On 12 October 2020, the European Banking Authority (EBA) published the list of authorities designated as competent for the Anti-Money Laundering (AML) and Countering Terrorist Financing (CFT) supervision of financial institutions in the EU. 

On 23 October 2020, the European Banking Authority (EBA) published updated compliance table regarding the Guidelines on simplified and enhanced customer due diligence and the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions.

On 23 October 2020, the European Banking Authority (EBA) published Question ID: 2020_5348.

Question:

Is there the expectation that such consent clauses, under Article 4 of the Delegated Regulation, be incorporated into contracts on a go-forward basis from the date the Regulation entered into force (i.e. with new customers and existing customer contract renewals) or is there the expectation that all existing customer contracts will be remediated to meet this requirement? What approach should be used with former customers?

EBA Answer:

Article 8 of Directive (EU) 2015/849 (AMLD) requires obliged entities to put in place and maintain policies and procedures to identify, assess and manage the Money Laundering (ML)/Terrorist Financing (TF) risk to which they are exposed.  

ML/TF risk management is an ongoing process. Article 8 of the AMLD explicitly requires obliged entities' ML/TF risk assessments to be ‘kept up-to-date’. Further, Article 14(5) of the AMLD requires obliged entities to ‘apply the customer due diligence measures not only to all new customers but also at appropriate times to existing customers on a risk-sensitive basis’.  

Consequently, credit institutions and financial institutions should take steps to ensure that they comply with the legal AML/CFT obligations in relation to all business relationship, irrespective of when these business relationships commenced. When applying new AML/CFT controls to existing business relationships, credit institutions and financial institutions should take a risk-sensitive approach.  For example, by extending new AML/CFT controls to ‘higher risk’ business relationships in the first instance. 

Article 45 of the AMLD requires obliged entities that are part of a group to implement group-wide policies and procedures. These group-wide AML/CFT policies and procedures include policies and procedures for sharing information within the group for AML/CFT purposes. Sharing customer data within the group supports effective, ongoing ML/TF risk identification and management at the level of the group. It is also necessary to enable competent authorities effectively to supervise the group's compliance with the AMLD’s requirements.  

Article 4 of the Commission Delegated Regulation (EU) 2019/758  sets out  the requirements for credit institutions and financial institutions, that are part of a group, where a third country’s law limits the group's ability to access, process or exchange information related to customers of branches or majority-owned subsidiaries in the third country. This includes requiring customers and their beneficial owners to consent to their data being shared within the group.

In light of the considerations set out above, where the Delegated Regulation applies and where:

the credit institution or financial institution has established in line with Article 4(1)b of the Delegated Regulation that consent from the customer and/or beneficial owner can be used to legally overcome the restrictions or prohibition on sharing of customer data within the group, and
a credit institution or financial institution has a branch or majority-owned subsidiary in a third country jurisdiction whose laws do not permit the sharing or processing of customer data for AML/CFT purposes within the group, this branch or majority-owned subsidiary has a customer who was onboarded before Commission delegated regulation (EU) 2019/758 entered into force, and not required at the time of onboarding to give consent to their data being shared, the credit institution or financial institution has to take steps to amend the customer’s contract in line with the provisions in Article 4(1)(c) of the Delegated Regulation. Until then, the credit institution or financial institution should follow the steps set out in Article 4(2) of the Delegated Regulation.

On 23 October 2020, the European Banking Authority (EBA) published Question ID: 2020_5350.

Question:

Does the phrase “data related to their customers” under Article 6 of the Delegated Regulation refer to personal customer data (as defined by EU Regulation 2016/679) or general data for management purposes (e.g. descriptive statistics on the number of customers, customer risk distribution, etc.)?

EBA Answer:

Obliged entities are required to demonstrate to their home Anti Money Laundering (AML)/ Countering the Financing of Terrorism (CFT) supervisor that they comply with the requirements under the Directive (EU) 2015/849 (AMLD). These requirements include a legal duty, in Article 45 of the AMLD, to put in place and maintain group-wide AML/CFT policies and procedures where applicable. Group-wide AML/CFT policies and procedures include policies and procedures to share information within the group, to the extent that this is necessary to support effective, ongoing Money Laundering (ML)/Terrorist Financing (TF) risk identification and management at the level of the group, and enable competent authorities effectively to supervise the group's compliance with the AMLD’s requirements.

The Commission Delegated Regulation (EU) 2019/758 sets out the steps credit institutions and financial institutions have to take if they have branches or majority-owned subsidiaries in third countries whose laws do not permit the application of group-wide AML/CFT policies and procedures. Article 6 of the Delegated Regulation sets out the steps credit institutions and financial institutions must take if the third country’s law prohibits or restricts the transfer of data related to customers to an EU Member State for the purpose of AML/CFT supervision. These steps include obtaining aggregate information that is designed to support an understanding, by the credit institution or financial institution, of the ML/TF risk associated with the third country branch or majority-owned subsidiary’s customers and business and that can be shared with the home competent authority for AML/CFT supervision purposes upon request. They also include taking additional measures so that the credit institution or financial institution is satisfied that the branch or majority-owned subsidiary complies with group AML/CFT policies and procedures and effectively identified, assesses and mitigates ML/TF risk.

The term ‘data related to customers’ in Article 6 of the Delegated Regulation includes personal data as well as aggregate data on a third country branch’s or majority-owned subsidiary’s customers and business relationships. However, the minimum requirement in Article 6 (e) of the Delegated Regulation to make such data available to EU competent authorities upon request, extends only to information set out in Article 6(d) of that Regulation. This is because Article 6 covers the minimum information that competent authorities may need to access to assess how credit institutions and financial institutions that are part of a group comply with their obligations under Article 45 of the AMLD. Article 6 of the Regulation does not prevent the sharing of personal data for AML/CFT supervision purposes, beyond the minimum information required under Article 6, in situations where this is legally possible.

On 5 October 2020, the European Commission updated on Anti-money laundering directive IV (AMLD IV) transposition status, in particular:

• Partial transposition measures communicated: 4 Member States
• Full transposition measures communicated: 23 Member States
• Infringement proceedings are pending against 8 Member States.

On 28 October 2020, the European Union published an Opinion of the European Economic and Social Committee on ‘White paper on Artificial Intelligence — A European approach to excellence and trust’ in the Official Journal from rapporteur Catelijne MULLER.

The European Economic and Social Committee (EESC) congratulates the Commission for its strategy, laid out in the White Paper on Artificial Intelligence (AI), to encourage the uptake of AI technologies while also ensuring their compliance with European ethical norms, legal requirements and social values.

The EESC urges the Commission to also promote a new generation of AI systems that are knowledge-driven and reasoning-based, and that uphold human values and principles and calls for the Commission to: foster multidisciplinarity in research, involve relevant stakeholders in the debate around AI, keep educating and informing the broader public on the opportunities and challenges of AI.

Moreover, the EESC urges the Commission to consider in more depth the impact of AI on the full spectrum of fundamental rights and freedoms and asks for a continuous, systematic socio-technical approach. The EESC also recommends that the Commission draw up a list of common characteristics of AI applications or uses that are considered intrinsically high risk, irrespective of the sector.

The EESC strongly suggests that any use of biometric recognition only be allowed in limited cases as the widespread use of AI-driven biometric recognition for surveillance or to track, assess or categorise humans or human behaviour or emotions, should be prohibited. The EESC recommends that any use of biometric recognition only be allowed if there is a scientifically proven effect, in controlled environments, and under strict conditions.

Finally concerning the COVID-19 crisis, the EESC announces the AI techniques and approaches used to fight the pandemic should be robust, effective, transparent and explainable. They should also uphold human rights, ethical principles and existing legislation, and be fair, inclusive and voluntary.

The Committee concludes by announcing the mere focus of the White Paper on data-driven AI is too narrow to make the EU a true leader in cutting-edge, trustworthy and competitive AI. AI systems also comprise the socio-technical system around them. When considering AI governance and regulation, the focus should thus also be on the ambient social structures around it.

It should also be noted that legal definitions (for the purpose of governance and regulation) differ from pure scientific definitions, whereas a number of different requirements must be met, such as inclusiveness, preciseness, permanence, comprehensiveness, and practicability. The EESC continues to firmly oppose the introduction of any form of legal personality for AI.

On 1 October 2020, the European Securities and Markets Authority (ESMA) updates its statement on pending applications by EU administrators of benchmarks, including the information shared by National Competent Authorities with ESMA in relation to the applications for authorization and registration by EU administrators under Article 51.1 of BMR for which, as of 01.01.2020, the decision by the relevant competent authority is still pending. 

Under Article 51.3 of BMR EU supervised entities can continue to use existing benchmarks provided by the administrators included in the below list unless and until such authorization or registration is refused.

On 2 October 2020, the European Parliament published briefing on the review of the Benchmark Regulation.

Following the London Interbank Offered Rate (LIBOR) scandal in 2012, the European Commission proposed a regulation on indices used as benchmarks in financial instruments and financial contracts. The resulting Benchmark Regulation (Regulation (EU) 2016/1011) entered into force on 30 June 2016, and into application in January 2018. 

On 27 July 2017, the United Kingdom (UK) Financial Conduct Authority (FCA) announced its intention to phase out the London Interbank Offered Rate (LIBOR) by the end of 2021. As supervisor of the LIBOR, the FCA sought to allow for a smooth transition from this widely used benchmark to alternative reference rates. 

The European Commission adopted a proposal to amend the Benchmarks Regulation on 24 July 2020. The proposal's most important ambition is to regulate the replacement rate of a benchmark in cessation (in this case: LIBOR) and to avoid a legal vacuum. 

This amendment would empower the European Commission to designate, by an implementing act, a statutory replacement rate to replace the reference to the benchmark in cessation, if this cessation could result in significant disruption of financial markets in the Union.

On 7 October 2020, the Council of the EU adopted its position on amendments addressing LIBOR cessation.

The aim of the amendments is to create a framework that would allow a statutory replacement rate to be in place by the time a systemically important benchmark such as LIBOR is no longer in use. This will reduce legal uncertainty regarding legacy contracts and avoid risks to financial stability. The new rules will:

• give the Commission the power to designate a statutory replacement rate to take the place of all references to a benchmark whose cessation would result in significant disruption to the functioning of financial markets in the EU. When designating a statutory replacement rate, the Commission would have to take into account the recommendations made by dedicated working groups on replacement rates.
• ensure that EU benchmark users can for the time being continue to rely on third-country spot exchange rates to hedge exchange rate risk.
• take the view that the Commission's powers should apply to a broader range of contracts and financial instruments that reference a benchmark than is proposed by the Commission. The expanded scope includes both financial contracts and instruments that are subject to the law of an EU member state and certain third-country law contracts.
• provide for the possible statutory replacement of benchmarks that do have a fall-back provision for the cessation of a benchmark, but where the application of that clause would challenge financial stability and disrupt the market in a member state.
• take the view that the current rules allowing EU supervised entities to make use of third-country benchmarks should continue to apply until the end of 2025 and not 2021, thus allowing a smooth transition to a list of exempted benchmarks to be drawn up by the Commission.

On 1 October 2020, the European Commission sent the United Kingdom a letter of formal notice for breaching its obligations under the Withdrawal Agreement. This marks the beginning of a formal infringement process against the United Kingdom. It has one month to reply to today's letter.

Article 5 of the Withdrawal Agreement states that the European Union and the United Kingdom must take all appropriate measures to ensure the fulfilment of the obligations arising from the Withdrawal Agreement, and that they must refrain from any measures which could jeopardise the attainment of those objectives. Both parties are bound by the obligation to cooperate in good faith in carrying out the tasks stemming from the Withdrawal Agreement.

On 9 September 2020, the UK government tabled a Bill (‘United Kingdom Internal Market Bill') that, if adopted, would flagrantly violate the Protocol on Ireland / Northern Ireland, as it would allow the UK authorities to disregard the legal effect of the Protocol's substantive provisions under the Withdrawal Agreement. Representatives of the UK government have acknowledged this violation, stating that its purpose was to allow it to depart in a permanent way from the obligations stemming from the Protocol. The UK government has failed to withdraw the contentious parts of the Bill, despite requests by the European Union.

By doing so, the UK has breached its obligation to act in good faith, as set out in Article 5 of the Withdrawal Agreement. Furthermore, it has launched a process, which – if the Bill is adopted – would impede the implementation of the Withdrawal Agreement. As a result, the Commission has launched infringement proceedings today in line with the provisions of the Withdrawal Agreement.

The UK has until the end of this month to submit its observations to the letter of formal notice. After examining these observations, or if no observations have been submitted, the Commission may, if appropriate, decide to issue a Reasoned Opinion.

On 8 October 2020, the European Parliament published a Briefing on the Guidance by the EU supervisory and resolution authorities on Brexit.

This briefing gives an overview of the repercussions of the United Kingdom’s withdrawal from the EU on financial services, followed by thae most recent guidance from the ECB Banking Supervisor, the Single Resolution Board and the three European Supervisory Authorities: the European Banking Authority, the European Securities and Markets Authority; and the European Insurance and Occupational Pensions Authority. The work of the European Systemic Risk Board on Brexit is also highlighted.

BACKGROUND

In the context of the United Kingdom  leaving the European Union, the European Securities and Markets Authority (ESMA) wishes to remind market participants of the application of the EU trading obligation for shares (STO) as of 1 January 2021, i.e. after the end of the transition period provided for in the Withdrawal Agreement between the EU and the UK.

In an earlier statement published on 29 May 2019, ESMA has considered the impact of the UK leaving the EU without a withdrawal agreement (“no-deal Brexit”) on the STO under Article 23 of MiFIR in the absence of an equivalence decision in respect of the UK by the European Commission and provided guidance on the application of the EU STO in those circumstances. 

Since then, pursuant to the Withdrawal Agreement, the UK became a third country on 1 February 2020 and a transition period has been established, whereby EU law will cease to apply to and in the UK on 31 December 2020.

WHAT'S NEW?

On 26 October 2020, the European Securities and Markets Authority (ESMA) released a public statement that clarifies the application of the European Union’s (EU) trading obligation for shares (STO) following the end of the UK’s transition from the EU on 31 December 2020.

The statement outlines that the trading of shares with a European Economic Area (EEA) ISIN on a UK trading venue in UK pound sterling (GBP) by EU investment firms will not be subject to the EU STO. This currency approach supplements the EEA-ISIN approach outlined in a previous ESMA statement of May 2019.

This revised guidance aims at addressing the specific situation of the small number of EU issuers whose shares are mainly traded on UK trading venues in GPB. ESMA, based on EU-wide data, regards that such trading by EU investments firms occurs on a non-systematic, ad-hoc, irregular and infrequest basis. Therefore, those trades will not be subject to the EU STO, under Artcile 23 of MiFIR.

ESMA has done the maximum possible in close cooperation with the European Commission to minimise disruption and to avoid overlapping STO obligations and their potentially adverse effects for market participants. ESMA notes that the scope of the UK STO after the end of the transition period remains unclear at this stage.

WHAT'S NEXT?

The approach put forward by ESMA will effectively avoid such overlaps if the UK adopts an approach that does not include EEA ISINs under the UK STO. 

In the absence of an equivalence decision in respect of the UK, the potential adverse effects of the application of the STO after the end of the transition period are expected to be the same as in the no-deal Brexit scenario considered in the previous ESMA statement.

The application of the STO to shares with a different ISIN should continue to be determined taking into account the previous ESMA guidance published on 13 November 2017.

BACKGROUND

The European Parliament estimates that although most actions taken so far to achieve the CMU are moving in the right direction even though, multiple targets have not been reached, and the importance of bank lending as compared to equities has actually increased in recent years and much work remains to be done in terms of the convergence, precision, effectiveness and simplification of the measures adopted. An ambitious vision for the CMU project is essential to overcome national sensitivities and build the momentum to complete the CMU in order to make the EU an attractive market for foreign capital investment and to increase its competitiveness in global markets.

WHAT'S NEW?

On 8 October 2020, the European Parliament published adopted text for its resolution of 8 October 2020 on further development of the Capital Markets Union {CMU}: improving access to capital market finance, in particular by SMEs, and further enabling retail investor participation.

The Parliament remarks on following criteria:

• Financing business
• Promoting long-term and cross-border investments and financial products
• Market architecture 
• Retail investors
• Financial education 
• Digitalization and data 
• EU’s role in global markets

WHAT'S NEXT?

This resolution will be forwarded to the Council, the Commission, the ESAs and the European Central Bank.

On 23 October 2020, the European Commission published Commission Delegated Regulation (EU) …/... of 23.10.2020 amending Delegated Regulation (EU) 2018/1229 concerning the regulatory technical standards on settlement discipline, as regards its entry into force.

