On 9 November 2020, the European Banking Authority (EBA) updated the compliance table of the Joint Guidelines on cooperation and information exchange for the purpose of Directive (EU) 2015/849 between competent authorities supervising credit and financial institutions:

• 20 competent authorities will comply 
• 13 competent authorities intend to comply.

On 25 November 2020, the European Securities and Markets Authority (ESMA) released a public statement that clarifies the application of the European Union’s (EU) trading obligation for derivatives (DTO) following the end of the UK’s transition from the EU on 31 December 2020.

The statement clarifies that the DTO will continue applying without changes after the end of the transition period. ESMA considers that the continued application of the DTO would not create risks to the stability of the financial system. The statement confirms the approach outlined in ESMA’s previous statement in March 2019.

ESMA acknowledges that this approach creates challenges for some EU counterparties particularly UK branches of EU investment firms. However, ESMA considers that EU counterparties can meet their obligations under the DTO by trading on EU trading venues or eligible trading venues in third countries, and this situation is primarily a consequence of the way the UK has chosen to implement the DTO.

Based on the current legal framework, and in the absence of an equivalence decision by the European Commission, ESMA does not see room for providing different guidance.
ESMA will continue to closely monitor the situation to assess whether markets would be sufficiently liquid for the purpose of the DTO after the end of the transition period.

On 26 November 2020, the Commission Implementing Decision (EU) 2020/1766 of 25 November 2020 determining, for a limited period of time, that the regulatory framework applicable to central securities depositories of the United Kingdom of Great Britain and Northern Ireland is equivalent in accordance with Regulation (EU) No 909/2014 of the European Parliament and of the Council was published in the Official Journal of the European Union (OJ).

For the purposes of Article 25 of Regulation (EU) No 909/2014, the legal and supervisory arrangements of the United Kingdom of Great Britain and Northern Ireland applicable to central securities depositories already established and authorized in the United Kingdom of Great Britain and Northern Ireland shall be considered to be equivalent to the requirements laid down in Regulation (EU) No 909/2014 during a period of six month, from 1 January 2021 to 30 June 2021.

Here are three statements on Brexit from the ESMA.

1. On 9 November 2020, the European Securities and Markets Authority (ESMA) published an update of its statement on issues affecting EMIR and SFTR reporting following the end of the UK transition period on 31 December 2020 published in 1 February 2019. 

In this regard, the CSSF published a press release to declare that it expects counterparties to follow the clarifications provided in ESMA’s statement.

In this context, the CSSF wants to draw the attention of counterparties falling under the scope of EMIR, to specific elements provided in the ESMA’s statement, as indicated below.

EU counterparties and CCPs should report the conclusion of derivatives to an EU TR or an EU recognized TR when they have a reporting obligation in accordance with Article 9 of EMIR.

Following the end of the transition period, UK financial counterparties are no longer responsible for the reporting of OTC derivatives subject to mandatory allocation of responsibility for reporting under Articles 9(1a) to 9(1d) of EMIR. From 1 January 2021, the EU counterparties become responsible for the reporting of those derivatives. EU NFC are required to do so unless the condition relating to equivalence in the last sub-paragraph of Article 9(1a) of EMIR with regards to the UK counterparty becomes applicable.

Similarly, the CSSF wants to draw the attention of the counterparties falling under the scope of SFTR, to specific elements provided in the ESMA’s statement, as indicated below.

EU counterparties and EU branches of third-country counterparties should report the conclusion of SFTs to an EU TR or an EU recognized TR when they have a reporting obligation in accordance with Article 4 of SFTR.

Following the end of the transition period, UK counterparties and UK branches of third-country counterparties are no longer responsible for the reporting of SFTs subject to mandatory allocation of responsibility for reporting under Article 4(3) of SFTR. From 1 January 2021, the EU counterparties and EU branches of third-country counterparties become responsible for the reporting of those SFTs.

The CSSF recommends that:

a. counterparties currently reporting to UK TRs are ready to ensure continuity of their reporting obligation by reporting to a TR registered or recognized in the EU, at the latest by 31 December 2020, in accordance with the principles laid down in the ESMA’s statement;

b. counterparties currently benefiting from the mandatory allocation of responsibility for reporting under Articles 9(1a) to 9(1d) of EMIR or Article 4(3) of SFTR, towards UK entities, are ready to assume their reporting obligation as from 1 January 2021.

2. On 9 November 2020, the European Securities and Markets Authority (ESMA) issued a statement on Brexit Data Operational Plan. 

This statement complements the statement on the use of UK data in ESMA’s databases and performance of MiFID II calculations after the end of the transition period on 31 December 2020, and provides further details related to the operational use of ESMA’s IT systems during

the period following the end of the transition period on 31 December 2020. Following the end of the transition period on 31 December 2020, the submission of UK data to ESMA will cease, starting from 1 January 2021, as EU law will no longer apply to, and in the UK. Consequently, ESMA is currently preparing its IT systems and databases to continuefunctioning for the EU27, without UK data.

ESMA will perform several actions from 31 December 2020, some of which may have a direct or indirect impact on external stakeholders that exchange data with ESMA. The purpose of this document is therefore to provide information and instructions, where needed, to market

participants on operations just after 31 December 2020.

This statement covers the actions related to the following systems:

• Financial Instruments Reference Data System (FIRDS);
• Financial Instrument Transparency System (FITRS);
• Double Volume Cap System (DVCAP);
• Transaction reporting systems; and
• ESMA’s registers and data.

Finally, this statement also sets out ESMA’s further communication plan to external stakeholders.

3. On 9 November 2020, the European Securities and Markets Authority (ESMA) issued a statement to inform the public of ESMA’s approach for the various ESMA databases and IT-systems, including the transparency calculations, after the end of the UK transition period on 31 December 2020.

This statement builds on earlier statements on the publication of databases and IT-systems published on 5 February 2019, including the update on 28 March 2019, and on 7 October 2019 informing the public of ESMA’s approach for the various databases and IT-systems in case of a no deal Brexit.

With the end of the transition period on 31 December 2020, the UK Financial Conduct Authority (FCA) will stop sending data to ESMA and will no longer have access to ESMA’s IT applications and databases, as EU law will no longer apply to, and in the UK. Starting from 1 January 2021 no new UK-related data will be received and processed by ESMA nor published on the ESMA website.

This updated statement informs stakeholders on ESMA’s approach to all ESMA IT applications and databases after the end of the transition period and focuses in particular on the MiFID II/MiFIR publications performed by the various ESMA databases (Financial Instruments Reference Database (FIRDS), Financial Instruments Transparency System (FITRS), double volume cap mechanism data (DVC system)) as well as the annual ancillary activity calculations. Should there be further changes to the timing and conditions of the future relationship between the UK and the EU, ESMA will adjust the approach for ESMA’s IT applications and databases and will inform the public of the adjusted approach as soon as possible

On 26 November 2020, the European Union informed on ECA  Special Report No 25/2020 ‘Capital Markets Union – Slow start towards an ambitious goal’ published on 11 November 2020.

The European Court of Auditors hereby informs that Special Report No 25/2020 ‘Capital Markets Union – Slow start towards an ambitious goal’ has just been published. The report can be accessed for consultation or downloading on the European Court of Auditors’ website: eca.europa.eu

On 5 November 2020, the European Securities and Markets Authority (ESMA) publishes a report on CSDR Internalised Settlement.

The Report on internalised settlement presents the findings related to the settlement activity which does not take place through a securities settlement system operated by a CSD in the EEA. It takes into account the responses to the ESMA survey on internalised settlement conducted in June and July, and also includes an analysis of the internalised settlement data based on the quarterly reports sent by settlement internalisers under Article 9 of CSDR for the period Q2 2019 – Q3 2020.

While no major risks have been identified during the period covered by the report, NCAs have identified some risks related to this activity, the most common being operational risk and custody risk, which could be mitigated through adequate identification of the clients’ accounts involved, and the improvement of operational processes.

The challenges encountered when implementing the internalised settlement reporting regime seem normal in terms of any new reporting requirements. ESMA, to support the implementation process, has provided additional clarifications through supervisory convergence measures, including the ESMA Guidelines on internalised settlement reporting, as well as Q&As.

ESMA considers that custodians’ clients should be informed of the risks and costs associated with internalised settlement, and highlights the importance of continuing to monitor internalised settlement, in order to assess if this activity should be regulated in the future.

On 5 November 2020, the European Securities and Markets Authority (ESMA) published a report covering central securities depositories’ (CSDs) cross-border services and handling of applications.

The Report on cross-border services and handling of applications highlights the findings related to the provision of services by CSDs in other Member States, and considers the responses to the ESMA survey addressed to National Competent Authorities (NCAs), CSDR relevant authorities and trade associations, in June and July. The report also uses the data collected by ESMA to determine the substantial importance of a CSD for host Member States. 

The CSDs’ cross-border activity has been measured through the study of the links established between European Economic Area (EEA) CSDs and of the services provided to participants and issuers from other Member States. No major variations in the provision of cross-border services have been detected since the entry into force of CSDR, but most respondents do foresee a potential increase in the coming years. They have also pointed out challenges, in particular linked to the application process to provide notary and central maintenance services in relation to securities constituted under the laws of other Member States, as set out under Article 23 of CSDR. The Report includes suggestions to simplify the existing process.

On 25 November 2020, the European Parliament (EP) adopted the amendments to the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU as regards information requirements, product governance and position limits to help the recovery from the COVID-19 pandemic.

• The overall aim of the amendments will remove unnecessary red tape and make temporary exceptions that are deemed effective in order to mitigate the economic turmoil. The amendments should avoid making changes that result in more burdens on the sector and leave complex legislative questions to be settled during the planned review of MIFID II.
• To better enhance investor protection, it is critical that the debt level of retail investors is taken into account in the suitability assessment, in particular given the rising level of consumer debt due to the COVID-19 pandemic. Furthermore, certain requirements in Directive 2014/65/EU could be amended to facilitate the provision of investment services and the performance of investment activities provided that the amendment is done in a balanced way which fully protects investors. 
• The Commission should come forward with a report on the impact of the application of position limits and position management on liquidity, market abuse and orderly pricing and settlement conditions in commodity derivatives markets, as provided for in this Directive.
• Directive 2014/65/EU allows persons that trade in commodity derivatives, emission allowances and derivatives on emission allowances on a professional basis to make use of an exemption from authorisation as an investment firm when their trading activity is ancillary to their main business. Those persons applying for the ancillary activity test are required to notify the relevant competent authority annually that they make use of that possibility and to provide the necessary elements to satisfy the two quantitative tests that determine whether its trading activity is ancillary to its main business. Those quantitative tests should remain the baseline rule for the ancillary activity exemption. As an alternative, national supervisory authorities should be able to be authorized to rely on qualitative elements, subject to clearly defined conditions. ESMA should be empowered to provide guidance on the circumstances under which national authorities could apply a qualitative approach, as well as to develop draft regulatory technical standards on the qualitative criteria. 
• The changes to the position limit regime are designed to support the development of new energy contracts, in particular in the electricity market, and do not seek to relax the regime for agricultural commodity contracts.
• The aim of the amendments should be to make temporary exceptions and remove clear red tape in order to mitigate the economic crisis; the amendments should therefore avoid opening up more complex issues of the legislation which could risk causing more burdens for the sector. Larger changes to the legislation should first be re-evaluated in the planned review of MiFID II.

The next step is for the Council of the EU to adopt the proposed Directive.

Here are two reports from the European Parliament on the securitisation framework during the COVID-19 crisis.

1. On 10 November 2020, the European Parliament published a report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards adjustments to the securitization framework to support the economic recovery in response to the COVID-19 pandemic.

Main amendments by the European Parliament to the Commission proposal are as followings:

• In order to be consistent with the Basel III framework, an unregulated provider of unfunded credit protection is required to have credit quality step 2 at inception and credit quality step 3 thereafter.
• A specific treatment for the securitization of NPEs should therefore be introduced building on the EBA Opinion and taking due account of the Union specificities of the NPE securitization market and the market for NPEs as well as of the developments in the international standards for exposures to NPE securitizations. To allow for the due assessment of the relevant Basel standard once it is published, the Commission should be mandated to review the prudential treatment of NPE securitizations.
• Since the market for NPEs is very likely to grow and change quite substantially as a result of the COVID-19 crisis, it is deemed appropriate to continue monitoring closely the NPE securitization market and to reassess the framework in the light of a potentially larger pool of data. Therefore, a mandate should be included in Article 519aa for the EBA to monitor the NPE securitization market and to submit a report to the European Parliament and the Commission on the convenience of reviewing the regulatory capital treatment of NPE securitizations, having regard to the state of the NPE securitization market, in particular, and the market for NPEs, in general, following the COVID-19 crisis.
• A grandfathering rule should be applied to outstanding senior positions in synthetic on-balance sheet securitizations to which originator institutions have applied the current Article 270 before the entry into force of this Regulation.
• It is essential that end-users can effectively hedge their risks to protect the robustness of their balance-sheets. The Final Report of the High-Level Forum on the Capital Markets Union noted that an overly conservative Standardized Approach for Counterparty Credit Risk (SA-CCR) might have a detrimental impact on the availability and cost of financial hedges to end-users. In that regard, the Commission should review by .30 June 2021 the application of the SA-CCR approach while taking due account of the specificities of the European banking sector and economy, the international level-playing-field and any developments in international standards and fora.
• Commission should, as part of the upcoming implementation of the Basel III framework, produce a report by 31 December 2021 to duly assess the preferential regulatory treatment of exposures in the form of units or shares in Collective Investment Undertakings (CIUs) with an underlying portfolio consisting of sovereign bonds of euro area Member States, whose relative weight for each Member State’s bonds equals the relative weight of each Member State’s capital contribution to the European Central Bank (ECB) taking into account the European Parliament's position on the Sovereign Bond-backed Securities Regulation adopted on 23 March 2019.

2. On 10 November 2020, the European Parliament published a report on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) 2017/2402 laying down a general framework for securitization and creating a specific framework for simple, transparent and standardized securitization to help the recovery from the COVID-19 pandemic.

The main amendments are as followings:

• In particular, the COVID-19 crisis risks increasing the number of non-performing exposures (NPEs), and increases the need for them to be traded on the market. Additionally, in the context of a crisis, it is vital that risks are moved away from the systemically important parts of the financial system and that lenders strengthen their capital position. While synthetic securitization is one way of achieving this, banks should in parallel seek to increase their capital position by raising new own capital. 
• Securitization special purpose entities (SSPEs) should only be established in third countries that are not listed by the European Union as high-risk third countries having strategic deficiencies in their regime on anti-money laundering and counter terrorist financing or as non-cooperative jurisdictions for tax purposes.
• Given that specific risks of regulatory arbitrage may arise with NPE Securitization, specific information should be provided to competent authorities and a specific duty to monitor compliance is introduced.
• It is important that the interests of originators, sponsors, and original lenders that are involved in a securitization are aligned. The risk retention requirement pursuant to this Regulation, which applies to all types of securitizations, works to align these interests. As a minimum, the originator, sponsor or original lender should retain on an ongoing basis a material net economic interest in the securitization of not less than 5 % for all types of securitizations, including on-balance-sheet synthetic securitizations. Higher risk retention ratios may be justified, however, and it should be noted that some market participants use risk retention rates of 10 or up to 20%.
• Fitting within the STS framework may, but does not necessarily, mean that a transaction involves significant risk transfer. STS synthetic securitization products do not therefore necessarily qualify for significant risk transfer and relevant authorities should assess these two issues separately.
• Transactions for balance-sheet synthetic securitization are allowed to feature non-sequential amortization in order to avoid disproportionate costs of protection of the underlying exposures and the evolution of the portfolio. However, to ensure that significant risk transfer is not undermined, certain performance-related triggers should determine the application of sequential amortization.
• The EBA warns that the introduction of a specific STS framework for balance sheet synthetic securitization (BSSS) needs to be diligently accompanied by supervision to avoid negative consequences. Specifically, the ESRB should monitor macroprudential risks associated with synthetic securitization and assess whether risks are sufficiently moved out of the systemic part of financial system.
• For the purpose of integrating sustainability-related transparency requirements in this Regulation, the EBA, in close cooperation with the ESMA, EIOPA, should be mandated to publish a report on developing a specific ‘sustainable securitization’ framework. That report should duly assess in particular the introduction of sustainability factors, the implementation of proportionate disclosure and due diligence requirements, the content, methodologies and presentation of information in relation to environmental, social and governance-related adverse impacts, and any potential effects on financial stability, the scaling up of the Union securitization market and bank lending capacity. Based on the EBA report the Commission should submit a report to the European Parliament and the Council on the creation of a specific sustainable securitization framework, together with a legislative proposal, if appropriate.

On 23 November 2020, the Council Implementing Regulation (EU) 2020/1744 of 20 November 2020 implementing Regulation (EU) 2019/796 concerning restrictive measures against cyber-attacks threatening the Union or its Member States was published in the Official Journal. 

The Implementing Regulation modifies the annex I of Regulation (EU) 2019/796 listing natural persons concerned by restrictive measures against cyber-attacks threatening the Union or its Member States.

On 12 November 2020, the European Commission published two sets of draft model data protection clauses to launch the process to revise the existing Standard Contractual Clauses (SCCs). Standard Contractual Clauses are the most commonly used tool for international data transfers, including for transatlantic data flows. The General Data Protection Regulation (GDPR) provides a broad toolbox for international data transfers and standard clauses that companies can use. The modernized clauses will assist companies with their efforts to comply with the GDPR requirements. For its work on modernizing the Standard Contractual Clauses, the Commission has also taken into account the guidance from the Schrems II judgment of July 2020. 

The publication of the draft model data protection clauses - one on standard contractual clauses between controllers and processors located in the EU, and the other on the transfer of personal data to third countries - is the beginning of a process towards their adoption. The draft clauses have been sent to the European Data Protection Board and the European Data Protection Supervisor for their opinion. After taking these opinions into account, as well as the outcome of the four-week public consultation, the final clauses will be adopted by the Commission, after having obtained the green light from Member States' representatives in the so-called comitology procedure. 

On 25 November 2020, the European Commission proposed measures to boost data sharing and support European data spaces.

The Regulation will facilitate data sharing across the EU and between sectors to create wealth for society, increase control and trust of both citizens and companies regarding their data, and offer an alternative European model to data handling practice of major tech platforms. These new rules will allow data to be harnessed and will pave the way for sectoral European data spaces to benefit society, citizens and companies. They will contribute to the green transition by improving the management of energy consumption, make delivery of personalised medicine a reality, and facilitate access to public services.

The Regulation will create the basis for a new European way of data governance that is in line with EU values and principles, such as personal data protection (GDPR), consumer protection and competition rules. It offers an alternative model to the data-handling practices of the big tech platforms, which can acquire a high degree of market power because of their business models that imply control of large amounts of data. This new approach proposes a model based on the neutrality and transparency of data intermediaries, which are organisers of data sharing or pooling, to increase trust. To ensure this neutrality, the data-sharing intermediary cannot deal in the data on its own account (e.g. by selling it to another company or using it to develop their own product based on this data) and will have to comply with strict requirements.

