On 11 May 2021, the European Central Bank (ECB) published Recommendations by the working group on EURIBOR fallback trigger events and €STR-based EURIBOR fallback rates.

This paper discusses a variety of options relating to the introduction of fallback trigger events and fallback rates for contracts and financial instruments referencing EURIBOR. Recipients of this recommendation are responsible for making their own assessments as to the suitability of the various options discussed herein. Recipients must continue to operate in an independent and competitive manner and they should not use the content of this document to coordinate their activities in breach of applicable law.

While there is currently no plan to discontinue EURIBOR, the development of more robust fallback language addresses the risk of a potential permanent discontinuation and is in line with the EU Benchmarks Regulation (BMR). The valuable feedback from the two market-wide consultations on the draft recommendations has been taken into account in the final recommendations.

As with similar fora in other currency areas, the working group’s recommendations are not legally binding for market participants. They do, however, provide guidance and represent the prevailing market consensus on EURIBOR fallback trigger events and €STR-based fallback rates, which market participants may consider in their contracts.

The decision approving these recommendations was unanimous.

Now that the working group on risk-free rates has delivered the last of its predefined deliverables, it will focus more on monitoring benchmark rate developments in general. It has been decided that the secretariat will move to the European Securities and Markets Authority (ESMA), which, as provided for in the BMR, will supervise the administrator of EURIBOR as of 2022. This means that the working group’s publications will, from now on, be available on ESMA’s website. Communication aspects (media enquiries, newsletter, etc.) will also be taken over by ESMA.

Here are five draft Commission Delegated Regulations on the Benchmarks Regulation. 

1. On 6 May 2021, the European draft Commission published Commission delegated Regulation supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying the conditions to ensure that the methodology for determining a benchmark complies with the quality requirements

Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (the Benchmark Regulation) introduces a common framework to ensure the accuracy and integrity of benchmarks referenced in financial instruments, financial contracts or investment funds in the European Union. In doing so it aims to contribute to the functioning of the internal market, while achieving a high level of consumer and investor protection.

This Delegated Regulation is based on a mandatory empowerment in Article 12 of Regulation (EU) 2016/1011 (BMR) as amended by Regulation (EU) 2019/2175. The issue of subsidiarity was covered in the impact assessment for the Benchmark Regulation

This delegated act has not yet entered into force. It is subject to the right of the European Parliament and of the Council to express objections, in accordance with Article 290 (2) of the Treaty on the Functioning of the European Union.

2. On 6 May 2021, the European Commission published a draft Commission delegated Regulation supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying the characteristics of the systems and controls for the identification and reporting of any conduct that may involve manipulation or attempted manipulation of a benchmark.

Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (the Benchmark Regulation) introduces a common framework to ensure the accuracy and integrity of  benchmarks referenced in financial instruments, financial contracts or investment funds in the  European Union. In doing so it aims to contribute to the functioning of the internal market, while achieving a high level of consumer and investor protection.

This Delegated Regulation is based on a mandatory empowerment in Article 14 of Regulation  (EU) 2016/1011 (BMR) as amended by Regulation (EU) 2019/2175. The issue of subsidiarity was covered in the impact assessment for the Benchmark Regulation.

This delegated act has not yet entered into force. It is subject to the right of the European Parliament and of the Council to express objections, in accordance with Article 290 (2) of the Treaty on the Functioning of the European Union.

This delegated act has not yet entered into force. It is subject to the right of the European Parliament and of the Council to express objections, in accordance with Article 290 (2) of the Treaty on the Functioning of the European Union.

3. On 6 May 2021, the European Commission published draft Commission delegated Regulation supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying the requirements to ensure that an administrator’s governance arrangements are sufficiently robust.

Article 1 defines the content of an administrator’s governance arrangements, whose organisational structure is to contain the decision-making procedures, the allocation of functions and responsibilities, and the reporting lines. Article 2 specifies the persons involved with the provision of a benchmark whose responsibilities are to be defined in the governance arrangements of the administrator. Article 3 specifies that an administrator’s governance arrangements are to ensure a clear definition of the responsibilities allocated to the persons involved with the provision of a benchmark and the procedures which must be followed for the proper discharge of those responsibilities.

This delegated act has not yet entered into force. It is subject to the right of the European Parliament and of the Council to express objections, in accordance with Article 290 (2) of the Treaty on the Functioning of the European Union.

4. On 6 May 2021, the European Commission published draft Commission delegated Regulation supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying the criteria for the competent authorities’ compliance assessment regarding the mandatory administration of a critical benchmark.

Article 1 defines the criteria on which a competent authority shall base its assessment of how a critical benchmark is to be transitioned to a new administrator. 

Article 2 specifies the criteria on which a competent authority shall base its assessment of how a critical benchmark is to be ceased to be provided. 

5. On 6 May 2021, the European Commission published draft Commission delegated Regulation supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council with regard to regulatory technical standards specifying the criteria under which competent authorities may require changes to the compliance statement of non-significant benchmarks.

Article 1 defines the criteria at the level of the administrator on which a competent authority may require changes to a non-significant benchmark compliance statement if it considers that the statement does not clearly state why it is appropriate for the relevant administrator not to comply with one or more of the requirements referred to in Article 26(1) of Regulation (EU) 2016/1011.

Article 2 defines the criteria at the level of the benchmark or family of benchmarks on which a competent authority may require changes to a non-significant benchmark compliance statement if it considers that the statement does not clearly state why it is appropriate for the relevant administrator not to comply with one or more of the requirements referred to in Article 26(1) of Regulation (EU) 2016/1011.

This delegated act has not yet entered into force. It is subject to the right of the European Parliament and of the Council to express objections, in accordance with Article 290 (2) of the Treaty on the Functioning of the European Union.

On 26 May 2021, the European Securities and Markets Authority (ESMA) published a letter to EC regarding the Review of the CSDR.

Regarding T2S, ESMA would like to make the following proposals: 

• ESMA believes that it is important to strengthen the possibilities for the T2S CSDs, and the NCAs supervising them, to be able to better manage the risks that stem from outsourcing settlement activities to the T2S platform.
• ESMA is also of the view that it is important to ensure the most appropriate arrangement for T2S supervision and oversight, in order to enable adequate risk mitigation related to the services provided by this systemically important settlement platform, as well as proper recognition of the roles of the relevant authorities and adequate assessment of the relevant requirements.
• ESMA believes that the importance of this arrangement should be adequately reflected in the CSDR, considering the systemic importance of T2S for the EU and the significance of having an adequate cooperative regime across all relevant authorities. ESMA considers that CSDR should be amended in order to ensure that the legislative framework provides for a cooperative arrangement in respect of the supervision/oversight of T2S, with clear roles for the participating authorities.

With regard to the TC-CSD recognition regime, ESMA supports an enhanced regime, including the following main components: 

a) Requirement for TC-CSDs to notify ESMA regarding services provided in the EEA; 

b) Broadening the scope of the TC-CSD recognition regime by also covering the provision of settlement services in the EEA

Finally, with reference to the frequency of ESMA reports to the European Commission on CSDR implementation, ESMA would like to highlight the need to recalibrate the frequency of the ESMA reports. CSDR currently envisages that ESMA should, in cooperation with national authorities and the EBA, prepare annual reports on 12 topics and communicate them to the EC by 30 April of the following year. 

This requirement appears to be disproportionate considering: 

a) the nature of certain topics, which would not require an annual update and

b) the impact in terms of resources for ESMA and national authorities. 

ESMA’s proposal on reducing the frequency of the reports under Article 74 of CSDR is included in the Annex to this letter.

On 21 May 2021, the European Parliament adopted its resolution of 21 May 2021 on the adequate protection of personal  data by the United Kingdom.

In this resolution, the EP asks the Commission to modify its draft decisions on whether or not UK data protection is adequate and data can safely be transferred there, bringing them in line with the latest EU court rulings and responding to concerns raised by the European Data Protection Board (EDPB) in its recent opinions.

The resolution states that, if the implementing decisions are adopted without changes, national data protection authorities should suspend transfers of personal data to the UK when indiscriminate access to personal data is possible.

1. Exemptions for national security and immigration

• The resolution states that the UK’s basic data protection framework is similar to that of the EU, but raises concerns about its implementation. 
• EP underlines that provisions on metadata (or “secondary data”) do not reflect the sensitive nature of such data and are therefore misleading. 
• Although the Parliament objects to the Commission’s draft implementing acts granting data adequacy decisions for these reasons, EP also welcomes recent legislative changes that provide citizens access to judicial redress on data decisions and detailed oversight reports available for data interception on nation security grounds.

2. Third countries and onward transfers

• EPs also concerns about onward data transfers. The UK’s data-sharing agreements with the US mean EU citizens’ data could be shared across the Atlantic, despite recent rulings of the European Court of Justice that found US practices of bulk data access and retention incompatible with GDPR. Also, the UK’s application to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) could have implications for data flow to countries that do not have an adequacy decision from the EU.
• EP urges the Commission and the UK authorities to address all these issues and insists that no adequacy decision should be granted. 

Next steps: The Commission is expected to decide on the UK’s data protection and the continuation of data transfers across the Channel in the coming months.

On 6 May 2021, the EU published Commission Delegated Regulation (EU) 2021/732 of 26 January 2021 amending Delegated Regulation (EU) No 667/2014 with regard to the content of the file to be submitted by the investigation officer to the European Securities and Markets Authority, the right to be heard with regard to interim decisions and the lodging of fines and periodic penalty payments.

The Regulation amends Regulation (EU) No 667/2014 regarding the right to be heard by ESMA with regard to interim decisions on supervisory measures.

The Regulation enters into force on 7 May 2021.

On 6 May 2021, the European Commission published draft Commission delegated Regulation extending the transitional period referred to in Article 89(1), first subparagraph, of Regulation (EU) No 648/2012 of the European Parliament and of the Council.

Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) provides for a temporary exemption from the clearing obligation for Pension Scheme Arrangements (PSAs) meeting certain criteria. This transitional period is set out under Article 89(1) of EMIR and provides further time for central counterparties (CCPs), PSAs and clearing members to develop viable technical solutions which would allow PSAs to meet the cash variation margin calls of CCPs. 

The temporary exemption has been extended over the years, since no viable technical solution has emerged. The recent review of EMIR (Regulation (EU) No. 834/2019, “EMIR Refit”) prolonged the exemption until 18 June 2021. In accordance with Article 85(2) it is possible to further extend it by two years maximum through two Commission delegated acts, while the ultimate aim of the Regulation remains central clearing for PSAs.

The Commission is proposing to prolong the existing exemption by an additional year, by means of this Delegated Act.

On 28 May 2021, the European Securities and Markets Authority (ESMA) updated its Questions and Answers on the following topics:

• AIFMD
• UCITS
• EMIR implementation
• MiFID II and MiFIR Investor Protection topics
• MiFIR data reporting topics
• SFTR reporting
• CSDR
• Sustainability-related disclosures for benchmarks
• Securitisation

BACKGROUND

On 9 November 2020, the European Securities and Markets Authority (ESMA) launched a consultation on the draft guidelines on marketing communications under the Regulation (EU) 2019/1156 of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings (CBR).

Fund managers shall ensure that:

• All marketing communications addressed to investors are identifiable as such;
• They describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner; and
• All information included in marketing communications is fair, clear and not misleading.

WHAT'S NEW?

On 27 May 2021, the European Securities and Markets Authority (ESMA) published its final report on the Guidelines under the Regulation (EU) 2019/1156 on cross-border distribution of funds (CBR).
The main proposed amendments are:

• Scope:
  - The Guidelines will apply to all associated marketing communications including potential investors for undertakings collective investment in transferable securities (UCITS) and alternative investment funds (AIFs)
  - Positive list: ESMA has produced a non-exhaustive list of documents that should be considered as marketing communications (removing communications describing the characteristics of a UCITS or an AIF from this list to avoid any confusion)
  - Negative list: information communicated as ‘pre-marketing’ was added to the list of documents that should not be considered as marketing communications.
• Identification of marketing communications:
  - To better fit the size and format of marketing communications, the requirement to include a disclaimer was amended (especially in an on-line environment)
  - New disclaimer states as follows: “This is a marketing communication. Please refer to the [prospectus of the [UCITS/AIF/EuSEF/EuVECA]/Information document of the [AIF/EuSEF/EuVECA] and to the [KIID/KID](delete as applicable)] before making any final investment decisions.”
  - For on-line marketing communications with space constraints, the disclaimer may be replaced with a shorter identification, such as “Marketing Communication”.
• Fair, clear and not misleading character of marketing communications:
  - The marketing communication should be written in one of the official languages of the Member State, or in one of the official languages used in the Member State where the fund is distributed, or in another language accepted by the national competent authorities of that Member State
  - The use of the information on indicators, simulations, or figures relating to risks and rewards, etc., should be consistent and not contradictory with that included in the fund’s prospectus, KID, or KIID- Information on risks and rewards: Removal of the provision that, in the case of illiquid AIFs open to retail investors, the marketing communications should inform investors to invest a small proportion of their assets
  - Information on costs: Costs should not refer only to purchasing, but also to the holding, converting, or selling of units or shares of an AIF or units of a UCITS (inscribe a warning if the costs may increase or decrease because of currency and exchange rate fluctuations)
  - Information on past performance: Alignment of the requirements for past performance and simulated past performance and disclosed for the preceding 10 years for funds establishing a KIID, or for the preceding five years for other funds.

WHAT'S NEXT?

The Guidelines will apply six months after the date of their publication on ESMA’s website in all EU official languages.
ESMA also provided that:

• PRIIPs: ESMA maintained its approach on the alignment of the period for which past performance should be disclosed ( difference between funds establishing a KIID and those establishing a KID). However, the KIID should eventually be replaced by a PRIIPs KID.
• SFDR: The Guidelines provide guidance regarding the practical implementation of SFDR disclosures in marketing communications for funds.

On 28 May 2021, the European Securities and Markets Authority (ESMA) updated the Opinion Collection of information for the effective monitoring of systemic risk under Article 24(5), first sub-paragraph, of the AIFMD, in the context of AIFMD reporting.

