On 17 November 2021, the European Parliament (EP) published the EU legislation in progress briefing on the Artificial intelligence act. 

The European Commission unveiled a new proposal for an EU regulatory framework on artificial intelligence (AI) in April 2021. The draft AI act is the first ever attempt to enact a horizontal regulation of AI. The proposed legal framework focuses on the specific utilisation of AI systems and associated risks. The Commission proposes to establish a technology-neutral definition of AI systems in EU law and to lay down a classification for AI systems with different requirements and obligations tailored on a 'risk-based approach'. Some AI systems presenting 'unacceptable' risks would be prohibited. A wide range of 'high-risk' AI systems would be authorised, but subject to a set of requirements and obligations to gain access to the EU market. Those AI systems presenting only 'low or minimal risk' would be subject to very light transparency obligations. While generally supporting the Commission's proposal, stakeholders and experts call for a number of amendments, including revising the definition of AI systems, broadening the list of prohibited AI systems, strengthening enforcement and redress mechanisms and ensuring proper democratic oversight of the design and implementation of EU AI regulation.

The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.

On 19 November 2021, the European Securities and Markets Authority (ESMA) updated the Q&A on the Benchmarks Regulation (BMR).

10.12 Benchmark Statement Article 27(2a) BMR: Disclosure requirements in Section 3 of Annex I of the benchmark statement

What should an administrator disclose in items 10 (b) to (e) of the Section 3 of the Annex I of the Delegated Regulation (EU) 2020/1816?

10.13 Benchmark Statement Article 27(2a) BMR: ESG factors and ESG objectives

What is the difference between taking into account ESG factors and pursuing ESG objectives?

On 19 November 2021, the European Commission (EC) opened a public consultation and a targeted consultation on Listing Act – making public capital markets more attractive for EU companies and  facilitating access to capital for Small and Medium Entreprises (SMEs). 

The general objective of this initiative is to make listing of equity and non-equity securities on EU public markets more attractive for companies, in particular SMEs. This would make it easier for EU issuers to finance their activity and to grow, innovate and create jobs, while preserving a high level of investor protection and market integrity. This would in turn increase the resilience of the EU economy, with a positive impact on economic growth and employment prospects in the EU. More specifically, this initiative aims to: (i) simplify and ease both initial and ongoing listing requirements in order to reduce costs and increase legal certainty for issuers; (ii) remove regulatory constraints that may hinder public markets’ flexibility; and (iii) raise SMEs’ visibility vis-à-vis investors and improve their attractiveness. This could be achieved through the following high-level policy options: 

• (a) targeted changes to the provisions in several EU acts (such as the Prospectus Regulation, MAR, MiFID II and the Listing Directive) that today may deter companies, especially SMEs, from seeking a listing (e.g. alleviation of the requirements laid down in the Prospectus Regulation, clarifications of the conditions to delay the disclosure of inside information, simplification of the market-sounding regime under MAR, etc.); 
• (b) through the introduction of new provisions aimed at enhancing flexibility for issuers accessing public markets and improving SMEs’ attractiveness towards investors (e.g. introduction of provisions on shares with multiple voting rights, corporate governance standards for companies listed on SME growth markets, etc.) 

These policy options will be assessed against a baseline scenario where no amendments are made to the EU rulebook and the EU regulatory framework continues to apply as it is. If legislative amendments are required, the ‘think small first’ principle would be applied throughout the 

Commission’s proposal, as one of the proposal’s objectives is to reduce the burden for smaller companies and ensure proportionality in the EU regulatory framework. 

Regarding the targeted consultation, it is split into two main sections. The first section contains general questions and aims at gathering views on stakeholders’ experience with the current listing rules and the possible need to adapt those rules. The second section seeks views from stakeholders on various technical aspects of the current listing rules, with questions grouped according to the legal act that they pertain to. In parallel, the public consultation covers only the general questions. As the general questions are asked in both questionnaires, the EC advised stakeholders to reply to only one of the two versions (either the targeted consultation or the open public consultation) to avoid unnecessary duplications. Replies to both questionnaires will be equally considered.

These consultations are open until 5 January 2022.

On 25 November 2021, the European Commission (EC) published a Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Capital Markets Union - Delivering one year after the Action Plan.

One year after the adoption of the 2020 CMU action plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals. All of these proposals are designed to contribute to achieving the CMU objectives. Progress on other CMU actions continues, paving the way for further ambitious deliverables in 2022.

The legislative proposals adopted are an important step in the implementation of the Commission’s 2020 CMU action plan. They tackle problems across a broad range of capital market services and help achieve the core CMU objectives.

The legislative proposals are the following:

• A European Single Access Point (ESAP) to create more funding and business opportunities for companies;
• Promoting long-term investments through European Long-Term Investment Funds (ELTIFs);
• Making funding more diversified for companies by reviewing the Alternative Investment Fund Managers Directive (AIFMD); and
• Enhancing market transparency by reviewing the Markets in Financial Instruments Regulation (MiFIR).

On 11 November 2021, the European Banking Authority (EBA) published a guidance on how to grant authorisation as credit institution.

It is the first guidance addressed to all competent authorities across the EU in charge of granting authorisation as a credit institution, and covers the authorisation requirements set out in the Capital Requirements Directive (CRD).

The draft Guidelines advocate for a risk-based approach and insist on the importance of consistency with the supervisory approaches applied in going concern situations. In addition, they consider the proportionality principle for all relevant assessment criteria and apply to both traditional and innovative business models and/or delivery mechanisms, as they are technology neutral.

In the context of the assessment of the application for granting an authorisation, the final Guidelines also include guidance on money laundering or terrorist financing (ML/TF) risks and highlight the importance of cooperation with the anti-money laundering (AML) supervisor and other public bodies, in accordance the CRD.

These Guidelines apply from two months after the publication in the EU official languages.

On 10 November 2021, the European Commission (EC) published the statement of Commissioner for Financial Services, Financial Stability and Capital Markets Union Mairead McGuinness who announces proposed way forward for central clearing. 

