On November 27 2023, the Council of the European Union adopted a regulation on central securities depositories (CSDs).

The new law will reduce the financial and regulatory burden on CSDs and improve their ability to operate across borders, while also strengthening financial stability.

The CSDs are national or international financial organisations that manage the ‘settlement’ (transfer of ownership) of securities such as shares and bonds. As such they play a key role on financial markets. The new regulation will reduce compliance costs and regulatory burdens for CSDs. This will improve the efficiency of securities settlement in the EU. It will also make it easier for CSDs to offer services across borders, while improving cooperation among supervisors.

‘Passporting’ refers to the procedure via which a CSD based in one EU member state can provide services in another member state. The new regulation will clarify and simplify the rules, thus reducing the barriers to cross-border settlement and easing the administrative and financial burden.

The regulation will also make supervision of CSDs more effective by improving cooperation between supervisors. In cases where a CSD’s activities in at least two other member states are considered to be of substantial importance to the functioning of the securities markets and investor protection, a college will be set up to facilitate cooperation and information exchange between member state authorities. Supervisors will also have access to better information about the activities of non-EU CSDs operating in the EU.

The new regulation contains measures to improve ‘settlement efficiency’ (the rate at which securities transactions settle on the intended date) by amending certain elements of the settlement discipline regime, including the preconditions for applying so-called mandatory buy-ins. These occur when a transaction has failed to settle at the end of an agreed period and the buyer of the securities is forced to repurchase them elsewhere. Under the revised regulation, such buy-ins will only be introduced as a measure of last resort, where the rate of settlement fails in the EU is not improving and is presenting a threat to financial stability.

The regulation provides conditions under which CDSs can access banking-type services, including through other CSDs. As a result, offering services for a broader range of currencies as well as across borders will be facilitated.

The Council adoption closes the decision-making procedure. The regulation will be published in the Official Journal and enter into force 20 days after its publication.

On November 3 2023, the European Central Bank (ECB) published its opinion on the digital euro.

On September 11 and October 31 2023, the ECB received requests from the Council and the European Parliament, respectively, for an opinion on a proposal for a regulation on the establishment of the digital euro. On September 11 and 18 2023, the ECB received requests from the Council and the European Parliament, respectively, for an opinion on a proposal for a regulation on the provision of digital euro services by payment services providers incorporated in Member States whose currency is not the euro and amending Regulation (EU) 2021/1230 of the European Parliament and the Council.

The ECB strongly welcomes the proposed regulations’ goal of establishing a framework facilitating the possible introduction of a digital euro that would ensure that central bank money continues to play a key role, side by side with commercial bank money payments, in maintaining a well functioning payment system and financial stability, and ultimately trust in the euro currency: the ‘monetary anchor’ role of central bank money.

To preserve the singleness of the euro and the effectiveness of monetary policy, and thus to enable the ECB to achieve its primary objective of maintaining price stability, the euro needs to continue to fulfil all functions of money as a unit of account, means of exchange and store of value. Making central bank money available to the public not just in physical form, through cash, but also in digital form, will allow central bank money to continue to play its role as a monetary anchor and as an efficient means of payment, in a context where people increasingly choose to pay electronically, rather than in cash. Thus, the digital euro will contribute to underpinning the stability of the monetary and payment system and to preserving the integrity of the euro in all its forms. This, in turn, is a precondition for the continued effectiveness of the ECB’s monetary policy, which is aimed at preserving price stability.

The proposed regulations are essential to ensure that central bank money, as a monetary anchor, evolves in response to changes in technology and payment behaviour that lead to an increase in digital payments, and hence to contribute to safeguarding the stability of the monetary system in a digitalised economy and society.

Making central bank money available in digital form for retail transactions would also have broader benefits, in particular by offering a universally accepted digital means of payment that can be used throughout the euro area for payments in shops, online and from person to person.

Furthermore, the digital euro would safeguard the strategic autonomy of the Union’s payment ecosystem, while supporting competition and innovation in payments to the benefit of consumers and merchants alike. The digital euro would facilitate the development of payment solutions subject to European governance arrangements and provide a pan-European platform on which innovative services can be built. This would boost the efficiency of the European payment ecosystem as a whole, driving down costs, fostering innovation, and ensuring resilience against potential cyberattacks or technical disruptions such as power outages.

On November 27 2023, the Council of the European Union adopted a regulation on harmonised rules on fair access to and use of data (Data Act).

The data act puts obligations on manufacturers and service providers to let their users (companies or individuals) access and reuse the data generated by the use of their products or services, from coffee machines to wind turbines. It also allows users to share that data with third parties – for example, car owners could choose in the future to share certain vehicle data with a mechanic or their insurance company.

The regulation sets up new rules on who can access and use data generated in the EU across all economic sectors. It aims to:

• ensure fairness in the allocation of value from data among actors in the digital environment
• stimulate a competitive data market
• open opportunities for data-driven innovation, and
• make data more accessible to all.

The new law also aims to ease the switching between providers of data processing services, puts in place safeguards against unlawful data transfer and provides for the development of interoperability standards for data to be reused between sectors.

The data act will give both individuals and businesses more control over their data through a reinforced portability right, copying or transferring data easily from across different services, where the data are generated through smart objects, machines, and devices. The new law will empower consumers and companies by giving them a say on what can be done with the data generated by their connected products.

Following the formal adoption by the Council, the new regulation will be published in the EU’s official journal in the coming weeks and will enter into force the twentieth day after this publication.

On November 8 2023, the Council of the European Union and the European Parliament reached provisional agreement on the European digital identity (eID).

The revised regulation constitutes a clear paradigm shift for digital identity in Europe aiming to ensure universal access for people and businesses to secure and trustworthy electronic identification and authentication.

Under the new law, member states will offer citizens and businesses digital wallets that will be able to link their national digital identities with proof of other personal attributes (e.g., driving licence, diplomas, bank account). Citizens will be able to prove their identity and share electronic documents from their digital wallets with a click of a button on their mobile phone.

The new European digital identity wallets will enable all Europeans to access online services with their national digital identification, which will be recognised throughout Europe, without having to use private identification methods or unnecessarily sharing personal data. User control ensures that only information that needs to be shared will be shared.

Since the initial provisional agreement on some of the main elements of the legislative proposal at the end of June 2023, a thorough series of technical meetings followed in order to complete a text that allowed the finalisation of the file in full. 

Some relevant aspects agreed by the co-legislators are:

• the e-signatures: the wallet will be free to use for natural persons by default, but member states may provide for measures to ensure that the free-of-charge use is limited to non-professional purposes
• the wallet’s business model: the issuance, use and revocation will be free of charge for all natural persons
• the validation of electronic attestation of attributes: member states shall provide free-of-charge validation mechanisms only to verify the authenticity and validity of the wallet and of the relying parties’ identity
• the code for the wallets: the application software components will be open source, but member states are granted necessary leeway so that, for justified reasons, specific components other than those installed on user devices may not be disclosed
• consistency between the wallet as an eID means and the underpinning scheme under which it is issued has been ensured.

Finally, the revised law clarifies the scope of the qualified web authentication certificates (QWACs), which ensures that users can verify who is behind a website, while preserving the current well-established industry security rules and standards.

Technical work will continue to complete the legal text in accordance with the provisional agreement. When finalised, the text will be submitted to the member states’ representatives (Coreper) for endorsement. Subject to a legal/linguistic review, the revised regulation will then need to be formally adopted by the Parliament and the Council before it can be published in the EU’s Official Journal and enter into force.

On November 29 2023, the European Parliament published a press release on adopting new rules on central counterparties (CCPs).

The adopted rules relate to curbing third country clearing risks, improve the competitiveness of the EU’s clearing services and allow for EU supervision.

Members of the European Parliament (MEPs) want to centralise the supervision of EU CCPs and address the financial stability risks caused by the EU clearing members and clients being exposed to systemically important third-country CCPs. They also want to make clearing services and European CCPs more efficient and competitive.

With their vote, the MEPs aim to have an adequate supervisory framework. To this end, they proposed that the European Securities and Markets Authority (ESMA) should directly supervise the EU CCPs. They should apply to the ESMA for authorisation and report their risk management data as well as consult and inform the ESMA about their recovery and resolution plans. Recognised third country CCPs should annually report to the ESMA the scope of their clearing activity.

The MEPs agreed that financial counterparties or non-financial counterparties that are subject to the clearing obligation should hold at least one active account at a CCP established in the EU and regularly clear there systematically important products.

CCPs would be subject to streamlined procedures if they provide additional services or changing risks models. Where a CCP intends to clear a new currency or offer a new settlement mechanism, it would be subject to a non-objection procedure.

The clients of the EU CCPs, as well as recognised third-country CCPs, should be informed about an option to clear a derivative contract in an EU CCP, which should be transparent on fees, risks associated with the service provided and volumes of cleared transactions.

On November 9 2023, the European Parliament adopted its position on the European single access point (ESAP) Regulation.

The European Parliament adopted the following texts:

• European Parliament legislative resolution on the proposal for a regulation amending certain Regulations as regards the establishment and functioning of the European single access point
• European Parliament legislative resolution on the proposal for a regulation establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability
• European Parliament legislative resolution on the proposal for a directive amending certain Directives as regards the establishment and functioning of the European single access point.

Easy and structured access to data is important in order for decision makers, professional and retail investors, non-governmental organisations, civil society organisations, social and environmental organisations, as well as other stakeholders in the economy and society, to make sound, informed, and environmentally and socially responsible investment decisions that serve the efficient functioning of the market. The provision of reliable and systematised sources of information is likewise of particular relevance for researchers and practitioners in academia, who engage in empirical or theoretical research into financial markets. Ensuring easier access to public information, including to information provided on a voluntary basis, is also necessary in order to increase opportunities for the growth and visibility of and innovation by small and medium-sized enterprises (SMEs). Rolling out common Union data spaces in crucial sectors, including the financial sector, serves the purpose of providing easy access to reliable sources of information in those sectors.

For the green transition of the Union economy to succeed through sustainable finance, it is essential that information related to the sustainability of businesses be easily accessible to investors so that they are better informed when making decisions about investments. For those purposes, public access to the financial and non-financial information of entities such as companies, businesses and financial institutions needs to be improved. An efficient means of doing so at Union level is to establish a centralised platform, ESAP, giving electronic public access to all relevant information.

ESAP should provide the public with easy, centralised access to information about entities and their products that is made public and is of relevance to financial services, capital markets, sustainability and diversity, but should exclude marketing information. Such access is needed in order to meet the rising demand for investable and diversified financial products that fall under the environmental, social and governance umbrella and to channel capital towards those products. ESAP is intended to be a forward-looking platform that should allow for the inclusion of public information of relevance to financial services, capital markets, sustainability and diversity stemming from future Union legislative acts, such as a Directive of the European Parliament and of the Council on corporate sustainability due diligence and amending Directive (EU) 2019/1937.

On November 27 2023, the Council of the European Union adopted the European Single Access Point (ESAP) regulation.

The ESAP is a platform that will make this information easier for investors to consult.

The ESAP will give companies more visibility towards investors and open up more financing opportunities, especially for small companies in small capital markets.

Investors in capital markets must have access to comparable information about companies and financial products. The ESAP will offer free, user friendly, centralised and digital access to financial and sustainability-related information made public by European companies, including small companies. This will facilitate the decision-making process for a broad range of investors, including retail investors.

ESAP does not impose any additional information reporting requirements on European companies. The accessible information will already be public in application of the relevant European directives and regulations. Sustainability information will also be made available on ESAP.

The ESAP platform is expected to be available from summer 2027 and gradually phased in to allow for a robust implementation. This phasing-in will ensure that European regulations and directives will enter into the scope of ESAP within four years, in order of priority. During this time, there will also be a regular assessment of ESAP’s functioning and a review that should guarantee the adequacy of the platform to the needs of its users and its technical efficiency.

The Council adoption closes the decision-making procedure. The regulation will be published in the Official Journal and enter into force 20 days after its publication.

On November 9 2023, the European Securities and Markets Authority (ESMA) published a press release on changing its Union Strategic Supervisory Priorities (USSPs) to focus on cyber risk and digital resilience alongside environmental, societal, governance ESG disclosures.

With this new priority, EU supervisors will put greater emphasis on reinforcing firms’ information and communication technology (ICT) risk management through close monitoring and supervisory actions, building new supervisory capacity and expertise. The aim is to keep pace with market and technological developments, and closely monitor potential contagion effects of attacks and disruptions across markets and firms.

The new USSP will come into force in 2025, at the same time as the Digital Operational Resilience Act – DORA. This timeline is intended to provide supervisors and firms in Member States with sufficient time to prepare for compliance with the new regulatory requirements. Meanwhile, ESMA and national competent authorities (NCAs) will carry out preparatory work planning and shaping the supervisory activities to undertake under this priority.

In addition, ESMA and NCAs will continue their work on the second priority – ESG disclosures. The aim is to tackle greenwashing, increase investors understanding and embed sustainability requirements when firms advise investors. ESG disclosures will remain the focus in 2024 across key segments of the sustainable finance value chain such as issuers, investment managers and investment firms.

The new USSP on cyber risk and digital resilience will replace the USSP on market data quality. ESMA and NCAs have carried out intensive and concerted supervisory efforts to make structural, long-lasting improvements in this area. Notably, ESMA has:

• built common data quality methodologies and data sharing frameworks; and
• worked on the detection of supervisory issues, carried out investigations and developed supervisory tools to extract further intelligence from the data reported.

Ensuring data quality remains a primary duty of supervised entities.  Firms, and in particular their top management, should take ownership of the data they report and increase its use also for internal purposes. EU supervisors will continue to undertake important supervisory work on data quality, leveraging on the new methodologies and tools developed through the USSP. Paying close attention to this topic remains fundamental in building a data-driven supervisory approach, a key strategic objective under the ESMA Strategy.

On November 8 2023, the European Banking Authority (EBA) published consultation papers on the Markets in Crypto Assets Regulation (MiCAR).

The consultation papers are as follows:

• Consultation on ITS on the reporting on ARTs and EMTs denominated in a non-EU currency (MiCAR) (EBA/CP/2023/32)
• Consultation on RTS to specify the highly liquid financial instruments in the reserve of assets under MiCAR (EBA/CP/2023/24)
• Consultation on RTS further specifying the liquidity requirements of the reserve of assets under MiCAR (EBA/CP/2023/25)
• Consultation on RTS to specify the minimum contents of the liquidity management policy and procedures under MiCAR (EBA/CP/2023/26)
• Consultation on RTS on the use of ARTs and EMTs denominated in a non-EU currency as a means of exchange (MiCAR) (EBA/CP/2023/31)
• Consultation on Guidelines on recovery plans under MiCAR (EBA/CP/2023/30)
• Consultation on Guidelines liquidity stress testing under MiCAR (EBA/CP/2023/27)
• Consultation on the adjustment of own funds requirements and design of stress testing programmes for issuers under MiCAR (EBA/CP/2023/28)
• Consultation on RTS on procedure and timeframe to adjust its own funds requirements for issuers of significant asset-referenced tokens or of e-money tokens under MiCAR (EBA/CP/2024/29)
• Consultation on RTS on supervisory colleges under MiCAR (EBA/CP/2023/33).

On November 7 2023, the European Commission published a draft Commission delegated Regulation (EU) of November 7, 2023 amending the regulatory technical standards laid down in Delegated Regulation (EU) 2019/1851 as regards the homogeneity of the underlying exposures in simple, transparent and standardised securitisations.

Article 26b(13) of Regulation (EU) 2017/2402 (the Securitisation Regulation) as amended by the Capital Markets Recovery Package Regulation (EU) 2021/557 empowers the Commission to adopt, following submission of draft regulatory technical standards by the European Banking Authority (EBA) developed in close cooperation with ESMA and EIOPA, and in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010, regulatory technical standards specifying the conditions for the assessment of the homogeneity of the underlying exposures in a pool of a simple, transparent and standardised (STS) on-balance sheet securitisation in accordance with Article 26b(8) of the Securitisation Regulation.

The final draft technical standards specify the conditions for the assessment of the homogeneity of the underlying exposures in a pool of an STS on-balance-sheet securitisation in accordance with Article 26b(8) of the Securitisation Regulation. These draft regulatory technical standards, in accordance with Article 26b(13) of the Securitisation Regulation, amend the Commission Delegated Regulation (EU) 2019/1851 on the homogeneity of the underlying exposures in Asset-Backed Commercial Paper (ABCP) and non-ABCP securitisation extending the scope to on balance-sheet securitisations. These draft regulatory technical standards establish the same conditions for the homogeneity of the assets for all types of securitisations (ABCP, non ABCP and on-balance-sheet securitisations). They carry over a significant part of the provisions on homogeneity set out in the 2019 Commission Delegated Regulation with minor modifications. These modifications aim at ensuring consistency with the new enlarged scope and providing further clarity on specific requirements.

On November 2 2023, the Association for Financial Markets in Europe (AFME) published a high yield environmental, societal and governance (ESG) due diligence questionnaire.

This questionnaire is intended to provide a suggested framework for market participants’ ESG due diligence with respect to high yield and leveraged finance transactions. However, the scope of the questionnaire is not limited to such areas, and the underlying guidance should be helpful in any capital markets transaction.

The questionnaire is not meant to be mandatory or comprehensive, nor to cover all ESG considerations. In addition, there is currently no one generally accepted standard or guidance (legal, regulatory or otherwise) related to ESG and the field is evolving. As such, market participants should closely follow and implement any regulatory developments to ensure that all operations comply with relevant legislation, and adjust the questions and relevant references in this questionnaire accordingly.

AFME further notes that the below may include certain questions or cover certain topics that already form part of questionnaires prepared by underwriters and other participants for use in existing due diligence processes. As such, this questionnaire is intended to complement, rather than replace, existing due diligence processes and to suggest relevant considerations, where appropriate, that should be taken into account in this context.

Part 1 is intended to cover general ESG compliance-related diligence questions. This can be used as a standalone section or supplemented, as applicable, by questions from Parts 2-4 and/or Part 5.

Parts 2-4 are intended to provide additional detailed questions per topic. If required by parties, these questions can be used as a supplement to Part 1 and/or Part 5.

Part 5 is intended to provide themed samples of questions which can be used in connection with an offering of green “use-of-proceeds” bonds (UoP Bonds) or offering of sustainability linked bonds (SLBs). Part 5 may also be used for any other bond offerings that are not UoP Bonds or SLBs, but that nevertheless incorporate relevant ESG-related issues into disclosure and other processes.

On November 8 2023, the European Financial Reporting Advisory Group (EFRAG) announced cooperation with the Carbon Disclosure Project (CDP) to drive market uptake of European Sustainability Reporting Standards (ESRS).

Under the agreement, CDP will explore and implement alignment of its disclosure system with the ESRS as EFRAG provides technical expertise, access and guidance. This collaboration will support the market readiness for quality environmental reporting by accelerating the implementation of the European sustainability reporting standards.

CDP, supported by EFRAG, will begin to offer webinars and detailed technical guidance materials to support companies report on ESRS data points through CDP. Currently used by over 23,000 companies, CDP disclosing companies represent two-thirds of global stock market capitalization and nearly 90% of European market value.

Starting January 2024, the ESRS will apply to around 50,000 businesses and in due course to a significant number of non-EU headquartered businesses, meaning that requesting information in relation to value chains will have to be considered by many companies worldwide.

