November 2019


CONTENT

CACEIS

EUROPEAN UNION

Benchmarks Regulation (BMR)

Working group on euro risk-free rates issues recommendations to address accounting impact of euro risk-free rates transition

  • On 5 November 2019, the private sector working group on euro risk-free rates has published a report with recommendations, from an accounting perspective, on the transition to new risk-free rates. The report focuses on the implications for International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS).

    The report describes the overall consequences for financial accounting and potential issues that may arise, especially concerning hedge accounting. The report also sets out the challenges for non-hedge-related topics.

    The recommendations cover three areas: (i) the impact of the transition from the euro overnight index average (EONIA) to the euro short-term rate (the €STR) on the modification of contracts and hedge accounting, (ii) fallbacks for EURIBOR and hedge accounting, and (iii) general accounting and financial reporting. Among the recommendations it makes, the working group on euro risk-free rates suggests that prepares of financial statements should closely monitor the IAS Board’s project on interbank offered rate reforms and any amendments or clarifications to the standards that result from it.

  • Working group on euro risk-free rates issues high level recommendations for fallback provisions in contracts referencing EURIBOR

  • On 6 November 2019, the European Central Bank (ECB) working group on euro risk-free rates issued high level recommendations for fallback provisions in contracts referencing EURIBOR.

    These recommendations support compliance with the EU Benchmarks Regulation (BMR) and enhance legal and commercial certainty. 

    The working group recommends that market participants incorporate fallback provisions in all new financial instruments and contracts referencing EURIBOR, regardless of whether they fall within the scope of the BMR.

    Legacy financial instruments and contracts referencing EURIBOR that were entered into after 1 January 2018 and that fall within the scope of the BMR should be covered by “robust written plans” prepared by supervised entities in accordance with Article 28(2) of the BMR.

    For legacy contracts which do not contain appropriately worded fallback provisions, to the extent practicable, market participants should introduce EURIBOR fallback provisions, or enhance existing provisions, when such financial instruments and contracts are next amended or updated. 

    Where no specific fallback provisions are recommended and pending further guidance from the working group or regulatory authorities, market participants may wish to consider including generic language in their fallback provisions. To this end, the working group is recommending a standard text for a generic EURIBOR fallback provision.

  • ECB publishes Working Group Report on €STR fallback arrangements

  • On 12 November 2019, the European Central Bank (ECB) published private sector's working group report on €STR fallback arrangements.

    The report explains that the working group has assessed two options for possible fallback arrangements for €STR products.

    Based on the assessment the working group has decided to recommend that market participants consider the measures that might be taken by the ECB as part of the regular review of the €STR methodology, as well as the policies and procedures to be followed in the event of the possible cessation of the €STR, along with the fallback provisions provided by the working group in the EONIA to €STR Legal Action Plan.

    The working group is of the opinion that this combination will provide sufficient contingency as fallback measures for the €STR.

    Key points of the report:

    • Working group has assessed different fallback arrangements for products referencing €STR, the new overnight euro risk free rate
    • Working group recommends market participants to consider existing methodological review procedures of €STR and the policies and procedures in case of the possible cessation of the €STR, along with fallback provisions provided in the EONIA to €STR Legal Action Plan, as sufficient contingency to serve as fallback measures for €STR.
  • Brexit

    EU publishes Withdrawal Agreement between UK and EU and the corresponding European Political Declaration

  • On 12 November 2019, the European Union published in the Official Journal of the European Union (OJ) the Council Agreement setting out the arrangements of the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community. 

    A transition or implementation period shall start on the date of entry into force of this Agreement and end on 31 December 2020. During the transition period, the current rules and regulations applicable to financial services remain in force. 

    Also on 12 November 2019,  the Political declaration setting out the framework for the future relationship between the European Union and the United Kingdom was published in the OJ. 

    In the area of financial services, the Parties are committed to preserving financial stability, market integrity, investor and consumer protection and fair competition, while respecting the Parties’ regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest. This is said to be without prejudice to the Parties’ ability to adopt or maintain any measure where necessary for prudential reasons. The Parties also agree to engage in close cooperation on regulatory and supervisory matters in international bodies. 

    Furthermore, both Parties will have equivalence frameworks in place that allow them to declare a third country’s regulatory and supervisory regimes equivalent for relevant purposes and therefore the Parties should start assessing equivalence with respect to each other under these frameworks as soon as possible after the United Kingdom’s withdrawal from the Union, endeavouring to conclude these assessments before the end of June 2020. The Parties will keep their respective equivalence frameworks under review.

  • Capital Markets Union

    Council adopts legislative reforms for Capital Markets Union

  • On 8 November 2019, the Council of the EU adopted a set of legislative reforms which are part of progress towards the capital markets union. The texts concern:

    • the creation of a new category of benchmarks contributing to sustainable finance;
    • transparency obligations for sustainable investments;
    • a new prudential framework for investment firms;
    • a harmonized framework for covered bonds;
    • rules promoting access to SME growth markets.

    All the texts will be signed in Strasbourg in the week of 25 November and will then be published in the Official Journal of the European Union.

  • Directive on the protection of persons who report breaches of Union law (Whistleblowers Directive)

    EU publishes Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law

  • BACKGROUND

    In the past, several cases of whistleblowers shedding light on breaches of law or policy, ethics, or general maltreatment and misconduct occurred. These individuals used channels such as newspapers and broadcast news to report on the violations of law, abuse, negligence, and/or misconduct they had encountered. Yet, in some cases the inadequate protection of those individuals exposing wrongful behavior became obvious. The European Union thus came to the conclusion that the existing instruments for the protection of whistleblowers at the EU level were limited. As of now, only ten EU countries (out of 28) have comprehensive legislation in place that protects whistleblowers. 

    To improve the applicable whistleblowers' protection and introduce a more uniform standard in the EU, the legislators have now adopted a Directive on the protection of persons reporting on breaches of Union law (the “Whistleblowing Directive”).


    WHAT'S NEW?

    On 26 November 2019, the new EU Whistleblowing Directive - Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law - was published in the Official Journal of the EU. 

    The Directive introduces minimum standards for the protection of whistleblowers in the EU which companies and authorities must follow. In addition to prescribing the establishment of a channel for reporting breaches, the Directive focuses on how quickly a company deals with the reporting of breaches, how it investigates, and how information is processed until the case is closed. 

    The provisions of the Directive also comprise the rule for companies to duly inform the whistleblower about the process and to have an impartial person undertaking any remedial actions.

    For many EU member states, the Directive introduces new legal concepts and new rules that will:

    • alter company and employee behavior, in many instances; 
    • require new policies and communications; and 
    • provide employees with a framework for bringing wrong-doing and breaches of law and policy to light.

    Once the Directive has been transposed into national law, its provisions will affect companies’ legal departments and HR departments and permeate the entire business entity.


    WHAT'S NEXT?

    Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 17 December 2021.

