On 3 January 2022, the European Securities and Markets Authority (ESMA) published the final report on the guidelines on certain aspects of the MiFID II appropriateness and execution-only requirements. 

These requirements constitute an important element of investor protection in the provision of investment services other than investment advice or portfolio management. Under MiFID II, investment firms providing non-advised services are required to request information on the knowledge and experience of clients or potential clients to assess whether the investment service or product envisaged is appropriate, and to issue a warning in case the investment service or product is deemed inappropriate. The execution-only framework allows for an exemption to this assessment in certain conditions, including that the firm issues a warning to the client.

The purpose of the Guidelines is to enhance clarity and to foster convergence in the application of the appropriateness and execution-only requirements. The ESMA Common Supervisory Action (CSA) conducted in 2019 showed there was a need for such convergence in the area of appropriateness and execution-only. The Guidelines cover several important aspects of the appropriateness process, spanning from the information to be provided to clients about the purpose of the appropriateness assessment, the arrangements necessary to understand clients and products, to the matching of clients with appropriate products and the effectiveness of warnings. Moreover, other related requirements are clarified, such as the execution-only exemption and record-keeping and controls.

ESMA conducted a public consultation on these Guidelines to gather the views of relevant stakeholders. The report published on this day contains a feedback statement summarising the responses received and highlighting the amendments and clarifications introduced in the final guidelines to consider the feedback received during this consultation.

The Guidelines will be translated into the official languages of the EU and published on ESMA’s website. The publication of the translations will trigger a two-month period during which national competent authorities must notify ESMA whether they comply or intend to comply with the Guidelines. The Guidelines will apply six months after the date of the publication on ESMA’s website in all EU official languages.

On 27 January 2022, the European Securities and Markets Authority (ESMA) opened a consutation on the Guidelines on certain aspects of the MiFID II suitability requirements.

The assessment of suitability is one of the most important protections for investors under MiFID II and applies to the provision of all types of investment advice (whether independent or not) and portfolio management.

The main amendments introduced to the MIFID II Delegated Regulation and reflected in the guidelines on the topic of sustainability are:

• Collection of information from clients on sustainability preferences – Firms will need to collect information from clients on their preferences in relation to the different types of sustainable investment products to what extent they want to invest in these products;
• Assessment of sustainability preferences – Once the firm has identified a range of suitable products for client, in accordance with the criteria of knowledge and experience, financial situation and other investment objectives, it shall identify - in a second step - the product(s) that fulfil the client’s sustainability preferences; and
• Organisational requirements – Firms will need to give staff appropriate training on sustainability topics and keep appropriate records of the sustainability preferences of the client (if any) and any updates of these preferences.

The review of this set of guidelines is also the opportunity to consider other relevant factors such as:

• the integration of the good and poor practices identified in the 2020 Common Supervisory Actions (CSA) to complement the current guidelines. These good and poor practices will give practical guidance to firms in the areas where lack of convergence still seems to persist; and
• the amendments introduced through the Capital Markets Recovery Package to Article 25(2) of MiFID II.   

The consultation closes on 27 April 2022. ESMA will consider the feedback it receives to the consultation in Q2 2022 and expects to publish a final report in Q3 2022.

On 10 January 2022, the European Union (EU) published in its Official Journal (OJ) Commission Delegated Regulation (EU) 2022/26 of 24 September 2021 supplementing Regulation (EU) 2019/2033 of the European Parliament and of the Council with regard to regulatory technical standards specifying the notion of segregated accounts to ensure client money’s protection in the event of an investment firm’s failure.

The regulation is as follows: 

As regards the conditions that ensure the protection of client money in the event of failure of an investment firm, the notion of segregated accounts referred to in Article 15(5)(b) of Regulation (EU) 2019/2033 shall mean that:

(a) records and accounts are kept in a way that enables investment firms at any time and without delay to distinguish funds held for one client from funds held for any other client and from their own funds;

(b) records and accounts are maintained in a way that ensures their accuracy, and in particular their correspondence to the funds held for clients, and that they may be used as an audit trail;

(c) reconciliations are conducted on a regular basis between the internal accounts and records of investment firms and those of any third parties by whom those funds are held;

(d) necessary steps have been taken to ensure that client funds deposited are held in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm;

(e) adequate organisational arrangements have been introduced to minimise the risk of the loss or diminution of client funds, or of rights in connection with those funds, as a result of misuse of the funds, fraud, poor administration, inadequate record-keeping or negligence.

On 10 January 2022, the European Union (EU) published in its Official Journal (OJ) Commission Delegated Regulation (EU) 2022/27 of 27 September 2021 amending Regulation (EU) No 236/2012 of the European Parliament and of the Council as regards the adjustment of the relevant threshold for the notification of significant net short positions in shares.

The recent developments in financial markets observed by the Commission, such as the instability caused by the global outbreak of COVID-19, which has led to a more frequent recourse to emergency measures on short selling by regulators and European Securities and Markets Authority (ESMA), as well as the growing risk of retail investors being involved in short squeezes, have stressed the importance to gather additional intelligence in significant net short positions in shares on permanent basis, which is critical for market surveillance purposes. In that regard, ESMA’s opinion assessed that the lower relevant notification threshold significantly improved transparency and monitoring of significant net short positions in shares at individual, sectorial and market-wide level, resulting in an increase in regulatory efficiency. ESMA also considered that marginal costs for implementation by market participants should be negligible, considering that they have been applying such threshold for several months. Furthermore, the Commission considers that uncertainty with respect to the regulatory reporting obligation should be avoided and rules and obligations in this respect should be stable. 

On that basis, and taking into account recommendations set out in ESMA’s opinion, with which the Commission agrees, the current relevant notification threshold is amended as follows:

• In Article 5 of Regulation (EU) No 236/2012, paragraph 2 is replaced by the following: ‘2.   A relevant notification threshold is a percentage that equals 0,1 % of the issued share capital of the company concerned and each 0,1 % above that.’.

On 26 January 2022, the European Securities and Markets Authority (ESMA) published a Statement to clarify how to report net short positions (NSPs) between 28 and 31 January 2022 when the reporting threshold changes from 0.2% to 0.1%.

The last day of application of the old reporting threshold (0.2%) will be in relation to Friday, 28 January 2022, with NSPs to be reported to RCAs by 15.30 of the following trading day, i.e. Monday, 31 January 2022.

From Monday, 31 January 2022 onwards, position holders will have to report when their NSPs in shares exceed or are equal to 0.1% of the issued share capital and each 0.1% above that.

The statement requires position holders to report NSPs between 0.1% and 0.2% on the day of application of the 0.1% reporting threshold, even where they were entered into ahead of that date. This is to give Relevant Competent Authorities the full picture of NSPs above the new threshold, which otherwise would be incomplete.

Reporting entities are invited to read the statement which also provides for practical examples on when and how to report.

On 5 January 2022, the Autorité des marchés financiers (AMF) published its priorities for 2022, the last year of its five-year strategy.

Priorities for action

The AMF's priorities for action for 2022 continue to be shaped by the #Supervision2022 five-year strategy, to round off some initiatives taken in recent years. They are divided into four main areas:

• Europe, where the AMF is actively involved, by providing technical support to the French presidency of the Council of the European Union in the first half of 2022, and by contributing to EU-led initiatives, whether to enhance capital market transparency, support the key role of asset management in financing the economy, prepare the implementation of the future crypto-asset framework or contribute to supervisory convergence;
• Retail investment: the AMF intends to push for a European framework that protects investors, while facilitating their access to capital markets. To this end, the AMF has already made several regulatory proposals and will play a full part in the discussions on a European retail investment strategy. The AMF will also continue to educate new investors and prevent scams and bad marketing practices by mobilising all the stakeholders concerned;
• Sustainable finance: The AMF will support companies in implementing the European taxonomy and contribute to the development of sustainability reporting standards. The AMF is also making the fight against greenwashing a priority in 2022, with the implementation of the European transparency framework, proposals for appropriate labels and standards and continued work on the contribution of finance to the transition to carbon neutrality;
• Further modernisation of the AMF’s action: the AMF will, for example, continue to expand the use of data across all its business lines using the ICY platform, which is based on big data and artificial intelligence technologies. It will extend the ROSA extranet, which has been open to portfolio management companies since 2021, to products including the 12,000 French investment funds. At the same time, the organisation of work inside the AMF will be overhauled in line with the reorganisation of its offices and continuation of teleworking.

Supervisory priorities

The AMF has also outlined its supervisory priorities for the year. The themes identified include:

• Asset management: valuation of illiquid assets such as real estate or corporate bonds, compliance with constraints and contractual commitments in terms of sustainable finance, governance and quality of reporting data, monitoring and control of asset management companies by depositaries;
• Activities of market intermediaries and market infrastructures: the quality of transaction data on bonds (post-trade transparency) and reporting on derivatives transactions as well as the provision of market data by trading venues, cross-border activities;
• Marketing and investment advisory services: supervision of financial investment advisers, control of marketing carried out inside banking networks, establishment and transparency of distributors' costs and fees, marketing to vulnerable elderly people under the ACPR/AMF Joint Unit.

Version française

Le 5 janvier 2022, l'Autorité des marchés financiers (AMF) a publié ses priorités pour 2022, dernière année de sa stratégie quinquennale.