The ESMA Opinion provides details on a set of additional information that, in ESMA view, NCAs could require AIFMs to report on a periodic basis pursuant to Article 24(5), first sub-paragraph of the AIFMD. In particular, the updates aim at providing clarifications to three risk measures (Value-at-Risk, Net FX delta and Net commodity delta) already included in the Opinion in the section “Information on risk measures”. This section has been amended to provide guidance to AIFMs, with definitions of the abovementioned risk measures and practical examples for the reporting. The content of the Opinion that does not refer to these measures is maintained as published in 2013.

On 31 May 2021, the European Securities and Markets Authority (ESMA) published a negative opinion on the intended Accepted Market Practice (AMP) notified by the French Autorité des Marchés Financiers (AMF).

ESMA considers that the new AMP, applicable as of 1 July 2021, replacing the current AMP on liquidity contracts, applicable since 1 January 2019, is not compatible with the Market Abuse Regulation (MAR) and the relevant Implementing Regulation, and it is also diverging from ESMA’s 2017 Opinion on Points for Convergence.

In its assessment, ESMA has identified several points of concerns. Those are the absence of limits on positions and the presence of volume and resources limits which are significantly higher compared to that recommended in the 2017 ESMA Opinion on Points for Convergence.

ESMA must issue its opinion, which is not binding, within two months of the notification, which was received on 31 March 2021. Should the AMF decide to establish its AMP contrary to the ESMA Opinion, it will have to publish on its website the relevant reasons, including why the AMF believes that the AMP does not threaten market confidence.

On 6 May 2021, the European Securities and Markets Authority (ESMA) updated its opinion on ancillary calculations.

The opinion provides the estimation of the market size of commodity derivatives and emission allowances for 2020.

ESMA has prepared these estimations based on data reported to the ESMA FITRS system as well as data reported to trade repositories under EMIR. Market participants, under MiFID II are required to measure their own activity against total market sizes in commodity derivatives.
These sizes are important to enable market participants to assess whether they exceed the ancillary activity thresholds in MiFID II and consequently would have to apply for authorisation as an investment firm.

In issuing this opinion, ESMA considers that the guidance on market size will contribute positively to the consistency of supervisory practices and will ensure a uniform approach throughout the Union.

On 27 May 2021, the European Commission launched a consultation on the Delegated Act on the Ancillary Activity Exemption. The consultation closes on 24 June 2021.

The draft delegated act is based on the provisions of the current RTS 20. Implemented changes correspond to the amended Ancillary Activity Exemption under Directive (EU) 2021/338. The changes triggered by the amended Ancillary Activity Exemption text are the deletion of the Overall Market Size Test and the introduction of a new de-minimis Threshold Test. The amended text does not require changes to the established calculation methodology of the current Trading Test and Capital Employed Test.

On 10 May 2021, the European Securities and Markets Authority (ESMA) published translated version of its Guidelines on outsourcing to cloud service providers in all official languages of the EU (the Guidelines themselves were published in December 2020). NCAs now have 2 months to notify ESMA whether they comply or intend to comply with the Guidelines.

On 5 May 2021, the European Securities and Markets Authority (ESMA) published a Q&A on the Prospectus Regulation. 

The purpose of this document is to promote common, uniform and consistent supervisory approaches and practices in the day-to-day application of the Prospectus Regulation. It does this by providing responses to questions asked by the public, financial market participants, competent authorities and other stakeholders. The question and answer (Q&A) tool is a practical convergence tool used to promote common supervisory approaches and practices under Article 29(2) of the ESMA Regulation. Further information on ESMA’s Q&A process is available on our website. 

ESMA intends to update this document on a regular basis and, for ease of reference, ESMA provides the date each question was first published as well as the date/s of amendment beside each question. A table of all questions in this document is provided in Section 3. 

On 19 May 2021, the European Central Bank (ECB) published a supervision newsletter article on Large investment firms: new license, new supervisor.

From 26 June 2021, investment firms will be subject to a new European regulatory regime. These new rules are intended to better reflect the actual risks taken by the different types of investment firms and to make the supervision of such firms more effective. The new regime introduces various categories of investment firms. 

• The largest firms will be classified as credit institutions and will therefore need to be licensed as such. These bank-like firms will continue to be subject to the Capital Requirements Regulation and Directive. In most cases, the ECB will assume responsibility for their direct supervision. 
• Smaller investment firms will be subject to a new regime that is more tailored to their activities, risk profile and size.

With the new regime just around the corner, large investment firms need to prepare. Firms that qualify as a credit institution should gather the detailed information required for the licence application. This includes information on the capital position, business plan, financial projections, operational structure, governance arrangements, internal controls and risk management.

The ECB encourages large investment firms to reach out to their supervisors to start a dialogue on the transition to the new regime.

On 28 May 2021, the European Banking Authority (EBA) published a provisional list of additional instruments and funds that competent authorities may allow to use as own funds for some of the smallest investment firms. The latter include only non-legal persons or joint?stock companies, or those which meet the conditions for qualifying as small and non?interconnected investment firms as defined in the Investment Firm Regulation (IFR). The list is provisional and intended to provide guidance to investment firms and competent authorities ahead of the application of the IFR requirements, as of 26 June 2021.

This provisional list is based on the information received from National Competent Authorities (NCAs) across the EU, and includes instruments and funds that NCAs may permit to use as own funds in addition to the instruments included in the Common Equity Tier 1 (CET1) list published by the EBA in accordance with the Capital Requirements Regulation (CRR). Therefore, instruments and funds of investment firms will be allocated either to this new list or the existing CET1 list, depending on their nature.

The EBA, together with ESMA, will assess the terms and conditions of all instruments and funds included in this provisional list against regulatory provisions at a later stage, and subsequently, will update, maintain and publish the list on a regular basis.

On 25 May 2021, the European Securities and Markets Authority (ESMA) published the Final Report on Guidelines on the calculation of positions in SFTs by Trade Repositories (TRs) under the Securities Financing Transactions Regulation (SFTR).

The purpose of the Guidelines is to ensure that a uniform methodology is used under EMIR and SFTR, while taking into account the specificities of Securities Financing Transactions (SFT) Reporting. Consistency in position calculation produces high-quality position data, which is necessary for the assessment of systemic risks to financial stability.

The Guidelines aim to ensure consistency of position calculation across TRs, with regard to the time of calculations, the scope of the data used in calculations, the data preparation, the recordkeeping of data and the calculation methodologies. They contain relevant clarifications to Trade Repositories (TRs) as to:

• the calculations carried out by TRs and the format of provision of access to data pursuant to Article 80(4) of EMIR as referred to in Article 5(2) of SFTR and detailed under Article 5 of RTS on data aggregation
• the level of access to positions provided by TRs to the entities included in Article 12(2) of SFTR with access to positions in line with Article 3 of RTS on data access.

The Guidelines will apply from 31 January 2022.

On 6 May 2021, the European Commission published draft Commission delegated Regulation supplementing Regulation (EU) 2017/2402 of the European Parliament and of the Council with regard to regulatory technical standards on the cooperation, exchange of information and notification obligations between competent authorities and ESMA, the EBA and EIOPA.

Regulation (EU) No 2017/2402 (“The Securitisation Regulation”) harmonises the legal framework governing the securitisation market and aims to instil higher market discipline and transparency. In view of the complexity of securitisation transactions, which involve many different players, there are a number of competent authorities charged with supervising the actions of those entities. In order to ensure a consistent and appropriate implementation of the new legal framework, the relationship between the different competent authorities needs to be clarified.

To that end, Article 36(8) of the Securitisation Regulation empowers the Commission to adopt, following submission of draft regulatory technical standards by the European Securities and Markets Authority (‘ESMA’), a delegated act specifying in greater detail the cooperation obligations and the information to be exchanged among competent authorities. 

The European Securities and Markets Authority was required to submit the draft standards to the Commission by 18 January 2019. The Board of Supervisors of the Authority adopted the draft technical standards and submitted it to the Commission on 8 January 2019.

On 17 May 2021, the European Supervisory Authorities (ESAs) published its analysis of the implementation and the functioning of the EU Securitization Regulation (SECR), including recommendations on how to address initial inconsistencies and challenges, which may affect the overall efficiency of the current securitization regime. 

The Report highlights:

• Transparency requirements: given the trend in increasing issuances of private securitisations and considering the SECR objectives of access of information and investor protection, a more precise legal definition for private securitisations should be specified in the SECR in order to clearly identify private securitisations that should comply with the transparency requirements. Data reported for those private securitisations should also be made available by means of a securitisation repository in order to ensure high quality data and facilitate the supervision of the compliance with the transparency requirements.
• Due diligence requirements: regulatory guidance would be useful to specify how proportionality could be implemented in the area of due-diligence to facilitate entrance of new investors in the EU securitisation market.
• Criteria for simple, transparent and standardised (STS) securitisation: targeted amendments in the STS criteria would be needed to facilitate the use of the STS label for ABCP programmes. In addition, in the medium term, as more STS issuances are executed and the STS market reaches a stable pace, further analysis should be performed by the European Commission with ESAs’ support to determine how the STS criteria could be simplified without reducing the quality of the standard.
• Supervision of securitisation requirements: in order to further enhance the supervision of securitisation requirements, it is deemed necessary to explore i) how to develop common EU supervisory tools, ii) potential alternatives to the current STS supervisory framework, in particular for those jurisdictions with limited STS securitisation issuances and, iii) the relevance of a common EU approach to the ongoing supervision of authorisation conditions for third-party verifiers (TPVs).

On 18 May 2021, the European fund and Asset Management Association (EFAMA) published its response to the joint European Supervisory Authorities (ESAs) consultation on taxonomy-related sustainability disclosures in the Sustainable Finance Disclosure Regulation (SFDR).

EFAMA finds that there is a need for full consistency between taxonomy alignment metrics used by financial undertakings for taxonomy-related disclosures in SFDR, the Article 8 Taxonomy Delegated Act and the portfolio greenness formula in the EU Ecolabel for retail financial products.

In its response, EFAMA identifies six key issues that the ESAs ought to address:

• Timeline-related implementation challenges
• Key performance indicators (KPI) 
• Assets not covered by the Taxonomy
• Periodic disclosures
• Data costs.

On 20 May 2021, the Association Française des Marchés Financiers (AMAFI) published a note on the GDPR and data confidentiality policy.

The AMAFI defines the terms of personal data and how to treat those in the every day business life.

Version française

Le 20 mai 2021, l'Association Française des Marchés Financiers (AMAFI) a publié une note sur le RGPD et la politique de confidentialité des données.

L'AMAFI définit les termes de données personnelles et la manière de les traiter dans la vie professionnelle quotidienne.

On 10 May 2021, the Autorité des marchés financiers (AMF) published the Costs and performance of funds incorporating a non-financial approach marketed in France between 2012 and 2018.

In a context of significant development of sustainable finance and fund ranges incorporating environmental, social and governance (ESG) criteria, the AMF has published a study that provides an initial overview of the costs and performance of funds marketed in France between 2012 and 2018 that integrate a non-financial approach.

Version française

Le 10 mai 2021, l'Autorité des marchés financiers (AMF) a publié les Frais et performances des fonds commercialisés en France et intégrant une approche extra-financière entre 2012-2018.

Dans un contexte de développement important de la finance durable et de gammes de fonds intégrant des critères environnementaux, sociaux et de gouvernance (ESG), l’AMF publie une étude qui donne un premier éclairage sur les frais et performances des fonds commercialisés en France intégrant une approche extra-financière entre 2012 et 2018.

On 10 May 2021, the Autorité des marchés financiers (AMF) gave details about the identity of the head of the depositary function in its instruction DOC-2016-01.

UCITS and AIF depositaries must appoint a head of the depositary function and inform the AMF of his or her identity. The AMF has completed its instruction DOC-2016-01 on the information relating to this appointment.

1) A new form on the identity of the head of the depositary function

In accordance with Articles 323-8 and 323-28 of the AMF Regulation, UCITS and AIF depositaries must appoint a head of the depositary function and inform the AMF of his or her identity. In this regard, AMF Instruction DOC-2016-01 stipulates that, depending on the case, the programme of operations or the specifications of the depositary must mention the identity of the head of the depositary function. 

This instruction has been amended to include a form that the depositary must submit to the AMF in order to declare this person in the following cases:

• an application to the AMF for prior approval of the programme of operations of UCITS depositaries when they are investment firms;
• prior approval by the AMF of the specifications of UCITS depositaries when they are credit institutions or branches of credit institutions;
• submission to the AMF of the specifications of AIF depositaries;
• after the appointment of a new head of the depositary function.

2) Explanations about the information on existing depositaries to be sent to the AMF

For depositaries whose programme of operations or specifications were approved or submitted before 4 May 2021, this form must be submitted to the AMF within three months, i.e. before 4 August 2021.

Furthermore, if there is a change in the head of the depositary function, the form appended to instruction DOC-2016-01 must be sent to the AMF within 30 days after the appointment of this person, together with their curriculum vitae.

Version française

Le 10 mai 2021, l'Autorité des marchés financiers (AMF) a précisé les informations sur l’identité du responsable de la fonction dépositaire dans son instruction DOC-2016-01.

Les dépositaires d’OPCVM et de FIA doivent désigner un responsable de la fonction dépositaire et informer l’AMF de son identité. L’AMF complète son instruction DOC-2016-01 sur l’information relative à cette désignation.

1) Un nouveau formulaire relatif à l’identité du responsable de la fonction dépositaire

Conformément aux articles 323-8 et 323-28 du règlement général de l’AMF, les dépositaires d’OPCVM et de FIA doivent désigner un responsable de la fonction dépositaire et informer l’AMF de son identité. A ce titre, l’instruction AMF DOC-2016-01 prévoit que, selon le cas, le programme d’activité ou le cahier des charges du dépositaire doit mentionner l’identité de la personne responsable de la fonction dépositaire.

Cette instruction est modifiée pour intégrer un formulaire que le dépositaire doit adresser à l’AMF afin de lui déclarer le responsable de la fonction dépositaire dans les cadres suivants :

• une demande d’approbation préalable de l’AMF du programme d’activité des dépositaires d’OPCVM lorsqu’ils sont des entreprises d’investissement ;
• une approbation préalable de l’AMF du cahier des charges des dépositaires d’OPCVM ; lorsqu’ils sont des établissements de crédit ou des succursales d’établissements de crédit ;
• une transmission à l’AMF du cahier des charges des dépositaires de FIA ;
• suite à la nomination d’un nouveau responsable de la fonction dépositaire.