Covering climate change (ESRS E1), pollution (E2), water and marine resources (E3), biodiversity and ecosystems (E4), and resource use and circular economy (E5), the ESRS represent a very comprehensive and ambitious effort to legally require companies to report wide-ranging data on their environmental impacts, risks and opportunities.

Building on and contributing to global sustainability reporting progress, the ESRS are interoperable with the IFRS S2 climate-related disclosure standard developed by the International Sustainability Standard Board (ISSB) as well as with the Global Reporting Initiative (GRI) standards. 

The ESRS follow a double materiality approach, meaning businesses must report both how they expect climate and environmental changes to affect their operations and value creation, as well as how they impact people and planet.

CDP’s disclosure system already extensively covers climate change, forests, and water security, impacts and risks. Data from those disclosures is used by financial institutions, policymakers and many other organizations worldwide to measure and drive corporate environmental progress.

On November 21 2023, the European Union published a Commission delegated Regulation (EU) 2023/2486 of June 27 2023 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to the sustainable use and protection of water and marine resources, to the transition to a circular economy, to pollution prevention and control, or to the protection and restoration of biodiversity and ecosystems and for determining whether that economic activity causes no significant harm to any of the other environmental objectives and amending Commission Delegated Regulation (EU) 2021/2178 as regards specific public disclosures for those economic activities.

Regulation (EU) 2020/852 establishes the general framework for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable. That Regulation applies to measures adopted by the Union or by Member States that set out requirements for financial market participants or issuers in respect of financial products or corporate bonds that are made available as environmentally sustainable, to financial market participants that make available financial products, and to undertakings that are subject to the obligation to publish a non-financial statement pursuant to Article 19a of Directive 2013/34/EU of the European Parliament and of the Council or a consolidated non-financial statement pursuant to Article 29a of that Directive. Economic operators or public authorities that are not covered by Regulation (EU) 2020/852 may also apply that Regulation on a voluntary basis.

Articles 12(2), 13(2), 14(2) and 15(2) of Regulation (EU) 2020/852 require the Commission to adopt delegated acts establishing the technical screening criteria for determining the conditions under which a specific economic activity qualifies as contributing substantially to the sustainable use and protection of water and marine resources, to the transition to a circular economy, to pollution prevention and control or to the protection and restoration of biodiversity and ecosystems, respectively, and to establish, for each relevant environmental objective laid down in Article 9 of that Regulation, technical screening criteria for determining whether that economic activity causes no significant harm to one or more of those environmental objectives.

The four environmental objectives referred to in Article 9, points (c) to (f), of Regulation (EU) 2020/852 and in Articles 12, 13, 14 and 15 of that Regulation are closely interlinked in terms of the means by which an objective is achieved and the benefits that achieving one of the objectives may have on other objectives. The provisions determining whether an economic activity contributes substantially to the sustainable use and protection of water and marine resources, to the transition to a circular economy, to pollution prevention and control or to the protection and restoration of biodiversity and ecosystems, are thus closely interrelated, and are closely linked to the need to widen the disclosure obligations laid down in Delegated Regulation (EU) 2021/2178. To ensure coherence between those provisions, which should enter into force at the same time, to facilitate a comprehensive view of the legal framework for stakeholders and to facilitate the application of Regulation (EU) 2020/852, it is necessary to include those provisions in a single Regulation.

It shall apply from January 1 2024.

On November 15 2023, the Financial Data Exchange Templates (FinDatEx) published frequently asked questions (FAQ) on European ESG Template (EET) Principal Adverse Impact (PAI) data fields.

The FAQ contains the following questions:

• Why shall I provide the PAI quantification?
• Why shall the PAI information be provided in the EET when the EET is about product reporting and PAI publication is an entity level requirement?
• Why is the information about whether a PAI is considered optional while the quantification is mandatory? Aren’t the 2 notions connected?
• What if I am sure that none of the users are publishing PAI information (no distribution through insurance products, funds of funds or mandates)?
• What if I do not have the information on a particular PAI? Shall I put zero or leave it blank?
• As a user of the EET, shall I accept templates where the PAI quantification is blank?
• My fund does not publish PAI indicators. Shall I provide information anyway?
• Why shall I provide information about coverage, eligibility and total AUM?
• I have data only for a portion of the eligible assets. Shall I extrapolate to the remainder portion?

On November 22 2023, the European Securities and Markets Authority (ESMA) published three explanatory notes covering key topics of the Sustainable Finance framework.

The explanatory notes are purely descriptive and cover:

• Definition of sustainable investments. This document is intended as aid to stakeholders to navigate the Sustainable Finance framework concerning the Sustainable Finance Disclosure Regulation (SFDR) definition of sustainable investment and the Taxonomy Regulation definition of environmentally sustainable economic activities.
• Application of do no significant harm requirements. This document seeks to explain the Do No Significant Harm (DNSH) principle that is embedded in several pieces of Sustainable Finance legislation. The DNSH principle is a key element in the Taxonomy Regulation, SFDR and the Benchmark Regulation.
• Use of estimates. The purpose of this document is to explain how key Sustainable Finance legislation deal with the use of “estimates” and “equivalent information” and the conditions under which these are allowed as sources of data to prepare mandatory ESG metrics for the compliance of regulated entities with their obligations.

On November 13 2023, the Financial Services and Markets Authority (FSMA) updated its Q&A on the entry into force of the Delegated Regulation supplementing the Sustainable Finance Disclosures Regulation (SFDR).

These questions and answers are addressed to companies under Belgian law which provide collective management services for collective investment undertaking (UCI(A)) portfolios (Managers) and to public undertakings for collective investment (UCI) under Belgian law.

These questions and answers aim to provide support to managers upon the entry into force of Delegated Regulation 2022/1288 and its requirements. This Regulation comes into force on January 1, 2023. These questions and answers aim more particularly to provide clarification on the rules applicable to Undertakings for the Collective Investment in Transferable Securities (UCITS) management companies, self-managed UCITS, managers of public and non-public Alternative Investment Funds (AIFs) resulting from the Delegated Regulation, as well as the expectations of the FSMA in this area.

The FSMA is the competent authority for monitoring the provisions of Delegated Regulation 2022/1288 and ensures that sustainability-related information published by managers is complete, correct, clear, transparent and non-misleading. The proper functioning of the financial sector lies in the trust placed by the public in financial institutions and the fight against “greenwashing” is in this sense a priority. The clarifications and expectations of the FSMA included in this document are formulated subject to any clarification from the European Commission or the European Supervisory Authorities.

On November 29 2023, the Financial Services and Markets Authority (FSMA) published a communication to help listed companies prepare for the Corporate Sustainability Reporting Directive (CSRD).

The CSRD is currently being transposed into Belgian law, is a very important part of the sustainable finance "package" of rules. This is the first link in the chain of rules: the CSRD requires the publication of sustainability information on a large number of companies, including all companies listed on a regulated market (except micro-enterprises).

Companies will have to report in accordance with new reporting standards: the European Standards for Sustainability Reporting (ESRS).

These new rules will come into force gradually. The first listed companies that will have to report in accordance with the CSRD are those that are currently subject to the Non-Financial Reporting Directive (NFRD). The other companies will follow according to a specific schedule.

The FSMA will monitor the sustainability information of listed companies as part of its periodic audits. The Communication sets out the timetable for the application of the CSRD Directive, the main lines of the new reporting requirements and the new reporting standards. It clarifies the relationship between these new information obligations and other regulations (Taxonomy, SFDR, etc.).

On November 16 2023 , the Comissão de Valores Mobiliários (CVM) published the Circular nº 9/2023/CVM/SIN on the new operational dynamics for non-resident investors exempt from registration with the CVM under the terms of CVM Resolution No. 13.

The document discloses the new operational dynamics for obtaining a code by non-resident investors qualified as natural persons (INR PF), exempt from registration with the Agency, under the terms of CVM Resolution 13.

This type of investor, until then, had already sent information that would allow them to obtain a CPF, as well as a code that allows this investor to operate in the Brazilian market, pursuant to article 2, sole paragraph, of CVM Resolution 13.

The new system will allow the market to live with the situations of:

(i) a non-resident investor who is an individual effectively not registered with the CVM, and

(ii) one who chooses, by his own decision, to waive this exemption and maintain formal registration with the Authority, for any lawful reason envisaged.

On November 22 2023, the Comissão de Valores Mobiliários (CVM) published the Joint Circular Letter CVM/SIN/SSE 4/2023 on the shareholders reporting.

The objective is to clarify the correct completion of the information of quota holders that fund managers are required to send to the Central Bank of Brazil (BCB), under the terms of BCB Resolution 38, as regulated by BCB Normative Instruction 94, to support the correction of data provided to BCB.

On November 30 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published changes to the Distribution and Qualified Services Codes.

The texts were adapted to CVM Resolution 175 in all rules that deal with funds. In addition, they have acquired a more principled character, with the operational standards detailed in a new document, the Rules and Procedures.

In the case of the Distribution Code, there were two more novelties. One is that the requirement to apply the suitability scorecard to exclusive funds and managed portfolios has been excluded. Now, each institution must establish a policy for verifying investment mandates, considering the profile of each client. The other is that the minimum investment amount to consider a client in the private segment is now R$ 5 million (previously it was R$ 3 million).

On November 30 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published changes to the rules for crypto assets of the Code of Administration and Management of Third-Party Resources and extended the adaptation period to ESG identification rules for sustainable funds.

The aim is to make the rules more transparent for the investor and more aligned with the CVM Resolution 175. Now, funds and managed portfolios that invest in crypto assets must inform in their documents the maximum direct or indirect limit of exposure to digital assets. If the risk of this asset is among the first or second largest risk in the portfolio, there remains a need to detail the risk factors related to the investment.

In addition, in response to market requests, the deadline for adapting to the ESG identification rules in stock funds (multimarket, ETFs, FIDCs, FIPs, real estate funds, CICs and classes that invest in funds incorporated abroad) has been extended to June 28, 2024. Previously, the deadline was December 29, 2023.

On November 17 2023, the Comissão de Valores Mobiliários (CVM) published the CVM Resolution 194 containing new rule changes rule involving securitization companies.

The Brazilian regulator revisits its rules to promote greater systematization with the law, as foreseen in the CVM's Regulatory Agenda for 2023.

The measure was taken on the basis of arts. 2, § 2, and 4, II and III, of Decree 10,411, combined with arts. 10, I, and 14, II and III, of CVM Resolution 67.

Revolving rights are now allowed for credit rights originated in any economic sector.

On November 14 2023, the Unidad de Proyección Normativa y Estudios de Regulación Financiera (URF) published the Draft Decrees concerning the collective investment funds, foreign securities listing systems, mortgage asset securitization companies and other provisions.

The stock exchange or the administrators of Securities Trading Systems subject to the financial inspection and surveillance  authorized to administer Foreign Securities Quotation Systems may list foreign securities in the system they administer.

The minimum capital of the companies holding mortgage assets will be adjusted from the 1st of January of each year automatically.

The Financial Supervisor of Colombia will previously authorize the umbrella of collective investment funds, the first collective investment fund belonging to each umbrella of collective investment funds and each collective investment fund that is not part of an umbrella, with a prior request of the administrative company. 

The collective investment fund management company or the external manager, if any, will establish the risk management criteria associated with these operations and the information disclosure criteria for investors, which must be included in the disclosure mechanisms of collective investment fund information in the terms that establish the regulation of the respective fund.

The management company must clearly disclose the risks inherent in the collective investment fund and the leveraged nature operations, including expressly in the regulation, in the prospectus and in the promotional material the specified warning. The money delivered by the collective investment fund is not a deposit, nor does it generate for the authorized society the obligations of a deposit institution.

When collective investment funds carry out operations of a leveraged nature, the administrative society must inform expressly within the process of vinculación a los inversionistas, that said collective investment fund realizes this type of operations.

During the term of the collective investment fund, a single investor may not directly or indirectly hold, through an omnibus account, a share that exceeds the percentage of the fund's patrimonial value established by the administrative society in the regulation taking into account the risks assumed in the management of the fund, its size and nature, the liquidity of the assets, the investment policy and the profile of the investors, among others.

The ex-distribution period or date refers to the time during which it is understood that a purchase and sale operation of shares of collective investment funds registered in securities trading systems does not include the right to receive distributions pending payment by the buyer.

Closed collective investment funds may reacquire their shares under conditions of equality and guaranteeing transparency in the operation.

The reforms that are introduced in the regulations of the collective investment funds or in the framework regulations of the family of collective investment funds must be previously approved by the board of directors of the management company and sent to the Financial Superintendence of Colombia, in a manner prior to its entry into force, which may request at any time the adjustments it deems necessary. When such reforms imply a negative impact on the economic rights of investors, they must be previously authorized by the Board of Directors of the management company. In this case, investors must be informed through one of the following mechanisms: a publication in a newspaper with wide national circulation, Internet pages, another means of electronic communication, or by sending a communication addressed to each of the investors. , indicating the reforms that will be carried out and in the case of closed and open collective investment funds with a permanence agreement, the possibility of withdrawing from the collective investment fund.

On November 6 2023, the Autorité des marchés financiers (AMF) published a communication about the changes to reporting dates on stock market capitalisation contributions and share repurchases.

The Decree No. 2023-978 published in the Official Journal No. 248 on October 25 2023 provides that the date of declaration and payment of the contribution on market capitalization is January 15 and that of the contribution on share repurchases is February 15 instead of March 31.

Pursuant to 3° of II and II bis of Article L621-5-3 of the French Monetary and Financial Code, issuers with a market capitalisation of more than €1 billion on January 1 2024 will have to declare:

• on January 15 2024, their average market capitalization of the last 3 years and pay their contribution due according to the scale in force;
• on February 15 2024, the amount of share repurchases made in 2023.

Version française

Le 6 novembre 2023, l'Autorité des marchés financiers (AMF) a publié une communication relative à l'évolution des dates de clôture des apports en capitalisation boursière et des rachats d'actions.

Le décret n° 2023-978 publié au Journal Officiel n° 248 du 25 octobre 2023 prévoit désormais que la date de déclaration et de paiement de la contribution sur la capitalisation boursière est le 15 janvier et celle de la contribution sur les rachats d'actions est le 15 février au lieu de 31 mars.

En application du 3° du II et du II bis de l'article L621-5-3 du Code monétaire et financier, les émetteurs dont la capitalisation boursière est supérieure à 1 milliard d'euros au 1er janvier 2024 devront déclarer :

• le 15 janvier 2024, leur capitalisation boursière moyenne des 3 dernières années et s'acquitter de leur cotisation due selon le barème en vigueur ;
• le 15 février 2024, le montant des rachats d'actions réalisés en 2023.

On November 8 2023, the Autorité des marchés financiers (AMF) published a communication encouraging listed companies to implement ESMA's recommendations regarding the 2023 extra-financial reporting.

ESMA's recommendations cover both accounting aspects, dealt with in a specific communication from the AMFand non-financial reporting (non-financial performance statement and taxonomy). 

For non-financial reporting, European supervisors agreed this year on three main common supervisory priorities:

Priority 1: the information to be provided in accordance with Article 8 of the Taxonomy Regulation. ESMA recalls that companies must analyse the alignment of their activities with the different objectives of the taxonomy for which examination criteria are defined and specify, where appropriate, how double counting has been avoided. An analysis of capital expenditure (CapEx) plans related to the development of sustainable activities is also necessary to report on companies' transition efforts. ESMA also insists on the faithful use of the new reporting table templates and on the importance of contextual information that accompanies key performance indicators (KPIs) in terms of taxonomy (increased transparency on the analysis methodology, on CapEx plans, on the elements of variation in the indicators, etc.). Finally, after a reminder of the upcoming taxonomy reporting obligations applicable from January 1 2024, ESMA strongly encourages companies to refer to the Frequently Asked Questions (FAQ) of the European Commission on the interpretation and implementation of Taxonomy obligations.

Priority 2: Issues related to the publication of climate-related targets, and in particular greenhouse gas (GHG) reduction targets and targets supporting transition trajectories. It is important for ESMA that issuers communicate time-bound climate targets, specifying the expected consequences for the company and its environment and the links to other public or company-set targets (e.g. the link to the 1.5°C global warming target for GHG reduction targets). ESMA also insists on the link with the company's global strategy, the more specific actions put in place to achieve these targets and their financing (e.g. decarbonisation levers to reduce GHG emissions). ESMA also calls for greater transparency on the methodology and assumptions used to set these targets (e.g. specifying the GHG emission scopes covered). Finally, it is essential that issuers describe the progress made in achieving these targets and explain how they are monitored and reviewed.

Priority 3: Publication of Scope 3 indirect greenhouse gas emissions. Given the importance of this emissions item for certain companies and the fact that investors take this information into account in their sustainable investment decisions, ESMA recalls certain important aspects in terms of transparency: the assessment of the completeness of the reporting of GHG emissions in the absence of scope 3, the scope and methodology for calculating scope 3 emissions, the presentation of raw GHG emissions data separately from sequestered or offset emissions, where applicable. ESMA pays particular attention to the wording of scope 3 indicators, which must be able to reflect its partial nature in the event of significant exclusions from the reporting methodology followed.

As in previous years, the AMF encourages listed companies that prepare a declaration of non-financial performance and those that are required to report taxonomy to apply these recommendations.

ESMA also wished to raise awareness among issuers on the need to prepare for the entry into force on January 1 2024 of the Corparate sustainability reporting directive (CSRD)) on corporate sustainability disclosures. ESMA reports that EFRAG has set up a Platform dedicated to technical questions with a view to facilitating the application of the European Sustainability Reporting Standards (ESRS).

ESMA draws the attention of companies to the gradual expansion of the scope of issuers that will be liable for sustainability information and taxonomy reporting in particular. It recalls/clarifies that the collection and consolidation of data will cover the issuer's own operations as well as the relevant players in its value chain.

Finally, ESMA presents some relevant courses of action to be considered by issuers in the preparation of these reports, whether in terms of collection issues, internal control/procedures, or the necessary training.

Version française

Le 8 novembre 2023, l'Autorité des marchés financiers (AMF) a publié une communication incitant les sociétés listées à mettre en œuvre les recommandations de l'ESMA concernant le reporting extra-financier 2023.

Les recommandations de l'ESMA couvrent à la fois les aspects comptables, traités dans une communication spécifique de l'AMF, et le reporting extra-financier (déclaration de performance extra-financière et taxonomie).

Pour l’information extra-financière, les superviseurs européens se sont mis d’accord cette année sur trois grandes priorités communes en matière de surveillance :

Priorité 1 : les informations à fournir conformément à l'article 8 du règlement taxonomie. L'ESMA rappelle que les entreprises doivent analyser l'alignement de leurs activités avec les différents objectifs de la taxonomie pour laquelle des critères d'examen sont définis et préciser, le cas échéant, comment la double comptabilisation a été évitée. Une analyse des plans d’investissements (CapEx) liés au développement d’activités durables est également nécessaire pour rendre compte des efforts de transition des entreprises. L'ESMA insiste également sur l'utilisation fidèle des nouveaux modèles de tableaux de reporting et sur l'importance des informations contextuelles qui accompagnent les indicateurs clés de performance (KPI) en termes de taxonomie (transparence accrue sur la méthodologie d'analyse, sur les plans CapEx, sur les éléments de variation des les indicateurs, etc.). Enfin, après un rappel des prochaines obligations de reporting taxonomique applicables à partir du 1er janvier 2024, l'ESMA encourage fortement les entreprises à se référer à la Foire Aux Questions (FAQ) de la Commission européenne sur l'interprétation et la mise en œuvre des obligations en matière de taxonomie.

