three years until 4 January 2024.

  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    SFC announces that amendments to the Code on Real Estate Investment Trusts (REIT Code) have taken effect

    CACEIS

  • On 4 December 2020, the Securities and Futures Commission (SFC) informed management companies of SFC-authorized real estate investment trusts (REITs) of the streamlined approach for vetting and approval of announcements and circulars under 10.2 of the Code on Real Estate Investment Trusts (REIT Code) with effect from 4 December 2020.

    From 4 December 2020, announcements and circulars to be issued by a REIT under the REIT Code need not be submitted to the SFC for pre-vetting before publication except where:

    (a)  such announcements or circulars, if issued by a listed company, are required to be submitted to The Stock Exchange of Hong Kong Limited (SEHK) for review before they are issued under the Listing Rules; or

    (b)  pre-vetting is specifically required under the REIT Code or other guidance published by the SFC from time to time, for example in the case of issue and redemption of perpetual bonds referred in Question 34 of Frequently Asked Questions relating to REITs.

    Notwithstanding the post-vetting approach adopted for certain announcements or circulars, REIT managers are reminded that where any matter covered by an announcement or a circular (such as proposed change in the management company or trustee of a REIT and classification of certain properties as Qualified Minority-owned Properties) is subject to the SFC’s prior approval under the REIT Code, such approval must be obtained before the publication of the relevant announcement or circular.

    Frequently Asked Questions on the SFC website have been revised to reflect the changes to the REIT Code. The SFC’s circular regarding vetting and approval of announcements and circulars has also been updated.

  • Supervisory Reporting

    SFC previews new electronic licensing services

    CACEIS

  • On 21 December 2020, the Securities and Futures Commission (SFC) unveiled new electronic licensing functions on WINGS, an online platform for submitting information to the regulator. These functions are a cornerstone of the fully digitalized licensing process which the SFC plans to launch in 2021.

    The new online features introduced include web-based licensing forms with auto-fill and skip logic features and pre-set validation rules to reduce errors. Electronic signatures will also be supported. Upgraded administration functions will allow separate accounts for licensees and their professional advisory firms, giving them more flexibility in how they handle licensing matters and manage submissions.

  • IRELAND

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    CBI publishes letter to firms on low level of compliance with AML/CFT obligations

    CACEIS

  • On 16 December 2020, the Central Bank of Ireland (CBI) published a letter regarding the compliance by entities which are required to registered under Section 108A of the Criminal Justice (Money Laundering and Terrorist Financing) Act, 2010 (CJA 2010) with their obligations under CJA 2010. 

    The examination, which comprised of both inspections and review meetings, found an overall lack of compliance across all areas of the AML/CFT control framework. There is also poor understanding of the requirements from Board and senior management levels, including at those firms who outsourced their AML/CFT and FS activities to third parties.

    While the CBI expects firms to assess against all of the areas outlined in the findings, it recommends that firms prioritize assessment of the areas of Governance, Risk Assessment and Customer Due Diligence in the first instance.  The CBI considers that the findings identified in these areas are the most serious in nature and therefore should be considered and addressed immediately.

  • Ireland publishes S.I. No. 607/2020 - European Union (Restrictive Measures against Cyber-attacks threatening the Union or its Member States) (No. 3) Regulations 2020

    CACEIS

  • On 18 December 2020, the S.I. No. 607 of 2020 - European Union (Restrictive Measures against Cyber-attacks threatening the Union or its Member States) (No. 3) Regulations 2020 was published in the Irish Statute Book.

    These Regulations provide for the enforcement of restrictive measures contained in Council Regulation (EU) 2019/796 of 17 May 2019 regarding Restrictive Measures against Cyber-attacks threatening the Union or its Member States.

  • Brexit

    Ireland publishes Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020

    CACEIS

  • On 10 December 2020, the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020 was published in the Irish Statute Book. 

    Among several issues regarding the Brexit consequences, the Act makes provision for following matter regarding Financial Services: 

    1. Settlement Finality: In order to support the full implementation of the Commission equivalence decisions in this area, legislation is required to address the fact that the relevant EU law will no longer apply to or in respect of the UK from the end of the transition period and to ensure the protections provided under the EU Settlement Finality Directive (98/26/EC) and the Irish Settlement Finality Regulations (SI 624 of 2010) continue to apply to Irish market participants in UK based settlement systems.

    2.  Amendment to the European Union (Insurance and Reinsurance) Regulations 2015 and the European Union (Insurance Distribution) Regulations 2018.

  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    CBI publishes Consultation Paper 134 on performance fee guidance for UCITS and certain types of retail AIFs

    CACEIS

  • On 3 December 2020, the Central Bank of Ireland (CBI) published Consultation Paper 134 on performance fee guidance for UCITS and certain types of retail AIFs. Responses should be submitted no later than 15 January 2021. 

    The CBI is proposing a phased implementation of the ESMA Guidelines over time due to the need to consult on amending the domestic framework to incorporate the ESMA Guidelines, to reflect the transitional periods provided for under the ESMA Guidelines and to maintain a consistent approach for retail investor funds.  

    The CBI is proposing:

    • new UCITS or in-scope retail AIFs established will apply from the date of establishment of those funds.  
    • existing UCITS and in-scope retail AIFs which amend an existing performance fee or introduce a new performance fee will apply from the date of amendment or introduction of the performance fee.   
    • existing UCITS and in-scope retail AIFs with performance fees will apply from the next accounting period, which occurs six months after 5 January 2021.  Until that time, these funds must continue to comply with the current applicable requirements for performance fees.   
  • Ireland signs the Investment Limited Partnership (Amendment) Act, 2020

    CACEIS

  • On 23 December 2020, the Investment Limited Partnership (Amendment) Act, 2020 was signed into law by the President of Ireland on 23 December, 2020. The purpose of the 2020 Act is to amend The Investment Limited Partnerships Act, 1994, which governs the establishment and operation of regulated investment limited partnerships  in Ireland.

    The 2020 Act looks to modernise the law governing investment limited partnerships so as to make the ILP the vehicle of choice for implementing private equity, venture capital, private debt and real assets investment strategies in Europe. As well as modernising the ILP in line with other types of Irish investment fund vehicles, the amendments to the existing ILP regime are intended to incorporate “best in class” features for this type of vehicle.

    Some of the key features concern:

    • Formation of ILPs
    • Regulation of ILPs as alternative investment funds
    • Ability to establish umbrella type ILPs
    • Limited liability of limited partners
    • Limited Partners performing certain functions
    • Amendments to the LPA
    • Partner defaults and failure to perform
    • Return of contributions
    • Migration of limited partnerships from other jurisdictions
    • Beneficial Ownership Requirements – ILPs and Common Contractual Funds

    The official document is not yet available.

  • Prudential Requirements for Investment Firms Directive & Regulation (IFD / IFR)

    CBI publishes Consultation Paper 133 on enhancements to the Central Bank Client Asset Requirements, as contained in the Central Bank Investment Firms Regulations

    CACEIS

  • On 3 December 2020, the Central Bank of Ireland (CBI) published Consultation Paper 133  on enhancements to the Central Bank Client Asset Requirements (CAR), as contained in the Central Bank Investment Firms Regulations. Responses should be submitted no later than 10 March 2021.

    The key aspects of the proposed enhancements to the CAR include:  

    a. Extending the scope and application of the CAR to include credit institutions undertaking MiFID investment business; 

    b. Introducing new requirements regarding client disclosure and consent, including enhancements applicable to investment firms that have obtained client consent to the use of client financial instruments and investment firms providing prime brokerage services; 

    c. Introducing new CAR guidance to clarify the Central Bank’s expectations as to how client funds should be segregated; 

    d. Introducing new requirements, and placing some existing CAR guidance on a legislative footing, in relation to the performance of reconciliations and the treatment of client asset discrepancies and reconciliation differences, and shortfalls and excesses; and 

    e. Introducing new requirements and CAR guidance on the contents of the Client Asset Management Plan (the CAMP). 

  • ITALY

    Brexit

    Banca d'Italia shares provisions applicable to Italian entities participating in securities settlement systems or payment systems with UK intermediaries

    CACEIS

  • On 9 December 2020, a provision of Banca d'Italia concerning the participation of Italian entities to payment and securities settlement systems managed by central counterparties to which UK law applies.

    In particular, Banca d'Italia clarified that Legislative Decree no. 210/2001 (that regulates orders managed by a payment or settlement system) will be applied to Italian entities that participate directly in the system managed by central counterparties, as long as the relevant CCP is 

    recognized by the European Union, even after the expiry of the transition period for the withdrawal of the United Kingdom from the EU.

  • Banca d'Italia reminds to financial intermediaries the effects of the end of the transition period following Brexit

    CACEIS

  • On 15 December 2020, Banca d'Italia issued a communication to remind financial intermediaries about the end of the transition period established in the Withdrawal Agreement.

    As of 31 December 2020 British intermediaries operating in Italy have to provide adequate information to their customers, in particular on the following aspects:

    • methods and contacts for requests of assistance, reports or complaints
    • alternative dispute resolution system
    • deposit protection regime. 

    Intermediaries are also invited to complete the Brexit management plans and to limit the negative effects for customers affected by the interruption of services, so to allow the exercise of the rights due to customers for the continuation, transfer or termination of existing relationships.

  • Financial reporting

    Banca d'Italia and the FIU share operational guidelines on AML reporting

    CACEIS

  • On 25 August 2020, updated provisions on Aggregate Anti-Money Laundering Reports (S.AR.A.) were issued. On 16 December 2020, Banca d'Italia and the Financial Information Unit, shared operational guidelines accompanying the provisions.

    The new provisions apply starting from the reports referring to the transactions of January 2021. Reports must be sent by 2 April 2021. Reports referring to dates prior to January 2021, are not affected by the new provisions. 

    In order to send the report, the communication informs that a registration on the Infostat-UIF portal is necessary. Moreover, as of January 2021, reporting requirements also apply to fixed capital investment companies (SICAF), banks, payment institutions, and electronic money institutions headquartered in EU countries. 

    Below the main changes introduced from a technical / operational perspective:

    • the introduction of new causes to explain remittances
    • the elimination of reasons for cash transactions presented as fractional operations which would not pass the threshold to be aggregated and  , having not passed the amount threshold, have not been aggregated
    • the elimination of causals for payments of credit instruments and cash 
    • changes to the sectors of economic activities.
  • Governance

    Italy publishes Decree of 23/11/2020 no.169 on requirements and criteria to be considered to assess the suitability of corporate officers representing banks, intermediaries, trusts, electronic money & payment institutions and depositor guarantee systems

    CACEIS

  • On 15 December 2020, the Ministry of Economy and Finance published in the Gazzetta Ufficiale, the Decree of 23 November 2020, no. 169 concerning requirements and criteria to be considered to assess the suitability of corporate officers representing banks, financial intermediaries, trust companies, money institutions electronics, payment institutions and depositor guarantee systems.

    The Decree introduces a differentiation between (1) the requirements and (2) the eligibility criteria that should be shown by the candidates. The requirements are objective, while eligibility criteria are characterized by a margin of discretion.

    In addition to the criteria of correctness that are added to the requirements of integrity and those of competence that are added to the requirements of professionalism, the following evaluation factors are introduced, such as independence of judgment, adequate collective composition of the bodies, availability of time and, for larger banks, limits to the accumulation of offices.

  • Packaged Retail and Insurance-based Investment Products (PRIIPs)

    CONSOB amends rules to access the KID (resolution no. 21639)

    CACEIS

  • On 15 December 2020, CONSOB introduced changes to the Issuers' Regulation with Resolution no. 21639, regarding the methods to access PRIIPs KIDs.

    The amendments aim to harmonize the issuers' Regulation with the provisions detailed in the TUF, following the changes introduced by Legislative Decree 25 November 2019 no. 165, which abrogated the obligation of prior notification to CONSOB of the KID. 

    KIDs should however still be shared with CONSOB in an electronic format.

    The discipline applies to both new and revised KIDs issued as of 1 January 2021.

  • CONSOB details reviewed information to be included in the KID

    CACEIS

  • On 15 December 2020, with Resolution no. 21640, CONSOB published provisions concerning the  information to be shared concerning PRIIPs products by the issuers of such products. 

    The obligations set out will apply to products launched in Italy as of 1 January 2022 and to the  versions of KID revised as of 1 January 2022, even if they refer to products previously issued, as established by Article 16 of the Delegated Regulation (EU) 2017/653.

    The following information should be made available:

    The creators of PRIIPs make the following data and information relating to the PRIIPs marketed in Italy to retail investors accessible to CONSOB.

    The following information should be made available:

    (1) Information about the PRIIP manufacturer, such as: the company name, the LEI code, the full address of the registered office.