The proposed Commission Delegated Regulation postpones the entry into force of Commission Delegated Regulation (EU) 2018/1229 from 1 February 2021 to 1 February 2022.

On 2 October 2020, the European Commission published its Statement on consulting Member States on proposal to prolong and adjust State aid Temporary Framework .

The Commission has sent to Member States for consultation a draft proposal:

• to prolong at current limits existing provisions of the Temporary Framework (including for liquidity support) for an additional six months until 30 June 2021. 
• to extend the scope of the Temporary Framework, taking into account the continued economic uncertainty and the needs of businesses with significant turnover losses, by enabling Member States to contribute to the fixed costs of companies that are not covered by their revenues.
• to adapt the conditions for recapitalization measures under the Temporary Framework, in particular for the State's exit from enterprises where the State was an existing shareholder prior to the recapitalization.

On 6 October 2020, the European Banking Federation {EBF}, together with five other financial industry associations, has co-signed a letter calling attention to the impact of the Court of Justice of the European Union {CJEU} “Schrems II” ruling on the framework for international data transfers.

The letter notes the substantial legal uncertainty which companies currently face regarding the conditions under which Standard Contractual Clauses {SCCs} can be used for data transfers, especially to the US, and to the questions it has raised on all the available mechanisms under the GDPR to transfer personal data between EU and non-EU countries.

Warning against risks such as the fragmentation in the interpretation and enforcement of the judgement by national data protection authorities {DPAs}, the letter welcomes the European Data Protection Board’s {EDPB} work on guidance on additional measures companies can put in place alongside SCCs, and stress the need for a proportionate and risk based approach. The Annex of the letter includes specific recommendations for this upcoming Guidance.

The European Commission’s work on modernizing the SCCs is also welcome and the letter calls on the Commission to finalize their work, providing SCCs which take a risk based approach, provide for transfers in a variety of situations and relationships and are available for use as standalone tools.

BACKGROUND

The Parliament declared it wishes to set the groundwork for a future-oriented approach to rules concerning digital finance in the Union and to ensure that digital finance can continue to be an innovative driver of growth and jobs across the single market. The idea is to foster a common understanding of the key issues concerning digital finance and encourage the harmonisation of relevant provisions, which will lead to enhanced cross border activity and to increase data sharing in accordance with Union principles in order to stimulate innovation. 

The aim should be to facilitate access to public data across the Union. This would not only benefit digital finance companies, but would also be to the benefit of a number of other Union policy areas and increase market transparency.

WHAT'S NEW?

On 8 October 2020, the European Parliament published its adopted text for the resolution with recommendations to the Commission on Digital Finance: emerging risks in crypto-assets - regulatory and supervisory challenges in the area of financial services, institutions and markets.

The EP proposes the following actions:

• To put forward a legislative proposal for Crypto-Assets, which provides legal certainty for the treatment of Crypto-Assets while ensuring high standard of consumer and investor protection, market integrity and financial stability. Such a legislative proposal should:
  (a) provide guidance on the applicable regulatory, supervisory and prudential processes and treatment of crypto-assets; adopt specific rules on market transparency and integrity at least equivalent to those of MiFID II for issuers or sponsors of crypto-assets;
  (b) address the regulatory gaps in existing Union legislation as regards to cryptoassets, for example, classifying certain crypto-assets as ‘transferable securities’ under MiFID II to ensure they are treated in the same manner as other transferable securities;
  (c) create a bespoke regulatory regime for new and evolving crypto-asset activities, such as ICOs or IEOs, and any crypto-assets which do not fall under the existing regulatory framework, ensuring that they are regulated in a harmonized manner on the Union level;
  (d) address the environmental impact of crypto-mining and the need for solutions aimed at mitigating the ecological footprint of mainstream crypto-assets;
• To move towards stronger regulatory and supervisory convergence, with the aim of developing a common Union framework
• Based on an assessment, put forward a proposal for a common Union framework for a pan-European sandbox for digital financial services;
• To strengthen the application of the AML/CTF framework as regards crypto-assets and close the existing loopholes through, in particular.
• Ensure that the proliferation of digital finance leaves no-one behind
• To put forward a legislative proposal on cyber resilience
• To appoint a single European supervisor for oversight and registration of all relevant crypto-assets related activities with a cross-border element in the Union
• Calls on the Commission to consider undertaking a supervisory overview of ICT providers in the area of financial services which provide their services in the Union
• To work to develop Union standards in the area of cloud computing and outsourcing, while simultaneously working with international partners to develop international standards.

WHAT'S NEXT?

The European Parliament instrucs its President to forward this resolution and the accompanying recommendations to the Commission and the Council, and to the parliaments and governments of the Member States.

BACKGROUND

Where clients are undertaking tax planning, in many (if not most) circumstances, firms will not have sufficient knowledge to be regarded as “service provider” intermediaries under the DAC6 implementing legislation. However, while firms may or may not (depending on the circumstances) have reporting obligations in their own right, it is recognised that clients and/or their independent tax advisors will have further knowledge regarding any tax planning undertaken in relation to a particular transaction or arrangement and therefore may have their own reporting obligations under DAC6. Further, firms do not provide and are not authorized to provide tax advice to issuers and clients. To the extent issuers and clients require tax advice, they are strongly advised to consult their own independent advisors on any tax issues relating to their transactions.

It is in the interests all parties to these transactions that efficient, effective and common processes are established to facilitate DAC6 compliance in these circumstances.

WHAT'S NEW?

On 22 October 2020, the Association for Financial Markets in Europe (AFME) published a Guidelines on DAC6: Hallmark evaluation in certain capital markets transactions.

The AFME adopted the following principles:

1. Each participant in a potentially reportable transaction is responsible for its own compliance. This includes determining whether they are an intermediary or taxpayer responsible for reporting in the context of a particular arrangement and whether the arrangement in question is subject to reporting under DAC 6 as implemented in a relevant member state or jurisdiction.

2. Notwithstanding the first principle, in many common transactions that require the participation and cooperation of a number of firms and advisors, there is usually one or more “Primary Participants” that will generally be best placed among all of the parties involved to understand the totality of the circumstances.

3. In transactions where there is an identifiable Primary Participant, it would be efficient and effective for each Primary Participant to:

- instruct a qualified (external or internal) advisor to determine whether the relevant transaction – or arrangement of which the transaction forms a part – is reportable under the laws of the jurisdiction of the Primary Participant, and any other material participants or intermediaries to the arrangement. 

- On request, provide, to any other participants or service providers (“Ancillary Participants”) to the transaction or arrangement ,the name of the advisor, the conclusion reached by the advisor, and (if requested) a summary explanation of the reason why the advisor has reached that conclusion;

- If the advisor has determined that the transaction or arrangement of which the transaction forms a part is reportable,

i. file or instruct an advisor to file a report under DAC 6 as required in any relevant jurisdiction; and

ii. on request, provide each Ancillary Participant with the reporting reference number where such reference number is provided.

WHAT'S NEXT?

AFME reminds that stakeholders and entities must still comply with any relevant regulation or law. Market participants should make their own decisions based on appropriate professional advice.

Here are publications from the European Parliament on the European Crowdfunding Service Providers (ECSP) Regulation.

1. On 2 October 2020, the European Parliament published briefing paper concerning the regulation on crowdfunding.

As a step towards Capital Markets Union, the European Commission presented a proposal for a regulation on crowdfunding service providers in March 2018, to facilitate the cross-border offer of such financial services across the EU. It was accompanied by a proposal for a directive, to exempt those providers from the scope of the Markets in Financial Instruments Directive (MiFID II). The co-legislators reached a political agreement in December 2019, significantly modifying the Commission proposals. 

Parliament is expected to vote on the Council's positions at second reading during its October I plenary session.

2. On 5 October 2020, the European Parliament published its adopted text for the legislative resolution of 5 October 2020 on the Council position at first reading with a view to the adoption of a regulation of the European Parliament and of the Council on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937.

The Parliament:

1.  Approves the Council position at first reading;

2.  Notes that the act is adopted in accordance with the Council position;

3.  Instructs its President to sign the act with the President of the Council, in accordance with Article 297(1) of the Treaty on the Functioning of the European Union;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

3. On 5 October 2020, the European Parliament published its adopted text for the legislative resolution of 5 October 2020 on the Council position at first reading with a view to the adoption of a directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments. Particularly, the European Parliament:

1. Approves the Council position at first reading; 

2. Notes that the act is adopted in accordance with the Council position; 

3. Instructs its President to sign the act with the President of the Council, in accordance with Article 297(1) of the Treaty on the Functioning of the European Union;

4. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

On 13 October 2020, the European Securities and Markets Authority (ESMA) updated the public register for the clearing obligation under EMIR. 

In accordance with Article 6 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR), ESMA shall maintain a Public Register to inform market participants on the clearing obligation.

The details to be included in the Public Register are further specified in Article 8 of the Commission Delegated Regulation (EU) No 149/2013 of the European Parliament and of the Council of 19 December 2012 on inter alia the clearing obligation and the public register.

On 13 October 2020, the European Securities and Markets Authority (ESMA) updated the list of central counterparties authorised to offer services and activities in the Union. 

The document contains:

Table 1: List of CCPs that have been authorised to offer services and activities in the Union

Table 1 bis: List of CCPs that have been granted an extension of authorisation

Table 2: Classes of financial instruments covered by the CCP’s authorisation

Table 3: Definition of the classes of financial instruments covered by the CCP’s authorisation

BACKGROUND

EMIR mandates reporting of all derivatives to Trade Repositories (TRs). TRs centrally collect and maintain the records of all derivative contracts. They play a central role in enhancing the transparency of derivative markets and reducing risks to financial stability.

ESMA has developed detailed rules and guidance on reporting, registering, and accessing data.

The EMIR validation rules were last updated on 10 September 2020 and were supposed to apply from 1 February 2021.

WHAT'S NEW?

On 26 October 2020, the European Securities and Markets Authority (ESMA) postponed the applicability date of the updated EMIR validation rules.

The amended rules will apply five weeks later than originally planned due to technical issues related to their implementation in light of the UK’s withdrawal from the EU.

WHAT'S NEXT?

The updated EMIR validation rules will apply from 8 March 2021.

On 2 October 2020, the European Securities and Markets Authority (ESMA) published its 2021 Work Programme (WP),  setting out its priorities and areas of focus for the next 12 months in support of its mission to enhance investor protection and promote stable and orderly financial markets.

BACKGROUND

In view of the European Commission’s continuous efforts to forge Capital Markets Union (CMU), the European Commission  wished to seek views on how to achieve a more efficiently functioning EU AIF market as a part of a stable financial system.

WHAT'S NEW?

On 22 October 2020, the European Commission published consultation on the review of EU rules on alternative investment fund managers. 

This public consultation focuses on improving the utility of the AIFM passport and the overall competitiveness of the EU AIF industry. The questions in the section on authorisation/scope seek views from stakeholders on the scope of the AIFM licence, its potential extension to smaller AIFMs and level playing field concerns in relation to the regulation of other financial intermediaries, like MiFID firms, credit institutions or UCITS managers that provide similar services.

The investor protection section raises questions on investor access that take into account the differences between retail and professional investors. The issue of a level playing field is also covered in the section dedicated to international issues. The section dedicated to financial stability seeks stakeholder views on how to ensure NCAs and AIFMs have the tools necessary to effectively mitigate and deal with systemic risks. 

The rules on investment in private companies are examined with a view to potential improvements and comments are sought on the effectiveness of the current rules and their potential enhancement. The sustainability related section seeks input on how the alternative investment sector can participate effectively in the areas of responsible investing and the preservation of our planet. Questions are posed as regards the treatment of UCITS, particularly where a more coherent approach may be warranted.

WHAT'S NEXT?

Stakeholders are welcome to raise other AIFMD related issues and submit proposals on how to otherwise improve the AIFMD legal framework with regard to any issues not directly addressed in the consultation.

The consultation is open until 29 January 2021.

BACKGROUND

Article 24(2) MAR requires Member State competent authorities (NCAs) to provide ESMA with all necessary information to carry out its duties. Article 25 MAR requires NCAs to cooperate and exchange information with each other and with ESMA, with the Commission and with relevant national and third-country regulatory authorities responsible for related spot markets.

Commission Implementing Regulation (EU) 2018/292 has already established procedures and forms for the exchange of information and assistance between competent authorities pursuant to Article 25 of MAR.

WHAT'S NEW?

On 7 October 2020, the European Commission published Commission Implementing Regulation (EU) 2020/1406 of 2 October 2020 laying down implementing technical standards with regard to procedures and forms for exchange of information and cooperation between competent authorities, ESMA, the Commission and other entities under Articles 24(2) and 25 of Regulation (EU) No 596/2014 of the European Parliament and of the Council on market abuse.

The Regulation specifies the following aspects:

• Contact points
• Means of communication
• Requests for information or cooperation
• Acknowledgement of receipt 
• Reply to a request
• Procedures for processing pending requests
• Unsolicited cooperation or exchange of information
• Cooperation procedures
• Referral to ESMA under Article 25(7) 
• Restrictions and permissible uses of information.

The Implementing Regulation will enter into force on 27 October 2020.

WHAT'S NEXT?

It is expected that separate rules with regard to cooperation with third country regulatory authorities responsible for related spot markets will be established.

On 2 October 2020, the European Securities and Markets Authority (ESMA) announced an update of the validations of the technical instructions for reporting under the Money Market Funds Regulation (MMFR).

The proposed changes are not related to the published XML schemas. The changes only add new warning type validations or provide clarifications on existing validation rules in order to fix inconsistencies or ease the understanding of the rules.

As the updates in the validation rules have no effect on the data processing the deadline for the reporting announced earlier remain unchanged.

For the MMF Managers the time for submission of the first quarterly reports to the National Competent Authorities is still September 2020, when the MMF Managers will have to submit a report for both Q1 and Q2 reporting periods.

On 8 October 2020, the European Fund and Asset Management Association (EFAMA) published its second Market Insights highlighting the major trends shaping the European Money Market Fund (MMF) landscape since the entry into force of the Money Market Fund Regulation (MMFR). 

This new Market Insights shows that the stringent regulatory requirements imposed by the MMFR resulted in a 16% decline in the number of UCITS MMFs in the first quarter of 2019. This is  especially evident in smaller domiciles as the increased costs of complying with the MMFR were deemed too high. However, the total net assets in European MMFs were hardly affected, reflecting the importance European investors continue to place in European MMFs. 

The report also evaluates the impact of the pandemic-induced market stress on the gross sales and redemptions recorded by MMFs in the first half of 2020, as well as  their portfolio holdings and total net assets. Despite the unique liquidity challenges that affected the market for short-term instruments in March 2020, no European MMF was found to be in breach of its regulatory liquidity requirements and all MMFs were fully able to meet investor redemption requests. Whereas MMFs suffered a significant increase in redemptions, they also recorded a sharp increase in gross sales, as certain investors moved into MMFs, viewing these as safe, diversified assets that would protect them from the disruptions and volatility in the capital markets.  

BACKGROUND

The financial sector is the largest user of Information and Communication Technology (ICT) infrastructure in the world, accounting for about a fifth of all IT expenditure. The dependence on ICT and data raises new challenges in terms of operational resilience. The increasing level of digitalisation of financial services coupled with the presence of high value assets and data make the financial system vulnerable to operational incidents and cyber-attacks.

In order to preserve and build on this harmonised approach and implement international standards with a view to more effectively address operational resilience and in particular the ICT risks in the financial sector, it is essential that financial supervisors work in a harmonised and convergent manner across Member States and across different parts of the financial sector.

In April 2019, in response to the Fintech Action Plan, the European Supervisory Authorities (ESAs) provided technical advice to the Commission on the need for legislative improvements on ICT risk management requirements and on the costs and benefits of developing a coherent cyber resilience testing framework for significant market participants and infrastructures within the whole EU financial sector.

WHAT'S NEW?

On 2 October 2020, the European Commission (EC) opened feedback period for the adoption of the proposal for a regulation on digital operational resilience for the financial sector.

The overall objective of the initiative is to strengthen the digital operational resilience of the EU financial sector entities, including their ICT security, by streamlining and upgrading existing rules and introducing requirements where gaps exist, duly taking into account recommendations endorsed at international level, as well as existing EU and national frameworks on ICT and security risk management. 

The proposed regulation provides that all firms ensure they can withstand all types of ICT-related disruptions and threats. Banks, stock exchanges, clearinghouses, as well as fintechs, will have to respect strict standards to prevent and limit the impact of ICT-related incidents. The Commission also sets an oversight framework on service providers (such as Big Techs) which provide cloud computing to financial institutions.

