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EU Regulatory Update



ESMA Publishes Statement on No-Deal Brexit Contingency Planning

On 28 March, the European Securities and Markets Authority (“ESMA”) published a statement on its preparations for a possible no-deal Brexit on 12 April 2019.  The statement clarifies that references to a possible no-deal Brexit on 29 March 2019 in previous measures and public statements issued by ESMA should now be read as references to 12 April 2019, in light of the European Council’s agreement to extend the Article 50 deadline.  The statement addresses measures related to clearing and settlement, counterparties to uncleared over-the-counter (“OTC”) derivatives, and ESMA’s databases and IT systems.

European System of Financial Supervision Omnibus Proposal

On 29 March, the Council of the EU published compromise texts on the European Commission’s omnibus proposal to review the European System of Financial Supervision (“ESFS”).  The proposal aims to strengthen the ESFS and improve the mandates, governance and funding of the European Banking Authority (“EBA”), ESMA, the European Insurance and Occupational Pensions Authority (“EIOPA”) and the European Systemic Risk Board (“ESRB”) and includes:

o    A proposal for a regulation amending Regulation (EU) No 1092/2010 on EU macroprudential oversight of the financial system and establishing the ESRB;

o    A proposal for a directive amending Directive 2014/65/EU on markets in financial instruments (“MiFID”) and Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance (“Solvency II”); and

o    A proposal for a regulation to amend the regulations establishing the European Supervisory Authorities (“ESAs”) and other financial markets regulations.

The agreed texts of the proposals aim to improve the existing system for supervisory convergence by building on existing tools such as peer reviews, guidelines and Q&A documents.  The proposals also resolve to: (i) review the ESAs’ governance structure; (ii) preserve the existing funding scheme for ESAs; (iii) review the powers of each of the ESAs; and (iv) strengthen the role and powers of the EBA with respect to anti-money laundering supervision.  The Council of the EU invited the EU Committee of Permanent Representatives (“COREPER”) to approve the final compromise texts, with a view to reaching an agreement at first reading with the European Parliament (currently scheduled for April 16, 2019).

COREPER Agrees Position on Proposal for Enforcement of EU Consumer Protection Rules

On 1 March, the COREPER agreed to the Council of the EU’s position on the European Commission’s proposal for a Directive (2018/0090(COD)) on better enforcement and modernisation of EU consumer protection rules.  The proposed directive would amend the Unfair Contract Terms Directive (93/13/EEC), the Unfair Commercial Practices Directive (2005/29/EC) and the Consumer Rights Directive (2011/83/EU) and was proposed as part a “New Deal for Consumers” launched by the European Commission in 2017.  Among other things, the proposal provides for a right to individual remedies for consumers when they are harmed by unfair commercial practices, introduces transparency requirements for online marketplaces, and encourages the enhanced harmonisation of rules on penalties for the Directives.  With respect to the latter, COREPER agreed that “[i]t should remain a matter for the Member States to choose the type of penalties to be imposed” and the procedures for imposing penalties. The Presidency of the European Council will explore with European Parliament the possibility of agreeing to adopt the proposal at first reading (currently scheduled for 15 April 2019).

European Commission Publishes Staff Working Document on the Movement of Capital and the Freedom of Payments

On 27 February, the European Commission published a staff working document on the movement of capital and the freedom of payments.  The first part of the report reviews global and EU capital flows in 2017 and the first half of 2018, as well as related economic developments.  The second part of the report sets out the legal framework underlying the free movement of capital and payments, details recent policy initiatives and important challenges, and reviews relevant global developments.  The report found that “[g]lobal and EU capital flows moderated compared to the previous decade, although they remain much higher now than in the immediate aftermath of the financial crisis” and notes that “[f]rom a forward-looking perspective, downside risks seem to be higher than the upside risks.”


ESMA Publishes First Annual Report on Supervisory Sanctions Under UCITS

On 4 April, ESMA published its first annual report on supervisory sanctions imposed by national competent authorities (“NCAs”) under the Undertakings in Collective Investments in Transferable Securities (“UCITS”) Directive (EU) 2009/65.  The report provides aggregate data regarding the penalties and measures issued by NCAs under the UCITS Directive in 2016 and 2017.  ESMA noted in the report that the data “do[] not allow [ESMA] to observe clear trends or tendencies in the imposition of sanctions, nor to produce detailed statistics based on it.”