    (2) An indication of the organizational units responsible for the creation, validation and control of KIDs and data, indicating the possible involvement of service providers in the process.

    (3) Information concerning the provider of the KIDs, such as the name, surname and contact details of an administrative contact a(so-called Administration Reference), an indication of the presence of any outsourcing agreements for the process of provision of KIDs to CONSOB, indicating in this case the details of the service provider and its full address.

    (4) Indication of the name and surname as well as the contact details of a contact person, for any request of information and explanations of technical nature (so-called Technical Reference). 

    (5) A list of structured data identified by CONSOB with operating instructions.

    The information and structured data relating to the PRIIPs should be accessible by CONSOB in an electronic format.

    • More
    • http://www.consob.it/web/area-pubblica/bollettino/documenti/bollettino2020/d21640.htm?hkeywords=&docid=2&page=0&hits=3&nav=false details reviewed information to be included in the KID
  • Shareholders' Rights Directive (SRD II)

    CONSOB adjusts market regulations to implement changes to SRD II (resolutions no. 21623 & 21624)

    CACEIS

  • On 11 December 2020, CONSOB amended the Issuers' Regulations and to the Regulations on

    Related Party Transactions (resolutions no. 21623 and 21624) to adapt them to the changes introduced by Directive (EU) 2017/828 ("SRD 2") and by the national provisions for its implementation, contained in Legislative Decree 49/2019.

    The relevant Market Regulations have also been amended regarding the governance requirements. As detailed in article 16 of the Market Regulations, listed companies subject to management and coordination after listing have 30 days to adapt to the new governance, if they have enough administrators and control entities.

    Resolution no. 21623 will be implemented after its publication in the Official Gazette while resolution no. 21624 will enter into force on 1 July 2021.

  • Supervisory Reporting

    Banca d'Italia shares updates on circular no. 154 of 22 November 1991 on supervisory reporting

    CACEIS

  • On 24 December 2020, Banca d'Italia shared updates to circular no. 154 of 22 November 1991 concerning supervisory reporting to be realized by financial and credit institutions.

    The circular details the instructions for the production and forwarding of the reports to Banca d'Italia.  It is divided into three volumes: the first contains administrative and operational instructions; the second contains the coding system; the third shows the reporting schemes divided based on the type of reporting body and the level of reporting (individual or consolidated). 

    The updates to the circular introduce new variables in the coding system and amends reporting schemes to introduce additional scenarios.

  • Trading rules

    Borsa Italiana amends trading rules for the SeDex market (notice no. 31992)

    CACEIS

  • On 4 December 2020, Borsa Italiana introduced changes to rules applicable to the SeDex market (i.e. the market dedicated to Securitised Derivatives Exchange).

    Below the amendments introduced concerning (1) the conditions for the admission of financial instruments; (2) the underlying assets (3) the obligations to list financial instruments.

    (1) Conditions for admission

    Issuers should have a regulatory capital of 25 million at the time of listing. The prudential requirement must be respected when the application for admission of the instrument is submitted. 

    The application for admission contains a self-declaration to be filled in for class A investment certificates, in order to confirm the underlying financial instruments can be classified as UCITS, that have been passported in Italy and are subject to marketing authorization in Italy.

    (2) Underlying asset

    The ex-dividend rule now prescribes at least three trading days between the date of  evaluation and the record date on which the coupon is paid.  Moreover, the guidelines on underlying assets are changes in order to extend the derivative instruments that can be considered as underlying.

    (3) Listing obligations of specialists

    The cap for specialized operators is reduced from 1 million to 250,000 for covered warrants plain vanilla with reference prices below certain thresholds. The change is also extended to MIFID II market maker operators.

  • Borsa Italiana amends trading rules on the ExtraMot market (notice no. 31993)

    CACEIS

  • On 4 December 2020, Borsa Italiana, with Notice no. 31993, published changes to the ExtraMOT Market Regulations (market dedicated to debt instruments).

    In particular, the amendments concern the requirements for admission of financial instruments to the ExtraMOT market and provide that such admission can only take place on the initiative of Borsa Italiana and of the issuer. 

    Furthermore, with reference to the admission of financial instruments issued by entities subject to prudential supervision, it is specified that for bank bonds, originally and / or mainly placed with the customers of the bank, the request for admission can only be made to the EuroTLX market managed by Borsa Italiana.

  • Borsa Italiana amends trading rules on the EuroTLX market (notice no. 31994)

    CACEIS

  • On 4 December 2020, Borsa Italiana, with  notice no. 31994, introduced changes to the EuroTLX Market Regulations.

    In particular, some changes concern only the Cert-X segment and will enter into force as of 21 December 2020 - while other changes concern all segments of the market. The changes amend the following matters:

    • Listing obligations for liquidity providers,
    • "Sell only" discipline (the liquidity provider can no longer only share exclusively selling proposals),
    • Exclusion of operations on financial instruments of the liquidity provider, 
    • Error handling procedures,
    • Admission requirements.
  • Borsa Italiana amends the Guide for trading on the EuroTLX market

    CACEIS

  • On 15 December 2020, Borsa Italiana amended the trading rules on the Euro TLX segment (i.e. segment dedicated to obligations), with Notice no. 32936. 

    In particular, the changes concern:

    • the debt instruments that can be admitted to the segment Bond-X and the minimum quantity obligations applicable to Liquidity Providers for instruments traded on the Bond-X and Equity segments
    • the reorganization of information relating to quantity obligations on the Cert-X segment (i.e. the segment of the EuroTLX multilateral trading facility, dedicated to the trading of covered warrants and certificates)
  • Borsa Italiana amends ATFund Market regulation (notice no. 33360)

    CACEIS

  • On 18 December 2020, Borsa Italiana, with notice no. 33360, published amendments to the ATFund Market Regulations (market dedicated to the trading of open-end funds for both institutional and retail investors) and the Regulations of the MTF.

    In particular, the changes concern the following aspects:

    - Trading on behalf of several operators of the same group

    Employees who carry out trading activities can do so on behalf of the (same) operator for which they work. These activities can also be carried out on behalf of several operators belonging to the same group.

    - Participation requirements

    Borsa Italiana intervened on the certifications that the operator must provide as part of the procedure to be admitted to trading. More specifically, Borsa Italiana allows to transmit such information via an automatic system (i.e. without human intervention for financial instruments which are not derivatives.

    - Sponsored access - sub delegation

    The sponsored client can sub delegate the access to third parties (e.g. its own clients). This aspect of the newly issued regulation also described the information to be provided and procedures to be followed in this case). 

  • Borsa Italiana amends trading rules on the BIt EQ MTF market (notice no. 33361)

    CACEIS

  • On 18 December 2020, Borsa Italiana introduced changes on the trading rules applied on the BIt EQ MTF market (market dedicated to the trading of shares).

    In particular, the changes concern the following aspects:

    - Sponsored access - sub delegation

    Market operators can authorize their customers to transmit orders to the market electronically without using the operator's technological infrastructure (sponsored access). The sponsored customer can sub-delegate the access to third parties, i.e. its customers (sub-delegates).

    - Negotiation on behalf of the operator

    Operators that execute trading activities and specialized operators, can carry out the operations on behalf of the (same) operator for which they work, or for multiple operators belonging to the same group.

    - Participation requirements

    Operators can shared admission documents and place order on the market without relying on human interactions (i.e. exclusively using automatic systems).

  • LUXEMBOURG

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    Luxembourg updates its national risk assessment of money laundering and terrorist financing

    CACEIS

  • On 14 December 2020, Luxembourg updated its national risk assessment of money laundering and terrorist financing.

    Luxembourg has just finalised the update of its National Risk Assessment on Money Laundering and Terrorist Financing (ENR 2020). The ENR 2020 was conducted under the direction of the Ministry of Justice and adopted on 15 September 2020 by the Committee for the Prevention of Money Laundering and Terrorist Financing (Comité de prévention BC/FT). The first national risk assessment dates from September 2018 (ENR 2018).

    The main findings of the ENR 2020 are as follows:

    • The money laundering threats facing Luxembourg stem mainly from the proceeds of predicate offences committed abroad.
    • Exposure to domestic money laundering from the proceeds of predicate offences committed in Luxembourg is significantly lower.
    • Threats of terrorism and terrorist financing are considered moderate overall.
    • Vulnerabilities stem from the sectors that may be exposed to abuse or misappropriation for CB/FT purposes (financial sector, non-financial sector, legal persons and legal arrangements).
    • The banking sector is vulnerable to BC/FT risks due to various factors such as a diversified customer base in terms of geographical origin, types and purpose of business relationships, high transaction speed and a large volume of financial flows.
    • Within the investment industry, investment funds are likely to be misused or misappropriated for various types of fraudulent practices, including for example Ponzi schemes, scams, scams or pressure selling and the use of fictitious companies.
    • Within the insurance sector, which is considered moderately vulnerable in Luxembourg, the life insurance sub-sector appears to be more vulnerable due to its large size and fragmentation.
    • The legal professions, chartered accountants, auditing professionals, accountants and tax advisors are exposed to significant risks from BC/FT given the activities of service providers to companies and trusts which they may carry out in addition to their main activities (with the exception of notaries and bailiffs).
    • The real estate and construction sectors are considered high risk. 
    • Legal entities and legal arrangements (including non-profit organisations) are also considered very vulnerable to CB/FT.
    • Corporate and Trust Service Providers (CSPs) constitute an inherently high-risk cross-cutting vulnerability.
    • Vulnerability to threats is also high in sectors such as money or value transfer services, due to the number and high volume of cross-border transactions they involve; specialised FSPs, due to their ability to provide FSP services; and free port operators, due to the high-risk nature of their activities and international flows.
    • Other sectors, such as merchants, market operators, support and other specialised PFS and gambling operators are considered less vulnerable because they are in Luxembourg either limited in size, scope or activity.
    • There are specific vulnerabilities that are particularly relevant in the context of the COVID-19 pandemic. These include online financial services and virtual assets (which may give criminals more opportunities to hide illicit funds in a larger volume of legitimate payments made online); entities in financial difficulty (which in turn create opportunities for exploitation by criminals seeking to launder illicit proceeds); and the provision of governmental or international financial assistance, including through non-profit organisations.
  • Luxembourg adopts Law of 19 December 2020 on the implementation of restrictive measures in financial matters

    CACEIS

  • On 28 December 2020, Luxembourg adopted the Law of 19 December 2020 on the implementation of restrictive measures in financial matters. 

    The object of this law is the implementation by the Grand Duchy of Luxembourg of restrictive measures in financial matters adopted against certain States, natural and legal persons, entities and groups by:

    - the provisions of the resolutions adopted by the United Nations Security Council in application of the Chapter VII of the Charter of the United Nation;

    - the following acts of the European Union:

    a) common positions adopted before 1st December 2009 under Articles 12 and 15 of the Treaty on the European Union and for the cases referred to in Articles 60, § 1st , 301 and 308 of the Treaty establishing the European Community ;

    b) decisions adopted from 1st December 2009 under Articles 25 and 29 of the EU Treaty European Union and for the cases referred to in Articles 75, 215 and 352 of the Treaty on the Functioning of the Union European;

    c) regulations adopted before 1st December 2009 under Article 249 of the Treaty establishing the European Community or decisions taken in application of these regulations and for cases under section 60, § 1st , 301 and 308 of the Treaty establishing the European Community;

    d) regulations adopted since 1st December 2009 under Article 288 of the Treaty on the functioning of the European Union or the regulations or decisions taken pursuant to these regulations and for the cases referred to in Articles 75, 215 and 352 of the Treaty on the Functioning of the European Union 

  • Brexit

    CSSF publishes communication on the end of the transitional period on 31 December 2020 following the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union

    CACEIS

  • On 7 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Press release 20/26 - End of the transitional period on 31 December 2020 following the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union.

    Following the departure of the UK from the EU on 31 January 2020 and the forthcoming end of a time-limited transitional period which will operate until 31 December 2020, the CSSF restates and/or clarifies the following aspects:

    • The lapse of passporting rights in relation to the management of Luxembourg funds on a cross-border basis
    • The lapse of passporting rights in relation to the cross-border distribution of funds into Luxembourg
    • Marketing in Luxembourg to professional investors
    • Marketing in Luxembourg to retail investors
    • Delegation of investment management/portfolio management and/or risk management activities to undertakings in the United Kingdom
    • Compliance with investment policy and eligibility issues
    • CSSF position on secondments of staff.
  • ChD publishes Draft Law 7736 amending several laws regarding AML/CFT, central data system of IBAN accounts, UCITS

    CACEIS

  • On 21 December 2020, the Chambre des députés - Luxembourg published Draft Law 7736 amending:

    1° the amended law of 12 November 2004 on the fight against money laundering and the financing of terrorism;

    2° the amended law of 20 April 1977 relating to the operation of games of chance and betting relating to sporting events;

    3° the amended law of 17 December 2010 concerning undertakings for collective investment;

    4° the law of 25 March 2020 establishing a central data retrieval system for bank, payment accounts and safe-deposit boxes, and 

    5° the law of 10 July 2020 establishing a Register of fiducies and trusts.