The Regulation includes:

• A number of measures to increase trust in data sharing, as the lack of trust is currently a major obstacle and results in high costs.
• Create new EU rules on neutrality to allow novel data intermediaries to function as trustworthy organisers of data sharing.
• Measures to facilitate the reuse of certain data held by the public sector. For example, the reuse of health data could advance research to find cures for rare or chronic diseases.
• Means to give Europeans control on the use of the data they generate, by making it easier and safer for companies and individuals to voluntarily make their data available for the wider common good under clear conditions.

On 6 November 2020, the Council of the EU published the Opinion 6/2020 of the European Data Protection Supervisor (EDPS) on a proposal for an amendment of Council Directive 2011/16/EU relating to administrative cooperation in the field of taxation.

With this Opinion, the EDPS puts forward recommendations aiming at minimizing the impact of a Commission’s legislative proposal amending Directive 2011/16/EU on administrative cooperation in the field of taxation on the fundamental right to privacy and to the protection of personal data of individuals, in particular:

• Whereas the EDPS acknowledges that tax compliance is an important objective of public interest, the right balance should be struck between the attainment of such goal and the right to privacy and personal data protection.
• Concerning the management of the secure central interface on administrative cooperation in the field of taxation, the EDPS stresses the need for the Commission to ensure compliance with the provisions on security of processing under Regulation (EU) 2018/1725, in particular following the EDPS “Guidelines on the protection of personal data in IT governance and management of EU institutions”.
• EDPS considers that the role of the Commission with regard to the management of the secure central interface pursuant to Regulation (EU) 2018/1725, needs to be further ascertained in particular in the light of any further arrangement with Member States and the factual circumstances of the technical and logistical support provided within the system .
• ESDPS expects to be consulted before its adoption by the Commission, on the implementing acts that will define the administrative arrangements to provide technical and logistical support for the secure central interface where Member States communicate with the use of standard forms pursuant to Directive 2011/16/EU.

On 10 November 2020, the European Parliament published a briefing on Directive on security of network and information systems (NIS Directive).

This implementation appraisal aim to provide a succinct overview of publicly available material on the implementation, application and effectiveness to date of NIS Directive, drawing on input from EU institutions and bodies, as well as external organizations:

• The EU cybersecurity strategy 2020-2025 underlines that 'security is not only the basis for personal safety, it also protects fundamental rights and provides the foundation for confidence and dynamism in our economy, our society and our democracy'. 
• The NIS Directive (Directive on security of network and information systems across the Union, Directive (EU) 2016/1148) entered into force in August 2016 as the first horizontal EU cybersecurity legal act. 
• It forms part of the EU cybersecurity policy and in particular the EU's cybersecurity strategies.  
• In 2020, the European Commission announced the revision of the NIS Directive with the aim to increase cybersecurity. Between July and October 2020, the Commission ran a public consultation designed to contribute to the revision of the NIS Directive. The proposal is expected in the fourth quarter of 2020.

On 23 November 2020, the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), the European Supervisory Authorities (ESAs) published a final report with draft regulatory technical standards (RTS) proposing to amend the Commission Delegated Regulation on the risk mitigation techniques for OTC derivatives not cleared by a CCP (bilateral margin requirements) under the European Market Infrastructure Regulation (EMIR).

ESMA has also published a final report with new draft RTS proposing to amend the three Commission Delegated Regulations on the clearing obligation under EMIR.

1) Intragroup transactions

The amendments included in these draft RTS propose to extend the temporary exemption for 18 months for intragroup transactions.

The bilateral margin Delegated Regulation and the clearing obligation Delegated Regulations originally introduced temporary exemptions for intragroup transactions with third-country group entities to facilitate centralised risk management-procedures for groups, while the relevant equivalence decisions are being assessed.

2) Equity options

The amendments included in the draft RTS on bilateral margin propose to extend the temporary exemption for single-stock equity options or index options (equity options) for three years.

The bilateral margin Delegated Regulation originally introduced a temporary exemption for equity options so as to facilitate international regulatory convergence with regard to risk-management procedures.

The new draft RTS for intragroup transactions and equity options are proposing to extend the abovementioned temporary exemptions to avoid undue costs and an unlevel playing field situation for EU counterparties.

3) Novations from UK counterparties to EU counterparties

In the context of the withdrawal of the UK from the EU, the ESAs and other EU authorities and institutions have highlighted the importance for market participants to be prepared for the end of the transition period. These draft RTS reintroduce a regulatory solution to support these preparations.

The draft RTS allow UK counterparties to be replaced with EU counterparties without triggering the bilateral margin and clearing obligation requirements under certain conditions. This limited exemption would ensure a level playing field between EU counterparties and the preservation of the regulatory and economic conditions under which the contracts were originally entered into. Counterparties should start negotiating as soon as possible the novation of their transactions which are in the scope of these amending regulations, given the twelve month timeframe to benefit from this measure.

On 13 November, the European Securities and Markets Authority (ESMA) identified costs and performance for retail investment products and market data quality as the Union Strategic Supervisory Priorities for national competent authorities (NCAs).

Under these Priorities, the specific topics on which NCAs will undertake supervisory action in 2021, coordinated by ESMA, are:

1. costs and fees charged by fund managers; and
2. improving the quality of transparency data reported under MiFIR. 

Under its revised Regulation, ESMA is now responsible for identifying supervisory Priorities to address key market risks impacting Member States. In this context, ESMA will coordinate supervisory action with NCAs on specific topics, the aim being to provide a structured and comprehensive response to such key risks. NCAs will incorporate these Priorities into their supervisory work programs. 

On 16 November 2020, the Council of the EU adopted a set of conclusions on the role of regulatory sandboxes and experimentation clauses in an innovation-friendly, future-proof, sustainable and resilient EU regulatory framework.

Regulatory sandboxes are defined as concrete frameworks which, by providing a structured context for experimentation, enable where appropriate in a real-world environment the testing of innovative technologies, products, services or approaches – at the moment especially in the context of digitalization – for a limited time and in a limited part of a sector or area under regulatory supervision ensuring that appropriate safeguards are in place.

Experimentation clauses, often the legal basis for regulatory sandboxes, are defined as legal provisions which enable the authorities tasked with implementing and enforcing the legislation to exercise on a case-by-case basis a degree of flexibility in relation to testing innovative technologies, products, services or approaches. 

In these conclusions, the Council affirms that regulatory sandboxes can offer significant opportunities particularly to innovate and grow for all businesses, especially SMEs, including micro-enterprises as well as start-ups, in industry, services and other sectors.

The Council therefore encourages the Commission to continue considering the use of experimentation clauses on a case-by-case basis when drafting and reviewing legislation, as well as to evaluate the use of experimentation clauses in ex-post evaluations and fitness checks on the basis of an exchange of information with member states.

Finally, it calls upon the Commission to present the findings of this evaluation in the first half of 2021, followed up by practical recommendations for the possible future use of regulatory sandboxes and experimentation clauses at EU level in the second half of 2021.

On 16 November 2020, the Association for Financial Markets in Europe (AFME) published Technology and Innovation in Europe’s Capital Markets report.

This report surveyed the largest investment banks in Europe to assess their technological progress over the past two years. Findings reveal that banks have accelerated adoption of emerging technologies and new ways of working. However, insufficient IT investment, complex legacy systems and increasing regulatory requirements, remain some of the key barriers for further progress.

On 9 November 2020, the European Securities and Markets Authority (ESMA) published a consultation on guidelines on marketing communications under the Regulation on cross-border distribution of funds. 

Regulation (EU) 2019/1156 of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings specifies that AIFMs, EuVECA managers, EuSEF managers and UCITS management companies shall ensure that marketing communications addressed to investors are identifiable as such and describe the risks and rewards of purchasing units or shares of an AIF or units of a UCITS in an equally prominent manner, and that all information included in marketing communications is fair, clear and not misleading.

The Regulation provides that ESMA shall develop guidelines on the application of these requirements for marketing communications, taking into account the on-line aspects of such marketing communications.
This consultation paper represents the first step in the development of these guidelines and sets out proposals on which ESMA is seeking the views of external stakeholders, as further explained in the following sections. 

ESMA will consider all comments received by 8 February 2021. 

On 13  November 2020, the European Securities and Markets Authority (ESMA) published the recommendation of the European Systemic Risk Board (ESRB) on liquidity risk in investment funds. 

The ESRB recommendation from 6 May 2020 requested that ESMA:

1. coordinates with the National Competent Authorities (NCAs) to undertake a focused piece of supervisory exercise with investment funds that have significant exposures to corporate debt and real estate assets to assess the preparedness of these two segments of the investment funds sector to potential future adverse shocks, including any potential resumption of significant redemptions and/or an increase in valuation uncertainty; and
2. reports to the ESRB on its analysis and on the conclusions reached regarding the preparedness of the relevant investment funds.

This report sets out ESMA's analysis and conclusions on the preparedness of the investment funds that were reviewed and presents five priority areas identified to enhance the preparedness of funds that have significant exposures to corporate debt and real estate assets to potential future adverse shocks.

On 13 November 2020, the European Securities and Markets Authority (ESMA) published the guidelines on the model MoU concerning consultation, cooperation and the exchange of information related to the supervision of AIFMD entities.

The competent authorities listed in the compliance table have informed ESMA that they comply or intend to comply with ESMA’s guidelines on the model MoU concerning consultation, cooperation and the exchange of information related to the supervision of AIFMD entities.

On 26 November 2020, the European fund and Asset Management Association (EFAMA) published An Overview of the Asset Management Industry in Europe.

The report is divided into six main sections:

• Section 1 provides an overview of the role of asset management in the economy, the services they provide to investors and the specificities compared to other financial service institutions. 
• Section 2 highlights the trends in total assets under management (AuM) in Europe, with a breakdown by country and by investment funds and discretionary mandates.
• Section 3 provides an overview of the industry’s clients.
• Section 4 focuses on the asset allocation of European asset managers. 
• Section 5 estimates how much the investment fund industry contributes to the financing of the economy.
• Section 6 looks at the industrial organisation of the asset management industry, its profitability and its contribution to the European economy in terms of employment.

The report is primarily based on data provided by eighteen EFAMA member associations on the value of the assets managed at the end of 2018: Austria, Belgium, Bulgaria, Croatia, Denmark, France, Germany, Greece, Hungary, Italy, Netherlands, Poland, Portugal, Slovenia, Switzerland, Spain, Turkey and the United Kingdom. Additional internal and external data have been used to estimate the assets managed in the other European countries. The report also provides an estimation of the assets under management in Europe at the end of December 2019 and June 2020. Finally, for the first time, the report presents data from McKinsey on the European asset managers’ share of overall European financial assets, the growth of active/passive investment strategies and the profitability of the industry.

On 30 November 2020, the EU Systemic Risk Board (ESRB) published its recommendation on identifying legal entities (LEI).

The purpose of this Recommendation is to contribute, in line with the ESRB’s mandate, to the prevention and mitigation of systemic risks to financial stability in the Union through the establishment of systematic use of the LEI by entities engaged in financial transactions. 

To achieve this objective, this Recommendation seeks the introduction of a Union legal framework to uniquely identify legal entities engaged in financial transactions by LEIs and to make the use of the LEI more systematic in respect of supervisory reporting and public disclosure. 

Recommendation A – Introduction of a Union framework on the use of the legal entity identifier:

• The Commission is recommended to propose that Union legislation incorporates a common Union legal framework governing the identification of legal entities established in the Union that are involved in financial transactions by way of a legal entity identifier (LEI), paying due regard to the principle of proportionality, taking into account the need to prevent or mitigate systemic risk to financial stability in the Union and thereby achieving the objectives of the internal market. 
• The Commission is recommended to propose that Union legislation that imposes an obligation on legal entities to report financial information, while paying due regard to the principle of proportionality
• The Commission is recommended to propose that Union legislation incorporates an obligation on authorities to identify by way of its LEI any legal entity about which they publicly disclose information and which has an LEI, paying due regard to the principle of proportionality.

Recommendation B – Use of the legal entity identifier until the possible introduction of Union legislation 

• Pending any action taken by the Commission to comply with Recommendation A and the possible introduction of corresponding Union legislation, it is recommended that to the extent permitted by law and subject to the principle of proportionality

Timeline for the follow-up:

• Recommendation A By 30 June 2023, the Commission is requested to deliver to the European Parliament, to the Council and to the ESRB a report on the implementation of Recommendation A. 
• Recommendation B By 31 December 2021, the addressees of Recommendation B are requested to deliver to the European Parliament, to the Council, to the Commission and to the ESRB a report on the implementation of Recommendation B.  

On 3 November 2020, the European fund and Asset Management Association (EFAMA) published its statement on the publication of Market Infrastructure Partners’ Study on the Creation of an EU Consolidated Tape which addresses the challenges, demand, benefits and proposed architecture for consolidating European financial market data.

An appropriately const?ructed consolidated tape (CT) could help to build deeper and more open capital markets in Europe. In line with the European Commission’s vision for the Capital Markets Union, a key aim should be to democratize access across European markets to provide all investors regardless of resources or sophistication with a comprehensive and standardized view of European trading.

The EFAMA does not believe that a CT is the solution to the concerning issue of increasing market data costs. This issue must be addressed head-on, including through the proper enforcement of the MiFID II and MiFIR requirements, standardization of pricelists, policies, audit procedures, etc., regardless of the existence of a CT.

The two issues are nevertheless connected as the commercial viability of the consolidated tape provider (CTP) will be closely connected to the price at which it obtains input data from trading venues and Approved Publication Arrangements (APAs) as well.

On 6 November 2020, the European Securities and Markets Authority (ESMA) published Q&As on MiFID II and MiFIR investor protection topics. 

The purpose of this document is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR in relation to investor protection topics. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of MiFID II and MiFIR.

The update concerns the following questions on product governance:

Question 2: How should firms manufacturing financial instruments ensure that these financial instruments’ costs and charges are compatible with the needs, objectives and characteristics of the target market, as required by Article 9(12)(a) of the MiFID II Delegated Directive? 

Question 3: How should firms manufacturing financial instruments ensure that costs and charges do not undermine the financial instrument's return expectations, as required by Article 9(12)(b) of the MiFID II Delegated Directive? 

Question 4: How should firms manufacturing financial instruments ensure that the charging structure of the financial instrument is appropriately transparent for the target market, such as that it does not disguise charges or is too complex to understand as required by Article 9(12)(c) of the MiFID II Delegated Directive? 

On 6 November 2020, the European Securities and Markets Authority (ESMA) published an annex to ESMA Opinion determining third-country trading venues for the purpose of transparency under MiFIR as well as a guidance.

The guidance addresses the following:

• Overall description of the third-country trading venues’ assessment
• General Guidance (Updates to the list of venues, Venue of execution in post-trade reports)
• Guidance related to specific fields (Market identifier codes (MIC), Instruments in scope of the assessment, Partially positive assessments and exemptions from the positive assessments, Active / Inactive venues)

Here are two ESMA consultations on Data Reporting Service Providers.

1. On 20 October 2020, the European Securities and Markets Authority (ESMA) published a public consultation on criteria to identify Authorised Reporting Mechanisms (ARMs) and Approved Publications Arrangements (APAs) subject to authorisation and supervision by a competent authority of a EU Member States from January 2022.

The aim of this consultation is to provide technical advice to the European Commission on such derogation criteria, in particular on:

• how to determine if the APA or ARM services are provided to investment firms authorised in one Member State;
• how to calculate the number of trade reports or transactions;
• how to determine whether the ARM or APA is part of a group of financial market participants operating cross-border; as well as other aspects relevant for the determination whether the ARM or APA has a limited relevance for the internal market.

The consultation closes on 4 January 2021.

2. On 20 October 2020, the European Securities and Markets Authority (ESMA) published public consultation on supervisory fees for data reporting services providers (DRSPs) to be supervised by ESMA starting in 2022.

Following the ESAs Review, the authorisation and supervision of data reporting services providers (DRSP) will be transferred from national competent authorities to ESMA starting January 2022.

The consultation aims to gather stakeholder views on fees for DRSPs that will be supervised by ESMA. The proposed fee framework for DRSPs draws on the existing fee frameworks for Trade Repositories and Securitisation Repositories which set out application as well as annual supervisory fees.

ESMA is proposing both application and authorisation fees, as well as an annual supervisory fee for DRSPs. It has also proposed a timeline for the payment of the fees.

The closing date for responses is 4 January 2021.

On 9 November 2020, the European Securities and Markets Authority (ESMA) updated its Q&As on Prospectus Regulation.

The updates concerns:

Question 7.3 on identification of profit forecasts in prospectuses 

Question 15.1 on the application of Article 1(5)(a) of the Prospectus Regulation

Question 15.2 on the adjustment of the basis for the 20% calculation in article  1(5)(a) of the Prospectus Regulation

Question 16.1 on the choice of PR home Member State at the end of the UK's transition period for leaving the EU

Question 16.2 on the use of prospectuses, approved by the UK, after the end of the UK's transition period for leaving the EU

On 4 November 2020, the European Securities and Markets Authority (ESMA) updated the List of market makers and authorized primary dealers who are using the exemption under the Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (the SSR).

On 19 November 2020, the European Securities and Markets Authority (ESMA) published updated List of market makers and authorised primary dealers who are using the exemption under the Regulation on short selling and credit default swaps. 

According to Article 17(13) of Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (the SSR), ESMA shall publish and keep up to date on its website a list of market makers and authorised primary dealers who are using the exemption under the Short Selling Regulation (SSR).  

The data provided in this list have been compiled from notifications of Member States’ competent authorities to ESMA under Article 17(12) of the SSR.  

BACKGROUND

The final legislative text of Regulation (EU) No 2015/23651 (SFTR) were approved by the European Parliament on 29 October 2015 and by the European Council on 16 November 2015. The two texts were published in the Official Journal on 23 December 2015 and entered into force on the twentieth day following this publication – i.e. 12 January 2016. 

Many of the obligations under SFTR needed to be further specified in the regulatory and implementing technical standards developed by the ESMA. These were adopted by the European Commission on 13 December 2018 and were published in the Official Journal on 22 March 2019. The technical standards entered into force on 13 April 2019.

In view of ESMA’s statutory role to build a common supervisory culture by promoting common supervisory approaches and practices, ESMA has adopted this Q&As document which relates to the consistent application of the SFTR data reporting obligation.

WHAT'S NEW?

On 5 November 2020, the European Securities and Markets Authority (ESMA) published its first set of Questions and Answers relating to reporting under  the Securities Financing Transactions Regulation (SFTR).