Council of the EU Publishes Compromise Texts Regarding Prudential Treatment of Investment Firms

On 19 March, the Council of the EU published compromise proposals regarding: (i) the Investment Firms Regulation (“IFR”) (2017/0359 (COD)), which is the European Commission’s proposal for a regulation on the prudential requirements of investment firms and amending the Capital Requirements Regulation (EU) 575/2013 (“CRR”), the Markets in Financial Instruments Regulation (EU) 600/2014 (“MiFIR”), and Regulation (EU) 1093/2010 establishing the EBA; and (ii) the Investment Firms Directive (“IFD”) (2017/0358 (COD)), which is the Commission’s proposal for a directive on the prudential supervision of investment firms and amending the Capital Requirements Directive (2013/36/EU) (“CRD IV”) and the Markets in Financial Instruments Directive (2016/65/EU) (“MiFID II”).  The Council of the EU and European Parliament previously reached a political agreement regarding the proposals on 26 February 2019.  The proposals would strengthen the equivalence regime applicable to third-country investment firms, would grant additional powers to the European Commission and would allow for capital requirements to be tailored to a firm’s size, nature, and complexity.  An indicative plenary sitting date for the IFD and IFR has been set for 16 April 2019.

ESMA Publishes First Annual Statistical Report on AIFs

On 7 March, ESMA published its first annual statistical report on EU alternative investment funds (“AIFs”).  The report notes that, based on data reported to ESMA under the Alternative Investment Fund Managers Directive (“AIFMD”), the AIF industry had a total net asset value (“NAV”) of €4.9 trillion at the end of 2017.  According to the data, funds of funds account for 16% of the NAV, followed by real estate funds (11%), hedge funds (5%) and private equity funds (4%).  “Other AIFs” account for the residual amount (63%); ESMA intends to provide a more detailed analysis of underlying strategies and classification issues in the “Other AIFs” category in future editions of its annual report.  The report comprises articles on: (i) market monitoring, including a more detailed analysis of market structure and trends in EU AIF markets; and (ii) statistical models, focusing on key features and statistical evaluation of, and data-quality issues with, AIFMD data and including a preliminary overview of the AIFMD national private placement regime market.  The report also contains a statistical annex, which provides an overview of the full list of indicators and metrics monitored by ESMA.

Joint Committee of the ESAs Submits Draft RTS on PRIIPs KID

On 7 March, the ESAs submitted draft regulatory technical standards (“RTS”) for endorsement by the European Commission.  The draft RTS include a “quick-fix” amendment to Commission Delegated Regulation (EU) 2017/653 in order to align the Packaged Retail and Insurance-Based Investment Products (“PRIIPs”) key information document (“KID”) exemption with the date of the exemption established by amendments to Regulation (EU) 1286/2014 (the “PRIIPs Regulation”).  The exemption under the PRIIPs Regulation is currently valid until 31 December 2021, whereas the exemption under Commission Delegated Regulation (EU) 2017/653 will expire on 31 December 2019; the “quick-fix” amendment proposed by the ESAs would therefore extend the exemption until 31 December 2021.

ESMA Chair Delivers Speech on Priorities for Asset Management

On 6 March, ESMA Chair Steven Maijoor delivered a speech on ESMA’s priorities for the asset management community.  Mr. Maijoor’s speech focused on: (i) the results of ESMA’s first annual costs and performance report on retail investment products, particularly regarding how costs affect the value of an investment over time; (ii) “the importance of costs of investment products in the EU framework regulating investment services”; and (iii) the importance of cost disclosure in the context of the PRIIPs Regulation.  With respect to the latter, Chair Maijoor recalled that the ESAs “decided that it is not appropriate to propose substantive amendments to the PRIIPs Level 2 at this time” in their 8 February 2019 report on targeted amendments to the PRIIPs KID. He noted that the ESAs have instead “initiated work to conduct a broad review of the PRIIPs Delegated Regulation during 2019” and expect to hold a public consultation in the third quarter of 2019.