    The main purpose of this draft law is to:

    • Clarify some provisions of the amended law of 12 November 2004 on AML/CFT regarding the operation of games of chance and betting relating to sports events. 
    • Specify the specific professional integrity provisions applicable to natural and legal persons exercising the activity of provider of services to companies and trusts subject to the supervision of the Registration Duties, Estates and VAT Authority (VAD)
    • Correct some minor errors in Law of 25 March 2020 establishing a central data retrieval system for bank, payment accounts and safe-deposit boxes, and Law of 10 July 2020 establishing a Register of fiducies and trusts.
    • Extend Brexit transitional period for UK UCITS which market their shares with retail investors in Luxembourg until 31 July 2021.

    The provision regarding transition period for UK UCITS enters into force on 1 February 2021.

  • CSSF publishes CSSF Regulation No 20-09 on the equivalence of the United Kingdom for the purpose of the MiFIR third country national regime

    CACEIS

  • On 24 December 2020, the Commission de Surveillance du secteur financier (CSSF) published CSSF Regulation No 20-09, amending CSSF Regulation No 20-02 of 29 June 2020 on the equivalence of certain third countries with respect to supervision and authorisation rules for the purpose of providing investment services or performing investment activities and ancillary services by third-country firms. 

    In the absence of an equivalence decision by the European Commission in accordance with Article 47(1) of Regulation (EU) 600/2014 (MiFIR), a third-country firm may, subject to certain conditions set forth in Circular CSSF 19/716 as amended by Circular CSSF 20/743, provide investment services or activities as well as ancillary services in Luxembourg to eligible counterparties and professional clients per se, without setting up a branch in Luxembourg. In particular, a third-country firm must be subject to supervision and authorisation rules that the CSSF deems equivalent to those laid down in the Law on the Financial Sector.

    The purpose of Regulation No 20-09 is to include the United Kingdom of Great Britain and Northern Ireland in the list of jurisdictions, which are deemed equivalent for the application of the national third-country regime.

    It is to be noted that, in accordance with Article 2(2) of Regulation No 20-02, the equivalence decisions made by the CSSF may be revoked where one or several conditions on which the decision was based are no longer met. To that effect, the CSSF will continue to monitor the applicable regulatory framework in the United Kingdom regarding the supervision and authorisation of firms providing investment services and activities.

    Regulation No 20-09 will apply from 1 January 2021 (hence, immediately after the termination of the transitional period set on 31 December 2020).

    In order to benefit from the national third-country regime, a third-country firm must submit a complete application file to the CSSF without any delay. Please refer to Circular CSSF 19/716 for more details.

  • CNPD updates its guidance on Brexit

    CACEIS

  • On 31 December 2020, the CNPD updated its guidance on Brexit. This guidance aims to help companies, public bodies and Luxembourg associations that are transferring personal data to the United Kingdom, and which continue such transfers in 2021.

    Pursuant to this agreement, the GDPR remains applicable in the United Kingdom for a maximum period of 6 months, allowing personal data to flow freely to the UK. Therefore, no additional step is required for Luxembourg entities until 1st July 2021. More specifically, companies, public bodies and Luxembourg associations that intend to continue to transfer personal data to the United Kingdom, will in principle not need to take additional steps for the specified period[1]. However, Luxembourg entities working with UK organizations may already put in place alternative transfer mechanisms, to safeguard against any interruption to the free flow of EU to UK personal data.

    However, as  of  1  January  2021,  the  so-called “one-stop-shop  mechanism” (“OSS”) will  no  longer  apply  to  the  UK, therefore  the  UK Information Commissioner’s Office (ICO) will no longer be part of it. The OSS mechanism allows for a cooperation between EU Supervisory Authorities (“SAs”) and provides that the SA in the jurisdiction of the main or single establishment of the controller’s or processor’s takes the role of the lead supervisory authority.

  • COVID-19 Regulatory Measures

    CNPD updates recommendations on the processing of personal data in the context of COVID-19 crisis

    CACEIS

  • On 21 December 2020, the Commission nationale pour la protection des données (CNPD) published its recommendations on the processing of personal data in the context of COVID-19 crisis. 

    1. Healthy and safety obligations of employers

    In a professional environment, private and public entities have a legal obligation to guarantee the health and safety of their employees/agents in the workplace (Article L.312-1 of the Labour Code). In order to limit risks, they should implement prevention, information and training actions and issue internal instructions to this end.

    As such, the CNPD invites employers to consult the online information published by the government and the Inspectorate of Labour and Mines (French) on a regular basis, in order to know their obligations during the crisis.

    In this context, private and public entities may process personal data in accordance with the GDPR when it is strictly necessary for compliance with their legal obligations. These entities may in particular:

    • Remind their employees and agents, whose work brings them in contact with other persons, of their obligation to inform either the employer or the Direction of Health of the Ministry of Health – Health Inspection Division (hereafter “the Health Inspection”) of a contamination or a suspicion of contamination, for the sole purpose of enabling the latter to adapt working conditions,
    • Invite their employees to consult a doctor or refer them to the Health Inspection and encourage the use of remote working.

    2. Health and safety obligations of employees/agents

    All employees/agents must implement all means to protect the health and safety of others and themselves (Article L.313-1 of the Labour Code).

    When an employee is ill (see Article L.121-6 of the Labour Code), the employee must, where applicable, inform the employer only of the employee’s incapacity to work, without providing any further information regarding his or her state of health or the nature of the illness (including the fact that the employee has been tested positive fir COVID-19 or has other symptoms).

    3. The processing of personal data by employers

    Private and public entities may only process the personal data, which are strictly necessary for compliance with their legal obligations, in accordance with the Labour Code.

    Thus, these entities may only process elements linked to the doctor certificate.

    However, public and private entities cannot compile files or treatments relating to health data linked to COVID-19 even if an employee informs his employer voluntarily that he has been tested positive for coronavirus or that he thinks he may present symptoms of the disease.  Entities also cannot collect files or data containing the body temperature of their employees or agents or other diseases (the “comorbidities”) which may be aggravating factors in the event of a COVID-19 infection. Furthermore, it is not their role to carry out investigations or “contact tracing”. This task falls to the Health Inspection from the moment where an employee or agent tests positive for COVID-19.

  • European Market Infrastructure Regulation (EMIR)

    CSSF publishes Circular CSSF 20/761 on liquidity risks arising from margin calls

    CACEIS

  • On 11 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Circular CSSF 20/761 on liquidity risks arising from margin calls. 

    The Circular follows the ESRB recommendation from May 2020 on liquidity risks arising from margin calls.  This recommendation has several implications for the CSSF as a competent authority in charge of the supervision of clearing members and of financial and non-financial counterparties in Luxembourg. 

    The ESRB recommendation ESRB/2020/6 attempts to address liquidity risks stemming from margin calls, in the context of volatile markets and uncertain collateral valuation. A large part of the recommendation concerns central counterparties (‘CCPs’) and their supervisors, while some sub-recommendations are also addressed to clearing members, financial and non-financial counterparties and their supervisors. All types of entities, CCPs, clearing members, financial and non-financial counterparties are defined in accordance with regulation EU 648/2012. The main objective of the recommendation is to limit cliff effects in relation to the demand for collateral and to limit liquidity constraints related to margin collection.  As highlighted in the recommendation, central clearing of derivatives and collateralisation of non-centrally cleared derivatives positions is essential to financial stability. 

    The CSSF intends to comply with the ESRB recommendation and makes recommendations to two sets of financial market participants:

    • Recommendations to clearing members
    • Recommendation to financial and non-financial counterparties
  • Financial supervision

    CSSF publishes Newsletter No 239 - December 2020

    CACEIS

  • On 18 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Newsletter No 239 - December 2020 which updates the CSSF latest publications such as:

    • Coronavirus: Information for all supervised entities
    • Warnings
    • National regulation 
    • FAQ
    • Fight against money laundering and terrorist financing Communications
    • Statistics
  • CSSF updates coordinated version of Grand-Ducal Regulation of 21 December 2017 on the fees to be levied by the Commission for the Supervision of the Financial Sector

    CACEIS

  • On 28 December 2020, the Commission de Surveillance du secteur financier (CSSF) published the coordinated version of Grand-Ducal Regulation of 21 December 2017 on the fees to be levied by the Commission for the Supervision of the Financial Sector (updated on 28/12/2020).

    The following sections were added:

    • J. Agents as defined in Article 1 st , item 1) of the amended Law of 10 November 2009 on payment services established in Luxembourg
    • Rbis. Companies from third countries which provide or wish to provide investment services, who carry out or wish to carry out investment activities and who offer or wish to offer auxiliary services in Luxembourg, pursuant to Article 32-1, paragraph 1 st , paragraph 2, of the amended law of 5 April 1993 relating to the financial sector
    • X. Providers of virtual asset services and providers of custody services or of Directors, as defined in Article 1 st points 20quater and 20quinquies, the law of12 November 2004 relating to the fight against money laundering and the financing of terrorism
  • Governance

    CSSF publishes prudential procedure for the appointment of directors and authorized managers and holders of key functions with investment companies (French version only)

    CACEIS

  • On 7 December 2020, the Commission de Surveillance du secteur financier (CSSF) published the prudential procedure for the appointment of directors and authorized managers and holders of key functions with investment companies.

    The procedure provides the requirements for : 

    • Appointment of new directors, authorized directors and holders of key positions with investment companies
    • Departure of a Director, Authorized Director or Key Position Holder with Investment Firms
    • Transmission of requests and notifications to the CSSF
    • Processing of requests and notifications 
    • Application of Article 38-2 (2) LSF

    This Procedure cancels and replaces the previous version with effect from 01.01.2021. Any files in progress at that date will have to be completed, at the request of the CSSF, in order to meet the new requirements. 

  • CSSF publishes Circular CSSF 20/759 on the update of Circular CSSF 12/552

    CACEIS

  • BACKGROUND

    On 12 December 2012, the CSSF published Circular 12/552 on central administration, internal governance and risk management. This Circular applies to all Luxembourg credit institutions and investment firms, as well as to Luxembourg branches of credit institutions and investment firms whose country of origin is outside the European Economic Area on an individual and consolidated basis. Professionals carrying out loan transactions shall only remain subject to specific rules relating to credit risk.

    This Circular has entered into force on 1 July 2013.

    The CSSF decided to distinguish regulatory requirements applicable to investment firms on one end through the Circular CSSF 20/758 and credit institutions and professionals performing lending operations on the other end through Circular CSSF 20/759.

    WHAT'S NEW?

    On 7 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Circular CSSF 20/759 on the update of Circular CSSF 12/552. 

    This Circular is the version with track changes of the Circular CSSF 12/552, as amended.

    This Circular implements six EBA Guidelines updating the governance framework applicable to credit institutions:

    EBA Guidelines on internal governance (EBA/GL/2017/11)

    Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders (EBA/GL/2017/12)

    EBA Guidelines on the application of the new definition of default (EBA/GL/2016/07)

    EBA Guidelines on specification of types of exposures to be associated with high risk (EBA/GL/2019/01)

    EBA Guidelines on the management of interest rate risk arising from non-trading book activities (EBA/GL/2018/02)

    EBA Guidelines on corrections to modified duration for debt instruments (EBA/GL/2016/09)

    These alignments with EBA Guidelines have led to adjustment in terminology, notably with the introduction of the concepts of ‘management body in its management function’ and ‘management body in its supervisory function’.

    Key changes introduced by the Circular relate to:

    • The extension of the scope of application to financial holding companies and mixed financial holding companies;
    • A more precise articulation of the concept of proportionality
    • The reinforcement of the concept of Culture of Compliance and Risk
    • The introduction of Environmental, Social, and Governance (ESG) factors to ensure the viability of the business model
    • The introduction of the concept of risk appetite to define business orientations and capacities
    • The strengthening of the management body in its supervisory function (including specialised committees) of which enhanced provisions on diversity and independence;
    • The addition of certain precisions regarding internal control functions
    • The redefinition of the concept of the “new Product Approval Process”
    • The repealing of requirements applicable to credit risk (in line with principles disclosed in the loan origination EBA guidelines) including credit approval process, forbearance, loan to value prudent valuation of collateral and non-performing exposures.
    • The repealing of the important AML/FT inherent risk when acting as private bankers; and
    • A new chapter dedicated to the risks arising from the activity of depositary bank.