Priorités d’action

Les priorités d’action 2022 de l’AMF restent guidées par la stratégie à 5 ans #Supervision2022, pour parachever certaines initiatives prises au cours des dernières années. Elles se déclinent autour de quatre axes principaux :

• Le niveau européen, pour lequel l’AMF se mobilise, en apportant son soutien technique à la présidence française du Conseil de l’Union européenne au 1er semestre 2022 et en contribuant aux travaux européens, que ce soit pour renforcer la transparence des marchés de capitaux, soutenir le rôle clé de la gestion d’actifs dans le financement de l’économie, préparer la mise en œuvre du futur cadre européen des crypto-actifs ou faire converger la supervision ;
• L’investissement des particuliers : l’AMF entend œuvrer pour un cadre européen protecteur de l’épargnant, tout en facilitant l’accès aux marchés de capitaux. Dans cet esprit, l’AMF a d’ores et déjà formulé des propositions règlementaires et prendra toute sa part dans la réflexion en vue d’une stratégie européenne pour les investisseurs particuliers. L’AMF poursuivra également ses actions de pédagogie à destination des nouveaux investisseurs et de prévention des arnaques et des mauvaises pratiques de commercialisation en mobilisant l’ensemble des acteurs concernés ;
• La finance durable : l’AMF accompagnera les entreprises dans la mise en œuvre de la taxinomie européenne et contribuera au développement de normes de reporting de durabilité. L’AMF fait aussi de la lutte contre le greenwashing une priorité en 2022, avec la mise en application du cadre européen de transparence, des propositions pour des labels et standards adaptés et la poursuite de travaux sur la contribution de la finance à la transition vers la neutralité carbone ;
• La poursuite de la modernisation de l’action du régulateur : l’AMF poursuivra, par exemple, la généralisation à l’ensemble de ses métiers  d’une exploitation plus intensive des données en s’appuyant sur la plateforme ICY, qui met en œuvre des technologies big data et d’intelligence artificielle. Elle étendra l’extranet ROSA, ouvert aux sociétés de gestion de portefeuille depuis 2021, aux produits dont les 12 000 fonds d’investissement français. Parallèlement, l’organisation du travail au sein de l’AMF sera repensée dans un contexte de réaménagement des locaux et de pérennisation du télétravail.

Priorités de supervision

L’AMF a, par ailleurs, détaillé ses priorités de supervision pour l’année. Parmi les thèmes identifiés, figurent notamment :

• Gestion d’actifs : la valorisation des actifs peu liquides comme l’immobilier ou les obligations d’entreprises, le respect des contraintes et des engagements contractuels en matière de finance durable, la gouvernance et la qualité des données de reporting, le suivi et le contrôle des sociétés de gestion de portefeuille par les dépositaires ;
• Les activités des intermédiaires et des infrastructures de marché : la qualité des données de transaction sur les obligations (transparence post-négociation) et de reporting sur les transactions sur dérivés, la fourniture de données de marché par les plateformes de négociation ainsi que les activités transfrontières ;
• Commercialisation et conseil en investissement : la supervision des conseillers en investissements financiers, le contrôle de la commercialisation réalisée au sein des réseaux bancaires, l’établissement et la transparence des coûts et des frais des distributeurs, la commercialisation auprès des personnes âgées vulnérables dans le cadre du Pôle commun avec l’ACPR.

On 21 January 2022, the Association Française de Gestion (AFG) updated its Corporate governance recommendations for 2022.

The main changes in 2022 concern the following points: 

1/ Transparency prior to the vote on the accounts 

In order to clarify the shareholders' vote on the approval of the financial statements, the AFG requires that they be able to systematically rely on the auditors' report published sufficiently in advance of the general meeting. The AFG recommends that the auditors' report should include any element that would enable shareholders to understand any reservations, specific findings or possible non-certification mentioned in the report.

2/ "One share, one vote", a pillar of good governance

 Faced with projects that could undermine the major good governance principle of "one share, one vote" by aiming to introduce multiple voting rights in France, the AFG stresses the importance for shareholders of respecting shareholder democracy. Multiple voting rights can be detrimental to the company and the attractiveness of investments. The disconnection thus created between investment and voting rights can lead to harmful effects such as the abusive entrenchment of certain managers and constitute an anti-takeover measure.

3/ Executive compensation: 

• Any use of the board's discretionary power to readjust executive remuneration criteria should be exceptional and can be exercised upwards or downwards. 
• In the event of recourse to this discretionary power, the AFG recommends that shareholders be informed of the circumstances and reasons justifying these decisions, as well as the consequences for the calculation of executive compensation. 
• The AFG is opposed to any remuneration policy that incorporates a mechanism of alternative criteria that would allow a secondary criterion to be used if the main criterion is not met.

4/ Risk analysis 

As part of the audit committee's monitoring of the effectiveness of risk management and internal control systems, the AFG recommends that cybersecurity risks and the organisational crisis management procedures in place be integrated

Version française

Le 21 janvier 2022, l'Association Française de Gestion (AFG) a mis à jour ses recommandations de gouvernance d'entreprise pour 2022.

Les principales évolutions en 2022 concernent les points suivants : 

1/ Transparence préalable au vote sur les comptes. 

Afin de clarifier le vote des actionnaires sur l'approbation des comptes, l'AFG exige qu'ils puissent systématiquement s'appuyer sur le rapport des commissaires aux comptes publié suffisamment en amont de l'assemblée générale. L'AFG recommande que le rapport des commissaires aux comptes comporte tout élément permettant aux actionnaires de comprendre les réserves, les constatations particulières ou les éventuelles non-certifications mentionnées dans le rapport.

2/ " Une action, une voix ", un pilier de la bonne gouvernance

 Face à des projets qui pourraient mettre à mal le grand principe de bonne gouvernance " une action, une voix " en visant à introduire des droits de vote multiples en France, l'AFG souligne l'importance pour les actionnaires de respecter la démocratie actionnariale. Les droits de vote multiples peuvent être préjudiciables à l'entreprise et à l'attractivité des investissements. La déconnexion ainsi créée entre l'investissement et les droits de vote peut conduire à des effets néfastes tels que l'enracinement abusif de certains dirigeants et constituer une mesure anti-OPA.

3/ La rémunération des dirigeants : 

• Toute utilisation du pouvoir discrétionnaire du conseil d'administration pour réajuster les critères de rémunération des dirigeants doit être exceptionnelle et peut être exercée à la hausse ou à la baisse. 
• En cas de recours à ce pouvoir discrétionnaire, l'AFG recommande que les actionnaires soient informés des circonstances et des raisons justifiant ces décisions, ainsi que des conséquences sur le calcul de la rémunération des dirigeants. 
• L'AFG est opposée à toute politique de rémunération intégrant un mécanisme de critères alternatifs qui permettrait d'utiliser un critère secondaire si le critère principal n'est pas atteint.

4/ Analyse des risques 

Dans le cadre du suivi par le comité d'audit de l'efficacité des systèmes de gestion des risques et de contrôle interne, l'AFG recommande d'intégrer les risques de cybersécurité et les procédures organisationnelles de gestion de crise en place.

On 18 January 2022, the Autorité des marchés financiers (AMF) published Asset management 2020 key figures.

This document compiles six letters containing all the 2020 key figures for asset management. Several topics are covered such as information on players in the management industry through an overview of management companies, their profiles, the assets they manage, their activity, their profitability by analyzing their financial data. , their control system but also their own funds.

Version française

Le 18 janvier 2022, l'Autorité des marchés financiers (AMF) a publié les chiffres clés 2020 de la gestion d'actifs.

Ce document compile six lettres reprenant l’ensemble des chiffres clés 2020 de la gestion d’actifs. Plusieurs sujets sont traités tels que les informations sur les acteurs de l’industrie de la gestion à travers un panorama des sociétés de gestion, leurs profils, les encours qu’elles gèrent, leur activité, leur rentabilité par l’analyse de leurs données financières, leur dispositif de contrôle mais aussi leurs fonds propres.

On 27 January 2022, the Autorité des marchés financiers (AMF) published an update of the AMF doctrine on certain funds using Total Return Swaps and communicating on the inclusion of non-financial criteria.

After having published, in December 2020, a first doctrine limiting the communication of these collective investments and inviting the actors to develop a robust framework in order to allow the development of this offer, the AMF updates its doctrine opening the possibilities of communication of these products following the publication by the AMAFI and the FBF of a charter.

Version française

Le 27 janvier 2022, l'Autorité des marchés financiers (AMF) a publié une mise à jour de la doctrine de l'AMF relative à certains fonds utilisant des contrats d'échange sur le rendement global et communiquant sur la prise en compte de critères extra-financiers.

Après avoir publié, en décembre 2020, une première doctrine limitant la communication de ces placements collectifs et invitant les acteurs à élaborer un cadre robuste afin de permettre le développement de cette offre, l'AMF met à jour sa doctrine ouvrant les possibilités de communication de ces produits suite à la publication par l'AMAFI et la FBF d'une charte.

On 30 January 2022, the Decree no. 2022-82 of January 28, 2022 amending the obligations applicable to counterparties of undertakings for collective investment for the granting of guarantees in connection with derivative contracts was published in the Official Journal.