  • European Market Infrastructure Regulation (EMIR)

    ESMA publishes List of third-country central counterparties recognized to offer services and activities in the Union (Version 12/11/2019)

  • On 12 November 2019, the European Securities and Markets Authority (ESMA) has updated its list of third-country central counterparties that are recognized to offer services and activities in the EU in accordance with the European Market Infrastructure Regulation (EMIR).

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

    Europe publishes Commission Delegated Regulation (EU) 2019/1866 of 3 July to align the transitional arrangement for PRIIP manufacturers offering units of funds as underlying investment options with the prolonged exemption period

  • On 8 November 2019, the Commission Delegated Regulation (EU) 2019/1866 of 3 July 2019 was published on Official Journal of the European Union (OJ), amending Delegated Regulation (EU) 2017/653 to align the transitional arrangement for PRIIP manufacturers offering units of funds referred to in Article 32 of Regulation (EU) No 1286/2014 of the European Parliament and of the Council as underlying investment options with the prolonged exemption period under that Article.

    In accordance with this Delegated Regulation, management companies, investment companies and persons advising on or selling UCITS are exempt from the obligations to have PRIIPs KID for additional 2 years, hence, until 31 December 2021. 

  • Securitisation Regulation

    EU publishes Commission Delegated Regulation (EU) 2019/1851 of 28 May 2019 with regard to regulatory technical standards on the homogeneity of the underlying exposures in securitization

  • On 6 November 2019, the EU published a Delegated Regulation supplementing the Securitization Regulation (2017/2402/EU) with regard to regulatory technical standards on the homogeneity of the underlying exposures in securitization. 

    The RTS cover:

    • homogeneity of the underlying exposures in securitization; and
    • the requirements for originators, sponsors and original lenders relating to risk retention pursuant to Article 6(7) of the Securitization Regulation.
  • ESMA updates its Q&As on the Securitisation Regulation

  • On 15 November 2019, the European Securities and Markets Authority (ESMA) updated its Questions and Answers (Q&As) on the Securitisation Regulation (Regulation 2017/2402). 

    The majority of Q&As in this document provide clarification on different aspects of the templates contained in the draft technical standards on disclosure which were recently published by the European Commission. 

    In particular, the Q&As clarifies how several specific fields in the templates should be completed and also contains clarifications relating to STS notifications and securitisation repositories, by following new topics:

    • Confirmation of submission completeness 
    • Handling of corrections 
    • Designated first contact point for investors and competent authorities 
    • Interest Rate Floor 
    • Credit impaired obligor
    • Balloon Amount
    • Non-Payments on equal ranking Underlying Exposures 
    • Noteholder Consent 
    • Collection of Other Reserves 
    • Obligor Must Pay Breakage On Swap
    • Sponsor 
    • Payment Date 
    • Total Shortfalls In Principal & Interest Outstanding 
    • Liquidation Expense
    • Calculation methods for fields regarding financial statement information (e.g. revenue, operating expenses, capital expenditure, etc.)
    • Financial information for self-employed workers and other micro-company structures 
    • Risk Weight Approach 
    • Material Amendment to Transaction Documents 
    • Any Other Information Line Number.
  • BELGIUM

    DAC 6

    Belgian Chamber of representatives publishes draft law concerning the transposition of DAC 6 in Belgium

  • On 26 November 2019, the Belgian Chamber of representatives published the draft law for transposing DAC 6 into Belgian Law. 

    The draft law aims to transpose Dac 6 into the various tax codes to provide the competent Belgian authorities with the information they need to act when they detect aggressive tax practices. It sets new reporting requirements for intermediaries and taxpayers that should allow for automatic exchange of information on cross-border devices.

  • Prospectus Regulation

    FSMA confirms the implementation of the Guidelines on risk factors under the prospectus regulation

  • On 13 November 2019, the Financial Services and Markets Authority (FSMA) published the implementation in Belgium of ESMA guidelines on risk factors under the prospectus regulation. 

    The guidelines are mainly addressed to FSMA, which is competent in respect of the Prospectus Regulation. However, the guidelines state that persons responsible for the prospectus should consider these guidelines when preparing a prospectus for submission to the competent authority, in order to expedite the approval process for prospectuses, registration documents, universal registration documents, securities notes and any supplements thereto.

  • FRANCE

    Investment management

    France adopts Decree No 2019-1172 of 14 November 2019 favoring diffusing investment capital / La France adopte le Décret no 2019-1172 du 14 novembre 2019 favorisant la diffusion du capital investissement

  • On 15 November 2019, France adopted Decree No 2019-1172 of 14 November 2019 favoring investment in the economy by diffusing investment capital.

    The current decree is targeting retail clients owning a life insurance contract, insurance companies, investment funds, alternative investment funds and management companies..  The decree aims at implementing reforms on  investment capital and its diffusion in life insurances from the new PACTE Law.

    The decree completes the list of financial instruments eligible life insurance contracts and modifies the thresholds of capital investments ownership to promote its diffusion and orientate even more saving schemes towards financing of enterprises.

    Version française

    Le 15 novembre 2019, la France a adopté le décret no 2019-1172 du 14 novembre 2019 favorisant l’investissement dans l’économie par la diffusion du capital investissement.

    Le présent décret est destiné aux particuliers détenteurs d’un contrat d’assurance vie, compagnies d’assurances, fonds de capital investissement, FIA, sociétés de gestion. Le but de ce décret est la mise en œuvre de la réforme du capital investissement et de sa diffusion dans l’assurance vie prévue par la loi relative à la croissance et la transformation des entreprises.

    Le décret complète la liste des instruments financiers éligibles aux contrats d’assurance vie et modifie les plafonds applicables à la détention de certains instruments de capital investissement afin de promouvoir leur diffusion et d’orienter davantage l’épargne vers le financement des entreprises.

  • Prospectus Regulation

    AMF applies ESMA Prospectus Guidelines on Risk Factors / L'AMF applique les orientations de l'ESMA sur les facteurs de risque

  • On 29 November 2019, the Autorité des marchés financiers (AMF) informed it will apply ESMA Prospectus Guidelines on Risk Factors from  4 December 2019. These guidelines aim at encouraging an appropriate, targeted, simplified communication of risk factors under a format easily understandable and precise.

    Version française

    Le 29 novembre 2019, l’Autorité des marchés financiers a informé qu'elle appliquer les orientations de l’ESMA sur les facteurs de risque dans le cadre de la réglementation Prospectus, à compter du 4 décembre 2019. Ces orientations visent à encourager une communication appropriée, ciblée et simplifiée des facteurs de risque sous une forme aisément analysable, concise et compréhensible.

  • Shareholders' Rights Directive (SRD II)

    France publishes Decree No 2019-1235 of 27 November 2019 concerning the transposition of Directive (EU) 2017/828, SRD II / La France publie le Décret no 2019-1235 du 27 novembre 2019 portant transposition de la directive (UE) 2017/828, SRD II

  • On 28 November 2019, France published in its Official Journal Decree No 2019-1235 of 27 November 2019 concerning the transposition of the Shareholders' Rights Directive II.