This adopted act is open for feedback for a period of 8 weeks, until 30 November 2020. All feedback received will be summarized by the European Commission and presented to the European Parliament and Council with the aim of feeding into the legislative debate.

WHAT'S NEXT?

An impact assessment is being prepared to support the preparation of this initiative and to inform the Commission's decision.
The Commission will also consult the Expert Group on Banking, Payments and Insurance (EGBPI) and the Financial Services Users Group (FSUG), and will continue to liaise with stakeholders through bilateral ad-hoc contacts to help further substantiate the analysis of the available policy options in line with the Better Regulation guidelines.

On 5 October 2020, the European Securities and Markets Authority (ESMA) published its final report on the Guidelines on portability of information between securitisation repositories under the Securitisation Regulation. These Guidelines set out common provisions that a securitisation repository (SR) should follow when transferring securitisation information to another SR.

The guidelines were re-structured in order to make them clearer to follow for market participants. The guidelines include:

• a set of common provisions that apply to all cases of transfer of securitisation information between SRs, 
• two detailed annexes that cover the specific provisions that SRs should follow in the event of a request by a reporting entity to transfer securitisation information from one SR to another, or in the event of a withdrawal of an SRs registration with ESMA.

ESMA has also published new Q&As on securitisation topics. These Q&As, inter alia, provide guidance on how to report certain underlying exposures which benefit from a COVID-related debt moratorium or payment holiday.

The Guidelines will be translated into the official languages of the European Union and published on ESMA’s website. ESMA will consider the Guidelines as part of its supervision of SRs.

On 5 October 2020, the European Parliament published ECON Committee reports on proposals to adjust securitisation framework. 

Firstly, the EU Commission has proposed a regulation to amend the Securitisation Regulation, which adapts the securitisation framework to cater for on-balance-sheet synthetic securitisation and the securitisation of nonperforming exposures (NPEs).  In summary, the rapporteur Paul Tang agrees with the intention of the Commission’s proposals but argues that banks should not neglect the option of improving their capital position by raising new own capital.  Suggested amendments to the proposals include: 

• adjusting the definition of NPEs to require the maintenance of a pool containing more than 90% NPEs after the origination; 
• establishing a notification process to competent authorities to oblige originators either to show the fulfilment of credit granting criteria or to demonstrate the impossibility of fulfilling these requirements; 
• further reducing the complexity of STS synthetic products; 
• requiring the European Systemic Risk Board to monitor macroprudential risks associated with synthetic securitisation; and 
• calling on the Commission to consider how sustainable securitisation could be stimulated as part of the framework revision. The EU Commission has also proposed a regulation to amend the Capital Requirements Regulation (CRR) in an effort to make recourse to the securitisation tool more economically viable.  The rapporteur Othmar Karas supports the proposal, particularly the more risk-sensitive prudential treatment for STS on-balance-sheet securitisations, but suggests the following: 
• that the treatment of NPE securitisations be refined in line with the findings of the European Banking Authority Opinion 2019/13 and the European Central Bank Opinion 2020/22; 
• that the Commission reviews the provisions to implement the final Basel standard on the treatment of NPE securitisations and puts forward a legislative proposal, if appropriate; and 
• that the inconsistency between the CRR and the Basel III framework, with regards the eligibility of unfunded credit protection, is addressed.

On 26 October 2020, the European Commission launched the Public consultation on Sustainable corporate governance, which last until 8 February 2021.

This initiative is complementary to the review of the Non-Financial Reporting Directive (NFRD, Directive 2014/95/EU) which currently requires large public-interest companies to disclose to the public certain information on how they are affected by non-financial issues, as well as on the company’s own impacts on society and the environment. 

Whilst the NFRD is based on incentives “to report”, the sustainable corporate governance initiative aims to introduce duties “to do”. Such concrete actions would therefore contribute to avoiding “greenwashing” and reaching the objectives of the on-going review of the NFRD too, in particular the aim of enhancing the reliability of information disclosed under the NFRD by ensuring that the reporting obligation is underpinned by adequate corporate and director duties, and the aim of mitigating systemic risks in the financial sector. Reporting to the public on the application of sustainability in corporate governance and on the fulfilment of directors’ and corporate duties would enable stakeholders to monitor compliance with these duties, thereby helping ensure that companies are accountable for how they mitigate their adverse environmental and social impacts.

In this consultation, the EC seek views on:

• Due diligence requirements through the supply chain as well as directors’ duties and sustainable corporate governance.
• Directors’ duty of care – stakeholders’ interests:  In most Member States the law does not clearly define what this means. Lack of clarity arguably contributes to short-termism and to a narrow interpretation of the duty of care as requiring a focus predominantly on shareholders’ financial interests. It may also lead to a disregard of stakeholders’ interests, despite the fact that those stakeholders may also contribute to the long-term success, resilience and viability of the company.
• Due diligence duty: legal requirement for companies to establish and implement adequate processes with a view to prevent, mitigate and account for human rights (including labor rights and working conditions), health and environmental impacts, including relating to climate change, both in the company’s own operations and in the company’s the supply chain. 
• Other elements of sustainable corporate governance: such as for example employees, civil society organizations representing the interests of the environment, affected people or communities.

Commission adoption is planned for the second quarter of 2021.

On 1 October 2020, Belgium published Royal Decree amending the royal decree of 30 July 2018 relating to the operating procedures of the UBO register.

This Royal Decree aims to bring the Royal Decree of July 30, 2018 into full compliance with the latest legislative developments, and this by making a number of modifications. It partially implements Directive 2015/849 in Belgium Law.

On 7 October 2020, the Financial Services and Markets Authority (FSMA) published  guide to the preparation of the AMLCO’s annual activity report. The FSMA has observed that the annual activity reports of AMLCOs have often been limited to a general, relatively unstructured description of the policies, procedures and organization of internal controls. With a view to increasing the quality and clarity of such reports, the FSMA is offering AMLCOs a guide to the preparation of the annual activity report.

On 2 October 2020, the Banque nationale de Belgique (BnB) published communication NBB_2020_038 - Provision of cross-border investment services - Standard notification forms.

This Communication aims to provide further details on the notification procedure to be followed by stockbroking firms in the context of the European passport regime.

It also draws attention to the fact that, in accordance with Implementing Regulation (EU) 2017/2382 and with Articles 88/1 and 90, § 2 of the Banking Law, this notification procedure should also be followed by credit institutions that use tied agents to provide investment services under the freedom to provide services or the right of establishment. This applies not only to credit institutions that are under the direct supervision of the Bank, but also to credit institutions that are under the direct supervision of the European Central Bank, in which case the Bank acts as first point of contact in this procedure.

In addition, this Communication also covers the case where a stockbroking firm governed by Belgian law opens a branch or provides services on the territory of a non-EEA Member State.

On 7 October 2020, the Banque de France announced the Central Bank of the Netherlands joins MAPS, the cash management solution designed by and for central banks.

De Nederlandsche Bank has officially chosen MAPS - Market Activities Processing System - as a global solution for processing its treasury and financial market transactions. It integrates portfolio management, reserves, risks, foreign exchange transactions as well as the associated accounting treatments.

MAPS is a solution for central banks offered by the Banque de France and the Banque d'Espagne. MAPS manages a wide range of financial instruments and covers front, back office, risk management, accounting and financial reporting functions. It includes a technical platform and tailor-made adaptations to meet the business needs of central banks. MAPS, as a global offering, provides both a preconfigured solution based on Calypso software and a complete set of hosting and operational management services as well as the services necessary for the implementation, training and migration of new member central banks.

MAPS as a system has been operational since November 2016 for the Bank of France and the Bank of Spain, and since February 2020 for the Central Bank of Cyprus. This experience enables the MAPS teams to offer proven expertise in the provision and operation of pooled services on market operations for central banks, in accordance with the guidelines adopted within the ESCB.

With the Bank of France, the Bank of Spain and the Central Bank of Cyprus, the entry of the Central Bank of the Netherlands expands the community of MAPS central bank users and strengthens this common solution for the management of financial market operations within central banks of the EU. MAPS is open to all members of the European System of Central Banks (ESCB).

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Le 7 octobre 2020, la Banque de France a informé que la Banque centrale des Pays-Bas rejoint MAPS, La solution de gestion de trésorerie conçue par et pour les banques centrales.

De Nederlandsche Bank a officiellement choisi MAPS - Market Activities Processing System - comme solution globale de traitement de ses opérations de trésorerie et sur les marchés financiers. Elle intègre la gestion de portefeuille, des réserves, des risques, les opérations de change ainsi que les traitements comptables associés.

MAPS est une solution pour les banques centrales que propose la Banque de France et la Banque d’Espagne. MAPS gère une large gamme d'instruments financiers et couvre les fonctions de front, de back-office, de gestion des risques, de comptabilité et de reporting financier. Elle comprend une plateforme technique et des adaptations sur mesure pour faire face aux besoins métiers des banques centrales. MAPS, en tant qu'offre globale, fournit à la fois une solution préconfigurée basée sur le logiciel Calypso et un ensemble complet de services d'hébergement et de gestion opérationnelle ainsi que les prestations nécessaires à l’implémentation, la formation et la migration des nouvelles banques centrales adhérentes.

MAPS en tant que système est opérationnel depuis novembre 2016 pour la Banque de France et la Banque d’Espagne, et depuis février 2020 pour la Banque centrale de Chypre. Cette expérience permet aux équipes MAPS d’offrir une expertise éprouvée dans la fourniture et l'exploitation de services mutualisés sur les opérations de marchés à destination des banques centrales, conformément aux orientations prises au sein du SEBC.

Avec la Banque de France, la Banque d’Espagne et la Banque centrale de Chypre, l'entrée de la Banque Centrale des Pays Bas élargit la communauté des utilisateurs banques centrales MAPS et renforce cette solution commune de gestion des opérations sur marchés financiers au sein des banques centrales de l'UE. MAPS est ouvert à tous les membres du Système européen de banques centrales (SEBC).

On 26 October 2020, the Autorités des marchés financiers (AMF) announced the equivalence between the AMF certified exam and the FCA requirements extended by two years.

The AMF College has extended until 12 December 2022 the mechanism granting equivalence with the certified minimum knowledge examination to certain professionals with appropriate qualifications recognized by the British regulator.

On 12 December 2017, the AMF College decided to grant an equivalence with the certified minimum knowledge exam (“the AMF certified exam”), for a period of three years, which may benefit certain employees or agents of investment service providers (PSI) or of incoming branches of PSI in the United Kingdom who come to work in France as part of a transfer of activities or (re) installation of their employer or principal on the national territory.

This equivalence may be granted to employees of PSI or of PSI's incoming branches in the United Kingdom, when they have held certain activities there for which they have demonstrated "appropriate qualifications" and they come to occupy certain positions with a PSI or an incoming branch of PSI in France.

On 13 October 2020, the AMF Board decided to extend this system for two additional years, until 12 December 2022.

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Le 26 octobre 2020, l'Autorités des marchés financiers (AMF) a annoncé que l’équivalence entre l’examen certifié AMF et les exigences FCA est prolongée de deux ans.

Le Collège de l’AMF a prorogé jusqu’au 12 décembre 2022 le dispositif accordant une équivalence avec l’examen certifié de connaissances minimales à certains professionnels justifiant de qualifications appropriées reconnues par le régulateur britannique.

Le 12 décembre 2017, le Collège de l’AMF a décidé d’accorder une équivalence avec l’examen certifié de connaissances minimales (« l’examen certifié AMF »), pour une durée de trois ans, pouvant bénéficier à certains salariés ou préposés de prestataires de services d’investissement (PSI) ou de succursales entrantes de PSI au Royaume-Uni qui viendraient à travailler en France dans le cadre d’un transfert d’activités ou d’une (ré)installation de leur employeur ou mandant sur le territoire national.

Cette équivalence peut être accordée aux collaborateurs de PSI ou de succursales entrantes de PSI au Royaume-Uni, lorsqu’ils y ont occupé certaines activités pour lesquelles ils justifiaient des « qualifications appropriées » et qu’ils viennent à occuper certaines fonctions auprès d’un PSI ou d’une succursale entrante de PSI en France.

Le 13 octobre 2020, le Collège de l’AMF a décidé de proroger ce dispositif pour deux années supplémentaires, jusqu’au 12 décembre 2022.

On 28 October 2020, the Autorité des marchés financiers (AMF) clarified its expectations on closing of the 2020 accounts and review of the financial statements in the COVID-19 context.

1) Review of the AMF's activity on the financial statements

The AMF presents the conclusions of its review of the annual financial statements conducted between October 2019 and September 2020. During the first half of 2020, given the context, the AMF exchanged views with a very large number of companies from all the sub-funds. These exchanges enabled a dialogue between the companies, their statutory auditors and the AMF on the main accounting and financial communication issues prior to the publication of the half-yearly (or annual for companies with a delayed closing) financial statements.

2) Recommendations prepared in the context of the crisis

The recommendations return to the presentation of the effects of the pandemic in company accounts and stress the importance of specific and as transparent as possible information on the main judgments made by the company. 

In addition, the AMF looks at the information communicated on liquidity (liquidity position, going concern and management of working capital requirements), which is particularly monitored by users. Finally, a section has been devoted to financial institutions and in particular to the methodology for determining credit risk and the expected transparency on this subject (management and exposure to credit risk, expected losses).

3) Focus on leases

Due to the first year of application of IFRS 16 on leases, the AMF is reviewing certain technical items that have been the subject of recent discussions and the information expected in the financial statements.

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Le 28 octobre 2020, l'Autorité des marchés financiers (AMF) a clarifié ses attentes sur l’arrêté des comptes 2020 et travaux de revue des états financiers dans le contexte du COVID-19.

1) Retour sur l’activité de l’AMF sur les états financiers

L’AMF présente les conclusions de ses travaux de revue des états financiers annuels, menés entre octobre 2019 et septembre 2020. Au cours du premier semestre 2020, au vu du contexte, l’AMF a échangé avec un très grand nombre de sociétés de l’ensemble des compartiments. Ces échanges ont permis un dialogue entre les sociétés, leurs commissaires aux comptes et l’AMF sur les principaux sujets comptables et de communication financière en amont de la publication des comptes semestriels (ou annuels pour les sociétés en clôture décalée).

2) Des recommandations préparées dans un contexte de crise

Les recommandations reviennent sur la présentation des effets de la pandémie dans les comptes des sociétés et soulignent l’importance d’une information spécifique et la plus transparente possible sur les principaux jugements exercés par la société. 

Par ailleurs, l’AMF se penche sur les informations communiquées sur la liquidité (position de liquidité, continuité d’exploitation et gestion du besoin en fond de roulement) qui sont particulièrement suivies par les utilisateurs. Enfin, une partie a été consacrée aux institutions financières et notamment à la méthodologie de détermination du risque de crédit et la transparence attendue sur ce sujet (gestion et expositions au risque de crédit, pertes attendues).

3) Zoom sur les contrats de location

Du fait de la première année d’application de la norme IFRS 16 sur les contrats de location, l’AMF revient sur certains éléments techniques ayant fait l’objet de discussions récentes et sur les informations attendues dans les états financiers.

On 15 October 2020, the Autorité des marchés financiers (AMF) published the Decision of 29 September 2020 on changes to the operating rules of the ID2S central securities depository with a view to extending the scope of eligible securities.

The amendments to the operating rules of the ID2S central securities depository as annexed to this decision are approved. They will come into force on the date determined by ID2S.

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Le 15 octobre 2020, l'Autorité des marchés financiers (AMF) a publié la décision du 29 septembre 2020 portant sur les modifications des règles de fonctionnement du dépositaire central de titres ID2S périmètre des titres admissibles.

Sont approuvées les modifications des règles de fonctionnement du dépositaire central de titres ID2S telles à la présente décision. Elles entreront en vigueur à la date déterminée par ID2S.

On 27 October 2020, the Autorité des marchés financiers (AMF) published an infographic on FCPs and Sicavs' fees. 

FCPs and Sicavs apply entry and exit charges and, each year, management and operating costs. What is the impact of these fees on the final return on an investment?

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Le 27 octobre 2020, l'Autorités des marchés financiers (AMF) a publié une infographie sur les frais des fonds et Sicav.

Les FCP et les Sicav appliquent des frais d'entrée et de sortie et, chaque année, des frais de gestion et de fonctionnement. Quel est l'impact de ces frais sur le rendement final d'un investissement ? 

On 28 October 2020, the Autorité des marchés financiers (AMF) informed on the evolution of approval procedures of portfolio management companies.

The ROSA extranet, which is intended to replace the current GECO extranet, reinforces the digitalization of exchanges between the AMF and portfolio management companies. This tool will be launched at the end of 2020. In this perspective, the AMF is updating instruction DOC-2008-03 on the approval procedure for portfolio management companies, information obligations and passport. 