    CSSF Circular 12/552, as amended, is applicable in its entirety to credit institutions and partly to professionals carrying out lending operations. A separate circular now covers investment firms.

    This circular is applicable as from 1 January 2021.

    WHAT'S NEXT?

    Internal Governance is a major topic for the CSSF and immediate actions are recommended:

    • Impact assessment on current internal governance framework and mechanisms; 
    • Update your existing internal governance documentation (e.g. Governance policy, Terms of reference, Outsourcing policy), and review and assess the quality of the decision-making process (minutes of the Management Body); 
    • Perform an assessment of both the individual and collective suitability of the Management Body.
  • International Financial Reporting Standards (IFRS)

    CSSF publishes Circular CSSF 20/760 on the repeal of the ad hoc report to be issued by the approved statutory auditor for the reconciliation between the published accounts in LUX GAAP or LUX GAAP with “IAS options” and the final version of FINREP

    CACEIS

  • On 8 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Circular CSSF 20/760 on the repeal of the ad hoc report to be issued by the approved statutory auditor for the reconciliation between the published accounts in LUX GAAP or LUX GAAP with “IAS options” and the final version of FINREP. 

    From the financial year ending on 31 December 2020, institutions publishing their accounts in LUX GAAP or LUX GAAP with "IAS options" continue to submit a reconciliation between the annual accounts and the FINREP reporting including quantified and narrative information, without this reconciliation is assessed by their approved statutory auditor.

    This circular amends CSSF circular 08/340 relating to the legal publication of accounts by deleting the following provision formulated in paragraph 5 of sub-chapter II.1

  • Investment firms /MiFID firms

    CSSF publishes Circular CSSF 20/758 on central administration, internal governance and risk management

    CACEIS

  • BACKGROUND

    On 12 December 2012, the CSSF published Circular 12/552 on central administration, internal governance and risk management. This Circular applies to all Luxembourg credit institutions and investment firms, as well as to Luxembourg branches of credit institutions and investment firms whose country of origin is outside the European Economic Area on an individual and consolidated basis. Professionals carrying out loan transactions shall only remain subject to specific rules relating to credit risk.

    This Circular has entered into force on 1 July 2013.

    The CSSF decided to distinguish regulatory requirements applicable to investment firms on one end through the Circular CSSF 20/758 and credit institutions and professionals performing lending operations on the other end through Circular CSSF 20/759.

    WHAT'S NEW?

    On 7 December 2020, the Commission de Surveillance du secteur financier (CSSF) published the Circular 20/758 on central administration, internal governance and risk management.

    Investment firms are removed from the scope of application of Circular 12/552 and are specifically addressed in Circular CSSF 20/758. 

    The reason behind this split is that the CSSF considers that the regulatory framework applicable to credit institutions is increasingly diverging from the one applicable to investment firms. Maintaining a unique circular covering different entities and different areas of activity becomes difficult to manage for both the CSSF and supervised entities. This is notably evidenced by the forthcoming application of Investment Firm Directive and Regulation (IFR/IFD) that will introduce a dedicated prudential regime for investment firms, departing for the Capital Requirements Directive and Regulation (CRR/CRD) framework.

    Maintaining a unique Circular covering different entities and different areas of activity becomes difficult to manage for both the CSSF and supervised entities. The new Circular CSSF 20/758 introduces new and adapted requirements for investment firms, under the principle of proportionality.

    In addition, the CSSF published the prudential procedure for the appointment of directors, members of the authorized management and key function holders in investment firms.

    The Circular CSSF 20/758 repeals Circular CSSF 12/552 and introduces a new governance framework specifically applicable to investment firms. It is jointly published with Circular CSSF 20/757, highlighting the main changes between Circular CSSF 12/552 and Circular CSSF 20/758.

    Similarly to the provisions applicable to credit institutions, Circular CSSF 20/758 implements in Luxembourg four EBA Guidelines updating the governance framework in force of investment firms:

    • Guidelines on internal governance « EBA/GL/2017/11 »;
    • Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders « EBA/GL/2017/12 »;
    • Guidelines on the management of interest rate risk arising from non-trading book activities « EBA/GL/2018/02 »;
    • Guidelines on corrections to modified duration for debt instruments under the second subparagraph of Article 340(3) of Regulation (EU) 575/2013 « EBA/GL/2016/09 ».

    The key changes presented in the Circular discuss the same areas as the one introduced for credit institutions at the exception of the provisions dedicated to depositary banks.

    The Circular is applicable from 1st January 2021.

    WHAT'S NEXT?

    Internal governance and risk management practices are among the central areas of scrutiny of the CSSF and investment firms need to ensure proper governance arrangement are in place in their organizations.

    Incorporating multiple key priorities of the EU regulators such as diversity, ESG, proportionality and enhanced risk management practices, the Circular play a central role in the way investment firms should design their organizational arrangements and strategic objectives.

    To adapt their institution to the latest European guidelines, institutions concerned will have to undertake an assessment of their organization, evidence potential gaps and propose review of current processes, procedures and potentially reorganize their structure.

  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    CSSF publishes Guidelines on the UCITS risk reporting - December 2020

    CACEIS

  • On 16 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Guidelines on the UCITS risk reporting.

    These Guidelines give further indications on the UCITS risk reporting and contain definitions, explanations and examples for the items as referred to in the Excel reporting file (URR – Excel reporting file).  

    The present reporting obligation does apply to all Luxembourg domiciled UCITS authorized by the CSSF as at 31 December 2020. UCITS liquidated during the reference period are out of scope. 

  • CSSF publishes Results of the Thematic Review Efficient Portfolio Management by UCITS and FAQ on Use of SFTs by UCITS

    CACEIS

  • BACKGROUND

    That Review launched at the end of 2019 by the CSSF focused on the rules on revenues and costs/fees raising from Efficient Portfolio Management techniques (in particular securities lending, repurchase agreement and reverse repurchase agreement transactions, hereinafter denominated as “EPM techniques”) as stated in ESMA Guidelines on ETFs and other UCITS issues dated August 2014 as transposed into Luxembourg regulation.

    Alongside the results of the Review, the CSSF published a FAQ to provide further clarity concerning the use by a Luxembourg-domiciled UCITS of the three EPM techniques as aforementioned.

    WHAT'S NEW?

    On 18 December 2020, the Commission de Surveillance du Secteur Financier (CSSF) published the results of the Thematic Review on Efficient Portfolio Management – Revenues and Costs/Fees (“the Review”) and of the Frequently Asked Question on the use of Securities Financing Transactions by UCITS.

    The consolidated key takeaways from the Review and the FAQ are as following:

    - Disclosure

    The CSSF recommends to disclose the information on the identity of the concerned entity(ies) to which the direct and indirect operational costs are paid in both the prospectus and in the annual report for informing investors in a comprehensive manner.

    The CSSF reminds UCITS management companies to control, in accordance with the applicable regulation, the compliance of the UCITS they manage with the disclosure requirements as described just above, including the disclosure requirements on EPM techniques.

    The CSSF considers that the prospectus should disclose the percentage of gross revenues generated by the use of EPMs on the basis of arm’s length transactions which is returned to the UCITS. In addition, the prospectus should disclose a breakdown of the overall percentage of direct and indirect operational costs/fees by service provider with an indication of the category of service provided.

    As UCITS are required to inform investors in the prospectus clearly of its intention to use EPM techniques, the CSSF expects this disclosure to be included for each UCITS (i.e. at sub-fund level for umbrella funds). To ensure compliance with this requirement, the CSSF provides disclosure points that need to be adequately addressed in the UCITS prospectus: (i) general description of the EPM techniques (ii) the precise conditions under which those EPM techniques will be used and (iii) the rationale/objectives and impact of using those EPM techniques.

    As regards the disclosure of the risks involved by the use of EPM techniques, the CSSF considers that the prospectus of a UCITS must include a risk description that adequately covers the risks for every single EPM technique and the ones linked to collateral management, and as a minimum refers to operational, liquidity, counterparty, custody and legal risks and, where applicable, the risks arising from its reuse.

    - Conflicts of interest

    The CSSF expects UCITS management companies to perform a comprehensive documented assessment of the operational model (whether on a principal or model basis) and related processes underlying the EPM techniques in order to identify and record the circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of the UCITS.

    In addition, UCITS management companies have to mitigate the conflicts of interest identified and to manage those if they cannot be prevented, including by adequate disclosure of material conflicts of interest to investors by means of the UCITS prospectus. It is worth noting that the CSSF considers that EPM techniques concluded with or involving related parties lead to conflicts of interest that have to be managed accordingly. 

    - Best execution controls

    UCITS management companies shall cover EPM techniques in their best execution policy and have robust and comprehensive control processes in place to ensure that the UCITS obtain the best possible result regarding both  the revenues arising from EPM techniques (lending fee and interest rates underlying repurchase agreement transactions and reverse repurchase agreement transaction) and the costs / fees charged to the UCITS when executing such transactions.

    The UCITS management companies have to perform the best execution controls either themselves or, notably in case of a portfolio management delegation, to have robust initial and on-going due diligence/oversight set up to ensure that the best execution controls performed by the delegate are adequate.

    - Costs/fees

    Only effective costs/fees, corresponding to services rendered to the UCITS in the context of EPM techniques, can be charged to the UCITS. To ensure that costs/fees do not include any hidden revenues and all the revenues coming from EPM techniques net of direct/indirect operational costs are returned to the UCITS, the UCITS management companies must perform a comprehensive assessment of the adequacy of the operational costs/fees and must be able to prove their relevance by means of quantitative information notably.

    - Investment restriction controls

    The CSSF clarifies that the reinvested cash collateral placed on deposit with a credit institution has to be taken into account in the 20% deposit limit laid down in the UCITS regulation. In addition, the reinvestment of the cash collateral in other eligible reinvestments (e.g. high-quality quality government bonds) has also to be taken into account in the relevant diversification requirements laid down in the UCITS regulation.

    WHAT'S NEXT?

    UCITS using EPM shall ensure that the necessary disclosure requirements are met by 30 September 2021 at the latest.

    Specifically in relation to the costs/fees, on 6 January 2021, ESMA announced that it was launching a Common Supervisory Action (CSA) with Member State national competent authorities (NCAs) on the supervision of costs and fees of UCITS across the EU. The CSA will be conducted in 2021. The CSA will assess entities’ compliance with the relevant cost-related provisions in the UCITS framework and the obligation of not charging investors with undue costs, taking into account the ESMA supervisory briefing on the supervision of costs published in June 2020. The CSA will also cover entities employing EPM techniques to assess whether they adhere to the requirements set out in the UCITS framework and ESMA Guidelines on ETFs and other UCITS issues, the latter being the basis of the CSSF Thematic review and was mentioned already in the ESMA supervisory briefing.

    As result, UCITS managements shall pay a specific attention to the prevention of undue costs in particular when using EPM techniques as it is definitely a hot topic at the European Level.

  • CSSF publishes FAQ on Use of Securities Financing Transactions by UCITS

    CACEIS

  • On 18 December 2020, the Commission de Surveillance du secteur financier (CSSF) published FAQ  in relation to the use by Luxembourg-domiciled UCITS of the following Securities Financing Transactions: securities lending transactions, reverse repurchase agreement transactions and repurchase agreement transactions. 

    The objective of the present FAQ is to bring further clarity to the following topics concerning the use by UCITS of these SFTs, thereby taking into account the applicable regulatory framework as well as the supervisory experienced gained by the CSSF over the last years: 

    • disclosure to investors; 
    • revenues and costs / fees; 
    • conflicts of interest; 
    • best execution.rs.
  • CSSF publishes Circular 20/764 regarding ESMA’s guidelines on performance fees in UCITS and certain types of AIFs

    CACEIS

  • BACKGROUND

    The ESMA published guidelines on 5 November 2020 with a view to establishing harmonised common standards in relation to the manner in which investment fund managers charge performance fees to retail investors in UCITS/AIFs and the circumstances in which performance fees can be paid, in such a way as to prevent undue costs being charged to the relevant UCITS/AIF and its investors. 

    In particular, ESMA set out common standards and criteria in relation to the following: (i) performance fee calculation method, (ii) consistency between the performance fee model chosen and the fund’s investment objectives, strategy and policy, (iii) frequency for crystallisation of the performance fee (and for the subsequent payment of the performance fee), (iv) circumstances where a performance fee should be payable, (v) duration of the performance reference period, and (vi) disclosure of the performance fee model.

    WHAT'S NEW?

    On 18 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Circular CSSF 20/764 - Guidelines on performance fees in UCITS and certain types of AIFs.