    This decree sets the content and elements of the regulatory framework on directors' remuneration and of the remuneration politics to implement according to different types of companies.
    It describes the nature of information to be disclosed by public limited company with a board of directors and public limited company with a board of supervision.
    The text clarifies information and delays applicable to the identification procedure of shareholders and fixes the content of the shareholder engagement policy.

    Version française

    Le 28 novembre 2019, la France a publié au Journal Officiel le Décret no 2019-1235 du 27 novembre 2019 portant transposition de la directive (UE) 2017/828 en vue de promouvoir l’engagement à long terme des actionnaires.

    Ce décret fixe le contenu et les éléments de niveau réglementaire du régime du dispositif encadrant la rémunération des dirigeants pour les différentes formes de sociétés. Il précise la nature des informations à publier concernant les conventions réglementées conclues tant par des sociétés anonymes à conseil d’administration que par les sociétés anonymes à conseil de surveillance.

    Ce texte précise les informations et les délais applicables à la procédure d’identification des propriétaires des titres et fixe le contenu du régime de la politique d’engagement actionnarial.

  • UCITS V / Alternative investment funds manager directive (AIFMD)

    AMF updates policy on UCITS and AIFs / AMF met à jour sa doctrine OPCVM et FIA

  • BACKGROUND

    On 26 November 2019, the Autorité des marchés financiers (AMF) updated its policy on UCITS and AIFs in order to integrate recent national and European legislative and regulatory developments.


    WHAT'S NEW?

    More specificallly, the update amends five instructions relating to collective investment undertakings (CIU) in order to integrate changes in the applicable texts, and in particular the entry into force of the European regulation on money-market funds (MMF). The instructions have been adapted to take into account the new European framework and the resulting disclosure requirements, in line with the instruction guide to MMFs for portfolio asset management companies published by the AMF in July 2018 and updated in November 2018.

    These instructions have also been adapted to take into account the following:

    • Work related to the transposition of MiFID 2, in particular the procedures for displaying research costs in the prospectuses of UCITS and AIFs when the investment management company chooses to use a research account within the meaning of MiFID 2 as provided for in Article 314-22 of the AMF General Regulation as part of its collective management activity;
    • The possibility, introduced by Order 2017-1432 of 4 October 2017, to create French employee savings plan funds (FCPEs) invested in the company's shares when the company is not governed by French law (Article L. 214-165-1 of the French Monetary and Financial Code).

    AMF also updated its position on performance swaps on CIUs and structuring of active management.


    WHAT'S NEXT?

    The AMF announced its intention to publish a further update that will set out the practical details of the AMF’s new approach on the review of promotional marketing materials on collective investments according to a risk-based approach. This update would also take into account the provisions of the Pacte Law that impact these documents (e.g. the revision of the side pockets system).

    Version française

    BACKGROUND

    Le 26 novembre 2019, l’Autorité des marchés financiers (AMF) a mis à jour sa doctrine relative aux OPCVM et FIA afin de prendre en compte les récentes évolutions législatives et règlementaires nationales et européennes.


    WHAT'S NEW?

    Plus précisemment, la mise à jour modifie cinq instructions relatives aux organismes de placements collectifs (OPC) afin de prendre en compte les évolutions des textes applicables, et principalement l’entrée en application du règlement européen sur les fonds monétaires (MMF).

    Les instructions sont adaptées pour prendre en compte ce nouveau cadre européen et les exigences d’information qui en découlent, dans la continuité du guide pédagogique sur MMF pour les sociétés de gestion de portefeuille publié par l’AMF en juillet 2018 et mis à jour en novembre 2018.

    Ces instructions sont également adaptées afin de prendre en compte notamment :

    • les travaux liés à la transposition de la directive MIF 2, en particulier les modalités d’affichage des frais de recherche dans les prospectus des OPCVM et des FIA lorsque la société de gestion choisit de recourir, dans le cadre de son activité de gestion collective, à un compte de recherche au sens de MIF 2 comme prévu à l’article 314-22 du règlement général de l’AMF ;
    • la possibilité, introduite par l’ordonnance n° 2017-1432 du 4 octobre 2017, de créer des FCPE de droit français investis en titres de l’entreprise lorsque celle-ci ne relève pas du droit français (article L. 214-165-1 du code monétaire et financier).

    L'AMF a également mis à jour sa position relative aux swaps de performance sur OPC et structurations sur gestion active.


    WHAT'S NEXT?

    L'AMF a annoncé son intention de publier une mise à jour ultérieure qui précisera les modalités pratiques liées à la nouvelle approche de l’AMF sur la revue des communications à caractère promotionnel des placements collectifs sur la base d’une approche par les risques. Cette mise à jour prendra en compte des dispositions de la loi Pacte impactant ces documents (par exemple, la révision du dispositif des side pockets).

  • GERMANY

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

    German Bundesrat approves the Law transposing AMLD V

  • On 29 November 2019, the German Federal Council (Bundesrat) approved the law transposing the fifth European Anti-Money Laundering Directive (AMLD V) into German law, which has been adopted by the German parliament on 14 November 2019. The law implements AMLD V and amends the existing Money Laundering Act and other laws affecting the financial sector. The law also extends the scope of the money laundering legal obligations to the real-estate sector, in particular by including public auctions and by making changes to the suspicions reporting requirements.

    Despite the approval, the Bundesrat points out several issues that have not been included in the law and should therefore be considered by the German Bundestag for future law projects.

  • Banking Union

    German Finance Minister presents proposals for completing the banking union

  • On 6 November 2019, the Ministry of Finance released proposals at the EU level to complete the banking union. 

    These proposals consist of four elements:

    • Efficient supervisory regime and crisis management;
    • Further reduction of risks;
    • European deposit insurance;
    • Prevention of arbitrage.
  • Prospectus Regulation

    BaFin applies ESMA guidelines on risk factors under the Prospectus Regulation

  • On 21 November 2019, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published a statement concerning the application of ESMA guidelines on risk factors under the Prospectus Regulation.  BaFin intends to apply the Guidelines in Germany in the context of its Supervisory powers.

    The guidelines are intended to assist competent authorities to examine the risk factors in prospectuses for specificity, materiality and risk categories. The guidelines are addressed to regulators, but should also be considered by prospect holders when preparing prospectuses. The approval process should thereby be accelerated.

    Only risk factors that investors need for a sound investment decision should be included in a prospectus.

  • Shareholders' Rights Directive (SRD II)

    German parliament adopts Law transposing SRD II

  • On 14 November 2019, the German parliament (Deutscher Bundestag) adopted the law transposing the second Shareholders' Rights Directive of the EU (SRD II). 