2) Des précisions sur l’information de l’AMF pour les dépositaires existants

Pour les dépositaires dont le programme d’activité ou le cahier des charges a été approuvé ou transmis avant le 4 mai 2021, ce formulaire doit être transmis à l’AMF dans un délai de trois mois, soit avant le 4 août 2021.

Par ailleurs, en cas de changement du responsable de la fonction dépositaire, le formulaire annexé à l’instruction DOC-2016-01 doit être adressé à l’AMF dans un délai de 30 jours suivants la nomination du nouveau responsable, accompagné de son curriculum vitae.

On 20 May 2021, the Autorité des marchés financiers (AMF) published its findings after a European CSA on liquidity management in UCITS.

As announced by the Autorité des Marchés Financiers when presenting its supervisory priorities for 2021, the AMF took part in the Common Supervisory Action on UCITS liquidity coordinated by ESMA.  

In practice, based on a methodology defined by ESMA, the AMF was able to (i) undertake a review of liquidity risk management processes in a representative sample of UCITS asset management companies and UCITS funds, (ii) assess the level of compliance of these practices with the regulatory obligations defined by the UCITS Directive and its implementing texts, and (iii) identify good and poor practices in this area.

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Le 20 mai 2021, l'Autorité des marchés financiers (AMF) a publié ses constats à l’occasion d’un exercice de supervision européen sur la gestion de la liquidité dans les OPCVM.

Comme annoncé par l’Autorité des marchés financiers dans le cadre de la présentation de ses priorités de supervision pour l’année 2021, l’AMF a pris part à l’exercice de supervision conjointe de la gestion de la liquidité par les fonds OPCVM coordonné par l’ESMA.  

En pratique, sur la base d’une méthodologie définie par l’ESMA, l’AMF a donc pu (i) effectuer une revue des pratiques de gestion du risque de liquidité sur un échantillon représentatif de sociétés de gestion de portefeuille et de fonds OPCVM, (ii) évaluer le niveau de conformité de ces pratiques avec les obligations réglementaires définies par la directive OPCVM et ses textes d’application et (iii) identifier des bonnes et mauvaises pratiques dans ce domaine.

On 26 May 2021, the Autorité des marchés financiers (AMF) published a guide and new letter templates on special information to provide unitholders and shareholders of UCIs.

Some changes made during the life of UCITS and certain AIFs require special information to be provided to unitholders or shareholders to enable them to decide whether to keep or dispose of their investment with full knowledge of the facts. These changes are in the form of a "letter to unitholders". As these information letters are increasing long and complex, the AMF has decided to publish new templates and a guide.

1) New templates for letters to unitholders or shareholders

AMF Instructions DOC-2011-19, DOC-2011-20, DOC-2011-21, DOC-2011-22 and DOC-2011-23, and more specifically their annexes entitled "Standard template for individual notification of unitholders or shareholders" have been updated to specify the content and formalisation expected from information letters sent to unitholders or shareholders of UCITS, retail investment funds, funds of alternative funds and professional investment funds, employee savings funds, private equity funds and real estate collective investment undertakings and professional real estate collective investment undertakings.

2) Publication of a guide for writing letters to approved UCI unitholders

To assist asset management companies, the AMF has published a guide that sets out the main principles to be observed when writing letters to unitholders or shareholders.

It stresses the need to adopt a clear and concise style that will make it easy for investors to understand by presenting the information in a simple manner, using visual elements, charts or adding a glossary that defines certain technical terms, if necessary.

3) Implementation timetable

Approved collective asset management companies (UCITS, retail investment funds, funds of alternative funds, professional investment funds, employee savings funds, retail private equity investment funds, retail venture capital investment funds, retail local investment funds, real estate collective investment undertakings and professional real estate collective investment undertakings) will have to comply with these templates by using the guide as from 1 September 2021.

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Le 26 mai 2021, l'Autorité des marchés financiers (AMF) a publié un guide et de nouvelles trames-types de lettres aux porteurs sur l'information particulière à fournir aux porteurs de parts et actionnaires des OPC.

Certaines modifications intervenant dans la vie des OPCVM et de certains FIA nécessitent une information particulière des porteurs de parts ou actionnaires afin de leur permettre de prendre leur décision de maintenir leur investissement ou de désinvestir en toute connaissance de cause. Ces modifications prennent la forme d’une « lettre aux porteurs ». Face au constat de l’allongement et de la complexification de ces lettres d’information, l’AMF publie de nouvelles trames-types et un guide.

1) De nouvelles trames-types pour les lettres aux porteurs

Les instructions AMF DOC-2011-19, DOC-2011-20, DOC-2011-21, DOC-2011-22 et DOC-2011-23, et plus particulièrement leurs annexes « Plan-type d’information particulière aux porteurs ou actionnaires », sont mises à jour afin de  préciser le contenu et la formalisation attendus des lettres d’information adressées aux porteurs de parts ou actionnaires, respectivement, des OPCVM, des FIVG, fonds de fonds alternatifs et FPVG, des fonds d’épargne salariale, des fonds de capital investissement et des OPCI et OPPCI.

2) Publication d’un guide de rédaction des lettres aux porteurs des OPC agréés

Dans une logique d’accompagnement des sociétés de gestion, un guide pédagogique vient rappeler les grands principes à respecter lors de la rédaction des lettres aux porteurs.

Il insiste sur la nécessité d’adopter un discours clair et concis qui facilite la compréhension des investisseurs, en le présentant de façon pédagogique, le cas échéant, via le recours à des éléments visuels, l’insertion de graphiques ou bien encore, l’ajout d’un glossaire pour définir certains termes techniques.

3) Calendrier d’entrée en application

Les sociétés de gestion de placements collectifs agréés (OPCVM, FIVG, fonds de fonds alternatifs, FPVG, fonds d’épargne salariale, FCPR, FCPI, FIP, OPCI et OPPCI) devront se conformer à ces nouvelles trames-types en s’appuyant sur le guide pédagogique à compter du 1er septembre 2021.

On 21 May 2021, the Autorité des marchés financiers (AMF) published a Decision of 11 May 2021 to modify the operating rules of LCH SA applicable to the CDSClear segment.

The amendments to the Operating Rules of LCH SA as annexed to this decision are approved. They will come into force on the date determined by LCH SA.

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Le 21 mai 2021, l'Autorité des marchés financiers (AMF) a publié une Décision du 11 mai 2021 de modification des règles de fonctionnement de LCH SA applicables au segment CDSClear.

Sont approuvées les modifications des règles de fonctionnement de LCH SA telles qu’annexées à la présente décision. Elles entreront en vigueur à la date déterminée par LCH SA.

On 26 May 2021, the Association Française des Marchés Financiers (AMAFI) published a position paper on the MiFID Review.

AMAFI is extremely worried by the potential amendments considered in light of the recent consultations from ESMA and the European Commission (EC) which tend to strengthen the constraints weighing on transparency and on systematic internalisers, especially since such reforms would likely weigh on the liquidity of EU markets, and since no proper cost-benefit analysis has been undertaken to assess the necessity of such reform.

Besides, AMAFI has particular concerns with regards to the potential implications unfolding from the recent ESMA final report on reference data and transaction reporting. Again, AMAFI considers the proposed changes should be supported by facts and an in-depth analysis to justify that they are beneficial either in terms of monitoring market abuse or market transparency. 

In light of the preparatory work undertaken by both ESMA and the EC and while the exact scope of the MiFIR review still has to be determined, AMAFI highlights in this paper issues of (i) high and (ii) medium priority in order to improve the competitiveness of EU financial market actors and the sovereignty of the Union in the financing of its economy.

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Le 26 mai 2021, l'Association Française des Marchés Financiers (AMAFI) a publié une prise de position sur la revue MiFID.

L'AMAFI est extrêmement préoccupée par les amendements potentiels envisagés à la lumière des récentes consultations de l’ESMA et de la Commission européenne (CE) qui tendent à renforcer les contraintes pesant sur la transparence et sur les internalisateurs systématiques, d'autant plus que de telles réformes pèseraient probablement sur la liquidité des marchés de l'UE, et qu'aucune analyse coût-bénéfice appropriée n'a été entreprise pour évaluer la nécessité d'une telle réforme.

Par ailleurs, l'AMAFI est particulièrement préoccupée par les implications potentielles du récent rapport final de l’ESMA sur les données de référence et le reporting des transactions. De plus, l'AMAFI considère que les changements proposés doivent être étayés par des faits et une analyse approfondie pour justifier qu'ils soient bénéfiques, que ce soit en termes de surveillance des abus de marché ou de transparence du marché. 

A la lumière des travaux préparatoires entrepris à la fois par l'ESMA et la CE et alors que la portée exacte de la révision de MiFIR doit encore être déterminée, l'AMAFI souligne dans ce document les questions de (i) haute et (ii) moyenne priorité afin d'améliorer la compétitivité des acteurs des marchés financiers de l'UE et la souveraineté de l'Union dans le financement de son économie.

On 18 May 2021, the Autorité des marchés financiers (AMF) published a Detailed analysis of the portfolios of French MMFs during the COVID-19 crisis in early 2020.

This study is a detailed analysis of French money market fund (MMF) portfolios during the COVID crisis, from January to April 2020. It presents the French MMF market and the distortion of portfolios during this period marked by a massive wave of redemptions in March.

The study presents the following findings:

• The bulk of the French MMFs portfolio consists of securities issued by the financial sector and these securities were sold as a priority to meet redemptions. This led to a distortion of the portfolio to the benefit of cash and sovereign securities;
• The exposure of a French MMF to securities issued by the bank of the group to which its fund manager belongs is no greater than to other banks and the crisis did not change this observation;
• The share of cash and short-dated securities (less than one month maturity) increased at the expense of longer-dated securities, especially those maturing between 6 and 12 months;
• In March 2020, the €53 billion decline in assets under management corresponds to €42 billion in securities reaching maturity and €56 billion in active sales while at the same time MMFs purchased €27 billion of new securities and increased their cash holdings by €19 billion.

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Le 18 mai 2021, l'Autorité des marchés financiers (AMF) a publié une analyse détaillée des portefeuilles des fonds monétaires de droit français lors de la crise de la COVID-19 de début 2020.

Cette enquête est une analyse détaillée des portefeuilles des fonds monétaires de droit français lors de la crise de la Covid de janvier à avril 2020. Le marché des fonds monétaires français est présenté ainsi que la déformation des portefeuilles lors de cette période marquée par une vague de rachats de grande ampleur en mars 2020.

Les constats suivants sont détaillés dans l’étude :

• l’essentiel du portefeuille des fonds monétaires français est constitué de titres émis par le secteur financier et ces titres ont été prioritairement cédés pour faire face aux rachats, entraînant une déformation du portefeuille au profit du cash et des titres souverains ;
• l’exposition d’un fonds monétaire français aux titres émis par la banque du groupe auquel appartient son gestionnaire n’est pas plus importante qu’envers d’autres banques et la crise n’a pas modifié ce constat ;
• la part du cash et des titres à échéance courte (arrivant à maturité à moins d’un mois) a crû au détriment des titres plus longs, et surtout des titres arrivant à maturité entre 6 et 12 mois ;
• lors du mois de mars 2020 la baisse des encours de 53 milliards d’euros correspond à l’arrivée à échéance de 42 milliards d’euros de titres et à 56 milliards d’euros de cessions actives de titres alors qu’en parallèle 27 milliards d’euros de nouveaux titres ont été achetés par les fonds monétaires, qui ont également accru leur détention de cash de 19 milliards d’euros.

On 17 May 2021, the Association Française de Gestion (AFG) published a study on the exercise of voting rights by management companies.

At the start of 2021, AFG carried out its annual survey of its members, the portfolio management companies, on the exercise of their voting rights at general meetings held in 2020.

This nineteenth edition of the study presents, in the first part, the trends in the participation of SGPs in votes at general meetings and the grounds for dispute, then in the second part, the means deployed by the SGP to carry out this activity, develop dialogue with issuers and establish their judgment on the quality of their governance.

The main results of the survey :

• a strong increase in participation in votes in a context of the global health crisis;
• the remuneration and financial transactions are at the center of the opposition votes of the managers;
• a strengthening of the dialogue on issues related to the management of the health and social crisis.

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Le 17 mai 2021, l'Association Française de Gestion (AFG) a publié une enquête sur l'exercice des droits de vote par les sociétés de gestion.

Cette dix-neuvième édition de l’étude présente, en première partie, les tendances de la participation des SGP aux votes en assemblée générale et les motifs de contestation, puis en seconde partie, les moyens déployés par les SGP pour réaliser cette activité, développer le dialogue avec les émetteurs et établir leur jugement sur la qualité de leur gouvernance.

Les principaux résultats de l’enquête :

• une progression forte de la participation aux votes dans un contexte de crise sanitaire mondiale ;
• les rémunérations et les opérations financières sont au centre des votes d’opposition des gérants ;
• un renforcement du dialogue sur les enjeux liés à la gestion de la crise sanitaire et sociale.

On 3 May 2021, the Autorité des marchés financiers (AMF) clarified the conditions for the certification of a training organization to administer the AMF sustainable finance exam.

The AMF has decided, on the proposal of the Haut conseil certificateur de Place (HCCP), to create a new module for verifying the knowledge of professionals in the field of green and responsible finance. The instruction DOC 2021-03 specifies the characteristics of the exam, the content of the certification application file and the obligations of the certified organizations.

The sustainable finance exam is intended in particular for professionals working as salespeople who wish to acquire a general knowledge of the institutional and economic framework of sustainable finance, understand the essential concepts and acquire an understanding of the products and methodologies used, in order to be able to gather client preferences and propose products adapted to their needs. This module is complementary to the AMF generalist exam to verify the minimum knowledge.

It is optional and accessible to any person wishing to demonstrate the acquisition of basic knowledge in the field.

Candidate organizations can now send their application to the AMF in accordance with the procedures set out in the instruction.