All of the so-called reference data (identity of the portfolio management companies, its managers, etc.) and documents such as the business program and other documents submitted at the time of approval will be filed and updated directly, and under its own responsibility, by the portfolio management companies on the ROSA extranet. In the interests of simplification and a risk-based approach, certain changes previously subject to prior authorization will now be declared by the portfolio management companies and will be subject to a subsequent review.

A new format for the business program will enable portfolio management companies to update their business program in a more targeted manner, since it will no longer be necessary to submit a new basic document for each update. Only the impacted sections will have to be modified on the ROSA extranet.

Companies wishing to apply for initial approval as a portfolio management companies will have to submit their file on the ROSA extranet for all applications made on or after 7 December 2020.

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Le 28 octobre 2020, l'Autorité des marchés financiers (AMF) a informé sur l’évolution des procédures d’agrément des sociétés de gestion de portefeuille.

L’extranet ROSA qui a vocation à remplacer l’actuel extranet GECO renforce la digitalisation des échanges entre l’AMF et les sociétés de gestion de portefeuille. Cet outil sera lancé à la fin de l’année 2020. Dans cette perspective, l’AMF met à jour l’instruction DOC-2008-03 sur la procédure d'agrément des sociétés de gestion de portefeuille, obligations d'information et passeport.

L’ensemble des données dites référentielles (identité de la SGP, de ses dirigeants, etc.) et de ses documents tels que le programme d’activité et autres documents soumis lors de l’agrément sera déposé et mis à jour directement, et sous sa propre responsabilité, par la SGP sur l’extranet ROSA.

Dans une logique de simplification et d’approche par les risques, certaines modifications soumises jusqu’alors à autorisation préalable seront désormais déclarées par la SGP et feront l’objet d’une revue a posteriori.

Un nouveau format permettra aux SGP de mettre à jour leur programme d’activité de manière plus ciblée puisqu’il ne sera plus nécessaire de déposer un nouveau document de base à chaque mise à jour. Seules les sections impactées devront être modifiées dans l’extranet ROSA.

Les sociétés souhaitant demander un agrément initial en tant que SGP devront déposer leur dossier dans l’extranet ROSA pour toute demande formulée à compter du 7 décembre 2020.

On 1 October 2020, the Autorité des marchés financiers (AMF) informed on  the MiFID client assessment questionnaire.

With MiFID 2, the obligations of investment service providers (ISPs) in terms of assessing their clients have been strengthened: more than ever, clients must ensure that the product or service envisaged corresponds to the profile of their customers. However, to do this, they must have the necessary information. 

It happens that a client refuses to complete the evaluation questionnaire making it impossible to determine his profile. 

Sometimes perceived as intrusive, the client assessment questionnaire is not just a regulatory obligation. This is a document that is as useful as it is important for both the bank and the saver. It allows the bank, which is legally bound to submit it to its client, to assess his profile and to determine that the service or financial instrument is suitable for him. It is therefore in the customer's interest to complete it with care and accuracy.

Moreover, when it comes to investment advice (or portfolio management service), the obligations of the ISP and client response are more demanding:

• on the one hand, the client's assessment is more in-depth: in addition to the client's experience and knowledge, the ISP must also collect information relating to his financial situation, including his capacity to bear losses, and his objectives investment, including its risk tolerance
• on the other hand, if the client does not provide the required information, the ISP does not issue him a simple warning but must refrain from recommending financial instruments (or providing him with the portfolio management service).

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Le 1 octobre 2020, l'Autorité des marchés financiers (AMF) a informé sur le questionnaire MiFID d'évaluation des clients.

Avec MIF 2, les obligations des prestataires de services d’investissement (PSI) en matière d’évaluation de leurs clients ont été renforcées : plus que jamais, ces derniers doivent s’assurer que le produit ou le service envisagé correspond au profil de leurs clients. Toutefois, pour ce faire, ils doivent disposer des informations nécessaires.

Il arrive qu’un client refuse de compléter le questionnaire d’évaluation rendant impossible la détermination de son profil.

Parfois perçu comme intrusif, le questionnaire d’évaluation du client n’est pas qu’une obligation réglementaire. Il s’agit d’un document aussi utile qu’important tant pour la banque que pour l’épargnant. Il permet à la banque, qui est tenue réglementairement de le soumettre à son client, d’apprécier son profil et de déterminer que le service ou l’instrument financier lui convient. Il est donc dans l’intérêt du client de le compléter avec soin et exactitude.

Par ailleurs, s’agissant du conseil en investissement (ou du service de gestion de portefeuille), les obligations du PSI et de réponse du client sont plus exigeantes :

• d’une part, l’évaluation du client est plus approfondie :  outre l’expérience et les connaissances du client, le PSI doit également recueillir des informations relatives à sa situation financière, y compris sa capacité à subir des pertes, et à ses objectifs d'investissement, y compris sa tolérance au risque
• d’autre part, si le client ne communique pas les informations requises, le PSI ne lui délivre pas un simple avertissement mais doit s’abstenir de lui recommander des instruments financiers (ou lui fournir le service de gestion de portefeuille).

On 27 October 2020, the Autorité de contrôle prudentiel et de résolution (ACPR) published Instruction No. 2020-I-11 amending instruction n ° 2019-I-22 of 23 April 2019 relating to the forms for requests for authorization and simplified authorization of a payment institution, for the application for registration as a service provider declaration of payment service provider agent and application for exemption from approval under the conditions set forth in Articles L. 521-3-1 and L. 525-6-1 of the Monetary and Financial Code.

The standard application file for obtaining a payment institution authorisation, referred to in Article 2 of the aforementioned Order of 29 October 2009 and presented in Annex 1 of the aforementioned Instruction No. 2019-I-22, is replaced by the standard file in Annex 1 of the present Instruction.

The standard application file for simplified payment institution accreditation, referred to in Article 2-1 of the aforementioned Order of October 29, 2009 and presented in Annex 2 of the aforementioned Instruction 2019-I-22, is replaced by the standard file appearing in Annex 2 of this Instruction.

The standard file for the declaration of an agent for the provision of payment services on behalf of a payment service provider, referred to in Article 36 of the aforementioned Order of October 29, 2009 and set out in Appendix 4 of the aforementioned Instruction 2019-I-22, is replaced by the standard file set out in Appendix 3 of this Instruction.

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Le 27 octobre 2020, l'Autorité de contrôle prudentiel et de résolution (ACPR) a publié l'Instruction n° 2020-I-11 modifiant l’instruction n° 2019-I-22 du 23 avril 2019 relative aux formulaires de demandes d’agrément et d’agrément simplifié d’établissement de paiement, de demande d'enregistrement en tant que prestataire de services d'information sur les comptes, de déclaration d’agent prestataire de services de paiement et de demande d’exemption d’agrément dans les conditions fixées aux articles L. 521-3-1 et L. 525-6-1 du Code monétaire et financier.

Le dossier type de demande d'obtention de l'agrément simplifié d'établissement de paiement, mentionné à l’article 2-1 de l’arrêté du 29 octobre 2009 susvisé et présent à l’annexe 2 de l’instruction n° 2019-I-22 susvisée, est remplacé par le dossier type figurant à l’annexe 2 de la présente instruction.

Le dossier type de déclaration d’un agent pour la fourniture de services de paiement pour le compte d’un prestataire de services de paiement, mentionné à l’article 36 de l’arrêté du 29 octobre 2009 susvisé et présent à l’annexe 4 de l’instruction n° 2019-I-22 susvisée, est remplacé par le dossier type figurant à l’annexe 3 de la présente instruction.

Le dossier type de déclaration d’un agent pour la fourniture de services de paiement pour le compte d’un prestataire de services de paiement, mentionné à l’article 36 de l’arrêté du 29 octobre 2009 susvisé et présent à l’annexe 4 de l’instruction n° 2019-I-22 susvisée, est remplacé par le dossier type figurant à l’annexe 3 de la présente instruction.

On 29 October 2020, the Autorité de contrôle prudentiel et de résolution (ACPR) published Instruction no. 2020-I-12 amending Instruction no. 2013-I-09 of July 12, 2013 relating to application forms for authorization, declaration of agent and notification of freedom of establishment, freedom to provide services, use of an agent and use of a distributor in another Member State of the European Union or in another State party to the Agreement on the European Economic Area for an electronic money institution amended by Instructions no. 2018-I-01 and no. 2018-I-02 of February 21, 2018 and by Instruction no. 2019-I-16 of April 23, 2019.

The standard application file for electronic money institution authorisation, mentioned in Article 2 of the aforementioned Order of May 2, 2013 and presented in Annex 1 of the aforementioned Instruction No. 2013-I-09, is replaced by the standard file in the Annex to this Instruction.

The standard file for the declaration of an agent for the provision of payment services on behalf of a payment service provider, referred to in Article 50 of the aforementioned Order of May 2, 2013 and in Article 36 of the aforementioned Order of October 29, 2009 and presented in Appendix 3 of the aforementioned Instruction No. 2013-I-09, is repealed.

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Le 29 octobre 2020, l'Autorité de contrôle prudentiel et de résolution (ACPR) a publié l'Instruction n° 2020-I-12 modifiant l’instruction n° 2013-I-09 du 12 juillet 2013 relative aux formulaires de demandes d’agrément, de déclaration d’agent, ainsi que de notification de libre établissement, de libre prestation de services, d’utilisation d’un agent et de recours à un distributeur dans un autre État membre de l’Union européenne ou dans un autre État partie à l’accord sur l’Espace économique européen pour un établissement de monnaie électronique modifiée par les instructions n° 2018-I-01 et n° 2018-I-02 du 21 février 2018 et par l’instruction n° 2019-I-16 du 23 avril 2019.

Le dossier type de demande d'obtention de l'agrément d'établissement de monnaie électronique, mentionné à l’article 2 de l’arrêté du 2 mai 2013 susvisé et présent à l’annexe 1 de l’instruction n° 2013-I-09 susvisée, est remplacé par le dossier type figurant à l’annexe de la présente instruction.

Le dossier type de déclaration d’un agent pour la fourniture de services de paiement pour le compte d’un prestataire de services de paiement, mentionné à l’article 50 de l’arrêté du 2 mai 2013 susvisé et à l’article 36 de l’arrêté du 29 octobre 2009 susvisé et présent à l’annexe 3 de l’instruction n° 2013-I-09 susvisée, est abrogé.

On 22 October 2020, the Autorité des marchés financiers (AMF) announced the implementation of a new data collection methods from 30 November 2020.

The AMF announces the modification, on 30 November 2020, of the list of information required when filing prospectuses / supplements and of the final conditions for issuing debt securities, as well as the evolution of the methods for collecting those data.

The AMF will change the methods of collecting this data to meet European requirements, while limiting the burden for issuers. 

For flyers / supplements: When filing a prospectus, one must complete and send a form to the AMF. This form in "pdf" format can be downloaded from the AMF website from the "Forms and declarations" section.

The final terms of issuance of debt securities (Final terms), containing this new information, must be sent:

• either via the ONDE extranet, thanks to a new deposit form,
• or via a new deposit system which allows frequent issuers who so wish to industrialize the deposit of their final conditions for issuing debt securities with the AMF.

Version française

Le 22 octobre 2020, l'Autorité des marchés financiers (AMF) a annoncé la mise en place de nouvelles modalités de collecte des données à partir du 30 novembre 2020.

L’AMF annonce la modification, au 30 novembre 2020, de la liste d’informations requises à l’occasion du dépôt de prospectus/suppléments et de conditions définitives d’émission de titres de créance ainsi que l’évolution des modalités de collecte de ces données.

L’AMF fera évoluer les modalités de collecte de ces données pour répondre aux exigences européennes, tout en limitant la charge pour les émetteurs. 

Pour les prospectus/suppléments: à l’occasion du dépôt d’un prospectus, l’acteur devra compléter et transmettre un formulaire à l’AMF. Ce formulaire au format "PDF" est téléchargeable sur le site internet de l’AMF depuis la rubrique "formulaires et déclarations".

Les conditions définitives d’émission de titres de créance (Final termes), contenant ces nouvelles informations, devront être transmises :

• soit via l’extranet ONDE, grâce à un nouveau formulaire de dépôt.
• soit via un nouveau dispositif de dépôt qui permet aux émetteurs fréquents qui le souhaitent d’industrialiser le dépôt de leurs conditions définitives d’émission de titres de créance auprès de l’AMF. Si vous êtes intéressé par ce service gratuit, nous vous invitons à envoyer un mail à MassFilingFT@amf-france.org .

On 12 October 2020, the Autorité des normes comptables (ANC) published the Regulation No. 2020-05 of July 24, 2020 modifying ANC regulation No. 2014-03 of 5 June 2014 relating to the modified general chart of accounts.

The Regulation concerns special procedures for tokenization. It specifically deals with specificities concerning the price of subscription, issuance of tokens, means of exchange or payments. 

Version française

Le 12 octobre 2020, l'Autorité des normes comptables (ANC) a publié le Règlement 2020-05 du 24 juillet 2020 modifiant le règlement 2014-03 relatif au plan comptable général modifié

Ce règlement concerne les procédures spéciales de tokenisation. Il traite notamment des spécificités concernant le prix de souscription, l'émission de jetons, les moyens d'échange ou les paiements.

On 29 October 2020, the Autorité des marchés financiers (AMF) published a monitoring and evaluation report on coal policies of players in the Paris financial center.

As part of the implementation of the mechanism for monitoring and evaluating the climate commitments of Place de Paris players announced in July 2019, the Prudential Control and Resolution Authority (ACPR) and the Financial Markets Authority (AMF) publish the conclusions of the work carried out specifically on the “coal” commitments of French banks, insurance companies and management companies, as well as a certain number of recommendations. The global report will be published at the end of 2020.

This report presents the work carried out specifically on the coal policies of the players in the Paris financial center. The work was carried out by the authorities on the basis of public information and detailed questionnaires sent to the major players in the market, supplemented by numerous interviews and bilateral exchanges between July and September.

The analyses cover several aspects: 

• A qualitative comparison of the policies in force and published as of 31 July 2020 (criteria and thresholds used, scope of application, exit strategy defined, governance, resources and processes implemented for monitoring);
• An assessment of the exposure of French banks, insurers and funds to thermal coal as of 31 December 2019; 
• A line-by-line study of certain exposures of the largest managers in order to verify the implementation of policies and to understand the reasons for the presence of thermal coal emitters in the portfolio (according to the thresholds retained by the Global Coal Exit List);
• An analysis of the exit and disengagement strategies for thermal coal, based on the information provided by the players in the sample.

Version française

Le 29 octobre 2020, l'Autorité des marchés financiers (AMF) a publié un rapport de suivi et d’évaluation des politiques de charbon des acteurs de la place financière de Paris.

Dans le cadre de la mise en place du dispositif de suivi et d’évaluation des engagements climatiques des acteurs de la Place de Paris annoncé en juillet 2019, l’Autorité de contrôle prudentiel et de résolution (ACPR) et l’Autorité des marchés financiers (AMF) publient les conclusions des travaux menés spécifiquement sur les engagements « charbon » des banques, assurances et sociétés de gestion françaises, ainsi qu’un certain nombre de préconisations. Le rapport global sera publié en fin d’année 2020.

Ce rapport présente, en amont de la publication de décembre prochain, les travaux menés spécifiquement sur les politiques charbon des acteurs de la Place de Paris. Les travaux ont été menés par les autorités sur base des informations publiques et de questionnaires détaillés envoyés aux plus grands acteurs de la Place (9 banques, 17 assureurs et 20 sociétés de gestion), complétés par de nombreux entretiens et échanges bilatéraux entre les mois de juillet et septembre. 

Les analyses portent sur plusieurs volets :

• une comparaison qualitative des politiques en vigueur et publiées au 31 juillet 2020 (critères et seuils retenus, champ d’application, stratégie de sortie définie, gouvernance, moyens et processus mis en œuvre pour le suivi) ;
• une évaluation de l’exposition des banques, assureurs et fonds français au charbon thermique au 31 décembre 2019 ;
• une étude ligne à ligne de certaines expositions des plus gros gérants afin de vérifier la mise en œuvre des politiques et de comprendre les raisons expliquant la présence d’émetteurs liés au charbon thermique en portefeuille (selon les seuils retenus par la Global Coal Exit List) ;
• une analyse des stratégies de sortie et de désengagement du charbon thermique, au regard des informations fournies par les acteurs de l’échantillon.

On 29 October 2020, the Association Française de Gestion (AFG) informed on the launch of the Sustainable Finance Observatory, the first tool for monitoring the transformation of Paris market actors towards carbon neutrality by 2050.