The Commission remains of the view that over-reliance on UK-based central counterparties (CCPs) for some clearing activities is a source of financial stability risk in the medium term and will pursue its work to develop the capacity of EU-based CCPs as a means to reduce such over-reliance. However, in order to address possible short-term financial stability risk, linked to an abrupt interruption in access to clearing services, the Commission will soon propose an extension of equivalence for UK-based CCPs.

On 25 November 2021, the International Capital Market Association (ICMA) published a news welcoming the delay to the Central Securities Depositories Regulation (CSDR) mandatory buy-in regime.

ICMA very much welcomes the news of the delay to the CSDR mandatory buy-in regime. ICMA has long taken the position that this regulatory initiative contained a number of critical design flaws as well as ambiguity around scope and process, not only from an implementation perspective, but also with respect to the potential implications for EU bond market liquidity and stability. 

ICMA stated that it looks forward to engaging further with the European Commission and European Securities and Markets Authority (ESMA) as they review the role of regulatory buy-ins in the European bond markets, and how this sits with the objectives of Capital Markets Union (CMU). Meanwhile, the ICMA Buy-in Rules, part of the ICMA Secondary Market Rules & Recommendations, will remain an effective and accessible contractual remedy for settlement fails in the international bond markets.

On 24 November 2021, the Council of the EU adopted its position on two proposals that are part of the digital finance package: the Regulation on Markets in Crypto Assets (MiCA) and the Digital Operational Resilience Act (DORA). 

This agreement forms the Council’s negotiating mandate for trilogue negotiations with the European Parliament. 

The package contains a digital finance strategy, proposals on markets in crypto-assets (MiCA), digital operational resilience (DORA) and a proposal on distributed leverage technology (DLT). This package bridges a gap in existing EU legislation by ensuring that the current legal framework does not pose obstacles to the use of new digital financial instruments and, at the same time, ensures that such new technologies and products fall within the scope of financial regulation and operational risk management arrangements of firms active in the EU. Thus, the package aims to support innovation and the uptake of new financial technologies while providing for an appropriate level of consumer and investor protection.

The Council and European Parliament will now enter trilogue negotiations on the proposals. Once a provisional political agreement is found between their negotiators, both institutions will formally adopt the regulations.

On 9 November 2021, the European Banking Authority (EBA) published its Final Report on draft Regulatory Technical Standards (RTS) specifying the information that crowdfunding service providers offering individual portfolio management of loans shall provide to investors in relation to the method to assess credit risk, and on each individual portfolio.

The draft RTS also specify the policies, procedures and organisational arrangements that crowdfunding service providers shall have in place in relation to any contingency fund they may offer to investors. These RTS are the first of two mandates assigned to EBA with a view to contributing to a sound prudential and disclosure framework for crowdfunding service providers.

These draft RTS require crowdfunding service providers to show that the measurement techniques used for credit risk assessments are based on a sufficient number of elements and are appropriate to the complexity and level of the risks underlying:

i) the individual project;

ii) the portfolio;

iii) the project owner.

In addition, the draft RTS set out the information that crowdfunding platforms must disclose, namely the key characteristics of each individual portfolio.

The draft RTS specify adequate policies, procedures and governance arrangements that providers should have in place when managing, either directly or through a third-party provider, contingency funds.

The draft regulatory technical standards will be submitted to the Commission for endorsement (after which they will be subject to scrutiny by the European Parliament and the Council) before being published in the Official Journal of the European Union. 

On 10 November 2021, the European Securities and Markets Authority (ESMA) published the final report on draft technical standards under the European crowdfunding service providers for business Regulation. 

The report covers all of ESMA’s 12 mandates in this area, including 4 with a legal deadline of May 2022. As the ECSPR will enter into force on 10 November 2021, ESMA decided to deliver on all its technical mandates simultaneously in order to provide indicative guidance to competent authorities and stakeholders.

The 12 standards in the report cover all investor protection aspects under the ECSPR, namely:

• Complaints handling;
• Conflict of interest;
• Business continuity plan;
• Authorisation;
• Information on default rate;
• Entry knowledge test and simulation of the ability to bear loss;
• Key investment information sheet;
• Cooperation between competent authorities;
• Reporting;
• Notification to ESMA of national provisions concerning marketing requirements;
• Cooperation between competent authorities; and
• Cooperation between competent authorities and ESMA.

The draft technical standards have been amended and improved based on the feedback received during the consultation.

On 19 November 2021, the European Securities and Markets Authority (ESMA) updated a Q&A on the implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR).

The new Q&As are the following : 

3. Calculation of the clearing threshold 4a and 10 of EMIR: Articles 4a and 10 of EMIR, as amended by Regulation 2019/834 – Calculation of positions for the clearing thresholds

(h) When a financial counterparty calculates its positions for the purpose of the clearing threshold determination in accordance with Article 4a(3) of EMIR, should it include in the calculation the OTC derivative contracts that are objectively measurable as reducing risks directly relating to the commercial activity or treasury financing activity entered into by the non-financial counterparties that are part of the same group?

Answer: Yes. Article 4a(3), unlike Article 10(3) EMIR, does not provide for a hedging exemption. The hedging exemption in Article 10(3) EMIR is meant to avoid impediments for non-financial counterparties to appropriately mitigate their commercial risks, but it is not meant to be applied when it comes to determining whether a financial counterparty should be subject to the obligation to clear centrally. Article 10(3) EMIR only refers to "non-financial counterparty or by other non-financial entities within the group to which the non-financial counterparty belongs," and not to financial entities within that group. Non-financial counterparties belonging to a group are not affected by the way the financial counterparties belonging to the same group calculate the threshold.

10. Hedging definition: Article 10(3) of Regulation (EU) 648/2012

(d) Can non-financial counterparties (NFCs) whose core activity is to buy, sell or own financial instruments, benefit from the hedging exemption when using OTC derivative contracts to hedge certain risks, for example risks arising from the potential indirect impact on the value of assets the NFC buys, sells or owns resulting from the fluctuations of interest rates, inflation rates, foreign exchange rates or credit risk?