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Le 3 mai 2021, l'Autorité des marchés financiers (AMF) a précisé les conditions de certification des organismes pour administrer la certification AMF en finance durable.

L’Autorité des marchés financiers a décidé, sur proposition du Haut conseil certificateur de Place (HCCP), de créer un nouveau module de vérification des connaissances des professionnels portant sur la finance verte et responsable. L’instruction DOC 2021-03 précise les caractéristiques de l'examen, le contenu du dossier de demande de certification et les obligations à la charge des organismes certifiés.

L’examen en finance durable s’adresse en particulier aux professionnels exerçant la fonction de vendeur et souhaitant disposer d’une culture générale sur le cadre institutionnel et économique de la finance durable, en comprendre les concepts essentiels et acquérir une grille de lecture des produits et des méthodologies utilisées, afin d’être en capacité de recueillir les préférences des clients et de proposer des produits adaptés à leurs besoins. Ce module est complémentaire de l’examen généraliste AMF de vérification des connaissances minimales.

Il est optionnel et accessible à toute personne désireuse de démontrer l’acquisition de connaissances socles dans le domaine.

Les organismes candidats peuvent désormais adresser leur dossier de candidature à l’AMF selon les modalités prévues par l’instruction.

On 17 May 2021, the Autorité des marchés financiers (AMF) approved, for the first time, a bond prospectus allowing the admission on Euronext Paris of “Sustainable Linked Bonds”.

Sustainable Linked Bonds (SLBs) are debt securities that provide a financial incentive for the issuer to commit to a more "sustainable" business model. SLB issuance is expected to grow over the next few years. The French legal framework allows for the issuance of these securities under French law.

On May 11, 2021, the AMF approved a prospectus allowing the listing of French Sustainable Linked Bonds (SLB) on Euronext Paris. Unlike green bonds, where the funds raised are used to finance "green" assets, SLBs see the coupon offered automatically increase at a predetermined date if the issuer has failed to meet the sustainability target(s) it set at issuance. These quantified sustainability objectives are set through Key Performance Indicators (KPIs) defined in the prospectus.

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Le 17 mai 2021, l'Autorité des marchés financiers (AMF) a approuvé, pour la première fois, un prospectus obligataire permettant l’admission sur Euronext Paris de « Sustainable Linked Bonds ».

Les Sustainable Linked Bonds (SLB) sont des titres de créance comportant une incitation financière pour son émetteur à s’engager dans une trajectoire plus « durable » de son modèle d’affaires. Les émissions de SLB devraient se développer au cours des prochaines années. Le cadre juridique français permet l’émission de ces titres en droit français.

Le 11 mai 2021, l’AMF a approuvé un prospectus permettant l’admission sur Euronext Paris de Sustainable Linked Bonds (SLB) de droit français. A la différence des obligations vertes dont les fonds levés sont utilisés pour financer des actifs «verts», les SLB voient le coupon offert augmenter automatiquement à une date prédéterminée si l’émetteur n’a pas réussi à atteindre le ou les objectifs de durabilité qu’il s’est fixé à l’émission. Ces objectifs de durabilité chiffrés sont fixés au travers d’indicateurs clé de performance définis dans le prospectus (en anglais Key Performance Indicators ou KPI).

On 28 May 2021, the Decree No. 2021-663 of 27 May 2021 pursuant to Article L. 533-22-1 of the Monetary and Financial Code was published in the Official Journal. 

Article 29 of Law no.2019-1147 of November 8, 2019 relating to energy and climate completed the provisions relating to the information provided by financial market players on the methods for taking into account in their investment policy criteria relating to compliance with environmental, social and quality of governance objectives; in particular with regard to climate and biodiversity. This decree specifies the information required and the methods of presentation.

This text presents the information to be published on the methods of taking into account in the investment policy the criteria relating to the respect of environmental, social and governance quality objectives and on the means implemented to contribute to the energy and ecological transition.

The decree is applicable to the following entities: insurance and reinsurance companies, mutual insurance companies, provident institutions and their unions, portfolio management companies, credit institutions and investment firms for their portfolio management activities on behalf of third parties and investment advice, Caisse des dépôts et consignations, supplementary occupational pension institutions, supplementary occupational pension funds, supplementary pension institution for non-tenured employees of the State and public authorities, public institution managing the compulsory supplementary public pension scheme, and the national pension fund for local authority employees.

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Le 28 mai 2021, le Décret No. 2021-663 du 27 mai 2021 pris en application de l’article L. 533-22-1 du code monétaire et financier a été publié au Journal Officiel. 

L’article 29 de la loi no 2019-1147 du 8 novembre 2019 relative à l’énergie et au climat a complété les dispositions relatives aux informations fournies par les acteurs de marchés financiers sur les modalités de prise en compte dans leur politique d’investissement des critères relatifs au respect d’objectifs environnementaux, sociaux et de qualité de gouvernance ; en particulier en matière climatique et de biodiversité. Ce décret précise les informations requises et leurs modalités de présentation.

Ce texte présente des informations à publier sur les modalités de prise en compte dans la politique d’investissement des critères relatifs au respect d’objectifs environnementaux, sociaux et de qualité de gouvernance et sur les moyens mis en œuvre pour contribuer à la transition énergétique et écologique.

Le décret est applicables aux entreprises d’assurance et de réassurance, mutuelles, institutions de prévoyance et leurs unions, sociétés de gestion de portefeuille, établissements de crédit et entreprises d’investissement pour leurs activités de gestion de portefeuille pour le compte de tiers et de conseil en investissement, Caisse des dépôts et consignations, institutions de retraite professionnelle supplémentaire, fonds de retraite professionnelle supplémentaire, Institution de retraite complémentaire des agents non titulaires de l’Etat et des collectivités publiques, Etablissement public gérant le régime public de retraite additionnel obligatoire, Caisse nationale de retraites des agents des collectivités locales.

On 20 May 2021, the Chambre des représentants de Belgique adopted Draft Law implementing various financial provisions relating to the fight against fraud. This text aims in particular to adapt and broaden the duty to denounce so-called " special " tax mechanisms by the supervisory authorities in the banking and financial fields, namely the FSMA (Financial Services and Markets Authority) and the BNB (National Bank).
Concretely, the FSMA and the BNB will be required to denounce the so-called " special " mechanisms to the judicial authorities . Until now, the reporting obligation only concerned arrangements with the aim or effect of promoting a tax offense liable to criminal penalties. This bill extends this obligation to all cases of violation of the prohibition to set up a particular mechanism. 

The draft law also introduces provision in relation to the UBO register. Accountants and tax advisers will now have to report discrepancies between data in the UBO register (including company information) and other information they have about their client. 

On 3 May 2021, the Financial Services and Markets Authority (FSMA) published circular FSMA_2021_10 on the periodic questionnaire on the prevention of money laundering and terrorist financing.

This circular informs obliged entities on the contents of the information, and the modalities for their transmission, intended to be used to assess the compliance and the efficiency of the system they have implemented for combating money laundering and the financing of terrorism. This information is collected by means of an annual questionnaire, which is an important tool in the exercise of the Financial Services and Markets Authority’s permanent legal supervisory powers in combating ML/TF.

On 6 May 2021, the Financial Services and Markets Authority (FSMA) published an updated study on Asset management and Non-bank financial intermediation (NBFI) in Belgium. This update is part of the regular monitoring of these activities, which constitutes a €138 billion market in Belgium.

On 12 May 2021, the Financial Services and Markets Authority (FSMA) published communication FSMA_2021_11 on ESMA guidelines on the MiFID II compliance function.

These guidelines replace the ESMA guidelines on the same topic issued in 2012 and include updates that enhance clarity and foster greater convergence in the implementation, and supervision, of the new MiFID II compliance function requirements.

The Guidelines are now integrated in the supervisory practice of FSMA.

On 6 May 2021, the German Bundestag adopted the Electronic Securities Act (eWpG) in the form proposed by the Finance Committee. The introduction of electronic securities is intended to make the German financial market more viable in the future and, at the same time, to protect the integrity, transparency and functioning of the markets. The eWpG will enter into force on the day after its promulgation.

On 4 May 2021, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published its supervisory priorities for 2021, which include addressing the impact of the pandemic on supervised companies and financial markets, IT and cyber risks, and consumer protection issues. The focus of planned activities also includes business areas of banking, insurance, and securities supervision and resolution.

On 4 May 2021, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published FAQs on the new requirements for investment firms under IFR/IFD. 

From 26 June 2021, the new Regulation (EU) 2019/2033 on the prudential requirements of investment firms (IFR) will apply. At the same time, the German implementation act for the Investment Firm Directive (EU) 2019/2034 (IFD) (WpIG) will also come into force.

The BaFin FAQs are the result of remaining uncertainty and the number of questions BaFin received regarding the new regulations in recent months.

BaFin published its views in relation to 15 of the most frequently asked questions including the following:

• reporting obligations under Article 54 (1) of the IFD;
• the scope of application of MaComp, MaRisk , the BAIT and other BaFin publications;  
• the concept of a group within the meaning of the IFR;
• whether securities institutions can also provide the crypto custody business.

The published questions and answers will be updated regularly.

On 12 May 2021, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) announced the application in Germany of ESMA Guidelines on the Reporting under Articles 4 and 12 SFTR. The guidelines aim to clarify a number of provisions of SFTR and to provide practical guidance on the implementation of some of those provisions. The guidelines will contribute to the reduction of costs along the complete reporting chain - the counterparties that report the data, the TRs which put in place the procedures to verify the completeness and correctness of data, and the authorities, defined in Article 12(2) SFTR, which use the data to supervise risks to financial stability.

On 5 May 2021, the German Federal Government (Bundesregierung) adopted the first German Sustainable Finance Strategy, which is intended to mobilize investments for climate action and sustainability while also addressing the climate risks that are increasingly relevant for the financial system. The German Sustainable Finance Strategy sets a new course in the financial system based on the core themes of climate action and sustainability. It contains a comprehensive set of 26 measures. The following key steps, among others, are intended to mobilize sustainable investments: 

• federal investments shall be shifted towards sustainable investments;
• the German Federal Government shall ensure that reliable and comparable information is available for investors that show how sustainability risks and opportunities affect corporate business models and what impact corporate activities have on environmental and human rights; -
• sustainability 'traffic light' labels shall be introduced to provide more clarity for private investors regarding financial products; 
• the German Federal Government has also agreed on a list of requirements for so-called 'non-financial' corporate reporting. The list requires all publicly traded companies and major corporations with limited liability to present sustainability reports; 
• the German Federal Government will be commissioning a scenario analysis of physical climate risks in the real economy and financial sector in Germany. This will improve methodologies and data; it is also an exercise that will allow individual actors to identify their own risks and incorporate them into their risk management systems; 
• the German Federal Ministry of Finance (Bundesfinanzministerium) will be drawing up a strategy before the end of 2021 on how the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) will be supported organisationally. BaFin is due to present a report by the autumn of 2021, in which it will demonstrate how it can improve cooperation with other government departments and thus better benefit from their expertise on sustainability; and 
• the German Federal Government will continue to support the Kreditanstalt für Wiederaufbau (KfW) (the German promotional bank) in implementing its sustainable finance agenda. 

Which activities can be deemed sustainable is currently being negotiated at European level with the drafting of the EU taxonomy for sustainable activities. In its Sustainable Finance Strategy, the German Federal Government makes clear its position that nuclear energy cannot be considered sustainable.

On 28 May 2021, the Securities and Futures Commission (SFC) published Circular to licensed corporations on persons in the financial services sector to be exempted from the compulsory quarantine arrangements in Hong Kong.

Eligibility criteria: 

1. Senior executives travelling from and returning to Hong Kong — Senior executives of a licensed corporation with global or regional roles who are returning to Hong Kong after travelling to foreign places primarily for the purposes of managing the group entities for which they have responsibility (returning executive). 
2. Senior executives visiting Hong Kong — Global or regional heads or senior executives of financial institutions that a licensed corporation is affiliated with, who are travelling to Hong Kong primarily for the purposes of managing the licensed corporation (visiting executive).

On 28 May 2021, the Securities and Futures Commission (SFC) informed licensed corporations (LCs) that the effective date of the revised form of the returns required to be submitted by them under section 56 of the Securities and Futures (Financial Resources) Rules will be postponed to 1 January 2022.

On 10 May 2021, the Securities and Futures Commission (SFC) announced the implementation of the Government’s grant scheme to subsidize the setting up of open-ended fund companies (OFCs) and real estate investment trusts (REITs) in Hong Kong.

The scheme will operate for three years and is open for applications starting today on a first-come-first-served basis. 

The SFC also published frequently asked questions to provide guidance to the industry together with the grant application forms.

On 18 May 2021, the S.I. No. 235 of 2021 - European Union (Restrictive Measures Against Serious Human Rights Violations and Abuses) (No. 3) Regulations 2021 was published in the Irish Statute Book.

A person who contravenes a provision of the following Council Regulations shall be guilty of an offence:

• Council Implementing Regulation (EU) 2021/371 of 2 March 2021 implementing Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses
• Council Implementing Regulation (EU) 2021/478 of 22 March 2021 implementing Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuse.

A person who is guilty of an offence under this Instrument shall be liable: 

(a) on summary conviction, to a class A fine or to imprisonment for a term not exceeding 12 months or both, or 

(b) on conviction on indictment, to a fine not exceeding €500,000 or to imprisonment for a term not exceeding 3 years or both.

On 3 May 2021, the Irish Funds Industry Association (IF) published the summary of its discussion from the Central Bank of Ireland (CBI) on regulatory reporting.

Highlighted topics are: 

1. Alternative Investment Fund Manager’s Directive (AIFMD):

• The CBI recommends that parties responsible for submitting returns ensure robust data quality checks are in place to mitigate against data inconsistency. 
• Related to this, the CBI will be introducing enhanced technologies in 2021 to monitor data and identify inconsistencies 

2. Resident Investment Funds Return (MMIF):

• Whilst noting the improvement in data quality the CBI emphasized that there are still areas that need improvement. 
• The CBI emphasized the importance of data accuracy and highlighted areas that result in poor data quality.
• The CBI recommends that the incumbent administrator is responsible for sign off at the transition date

3. Money Market Funds (MMF)

• The CBI confirmed that the MMF Daily Characteristics Reporting would remain in place even with the introduction of the Article 37 MMFR quarterly reporting. 
• The CBI are in the process of changing the submission channel for this report, with plans to gather the daily data through the Online Reporting System (“ONR”) return as an XML template as opposed to current email format. 
• The template will include new data validations. 
• The CBI have confirmed that once they issue the draft schema for this ONR change, they will engage with the industry (including Irish Funds Working Groups) regarding additional data requirements and validations ahead of target implementation date later this year.