Priorité 2 : Enjeux liés à la publication des objectifs liés au climat, et notamment des objectifs de réduction des gaz à effet de serre (GES) et des objectifs accompagnant les trajectoires de transition. Il est important pour l'ESMA que les émetteurs communiquent des objectifs climatiques limités dans le temps, en précisant les conséquences attendues pour l'entreprise et son environnement ainsi que les liens avec d'autres objectifs publics ou fixés par l'entreprise (par exemple le lien avec l'objectif de réchauffement climatique de 1,5°C pour la réduction des GES). cibles). L'ESMA insiste également sur le lien avec la stratégie globale de l'entreprise, les actions plus spécifiques mises en place pour atteindre ces objectifs et leur financement (ex : leviers de décarbonation pour réduire les émissions de GES). L’ESMA appelle également à une plus grande transparence sur la méthodologie et les hypothèses utilisées pour fixer ces objectifs (par exemple en précisant les périmètres d’émission de GES couverts). Enfin, il est essentiel que les émetteurs décrivent les progrès réalisés dans la réalisation de ces objectifs et expliquent comment ils sont suivis et revus.

Priorité 3 : Publication des émissions indirectes de gaz à effet de serre du Scope 3. Compte tenu de l'importance de ce poste d'émissions pour certaines entreprises et du fait que les investisseurs prennent en compte cette information dans leurs décisions d'investissement durable, l'ESMA rappelle certains aspects importants en termes de transparence : l'évaluation de l'exhaustivité du reporting des émissions de GES en l'absence du scope 3, le périmètre et la méthodologie de calcul des émissions du scope 3, la présentation des données brutes d'émissions de GES séparément des émissions séquestrées ou compensées, le cas échéant. L’ESMA porte une attention particulière à la formulation des indicateurs du scope 3, qui doivent pouvoir refléter son caractère partiel en cas d’exclusions significatives de la méthodologie de reporting suivie.

Comme les années précédentes, l’AMF encourage les sociétés listées qui établissent une déclaration de performance extra-financière et celles qui sont tenues de déclarer une taxonomie à appliquer ces recommandations.

L’ESMA a également souhaité sensibiliser les émetteurs à la nécessité de préparer l’entrée en vigueur au 1er janvier 2024 de la Corporate Sustainable Reporting Directive (CSRD) sur les informations fournies par les entreprises en matière de développement durable. L'ESMA indique que l'EFRAG a mis en place une plateforme dédiée aux questions techniques en vue de faciliter l'application des normes européennes de reporting sur le développement durable (ESRS).

L’ESMA attire l’attention des entreprises sur l’élargissement progressif du périmètre des émetteurs qui seront responsables des informations en matière de durabilité et du reporting taxonomique en particulier. Il rappelle/précise que la collecte et la consolidation des données couvriront les opérations propres de l'émetteur ainsi que les acteurs concernés de sa chaîne de valeur.

Enfin, l'ESMA présente quelques pistes d'action pertinentes à considérer par les émetteurs dans la préparation de ces rapports, que ce soit en termes de questions de collecte, de contrôle/procédures internes ou de formation nécessaire.

On November 23 2023, the Federal Financial Supervisory Authority (BaFin) published the Information sheet 03/2023 on the crypto assets register management.

Article 6 of the Act on the Introduction of Electronic Securities extended the catalogue of financial services to include the offence of keeping crypto assets registers. It is defined as the maintenance of a crypto assets register in accordance with Section 16 of the Act on Electronic Securities (eWpG) (Crypto Securities Registry Management). The registration and sub-authorisation of the management of the crypto assets registry is intended to take into account investor protection, in particular the protection of ownership and market integrity as well as the transparency and functional protection of the capital markets for electronic securities and crypto fund units issued using distributed ledger technology (DLT).

Under the impression of the ongoing digitalisation of the financial markets, the national legislation has for the first time opened up German securities law outside the state sector to the issuance of electronic securities, i.e. securities without a physical certificate, with the adoption of the eWpG. Due to the high practical significance of this form of refinancing, the introduction of electronic securities initially only includes electronic bearer bonds and electronic share certificates in accordance with the Ordinance on Crypto Fund Shares (Crypto Fund Shares).

In the case of electronic bonds and crypto fund units, the securities certificate required prior to the enactment of the eWpG will be replaced by the entry of the issue in an electronic assets register. Electronic securities are treated like property, so investors enjoy the same property protection as they would with custody of securities certificates.

On November 13 2023, the Federal Financial Supervisory Authority (BaFin) alerted on indirect investments in special funds and investor protection concerns.

Issuers of investments or securities are always on the lookout for new forms of investment. However, if private investors are offered to invest like professional investors, caution is advised. This is especially the case if they are not to invest directly, but indirectly in funds that are otherwise only accessible to professional investors – in special Alternative Investment Funds (AIFs). After all, there are good reasons why some asset classes are reserved for certain groups of investors.

The legal protection conditions for special AIFs are lower than for public AIFs, which are open to all interested investors. On the other hand, special AIFs have more room for maneuver. One trend that can currently be observed is the linking of blockchain technology, i.e. tokenization, with investments in venture capital, real estate or start-ups.

Investments by private investors in special AIFs require a critical examination from a regulatory point of view. This is because management companies are actually responsible for preventing shares in special AIFs from being distributed to or transferred to such persons.

If retail investors are offered the opportunity to invest indirectly in special AIFs, these access restrictions are circumvented. This is achieved by means of structures in which the legal framework is formally complied with: for example, the share in the special AIF is not acquired by the retail investors themselves, but by the issuer of the financial assets.

Indirect investments in special AIFs are complex – after all, it is a multi-stage investment in a professional asset class. Investments in a special AIF do not take place according to generally applicable rules, but depend on individually negotiated conditions. The information material made available to investors for this purpose necessarily does not contain all the details of the investment. It is limited to the key data. For private investors, the conditions are therefore not transparent enough.

If there are indications of investor protection concerns, BaFin initiates a product intervention procedure. It examines whether the concerns exceed the threshold of materiality. The specific design of the financial instrument is crucial. In extreme cases, it can prohibit the marketing, distribution and sale of the products to retail investors. BaFin announces the adoption of a product intervention measure on its website. The legal basis for product intervention is Article 42 of the European Markets in Financial Instruments Regulation (MiFIR) in conjunction with Section 15 of the German Securities Trading Act (WpHG).

However, product intervention can only be considered as a last resort. In practice, it is often sufficient for BaFin to express its concerns to the respective financial service providers. In most cases, they then adapt their product or withdraw their offer.

On November 30 2023, the Guernsey Financial Services Commission (GFSC) published an explanatory note on the surrender of the authorisation or registration of collective investment schemes.

The note clarifies the typical circumstances under which the Commission will consider granting consent to the surrender of a scheme’s authorisation or registration, as required under the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (the POI Law).

Relevant persons are reminded that where a collective investment scheme remains authorised or registered under the POI Law as at January 1 2024 (including where such authorisation or registration is suspended), then the Commission’s (non-refundable) annual fee for 2024 will apply.

On November 22 2023, the Guernsey Financial Services Commission (GFSC) announced that it plans to increase license fees paid by firms from January 1 2024 by 6.3% (1% less than the figure upon which it consulted).

On July 26 2023, the Commission issued a consultation paper on the fee rates and administrative penalties to apply from January 1 2024, which contained the following proposals:

• an overall proposed increase in fees of 7.3%, with the exception of fees introduced in 2023;
• a rebalancing of fees within the insurance sector on request of the industry body with an aim to provide greater comparability with other jurisdictions;
• an increase in the regulatory fee for operating an investment exchange within the Bailiwick of Guernsey; and
• an update to the fees for VASPs within an Actively Managed Certificate (‘AMC’) structure. 

The consultation period ran for eight weeks, until September 20 2023 and the Commission’s response to the feedback received as part of the consultation is available on our Consultation Hub.  It is fair to say that, given the current inflationary environment, there was little opposition to the Commission’s proposed increases.

Since the Commission issued its consultation, a more recent inflation figure has been released by the States of Guernsey showing a small decrease in the overall rate of inflation to 7% RPI for the Bailiwick. In the light of this, taking into account both its anticipated funding needs in the next year, the state of its reserves, its likely 2023 end year financial outturn, and the likely economic environment in 2024, the Commission has decided to proceed with an increase lower than that upon which it originally consulted.

On November 10 2023, the Securities and Futures Commission (SFC) published a Circular to licensed corporations, SFC-licensed virtual asset service providers and associated entities on anti-money laundering/counter-financing of terrorism (AML/CFT).

Further to the SFC-issued circular issued on July 5 2023, the Financial Action Task Force (FATF) issued a statement on High-Risk Jurisdictions subject to a Call for Action on October 27 2023.

For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and, in the most serious cases, apply countermeasures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from those countries.

The FATF also published various outcomes of its recent Plenary which may be of interest to licensed corporations, SFC-licensed virtual asset service providers and associated entities.

On November 14 2023, the Securities and Futures Commission (SFC) published a Circular to licensed corporations, SFC-licensed virtual asset service providers and associated entities on the updated anti-money laundering/counter-terrorism financing (AML/CFT) checklist.

SFC posted an updated AML/CFT Self-Assessment Checklist, which reflects the latest Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers) (AML/CFT Guideline).

The AML/CFT Self-Assessment Checklist aims to provide a structured and comprehensive framework for licensed corporations, SFC-licensed virtual asset service providers and associated entities to assess their compliance with the key AML/CFT requirements. Licensed corporations, SFC-licensed virtual asset service providers and associated entities are advised to use the self-assessment checklist as part of their regular review to monitor their AML/CFT compliance.

On November 2 2023, the Securities and Futures Commission (SFC) published a circular on intermediaries engaging in tokenised securities-related activities.

SFC has observed financial institutions’ growing interest in tokenising traditional financial instruments in the global financial markets, with an increasing number of intermediaries entering the space to explore the tokenisation of securities and the distribution of tokenised securities to their clients.

Tokenisation generally involves the process of recording claims on assets that exist on a traditional ledger onto a programmable platform, which includes the use of distributed ledger technology (DLT) in the security lifecycle. This can be seen as digital record-keeping with integration of rules and logic governing the transfer process for the asset.  The SFC sees the potential benefits of tokenisation to the financial markets, particularly in increasing efficiency, enhancing transparency, reducing settlement time and lowering costs for traditional finance, but it is also aware of the new risks arising from the use of this technology.

Many intermediaries have already been conducting pilots to experiment with tokenisation of securities. For example, traditional brokers are already dealing in or advising on tokenised securities. Fund managers are issuing and distributing tokenised funds and managing funds investing in tokenised securities. Licensed operators of virtual asset trading platforms have been experimenting with and integrating tokenisation in their business operations. The SFC is supportive of intermediaries taking the initiative to tokenise traditional securities and believes the industry has made encouraging progress so far in coming up with scalable and interoperable tokenisation solutions.

The SFC considers it timely to provide more guidance on tokenised securities-related activities. This will help to clarify regulatory expectations for intermediaries engaged in such activities, thereby providing regulatory certainty to support continued innovation with appropriate safeguards from an investor protection perspective. This circular focuses on providing guidance to intermediaries in addressing and managing the new risks arising from the use of this new tokenisation technology so that the tokenisation marketplace could be developed in a healthy, responsible and sustainable manner. For SFC-authorised investment products, this circular should be read in conjunction with the SFC’s Circular on tokenisation of SFC-authorised investment products.

On November 2 2023, the Securities and Futures Commission (SFC) published a circular on tokenisation of SFC-authorised investment products.

This circular sets out the requirements under which the SFC would consider allowing tokenisation of investment products authorised by the SFC under Part IV of the Securities and Futures Ordinance for offering to the public in Hong Kong.

Tokenisation of investment products refers to the creation of blockchain-based tokens that represent or aim to represent ownership in an investment product. The tokenised product can then be recorded digitally on the blockchain, offered directly to end-investors, distributed by SFC-licensed intermediaries, or traded among the blockchain participants where allowed.

Some market participants in Hong Kong have already started or are exploring tokenisation of securities and other investment products, with potential benefits of increasing product efficiency, bringing down operational costs by reducing reliance on intermediaries and reaching end-investors via new channels. 

In light of market demand and to facilitate market development, the SFC has been assessing various proposals on tokenisation of SFC-authorised investment products, for example, some for primary dealing of a tokenised product (ie, subscription and redemption) and some for secondary trading of a tokenised product on an SFC-licensed virtual asset trading platform.

By adopting a see-through approach, the SFC is of the view that it is appropriate to allow primary dealing of tokenised SFC-authorised investment products, as long as the underlying product can meet all the applicable product authorisation requirements and the additional safeguards to address the new risks associated with the tokenisation arrangement (as set out in paragraphs 10-19 below).  

On the other hand, secondary trading of tokenised SFC-authorised investment products would warrant more caution and careful consideration in order to provide a substantially similar level of investor protection to those investing in a non-tokenised product. The considerations include maintaining proper and instant token ownership record, readiness of the trading infrastructure and market participants to support liquidity, and fair pricing of the tokenised products, among others.

As such, the SFC will keep in view and continue to engage with market participants on proper measures to address the risks relating to secondary trading of tokenised SFC-authorised investment products.

On November 2 2023, the Securities and Futures Commission (SFC) published a press release on a new financial infrastructure for retail fund distribution in Hong Kong.

The integrated fund platform, which will be developed and operated by the Hong Kong Exchanges and Clearing Limited (HKEX), will provide a business-to-business service model initially and will cover the front-to-back distribution life cycle and value chain for distribution of SFC-authorised funds in Hong Kong.

The SFC acknowledged the support of industry stakeholders and industry association on this initiative and will work closely with HKEX and other related parties to bring about the implementation of the platform.

On November 1 2023, the Central Bank of Ireland (CBI) published the 48th Edition of the AIFMD Q&A.

This new edition features the publication of a new Q&A which sets out the circumstances in which the Central Bank may exempt, pursuant to Section 15(1) of the Investment Limited Partnerships Act 1994, an investment limited partnership from the provisions of European Union (Qualifying Partnerships: Accounting and Auditing) Regulations 2019 (S.I. 597 of 2019).  

The 48th Edition also extends the exemption from the loan origination regime which is currently available to AIFs who grant loans to subsidiaries (set out in Q&A ID 1084) to AIFs who grant loans to co-investment vehicles in which they have a majority interest.

On November 1 2023, the Central Bank of Ireland (CBI) published a Consultation on ELTIF chapter in the AIF Rulebook.

The Central Bank has published Consultation Paper 155 on a new ELTIF chapter in the Central Bank’s AIF Rulebook to support the establishment of ELTIFs in Ireland.

The Central Bank is seeking the views of stakeholders on the proposed chapter and the consultation process will remain open until December 13 2023.  

In determining its proposed approach to the ELTIF chapter of the AIF Rulebook, the Central Bank had due regard to the existing requirements for AIFs and the ELTIF chapter will be introduced as Chapter 6 of the AIF Rulebook consisting of  ELTIF restrictions, supervisory requirements, prospectus requirements, general operational requirements and requirements regarding financial reports, as well as requirements related to the marketing of ELTIFs to retail investors.

On November 27 2023, the Central Bank of Ireland (CBI) published the 40th Edition of the UCITS Q&A.

The 40th Edition revises QA ID 1109 to clarify that from January 1 2024, UCITS authorised prior to January 1 2023 that are required to provide a PRIIPs KID should submit the PRIIPs KID to the Central Bank through the Portal in accordance with the guidance on the Central Bank’s website.

On November 27 2023, the Central Bank of Ireland (CBI) published the 49th Edition of the AIFMD Q&A.

The 49th Edition revises existing Q&A ID 1126 to clarify that where an AIF is required to produce a PRIIPs KID, this should be filed through the Portal in accordance with the Central Bank’s guidance on the filing of a PRIIPs KID.

The 49th Edition also features the publication of three new Q&As (IDs 1157, 1158 and 1159) which considers what is permissible when a RIAIF/QIAIF invests through a subsidiary.

On November 27 2023, the Central Bank of Ireland (CBI) published a Feedback Statement to the Consultation Paper CP152 – Own Funds requirements for UCITS Management Companies and AIFMs authorised for discretionary portfolio management services.

This Feedback Statement confirms the amendment of the additional capital requirement imposed on UCITS Management Companies and AIFMs authorised for discretionary portfolio management services, which should operate on a sound financial basis relative to the services they provide and the resulting risks incurred. The CBI aims to balance the costs for authorised entities associated with new regulatory requirements with the benefits arising from the application of appropriate and proportionate requirements.

As per the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2023 (S.I. No. 565 of 2023), the new requirements will not apply to UCITS Management Companies authorised for discretionary portfolio management services on or before November 27 2023 until May 27 2024.   

The new requirements for AIFMs authorised for discretionary portfolio management services are included in Part B of Chapter 3, Alternative Investment Fund Manager Requirements, in the AIF Rulebook. The new requirements will not apply to AIFMs authorised for discretionary portfolio management services on or before November 27 2023 until May 27 2024.    

For the avoidance of doubt, the current condition of authorisation continues to apply to all relevant UCITS Management Companies and AIFMs authorised for discretionary portfolio management services on or before November 27 2023 pending the application of the new own funds requirements.

UCITS Management Companies and AIFMs which obtain authorisation for discretionary portfolio management services after November 27 2023 will be subject to these new requirements upon authorisation.

On November 24 2023, the Houses of the Oireachtas (Ireland's National Parliament) published the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2023.

These Regulations set out additional requirements in respect of the calculation of own funds, and the assessment of internal capital, by UCITS management companies authorised to provide individual portfolio management services.

The new requirements will not apply to UCITS Management Companies authorised to provide individual portfolio management services on or before November 27 2023 until May 27 2024.

The new requirements will apply on authorisation to UCITS Management Companies authorised to provide individual portfolio management services from November 28 2023. 

On November 27 2023, the Central Bank of Ireland (CBI) published an updated AIF Rulebook setting out additional capital requirements for AIFMs authorised to provide individual portfolio management services.

The new requirements for AIFMs authorised to provide individual portfolio management services are included in Part B of Chapter 3, Alternative Investment Fund Manager Requirements, in the AIF Rulebook. The new requirements will not apply to AIFMs authorised to provide individual portfolio management services on or before November 27 2023 until May 27 2024.    

For the avoidance of doubt, the current condition of authorisation continues to apply to all AIFMs authorised to provide individual portfolio management services authorised on or before November 27 2023 pending the application of the new own funds requirements.

AIFMs which obtain authorisation to provide individual portfolio management services after November 27 2023 will be subject to these new requirements upon authorisation.

On November 30 2023, the Central Bank of Ireland (CBI) updated the Minimum Capital Requirements Reporting Template for AIFMs and UCITS Management Companies.

The updated MCR reflects:

The amendment of Article 17(6) of European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 and Regulation 10(5) of the European Union (Alternative Investment Fund Managers) Regulations 2013 such that the own funds of a UCITS Management Company or AIFM can never be less than the amount prescribed in Article 11 of Regulation (EU) No. 2019/2033 on the prudential requirements of investment firms (IFR), the fixed overhead requirement.

The additional capital requirement for UCITS Management Companies and AIFMs authorised to provide individual portfolio management services as set out in Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2023 (S.I. No. 565 of 2023) and Part B of Chapter 3, Alternative Investment Fund Manager Requirements, in the AIF Rulebook.