Answer: Yes. The hedging exemption set out in Article 10(3) EMIR applies to all non-financial counterparties, irrespective of what their core activity is. The list of financial counterparties in Article 2(8) EMIR is a closed list. It does not allow for the treatment of non-financial counterparties as financial counterparties for certain EMIR provisions, such as Article 10(3). That provision itself does not distinguish which non-financial counterparty is allowed to use the hedging exemption depending on that counterparty's specific activity.

On 25 November 2021, the European Commission (EC) published a proposal package for the establishment of a European Single Access Point (ESAP).

One year after the adoption of the 2020 CMU action plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals. All of these proposals are designed to contribute to achieving the CMU objectives. Progress on other CMU actions continues, paving the way for further ambitious deliverables in 2022.

The legislative proposals adopted are an important step in the implementation of the Commission’s 2020 CMU action plan. They tackle problems across a broad range of capital market services and help achieve the core CMU objectives.

The establishment of a European Single Access Point (ESAP) by 2024 is a flagship action of the Capital Markets Union (CMU) Action Plan adopted by the European Commission in September 2020. ESAP will contribute to the achievement of the CMU’s objectives by providing EU-wide access to information activities and products of the various categories of entities that are required to disclose such information, which is relevant to capital markets, financial services and sustainable finance. ESAP will provide access to this information in an efficient and non-discriminatory manner.

Information about entities’ activities and products is essential for decision-making by providers of capital. ESAP will contribute to further integrating the financial services and capital markets in the single market, to allocating capital more efficiently across the EU and promoting the development of smaller national capital markets and economies by giving them greater visibility. ESAP will also allow non-listed entities including Small and Medium-sized Enterprises (SMEs) to make available information on a voluntary basis. This will facilitate their access to capital.

The package comprised of:

• a proposal for a Regulation establishing a European Single Access Point;
• a proposal for a Directive amending certain Directives; and
• a proposal for a Regulation amending certain Regulations. 

The feedback period lasts until 24 January 2022.

On 18 November 2021, the European Securities and Markets Authority (ESMA) published a preliminary report on Emission Allowances and derivatives thereof.

The European Trading Scheme (ETS) is a key tool of the EU policy against climate change. It puts a price on the CO2 that entities subject to compliance obligations can release to the atmosphere, with the overall objective of reducing net greenhouse gas emissions. In its Communication on Energy Prices “Tackling rising energy prices: a toolbox for action and support”, published on 13 October 2021, the European Commission highlights that questions have emerged around the functioning of the European carbon market. In order to examine more closely patterns of trading behaviours and the potential need for targeted actions, the Commission asks ESMA for a first preliminary assessment of European carbon markets by 15 November and tasks it to analyse, by early 2022, the trading of emission allowances (EUA). This report presents the preliminary assessment of carbon markets and derivatives thereof.

Following this preliminary report, according to the mandate given to ESMA by the Commission, ESMA will produce, by early 2022, a report analysing the trading of emission allowances. In order to do so, ESMA intends to deepen its analysis of the EU carbon market based on the regulatory data available under the applicable MiFID II and EMIR requirements. This will allow the Commission to assess whether certain trading behaviours would require further regulatory actions.

On 23 and 30 November 2021, the ESMA provided for four compliance tables on AIFMD and MiFID guidelines.

1. On 23 November 2021, the European Securities and Markets Authority (ESMA) published guidelines compliance table on certain aspects of the MiFID II compliance function

The table shows the competent authorities that comply or intend to comply with ESMA’s Guidelines on certain aspects of the MiFID II compliance function. 

www.esma.europa.eu/sites/default/files/library/esma35-43-2517_compliance_table_of_esma_guidelines_on_mifid_ii_compliance_function.pdf

2. On 23 November 2021, the European Securities and Markets Authority (ESMA) published a compliance table on guidelines on MiFID II/MiFIR obligations on market data. 

The document shows the willingness of competent authorities to comply or intend to comply with the above-mentioned guidelines. 

www.esma.europa.eu/system/files_force/library/esma70-156-4754_compliance_table_guidelines_market_data.pdf

3. On 30 November 2021, the European Securities and Markets Authority (ESMA) updated compliance table on guidelines on key concepts of the AIFMD. 

The listed competent authorities comply or intend to comply with ESMA Guidelines on key concepts of the AIFMD (ESMA/2013/611).

www.esma.europa.eu/sites/default/files/library/2016-572_compliance_table_-_guidelines_on_key_concepts_of_the_aifmd.pdf

4. On 30 November 2021, the European Securities and Markets Authority (ESMA) updated compliance table on guidelines on reporting obligations under Articles 3(3)(d) and 24(1),(2) and (4) of the AIFMD.

The listed competent authorities comply or intend to comply with ESMA’s Guidelines on reporting obligations under Articles 3(3)(d) and 24(1),(2) and (4) of the AIFMD  ESMA/2014/869).

www.esma.europa.eu/sites/default/files/library/2016-571_compliance_table_-_guidelines_on_reporting_obligations_aifmd.pdf

On 19 and 26 November 2021, the European Securities and Markets Authority (ESMA) updated their Q&As on:

1. European crowdfunding service providers for business Regulation.

• Transitional period: Article 48(1) of Regulation (EU) 1503/2021 ('ECSPR') provides for a transitional period applicable to existing crowdfunding service providers that are operating under the applicable national law. Recital 76 clarifies that the transitional period is appropriate to allow 'persons providing such crowdfunding services in accordance with national law' 'to have sufficient time to apply for an authorisation thereunder'. As a result, the transitional period should be intended as applicable to all entities providing crowdfunding services in the scope of the ECSPR under 'national law', whereby 'national law' can be either a specific crowdfunding regime or other applicable legislation or simply the private law applicable to crowdfunding transactions in that specific Member State. It is also important to note that the transitional period would apply to crowdfunding service providers for existing crowdfunding service provision before the date of application (10 November 2021). Crowdfunding services under the scope of this Regulation that are newly provided on and after that date shall be subject to the ECSPR requirements and related authorisation process.
• Clarification of a crowdfunding project: The concept of 'business activity' is intended to be interpreted in a broad sense, encompassing all kinds of economic activities by a natural (in the course of their business, trade or profession) or a legal person that give rise to a profit or any other economic benefit for those owning this 'business activity'. That would imply that non-profit organisations (e.g. an association or local public authorities) may act as 'project owners' as long as they raise funds for an activity that generates some economic benefit for its owners/members/ultimate beneficiaries (whether monetary or non-monetary).
• Provisions of crowdfunding services and organisational and operational requirements: Routing of orders' does mean any form of practice to direct prospective investors to a particular offer, unless that practice is based on objective criteria that are disclosed ex ante (such as filtering or search engines).
• Investor protection provisions: Article 23(9) of the ECSPR sets out the liability of 'at least' the project owner for the information given in a key investment information sheet (hereinafter, KIIS). That paragraph needs to be read in conjunction with article 23(11), which limits the responsibility of the crowdfunding service provider to having 'adequate procedures to verify the completeness, correctness and clarity of the information contained in the key investment information sheet'. As a result, the project owner is the one ultimately responsible for the information provided in the KIIS, while the crowdfunding service provider is responsible for the procedures in place to verify that the information provided is complete, correct and clear. In other words, the project owner is solely responsible for any misleading or inaccurate information, as well as omissions, unless those omissions are the direct result of inadequate procedures by the crowdfunding service provider in the collection of this information made available in the KIIS. In that case, the crowdfunding service provider could be partially or fully responsible.

2. Securitisation Regulation.

The current update concern the following subjects : 

• More frequent reporting for securitisations
• Customer Type
• Original Valuation Method
• Pool Addition Date and Date Of Repurchase in a revolving deal
• Primary Income
• Reporting of non-performing exposures securitisations – use of the EBA templates
• Annualised Constant Prepayment and Default Rates
• Trigger Measurements/Ratios
• How to complete the Synthetic Coverage Information Section in Annex XIV.

3. Central Securities Depositories Regulation.

The current update adds a new question:

Settlement Discipline Questions 8 – Partial settlement functionality

(a) When should CSDs start offering a partial settlement functionality as per Article 10 of the RTS on Settlement Discipline? 

(b) How should field 19 of table 1 of Annex II to the RTS on Settlement discipline be filled in if a CSD has no intention to use the derogation provided for in Article 12 of the RTS on Settlement Discipline?

Answer: 

(a) Article 10 of the RTS on Settlement Discipline requires CSDs to allow for the partial settlement of settlement instructions. Article 12 of the same RTS provides for a derogation to that requirement, if both the value and the rate of settlement fails in a securities settlement system operated by a CSD are below certain thresholds. CSDs that want to benefit from the derogation in Article 12 of the RTS on Settlement Discipline should perform the required calculations by 20 January of the year following that of the entry into force of the RTS on Settlement Discipline. If the calculation shows that a CSD reaches one of the above-mentioned thresholds, that CSD should start offering a partial settlement functionality within one year following the notification of the results of the calculation to the competent authority.

(b) If a CSD does not intend to use the derogation provided for in Article 12 of the RTS on Settlement Discipline, the CSD should specify “NO” in field 19 of table 1 of Annex II to the same RTS. In such a case, the CSD would not need to provide any justification.

4. MiFID II and MiFIR investor protection topics.

The current update adds the following question on product governance: Are all bonds embedding a make-whole clause exempt from the MiFID II product governance requirements?

According to Article 16a of MiFID II, “an investment firm shall be exempted from the requirements set out in the second to fifth subparagraphs of Article 16(3) and in Article 24(2), where the investment service it provides relates to bonds with no other embedded derivative than a make-whole clause or where the financial instruments are marketed or distributed exclusively to eligible counterparties”. This means that the mere presence of a make-whole clause is not sufficient for a financial instrument to be exempt from the MiFID II product governance requirements.

5. The application of the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. 

The update is the following: 

Do you agree that: 

• (i) restrictions under Article 29 of the Commission Directive 2010/43/EU 34 shall not be applicable to a rebate arrangement, if management companies pay these rebates from their  own resources (payment vis-à-vis an individual investor)? 
• (ii) management companies may pay fees from their own resources to separate investors (e.g. by concluding side letters with institutional investors, which buy investment fund units on behalf of their clients), where management companies prevent undue costs being charged to the  UCITS and its unit-holders?

The ESMA answered by the negative.  

Article 29 of Commission Directive 2010/43/EU lays down strict conditions for fees or commissions paid or received to/from a third party in relation to the activity of investment management and administration of the UCITS. Those conditions ensure that management companies act honestly, fairly and professionally. In particular, they ensure UCITS best interests, investors’ fair treatment and the transparency of UCITS operations. 

Management fee discount arrangements entail payments to certain investors based on the fees charged by the UCITS management companies to remunerate investment management and/or administration activities. As such, they should be analysed as payments for the activity of the investment management and administration of the UCITS. Therefore, management companies shall ensure that the conditions laid down in Article 29(1)(b) of Commission Directive 2010/43/EU are satisfied:

“(i) the existence, nature and amount of the fee, commission or benefit, or, where the amount cannot be ascertained, the method of calculating that amount, must be clearly disclosed to the UCITS in a manner that is comprehensive, accurate and understandable, prior to the provision of the relevant service; 

(ii) the payment of the fee or commission, or the provision of the non-monetary benefit must be designed to enhance the quality of the relevant service and not impair compliance with the management company’s duty to act in the best interests of the UCITS;”

It follows from the above that, in particular:

(a) those arrangements should be transparent and meet the conditions laid down in Article 29(1)(b) of Commission Directive 2010/43/EU; 

(b) management companies should demonstrate that: 

• (i) these arrangements will “enhance the quality of the relevant service” for the UCITS. That requirement refers to the quality of the UCITS services to the benefit of all investors and not only to investors who benefit from those arrangements; 
• (ii) those arrangements will “not impair compliance with the management company’s duty to act in the best interests of the UCITS”. In particular, Article 22 of Commission Directive 2010/43/EU sets out rules related to the “Duty to act in the best interests of UCITS and their unit-holders”. Under that Article, management companies are bound to treat all unit-holders fairly, act in the best interest of the unit-holders and to refrain from placing the interest of any group of unit holders above others. Therefore, management companies should be able to justify that all investors pay their fair share in the funds functioning (taking into account management fee discount) and the UCITS cost structure. Those arrangements should not have a negative impact on other investors. 