The purpose of this Q&A is to provide greater clarity to market participants on how to comply with their reporting requirements under SFTR. The Q&A includes clarifications on how reporting of certain business events should be performed, such as:

•  Reporting of fields related to time and applicable calendars
• Reporting of settlement legs
• Reporting of SFTs collateralized initially at transaction and then at net exposure level
• Reporting of SFTs concluded off venue and cleared on the same day
• Reporting of zero collateral for margin loans

The content of this document is aimed at competent authorities, entities and market infrastructures by providing clarity on the application of the SFTR requirements. The set of Q&A complements ESMA’s guidance on reporting under SFTR and is aimed at trade repositories and at entities that have a reporting obligation under SFTR.

WHAT'S NEXT?

ESMA will periodically review these Q&As on a regular basis to update them where required and to identify if, in a certain area, there is a need to convert some of the material into ESMA Guidelines and recommendations. In such cases, the procedures foreseen under Article 16 of the ESMA Regulation will be followed. Subsequent updates will be published on a regular basis. This document is expected to be updated and expanded as and when appropriate.

On 3 November 2020, the European Banking Authority (EBA) published a Discussion Paper on Environmental, Social and Governance (ESG) risks management and supervision aiming to collect feedback for the preparation of its final report on the topic. 

The Discussion Paper provides a comprehensive proposal on how ESG factors and ESG risks could be included in the regulatory and supervisory framework for credit institutions and investment firms. The consultation runs until 3 February 2021.

The main focus of this Discussion Paper is on the risks to which institutions are exposed via the impact of ESG factors on their counterparties. The Paper provides details on the risks stemming from environmental factors, especially climate change, and illustrates ongoing initiatives and progress achieved on this topic over the recent years. In particular, the consultation aims to:

• elaborate on the relevance of ESG risks for the financial sector and provides uniform definition of ESG factors and ESG risks, including definitions of physical risks and transition risks as the main transmission channels for environmental risks. 
• present a non-exhaustive list of quantitative and qualitative definitions, indicators and metrics for a non-exhaustive list of ESG factors, together with a description of several tools and methodologies that can support the identification, evaluation and assessment of ESG risks, namely the (i) alignment method, (ii) risk framework method and (iii) exposure method.
• include several policy recommendations regarding the way in which institutions can embed ESG risks in their internal governance and risk management frameworks in a proportionate manner.
• elaborate on the effective way to proportionately reflect ESG risks in the supervisory review for credit institutions and makes several policy recommendations in this respect.

On 19 November 2020, the European fund and Asset Management Association (EFAMA) published its first ESG-focused Market Insights “Sustainable investment in the European asset management industry: defining and sizing ESG strategies”. 

Highlights include:

• Firm-level ESG selection strategies represented a total of EUR 10.7 trillion or 45% of the total assets under management at the end of 2019 in the countries covered in the report. These strategies include two broad types of ESG selection: exclusions of certain types of investment and systematic and explicit integration of ESG risks and opportunities in the investment decision-making process.
• Exclusions are one of the most basic and common forms of ESG selection strategy – nearly a third of assets covered in the report applied this strategy. ESG integration is the most popular ESG selection strategy, with a little over 37% of total AuM are selected following this approach. 
• Investment stewardship and engagement also play a key role in the ESG strategies of many asset managers: EUR 10.2 trillion of assets are subject to ongoing ESG-related engagement or voting policies, accounting for over 43% of total AuM.
• Product-level ESG selection strategies include four different approaches: exclusions, ESG integration, sustainability-themed products and impact investing. ESG integration is the most common selection strategy at the product-level in Europe. In total, EUR 3.9 trillion of assets are managed in this way, accounting for around 16% of total fund and mandate assets.

According to EFAMA, the following actions will play a crucial role in the further development of the European ESG market:

• Narrowing the data gap by ensuring reliable and comparable ESG data reporting by companies in Europe and beyond.
• Increasing transparency through appropriate disclosures by asset managers.  
• Avoiding the proliferation of national ecolabels by promoting the use of an EU label.

On 9 November 2020, the European Securities and Markets Authority (ESMA) issued a Q&A on Transparency Directive. 

The purpose of this document is to promote common supervisory approaches and practices in the application of TD and its implementing measures (together referred to as TD) as well as provide guidance regarding certain TD requirements to market participants. It does this by providing responses to questions posed by the general public and competent authorities in relation to the practical application of the TD.  

The content of this document is aimed at competent authorities under TD to ensure that in their supervisory activities their actions are converging along the lines of the responses adopted by ESMA. However, these responses are also meant to help and give issuers and market participants indications as to correct implementation of TD provisions, rather than creating an extra layer of requirements on them.  

On 3 November 2020, the Financial Services and Markets Authority (FSMA) published Communication FSMA_2020_13 on the implementation of ESMA Guidelines on liquidity stress testing in UCITS and AIFs. With this communication FSMA integrates the Guidelines in supervisory practice. 

On 10 November 2020, the Financial Services and Markets Authority (FSMA) announced that, in accordance with Article 2 of the Royal Decree of 21 August 2008 on the rules for certain multilateral trading facilities, it approved the modified market rules of Alternext Brussels (Euronext Growth).

On 10 November 2020, the Financial Services and Markets Authority (FSMA) announced that the modified market rules of the regulated markets organized by Euronext NV/SA (namely Euronext Brussels and the Euronext Brussels Derivative Instruments Market) were approved on 27 October 2020 in accordance with Article 34, §1, of the Law of 21 November 2017 on the market infrastructures for financial instruments and transposing Directive 2014/65/EU. These market rules enter into force as of 30 November 2020.

On 13 November 2020, the Financial Services and Markets Authority (FSMA) published Communication FSMA_2020_14 on the offering of structured products in Belgium. Credit institutions and insurance distributors are required to act honestly, fairly and professionally in the best interests of their customers when offering structured products in Belgium. this communication applies in particular to the product governance requirements.

On 23 November 2020, the Financial Services and Markets Authority (FSMA) published consultation on Q&As regarding advertisements for investment instruments.

FSMA has drafted questions and answers relating to the advertising of investment instruments in the event of an offer to the public, admission to trading or marketing to retail clients.¨

These FSMA questions and answers highlight good practices that will help ensure that the applicable requirements are met. 

FSMA is organizing an open consultation on these questions and answers. It will take place from 23 November 2020 to 4 January 2021.

On 1 November 2020, Decree No.2020-1321 of 30 October 2020 relating to the reporting obligations of trust administrators was published in the Official Journal. 

The present decree modifies the place of filing of annual and event declarations filed by trust administrators and the payment of the sui generis levy to entrust it to the non-resident tax department's non-resident tax department.

It also updates the reporting obligations of trust administrators by enriching the information relating to the beneficiaries of trusts to be communicated to the administration (notions of "beneficial owner" and "nationality"), in accordance with Article 1649 AB of the CGI in its wording resulting from Order no. 2020-115 of 12 February 2020 strengthening the national AML/CFT regime.

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Le 1 novembre 2020, le Décret No.2020-1321 du 30 octobre 2020 relatif aux obligations déclaratives des administrateurs de trusts a été publié au Journal Officiel.

Le présent décret modifie le lieu de dépôt des déclarations annuelles et événementielles déposées par les administrateurs de trusts et de paiement du prélèvement sui generis pour le confier à la recette des non-résidents de la direction des impôts des non-résidents. 

Il actualise également les obligations déclaratives des administrateurs de trusts en enrichissant les informations relatives aux bénéficiaires des trusts à communiquer à l’administration (notions de « bénéficiaire effectif » et de « nationalité »), conformément à l’article 1649 AB du CGI dans sa rédaction issue de l’ordonnance no 2020-115 du 12 février 2020 renforçant le dispositif national de lutte contre le blanchiment de capitaux et le financement du terrorisme.

On 5 November 2020, the Order No. 2020-1342 of 4 November 2020 strengthening the mechanism for freezing assets and prohibiting their disposal was published in the Official Journal together with an Report to the President of the Republic.

This Ordinance introduces a mechanism for the prompt implementation of designations adopted by the United Nations Security Council. It aligns the obligation to apply national asset freezing measures with the perimeter of European freezing measures. It also simplifies the application of the asset freezing measures adopted by European regulations in Saint Barthélemy, Saint Pierre and Miquelon, New Caledonia, French Polynesia and the Wallis and Futuna Islands.

It extends the mandate of the supervisory authorities of the professions subject to AML/CFT obligations to include compliance with the obligations of the European regulations freezing assets and specifies the sanctions in the event of non-compliance. 

It also facilitates access by officials of the State services responsible for implementing asset freezing measures to the files held by the tax authorities to ensure the identification of assets and resources to be frozen.

Finally, it clarifies the transposition of the AMLD V by Order 2020-115 of 12 February 2020, in particular by strengthening the procedures for monitoring LCB-FT obligations by chartered accountants and dealers in gold and precious metals and introduces various coordination measures.

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Le 5 novembre 2020, l'Ordonnance No.2020-1342 du 4 novembre 2020 renforçant le dispositif de gel des avoirs et d’interdiction de mise à disposition a été publiée au Journal Officiel avec le rapport au président de la République.

La présente ordonnance introduit un mécanisme d’application sans délai des désignations adoptées par le Conseil de Sécurité des Nations Unies. Elle aligne l’obligation d’appliquer les mesures nationales de gel des avoirs sur le périmètre des mesures européennes de gel. Elle simplifie également l’application des mesures de gel des avoirs adoptées par les règlements européens à Saint-Barthélemy, à Saint-Pierre-et-Miquelon, en Nouvelle- Calédonie, en Polynésie française et dans les îles Wallis et Futuna. 

Elle étend le mandat des autorités de contrôle des professions assujetties aux obligations en matière de lutte contre le blanchiment des capitaux et le financement du terrorisme (LCB-FT) au respect des obligations des règlements européens portant gel des avoirs et précise les sanctions en cas de manquement. 

Elle facilite également l’accès des agents des services de l’Etat chargés de mettre en œuvre les mesures de gel des avoirs aux fichiers tenus par l’administration fiscale pour assurer l’identification des avoirs et ressources devant être gelés. 

Elle précise enfin la transposition de la cinquième directive anti-blanchiment par l’ordonnance no 2020-115 du 12 février 2020, notamment en renforçant les modalités de contrôle des obligations en matière de LCB-FT par les experts-comptables et les marchands d’or et métaux précieux et introduit diverses mesures de coordination.

On 3 November 2020, the Decree No. 2020-1328 of 2 November 2020 relating to the solidarity fund for companies particularly affected by the economic, financial and social consequences of the spread of the COVID-19 epidemic and the measures taken to limit this spread was published in the Official Journal. 

Tier 1 of the fund is extended until 30 November 2020. 

The eligibility conditions for this assistance are relaxed. The fund is now open to companies with fewer than 50 employees, with no turnover or profit conditions. Companies that started their activity before 31 August 2020 are now eligible. Companies controlled by a holding company are eligible provided that the combined workforce of the subsidiary(s) and the holding company is less than 50 employees. The list of sectors 1 and 1a is completed. Companies that close administratively in September and October will be eligible for aid equal to the loss of turnover up to EUR10,000 over one month during the period of closure.

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Le 3 novembre 2020, le Décret No.2020-1328 du 2 novembre 2020 relatif au fonds de solidarité à destination des entreprises particulièrement touchées par les conséquences économiques, financières et sociales de la propagation de l’épidémie de COVID-19 et des mesures prises pour limiter cette propagation a été publié au Journal Officiel.

Le volet 1 du fonds est prolongé jusqu’au 30 novembre 2020. 

Les conditions d’éligibilité à cette aide sont assouplies. Le fonds est désormais ouvert aux entreprises de moins de 50 salariés, sans condition de chiffre d’affaires ni de bénéfice. Les entreprises ayant débuté leur activité avant le 31 août 2020 sont désormais éligibles. Les entreprises contrôlées par une holding sont éligibles à condition que l’effectif cumulé de la ou des filiales et de la holding soit inférieur à 50 salariés. La liste des secteurs 1 et 1 bis est complétée. Les entreprises fermées administrativement en septembre et octobre pourront bénéficier d’une aide égale à la perte du chiffre d’affaires jusqu’à 10 000EUR sur un mois pendant la durée de fermeture.

On 12 November 2020, the Commission nationale de l'informatique et des libertés (CNIL) updated its Q&As on teleworking.

CNIL answers the following questions: 

• What is teleworking?
• What are the conditions for setting up telework?
• Can the employer control the activity of employees in telework?
• Can the employer constantly monitor his employees?
• What precautions should be taken if employees use their personal equipment (mobile phone, computer, tablet, etc.)?
• Videoconferencing: can an employer force an employee to activate his camera during a meeting?
• What are the tools specifically dedicated to teleworking?
• What can the CNIL do in the event of a complaint?

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Le 12 novembre 2020, la Commission nationale de l'informatique et des libertés (CNIL) a mis à jour les questions-réponses sur le télétravail.

La CNIL répond aux questions suivantes :

• Qu’est-ce que le télétravail ?
• Quelles sont les conditions de mise en place du télétravail ?
• L’employeur peut-il contrôler l’activité des salariés en télétravail ?
• L’employeur peut-il surveiller constamment ses salariés ?
• Quelles précautions prendre en cas d’utilisation par les salariés de leur équipement personnel (téléphone portable, ordinateur, tablette…) ?
• Visioconférence : un employeur peut-il obliger un salarié à activer sa caméra lors d’une réunion ?
• Quels sont les outils spécifiquement dédiés au télétravail ?
• Que peut faire la CNIL en cas de plainte ?

On 24 November 2020, the Autorité des marchés financiers (AMF) published the 2020 Report on Corporate Governance and Remuneration of Directors of Listed Companies.

In the exceptional context of the COVID-19 pandemic, the AMF reviews in detail the holding of general meetings behind closed doors. It analyses the information published by listed companies on directors compensation, with a focus on variable and exceptional compensation. For the first time this year, the regulator is devoting developments to voting advisers.

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Le 24 novembre 2020, l'Autorité des marchés financiers (AMF) a publié le Rapport 2020 sur le gouvernement d'entreprise et la rémunération des dirigeants des sociétés cotées.

Dans le contexte exceptionnel de pandémie liée à la COVID-19, l’AMF revient en détails sur la tenue des assemblées générales à huis clos. Elle analyse l’information publiée par les sociétés cotées sur les rémunérations des dirigeants avec un focus sur les rétributions variables et exceptionnelles. Pour la première fois cette année, le régulateur consacre des développements aux conseillers en vote.

On 17 November 2020, the Ministère de l'Economie announced the Finance Bill for 2021 favors the development of employee shareholding.

The National Assembly adopted in first reading of the Finance Bill for 2021, with the favorable opinion of the Government, two amendments that will facilitate the development of employee shareholding.

The first amendment adopted exempts from the social security lump-sum payment the employer's contributions to supplement the voluntary payments made by employees to acquire shares in their company within their employee savings plan. This measure, which will last during the recovery period until the end of 2022, encourages employees to direct their savings towards strengthening the equity of companies. 

The second amendment extends to mid-sized companies that have never paid dividends since their creation the exemptions currently enjoyed by small and medium-sized companies that grant free company shares to their employees. This amendment is the concrete expression of a commitment made by the President of the Republic in favor of mid-sized companies.

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Le 17 novembre 2020, le Ministère de l'Economie a annoncé que le projet de loi de finances pour 2021 favorise le développement de l’actionnariat salarié.

L’Assemblée nationale a adopté en première lecture du Projet de loi de finances pour 2021, sur avis favorable du Gouvernement, deux amendements qui faciliteront le développement de l’actionnariat salarié.

Le premier amendement adopté exonère de forfait social les abondements de l’employeur complétant les versements volontaires des salariés pour acquérir des actions de leur entreprise au sein de leur plan d’épargne salariale. Cette mesure, qui durera le temps de la relance, jusqu’à fin 2022, incite les salariés à flécher leur épargne vers le renforcement des fonds propres des entreprises. 

Le deuxième amendement étend aux entreprises de taille intermédiaire qui n’ont jamais versé de dividendes depuis leur création les exonérations dont bénéficient aujourd’hui les petites et moyennes entreprises qui attribuent gratuitement à leurs salariés des actions de l’entreprise. Il vient ainsi concrétiser un engagement pris par le Président de la République en faveur des entreprises de taille intermédiaire.

On 17 November 2020, the Association Française de Gestion (AFG) published a list of "Relance" labeled funds & FAQs.

As a reminder, Bruno Le Maire presented on 19 October 2020 the  roadmap of the Place de Paris  to support the financing of French companies as part of the relaunch, in the presence of business federations, professional associations of the financial sector - including AFG - and associations of savers, as well as parliamentarians.
The Relance Label is one of the flagship measures of this system. AFG and asset management companies are mobilized to participate in its success.

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Le 17 novembre 2020, l'Association Française de Gestion (AFG) a publié la liste des fonds labellisés et FAQ.

Pour rappel, Bruno Le Maire avait présenté le 19 octobre 2020 la feuille de route de la Place de Paris pour soutenir le financement des entreprises françaises dans le cadre de la relance, en présence des fédérations d’entreprises, des associations professionnelles du secteur financier – dont l’AFG – et des associations d’épargnants, ainsi que de parlementaires.
Le Label Relance constitue l’une des mesures phare de ce dispositif. L’AFG et les sociétés de gestion d’actifs sont mobilisées pour participer à son succès.

On 6 November 2020, the Autorité des marchés financiers (AMF) published the Decision of 27 October 2020 concerning the amendment of Book I of the Harmonized Rules of Euronext Paris SA in connection with the integration of Oslo Bors. 

The amendments to Book I of the Harmonized Operating Rules of Euronext Paris SA as annexed to this decision are approved. They will come into force on the date determined by Euronext Paris S.A.

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Le 6 novembre 2020. l'Autorité des marchés financiers (AMF) a publié la Décision du 27 octobre 2020 concernant la modification du livre I des règles harmonisées d’Euronext Paris SA dans le cadre de l’intégration d’Oslo Bors.

Sont approuvées les modifications du livre I des règles de fonctionnement harmonisées d’Euronext Paris SA telles qu’annexées à la présente décision. Elles entreront en vigueur à la date déterminée par Euronext Paris S.A

On 6 November 2020, the Autorité des marchés financiers (AMF) published Decision of 27 October 2020 concerning the amendment of Book I of the harmonized operating rules of the Euronext Growth multilateral trading facility in connection with the integration of Oslo Bors.

The amendments to Book I of the Harmonized Operating Rules of the Euronext Growth Multilateral Trading System as annexed to this Decision are approved. They will enter into force on a date to be determined by Euronext Paris S.A.

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Le 6 novembre 2020. l'Autorité des marchés financiers (AMF) a publié la Décision du 27 octobre 2020 concernant la modification du livre I des règles de fonctionnement harmonisées du système multilatéral de négociation Euronext Growth dans le cadre de l’intégration d’Oslo Bors.

Sont approuvées les modifications du livre I des règles de fonctionnement harmonisées du système multilatéral de négociation Euronext Growth telles qu’annexées à la présente décision. Elles entreront en vigueur à la date déterminée par Euronext Paris S.A

On 13 November 2020, the Autorité des marchés financiers (AMF) published the Decision of 27 October 2020 concerning the modification of the operating rules of LCH SA relating to the netting of futures contracts on shares with physical delivery.