    The CSSF will integrate the Guidelines into its administrative practices and regulatory approach with a view to promoting supervisory convergence in this field at European level as of the date of application of the Guidelines.

    Points of attention

    This circular shall as from 6 January 2021, apply to:

    • Performance fees in UCITS,

    • AIFs managed by an AIFM, when the AIFM markets the AIF to retail investors:

    • Except for closed-ended AIFs and open-ended AIFs that are EuVECAs (or other types of venture capital AIFs), EuSEFs, private equity AIFs or real estate AIFs. 
    • In respect of AIFs, the Guidelines clarify that they apply in relation to Article 43 of the AIFM Directive 2011/61/EU. 
    • In relation to foreign AIFs marketed to retail investors in Luxembourg, the Guidelines also apply to all funds marketed in Luxembourg to retail investors in accordance with Article 46 the Law of 12 July 2013 5 and CSSF Regulation N° 15-036, as well as to funds marketed to retail investors in Luxembourg under Article 100(1) of the Law of 17 December 20107, subject to the exceptions above.

    WHAT'S NEXT?

    Ensuring greater supervisory convergence regarding performance fees in funds marketed to retail investors is an integral part of ESMA’s broader efforts on the cost of retail investment products. ESMA as well as national authorities will continue monitoring and working on the topic.

  • ChD publishes Draft Law 7737 transposing Directive (EU) 2019/1160 with regard to cross-border distribution of collective investment undertakings

    CACEIS

  • On 21 December 2020, the Chambre des députés - Luxembourg published Draft Law 7737 transposing Directive (EU) 2019/1160 with regard to cross-border distribution of collective investment undertakings (CBD), and amending:

    1. Law of 17 December 2010 relating to undertakings for collective investment (as amended)

    2. Law of 12 July 2013 on alternative investment fund managers (as amended).

    The Draft Law transposed most of the provisions under CBD, except point 7, article 2 of the Directive regarding the Commission's obligation for the assessment of the passport regime.

    In addition to the main provisions which transpose the Directive, the Draft Law provided that:

    • The CSSF will the national competent authority in Luxembourg who shall receive the notification / de-notification of the arrangements made for marketing for the UCITS / AIFs.
    • The information and means of communication shall be available to Luxembourg investors in one of 4 official languages: Luxembourgish, French, German or English.

    The law will entry into force on 2 August 2021.

  • Luxembourg publishes CSSF Regulation 20-10 on the marketing of foreign UCIs to retail investors and other related updates

    CACEIS

  • BACKGROUND

    On 2 December 2015, the Commission de Surveillance du secteur financier (CSSF) published Regulation N° 15-03 laying down detailed rules for the application of Article 46 of the law of 12 July 2013 on alternative investment fund managers on the marketing of foreign alternative investment funds to retail investors in Luxembourg.

    This regulation lays down detailed rules for the application of Article 46 of the law of 12 July 2013 on alternative investment fund managers by establishing the procedure and the conditions applicable to the marketing of foreign AIFs to retail investors in Luxembourg.

    On 23 December 2020, the Commission de Surveillance du secteur financier (CSSF) published Regulation No 20-10 of 21 December 2020 laying down detailed rules for the application of Article 100 (1) of the Law of 17 December 2010 relating to undertakings for collective investment (UCIs) by establishing the procedure and the conditions applicable to the marketing of UCIs other than the closed-ended type established or operating under foreign laws (foreign UCIs) to retail investors in Luxembourg. 

    This regulation shall apply to the marketing of foreign UCIs to retail investors in Luxembourg, which are not covered by CSSF Regulation N° 15-03 on the marketing of foreign AIFs to retail investors in Luxembourg.

    This regulation does not apply to the marketing of foreign UCIs in Luxembourg to:

    • eligible investors pursuant to Regulation (EU) No 345/2013 on European venture capital funds; 
    • eligible investors pursuant to Regulation (EU) No 346/2013 on European social entrepreneurship funds; 
    • eligible investors pursuant to Regulation (EU) No 2015/760 on European long-term investment funds.

    WHAT'S NEW?

    Prior to marketing its units or shares to retail investors in Luxembourg, any foreign UCI must have obtained an authorization for such marketing by the CSSF, in accordance with the provisions of Article 129 (1) of the Law of 17 December 2010, and with the provisions of this regulation.

    The regulation shall enter into force on the 1st day of the month following its publication in the Legilux (Official Journal of Luxembourg), 1 January 2021.

    Additional information:

    Regarding the fees to payable for marketing investment funds in Luxembourg, the Grand-Ducal Regulation (GDR) of 19 December 2020 was published in the Legilux which aims to amend the GDR of 21 December 2017 relating to the fees to be levied by the CSSF. In relation to foreign UCITS and AIFs, the fees payable by foreign IFMs remain as followings:

    1. For UCITS:

    • Initial notification fees: single fund of € 2,650, Umbrella fund : € 5,000

    • Annual fees:

    • € 5,000 per umbrella fund (irrespective of number of sub-funds)
    • € 2,650 per single-compartment fund.

    2. AIFs:

    • Initial notification fees:

    • Single fund as defined by Articles 100(1) and 100(2) of the Law of 17 December 2010: € 2,650
    • Umbrella fund as defined by Article 100(2) of the Law of 17 December 2010: € 5,000

    • Annual fees:

    • € 2,650 for fund as defined by Article 100(2) of the Law of 17 December 2010: € 5,000 for umbrella fund
    • € 3,950 for fund as defined by Article 100(1) of the Law of 17 December 2010.

    Points of attention:

    • A foreign UCI must comply with the following rules to be eligible for marketing its units or shares to retail investors in Luxembourg:

    • Determine the issue and redemption prices of their units or shares at sufficiently close and fixed intervals, but at least once a month. 
    • Demonstrate sufficient risk spreading, in particular:
      i. Not invest more than 10% of its assets in unlisted securities,
      ii. Not acquire more than 10% of the same type of securities issued by the same issuer,
      iii. Not invest more than 20% of its assets in securities of a same issuer,
      iv. Not take on borrowings for an amount exceeding 25% of its net assets,
      v. Must ensure an appropriate risk spreading of the underlying assets, when using financial derivatives,
      vi. Not invest more than 20% of its assets in a single real estate object,
      vii. Have the aggregate of all borrowings not exceeding on average 50% of the valuation of all its properties.

    • A foreign UCI which is authorized to market its units or shares to retail investors in Luxembourg must:

    • Appoint a credit institution to ensure that facilities are available in Luxembourg for making payments to unit-holders and repurchasing or redeeming units.
    • Take appropriate measures to ensure that the information and documents it has to produce are available to investors in Luxembourg.

    • The manager of a foreign UCI that terminates the marketing of units or shares of this UCI in Luxembourg must continue to comply with the transparency requirements under Articles 22, 23 and 24 of AIFMD, as long as investors established or located in Luxembourg have investments in this UCI.

    WHAT'S NEXT?

    The regulation shall enter into force on the 1st day of the month following its publication in the Legilux (Official Journal of Luxembourg), 1st January 2021.

  • Supervisory Reporting

    CSSF publishes Circular CSSF 20/763 on the mandatory use of the IMAS Portal for fit and proper applications submitted by significant credit institutions

    CACEIS

  • On 15 December 2020, the Commission de Surveillance du secteur financier (CSSF) published a Circular CSSF 20/763 on the mandatory use of the IMAS Portal for fit and proper applications submitted by significant credit institutions.

    The present circular shall apply to all significant credit institutions incorporated under Luxembourg law.

    On 27 January 2021, the European Central Bank (ECB) and the CSSF will launch the IMAS Portal for fit and proper (FAP) applications. The IMAS Portal is a new digital gateway for supervisory processes, developed in collaboration with the banking industry. It is part of the ECB’s and NCAs’ commitment to enhance efficiency through digitalisation, as well as to increase communication and transparency during supervisory processes. 

    Significant banks shall use the IMAS Portal to submit their applications for fit and proper assessment, track the status of these assessments and exchange related information with supervisors. 

    The use of the portal does not change the legal environment under which the ECB and the CSSF interact with supervised institutions and does not change in any way the allocation of legal responsibilities between the CSSF and the ECB. The CSSF remains the entry point in line with the SSM Framework Regulation and will have primary availability to all information received via the portal.

  • Sustainable Finance / Green Finance

    CSSF communicates on regulatory requirements and fast track procedure in relation to Regulation (EU) 2019/2088 on the sustainability-related disclosures in the financial services sector

    CACEIS

  • BACKGROUND

    On 6 November 2020, the Commission de Surveillance du secteur financier (CSSF) addressed a reminder to the attention of financial market participants and financial advisers that the European Commission confirmed the application dates of Regulation (EU) 2019/2088 on the sustainability-related disclosures in the financial services sector (SFDR), which lays down harmonised rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability related information with respect to financial products.

    In this context, the European Commission has addressed a letter to the ESA’s on 20 October 2020 concerning the application of the SFDR and its related technical standards. In this letter, the European Commission states that the co-legislators agreed in March 2019 on an ambitious timeframe for the SFDR, requiring the joint development by EIOPA, ESMA and EBA of most of the draft regulatory technical standards by 30 December 2020 and the application of the SFDR’s provisions from 10 March 2021.

    WHAT'S NEW?

    On 16 December 2020, the Commission de Surveillance du Secteur Financier (CSSF) published a communication on the regulatory requirements and fast-track procedure regarding Regulation (EU) 2019/2088 on the sustainability-related disclosures in the financial services sector (SFDR).

    As mentioned in the previous CSSF communication on 6 November 2020, all SFDR application dates remain unchanged; therefore, investment fund managers (IFMs) will need to comply with the SFDR’s high-level principle-based requirements by 10 March 2021. 

    SFDR fast-track procedure

    The CSSF has implemented a fast-track procedure specifically for the SFDR to facilitate the submission of the prospectus/issuing document updates to the CSSF.

    • Updates must be limited to reflect the changes required under the SFDR.
    • If the modifications to the investment policy and restrictions are material, the fast-track procedure cannot be used.
    • Alternative Investment Fund Managers (AIFMs) will be able to update the prospectus/issuing documents of AIFs under the form of Specialized Investment Funds (SIFs) and Part II Undertakings for Collective Investment (UCIs).
    • To benefit from this fast-track procedure, each updated prospectus/issuing document that requires a visa stamp will have to be accompanied by a confirmation letter.

    Confirmation letter for CSSF visa stamping

    With this confirmation letter, IFMs shall provide a conformity confirmation of the prospectus/issuing document update and an upgrade of IFM policies/processes with the SFDR. Among others, in this letter they must confirm that:

    • Only changes in direct relation to the SFDR’s entry into force have been inserted into this prospectus/issuing document submitted for a visa stamp to the CSSF.
    • The fund’s/sub-fund’s investment objectives and policy have been/not been changed.
    • Disclosures have been made in consideration of SFDR requirements.
    • Disclosures are accurate, fair, clear, not misleading, simple and concise.
    • The changes are compliant and entirely in line with the investor information that the fund must publish in accordance with the SFDR.
    • Information related to adverse sustainability impacts has been (or will be) published at the latest on 10 March 2021, or 30 June 2021 on a website.
    • The remuneration policy has been (or will be) updated, and published on a website at the latest by 10 March 2021.
    • The investment decision process has been reviewed.
    • The risk management process (RMP) has been (or will be) updated at the latest by 10 March 2021.

    WHAT'S NEXT?

    By 28 February 2021 at the very latest:

    • UCITS management companies will have to assess their situation regarding the new disclosure obligations and, for each Luxembourg UCITS managed by them, submit an updated UCITS prospectus to the CSSF (including all the requested disclosures).
    • IFMs shall submit to the CSSF an updated prospectus/issuing document version for a visa stamp together with the confirmation letter.
    • This information must also be made available to AIF investors.

    Upon satisfactory acceptance by the CSSF, the prospectus/issuing document will be visa stamped and returned through the e-file/Sofie channel.

    Unsatisfactory filing will result in the CSSF issuing a notice requesting the filing of a new revised prospectus/issuing document version.

  • NETHERLANDS

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    AFM informs investment firms should report unusual transactions more often

    CACEIS

  • On 16 December 2020, the Autoriteit Financiële Markten (AFM) informed investment firms should report unusual transactions more often.

    Of the alerts on possible unusual transactions that arise from transaction monitoring in investment firms, only a small proportion leads to a report to the Financial Intelligence Unit Netherlands (FIU-NL). This is shown by the market picture drawn up by the Netherlands Authority for the Financial Markets (AFM) on the basis of the annual survey of more than 300 investment firms in the Netherlands. However, the number of reported unusual transactions has increased.