    It is a comprehensive law, which introduces many changes to the German Stock Corporation Act of considerable practical and economic importance. These relate, for example, to improved shareholder information, the more effective exercise of shareholder rights and the more comprehensive identification of shareholders, especially in cross-border contexts. New disclosure requirements for influential proxy advisers and institutional investors such as insurance companies and pension funds shall ensure greater transparency.

    The law also contains important changes regarding the business of listed joint-stock companies with related parties, i.e. in particular with major shareholders. To avoid abuse, they must be approved by the Supervisory Board or a Supervisory Board committee and must be made public. Thus, the law secures the sustainable existence of the company, avoids conflicts of interest and protects minority shareholders in the sense of a balanced corporate constitution.

    The law also contains rules on executive compensation. In the future, the Supervisory Board must develop a compensation system and submit it to the Annual General Meeting, which sets out a clear framework for the Supervisory Board on how to determine the remuneration of the Management Board. This remuneration system must include a compensation cap. A detailed annual compensation report will also be required on the actual payments made. The Supervisory Board, in which the employees of the company are represented, draws up the compensation system. The remuneration system shall be submitted to the general meeting as a body of shareholders and consequently the owner of the company for advice. If the upper compensation limit is too high, the Annual General Meeting can reduce it to a binding amount.

    On 29 November 2019, the German Federal Council decided not to request the establishment of a working group to evaluate the draft law or to object against it. Thus, the law will soon be published in the Official Journal of Germany and enter into force in early 2020. 

  • HONG KONG

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

    SFC publishes statement on the Disclosure of Actual Controllers or Beneficial Owners of Counterparties to a Transaction

  • On 21 November 2019, the Securities and Futures Commission (SFC) published statement on the Disclosure of Actual Controllers or Beneficial Owners of Counterparties to a Transaction. 

    The SFC’s statement reminds listed companies to ensure that their announcements and other documents do not include false, incomplete or misleading information about their counterparties in pending corporate transactions. In some cases, the SFC has observed that insufficient information was provided about counterparties’ controllers or beneficial owners.

  • Central Counterparty Clearing House (CCP)

    SFC publishes Circular in relation to the clearing and record keeping rules for the OTC derivatives regime – changes to the list of persons designated as financial services providers

  • On 22 November 2019, the Securities and Futures Commission (SFC) published Circular in relation to the clearing and record keeping rules for the OTC derivatives regime – changes to the list of persons designated as financial services providers.

    The revised list of persons designated as financial services providers (FSPs) for the purposes of the Securities and Futures (OTC Derivative Transactions—Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules (Clearing Rules) is gazetted on the Government website, and becomes effective on 1 January 2020.

  • Cryptoasset / Cryptocurrency / Virtual Currency

    SFC adopts new approach to virtual asset trading platforms

  • On 6 November 2019, the Securities and Futures Commission (SFC) issued a position paper setting out a new regulatory framework for virtual asset trading platforms. Platforms which operate in Hong Kong and offer trading of at least one security token may apply to be licensed by the SFC.

    The position paper emphasizes that the SFC will only grant licenses to platform operators which are capable of meeting robust regulatory standards. These standards are comparable to those which apply to licensed securities brokers and automated trading venues but also incorporate additional requirements to address specific risks associated with virtual assets.

    The SFC’s new regulatory framework is aligned with the recommendations of international standard setting bodies. It will help investors identify trading platforms which agree to be regulated or supervised. However, the SFC would like to make clear that virtual assets traded on licensed platforms will not be subject to the same kind of regulation which applies to traditional offerings of securities or collective investment schemes. Moreover, the SFC has no power to grant a license to or supervise platforms which only trade virtual assets or tokens which do not qualify as securities under Hong Kong law.

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

    SFC publishes Circular to licensed corporations regarding dubious private fund and discretionary account arrangements or transactions

  • On 21 November 2019, the Securities and Futures Commission (SFC) published Circular to licensed corporations regarding dubious private fund and discretionary account arrangements or transactions.

    This circular provides guidance to assist asset managers in 

    (i) considering if a proposed private fund and discretionary account arrangement or transaction is dubious and 

    (ii) deciding if they should proceed with a proposed arrangement or transaction that has been considered dubious.

    In disregarding dubious arrangements or transactions, an asset manager may have failed to act honestly, fairly or with due skill, care or diligence, in the best interests of its clients or the integrity of the market. In addition, an asset manager may also be in breach of AML Guideline by failing to:

    (a) conduct customer due diligence (CDD) measures to verify the identity of the client or beneficial owner;

    (b) obtain information about the purpose and intended nature of the business relationship it has established;

    (c) adopt a risk-based approach in determining the extent of CDD measures and ongoing monitoring so that preventive or mitigating measures are commensurate to the risks identified;

    (d) comply with special requirements in a situation which by its nature may present a high risk of money laundering or terrorist financing; or

    (e) report suspicious transactions to the JFIU.

    These failures or breaches will call into question whether the asset manager remains fit and proper to be licensed.

  • IRELAND

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

    Ireland publishes S.I. No. 578/2019 - European Union (Money Laundering and Terrorist Financing) Regulations 2019

  • On 22 November 2019, the S.I. No. 578/2019 - European Union (Money Laundering and Terrorist Financing) Regulations 2019 was published on Irish Statute Book. This  Statutory Instrument amends Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended in 2018.

    Regarding the article on Internal policies and procedures, training and record keeping, the new requirement is that a designated person shall have in place appropriate procedures for their employees, or persons in a comparable position, to report a contravention of this Act internally through a specific, independent and anonymous channel, proportionate to the nature and size of the designated person concerned.

    The amendments also strengthen the monitoring power of competent authority to designated persons, such as:

    • Competent authorities shall take the necessary measures to prevent persons convicted of a relevant offence from performing a management function in or being the beneficial owners of the designated persons
    • Any person performing a management function in or being the beneficial owner of the designated persons and who is convicted of a relevant offence must inform the relevant competent authority within 30 days of the day on which that person was convicted of the relevant offence.
  • Central Securities Depositary Regulation (CSDR)

    Migration of Participating Securities Bill 2019

  • On 20 November 2019, the Migration of Participating Securities Bill 2019 was initiated to the Ireland's national parliament and the accompanying Explanatory Memorandum for the Migration of Participating Securities Bill 2019 was published by the Ireland's national parliament. According to the two texts, the Bill is aimed to provide provision with respect to the contingency that a substitute securities settlement system may be required, on or after 30 March 2021, for the securities settlement system commonly known as “CREST”. 