ESMA Advises European Commission on Disclosures Regarding Takeovers, Mergers and Divisions

On 29 March, ESMA published final technical advice on the minimum information content of documents describing a takeover, merger or division.  Under the Prospectus Regulation, “issuers may offer/admit securities in connection with takeovers, mergers or divisions without publishing a prospectus,” provided that a document is made available describing the transaction and its impact on the issuer.  The final report, which followed a consultation period in 2018, will form the basis for delegated acts to be adopted by the European Commission.

ESMA Clarifies Format for Risk Factor Disclosures in Prospectuses

On 29 March, ESMA published a report on guidelines regarding how NCAs should review risk factors, as required by the Prospectus Regulation.  The report provides an overview of the feedback received from stakeholders during ESMA’s public consultation, as well as ESMA’s responses to the various points raised during the consultation. ESMA’s guidelines on risk factors are provided as Annex II of the report.  The guidelines address issues concerning the specificity, materiality and quality of disclosures in the prospectus.

European Commission Publishes two Delegated Regulations on Prospectus Regulation

On 14 March, the European Commission published two Commission Delegated Regulations supplementing the Prospectus Regulation:

  • Commission Delegated Regulation (C(2019) 2020 final) (annex), which repeals Commission Regulation (EC) 809/2004 and establishes requirements for the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market; and 

  • Commission Delegated Regulation (C(2019) 2022 final) (annex), which repeals Commission Delegated Regulations (EU) 382/2014 and 2016/301 and establishes RTS on: (i) key information in the summary of a prospectus, (ii) the publication and classification of prospectuses, (iii) advertisements for securities, (iv) supplements to a prospectus, and (v) the notification portal used for passporting prospectuses.

ESMA Publishes Q&As on UCITS, AIFMD, Prospectus Regulation and PRIIPs KID

o    On 29 March, ESMA updated its Q&As regarding the application of Directive 2014/91/EU (“UCITS Directive V”).  The updated Q&As clarify obligations related to benchmark disclosures and past performance disclosures in the UCITS key investor information document (“KIID”).

o    On 29 March, ESMA updated its Q&As regarding application of the AIFMD to provide clarification on the calculation of leverage.

o    On 27 March, ESMA published a new Q&A document regarding Regulation (EU) 2017/1129  (“Prospectus Regulation”).  The Q&As provide clarification regarding: (i) the scope of the grandfathering of prospectuses approved under the national laws of Member States implementing Directive 2003/71/EC (“Prospectus Directive”); (ii) the applicability of the current level 3 guidance on the Prospectus Directive following entry into application of the Prospectus Regulation; and (iii) the process of updating the information included in registration documents and universal registration documents.

o    On 4 April, the ESAs published updated Q&As on the PRIIPs KID.  The updated document includes a new Q&A regarding: (i) what aspects should be considered by the PRIIP manufacturer when determining the recommended holding period of a PRIIP; and (ii) the form and name of “specific information on each underlying investment option,” as referred to in Article 14(1) of Commission Delegated Regulation (EU) 2017/653.


European Parliament Adopts Regulation Introducing PEPP

On 4 April, the European Parliament adopted the text of the Regulation introducing a Pan-European personal pension product (“PEPP”) (2017/0143 (COD)).  The PEPP aims to provide a simple alternative to personal pension products currently available in EU markets with standard features and transparent costs.  The proposed regulation introducing the PEPP also establishes rules regarding the information to be made available to investors, the advice to be furnished to investors, and provides for pan-European oversight by EIOPA.  On 4 April, EIOPA published a statement welcoming adoption of the regulation by European Parliament.  Once the Council of the EU has approved the adopted text, the regulation will be published into the Official Journal of the EU.

EIOPA Publishes Discussion Paper on Systemic Risk and Macroprudential Policy in Insurance

On 29 March, EIOPA published a discussion paper on systemic risk and macroprudential policy in the insurance sector.  EIOPA intends to turn the work into a specific policy proposal for additional macroprudential measures and tools as part of the review of Solvency II and is soliciting feedback from stakeholders.  EIOPA is considering, among other things: (i) tools to enhance reporting and monitoring, including capital and reserving-based tools, liquidity-based tools, exposure-based tools and pre-emptive planning tools; and (ii) intervention powers, including capital and reserving-based tools, liquidity-based tools and exposure-based tools.  The comment period closes 30 April 2019.