The updated MCR will not apply to UCITS Management Companies or AIFMs authorised on or before November 27 2023 until May 27 2024 but will apply on authorisation to UCITS Management Companies or AIFMs authorised from November 27 2023.

On November 23 2023, the Central Bank of Ireland (CBI) issued the Consultation Paper CP157 - Macroprudential measures for GBP liability driven investment funds.

The Central Bank is consulting on a proposal to codify and, in certain cases, augment the existing yield buffer measure introduced via an industry letter in November 2022. The proposal to codify the yield buffer would be imposed through Article 25 of the Alternative Investment Fund Managers’ Directive (AIFMD).

This consultation paper outlines a policy proposal to strengthen the steady-state resilience of GBP LDI funds. The consultation process is being undertaken in alignment with Luxembourg's Commission de Surveillance du Secteur Financier (CSSF), building on initial coordination between the CBI and the CSSF in the publication of the November 2022 industry letter.

The Central Bank invites stakeholders’ feedback to this consultation paper. Where possible the Central Bank would welcome evidence to support the views submitted in response to this consultation, which will aid the consideration of the issues. It is intended to publish the feedback received on the Central Bank’s website. 

The consultation process will be open for submissions via the online response form until January 18 2024.

On November 16 2023, the Central Bank of Ireland (CBI) published the Individual Accountability Framework Standards and Guidance.

The Guidance provides clarity regarding the Central Bank’s expectations for the implementation of three aspects of the framework: the Senior Executive Accountability Framework (SEAR), the Conduct Standards and certain aspects of the enhancements to the Fitness & Probity regime.

Senior Executive Accountability Regime (SEAR): This will require in-scope firms to set out clearly and fully where responsibility and decision-making lie within the firm’s senior management.

Conduct Standards: Common Conduct Standards are basic standards such as acting with honesty and integrity, with due skill, care and diligence, and in the best interest of customers, and will apply to individuals in all regulated firms. Senior executives will also have Additional Conduct Standards related to running the part of the business for which they are responsible.

Enhancements to the current Fitness & Probity (F&P) Regime: This will include clarifying firms’ obligations to proactively certify that individuals carrying out certain specified functions are fit and proper.

Amendments to the Administrative Sanctions Procedure (ASP): A key change will be the Central Bank’s ability to take enforcement action under the ASP directly against individuals for breaches of their obligations rather than only for their participation in breaches committed by a firm.

On November 20 2023, the Banca d'Italia  published Frequently Asked Questions (FAQs) on the Beneficial Ownership and the Beneficial Ownership Register.

The FAQ aims at providing operators with clarifications on the identification of the beneficial owner and on the communication of data and information on beneficial ownership to the Register of Beneficial Owners.

On November 3 2023, the Commissione Nazionale per le Societa e la Borsa (CONSOB) announced the second experimentation phase on FinTech Sandbox. 

The second phase of experimentation in Italy of techno-finance (FinTech) activities kicked off on November 3, and ended on December 5 2023, during which operators in the sector will be able to apply for admission to the regulatory sandbox, a protected space for testing projects in the banking, finance and insurance sectors.

Projects that may participate in the Sandbox managed by Consob - in coordination with the FinTech Committee, the Bank of Italy and IVASS (which activate the Sandbox for the areas under their competence) - concern:

• Activities subject to authorisation or registration in a register, list or registry kept by Consob (e.g. provision of investment services and management of crowdfunding portals);
• Activities that would be subject to authorisation or registration in a register, list or registry kept by Consob, but which fall within a case of exclusion provided for by law, including cases in which the activity is not carried out vis-à-vis the public or is carried out vis-à-vis a restricted public pursuant to law;
• Activities affecting regulated areas performed by outsourcers in favour of entities supervised or regulated by Consob;
• Activities affecting regulated areas carried out by an entity supervised or regulated by Consob (e.g. a SIM, a bank for the areas concerning the provision of investment services supervised by Consob, a crowdfunding portal operator, a listed issuer, an OICR operator, a regulated market operator, etc.).

Participation in the sandbox (envisaged by Ministry of Economy and Finance Decree No. 100 of April 30 2021) allows supervised intermediaries and FinTech operators to test innovative products and services, being able to benefit from a simplified transitional regulatory regime. Projects in the FinTech field may be admitted, with no limitation in terms of number: interested operators are invited to start informal discussions with the Supervisory Authorities as soon as possible. 

Information on the Regulation, on the modalities and requirements for participation, and on how to apply can be found in the section of the Consob's website dedicated to the sandbox. 

On November 22 2023, the Commission de Surveillance du secteur financier (CSSF) announced the 2023 Survey on Financial Crime.

The CSSF will start the annual online survey for the year 2023 on February 19 2024.

The objective is to collect standardised key information concerning money laundering and terrorism financing (ML/TF) risks to which professionals under CSSF supervision are exposed and the implementation of measures to mitigate these risks. This cross-sector survey contributes to the CSSF’s ongoing assessment of ML/TF risks present in the financial sectors under its supervision and forms part of the AML/CFT risk-based supervision approach put in place by the CSSF.

The 2023 survey remains mostly unchanged compared to the previous year. However, some questions have been removed, added, or amended. The new and amended questions have been highlighted in the survey. Specifically, the Country List has been modified with the addition of Palestine (ISO Code PS) so the related data extracts are modified.

The final submission to the survey questions will have to be completed through the CSSF eDesk Portal by 1 April 2024 (at the latest).

The CSSF will make available a new Application Programming Interface (“API”) solution allowing to pre-populate the survey in order to ease the process. The API solution is based on the use of a structured exchange file (json format) to be transmitted to the CSSF via the S3 (“simple storage service”) protocol. This file will then pre-fill the survey available on the CSSF eDesk platform. The entity will also be able to update directly in eDesk the data prefilled through S3. The manual input of the responses directly in the eDesk online form remains possible.

A dedicated user guide will soon be made available. 

In order to avoid connection problems when the survey will be launched, the CSSF invites all entities it supervises for AML/CFT purposes to ensure they have an account.

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Le 22 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a annoncé l'Enquête 2023 sur la criminalité financière.

La CSSF lancera l’enquête annuelle en ligne pour l’année 2023 le 19 février 2024.

L’objectif est de collecter des informations clés standardisées concernant les risques de blanchiment d’argent et de financement du terrorisme (BC/FT) auxquels sont exposés les professionnels sous la surveillance de la CSSF et la mise en œuvre de mesures pour atténuer ces risques. Cette enquête transversale contribue à l’évaluation continue par la CSSF des risques de BC/FT présents dans les secteurs financiers sous sa surveillance et s’inscrit dans le cadre de l’approche de surveillance basée sur les risques de LBC/FT mise en place par la CSSF.

L’enquête 2023 reste pratiquement inchangée par rapport à l’année précédente. Cependant, certaines questions ont été supprimées, ajoutées ou modifiées. Les questions nouvelles et modifiées ont été mises en évidence dans l'enquête. Plus précisément, la liste des pays a été modifiée avec l'ajout de la Palestine (code ISO PS), de sorte que les extraits de données associés sont modifiés.

La soumission finale des questions de l’enquête devra être complétée via le portail eDesk de la CSSF au plus tard le 1er avril 2024.

La CSSF mettra à disposition une nouvelle solution Application Programming Interface (« API ») permettant de pré-remplir l’enquête afin de faciliter le processus. La solution API repose sur l’utilisation d’un fichier d’échange structuré (format json) à transmettre à la CSSF via le protocole S3 (« simple storage service »). Ce fichier pré-remplira ensuite l'enquête disponible sur la plateforme CSSF eDesk. L'entité pourra également mettre à jour directement dans eDesk les données préremplies via S3. La saisie manuelle des réponses directement dans le formulaire en ligne eDesk reste possible.

Un guide d'utilisation dédié sera bientôt disponible.

Afin d'éviter des problèmes de connexion au moment du lancement de l'enquête, la CSSF invite toutes les entités qu'elle supervise en matière de LBC/FT à s'assurer qu'elles disposent d'un compte.

On November 7 2023, the Luxembourg Tax Authority - Portail de la fiscalité indirecte (PFI) informed on the Central Electronic System of Payment information (CESOP).

From January 1 2024, all EU Payment Service Providers will be required to record and report transactional data of cross-border payments. This includes banks, electronic money institutions and other regulated payment institutions. Further information on EU legislation, technical specifications, guidelines and FAQ can be found on a dedicated Webpage of the EU Commission.

On February 18 2020, the Council adopted a legislative package to request payment service providers to transmit information on cross-border payments originating from Member States and on the beneficiary (“the payee”) of these cross-border payments. Under this package, payment service providers offering payment services in the EU will have to monitor the payees of cross-border payments and transmit information on those who receive more than 25 cross-border payments per quarter to the administrations of the Member States

This information will then be centralised in a European database, the Central Electronic System of Payment information (CESOP) where it will be stored, aggregated and cross-checked with other European databases. All information in CESOP will then be made available to anti-fraud experts of Member States via a network called Eurofisc.

The objective of this new measure is to give tax authorities of the Member States the right instruments to detect possible e-commerce VAT fraud carried out by sellers established in another Member State or in a non-EU country.

The measure respects the data protection rules. Only information related to payments that are likely to be connected to an economic activity is transmitted to the tax authorities. Information on consumers and on the reason underlying the payment is not part of the transmission.

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Le 7 novembre 2023, l'Administration Fiscale luxembourgeoise - Portail de la fiscalité indirecte (PFI) a informé sur le Système Electronique Centrale d'Information de Paiement (CESOP).

À partir du 1er janvier 2024, tous les prestataires de services de paiement de l’UE seront tenus d’enregistrer et de déclarer les données transactionnelles des paiements transfrontaliers. Cela inclut les banques, les établissements de monnaie électronique et autres établissements de paiement réglementés. De plus amples informations sur la législation de l’UE, les spécifications techniques, les lignes directrices et la FAQ sont disponibles sur une page Web dédiée de la Commission européenne.

Le 18 février 2020, le Conseil a adopté un paquet législatif visant à demander aux prestataires de services de paiement de transmettre des informations sur les paiements transfrontaliers provenant des États membres et sur le bénéficiaire (« le bénéficiaire ») de ces paiements transfrontaliers. Dans le cadre de ce paquet, les prestataires de services de paiement proposant des services de paiement dans l'UE devront surveiller les bénéficiaires des paiements transfrontaliers et transmettre des informations sur ceux qui reçoivent plus de 25 paiements transfrontaliers par trimestre aux administrations des États membres.

Ces informations seront ensuite centralisées dans une base de données européenne, le Système Central Electronique d'Information de Paiement (CESOP) où elles seront stockées, agrégées et recoupées avec d'autres bases de données européennes. Toutes les informations contenues dans le CESOP seront ensuite mises à la disposition des experts antifraude des États membres via un réseau appelé Eurofisc.

L'objectif de cette nouvelle mesure est de donner aux autorités fiscales des États membres les instruments adéquats pour détecter une éventuelle fraude à la TVA dans le commerce électronique réalisée par des vendeurs établis dans un autre État membre ou dans un pays tiers.

La mesure respecte les règles de protection des données. Seules les informations relatives aux paiements susceptibles d'être liés à une activité économique sont transmises à l'administration fiscale. Les informations sur les consommateurs et sur le motif du paiement ne font pas partie de la transmission.

On November 15 2023, the Commission de Surveillance du secteur financier (CSSF) issued a Statement on the UCITS marketing notifications to be updated in 2024.

Following the publication of Circular CSSF 22/810 on May 12 2022, the CSSF informs Luxembourg UCITS wishing to notify or de-notify arrangements for marketing of shares in another Member State in accordance with Article 6 of the 2010 Law, that they must comply with the marketing notification and de-notification procedures, which will be available via the eDesk Portal as of January 2 2024. Circular CSSF 11/509 will therefore be repealed on this date.

It will be possible to use an API solution (S3 technology) to submit the packages for the entities concerned.

More details will be provided in December with the publication of a new version of the user guide.

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Le 15 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié un Communiqué sur les notifications de commercialisation des OPCVM à mettre à jour en 2024.

Suite à la publication de la circulaire CSSF 22/810 du 12 mai 2022, la CSSF informe les OPCVM luxembourgeois souhaitant notifier ou dénotifier des modalités de commercialisation d'actions dans un autre État membre conformément à l'article 6 de la loi 2010, qu'ils doivent se conformer aux les procédures de notification et de dénotification de mise sur le marché, qui seront disponibles via le Portail eDesk à partir du 2 janvier 2024. La circulaire CSSF 11/509 sera donc abrogée à cette date.

Il sera possible d'utiliser une solution API (technologie S3) pour soumettre les packages pour les entités concernées.

Plus de détails seront fournis en décembre avec la publication d'une nouvelle version du guide d'utilisation.

On November 27 2023, the Association des Banques et Banquiers, Luxembourg (ABBL) issued a Letter to EMIR 2/3 - Some examples of challenges you may be facing as a bank.

1. Luxembourg treatment of EMIR and market overview

EMIR and EMIR ReFIT are directly applicable in Luxembourg and is complemented by the Luxembourg act dated 15 March 2016 on OTC derivatives, as amended and several CSSF Circulars. The Financial Sector Supervisory Commission (CSSF) and the insurance sector supervisory authority (CAA) are the national authorities competent for the implementation of EMIR and have the power to sanction both FCs and NFCs for non-compliance with the requirements laid down under EMIR.

Note: "Financial counterparties":

(a) an investment firm 

(b) a credit institution 

(c) an insurance undertaking or reinsurance undertaking 

(d) a UCITS and, where relevant, its management company, unless that UCITS is set up exclusively for the purpose of serving one or more employee share purchase plans

(e) an institution for occupational retirement provision (IORP)

(f) an alternative investment fund (AIF), which is either established in the Union or managed by an alternative investment fund manager (AIFM), unless that AIF is set up exclusively for the purpose of serving one or more employee share purchase plans, or unless that AIF is a securitisation special purpose entity and, where relevant, its AIFM established in the Union

(g) a central securities' depository

2. Challenges related to the reporting under EMIR/ EMIR ReFIT

Regulatory assessments of data quality, including the poor level of pairing and matching of the reports, have shown that there is an unequal level of sophistication and understanding with respect to EMIR among market participants.

Many (incl. Insurances, Investment Funds and Management Companies) have decided to delegate the EMIR reporting processing to their banks (FCs) and often entirely rely on them to the extent that they are not always aware of their ultimate responsibility for the reporting performed on their behalf.

With the entry into force of the reporting new technical standards applicable from 29 April 2024, the supervision of data quality is also required to increase. ESMA and National Competent Authorities (NCA) are required to strengthen their controls and all counterparties to derivatives, regardless of their classification, must sharpen up and be alert to their obligations under EMIR.

The challenges faced can be split in three main categories:

1. Data related challenges
2. Process related challenges
3. Business related challenges

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Le 27 novembre 2023, l'Association des Banques et Banquiers de Luxembourg (ABBL) a publié une Lettre à EMIR 2/3 - Quelques exemples de défis auxquels vous pouvez être confronté en tant que banque.

1. Traitement luxembourgeois d’EMIR et aperçu du marché

EMIR et EMIR ReFIT sont directement applicables au Luxembourg et sont complétés par la loi luxembourgeoise du 15 mars 2016 sur les dérivés OTC, telle que modifiée et plusieurs circulaires CSSF. La Commission de surveillance du secteur financier (CSSF) et l’Autorité de surveillance du secteur des assurances (CAA) sont les autorités nationales compétentes pour la mise en œuvre d’EMIR et ont le pouvoir de sanctionner tant les FC que les NFC en cas de non-respect des exigences fixées par EMIR.

Remarque : « Contreparties financières » :

(a) une entreprise d'investissement

(b) un établissement de crédit

(c) une entreprise d'assurance ou de réassurance

(d) un OPCVM et, le cas échéant, sa société de gestion, sauf si cet OPCVM est constitué exclusivement dans le but de servir un ou plusieurs plans d'actionnariat salarié

(e) une institution de retraite professionnelle (IRP)

f) un fonds d'investissement alternatif (FIA), qui est soit établi dans l'Union, soit géré par un gestionnaire de fonds d'investissement alternatif (FMIA), à moins que ce FIA ne soit créé exclusivement dans le but de servir un ou plusieurs plans d'actionnariat salarié, ou sauf si ce FIA est une entité ad hoc de titrisation et, le cas échéant, son gestionnaire établi dans l'Union

(g) un dépositaire central de titres

2. Défis liés au reporting sous EMIR/EMIR ReFIT

Les évaluations réglementaires de la qualité des données, y compris le faible niveau de couplage et de mise en correspondance des rapports, ont montré qu'il existe un niveau inégal de sophistication et de compréhension d'EMIR parmi les acteurs du marché.

Beaucoup (y compris les assurances, les fonds d'investissement et les sociétés de gestion) ont décidé de déléguer le traitement du reporting EMIR à leurs banques (FC) et s'en remettent souvent entièrement à elles dans la mesure où elles ne sont pas toujours conscientes de leur responsabilité ultime dans le reporting effectué sur les banques. leur nom.

Avec l’entrée en vigueur des nouvelles normes techniques de reporting applicables à partir du 29 avril 2024, le contrôle de la qualité des données doit également être renforcé. L’ESMA et les autorités nationales compétentes (ANC) sont tenues de renforcer leurs contrôles et toutes les contreparties aux produits dérivés, quelle que soit leur classification, doivent se perfectionner et être attentives à leurs obligations au titre d’EMIR.

Les défis rencontrés peuvent être divisés en trois catégories principales :

1. Défis liés aux données
2. Défis liés aux processus
3. Défis liés aux affaires

On November 14 2023, the Commission de Surveillance du secteur financier (CSSF) published the Circular CSSF 23/845 updating the Circular CSSF 22/821 on the long form report and the Circular CSSF 22/826 on the statutory audit mandate.

It aims to include clarifications based on the feedback from the industry and to further align the content of the self-assessment questionnaire (SAQ) with supervisory points of focus.

As a result, the following 5 thematic sections have been included in the revised SAQ: 

a. credit and counterparty risk;

b. interest rate risk in the banking book (IRRBB) and credit spread risk arising from non-trading book activities (CSRBB);

c. liquidity risk;

d. strong customer authentication and secure communication following the Payment Services Directive (PSD 2);

e. climate-related and environmental risks. 

This circular also introduces changes in relation to the reports to be established by the réviseurs d’entreprises agréés (approved statutory auditors or “REA”). Whereas both the report on the protection of financial instruments and funds belonging to clients and the report on anti-money laundering and countering the financing of terrorism (AML/CFT) remain, it is no longer foreseen that Agreed Upon Procedure (AUP) reports are required from all banks on a recurring basis. While the CSSF might request such AUPs in the future on an ad hoc basis, no such AUPs are to be submitted with respect to financial year-end 2023 information. 

The purpose of this circular is also to amend Circular CSSF 22/826 on the practical rules concerning the statutory audit mandate of the REA. In particular, the submission deadline for the management letter is adapted in order to ensure a better alignment with the submission deadline foreseen for the reports to be established by the REA pursuant to Circular CSSF 22/821 on the Long Form Report, as amended.

The provisions of this circular are applicable to credit institutions incorporated under Luxembourg law, including their branches, as well as Luxembourg branches of third-country credit institutions, but not to Luxembourg branches of EU credit institutions.

Annex I details the amendments to Circular CSSF 22/821 and Annex II the amendments to Circular CSSF 22/826.