    The key points of the Bill are:

    • Definitions of uncertificated and certificated securities, ‘nominated central securities depository’ and ‘security holders’ 
    • Conditions that an issuer wishing to consent to migration under the provisions of the Bill must satisfy in order to migrate
    • Conditions that must be satisfied regarding the special resolution that members of the participating issuer must approve in order to migrate
    • Further requirements to be complied with for consent by issuer to migration 
    • The possibilities that a participating issuer or an officer of the company who makes default in complying shall be guilty of an offence.
    • Necessary quorum for the meeting at which the special resolution is proposed. 
    • The special resolution be filed with the Companies Registration Office.
    • Confirmation that relevant requirements have been complied with and consent of issuer to migration to be expressed in confirmatory statement.
    • Effect of the migration of relevant participating securities
    • Power of the Listing Authority to make certain specified orders fixing dates for the migration of participating securities. 
  • Financial supervision

    CBI launches guidance on enforcement sanctions

  • On 14 November 2019, the Central Bank of Ireland (CBI) published a new guide to sanctions imposed under the Administrative Sanctions Procedure (ASP) for the financial services sector.

    Guidance will:

    • provide greater clarity on the Central Bank’s approach to enforcement sanctioning factors
    • seek to promote an improved culture of compliance in firms by clarifying the behaviors which may aggravate or mitigate a breach of financial services law.
    • cover sanctions imposed on firms and individuals under the Central Bank’s Administrative Sanctions Procedure (“ASP”; as governed by Part IIIC of the Central Bank Act 1942) and 
    • provide further guidance on the application of the sanctioning factors set out in the Outline of the Administrative Sanctions Procedure 
    • not represent a new policy, and should therefore be read alongside that already set out in the ASP Outline and the Inquiry Guidelines prescribed pursuant to section 33BD of the Central Bank Act 1942. 
  • Investment Funds / Collective Investment Schemes (CIS) / Asset Management

    Irish Funds publishes Central Bank's letter on the changes to the post-authorization submission process for UCITS

  • On 28 November 2019, the Irish Funds Industry Association published a letter from the Central Bank of Ireland with respect to changes to the post-authorization submission process for UCITS and RIAIFs.

    The Central Bank informed that, from 9 December 2019, the post-authorization submissions process will move from hard copy to soft copy. The Central Bank requires that all email submissions adhere to the following guidelines:

    • Submissions should be made to the email address fundspostauthorisation@centralbank.ie with documents attached;
    • All fund documents and application forms should be submitted in searchable format (i.e. PDF/Word). Executed letters/agreements should be sent in scanned format.
    • Submissions should include all relevant documents required for review. Any subsequent updates to the submission will result in a delay in issuing comments.
    • Emails should not include submissions for more than one umbrella/standalone fund. An email containing submissions in respect of multiple umbrellas will not be accepted.
    • The subject line of the email should set out the nature of the submission, for example “ABC Fund plc – Prospectus and New Sub-Fund” or “XYZ ICAV – Change of Service Provider”.
  • ITALY

    Supervisory power

    Banca d'Italia and CONSOB sign MoU on cooperation on supervision of investment activities and services and collective investment

  • On 6 November 2019, Banca d'Italia and CONSOB signed a memorandum of understanding (MoU) concerning their supervisory activity on investment activities and services as well as collective investments.

    The goal of this MoU is to enhance the cooperation between the two authorities.

  • LUXEMBOURG

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

    CSSF publishes AML/CFT investment market entry forms (funds and IFMs)

  • On 7 November 2019, the Commission de Surveillance du Secteur Financier (CSSF) published new forms aiming at collecting standardized key information in relation to money laundering and terrorist financing risks to which the professionals supervised by the CSSF are exposed to and in relation to the measures they put in place to mitigate these risks.  

    The AML/CFT form for Funds must be completed and added as enclosure to any submission of an application for the set-up of a UCITS, UCI Part II, SIF, SICAR, ELTIF, EUSEF, EUVECA or MMF. 

    It must also be renewed when requesting approval of an additional sub-fund to provide sub-Fund related information and to update any information previously submitted which is no longer valid.

    The AML/CFT form for IFMs must also be completed and added as enclosure to any submission of an application for the set-up of an authorized or registered Investment Fund Manager.  It must also be renewed when requesting approval of an additional license, a license extension or a change in the shareholder structure of the IFM. This aims at providing license or shareholder related information and to update any information previously submitted which is no longer valid. 

  • CSSF publishes Circular 19/730 on latest FATF statements

  • On 7 November 2019, the Commission de Surveillance du secteur financier (CSSF) published Circular CSSF 19/730 on FATF statements concerning:

    1. jurisdictions whose anti-money laundering and combating the financing of terrorism regime has substantial and strategic deficiencies;
    2. jurisdictions for which
      i) increased supervision must be implemented with respect to subsidiaries and branches of financial institutions based in Iran,
      ii) enhanced control measures must be applied, including enhanced mechanisms for reporting suspicious transactions or systematic reporting of financial transactions, as well as
      iii) increased external audit must be required for financial groups with respect to their subsidiaries and branches located in Iran;
    3. jurisdictions whose anti-money laundering and combating the financing of terrorism regime is not satisfactory.
  • CSSF updates FAQ regarding AML/CFT for individuals/investors

  • On 15 November 2019, the Commission de Surveillance du secteur financier (CSSF) updated the Frequently asked questions regarding the fight against money laundering and counter terrorist financing (AML/CTF) for individuals/ investors.

    The CSSF modified 18/20 questions in the documents:

    • Q1: What does “money laundering” mean? 
    • Q2: What does money laundering “primary offence” or “predicate offence” mean? 
    • Q3: What are the various stages of the money laundering process? 
    • Q5: What does “international financial sanctions”, in particular within the context of the fight against terrorist financing, mean? 
    • Q6: Where are the documents relating to the various international financial sanctions available?  
    • Q7: Does a consolidated list comprising all the persons and entities subject to the various international financial sanctions exist?
    • Q9: What are the main legal and regulatory texts with respect to AML/CTF applicable to the financial sector? 
    • Q10: Which Luxembourg authorities are competent with respect to AML/CTF regarding professionals of the financial sector?
    • Q11: Does an international body which provides for supranational standards and monitors national AML/CTF mechanisms exist? 
    • Q12: What is the CSSF’s approach with respect to AML/CTF?
    • Q13: What are the powers of the CSSF in the exercise of its duties with respect to AML/CTF? 
    • Q14: What are the financial sector professionals’ obligations with respect to AML/CTF?
    • Q15: When do financial sector professionals have to request information from their customers for AML/CTF purposes?  
    • Q16: Which documents and information shall financial sector professionals request from the customer?  
    • Q17: Which information on the payer shall the financial sector professional (i.e. payment service provider) collect before transferring funds?
    • Q18: What does “PEP” mean and what are the specific risks? 
    • Q19: What are the fraud mechanisms to which investors may be directly exposed
    • Q20: Who can the investor/customer contact in the event of a prejudice?
  • CSSF publishes FAQ concerning the persons involved in AML/CFT for a Luxembourg Investment Fund or Investment Fund Manager supervised by the CSSF for AML/CFT purposes

  • BACKGROUND

    Article 4(1) of the Law of 12 November 2004 as amended requires a Luxembourg investment fund or an investment fund manager supervised by the Commission de Surveillance du Secteur Financier (CSSF) for Anti-Money Laundering or Combating the Financing of Terrorism (AML/CFT) purposes to appoint: 

    • a member from their management body, responsible for compliance with professional obligations in the fight against money laundering and terrorist financing (responsable du respect des obligations, hereafter referred to as RR); 
    • if the size and nature of the activity it requires, a compliance officer at appropriate hierarchical level (responsable du contrôle du respect des obligations, hereafter referred to as RC).