EIOPA Calls for Principles-Based Regulation of Cloud Computing

On 27 March, EIOPA published its report regarding the need for guidelines on the purchase of cloud computing services pursuant to the European Commission’s FinTech action plan.  The report notes that, while data suggest cloud computing is not extensively used by (re)insurance undertakings, it is increasingly being used by such undertakings as part of their wider digital transformation strategies.  EIOPA intends to prepare guidance on outsourcing to cloud service providers building on the EBA’s existing recommendations on outsourcing.  The guidelines will be drafted during the first half of 2019 before being issued for consultation.

EIOPA Publishes Report on Authorising and Licensing Approaches to InsurTech

On 27 March, EIOPA published a report on best practices on licensing requirements, peer-to-peer insurance and the principle of proportionality in the context of InsurTech.  The report highlights best practices for NCAs to support a systematic approach to InsurTech licensing requirements and a common application of the proportionality principle, which requires that NCAs consider proportionality when implementing the requirements laid down in the EU law and conduct supervision in a proportionate manner.  The report also presents a mapping of current approaches to Solvency II requirements for granting authorisation and licenses to InsurTech firms, including an assessment of how the principle of proportionality is applied in practice, and provides an analysis of the current approaches to InsurTech start-ups operating as peer-to-peer insurers.  With respect to licensing approaches, EIOPA concludes that there is no need for further regulatory steps at this stage, but NCAs should take steps to avoid divergent practices.

EIOPA Publishes Findings from Comparative Study on Market and Credit Risk in Internal Models

On 18 March, EIOPA published the findings of its comparative study of market and credit risk in internal models.  The study is based on year-end 2017 data from 19 participants that cover 98.5% of the Euro investments held by all insurance undertakings with an approved internal model covering market and credit risk in the European Economic Area (“EEA”).  The study found significant variations in asset model outputs, which EIOPA noted could be partly attributable to model and business specificities but may require “further supervisory scrutiny.”

EIOPA Requests Information from Insurance Undertakings on Solvency II

On 18 March, EIOPA requested that insurance undertakings in the European Economic Area (“EEA”) subject to Solvency II provide information on: (i) long-term guarantees (“LTG”) measures; (ii) the dynamic volatility adjustment; and (iii) long-term illiquid liabilities.  EIOPA solicited the information for its fourth LTG report due in 2019 and for the preparation of its opinion on the measures and the review of Solvency II due in 2020. 

European Commission Adopts Delegated Regulation on Solvency II

  • On 8 March, the European Commission adopted a Delegated Regulation amending Delegated Regulation (EU) 2015/35 supplementing Solvency II (annexes 1 to 12 and 13 to 16).  The Delegated Regulation lowers the capital requirements for insurers’ investments in equity and private debt, in line with one of the main objectives of the Capital Markets Union, which is to mobilise private sector investment particularly in small and medium enterprises.  The Delegated Regulation amends various aspects of the Solvency II implementing rules by introducing: (i) simplified calculations of capital requirements; (ii) improved alignment between insurance and banking prudential requirements; and (iii) updated principles and standard parameters to incorporate up-to-date data and developments in risk management. The amendments are now subject to a three-month scrutiny period by the European Parliament and Council of the EU.

  • On 12 March, Vice-President of the European Commission, Valdis Dombrovis, published a letter to the Chair of the European Parliament’s Economic and Monetary Affairs Committee (“ECON”), Roberto Gualtieri, responding to Mr. Gualtieri’s concerns related to the Delegated Regulation.  Mr. Dombrovis explained that, to address Mr. Gualtieri’s concerns, the Commission reduced the minimum holding period for long-term equity investments, sent requests to EIOPA regarding activation of the country component of the volatility adjustment, and determined not to adjust the cost-of-capital rate based on EIOPA’s assessment.



IOSCO Publishes 2019 Work Program

On 25 March, the International Organization of Securities Commissions (“IOSCO”) published its work program for 2019.  The program outlines IOSCO’s five priorities: (i) crypto-assets; (ii) artificial intelligence and machine learning; (iii) market fragmentation; (iv) passive investing and index providers; and (v) retail distribution and digitalization.