4. European Market Infrastructure Regulation (EMIR)

• EMIR reporting data quality will continue to be a strong focus in 2021 by the CBI and it was stressed that EMIR data is also used as part of the CBIs approach in regulating other activities, highlighting the importance of data quality (e.g. thematic reviews). 
• In addition, it is expected ESMA will continue to focus in this area in 2021..

On 18 May 2021, the Central Bank of Ireland (CBI) published its letter on Common Supervisory Action on UCITS Liquidity Risk Management.

In light of the seriousness of the findings of the CSA in the context of the importance of effective LRM frameworks, all Irish authorized UCITS managers are required to conduct a specific review of their practices, documentation, systems and controls by reference to the findings in the ESMA public statement and this letter: in particular:

• Instances of LRM frameworks that were not clearly defined, adaptable and/or independent 

• A lack of formal documented pre-investment forecasting frameworks 
• A lack of formal liquidity escalation policies 
• Cases where no pre-investment forecasting performed 
• Over-reliance on the presumption of ongoing liquidity 
• Oversight of delegates below expectations 
• Shortcomings in the role of the designated person for fund risk management 
• Cases of no liquidity reporting to the board of the UCITS manager 
• Shortcomings in internal control framework.

This review must be documented and must include details of actions taken to address any of the findings in the ESMA public statement and this letter. This review should be completed and an action plan discussed and approved by the board of each UCITS manager by end of Q4 2021.

Liquidity risk management will continue to be an area of supervisory focus by the CBI. In circumstances of non-compliance by any firm with any regulatory requirements relevant to the matters raised in this letter, the CBI may, in the course of future supervisory engagement, or when exercising its supervisory and/or enforcement powers in respect of such non-compliance, have regard to the consideration given by a firm to the matters raised in the ESMA public statement and this letter.

On 28 May 2021, the S.I. No. 258 of 2021 - European Union (Markets in  Financial Instruments) (Amendment) (No. 2) Regulations 2021 was published in the Irish Statute Book.

The amendments concern requirements for approved publication arrangement (APA) or an approved reporting mechanism (ARM), which provide that:

• The CBI shall monitor the activities of an APA or an ARM and shall ensure that the appropriate measures are in place to enable it to obtain the information needed to assess the compliance of APAs and ARMs with those obligations.
• The auditor of an investment firm, a regulated market, or an APA or ARM authorized shall report promptly to the CBI any fact or decision concerning the investment firm, regulated market, APA or ARM of which the auditor has become aware while carrying out an audit of it or an undertaking having close links with it and which is liable to.

On 13 May 2021, the Central Bank of Ireland (CBI) updated the Reporting Requirements for MiFID Investment Firms in relation to the submission of prudential returns for the period ending 30 June 2021 and the timing of first reporting under the Investment Firm Regulation. 

CRR/IFR Reporting

• CRR reporting will commence for all class one minus investment firms on 30 September 2021.
• IFR reporting will commence for all class two investment firms on 30 September 2021.
• IFR reporting will commence for all class three investment firms on 31 December 2021.

In line with the legal mandate under Article 54(1) of the IFR, class two will be required to report all of the following on a quarterly basis: 

• Level and composition of own funds;  
• Own funds requirements; 
• Own funds calculations;
• The level of activity in respect of the conditions set out under Article 12(1) of the IFR including the balance sheet and revenue break down by investment service and applicable K-factor;  
• Concentration risk; and  
• Liquidity requirements. 

In line with the legal mandate under Article 54 of the IFR class three firms will be required to report on all of the following on an annual basis:

• Level and composition of own funds;
• Own funds requirements;
• Own funds calculations;
• The level of activity in respect of the conditions set out under Article 12(1) of the IFR including the balance sheet and revenue break down by investment service and applicable K-factor; and 
• Liquidity requirements.

On 13 May 2021, the Central Bank of Ireland (CBI) published a third edition of the Central Bank Transparency Regulatory Framework - Questions and Answers document.  

The new QA added (ID 1006) reminds issuers of the Transparency Directive home Member State disclosure obligations where, in light of the UK’s withdrawal from the EU, an issuer is disclosing its choice of a new home Member State.

On 20 May 2021, CONSOB shared Resolution no. 21850 and the parameters for identifying all subjects whose non-financial statements will be checked on a sample basis, according to the provisions of art. 6, paragraph 1, of the Regulation about non-financial information, adopted with Resolution CONSOB no. 20267 of 18 January 2018.

Below the list of areas from which the supervised entities will be selected.

a) With reference to the issuers subject to control for financial reporting, supervision is executed taking into account the degree of adherence to the supervisory priorities on non-financial disclosure indicated by ESMA in Section 2 paragraph 1. Non financial information, of ESMA's Public Statement, containing the European common enforcement priorities for 2019 financial reports

b) A further selection of subjects is supervised following the supervisory activity carried out by CONSOB, which led to the identification of areas for improvement in the content of the NFS, or in the procedures for data collection to prepare NFS

c) Companies whose NFS were populated significantly by information received from interested parties

d) To take into account possible greenwashing trends, the supervisory selection also focuses on the  importance of ESG factors when raising capital by issuing financial instruments, intended to finance sustainable projects. This last sample is determined net of the companies identified on the basis of the other criteria indicated above, in order to favor the rotation of the selected companies

e) Lastly, companies are selected among issuers of shares listed on the Italian regulated market who have proceeded with the publication of the NFS, according to a criterion that uses external sources to summarize the degree of sustainability of the company, in the three environmental, social and governance dimensions.

On 5 May 2021, Banca d'Italia issued updated provisions on the procedure for assessing the suitability of representatives of banks, intermediaries of financial institutions, electronic money institutions, payment institutions and guarantee systems for depositors.

In particular, the provisions update the previous procedures following the adoption of the decree of the Ministry of Economy and Finance n. 169/2020 on eligibility requirements of representatives of banks and other intermediaries. The topic is also regulated by Legislative Decree 385/1993.

The Provisions will enter into force on 1 July 2021 and will apply to:

(i) appointments made after 1 July 2021

(ii) appointments made after the date of entry into force of the Ministerial Decree (30

December 2020), but limited to (1) events occurring after 1 July 2021 and (2) limited to events related to the suitability of members of the control body of the entity, the responsibility for non-executive positions, renewals and suspension of offices.

Moreover, as of 1 July 2021, the following provisions are eliminated: 

(i) Title II, Chapter 2, of Circular no. 229 of 21 April 1999 and the provision “Requirements for representatives of banks and parent company of banking groups. Verification procedure", dated 1 December 2015

(ii) Title II, Chapter 2, of Circular no. 288 of 3 April 2015 - except  Annexes A, C and D and the indication, contained in the Section I paragraph 4, on the administrative procedure

for the declaration of forfeiture/decadence, following the violation of the prohibition of cross holdings in financial intermediaries or financial groups competitors ("interlocking")

(iii) Chapter III, Section IV, with the exception of references to the prohibition of interlocking,

(iv) Section V, limited to the indications regarding administrative procedures for forfeiture in the event of a defect of suitability, and suspension of corporate officers, covered in the provisions applicable to payment institutions and electronic money institutions (dated 23 July 2019).

On 27 May 2021, CONSOB issued a notice regarding ESMA Guidelines on the reporting of securities financing transactions (SFTs), pursuant to articles 4 and 12 of EU Regulation no. 2365/2015 (SFTR)

On 6 January 2020, in order to implement the provisions of the SFTR Regulation, ESMA published, following a public consultation, the guidelines on "Reporting of securities financing transactions (SFTs) pursuant to articles 4 and 12 of SFTR"(hereinafter the Guidelines), which provide operational indications on the implementation of the reporting provisions and on the transparency, collection and storage of data (referred to in articles 4 and 12 of SFTR and related implementing provisions, pursuant to EU Delegated Regulations no. 356/2019, n. 357/2019, n. 358/2019 and EU Implementing Regulation no. 363/2019).

The Guidelines, were published in Italian on the website of the European Authority on 29 March 2021. CONSOB communicated to the European Authority its intention to comply with the Guidelines in question.

On 21 May 2021, the Law of 20 May 2021 as regards the loss absorption and recapitalization capacity of credit institutions and investment firms, capital requirements and risk management was published in the Legilux (Journal Officiel du Grand-Duché de Luxembourg).

The Law aims to:

• Transpose Directive (EU) 2019/878 (CRD V)
• Transpose Directive (EU) 2019/879  (BRRD II)
• Implement Regulation (EU) 2019/876  (CRR II).

The Law, which mainly amends the Luxembourg law of 5 April 1993 on the financial sector, inter alia strengthens one of the pillars of banking supervision, i.e. additional capital requirements, by introducing the possibility for the CSSF to impose capital recommendations in addition to capital requirements.

• The most important volume of the new prudential rules applicable to banks is to be found in the regulations of direct application, of which only a few isolated provisions is transposed through this bill. These include the provisions on the introduction of a binding leverage ratio and a stable funding ratio, as well as the definition of the new standard on "total loss absorption capacity".
• In order to ensure an efficient and credible application of the internal bail-out tool, the Law aims at adapting the modalities related to the determination of the minimum capital requirement and eligible instruments specific to each institution. 
• The calibration of the requirements applicable to entities is being recast in order to better modulate the level and quality of the minimum requirement according to the degree of risk of each institution. In addition, it is proposed to strengthen depositor protection by introducing an additional safety net for the benefit of the deposit guarantee fund.
• The Law, through amendments to the existing legal framework, will further strengthen the ability of banks to withstand potential future shocks and thus support the stability of the financial sector as a whole.

The law also introduces the Remuneration policy equal by gender as a condition of PSF authorisation.

On 31 May 2021, the Chambre des députés published Draft Law n°7826 extending the temporary measures concerning holding of meetings in companies and other legal entities in the context of the COVID-19 pandemic.

The Draft Law allows shareholder meetings and meetings of management bodies of all Luxembourg companies, private or listed, and other referenced legal entities to be held  in digital form until 31 December 2021.

On 4 May 2021, the Commission de Surveillance du secteur financier (CSSF) published a User Guide concerning  reporting under Art.37 of the MMFR. 

The user guide answers the following questions:

Question: When is the reporting deadline for the submission of the MMFR reports?

Question: Is an unlaunched fund/sub-fund required to submit an MMF report?

Question: The file covers more than one quarter. How should it be named?

Question: Does the inception date correspond to the launch date of the fund/sub-fund?

Question: The reporting template requires display of the fund/sub-fund NAV while the MMF Regulation asks for assets under management. Which is correct?

Question: Does the CSSF perform checks on the MMF type?

Question: Does the CSSF perform checks on the WAM and WAL?

Question: Does the CSSF perform checks on the Daily Maturing Asset Rate and Weekly Maturing Asset Rate?

Question: The excel file Validation_rules_V06 requires the clean price: Price of the asset expressed as a clean price for 

the money market instruments, the securitisations or asset backed commercial papers. and as a net asset value per unit or share for other money market funds. How should the data be reported?

Question: The template requires display of the MMF’s NAV in EUR over the reporting period for each month of the quarter(s) included in the report (Field codes 262, 265, 268 & 271). How should the data be reported?

Question: The excel file Validation_rules_V06 indicates the Reporting Currency Market Price applicable to LVNAV MMF: Specifies the market price expressed in the reporting currency of the asset valued by using the mark-to-market or mark-to-model method. How should the data be reported?

Question: The excel file Validation_rules_V06 provides information about the units or shares for other money market funds. How should the data be reported?

Question: Does the percentage of the NAV subject to liquidity arrangements relate to the used or theoretical percentage of NAV covered by the arrangement types?

Question: How many stress tests must be included in the reporting?

Question: With respect to the reporting items relating to monthly data, is it possible for the months that do not relate to the period covered by the reporting to submit either previously reported data or “not available”?

Question: Does the CSSF perform checks between NAV of the MMF in EUR for each month of 

Question: CME-028 ERR - The national code of the manager of the MMF XXXXXXXXX is not authorised under Article 4 for that MMF national code and country. How should it be corrected? The quarter and the U1.1 reports?

Question: CME-035 ERR - At least one country code of the EU member state where the MMF is marketed XX is not an ISO 3166 2-character country code of an EU country. Is a fund/sub-fund required to display the non-EU countries where the fund/sub-fund is distributed?

Question: CME-038 ERR - The LEI of the MMF’s depositary has not been provided. What should be entered if the depositary is a branch and does not have a LEI code?

Question: CME-059 ERR - More than one share class is flagged with the largest NAV or no share class is reported as the one with the highest NAV. How should situations where several classes have the same values be handled?

Question: CME-077 ERR - The input factor is not reported for macro scenario code MST-01 or MST-02. How should it be corrected?

Question: CME-078 ERR - The CFI code of the asset XXXXXX under field 93 for Money Market Instrument must be an existing ISO 10962 CFI code. How should it be corrected?

Question: CME-086/089 ERR - Accrued interests in base currency/EUR under field 109/110 are XXX and are not consistent with the method used to price the money market instrument AMCS / MTMO. How should it be corrected?

Question: CME-191 ERR - The minimum price deviation XXX is not greater than or equal to 10 basis points (absolute value). How should it be corrected?

Question: What is the consequence of incorrect or delayed submission of an MMFR report?

On 11 May 2021, the Commission de Surveillance du secteur financier (CSSF) updated the questionnaire for the approval of a new sub-fund.

On 28 May 2021, the Commission de Surveillance du secteur financier (CSSF) updated the Annex to CSSF Circular19/708 on Electronic transmission of documents to the CSSF.

On 20 May 2021, the Autoriteit Financiële Markten (AFM) pointed out the obligation to adequately indicate the risks when advertising an investment product.