    WHAT'S NEW?

    On 25 November 2019, the CSSF released a document with Frequently Asked Questions (FAQ) concerning the requirements related with the appointment of two different persons in charge of AML/CFT as required by Article 4(1) of the Law of 12 November 2004 and the conditions applicable to them. 

    More specifically, it is clarified that an investment fund supervised by the CSSF can appoint as RR the board of directors (or other governing body depending on the legal structure of the fund) acting as a collegial body. Alternatively, the board may appoint one of its members as RR. The RR must be reachable for any contact by the Luxembourg AML/CFT competent authorities. 

    As concerns the RC, he/she shall be mandated intuitu personae by the board of directors (or other governing body) of the fund and may be a member of the board with appropriate experience meeting or - where the fund appoints a third-party RC - must personally have a contractual relationship with the fund. If the contract is instead concluded with the employer of the RC, (i) the contract must name the RC, (ii) any replacement of the RC must be subject to the fund’s approval and (iii) the RC must acknowledge its appointment in writing. Further. the said appointee can be chosen among the staff of the designated Investment Fund Manager (IFM) of the fund. As a general principle, the RC must be available in Luxembourg for the accomplishment of his/her tasks. However, on an exceptional basis, it is acceptable that the RC is located outside of Luxembourg - but only if the IFM and its relevant staff member acting as RC are not domiciled in Luxembourg.  

    For Investment Fund Managers supervised by the CSSF for AML/CFT purposes, the rules slightly differ: While the RR can still be the entire board of directors (or other governing body depending on the legal structure of the Investment Fund Manager) of the IFM acting as a collegial body or one of the members of such board of directors (or other governing body), the RC shall be the compliance officer at appropriate hierarchical level in charge of AML/CFT aspects for the Investment Fund Manager. This means that a third party cannot be assigned as RC for IFMs.  

    As concerns the conditions applicable to the persons in charge of AML/CFT, the CSSF requests that the RR: 

    • has sufficient AML/CFT knowledge with regard to the applicable Luxembourg legislation and regulation and can demonstrate this upon request, 
    • is knowledgeable about the investments and distribution strategies of the fund/about the services offered by the IFM, and  
    • will be available without delay upon contact by the Luxembourg AML/CFT competent authorities (if the RR is a collegial body, at least one of its members must fulfil this requirement). 

    With respect to the RC, the CSSF requests that the RC: 

    • has sufficient AML/CFT knowledge and expertise with regard to the applicable Luxembourg legislation and regulation and can demonstrate this upon request, 
    • is knowledgeable about the investments and distribution strategies of the Fund/about the services offered by the IFM,  
    • will be available without delay upon request by the Luxembourg AML/CFT competent authorities, and 
    • has access to all internal documents and systems required necessary for performing its tasks. 

    WHAT'S NEXT?

    Luxembourgish investment funds and IFMs supervised by the CSSF are expected to consult the FAQ and comply with Article 4(1) of the Law of 12 November 2004 accordingly. The CSSF will keep the FAQ up-to-date and may amend it in future if it sees the need of providing additional clarifications.

  • CSSF publishes a survey related to the fight against money laundering and terrorist financing

  • On 28 November 2019, the Commission de Surveillance du Secteur Financier (CSSF) published a survey related to the fight against money laundering and terrorist financing. This annual online survey for the year 2019 collecting standardized key information concerning ML/FT risks to which the professionals under supervision are exposed and the implementation of related risk mitigation and targeted financial sanctions measures will be launched on 3 February 2020. This cross-sector survey contributes to the CSSF’s ongoing assessment of ML/FT risks present in the financial sectors under its AML/CFT supervision and forms part of the AML/CFT risk-based supervision approach put in place by the CSSF over the last years.  

    Answers to the survey questions will imperatively have to be submitted through the CSSF eDesk portal within a period of 6 weeks, except for the banking sector where the period is of 4 weeks.  The self-assessment ML/FT risk survey must be initiated and submitted within the CSSF eDesk portal by a member of the management body of the entity (preferably the AML/CFT Compliance Officer who is responsible for AML/CFT compliance).

  • Brexit

    CSSF issues a communication regarding mandatory notifications in the context of Brexit

  • On 6 November 2019, the Commission de Surveillance du Secteur Financier (CSSF) published a communication to  follow up on previous press releases in the context of Brexit, which were based on the assumption of a hard Brexit potentially occurring on 31 October 2019. 

    Following the decision of the European Council of 30 October 2019 extending the period under Article 50(3) relating to the United Kingdom’s (UK) withdrawal from the European Union, the reference date for a potential hard Brexit in all of CSSF’s previously published communications should now be read as 31 January 2020. 

    As regards in particular press releases 19/33 and 19/34, with respect to the mandatory notification for UK firms, undertakings for collective investment and/or their managers wishing to continue to provide services in Luxembourg after a no-deal Brexit, the CSSF encourages UK entities that have not yet done so to apply for the transitional regime by introducing a Brexit notification via the dedicated eDesk portal at their earliest convenience.  

    The subsequent application for authorization, or, as the case may be, notification, or other information on any action taken otherwise shall be submitted by undertakings for collective investment and/or their managers to the CSSF no later than by 15 January 2020. 

    The CSSF further recalls that notwithstanding the current political developments, impacted entities should continue to take all necessary steps to prepare and anticipate the consequences of a possible hard Brexit. Continued progress should also be made on contingency planning, notably to ensure that customers and investors are adequately informed. 

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

    CSSF updates a form for the Conversion of an existing fund into a UCITS

  • On 7 November 2019, the Commission de Surveillance du secteur financier (CSSF) updated a form for the Conversion of an existing fund into a UCITS. 

    The form includes 14 main sessions to be completed: General, Summary, Initiator, ManCo, Governance, Depositary, Administrative Agent, Investment Management, Distributor, External Audit, Sub-Funds, Share-classes, EMIR General, EMIR Reporting Obligation.

  • CSSF updates form for the Conversion of an existing fund into a UCI Part II, SIF, SICAR

  • On 7 November 2019, the Commission de Surveillance du secteur financier (CSSF) updated the form for the Conversion of an existing fund into a UCI Part II, SIF, SICAR.

    The form includes 17 main sessions to be completed: General, Summary, Initiator, Governance, ManCo and AIFM, RM & COI, Depositary, Administrative Agent, Portfolio Management, Distributor, External Audit, Sub-Funds, Share-classes, ELTIF - AIFM Identity & Potential Investors, ELTIF - all documents, EMIR General, EMIR Delegation.