CPMI and IOSCO Publish Report on Implementation of Principles for FMIs

On 14 March, the Committee on Payments and Market Infrastructures (“CPMI”) and IOSCO published an update on the implementation of the principles for financial market infrastructures (“FMIs”).  The update comprises self-reported progress on the implementation of the principles for all FMI types for the level 1 assessment program and indicates that 23 of 28 jurisdictions have completed implementation measures for all FMI types.

Basel Committee and IOSCO Publish Statement on Final Implementation Phases of Margin Requirements for Non-Centrally-Cleared Derivatives

On 5 March, the Basel Committee on Banking Supervision (“BCBS”) and IOSCO published a statement with guidance to support the timely and smooth implementation of the framework for margin requirements for non-centrally-cleared derivatives.  The statement clarifies that amendments to legacy derivatives contracts made solely in response to interest rate benchmark reforms do not require application of margin requirements for the purposes of the BCBS/IOSCO framework.  The statement also sets expectations regarding the actions of covered entities when exposures approach the framework’s €50 million initial margin threshold.


European Parliament Adopts Text of Proposed Regulation on Carbon Benchmarks

On 27 March, the European Parliament voted at first reading to adopt the text of the proposal for a regulation amending the Benchmarks Regulation (EU) 2016/1011 (“BMR”) regarding low carbon benchmarks and positive impact benchmarks.  The Council of the EU and European Parliament previously announced a political agreement on the proposal on 25 February, and the Council of the EU invited COREPER to approve the compromise text on 11 March.  The proposal would: (i) create two new types of financial benchmarks, including EU climate transition benchmarks and EU Paris Agreement-aligned benchmarks; (ii) provide an obligation for all benchmarks or families of benchmarks to provide an explanation as to how environmental, social and governance (“ESG”) factors are reflected in their investment strategy, as well as how the methodology aligns with the target of reducing carbon emissions; and (iii) review existing provisions of BMR by providing an extension of the transition regime for critical and third-country benchmarks until the end of 2021.

EMMI Publishes Consultation Paper on Recommendations for the Transition from EONIA to €STR

On 20 March, the European Money Markets Institute (“EMMI”) published a consultation paper on the recommendations of the European Central Bank (“ECB”) working group on the transition from the Euro overnight index average (“EONIA”) to the Euro short-term rate (“€STR”) as the new Euro risk-free rate.  EMMI is soliciting feedback on recommendations regarding: (i) implementation of the recalibrated methodology for EONIA, whereby EONIA would be defined as €STR plus a spread; (ii) the continued publication of EONIA under the current methodology until €STR is published; (iii) the projected implementation date of the recalibrated methodology for EONIA (2 October 2019); and (iv) the market’s transition from EONIA to €STR following the discontinuation of EONIA on 3 January 2022.  The consultation period ends on 15 April 2019.

European Commission Publishes Draft Decisions on Equivalence of Singaporean and Australian Regimes for Financial Benchmarks

On 19 March, the European Commission published for comment draft decisions on the equivalence of the legal and supervisory framework applicable to benchmarks in Australia and Singapore for the purposes of Article 30 of BMR.  The consultation period on the draft equivalence decision for Australia ends on 16 April 2019; the period for Singapore ends on 19 April 2019.


Council of the EU Publishes Compromise Text on Sustainable Finance

On 22 March, the Council of the EU published the final compromise text of the proposal for a regulation on sustainability-related disclosures in the financial services sector.  The proposal would require financial market participants, investment firms, and insurance intermediaries and undertakings that advise on insurance-based investment products to integrate consideration of sustainability risks into investment decision-making or advisory processes and includes transparency rules regarding the sustainability impact of financial products or services.  The Council invited COREPER to approve the text and to confirm to ECON that, should the European Parliament adopt the proposal in its current form, the Council would approve Parliament’s decision.