Investment firms that advertise the benefits of a product or service do not always adequately alert consumers to the risks in advertising. Sometimes the risks are even omitted. The AFM has called various companies to account on this issue and will continue to pay extra attention to it.

Dutch consumers have started to invest more in recent years. The AFM sees this trend reflected in an increase in advertisements for investments. It is important that consumers are aware of the risks involved in choosing an investment product or service when presented with an advertisement. A more balanced picture between the advantages and possible disadvantages in advertisements will better enable them to make the right decision.

Risks that are not easy to find

The AFM sees, for example, that the advantages are clearly stated, but the text in which the risks are depicted is too small and therefore not easy to read, or that the risks are even completely missing. It is also important that the risks are not "hidden" but can be found easily and are also listed with the benefits. On websites that form as it were one long page, it is for example insufficient that the risks only come into view after a long scroll, while the positive points are displayed in large font at the top of the page.

Risks alongside benefits 

Since MiFID II came into force in 2018, the rules for investor protection have been further tightened. The requirements for correct, clear and non-misleading information are included in Article 44 of the Delegated Regulation (EU) 2017/565. This states that investment firms are required to provide in advertisements "a correct and clear indication of the relevant risks of an investment service or financial instrument, when (possible) benefits of the service or product are mentioned. 

The concept of 'possible benefit' of a service or product should be seen broadly. This can be a mentioned successful investment strategy, but also, for example, a financial peace of mind for consumers if they have their assets managed, low costs or an advertised transaction credit when consumers start investing.

All forms of advertising

The application applies to all advertising messages: i.e. all commendatory and recruiting information about an investment service or financial instrument. This includes television commercials and presentations, newspaper ads, brochures, websites, social media statements, advertorials, online banners, and Google ads.

On 17 May 2021, the Autoriteit Financiële Markten (AFM) published a letter to investment firms to pay attention to the consequences of the COVID-19 crisis on business operations.

The AFM has performed an exploratory study into the risks to the controlled operational management of a selection of investment firms, managers of investment institutions and managers of UCITS, caused by the outbreak of the COVID-19 virus and the measures to prevent its spread. In this letter, the AFM first shares the design of the exploratory research, then the most frequently mentioned risks and measures, followed by the findings, and finally AFM concludes with some points for attention.

Investment firms and managers appear to be adapting their business operations well to the consequences of the COVID-19 crisis. Continuing the measures does increase the chance of operational risks. In a letter to the entire sector, the AFM therefore requests continued attention for periodic evaluation and adjustment of business continuity plans.

Many investment firms and managers have (partly) adjusted their working methods due to the measures surrounding the COVID-19 crisis. This may affect the control of their business operations. To gain insight into this, the AFM approached approximately 50 investment firms and managers.

Main points of attention

The AFM sees that companies appear to be aware of the impact of the COVID-19 crisis and that they include (the consequences of) the pandemic in their risk analyzes. The AFM does, however, draw attention to a number of matters:

• Periodically evaluate and adjust the business continuity plans (where necessary and possible)
• Consider the long-term consequences of the largely disappearance of more informal communication
• Centralize the activities surrounding the corona crisis within the organization.

On 31 May 2021, the Autoriteit Financiële Markten (AFM) called on investment firms to send their financial statements and asset segregation assurance report to the regulator before 1 July 2021.

Annual accounts, management report and other information

Investment firms with their registered office in the Netherlands must provide the AFM with their annual accounts, a management report and other information (together these form the annual report) within six months of the end of the financial year. For many investment firms, the financial year is the same as the calendar year. This means that the AFM must receive the annual accounts, the management report and other information before 1 July 2021. The AFM would like to receive the documents formatted as a file in an automated readable PDF format, and not as an image in PDF format created by a copier. Send this by e-mail to: tgfo_jaarrekeningen@afm.nl .

Assurance Report Asset Separation

Investment firms that hold financial instruments and/or client funds must submit an asset segregation assurance report to the AFM each year. The AFM must receive the assurance report for 2020 by 1 July 2021 at the latest. In addition, the AFM points out the requirements on its website and would like to receive the documents as a file in an automatically readable PDF format, not as an image in PDF format created by a copier. Send the assurance report by e-mail to: am_assurancerapporten@afm.nl.

In its supervision, the AFM will pay extra attention to compliance with the timely and correct submission of the asset segregation assurance report. In addition, the AFM may proceed with enforcement if the asset segregation assurance report is not submitted on time or otherwise does not meet the legal requirements.

On 13 May 2021, the Comicion Nacional del Mercado del valores (CNMV) publishes Circular 3/2021 , of May 13, of the Bank of Spain, which modifies Circular 5/2012 regarding the definition of the reference interest rate based on the Euro short-term rate (€ STR) , of June 27, to credit institutions and payment service providers, on transparency of banking services and responsibility in granting loans.

The main objective of this circular is to adapt the definition of the index based on the Euro short-term rate  (€ STR), for the purposes of its consideration as an official rate, included in Annex 8, section six, of Circular 5/2012 , of June 27, to credit institutions and payment service providers, on transparency of banking services and responsibility in granting loans, following the publication of the European Central Bank's Guideline (EU) 2021/565, of 17 March 2021, which modifies Guideline (EU) 2019/1265, on the short-term interest rate of the euro (€ STR) (ECB / 2021/10), which establishes the preparation and daily publication, as of April 15, 2021, of compound average rates based on € STR.

On 27 May 2021, Law 7/2021 on the protection of personal data processed for the purposes of prevention, detection, investigation and prosecution of criminal offenses and the execution of criminal sanctions was published in the Official Journal.

This Law transposes, with general effects from 16 June 2021, Directive (EU) 2016/680 of the European Parliament and of the Council, by which it broadens the scope of application to the national treatment of personal data in the space of the criminal police and judicial cooperation. 

The transposition of this directive implies the establishment of a consistent legal framework, which provides the necessary legal security to facilitate criminal police and judicial cooperation and, therefore, greater efficiency in the performance of their functions by the Security Forces and Bodies and of the criminal justice system as a whole, including the penitentiary.

• Chapter I, general provisions: object, consisting in regulating the processing of personal data for purposes of prevention, detection, investigation and prosecution of criminal offenses or the execution of criminal penalties, including protection and prevention against the threats to public safety.
• Chapter II, principles, legality of treatment and surveillance: the principles of which corresponds to guarantee the responsible treatment are collected. These principles are regulated in terms similar to what is established in the GDPR, with some of their own specialties. A duty of collaboration with the competent authorities is included.
• Chapter III, people's rights: the exercise thereof, as is the obligation of the person responsible to provide the information corresponding to the rights of the interested party in a concise manner, with clear and simple language and free of charge.

On 5 May 2021, the Ministry of Economic Affairs and Digital Transformation published in a public hearing a legislative package that includes the reform of the Securities Market and Investment Services Law, which will make it possible to enhance the competitiveness of market infrastructures and strengthen the supervisory regime applicable to investment services companies.

This legislative package also includes three royal development decrees related to investment services companies; financial instruments, the negotiable securities registration regime and market infrastructures and the supervisory powers of the National Securities Market Commission. The publication of the texts is intended for citizens and operators to present their contributions and comments.

With this set of rules, various community directives are incorporated into the Spanish legal system. First, Directive 2019/2034, on the prudential regime for investment services companies, which improves the operation of these companies and incorporates specific solvency obligations for these entities. 

The standard establishes a prudential supervision regime for these companies, adapting it to the particularities of their business model and taking into account the principle of proportionality. 

Additionally, a classification of investment services companies is included, which will determine the applicable regulations according to the level of total assets, and powers are granted to the CNMV to establish the applicable regime, within certain margins, depending on size, the nature, scale and complexity of the activities of investment firms. A more flexible regime is also contemplated for very small companies that do not involve systemic risk, while maintaining the protection of investors.

Second, the recent changes approved in the MIFID II Directive are incorporated into Spanish regulations, with the aim that investment services favor the recapitalization of European companies and facilitate investments in the real economy. 

To this end, the reform adjusts the administrative requirements and obligations that, in the current context, may be redundant, to facilitate the channeling of savings towards financing, also safeguarding the protection and interests of investors.

It also adjusts the limitation of positions in certain derivatives and the corresponding hedging exemption regime in order to boost new markets denominated in euros. 

Finally, specific modifications are included to the European Union Regulation on the prospectus to be published in securities issues or the EU Regulation on securitizations, among others.

On 26 May 2021, the S.I. 2021 No. 628 - The Sanctions and Anti-Money Laundering Act 2018 (Commencement No. 3) Regulations 2021 was published in the UK legislation.

These Regulations bring into force paragraph 8(4) of Schedule 3 to the Sanctions and Anti-Money Laundering Act 2018 (c.13) (“the Act”). This provides for the repeal of sections 152 to 156 of the Policing and Crime Act 2017 (c. 3).

The powers in section 152 to 156 of the Policing and Crime Act 2017 enabled the government to make temporary provisions to implement United Nations (“UN”) financial sanctions without delay so that, while such sanctions were implemented in the United Kingdom by way of European Union Council Regulations, there was no implementation gap between the UN agreeing the sanctions and the European Union adopting them. 

These powers are no longer necessary since the United Kingdom has withdrawn from the European Union and the powers in the Act enable UN sanctions to be implemented by the United Kingdom directly.

On 27 May 2021, the Financial Reporting Council (FRC) issued revised auditing standard for the auditor's responsibilities relating to fraud.

The revisions to the standard are designed to provide increased clarity as to the auditor's obligations, addressing the concern raised by Sir Donald Brydon in his review of the quality and effectiveness of audit. The revisions include enhancements to the requirements for the identification and assessment of risk of material misstatement due to fraud and the procedures to respond to those risks. 

The revised UK standard is effective for audits of periods beginning on or after 15 December 2021 with early adoption permitted.

The Department for Business, Energy and Industrial Strategy (BEIS) is currently consulting on proposals to restore trust in audit and corporate governance, including statutory requirements for directors to report on the steps they have taken to prevent and detect material fraud and for auditors to report in relation to such a director's statement. The FRC will address these proposals in due course, taking account of the outcome of the BEIS consultation.

On 5 May 2021, the UK Government updated its guidance on open access regime for exchange traded derivatives.

The update aims to explain that the Government intends to permanently remove the open access regime for ETDs.

This decision has no bearing on the UK’s continued support for the open access regimes in equity and OTC derivatives markets, which will continue to operate as normal.

On 11 May 2021, the Financial Conduct Authority (FCA) updated on the changes to regulatory reporting during COVID-19.

Due to the challenges faced by firms and their auditors preparing audited financial statements during COVID-19, the FCA will allow flexibility in the submission deadline for FIN-A (annual report and accounts). For this return only, firms will have an automatic 2-month extension to the deadline for submissions up to and including 31 July 2021.

Firms should note this flexibility is intended to cover the situation where the impacts of COVID-19 have made it impractical to finalize audited financial statements. If firms are able to submit FIN-A on time, then they should do so – and in any event should submit it as soon as they are reasonably able to and no later than 30 September 2021.

On 19 May 2021, the Financial Conduct Authority (FCA) informed that the FCA has completed the move of 52,000 firms and 120,000 users from Gabriel to RegData. 

The FCA expects to hear from firms that have used RegData and invite firms to complete a short survey on their experience of the move and the system.

On 20 May 2021, the Financial Conduct Authority (FCA) informed that the FCA will no longer be accepting Change of Legal Status applications. 

Instead, if a firm think of changing its legal status, the firm will need to submit a New Authorization application, and will also need to cancel the previous entity's permissions.

By making these changes, the FCA’s intention is to improve the process for firms changing their legal status, minimizing any delays to the assessment process.

On 28 May 2021, the Financial Conduct Authority (FCA) published Handbook Notice 88 which describes the latest changes to the FCA Handbook regarding Individual Accountability (Miscellaneous Amendments) Instrument 2021.

On 5 May 2021, the Financial Conduct Authority (FCA) updated the RegData user guide for submitting and managing Alternative Investment Fund Directive (AIFMD) data.

In this guide, firms will find out how to: 

1. Enter data manually online via the AIFMD forms. 
2. Upload an XML with AIFMD data in RegData. 
3. How to amend an AIFMD report that has been submitted?
4. How to cancel an AIFMD report that has been submitted?

On 7 May 2021, the Financial Conduct Authority (FCA) published Consultation Paper CP21/12 - A new authorized fund regime for investing in long term assets.

This consultation will primarily interest:

• asset managers with experience of managing illiquid, long-term assets
• depositaries
• potential investors in long-term asset funds, like pension providers and trustees of defined contribution or hybrid pension schemes, and sophisticated or wealthy investors
• investment advisers and private wealth managers
• insurers who write unit-linked insurance business
• fund distributors.

The FCA hopes that the creation of the Long-Term Asset Fund (LTAF) will overcome issues related to fund structures and help facilitate an environment where investors that wish to invest in productive finance assets can do so.

FCA proposes a flexible regime that aims to offer an appropriate level of investor protection and to address the specific risks of investing in long-term illiquid assets via an open-ended fund. 

Initially, the FCA proposes to restrict distribution of the LTAF to professional investors and sophisticated retail investors. 

The consultation lasts until 25 June 2021.

On 12 May 2021, the S.I. 2021 No. 566 - The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2021was published in the UK legislation.

The CIS Order made under section 235(5) of FSMA prescribes particular arrangements which do not amount to a collective investment scheme. In particular, the Order provides that certain arrangements do not amount to a collective investment scheme. 

• These are arrangements concerning the operation of an electronic system which enables the operator (a firm) to facilitate persons becoming a lender and borrower under an agreement that is subject to certain conditions. The electronic systems which enable lending are commonly referred to as peer to peer lending platforms. 
• In practice, this means that a firm operating a peer to peer lending platform, and which is regulated by the FCA to carry out this type of activity does not need to be regulated by the FCA as an operator of a collective investment scheme.

The purpose of the Order is also to clarify that arrangements with the purpose of continuing the provision of services to a lender and borrower in relation to certain agreements - specifically because the arrangements of the original firm are being wound up - also do not amount to collective investment scheme. 