The amendments to the operating rules of LCH SA as annexed to this decision are approved. They shall enter into force on the date determined by LCH SA.

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Le 13 novembre 2020, l'Autorité des marchés financiers (AMF) a publié la Décision du 27 octobre 2020 concernant la modification des règles de fonctionnement de LCH SA portant sur la compensation des contrats à terme sur action avec livraison physique.

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.

BACKGROUND

As part of its SPOT thematic inspections, the AMF examined how seven asset management companies (AMCs) outsourced internal control to three firms. The inspections were aimed at encouraging good practice in the selection and monitoring of service providers, and in the periodic review of the quality of their work.

Outsourcing of internal control is a model that is particularly widespread in France among small AMCs. Internal control plays a key role in management, which is why the AMF has made this issue one of its supervision priorities for 2020. It therefore examined the practices of seven separate entities. In order to assess concretely the implementation of these internal control outsourcing systems, the AMF conducted its inspections of each AMC in three of the four issues below: investment and valuation processes, the anti-money laundering and combating the financing of terrorist, compliance with the Markets in Financial Instruments Directive framework (MiFID II) for discretionary management activities, and cybersecurity. 

The verifications mainly covered the period 2017-2020 and examined:

• the internal control organisation of the AMCs (selection of the service provider, resources allocated, scope of outsourcing, governance, etc.);
• the procedures and methodology for conducting controls and the control plan;
• practical implementation of the control process;
• reporting to senior management and the AMF;
• the system for evaluation and monitoring of the service provider by the AMC.

WHAT'S NEW?

On 26 November 2020, the Autorité des marchés financiers (AMF) published the Summary of SPOT inspections 2020 on the outsourcing of internal control.

In all but two cases, the allocation of human resources corresponds to or exceeds what is provided for in the programme of operations. However, the AMF noted that the distinction between permanent control (second-level control of the correct performance of first-level controls by operational teams) and periodic control (audit or third-level control) is clear neither for the entities in the sample nor for service providers. In most cases, periodic control does not concern the control work carried out in the framework of second-level controls and is reduced to no more than occasional permanent control. 

With regard to the conduct of controls, the AMF noted that five entities did not have sufficiently precise and operational procedures. Although they all had compliance and annual internal control plans drawn up by or with the assistance of the service provider on the basis of reporting data or internal control plan for financial year n-1, only two of them had formalised priorities based on their assessment of the non-compliance risk assessment, which is good practice. For the entire sample, the AMF highlighted the failure to mention the anomalies identified by the internal control function in the annual fact sheets and annual inspection reports sent to the AMF. 

Lastly, the AMF noted that in three cases the service provider was not monitored and in the other cases, the due diligence carried out was not always sufficient. In this respect, filling out an annual form on an ongoing basis in order to formalise the monitoring of the internal control service provider was one of the good practices observed.

Overall, this series of inspections revealed an excessively disparate level of effectiveness of the internal control systems that use the services of service providers. In some cases, these systems are insufficient, both in terms of the depth of the analyses and the traceability of the due diligence performed.

WHAT'S NEXT?

All AMCs that wish to outsource their internal control must pay special attention to the choice and monitoring of the service provider. To improve practices, the AMF will therefore clarify its policy.

Version française

BACKGROUND

A l’occasion de ses contrôles thématiques SPOT, l’Autorité des marchés financiers a examiné les modalités d’externalisation du contrôle interne de sept sociétés de gestion auprès de trois cabinets. Elle entend encourager les bonnes pratiques en matière de sélection et suivi du prestataire, et de revue périodique de la qualité des travaux réalisés par le prestataire.

L’externalisation du contrôle interne est un modèle particulièrement répandu en France auprès des sociétés de gestion de petite taille. La fonction de contrôle interne jouant un rôle clé au sein des sociétés de gestion, l’AMF a placé le sujet parmi ses priorités de supervision 2020. Elle a donc examiné les pratiques de sept établissements distincts. Afin d’évaluer concrètement la mise en œuvre de ces dispositifs d’externalisation du contrôle interne, l’AMF a poursuivi, pour chacune des sociétés de gestion, ses vérifications sur trois thématiques parmi les quatre suivantes : processus d’investissement et de valorisation, la lutte contre le blanchiment et le financement du terrorisme, le respect du cadre de la directive sur les marchés d’instruments financiers pour l’activité de gestion sous mandat (MIF2) et la cyber sécurité.

L’examen du régulateur, réalisé sur la période 2017-2020, a porté sur :

• l’organisation des sociétés de gestion en matière de contrôle interne (sélection du prestataire, ressources allouées, périmètre externalisé, gouvernance, etc.) ;
• les procédures, la méthodologie de conduite et le plan de contrôle ;
• la mise en œuvre pratique du processus de contrôle ;
• le reporting fait aux dirigeants de la société de gestion et à l’AMF ;
• le dispositif d’évaluation et de contrôle du prestataire par le gestionnaire. 

WHAT'S NEW?

Le 26 novembre 2020, l'Autorité des marchés financiers (AMF) a publié la Synthèse des contrôles SPOT sur l'externalisation du contrôle interne.

A deux exceptions près, l’allocation des moyens humains est cohérente ou supérieure à ce que prévoit le programme d’activité. L’AMF a cependant constaté que la distinction entre contrôle permanent (contrôle de deuxième niveau de la bonne exécution des contrôles de premier niveau pris en charge par les équipes opérationnelles) et contrôle périodique (audit ou contrôle de troisième niveau) n’est claire ni pour les entités du panel ni pour les prestataires. Le plus souvent, les travaux de contrôle périodique ne consistent pas à vérifier les travaux de contrôle permanent de deuxième niveau. Le contrôle périodique se réduit le plus souvent à un contrôle permanent ponctuel.

S’agissant de la conduite des contrôles, l’AMF a relevé que 5 entités n’ont pas de procédures suffisamment précises et opérationnelles. Toutes disposent bien de plans de conformité et de contrôle interne annuels établis par ou avec l’aide du prestataire sur la base des données de reporting de l’année précédente. Mais seules deux formalisent des priorités en fonction de leur évaluation du risque de non-conformité, ce qui est une bonne pratique.

Pour l’ensemble du panel, l’AMF a souligné l’absence de mention des anomalies relevées par la fonction de contrôle interne dans les fiches de renseignements annuelles et les rapports annuels de contrôle adressés à l’AMF.

Enfin, le régulateur a noté l’absence de contrôle du prestataire dans trois cas et, dans les autres cas, une traçabilité des diligences menées qui n’est pas toujours suffisante. A cet égard, disposer d’un fichier annuel renseigné au fil de l’eau afin de formaliser le suivi du prestataire de contrôle interne fait partie des bonnes pratiques constatées.

Au total, il ressort de cette série de contrôles des niveaux d’efficacité trop disparates dans les dispositifs de contrôle interne ayant recours aux services d’un prestataire. Dans certains cas, ces dispositifs sont insuffisants, à la fois en matière de profondeur des analyses et de traçabilité des diligences réalisées.

WHAT'S NEXT?

Toute société de gestion qui souhaite recourir à un prestataire pour son contrôle interne doit apporter une attention particulière au choix et au suivi de ce prestataire.

Pour faire progresser les pratiques, le régulateur apportera donc des précisions à sa doctrine.

On 27 November 2020, the Autorité des marchés financiers (AMF) published a Practical guide for entering a PDF form relating to prospectus or supplement data.

This guide has been established to assist issuers and their advisers in entering the forms required as part of the examination of their draft prospectus or supplement, and downloadable from the AMF website.

Version française

Le 27 novembre 2020, l'Autorité des marchés financiers (AMF) a publié le Guide pratique de saisie d'un formulaire PDF relatif aux données d'un prospectus ou d'un supplément.

Ce guide a été établi afin d’accompagner les émetteurs et leurs conseils dans la saisie des formulaires exigibles dans le cadre de l'instruction de leur projet de prospectus ou supplément, et téléchargeables sur le site de l’AMF.

On 6 November 2020, the Bundesrat published Draft Law amending the Criminal law to implement Directive (EU) 2019/713 on combating fraud and counterfeiting of non-cash means of payment. 

The Draft Law establishes minimum rules concerning the definition of criminal offences and sanctions in the areas of fraud and counterfeiting of non-cash means of payment. It facilitates the prevention of such offences, and the provision of assistance to and support for victims.

Here are two publications on Brexit from the BaFin.

1. On 19 November 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published updated Brexit FAQ addressed to management companies and investment funds.

Question:
Does the Federal Agency intends to include trading venues from the UK on 01.01.2021 in the list of approved stock exchanges and other organized markets in accordance with the KAGB?

Answer:
When the Brexit transition period expires on 31 December 2020, the UK will be considered a third country. Securities that at that time are only admitted to or included in a stock exchange or an organized market in the UK may only be acquired or held by UCITS capital management companies if these trading venues are listed on the BaFin stock exchange list. Against this background, the Federal Agency examined the inclusion of 10 UK trading venues on the BaFin exchange list and came to the conclusion that, given the current situation, there are no concerns about inclusion.

2. On 19 November 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published communication concerning the marketing of UK investments funds post-Brexit.

After the transition period expires on 31 December 2020, UK investment funds may no longer be marketed in Germany on the basis of the European passporting regime. If these funds are to continue to be marketed in Germany after expiry of this transition period, a bilateral notification procedure must be completed for the marketing of third-country funds for each fund.

At the moment, UK investment funds are still being marketed in Germany by way of the passporting procedures under section 310 of the German Capital Investment Code (Kapitalanlagegesetzbuch – KAGB) for UCITS and section 323 of the KAGB for special AIFs. Once the transition period expires, this will no longer be possible and the marketing authorisations will become void. If these funds are to continue to be marketed in Germany after expiry of this transition period, a bilateral notification procedure must be completed for each fund for the marketing of third-country funds under section 320 of the KAGB for the former UK UCITS or section 329/section 330 of the KAGB for the special AIFs.

Marketing notification procedures for UK investment funds which are to continue to be marketed in Germany can already be initiated before expiry of the transition period on 31 December 2020 even if they are not third-country funds by this date, thus preventing any interruptions in the marketing of these funds.

On 4 November 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published revised circular on the depositary’s responsibilities and duties according to the German Capital Investment Code (Kapitalanlagegesetzbuch - KAGB). The circular addresses certain questions in relation to chapter 1 of section 3 of the KAGB and chapter IV of the Delegated Regulation (EU) No. 231/2013 (Level 2 Regulation). 

On 3 November 2020, the Hong Kong Monetary Authority (HKMA) informed the authorized institutions (AIs) of the introduction of Cybersecurity Fortification Initiative (CFI) 2.0 and the associated implementation timeline. 

The initiative is underpinned by three pillars: 

(i) the Cyber Resilience Assessment Framework (C-RAF); 

(ii) the Professional Development Program (PDP); and 

(iii) the Cyber Intelligence Sharing Platform (CISP). 

CFI 2.0 will come into effect from 1 January 2021. The HKMA will continue to adopt a phased approach to the implementation of C-RAF 2.0

On 3 November 2020, the Securities and Futures Commission (SFC) published a Circular to Licensed Corporations on the Updated Technical Specifications for OTC Derivatives Trade Reporting.

The Circular informs that the Hong Kong Trade Repository (HKTR) issued a notice about updated technical specifications for over-the-counter (OTC) derivatives trade reporting. Specifically, in order to cope with the floating rate indices emerging from the markets from time to time, a bi-monthly update to the coding scheme “FloatingRateIndex” supported in the HKTR system will be published on the HKTR Info Page. Licensed Corporations that may be subject to mandatory reporting obligation are advised to refer to the Notice.

On 16 November 2020, the Hong Kong Monetary Authority (HKMA) informs on a new Return of Consolidated Accounts (Form MA(BS)1H) and revised the submission deadlines of several existing returns. 

In response to the request by the industry, the submission deadline of the Return will be six weeks after the end of each quarter during the first year of submission (i.e. the reporting positions of December 2021, March 2022, June 2022 and September 2022) to provide reporting institutions with sufficient time to adopt the reporting of the new Return; thereafter, the deadline will be one month after each quarter end. 

Revised submission deadlines for selected returns  will become effective starting from the reporting position of March 2022. 

On 17 November 2020, the Securities and Futures Commission (SFC) entered into a cooperation agreement with the Israel Securities Authority (ISA) to establish a framework for cooperation on financial technology (Fintech).

Under the agreement, the SFC and the ISA will cooperate on information sharing, potential joint innovation projects and referrals of innovative firms seeking to enter one another’s markets.

On 25 November 2020, the Securities and Futures Commission (SFC) remarked that the SFC The Securities and Futures Commission (SFC) welcomes the initiatives in the Chief Executive’s Policy Address to further deepen the mutual access between the Mainland and Hong Kong financial markets.

The SFC also supports further promoting the development of private equity funds, family office business, and the real estate investment trusts (REIT) market in Hong Kong and will soon release its consultation conclusions on proposed regulatory changes that would give REITs more flexibility in making investments.

On 27 November 2020, the Securities and Futures Commission (SFC) released consultation conclusions on proposals to provide Hong Kong Real Estate Investment Trusts (REITs) with more flexibility in making investments.

The revised REIT Code will become effective upon its gazettal.  To address respondents’ suggestion that an appropriate transitional period be provided for the requirements for connected party transactions in order to assess their impact, a transitional period of six months will be allowed for existing REITs to comply with the revised connected party transactions requirements in relation to transactions entered into before the effective date of the revised REIT Code. 

The proposed amendments to the Code on Real Estate Investment Trusts (REIT Code) include: 

(i) allowing REITs to make investments in minority-owned properties1 (Minority-owned Properties) subject to various conditions; 

(ii) allowing REITs to make investments in property development projects in excess of the existing limit of 10% of gross asset value (GAV) subject to unitholders’ approval and other conditions; 

(iii) increasing the borrowing limit for REITs from 45% to 50% of GAV; and  

(iv) broadly aligning the requirements for REITs’ connected party transactions and notifiable transactions with the requirements for listed companies, in line with existing policy and practices. 

On 23 November 2020, the Central Bank of Ireland (CBI) reminded that the closing date for submissions to the Central Register of Beneficial Ownership for Certain Financial Vehicles is the 25 December 2020 for Irish Collective Asset- Management Vehicles (ICAVS) and Unit Trusts.

CFV who are not yet authorized will have six months from the date of their authorization to file their beneficial ownership information with the Central Bank. Late submissions will not be accepted and may be subject to sanctions for non-compliance.

On 25 November 2020, the Central Bank of Ireland (CBI) informed about its welcome to the announcement by the EU Commission of the temporary UK equivalence decision for the purposes of the Central Securities Depository Regulation (CSDR) until 30 June 2021. 

The announcement is another important action aimed at ensuring the Irish capital markets do not face disruption at end December 2020 when the UK’s transition period ends. 

Irish market participants have selected Euroclear Bank Belgium as the preferred long-term CSD solution for the Irish market. The CBI acknowledges and continues to monitor the work being undertaken by the project team and wider market participants, to facilitate the Irish market migration to the EU based CSD. 

However, the CBI highlights again the need for the whole industry to maintain momentum as it enters the final phase of this complex, multi-year migration project. The CBI expects industry to continue to work to ensure successful migration by the agreed March 2021 timeline. The temporary equivalence timeline of June 2021 provides a contingency for potential unforeseen events affecting the expected migration in March 2021.

On 5 November 2020, the Central Bank of Ireland published an update on its expectations as regards regulatory flexibility for Securities Markets, Investment Management, Investment Firms and Fund Service Providers.

The Central Bank has determined that certain measures previously communicated in respect of Securities Markets, Investment Management, Investment Firms and Fund Service Providers, and which have since expired on their terms, will not be extended. This includes those setting out expectations relating to:

• Regulatory remittance dates for investment firms and fund service providers;
• Pillar 3 disclosures; and 
• The submission of assurance reports in respect of investment firms and fund service providers’ arrangements for the safeguarding of client assets or investor money.

The Central Bank has also revised its expectations in respect of risk mitigation programme (RMP) implementation dates and clarified its expectations as regards the application of Pillar 2 Guidance by MiFID investment firms subject to CRR/CRD IV. The Central Bank continues to apply relevant announcements made by the European Supervisory Authorities (ESAs), again to the extent they have not expired on their terms, and to allow limited and time-bound flexibility in specified areas. 

On 26 November 2020, the Central Bank of Ireland (CBI) published the second Financial Stability Review (FSR) of 2020. The FSR outlines key risks facing the financial system and the Central Bank’s assessment of the resilience of the economy and financial system to adverse shocks. 

The Financial Stability Review indicates that:

• Policy supports have cushioned the initial liquidity shock to firms and households. 
• The loss-absorbing capacity of the system as a whole is sufficient to absorb shocks that are materially worse than current baseline projections. That loss-absorbing capacity is not unlimited.
• Macro-financial conditions would be worse if the banking system sharply reduced the supply of credit.
• To guard against this risk, policymakers have responded with a range of fiscal, monetary, macroprudential and micro-prudential actions.

On 17 November 2020, the Central Bank of Ireland (CBI) issued a letter to the management of all regulated financial services providers setting out its expectations for firms to take appropriate action to address the significant issues identified by thematic inspections concerning their legal obligations under the Fitness and Probity (F&P) regime.

In many of the firms, the level of awareness by Board members of their fitness and probity obligations was poor. This was evident in particular in relation to the process for appointing members to the Board. More broadly, the area which was most consistently weak across the majority of firms was due diligence. Issues identified included a lack of evidence of qualifications, reference checks and suitability searches.

Where Pre-Approval Controlled Function (PCF) or Controlled Function (CF) roles are outsourced to unregulated Outsource Service Providers (OSPs), the majority of firms had not, as part of their due diligence in appointing CF role holders, obtained the required documentation nor made any inquiries as to the OSP’s process for assessing fitness and probity.

In addition, many firms did not have robust processes in place to identify, escalate and notify the Central Bank in a timely manner of potential concerns regarding the fitness and probity of a CF or PCF holder.

While the majority of firms had compliance frameworks, policies and procedures in place, given the findings of the thematic inspections, it is clear that many firms are not undertaking robust compliance testing of their fitness and probity processes and procedures.

On 23 November 2020, the Central Bank of Ireland (CBI) issued the 36th edition of the Central Bank AIFMD Q&A, which includes new Q&As:

1. ID 1134 

- Q. Must a general partner of an investment limited partnership (ILP) also be authorized as an AIF management company? 

- A. No. The general partner of an ILP has statutory functions imposed by the Investment Limited Partnerships Act 1994 relating to its authority to conduct the business of the ILP. 

2. ID 1135 

Q. I am a general partner and am also approved as an AIF management company. Can I seek revocation of that approval from the Central Bank? 

A. Yes. Application may be made by a general partner to the Central Bank for revocation of approval as an AIF management company. 