  • CSSF updates Registration form for an alternative investment fund manager

  • On 7 November 2019, the Commission de Surveillance du secteur financier (CSSF) updated the Registration form for an alternative investment fund manager.

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

    CSSF publishes communication regarding PRIIPs assessment

  • On 26 November 2019, the Commission de Surveillance du Secteur Financier (CSSF) communicated that a new feature is available on the eDesk portal, allowing to download files in a CSV format. The objective is to facilitate the online PRIIPs assessment.

    The CSSF also decided to extend the deadline to complete the evaluation by 31 December 2019.

  • Statistical reporting

    BCL publishes calendar of remittance dates for the statistical reporting of investments funds and financial companies in 2020

  • On 5 November 2019, the Central Bank of Luxembourg (Banque de Luxembourg, BCL) published the calendars of remittance dates for the statistical reporting of investments funds and financial companies in 2020.

  • NETHERLANDS

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

    NVB presents 15 Action points to fight financial crime cross border

  • On 21 November 2019, the Dutch Banking Association presented 15 Action points to fight financial crime cross border. 

    The plan includes proposals for a new EU regulation, access to the UBO register, a European money laundering supervisor and an EU-wide Financial Intelligence Unit.

  • Financial market infrastructure

    The Netherlands issue Financial Markets Decree 2019

  • On 7 November 2019, the Decree of 24 October 2019 amending the Decree on the Supervision of the Conduct of Financial Undertakings under the Financial Supervision Act, the Decree on Market Access of Financial Undertakings under the Financial Supervision Act (Wft), the Decree on the supervision of audit firms, as well as some other decisions in the field of financial markets (Financial Markets Decree 2019) was published in the Official Gazette of the Kingdom of the Netherlands.

    This Decree is a collective decree with which changes are made to the Decree on the Conduct of Supervision of Financial Undertakings under the Financial Supervision Act (Wft), the Decree on Market Access of Financial Undertakings under the Financial Supervision Act (Wft), the Decree on the supervision of audit firms, as well as some other decisions in the field of financial markets.

    It sets out the requirements that distributors of payment accounts, credits or savings accounts must comply with in order to ensure that the relevant financial products meet the needs, characteristics and objectives of the target group and that the distribution strategy is in line with the relevant target group. Furthermore, it rules under which conditions a trial period with regard to investment research of a maximum of three months is regarded as a small non-monetary provision. Such a small non-monetary commission may be provided or received by an investment firm. The decree also limits the right of consent of the Minister of Finance with regard to the appointment of the members of the dispute resolution bodies to the chairmen of these bodies. In addition, an extension of qualifications is provided for which an employee is deemed to be competent to advise in travel or cancellation insurance and a number of deficiencies that have occurred during the implementation of the directive on collective investment undertakings in securities are corrected. Use was made of the opportunity to make a number of improvements and other adjustments of a technical nature to the Decree on the Supervision of the Conduct of Financial Undertakings.

    In addition, this Decree contains amendments to the Decree on Market Access for Financial Enterprises under the Financial Supervision Act, which addresses a number of defects and omissions that occurred during the implementation of the Solvency II Directive , and a number of technical improvements are made. The amendments to the Decree on Prudential Supervision of Financial Groups under the Financial Supervision Act are also related to the correct implementation of the Solvency II Directive. Finally, this decision corrects a failure in the implementation of the Markets in Financial Instruments Directive 3 and settles a compliance point in connection with the implementation of the securitization regulation 4.

    This Decree enters into force on 1 January 2020, with the exception of Article III, which comes into force at a time to be determined by Royal Decree.

  • Governance

    AFM launches cooperation with DUO to better verify professional competence

  • On 28 November 2019, the Dutch Authority for the Financial Markets (AFM) announced that it has entered into a cooperation agreement with the Education Executive Agency (Dienst Uitvoering Onderwijs, DUO). The step will enable the AFM to request information about professional competence from DUO within the framework of the AFM's regular checks of the diplomas as required under the financial sector law. 

    In this way, the supervisor would immediately be able to check whether financial service providers' employees have the legally required diplomas. As a result, the supervision could take place more efficiently for both the financial service providers and the supervisor.

  • Outsourcing

    AFM reminds investment firms and institutions of the need to manage outsourcing risks

  • On 29 November 2019, the Autoriteit Financiële Markten (AFM) published a letter it has addressed to financial institutions and investment firms to remind them of the necessity to handle outsourcing risks appropriately. 

    In the letter, the AFM informs institutions about the most important results of the AFM's investigation "Chain in Focus" which focused on the outsourcing arrangements in the financial services sector. 

  • Shareholders' Rights Directive (SRD II)

    Dutch Parliament adopts law implementing the revised Shareholders' Rights Directive (EU 2017/828)

  • On 5 November 2019, the Dutch Parliament adopted the bill implementing the revised Shareholder Rights Directive (EU 2017/828).  It is expected to enter into force, for the most part, this year. The new rules will affect ordinary limited companies (NVs), so-called structure NVs, listed NVs, private limited-liability companies (BVs), life insurance companies, pension funds, asset managers, proxy advisors and parties in the custody chain.

    The law (Law of 6 November 2019 amending Book 2 of the Civil Code, the Financial Supervision Act and the Securities Giro Transfer Act implementing Directive 2017/828 / EU of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36 / EC as regards promoting the long-term involvement of shareholders) has been published in the Official Gazette of the Kingdom of the Netherlands on 26 November 2019.

  • SWITZERLAND

    Capital requirements / CRD / CRR / Basel III/IV

    Federal Council adopts amendment of Capital Adequacy Ordinance

  • On 27 November 2019, the Swiss Federal Council adopted amendments to the Capital Adequacy Ordinance. In the main, they correspond to the proposals put out for consultation by the Federal Department of Finance (FDF). From 1 January 2020, the Ordinance will simplify the requirements for certain small banks and securities firms, and ensure that the parent entities of systemically important banks are sufficiently well capitalised in the event of a crisis. However, the Federal Council has decided against introducing measures in the residential investment property segment, in favour of self-regulation by banks.

  • Exchange of information

    Der Bundesrat adopts dispatch on amending AEOI Act

  • On 20 November 2019, the Federal Council adopted the dispatch on amending the Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOIA). The aim of the proposal is to implement the recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum).

    Concerning amendments of the Law, the Federal Council proposed removing the exception for condominium owners associations. Furthermore, it intends to adapt the applicable due diligence obligations, show amounts in US dollars and introduce a document retention obligation for reporting Swiss financial institutions.

    Parliament will probably examine the proposal for the first time in the 2020 spring session. It is not expected to come into force until the start of 2021 at the earliest.