Upon national competent authorities’ request, management companies should be able to provide accurate and documented justifications.

On 11 November 2021, the European Union (EU) published in the Official Journal (OJ) a Corrigendum to Commission Implementing Regulation (EU) 2021/955 of 27 May 2021 laying down implementing technical standards for the application of Regulation (EU) 2019/1156 of the European Parliament and of the Council with regard to the forms, templates, procedures and technical arrangements for the publications and notifications of marketing rules, fees and charges, and specifying the information to be communicated for the creation and maintenance of the central database on cross-border marketing of AIFs and UCITS, as well as the forms, templates and procedures for the communication of such information. 

Some wording corrections was made to:

• Article 1 - Publication of national provisions concerning marketing requirements
• Annex I - Disclaimer concerning non-exhaustive list of national laws that could be applicable.

On 25 November 2021, the European Commission (EC) published a proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2015/760 as regards the scope of eligible assets and investments, the portfolio composition and diversification requirements, the borrowing of cash and other fund rules and as regards requirements pertaining to the authorisation, investment policies and operating conditions of European long-term investment funds.

One year after the adoption of the 2020 CMU action plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals. All of these proposals are designed to contribute to achieving the CMU objectives. Progress on other CMU actions continues, paving the way for further ambitious deliverables in 2022.

The legislative proposals adopted are an important step in the implementation of the Commission’s 2020 CMU action plan. They tackle problems across a broad range of capital market services and help achieve the core CMU objectives.

The ELTIF regulatory framework is intended to facilitate long-term investments in these types of assets by institutional and retail investors and provide an alternative, non-bank source of finance to the real economy. Such long-term finance can support the development of the European Union’s economy along the path of smart, sustainable and inclusive growth. 

This review aims to increase the uptake of ELTIFs across the EU for the benefit of the European economy and investors. This, in turn, would support the continued development of the Capital Markets Union (CMU), which also aims to facilitate EU companies’ access to more stable, sustainable and diverse long-term financing.

The review of the ELTIF regulatory framework seeks to accelerate the acceptance and improve the attractiveness of ELTIFs as a ‘go to’ fund structure for long-term investments. To make this framework more appealing, the forthcoming proposal will make targeted changes in the fund rules. This especially means broadening the scope of eligible assets and investments, allowing more flexible fund rules that include the facilitation of fund of-fund strategies, and reducing the unjustified barriers preventing retail investors from accessing ELTIFs, in particular the EUR 10.000 initial investment requirement and the maximum 10 % aggregate threshold requirement for those retail investors whose financial portfolios are below EUR 500.000.

Furthermore, the proposal aims to make the ELTIF structure more attractive by easing selected fund rules for ELTIFs distributed solely to professional investors. The review of the ELTIF legal framework also introduces an optional liquidity window mechanism to provide extra liquidity to ELTIF investors and newly subscribing investors without requiring a drawdown from the capital of ELTIFs. The proposal also seeks to ensure appropriate investor protection safeguards are in place.

The feedback period lasts until 24 January 2022.

On 25 November 2021, the European Commission (EC) published a proposal for a Directive of the European Parliament and of the Council amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds.

One year after the adoption of the 2020 CMU action plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals. All of these proposals are designed to contribute to achieving the CMU objectives. Progress on other CMU actions continues, paving the way for further ambitious deliverables in 2022.

The legislative proposals adopted are an important step in the implementation of the Commission’s 2020 CMU action plan. They tackle problems across a broad range of capital market services and help achieve the core CMU objectives.

This legislative proposal puts forward amendments to the Alternative Investment Funds Manager Directive (AIFMD – Directive 2011/61/EU) and, to the relevant extent, to the Directive relating to undertakings for collective investment in transferable securities (‘UCITS’) (UCITSD – Directive 2009/65/EC).

The Commission considered that a number of issues highlighted in the AIFMD review are equally relevant for the activities of UCITS. Consequently, this legislative proposal aims to address these issues by amending AIFMD and UCITSD to better align their requirements.

Changes are proposed to both AIFMD and UCITSD on delegation, liquidity risk management, data reporting for market monitoring purposes and regulatory treatment of custodians, whereas the AIFMD alone should be amended as regards activities of loan originating investment funds and access to depositary services across borders. 

The feedback period lasts until 24 January 2022.

On 25 November 2021, the European Commission (EC) published a proposal to amend Directive 2014/65/EU on markets in financial instruments and Regulation (EU) 600/2014 on markets in financial instruments.

One year after the adoption of the 2020 CMU action plan, the European Commission is now delivering on its commitments, putting forward a set of four legislative proposals. All of these proposals are designed to contribute to achieving the CMU objectives. Progress on other CMU actions continues, paving the way for further ambitious deliverables in 2022.

The legislative proposals adopted are an important step in the implementation of the Commission’s 2020 CMU action plan. They tackle problems across a broad range of capital market services and help achieve the core CMU objectives.

This initiative is one of a series of measures that implement the Capital Markets Union (CMU). It aims to empower investors, in particular smaller and retail investors, by enabling them to access market data necessary to invest in shares or bonds more easily and by making EU market infrastructures more robust. This will also help increase market liquidity, making in turn easier for companies to get funding from capital markets. In order to deliver on its objective of fostering a true and efficient single market for trading, the Commission has identified three priority areas for the review: improving transparency and availability of market data, improving the level-playing field between execution venues and ensuring that EU market infrastructures can remain competitive at international level. This initiative is accompanied by a proposal to amend Directive 2014/65/EU on markets in financial instruments (MiFID) and to amend Regulation (EU) 600/2014 on markets in financial instruments (MiFIR) and is included in the Commission’s 2020 Work Programme.

In its Communication on ‘The European economic and financial system: fostering openness, strength and resilience’ of 19 January 2021, the European Commission confirmed its intention to propose to improve, simplify and further harmonise capital markets’ transparency, as part of the review of the MiFID II and MiFIR framework (MiFID/R). In the wider context of the efforts aimed at strengthening the international role of the euro, the Commission announced that such a reform would include the design and implementation of a consolidated tape, in particular for corporate bond issuances with an aim of increasing the liquidity of secondary trading in euro-denominated debt instruments.