On 10 November 2020, the Financial Information Unit listed four common fraudulent behaviors, aiming to hiding capital with illicit origin, shielding ownership structures, interrupting the traceability of financial flows.

The behaviors identified are the following: 

A. use or issue of invoices for non-existent transactions; 

B. intra-community VAT fraud; 

C. international tax fraud and other forms of international tax evasion; 

D. assignment of fictitious tax credits and other undue uses.

The document describes the most typical schemes to implement the above mentioned behaviors, in order to inform financial intermediaries and consequently encourage punctual reporting.

Here are two publications on Brexit from the CONSOB.

1. On 12 November 2020, CONSOB published a notice to remind investment companies operating in Italy about the end of the transition period post Brexit.

More specifically, the communication reiterates the need for investment firms (1) having their registered office in the United Kingdom and (2) that want to continue operating in Italy from 1 January 2021, to obtain the relevant authorization by 31 December 2020. 

CONSOB also recommended to investment firms to pay attention when sending the application, to take in consideration of the time needed to receive the approval in order to avoid delays in the authorization process.

2. On 12 November 2020, CONSOB published a communication targeting both financial intermediaries as well as their clients concerning actions to take following Brexit, in view of the end of the transition period.

Concerning financial intermediaries, as of 1 January 2021, they can continue to provide investment services and activities in Italy only if authorized as companies from third countries.

In the absence of the required authorizations, the British intermediaries must have ceased their operations in Italy or transferred the activity to other authorized intermediaries by 31 December 2020. 

CONSOB will update the list of investment firms from the EU and those from non-EU countries authorized to operate in Italy from 1 January 2021, also providing adequate evidence on UK companies no longer authorized to offer services to Italian customers. 

From a client perspective, UK investment service providers have been encouraged to provide customers with appropriate information regarding the consequences of Brexit on existing contractual relationships. In fact, clients of these investment firms have the right to obtain information on the consequences linked to Brexit and the possible possibility of exercising the right of withdrawal.

On 13 November 2020, Banca d'Italia shared an article discussing the effects of the pandemic on liquidity needs, on the balance sheet and on the risk profiles of businesses.

The article explains that the recession caused by COVID-19 significantly increased liquidity needs for companies as well as the likelihood of a capital deficit. The main support measures launched by the Government between March and August attenuated these risks by reducing the liquidity deficit and limiting the deterioration of capital conditions. 

At the same time, according to the article, the use of new loans and public guarantees, further expanded debt. This phenomenon contributed to weakening the balance sheet positions by increasing the chances of insolvency, in particular for riskier companies.

Despite this counter effect deriving from the measures taken by the government, the methodology implemented in the article proves that without the government's intervention, the pandemic would have caused liquidity needs for a total of EUR 48 billions. While the financial leverage will generally increase and the revenues decrease for the sample of companies, the article concludes showing how the government measures had a benefic effect, also for those companies who would have probably had a less favorable financial year, even without COVID-19.

On 14 November 2020, the Italian government decided to exempt from reporting obligations financial instruments that can support the economy during the current pandemic.

In particular, in order to simplify and speed up the securities issuing process aimed at supporting and relaunching the economy, the issuing offering and placements of financial instruments pursuant to articles 26, paragraph 12, 27, paragraph 5 and 38, paragraph 3 of decree-law n. 34 of 19 May 2020, converted into law no. 77 of July 17, 2020 are exempted from reporting obligations. 

The financial instruments listed at the aforementioned articles are financial resources provided by the government in the form of funds, to support businesses affected by COVID-19 (e.g. Support fund for venture capital).

On 30 November 2020, Banca d'Italia communicated the implementation of ESBR recommendations of 25 May 2020.

The recommendations were issued following the economic crisis triggered by COVID-19 which led to significant requests for guarantee margins both for transactions cleared by a central counterparty (CCP) and for those cleared bilaterally. 

This caused increased liquidity risks and the European Systemic Risk Board (ESRB) consequently intervened with the Recommendation of 25 May 2020 (published in the Official Journal of the European Union of 20 July 2020), divided into four (sub) recommendations, addressed to different authorities according to the objective to be pursued.

Recommendation A is addressed to:

• the competent authorities on CCPs and 
• the competent authorities on clearing members in CCPs, on financial and non-financial counterparties in bilateral transactions, aims to ensure that sudden and significant changes in margins are limited by CCPs towards their direct participants;  by direct participants towards their customers; as well as bilaterally.

Recommendation B, addressed to the European Securities and Markets Authority (ESMA) and to the CCP competent authorities, aims to ensure that CCPs consider the consequences of default by two service providers in their liquidity stress tests

Recommendation C, addressed to the competent authorities on CCPs and those on clearing members of CCPs, aims to ensure that CCPs limit the time lag in the settlement of variation margins calculated on an intraday basis

Recommendation D targets all competent authorities  so that they can contribute to stimulating the international debate on how to mitigate pro-cyclicality in the provision of client clearing services and in securities financing transactions. Moreover, this recommendation also encourages the European Commission to make any global standards on the subject effective in Union legislation.

With the communication in question, Banca d'Italia implemented the recommendations of ESBRs.

On 17 November 2020, Banca d'Italia amended the regulations to concerning financial reporting on the issuing or offering of financial instruments.

Background:

Information reporting requirements have been defined considering that Banca d'Italia is in charge of tracking newly issued Italian financial instruments (National Numbering Agency, NNA). Additionally, it receives information when assigning the International Securities Identification Number (ISIN) and is in charge of the Classification of Financial Instruments (CFI) of newly issued financial instruments. 

Banca d'Italia also feeds a database on the characteristics of financial instruments ("Securities Register"), established to realize statistical and supervisory reports. The information from the Securities Registry helps to reconcile the data in the securities archive of the European Central Bank (Centralized Securities Data Base - CSDB) and to the prepare statistics on issues pursuant to art. 15 of the ECB / 2007/9 guidelines of the European Central Bank.

Information requirements:

At present, the information required by Banca d'Italia includes the below list of information strictly related to the financial instrument, plus quantitative information.

ISIN Code, Issuer Code, Issuer Parent Company Code, Guarantor Code, Parent Company Code Guarantor , Economic Activity Sub-Group, Currency Of Denomination, Type Of Financial Instrument, Regulated Listing Market, Multilateral Trading Systems (MTF), Restrictions On Sale, Refund Priority, Issue Or Offer Price, Date From Which Interest Will Start, Date Of Settlement, Expiry Date, Coupon Periodicity, Refund Price, Issue Rate, ISIN Code Of The Indexing Parameter, Indexing Of Capital And Coupons, Cap Clauses, Early Redemption Option, Derivative Component ( Structured Financial Instrument), Costs Related To The Emission, Expected Duration Of The Financial Instrument

On 24 November 2020, CONSOB shared operational guidelines on how to  deposit the prospectus on the CONSOB's website.

The filing of the prospectus (or of its parts) and of any supplements relating to the securities must take place within the term established by art. 9, co. 1, of the Issuers' Regulation. The prospectus should be provided to CONSOB through the Deproem System, available on CONSOB institutional website, using password and username provided by CONSOB itself.

It should be noted that transitional regime established by ESMA for the communication of data provided for by Regulation (EU) 2019/979 will cease on 25 November 2020. As a consequence, the current version of the Deproem system will cease to operate - the new version will be operational starting from 26 November 2020. The date on which the new system will be implemented, will allow to publish the prospectuses and data on the ESMA website, which will be mandatory as of 30 November 2020, in line with the new format of the Prospectus Register.

On 4 November 2020, Borsa Italiana shared the responses to FAQs concerning the application of the Corporate Governance Code.

The Corporate Governance Code ("Code") can be applied to all companies with shares listed on the market "Mercato Telematico Azionario" managed by Borsa Italiana and aims to ensure that the companies are aligned with international best practices in terms of governance.

The FAQs cover the following topics:

• The application of the Code
• The role of executive administrators
• The committee(s) that can support the administrative organ
• How to calculate quotas referring to independent administrators, how to define "independency", remuneration matters, and topics that should be treated by independent administrators
• The role of the CEO
• The role of controlling entities and other supervisory matters
• Composition of and reporting deadlines for: internal committees.

On 23 November 2020, Borsa Italiana published amendments to the Trading Parameters Guide of regulated markets organized and managed by Borsa Italiana.

In particular, the following changes were implemented: 

• the deviation limits for the conclusion of transactions on share options were changed, differentiating them between American-type and European-type options and taking into account the liquidity of the instruments; 
• the information related to the “price variation limits” on the IDEM market was reorganized and updated.

The changes will take effect on 7 December 2020.

On  9 November 2020, the Financial Information Unit of Banca d'Italia established a new field to report suspicious operations concerning the cross border provision of services.

Art. 13 bis, paragraph 4, of Legislative Decree 231/2007 as amended by Legislative Decree 125/2019 provides that the Italian Financial Information Unit should transmit to the FIUs of the other Member States the information on suspicious transactions concerning the respective States. 

In this context,  2 new fields have been created and can be used by Italian financial intermediaries for reporting transactions carried out exclusively for the provision of services. The reporting should be executed in English and no documentation should be attached.

On 18 November 2020, Luxembourg published Grand-Ducal Regulation of 14 November 2020 amending the amended Grand-Ducal Regulation of 23 January 2003 implementing the Law of 19 December 2002 on the Trade and Companies Register as well as the accounting and annual accounts of companies.

The modifications concern amendments to article 11 of the Law of 19 December 2002.

On 20 November 2020, the Commission de Surveillance du secteur financier (CSSF) published podcasts of highlights of the CSSF’s 2020 AML/CFT for the collective investment sector conference.

Close to 850 representatives of supervised entities attended this year’s AML/CFT for the collective investments sector conference, which was organised as a webinar:

• What’s new on the AML/CFT front in the Luxembourg collective investment sector? with Marco Zwick, Director of the CSSF
• Key takeaways of annual AML surveys (2018-2020) in the collective investment sector with Guilhem Ros, Head of Division for the offsite AML supervision for the collective investment sector at the CSSF
• A look behind the scenes of AML on-site inspections in the collective investment sector with Guido Kruse, Head of Division for the on-site AML inspections for the collective investment sector at the CSSF
• Tax crime digest for AML practitioners in the collective investment sector with Marie Laffont, responsible for tax matters at the CSSF.

On 27 November 2020, the Chambre des députés - Luxembourg published the adopted amendments of the Draft Law 7395:

1. Change of its title to "Draft Law on the implementation of restrictive measures in financial matters"

2. Main amendments adopted by the Commission des Finances et du Budget are about:

• putting the definitions of the freezing of funds and the freezing of resources economic under the definition of "restrictive measures of financial matters".
• amending the paragraph 1 of Article 5 to reproduce the text of Article 21 of the law of 27 June 2018, regarding a Grand-Ducal regulation to impose a restrictive measure against the states, natural and legal persons, entities and groups to ensure the defense of national or external security or the vital interests of the country, and pending the formal taking of decisions of the United Nations or the European Union.

The 3 last amendments are mainly alignment with the AML Law of 2004.  

On 26 November 2020, the Commission de Surveillance du secteur financier (CSSF) published  a FAQ on Investor Compensation Scheme in Luxembourg.

What is the definition of “other professional investors” that are excluded from the SIIL’s coverage pursuant to point 7 of Article 195 (2) of the Law of 2015?

The Council for the Protection of Depositors and Investors, which manages and administers the SIIL, has decided to refer to the definition of “professional clients”, provided for in Annexe II of the MiFID 2 in order to define the “professional investors” that are excluded from the SIIL’s guarantee. This definition comprises two parts, namely the clients who are considered to be professionals, and the clients who may be treated as professionals on request (together referred to as “professional clients”). The CPDI’s decision implies that the two aforementioned categories of professional clients are excluded from the SIIL’s guarantee. 

In accordance with the first part of the definition provided by Annexe II of the MiFID 2, a client who is considered to be a professional may enter into a written agreement with the SIIL member to the effect that the client shall not be treated as a professional for the purposes of the applicable conduct of business regime. Such agreement shall specify the particular services or transactions, or the types of product or transaction to which it applies. The claims resulting from such services, transactions or products are then covered by the SIIL, provided that they are not excluded from the SIIL’s coverage pursuant to a point, other than point 7, of Article 195(2) of the Law of 2015.

On 19 November 2020, the Commission de Surveillance du secteur financier (CSSF) published communication by the UK Financial Conduct Authority (FCA) to Luxembourg-based entities regarding the UK Temporary Permissions Regime (TPR). This publication is based on a request of the UK Financial Conduct Authority (FCA) asking the CSSF to channel its communication on the UK Temporary Permissions Regime (TPR) to Luxembourg-based entities.

The FCA communication: 

“The TPR will enable relevant firms and funds which passport into the UK from your jurisdiction to continue operating in the UK from the end of the transition period. The regime will allow firms and investment funds time to obtain authorisation or recognition in the UK, if required. Firms and funds need to notify the FCA of their desire to benefit from the regime, and any solo-regulated firms that have already notified us are now receiving communications from us about how they should prepare. We would be very grateful for your assistance to help facilitate these preparations, specifically, if you could please remind firms in your jurisdiction of the following:

1. For firms that passport into the UK, the notification window for the TPR reopened on 30 September. This will allow any solo-regulated firms and fund managers that have not yet notified to do so. The reopening of the notification window also provides an opportunity for fund managers to update their previously submitted notifications, if necessary. The FCA’s passporting team will be in touch shortly to check that all firms from your jurisdiction that have notified for TPR remain authorised.

2. If firms hold a passport and have already notified to be in the TPR, but do not require a UK authorisation because, for example, they are not doing any UK business, they should withdraw their TPR notification and, if they have no existing contracts, also cancel their passport. This is an important message which we would appreciate your help with communicating.

3. Any firms with a passport to the UK that do not enter the TPR, and that require permission to perform an existing contract, will automatically enter the UK’s Financial Services Contracts Regime (FSCR), to allow them to wind down their UK business in an orderly fashion. Firms in the FSCR will not be able to write new business in the UK, and we would appreciate you reminding firms of this. More details are available on the FCA’s website, and should there be further questions then the FCA’s Contact Centre can assist.

We also wanted to bring your and your firms’ attention to a recent publication. On 23 September we published a consultation paper on our general expectations for international firms that require FCA authorisation, which will be needed if they wish to undertake regulated activities in the UK on an on-going basis. It sets out more information on our expectations for that authorisation. All firms seeking a UK authorisation will be expected to have an active place of business in the UK. As such, we would be grateful if you could draw the consultation paper to the attention of local firms, especially those which currently passport into the UK on a services basis. The consultation closes on 27 November 2020.”

BACKGROUND

This communication follows up on press releases 19/05, 19/07, 19/18, 19/33, 19/34, 19/41, 19/43, 19/48, 19/54, 20/03 and 20/23 issued by the Commission de Surveillance du Secteur Financier in the context of Brexit.

As stated in CSSF press release 20/03 and during the transitional period, European Union’s laws and regulations continue to apply in the UK and UK entities can continue to provide their services in Luxembourg based on their current passporting rights under applicable EU legislation, which will be terminated as of 31 December 2020 at midnight. Such lapse of passporting rights affects:

• All UK managers managing investment funds established in Luxembourg on a cross-border basis, i.e. UCITS and AIFs established in Luxembourg whether regulated under a sectorial law or not.
• The passporting rights in relation to the cross-border marketing of UCITS and AIFs in Luxembourg. Such lapse of passporting rights also applies to EuVECAs, EuSEFs and ELTIFs with a UK manager marketing in Luxembourg.

WHAT'S NEW?

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

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

• The lapse of passporting rights in relation to the management of Luxembourg funds on a cross-border basis
• The lapse of passporting rights in relation to the cross-border distribution of funds into Luxembourg
• Marketing in Luxembourg to professional investors
• Marketing in Luxembourg to retail investors
• Delegation of investment management/portfolio management and/or risk management activities to undertakings in the United Kingdom
• Compliance with investment policy and eligibility issues
• CSSF position on secondments of staff.

Concerning the cross-border distribution of funds into Luxembourg and in relation to the lapse of passporting rights for cross-border distribution of funds into Luxembourg under a European passport, the required action comprises:

1. De-notification: a notification to withdraw from cross-border distribution into Luxembourg under the regime currently applicable via CSSF emails;

2. Re-registration: a fund is required to be re-registered with the CSSF if:

• The fund, for which a de-notification for marketing has been notified to the CSSF, continues to retain investors established in Luxembourg, 
• The fund does not wish to pursue any active marketing to investors in Luxembourg going forward.

3. A new notification or request for authorization for cross-border marketing in Luxembourg (a distinction needs to be made between marketing to professional investors and marketing to non-professional).

As defined in Circular CSSF 18/698, all Luxembourg funds currently managed by a UK manager will need to appoint an EU-27 manager to maintain EU passporting rights. Any reference in this press release to UK entities also comprises entities established in Gibraltar.

WHAT'S NEXT?

The Brexit transition deadline is rapidly approaching. 

EU Institutions and different NCAs have increased their activities by providing final clarifications for financial institutions in this context.

On 13 November 2020, the Commission de Surveillance du secteur financier (CSSF) published communication on COVID-19 thematic review of issuers’ reporting.

The COVID-19 pandemic has hit Luxembourg as other European countries since the beginning of the year 2020 and has adversely affected a number of issuers under CSSF supervision. In this context, CSSF decided to carry out a thematic review of the information provided by issuers concerning the impact of COVID-19 on their operations and financial performance as of 30 June 2020.

CSSF noted that information provided in the interim financial reports regarding the effects of the COVID-19 pandemic was generally sufficiently entity-specific and detailed. The information was mainly available in the management reports and often repeated or summarized in the relevant notes to the financial statements.

However CSSF considers that there are several areas for improvement that issuers should consider when preparing their future financial information regarding the impacts of this pandemic.

The main issue encountered concerns the impairment of non-financial assets. Indeed CSSF were confronted with insufficient disclosure in the interim financial reports and more importantly, CSSF observed that the assessments made by management with regard to the recoverable value of non-financial assets did not always appear consistent with the impacts of the COVID-19 pandemic (on the first half-year 2020 and planned) described elsewhere in the financial reports.

Another area for improvement concerns the measurement and disclosure of expected credit losses (ECLs), especially on trade and lease receivables for corporates. A number of the issuers examined hold significant receivables for which the credit risk is likely to change as their clients could be weakened by the effects of COVID-19. As such, CSSF expects issuers to provide precise information on their credit risk management in response to COVID-19 and on any significant adjustments made to the impairment models as well as on the impairment losses recognized.

The purpose of this document is to assist issuers in preparing their next interim or annual financial report.

On 20 November 2020, the Gouvernement du Luxembourg  announced it support measures for businesses affected by the COVID-19 pandemic.

The Luxembourg government has decided to strengthen its support to companies in the context of the COVID-19 pandemic. It approved a draft law that provides for the introduction of new financial aid for companies in the sectors most severely affected by the COVID-19 pandemic and whose financial situation makes it difficult to bear the new burden resulting from the increase in the minimum social wage scheduled for January 1, 2021.