    In brief:

    • Transaction monitoring process should be more adequate
    • Companies are taking more measures to control risks
    • Number of clients from risk sectors and risk areas is limited
    • Risk classification of clients outside the Netherlands lower
    • PEPs concentrated in a small proportion of investment firms.
  • COVID-19 Regulatory Measures

    DNB informs on the expectations regarding the ESRB recommendation on capital distributions by investment firms and investment funds

    CACEIS

  • On 18 December 2020, the De Nederlandsche Bank (DNB) published a communication on its expectation regarding ESRB recommendation on capital distributions by investment firms and investment funds.

    The DNB expects investment firms and investment funds to:

    • take account of the current crisis, the outlook and possible other scenarios that could affect their profitability, and financial buffers when considering dividend payments, share buybacks and variable remuneration payments. 
    • reconsider the strict necessity of such actions. 
    • keep a close watch over their financial buffers in these uncertain times. If they detect any developments that could result in prudential deficits in the short term, they must report them to DNB without delay. 

    DNB will assess individual reports and consult with the relevant institution on any follow-up and remedial action.

  • AFM calls on the financial sector to report incidents

    CACEIS

  • On 23 December 2020, the Autoriteit Financiële Markten (AFM) called on the financial sector to report incidents.

    Every day, companies are exposed to risks that can pose a serious danger to companies and their customers. At such times, it is important that companies respond appropriately to incidents. This certainly also applies to financial companies.

    • Risks
      Since the outbreak of the COVID-19, there has been more remote collaboration within companies. This entails specific risks. Earlier this year, the AFM already investigated the risks of working from home . Partly as a result of this, the AFM will draw attention in the coming period to the reporting of incidents, including integrity and information security incidents.
    • Well-functioning market: Incident reports are not only important for the AFM. 
    • Report immediately
      The AFM calls on the sector to report incidents immediately. The AFM will pay extra attention to this in its supervision in the coming period. The AFM does this through various means of communication, including discussions with industry associations and by informing individual companies of the obligation to report incidents. In the future, the AFM may investigate compliance with the incident reporting obligation.
  • Digital economy

    AFM publishes a Report on digitalization for financial services providers

    CACEIS

  • On 8 December 2020, the Autoriteit Financiële Markten (AFM) published a Report on digitalization for financial services providers.

    Financial service providers must make clear choices in their offerings and innovate as 'Market Impressions' report outlines market development for intermediaries between providers of financial products and consumers.

    In brief:

    • Market developments require offices to specialise and collaborate
    • COVID-19 crisis accelerates digitization
    • Increasing risk of uninsurability
    • Possible improvements in the prevention of money laundering and terrorist financing
    • The Netherlands has more than 7,000 financial service providers.
  • Directive on disclosure of non-financial and diversity information / Non-financial reporting

    AFM informs Pension administrators must prepare in time for the Sustainable Finance Disclosure Regulation

    CACEIS

  • On 16 December 2020, the Autoriteit Financiële Markten (AFM) informed Pension administrators must prepare in time for the Sustainable Finance Disclosure Regulation.

    Additional rules on disclosure of sustainability of investments will enter into force on 10 March 2021. This is the result of the Sustainable Finance Disclosure Regulation (SFDR). In a sector letter, the AFM points out to pension providers the importance of proper preparation. The regulator also provides guidance on implementation.

    In short:

    • the AFM provides tools for compliance with the SFDR regulation.
    • the AFM sets out in sector letter the importance of good preparation for SFDR
    • the AFM will supervise compliance with the SFDR

    This regulation requires further transparency on sustainability. The sector letter is addressed to pension providers, i.e. pension funds, premium pension institutions (PPIs) and pension providers in the second pension pillar.

    Transparent information

    The sector letter offers pension administrators tools to inform end investors/consumers about sustainability in a transparent manner. The regulator also wants to encourage the sector to look for solutions for the implementation of the obligations. In addition, talks are being held with sector organisations on this subject.

  • Double Tax Treaties

    Netherlands publishes Agreement between the competent authorities of the Netherlands and Belgium to renew the agreement on the situation of frontier workers in the context of the COVID-19 health crisis

    CACEIS

  • On 31 December 2020, the Agreement between the competent authorities of the Netherlands and Belgium to renew the agreement on the situation of frontier workers in the context of the COVID-19 health crisis of April 30, 2020, as extended by the agreements of 19 May 2020, June 19, 2020 and August 24, 2020 was published in the Official Journal.

    On April 30, 2020, the Netherlands and Belgium concluded an agreement on the basis of Article 28, paragraph 3, of the Convention between the Kingdom of the Netherlands and the Kingdom of Belgium signed on June 5, 2001 for the avoidance of double taxation and the prevention of taxes on income and on capital, as amended by the Protocol signed on June 23, 2009.

    The competent authorities of the Netherlands and Belgium agree that the application of the Agreement will be extended a fourth time until 31 March 2021.

  • Financial supervision

    The Netherlands publishes DNB's policy with regard to determining the amount of administrative fines

    CACEIS

  • On 11 December 2020, the DNB's general policy with regard to determining the amount of administrative fines was published in the Overheid (Government Documents in the Netherlands).

    To determine the amount of administrative fines, a distinction is made between the following three fine regimes:  

    • Penalty regime based on a basic amount, 
    • Revenue-related penalty regime
    • Benefit-related penalty regime.
  • Governance

    AFM calls for further professionalization of compliance function

    CACEIS

  • On 14 December 2020, the Autoriteit Financiële Markten (AFM) called for further professionalization of compliance function.

    In many cases, investment fund managers and investment firms can improve and further professionalise their compliance function. 

    With this report, the AFM also wants to offer companies that were not part of the survey tools to improve the compliance function. AFM explains what the authority expects at different maturity levels and show examples of how a company can improve the maturity level of the compliance function. This research was conducted in 2019 and 2020 at investment firms and investment institution managers. The AFM also conducts similar research at other types of companies, such as insurers and banks.

    In short:

    • Better compliance with laws and regulations with a well-functioning compliance function
    • Room for improvement: AFM offers handles
    • Call for research to be carried out within your own organization.
  • Sustainable Finance / Green Finance

    AFM and AMF call for a European regulation of ESG data, ratings, and related services

    CACEIS

  • On 15 December 2020, the Autoriteit Financiële Markten (AFM) and AMF called for a European regulation of ESG data, ratings, and related services.

    The authorities propose a European regulatory framework for providers of sustainability-related services, which could become one of the key measures of the European Commission's renewed sustainable finance strategy. The proposed framework is aimed at preventing misallocation of investments, greenwashing, and ensuring investor protection. It includes requirements on transparency on methodologies, management of conflicts of interest, internal control processes, and enhanced dialogue with companies subject to sustainability ratings.

  • SWITZERLAND

    Blockchain / Distributed Ledger Technology (DLT)

    Federal Council brings part of DLT bill into force

    CACEIS

  • On 11 December 2020, the Federal Council brought into force, with effect from 1 February 2021, the parts of the DLT bill that enable ledger-based securities to be introduced. In addition, from that date, the ombudsman affiliation requirement will apply only to those financial service providers that serve private clients.

    In September 2020, Parliament adopted the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT bill). This blanket act will adapt various federal laws such that Switzerland can continue to develop as a leading, innovative and sustainable location in the blockchain and DLT area.

    The amendments to the Code of Obligations, the Federal Intermediated Securities Act and the Federal Act on International Private Law that are envisaged in the DLT bill will now enter into force from 1 February 2021. These provisions enable the introduction of ledger-based securities that are represented in a blockchain. The remaining provisions of the DLT bill will probably enter into force on 1 August 2021.

    In addition, it is envisaged that financial service providers serving solely institutional or professional clients will no longer have to affiliate to an ombudsman as of 1 February 2021. Financial institutions that provide no financial services at all do not have to be affiliated to an ombudsman.

  • Financial Market Infrastructure (FMI)

    Federal Ministry of Finance of Switzerland launches "finance.swiss" information platform

    CACEIS

  • On 7 December 2020, the Federal Department of Finance (FDF) and the Federal Department of Foreign Affairs (FDFA) launched the new information platform "finance.swiss" together with players in the Swiss financial centre.

    The platform is aimed at an international audience and is intended to demonstrate the framework conditions and qualities that Switzerland offers in the financial sector in order to position itself as an attractive business location in the global competition between financial centres.

  • Insurance

    Switzerland publishes Draft Law of the Insurance Supervision Act

    CACEIS

  • On 1 December 2020, the Draft Law of the Insurance Supervision Act was publishes in the Official Journal.

    Since its entry into force in 2006, the Insurance Supervision Act (ISA) has governed the Confederation's supervision of insurance undertakings and intermediaries. To date, it has only been amended on an ad hoc basis. The present draft aims to adapt it to the developments that have been taking place in certain areas in recent years.

    The draft therefore proposes, firstly, that a legal basis for the reorganisation of insurance undertakings be enshrined in the ISA, so that insurance undertakings that are insolvent can be reorganised rather than compulsorily liquidated, as provided for by current law. This possibility will make it possible to take account of policyholders' interests in the event of a crisis. 

    Secondly, the draft introduces a completely new system, at least at the European level, by introducing a categorisation of clients in insurance supervision law. This system will allow insurance undertakings to benefit from a reduction in prudential obligations, particularly if their contractual partners are only professional clients who do not require special protection. Undertakings with a particularly innovative and promising business model may even be fully or partially exempted from supervision, provided that the protection of policyholders is not affected. 

    Thirdly, in accordance with the parliamentary mandate and by analogy with the FinSA, the ISA will define the rules of conduct applicable to insurance intermediaries offering insurance products with investment characteristics. In future, a basic information sheet will be required for these products. Finally, the draft contains less far-reaching amendments, the relevance of which, however, became apparent during the revision work. Formally, the ISA will be given a clearer structure through the addition of section headings.

    Insurance intermediation: The legislation on intermediation should be modernised and consumer protection strengthened, in particular by introducing a general requirement to affiliate to an ombudsman. In addition, there are to be new special requirements on avoiding conflicts of interest, and, for independent insurance intermediaries, on disclosing compensation from insurance undertakings or third parties. As regards the sale of certain insurance-based investment products, special conduct rules and a duty to provide information will be introduced - as has already been done for financial instruments under the FinSA.

    The Law is subject to a referendum.

  • Macroeconomic Framework

    Federal Council decides on further development of financial market policy: leading worldwide, rooted in Switzerland

    CACEIS

  • On 4 December 2020, the Federal Council decided on the strategic development of the financial market policy. Switzerland shall remain one of the world's leading financial centres and thereby further increase its appeal as an international business location. Established strengths like stability, security and trust are being combined with an openness for new developments such as fintech and sustainable finance. The Federal Council is creating the best possible framework for this.

    A strong financial centre is key for the Swiss economy. Given the changing international environment and the rapid pace of technological change, the Federal Council considers that a strategic development of the financial market policy is necessary to maintain Switzerland's position as one of the world's leading financial centres. Along the three key thrusts "innovative", "interconnected" and "sustainable", the Federal Council has defined concrete areas of action for a future-proof Swiss financial centre.

    Innovative: Existing and new financial centre players must be able to exploit the many possibilities offered by new technologies, such as data-driven business models, in an optimal manner. To enable this, the Federal Council is creating a technology-neutral regulatory framework and promoting innovation in the financial sector. The aim is to encourage standardisation and the opening of interfaces both within the sector and between state and business.

    Interconnected: In a changing international environment, the Federal Council actively represents Switzerland's interests both in multilateral bodies and with its bilateral partners, and promotes open markets. It provides attractive and internationally compatible conditions and pragmatic solutions for Switzerland which continue to enable a financial centre with global reach. Switzerland's advantages as a location are actively communicated to the rest of the world.

    Sustainable: Only a financial sector that aligns itself with the sustainable development goals under the 2030 Agenda is future-proof. For this reason, the Federal Council, together with the competent authorities, ensures the fundamental stability of the sector, the integrity of the financial centre combined with the effective combating of financial crime and other risks and, with respect to climate change, greater transparency in investment.

  • Sustainable Finance / Green Finance

    Federal Council fleshes out proposals for sustainable Swiss financial centre

    CACEIS

  • On 11 December 2020, the Federal Council adopted concrete measures to make the Swiss financial centre sustainable. They are designed to improve transparency, strengthen risk analysis and expand Switzerland's international commitment. The aim is to continue to consolidate Switzerland's position as a leading location for sustainable financial services.