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Le 14 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié la Circulaire CSSF 23/845 mettant à jour la Circulaire CSSF 22/821 relative au rapport analytique et la Circulaire CSSF 22/826 relative au mandat de commissaire aux comptes.

Il vise à inclure des clarifications basées sur les commentaires du secteur et à aligner davantage le contenu du questionnaire d'auto-évaluation (SAQ) sur les points centraux de la surveillance.

En conséquence, les 5 sections thématiques suivantes ont été incluses dans le SAQ révisé :

un. risque de crédit et de contrepartie ;

b. le risque de taux d'intérêt dans le portefeuille bancaire (IRRBB) et le risque de spread de crédit découlant des activités hors portefeuille de négociation (CSRBB) ;

c. Risque de liquidité;

d. authentification forte du client et communication sécurisée conformément à la directive sur les services de paiement (PSD 2) ;

e. les risques liés au climat et à l’environnement.

Cette circulaire introduit également des modifications par rapport aux rapports à établir par les réviseurs d’entreprises agréés. Alors que le rapport sur la protection des instruments financiers et des fonds appartenant aux clients et le rapport sur la lutte contre le blanchiment d'argent et le financement du terrorisme (LAB/CFT) restent en vigueur, il n'est plus prévu que les rapports de procédure convenue (AUP) soient publiés. exigées de toutes les banques de manière récurrente. Bien que la CSSF puisse demander de telles AUP à l’avenir de manière ponctuelle, aucune AUP de ce type ne doit être soumise.

Au titre des informations de clôture de l’exercice 2023.

La présente circulaire a également pour objet de modifier la circulaire CSSF 22/826 relative aux règles pratiques concernant le mandat de commissaire aux comptes de la REA. En particulier, le délai de soumission de la lettre de recommandation est adapté afin d'assurer un meilleur alignement avec le délai de soumission prévu pour les rapports à établir par la REA en application de la circulaire CSSF 22/821 relative au rapport détaillé, telle que modifiée.

Les dispositions de la présente circulaire sont applicables aux établissements de crédit de droit luxembourgeois, y compris leurs succursales, ainsi qu'aux succursales luxembourgeoises d'établissements de crédit de pays tiers, mais pas aux succursales luxembourgeoises d'établissements de crédit de l'Union européenne.

L’Annexe I détaille les modifications de la Circulaire CSSF 22/821 et l’Annexe II les modifications de la Circulaire CSSF 22/826.

On November 7 2023, the Commission de Surveillance du secteur financier (CSSF) issued the MMF Reporting dashboard – December 2022.

This MMF Reporting Dashboard encompasses a set of indicators based on the data reported under Article 37 of the MMF Regulation, with data as from Q1/2020 onwards.

The total NAV of Luxembourg domiciled MMFs reached EUR 413bn as per December 31, 2022, which constitutes a decrease of EUR 3bn (-1%) over one year. The number of MMFs decreased from 128 active funds last year to 116 active funds by the end of 2022, with 95 UCITS1 and 21 AIFs.

The breakdown by categories of MMFs remained rather stable compared to a year ago. As per 31/12/22, 52% of MMFs are short term low volatility NAV MMFs (“ST LVNAV” MMFs) in terms of total NAV, 18% are short term variable NAV MMFs (“ST VNAV” MMFs), 16% are standard variable NAV MMFs (“STD VNAV” MMFs) and 15% are short term public debt constant NAV MMFs (“ST PD CNAV” MMFs) (essentially in USD). 

91% of MMF investors are professional investors and the 5 largest investors represent on average 31% of the NAV (to be compared to 36% by the end of 2021, mainly due to data quality enhancements). The largest MMF investor groups are other financial institutions (38% of total NAV), followed by non-financial corporations (22% of total NAV) and other UCIs (11%). Households represent 8%.

MMFs in Luxembourg are highly concentrated (the 5 largest MMFs account for ~49% of the total NAV).

In a context of anticipation of rate increases, MMFs globally decreased their WAM and their WAL at low levels in order to capture more quickly investments with higher returns. In the meantime, they tended to maintain or increase their level of liquidity. The average levels of DLA and WLA remained globally well above the regulatory thresholds during the year.

For 2022, no ST LVNAV MMF experienced a NAV deviation larger than the 20bps threshold foreseen under art. 33(2)(b) MMFR. No vulnerabilities from stress testing (Art. 28(4)) and no liquidity measures for ST PD CNAV and ST LVNAV MMFs (Art. 34) had to be implemented according to the MMFR Reporting.

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Le 7 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié le tableau de bord MMF Reporting – Décembre 2022.

Ce tableau de bord de reporting MMF comprend un ensemble d'indicateurs basés sur les données déclarées en vertu de l'article 37 du règlement MMF, avec des données à partir du premier trimestre 2020.

La VNI totale des fonds monétaires domiciliés au Luxembourg atteint 413 MdsEUR au 31 décembre 2022, ce qui constitue une diminution de 3 MdsEUR (-1%) sur un an. Le nombre de fonds monétaires est passé de 128 fonds actifs l’an dernier à 116 fonds actifs fin 2022, avec 95 OPCVM1 et 21 FIA.

La répartition par catégories de fonds monétaires est restée plutôt stable par rapport à il y a un an. Au 31/12/22, 52% des fonds monétaires sont des fonds monétaires à faible volatilité à court terme à valeur liquidative (« ST LVNAV ») en termes de valeur liquidative totale, 18 % sont des fonds monétaires à court terme à valeur variable à valeur liquidative (« ST VNAV »), 16 % sont des fonds monétaires standards à valeur liquidative variable (« STD VNAV ») et 15 % sont des fonds monétaires de dette publique à court terme à valeur constante (MMF « ST PD CNAV ») (essentiellement en USD).

91% des investisseurs MMF sont des investisseurs professionnels et les 5 plus grands investisseurs représentent en moyenne 31% de la VNI (à comparer à 36% à fin 2021, principalement en raison de l'amélioration de la qualité des données). Les principaux groupes d'investisseurs de fonds monétaires sont les autres institutions financières (38 % de la VNI totale), suivis par les sociétés non financières (22 % de la VNI totale) et les autres OPC (11 %). Les ménages représentent 8%.

Les fonds monétaires au Luxembourg sont très concentrés (les 5 plus grands fonds monétaires représentent ~49% de la VNI totale).

Dans un contexte d'anticipation de hausses de taux, les fonds monétaires ont globalement diminué leur WAM et leur WAL à des niveaux bas afin de capter plus rapidement des investissements aux rendements plus élevés. Dans l’intervalle, ils ont eu tendance à maintenir ou à accroître leur niveau de liquidité. Les niveaux moyens de DLA et WLA sont restés globalement bien supérieurs aux seuils réglementaires au cours de l’année.

Pour l’année 2022, aucun fonds monétaire ST LVNAV n’a connu d’écart de VNI supérieur au seuil de 20 pdb prévu à l’art. 33(2)(b) du RMFM. Selon le reporting MMFR, aucune vulnérabilité issue des tests de résistance (article 28, paragraphe 4) ni aucune mesure de liquidité pour les fonds monétaires ST PD CNAV et ST LVNAV (article 34) n'ont dû être mises en œuvre.

On November 6 2023, the Commission de Surveillance du secteur financier (CSSF) issued the UCITS Risk Reporting dashboard – December 2022.

The key outcomes for UCITS falling in the full reporting scope are the following: 

- With regards to market risk, leverage and EPM techniques

o The annualised realised volatility increased from 8.1% in the second semester 2021 to 13.4% in the first semester 2022 and decreased to 12.1% in the second semester 2022.

o The average VaR increased from 5.1% in the second semester 2021 to 5.2% in the first semester 2022 and to 6.1% in the second semester 2022.

o The usage of leverage remained generally low in comparison to the regulatory limit (for funds under the commitment approach), respectively to the expected/maximum expected level of gross leverage disclosed in the prospectus (for funds under the VaR approach).

o The volume of EPM techniques is fairly stable at EUR 147bn at year-end, of which EUR 82bn from Securities Lending and EUR 63bn from Reverse Repos. Reverse repo volumes mainly originate from 3 IFMs in relation to money market funds, while securities lending volumes are less concentrated across IFMs and investment policies.

o The results of the univariate stress tests on interest rates (scenario of +200 bps parallel shift) remained stable for bond funds but deteriorated for mixed funds (from -2.9% to -4.0%), suggesting that the decrease in duration observed in 2021 might have come to an end and that the exposure of mixed funds to bonds might have increased.

- With regards to liquidity risk (based on self-assessments from the IFMs under non-harmonised models and processes)

o The liquidity risk profiles under normal conditions on a 1-week horizon remained stable.

o The use of Liquidity Management Tools remained broadly stable, the most used being swing pricing.

o The availability of gates as well as swing pricing in the constitutive documents remained broadly stableresp. increased over 2022 (92% resp. 71% of the NAV). On the basis of the reporting submissions, there is still a minority of funds that do not have the possibility to apply temporary suspensions of redemptions or gates according to their constitutive documents.

o The highest net redemption on a given day during the semester remained broadly stable during 2022, generally below 2.5% of the NAV for most UCITS, with the notable exception of MMFs displaying higher levels which can be explained by their use as short-term cash management vehicles by investors.

- With regards to credit risk

o The credit exposures by internal ratings remained stable and are mainly on high quality assets, with 90% of the credit exposure being on assets with an internal credit rating of 1 to 5 (on a scale going from 1 for high quality to 10 for low quality assets)

o The credit exposures by credit spreads remained stable as well, with more than 60% of the credit exposure being on assets with a credit spread < 100 bps

o The results of the univariate stress tests on credit spreads (scenario of a +100% proportional shift) deteriorated significantly in the first semester 2022 (e.g. for bond funds from -7.1% to -10.2% of the NAV, mostly due to the combined effects of the Ukraine/Russia crisis and tensions in the Chinese real estate sector that weighted on High Yield bonds) and went down in the second semester 2022 (to -8.2% for bond funds).

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Le 6 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié le tableau de bord de reporting des risques UCITS – décembre 2022.

Les principaux résultats pour les OPCVM entrant dans le périmètre de reporting complet sont les suivants :

- En matière de risque de marché, de levier et de techniques EPM

o La volatilité réalisée annualisée est passée de 8,1% au deuxième semestre 2021 à 13,4% au premier semestre 2022 et a diminué à 12,1% au deuxième semestre 2022.

o La VaR moyenne est passée de 5,1% au deuxième semestre 2021 à 5,2% au premier semestre 2022 et à 6,1% au deuxième semestre 2022.

o Le recours à l'effet de levier est resté généralement faible par rapport à la limite réglementaire (pour les fonds sous approche par engagement), respectivement au niveau attendu/maximum attendu de levier brut divulgué dans le prospectus (pour les fonds sous approche VaR).

o Le volume des techniques EPM est assez stable à 147 MdsEUR à la fin de l'année, dont 82 MdsEUR de prêts de titres et 63 MdsEUR de Reverse Repos. Les volumes de prises en pension proviennent principalement de 3 GFI pour les fonds monétaires, tandis que les volumes de prêts de titres sont moins concentrés entre les GFI et les politiques d'investissement.

o Les résultats des stress tests univariés sur les taux d'intérêt (scénario de décalage parallèle de +200 bps) sont restés stables pour les fonds obligataires mais se sont détériorés pour les fonds mixtes (de -2,9% à -4,0%), suggérant que la diminution de la sensibilité observée en 2021 aurait pu prendre fin et que l'exposition des fonds mixtes aux obligations aurait pu augmenter.

- En matière de risque de liquidité (sur la base des auto-évaluations des GFI selon des modèles et processus non harmonisés).

o Les profils de risque de liquidité en conditions normales à horizon 1 semaine sont restés stables.

o L'utilisation des outils de gestion de la liquidité est restée globalement stable, le plus utilisé étant le swing pricing.

o La disponibilité des gates ainsi que du swing pricing dans les documents constitutifs est restée globalement stable. en hausse par rapport à 2022 (92% resp. 71% de la VNI). Sur la base des rapports soumis, il existe encore une minorité de fonds qui n'ont pas la possibilité d'appliquer des suspensions temporaires de rachats ou des gates conformément à leurs documents constitutifs.

o Les rachats nets les plus élevés un jour donné du semestre sont restés globalement stables au cours de l'année 2022, généralement inférieurs à 2,5% de l'ANR pour la plupart des OPCVM, à l'exception notable des fonds monétaires qui affichent des niveaux plus élevés qui peuvent s'expliquer par leur utilisation comme liquidités à court terme. véhicules de gestion par les investisseurs.

- En ce qui concerne le risque de crédit

o Les expositions de crédit par notation interne sont restées stables et portent principalement sur des actifs de haute qualité, avec 90% de l'exposition de crédit portant sur des actifs ayant une notation de crédit interne de 1 à 5 (sur une échelle allant de 1 pour haute qualité à 10 pour basse qualité). des atouts de qualité).

o Les expositions de crédit par spreads de crédit sont également restées stables, avec plus de 60 % de l'exposition de crédit portant sur des actifs avec un spread de crédit < 100 points de base.

o Les résultats des stress tests univariés sur les spreads de crédit (scénario d'un déplacement proportionnel de +100%) se sont significativement détériorés au premier semestre 2022 (par exemple pour les fonds obligataires de -7,1% à -10,2% de la VNI, principalement en raison de l'effet combiné effets de la crise Ukraine/Russie et tensions dans le secteur immobilier chinois qui ont pesé sur les obligations High Yield) et s'est replié au deuxième semestre 2022 (à -8,2% pour les fonds obligataires).

On November 15 2023, the Commission de Surveillance du secteur financier (CSSF) issued a statement on the new AIFMD Annex IV reporting rules based on the new rules and updates of ESMA’s AIFMD Q&As.

Following the implementation in November 2023 of the revised IT technical guidance introduced in ESMA’s AIFMD Reporting Technical Guidance – revision 6 document, the CSSF has updated the corresponding document AIFM Reporting – Technical Guidance – CSSF, that describes the different feedback files that the senders of AIFM reporting receive and the CSSF’s checks on the reporting files. Certain fields have now become mandatory.

Each AIFM must receive at least three positive feedback files until the necessary controls have been completed. This does not exclude the possibility that the CSSF may contact the AIFM again at a later stage regarding the content of the reporting file(s).

In case the AIFM encounters problems with the feedback files and/or error messages, they are invited to inform their service provider and/or to contact the CSSF exclusively at aifm_reporting@cssf.lu.

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Le 15 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié un communiqué sur les nouvelles règles de reporting de l'annexe IV de la directive AIFM, basées sur les nouvelles règles et les mises à jour des questions-réponses sur la directive AIFMD de l'ESMA.

Suite à la mise en œuvre en novembre 2023 des orientations techniques informatiques révisées introduites dans le document AIFMD Reporting Technical Guidance – révision 6 de l'ESMA, la CSSF a mis à jour le document correspondant AIFM Reporting – Technical Guidance – CSSF, qui décrit les différents fichiers de feedback que les expéditeurs d'AIFM réception des reportings et des contrôles de la CSSF sur les fichiers de reporting. Certains champs sont désormais devenus obligatoires.

Chaque gestionnaire doit recevoir au moins trois dossiers d’avis positifs jusqu’à ce que les contrôles nécessaires soient réalisés. Ceci n’exclut pas la possibilité que la CSSF recontacte ultérieurement le gestionnaire au sujet du contenu du ou des dossiers de reporting.

Dans le cas où l'AIFM rencontre des problèmes avec les fichiers de feedback et/ou des messages d'erreur, il est invité à en informer son prestataire et/ou à contacter exclusivement la CSSF à aifm_reporting@cssf.lu.

On November 15 2023, the Commission de Surveillance du secteur financier (CSSF) issued a Communiqué on the reports foreseen by Circulars CSSF 21/788, 21/789 and 21/790, applicable as from year-end December 31 2023, that are now available in eDesk and informed on main updates.

As from November 15 2023, the reports for IFMs and UCIs with a financial year-end December 31 2023 and January 31 2024, are available in the CISERO module. The reports with a financial year-end after January 31 2024, will be made available 3 months before the respective year-end.

Based on the reports submitted to the CSSF, the feedback received from the industry (also through the CISERO mailbox cisero@cssf.lu) as well as the applicable regulatory requirements, the CSSF proceeded to some limited updates of the questionnaires included in the respective reports for IFMs and UCIs. The main aim of these updates is to clarify certain questions and to complement certain topics of the reports. 

A short AML/CFT section has been added in the Separate Report for UCIs that fall under the scope of Circular CSSF 21/790 and which have designated an IFM outside of Luxembourg.

An IT solution optimising the filling in of the self-assessment questionnaire for the UCIs within the scope of Circular CSSF 21/790 is also available as from November 15 2023. This solution allows to fill in the questionnaire through a structured file transmitted to the CSSF via S3 (“simple storage service”) protocol. This file will then prefill the questionnaire available on the CSSF eDesk Portal. The UCI will still be able to manually update in eDesk the data prefilled through S3. 

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Le 15 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié un Communiqué sur les rapports prévus par les circulaires CSSF 21/788, 21/789 et 21/790, applicables à compter de la fin de l'exercice le 31 décembre 2023, qui sont désormais disponible dans eDesk et informé des principales mises à jour.

Depuis le 15 novembre 2023, les rapports des GFI et OPC dont l'exercice clos le 31 décembre 2023 et le 31 janvier 2024, sont disponibles dans le module CISERO. Les rapports dont la clôture de l'exercice est postérieure au 31 janvier 2024 seront mis à disposition 3 mois avant la fin de l'exercice concerné.

Sur la base des rapports soumis à la CSSF, des retours reçus de l'industrie (également via la boîte mail CISERO cisero@cssf.lu) ainsi que des exigences réglementaires applicables, la CSSF a procédé à quelques mises à jour limitées des questionnaires inclus dans les rapports respectifs. pour les GFI et les OPC. L'objectif principal de ces mises à jour est de clarifier certaines questions et de compléter certains thèmes des rapports.

Une courte section LBC/FT a été ajoutée dans le rapport séparé pour les OPC entrant dans le champ d'application de la circulaire CSSF 21/790 et ayant désigné un GFI en dehors du Luxembourg.

Une solution informatique optimisant le remplissage du questionnaire d'auto-évaluation pour les OPC entrant dans le champ d'application de la circulaire CSSF 21/790 est également disponible à compter du 15 novembre 2023. Cette solution permet de remplir le questionnaire via un fichier structuré transmis à la CSSF. via le protocole S3 (« simple storage service »). Ce fichier préremplira ensuite le questionnaire disponible sur le portail CSSF eDesk. L'UCI pourra toujours mettre à jour manuellement dans eDesk les données préremplies via S3.

On November 17 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ concerning SIFs and SICARs that do not qualify as AIFs.

The update concerns the replacement of the terms “central administration” by  “UCI administrator” in line with CSSF Circular 22/811 (question 2) – version 6.

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Le 17 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ concernant les FIS et SICAR non qualifiés de FIA.

La mise à jour concerne le remplacement des termes « administration centrale » par « administrateur OPC » conformément à la Circulaire CSSF 22/811 (question 2) – version 6.

On November 17 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ on SICARs.

The update concerns the deletion of question 4 (What does the CSSF require for the central administration of SICARs) and the replacement of the term “Central Administration” and other linked functions by “UCI administrator” in line with CSSF Circular 22/811 (questions 1 and 6) – version 4.