The decree abolishes the obligation for investment firms and branches of firms from third countries authorized in France mentioned in I of Article L. 532-48 of the Monetary and Financial Code to be authorized to hold custody accounts and to hold a minimum amount of own funds in order to grant guarantees to UCITS and AIFs. The abolition of these conditions applies only to guarantees granted in the context of derivative contracts.

Version française

Le 30 janvier 2022, le décret n° 2022-82 du 28 janvier 2022 modifiant les obligations applicables aux contreparties des organismes de placement collectif pour l'octroi de garanties dans le cadre des contrats sur produits dérivés a été publié au Journal officiel.

Le décret supprime l'obligation pour les entreprises d'investissement et les succursales d'entreprises de pays tiers agréées en France mentionnées au I de l'article L. 532-48 du code monétaire et financier d'être autorisées à détenir des comptes de dépôt et de détenir un montant minimal de fonds propres pour accorder des garanties aux OPCVM et aux FIA. La suppression de ces conditions ne s'applique qu'aux garanties accordées dans le cadre de contrats sur produits dérivés.

On 26 January 2022, the Autorité des marchés financiers (AMF) announced the new step in the adoption of the Regulation Pilot scheme for blockchain-based market infrastructures.

The European Commission's proposal to create a transitional regulatory framework to test the use of distributed ledger technologies (DLTs) in market infrastructures was approved by the European Council in December 2021. The European Parliament's Committee on Economic and Monetary Affairs has now adopted the text, which is expected to come into force by the end of 2022.

The creation of a pilot regime for market infrastructures based on blockchain technology has just passed several important milestones: a provisional political agreement on this draft regulation was reached in trilogues on 24 November between the Council Presidency and the European Parliament negotiators, and validated by the EU ambassadors on 21 December. The European Parliament's Committee on Economic and Monetary Affairs voted on this text on 13 January 2022. The pilot scheme regulation will have to be formally adopted by the European Parliament in plenary session and then by the Council in the coming months. It will then be published in the Official Journal of the EU. Its entry into force is envisaged before the end of the second half of 2022, and its application will take place 9 months later.

In parallel, the European Securities and Markets Authority (ESMA) has called on stakeholders to submit comments by 4 March 2022 on the adaptation of the MiFIR regulatory technical standards to this new pilot regime.

The pilot regime will be in place for three years, with the possibility of an extension for a further three years. It will be closely monitored by each national authority and by ESMA, which will check the uniformity of the system in the EU and will draw up a detailed report on the pilot scheme at the end of the three years. On the basis of this evaluation by ESMA, the Commission will have to submit a report to the Council and the Parliament on the costs and benefits of extending, amending or repealing the scheme.  

Version française

Le 26 janvier 2022, l'Autorité des marchés financiers (AMF) a annoncé une nouvelle étape dans l'adoption du règlement Régime pilote pour les infrastructures de marché sur blockchain.

La proposition de la Commission européenne de créer un cadre réglementaire transitoire destiné à tester l’utilisation des technologies de registre distribué (DLT) dans les infrastructures de marché a été approuvée par le Conseil européen en décembre 2021. La Commission des affaires économiques et monétaires du Parlement européen vient d’adopter le texte qui devrait entrer en vigueur d’ici à la fin de 2022.

La création d’un régime pilote pour les infrastructures de marché reposant sur la technologie blockchain vient de franchir plusieurs étapes importantes : un accord politique provisoire sur ce projet de règlement a été adopté en trilogues le 24 novembre entre la présidence du Conseil et les négociateurs du Parlement européen, accord validé par les ambassadeurs de l'Union européenne le 21 décembre. La Commission des affaires économiques et monétaires du Parlement européen a voté ce texte le 13 janvier 2022. Le règlement Régime pilote devra être formellement adopté par le Parlement européen en session plénière puis par le Conseil dans les prochains mois. Il sera ensuite publié au Journal officiel de l'UE. Son entrée en vigueur est envisagée avant la fin du second semestre 2022, son entrée en application aura lieu 9 mois plus tard.

Parallèlement, l'Autorité européenne des marchés financiers (ESMA) a appelé les parties prenantes à transmettre d’ici au 4 mars 2022 leurs commentaires sur l’adaptation des normes techniques réglementaires de MiFIR à ce nouveau régime pilote.

Le régime pilote sera mis en place pour une durée de 3 ans, pouvant être prolongée de trois années supplémentaires. Il fera l’objet d’un suivi rapproché de chaque autorité nationale et de l'ESMA, qui contrôlera l'uniformité du dispositif dans l'Union et établira un rapport détaillé sur le régime pilote à l’issue des trois années. Sur la base de cette évaluation de l’ESMA, la Commission devra remettre au Conseil et au Parlement un rapport sur les coûts et les avantages liés à l’extension de ce régime, sa modification ou son abrogation.

On 11 January 2022, the Chambre des représentants de Belgique publishes the Draft Law to implement Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European providers of participatory finance services for entrepreneurs, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 and to transpose Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021 amending Directive 2014/65/EU as regards information requirements, product governance and position limits, and Directives 2013/36/EU and (EU) 2019/878 as regards their application to investment firms, in order to support recovery from the COVID-19 crisis (II).

This bill aims to ensure the transposition of Directive 2021/338 of the European Parliament and of the Council of 16 February 2021 amending Directive 2014/65/EU as regards disclosure requirements, product governance and position limits, and Directives 2013/36/EU and 2019/878 as regards their application to investment firms, in order to support recovery from the COVID-19 crisis. The objective of this EU Directive is to support recovery from the economic shock of the COVID-19 pandemic by making limited and targeted changes to existing EU financial services legislation.

On 27 January 2022, the Financial Services and Markets Authority (FSMA) published Rules on sustainable finance.

New European rules on sustainable finance have been in the making since 2019. They are gradually coming into force. The FSMA wishes to draw the attention of credit institutions, management companies and investment firms to the sustainability rules that are or will be applicable to them. It has drawn up a document outlining these rules in brief. It is the responsibility of the companies to conduct their own in-depth analysis of the rules in order to ascertain their precise impact on their activities.

On 7 January 2022, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) announced that asset investments and securities documents are now being available in full in BaFin database.

As of 1 January 2022, BaFin will make asset and securities information sheets as well as asset sales prospectuses and their supplements available for full retrieval as pdf files on its website and keep them accessible there for at least ten years. Previously, only meta records were available for this purpose.

BaFin is now adapting its practice to the standard practice for securities prospectuses. The background to this are changes in the law as a result of the Anlegerschutzstärkungsgesetz (Investor Protection Strengthening Act), which came into force at the beginning of the year (sections 9(3), 13a(3), 14(4) of the Vermögensanlagengesetz (Investment Act), new version, and section 5(4) of the Wertpapierprospektgesetz (Securities Prospectus Act), new version). The following documents are concerned:

• Approved asset investment sales prospectuses as well as supplements thereto,
• Asset investment information sheets (VIBs) permitted for publication as well as their updated versions,
• Securities Information Sheets (WIBs) authorized for publication and their updated versions.

Prospectuses and VIBs, as well as supplements and updated versions of VIBs, must be submitted to BaFin for review and filing electronically and in an electronically searchable format via its reporting and publication system (MVP) as of January 1, 2022. This already applied to WIBs and their updated versions.

The publication of the documents by BaFin does not replace the publication by the provider itself. 

On 5 January 2022, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) informed that it is applying the ESMA Guidelines on enforcement of financial information.

BaFin will apply the German version of the updated guidelines on the supervision of financial information (enforcement) published by the European Securities and Markets Authority (ESMA) as of January 1, 2022.

The updated version of the guidelines is mainly intended to ensure further harmonization in the European Economic Area with regard to the following points:

• The manner in which issuers are selected for balance sheet control reviews
• The time period within which all issuers within the jurisdiction of a supervisory authority should be audited
• The manner in which the audits are carried out

ESMA's aim in amending its guidelines is to standardize the enforcement of accurate and complete financial information across Europe, thereby preventing regulatory arbitrage and contributing to investor protection. The amendments are effective as of January 1, 2022.

On 27 January 2022, Securities and Futures Commission (SFC) posted an updated AML/CFT Self-Assessment Checklist, which reflects the latest Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) (“AML/CFT Guideline”).

The AML/CFT Self-Assessment Checklist aims to provide a structured framework for licensed corporations (“LCs”) and associated entities (“AEs”) to assess compliance with the key AML/CFT requirements. LCs and AEs are advised to use the self-assessment checklist as part of their regular review to monitor their AML/CFT compliance.

The senior management of LCs and AEs should ensure that any compliance deficiencies identified during the regular reviews are rectified in a timely manner. In the course of our inspections, we may require LCs and AEs to provide documentary evidence of the performance of such review and its results.

On 21 January 2022, the Securities and Futures Commission (SFC) published a reminder of effective date of revised financial return form and e-submission.

reminded licensed corporations to use the revised financial return form for submitting a return in respect of any period ending on or after 24 January 2022. With effect from 1 February 2022, the electronic submission of financial returns will migrate to the SFC’s online platform, WINGS.

The SFC reminds licensed corporations that they must not make any unauthorised changes to the electronic financial return form. Otherwise, their submissions will be rejected by WINGS.

