A roundup of recent regulatory developments in the EU and UK. To receive daily updates on regulatory developments subscribe to our blog, Regulationtomorrow.com
|ESMA consults on potential CFD and binary options measures to protect retail investors||18.01.2018||The European Securities and Markets Authority (ESMA) publishes a call for evidence on potential product intervention measures relating to the provision of contracts for difference (CFDs), including rolling spot forex and binary options to retail investors. In relation to CFDs, ESMA is considering restricting the marketing, distribution or sale to retail clients of CFDs, including rolling spot forex. ESMA states that the option of applying the restrictions to professional clients is not under consideration due to the lack of evidence of harm to this type of client. The deadline for comments on the call for evidence was 5 February 2018.|
|Commission Delegated Regulations supplementing the Benchmarks Regulation published in OJ||17.01.2018||The following Commission Delegated Acts are published in the Official Journal of the EU (OJ):
|Commission Roadmap – Delegated Act on MMF Regulation||16.01.2018||The European Commission (Commission) publishes a Roadmap on the Delegated Act on the Money Market Funds (MMF) Regulation, specifying quantitative and qualitative liquidity requirements applicable to assets received as part of a reverse repurchase agreement and on credit quality assessment. The deadline for feedback on the Roadmap was 12 February 2018.|
|ISDA updates Brexit FAQs||10.01.2018||
The International Swaps and Derivatives Association (ISDA) updates its publicly available FAQs on Brexit which covers the following key areas:
|FCA Dear CEO letter to providers and distributers of CFDs||09.01.2018||The FCA publishes a Dear CEO letter to providers and distributers of CFD products. The Dear CEO letter summarises the findings of an FCA review of 19 firms that provide CFDs to intermediaries which in turn distribute this product to retail consumers on either an advisory or discretionary basis. Overall, the FCA observed that CFD providers and distributors may be failing to conduct their activities in accordance with the Principles for Businesses, the client’s best interests rule (COBS 2.1.1R) and the Senior Management Arrangements, Systems and Controls sourcebook.|
|AFME due diligence questionnaire to further standardise process for global custodians||08.01.2018||The Association for Financial Markets in Europe publishes a revised version of its Due Diligence Questionnaire (DDQ) which harmonises and simplifies the process of completing questionnaires for global custodians.|
|IOSCO statement on the use of financial benchmarks||05.01.2018||The International Organization of Securities Commissions (IOSCO) publishes a statement setting out matters for users of financial benchmarks to consider in selecting an appropriate benchmark and in contingency planning, particularly for scenarios in which a benchmark is no longer available.|
|FMLC paper on Brexit and impact of WTO rules on financial services||22.12.2017||The Financial Markets Law Committee publishes a paper on the potential impact of Brexit and World Trade Organisation (WTO) rules on financial services. The paper examines the future of the UK’s cross-border trade with the EU and the potential impact of the WTO rules.|
|Revised versions of JMLSG AML and CFT guidance||21.12.2017||The Joint Money Laundering Steering Group (JMLSG) publishes revised versions of its anti-money laundering (AML) and counter-terrorist financing (CTF) guidance.|
|FCA updates documents on reporting transparency information under AIFMD||20.12.2017||
The FCA publishes an updated version of its Q&A document on reporting transparency information to the FCA. The document provides information to alternative investment fund managers about:
Commission adopts legislative proposals for revised EU prudential framework for investment firms
|20.12.2017||The Commission publishes legislative proposals that revise the EU prudential regime for investment firms. Under the legislative proposals EU investment firms would be classified into one of three categories for prudential purposes:
The minimum capital requirement for class 2 investment firms would be set either as for class 3 investment firms, or according to a new ‘K-factor’ approach for measuring their risks, whichever is higher. The K-factors specifically target the services and business practices that are most likely to generate risks to the firm, to its customers and to counterparties. They set capital requirements according to the volume of each activity.
Revised governance and remuneration requirements will also apply to class 2 and 3 investment firms.
The provisions in MiFIR on assessing the equivalence of a third country’s regulatory framework are adjusted in light of the proposals.
The legislative proposals are being discussed by the European Parliament and the Council of the EU. Once adopted, an implementation period of 18 months is envisaged before the new regime starts to apply.
|FCA feedback statement on distributed ledger technology||15.12.2017||The FCA publishes Distributed ledger technology: Feedback statement on DP17/03. The FC14 states that nearly all respondents to its earlier Discussion Paper feel that these is generally no substancial barriers to adopting distributed ledger technology under existing FCA rules.|
|PFOF – priority area of FCA supervisory focus||13.12.2017||The FCA publishes a Dear CEO letter on payment for order flow (PFOF). In the Dear CEO letter, the FCA reiterates that firms that continue to charge PFOF will breach the new standards implemented in MiFID II, reminding firms that they must take action to ensure compliance and warn against any attempted models that seek to avoid these rules.|
|The Duty of Responsibility for FCA solo-regulated firms||13.12.2017||The FCA publishes Consultation Paper 17/42: The duty of responsibility for insurers and FCA solo-regulated firms (CP17/42). In CP17/42 the FCA consults on extending the duty of responsibility (that already applies to firms currently subject to the Senior Managers & Certification Regime (SM&CR)) to FCA solo-regulated firms and insurance and reinsurance firms. The deadline for comments on CP17/42 is 21 February 2018.|
|FCA consultation paper on transitioning FCA firms and individuals to the SM&CR||13.12.2017||The FCA publishes Consultation Paper 17/40: Individual Accountability: Transitioning FCA firms and individuals to the SM&CR (CP17/40). In CP17/40, the FCA consults on the operational aspects of extending the SM&CR to FCA solo-regulated firms, including how firms would transition from the approved persons regime to the SM&CR.