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Le 17 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ sur les SICAR.

La mise à jour concerne la suppression de la question 4 (Qu'est-ce que la CSSF exige pour l'administration centrale des SICAR) et le remplacement du terme « Administration Centrale » et autres fonctions liées par « Administrateur OPC » conformément à la Circulaire CSSF 22/811 (questions 1 et 6) – version 4.

On November 23 2023, the Commission de Surveillance du secteur financier (CSSF) launched a Consultation on the GBP Liability Driven Investment Funds.

The CSSF is consulting on a proposal to introduce macroprudential measures by imposing a minimum yield buffer to GBP denominated Liability Driven Investment (LDI) funds, via the use of Article 25 of the Alternative Investment Fund Managers’ Directive (AIFMD) on the use of information by competent authorities, supervisory cooperation and limits to leverage, as implemented into Luxembourg legislation by Article 23 of the Law of July 12 2013 on Alternative Investment Fund Managers.

The proposed policy, prepared in coordination with the Central Bank of Ireland (CBI), aims to codify the existing minimum yield buffer measure from the industry letter in November 2022 and strengthen the steady-state resilience of GBP denominated LDI funds managed by Luxembourg Alternative Investment Fund Managers. The CSSF is seeking input on the yield buffer proposal which comprises the following aspects:

• the level of the yield buffer and its calculation;
• the scope of measures, including a definition of LDI funds;
• third party assets;
• the buffer usability and
• the reporting requirements.

The consultation is open and welcomes evidence to support the views submitted in response to this consultation. Submissions must be made using the CSSF’s response form that can be sent to the following address: opc_prud_risk@cssf.lu until Thursday, January 18 2024.

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Le 23 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a lancé une Consultation sur les GBP Liability Driven Investment Funds.

La CSSF mène une consultation sur une proposition visant à introduire des mesures macroprudentielles en imposant un coussin de rendement minimum aux fonds Liability Driven Investment (LDI) libellés en GBP, via l'utilisation de l'article 25 de la directive sur les gestionnaires de fonds d'investissement alternatifs (AIFMD) sur l'utilisation des informations. par les autorités compétentes, la coopération en matière de surveillance et les limites de l'effet de levier, telles que transposées dans la législation luxembourgeoise par l'article 23 de la loi du 12 juillet 2013 relative aux gestionnaires de fonds d'investissement alternatifs.

La politique proposée, préparée en coordination avec la Banque centrale d'Irlande (CBI), vise à codifier la mesure de coussin de rendement minimum existante issue de la lettre de l'industrie de novembre 2022 et à renforcer la résilience à l'état stable des fonds LDI libellés en GBP gérés par Luxembourg Alternative Investment. Gestionnaires de fonds. La CSSF sollicite des commentaires sur la proposition de coussin de rendement qui comprend les aspects suivants :

• le niveau du coussin de rendement et son calcul ;
• la portée des mesures, y compris une définition des fonds LDI ;
• les biens de tiers ;
• la convivialité du tampon et
• les exigences de déclaration.

La consultation est ouverte et accueille des preuves pour étayer les points de vue soumis en réponse à cette consultation. Les soumissions doivent être effectuées au moyen du formulaire de réponse de la CSSF qui peut être envoyé à l’adresse suivante : opc_prud_risk@cssf.lu jusqu’au jeudi 18 janvier 2024.

On November 29 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ – Circular CSSF 22/811 on UCI Administrators (UCIA) Version 3 – November 2023.

In accordance with point 28 of the UCIA Circular, the sole compilation/input of accounting information is not sufficient to comply with the UCIA duties when the UCIA is responsible for the NAV calculation and accounting function. 

Additionally, pursuant to point 96 of the UCIA Circular, any delegation model, which is of such a scale that the UCIA can no longer be considered as a UCIA in substance and that it would become a letter-box entity, must be considered as contravening the conditions which the UCIA is required to meet in order to obtain and maintain its authorisation. Therefore, delegation models leading to a UCIA solely compiling accounting information received from third parties or delegates are not compliant with the requirements of the UCIA Circular.

The UCIA needs to ensure that its entire delegation model, including any potential sub-delegations, is/are based on objective reasons and does not generate additional or increased risks for the underlying UCIs. The UCIA may delegate UCI administration tasks to one or more entities (which may be part of the group to which the UCIA belongs or not) under the requirements set out in Chapter 3.5 of the UCIA Circular. These requirements apply mutatis mutandis where the delegate sub-delegates UCI administration tasks (excluding ICT delegation), and in case of any subsequent level of sub-delegation (i.e. a chain of delegation). Point 99 of the UCIA Circular does not prevent the UCIA’s delegate to delegate UCI administration tasks to an entity of its group, as well as to an entity of the UCI’s and/or the IFM’s group, provided that all other delegation requirements provided for in the UCIA Circular are being complied with. 

In any other cases, when the UCIA can demonstrate that (i) it has objective reasons justifying a sub-delegation to another entity (i.e. outside the group of the UCIA, its delegate, the UCI and/or its IFM) and that (ii) the risks linked to such sub-delegation are appropriately managed, an ad hoc derogation may be granted by the CSSF upon request. Such a derogation should be requested before the model is implemented.

A UCIA must file information regarding its business activities and resources, as detailed in Annex B of the UCIA Circular, at the latest five months after its financial year-end, starting from June 30 2023. For example, a UCIA with a financial year ending on June 30 2023 should first report the requested information no later than November 30 2023. A UCIA with a financial year ending on 31 December 2023 should provide the CSSF with the UCIA reporting no later than May 31 2024.

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Le 29 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ – Circulaire CSSF 22/811 relative aux Administrateurs d'UCI (UCIA) Version 3 – Novembre 2023.

Conformément au point 28 de la Circulaire UCIA, la seule compilation/saisie d'informations comptables n'est pas suffisante pour se conformer aux obligations de l'UCIA lorsque l'UCIA est responsable du calcul de la VNI et de la fonction comptable.

Par ailleurs, conformément au point 96 de la Circulaire UCIA, tout modèle de délégation, qui est d'une ampleur telle que l'UCIA ne peut plus être considérée comme une UCIA en substance et qu'elle deviendrait une entité boîte aux lettres, doit être considéré comme contrevenant. les conditions que l'UCIA est tenue de remplir pour obtenir et conserver son agrément. Par conséquent, les modèles de délégation conduisant une UCIA à compiler uniquement des informations comptables reçues de tiers ou de délégataires ne sont pas conformes aux exigences de la Circulaire UCIA.

L’UCIA doit s’assurer que l’ensemble de son modèle de délégation, y compris toute sous-délégation potentielle, est/sont fondé(s) sur des raisons objectives et ne génère pas de risques supplémentaires ou accrus pour les OPC sous-jacents. L'UCIA peut déléguer des tâches d'administration de l'UCI à une ou plusieurs entités (qui peuvent faire partie du groupe auquel l'UCIA appartient ou non) dans le cadre des exigences énoncées au chapitre 3.5 de la Circulaire UCIA. Ces exigences s'appliquent mutatis mutandis lorsque le délégué sous-délègue des tâches d'administration de l'UCI (à l'exclusion de la délégation TIC), et en cas de tout niveau ultérieur de sous-délégation (c'est-à-dire une chaîne de délégation). Le point 99 de la Circulaire UCIA n'empêche pas le délégué de l'UCIA de déléguer des tâches d'administration d'UCI à une entité de son groupe, ainsi qu'à une entité du groupe de l'UCI et/ou du GFI, à condition que toutes les autres exigences de délégation prévues dans la La circulaire UCIA est respectée.

Dans tous les autres cas, lorsque l'UCIA peut démontrer que (i) elle a des raisons objectives justifiant une sous-délégation à une autre entité (c'est-à-dire extérieure au groupe de l'UCIA, de son délégataire, de l'UCI et/ou de son GFI) et que (ii ) les risques liés à une telle sous-délégation sont gérés de manière appropriée, une dérogation ponctuelle peut être accordée par la CSSF sur demande. Une telle dérogation devrait être demandée avant la mise en œuvre du modèle.

Une UCIA doit déposer des informations concernant ses activités commerciales et ses ressources, telles que détaillées à l'Annexe B de la Circulaire UCIA, au plus tard cinq mois après la clôture de son exercice financier, à compter du 30 juin 2023. Par exemple, une UCIA dont l'exercice financier se termine au 30 juin 2023 devra d'abord déclarer les informations demandées au plus tard le 30 novembre 2023. Une UCIA dont l'exercice se termine le 31 décembre 2023 devra fournir à la CSSF le reporting UCIA au plus tard le 31 mai 2024.

On November 30 2023, the Commission de Surveillance du secteur financier (CSSF) updated on the SFDR data collection exercise applicable to investment fund managers (IFMs) and institutions for occupational retirement provision (IORPs) on periodic disclosures in relation to Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR) and Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment (TR).

This communiqué follows from the CSSF communiqué published on June 30 2023 announcing the launch of the data collection exercise relating to the disclosures in periodic reports for financial products disclosing under Article 8 or Article 9 of SFDR.

The objective of this communiqué is to inform industry participants that an online solution via eDesk, for manual input by IFMs/IORPs for each fund/sub-fund they manage, is now available. This solution comes in addition to the possibility to submit the data by means of a structured file through S3 protocol.

The existing user guide has been updated.

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Le 30 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a fait le point sur l'exercice de collecte de données SFDR applicable aux gestionnaires de fonds d'investissement (GFI) et aux institutions de retraite professionnelle (IRP) sur les informations périodiques relatives au règlement (UE) 2019. /2088 sur les informations liées à la durabilité dans le secteur des services financiers (SFDR) et le règlement (UE) 2020/852 sur l'établissement d'un cadre visant à faciliter l' investissement durable (TR).

Ce communiqué fait suite au communiqué de la CSSF publié le 30 juin 2023 annonçant le lancement de l'exercice de collecte de données relatives aux informations contenues dans les rapports périodiques sur les produits financiers inventés au titre de l'article 8 ou de l'article 9 du SFDR.

L'objectif de ce communiqué est d'informer les acteurs du secteur qu'une solution en ligne via eDesk, permettant la saisie manuelle par les GFI/IRP pour chaque fonds/compartiment qu'ils gèrent, est désormais disponible. Cette solution s'ajoute à la possibilité de soumettre les données au moyen d'un fichier structuré via le protocole S3.

Le guide de l'utilisateur existant a été mis à jour.

On November 30 2023, the Commission de Surveillance du secteur financier (CSSF) published a FAQ on the submission of closing documents and financial information by fund managers.

The closing documents to be transmitted are listed in point 3 of Annex 2 of Circular CSSF 18/698. Nevertheless, for IFMs whose financial year end falls either on or after December 31 2021, the transmission method for the management 

letter is that which is indicated in Circular CSSF 21/789. This method should also be used when submitting the self-assessment questionnaire and the separate report. Paper versions are no longer required by the CSSF.

Depending on the scope of the IFM authorisation, some or all of the documents listed in Annex I are to be submitted.

Circular CSSF 21/789 which introduced two additional reports to be submitted to the CSSF: the self-assessment questionnaire and the separate report. This circular is now applicable in regard to the submission method for the management letter/no comment management letter for financial year ends falling on or after December 31 2021.

(Although only included in the annex to Circular CSSF 19/708 and currently not in point 3 of annex 2 of Circular CSSF 18/698) The minutes of the meetings of the governing body (board of directors or management board), minutes of the meetings of the conducting officers’ during the year and during which AML/CFT topics have been discussed, proof that all the conducting officers and board members followed AML/CFT training must also be submitted to the CSSF.

The nomenclature to be respected is that indicated in the annex to Circular CSSF 19/708 and also reproduced in Annex I of this document.

The closing documents must be provided yearly, at the latest within five months following the IFM's financial year end, with the exception of the audited annual report and the management letter/no comment management letter. These must be submitted within one month of the ordinary general meeting that approves the annual accounts and no later than seven months following the date of the IFM’s financial year end. Point 4.3 of Circular CSSF 21/789 refers to the deadlines for the submission of the self-assessment questionnaire and the separate report.

The IFM is exposed to the risk of receiving formal reminders from the CSSF concerning the missing documents, which may lead to sanctions and other administrative measures. The same applies to all documents/financial information not submitted on time.

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Le 30 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié une FAQ sur la transmission des documents de clôture et des informations financières par les gestionnaires de fonds.

Les documents de clôture à transmettre sont énumérés au point 3 de l'annexe 2 de la circulaire CSSF 18/698. Néanmoins, pour les GFI dont la clôture de l'exercice tombe soit à compter du 31 décembre 2021, le mode de transmission de la gestion

lettre est celle qui est indiquée dans la circulaire CSSF 21/789. Cette méthode doit également être utilisée lors de la soumission du questionnaire d’auto-évaluation et du rapport séparé. Les versions papier ne sont plus exigées par la CSSF.

En fonction de la portée de l'agrément IFM, tout ou partie des documents énumérés à l'annexe I doivent être présentés.

Circulaire CSSF 21/789 qui a introduit deux rapports supplémentaires à soumettre à la CSSF : le questionnaire d'auto-évaluation et le rapport séparé. La présente circulaire est désormais applicable en ce qui concerne le mode de soumission des lettres de recommandations/lettres de non-commentaires pour les exercices clos à compter du 31 décembre 2021.

(Bien que inclus uniquement dans l'annexe de la circulaire CSSF 19/708 et actuellement pas au point 3 de l'annexe 2 de la circulaire CSSF 18/698) Les procès-verbaux des réunions de l'organe de direction (conseil d'administration ou directoire), les procès-verbaux des réunions des dirigeants au cours de l'année et au cours desquelles des sujets LBC/FT ont été abordés, la preuve que tous les dirigeants et membres du conseil d'administration ont suivi une formation LBC/FT doit également être soumise à la CSSF.

La nomenclature à respecter est celle indiquée en annexe de la circulaire CSSF 19/708 et également reproduite en annexe I du présent document.

Les documents de clôture doivent être fournis annuellement, au plus tard dans les cinq mois suivant la clôture de l'exercice social du GFI, à l'exception du rapport annuel audité et de la lettre de recommandation/lettre de recommandation sans commentaire. Ceux-ci doivent être déposés dans le mois qui suit l’assemblée générale ordinaire qui approuve les comptes annuels et au plus tard sept mois après la date de clôture de l’exercice du GFI. Le point 4.3 de la circulaire CSSF 21/789 fait référence aux délais de soumission du questionnaire d'auto-évaluation et du rapport séparé.

Le GFI est exposé au risque de recevoir des rappels formels de la CSSF concernant les documents manquants, pouvant conduire à des sanctions et autres mesures administratives. Il en va de même pour tous les documents/informations financières qui ne sont pas soumis à temps.

On November 30 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ on the Luxembourg Law of December 17 2010 relating to undertakings for collective investment – version 16.

Ancillary liquid assets should be limited to bank deposits at sight, such as cash held in current accounts with a bank accessible at any time, in order to cover current or exceptional payments, or for the time necessary to reinvest in eligible assets provided under Article 41(1) or for a period of time strictly necessary in case of unfavourable market conditions. 

The holding of such ancillary liquid assets is limited to 20% of the net assets of a UCITS. This  limit shall only be temporarily breached for a period of time strictly necessary when, because of exceptionally unfavourable market conditions, 

circumstances so require and where such breach is justified having regard to the interests of the investors, for instance in highly serious circumstances such as the September 11 attacks or the bankruptcy of Lehman Brothers in 2008. 

In the context of article 77 (2) (a) applicable to feeder UCITS, ancillary liquid assets may also include highly liquid assets such as deposits with a credit institution, money market instruments and money market funds. A feeder UCITS may hold up to 15% of its assets in ancillary liquid assets.

Bank deposits, money market instruments and money market funds that meet the criteria of Article 41(1) qualify as eligible assets for a UCITS and cannot be considered as ancillary liquid assets. Other money market instruments may also constitute eligible investments for a UCITS under the trash ratio. 

Version française

Le 30 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ sur la loi luxembourgeoise du 17 décembre 2010 relative aux organismes de placement collectif – version 16.

Les liquidités accessoires devraient être limitées aux dépôts bancaires à vue, tels que les espèces détenues sur des comptes courants auprès d'une banque accessibles à tout moment, afin de couvrir des paiements courants ou exceptionnels, ou pendant la durée nécessaire au réinvestissement dans des actifs éligibles prévus à l'article 41. (1) soit pour une durée strictement nécessaire en cas de conditions de marché défavorables.

La détention de ces liquidités à titre accessoire est limitée à 20 % de l'actif net d'un OPCVM. Cette limite ne sera dépassée que temporairement, pour une durée strictement nécessaire, lorsque, en raison de conditions de marché exceptionnellement défavorables,

les circonstances l'exigent et lorsqu'une telle violation est justifiée au regard des intérêts des investisseurs, par exemple dans des circonstances très graves telles que les attentats du 11 septembre ou la faillite de Lehman Brothers en 2008.

Dans le cadre de l'article 77 (2) (a) applicable aux OPCVM nourriciers, les actifs liquides à titre accessoire peuvent également comprendre des actifs très liquides tels que les dépôts auprès d'un établissement de crédit, les instruments du marché monétaire et les fonds monétaires. Un OPCVM nourricier peut détenir jusqu'à 15% de ses actifs en liquidités accessoires.

Les dépôts bancaires, les instruments du marché monétaire et les fonds monétaires qui répondent aux critères de l'article 41(1) sont considérés comme des actifs éligibles pour un OPCVM et ne peuvent être considérés comme des liquidités accessoires. D'autres instruments du marché monétaire peuvent également constituer des investissements éligibles pour un OPCVM au titre du ratio trash.

On November 9 2023, the Central Bank of Luxembourg (CBL) informed on the dates for the statistical reports for the investment funds for 2024.

Money Market funds:

• Reports of January 2024 = 14.02.2024
• Reports of February 2024 = 15.03.2024
• Reports of March 2024 = 15.04.2024
• Reports of April 2024 = 15.05.2024
• Reports of May 2024 = 14.06.2024
• Reports of June 2024 = 12.07.2024
• Reports of July 2024 = 14.08.2024
• Reports of August 2024 = 13.09.2024
• Reports of September 2024 =14.10.2024
• Reports of October 2024 = 15.11.2024
• Reports of November 2024 = 13.12.2024
• Reports of December 2024 = 15.01.2025

Non MMF investment funds:

• Reports of January 2024 = 28.02.2024
• Reports of February 2024 = 02.04.2024
• Reports of March 2024 = 29.04.2024
• Reports of April 2024 = 31.05.2024
• Reports of May 2024 = 01.07.2024
• Reports of June 2024 = 26.07.2024
• Reports of July 2024 = 29.08.2024
• Reports of August 2024 = 27.09.2024
• Reports of September 2024 = 29.10.2024
• Reports of October 2024 = 29.11.2024
• Reports of November 2024 = 02.01.2025
• Reports of December 2024 = 30.01.2025

Remittance dates for the quarterly statistical reporting for non MMF investment funds:

• Reports of  March 2024 = 29.04.2024
• Reports of  June 2024 = 26.07.2024
• Reports of  September 2024  = 29.10.2024
• Reports of  December 2024 = 30.01.2025

Version française

Le 9 novembre 2023, la Banque Centrale du Luxembourg (CBL) a informé des dates des rapports statistiques des fonds d'investissement pour 2024.