    Based on the findings of this work, the Federal Council has adopted the following measures:

    • The authorities are to prepare the binding implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by Swiss companies in all sectors of the economy. These should indicate how they deal with climate risks in the areas of governance, strategy and risk management, as well as show the indicators and targets they use. The Federal Council is further advising companies to apply the TCFD recommendations already now.
    • SIF, in close cooperation with the FOEN, for instance, has until autumn 2021 to propose to the Federal Council any necessary amendments to financial market legislation to prevent so-called greenwashing, i.e. feigned sustainable business activity in terms of environmental impact. International developments, especially in the EU, have to be taken into account to ensure that Swiss financial products remain exportable.
    • The Federal Council recommends that financial market players publish methods and strategies for taking account of climate and environmental risks when managing their clients' assets, in accordance with the existing legal duties of loyalty and diligence. SIF will inform the Federal Council by the end of 2022 whether and how this recommendation is followed.
    • Switzerland will step up its involvement in international environmental conferences and initiatives, focusing on the disclosure of environmental information and the internalisation of environmental costs. Moreover, it will look into the organisation of a future UN climate conference.
  • Swiss Financial Institutions Act (FinIA)

    FINMA publishes Regulations on the Framework Rules for Asset Management

    CACEIS

  • On 18 December 2020, the FINMA published a Regulations on the Framework Rules for Asset Management.

    These regulations define the framework rules to which every financial intermediary active in the field of asset management (independent asset manager) is subject by virtue of the laws to which his activity is subject.

  • UNITED KINGDOM

    Audit matter

    FRC publishes guidance for companies preparing IAS accounts for accounting periods straddling IP completion day

    CACEIS

  • On 23 December 2020, the Financial Reporting Council (FRC) published its guidance for preparers using IFRS, and their auditors. This includes proposed wording to explain the basis of accounts preparation, where an entity has a financial period which straddles the end of the transition period following the UK’s exit from the European Union. This is to ensure consistent understanding and application of requirements in the Companies Act.

  • Brexit

    UK publishes European Union (Future Relationship) Act 2020

    CACEIS

  • On 31 December 2020, the European Union (Future Relationship) Act 2020 was published in the UK legislation.

    • The European Union (Future Relationship) Act implements the Trade and Cooperation Agreement (TCA), Agreement on Nuclear Cooperation and Agreement on Security Procedures for Exchanging and Protecting Classified Information (‘the Agreements’), as agreed between the United Kingdom and the European Union (EU). 
    • It also enables the implementation of arrangements and agreements that are either foreseen in the Agreements, or which are agreed by the UK and EU to be ‘supplementary’ to the TCA where these do not engage Section 20 of the Constitutional Reform and Governance Act 2010; these are, together with the Agreements, the future relationship agreements. 
    • The Act is required to implement the Agreements for them to have domestic legal effect and to enable the UK Government to ratify the Agreements. 
    • The Act provides for the application of the Agreements in domestic law where relevant. The Act also creates powers to make secondary legislation, where appropriate, to enable the Agreements to be implemented domestically or for domestic law to be interpreted in light of the Agreement. These measures provide for the implementation of the Agreements agreed between the UK and the EU. 
    • The Act also makes a small number of additional provisions relating to the UK’s relationship with the EU.
  • Here are nine publications from the FCA on Brexit

    CACEIS

  • Here are nine publications from the FCA on Brexit.

    1. On 3 December 2020, the Financial Conduct Authority (FCA) published a draft version of this direction and a draft notification letter regarding the process for adding a new sub-fund to an umbrella scheme that will be in the temporary marketing permissions regime (TMPR).

    The Collective Investment Schemes (CIS) Regulations create a UK-wide TMPR for Undertakings for the Collective Investment in Transferable Securities (UCITS) funds which were already passporting into the UK before 11pm on 31 December 2020 ('IP Completion Day'). The CIS Regulations also extend this regime to new sub-funds.

    To use the regime, a sub-fund will need to satisfy the conditions specified in regulation 63(3) of the CIS Regulations:

    • the new sub-fund must become authorized by its home state regulator on or after 31 December 2020
    • when the new sub-fund becomes authorized by its home state regulator, at least 1 other sub-fund of the new sub-fund’s umbrella scheme must be a recognized scheme in the TMPR
    • after the new sub-fund becomes authorized by its home state regulator and while at least 1 other sub-fund of the umbrella scheme continues to be so authorized, the operator of the new sub-fund must have notified us that they wish the new sub-fund to enter the TMPR
    • the notification must be given before the start of the period specified by us directing the new sub-fund’s umbrella scheme to apply for individual recognition under section 272 of the Financial Services and Markets Act 2000.

    The FCA plans to give this proposed  direction on 31 December 2020 under Regulation 64 of the CIS Regulations setting out the information that's needed to make a valid notification of a new sub-fund.

    The new regime applies to sub-funds authorized on or after 31 December 2020. Sub-funds that are authorized by their relevant home state regulator before this date must be included in a fund manager’s TMPR notification.

    2. On 9 December 2020, the Financial Conduct Authority (FCA) published frequently asked questions (FAQs) on Brexit, which provides answers for following issues:

    • Temporary permissions regime (TPR)
    • Passporting 
    • Operating and the TTP 
    • Planning for reporting changes.

    3. On 17 December 2020, the Financial Conduct Authority (FCA) published List of third-country markets considered as equivalent to a UK regulated market under UK EMIR.

    4. On 16 December 2020, the Financial Conduct Authority (FCA) published Supervisory Statement on the Operation of the MiFID Markets Regime after the end of the EU withdrawal transition period.

    This Supervisory Statement (Statement) sets out how FCA will operate the pre- and post-trade transparency regime for the secondary trading of financial instruments after the end of the EU withdrawal transition period (transition period), including:

    • FIRDS, FITRS, investment firms register, trading venues register, and systematic internalisers register  
    • Concept of Traded on a Trading Venue 
    • Submission of transparency data to the FCA 
    • Double Volume Cap (DVC)  
    • Transparency waivers and deferrals  
    • Equity transparency
    • Frequent batch auctions 
    • Bond transparency  
    • Derivatives and other non-equity instruments transparency 
    • Actionable indications of  trading interest 
    • Systematic internalisers (SIs)
    • Territorial scope of trade reporting  
    • Trade reporting and the TPR  
    • Trade reporting and the temporary transitional power (TTP) 
    • Tick sizes 
    • Commodity position limits.

    5. On 22 December 2020, the Financial Conduct Authority (FCA) published the final onshoring instruments, related guidance and Temporary Transitional Power (TTP) directions that will apply at the end of the Brexit transition period.

    To prepare for the end of the transition period, the FCA has made further EU exit-related changes to its Handbook and Binding Technical Standards for which, in some cases, it shares responsibility with the Prudential Regulation Authority (PRA) or the Bank of England.

    These changes ensure that a functioning regulatory and legal framework for financial services continues to be in place after the transition period.

    The TTP applies transitional provisions to financial services legislation for a temporary period. The TTP will be applied on a broad basis from the end of the transition period until 31 March 2022, but there are some areas where the TTP will not apply.

    6. On 31 December 2020, the Financial Conduct Authority (FCA) published a statement on use of the Temporary Transitional Power to modify the UK’s derivatives trading obligation.

    Where firms that are subject to the UK DTO trade with, or on behalf of, EU clients that are subject to the EU DTO, they will be able to transact or execute those trades on EU venues providing that:

    • firms take reasonable steps to be satisfied the client does not have arrangements in place to execute the trade on a trading venue to which both the UK and EU have granted equivalence; and
    • the EU venue has the necessary regulatory status to do business in the UK – such venues include those that are a Recognised Overseas Investment Exchange, have been granted the relevant temporary permission, or are certain that they benefit from the Overseas Person Exclusion. 

    This modification of the application of the UK DTO applies to UK firms, EU firms using the UK’s temporary permissions regime (TPR), and branches of overseas firms in the UK. Transactions concluded by an EEA Undertakings for the Collective Investment in Transferable Securities (UCITS) fund or an EEA alternative investment fund (AIF) are currently outside the scope of the UK DTO. 

    FCA expects firms and other regulated persons to be able to demonstrate they are taking all reasonable steps during the first quarter of 2021 to ensure compliance with the UK DTO. 

    7. On 31 December 2020, the Financial Conduct Authority (FCA) informed on the Regulatory change for firms as Brexit transition period ends.

    • Passporting between the UK and EEA states has ended and the temporary permissions regime (TPR) has now come into effect for those firms and funds that notified FCA’s that they wanted to enter this regime. 
    • The extent to which UK firms can continue to provide services to customers in the EEA depends on local law and local regulators’ expectations. The FCA expects UK firms to take the steps available to them to make sure they act consistently with these local laws and expectations. 
    • Firms should also be prepared for the regulatory changes that have come into force. To help firms adapt to some of the new rules, the Treasury has given the FCA new powers to make transitional provisions, known as the Temporary Transitional Power (TTP).
    • Any UK legal entity that wishes to issue credit ratings publicly or by subscription will need to be registered or certified as a CRA with the FCA.
    • Additionally, any trade repository (TR) wishing to offer its services in the UK after 31 December 2020 will need to be registered with, or recognised by the FCA. UK reporting counterparties and UK TRs should use the UK EMIR validation rules when submitting derivative transactions entered into from 11pm on 31 December 2020 onwards.

    8. On 31 December 2020, the Financial Conduct Authority (FCA) published its remarks on the regimes for EEA firms and investment funds that passported into the UK:

    • The previous passporting regime: following the end of the transition period, EEA-based firms can no longer passport into the UK and, where necessary, will need to be authorized and regulated by the PRA and/or the FCA in the UK. Similarly, EEA-based investment funds can no longer be marketed under a passport in the UK.
    • The temporary permissions regime (TPR): allows those EEA-based firms that were passporting into the UK at the end of the transition period, to elect to continue operating in the UK within the scope of their previous passport, for a limited period after the end of the transition period, while seeking full authorization by the PRA and/or the FCA in the UK, if this is required.
    • The temporary marketing permissions regime (TMPR): allows EEA-based funds that were passporting into the UK at the end of the transition period to continue to be marketed in the UK in the same manner as they were before the end of the transition period, for a limited period.
    • The financial services contracts regime (FSCR): ensures that EEA-based firms that were passporting into the UK at the end of the transition period, and who do not enter the TPR, can continue, for a limited period, to fulfil their contractual obligations existing at that time to UK customers while conducting an orderly exit from the UK market.

    9. On 31 December 2020, the Financial Conduct Authority (FCA) published Contractual run-off notification form, which applies to:

    • FSMA schedule 3 passporting firms (credit institutions, Solvency 2 insurers, investment firms, AIF managers, UCITS management companies, insurance distribution firms and mortgage intermediaries)
    • Payment services and electronic money passporting firms.
  • Climate-related financial disclosures

    FCA publishes PS20/17 - Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations

    CACEIS

  • On 21 December 2020, the Financial Conduct Authority (FCA) published PS20/17 - Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations.

    Final rule will directly impact commercial companies with a UK premium listing. Other listed issuers will also be interested in FCA's plans to consult in the future on extending the rule to a wider scope of listed issuers.

    Final Technical Note will also impact a wider scope of issuers, including listed issuers, issuers with securities admitted to trading on regulated markets and other entities in-scope of requirements under the Market Abuse Regulation (MAR) and the Prospectus Regulation (PR) (as those regulations will be ‘on-shored’ at the end of the Implementation Period).

    Companies will be required to include a statement in their annual financial report which sets out whether their disclosures are consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), and to explain if they have not done so. 

    The rule will apply for accounting periods beginning on or after 1 January 2021, meaning the first annual financial reports subject to FCA's rule would then be published in spring 2022. 

    Along with PS20/17, the FCA issued a Technical Note clarifying existing disclosure obligations in EU legislation and FCA’s Handbook. In certain circumstances these disclosure obligations may already require securities issuers to disclose information on climate-related and other environmental, social and governance matters.

    The FCA aims to publish further consultation papers to extend the application of TCFD disclosures in early 2021. FCA’s planned next steps were recently set out as part of a Roadmap to mandatory TCFD-aligned disclosures, released by a joint government and regulator taskforce in November.

  • Cryptoasset / Cryptocurrency / Virtual Currency

    FCA establishes Temporary Registration Regime for cryptoasset businesses

    CACEIS

  • On 16 December 2020, the Financial Conduct Authority (FCA) published established a Temporary Registration Regime to allow existing cryptoasset firms, who have applied to be registered with the FCA, to continue trading. 

    The FCA is advising customers of cryptoasset firms which should have applied to the FCA, but have not done so, to withdraw their cryptoassets or money before 10 January 2021. 

    The Temporary Registration Regime is for existing cryptoasset businesses which have applied for registration before 16 December 2020, and whose applications are still being assessed. This is to enable those existing businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA’s determination of their application.  