On the establishment of a consolidated tape, in the 2020 CMU Action Plan the Commission announced that it would put forward a legislative proposal by the end of 2021 to create a centralised database meant to provide, for equity and equity-like financial instruments, a comprehensive view on market data, namely on prices and volume of securities traded throughout the Union across a multitude of trading venues. This centralised database, also referred to as the ‘consolidated tape’ would have the objective to “improve overall price transparency across trading venues”. 

The feedback period lasts until 24 January 2022.

On 23 November 2021, the European Parliament (EP) adopted a legislative resolution on the proposal for a regulation of the EP and of the Council amending Regulation (EU) No 1286/2014 as regards the extension of the transitional arrangement for management companies, investment companies and persons advising on, or selling, units of undertakings for collective investment in transferable securities (UCITS) and non-UCITS (COM(2021)0397 – C9-0326/2021 – 2021/0215(COD))

The changes are as follows:

The date of application of that Delegated Regulation is 1 July 2022, but it is important to reflect the need to give management companies, investment companies and persons advising on, or selling, units of UCITS and non-UCITS sufficient time to prepare for the end of the transitional arrangement and thus for the obligation to draw up a Key Information Document (KID). That is the reason why, it is necessary to extend the transitional arrangement until 31 December 2022. 

In EP's opinion Regulation (EU) No 1286/2014 aims to enable retail investors to make better-informed investment decisions. In spite of the good intentions underpinning Regulation (EU) No 1286/2014, a number of concerns have been expressed since its adoption, including as regards the need for a clearer definition of ‘retail investor’, the product scope of that Regulation, the elimination of paper as the default option where a PRIIP is offered on a face-to-face basis, the concept of ‘successive transactions’, and the provision of pre-contractual information to professional investors. Those concerns need to be urgently addressed in order to improve retail investors' trust in financial markets, both for the benefit of companies looking for funding and for the long-term benefit of investors. The need for a broader review was already set out in Regulation (EU) No 1286/2014, and its urgency remains unchanged. On the basis of such a review in accordance with Regulation (EU) No 1286/2014, the Commission is expected to submit, as a matter of urgency, a report to the European Parliament and to the Council accompanied, if appropriate, by a proposal to address the existing limitations.

On 18 November 2021, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) launched a public consultation on their Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). 

The Investment Firms Regulation (IFR) and Directive (IFD) introduced a dedicated prudential framework for investment firms which reflects specific risks faced and posed to others by investment firms. This framework specifies the structure of own funds requirements for those investment firms, which are not considered systemic and are not treated as credit institutions.

The draft joint SREP Guidelines set out the process and criteria for the assessment of the main SREP elements such as:

1. Business model;
2. governance arrangements and firm-wide controls;
3. risks to capital and capital adequacy; and
4. liquidity risk and liquidity adequacy.

As part of this assessment, a scoring system is introduced to facilitate the comparability across firms. In addition, the proposed joint Guidelines provide clarifications on the monitoring of key indicators, on the application of SREP in the cross-border context, and on the use of supervisory measures.

While the proposed structure of SREP and the scoring system is similar to those used for credit institutions, the guidance provided is proportionate to the nature, size and activities of investment firms, and in addition, the criteria for the assessment of risks follow the requirements of IFR and IFD.

For the determination of additional own funds requirements for risks not covered or not sufficiently covered by Pillar 1 requirements, the joint SREP Guidelines refer to the draft Regulatory Technical Standards (RTS) on the additional own funds requirements also published for consultation today by EBA. These RTS set out more detailed guidance on the measurement of risks to capital, including specific indicative metrics to be used for the assessment of materiality and determination of capital considered adequate to cover specific risks.

The EBA is also consulting on draft RTS on the additional own funds requirements that could be determined by competent authorities for investment firms. Both regulatory products are based on the IFD and aim at consistent supervisory practices with regard to the review and evaluation of investment firms. The consultations runs until 18 February 2022.

On 22 November 2021, the European Banking Authority (EBA) publishes two final guidelines under the Investment Firms Directive.

1. On internal governance for investment firms under the Investment Firms Directive.

The IFD contains specific governance requirements for investment firms in parallel to and consistently with the ones already applicable under the Capital Requirements Directive (CRD). These specific provisions apply to class 2 investment firms. All investment firms must also comply with the governance requirements under the Markets in Financial Instruments Directive (MiFID).

The Guidelines provide further details on how the IFD governance provisions should be applied by Class 2 investment firms, specifying the tasks, responsibilities and organisation of the management body, and the organisation of investment firms, including the need to create transparent structures that allow for supervision of all their activities. The Guidelines also specify requirements aimed at ensuring the sound management of risks across all three lines of defence and, in particular, set out detailed requirements for the second line of defence (the compliance function and the independent risk management where applicable) and, the third line of defence (the internal audit function), where applicable.

The Guidelines will enter into force on 30.4.2022.

2. On remuneration for investment firms under the Investment Firms Directive.

The final Guidelines provide further details on how the provisions under IFD on remuneration policies and variable remuneration of identified staff should be applied by class 2 investment firms. The Guidelines are as far as possible consistent with the existing Guidelines under the Capital Requirements Directive (CRD). Relevant differences between IFD and CRD (e.g., the absence of a bonus cap and differences in instruments and the length of deferral periods) have been taken into account.

All aspects of the remuneration policy must be gender-neutral in accordance with IFD remuneration requirements. Institutions should, therefore, comply with the principle of equal pay for equal work or equal value of work. The provisions on anti-discrimination and equal opportunities have been retained as they are important to foster diversity in the longer term and to reduce the gender pay gap over time.

The Guidelines will enter into force on 30.4.2022.

On 24 November 2021, the European Parliament (EP) strucks deal on a pilot regime based on distributed ledger technology. 

The project based on distributed ledger technology (DLT) follows the ‘sandbox’ approach, allowing for temporary derogations from certain requirements under the EU’s financial services legislation. The experience gained with the pilot regime should help to identify possible practical proposals for new rules on trading and settlement of transactions in financial instruments based on DLT.