This aid takes the form of a one-time lump-sum capital grant of up to 500 euros per employee whose monthly remuneration is greater than or equal to the minimum social minimum wage and less than or equal to the qualified minimum social wage (SSM). The compensation aid takes into account employees who were hired before December 31, 2020 and who were in service during a monthly period between January 1, 2021 and June 30, 2021. This aid is aimed at the sectors most affected by the health crisis, namely tourism, events, culture, Horeca, entertainment, retail, as well as managers of continuing vocational training organizations.

On 25 November 2020, the Law of 25 November 2020 amending the amended law of 23 September 2020 on measures concerning the holding of meetings in companies and other legal persons was published in the Official Journal. 

The applicability of exceptional measures concerning the holding of meetings in companies and other legal persons has been extended from 31 December 2020 to 30 June 2021 inclusive.

• Holding meetings without the obligation of physical presence in companies and other legal entities: the current situation due to the pandemic justifies the extension until 30 June 2021 of certain measures so that companies and other legal entities can hold their meetings without the obligation of physical presence. This possibility has also been extended to other entities that have requested it, such as the Order of Architects and Consulting Engineers (OAI), mutual insurance associations and the Bar Associations.
• The measure to suspend the time limit for a merchant's admission of cessation of payments has also been extended to 30 June 2021.

On 26 November 2020, the Commission nationale pour la protection des données (CNPD) published its annual report 2019.

• An increase in activity
  The new rules and the growing interest of individuals and professionals in data protection issues have led to an increase in inquiries received by the CNPD.
  While remaining below the peak in 2018, the number of requests remained high, with 708 written requests for information in 2019. While in 2018, with the entry into force of the GDPR, a large number of questions were related to more general issues concerning the compliance with the new legislation, the requests became more specific, demonstrating greater awareness among the public in 2019.
• Guidance, awareness and monitoring on various topics
  The CNPD continued its guidance and awareness-raising efforts in 2019 with the development of guidelines on various topics such as the consequences of the Brexit on international data transfers, electoral campaigns in compliance with data protection and the compliance with the GDPR of mobile video surveillance cameras (of the “dashcams” type).
• An increasing number of complaints and a new investigation procedure
  The number of complaints increased significantly from 450 in 2018 to 625 in 2019. These complaints were made by individuals who contacted the CNPD when they considered that the law had not been respected or that their rights had been violated.
  In 2019, the CNPD developed a new regulation on the investigation procedure, which was adopted in early 2020. On the one hand, there are unannounced on-site visits, largely led by the complaints, and on the other hand, there are investigations in the form of an audit.
• 526 data breaches since the entry into force of the GDPR
  The data controllers shall notify the CNPD of violations of personal data within 72 hours after they become aware of them if the violation in question is likely to cause a risk to the rights and freedoms of the data subjects.
• Reorganisation of the services and adaptation of the organisational chart of the CNPD
  During 2019, the CNPD reorganised its services and adapted its organisational chart in order to better carry out its missions.
  The year 2019 was also impacted by the preparations for a relocation of the CNPD to new headquarters. Planning work began in the summer of 2018 to allow the CNPD to move to the new NAOS building on the Belval site in the commune of Sanem in the summer of 2020.

Here are two commitment letters from the CSSF for investment fund managers.

1. On 27 November 2020, the Commission de Surveillance du secteur financier (CSSF) published the Commitment letter to be signed by the person responsible for compliance with the professional obligations as regards the fight against money laundering and terrorist financing (“Responsable du Respect” or “RR”).

2. On 27 November 2020, the Commission de Surveillance du secteur financier (CSSF) published Commitment Letter – IFM confirmation of AML/CFT compliance for distribution channels.

BACKGROUND

Previously, on 2 September 2019, the CSSF published Frequently Asked Questions (FAQ) concerning the Undertakings for Collective Investment and the Alternative Investment Fund Managers relating to the applicable requirements when a central administration or a depositary transfer data to another service provider.

The Service Provider must obtain the consent of the UCI, via the Board for a SICAV or via the IFM for common funds, for the outsourcing of the service, the type of information that will be transmitted and the country of establishment of the provider of the outsourced service.

The Board of the SICAV should inform and obtain consent from investors to the transfer of their personal and confidential data. Such information may be provided through a letter to existing investors, a change in the subscription form, a change of prospectus. The Service Provider should obtain a confirmation from the Board of the fund that the investors have been informed and consented to the transfer of personal and confidential data.

WHAT'S NEW?

On 24 November 2020, Commission de Surveillance du secteur financier (CSSF) updated the FAQs on Luxembourg Law of 12 July 2013 on alternative investment fund managers and concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment. The new question in both documents concern the conditions to comply with in case of data transfer by a central administration or a depositary to another service provider.

Pursuant to Article 41 (2a) of the amended Law of 5 April 1993 on the financial sector, in case a central administration agent or a depositary (a credit institution, an investment firm or a professional of the financial sector) is outsourcing services implying a transfer of relevant information to a third party, the central administration agent or the depositary must ensure that its client, the Board of Directors (“BoD”) of the SICAV or of the IFM for common funds, has accepted the outsourcing of the relevant outsourced services, the type of information transmitted in the context of the outsourcing and the country of establishment of the entities that provide the outsourced services. 

Any transfer of information related to investors should be disclosed prior to the transfer, by the UCI, respectively the IFM for common funds, to investors through appropriate means, namely the prospectus and the application form combined, if appropriate, with a reference to a website. Existing investors should be informed by the UCI, respectively the IFM for common funds, prior to the transfer of their information, about any update of the fund documents aiming at the aforesaid disclosure by means of a letter, email or any other means of communication provided for by the prospectus. Due to transparency and confidentiality requirements, the same conditions apply to UCI/IFM acting as central administration. The aforesaid requirements apply independently from the General Data Protection Regulation (EU) 2016/679, if applicable.

WHAT'S NEXT?

This document will be updated from time to time and the CSSF reserves the right to alter its approach to any matter covered by the FAQs at any time. The present FAQs are to be read in conjunction with the questions and answers ESMA has published with respect to the application of the AIFMD regulation and with respect to the application of the laws and regulations governing UCITS.

On 2 November 2020, the Commission de Surveillance du secteur financier (CSSF) published a document on External Asset Managers Servicing Banks (EAM) Dashboard Definitions 2020 (as of 30/06/2020).

Reportable assets should be defined by the following conditions:

• include all assets, booked within a Luxembourg custodian bank
• exclude any assets booked within  European branches.
• include all accounts opened in the name of a private person, life insurance policy or other private wealth planning structure (SPF, financial holding company)
• exclude any accounts opened in the name of institutional or global custody clients.
• include any accounts that are managed on a discretionary, or advisory, basis a third party, independent, professional, asset manager (IAM) licensed to authorize such a profession by a Luxembourg, EU, or other regulator, or affiliated to a self regulating organization
• exclude any accounts that are managed by the bank, or another bank affiliate within the group.

On 27 November 2020, the Chambre des députés - Luxembourg published Draft Law 7723 on:

• the transposition of Directive (EU) 2019/2034 on the prudential supervision of investment firms
• the partial transposition of Directive (EU) 2019/2177 amending Solvency II, MiFID II, AMLD 4 
• the implementation of Regulation (EU) 2019/2033 on the prudential requirements of investment firms
• the implementation of Article 4 of the Regulation (EU) (2019/2175) amending Regulation (EU) No?1093/2010 establishing EBA, EIOPA, ESMA, amending MiFIR, BMR, and Regulation (EU) 2015/847 on information accompanying transfers of funds
• the amendments to:
  a) the amended law of 5 April 1993 on the financial sector;
  b) the amended law of 23 December 1998 establishing a supervisory commission for the financial sector;
  c) the amended law of 17 December 2010 concerning undertakings for collective investment;
  d) the amended law of 12 July 2013 relating to managers of alternative investment funds;
  e) the amended law of 7 December 2015 on the insurance sector;
  f) the amended law of 18 December 2015 on the failure of credit institutions and certain investment firms; and
  g) the amended law of 30 May 2018 on markets in financial instruments.

The main 3 objectives of the draft law:

1. introduce a prudential framework for MiFID-authorized investment firms which allow for differentiated regulation of Investment Firms depending on their classification, with higher impact Investment Firms being subjected to more intensive regulation. Investment Firms will be categorized into one of the following four classes:

"Class 1": these investment firms will be considered as separate credit institutions. They will thus be treated in all respects as credit institutions, including in terms of supervision. These are the largest investment firms carrying out the activities of trading for their own account or the underwriting of financial instruments and / or the placement of financial instruments with firm commitment, and which exceed € 30 billion in total asset value;

"Class 1b": These are investment firms engaged in trading activities for their own account, or the underwriting of financial instruments and / or the placement of instruments financial with firm commitment, and which, due to their size and their importance to a group, will remain under the regulation 2019/2033 subject to a certain number of obligations from the CRD/CRR framework, without however being treated as full-fledged credit institutions. In Luxembourg, these are CRR investment firms.

"Class 2": they represent the classic investment firms, which will be fully subject to the new regime put in place by directive 2019/2034 and regulation 2019/2033.

"Class 3": these are small non-interconnected investment firms that benefit from certain exemptions in order to ensure the proportionality of the rules which are applicable.

2. modernize the statutes of certain PSF, and mainly the statutes of investment firms.

• Access to investment firm activity will be reserved for legal persons only, as is moreover the case by default in Directive 2014/65/EU, for the protection of investors.
• This bill also makes changes to the statutes of certain specialized PSF and support PSF. Thus, the status of "persons carrying out currency exchange transactions”, will be deleted. This activity will be reserved for credit institutions only. The status of operator of primary and secondary computer systems will be merged.

3. transpose into Luxembourg law the Articles 1 and 2 of Directive (EU) 2019/2177

• The draft law makes a series of adjustments in the amended law of 5 April 1993 relating to the financial sector, which aim to reflect the amendments to MiFID II regarding the transfer of certain authorization and supervision powers relating to the Data Reporting Service Providers (DRSP) from the national competent authorities to the ESMA.
• The draft law also reflects the modifications of the Directive (EU) 2009/138 which aims to promote the exchange of information and cooperation between the Commissariat aux Assurance (CAA), the national competence authorities of Member States, the EIOPA, in particular as regards the use of internal models and cross-border insurance business.

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

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

On 24 November 2020, the Law of 28 October 2020 amending the Money Laundering and Terrorist Financing (Prevention) Act BES and the BES Financial Markets Act in connection with addressing identified money laundering and terrorist financing risks on the BES and bringing this legislation into line with the recommendations of the Financial Action Task Force was published in the Official Journal.

The aim of the Law it to adapt the BES Money Laundering and Terrorist Financing (Prevention) Act to the FATF standards, to harmonize the definition of politically exposed persons, to further regulate data sharing between supervisory authorities, the reporting point and investigative authorities, to extend the scope of the law to hardware stores and to expand the tools of the supervisory authorities.

This Act enters into force at a time to be determined by Royal Decree, which can be determined differently for the various articles or parts thereof.

On 25 November 2020, the Autoriteit Financiële Markten (AFM) and De Nederlandsche Bank (DNB) published a Report on the transition to alternative benchmark rates.

As a result of manipulations in interbank reference interest rates (IBORs) and the drying up of liquidity in the market for interbank funding, it was decided worldwide to switch from IBORs, in particular EONIA and LIBOR, to alternative benchmarks. The alternative benchmarks differ per jurisdiction and include €STR, SONIA and SOFR. EURIBOR is also considered an alternative benchmark. Market parties must transfer their contracts to an alternative benchmark. In addition, if they make use of EURIBOR, they must include fallback options in the event that EURIBOR disappears.

Concerns remain
Many contracts are now based on future-proof benchmarks, including EURIBOR. However, important issues still remain, such as the inclusion of fallback options in financial contracts in the event that the benchmark used disappears. Market parties are struggling to use good fallback options and are waiting for standards from working groups, such as the Working Group on EU Risk-Free Rates, or international industry organizations. The AFM and DNB are of the opinion that market parties should also take the initiative in this respect.

Possible systemic risks
Poor preparation for the transition can lead to multiple risks. These include uncertainty about payments or valuations, legal conflicts, reputational damage, operational problems, and reducing liquidity in markets for commonly used derivatives. An accumulation of risk can ultimately threaten financial stability. The AFM and DNB therefore closely monitor the transition phase and call on financial institutions to switch to suitable alternative interest rate benchmarks and to include fall-back options in contracts where applicable.

On 2 November 2020, the Dutch Banking Association (Nederlandse Vereniging van Banken, NVB) published a paper on crypto-assets in the Netherlands.

The Dutch economy must be able to take full advantage of the opportunities offered by the 'crypto assets' and the Netherlands can play a pioneering role in Europe in this regard. For example, securities or assets can also be programmed ('tokenised') to be traded on the blockchain.

Crypto assets can bring significant benefits to both market participants and consumers. For example, they can lead to a cheaper, less burdensome and more inclusive way to finance small and medium-sized enterprises (SMEs). Banks can also manage risks more efficiently and thus offer lower prices. Payment tokens can also be used as a cheaper, faster and more efficient way of paying, reducing the number of intermediaries.

At the moment there is a lot of discussion about this subject in Brussels and The Hague politics. In addition to the European supervisory framework that is currently being worked on, the Netherlands can further stimulate the development of crypto assets. The NVB proposes concrete measures to stimulate innovation and create a clear legislative framework. The minimum aim of Dutch regulators must be to achieve a harmonized legislative framework at European level, and preferably worldwide.

On 6 November 2020, the Ministry of Finance of the Netherlands  launched a consultation on the Financial Markets Amendment Act 2022.

The legislative proposal amends the Wft to provide for the possibility for settlement firms, payment institutions, electronic money institutions (ELMIs) and investment firms to use a segregated capital account. The proposed amendment to the Wbft makes it possible for supervisors the Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM) to keep a reserve for incidental costs within the funding system of supervision. The bill also contains a number of other amendments, including the introduction of compulsory auditing of the financial statements of payment institutions and ELMIs, the provision of a lighter regime for certain foreign managers of investment institutions, a regime for the management of UCITS domiciled in the Netherlands by managers domiciled in another Member State, and the direct filing of certain financial reporting documents with the commercial register by issuers.

The consultation runs until 18 December 2020.

On 2 November 2020, the De Nederlandsche Bank (DNB) updated the enforcement policy on the current supervisory practice. 

The most important changes in the updated enforcement policy are: 

(i) expansion of the regular supervision described, including the relationship with European supervision; 

(ii) a clearer distinction between the principles of the supervisors and factors that are 'co-determining' in the use of enforcement instruments in a specific case; 

(iii) brief addition on the choice between informal and formal measures and fining of institutions and de facto managers; and 

(iv) an addition of a section on disclosure due to the extension of the disclosure regime in various supervisory laws. 

The previous enforcement policy dates from 2008.

On 24 November 2020, the De Nederlandsche Bank (DNB) updated its supervision priorities.

While the COVID-19 crisis now requires a lot of attention from banks, pension funds and insurers, they face important structural challenges. 

1) Data are increasingly important

Not only is the financial sector grappling with the impact of the COVID-19 crisis, it is also facing challenges such as digitalisation, greening the economy and persistently low interest rates. Rapid technological developments mean that institutions not only need to review their business models, but also face new players from a technological background in their markets.  

Data are of increasing importance in these trends. This is why we call institutions to account over their duty to have adequate safeguards for their data in place. They must ensure the quality of their data, in terms of completeness and integrity, but also in terms of robust security, for example to withstand cyberattacks. In addition, the privacy aspects of managing and using such data are important, especially if financial institutions increasingly use algorithms and artificial intelligence.  

Data-driven working methods are also benefiting the quality and efficiency of our supervision. For example, the use of artificial intelligence allows us to gain a better understanding of an institution's risk profile. We collaborate with the institutions in the iForum. This is a platform on which we share knowledge and conduct experiments aimed, for example, at limiting the costs of indirect supervision and improving data quality in supervisory reports.  

2) Sustainability risks warrant additional attention

Adequate management of sustainability risks by financial institutions requires even more of our attention. In recent years, we have studied how climate change, the energy transition and biodiversity loss can affect financial institutions. It is now up to them to embed the results into their policies and risk management, while we integrate them further into our supervision.

3) Stepping up the fight against financial crime

Financial institutions have further strengthened their gatekeeping role and invested in human and technological resources to keep criminals out of our financial system more effectively. There is still great scope for improvement, however. Over the coming years, we will monitor that financial institutions take more structural measures aimed at managing integrity risks and more effectively preventing financial crime. Both the sector participants and we can do so by, among other things, promoting initiatives for public-private partnership in crime prevention, and cooperating more closely across borders.  

On 30 November 2020, the De Nederlandsche Bank (DNB) published information on its new adjusted supervisory approach.

From 1 January 2021, DNB will conduct supervision according to an updated supervision methodology.
The starting point is that a stable and reliable financial system benefits from public confidence in financial institutions to meet their obligations and act with integrity. DNB stresses that the purpose of its supervision is to reduce the risk and impact of a failing institution and not to prevent it at all times. 

DNB wants to work more on a data-driven basis with the updated methodology and create a more uniformed supervision between sectors. In order to facilitate this uniformity, DNB will focus more on the digitisation of supervisory processes during the coming year.
Concerning the ordinary supervision, the number of conversations with the account supervisor will be reduced depending on the supervisory class to which the institution is assigned. There are three classes, from small and not very complex to large and complex. The larger and more complex the institution is, the more conversations will be held. 

On 30 November 2020, the De Nederlandsche Bank (DNB) informed on legal requirements for outsourcing contracts.

DNB requests entities check to what extent their outsourcing contracts comply with the requirements as set out in the EBA Guidelines on outsourcing arrangements and the Bpr . Where this is insufficiently the case, DNB requests that entities adjust the contracts and refine the outsourcing processes. 

On 2 November 2020, the Autoriteit Financiële Markten (AFM) published a paper on the pension system in the Netherlands. 

The AFM welcomes the recently concluded pension agreement, which aims to make pensions more transparent and personal and to make them more in line with developments in society and on the labor market. At the same time, the new pension system will lead to more variable pension outcomes and more freedom of choice for members. More freedom of choice also places a responsibility on participants.

1) Better participant protection

To this end, the AFM wants:

• a chosen pension scheme in line with the characteristics of the participants
• well guided participants in making choices
• choices that pension providers have to make when transitioning to a new system are explainable.

2) Not too complicated, avoid foreseeable disappointments

In all cases, it must not be made too complicated for participants and that foreseeable disappointments among participants are avoided.

On 12 November 2020, the Autoriteit Financiële Markten (AFM) published Guidelines on the provision of information in the case of collective value transfer of pensions.

These Guidelines replace the current document Principles for the provision of information to participants in a Collective Value Transfer pursuant to Sections 83 and 84 of the PW as of 1 January 2021. From that moment on, the AFM will increase its attention for this provision of information, also in view of the upcoming revision of the Pension Scheme.