The Observatory assembles sectorial data and individual commitments which are all available on the website www.observatoiredelafinancedurable.com to ensure transparency. The data is sectioned into 4 different groups: 

• Sustainable management
• Transition towards a low-carbon economy
• End of coal
• Offer of sustainable products.

Version française

Le 29 octobre 2020, l'Association Française de Gestion (AFG) a informé sur le lancement de l’Observatoire de la finance durable, premier outil de suivi de la transformation des acteurs de la Place de Paris vers une neutralité carbone à l’horizon 2050.

L’Observatoire rassemble des données sectorielles et des engagements individuels présentées sur le site : www.observatoiredelafinancedurable.com dans une volonté de transparence. Les données sont classées en quatre thématiques :

• Gestion responsable
• Transition vers une économie bas-carbone
• Sortie du charbon
• Offre de produits responsables.

On 16 October 2020, the Bundestag adopted the draft law on anti-money laundering submitted by the Federal Minister of Justice and Consumer Protection to improve the fight against AML under criminal law. The draft law aims to further strengthen the foundations for effective and consistent criminal prosecution of AML and implements Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combating money laundering by criminal law. The heart of the draft law is the waiver of a selective catalog of predicate offences and that in the future, every crime can be a predicate offence to AML. 

On 2 October 2020, the Bundesfinanzministerium published draft law to implement the Covered Bonds Directive (Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and covered bond public supervision and amending Directives 2009/65/EC and 2014/59/EU).

The aim of the directive is to harmonize the various regulations in the EU and to strengthen the European Capital Markets Union. The Directive will create more transparency for investors and improve covered bonds marketing opportunities. 

The German Pfandbrief Act is already largely aligned with the requirements of the Covered Bonds Directive. The changes introduced in the drat law are therefore limited and mainly affect the protection of the names “ European Covered Bond ” and “ European Covered Bond (Premium)”, which were created by the Covered Bonds Directive. In future, it should be possible to use these terms in addition to the term “Pfandbrief”.

On 6 October 2020, the Bundesfinanzministerium (Federal Ministry of Finance) published action plan to combat financial reporting fraud and to strengthen controls over capital and financial markets. 

The goal is to eliminate any deficiencies in financial reporting enforcement, to strengthen the independence of auditors, increase their liability for misconduct, and to improve internal controls in companies and safeguards against financial reporting manipulation. To implement the action plan’s measures swiftly, the Federal Ministry of Finance and Federal Ministry of Justice and Consumer Protection will shortly present corresponding draft legislation.

On 26 October 2020, the Bundesfinanzministerium (Federal Ministry of Finance) published draft law to strengthen financial market integrity (FISG). The functionality of the German financial market is of central importance for the German economy and for the prosperity of the Federal Republic of Germany. Manipulation of the balance sheets of capital market companies undermines confidence in the German financial market and causes it serious damage. Recent events have shown that, in particular, balance sheet control needs to be strengthened and the audit of the financial statements needs to be further regulated in order to ensure the accuracy of companies' accounting documents. But also with the supervisory structures and the powers of the Federal Financial Supervisory Authority ( BaFin) There is a need for improvement when examining outsourcing by financial services companies. The draft aims to implement the urgent measures to restore and permanently strengthen confidence in the German financial market.

On 26 October 2020, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published Consultation 13/2020 concerning a review of Circular 10/2017 on the Supervisory Requirements for IT in Financial Institutions (BAIT).

The draft Circular published by BaFin implements EBA Guidelines on ICT and security risk management in Germany. These Guidelines establish requirements for credit institutions, investment firms and payment service providers (PSPs) on the mitigation and management of their information and communication technology (ICT) risks and aim to ensure a consistent and robust approach across the Single market.

The consultation period is open until 23 November 2020.

On 16 October 2020, the Hong Kong Monetary Authority (HKMA) published a letter to all authorized institutions (AI) on the Reform of interest rate benchmarks.

The HKMA requests AIs to take early action to adhere to the IBOR Fallbacks Protocol (the Protocol) published recently by the International Swaps and Derivatives Association (ISDA).  

ISDA announced on 9 October 2020 that it would launch the Protocol and the IBOR Fallbacks Supplement (the Supplement) on 23 October 2020 to implement fallbacks for existing and new derivatives contracts referencing key interbank offered rates (IBORs).  The Protocol and the Supplement will take effect on 25 January 2021. 

The HKMA earlier requested AIs to endeavour to include adequate fallback provisions in all newly issued LIBOR-linked contracts that will mature after 2021 from 1 January 2021.  In the light of the latest development, AIs may achieve this transition milestone for derivatives contracts within January 2021.     

On 21 October 2020, the Hong Kong Monetary Authority (HKMA) published a letter on the Customer Protection in respect of Reform of Interest Rate Benchmarks.

Further to the circulars previously relating to the reform of interest rate benchmarks, the HKMA reminds all authorized institutions (AIs) to pay attention to the customer protection aspects:

• Fair Treatment of Customers 
• Customer Communication and Education.

On 29 October 2020, the Securities and Futures Commission (SFC) published launched a consultation on proposed requirements for fund managers to take climate-related risks into consideration in their investment and risk management processes and make appropriate disclosures to meet investors’ growing demands for climate risk information and combat greenwashing.

Under the proposals, the Fund Manager Code of Conduct would be amended and the SFC will set out expected baseline requirements and standards to facilitate fund managers’ compliance.

Market participants and other interested parties are invited to submit their comments to the SFC on or before 15 January 2021.

On 2 October 2020, the Central Bank of Ireland (CBI) published Anti-Money Laundering Bulletin - Issue 6 / October 2020.

This edition concerns the application of transaction monitoring. The bulletin sets out the Central Bank’s findings following supervisory engagements across multiple credit and financial institutions, and also sets out the Central Bank’s expectations with regard to the application of transaction monitoring controls.

On 6 October 2020, the Central Bank of Ireland (CBI) published Beneficial Ownership Register - Guidance Document 1.1 (dated in July 2020), together with the Beneficial Ownership Submission Form.

The document is a guide for users to submit the Beneficial Ownership Information Return to the Central Bank of Ireland via the Online Reporting (ONR) system. 

The purpose of the CBI's Register is to ensure that information on the beneficial owners of Centain Financial Vehicles (CFV) is held on a central register, pursuant to Article 30(3) of 4AMLD which requires that beneficial ownership of CFV are held in a central register in each member state . For the purposes of the Register, CFV include:

• Irish Collective Asset-Management Vehicles (ICAV)
• Unit Trusts whereby Unit Trust means
  (a) a Unit Trust scheme with the meaning of the Unit Trusts Act 1990 (No. 37 of 1990); or
  (b) an undertaking for collective investment in transferable securities (within the meaning of the UCITS Regulations), that is constituted of a unit trust (within the meaning of the UCITS Regulations) and authorized under those Regulations
• Credit Unions.

In accordance with the SI No. 233 of 2020, CFV will have until 25 December 2020 to submit this information to the Register. CFV who are not yet authorized will have six months from the date of their authorization to file their beneficial ownership information with the Central Bank.

On 27 October 2020, the Houses of the Oireachtas (Ireland's national parliament) published the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2020. Among several issues regarding the Brexit consequences, the Bill makes provision for following matter regarding Financial Services: 

1. Settlement Finality: In order to support the full implementation of the Commission equivalence decisions in this area, legislation is required to address the fact that the relevant EU law will no longer apply to or in respect of the UK from the end of the transition period and to ensure the protections provided under the EU Settlement Finality Directive (98/26/EC) and the Irish Settlement Finality Regulations (SI 624 of 2010) continue to apply to Irish market participants in UK based settlement systems.
2. Amendment to the European Union (Insurance and Reinsurance) Regulations 2015 and the European Union (Insurance Distribution) Regulations 2018.

On 5 October 2020, the Central Bank of Ireland (CBI) publishes the Statutory Instrument S.I. No. 410 of 2020 - Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2020, which:

1. Introducing three new Pre-Approval Controlled Functions (PCFs): 

• Chief Information Officer (under the ‘General’ category); 
• Head of Material Business Line (under the ‘Banking’ category);
• Head of Market Risk (under the ‘Banking’ category); 

2. Splitting PCF-39 Designated Person into six PCF roles aligned to the specific managerial functions.

The regulation applies to:

• Insurance Undertaking or a Reinsurance Undertaking 
• Credit Institution
• Market Operator of a Regulated Market
• Investment Firm
• Alternative investment fund manager or Internally managed AIFs
• Entity authorized or required to be authorized under section 10 of the Investment Intermediaries Act 1995 
• Trustees
• UCITS Self-Managed Investment Company or Management Company
• Payment Institution 
• Retail Credit Firm.

On 9 October 2020, the Central Bank of Ireland published frequently asked questions (FAQs) relating to additions to pre-approved control functions. 

The FAQs provide details for the information on

• The three new Pre-Approval Controlled Functions (PCFs):
  i. Chief Information Officer (under the ‘General’ category);
  ii. Head of Material Business Line (under the ‘Banking’ category);
  iii. Head of Market Risk (under the ‘Banking’ category). 
• The Split of PCF-39 role (Designated Person):
  i. Designated Person with responsibility for Capital and Financial Management
  ii. Designated Person with responsibility for Operational Risk Management
  iii. Designated Person with responsibility for Fund Risk Management
  iv. Designated Person with responsibility for Investment Management
  v. Designated Person with responsibility for Distribution
  vi. Designated Person with responsibility for Regulatory Compliance.

On 9 October 2020, the Central Bank issued the 35th edition of the Central Bank AIFMD Q&A, which includes a new Q&A ID 1133 in relation to liquidity stress testing in AIFs.

The Q&A clarifies the Central Bank’s expectations in relation to liquidity stress testing in AIFs, particularly in relation to the application of the ESMA “Guidelines on liquidity stress testing in UCITS and AIFs”. The Q&A sets out the Central Bank’s reporting expectations where a stress test reveals a material risk.  

The CBI clarifies that the notification to the CBI takes the form of a two-stage process: 

1. Initial notification: The CBI requires that it be immediately informed via an ONR IF Regulatory Report if a stress test performed reveals a material risk.   
2. Subsequent notification: In addition to this initial notification, where a stress test reveals a material risk, the manager should draw up an extensive report with the results of the stress testing and a proposed action plan.  Where necessary, the manager should take action to strengthen the robustness of the AIF including actions that reinforce the liquidity or the quality of the assets of the AIF. The manager shall again immediately inform the CBI via an ONR IF Regulatory report of the measures taken, to include the extensive report and the action plan. 

On 9 October 2020, the Central Bank of Ireland (CBI) issued the 30th edition of the Central Bank UCITS Q&A, which includes new a Q&A ID 1098 in relation to liquidity stress testing in UCITS.

The Q&A clarifies the CBI’s expectations in relation to liquidity stress testing in UCITS, particularly in relation to the application of the ESMA “Guidelines on liquidity stress testing in UCITS and AIFs”. The Q&A sets out the Central Bank’s reporting expectations where a stress test reveals a material risk.  

Notification to the CBI takes the form of a two-stage process: 

1. Initial notification: The CBI requires that it be immediately informed via an ONR IF Regulatory Report if a stress test performed reveals a material risk.   
2. Subsequent notification: In addition to this initial notification, where a stress test reveals a material risk, the manager should draw up an extensive report with the results of the stress testing and a proposed action plan.  Where necessary, the manager should take action to strengthen the robustness of the UCITS including actions that reinforce the liquidity or the quality of the assets of the UCITS. The manager shall again immediately inform the CBI via an ONR IF Regulatory report of the measures taken, to include the extensive report and the action plan. 

On 16 October 2020, the Irish Funds Industry Association (IF) published a Guide to International Fund Distribution - Canada.

The Canadian investment market represents a significant pool of potential investors, including Canada’s pension industry (the fifth largest in the world), as well as the eight largest investment fund market in the world. 

• At the end of 2019, Canadian investment fund assets totaled C$1.6 trillion. The Canadian investment fund industry is a mature industry, demonstrated by both its relative size and level of concentration. The marketing of investment products and services, however, is subject to significant regulation. 
• The sale of shares of an Irish fund (each, “Fund”) to a resident of Canada will trigger licensing and/or Fund registration issues under the laws of Canada. 
• It is not, however, possible to register a foreign investment fund for retail registration in Canada. As a result, Irish Funds may only be offered and sold to residents of Canada on a “private placement basis”.

On 20 October 2020, the Central Bank of Ireland (CBI) published the outcome of a thematic review of the implementation of its framework for governance, management and oversight in fund management companies (FMCs).

 It includes detailed requirements on organizational effectiveness, the performance of managerial functions, delegate oversight, and resourcing. It is key to protecting investors, ensuring the integrity of the market, and promoting systemic stability.

Some of the key issues identified in the review related to:

• Resourcing: A large number of FMCs authorized before the framework have not appropriately increased resources to ensure effective implementation of the framework. The Central Bank expects that the number of FTE should reflect the nature, scale and complexity of the firm and must ensure that sufficient resources are in place.
• Designated Persons: Significant shortcomings were also identified in relation to how some Designated Persons discharged their roles.
• Delegate Oversight: Some firms were unable to evidence that they had carried out the appropriate level of due diligence on their delegates. Not all could demonstrate that they had reviewed and approved delegate/group policies and procedures as being fit for purpose when applied to the firm.
• Risk Management Framework: Deficiencies were identified for a significant number of FMCs, with many firms not having an entity-specific risk management framework, no entity-specific risk register, and/or no defined risk appetite in place.
• Board approval of new funds: Not all FMCs could evidence approval by the Board of the launch of sub-funds. The Central Bank expects evidence of robust discussion and challenge by the Board in relation to proposed new fund strategies/structures and their attendant risks.
• Organizational Effectiveness Director In many cases, the Organizational Effectiveness Director could not evidence that meetings were conducted and no formal records were kept of meetings with Designated Persons. An absence of formal reporting to the Board was also identified, particularly in the area of resource evaluation.
• Gender Balance: The review found a significant gender imbalance on the Boards of FMCs, with only 16% of Director roles held by women.

On 29 October 2020, the Irish Funds Industry Association (IF) published a Guide to International Fund Distribution - France.

Key distribution channels in France:

• Distribution networks of banks: through their investment services providers.
• Insurance companies: through life insurance contracts
• French conseiller en investissements financiers (financial investment advisor): This is a French specific regime. The Financial Investment Advisor can provide investment advice. It must (i) be insured, (ii) join a professional association and (iii) be registered on the French financial intermediaries register (ORIAS). It has to follow good conduct rules and is under the surveillance of the Autorité des Marchés Financiers (French Financial Markets Authority, the “AMF”).

The guide also provides further details on:

• Distributing UCITS in France
• Distributing AIFS in France
• Regulatory authorities
• Costs of registration in France.

On 29 October 2020, the Irish Funds Industry Association (IF) published a Guide to International Fund Distribution - Switzerland.

Switzerland represents one of the largest markets in the world for Asset Managers. According to the Swiss Banking Association, Switzerland ranks 5th globally in terms of AUM and  leads the world in offshore private banking (25% of global offshore assets).

It is a diversified and fragmented market made up of a large number of private banks and asset management firms in addition to many small family office operations, fund of funds and independent wealth managers. There are also many asset consultants and pension fund advisors servicing the market.

Although Switzerland is not a member of the European Union (“EU”), and thus the standard EU passporting regulations do not apply, many of the requirements in relation to authorisation of foreign funds for distribution in Switzerland are similar, with the notable exception of the requirement to produce a Swiss specific Prospectus when applying for a full public marketing licence. Some of the additional local requirements also include specific disclosure as regards total expense ratio and performance data.

The guide also provides further details on:

• Main Players in the Swiss Fund Market
• Asset Allocation of the Swiss Fund Market
• Main Distribution Channels
• Regulatory Environment – What's Changing
• Regulatory Licences
• Role of Swiss Representative 
• Role of Swiss Paying Agent
• Distribution Regulatory Requirements 
• Costs of Registration in Switzerland
• Listing on SIX Swiss Exchange
• Tax Reporting Requirements.

On 26 October 2020, Banca d'Italia implemented the Guidelines of the European Banking Authority (EBA) on supervisory reporting and public disclosure (EBA / GL / 2020/11 and EBA / GL / 2020/12) in light of the changes to the regulatory requirements introduced with EU Regulation no. 873/2020 (so-called Quickfix), due to COVID-19 . 

In particular, the following second level acts issued by the EBA are implemented: 

(1) Guidelines on supervisory reporting and disclosure requirements in compliance with CRR "Quick fix", issued in response to COVID-19 pandemic (EBA / GL / 2020/11) 

2. Guidelines on uniform disclosures as per Article 473a of Regulation (EU) No 575/2013 (CRR) on the transitional period for mitigating the impact of the introduction of IFRS 9 on own funds to ensure compliance with the CRR "quick fix" for the COVID-19 pandemic (EBA / GL / 2020/12).