• In essence, where a firm is being wound up and its lending agreements are transferred to another firm, that other firm will also benefit from the CIS exemption. 
• Similarly, where the lending agreements are transferred to a number of firms, the CIS exemption will apply to all those firms. 
• In addition, if one or more of those subsequent firms is, itself, subject to winding up proceedings, a further firm to which the lending agreements are transferred will also benefit from the CIS exemption.

This legislation applies to activities that are undertaken by very specific businesses across the UK – i.e., firms wishing to take over the loan books of failing peer to peer platforms whose operations are being wound up.

On 28 May 2021, the Financial Conduct Authority (FCA) published Market Watch 67, in which, the FCA discusses how the FCA uses order-book data to help conduct surveillance to identify suspected market manipulation, and share some outcomes resulting from this work.

To identify suspected market manipulation, the FCA uses suspicious transaction and order reports (STORs) and other notifications about suspected market abuse under article 16 of the Market Abuse Regulation (UK MAR).

The FCA also undertakes its own surveillance of market activity, for example using order-book data provided by UK trading venues.

The FCA reviews all STORs and other notifications received and determine the most appropriate action. Although some result in enforcement outcomes, many outcomes are not public. The FCA intends to share outcome case studies in Market Watch, including more non-enforcement outcomes.

FCA’s aim is to help firms and trading venues in ensuring that they identify, report and, where applicable, prevent potential misconduct appropriately. The FCA aims to ensure that individuals, particularly those working for FCA authorized firms, understand the full range of consequences of engaging in inappropriate conduct. 

On 6 May 2021, the Financial Conduct Authority (FCA) updated on its information regarding EBA outsourcing guidelines.

The updated information provides that the EBA notified the EBA that the FCA will comply with the EBA guidelines on outsourcing. The FCA expects firms to continue to comply with the guidelines, to the extent they remain relevant, even though the UK has left the EU.

Firms are not expected to report to the FCA on their progress towards meeting the timeline of 31 December 2021 in the EBA Guidelines regarding legacy outsourcing arrangements. Firms should aim to review any outstanding critical or important outsourcing arrangement at the first appropriate contract renewal following the first renewal date of each existing outsourcing arrangement or revision point. 

Where arrangements of critical or important outsourcing arrangements have not been finalized by 31 March 2022, firms should inform the FCA. This timeframe aligns with that of the FCA’s final operational resilience policy (PS21/3) and the FCA’s approach to these guidelines aligns with that of the PRA. 

On 4 May 2021, the Financial Conduct Authority (FCA) published Consultation paper CP21/11: The stronger nudge to pensions guidance, which lasts until 29 June 2021.

This applies to: 

• providers of pensions
• operators of self-invested personal pensions
• individuals and firms providing advice and information in this area
• distributors of financial products, in particular retirement income products
• trade bodies representing financial services firms
• consumer representative bodies
• charities and other organizations with a particular interest in retirement and/or financial services more generally
• individual consumers.

The FCA’s proposals mean consumers will be given a further opportunity to take Pension Wise guidance, including making the appointment arrangements for them, before they access their pension. This will make it easy for consumers to book an appointment while they are already engaged in a conversation about their pension. The proposals would implement a requirement set by Parliament to encourage consumers to take Pension Wise guidance.

The FCA is proposing that when a consumer has decided, in principle, how to access their savings, a provider must:

• refer the consumer to Pension Wise guidance
• explain the nature and purpose of Pension Wise guidance
• offer to book an appointment, and where the consumer accepts the offer, book the appointment or provide the consumer with sufficient information to book their own appointment.

On 26 May 2021, the S.I. 2021 No. 609 - The International Accounting Standards (Delegation of Functions) (EU Exit) Regulations 2021 was published in the UK legislation.

These Regulations delegate the responsibility for the adoption of international accounting standards for use within the United Kingdom from the Secretary of State to the UK Accounting Standards Endorsement Board (“the UK Endorsement Board”).

The UK Endorsement Board must have satisfactory arrangements for— 

(a) recording decisions made in the exercise of the functions transferred by these Regulations, and 

(b) the safekeeping of the records of those decisions.

On 10 May 2021, the UK Government published updated on UK Emissions Trading Scheme markets.

The UK Emissions Trading Scheme (UK ETS) went live on 1 January 2021, replacing the UK’s participation in the EU ETS. Under the Ireland/Northern Ireland Protocol, electricity generators in Northern Ireland remained within the EU ETS. 

The information from UK Government:

• explains the supply of allowances in the UK ETS in the early years of the scheme.
• sets out background information on the functioning of the auctions and secondary market, free allocation, and the market stability mechanisms that the ETS Authority has in place to support smooth market operation. 
• signals that the UK ETS Authority will monitor the market closely as it develops and will actively consider at the earliest opportunity actions to support smooth market operation.

On 19 May 2021, the S.I. 2021 No. 561 - The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2021 was published in the UK legislation.

This instrument amends the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021 (“the Auctioning Regulations”).

The Auctioning Regulations make provision for the auctioning of emissions allowances to emit 1 ton of carbon dioxide equivalent under the UK Emissions Trading Scheme (the UK ETS) and introduce mechanisms to support market stability in this new scheme. The UK ETS was established by the Greenhouse Gas Emissions Trading Scheme Order 2020 (the UK ETS Order). 

This amending instrument clarifies the policy intent in the Auctioning Regulations as regards the establishment of those who are permitted to represent bidders in UK ETS auctions. Particularly the instrument:

• removes the requirement that a natural person be established in the United Kingdom in order to submit, modify or withdraw a bid.
• ensures that those eligible to be admitted to bid who may be outside of the United Kingdom are able to comply with the information requirements which form part of the application process under Auctioning Regulations.

On 7 May 2021, Monaco published Sovereign Ordinance No.8.635 of April 29, 2021 implementing law No.214 of February 27, 1936 revising law No.207 of July 12, 1935 on trusts, as amended.

The Ordinance defines the conditions under which a legal construction is considered as a trust.

The entry in the trust register referred to in article 11 of law No.214 of February 27, 1936, amended, above, must be made with the service in charge of the trust register within one month from the constitution, modification or termination of a trust or any equivalent legal structure.

The provisions of the preceding article are applicable to trustees and to all persons occupying an equivalent function in legal arrangements similar to the trusts referred to in the second paragraph of article 11 of law No.214 of February 27, 1936, as amended, referred to above, who are required to register in the trust register within one month of the acquisition of the property or the establishment of the business relationship in the territory of the Principality.

Trustees and all persons occupying an equivalent function in legal arrangements similar to trusts, registered in the trust register, should inform the service in charge of the trust register at the latest one month after the end of the trust or after the reasons for registration referred to in Article 11 of Law No.214 of February 27, 1936, amended, referred to above, have ceased to exist.

On 28 May 2021, the Brazilian Financial and Capital Markets Association (ANBIMA) informed on the National Money Laundering and Terrorist Financing Risk Assessment report.

According to this report, Brazil's financial and capital markets have low vulnerability to the risks of money laundering and terrorist financing.

The overall assessment was positive. The fund industry has several aspects and is quite complex, over the past few years the market has made the best efforts in the search to improve its money laundering and terrorist financing processes, and has managed to evolve.

On 11 May 2021, the Comissão de Valores Mobiliários (CVM) published CVM Resolution 30 on the duty to verify the adequacy of products, services and operations to the client's profile.

The rules provided for in this Resolution are applicable to the recommendations of products or services, directed to specific clients, carried out through personal contact or with the use of any means of communication, whether in oral, written, electronic form or through the worldwide network of computers, and must be adopted for the client holding the application.

Persons qualified to act as members of the distribution system and securities consultants cannot recommend products, carry out operations or provide services without checking their suitability for the client's profile. These persons must verify that:

I - the product, service or operation is adequate to the client's investment objectives;

II - the client's financial situation is compatible with the product, service or operation; and

III - the client has the necessary knowledge to understand the risks related to the product, service or operation.

On 19 May 2021, the Comissão de Valores Mobiliários (CVM) published CVM Resolution 31 concerning central securities depository services, which repeals CVM Instruction 541 of 20 December 2013.

The following are considered participants of the central depository:

• custodians, the legal entities authorized by the CVM to provide the services of custody of securities, for investors or for issuers
• as bookkeepers, the legal entities authorized by the CVM to provide the services securities bookkeeping
• trading systems, clearing and settlement systems for transactions and other central depositories with which the central depositary maintains a contractual link.

 The central depository must adopt and implement:

• adequate and effective rules for complying with the provisions of this Resolution
• procedures and internal controls in order to verify the implementation, application and effectiveness of the rules.

The central depository must maintain, for a minimum period of 5 years all documents and information required by this Resolution.

On 19 May 2021, the Comissão de Valores Mobiliários (CVM) published Resolution 32 on the provision of custody services for securities, which repeals CVM Instruction No. 542 of 20 December 2013.

This Resolution:

I - does not apply to positions held in derivatives markets; and

II - applies to financial bills and other instruments that in the case of public distribution are subject to the competence of the CVM.

The provision of securities custody services comprises:

I - in the case of providing services to investors:

a) the conservation, control and reconciliation of the positions of securities in custody accounts held in the name of the investor

b) the treatment of handling instructions received from investors or persons legitimized by contract or mandate; and

c) the treatment of events on the securities in custody

II - in the case of providing services to issuers:

a) the physical custody of non-book entry securities; and

b) the implementation of the procedures and registries necessary for the execution and application of the securities under central deposit regime.

The custodian must maintain, for a minimum period of 5 years all documents and information required by this Resolution.

On 19 May 2021, the Comissão de Valores Mobiliários (CVM) published CVM Resolution 33 on the provision of securities bookkeeping services and the issuance of securities certificates, which repeals the CVM Instruction 543 of 20 December 2013.

This Resolution:

I - does not apply to positions held in derivatives markets; and

II - applies to:

a) in the case of public distribution, to instruments that in this situation are subject to competence of the CVM; and

b) in the case of centralized deposit, to securities issued exclusively in the form of book entry, through registration in systems authorized to do so.

The provision of securities bookkeeping services comprises:

I - the opening and maintenance, in computerized systems, of registration books, as provided for current regulations;

II - the registration of information related to the ownership of securities, as well as rights real fruition or guarantee and other encumbrances on the securities;

III - the treatment of handling instructions received from the security holder or from person legitimized by contract or mandate;

IV - the implementation of the procedures and records necessary for the execution and application of the  securities, when applicable, under the centralized deposit regime; and

V - the treatment of events on the securities.

The provision of services for the issuance of securities certificates comprises:

I - the issuance, alteration, substitution and cancellation of certificates representing the securities received on deposit; and

II - control and confirmation of the origin and legitimacy of securities certificates.

The bookkeeper must maintain for a minimum period of 5 (five) years all documents and information required by this Resolution.

On 19 May 2021, the Comissão de Valores Mobiliários (CVM) published Resolution 34 on the provision of securities lending services by clearing houses and service providers for clearing and settlement of securities transactions.

Only clearing houses and providers of securities clearing and settlement services authorized by the CVM can maintain securities lending services.

The policy of securities lending service must include, at a minimum:

I  - the borrower's commitment to settle the loan by delivering securities of the same type and quality as the borrowed security;

II - the treatment to be given to the rights inherent to the securities used in the loan operation;

III - the obligation of the borrower to offer a guarantee to the clearinghouse or to the service provider of clearing and settlement, in an amount sufficient to ensure the settlement of its operations;

IV - the option of the entity providing the securities lending service to require the delivery of additional guarantees, at any time and according to the criteria established in its policy;

V - description of the method for calculating and updating the value of the guarantees to be presented by the policyholder;

VI - the option of the entity providing the securities lending service to carry out guarantees, regardless of judicial or extrajudicial notification, when the policyholder ceases to meet obligations arising from this operation, pursuant to the policy; and

VII - the form of loan remuneration and the collection of fees and charges.

On 26 May 2021, the Comissão de Valores Mobiliários (CVM) published Circular CVM/SIN 02/21 on the guidelines for market administrators and intermediaries.

The circular highlights the importance that these participants adopt procedures and controls in order to ensure effectiveness:

• of the penalties of temporary prohibition of carrying out any type of transaction in the securities market applied by the CVM and 
• of the commitments assumed under Terms of Commitment with CVM.

Therefore, market administrators and intermediaries must adopt controls so that persons convicted by CVM in this regard are prevented from carrying out operations in the securities market during the term of the penalty or commitment assumed, except for termination of open positions before the ban came into effect.

On 11 May 2021, the Comissão de Valores Mobiliários (CVM) published CVM Resolution 29 on the rules for the constitution and operation of an experimental regulatory environment (regulatory sandbox).

This Resolution regulates the constitution and functioning of the regulatory environment (regulatory sandbox), in which participating legal entities can receive temporary authorizations to test innovative business models in in regulated securities market activities under CVM.

The process of admitting participants in the regulatory sandbox must begin through notice to the market, published on the CVM website, which should indicate:

I - the schedule for receiving and analyzing proposals; and

II - the eligibility criteria and the required content of the proposals to be submitted, as well as  the applicable selection and prioritization criteria.

The minimum eligibility criteria for participation in the regulatory sandbox are :

I - the regulated activity must fit into the concept of an innovative business model;

II - the proponent must demonstrate that he has sufficient technical and financial capabilities to develop the intended activity in an experimental regulatory environment;

III - the proponent's direct or indirect controlling shareholders and controlling shareholders may not:

a) be disabled or suspended for the exercise of their position in financial institutions and other entities authorized to operate by regulatory bodies;

b) have been convicted of bankruptcy, malfeasance, corruption, concussion, embezzlement, money laundering or concealment of goods, rights and values, against the popular economy, the order consumer relations, public faith or public property, the national financial system, or the criminal penalty that prohibits, even temporarily, access to public offices, except for the hypothesis of rehabilitation; and

c) be prevented from managing their assets or disposing of them due to a judicial or administrative decision.

On 14 May 2021, the Brazilian Financial and Capital Markets Association (ANBIMA) published the new rules for the transparency to the remuneration for the sale of investment products.