The guideline provides pension administrators with clarity about the way in which they should communicate with pension members about the consequences of a Collective Value Transfer.

• Importance of information to participants
  A member has an interest in timely, clear, balanced and correct information from his pension providers. This is particularly important in the case of a collective value transfer because the accrued pension of a participant can be transferred to another administrator or another scheme. The information must give him sufficient insight into the consequences for his pension. In the case of a collective value transfer at the employer's request, the participant also needs this information to assess whether he wants to make use of his legal right of objection.
• Cooperation between AFM and DNB
  The AFM and DNB both have a supervisory role in an intended collective transfer of value. Both in the case of a transfer in accordance with Sections 83 and 84 of the Pensions Act. The AFM assesses the participant information and DNB assesses the (financial) consequences for the transferring and receiving pension administrator, and the group of participants to be transferred. Both supervisors work together.

On 23 November 2020, the De Nederlandsche Bank (DNB) informed on the application for a banking license for investment firms due to the entry into force of the IFR/IFD.

Certain investment firms that perform the investment activity 'proprietary trading' and / or provide the investment service 'take over or place financial instruments with a placement guarantee' may qualify as banks as a result of the entry into force of IFR / IFD. These institutions must apply for a banking license from DNB. 

Information is published on the DNB website about the application for the banking license by investment firms and when the banking license can be applied for.

On 24 November 2020, the Proposals of the Federal Council concerning the federal bill on credits secured by a joint and several surety bond following the COVID-19 (law on joint and several surety bonds related to COVID-19, LCaS-COVID-191) was published in the Official Journal.

The amendment of the urgent federal law on the legal bases of the Federal Council ordinances to overcome the COVID-19 epidemic (COVID-19 law) and the amendment of the federal law on credits guaranteed by a joint and several guarantee following the COVID-19 (LCaS-COVID-19) create additional legal bases (delegation norms) to enable the Federal Council to take additional measures that are particularly necessary to mitigate the consequences of the second wave of the COVID-19 epidemic.

The Federal Council intends to alleviate the economic consequences for businesses primarily through the regulations for austerity cases and the sectoral aids already adopted. More financial resources are to be made available for hardship cases than was foreseen in the consultation. In addition, the federal government should take over a larger proportion of these credits to relieve the burden on the cantons.

At present, there are no signs of a contraction in the credit markets. As a security measure, the Federal Council wishes to be empowered, by means of a delegation of authority, to create by ordinance a new system of joint and several guarantees COVID-19 in the event of a significant deterioration in the situation on the credit markets (credit crunch), with the aim of guaranteeing the liquidity of companies and stabilizing the Swiss economy and society.

On 4 November 2020, the FINMA updated its Circular 2013/8 on Market conduct rules and Supervisory rules on market conduct in securities trading.

This Circular sets out details about market conduct prohibited under FMIA (Arts. 142 and 143 FMIA) and Articles 122-128 of the Financial Market Infrastructure (FMIO; SR 958.11). It also specifies the requirement for assurance of proper business conduct in the specific context of market conduct and establishes organizational requirements for supervised institutions. Compliance with these rules should ensure that prohibited market conduct is prevented and identified. 

Amendments adopted on 4 November 2020 and will come into effect on 1 January 2021:

• Sections VI (Market abuse on the primary market, with foreign securities or on other markets) and VII (Organizational requirements) of this Circular now applies to the following institutions supervised by FINMA: banks, insurance companies, trading venues, securities firms, fund management companies, SICAVs, limited partnerships for collective investment, SICAFs, custodian banks and managers of collective assets, portfolio managers and trustees
• Market manipulation: Entering low-volume orders with successively higher or lower prices in order to simulate increased supply or demand (painting the tape) is added to the list of examples of conduct that particularly violate Article 143 FMIA.
• Market abuse on the primary market, with foreign securities or on other markets: the provisions on insider information and market manipulation applies to an extended list of securities, and not only securities admitted to trading on Swiss trading venues.
• Concerning Audit: the organizational requirements for supervised institutions are audited in accordance with FINMA-Circ. 13/3 “Auditing” as well as securities firms by audit firms engaged under Article 63 FinIA. Where violations of market conduct rules are detected during the audit, these must be reported to FINMA in accordance with Article 27 FINMASA or Article 30 ISA (SR 961.01) and mentioned in the audit report.

On 12 November 2020, the FINMA published FINMA Guidance 09/2020 on Financial Market Infrastructure Ordinance: exchange of collateral / further extension of transitional period for equity options.

With the entry into force of the FMIA / FMIO in Switzerland on 1 January 2016, a duty to exchange collateral for non-centrally cleared OTC derivatives was introduced. In line with EU law, a new transitional period was established in the summer of 2017 in the course of the partial revision of the FMIO. 

FINMA issued Guidance 04/2019 on 13 December 2019, extending the transitional period for the duty to exchange collateral for non-centrally cleared OTC derivative transactions involving options on individual equities or index options to 4 January 2021. In the consultation process in respect of the DLT Ordinance, the Federal Council in 2018, the transitional period should be extended until 1 January 2024, in order to achieve consistency. The DLT Ordinance is expected to enter into force towards the middle of 2021 at the earliest. 

This would result in a gap arising between the end of FINMA’s original extension to 4 January 2021 and entry into force of the extended transitional period pursuant to the revised FMIO, in which collateral would have to be exchanged for equity options for a few months between 4 January 2021 and the entry into force of the DLT Ordinance.

In order to cover the period of time up until entry into force of the DLT Ordinance, FINMA is extending the transitional period of Article 131 para. 5bis FMIO until entry into force of the DLT Ordinance, but until 1 January 2022 at the latest. Furthermore, in view of the ongoing regulatory debate in the EU, a prompt deadline extension pursuant to Article 131 para. 6 FMIO is needed.

On 18 November 2020, the FINMA published its goals for 2021 to 2024 together with a document “Key areas”  setting out in concrete terms how the FINMA plans to implement the strategic goals over the next four years. The ten goals show how FINMA intends to fulfil its legal mandate and where its focus will lie. The goals concern various areas of client and system protection, but also operational topics.  

1) Stability and accompanying structural change

Important progress was made in 2017-2020 with regard to the stability of the financial institutions, which contributed to the high resilience shown by the Swiss financial centre in the COVID-19 crisis. The strategic goals for 2021 to 2024 are therefore guided by continuity in this area. FINMA will continue to focus on the supervised institutions’ stability, in particular strong capitalisation and liquidity (goal 1), and on further mitigating the “too big to fail” problem (goal 4). FINMA will also seek to ensure that the financial system remains as robust and client-oriented as possible, despite structural challenges (goal 5). In doing so, FINMA will take account of the fact that the corona crisis is exacerbating existing risks and uncertainties.

2) Conduct, risk management and corporate governance

FINMA will also continue to focus on the supervised institutions’ conduct: FINMA will orient its supervisory work so as to have a lasting positive impact on the financial institutions’ conduct, particularly with regard to combating money laundering and suitability, cross-border and market conduct issues (goal 2). The areas of risk management and corporate governance are now listed as a separate goal (goal 3). 

3) Innovation and sustainability

Innovation is and will remain a core element for FINMA in all areas (goal 6). The topic of sustainability is enshrined in a new goal (goal 7). FINMA will give particular consideration to climate-related financial risks in its supervisory work and urge the financial institutions to tackle these risks transparently. By doing so, it will contribute to the sustainable development of the Swiss financial centre.

4) Risk-oriented regulation and international recognition

FINMA will make the case for risk-reducing, proportional and less complex regulation in the Swiss financial centre, which is also equivalent to international standards (goal 8). FINMA actively represents Swiss interests in international fora and is a recognised and reliable partner for foreign supervisory authorities.

5) Efficiency and further development of the authority

FINMA will use its resources in an efficient and risk-based way in order to fulfil its extended legal mandate. New technologies will be used to help realise gains in efficiency and effectiveness (goal 9). Effective, efficient and internationally recognised financial market supervision requires highly qualified managers and employees. These are the focus of the new strategic goal 10.

On 16 November 2020, the FINMA announced the revision of the Circular on “Video and online identification”.

The Circular is amending the due diligence requirements for client onboarding via digital channels to take account of technological developments. To this end it is revising the Circular on “Video and online identification” and holding a consultation up to 1 February 2021.

There have been further technological advances since FINMA Circular 2016/7 "Video and online identification" entered into force. The partial revision of the Circular takes account of these developments, so that the ability to innovate, technology neutrality and effective combating of money laundering can continue to be guaranteed. FINMA is holding a consultation up to 1 February 2021.

Specifically, financial intermediaries should be enabled to automate their identification processes further while maintaining at least the same security level and to improve their scaling. Therefore, an additional possibility for online identification is now available to the financial intermediaries, namely scanning the client’s biometric passport chip. The need for accompanying security requirements such as a bank transfer or scanning of the biometric information document chip is essentially upheld, however, so that the security level of digital onboarding remains the same. They take in particular into account the fact that the inhibition threshold for attempting abuse can be lower in the digital environment due to the lack of personal contact than with in-person identification.

On 11 November 2020, the FINMA published its 2020 Risk Monitor.

This report provides an overview of what FINMA believes are the most important risks currently facing supervised institutions and describes the resulting focus of its supervisory activity. FINMA identified seven principal risks in the year of COVID-19. New on its list are possible defaults or adjustments to corporate loans or bonds abroad.

The new risk identified by FINMA as a principal risk concerns possible defaults or adjustments to corporate loans or bonds abroad. Such defaults are becoming increasingly likely because health-policy measures are resulting in a massive downturn in numerous companies’ sales and earnings and the threat of a global recession is looming on the horizon. In FINMA’s view, the topics identified as principal risks in 2019 remain central for the supervised institutions and the Swiss financial centre:

• the persistent low interest-rate environment (increasing);
• a possible correction on the real estate and mortgage market (increasing);
• a disorderly abolition of LIBOR benchmark interest rates (decreasing);
• cyberattacks (increasing);
• money laundering (same);
• increased impediments to cross-border market access (same).

On 4 November 2020, the FINMA updated its Circular 2018/03 on Outsourcing in the sector of banks, insurance companies and certain financial institutions within the meaning of the FinIA. 

This Circular sets out the prudential requirements to be met by the outsourcing solutions of banks, insurance companies and financial institutions. It includes requirements that oblige the latter to set up an appropriate organization in order to limit the risks.

Amendments of 4 November 2020 coming into force on 1 January 2021:

• Extended scope to: collective asset managers with their head office in Switzerland as well as Swiss branches of a foreign collective asset manager and fund management companies with their head office and main administration in Switzerland and the self-managed SICAVs.
• Collective asset managers, fund management companies and SICAVs: in addition to the tasks that cannot be outsourced as mentioned in Cm 8, the following tasks in particular must be performed by the financial institution itself: collective asset managers and fund management companies.
• Requirements for outsourcing companies for the inventory of outsourced functions: Financial institutions within the meaning of Cm 6.1 and 6.2 as well as securities houses shall draw up this inventory within the framework of their organizational principles.
• For financial institutions within the meaning of Cm 6.1 and 6.2, the circular applies to the initial authorization as soon as it comes into force. It applies to approvals of amendments from the date on which the change is forwarded or announced to FINMA for authorization, but no later than one year after its entry into force.

On 4 November 2020, the FINMA updated its Circular 2013/03 on Audit activities.

The report in accordance with the requirements for an audit must be drawn up for all insurance companies and insurance groups and conglomerates, including reporting entities that are not public limited companies.

For the detailed report on the audit of the accounts of the enveloping health insurance funds for the 2016 financial year, only the latest version of Circular 5.4 of the Federal Office of Public Health applies.

The updated annexes are the following:

• Annex 2: Standard audit strategy Banks / Securities houses
• Annex 13: Risk analysis banks / securities houses
• Annex 19: Additional information in the report on the audit of insurance accounting.

On 9 November 2020, the Swiss Funds & Asset Management Association (SFAMA) announced Switzerland underwent the PACTA Climate Test 2020.

For the first time, the entire Swiss financial market has voluntarily undergone climate compatibility testing on the initiative of the Federal Office for the Environment FOEN and in cooperation with the State Secretariat for International Financial Matters SIF. A representative number of Swiss pension funds, insurance companies, banks and asset management companies have voluntarily participated in the PACTA 2020 test. 

A total of 179 financial institutions took part, including banks and asset managers for the first time. The results show initial progress, but still fall short of the target if the Swiss financial centre is to play a leading role in the area of sustainable financial flows. It continues to invest too heavily in oil and coal production.

On 9 November 2020, the Federal Council informed on the limitation on ombudsman affiliation requirement. The Federal Department of Finance (FDF) requests that the Federal Council bring into force as early as 1 February 2021 the limitation on the ombudsman affiliation requirement decided by Parliament within the framework of the DLT Act.

As part of the parliamentary deliberations on the DLT blanket law, Parliament also adopted amendments to the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) in connection with the ombudsman affiliation requirement. In the future, the ombudsman affiliation requirement will apply only to those financial service providers that serve retail clients. It does not apply to financial service providers serving solely institutional or professional clients (excluding high-net-worth retail clients who have declared themselves to be professionals). Financial institutions that provide no financial services at all do not have to be affiliated to an ombudsman in any case.

The Federal Council is expected to make his decision in mid-December 2020. The FDF is communicating already at this stage in order to give the sector greater planning certainty.

BACKGROUND

On 1 January 2020, the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) entered into force.

The new FINMA Financial Institutions Ordinance (FMIO-FINMA) regulates the details of professional indemnity insurance for portfolio managers, trustees and managers of collective assets, details on calculating the de minimis threshold for gaining authorisation as a portfolio manager, and on risk management and internal control system for managers of collective assets.

WHAT'S NEW?

On 12 November 2020, the FINMA adopted its regulation implementing FinSA and FinIA. 

The most important changes can be found below:

1) FINMA Ordinance on Money Laundering

• “Banks" and “Houses of title" are added to the list of entities eligible for exemptions to the obligation to draw up and keep documents (Art. 39 para. 1 let. C)
• Financial intermediaries also fall under the exception to the identification obligation (Art. 2 Para. 2 letter abis AMLA )
• Art. 78a para. 2 MLO-FINMA is amended to the effect that Art. 65a MLO-FINMA applies to business relationships that have been newly entered into since the granting of the authorization pursuant to Art. 74 para. 2 FinIA.

2) Lowering of the threshold value for exchange transactions in cryptocurrencies

• FINMA is lowering the client identification threshold values from CHF 5,000 to CHF 1,000 for exchange transactions in cryptocurrencies
• By amending the FINMA Anti-Money Laundering Ordinance it is implementing the international standards approved in mid-2019 and acknowledging the heightened money-laundering risks in this area.

3) Extension of the scope

• Extension of the scope of application of circular 2018/3 "Outsourcing - Banks and Insurers" to fund managers and collective asset managers
• Externally managed SICAVs are now excluded from the scope of application
• The circular serves to harmonize supervisory practice in relation to outsourcing, it complies with the requirements of the FinSA and the FinIA.

WHAT'S NEXT?

The changes encompass a new implementing ordinance to FinIA as well as changes to FINMA ordinances and circulars that need to be adjusted as a result of FinSA and FinIA. Three circulars will be repealed. The implementing ordinances and circulars will enter into force on 1 January 2021.

On 17 November 2020, the Federal Withholding Tax Act was published in the Official Journal. 

The provisions of the Federal Withholding Tax Act concerning the exemption of interest on instruments issued by financial institutions too big to fail (too big to fail, TBTF), such as lease-in bonds or mandatory conversion loans, expire at the end of 2021. If the withholding tax reform (strengthening the third-party capital market) were implemented, there would be no longer any need to extend these provisions. However, the Federal Council will only adopt the dispatch on this reform in the second quarter of 2021 and must then forward it to parliament.

In order to preserve financial stability, the Federal Council is therefore proposing a separate draft to extend the validity of the exemption provisions by five years, i.e. until the end of 2026. The participants in the consultation on the withholding tax reform are also in favour of extending the exemptions. As the exemption is included in the existing law, the measure will not entail any particular consequences. On the other hand, financial stability would be adversely affected if the exemption provisions were not valid until the withholding tax reform comes into force.

On 13 November 2020, the Statutory Instrument S.I. 2020 No. 1270 - The Cyber (Sanctions) (Overseas Territories) (No. 2) Order 2020 was published in the UK legislation.

This Order extends with modifications the Cyber (Sanctions) (EU Exit) Regulations 2020 (S.I. 2020/597) as amended from time to time to all British overseas territories except Bermuda and Gibraltar (which implement sanctions under their own legislative arrangements). 

On 18 November 2020, the Financial Conduct Authority (FCA) announced that it will consult on its intention that the euro, sterling, Swiss franc and yen LIBOR panels would, subject to confirmation following ICE Benchmark Administration (IBA)’s consultation, cease at end-2021. 

The FCA also published consultations about its proposed policy in relation to some of the new powers that would be granted to the FCA under the Benchmarks Regulation (BMR) as amended by the Financial Services Bill introduced into the UK Parliament on 21 October. FCA published these based on the assumption that the Bill is passed in its current form. 

Under the proposed policy, FCA will not envisage using its powers where critical benchmarks (such as LIBOR currency-tenor settings) are little used, where the contracts referencing the benchmark can practicably be amended by contractual counterparties without our intervention, or where using the powers would not be necessary to protect consumers or market integrity. Nor would FCA envisages using the powers where appropriate inputs, as described in the proposed policy, are not available. 

If FCA adopts and applies its proposed policy to the LIBOR settings, there would be, however, a case for using the proposed new powers to require a change to the LIBOR methodology where:

• LIBOR currency-tenor settings are widely used in outstanding contracts and/or instruments that cannot practicably be transitioned away from the benchmark rate by actions or agreements by or between contract counterparties themselves (often known as ‘tough legacy’ contracts) and
• using the powers would contribute to protecting consumers or preserving market integrity.

Responses to this consultation should be sent to the FCA by 18 January 2021. This consultation will affect to:  

• administrators of critical benchmarks   
• contributors to critical benchmarks; and  
• users of critical benchmarks, both regulated and unregulated. 

On 9 November 2020, the UK Government published a guidance document setting out its detailed approach to the equivalence procedures.

• The guidance highlights that, as the UK Government has decided to incorporate almost all of EU equivalence determinations into UK law. These determinations will continue to have effect in UK law, “unless and until they are revoked”.
• However, the UK Government has not on-shored decisions regarding CCPs. It is anticipated that new decisions will be made by HM Treasury and decisions to recognize individual CCPs within a jurisdiction deemed to be equivalent will be made by the Bank of England. All overseas CCPs for which a recognition decision has not been made by the end of the transition period will be able to continue providing services in the UK and to firms by using the UK’s ‘Temporary Recognition Regime’ for non-UK CCPs.
• HMT will be responsible for making equivalence determinations. It will be able to request technical advice and information from the FS regulators (PRA, FCA, Bank of England). Equivalence decisions will be monitored and reviewed regularly. Withdrawal of equivalence will only be considered as a “last resort” option, and appropriate “adaptation periods” will be decided upon to avoid the risks of disruptions to firms and markets.
• The new ‘Overseas Funds Regime’ (OFR) will enable HMT to make equivalence determinations for retail funds and money market funds (MMFs) from other jurisdictions. 