The deadline for comments on CP17/40 is 21 February 2018.
|FCA consultations on approach to consumers, competition and authorisation||11.12.2017||The FCA publishes the following documents that are linked to its Mission 2017:
|Commission and UK Government report on phase 1 of the Brexit negotiations||08.12.2017||The Commission and the UK Government jointly publish a report on the progress of phase 1 of the Brexit negotiations. The Commission is satisfied that sufficient progress had been made to allow the negotiations to move onto phase 2 dealing with the EU/UK future trading relationship.|
|The UK’s Investment Management Strategy II||06.12.2017||The HM Treasury publishes the UK’s Investment Management Strategy II. The report sets out the Government’s long-term strategy, to be delivered in collaboration with the industry, to ensure that the UK remains a globally competitive location for asset management.|
|Commission adopts Delegated Regulation supplementing ELTIF Regulation||04.12.2017||The Commission adopts a Delegated Regulation supplementing the Regulation on European long-term investment funds. The Council of the EU and the European Parliament will now consider the Delegated Regulation. If neither objects, the Delegated Regulation enters into force on the twentieth day following that of its publication in the OJ.|
|GLEIF published Entity Legal Forms Code List||30.11.2017||The Global Legal Entity Identifier Foundation (GLEIF) publishes the ‘Entity Legal Forms Code List’. The list covers more than 1,600 entity legal forms across more than 50 jurisdictions. The GLEIF will publish updated versions of the list periodically.|
|IOSCO reports on fourth hedge fund survey||23.11.2017||IOSCO publishes its latest biannual Hedge Fund Survey report. Among other things, the report makes the following observations:
|IOSCO final report on good practices for termination of investment funds||23.11.2017||IOSCO publishes a report setting out good practices on the voluntary termination of collective investment schemes and other fund structures such as commodity, real estate and hedge funds.|
|ESMA updates Q&As on MAR||21.11.2017||
ESMA publishes an updated version of its Q&As on the Market Abuse Regulation (MAR). ESMA added answers on the following questions:
|ESMA final report on MMF Regulation||17.11.2017||ESMA publishes a final report containing its technical advice, draft implementing technical standards (ITS) and guidelines under the MMF Regulation. With respect to the ITS on the establishment of a reporting template and the timing of implementation of the corresponding data base, ESMA confirms that managers would need to send their first quarterly reports mentioned in Article 37 to national competent authorities (NCAs) in October / November 2019.|
|FCA speech on effective compliance with MAR||14.11.2017||The FCA publishes a speech given by Julia Hoggett (Director of Market Oversight, FCA). The speech is entitled ‘Effective compliance with MAR – a state of mind’. Among other things, the FCA notes that it expects firms to ensure that their systems are in constant evolution to meet the changing nature and needs of the businesses within which they operate.|
|Public consultation on institutional investors and asset managers’ duties regarding sustainability||13.11.2017||The Commission issues a consultation document seeking information on how asset managers and institutional investors could include environmental, social and governance factors when taking decisions. The deadline for comments on the consultation document was 22 January 2018. The Commission will adopt an Action Plan on sustainable finance in Q1 2018.|
|ESMA highlights ICO risks for investors and firms||13.11.2017||ESMA issues two statements on initial coin offerings (ICOs), one on the risks of ICOs for investors and one on the rules applicable to firms involved in ICOs.|
Official Journal: Regulation amending EuVECA Regulation and EuSEF Regulation
|10.11.2017||There is published in OJ, Regulation (EU) 2017/1991 of the European Parliament and of the Council of 25 October 2017 amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds. The Regulation applies from 1 March 2018.|
FCA Market Watch issue 54
|07.11.2017||The FCA publishes Market Watch 54. In this issue of Market Watch, the FCA focusses on the MiFID II LEI.|
FCA publishes Future Approach to Consumers
|06.11.2017||The FCA publishes its ‘Approach to Consumers’ paper which explores its approach to regulating retail consumers. The paper sets out the FCA’s initial views on what good looks like for all retail consumers, and aims to clearly explain how the regulator will work to diagnose and remedy actual and potential harm, giving more certainty about its framework.|
FSB considers financial stability implications of artificial intelligence and machine learning
|01.11.2017||The Financial Stability Board (FSB) publishes a report that considers the financial stability implications of the growing use of artificial intelligence (AI) and machine learning in financial services. Overall, the FSB finds that AI and machine learning applications show substantial promise if their specific risks are properly managed.|
|MiFID II: EU issues guidance on obtaining brokerage and research services from non-EU brokers||26.10.2017||
The Commission issues FAQs in order to clarify how EU investment firms should interact when they seek out brokerage and research services from broker-dealers in non-EU countries.
How will latest changes to Volcker Rule affect non-US banks?
Kathleen A. Scott discusses the final Volcker Rule, focusing on some of the issues raised by non-US banks in their comments.