European Parliament Agrees Position on Proposal to Establish Framework for Sustainable Investment

On 28 March, the European Parliament adopted its position on the proposal for a regulation on the establishment of a framework to facilitate sustainable investment.  The proposal aims to provide for the development of an EU-wide taxonomy for environmentally sustainable economic activities as part of the European Commission’s action plan on sustainable finance.  European Parliament agreed that the European Commission should: (i) establish calibrated technical screening criteria to prevent non-sustainable activities from being designated as environmentally sustainable; and (ii) conduct an impact assessment of the regulation by 2022.  On 11 March, the European Parliament’s Environment, Public Health and Food Safety Committee (“ENVI”) and ECON had voted jointly on a draft report regarding the proposal for a regulation, rejecting the inclusion of social safeguards in the proposal.  On 12 March, the European Commission invited the Council of the EU to reach an agreement on the proposal so that trilogue negotiations could begin; the Council of the EU has yet to adopt its position.

Council of the EU and European Parliament Reach Agreement on Disclosure Rules Relating to Sustainable Finance

On 7 March, the Council of the EU and the European Parliament reached a political agreement on the proposal for a regulation on disclosures relating to sustainable investments and sustainability risks and amending directive (EU) 2016/2341 on the activities and supervision of institutions for occupational retirement.  The proposal sets out how financial market participants and financial advisors must integrate ESG risks and opportunities in their processes, as part of their duty to act in the best interest of clients.  Specifically, the proposal would require firms such as asset managers and insurance companies to disclose: (i) procedures in place to integrate ESG risks into investment and advisory processes; (ii) the extent to which ESG risks might have an impact on the profitability of an investment; and (iii) information on how “green” investment strategies are implemented and the sustainability or climate impact of the firms’ products and portfolios.  The agreed measures are part of a series of legislative measures presented by the European Commission on 24 May 2018, which also comprise: (i) proposed rules for the creation of benchmarks for low-carbon investment strategies (agreed by the European Parliament and Council on 25 February 2019); and (ii) a proposal from the European Commission to establish an EU taxonomy of sustainable economic activities (for which an agreement is yet to be reached).  The disclosure rules are currently scheduled for plenary sitting on April 16, 2019.


ESMA Publishes Framework for EU-wide CCP Stress Test Exercise

On 3 April, ESMA published the methodological framework for its third EU-wide stress test of central counterparties (“CCPs”), as mandated by the European Market Infrastructure Regulation (EU) 648/2012 (“EMIR”).  For its third CCP stress test, ESMA has adopted a new component on concentration risk, which will be used to assess associated credit and liquidity risks.  ESMA Chair, Steven Maijoor, stated that ESMA added the new component on concentration risk to ensure stress tests are fit for the purpose of “identify[ing] emerging systemic risks related to CCPs and . . . weaknesses and potential spill-over effects.”  ESMA plans to publish its final report containing the results of its third stress test in the second quarter of 2020.

European Parliament Adopts Text on Framework for the Recovery and Resolution of CCPs

On 27 March, the European Parliament adopted at first reading the text of the proposal for a regulation on a framework for the recovery and resolution of CCPs and amending the Regulation establishing ESMA (EU) 1095/2010, EMIR, and the Securities Financing Transactions Regulation (EU) 2015/2365 (“SFTR”).  The proposal, which was originally published by the European Commission in November 2016 (COM(2016)0856), is part of a broader legislative effort to implement the G20’s post-crisis commitment to clear standardised OTC derivatives through CCPs.  The proposal, which aims to ensure that both CCPs and national authorities in the EU have the means to act decisively in a crisis scenario, would implement new rules to ensure that recovery plans are designed to allocate losses to stakeholders on the basis of the stakeholder’s responsibility or ability to mitigate risks and that CCPs’ critical functions are preserved to maintain financial stability.

ECB Withdraws Recommendation and Council of the EU Invites COREPER to Approve Texts Regarding Third-County CCPs

  • On 20 March, the ECB announced its decision to withdraw its recommendation for a decision of the European Parliament and the Council of the EU amending Article 22 of the statute of the European System of Central Banks (“ESCB”) and of the ECB regarding extension of the ECB’s legal competence over clearing and payment systems to CCPs.  The ECB communicated withdrawal of its recommendation in two letters from President of the ECB, Mario Draghi, to President of the European Parliament, Antonio Tajani, and to Minister Delegate for European Affairs, George Ciamba.  The ECB withdrew its recommendation because the draft amended text of Article 22, in its view, no longer meets “one of the overarching objectives of [its original] Recommendation . . .  namely, to ensure that the Eurosystem would have binding powers to monitor and assess risks posed by CCPs clearing significant amounts of euro-denominated transactions, regardless of their place of establishment.”  The ECB does not expect the withdrawal to prevent the adoption of proposed amendments to EMIR regarding enhancements to the regulatory framework for third-country CCPs.