Separately, licensed corporations are reminded to ensure that financial returns are signed in accordance with section 56(6) of the Securities and Futures (Financial Resources) Rules (FRR). In addition, licensed corporations should remove from WINGS, in a timely manner, the signing rights of any of their responsible officers or officers approved under section 58(5)(e) of the FRR who are no longer authorised to sign the financial returns on their behalf.

On 1 January 2022, the the updated version of Financial Reporting Council Ordinance (Cap. 588) was published in the Official Gazette of Hong Kong.

The updates are on:

• Part 4A - Levies
• Schedule 7 - Calculation of Levies

On 1 January 2022, the Securities and Futures Commission (SFC) published revised Licensing Handbook.

All applications, notifications and annual returns by individual applicants and licensees should from 1 January 2022 be submitted via WINGS-LIC. Starting from 1 January 2022, applications, notification and annual returns by corporate applicants or intermediaries should also be submitted via WINGS.

On 27 January 2022, the Securities and Futures Commission (SFC) issued a joint circular, with the Australian Securities & Investments Commission (ASIC), highlighting observations from their collaborative reviews of FX activities conducted by global financial groups in their respective jurisdictions. 

The reviews focused on the participants’ internal controls and compliance with the applicable rules and regulations, as well as their adoption of the relevant industry guidelines (eg, the FX Global Code). 

Hong Kong, as a premier international financial centre, is one of the most important FX trading centres globally and in the Asia-Pacific region. The Hong Kong dollar has been amongst the top 10 currencies in global rankings in terms of turnover. Therefore, a major regulatory focus for the SFC is to ensure that licensed corporations, as participants in the FX market, act with fairness and in the best interests of clients as well as the integrity of the market.

Licensed corporations carrying out FX activities should review and consider how the observations and good industry practices set out in the SFC’s circular and its annex can be implemented to enhance their supervision, risk management and internal controls, and ensure compliance with the rules, regulations and industry guidelines.

On 1 January 2022, the Securities and Futures Commission (SFC) published revised Fit and Proper Guidelines.

The Fit and Proper Guidelines outline a number of matters that the SFC will normally consider in determining whether a person is fit and proper. The matters set out in these Guidelines are not exhaustive. These Guidelines do not have the force of law and should not be interpreted in a way that would override the provisions of any applicable laws, codes or other regulatory requirements.

The Fit and Proper Guidelines apply to a number of persons including the following: 

(a) an individual who applies for licence or is licensed under Part V of the SFO; 

(b) a licensed representative who applies for approval or is approved as a responsible officer under Part V of the SFO; 

(c) a corporation which applies for licence or is licensed under Part V of the SFO; 

(d) an authorized financial institution which applies for registration or is registered under Part V of the SFO; 

(e) an individual whose name is to be or is entered in the register maintained by the Hong Kong Monetary Authority (HKMA) under section 20 of the Banking Ordinance (relevant individual); and 

(f) an individual who applies to be or has been given consent to act as an executive officer of a registered institution under section 71C of the Banking Ordinance.

These Guidelines should be read in conjunction with the Guidelines on Competence and the Guidelines on Continuous Professional Training, which set out the initial and continuous competence requirements expected of a person.

On 21 January 2022, the S.I. No. 24 of 2022 - Consumer Protection Act 2007 (Competition and Consumer Protection Commission) Levy Regulations 2022 was published in the Irish Statute Book.

These Regulations provide for a levy scheme to fund the provision of information in relation to financial services including information in relation to the costs to consumers, the risks and benefits associated with the provision of those services and promoting the development of financial education and capability, in the year 2022. 

Scope of these Regulations:

• Credit Institutions
• Insurance Undertakings
• Investment & Stock Exchange Member Firms regulated under the European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017)
• Credit Unions
• Moneylenders
• Retail Credit firms.

On 11 January 2022, the S.I. No. 6 of 2022 - European Union (Markets in Financial Instruments) (Amendment) Regulations 2022 was published in the Irish Statute Book.

These Regulations give effect to Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021, the Capital Markets Recovery Package (CMRP). The CMRP is a package of measures that sets out of targeted amendments to financial services frameworks to support economic recovery in the aftermath of Covid-19 crisis. Amendments to Directive 2014/65/EU, the Markets in Financial Instruments Directive (MiFID II), include simplifying information requirements in a targeted manner while safeguarding investor protection.

On 26 January 2022, the Central Bank of Ireland (CBI) updated its statement for MiFID Investment Firms authorised to deal on own account or to underwrite financial instruments on a firm commitment basis (MiFID activities (3) or (6)).

All MiFID investment firms authorized to provide the MiFID investment services of dealing on own account or underwriting of financial instruments on a firm commitment basis1 should give due regard to both the threshold reporting requirements and the threshold calculation methodology for determining the need for reclassification of an investment firm as a credit institution set out in these publications.

In line with the Opinion published by the EBA MiFID investment firms that anticipate meeting the threshold triggering the requirement to seek re-authorization as a credit institution (“impacted MiFID investment firms”) are expected to:

• Engage with the Central Bank regarding their re-authorization within 3 months of date of the application of the Delegated Act;
• Submit an application for re-authorization as a credit institution within 6 months of date of the application of the Delegated Act.

On 31 January 2022, the Central Bank of Ireland (CBI) published its statement regarding ESMA Guidelines on Market Data.

These Guidelines are applicable from 01 January 2022 and will be applied by the CBI through incorporation of their contents into the CBI’s supervisory review practices.

On 12 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the two forms for:

• Declaration of honour for natural persons, and
• Declaration of honour for legal persons. 

The declaration shall be filled in electronically and a signed paper version shall be sent to the CSSF. 

On 27 January 2022, the Commission de Surveillance du Secteur Financier (CSSF) published a  reminder for 2021 Survey related to the fight against money laundering and terrorism financing.

Answers to the survey questions will have to be submitted through the CSSF eDesk portal by 15 April 2022 (at the latest).

The survey must be initiated and submitted via the CSSF eDesk portal by:

• the compliance officer in charge of the control of compliance with the professional obligations (“responsable du contrôle du respect des obligations professionnelles” (“RC”)), or
• the person responsible for compliance with the professional obligations (“responsable du respect des obligations professionnelles” (“RR”)).

On 27 January 2022, the Chambre des députés published draft law n°7961 amending the amended law concerning the register of commerce and companies as well as the accounting and annual accounts of companies and the amended law establishing a Register of beneficial owners.

The draft law aims at reinforcing the quality of the information registered in the RCS and at providing its manager with new means, in order to implement an efficient policy of follow-up of the registered persons and entities and to ensure their compliance with their obligations of registration and filing with the RCS.

In addition, the law has been adapted to new technologies allowing the optimization of the flow of information between the RBE manager and its users, by proposing a new secure channel of exchange, through an electronic platform made available by the State Information Technology Center (CTIE). This new platform opens the way to mass electronic communications, from "machine to machine", without human intervention and is designed for the implementation of computer services delivering large volumes of information, better adapted to the flow of exchanges with the manager's major clients than his current website. This new technology, already available for access to the RCS, is to be opened up to the RBE.

On 11 January 2022, the Commission de Surveillance du secteur financier (CSSF) published the Circular CSSF 22/792 on the application of the Guidelines of the European Securities and Market Authority on Settlement Fails Reporting under Article 7 of CSDR (ESMA70-156-4717).

The purpose of the present circular is to inform that the CSSF, in its capacity as competent authority, applies the Guidelines on Settlement Fails Reporting under Article 7 of CSDR (ESMA70-156-4717) (the “Guidelines”), published on 8 December 2021. Consequently, the CSSF has integrated the Guidelines into its administrative practice and regulatory approach with a view to promote supervisory convergence in this field at European level.

All Central Securities Depositories (“CSDs”), as defined in Article 2(1)(1) of CSDR, supervised by the CSSF shall duly comply with these Guidelines.

The Guidelines are issued by ESMA based on Article 16(1) of the ESMA Regulation. The purpose of these Guidelines is to establish consistent, efficient and effective supervisory practices within the European system of financial supervision and to ensure common, uniform and consistent application of Article 7(1) of CSDR and Articles 14 and 39 of the Commission Delegated Regulation (EU) 2018/1229 on settlement discipline, related to the exchange of information between ESMA and the competent authorities regarding settlement fails, and the content of the related reporting made by CSDs. 

The Guidelines apply from the date of entry into force of the RTS on settlement discipline.

The present circular shall apply to all CSDs established in Luxembourg.

This circular enters into force on the day of its publication.

BACKGROUND

On 18 January 2022, the Registre du Commerce et des Sociétés (RCSL) published a brochure relating to the new filing formalities applicable to natural persons from 31/03/2022.

This new filling formality follows a prior notice issued by the RCSL stating that, as of the end of Q1 2022, any natural person residing in Luxembourg or abroad, registered or to be registered with the Luxembourg trade and companies register (RCS) in any capacity whatsoever, will have to provide their Luxembourg national identification number (LNIN) and those who do not have a LNIN yet will have to obtain one.

WHAT'S NEW?

All natural persons recorded in the RCS in connection with the file of any legal entity registered therein (i.e. manager, director, shareholder, partner, auditor, authorized representative, etc.) must provide their LNIN to the RCS either through the process of a required filing by completing the form field dedicated to the LNIN or on a voluntary basis by updating their registered information on the RCS online portal.

A particular function will therefore be made available on the website of the RCS which will allow the communication of an already existing LNIN as well as enable users to request the creation of an LNIN.