Main changes of the rules are as followings:

• Institutions must disclose a document that explains the services provided in the commercialization of products, the forms of remuneration and their limits of action. For example, a percentage of the management fee or the performance fee, spread by the trade or distribution fee;
• It must be made clear whether the remuneration of the professional who serves the client (such as the manager, self-employed agent or advisor) is impacted according to the product distributed;
• The criteria for choosing the investments recommended in the portfolio, potential conflicts of interest in the offer of products and the actions taken to mitigate them must be informed;
• The language must be clear and accessible and the material must be a maximum of two pages;
• It is necessary to update the document whenever there are changes, or in a maximum of two years;
• The material must be made public on the institution's website so that everyone can consult it.

On 31 May 2021, the Brazilian Financial and Capital Markets Association (ANBIMA)published the final revised Liquidity Risk Rules for Investment Funds.

The main changes include:

1. Responsibilities of service providers

• Further definition of the responsibilities of the manager and administrator in the stages of liquidity management. 
• While the former is responsible for the analysis of management risk, it is up to the administrator to check the manager's controls to ensure that everything has been done in the best way.
• The manager also has more flexibility when it comes to defining the fund's liquidity management policy. It must inform ANBIMA, through its policy, the minimum parameters used, such as indexes, methodology and criteria for preventive evaluation.

2. Liability metrics

• Managers should consider when analyzing the fund's liabilities: the value of expected redemptions under normal market conditions; the degree of concentration of quotas per investor; the terms for settlement of redemptions; and the degree of concentration of allocators, distributors and / or other resource managers in the fund.
• “redemption probability matrix” includes fixed income funds, multi-markets, stocks, social security and foreign exchange. 

3. Asset metrics

• The characteristics of the assets, the strategies used and their behavior in the market must be taken into account. 
• Mitigating and aggravating impacts that may influence the liquidity of the funds should also be included in the policy.

On 6 May 2021, the Brazilian Financial and Capital Markets Association (ANBIMA) informed that updated Public Offering Code and the Rules and Procedures for the classification of Certificates of Real Estate Receivables (CRIs) and Agribusiness Receivables Certificates (CRAs) are in application.

Institutions associated and adhering to the code have 15 days to adapt the registration of new offers. In order to comply with the new standard, it will be necessary to provide information on the guarantees and risks involved in all documents for CRIs and CRAs offerings, such as prospectuses, advertisements, notices and notices to the market, in addition to advertising materials.

The update of the Public Offerings Code also presents two other new features. 

• One of them is the improvement of the rules aimed at fiduciary agents, with the inclusion of information requirements and minimum documents on the guarantees involved in the offers for the effective fulfillment of their responsibilities.
• The second one is the clarification on the obligation of the securitizers. When carrying out the distribution of bonds and securities derived from their own offerings, these houses must also comply with the rules of the Distribution Code.

On 18 May 2021, the Brazilian Financial and Capital Markets Association (ANBIMA) proposed to amend the document Rules and Procedures for ANBIMA Seals, which details the processes required for the use of seals by institutions that follow ANBIMA's codes of best practices.

The use of the ANBIMA's seals demonstrates the commitment of financial institutions to complying with self - regulation rules and procedures . 

The main changes are: the creation of the Standardized Debenture Seal in the Public Offering Code, with the objective of implementing good practices in the standardized debenture segment, and the mandatory use of seals in advertising materials . Currently, institutions are required to use them only in commercial proposals.

On 26 May 2021, the Comissão de Valores Mobiliários (CVM) published Resolution 35 on rules and procedures to be observed in the intermediation of transactions carried out with securities in regulated markets. This Resolution does not apply to commodity brokers, whose activities are regulated in a specific rule.

The intermediary must adopt and implement:

I – adequate and effective rules for compliance with the provisions of this Resolution ; and

II – procedures and internal controls with the objective of verifying the implementation, application and effectiveness of this Resolution.

The Resolution concerns following aspects:

• Registration of clients
• Transmission of Orders
• Recording of Orders
• Execution of Orders
• Identification of the final investor
• Persons related to the intermediary
• Transfer of transactions
• Payment and receipt of amounts
• Financing for the purchase and lending of shares
• Rules of conduct
• Business continuity plan
• Information security

Intermediaries must keep, for a minimum period of 5 years, or for a longer period determined by the CVM, all documents and information required by this Resolution, as well as all correspondence, papers of work, reports and opinions related to the exercise of its functions, whether physical or electronic, as well as the full recordings, the audit reports, and the records of the origins of the orders. 

On 28 May 2021, Colombia and the World Bank signed an agreement to support the development of a sovereign debt securities fund in the local market.

Colombia's Ministry of Finance and Public Credit and the World Bank signed a cooperation agreement to take the first step in launching an Issuer-Developed Exchange Traded Fund (ID-ETF).  

The ID ETF program is a global initiative designed by the World Bank to support the development of local bond markets and promote financial stability in emerging economies. The ID ETF also seeks to democratize access to capital markets and increase competitiveness through financial services. 

An exchange traded fund is a Collective Investment Fund whose purpose is to replicate or track an index, through the constitution of a portfolio or basket of assets and operates as a stock on the stock exchange. Like any stock, the units of the exchange-traded fund are listed and traded on the stock exchange.  

This innovation has the direct participation of the securities issuer, allowing the national government to design and align the tool with market development objectives. Local currency debt securities are particularly important for financing fiscal needs without incurring foreign exchange risks and increasing the flow of financing in the long term. The introduction of this exchange-traded fund seeks to increase the liquidity and transparency of securities at a lower cost, improving price discovery and diversifying the investor base. 

On 31 May 2021, the Unidad de Proyección Normativa y Estudios de Regulación Financiera (URF) published a presentation on the New Framework for Colombian Institutional Investors.

The main objectives are the following: 

1) Pension funds

• Adjust the management scheme of multiple funds to improve the long-term risk-adjusted return of workers
• More and better risk profiles: Increase the number of existing funds (today there are only three) to allow better risk profiling of workers
• Incentives: Elimination of short-term obligations that are not consistent with the long-term duration of savings (Minimum profitability requirement and the reserve that supports its fulfillment)
• Promote Competition: Encourage competition in price and service among the AFPs with competitive mechanisms that promote the arrival of new managers and a better distribution of market shares.

2) Insurance companies

• Improve the portfolio management according to their characteristics
• Eliminate the eligible assets and investment limits from the law
• Allow companies to make their strategic asset allocation (SAA) in accordance with the characteristics of their business.

On 28 May 2021, Banco de la República published a Circular DOAM-316 of 28 May 2021: Clearing Houses, their Operators and Authorized Operations in the Foreign Exchange Market.

This Circular replaces sheets 18-2, 18-5, 18-6, 18-A1-1 and 18-A1-10 of External Regulatory Circular DOAM-316 of 25 September 2020, corresponding: "Clearing houses, their operators and the operations authorized in the foreign currency market" of the Manual of the Operations and Market Analysis Department.

The modification is made in development of the provisions of External Resolution 5 of 2021, which modifies External Resolution 12 of 2008 of the Board of Directors of Banco de la República, to authorize the central counterparties to perform the clearing and settlement as counterparty of FX - swaps operations, as well as to perform the settlement with effective compliance of the exchange derivatives contracts authorized to such entity, with the exchange of Colombian legal currency for dollars.

On 10 May 2021, the SFC published Circular 008 - Instructions related to the voluntary pension fund management activity.

This circular aims to:

• update the legal framework in order to adopt high standards of professionalism for management companies, as well as mechanisms for disclosure of information to shareholders for informed decision-making and 
• modifying the procedures for the constitution and authorization of the voluntary pension funds.

I. Main changes relates to:

1. the instructions regarding voluntary pension funds
2. the investment regime of disability and survivorship pension funds
3. instructions and Proformas B.6000-11 and B.6000-12, relative to the extracts sent to the participants of voluntary pension funds .
4. technical file of the voluntary pension fund portfolios and incorporation the corresponding proforma.
5. minimum contents of the operating regulations for voluntary pension funds
6. instructions relative to the contributions of low amount in voluntary pension funds
7. business registration module, the typology of the portfolios of voluntary pension funds and their custody
8. administration of voluntary pension funds by insurance entities
9. special obligations for the custody of securities in the portfolios of voluntary pension funds, as well as their typology within the classification of securities custody activities .
10. calculation of the value and profitability of the portfolios of voluntary pension funds
11. modification of the instructions for Format 524 (Proforma F. 000 0-156) “Reporte de ingresos percibidos por comisiones” in relation to the codification of the concepts due to the accrual of commissions.
12. modification of the Form 535 (Proforma F. 7000-20) " Incumplimientos y/o posibles incumplimientos evidenciados por los custodios en desarrollo de las operaciones que realizan los FICs y portafolios de los fondos voluntarios de pensión" to incorporate the report of non-compliance evidence by custodians in developing operations portfolios the voluntary pension funds.
13. modification of the instructions for Format 351 (Proforma F.0000-110) “Composición el portafolio de inversiones" in order to include the obligation to report the composition of the portfolios of voluntary pension funds.
14. Reformatting of Format 314 (Proforma F.0000-101) “Profitability of the portfolio (in terms of annual effective" in order to update the formula for calculating the profitability of the portfolios.

II. Transitional period: 

• The management companies must:
  o submit the modifications to the regulations of the existing retirement and disability pension funds no later than 25 May 2021.
  o register in the business registration module the portfolios created or modified, as a consequence of the approval of the new regulations no later than 31 December 2021. 
• The first publication of the portfolio prospectuses, according to the new instructions must be made no later than 1 January 2022.
• The first publication of the technical sheet of the portfolios, according to the modifications, must be made with the information from the cut-off of December 2021, on the reporting date established in the corresponding instructions.
• The first remission of the modified extracts must be made with the information for the quarter ending in March 2022, on the remission date established in the corresponding instructions.
• The first submission of the accountability report, according to these amendments, must be made with the information for the semester ending in December 2021, on the submission date established in the corresponding instructions.
• The first publication of information on the management company's website, according to the new instructions, must be made no later than 1 January 2022.

III. Implementation plan:

• No later than 30 June 2021, the management companies must submit a plan for the implementation of the new instructions, which should include a monthly work schedule monthly to enable them to monitoring progress in its implementation.
• Additionally, no later than 30 September 2021, the management companies must send a document in which they explain the structure defined for the resource management scheme through plans, alternatives and portfolios.
• The submission of the information of Forms 314 and 351, according to the, must be made as of 1 January 2022.
• The requirement regarding the custody of the securities representing the investments of the voluntary pension fund portfolios must be implemented no later than 31 December 2021. 
• Additionally, the submission of the information of Form 535 for the portfolios of the voluntary pension funds must be made as of 1 January 2022.

On 11 May 2021, the U.S. Securities and Exchange Commission (SEC) published a staff statement on Funds Registered Under the Investment Company Act Investing in the Bitcoin Futures Market. 

The Division of Investment Management (“IM”) staff strongly encourages any investor interested in investing in a mutual fund with exposure to the Bitcoin futures market, as discussed below, to carefully consider the risk disclosure of the fund, the investor’s own risk tolerance, and the possibility, as with all investing, of investor loss. Among other things, investors should understand that Bitcoin, including gaining exposure through the Bitcoin futures market, is a highly speculative investment. As such, investors should consider the volatility of Bitcoin and the Bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying Bitcoin market. As with any fund investment, investors should focus on the level of risk they are taking on, and the level of risk they are comfortable taking on, prior to making an investment.

On 7 May 2021, the U.S. Securities and Exchange Commission (SEC) approved the registration of DTCC Data Repository (DDR), its first security-based swap data repository (SDR).

The approval will allow for the first time security-based swap transactions in the equity, credit, and interest rate derivatives asset classes.

Regulation SBSR, which governs regulatory reporting to registered SDRs and public dissemination of security-based swap transactions, is a major component of the security-based swap regulatory regime established by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act 2011.

DDR’s go-ahead to operate as a registered security-based swap data repository (SBSDR) is a key step in completing the implementation of derivatives oversight in the US. Dodd-Frank’s Title VII divided the regulatory oversight of derivatives between the SEC for security-based swaps and the Commodity Futures Trading Commission for all other swaps.

On 17 May 2021, the Association for Financial Markets in Europe (AFME), FIA, the International Capital Market Association (ICMA), the International Swaps and Derivatives Association, Inc. (ISDA) and the International Securities Lending Association (ISLA) jointly published a statement to help market participants comply with requirements under Article 15 of the UK Securities Financing Transactions Regulation. 

The Information Statement informs users of the general risks and consequences that may be involved in consenting to a right of use of collateral provided under a security collateral arrangement or of concluding a title transfer collateral arrangement (for example, the GMRA).

Information Statement should be used by firms who have entered into or may hereafter enter into one or more title transfer collateral arrangements or security collateral arrangements containing a right of use (together, "Collateral Arrangements") with the associations.

This Information Statement has been prepared to comply with Article 15 of the UK Securities Financing Transactions Regulation by informing firms of the general risks and consequences that may be involved in consenting to a right of use of collateral provided under a security collateral arrangement or of concluding a title transfer collateral arrangement.

On 20 May 2021, the United Nations Environment Programme – Finance Initiative (UNEP FI) published Investor Climate Action Plans (ICAPs) Expectations Ladder and Guidance.

This is a new tool to enable institutional investors to step up action to tackle the climate crisis and accelerate the transition to a net-zero economy. 

The ICAPs Expectations Ladder summarizes the key climate actions investors can take in the four interlocking areas of the Investor Agenda: investment, corporate engagement, policy advocacy, and investor disclosure. Governance is a cross-cutting theme across all four areas. The areas include: 

• Investment: Manage climate risks in investor portfolios and shift capital to value-creating businesses set to succeed in a net-zero future.
• Corporate Engagement: Engage companies to drive climate action and demonstrate real progress in line with a 1.5-degree Celsius future. 
• Policy Advocacy: Advocate for policies aligned with delivering a just transition to a net-zero economy by 2050 or sooner. 
• Investor Disclosure: Enhance investor disclosure to help stakeholders track investor climate action in line with a 1.5-degree Celsius pathway. 

Investors can use the ICAPs Expectations Ladder in several ways including: 

• Assessing their current approach to managing climate change risk and opportunity
• Publishing a standalone ICAP
• Embedding elements of the ICAPs into their climate change strategies and disclosures.
• Communicating their current activities and future plans to stakeholders.

The ICAPs Expectations Ladder is designed to be relevant to all institutional investors, including asset owners and active and passive asset managers.