Currently, there are no authorised financial market infrastructures using DLT to provide trading or settlement services for crypto-assets that qualify as financial instruments. Negotiators introduced the DLT settlement system and the DLT trading and settlement system, which should be able to cooperate with other market participants in order to test innovative solutions based on DLT. They will be exempt from certain rules that fall under financial services legislation, but the Parliament’s negotiators ensured that DLT market infrastructures and their operators should have in place adequate safeguards to ensure investors are effectively protected when using DLT. These safeguards will include clearly defined liability to clients for any losses due to operational failures.

To allow for competition, while preserving a level playing field and high standards of investor protection, as well as financial stability, new entrants should be able to access the pilot regime provided that they comply with the same requirements as authorised investment firms or market operators. Such requirements should be based on the service provided and on risks. Rules will be technologically neutral; operators of DLT market infrastructure will be required to comply with them irrespective of the technology used.

Finally, negotiators agreed that the operation of a DLT market infrastructure cannot undermine the EU’s climate policies. Development and investments in low- or zero-emission DLTs are therefore strongly encouraged.

On 22 November 2021, the Association for Financial Markets in Europe (AFME) published a report titled "Sustainable Finance in Europe: Regulatory State of Play - Key impacts for banks and capital markets". 

The report provides a practical guide to the significant number of initiatives which make up the regulatory framework for sustainable finance in the EU, UK and Switzerland. It highlights how the banking sector is impacted and makes recommendations to further the goal of developing sustainable finance in Europe. 

The report provides analysis and identifies key milestones and actions for the banking industry in the five key elements of the European sustainable finance regulatory framework including:

• Sustainability reporting and disclosures;
• The development of taxonomies for sustainable activities;
• The development of market standards;
• Incorporation of ESG into banks’ risk management; and
• Initiatives relating to sustainable corporate governance.

AFME assesses the current state of play of the European regulatory framework and highlights three priority areas to facilitate the flow of capital to help achieve sustainability objectives:

• Finalising effective foundations;
• Ensuring coherence and consistency; and
• Strong international coordination.

On 29 November, the European Securities and Markets Authority (ESMA) published a letter from the European Union Commission to European Parliament (EP) and Council on information regarding regulatory technical standards (RTS) under the Sustainable Finance Disclosure Regulation 2019/2088 (SFDR). 

In this letter, the EC mentions the 22 October 2021 European Supervisory Authorities (ESAs) draft RTS under Articles 8(4), 9(6) and 11(5) of the SFDR. It informs the EP and the Council that those draft RTS could not be adopted by the EC within the three-month period, given their length and technical detail, which requires additional time in the adoption process.

The EC also mentions its 8 July 2021 letter when it suggested to bundle those draft RTS with draft RTS under Articles 2a(3), 4(6) and (7), 8(3), 9(5), 10(2) and 11(4) of Regulation 2019/2088 in a single delegated act. It recalls that the EC has clarified that the delegated act should apply from 1 July 2022. 

However, due to the length and technical detail of those 13 RTS, the time of the submissions to the EC, and to facilitate the smooth implementation of the delegated act by product manufacturers, financial advisers and supervisors, the EC would defer the date of application of the delegated act to 1 January 2023. 

Since the grounds for the transitional arrangement envisaged in Article 4(3) of the draft RTS jointly submitted by the three Authorities to the EC on 4 February 2021 (JC 2021 03) are no longer relevant, and in view of the overall deferral of the application of the delegated act, the EC envisages that financial market participants, which publish the statement referred in Article 4(1), point (a), of Regulation 2019/2088, or paragraphs 3 and 4 of Article 4 of that Regulation will have to comply with the disclosure requirements on principal adverse impacts on sustainability matters laid down in the delegated act the first time by 30 June 2023, i.e. the first reference period under the RTS to be 1 January 2022 to 31 December 2022.

On 30 November 2021, the European Securities and Markets Authority (ESMA) published a letter from the EU Commission to ESA JC on Q&As correction.

The subject of the letter is the Corrigendum to Commission Decision C(2021)4858 final of 6 July 2021 on the adoption of the answers to be provided to questions submitted by the European Supervisory Authorities (ESAs) under Article 16b(5) of the founding Regulations of the ESAs. 

Two of the answers provided in the Commission Decision, relating to Regulation (EU) 2019/2088, had been paired with the wrong questions. The corrigendum rectifies that error and ensures that each answer is matched with the right question.

On 9 December 2021, the European Union published in the Official Journal (OJ) Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives.

The adopted regulation goes as follows:

• The technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives laid down in Article 9 of Regulation (EU) 2020/852 are set out in Annex I to this Regulation.
• The technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives laid down in Article 9 of Regulation (EU) 2020/852 are set out in Annex II to this Regulation.

The regulation shall apply from 1 January 2022.

On 24 November 2021, the Autorité des marchés financiers (AMF) announced it applies EBA guidelines on risk factors and revises AMF position DOC-2019-14.

Repeal of the previous guidelines on risk factors

The review of the European guidelines on ML/FT risk factors No. JC/2017/37, conducted by the European Banking Authority as from 2019, has led to the publication of new guidelines on ML/FT risk factors, which supersede the guidelines issued in 2017. These new guidelines came into force on 26 October 2021.

Contents of the new revised guidelines

General guidelines 1 to 3 on risk assessment methodology have been reviewed and developed to set out the stages, sources and analyses to be performed to assess each of the four risk categories. General guideline 4 on customer due diligence measures has been substantially enhanced with details of the measures to be included in policies and procedures, clarifications on the concept of beneficial owner and ways of identifying them, developments on the entry into remote relationships and the use of innovative technologies for identity checks. Two new guidelines have been added, Guideline 6 on the obligation to train staff and Guideline 7 on overall evaluation of the effectiveness of its AML/FT strategy.

Revision of the sectoral guideline on collective management

In 2018, the AMF notified the ESMA of its intention to comply with the first version of the guidelines, with an interpretative reservation on the determination of clients of asset management companies. Guideline 16.14 recasts the wording of the four situations whereby the management company's client is always determined based on the method of subscription and registration of units. The revised guidelines are now aligned with the AMF position, such that the interpretation reserve is no longer valid: AMF position DOC-2019-14 has therefore been revised accordingly.