WHAT'S NEXT?

These new registration formalities for natural persons will be applicable as of 31 March 2022.

Best way to anticipate these changes is to prepare the following:

• Establishing a list of persons already recorded in the RCS due to their shareholding or mandate relationship with the entity;
• Collecting LNINs from those who possess one already; and
• Obtaining the required authorizations to apply for a LNIN on the behalf of those who do not possess one already and collecting the necessary information/ documents to obtain such a LNIN.

Once the transitory period has ended and in case of any missing LNINs, with respect to individuals required to provide the LIN, the submission of documents will be blocked and will resume once all missing LNINs have been submitted.

On 4 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ on Virtual assets (UCIs) (4 January 2022).

The main update is the new question on whether a Luxembourg depositary may act as depositary for investment funds investing directly in virtual assets. The CSSF provided that Luxembourg fund depositaries may be mandated to act as depositary for investment funds investing directly in virtual assets. Certain conditions would need to be complied with as the regulatory requirements that depositaries are subject to would remain applicable. 

In this context, fund depositaries must put in place adequate organisational arrangements and an appropriate operational model, considering the specific risks related to the safekeeping of virtual assets. Moreover, depositaries shall notify the CSSF beforehand when they intend to act as depositary for an investment fund investing directly in virtual assets.

Beside the new question 5, the CSSF also updated the wordings of question 2 whether an AIF may invest in virtual assets. 

On 10 January 2022, the Chambre des députés published the draft law n°7945 transposing Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law.

The Directive aims to overcome the current fragmentation of whistleblower protection legislation in the European Union by introducing minimum rules and guarantees. Insufficient protection in one Member State could have negative effects on the functioning of EU policies not only in that Member State, but also in other Member States and in the EU as a whole. Common minimum standards for effective protection of whistleblowers should therefore apply. 

Although the Directive only covers certain EU acts and policy areas, the Luxembourg government has therefore chosen to extend the material scope of the Directive to all national law. This choice is motivated by the government's desire to guarantee a comprehensive and coherent framework for the protection of whistleblowers that is easily understandable and accessible. Violations of national law, irrespective of whether they are classified as administrative, criminal or other offences, can seriously harm the public interest and be detrimental to society in general.

It is furthermore planned to introduce a body to inform and assist whistleblowers, e.g. by indicating to which authority they should turn. This body will also be responsible for raising public awareness of the rights of whistleblowers. The remit of this body is without prejudice to the competences of the sectoral competent authorities.

The personal scope is also defined very broadly by the Directive, including not only workers and civil servants, but also shareholders, persons whose employment relationship has ended or not yet started, subcontractors, etc. The draft law therefore proposes to introduce means of protection covering these different categories of persons by drawing on existing and already very protective labour law, but innovating on certain points.

The Directive also obliges legal entities under private law with more than 50 employees to set up internal reporting channels, meeting certain criteria and allowing whistleblowers to inform their employer in confidence about significant violations. The obligation to establish an internal channel also applies to "all public sector legal entities, including any entity owned or controlled by such entities".

On 14 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the list of UCITS identifiers for URR reporting.

On 21 January 2022, the Commission de Surveillance du Secteur Financier (CSSF) published regulatory fees and charges.

The page contains information on the fees and charges levied by the Commission de Surveillance du Secteur Financier (the “CSSF”) for carrying out its duties in relation to the cross-border activities of AIFMs, EuSEF managers, EuVECA managers and UCITS management companies referred to in Article 10(1) of Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating crossborder distribution of collective investment undertakings.

On 24 January 2022, the Commission de Surveillance du Secteur Financier (CSSF) informed on the launch of the ESMA CSA on valuation in Luxembourg in March 2022.

On 20 January 2022, the European Securities and Markets Authority (ESMA) launched, in accordance with the announcement hereafter, a Common Supervisory Action (CSA) with national competent authorities (NCAs) on valuation of UCITS and open-ended AIFs (“CSA on valuation”) across the European Union. The methodology of this CSA has been developed by ESMA with the objective to ensure a common supervisory approach among NCAs.

The aim of the CSA on valuation is to assess the compliance of supervised entities with the relevant valuation-related provisions in the UCITS and AIFMD frameworks in particular the valuation of less liquid assets. The work will be done using a common assessment framework developed by ESMA, which sets out the scope, methodology, supervisory expectations and timeline for how to carry out a comprehensive supervisory action in a convergent manner.

The CSA will focus on authorised investment fund managers of UCITS and open-ended AIFs investing in less liquid assets.

In this context, the CSSF will launch beginning of March 2022 the first phase of the CSA by asking a sample of UCITS and AIFs investment fund managers to complete a dedicated questionnaire for all UCITS and AIFs managed. A representative selection of Luxembourg-based UCITS and AIFs investment fund managers as well as a limited number of EU UCITS and AIF investment fund managers managing Luxembourg UCITS and AIFs will be contacted by the CSSF shortly in that context.

In order to benefit from a secured environment and pre-submission data quality checks, the response questionnaire will have to be submitted by the respective UCITS/AIFs investment fund managers through a dedicated communication channel set up by the CSSF. The channel mentioned above will be accessible in due time.

The industry will be duly informed once this communication channel, together with additional guidance, will be available for use. Any complementary guidance from ESMA that may become available in that context at a later stage will also be made available and the communication channel updated accordingly.

On 28 January 2022, the Commission de Surveillance du Secteur Financier (CSSF) published summaries of national provisions governing the marketing requirements for AIFs, comprising:

I. Marketing procedures with a passport under the AIFM Law;

II. Other marketing procedures without a passport under the AIFM Law 

On 31 January 2022, the Commission de Surveillance du Secteur Financier (CSSF) published the Circular CSSF 22/795 on the application of the Guidelines of the European Securities and Market Authority on marketing communications under Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (the “CBDF Regulation”).

The CSSF has integrated the Guidelines into its administrative practices and regulatory approach with a view to promote supervisory convergence in this field at European level.

The CSSF requires IFMs to provide the CSSF with information regarding marketing communications and will conduct testing to verify their compliance with the applicable requirements under Article 4 of the CBDF Regulation and the Guidelines.

The practical and/or technical aspects (including frequency, formats, channel of submission) of the implementation of the collection of information (if any) will be communicated by means of additional Annexes to this Circular and supplemented by a FAQ.

This Circular will apply as from 2 February 2022.

Here are six updated forms the Commission de Surveillance du Secteur Financier (CSSF) published concerning investment funds.

1. On 4 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the Registration form for an alternative investment fund manager. This AIFM registration form aims at providing the CSSF with information about compliance with article 3 of the AIFM Law as well as any applicable laws, rules and regulations relating to the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010. 

2. On 18 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the form on notification letter for pre-marketing by non-EU AIFMs to potential professional investors in Luxembourg.

3. On 18 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the Notification letter for pre-marketing by EU AIFMs to potential professional investors in Luxembourg. 

4. On 18 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the De-notification letter AIF compartment. 

5. On 20 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the Questionnaire for the approval of a new sub-fund. 

6. On 24 January 2022, the Commission de Surveillance du secteur financier (CSSF) updated the  Investment vehicle EMIR Questionnaire.In case of changes in either the EMIR classication of use of derivative contracts or organizational model, the Investment vehicle Questionnaire - EMIR shall be updated and resubmitted to the CSSF within undue delay. 

On 28 January 2022, FINMA updated the templates on asset management.

Version française

Le 28 janvier 2022, la FINMA a mis à jour les modèles relatifs à la gestion des actifs.

On 17 January 2022, the Comisión Nacional del Mercado de Valores (CNMV) adopted ESMA guidelines on the assessment of the suitability of members of the administrative body and holders of key functions.

The CNMV has notified the European Securities and Markets Authority (ESMA) of its intention to comply with the "Guidelines on the assessment of the suitability of members of the management body and key function holders", which apply from 31 December 2021 and which ESMA published on 2 July 2021 on its website.

The aim of the Guidelines is to update the previous 2018 criteria, mainly introducing changes relating to the classification of investment firms under the new solvency rules, amendments to the money laundering rules, ESG criteria and to promote greater convergence in the assessment of the suitability of members of the management body and key function holders. It is also envisaged that investor protection will be strengthened by reinforcing the requirements to be met by these positions, which will ultimately lead to better corporate governance of institutions.

The Guidelines have been issued under article 16 of Regulation 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing ESMA, which states that competent authorities and financial market participants shall make every effort to comply with these guidelines. In addition, the ESMA Regulation also establishes the obligation for Competent Authorities to confirm whether they intend to comply with the guidelines issued by ESMA.

The CNMV will take these Guidelines into account in the exercise of its authorisation and supervisory powers but, in view of the changes introduced and the principle of proportionality, no changes to the authorisation and supervisory approach are envisaged.

On 28 January 2022, the Comisión Nacional del Mercado de Valores (CNMV) approved the Technical Guide on the management and control of the liquidity of Collective Investment Undertakings (CIUs).

The CNMV has approved the Technical Guide on the management and control of the liquidity of Collective Investment Undertakings (CIUs). The initiative aims to include and group together all the relevant supervisory criteria that the CNMV has been transmitting to institutions in recent years in relation to the management and control of the liquidity of CIUs, and also the results of recent actions carried out at national and European level (highlighting the Supervisory Convergence Action, or "Common Supervisory Action", carried out by ESMA during 2020).