  • On 18 and 19 March, the Council of the EU invited COREPER to approve the final compromise texts of: (i) the proposal for a regulation amending Regulation (EU) 1095/2010 establishing ESMA and amending EMIR, with respect to the procedures and authorities involved in the authorization of CCPs and regarding requirements for the recognition of third-country CCPs; and (ii) the European Parliament and Council of the EU’s joint decision to amend Article 22 of the statute of the ESCB and the ECB.  The Council of the EU also invited COREPER to confirm that the Presidency of the Council can indicate to European Parliament that it would approve Parliament’s position to adopt the compromise texts, should they be adopted at first reading.


ESMA Publishes Consultation Paper on Draft RTS Under the ELTIF Regulation

On 28 March, ESMA published a consultation paper regarding draft RTS under the European Long-Term Investment Fund (“ELTIF”) Regulation.  ESMA is soliciting input for its development of draft RTS to determine: (i) “the criteria for establishing the circumstances in which the use of financial derivative instruments solely serves hedging purposes”; (ii) “the circumstances in which the life of [an ELTIF] is considered sufficient in length”; (iii) “the criteria to be used for certain elements of the itemised schedule for the orderly disposal of the ELTIF assets”; and (iv) “the costs disclosure and the facilities available to retail investors.”  The consultation period closes on 29 June 2019.

ESMA Renews Restriction on Contracts for Differences Offered to Retail Investors

ON 27 March, ESMA agreed to renew its temporary restriction on the marketing, distribution or sale of contracts for differences (“CFDs”) to retail clients for a further three months from 1 May 2019.  The terms of the agreement are identical to its previous renewal decision that applied from 1 February 2019. 


EMIR Refit

  • On 28 March, ESMA published a public statement regarding implementation of the proposed Regulation amending EMIR (2017/0090 (COD)) (“EMIR Refit”).  The statement provides guidance to financial and non-financial counterparties on when they need to determine whether they would be subject to the clearing obligation under the new regime proposed by EMIR Refit, and when they would need to notify ESMA and any relevant competent authorities that they are subject to the obligation. 

  • On 1 March, the Council of the EU endorsed the compromise text on the EMIR Refit proposal and the text was subsequently confirmed by COREPER on 6 March 2019. Should the European Parliament adopt the text of the proposal in its current form, the Council of the EU is expected to adopt the proposed regulation. 

  • On 2 April, the procedure file for the EMIR Refit proposal was updated to show an indicative plenary sitting date of 18 April 2019.


ESMA Publishes Supervisory Briefing on Appropriateness and Execution-Only

On 4 April, ESMA published updates to its supervisory briefing on MiFID II appropriateness requirements.  The briefing was updated to take into account the new version of ESMA’s guidelines on suitability requirements (published on 28 May 2019).  The updated briefing includes provisions regarding: (i) determining situations where the appropriateness assessment is required; (ii) obtaining information from clients; (iii) assessment of appropriateness; (iv) warnings to clients; (v) qualifications of firm staff; and (vi) recordkeeping.

ESMA Publishes Updated Register of Derivatives to be Traded On-Venue Under MiFIR

On 4 April, ESMA updated the public register of derivative contracts subject to the trading obligation under MiFIR.  The register was updated to reflect the authorisation of an additional Dutch venue and the adoption of an equivalence decision for Singapore by the European Commission.

ESMA Publishes Results of LIS and SSTI Thresholds for Bonds

On 18 March, ESMA published its annual transparency calculations of the large in scale (“LIS”) and the size specific to the instruments (“SSTI”) thresholds for bonds under MiFID II and MiFIR; the publication had been delayed “due to the IT systems requiring more time than expected to complete the required calculations.”  The publication was originally expected to be published on 1 March 2019, in advance of the 30 April 2019 deadline provided by Commission delegated regulation (EU) 2017/583 (“RTS 2”) and as communicated by ESMA’s statement on the use of UK data in relation to the impact of a potential no-deal Brexit on 29 March 2019.  The application date of the transparency requirements was unaffected by the delay; they will apply from 1 June 2019 until 31 May 2020.