The implemented guidelines focus on how to calculate the leverage ratio, credit risk and prudential reporting on the management of own funds.

In relation to the leverage ratio, the guidelines establish that exposures towards central banks should not be considered for the calculation of this parameter. However, the amount of these exposures should be included in public disclosures.

On 16 October 2020, CONSOB published Resolution no. 21536, which implements changes to Market Regulations regarding participants in the capital of operators of regulated markets. 

The intervention aims to define the  "content, terms and methods" to communicate on the acquisition of qualified shares to the capital of regulated market managers (as per art. 64-bis, paragraph 4 of the TUF).

The resolution also defines  the minimal content of such communications, which includes:

• Information related to the entity acquiring the share
• Information related to people who will manage the business acquired
• Information related to the overall acquisition project
• If the acquirer has been evaluated by CONSOB or Banca d'Italia in during the last 2 years, the  buyer should only provide information that has changed since the previous evaluation. 

On 30 October 2020, Banca d'Italia shared the data related to the interest rate to be applied to subsidized credit operations carried out in November 2020:

• The weighted average yield, referring to the financial year of six-month and twelve-month BOTs, related to the month of October 2020 is equal to -0.456 
• The monthly average of the gross yields of government bonds, subject to taxation, for the month of September 2020 instead is equal to: 0,624

On 20 October 2020, Borsa Italiana announced that Eni decided to launch its first sustainable bond.

Enel's choice to issue the bond, the first of its kind for the sterling market, confirms the appreciation from the corporate world towards the creation of increasingly sustainable capital market .

The bond is aimed at contributing to the achievement of the sustainable development goals set by the United Nations and proves Borsa Italiana's commitment to promoting and developing a bond market characterized by attention to sustainability issues.

On 30 October 2020, the Italian government approved in preliminary exam* rules aiming to adapt the national legislation to the Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017, providing information on the prospectus needed for public offers / admission to trading securities on a regulated market.

More specifically, regulation (EU) 2017/1129 (so-called "prospectus regulation") defined the requirements relating to the preparation, approval and dissemination of the prospectus needed for the public offer of securities or their admission to trading on a regulated market that is established or operates in a Member State.

The national initiative aims to reduce the fragmentation of financial markets, diversify funding sources, strengthen cross-border capital flows and facilitate market funding.  The rules specifically focus on four types of issuers:

• issuers already listed on a regulated market or in a growth market for SMEs, who want to raise additional capital through a secondary issue;
• small and medium enterprises;
• frequent issuers of all types of securities;
• issuers of securities other than equity securities.

Furthermore, it aims to encourage the use of the cross-border "passport" for approved prospectuses.

Regarding money market funds, the national changes approved in preliminary exam aim to uniform the national regulatory framework with Regulation (EU) 2017/1131, which contains rules aimed at ensuring that funds invest in well-diversified and high-quality assets. These measures would ensure that the liquidity of the MMFs is adequate to meet investor redemption requests.

Finally, a common rating rule would ensure that fund managers and investors rely on a common reference system.

* Background information: in the Italian governmental system, the approbation in preliminary exam, means that: the draft text of a law proposition is approved by the competent governmental commission. 

On 9 October 2020, the Chambre des députés Luxembourg published draft law No 7677 implementing regulation on controls on cash entering or leaving the EU. 

The draft law enforces Regulation (UE) 2018/1672 of the European Parliament and of the Council of 23 October 2018 on controls on cash entering or leaving the Union and repealing Regulation (EC) No 1889/2005.

Key takeaways: 

• It is proposed that the Customs and Excise Administration be confirmed as the competent authority for controls of the transport of cash entering or leaving from the EU and entering, transiting through or leaving the Grand Duchy of Luxembourg (intra-EU).
• Regarding the obligation to disclose unaccompanied cash, this bill poses a real obligation to disclose unaccompanied cash of a value equal to or greater than 10,000 euros entering or leaving the EU or entering, transiting through or leaving the Grand Duchy of Luxembourg.
• Officials of the Customs and Excise Administration have the right to require the presentation of an identity document and to request all information and documents on the source and destination of the cash.
• The procedure for the temporary withholding of cash is adapted to the Luxembourg legal framework. An action for annulment before the administrative court is planned against the decision to temporarily withhold the initial cash for 30 days, as well as against the decision to extend this withholding to 90 days.
• The FIU is given the power to exchange information with foreign financial intelligence units, in accordance with the provisions of the amended law of 7 March 1980 on the organization of the judiciary.
• The penalties provided for in the event of non-compliance with some of the obligations provided for in this bill are identical to the law of 27 October 2010 on the organization of checks on the physical transport of cash entering, passing through or leaving the Grand Duchy of Luxembourg.

According to the draft law, the entry into force is on 3 June 2021.

On 9 October 2020, the Commission de Surveillance du secteur financier (CSSF) published Ministerial Regulation  of 9 October 2020 amending Annex I C of Grand ducal Regulation of 29 October 2010 enforcing the Law of 27 October 2010 implementing United Nations Security Council resolutions as well as acts adopted by the European Union concerning prohibitions and restrictive measures in financial matters in respect of certain persons, entities and groups in the context of the combat against terrorist financing.

Article 1. Annex I C of Grand-ducal Regulation of 29 October 2010 enforcing the Law of 27 October 2010 implementing United Nations Security Council resolutions as well as acts adopted by the European Union concerning prohibitions and restrictive measures in financial matters in respect of certain persons, entities and groups in the context of the combat against terrorist financing has been updated with the addition of the following person, as designated by the Security Council Committee established pursuant to Resolutions 1267 (1999), 1989 (2011) and 2253 (2015): 

JAMAL HUSSEIN HASSAN ZEINIYE 

Article 2. This regulation enters into force on the day of its publication. 

On 26 October 2020, the Commission de Surveillance du secteur financier (CSSF) listed the permanent external members of the AML/CFT Advisory Committee. 

These members are:

• ABBL
• ALCO
• ALFI
• ALPP
• ALRiM
• IIA
• IRE
• AED
• CAA
• CRF
• Ministry of Finance
• Ministry of Justice
• the Parquet.

On 28 October 2020, the Commission de Surveillance du secteur financier (CSSF)  published Circular 20/754 on FATF declarations regarding 1) high-risk jurisdictions against which enhanced due diligence measures and, where appropriate, counter-measures are required 2) jurisdictions subject to the FATF enhanced supervision process.

In October 2020, at its virtual plenary meeting, the FATF confirmed that its February 2020 declarations remain generally applicable. 

The current lists therefore read as follows: 

1) High-risk jurisdictions for which enhanced due diligence measures and, where appropriate, countermeasures are required: Democratic People's Republic of Korea, Iran, the Islamic Republic of Iran, and the United States.

2) Jurisdictions subject to the FATF enhanced supervisory process: jurisdictions that currently have strategic AML/CFT deficiencies and have developed action plans with the FATF to address these deficiencies are as follows: Albania, Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe.

As a result of the substantial efforts demonstrated by Iceland and Mongolia, these jurisdictions are no longer subject to the FATF's ongoing enhanced surveillance process.

On 23 October 2020, the Commission de Surveillance du secteur financier (CSSF) published a press release calling on the entities under its supervision to use telework.  

It is essential that entities under the CSSF’s supervision contribute to prevent the propagation of the virus, while ensuring business continuity. The CSSF reiterates the importance of following the health precautions mentioned in previous communiqués (communication of 19 June and 17 July).

On 28 October 2020, the CSSF published Council Implementing Regulation (EU) 2020/1536 of 22 October 2020 implementing Regulation (EU) 2019/796 concerning restrictive measures against cyber-attacks threatening the Union or its Member States.

In order to prevent, discourage, deter and respond to continuing and increasing malicious behaviour in cyberspace, two natural persons and one body should be included in the list of natural and legal persons, entities and bodies subject to restrictive measures set out in Annex I to Regulation (EU) 2019/796.

Annex I to Regulation (EU) 2019/796 is amended in accordance with the Annex to this Regulation adding entries to the list of natural and legal persons, entities and bodies set out in Annex I to Regulation (EU) 2019/796.

BACKGROUND

According to Article 3 of the NIS Law, the Commission de Surveillance du secteur financier (CSSF) is the competent authority in terms of network and information security for the credit institutions, the financial market infrastructures, and Digital Service Providers which are already under the supervision of the CSSF. 

Amongst the responsibilities of the CSSF are the designation of essential services by means of regulation and the subsequent identification of Operators of Essential Services (“OES”). Credit institutions and financial market infrastructures can under certain circumstances be considered as OES.

WHAT'S NEW?

On 15 October 2020, the Commission de Surveillance du secteur financier (CSSF) informed that supervised institutions identified as operators of essential services have been notified.

By this Communiqué, the CSSF informs the supervised institutions that the ones identified as OES have been notified of this decision on 15 September 2020.

WHAT'S NEXT?

The supervised institutions which have not received this notification are therefore not designated as OES and are not required to comply with the requirements of the NIS Law.

On 22 October 2020, the Association des Banques et Banquiers, Luxembourg (ABBL) published its summary on what the Commission has in store for financial services in 2021, such as:

• The recently published action plan on the CMU2.0 will be instrumental over the years to come.
• In order to tackle future bank failures and to complete the Banking Union, the Commission plans to revise the bank crisis management and deposit insurance framework in Q4 2021.
• The AML legislative package features prominently in the CWP and is scheduled for adoption in Q1 of 2021.
• The EU executive will propose to establish an EU green bond standard by Q2 2021, a previously announced measure.
• On digital finance, the draft legislation is already on course for adoption most likely sometime next year.

On 16 October 2020, the Commission de Surveillance du secteur financier (CSSF) published updated application questionnaire for the set up of a fully licensed alternative investment fund manager.

This document constitutes a request for approval as a fully authorized AIFM in accordance with Chapter 2 of the AIFM law.

On 2 October 2020, the Association of the Luxembourg Fund Industry (ALFI) published its response to  IOSCO consultation on proposed updates to its principles for regulated entities that outsource tasks to service providers.

The revised principles comprise a set of fundamental precepts and a set of seven principles. The fundamental precepts cover issues such as the definition of outsourcing, the assessment of materiality and criticality, their application to affiliates, the treatment of sub-contracting and outsourcing on a cross-border basis. The seven principles cover the following areas:

1. Due diligence in the selection and monitoring of a service provider 
2. The contract with a service provider 
3. Information security, business resilience, continuity and disaster recovery 
4. Confidentiality issues 
5. Concentration of outsourcing arrangements 
6. Access to data, premises, personnel and associated rights of inspection 
7. Termination of outsourcing arrangements

On 19 October 2020, the Association of the Luxembourg Fund Industry (ALFI) replied to the European Supervisory Authorities (ESAs) survey setting out the details of the presentation of the information to be disclosed pursuant to Article 8(3), Article 9(5) and Article 11(4) of the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability?related disclosures in the financial services (SFDR).

On 20 October 2020, the Netherlands Authority for the Financial Markets (AFM) amended its guidelines on the Money Laundering and Terrorist Financing (Prevention) Act (Wwft) and the Sanctions Act. An amendment to the guidelines was necessary due to new regulations, such as the establishment of the Ultimate Benificial Owners (UBO) register. In addition, companies needed more clarification.

With the new guidelines, the AFM provides further guidance on how companies can implement certain open standards of the Wwft. In the new guidelines:

• What requirements must a Wwft risk assessment and policy meet?
• To what extent do companies have to carry out research into the UBO at listed companies?
• What does the AFM understand by a risk-based continuous monitoring of clients and transactions carried out?
• When is there a training as referred to in the Wwft?
• Which sanction lists should companies check and how often?

UBO-register

Important in the context of compliance with the Wwft is the register in which is recorded who are the ultimate stakeholders of a company or institution, the UBO register. The register makes transparent which persons are in control within a company. The register came into force on 27 September 2020. The aim of this is to improve the government's ability to combat money laundering. The guidelines explain what the UBO-register is and what the obligations are for Wwft institutions.

The AFM expects companies to study and apply the amended guidelines in their daily practice.

On 2 October 2020, the De Nederlandsche Bank (DNB) called on payment and electronic money institutions to get prepared for Brexit and especially to enter into discussions with British service providers in a timely manner and to initiate the necessary actions to prevent bottlenecks in the service provision by 1 January 2021.

This can be done, for example, by verifying whether British service providers have the correct permits by 2021 to continue to provide services in the EU.

On 7 October 2020, the De Nederlandsche Bank (DNB) informed on the entry into force of the new prudential framework for investment firms on 26 June 2021.

The new prudential framework for investment firms will come into effect on 26 June next year. This new framework includes the capital requirements for investment firms. 

A Q&A has also been  published on the Open Book Supervision page regarding a number of IFR / IFD topics: 

• Liquidity requirements
• ICAAP & ILAAP
• Group capital criterion
• Voluntary application CRR (opt-in).

On 14 October 2020, the Law of 7 October 2020 amending the Financial Supervision Act, the Money Laundering and Terrorist Financing Prevention Act, the Trust Offices Supervision Act 2018 and any other laws related to the rectification of defects and omissions in the implementation of European regulations in the field of the financial markets (Financial Markets Recovery Act 2020) was published in the Official Journal.

The amendments mostly deal with rephrasing to match with the wording of European directives and regulations. One noticeable change concerns the definition of "payment transaction", «by the payer or the payee» is replaced by «one by or on behalf of the payer or by the payee» as well as the definition of the "ultimate beneficial owner of an exchange institution".

On 7 October 2020, the De Nederlandsche Bank (DNB) informed on the assessment of management board members and supervisory board members of holding companies with a participation in an investment firm.

DNB has established that not all day-to-day policymakers and members of a supervisory body of a financial holding company are registered for assessment by DNB.

Day-to-day policymakers and members of a supervisory body of a financial holding company must meet the requirements of suitability (Section 3: 8 Wft) and reliability (Section 3: 9 Wft). DNB must determine the suitability (in the case of day-to-day policymakers and members of a supervisory body) and reliability of the candidates. This assessment process makes an important contribution to DNB's supervision, which focuses on solid and ethical financial institutions that meet their obligations.

On 16 October 2020, the Eidgenössische Finanzmarktaufsicht (FINMA) publishes Guidance 08/2020 on LIBOR replacement for derivatives. 

FINMA recommends that supervised institutions affected by the replacement of LIBOR sign the new Fallbacks Protocol published by the International Swaps and Derivatives Association (ISDA) as soon as possible. 

The discontinuation of LIBOR is getting closer. The largest stock of legacy LIBOR-linked contracts are over-the-counter derivatives (OTC derivatives). In a survey of Swiss institutions conducted in June 2020, FINMA noted that OTC derivatives worth over CHF 11.5 trillion are contractually linked to LIBOR beyond the year 2021.

On 19 October 2020, the Der Bundesrat / Le Conseil fédéral published a consultation on blanket ordinance in area of blockchain.

On 25 September 2020, the Swiss Parliament unanimously adopted the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT), thereby amending specific provisions in ten existing federal acts. This has further improved the framework conditions for Switzerland to become a leading, innovative and sustainable location for blockchain and DLT companies.

A blanket ordinance is now planned to incorporate the legislative amendments voted by Parliament into law at federal ordinance level.

The consultation of the cantons, parties and other interested groups will run until 2 February 2021. It is expected that the Federal Council will bring the amendments to the acts and ordinances into force on 1 August 2021. However, it is planned that the amendments to the Financial Services Act and the Financial Institutions Act that were adopted by Parliament as part of the DLT bill will enter into force earlier. These amendments limit the ombudsman affiliation requirement for specific financial service providers.

On 2 October 2020, the FINMA published its Guidance 07/2020: partial extension of the exemptions due to the COVID-19 pandemic.

The FINMA is only partially extending exemptions in the procedure for opening new business relationships.

The current developments permit a return to the previous opening procedure for new business relationships in accordance with the Anti-Money Laundering Act. Exemptions are no longer required for clients domiciled in Switzerland. For clients domiciled abroad the situation varies depending on the domicile or individual situation, so that FINMA will continue to grant certain exemptions for new client relationships in particular cases. FINMA specifies this in more detail in its new Guidance 07/2020 published in the context of the COVID-19 crisis.

FINMA had previously granted exemptions for the opening of new client relationships in its Guidance 03/2020 of 7 April 2020. Some of these exemptions were extended in Guidance 06/2020 of 19 May 2020.