On 23 November 2020, the Financial Reporting Council (FRC) and the government published letters to the accounting and audit sectors setting out the UK framework for audit and reporting at the end of the transition period.

Here are two UK statutory instruments on Brexit.

1. On 18 November 2020, the S.I. 2020 No. 1301 - The Financial Services and Economic and Monetary Policy (Consequential Amendments) (EU Exit) Regulations 2020 was published in the UK legislation.

These Regulations make consequential provision in exercise of the powers in section 41(1) and (2) of the European Union (Withdrawal Agreement) Act 2020 (c. 1). 

These Regulations update references to “exit day” (in regulation 3 and the Schedule) and “exit” (in regulation 2) in UK statutory instruments in consequence on the Act, where considered appropriate, such that they refer instead to “IP completion day” (as defined in section 39 of the Act). 

2. On 30 November 2020, the S.I. 2020 No. 1385 - The Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020 was published in the UK legislation.

This instrument is being made in order to ensure there is a coherent and functioning financial services regulatory regime in the United Kingdom (“UK”) at the end of the Transition Period (“TP”). The instrument makes amendments to recently applicable and related European Union (“EU”) legislation (which will form part of retained EU law at the end of the TP) and other financial services legislation where appropriate. This instrument:

• amends and revokes aspects of retained EU law and related UK domestic law; 
• makes a small number of necessary clarifications and a minor correction to earlier financial services EU Exit instruments; and
• provides sufficient supervisory powers for the financial services regulators to effectively supervise firms during and after the end of the TP. 

Here are four FCA publications on Brexit.

1. On 4 November 2020, the Financial Conduct Authority (FCA) confirmed its approach to the share trading obligation (STO) at the end of the Brexit transition period, if mutual equivalence is not agreed.

The FCA has highlighted that, using its power under the Temporary Transitional Power (TTP), it will allow firms to trade all shares on EU trading venues and systemic internalisers (SIs) from the end of the transition period, provided the venue has the relevant regulatory permissions.

These will need to be:

• a UK Recognized Overseas Investment Exchange;
• using the temporary permissions regime, or
• certain that their activities meet all the conditions required to benefit from the Overseas Persons Exclusion (OPE).

Transitional directions implementing these changes will be published before the end of the transition period. The FCA has also indicated that it “will be discussing with market participants and trading venues the steps needed to protect the integrity of markets in the UK. (…) These discussions will include whether the MiFID II transparency calibrations, which were designed for a pan-European market of 28 countries, remain appropriate for the UK in the absence of [the UK’s] current equivalence being recognized”.

The FCA states that its approach is intended to ensure open markets and competition between trading venues globally, preserve the ability of UK-based firms to deliver best execution, and avoid the need to change rules to require new order-routing systems to be introduced. 

2. On 9 November 2020, the Financial Conduct Authority (FCA) responds to Treasury announcement on its intention to take equivalence decisions in respect of the European Economic Area (EEA) states across a number of financial services areas. These will come into effect at the end of the transition period.

What firms need to do:

• Firms should consult the Treasury’s publication for the full list of decisions. In some cases, firms will have to take action to benefit from the equivalence provisions. In other cases, including where the Treasury has already introduced a transitional regime to allow continued firm access after the transition period, firms might not need to take any action at this stage.  
• EMIR (Article 13) – Intragroup transactions exemption: To benefit from any new intragroup exemptions from clearing and/or margin, UK firms must submit an application (margin exemption) or a notification (clearing exemption) to the FCA. This should be based on the relevant conditions and timing set out in the UK EMIR and the processes prescribed by the FCA. UK firms that have already been granted intragroup exemptions from margin and clearing with their EEA group entities will be required to reapply or renotify the FCA following this equivalence decision. However, to avoid unnecessary burden we intend to streamline this process.
• EMIR (Article 2A) – Regulated markets: Firms do not need to take any action to benefit from this decision. The FCA will publish a list of all regulated markets under UK EMIR, including equivalent third country markets, before the end of the transition period. 
• SSR (Article 17) – Market making exemption: EEA firms wishing to benefit from this exemption need to have notified the FCA 30 days before they intend to do so. EEA firms who joined a UK trading venue and notified the FCA previously do not need to take any further action. 
• CRAR (Article 5) – Certification: Firms can already make use of the separate transitional regimes provided by UK CRAR, notably the temporary registration regime available to EEA CRAs wishing to issue ratings in the UK after the end of the transition period.
• BMR (Article 30): EEA benchmark administrators will need to notify the FCA if they wish to benefit from the decision. Further details on the process will be published in due course on our page about how to get authorized or registered as a benchmark administrator.

3. On 24 November 2020, the Financial Conduct Authority (FCA) updated on EMIR reporting requirements with:

• UK EMIR validation rules: UK reporting counterparties and UK TRs should use the UK EMIR validation rules when submitting derivative transactions entered into from 11pm on 31 December 2020 onwards.
• Note on EMIR reporting requirements: FCA's expectations for firms in relation to their UK EMIR reporting requirements immediately following the end of the transition period.

4. On 24 November 2020, the Financial Conduct Authority (FCA) updated on SFTR reporting obligation with:

• UK SFTR validation rules: UK SFTR reporting counterparties and UK TRs should use the UK SFTR validation rules when submitting securities financing transactions entered into from 11pm on 31 December 2020 onwards.
• Note on SFTR reporting requirements: FCA's expectations of firms in relation to their UK SFTR reporting requirements immediately following the end of the transition period.

On 5 November 2020, the Financial Conduct Authority (FCA) published PS20/14: Delay to the implementation of the European Single Electronic Format (ESEF).

This Policy Statement sets out FCA's decision on its proposals to push back by 1 year mandatory requirements related to ESEF for filing and publication of machine-readable financial statements and mandatory tagging of basic financial information.

These were originally scheduled for financial years starting on or after 1 January 2020, but will apply to financial years starting on or after 1 January 2021. Issuers will still be able to publish and file their financial reports in ESEF voluntarily for financial years starting on or after 1 January 2020, from January 2021, if they choose to do so. 

However, FCA adjusted the proposals in relation to implementation of mandatory tagging of notes to the annual financial statements. The FCA decided to keep this requirement to the existing timetable, and it will apply to financial years starting on or after 1 January 2022. 

This PS affects issuers with transferable securities admitted to trading on UK regulated markets, or who are considering admission to trading on a UK regulated market. It is also of interest to:

• issuers with securities admitted to our Official List or considering a listing
• firms advising issuers or advising persons investing in them
• firms or persons investing or dealing in UK listed securities or securities admitted to trading on a UK regulated market 
• firms providing research and analysis on issuers, and accountants and other advisors and service providers helping issuers with the preparation and publication of their annual financial statements. 

The new rules will come into force on IP completion day as defined in the European Union (Withdrawal Agreement) Act 2020 (that is, 31 December 2020 at 11pm).

On 9 November 2020, the Prudential Regulation Authority (PRA) published its statement which replaces previous guidance relating to COVID-19 measures for PRA-regulated firms, in light of updates from UK Government.

Firms should continue to follow relevant guidance, including updates on GOV.UK/coronavirus, to ensure they comply with any restrictions.

PRA recommends that the Chief Executive Officer senior management function (SMF1) is accountable for ensuring an adequate process for following and adhering to government guidance. For firms that do not have an SMF1 Chief Executive Officer, this will be the most relevant member of the senior management team.

On 13 November 2020, the Financial Conduct Authority (FCA) provided an update on work that FCA intends to either stop or postpone in light of the ongoing impact of COVID-19 and economic conditions. These changes will allow FCA to focus its resources on the most urgent work where FCA can make the most immediate difference to consumers and markets.

During the pandemic, FCA has been clear that FCA remains committed to ensuring that consumers are protected and firms treat their customers fairly. FCA introduced a number of measures to ensure firms are clear on their responsibilities, particularly where their customers are vulnerable. This has included support for consumers on mortgage payments, personal loans, credit cards, overdrafts, motor finance and other forms of credit, as well as a draft guidance for firms on the fair treatment of vulnerable customers.

Ensuring markets work well and that consumers are offered fair value products in a digital age is also a priority. This includes tackling the loyalty penalty in markets where FCA sees the most harm. As part of this, FCA is consulting on a package of remedies to stop firms systematically increasing prices in home and motor insurance for loyal customers in the future. The Mortgage Market Study looked at competition in the mortgage market and FCA also published research into mortgage switching and how consumers can be encouraged to seek better deals.

On 18 November 2020, the Financial Conduct Authority (FCA) warned that the current economic climate is changing the way many firms operate and may cause some to leave the market or merge with other firms. When this happens, firms must make sure they lawfully process and transfer client data.  

GDPR requires firms to provide information to clients clearly setting out ‘privacy information’, which includes the purposes for which they are collecting or processing client data, and individuals’ rights when their data is processed. Firms should generally ensure they maintain a record of how and why they process, share and retain personal data. Firms should also record the lawful basis for processing data.  If they are processing data based on consent, they should maintain an effective audit trail of how and when consent was given. 

On 10 November 2020, the Statutory Instrument S.I. 2020 No. 1245 - The Network and Information Systems (Amendment and Transitional Provision etc.) Regulations 2020 was published in the UK legislation.

The S.I. 2018/506, as amended by the S.I. 2018/629, implement Directive (EU) 2016/1148 (NIS Directive). These Regulations further amend the 2018 Regulations as follows:

• extend the scope of the provision relating to the sharing of information by enforcement authorities. 
• make provision for the circumstances in which a person identified under that regulation as an operator of essential services (OES) has reasonable grounds to believe that they no longer meet the conditions for deemed or actual designation as an OES. 
• insert a new regulation (regulation 8A) in relation to an OES who has their head office outside the UK. It requires such an OES, or sets out the circumstances in which such an OES is required, to nominate a person to act on their behalf in the United Kingdom and makes further provision relating to that nomination. 
• require compliance with information notices
• broaden the powers of inspection by, or initiated by, a NIS enforcement authority, that is, a designated competent authority (in relation to an OES) or the Information Commissioner (in relation to a relevant digital service provider (RDSP)
• extend the circumstances in which a NIS enforcement authority may serve an enforcement notice on an OES or RDSP for breaches of their duties under the 2018 Regulations
• provide for the circumstances in which a NIS enforcement authority may serve a notice of intention to impose a penalty (rather than a penalty notice) and includes further new provision in relation to the imposition of penalties
• remove the provisions (regulation 19) relating to the independent review of a decision to designate an OES or a penalty decision against an OES or RDSP
• insert new regulations which provide for the circumstances in which an OES or RDSP may appeal to the Firsttier Tribunal against a decision of a NIS enforcement authority (regulation 19A), how the Tribunal must determine the appeal (regulation 19B) and the circumstances in which a NIS enforcement authority may commence civil proceedings against an OES or RDSP (regulation A20)
• provide that after the next report containing the Secretary of State’s conclusions of a review of the 2018 Regulations (to be published on or before 9th May 2022) subsequent reports must be published at intervals not exceeding five years (rather than biennially)
• amend the threshold requirements for qualification as an OES (for the purposes of regulation 8) in the oil, gas, healthcare (in Scotland) and digital infrastructure subsectors.

On 10 November 2020, the Statutory Instrument S.I. 2020 No. 1244 - The Central Counterparties (Equivalence) Regulations 2020.

These Regulations are made in exercise of the powers conferred by regulation 14(1) of the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1184) (‘the 2018 Regulations’). They specify that the regulatory framework for central counterparties in each EEA state meets the relevant criteria in regulation 14(1) of the 2018 Regulations. 

As specified in regulation 14(2) of the 2018 Regulations, on and after IP completion day, these regulations will have effect as if made under Article 25(6) of the EMIR (as it has effect as retained EU law). 

On 11 November 2020, the Financial Conduct Authority (FCA) published Newsletter for primary market participants - November 2020 / No. 31.

The 31st edition of the Primary Market Bulletin (PMB):

• highlights FCA's approach to assessing eligibility and listing applications for cannabis-related companies. Further, FCA provides updates on the implementation of the European Single Electronic Format, Coronavirus-related temporary policy measures on corporate reporting, and recent changes to the Prospectus Regulation.
• reminds issuers and their advisors of their continuing obligations and provide an update on FCA's Primary Market Specialist Supervision function (formerly Sponsor Supervision).
• presents two articles summarizing FCA's recent review work. One is on listed companies’ compliance with the FCA’s rules relating to corporate governance disclosures. The second article is about Delayed Disclosure of Inside Information notifications. By publishing articles, FCA wants to improve the transparency of its work overseeing primary markets, in particular highlighting good practice and areas where FCA sees room for improvement. FCA aims to improve standards in the markets that FCA oversees more generally.

On 20 November 2020, the Financial Conduct Authority (FCA) informed that the FCA and HM Treasury, Bank of England will be convening an industry working group to facilitate investment in productive finance. 

The economic uncertainty created by COVID-19 means that it is more crucial than ever that a long-term investment culture is fostered that ensures good outcomes for consumers, while aiding economic recovery. 

The working group will build upon work already undertaken to investigate the challenges and potential barriers to investment in productive finance assets in the UK, including the Treasury’s Patient Capital Review in 2016 and the Asset Management Taskforce’s UK Funds Regime Working Group’s Long-Term Asset Fund (LTAF) proposal in 2019. 

The working group’s mandate will be to agree the necessary foundations that could be implemented by firms and investment platforms, to facilitate investment in long-term assets by a wide range of investors. 

The working group will: 

• Propose solutions for barriers to investment: to be implemented by industry participants. This includes considering potential fund structures, such as an LTAF, to invest viably in long-term assets, and that meet the demands of wide range of investors, including defined contribution pension funds; and 
• Propose a roadmap, timetable and set of actions: to implement those solutions.

On 27 November 2020, the Financial Conduct Authority (FCA) published Handbook Notice No 82.

This Handbook Notice describes the changes to the FCA Handbook and other material made by the Financial Conduct Authority (FCA) Board under its legislative and other statutory powers in November 2020:

• COVID-19 Consumer Credit Instrument 2020
• Debt Advice Levy (Additional Sum 2020/2021) Instrument 2020
• Technical Standards on Strong Customer Authentication and Common and Secure Methods of Communication Instrument 2020
• Payment Services (Amendment No 2) Instrument 2020 
• Technical Standards on Strong Customer Authentication and Common and Secure Methods of Communication (Amendment of eIDAS Certificate) Instrument 2020
• Prospectus Regulation Rules (Amendment) Instrument 2020.

On 9 November 2020, the UK Government published the outcome of its consultation on a new Overseas Funds Regime. In response to the consultation and taking into account respondents’ views, the Government has made the following key decisions:

• The Government will retain an outcomes-based equivalence approach.
• The Government has decided that the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS) will not apply to overseas funds.
• In order to ensure a smooth transition for EEA UCITS that are currently marketing under the Temporary Marketing Permissions Regime (TMPR), the Government has decided to extent the TMPR from three to five years.

The government will:

• launch a Call for Evidence on the UK’s overseas regime to ensure it supports the UK’s position as an open global financial center.
• soon publish a consultation on reforming the UK’s funds regime, designed to “further enhance the UK’s attractiveness for asset management”.
• launch the UK’s first long-term asset fund within a year, in order to encourage investment in long-term illiquid assets, such as infrastructure and venture capital.

On 25 November 2020, the S.I. 2020 No. 1346 - The Bearer Certificates (Collective Investment Schemes) Regulations 2020 was published in the UK legislation.

These Regulations prohibit bearer certificates for all collective investment schemes based in the UK. Provision is made for the conversion or cancellation of existing bearer certificates within the year from the Regulations coming into force; the payment of dividends or other distributions during that year; and the giving of notice to those who hold bearer certificates. 

The provisions regarding collective investment schemes that are not open-ended investment companies implement the obligations under Article 10(2) of the Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing(7) and therefore fall under section 2(2) of the European Communities Act 1972(8). The provisions regarding open-ended investment companies fall under the Financial Services and Markets Act 2000(9).

On 11 November 2020, the Financial Conduct Authority (FCA) informed to the investors that the FCA will be changing the way in which investors submit the Standard form for notification of major share holdings (TR-1 Form) as required under the Disclosure Guidance and Transparency Rules Chapter 5 (DTR 5) (attached with a Registration Guide).

This change will be introduced in Q1 2021 and the FCA wants to advise investors of the actions they need to take in preparation for the upcoming changes. 

FCA will be changing the way in which investors submit the Standard form for notification of major share holdings (TR-1 Form) as required under the Disclosure Guidance and Transparency Rules Chapter 5 (DTR 5).  This change will be introduced in Q1 2021 and we want to advise investors of the actions they need to take in preparation for the upcoming changes. 

On 9 November 2020, the UK Government published the interim report of the Government–Regulator TCFD Taskforce, set up to examine the most effective way to approach climate-related financial disclosures, including exploring the appropriateness of mandatory reporting. The report sets out an indicative path to mandatory climate-related financial disclosures across the UK economy.

The report covers:

• The case for mandatory TCFD-aligned disclosure.
• A roadmap towards mandatory climate-related disclosure, covering seven key sectors: listed commercial companies; UK registered large private companies; banks and building societies; insurance companies; life insurers; FCA-regulated pension schemes; and occupational pension schemes.
• Next steps, including: progression of strategies outlined in the roadmap; working with industry to facilitate implementation; and coordinating with international organizations to further global work on climate-related disclosures.
• Annexes provide an overview of proposals for each of the seven sectors within scope.

A separate roadmap document has been produced to summarize the proposed path towards mandatory climate disclosures.

On 17 November 2020, the Financial Action Task Force (FATF) published consolidated table of assessment ratings. This table provides an up-to-date overview of the ratings that assessed countries obtained for effectiveness and technical compliance.

On 23 November 2020, the Financial Stability Board (FSB) published a report on the implications of climate change for financial stability.

Building on the FSB Stocktake of financial authorities’ experience in including physical and transition climate risks as part of their financial stability monitoring, this report assesses the channels through which physical and transition risks could impact the financial system and how they might interact. Particular focus is on the potential amplification mechanisms and cross-border effects, and on the channels that could materialise in the short-to-medium term.

There are various actions that financial institutions can take – and are taking – to reduce or manage their exposure to climate-related risks. However, the efficacy of such actions taken by financial firms may also be hampered by a lack of data with which to assess clients’ exposures to climate-related risks, or the magnitude of climate-related effects. Robust risk management might be supported by initiatives to enhance information with which to assess climate-related risk.

The FSB will conduct further work to assess the availability of data through which climate-related risks to financial stability could be monitored, as well as any data gaps.