European Commission Adopts Delegated Regulation Exempting the People’s Bank of China from Pre- and Post-Trade Transparency Requirements

On 14 March, the European Commission adopted a delegated regulation (C(2019) 2802 final) amending Delegated Regulation (EU) 2017/1799 in order to grant an exemption to the Chinese central bank, the People’s Bank of China, from pre- and post-trade MiFIR transparency requirements.  The European Commission also published a complementary report, which concludes that it is appropriate to grant an exemption to the Chinese central bank in accordance with Article 1(9) of MiFIR. 

ESMA Includes MiFID II/MiFIR Level 2 and Level 3 measures in its Interactive Single Rulebook

On 14 March, ESMA updated its interactive single rulebook to include all level 2 and level 3 measures related to provisions of MiFID II and MiFIR.  ESMA’s interactive single rulebook aims to facilitate the consistent application of EU securities rules and its online tool provides an interactive version of key level 1 text under ESMA’s remit. 

ESMA Publishes Annual Transparency Calculation Results for Equity and Equity-Like Instruments

On 1 March 2019, ESMA published the annual transparency calculations for equity and equity-like instruments under MiFID II and MiFIR.  The calculations will apply from 1 April 2018 until 31 March 2020.


ESMA Publishes Updated Q&As on MiFID II/MiFIR and MAR

  • On 29 March, ESMA updated its Q&As regarding implementation of the Market Abuse Regulation 596/2014 (“MAR”).  The Q&As provide clarification regarding the scope of firms subject to the provision to detect and report suspicious orders and transactions and include detailed answers on the meaning of “parent” and “related” undertakings and the disclosure of insider information concerning emission allowances.

  • On 28 March, ESMA updated its Q&As on MiFID II and MiFIR topics regarding investor protection and intermediaries.  The new Q&As address issues concerning: (i) the provision of investment services by third-country firms; (ii) product governance; (iii) the suitability report; (iv) information on costs and charges; and (v) best execution.  ESMA also updated its Q&A on the presentation of product costs in the PRIIPs KID and included new and updated Q&As regarding use of the firm’s website as a “durable medium” for disclosure.

  • On 27 March, ESMA published updated Q&As on MiFID II and MiFIR commodity derivatives topics.  The updated Q&A provides clarification on issues related to position limits, position reporting and ancillary activity.

  • On 2 April, ESMA published updated Q&As on MiFID II and MiFIR transparency to provide clarification on issues related to: (i) the turnover to be used for the average value of transactions calculation; (ii) money market instruments; (iii) the “[i]mpact for systematic internalisers of an instrument changing liquidity status in between the systematic internaliser determination dates”; (iv) reporting of prime brokerage transaction; (v) the quoting obligation for systematic internalisers in non-equity financial instruments; (vi) branches of third-country firms operating as a systematic internaliser in the EU; and (vii) access by third-country trading venues to EU CCPs.

  • On 2 April, ESMA published updated Q&As on MiFID II and MiFIR market structures topics.  The Q&A document includes amendments to or deletions of four obsolete Q&As regarding: (i) the identification and authorisation of high frequency trading; (ii) timing of notification for transitional arrangements under Article 35(5) of MiFIR; (iii) timing and procedure of notification for temporary opt out under Article 36(5) of MiFIR; and (iv) timing of application for transitional arrangements under Article 54(2) of MiFIR.  The updated document also reflects the deletion of a Q&A regarding the tick size regime for non-EU instruments, following publication of Commission Delegated Regulation (EU) 2019/443 amending Delegated Regulation (EU) 2017/588 (“RTS 11”) in the Official Journal of the EU.


o    15 April: EMMI consultation on recommendations for EONIA ends.

o    16 April: European Commission consultation closes on draft equivalence decision for Australian benchmarks regime.

o    19 April: European Commission consultation closes on draft equivalence decision for Singaporean benchmarks regime.

o    30 April: Consultation closes for EIOPA discussion paper regarding systemic risk and macroprudential policy in insurance.

o    29 June: ESMA consultation closes on draft RTS under the ELTIF Regulation.

Ianthe Zabel
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