On 27 October 2020, Switzerland publishes the Federal Act on credits guaranteed by a surety as a result of the COVID-19 in the Official Journal.

This Act defines: 

a. the purpose of the joint sureties granted under the Order of 25 March 2020 on joint sureties related to COVID-19 and the illicit use of funds during the term of these bonds; 

b. the amortization of credits bonded under OCaS-COVID-19 and interest rates; 

c. the tasks of the four surety organizations recognized under the Federal Act of October 6, 2006, on Financial Aid to SME Surety Organizations (Surety Organizations) in the management, monitoring and settlement of joint and several surety bonds pursuant to letter a, as well as their tasks in the prevention, combating and prosecution of abuse; 

d. the prevention, combating and prosecution of abuse in connection with the granting of joint and several surety bonds and credits; 

e. the coverage of losses and the assumption of administrative costs by the Confederation; 

f. the simplified transfer of credit claims to the Swiss National Bank (SNB) for the purpose of refinancing the credit grantors.

The present law is declared urgent. It is subject to referendum.

BACKGROUND

As the federal competence centre, the National Cybersecurity Centre (NCSC) is responsible for coordinated NCS implementation and regularly prepares a report on the state of implementation on behalf of the NCS Steering Committee.

WHAT'S NEW?

On 19 October 2020, the Der Bundesrat / Le Conseil fédéral announced that the implementation of 2018-2022 national strategy for protection of Switzerland against cyber-risks (NCS) is on track.

During its meeting on 5 October 2020, the Federal Council Cyber Committee adopted the report on the progress made in implementing the national strategy for the protection of Switzerland against cyber-risks (NCS). The 2018-2022 NCS specifies the strategic goals for protecting against cyber-risks. Implementation is going according to plan and is largely supported by players from the cantons, the business community, universities and the general public. 

The report covers the current implementation status as of the first quarter of 2020. A third of the 247 milestones defined in the implementation plan have already been reached. It deals with the progress made in promoting research and training and the support for SMEs and the general public.

Since the adoption of the 2018-2022 NCS, the Federal Council has also decided on and implemented the Confederation's new organisation in the area of cyber-risks. The Ordinance on Protecting against Cyber-Risks in the Federal Administration, which has been in force since 1 July 2020, creates the legal basis and governs cooperation both within the Federal Administration and with the cantons, businesses and academia.

WHAT'S NEXT?

Coordination in the area of combating cybercrime will be improved.

On 6 October 2020, Switzerland published the revised Law on the protection of data (LPD) in the Official Journal. The purpose of this law is to protect the personality and fundamental rights of natural persons whose personal data is processed.

The revision strengthens individuals' protection of personal data and responds to technological advancements and developments in international data protection standards (including the EU General Data Protection Regulation ("GDPR")). It is meant to allow Switzerland to uphold its status as a country adequately protecting personal data from an EU perspective.

As key amendments, the revision provides for strengthened individuals’ rights, increased transparency in data processing activities and extended governance and process rules for data controllers ("Controllers") and processors ("Processors"). The revised DPA also stipulates more severe fines for particular violations as well as certain reliefs.

On 6 October 2020, Switzerland published the "Digital Switzerland Strategy".

Today, digitisation is increasingly shaping our lives. Especially for a country like Switzerland, which has few resources, it is important to make the most of the opportunities that digital change offers society and the economy. Thanks to its stable political system and high innovation capacity, Switzerland is well placed to transfer the model of an open and modern Switzerland as a good place to live into the digital future. The digital transformation makes an essential contribution to the sustainable development of the country and to the achievement of the sustainable development goals of the UN Agenda 2030.

In order to ensure that the benefits of digital transformation are available to all Swiss citizens, authorities at all federal levels, civil society, business, science and politics must work together to promote change. A constant dialogue between all the players involved makes it possible to anticipate future challenges. 

On the basis of these considerations, the Federal Council defines the guidelines for a "Digital Switzerland" in its strategy. It calls on all stakeholders in "Digital Switzerland" to jointly address implementation projects and important cross-cutting themes. The action plan is an integral part of the strategy and contains concrete measures for achieving the strategic objectives.

This document replaces the Federal Council's "Digital Switzerland" strategy of 5 September 2018. The text of the strategy and links to the reference documents are published at www.digitaldialog.swiss.

On 22 October 2020, the Eidgenössische Finanzmarktaufsicht (FINMA) published a practical guide to requests for recognition in terms of the quality of a foreign trading venue. 

These guidelines seek to assist applicants submitting applications for recognition of foreign trading venues in accordance with the requirements set out in the Financial Market Infrastructure Act (FMIA; SR 958.1). These guidelines are not legally binding (see Art. 41 para. 4 FMIA).  They define the details and documentation to be included with the application.

On 22 October 2020, the Swiss National Bank (SNB) announced its opposition to "War Deals Initiative".

On 29 November 2020, the popular initiative "For a ban on the financing of war material producers" (War Business Initiative) will be voted on. The SNB rejects the initiative.

According to the initiative, AHV, pension funds, foundations as well as the National Bank are to be banned from holding securities from companies that generate more than 5% of their annual turnover with the production of war material. No loans may be granted to the respective companies

The SNB is against it for the following reasons:

• The new constitutional provision would lead to legal uncertainty and major practical problems for the SNB as the institution directly affected. 
• By accepting the initiative, the SNB would significantly restrict its investment options and the professional management of its equity investments.
• Acceptance of the initiative would result in additional costs and risks for asset management.
• The initiative calls into question the independence of the National Bank in an important area of ??responsibility, namely asset management.

On 28 October 2020, the FINMA licensed a fifth supervisory organisation and authorised a third registration body.

FINMA has licensed a fifth supervisory organisation and authorised a third registration body. There are no further applications pending. The establishment phase of the institutional conditions for implementation of the Financial Institutions Act (FinIA) and Financial Services Act (FinSA) has thus been completed on schedule.

FINMA has licensed the Schweizerische Aktiengesellschaft für Aufsicht AOOS with effect from 27 October as the fifth supervisory organisation (SO). AOOS gained recognition at the same time as a self-regulatory organisation (SRO) as per the Anti-Money Laundering Act (AMLA). On 19 October, FINMA authorised PolyReg Services GmbH based in Zurich as a registration body for client advisers. PolyReg Services GmbH is the third registration body pursuant to FinSA.

FINMA currently has no further pending authorisation applications for SO, registration bodies or reviewing bodies for prospectuses.

The deadlines for implementing FinIA and FinSA differ depending on the financial services provider’s activity: 

• Portfolio managers and trustees: there are now five supervisory organisations for the supervision of portfolio managers and trustees. FINMA has licensed 11 portfolio managers to date.  Portfolio managers and trustees must apply for a licence from FINMA by the end of 2022, which includes proving that they are affiliated to an SO. They must be affiliated to an SO by 6 July 2021 at the latest and submit a licence application
• Client advisers: Three registration bodies keep registers of advisers in which client advisers of financial service providers which are not subject to prudential supervision must register by 20 January 2021.
• Prospectus review: The financial market participants have two reviewing bodies to choose from for the review of prospectuses prior to publication. From 2 December 2020, a prospectus must be published prior to making a public offer for the purchase of securities or to the admission of securities for trading on an exchange. The prospectus must have been approved by a reviewing body authorised by FINMA.

On 28 October 2020, the Financial Conduct Authority (FCA) published Policy Statement PS20/12  - Extending the implementation  deadlines for the Certification  Regime and Conduct Rules.

Scope of application:

1. These changes affect:

• all FCA solo-regulated firms authorised to provide financial services under the Financial Services and Markets Act 2000 (FSMA)
• Appointed Representatives (ARs) are in scope of the extension to the reporting deadline for Directory Persons

2. These changes do not apply to benchmark administrators.

This PS confirms that the FCA will extend the deadline for the following requirements correspondingly from 9 December 2020 to 31 March 2021 as consulted on: 

• the date the Conduct Rules come into force, for staff who are not Senior Managers, Certification Staff or board directors 
• the date by which relevant employees must have received training on the Conduct Rules (this automatically follows from the extension in the previous bullet point) 
• the deadline for submission of information about Directory Persons to the Register 
• references in FCA's rules to the statutory deadline for assessing Certified Persons as fit and proper following agreement with the Treasury 1.13.

The FCA will also extend the implementation deadlines for Claims Management Companies (CMCs) by an equivalent period. This means that a CMC receiving full authorization on or after 9 December 2019 will have just over 15 months after the date of its full authorization to meet the same set of requirements in paragraph 1.12. 1.14

The feedback that the FCA received indicates that most firms will be able to meet the original deadline of 9 December 2020. Once firm’s Directory Persons data has gone live on the Register, the information firms report to the FCA ahead of the new March 2021 deadline will appear as they report it.

On 9 October 2020, the Financial Conduct Authority (FCA) published PS20/10: Prohibiting the sale to retail clients of investment products that reference cryptoassets.

This PS will be particularly relevant for:

• firms issuing or creating products referencing cryptoassets
• firms distributing products referencing cryptoassets, including brokers and investment platforms, and financial advisers
• firms marketing products referencing cryptoassets
• operators of trading venues and platforms
• retail consumers and consumer organizations.

Unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as Bitcoin, Ether or Ripple. Specified investments are types of investment which are specified in legislation. Firms that carry out particular types of regulated activity in relation to those investments must be authorized by the FCA. 

To address these harms, the FCA has made rules banning the sale, marketing and distribution to all retail consumers of any derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.

The ban will come into effect on 6 January 2021. UK consumers should continue to be alert for crypto-derivative investment scams. As the sale of derivatives and ETNs that reference certain types of cryptoassets to retail consumers is banned, any firm offering these services to retail consumers is likely to be a scam.

On 30 October 2020, the Financial Conduct Authority (FCA) published Requirements and directions under reg. 8(4) and (7) of the Financial Services and Markets Act 2000 (Over the Counter Derivatives, etc) Regulations 2013.

The FCA has provided requirements and direction under this regulation in relation to the information to be contained in an application for, or notification of, an exemption under paragraph (8) or (9) of Article 11 of EMIR, and the form in which that information must be provided.

This instrument is limited to applications and notifications in relation to UK counterparties who benefited from an exemption under paragraph 2 of Article 36 or paragraph 3 of article 37 of Regulation 2016/2251, where: 

a) the exemption was not objected to or withdrawn by the FCA before its expiry on 4 January 2020; and  

b) no equivalence decision has yet been adopted pursuant to Article 13(2) of EMIR for the purposes of Article 11(3) of EMIR, in respect of the third country in which its counterparty is established. 

On 20 October 2020, the UK Government published the Financial Services Bill.

The new Bill designed to ensure the UK’s world-leading financial services sector continues to thrive and grasp new opportunities on the global stage was introduced to the UK's Parliament.

The Bill will:

1. Enhance the UK’s world-leading prudential standards and promote financial stability:

• updates to the prudential regulatory regime to implement the remaining Basel 3 banking standards
• implementation of a more proportionate prudential framework for the regulation of investment firms
• clarification and extension of the FCA’s set of powers to ensure the orderly wind-down of the critical LIBOR benchmark
• extension of the transitional period for third-country benchmarks from end-2022 to end-2025, avoiding financial stability risks and economic repercussions for UK users should they lose access

2. Promote openness between the UK and international markets

• introduction of the new equivalence regimes for retail investment funds and money market funds, which will simplify the process for investment funds that are domiciled overseas to market to UK consumers
• delivery of long-term market access between the UK and Gibraltar for financial services firms on the basis of alignment and cooperation, now that the UK and Gibraltar have left the EU
• updates the MiFIR regime which regulates the services and activities of third-country firms in the UK, following an equivalence decision. This will ensure the FCA has an appropriate degree of oversight over firms that could register under the regime.

3. Maintain an effective financial services regulatory framework and sound capital markets

• improvement of the functioning of the on-shored PRIIPs Regulation by enabling the FCA to make clarificatory rules regarding the scope of the Regulation and removing reference to performance scenarios
• amendments to the Market Abuse Regulation to bolster the effectiveness of the regime while reducing some of the administrative burden on issuers
• increase of the maximum prison sentence for market abuse from 7 to 10 years in line with other sentences for financial crimes, as recommended by the 2015 Fair and Effective Markets Review
• clarification of the Government’s ability to enforce and make changes to extra-territorial trust registration powers
• completing the implementation of European Market Infrastructure Regulation (EMIR REFIT)
• amendments to the Banking Act in relation to the Financial Collateral Arrangement Regulations (FCARs)
• clarification of FCA’s process for removing a firm’s authorization and taking them off the public register, to improve accuracy and reduce the risk of fraud.

On 23 October 2020, the FCA published Handbook Notice 81, which describes the changes to the FCA Handbook and other material made by the Financial Conduct Authority (FCA) Board under its legislative and other statutory powers on 23 July 2020, 30 September 2020 and 22 October 2020:

- FCA 2020/46 - Conduct of Business (Cryptoasset Products) (Amendment) and Associated Exiting the European Union Amendments Instrument 2020: 

• Annex A comes into force on 06/10/2020; 
• Annex B comes into force on: 06/01/2021; or 
• Effective from IP completion day as defined in the European Union (Withdrawal Agreement) Act 2020.

- FCA 2020/51 - Technical Standards (Securities Financing Transactions Regulation) (EU Exit) (No 1) Instrument 2020: 

• Effective from IP completion day as defined in the European Union (Withdrawal Agreement) Act 2020.

- FCA 2020/52 - Technical Standards (Securities Financing Transactions Regulation) (EU Exit) (No 2) Instrument 2020:

• Effective from IP completion day as defined in the European Union (Withdrawal Agreement) Act 2020.

- FCA 2020/56 - Technical Standards (Markets in Financial Instruments Regulation) (EU Exit) (No 3) Instrument 2020:

• Effective from IP completion day as defined in the European Union (Withdrawal Agreement) Act 2020.

- FCA 2020/61 - Handbook Administration (No 54) Instrument 2020:

• Effective from 23/10/2020; 
• Annex A which comes into force on 01/01/2021; 
• Part 2 of Annex B comes into force on 26/10/2020; 
• Part 3 of Annex B comes into force on 22/01/2021; 
• Part 4 of Annex B comes into force on 1 July 2021.

On 29 October 2020, the Financial Conduct Authority (FCA) informed that the FCA will be among 23 regulators across 5 continents taking part in the cross-border testing initiative organized by the Global Financial Innovation Network (GFIN).

To support the application process, the GFIN has developed several tools and solutions to improve the cross-border testing framework for a new cohort of firms, including:

• a single-entry application form for firms
• cross-border testing FAQs to help firms understand the process
• an evolved Regulatory Compendium clarifying the remit and interests of participating regulators and the types of innovation services available
• an extension of the application window to 9 weeks to allow firms more time to consider and prepare their applications.

Firms interested in applying to take part in cross-border testing should review the list of participating regulators and their respective Regulatory Compendiums and submit an application via the GFIN website before the 31 December deadline.

On 28 October 2020, the Prudential Regulation Authority (PRA) published Consultation Paper 20/20 which sets out its proposals to revise its operational continuity in resolution (OCIR) policy. This consultation closes on Sunday 31 January 2021.

Firms have already implemented the PRA’s existing OCIR requirements, and the proposals in this CP seek to build on the work firms have already undertaken. The PRA proposes to update that policy in four main ways:  

• The proposals in this CP would require firms to consider the operational arrangements that support the viability of the firm, and its key drivers of revenue and profit in addition to those supporting its critical functions. 
• The PRA is proposing changes to its policy regarding the way firms’ financial arrangements facilitate operational continuity. In the existing OCIR policy, the expectation for firms to hold resources is calibrated to ensure that firms remain financially resilient despite the failure or resolution of other group entities.
• Firms should be capable of ensuring continuity while being restructured following resolution. The PRA has proposed a number of changes to provide greater clarity compared with the existing policy, as well as amendments to the policy requirements that facilitate continuity throughout post-resolution restructuring. 
• As the proportion of operational arrangements for which operational continuity must be ensured is likely to increase, the PRA has considered how it may be possible to reduce the burden on firms of implementing OCIR policy without compromising a firm’s safety and soundness, or its ability to be resolved in an orderly manner. 

This CP is relevant to PRA-authorised UK banks, building societies, and PRA-designated UK investment firms currently in scope of, or likely to come into scope of, the Rules. For a firm to be in scope of the Rules, it must receive critical services, and must meet one of the three thresholds set out in Operational Continuity 1.1.

The PRA proposes that the changes resulting from this CP would take effect from Saturday 1 January 2022. The PRA intends to publish its final policy relating to OCIR in H1 2021. Many firms' existing OCIR arrangements may already be consistent with some of these proposals. The PRA would therefore expect that firms would be able to leverage their existing OCIR arrangements when considering the extent to which further work may be necessary ahead of Saturday 1 January 2022.