The Guide considers which elements should be included in the procedures of CIU Managers to ensure adequate management and control of the liquidity risk of their institutions, with the aim of avoiding the generation of damage and conflicts of interest among investors.

Specifically, the Guide details: 

• The analyses and limits at the design stage of each CIU and the checks that must be carried out prior to making any investment. 
• The recurring analyses and controls necessary to ensure an adequate alignment between the liquidity profile of the assets and liabilities of each CIU. To this end, the management company must include in the procedure how the proportion of liquid and less liquid assets will be maintained, with a reasonable margin, in the event of redemptions. In addition, detailed guidelines are included on the methodologies for determining the liquidity ratios or levels of financial instruments, the estimation of sales time horizons, as well as redemption scenarios and other payment obligations, and stress testing. 
• The different tools that may be used for an adequate liquidity management of CIUs. CIUs Managers should consider in their procedures, on the one hand, the circumstances under which the different tools established by the regulations would be applicable (notice periods, temporary borrowing, partial subscriptions/redemptions, special purpose compartments or side-pockets, etc.) and ensure that they are properly implemented and applied. ), ensuring their proper implementation and the use of anti-dulitive mechanisms (including the valuation of the portfolio at Bid or Ask prices and swing pricing) to avoid conflicts of interest between subscribers and redeemers and those who remain. 
• The functions assumed by the different areas of the fund manager, the involvement of the Board of Directors and additional analyses relating to the delegation of functions.

The final text has been defined after analysing the comments and observations received during the public consultation period (from 9 September to October 2021) as well as the report issued by the CNMV's Advisory Committee. A document with the assessment of the comments received is also made public.

Regulatory attention on liquidity management is also gaining momentum in the European Union, with the recent proposal to amend the hedge funds directives (AIFMD) and the UCITS regulation, which incorporate as a novelty at EU level similar elements to those contained in this guide for Spain.

The Technical Guide was among the initiatives included in the 2021 action plan.

On 4 January 2022, the Financial Conduct Authority (FCA) published a communication on the changes to LIBOR as of end-2021.

The LIBOR settings that have ended are: 

• all euro and Swiss franc LIBOR settings
• the overnight / spot next, 1-week, 2-month and 12-month sterling and Japanese yen LIBOR settings
• the 1-week and 2-month US dollar LIBOR settings

These 6 LIBOR settings will be calculated in a way that does not rely on submissions from panel banks. Market participants generally call this 'synthetic' LIBOR. 

Synthetic yen LIBOR will cease at the end of 2022. Availability of synthetic sterling LIBOR is not guaranteed beyond end-2022, so firms’ efforts to transition away from it should continue. The FCA also reminds market participants that new use of synthetic LIBOR is banned.

The remaining 5 US dollar LIBOR settings will continue to be calculated using panel bank submissions until mid-2023. However, new use of US dollar LIBOR is also now banned, with limited exceptions. The US dollar risk-free rate SOFR is already being widely used in new business. Firms should now focus on converting their legacy US dollar LIBOR contracts by mid-2023.

On 18 January 2022, the Financial Conduct Authority (FCA) confirmed its approach to European firms temporarily operating in the UK.

The regime was designed to ensure that European firms operating in the UK via a passport when the Brexit transition period ended could continue operating temporarily while they seek full authorisation in the UK.

The TPR should only be used by firms who want to operate in the UK in the long-term and meet the standards to do so.

Firms may be asked to stop undertaking new business or could be removed from the TPR if they miss their ‘landing slot’, fail to respond to mandatory information requests, have no intention in applying for full authorisation, or if their authorisation application is refused.

Firms that have had their permissions cancelled can no longer conduct regulated business in the UK and will be committing a criminal offence if they do so.

On 19 January 2022, the Financial Conduct Authority (FCA) published CP22/2: Strengthening our financial promotion rules for high risk investments, including cryptoassets.

This consultation will primarily interest:

• consumers and consumer organisations
• authorised firms which approve financial promotions for unauthorised persons (section 21 approvers), whether for high-risk investments or otherwise
• authorised firms which communicate financial promotions relating to investment business
• issuers of non-mainstream pooled investments, speculative illiquid securities and non-readily realisable securities
• investment-based crowdfunding platforms and other intermediaries distributing investments to consumers
• peer-to-peer platforms
• firms operating in the cryptoasset market
• trade bodies for the investment-based crowdfunding, peer to peer and crypto-asset sectors

In this Consultation Paper, the FCA proposes changes to:

• FCA’s classification of high-risk investments
• the consumer journey into high-risk investments
• strengthen the role of firms approving and communicating financial promotions
• apply FCA’s financial promotion rules to qualifying cryptoassets.

The FCA is inviting feedback on its proposals by 23 March 2022. It will consider all feedback before determining its final rules and, subject to the responses received, intends to confirm its final rules in summer 2022.

On 5 and 11 January 2022, the Financial Conduct Authority (FCA) published following forms:

• MIFIDPRU 2 Annex 6R: Application under MIFIDPRU 2.5.40R for permission to include a portfolio of a designated investment firm in a consolidated K-CMG requirement – Additional Portfolio Questions
• MIFIDPRU 2 Annex 7R: Application under MIFIDPRU 2.5.41R for permission to include a portfolio of a third country entity in a consolidated K-CMG requirement – Additional Portfolio Questions.
• MIFIDPRU 4 Annex 7R: Application under MIFIDPRU 4.13.9R for permission to apply K-CMG to a portfolio, instead of K-NPR – Additional Portfolio Questions.
• Temporary permission regime (TPR) / Supervised run-off (SRO) cancellation (PSRs/EMRs): this form to notify FCA when the firm will cease engaging in new business covered by the TPR.
• Temporary Permission Regime (TPR) to Supervised Run Off (SRO) notification form (PSD-EMD): this form to notify FCA that the firm’s temporary permission for new business is ending, and the firm wishes to enter the SRO.

On 28 January 2022, the Financial Conduct Authority (FCA) published a communication on Heads of compliance and MLRO applicant competency and capability.

Heads of compliance and MLROs are important roles within financial services firms and many firms are required to have an FCA-approved senior management function (SMF) holder. They will need necessary skills and knowledge, from training and experience, to be effective. The level of those skills and knowledge should be in line with the size of the firm and its risk of harm.

The communication, based on FCA’s experience of approved applications, should help firms decide if an individual candidate is suitable, by following criteria:

• Training
• Experience
• Support from third parties
• Capacity

On 13 January 2022, the Financial Conduct Authority (FCA) informed on the supervisory flexibility on the short selling indicator.

The FCA will put in place temporary measures for the reporting of the short selling indicator in transaction reports while we consider changes to the UK transaction reporting regime.

Transaction reports submitted to the FCA under UK MiFIR must contain a designation to identify a short sale. This information is contained in the short selling indicator (RTS 22, field 62). The FCA is in the early stages of considering policy options for the UK MiFIR transaction reporting regime, including, but not limited to, the future of the short selling indicator.  

Until the future of the short selling indicator field (for the purposes of the UK MiFIR transaction reporting regime) has been determined, the FCA will not take action against firms who do not meet these requirements. The FCA does not expect firms to notify FCA about issues affecting the short selling indicator field through an errors and omissions notification form. The FCA will keep this position under review.

On 18 January 2022, the S.I. 2022 No. 46 - The Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 was published in the UK legislation.

The regulations will require certain large UK LLPs to report climate-related financial information in their Strategic Reports or Energy and Carbon Reports. The regulations will apply these disclosure requirements to UK LLPs which have more than 500 employees and a turnover of more than £500m.

These Regulations: 

• requires the members of a traded or banking LLP, in either case with more than 500 employees, to include climate-related financial information in the strategic reports.
• amend regulation 12B of the 2008 Regulations to add a new section 416A on the details of Climate-related financial disclosures in the energy and carbon report
• provide for a review of the Regulations before 6th April 2027 with subsequent reviews at intervals not exceeding five years.

On 19 January 2022, the S.I. 2022 No. 31 - The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 was published in the UK legislation.

These Regulations require certain companies to provide climate-related financial disclosures in their strategic report. The requirement applies to a traded company, a banking company, an authorised insurance company and a company carrying on insurance business which in each case satisfy various conditions, including that of having more than 500 employees.

On 20 January 2022, the Federal Reserve System (FED) released a discussion paper that examines the pros and cons of a potential U.S. central bank digital currency, or CBDC. It invites comment from the public and is the first step in a discussion of whether and how a CBDC could improve the safe and effective domestic payments system. The paper does not favor any policy outcome.

The paper summarizes the current state of the domestic payments system and discusses the different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies. It concludes by examining the potential benefits and risks of a CBDC, and identifies specific policy considerations.

Consumers and businesses have long held and transferred money in digital forms, via bank accounts, online transactions, or payment apps. The forms of money used in those transactions are liabilities of private entities, such as commercial banks. Conversely, a CBDC would be a liability of a central bank, like the Federal Reserve.

While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides. They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance. The paper discusses these and other factors in more detail.

To fully evaluate a potential CBDC, the Board's paper asks for public comment on more than 20 questions. Comments will be accepted for 120 days and can be submitted here.