Les fonds du marché monétaire :

• Rapports de janvier 2024 = 14.02.2024
• Rapports de février 2024 = 15.03.2024
• Rapports de mars 2024 = 15.04.2024
• Rapports d'avril 2024 = 15.05.2024
• Rapports de mai 2024 = 14.06.2024
• Rapports de juin 2024 = 12.07.2024
• Rapports de juillet 2024 = 14.08.2024
• Rapports d'août 2024 = 13.09.2024
• Rapports de septembre 2024 =14.10.2024
• Rapports d'octobre 2024 = 15.11.2024
• Rapports de novembre 2024 = 13.12.2024
• Rapports de décembre 2024 = 15.01.2025

Fonds d'investissement non monétaires :

• Rapports de janvier 2024 = 28.02.2024
• Bilans de février 2024 = 02.04.2024
• Rapports de mars 2024 = 29.04.2024
• Rapports d'avril 2024 = 31.05.2024
• Rapports de mai 2024 = 01.07.2024
• Rapports de juin 2024 = 26.07.2024
• Rapports de juillet 2024 = 29.08.2024
• Rapports d'août 2024 = 27.09.2024
• Rapports de septembre 2024 = 29.10.2024
• Rapports d'octobre 2024 = 29.11.2024
• Bilans de novembre 2024 = 02.01.2025
• Rapports de décembre 2024 = 30.01.2025

Dates de remise du reporting statistique trimestriel pour les fonds d'investissement non monétaires :

• Rapports de mars 2024 = 29.04.2024
• Rapports de juin 2024 = 26.07.2024
• Rapports de septembre 2024 = 29.10.2024
• Rapports de décembre 2024 = 30.01.2025

On November 14 2023, the Commission de Surveillance du secteur financier (CSSF) issued a Whistleblowing Form.

Version française

Le 14 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a émis une fiche de dénonciation (Whistleblowing).

On November 17 2023, the Rijksoverheid (Government of the Netherlands) published a Bill to restrict access to UBO registers.

Access to the UBO registers will be limited to bodies with a statutory task in preventing and combating fraud, money laundering and terrorist financing. In addition, persons and institutions can be granted access to the UBO register if they have a legitimate interest, such as the press and NGOs. The reason for this is the ruling of the Court of Justice of the European Union of November 2022. Where previously everyone had access to the register, this proposal regulates that access is limited to a number of parties. This will better guarantee the privacy of the persons in the UBO registers. The Council of Ministers has approved the amendment bill by Minister Kaag of Finance, Minister Yesilgöz-Zegerius of Justice and Security and Minister Adriaansens of Economic Affairs and Climate.

The UBO registers state who owns an organisation, or who has control or an interest (the Ultimate Beneficial Owner). The UBO registers help prevent and detect criminal activities such as fraud, money laundering and terrorist financing, because they make it clear who the actual stakeholder is behind a particular organisation.

Banks, civil-law notaries and competent authorities can gain access to UBO information from the registers in order to tackle and prevent money laundering. Journalists and civil society organisations can gain access if they are engaged in investigations into individuals behind a company or organisation in the context of detecting fraud, money laundering and terrorist financing. In this case, there is a legitimate interest. What exactly this means will be further elaborated in a decision in the near future. This decision will be consulted on the internet next year.

Adjustments

Earlier this year, the bill was publicly consulted. As a result of this internet consultation, the proposal has been amended on a number of points. The most important change is that local authorities, such as municipalities and provinces, can also have access to the registers in order to prevent the government from being misused for criminal activities in cases where it is necessary.

The Council of Ministers has agreed to send the Amending Act to the Council of State for advice. This will be followed by the parliamentary debate.

On November 14 2023, the Dutch Banking Association (Nederlandse Vereniging van Banken, NVB) published a  new sector standard offering clarity for crypto service providers in customer due diligence.

Crypto service providers with a registration with DNB will soon have more clarity about the customer due diligence required to arrange their banking affairs. This clarity is provided by the new Sector Standard of the Dutch Banking Association (NVB) for risk-based customer due diligence at crypto service providers. The Sector Standard was established after a series of roundtable discussions between the United Bitcoin Companies of the Netherlands (VBNL), a number of their members, banks and DNB. With this Sector Standard, banks can carry out their customer due diligence in a risk-oriented manner and banks and crypto companies know where they stand and what questions they can expect.

On November 9 2023, Spain published the Royal Decree 814/2023 on financial instruments, admission to trading, registration of negotiable securities and market infrastructures.

The Law 6/2023, enacted on March 17, replaces the consolidated Securities Market Law, aiming to modernize Spain's securities market regulations. This legislation focuses on technical enhancements, adapting to digitalization's challenges and leveraging its advantages to enhance market competitiveness.

Primarily, the law aims to streamline and reorganize existing regulations, ensuring clear and straightforward rules for capital markets. It serves as a foundational regulatory framework, delineating rights and obligations for market participants while outlining the National Securities Market Commission's (CNMV) supervisory and penalty regime. By summarizing its content, the law appropriately divides responsibilities between primary legislation and royal decrees, facilitating regulation development within this framework.

Aligning with financial policy goals, the law's regulatory expansion is encapsulated in comprehensive royal decrees. These decrees consolidate existing regulations while incorporating specific provisions previously within the law's body. This restructuring ensures flexibility and legal certainty, accommodating potential future regulatory changes at both national and EU levels.

Specifically, the law reorganizes regulations governing financial instrument registration, tradable securities' admission to regulated markets, public offering subscriptions, and related prospectus requirements. While retaining core regulations within the Law, this royal decree delegates further development to streamline and clarify these aspects. This redistribution improves the understanding and applicability of regulations, aiding interpretation and implementation by stakeholders.

This royal decree came into force on November 30 2023.

Article 111 came into force on November 10 2023.

On November 9 2023, Spain published the Royal Decree 815/2023, of November 8, which implements Law 6/2023, of March 17, on Securities Markets and Investment Services, in relation to the official records of the National Securities Market Commission (CNMV), cooperation with other authorities and supervision of investment services companies.

This royal decree aims to unify and clarify the administrative powers granted to the CNMV by Law 6/2023 on Securities Markets and Investment Services. It elaborates on the inspection, verification, and investigative powers of the CNMV, consistent with the broader legal framework for public sector regulations.

By consolidating these powers into one regulation, this decree simplifies their understanding and application while enabling adaptability to future regulatory changes. It also streamlines the regulatory details from the previous Securities Market Law of 2015, reducing complexity and allowing for more agile adjustments in response to potential modifications in European Union Law.

This royal decree will come into force the day following its publication in the Official Journal.

On November 9 2023, Spain published the Royal Decree 816/2023 which modifies the Regulations for the development of Law 35/2003, of November 4, of Collective Investment Institutions, approved by the Royal Decree 1082/2012, of July 13.

The Royal Decree is a response to changes introduced through recent laws related to business creation, securities markets, collective investment institutions, and venture capital entities in Spain. These changes aim to bolster Spain's collective investment framework by enhancing competitiveness, improving operational efficiency, and aligning with European Union laws.

Additionally, the Royal Decree integrates modifications outlined in the Commission Delegated Directive (EU) 2021/1270. This directive focuses on sustainability factors within collective investments, aligning with the Commission's broader Action Plan on Financing Sustainable Growth. It mandates that management companies consider sustainability risks alongside financial risks, ensuring that investments take into account factors that may have a material negative effect on investment values. Clarity and technical expertise are essential for embedding sustainability risks within internal processes and controls, ensuring their proper analysis and implementation.

This royal decree came into force on November 10 2023.

On November 23 2023, the Comisión Nacional del Mercado de Valores (CNMV) published questions and answers (Q&A) on Code of good investor practices.

The clarifications included in this document should be taken as guidelines, given that it is the entities that must apply their professional judgment for the application of the principles and evaluation of the expectations and clarifications. The same goes for the examples mentioned in some of the answers.

The Code does not have a regulatory nature and its adherence is completely voluntary. It follows the apply and explain approach, in the sense that, after accession and the expiration, where applicable, of the three-year transitional period, the adhering entities must apply each and every one of the seven principles of the Code. Since its approval, several managers of collective investment institutions and pension funds have joined, along with a proxy advisor, and additional accessions are expected progressively.

On November 9 2023, Spain published the Royal Decree 813/2023, of November 8, on the legal regime of the investment services companies and other entities that provide investment services in the Boletin Oficial del Estado.

The purpose of this royal decree is to develop the provisions under Law 6/2023, of March 17, regarding investment service companies. It establishes rules on the authorization requirements of investment services companies, organizational and operating requirements, the initial capital and solvency requirements of investment services companies and the standards of conduct that must be met in the provision of investment services.

It also establishes rules on the requirements of authorization, the requirements relating to the dissemination, communication and processing of the information by supply providers and operational requirements and internal organization of data provision service providers.

This royal decree applies to investment services companies and national financial advisory companies, credit institutions that provide investment services and auxiliary services, and management companies of collective investment institutions and managers of closed-type collective investment entities.

All centers of activity established by credit institutions in the Union European Union authorized to provide investment services in Spanish territory whose central administration is located in another Member State shall be considered a single branch.

On November 2 2023, the Swiss National Bank (SNB) launched a CBDC (Central Bank Digital Currency) for financial institutions on a pilot basis.

The operation will take place on the regulated platform of SIX Digital Exchange (SDX). As part of this pilot project entitled “Helvetia phase III”, the SNB will issue a true wholesale MNBC in francs for the first time, on a financial market infrastructure based on distributed ledger technology (DRT). The work carried out so far in test environments will thus move to a productive stage. The wholesale MNBC provided by the SNB will enable the settlement of real bond transactions, via the TRD platform, by participating banks. The latter will thus serve as intermediaries between bond issuers and market players. This will involve settling tokenized bonds using wholesale MNBC according to the delivery versus payment principle. The operation, on a pilot basis, of this true wholesale MNBC will take place between December 2023 and June 2024. The institutions involved are the Banque Cantonale Vaudoise, the Cantonal Bank of Basel, the Kantonal Bank of Zurich, the Mortgage Bank of Lenzburg, Commerzbank and UBS. The pilot further uses the SIC system infrastructure to tokenize the central bank currency used on SDX, and the SIX SIS infrastructure for integration with traditional bond settlement infrastructure. Furthermore, the conclusion and settlement of wholesale MNBC repurchase agreements will be the subject of an experiment on the SIX Repo and SDX test systems.

In March 2023, the BNS had indicated that it was considering exploring three approaches to settle the monetary part of a transaction involving a transfer of tokenized assets: firstly the issuance of a wholesale MNBC as a trading asset regulation; second, connecting tokenized asset settlement systems to the existing SIC payment system; and third, the use by the private sector of a franc token protected under bankruptcy law. Pilot operation will develop the first approach. During this stage, the SNB will use lessons learned from previous phases of the Helvetia project. By this pilot operation, the BNS makes no commitment to put a wholesale MNBC into long-term operation. For the National Bank, it is more about exploring different approaches to settling tokenized assets.

Version française

Le 2 novembre 2023, la Banque nationale suisse (BNS) a lancé à titre pilote une CBDC (Central Bank Digital Currency) pour les institutions financières.

L'opération se déroulera sur la plateforme réglementée de SIX Digital Exchange (SDX). Dans le cadre de ce projet pilote «Helvetia phase III», la BNS émettra pour la première fois une véritable MNBC de gros en francs sur une infrastructure de marché financier basée sur la technologie du grand livre distribué (DRT). Les travaux réalisés jusqu'à présent dans des environnements de test passeront ainsi à une étape productive. La MNBC de gros fournie par la BNS permettra le règlement de transactions obligataires réelles, via la plateforme TRD, par les banques participantes. Ces derniers serviront ainsi d’intermédiaires entre les émetteurs obligataires et les acteurs du marché. Cela impliquera le règlement d’obligations tokenisées à l’aide de MNBC de gros selon le principe de livraison contre paiement. L'exploitation, à titre pilote, de cette véritable MNBC de gros aura lieu entre décembre 2023 et juin 2024. Les institutions concernées sont la Banque Cantonale Vaudoise, la Banque Cantonale de Bâle, la Banque Cantonale de Zurich, la Banque Hypothécaire de Lenzbourg, Commerzbank et UBS. Le projet pilote utilise en outre l'infrastructure du système SIC pour symboliser la devise de la banque centrale utilisée sur SDX, ainsi que l'infrastructure SIX SIS pour l'intégration avec l'infrastructure de règlement d'obligations traditionnelle. En outre, la conclusion et le règlement de contrats de pension de gros MNBC feront l'objet d'une expérimentation sur les systèmes de test SIX Repo et SDX.

En mars 2023, la BNS avait indiqué qu'elle envisageait d'explorer trois approches pour régler la partie monétaire d'une transaction impliquant un transfert d'actifs tokenisés : premièrement, l'émission d'une MNBC de gros en tant que réglementation des actifs de négociation ; deuxièmement, connecter les systèmes de règlement d'actifs tokenisés au système de paiement SIC existant ; et troisièmement, l’utilisation par le secteur privé d’un jeton en franc protégé par la loi sur les faillites. Une opération pilote développera la première approche. Au cours de cette étape, la BNS mettra à profit les enseignements tirés des phases précédentes du projet Helvetia. Par cette opération pilote, la BNS ne s’engage pas à mettre en service à long terme une MNBC de gros. Pour la Banque nationale, il s’agit davantage d’explorer différentes approches de règlement des actifs tokenisés.

On November 28 2023, the Eidgenössische Finanzmarktaufsicht (FINMA) published a guidance report on collective investment undertakings.

The document provides guidance on the collective investment schemes census and contains definitions, explanations, and examples regarding the mentioned elements. The aim of the report on collective investment schemes is to address certain gaps in areas related to liquidity risk, leverage effect, and counterparty risk. The data must be directly communicated to FINMA for each fund individually.

All funds (foreign and domestic) managed or administered in Switzerland by financial intermediaries (Art. 2 LEFin) are subject to data collection unless explicitly excluded. FINMA may, at its discretion, exclude certain types of funds from this collection if it deems they pose no major risk regarding leverage effect or financial stability.

For Swiss funds, as the census is established based on the fund's domicile, data is collected solely from the fund management. The collective asset manager is not required to report data on Swiss funds. The census is required for all Swiss funds with a net asset value exceeding 500 million francs. The threshold of 500 million francs of net assets refers to the compartment or individual fund, not to multi-compartment funds.

For foreign funds, the census must be established according to the domicile of the collective asset manager. The obligation to provide the required data lies with the fund management, the collective asset manager of the funds, and the bank within the meaning of the Banking Act (LB) or the securities firm within the meaning of Art. 41 let a LEFin that manages the foreign collective investment scheme. Only funds managed by financial institutions in Switzerland or from Switzerland require a report (individual establishment, no consolidated view). If the fund contract mentions the establishment as the main portfolio manager or co-manager, data must be provided for the entire fund. Managed accounts are not part of the census.

The census is required for funds with a net asset value exceeding 500 million francs pursuing an alternative investment strategy. The 500 million francs net asset value threshold refers to the compartment or individual fund, not to multi-compartment funds. The census is required for funds with assets under management exceeding 500 million Swiss francs (irrespective of the net assets effectively managed in or from Switzerland).

Funds pursuing one of the following predominant investment strategies or their subcategories (or presenting similar characteristics considered alternative) are considered alternative funds: hedge funds, alternative fund strategies aiming for absolute returns, private equity funds, real estate funds, commodity funds, or precious metal funds. Please note that based on these criteria, certain UCITS may fall under the definition of an alternative strategy.

Version française

Le 28 novembre 2023, l'Eidgenössische Finanzmarktaufsicht (FINMA) a publié un rapport d'orientation sur les organismes de placement collectif.

Le document fournit des conseils sur le recensement des organismes de placement collectif et contient des définitions, des explications et des exemples concernant les éléments mentionnés. L'objectif du rapport sur les placements collectifs de capitaux est de combler certaines lacunes dans les domaines liés au risque de liquidité, à l'effet de levier et au risque de contrepartie. Les données doivent être communiquées directement à la FINMA pour chaque fonds individuellement.

Tous les fonds (étrangers et suisses) gérés ou administrés en Suisse par des intermédiaires financiers (art. 2 LEFin) sont soumis à une collecte de données sauf exclusion expresse. La FINMA peut, à sa discrétion, exclure de cette collecte certains types de fonds si elle estime qu'ils ne présentent pas de risque majeur en termes d'effet de levier ou de stabilité financière.

Pour les fonds suisses, le recensement étant établi en fonction du domicile du fonds, les données sont collectées uniquement auprès de la direction du fonds. Le gestionnaire de fortune collective n'est pas tenu de communiquer des données sur les fonds suisses. Le recensement est obligatoire pour tous les fonds suisses dont la valeur nette d'inventaire dépasse 500 millions de francs. Le seuil de 500 millions de francs d'actif net se réfère au compartiment ou au fonds individuel et non aux fonds multi-compartiments.

Pour les fonds étrangers, le recensement doit être établi en fonction du domicile du gestionnaire collectif. L'obligation de fournir les données requises incombe à la direction du fonds, au gestionnaire collectif des fonds et à la banque au sens de la loi sur les banques (LB) ou à la maison de titres au sens de l'art. 41 laissent une LEFin qui gère le placement collectif étranger. Seuls les fonds gérés par des établissements financiers en Suisse ou depuis la Suisse nécessitent un rapport (établissement individuel, pas de vue consolidée). Si le contrat de fonds mentionne l'établissement comme gestionnaire principal ou co-gestionnaire, les données doivent être fournies pour l'ensemble du fonds. Les comptes gérés ne font pas partie du recensement.

Le recensement est obligatoire pour les fonds d'une valeur liquidative supérieure à 500 millions de francs poursuivant une stratégie de placement alternative. Le seuil de 500 millions de francs de valeur liquidative se réfère au compartiment ou au fonds individuel et non aux fonds multi-compartiments. Le recensement est obligatoire pour les fonds dont la fortune sous gestion dépasse 500 millions de francs suisses (indépendamment de la fortune nette effectivement gérée en ou depuis la Suisse).

Sont considérés comme fonds alternatifs les fonds poursuivant l'une des stratégies d'investissement prédominantes suivantes ou leurs sous-catégories (ou présentant des caractéristiques similaires considérées comme alternatives) : hedge funds, fonds alternatifs visant des performances absolues, fonds de private equity, fonds immobiliers, fonds de matières premières ou fonds de métaux précieux. fonds. Veuillez noter qu'en fonction de ces critères, certains OPCVM peuvent entrer dans la définition d'une stratégie alternative.

On November 7 2023, the UK government published a policy paper on extending the transitional period for third country benchmarks under the UK Benchmarks Regulation.

The policy paper confirmed that the Government would be laying a statutory instrument extending the transitional period for third country benchmarks to December 31 2030 by amending Article 51(5) of the UK Benchmarks Regulation.

The UK Benchmarks Regulation includes a third country regime which stipulates that only third country benchmark administrators approved for use via equivalence, recognition or endorsement may continue to be used within the UK after the end of a transitional period. Without this statutory instrument, the transitional period would expire at the end of 2025, at which time third country administrators must have taken one of the above access routes for their benchmarks to continue to be used in the UK.

The Government has set out previously its concerns that, should the third country benchmarks regime come into force, it could reduce the number and variety of important benchmarks available in the UK. Extending the transitional period to December 2030 is intended to allow time for the Government to consider where reforms are needed to the third country benchmarks regime, and make these changes as part of the implementation of the wider Smarter Regulatory Framework programme.

The UK government intends for the statutory instrument to come into force on January 1 2024.