    The FCA is advising consumers who deal with cryptoasset firms to:

    • Check if the firm they use is on the FCA’s Register or list of firms with Temporary Registration. 
    • If they are not, check whether they are entitled to carry on business without being registered with the FCA (this may apply if they are registered in a different country). 
    • If the firm is not entitled to carry on business, then consumers should withdraw their cryptoassets and/or money before 10 January 2021. This is because the firm will be operating illegally if it does not cease trading from 10 January 2021. 
  • Financial Market Infrastructure (FMI)

    BoE publishes Annual Report 2020 on its supervision of financial market infrastructures

    CACEIS

  • On 3 December 2020, the Bank of England (BoE) published its FMI Annual Report sets out how the BoE has exercised its responsibilities in respect of supervising financial market infrastructures since the last report. 

    The BoE's future priorities:

    • continue to promote FMIs’ financial and operational resilience, with its immediate focus remaining on addressing the impact of COVID-19
    • examine the procyclicality of margin calls and the resilience of non-bank liquidity when faced with margin calls
    • contribute to international work to learn the lessons from this year’s market volatility
    • remain innovation in payments as a key area of focus
    • develop an approach to recognition and supervision of incoming CCPs. 
  • Financial supervision

    FCA publishes Handbook Notice 83

    CACEIS

  • On 11 December 2020, the Financial Conduct Authority (FCA) published Handbook Notice 83 which describes the changes to the Handbook and other material made by the FCA Board under its legislative and other statutory powers on 7 December 2020 and 10 December 2020:

    • Conduct of Business (Speculative Illiquid Securities) Instrument 2020
    • Exiting the European Union: Handbook (Amendments) (No 3) Instrument 2020
    • Exiting the European Union: SMCR and APR (Amendments) (No 2) Instrument 2020
    • Technical Standards (Specifying the Information and Details of a Securitisation to be Made Available by the Originator, Sponsor and SSPE) (EU Exit) Instrument 2020
    • Technical Standards (Specifying the Information to be Provided to Comply with the STS Notification Requirements) (EU Exit) Instrument 2020
    • Technical Standards (Format of Applications for Registration of Securitisation Repositories) Instrument 202
    • Technical Standards (Information to be Provided in the Application for Registration of a Securitisation Repository) Instrument 2020
    • Technical Standards (Securitisation Repository Operational Standards for Data Collection, Aggregation, Comparison, Access and Verification of Completeness and Consistency) Instrument 2020
    • Technical Standards (Supplementing EMIR with regard to the Clearing Obligation) (EU Exit) Instrument 2020
    • Technical Standards (European Long-Term Investment Fund Regulation) (EU Exit) Instrument 2020
    • Technical Standards (Miscellaneous Amendments) (EU Exit) Instrument 2020.
  • Markets in financial instruments Directive and Regulation (MiFID II / MiFIR)

    FCA publishes PS20/15: High-risk investments: Marketing speculative illiquid securities (including speculative mini-bonds) to retail investors

    CACEIS

  • On 10 December 2020, the Financial Conduct Authority (FCA) confirmed proposals to permanently ban the mass-marketing of speculative illiquid securities - including speculative mini-bonds - to retail investors.

    This document will be directly relevant to:

    • issuers of SISs, including issuers of listed bonds with similar features to other SISs which are not regularly traded
    • investment-based crowdfunding (IBCF) platforms and other intermediaries offering or otherwise providing services in relation to SISs
    • authorized firms which approve financial promotions for unauthorized persons issuing SISs
    • trade bodies for the IBCF sector
    • Issuers and distributors of non-mainstream pooled investments (NMPIs).

    From 1 January 2021, FCA rules permanently ban promotions of ‘speculative mini-bonds’ to retail consumers, unless a consumer is a ‘sophisticated’ or high net worth investor.

    The kinds of mini-bond concerned are where a company raises money from investors with the intention of lending the money to a third party or investing in other companies, or property. 

    Whether or not investors are paid interest, or repaid their original investment depends on how the issuer’s lending or investment activities perform, which may be very risky and complex for investors to understand.

    Where these products are marketed to high net worth and sophisticated retail investors , they will have to clearly state the risk of losing all the investment. They must also provide clear information on the costs and charges associated with the product.

  • Prudential Requirements for Investment Firms Directive & Regulation (IFD / IFR)

    FCA publishes FG20/4, FG20/5, FG20/6, PS20/16 - Finalized Guidance on Dual-regulated firms Remuneration Code

    CACEIS

  • On 17 December 2020, the Financial Conduct Authority (FCA) informed on the finalized guidance relates to the Dual-regulated firms Remuneration Code, which includes following documents:

    • PS20/16: Updating the Dual-regulated firms Remuneration Code to reflect CRD V
    • FG20/4: General guidance on proportionality: the Dual-regulated firms Remuneration Code (SYSC 19D)
    • FG20/5: Dual-regulated firms Remuneration Code (SYSC 19D) – Frequently asked questions on remuneration.
    • FG20/6 IFPRU investment firms Remuneration Code (SYSC 19A) – Frequently asked questions on remuneration.

    This PS is relevant to firms in scope of the Dual-regulated firms Remuneration Code, specifically:

    • credit institutions (banks and building societies) 
    • designated investment firms (those designated for prudential regulation by the PRA) 
    • firms from outside the European Economic Area (EEA) that carry on activities from an establishment in the UK that mean they would be a credit institution or designated investment firm if they were a UK domestic firm 
    • firms in the same group as at least 1 of the types of firm in the previous 3 points.

    The amendments to the Dual-regulated firms Remuneration Code and the relevant  non-Handbook guidance to reflect the changes made by CRD V: 

    • adding categories of staff who must be included as material risk takers (MRTs) 
    • replacing FCA's current proportionality thresholds with exemptions from some remuneration rules for firms below a certain size and for individuals with remuneration below a certain level 
    • amending the criteria for assessing whether a UK branch of a third country  firm is in scope of application of certain rules 
    • amending the minimum deferral and claw-back periods
    • introducing a new requirement for firms to have gender neutral remuneration policies and practices 
    • permitting listed firms to award variable remuneration in the form of share-linked instruments and equivalent non-cash instruments.
  • Here are three publications published by the FCA regarding CP20/24 on IFR/IFD

    CACEIS

  • Here are three publications on the IFD / IFR published by the FCA.

    1. On 14 December 2020, the Financial Conduct Authority (FCA) published Consultation paper CP20/24: A new UK prudential regime for MiFID investment firms. The consultation lasts until 5 February 2021.

    This is the first of 3 consultations that the FCA will issue to introduce the regime in January 2022. Final rules will be published over the course of next year. Where possible the FCA is consulting earlier on the more complex topics. This is to give investment firms as much time as possible to ready themselves.

    The draft rules will apply to any MIFID investment firm that are currently subject to any part of the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR). These include: 

    • investment firms that are currently subject to BIPRU and GENPRU
    • ‘full scope’, ‘limited activity’ and ‘limited licence’ investment firms currently subject to IFPRU and CRR
    • ‘local’ investment firms
    • matched principal dealers
    • specialist commodities derivatives investment firms that benefit from the current exemptions on capital requirements and large exposures including:  oil market participants (OMPs), energy market participants (EMPs)
    • ‘exempt-CAD’ firms 
    • investment firms that would be exempt from MiFID under Article 3 but have ‘opted-in’ to MiFID
    • any regulated and unregulated holding companies of groups that contain an investment firm that are currently authorized under MiFID and or a Collective Portfolio Management Investment (CPMI).

    The new regime will streamline and simplify the prudential requirements for solo-regulated investment firms in the UK. At present, there are many different regimes which apply depending on size of firm and type of investment business.

    The new rules will extend the framework for prudential requirements to consider the potential harm FCA investment firms pose to clients, consumers and the market. This includes the amount of capital and liquid assets the FCA investment firm should hold so that if it does have to wind down, it can do so in an orderly manner.

    2. On 14 December 2020, the Financial Conduct Authority (FCA) published IFPR reporting instructions regarding its Consultation paper CP20/24: A new UK prudential regime for MiFID investment firms.

    3. On 14 December 2020, the Financial Conduct Authority (FCA) published IFPR reporting forms regarding its Consultation paper CP20/24: A new UK prudential regime for MiFID investment firms.

  • Senior Managers & Certification Regime (SM&CR)

    PRA publishes report on Evaluation of the Senior Managers and Certification Regime (SM&CR)

    CACEIS

  • On 16 December 2020, the Bank of England (BoE) published a report on Evaluation of the Senior Managers and Certification Regime (SM&CR).

    The evaluation examined each component of the SM&CR: the Senior Managers Regime, the Certification Regime, conduct rules, and regulatory references. In doing so, it looked at all aspects of dual-regulated firms, for which the PRA acts as the prudential regulator, but not at FCA solo-regulated firms (eg asset management companies, intermediaries, non-bank mortgage lenders, and financial advisors).

  • INTERNATIONAL

    Anti-money laundering / Combating the financing of terrorism (AML / CFT)

    FATF removes The Bahamas from the list of Jurisdictions under Increased Monitoring

    CACEIS

  • On 18 December 2020, the Financial Action Task Force (FATF) informed that it de-listed The Bahamas from the list of Jurisdictions under Increased Monitoring. The Bahamas is therefore no longer subject to the FATF’s increased monitoring process. The Bahamas will continue to work with CFATF to improve further its AML/CFT regime.

    The Bahamas has strengthened the effectiveness of its AML/CFT system and addressed related technical deficiencies to meet the commitments in its action plan and remedy the strategic deficiencies identified by the FATF in October 2018.

  • Sustainable Finance / Green Finance

    ICMA publishes Climate Transition Finance Handbook

    CACEIS

  • On 9 December 2020, the International Capital Market Association (ICMA) published a Climate Transition Finance Handbook. 

    This new handbook clarifies the information that should be made publicly available to investors in connection with the issuance of ‘use of proceeds’ bonds aligned with the Green and Social Bond Principles or Sustainability Bond Guidelines, or general corporate purpose bonds issued in line with the Sustainability-Linked Bond Principles.

    The recommended disclosures in the new Handbook are based on the work of the Climate Transition Finance Working Group made up of representatives from more than 80 entities participating in the capital markets, under the auspices of the Green and Social Bond Principles Executive Committee. They reference existing climate change disclosure frameworks developed by relevant industry groups, regulatory bodies and the scientific community. 

    The recommendations have four key elements:

    • Issuer’s climate transition strategy and governance; 
    • Business model environmental materiality; 
    • Climate transition strategy to be ‘science-based’ including targets and pathways; and, 
    • Implementation transparency. 

    The Handbook specifies that relevant disclosures can be included in the issuer’s annual report, framework document, or investor presentation, as long as they are publicly accessible to investors. Concurrently, the recommended independent review, assurance and verifications can be included as either a Second Party Opinion or provided in the context of an issuer’s ESG reporting. 

  • CONTACTS

    This publication is produced by the Projects & Regulatory Monitoring teams as well as experts from the Legal Department and the Compliance Department of CACEIS entities, together with the close support of the Communications Department.

    Editors
    Gaëlle Kerboeuf, CACEIS Group Legal Manager - Projects & Regulatory Monitoring
    Pauline Fieni, CACEIS Compliance - General secretary, Projects & Regulatory Monitoring

    Permanent Editorial Committee
    Gaëlle Kerboeuf, CACEIS Group Legal Manager - Projects & Regulatory Monitoring
    Pauline Fieni, CACEIS Compliance - General secretary, Projects & Regulatory Monitoring
    Corinne Brand, Group Communications Manager

    Local Expert Correspondents
    Jennifer Yeboah, Team Manager Legal (CACEIS Belgium)
    François Honnay, Head of Legal and Compliance (CACEIS Bank Belgium Branch)
    Tania Deltchev, Head of Legal (France)
    Stefan Ullrich, Head of Legal (Germany)
    Georgios Frangou, Compliance Officer (CACEIS Bank Germany Branch)
    Robin Donagh, Legal Advisor (Ireland)
    Razanajafy (Fara) Francois-Sim, Head of Compliance (CACEIS Ireland Limited)
    Costanza Bucci, Head of Legal & Compliance (Italy)
    Agathe Doleans, Deputy Chief Compliance Officer (Luxembourg)
    Fernand Costinha, Head of Legal (Luxembourg)
    Gérald Stadelmann, Head of Legal (Luxcellence Luxembourg)
    Alessandra Cremonesi, Legal Fund Structuring (Switzerland)
    Samuel Zemp, Compliance Officer (CACEIS Bank Switzerland Branch)
    Sarah Anderson, Head of Legal (UK Branch)
    Michele Tuen, Head of Trustee and Legal, Trustee and Legal (Hong Kong)
    Mireille Mol, Legal and Compliance (Netherlands)
    Marc Weijkamp, AH Legal (Netherlands)

    Design
    CACEIS Group Communications

    Photos credit
    CACEIS, Adobe Stock

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