On 26 January 2022, the U.S. Securities and Exchange Commission (SEC) voted to propose amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The proposed amendments are designed to enhance the Financial Stability Oversight Council’s (FSOC) ability to assess systemic risk as well as to bolster the Commission’s regulatory oversight of private fund advisers and its investor protection efforts in light of the growth of the private fund industry. 

The proposed amendments would require current reporting for large hedge fund advisers and advisers to private equity funds. These advisers would file reports within one business day of events that indicate significant stress at a fund that could harm investors or signal risk in the broader financial system. The proposed amendments would provide the Commission and FSOC with more timely information to analyze and assess risks to investors and the markets more broadly.

The proposal also would decrease the reporting threshold for large private equity advisers from $2 billion to $1.5 billion in private equity fund assets under management. Lowering the threshold would result in reporting on Form PF that continues to provide robust data on a sizable portion of the private equity industry. Finally, the proposal would require more information regarding large private equity funds and large liquidity funds to enhance the information used for risk assessment and the Commission’s regulatory programs. 

On 31 January 2022, the US Commodity Futures Trading Commission (CFTC) issued a no-action letter regarding the compliance dates for the November 25, 2020 amendments to the swap data reporting rules. The amendments became effective on January 25, 2021 with a May 25, 2022 compliance date, except for certain block and cap amendments to CFTC Regulations 43.4(h) and 43.6, which have a May 25, 2023 compliance date.

The letter states that DOD will not recommend that the Commission take an enforcement action against an entity for failure to comply with the amendments before December 5, 2022, and for failure to comply with the block and cap amendments before December 4, 2023, provided that the entity complies with the regulations that were in effect for Parts 43, 45, 46, and 49 on January 1, 2021.

The Commission previously discussed its intent in 2020 to require the use of the data transmission standard, ISO 20022, and the Unique Product Identifier when those standards became available. DOD clarified today that it currently expects those standards to be available for implementation no later than Q4 2023, at which time DOD expects the Commission will require the use of those standards.

On 13 January 2022, the U.S. Securities and Exchange Commission (SEC) published its proposal for the amendments to Rule 10b5-1 under the Securities Exchange Act of 1934, and Insider Trading.

The SEC proposes:

• amendments to Rule 10b5-1 under the Securities Exchange Act of 1934. The proposed amendments would add new conditions to the availability of the affirmative defense under Exchange Act Rule 10b5-1(c)(1) that are designed to address concerns about abuse of the rule to opportunistically trade securities on the basis of material nonpublic information in ways that harm investors and undermine the integrity of the securities markets;
• new disclosure requirements regarding the insider trading policies of issuers, and the adoption and termination (including modification) of Rule 10b5 1 and certain other trading arrangements by directors, officers, and issuers. 
• amendments to the disclosure requirements for executive and director compensation regarding the timing of equity compensation awards made in close proximity in time to the issuer’s disclosure of material nonpublic information. 
• amendments to Forms 4 and 5 to require corporate insiders subject to the reporting requirements of Exchange Act Section 16 to identify transactions made pursuant to a Rule 10b5-1(c)(1) trading arrangement, and to disclose all gifts of securities on Form 4.

On 7 January 2022, Monaco published the Law No 1.515 of 23 December 2021 amending Law No 1.338 of 7 September 2007 on financial activities, as amended.

The Law clarifies, without changing the substance, the definitions of financial activities subject to authorisation by the Commission de Contrôle des Activités Financières (“CCAF“) provided for in Article 1 of Law n° 1.338.

The Law (Article 3) puts an end to the incompatibility of the activities of management of collective investment scheme under Monegasque law with the activities of portfolio management on behalf of a third party, reception and transmission of orders on behalf of third parties, execution of orders on behalf of third parties and dealing on own account.

Article 7 of the Law replaces the regime of prior information to the CCAF when a licensed firm intends to modify one or more characteristic elements of its license in favour of the requirement of a systematic prior approval of the CCAF. In addition, the Law provides that decisions to revoke authorisations will henceforth be published in the Moanco legal bulletin, namely the “Journal de Monaco”.

The Law reinforces the duties of the CCAF and underlines its status as an independent administrative authority for the supervision of financial activities on the Monegasque territory:

• The CCAF now rules on applications for changes to authorisations, in accordance with the conditions laid down in the Law;
• It is specified that authorised companies may apply directly to the CCAF to have their authorisations revoked;
• The Law reconfirms that the CCAF ensures that authorised companies and credit institutions that carry out the activity of custody or administration of financial instruments, as well as the persons under their authority or acting on their behalf, must comply with the professional obligations to which they are subject by virtue of the legislative and regulatory provisions applicable to them. To this end, the CCAF may obtain from the said persons any documents or information, regardless of the medium, that are useful for the performance of its duties;
• International cooperation in the area of financial market supervision has prompted the legislator to explicitly provide that the CCAF participates in the protection and information of investors, but also in the proper functioning of financial markets, through the execution of cooperation and information exchange agreements concluded with the competent foreign authorities in this field.
• The Law specifies that the CCAF has a right of control to ensure the regularity of operations carried out establishes authorised companies and the respect of professional obligations of all professionals placed under its responsibility. The CCAF has the power to investigate, at the request of foreign authorities with which it has concluded a cooperation agreement, any fact likely to undermine the protection of investors and/or the due functioning of financial markets, at the request of foreign authorities with which it has concluded a cooperation agreement.
• Article 10 (8) of the Law provides that in the context of its duties, the CCAF may, under certain conditions, conclude cooperation agreements with foreign authorities competent in the field of financial market supervision, in particular by exchanging information.

The Law specifies and adds new provisions relating to the independence of the CCAF and its members, but also relating to the nature and exercise of its investigative powers.

The Law provides that authorised firms must henceforth put in place a system to identify situations of conflicts of interest and take all reasonable measures to prevent such conflicts of interest affecting the interests of their clients. This system includes the obligation to establish written procedures for managing conflicts of interest, adapted to the size and activities of the authorised company in question, under the conditions set by Sovereign Order.

Article 23-2 of the Law is new in that authorised firms must now keep relevant information and a record of all services they provide and all transactions they carry out, enabling the CCAF to monitor compliance with their obligations, in particular with regard to clients.

The Law provides that while it is important that the authorisation that has been issued to authorised companies appears on their commercial documentation, this mention for advertising purposes, presented in particular as constituting a label of quality of management, is strictly prohibited.

A significant change to the current regime, Article 13 of the Law specifies that within four months of the end of the financial year, authorised companies must send the CCAF an annual activity report and a certificate drawn up in accordance with the conditions defined by Sovereign Order. At the latest fifteen days after the approval of the annual accounts, the said companies shall send to the CCAF the annual accounts and their statutory auditors’ reports.

The Law creates an Article 31-1 which provides that the statutory auditors of authorised companies are released from professional secrecy with regard to the CCAF. This article provides, in addition to the obligation of the statutory auditors to alert the CCAF when they become aware that the activity of an authorised company does not comply with its authorization, a new obligation to report to the CCAF any fact concerning an authorised company that would constitute a breach of legislative or regulatory provisions applicable to that company and that could have a significant effect on the financial situation, the results or the assets and liabilities, any fact that would affect the continuity of the company’s operations and any fact that would lead to the issuance of reservations or the refusal to certify the accounts.

The Law provides, in particular, that the CCAF may temporarily suspend the authorisation of an authorised company for a maximum period of six months or withdraw this authorisation if the company has not engaged, without legitimate reason, in any significant activity for a period of six months, as opposed to twelve months previously.

The Law provides that, in addition to the fact that decisions imposing sanctions of suspension or revocation of authorisation are published in the Journal de Monaco, they will also be published on the CCAF’s website.

Article 21 of the Law increases to six months (instead of three months) the period during which the authorisation of a licensed company may be suspended by the CCAF in case of emergency.

The Law also devotes an entire section to market abuse offences and related criminal sanctions.

On 31 January 2022, the Comissão de Valores Mobiliários (CVM) published a Circular Letter CVM/SIN/SMI 1/2022 - Regular sharing of information for the prevention of money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction.

The document aims to clarify the interpretation of technical areas in relation to some provisions of CVM Resolution 50, which deals with policies, mechanisms and controls for prevention and combating money laundering, corruption, terrorist financing and proliferation of weapons (AML/CFT) to be adopted by CVM regulations.  

In addition, the letter seeks to alert the regulated to the public availability of documents related to the National Risk Assessment, carried out by Brazil recently, to take this into account in the elaboration of their respective updated AML/CFT policies. 

The document also highlights that, in order to comply with AML/CFT rules, it is essential to share information in operations and situations of greater risk among investment fund service providers, trustees, resource managers, custodians and distributors. 

The technical areas of the CVM point out that legal provisions subject to CVM Resolution 50 may not claim any modality of restriction of access to information of the quota-holders, in the regular exercise of their activities. This includes issues arising from secrecy or other legal restrictions, such as events within the Lei Geral de Proteção de Dados (LGPD), for example, or arising from rules regulating the existence of segregation of activities between areas of the institution itself.

On 4 January 2022, the Brazilian Financial and Capital Markets Association (ANBIMA) published a reminder that from 10 January 2022, the mandatory certification for people working in eligible activities in the institutions participating in the ANBIMA Certification Code is back in force.