On November 2 2023, the Financial Conduct Authority (FCA) published a finalized non-handbook guidance on crypto-asset financial promotions (FG23/3).

This release followed weaknesses in adherence to the new laws governing crypto asset promotions, which came into force on October 8 2023.

FG23/3 provides information on and sets out the FCA’s expectations of the communication and approval of financial promotions for qualifying crypto-assets.

The FCA published its final rules (PS23/6) for crypto-asset financial promotions on June 8 2023, after the Government made the relevant legislation. A central requirement of the FCA’s financial promotion rules is that financial promotions must be fair, clear and not misleading. To ensure firms clearly understand the implications of this requirement for crypto-asset promotions, alongside the final rules, the FCA also published a consultation on its proposed guidance. In FG23/3, the FCA sets out its finalised guidance following that consultation.

The guidance does not create new obligations for firms, but relates to firms’ existing regulatory obligations. As well as setting out the FCA’s views of how firms may approach ensuring their financial promotions of qualifying crypto-asset comply with PS23/6, the guidance also details how firms communicating or approving financial promotions should apply the Consumer Duty to their marketing.

FG23/3 applies to all qualifying crypto-asset and focuses particularly on types of crypto-asset and related models that can cause significant harm to consumers when promoted in a way that is not fair, clear and not misleading. The FCA notes that its financial promotions rules apply to a broad range of communications including promotions on social media, websites, mobile phone apps and many other types of content.

On November 6 2023, the Financial Conduct Authority (FCA) published the discussion paper DP23/4 on regulating cryptoassets.

The FCA’s discussion paper, DP23/4, sets out its proposed regulation around issuing and holding stablecoins that claim to maintain a stable value relative to a fiat currency by holding assets denominated in that currency.

Under the proposals, the FCA will regulate the issuance and custody of fiat-backed stablecoins under the Financial Services and Markets Act 2000, and the use of these stablecoins as a means of payment under the Payment Services Regulations 2017. DP23/4 is intended to help inform the development of the regime for fiat-backed stablecoins as a means of payment and ensure any regime the FCA creates meets its objectives, so that firms can facilitate payments safely and securely using fiat-backed stablecoins.

The FCA notes that the design of its new regime for regulating these activities is not entirely separate from the rest of the future regime. Various aspects, including, for example, its expectations of firms that provide custody of regulated stablecoins (or the cryptographic “private keys” to access them) would likely be the same when they provide custody of other types of cryptoassets that come into regulation.

The proposals are intended to be of interest to anyone in the UK who has bought, or may in the future buy, fiat-backed stablecoins, as well as organisations and individuals that participate in the cryptoasset sector (specifically, cryptoassets that claim a form of stability and make use of a stabilisation mechanism).

Feedback on DP23/4 is invited by February 6 2024. The FCA will consider that feedback to decide its next steps, and will consult on any of the proposals from DP23/4 that it proposes to adopt as part of its final rules. In addition to new Handbook rules, it will also consider whether there are other aspects of the existing rules that may need changing, raising with HM Treasury and other stakeholders if necessary.

On November 22 2023, the UK Government published its Autumn Statement 2023.

The statement sets out plans for public finances and economic growth, including some policy decisions aimed at supporting the growth of the UK financial services sector:

• Smarter Regulatory Framework programme. The government is pressing ahead with work to ensure the UK maintains its world-leading financial services regulatory environment. The government will deliver its commitment to make significant progress in building a Smarter Regulatory Framework, tailored to the UK, by the end of the year. This includes the upcoming laying of legislation to replace the current Prospectus, Securitisation and Data Reporting Services Regulation regimes.
• Replacing the Securitisation Regulation. The government will lay a statutory instrument that will replace the retained EU law Securitisation Regulation with a new framework tailored to the UK. This takes forward certain reforms identified in the government’s 2021 Review of the Securitisation Regulation.
• Replacing the Data Reporting Services Regulation (DRSR). The government will shortly lay a statutory instrument that will replace retained EU law in relation to Data Reporting Services Providers (DRSPs) with a new framework tailored to the UK. This delivers on the Edinburgh Reforms commitment to have a regulatory framework for a consolidated tape in place by 2024.
• Investment Research Review. The government and the Financial Conduct Authority (FCA) are engaging with industry stakeholders to take forward the recommendations of the Investment Research Review. This will inform formal consultations in 2024.
• UK Retail Disclosure Framework. The government has published a draft statutory instrument setting out how it will replace the retained EU law Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation with a new framework tailored to the UK. The accompanying policy note confirms the scope of the new framework, including its application to overseas funds, and sets out the government’s intention to fully resolve legislative issues with cost disclosure.
• Prospectus reform. The government will shortly lay a statutory instrument to replace the retained EU law prospectus regime with a new framework tailored to the UK. This will create a more agile and simplified regime, helping to widen participation in the ownership of public companies, simplify the capital-raising process for companies on UK markets, and make the UK a more attractive listing destination.
• Digital Securities Sandbox. The government will publish a response to the consultation on the Digital Securities Sandbox (DSS), which will facilitate the adoption of digital assets across financial markets. The government will also lay an SI to implement the DSS, delivering on the Edinburgh Reform announcement to implement a Financial Market Infrastructure Sandbox in 2023.
• Corporate Governance Reform. The government has written to the Financial Reporting Council (FRC) to update its remit, emphasising the role the FRC should play in promoting growth and competitiveness. The government welcomes the Capital Markets Industry Taskforce work to reset culture through an “investor covenant” and the commitment from industry to provide additional funding to the Investor Forum.

On November 7 2023, the UK Government published a report on financial promotion exemptions for high net worth individuals and sophisticated investors.

A consultation ran from 15 December 2021 to 9 March 2022. It proposed changes to these exemptions, which are set out in the Financial Promotions Order, in order to respond to economic, social and technological changes that have occurred since the exemptions were introduced in 2001, and to instances of misuse of the exemptions identified by the FCA.

After considering all responses, the government intends to update the exemptions by:

• Raising the financial thresholds to qualify for the exemptions to account for inflation.
• Tightening other eligibility criteria to reduce the risk of capturing ordinary consumers.
• Strengthening the statements that investors are required to complete when using the exemptions.

On November 6 2023, the Financial Conduct Authority (FCA) published a letter to chief executive officers (CEOs) of wealth management & stockbroking firms.

The letter describes the FCA’s assessment of this sector’s key harms and its updated supervisory priorities, i.e. preventing financial crime and meeting Consumer Duty outcomes.

Financial crime expectations

The FCA flags that it has seen firms “launder the assets of illegitimate clients through greed or incompetence and others squander or even steal the assets of legitimate clients through frauds and scams”, and warns of the damaging impacts that both of these aspects of financial crime can have.

In response, the FCA expects firms to:

• Not knowingly or otherwise engage or facilitate frauds, scams, or money laundering.
• Understand their financial crime risks by identifying who their clients are, including their expected transaction patterns and corporate structure.
• Not carry out tick box compliance exercises or outsource responsibility to third parties.
• Ensure they have robust and effective systems and controls to counter financial crime and money laundering in a proportionate and risk-based way.
• Ensure their SMF 16/17 holders have the required experience, skills, and independence.
• Share and report information about wrongdoing with the FCA or relevant law enforcement agencies immediately.
• Read and fully implement the FCA’s Financial Crime Guide: A Firm’s Guide to Countering Financial Crime risks and Financial Crime Thematic Reviews, which outline the steps firms must take to defend against financial crime.

Consumer Duty expectations

The FCA also notes that it has seen many wealth managers and stockbrokers failing to meet their obligations under the Consumer Duty to provide a service that delivers good consumer outcomes.

In response, the FCA expects firms to:

• Have a clear focus on the needs and objectives of their target market.
• Ensure their products and services remain aligned to their consumer’s needs, risk profile and circumstances.
• Reassess the vulnerability status of their consumers based on the FCA’s guidance, particularly the 49% of portfolio managers and 69% of stockbrokers from the wealth data survey who identified no vulnerable consumers, even though 50% of people will be classified as vulnerable over their lifetime.
• Ensure their consumers fully understand all aspects of their investment products and services, and that the firm does not exploit limited understanding.
• Not uprate consumers from retail to professional unless this is supported by robust systems and controls, given the loss of protections.
• Fully justify any complex and/or unregulated investments the firm offers, with a clear view of the suitability or appropriateness for the consumer.
• Ensure consumers understand any limitations to the Financial Ombudsman Service /Financial Services Compensation Scheme consumer protection status and associated risks of investments.

The letter concludes by advising that the FCA’s supervision will become more targeted, intrusive and assertive. For example, its new, dedicated financial crime function for consumer investments will focus solely on identifying firms with key fraud, scams or money laundering indicators. The FCA will also increase engagement with firms on non-financial misconduct, with anecdotal evidence supported by recent cases reported to the FCA and public negative press articles.

The FCA highlights that it has already started a major drive with short notice and unannounced visits, particularly for financial crime, and it is increasing the use of its supervisory tools and powers. It plans to use the Consumer Duty to intervene quickly against potential or actual consumers harms, on an individual or multi firm level.

On November 10 2023, the Bank of England (BoE) announced the launch of the scenario phase of the system-wide exploratory scenario (SWES).

The BoE launched the SWES in June 2023 to understand better how UK financial markets core to UK financial stability function under stress. The SWES consists of two phases: information gathering and scenario. The BoE has now started the scenario phase and has sent participants a hypothetical stress scenario that incorporates severe, but plausible, 10-day shocks to rates and risky asset prices.

The BoE is asking SWES participants to consider the impact of this hypothetical stress scenario, including how it would impact their business and what actions they would take in response. The BoE will then assess the system-wide consequences of these actions.

The shocks in the scenario incorporate many elements from recent market events. For example, comparing the SWES scenario to the largest 10-day movement in recent stresses:

• UK Government borrowing costs increase very sharply as yields on ten-year nominal gilts increase by 115 basis points, similar to the move seen during the Liability Driven Investment (LDI) episode.
• Sterling investment-grade corporate borrowing costs also sharply increase by around 130 basis points, as much as seen during the March 2020 dash for cash.
• Sovereign yields across many countries increase abruptly. For example, the rise in ten-year US Treasury note yields is on a par with the most severe seen since 2000, of around 75 basis points.

SWES participants are considering the scenario and will be submitting their responses to it in January 2024. The second round of the scenario phase, which will reflect the actions that the participants take in the first round, will be launched in Q2 2024. The BoE expects to publish a final report on the SWES by end 2024.

On November 30 2023, the Financial Conduct Authority (FCA) published a statement on communications in relation to Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) and Undertakings for the Collective Investment in Transferable Securities (UCITS).

This statement relates to concerns raised about costs and charges disclosure in the PRIIPs Key Information Document (KID), the UCITS Key Investor Information Document (KIID) and Markets in Financial Instruments Directive (MiFID II) requirements. It sets out our interim measure, pending broader reform possible through legislative change, to provide for some disaggregation of costs and charges disclosure. These actions should give investment companies greater ability to explain their costs and charges to help consumers make better informed investment decisions.

The FCA understands some firms are concerned that, for a minority of investment products, the required costs and charges disclosure may not result in representative cost information being published.

Specifically, this concern has been raised in the context of listed closed-ended funds. These are pooled investments but are also bodies corporate and so have some features of companies as well as of funds. This can affect their cost base, as some costs incurred by listed closed-ended funds can in some cases be equivalent to costs incurred by commercial companies. Commercial companies are not subject to these costs and charges disclosure requirements.   

Further concerns have been expressed about how the costs that listed closed-ended funds are required to disclose are then aggregated into other products, such as multi-asset funds that may invest in them. 

As part of the Treasury’s Smarter Regulatory Framework (SRF), retained EU law (REUL) will be replaced with firm-facing rules set by the FCA. Consumer disclosure for investment products is a priority area, and the repeal of PRIIPs has been prioritised by government in the SRF process. The Treasury issued draft legislation on the repeal and replacement of the PRIIPs regulation in November 2023.

As set out above, the current cost disclosure requirements are set out in legislation, in REUL. This limits the FCA’s ability to disapply the current rules or make changes until the relevant requirements are transferred to us through legislation. However, the FCA wants to ensure the best possible transparency to consumers within that context and take account of the concerns raised. 

Work on longer-term reforms is underway. Until that longer-term work has been finalised, where listed closed ended funds and funds that invest in them (or manufacturers of such funds) are concerned that the costs required to be disclosed in key information documents do not appropriately reflect the ongoing costs, they can provide additional factual information (as well as the aggregated figure) such as the breakdown of costs to put the aggregate number in context. For example, a listed closed ended fund may give a better explanation of costs that are clearly corporate costs. As a result, a fund of fund might seek to explain how its own aggregate figure is affected by the investment company’s cost.

The aim of this forbearance statement is to give greater flexibility for costs to be explained, including putting aggregate costs in context – pending more substantive change which will be possible through legislation which will give the FCA power to change the rules more substantively.

On November 30 2023, the Financial Conduct Authority (FCA) published a press release on setting out abstention measures for investment company cost disclosure.

The FCA has set out temporary measures to give investment companies greater ability to explain their costs and charges to help consumers make better informed investment decisions.

The FCA is taking steps to address concerns that current disclosure obligations are producing unhelpful cost information for consumers.    

To support better cost disclosure, the FCA will allow funds to provide a factual breakdown of the component parts of their costs. 

This will enable funds to provide additional context where they are concerned that the aggregate figure currently required by legislation does not accurately reflect ongoing costs.  

This measure is not intended as a long-term solution but is a step towards wider reform.   

Investment companies, and funds that invest in investment companies, can also consider how they reflect this additional information in their wider disclosure documents. The FCA also expects firms to consider their obligations under the Consumer Duty. 

These changes support our objectives under the Consumer Duty, that consumers receive the information they need, at the right time, and presented in a way that they understand.

On November 22 2023, the UK Government published a policy note and draft Statutory Instrument (SI) on UK Retail Disclosure Framework.

On December 9 2022, as part of the Edinburgh Reforms, the government committed to repealing and replacing the EU-inherited Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation as a matter of priority and issued a consultation on a proposed replacement framework.

On July 11 2023, the Government published its consultation response, confirming the Government’s intention to entirely remove from legislation all firm-facing retail disclosure requirements and ensure the FCA can deliver a new UK retail disclosure framework for consumer composite investments which is tailored to the UK. This draft SI, alongside an accompanying explanatory policy note, explains the government’s approach to establishing a new legislative framework for UK retail disclosure, and will facilitate the delivery of new FCA rules to replace PRIIPs.

The Government welcomes any technical comments on the draft SI by January 10 2024.

On November 16 2023, the Financial Conduct Authority (FCA) published the results of its multi-firm review which tested how authorised fund managers (AFMs) are embedding the ‘Guiding Principles’, which were set out in a Dear Chair letter in July 2021, for ESG and sustainable investment funds.

The FCA has published the review ahead of its final rules and guidance on Sustainability Disclosure Requirements (SDR) and investment labels regime.

In its review the FCA found that, while most AFMs have made efforts to comply with the FCA’s expectations on the design, delivery and disclosure of their ESG and sustainable funds, further improvement is needed, particularly around the disclosure and clarity of information being given to retail investors and consumers.

The FCA also found other examples of poor practice including:

• Products were inconsistently aligned with their ESG and sustainability goals even if they referenced them in their name.
• In some instances, fund holdings appeared inconsistent with a fund’s ESG or sustainability objectives, and some AFMs were not able to explain how these investments fit with their goals.
• Key ESG and sustainability information was often not explained, put into context or included in disclosures, meaning relevant information was not immediately or clearly accessible to investors.
• The design of AFMs’ stewardship approaches did not meet the FCA’s expectations. It was often difficult to identify the exact aim of the stewardship activities, how the activities were aligned to fund objectives, and examples of the progress they made against those aims.

Examples of good practice identified included the development and use of appropriate ESG and sustainability scoring systems and benchmarks, and AFMs conducting thorough due diligence on third party data providers.

The FCA noted that embedding the Guiding Principles and the good practice identified in its review will help firms to comply with proposed new requirements under the SDR and investment labels rules, alongside their Consumer Duty obligations. It expects boards to take the lead in monitoring and ensuring firms make any changes required to further enhance sustainability disclosures and practices and will continue to monitor the market to make sure firms and the investment products they provide to the market meet its expectations.

On November 28 2023, the Financial Conduct Authority (FCA) published final measures on Sustainability Disclosure Requirements (SDR) and investment labels.

The measures are intended to help consumers navigate the market for sustainable investment products, by improving the trust and transparency of such products and minimising greenwashing.

The FCA’s Policy Statement PS23/16 contains the final package of measures:

• An anti-greenwashing rule for all FCA authorised firms to reinforce that sustainability-related claims must be fair, clear and not misleading;
• Four labels to help consumers navigate the investment product landscape and enhance consumer trust;
• Naming and marketing rules for investment products, to ensure the use of sustainability-related terms is accurate;
• Consumer-facing information to provide consumers with better, more accessible information to help them understand the key sustainability features of a product;
• Detailed information in pre-contractual, ongoing product-level, and entity-level disclosures, targeted at institutional investors and consumers seeking more information;
• Requirements for distributors to ensure that product-level information (including the labels) is made available to consumers;

The anti-greenwashing rule applies to all FCA-authorised firms who make sustainability-related claims about their products and services. The investment labels, disclosure, and naming and marketing rules apply to UK asset managers. The FCA has also introduced targeted rules for the distributors of investment products to retail investors in the UK.

The anti-greenwashing rule will come into effect from May 31 2024, and firms can use the investment labels from July 31 2024. The naming and marketing rules for asset managers come into effect from December 2 2024.

On November 28 2023, the Financial Conduct Authority (FCA) published a consultation on guidance on anti-greenwashing rule.

The FCA is consulting on new guidance on the expectations for FCA-authorised firms making claims about the sustainability of a product or service.

Consumers are increasingly demanding more sustainable products and services. As a result, there has been a growing number of products and services which claim to meet that demand. As this demand continues to grow, so does the risk of “greenwashing” as there are concerns that some of these claims may be exaggerated and misleading. All sustainability-related claims made by FCA-authorised firms about their products and services must be fair, clear and not misleading, as our anti-greenwashing rule sets out.

This proposed guidance is designed to help firms better understand our expectations under the anti-greenwashing rule and other existing, associated requirements.

The consultation closes on January 26 2024.

On November 16 2023, the International Organization of Securities Commissions (IOSCO) published a final report on policy recommendations for the regulation of crypto and digital assets. 

The recommendations are principles-based and outcomes-focused and are aimed at the activities performed by crypto-asset service providers (CASPs). In line with IOSCO’s established approach for financial market regulation, the recommendations are addressed to relevant authorities. They look to support jurisdictions seeking to establish compliant markets for the trading of crypto-assets in the most effective way possible.

The recommendations cover six key areas, consistent with the IOSCO Objectives and Principles for Securities Regulation and relevant supporting IOSCO standards, recommendations, and good practices:

• Conflicts of interest arising from vertical integration of activities and functions.
• Market manipulation, insider trading and fraud.
• Custody and client asset protection.
• Cross-border risks and regulatory cooperation.
• Operational and technological risk.
• Retail distribution.

IOSCO separately consulted on proposed policy recommendations for ‘decentralised finance’ or ‘DeFi’ on September 7 2023, which will be finalised by the end of 2023. At that time, IOSCO will also publish an umbrella note explaining in more detail the interoperability between the two sets of recommendations.