  • Financial supervision

    Der Bundesrat brings FinSA and FinIA into force

  • On 6 November 2019, the Federal Council brought ordinances FinSA and FinIA into force.

    During its meeting on 6 November 2019, the Federal Council brought the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) – together with the implementing ordinances – into force as at 1 January 2020. Transitional periods of two years are provided for in principle. In the ordinances, the Federal Council has taken account of various concerns arising from the consultation.

    The FinSA contains provisions offering securities and other financial instruments, as well as on providing financial services. It also makes it easier for clients to assert their legal claims. The FinIA will introduce coordinated supervision for the various categories of financial institutions (portfolio managers, managers of collective assets, fund management companies and securities firms) in terms of content. Parliament adopted the acts in June 2018.

    The Financial Services Ordinance (FinSO), the Financial Institutions Ordinance (FinIO) and the Supervisory Organisation Ordinance (SOO) contain the Federal Council's implementing provisions for the FinSA and the FinIA. They were drawn up in broadly based working groups with administration and financial sector representatives, and were the subject of a consultation procedure until February 2019. The proposal was welcomed in principle. It has been possible to take account of the vast majority of the criticisms expressed. In order to give the sector greater planning certainty, the Federal Department of Finance (FDF) provided information already on 9 September 2019 concerning the key areas where the ordinances are likely to be modified after the consultation.

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

    SFAMA publishes Circular 06/2019

  • On 12 November 2019, the Swiss Funds & Asset Management Association (SFAMA) published Circular 06/2019 on the assessment of collective investments for the new year 2019/2020.

    A Recommendation is annexed, aimed at:

    • defining a clear and uniform process; 
    • explaining the difference between the asset value used for the calculation of performances and asset value used for the evaluation; and 
    • minimizing the difference between the two asset values.
  • UNITED KINGDOM

    Benchmarks Regulation (BMR)

    FCA publishes Q&A on conduct risk during LIBOR transition

  • On 19 November 2019, the Financial Conduct Authority (FCA) answered key questions on conduct risk arising from LIBOR transition and outline FCA's expectation that:

    • firms have a strategy in place and take necessary action during LIBOR transition
    • customers are treated fairly by following FCA's rules and guidance.

    LIBOR will end after 2021. FCA expects firms to take appropriate steps to ensure they can transition to alternative rates ahead of end-2021. FCA supervision of firms’ transition away from LIBOR is focused on firms effectively managing the risks arising from transition, including prudential, operational and conduct risks. 

    FCA encourage all firms that currently rely on LIBOR to read and consider these questions and answers. They are not exhaustive. They do apply to firms across various sectors. FCA has used sector-specific examples where relevant but firms will need to exercise judgement on the impact of LIBOR transition across their business, taking the interests of specific clients and the nature of the firm’s business model into account.

  • European Market Infrastructure Regulation (EMIR)

    FCA updates UK EMIR validation rules for Trade Repositories

  • On 7 November 2019, the Financial Conduct Authority (FCA) updated UK EMIR validation rules for Trade Repositories. Trade Repositories should use this UK EMIR Validation Rules when submitting derivative transactions entered into from 11.00pm on 31 January 2020 onwards.

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

    FCA provides statement on MiFID II inducements and research

  • On 8 November 2019, the Financial Conduct Authority (FCA) published its statement on MiFID II inducements and research. in which, the FCA welcomes the US Securities and Exchange Commission’s (US SEC) extension of no-action relief relating to the Markets in Financial Instruments Directive II (MiFID II) inducements and research provisions.

    The FCA’s own multi-firm review findings published in September 2019 found that rules have improved asset managers’ accountability over costs, saving millions for investors. The FCA will carry out further work in 12-24 months’ time to assess firms’ ongoing compliance with FCA's rules and developments in the market for research.

  • FCA publishes temporary intervention on the marketing of speculative mini-bonds to retail investors

  • On 26 November 2019, the Financial Conduct Authority (FCA) announced it will ban the mass marketing of speculative mini-bonds to retail customers.

    Ahead of the upcoming Individual Savings Account (ISA) season, the FCA is introducing the restriction without consultation, using its product intervention powers. The restriction will come into force on the 1 January 2020 and last for 12 months while the FCA consults on making permanent rules.

    The term mini-bond refers to a range of investments. The ban announced will apply to more complex and opaque arrangements where the funds raised are used to lend to a third party, invest in other companies or purchase or develop properties. There are various exemptions including for listed mini-bonds, companies which raise funds for their own activities (other than the ones above) or to fund a single UK property investment.

    The temporary interventions will impact: 

    • issuers of speculative illiquid securities
    • authorised firms that approve or communicate financial promotions relating to speculative illiquid securities
    • firms who offer services in relation to these products such as: investment advice, arranging deals in investments, dealing in investments on behalf of clients, 
    • companies receiving funding from issuers of speculative illiquid securities, 
    • law firms and other professional service providers to issuers or firms.
  • Shareholders' Rights Directive (SRD II)

    FCA publishes PS19/28: Proxy Advisors (Shareholders’ Rights) Regulations Implementation (DEPP and EG)

  • On 25 November 2019, the Financial Conduct Authority (FCA) published Policy statement PS19/28: Proxy Advisors (Shareholders’ Rights) Regulations Implementation (DEPP and EG), in which the FCA:

    • Sets out changes to Decision Procedure and Penalties manual (DEPP) and Enforcement Guide (EG) and 
    • Processes that the FCA has new powers to discipline and investigate proxy advisers.

    In particular, the FCA has made the following changes:

    • to DEPP:
      + Deciding when to publish a statement about a proxy adviser who has breached a relevant requirement. The FCA will decide to impose a public censure under the Regulatory Decisions Committee (RDC) procedure in contested cases. In settled cases, the settlement decision makers will decide using executive procedures.
      + Deciding when to impose a financial penalty on a proxy adviser. In contested cases, the FCA will decide to impose a financial penalty under the RDC procedure. In settled cases, the settlement decision makers will decide using executive procedures.
      + Deciding when to impose a restitution requirement. The FCA will use the RDC procedure when taking the decision to require someone to pay restitution. 
    • to EG: new section explains how we will use our powers under the Proxy Advisors (Shareholders’ Rights) Regulations 2019. FCA's approach will broadly mirror FCA's approach to conducting investigations, sanctioning and using FCA's regulatory powers under FSMA. 

    This Policy Statement will be of interest to anyone who may fall within the scope of the Regulations, or who uses the services of proxy advisors. This will include proxy advisors, listed companies, their shareholders and intermediaries.

  • 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 closed 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)
    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)
    Mireille Mol, Legal & Compliance (Netherlands)
    Alessandra Cremonesi, Legal Fund Structuring (Switzerland)
    Samuel Zemp compliance office (CACEIS Bank Switzerland Branch) 
    Elbaz Yves, Head of Compliance & Risk (UK)

    Design

    CACEIS Group Communications

    Photos credit
    CACEIS, Adobe Stock

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