On 26 October 2020, the FCA updated on publication date for dual and solo regulated firms Directory Persons data, in particular:

• Dual-regulated firms must submit their Directory Persons data via FCA’s Connect system by no later than 13 November 2020. The FCA will begin to publish this data on the FS Register from 23 November 2020. 
• Solo-regulated firms must submit their Directory Persons data via FCA’s Connect system by 31 March 2021 using the single entry submission form. Earlier dates apply if they wish to use the multiple entry submission form and/or if they wish their data to appear from earlier dates starting in December.
• The FCA will begin to incrementally display data from solo-regulated firms as it is submitted - the data will start to be published from 14 December 2020. The last date for single entry submissions to appear from the outset of this publication is 9 December 2020.

On 1 October 2020, the Financial Action Task Force (FATF) published updated consolidated assessment ratings.

On 7 October 2020, the Egmont Group published Public Bulletin July 2020 - Money Laundering of Serious Tax Crimes: Enhancing Financial Intelligence Units’ Detection Capacities and Fostering Information Exchange.

The “Money Laundering of Serious Tax Crimes” report intends to enhance FIU knowledge on their powers, capacities, and best practices in the fight against ML of serious tax crimes. Moreover, this report, through a best practices toolkit, seeks to provide opportunities for FIUs to consider improvements to both national and international cooperation in order to strengthen their abilities to respond to these crimes. The tools provided in the report and public bulletin will ideally enable FIUs to have timely access to quality tax-related information to assist them with analysis and, in turn, share this information with the relevant national and international competent authorities.

On 26 October 2020, the Financial Action Task Force (FATF) published updated version of its recommendations. 

Minor consequential amendment in R.2 to insert reference to counter proliferation financing in the context of national co-operation and co-ordination.

Insertion of a new interpretive note that sets out the inter-agency framework to promote domestic co-operation, co-ordination and information exchange.

On 16 October 2020, the Financial Stability Board (FSB) published global transition roadmap for LIBOR. The roadmap sets out a timetable of actions for financial and non-financial sector firms to take in order to ensure a smooth LIBOR transition by end-2021.

In July the FSB reaffirmed that financial and non-financial sector firms across all jurisdictions should continue their efforts to make wider use of risk-free rates in order to reduce reliance on IBORs where appropriate and in particular to remove remaining dependencies on LIBOR by the end of 2021.

The LIBOR benchmarks are not guaranteed to continue to be available after end-2021 and therefore preparations should be underway to reduce reliance on these rates well ahead of that point. Use of LIBOR in the five LIBOR currencies (USD, GBP, EUR, JPY and CHF) is widespread internationally. Transition away from LIBOR by end-2021 requires significant commitment and sustained effort from both financial and non-financial institutions across many LIBOR and non-LIBOR jurisdictions.

This Global Transition Roadmap for LIBOR is intended to inform those with exposure to LIBOR benchmarks of some of the steps they should be taking now and over the remaining period to end-2021 to successfully mitigate these risks. These are considered prudent steps to take to ensure an orderly transition by end-2021 and are intended to supplement existing timelines/milestones from industry working groups and regulators. Among the steps in the Roadmap:

• Firms should have already, identified and assessed all existing LIBOR exposures and agreed on a project plan to transition in advance of end-2021.
• By the effective date of the ISDA Fallbacks Protocol, the FSB strongly encourages firms to have adhered to the Protocol.
• By the end of 2020, firms should be in a position to offer non-LIBOR linked loans to their customers.
• By mid-2021, firms should have established formalised plans to amend legacy contracts where this can be done and have implemented the necessary system and process changes to enable transition to robust alternative rates.
• By end-2021, firms should be prepared for LIBOR to cease.

On 1 October 2020, the International Capital Market Association (ICMA) published Preliminary Thoughts on the New Capital Markets Union Action Plan.

The International Capital Market Association (ICMA) supports the overall ambition and three key objectives of the new CMU Action Plan. ICMA also agrees that capital markets can help the EU deliver on its key economic policy objectives. In this respect, we note that the pan-European primary bond market is generally well developed and integrated currently, and has been a crucial source of funding for EU businesses during the COVID-19 pandemic, with around €680 billion raised in international European debt capital markets in Q2 2020.

ICMA welcomes the fact that some of the points raised in its preliminary thoughts and feedback on the High-Level Forum’s (HLF) Final Report were included in the Action Plan. This includes, inter alia, a proposed review to strengthen the role of securitisation and the European Long-Term Investment Fund (ELTIF) Regulation.

Several of the EC’s proposed actions relate to developing EU equity markets, particularly for SME funding. In pursuing these goals, and noting the crucial role that bond markets play in funding the EU’s larger businesses, ICMA strongly believes that it will be important to ensure that any measures do not unintentionally negatively impact upon the international bond market and, where relevant, effective action is taken to strengthen and further integrate this market (particularly in relation to secondary trading and repo activity).  

On 7 October 2020, the Financial Stability Board (FSB), together with the International Monetary Fund (IMF), published the Fifth Progress Report – Countdown to 2021 in light of COVID-19 on the implementation of the second phase of the G20 Data Gaps Initiative (DGI-2). 

This report provides an overview of the progress since the previous report in September 2019. It sets out the challenges encountered by participating economies during this pandemic and the remaining steps to implement the DGI-2 recommendations in 2021. The report highlights that:

• The COVID-19 pandemic posed significant challenges to the 2020 DGI work program, and thus participating economies agreed to extend DGI work by six months to December 2021.
• Nevertheless, progress in implementing the DGI-2 recommendations continued, despite the challenges that COVID-19 poses. Positive developments include enhancements in compilation processes, data sharing arrangements, production and dissemination of additional tables, as well as instrument and sector breakdowns.
• To continue addressing data needs beyond 2021, many participating economies support maintaining an organized international collaboration process.
• The COVID-19 crisis has increased policymakers’ needs to obtain more granular, relevant, and reliable data. A possible new mandate could help address emerging policy questions. A general framework could be defined during 2021 and presented in the next DGI-2 progress report, which will be published in the second half of 2021 and delivered to G20 Finance Ministers and Central Bank.

On 23 October 2020, the Financial Action Task Force (FATF) published President Statement on the importance of allocating sufficient resources to AML/CFT regimes during the COVID-19 pandemic.

The COVID-19 pandemic, continues to have a profound impact on our society. Since the FATF’s May 2020 report on the challenges, good practices and policy responses to new money laundering and terrorist financing threats and vulnerabilities, arising from the COVID-19 crisis, the FATF has worked to update its understanding of the impact of this global crisis. The FATF has found that the analysis in the COVID-19-related Money Laundering and Terrorist Financing Risks and Policy Responses report remains relevant.

Criminals continue to exploit the pandemic, with mounting cases across the globe of counterfeiting of medical goods, investment fraud, adapted cyber-crime scams and exploitation of economic stimulus measures put in place by governments. At the same time, the pandemic has severely impacted some government and private sectors’ ability to implement measures to detect, prevent and investigate money laundering and terrorist financing. Over half of the responses to a survey conducted across the Global Network, report an impact on government’s ability to detect, investigate, prosecute or disrupt money laundering activity.

The FATF, its members and observers, the FATF-style regional bodies and members of the global network are continuing to work together to understand the impacts of the pandemic on money laundering, terrorist financing and on the operation of anti-money laundering and counter-terrorist financing (AML/CFT) systems.

A recent survey conducted across the Global Network, as well as a series of webinars on COVID-19 in July and September, indicate that the findings from the FATF’s earlier report remain relevant. However, the impact of the pandemic, and nature of the risks, the resilience of national AML/CFT regimes, and the risks faced by private sector all vary significantly from country to country, due to different approaches to confinement, social distancing measures, and available infrastructure.

It remains critical that jurisdictions continue to actively identify, assess, and understand how criminals and terrorists can exploit the COVID-19 pandemic, and apply a risk-based approach to ensure that measures to prevent or mitigate the risks are commensurate with the money laundering and terrorist financing risks identified.

Rising unemployment, increases in remote transactions and the accelerated implementation of stimulus programs represent vulnerabilities that criminals may exploit over the coming months. Increases in the circulation of cash in economies as a result of economic uncertainty, and the closure of borders are also likely to impact money laundering activity.

New technologies have helped the private sector adapt to the pandemic, for example using digital forms of identity to enable non-face-to-face interaction with customers. Other digital solutions could support information sharing, and detection and analysis of suspicious activities. Work under the German of the Presidency of the FATF will seek to drive forward the digital transformation of AML/CFT systems, helping ensure their resilience in future and building their efficiency.

Effective sharing of information between public and private sector entities, including through the use of public-private partnerships, has become even more crucial in ensuring that AML/CFT systems can adapt to the changing environment and continue to operate effectively.

Ensuring citizens remain safe from harm caused by criminal activity including money laundering and terrorist financing should remain a priority for all governments around the world. Competent authorities must continue to be provided with the appropriate resource to enable them to function effectively, in light of the evolving threats posed by criminals, and the constraints on resource faced as a result of the effects of the pandemic.

On 13 October 2020, the Financial Stability Board (FSB) delivered a roadmap to enhance cross-border payments. The roadmap has been delivered to G20 Finance Ministers and Central Bank Governors for their meeting on 14 October 2020.

This report presents a roadmap to address the key challenges often faced by cross-border payments and the frictions in existing processes that contribute to these challenges. 

The roadmap provides a high-level plan, which sets ambitious but achievable goals and milestones, and is designed to allow for flexibility and adaptation in the path to get there as the work progresses, while ensuring that the safeguards in terms of secure processing and legal compliance are observed. It encompasses a variety of approaches and time horizons, in order to achieve practical improvements in the shorter term while acknowledging that other initiatives will need to be implemented over longer time periods. It follows the structure of the Stage 2 report, setting out actions and indicative timelines in the following five focus areas:

• Committing to a joint public and private sector vision to enhance cross-border payments
• Coordinating on regulatory, supervisory and oversight frameworks
• Improving existing payment infrastructures and arrangements to support the requirements of the cross-border payments market
• Increasing data quality and straight-through processing by enhancing data and market practices
• Exploring the potential role of new payment infrastructures and arrangements

On 5 October 2020, the International Swaps and Derivatives Association (ISDA) published a whitepaper on Collaboration and Standardization Opportunities in Derivatives and SFT Markets.

This paper explains and illustrates how and why two large, important and interconnected markets – derivatives and securities financing transactions (SFTs) – could collaborate to achieve greater standardization and improved efficiency.

Key elements of such an approach would include:

• Developing common legal definitions across the derivatives and SFT markets, documenting derivatives and SFTs under a common master agreement and procuring one set of legal opinions in jurisdictions around the world on close-out netting for both derivatives and SFTs.
• Implementing consistent solutions across the derivatives and SFT markets that enable market participants to more seamlessly adapt and migrate when key changes (such as the interbank offered rate (IBOR) transition) occur.
• Facilitating the digitization of the derivatives and SFT markets, in terms of both negotiating and documenting trades, and developing a consistent trade record for confirmations and reporting, with standardized trade content and formats.

This paper will elicit constructive dialogue and analysis among derivatives and SFT market participants on the benefits, challenges and feasibility of a more collaborative and standardized approach in these key financial segments.

On 6 October 2020, the International Capital Market Association (ICMA) published amendments to the ICMA Primary Market Handbook, in particular:

• amendments to Chapter 5, Bookbuilding and launch – inserting a new item 5.13A (under the Book disclosure heading);
• amendments to Appendix A7, ECP documentation for Investment Grade issuers – content updating for LIBOR cessation, the MiFID II product governance regime and BRRD Article 55; inclusion of drafting notes (notably regarding the EU Blocking Regulation, German Foreign Trade Regulation and the US QFC Stay Rules); and inclusion of other minor practice/drafting changes (notably service by email, LEI placeholders and rating agency / clearing system name changes).

On 8 October 2020, the International Capital Market Association (ICMA) published Quarterly Report - Fourth Quarter 2020, which highlights three main themes:

• COVID-19 as a catalyst for change in international capital markets
• Post-Brexit: the way ahead in international capital markets
• Sustainable finance.

Other features are on Capital Markets Union and financing the recovery from COVID-19; the role of the Eurobond markets; transparency and liquidity in the European bond markets; lessons from COVID-19 and bond ETFs; and Asian bond market developments. The ICMA Quarterly Report also covers other international capital market practice and regulatory developments in the primary markets, secondary markets, repo and collateral markets, sustainable finance, asset management, the transition to risk-free rates, and FinTech in international capital markets.

On 12 October 2020, the International Capital Market Association (ICMA) announces that the third phase of SFTR reporting has gone live. 

SFTR reporting obligations will apply to investment funds, pensions funds and (re-)insurance undertakings, who will join sell-side firms, CCPs and CSDs, who have already been reporting for 3 months. The first few months of SFTR reporting have certainly exceeded expectations with consistently high acceptance rates reported by the trade repositories. It is hoped that the buy-side firms that start reporting today can build on and replicate this success. 

ICMA has been leading the implementation process for SFTR reporting of repos in a collaborative effort coordinated by the ERCC’s SFTR Task Force. The Task Force brings together around 700 individuals representing more than 150 firms, including most of the key players on the buy-side. It has also consulted with buy-side associations, in particular, the Investment Association in the UK.  

Based on feedback from the Task Force, ICMA has put together detailed best practice recommendations for the industry which complement and supplement the regulatory framework and aim to ensure consistency in firms’ implementation efforts (and a Quick Guide mapping recommendations to data fields). Over the past weeks, in the run-up to today’s go-live, discussions have focused on a number of specifically buy-side questions, including reporting issues for multimanaged funds, particularly for the reporting of reuse and variation margining, but also the classification of investment managers. These discussions have led to a few last-minute updates to the ICMA recommendations.   

In addition to the best practices, ICMA has published a set of sample reports, some of which show how buy-side repos should be reported. ICMA is also publishing, on a weekly basis, consolidated SFTR data released by the TRs. Figures and charts from the first 3 months of reporting are available on the SFTR public data page. We will continue to publish and analyse the data and will of course track the impact of today’s expansion of the reporting population on the statistics.   

On 29 October 2020, the ICMA European Repo and Collateral Council (ERCC) published an updated version of the ICMA Recommendations for Reporting under SFTR.

The Recommendations aim to help members interpret the regulatory reporting framework specified by ESMA and set out complementary best practice recommendations to provide additional clarity and address ambiguities in the official guidance. Compared to the previous edition, the new version of the guide includes a number of further updates to address reporting issues raised by members since the initial go-live on 13 July, and it also covers a number of specific buy-side questions and important lessons learnt since the buy-side reporting go-live on 12 October. In addition, the latest version of the guide now also includes a detailed breakdown of the post-Brexit reporting obligations under SFTR and MiFIR for UK, EU and non-EU counterparties.

For ease of comparison, ICMA published, alongside the new guide, a blackline version which shows all the changes that have been made since the last publication in September. Going forward, the document will continue to evolve to reflect ongoing discussions in the ERCC SFTR Task Force as well as any additional guidance received from ESMA and/or the National Competent Authorities (NCAs). In addition to the detailed recommendations, ICMA has also developed a number of complementary best practice documents, including a comprehensive set of over 50 SFTR sample reports, which are available on the ICMA website.

On 12 October 2020, the United Nations Environment Programme – Finance Initiative (UNEP FI) published climate risk applications guidance and practices. 

This report provides a stock-take on the myriad ways financial institutions are incorporating climate risk considerations into their businesses and risk operations. Guided by the TCFD framework, this top-to-bottom perspective on climate risk applications explores board and executive strategic planning, risk analysis and reporting, and business line engagement with clients.

As part of this work, UNEP FI conducted a study of the TCFD Banking program participants to provide a window into current financial sector practices regarding climate risk management, analysis, and reporting. Several TCFD Banking program participants also contributed case studies to the report, which go into significant detail regarding specific applications of climate risk at those institutions.

In addition to these observations, this report provides concrete and actionable guidance on how to successfully integrate climate risk throughout a financial institution. This guidance will help industry participants more effectively meet the challenges of a rapidly changing world.

On 20 October 2020, the United Nations Environment Programme – Finance Initiative (UNEP FI) published a report on Financing Circularity: Demystifying Finance for the Circular Economy, 

The report outlines how the financial sector can scale up financing to accelerate the shift to circular business models in order to keep resources at their highest value long-term and to reduce waste. The report explores strategies and actions that financial institutions can take to manage related risks and opportunities. Opportunities include rethinking of the design and manufacturing of products and services, reducing inputs in agricultural production, and digital solutions to transform industries, coupled with waste management models designed to close material and resource loops.