The rules had been relaxed during the pandemic period, with the aim of minimizing the impacts of the health crisis on the market, since there was temporary suspension of examinations.

On 28 January 2022, the Comissão de Valores Mobiliários (CVM) published SNC Notice 01/2022 - Public Hearing on updating accounting standards to align with international standards.

The draft Review of Technical Pronouncements CPC 20 includes changes brought by the following documents: 

• Classification of Liabilities as Current or Non-current. 
• Extension of the Temporary Exemption from applying IFRS 9. 
• Definition of Accounting Estimates. 
• Disclosure of Accounting Policies. 
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction. 

It is also foreseen the correction of inconsistency identified in the text of Technical Pronouncement CPC 47 (IFRS 15).  

The term of the extension of the temporary exemption from the application of CPC 48, provided for in item 2 of this Revision (amending CPC 11), will apply to the years initiated on or after 1/1/2021. The measure aims to bridge the existing regulatory gap for this period and, therefore, align the rules issued by the IASB. 

Suggestions and comments should be forwarded to the CVM until 2/3/2022.

On 6 January 2022, the Brazilian Financial and Capital Markets Association (ANBIMA) launched public hearing to amend the Certification Code.

The amendments seeks to adapt the text to the changes brought by the inclusion of the Annex of FIP (Fundos de Investimento em Participações - Equity Investment Funds) of the Code of Administration of Third Party Resources, which will enter into force from 2 March.

The main modifications to the code are:

• Expansion of the scope of CGE (Certificação de Gestores ANBIMA), which becomes mandatory also for the members of the committee of the institution and / or FIP who act in the activity of management of third-party resources and have discretion/ discretion of investment of the assets that are part of the FIP portfolio.
• Disclosure of deadlines for professionals from institutions working in FIP management to obtain CGE.

Two documents also entered a public hearing: Rules and Procedures for Defining Structured Funds and Rules and Procedures for Dispensing examinations. The first includes the FIP in the list of products self-regulated by the Certification Code, while the second guides how institutions can request exemption from the cge examination if they attest to the experience of their professionals in the management of FIP resources.

Suggestions and comments should be sent to ANBIMA by 21 January.

On 14 January 2022, the Brazilian Financial and Capital Markets Association (ANBIMA) developed  a document with the main information to assist institutions in the exchange of customer data and investment funds, and facilitate the process of portability between distributors.

The document aims to show what position and movement information is fundamental for the demand to be completed within the self-regulatory deadline, according to the rules and procedures of the Distribution Code.

On 19 January 2022, the Comissão de Valores Mobiliários (CVM) published Resolution 62 - prohibition of the practices of creating artificial conditions of demand, supply or price of securities, manipulation of prices, conducting fraudulent transactions and the use of unfair practices.

It is forbidden for managers and shareholders of publicly-held companies, intermediaries and other participants in the securities market to create artificial conditions for the demand, offer or price of securities, manipulation of prices, carrying out fraudulent operations.

On 24 January 2022, the Unidad de Proyección Normativa y Estudios de Regulación Financiera (URF) published Decree 053 of 2022 modifying Decree 2555 of 2010 in relation to, inter alia, the issuance of bonds by collective investment funds in the stock market and the development of the capital market. 

The changes include, inter alia, the following: 

• Credit institutions may hold shares or quotas in national or international parent companies resulting from the integration of stock exchanges. 
• The transactions carried out in the over-the-counter market may be subject to clearing and settlement through an entity legally authorised for this purpose, provided that they are carried out on products that can be traded on an agricultural, agro-industrial or other commodities exchange.
• The maximum period referred to in paragraph a) of this Article may be longer than one (1) year when a Central Counterparty Risk Clearing House acts as a direct counterparty and administers the clearing and settlement of the transactions referred to in this Article.
• In the case of collective investment funds that establish in their regulations the possibility of issuing bonds, the rating of the fund and of the respective fund management company shall be mandatory and shall be carried out in accordance with the methodologies used by risk rating agencies for collective investment funds. 
• Closed collective investment funds may issue bonds to be placed through public offering, prior authorisation of the Superintendencia Financiera de Colombia (SFC), in accordance with the regulations in force on the matter, and shall be deemed registered in the National Registry of Securities and Issuers RNVE once such authorisation has been given. These issues must take into account the following:
• When the possibility of issuing bonds is envisaged and the collective investment fund is liquidated, the regulations shall establish mechanisms and instances that allow for the effective satisfaction of the rights of bondholders.
• Bond issues by collective investment funds may be carried out in the second market, for which they must comply with the provisions set out in this decree.

On 27 January 2022, the Unidad de Proyección Normativa y Estudios de Regulación Financiera (URF) published Draft Decree - Regulation Law 2112 of 2021 modifying Decree 2555 of 2010 in relation to the investment regime of the management companies of mandatory pension funds and severance.

With the issuance of Law 2112 of 2021, the obligation to invest a minimum of 3% of the resources of the mandatory pension funds, namely moderate, conservative and higher risk funds, in private capital funds or private debt funds that invest in companies and productive projects in Colombia was established. This law empowered the national government to set the guidelines to be complied with for these investments, requiring them to be made within a framework of adequate security and to improve the risk and return conditions of the individual accounts of the affiliates.

Taking into account these legal foundations, the policies of regulation by principles and criteria, and of convergence to international standards adopted in recent years by the national government for the financial sector, and in accordance with international recommendations and best practices in this area, the URF published a document containing the technical justifications for the regulatory proposal for the regulation of Law 2112 of 2021, which, among other aspects, establishes conditions to be met by the professional manager and the private equity fund or private debt fund related to equity solidity, professional track record, operational and organisational capacity, governance and disclosure of information.

Comments will be received until February 15, 2022 to agamba@urf.gov.co and delopez@urf.gov.co

On 19 January 2022, Banco de la República opened a consultation on Draft exchange Regulation "Adjustments to the Regulation of Trading Systems and Registration of Foreign Exchange Transactions".

The project has the following objectives: 

(i) to extend the registration obligation to transactions executed between entities supervised by the Superintendencia Financiera de Colombia, other than foreign exchange market intermediaries, and Banco de la República, taking into account that these are the only foreign exchange transactions of these entities that are not subject to this obligation and that the proper registration of transactions by foreign exchange market participants allows for improved transparency and price formation; and 

(ii) authorise that spot foreign exchange transactions may be modified after trading, in the light of market needs and considering that such modifications are permitted for derivatives transactions with the same maturities as spot transactions.

Comments are welcome until 25 January 2022, at 5pm. 

On 25 January 2022, the European Systemic Risk Board (ESRB) published a Report on the economic rationale supporting the ESRB Recommendation of 2 December 2021 on money market funds and assessment.

Despite regulatory reforms implemented after the global financial crisis of 2008, Money market funds (MMFs) still exhibit certain systemic weaknesses, as manifested during the outbreak of the coronavirus (COVID-19) pandemic. These weaknesses emerged following an interplay of market dynamics and decisions taken by relevant market participants. This was because there is an underlying tension between the cash management and funding functions provided by MMFs. This is particularly the case for those MMFs that invest primarily in non-public debt (i.e. low-volatility net asset value (LVNAV) and variable net asset value (VNAV) MMFs). The tension arises from the fact that MMFs offer on-demand liquidity to investors and are often assumed to be cash-like instruments, whereas the instruments MMFs invest in are not reliably liquid. In normal times, MMFs are able to meet investor redemption requests from the liquidity within their portfolios (including from regulatory requirements on the minimum amounts of daily and weekly maturing assets as set out in the Money Market Fund Regulation, MMFR2) and without having to resort to extraordinary measures. However, market stress, such as that observed in March 2020, reveals the underlying tension.

The manifestation of systemic risk from MMFs arises from a complex interplay of market structures, the economic functions of MMFs and the decisions and actions taken by a number of market participants under stressed market conditions, namely:

• MMF unit holders (the investors) and how they decide to meet their liquidity needs;
• MMF managers and their reactions to increased redemptions (or the expectation of increased redemptions to come);
• wider market participants that have an impact on the money markets, e.g. dealer banks.

This interplay has important policy implications. It affects how the underlying risks and their emergence should be targeted by policy reforms to make MMFs more resilient and reduce their systemic vulnerabilities. 

In response to these vulnerabilities, the ESRB has prepared a Recommendation to ensure that the economic functions performed by MMFs continue to be fulfilled in a manner that is resilient to shocks. Both policy work and analytical work have been undertaken to support the delivery of the Recommendation. Together, this work considers policy discussions at the international (Financial Stability Board,FSB and International Organization of Securities Commissions, IOSCO) and European (European Securities and Markets Authority, ESMA) levels. The Recommendation makes proposals to reduce threshold effects, to reduce liquidity transformation, to impose on redeeming investors the cost of their redemptions and to enhance the monitoring and stress-testing frameworks. It is intended to feed into the MMFR review scheduled for 2022. In addition to the policy work, analytical work considers (i) the markets in which MMFs operate, given their large footprint and the disruptions observed in March 2020, (ii) the investors holding MMF shares/units and (iii) MMFs themselves.

This report supports the ESRB Recommendation and provides (i) an overview of the systemic vulnerabilities of MMFs and of the main issues identified in the short-term debt securities market, (ii) the economic rationale for the Recommendation and (iii) an assessment of its impact.