Other policy documents will be affected by these new guidelines, in particular Position - Recommendation DOC-2019-15 on customer due diligence measures.

Version française

Le 24 novembre 2021, l'Autorité des marchés financiers (AMF) a annoncé appliquer les orientations de l’EBA sur les facteurs de risque et révise la position AMF DOC-2019-14.

Abrogation des précédentes orientations sur les facteurs de risques

Les travaux de révision des orientations européennes sur les facteurs de risques BC/FT n°JC/2017/37, conduits par l’Autorité bancaire européenne à compter de 2019, ont abouti à la publication de nouvelles orientations sur les facteurs de risques BC/FT. Ces nouvelles orientations abrogent et remplacent celles publiées en 2017. Elles sont en vigueur depuis le 26 octobre 2021.

Contenu des nouvelles orientations révisées

Les orientations générales n°1 à 3 relatives à la méthodologie d’évaluation des risques sont revues et détaillées pour exposer les étapes, les sources et les analyses à conduire pour apprécier chacune des 4 catégories de risques. L’orientation générale n°4 sur les mesures de vigilance à l’égard des clients est significativement enrichie avec le détail de ces mesures à prévoir au sein des politiques et procédures, des précisions sur la notion de bénéficiaire effectif et les manières de l’identifier, des développements sur l’entrée en relation à distance et le recours aux technologies innovantes pour la vérification d’identité. Deux nouvelles orientations sont ajoutées, l’orientation n°6 relative à l’obligation de formation du personnel et l’orientation n°7 sur l’évaluation globale de l’efficacité de sa stratégie LCB-FT.

Révision de l’orientation sectorielle relative à la gestion collective

En 2018, l’AMF avait notifié à l’ESMA son intention de se conformer aux orientations dans leur première version, avec une réserve d’interprétation relative à la détermination du client des sociétés de gestion de portefeuille. L’orientation n°16.14 reprend l’énoncé des quatre situations au terme desquelles le client de la société de gestion est toujours déterminé en fonction du mode de souscription et d’inscription des parts. Les orientations révisées sont désormais alignées avec la position de l’AMF de sorte que la réserve d’interprétation est caduque : la position AMF DOC-2019-14 est révisée en ce sens.

D’autres documents de doctrine seront impactés par ces nouvelles orientations, notamment la Position - Recommandation DOC-2019-15 relatives aux mesures de vigilance à l’égard des clients.

On 26 November 2021, the Agence française anticorruption (AFA) launched a consultation on the practical guide to corporate anti-bribery accounting controls. 

An effective anti-corruption system is based on three inseparable pillars: the commitment of the management body to an honest business, the knowledge of the corruption risks to which the company is exposed by drawing up a map of these risks, and the management of the risks identified by a set of measures and procedures for prevention, detection and remediation.

These detection measures and procedures include anti-corruption accounting controls, to which the AFA has devoted a draft guide submitted for public consultation. It was drafted in collaboration with the Haut conseil du commissariat aux comptes, the Compagnie nationale des commissaires aux comptes, the Ordre des experts comptables, the Association des directeurs financiers et de contrôle de gestion and the Institut français de l'audit et du contrôle internes.

This guide takes the form of an educational collection of good practices and illustrations. It reminds us that rigorous and organised accounting, drawn up in accordance with the standards in force, contributes greatly to the prevention and detection of corruption. However, in the risk areas identified by the corruption risk map, the company can put in place dedicated, recorded and formalised accounting controls that will enable it to strengthen the security of its activities.

Contributions can be sent to consultation.afa@afa.gouv.fr until 7 January 2022.

Version française

Le 26 novembre 2021, l'Agence française anticorruption (AFA) a publié un Guide pratique sur les contrôles comptables anticorruption en entreprise.

Un dispositif anticorruption efficace repose sur trois piliers indissociables : l’engagement de l’instance dirigeante en faveur d’une activité intègre, la connaissance des risques de corruption  auxquels l’entreprise est exposée au moyen de l’élaboration d’une cartographie de ces risques, et la gestion des risques identifiés par un ensemble de mesures et procédures de prévention, de détection et de remédiation.

Parmi ces mesures et procédures de détection, figurent les contrôles comptables anticorruption auxquels l’AFA a consacré un projet de guide soumis à la consultation publique. Il a été rédigé en collaboration avec le Haut conseil du commissariat aux comptes, la Compagnie nationale des commissaires aux comptes, l’Ordre des experts comptables, l’Association des directeurs financiers et de contrôle de gestion et l’Institut français de l’audit et du contrôle internes. 

Ce guide prend la forme d’un recueil pédagogique de bonnes pratiques et d’illustrations. Il rappelle qu’une comptabilité rigoureuse et organisée, établie suivant les normes en vigueur, contribue fortement à la prévention et à la détection des faits de corruption. Pour autant, et sur les zones à risques identifiées par la cartographie des risques de corruption, l’entreprise peut mettre en place des contrôles comptables dédiés, recensés et formalisés qui lui permettront de renforcer la sécurité de ses activités.

Les contributions peuvent être adressées à consultation.afa@afa.gouv.fr jusqu’au 7 janvier 2022

On 18 November 2021, the Agence française anticorruption (AFA) published the final version of the guide on the prevention of conflicts of interest in a company.

The United Nations Convention against Corruption of 31 October 2003, known as the "Merida Convention", recalls the importance for each State Party to adopt measures involving the private sector in order to prevent the corrupt phenomenon.

The guide deals with conflicts of interest from the perspective of the risk of corruption. It does not, for example, deal with conflicts of interest relating to the protection of clients and investors, the prevention and management of which are already provided for by specific legislative and regulatory provisions at both European and national level.

Preventing and managing corruption risks means that an organisation must identify situations that may expose it to harmful legal, human, economic and financial consequences. In this context, the mapping exercise is, as the AFA's recommendations emphasise, the cornerstone of any anti-corruption system and must pay particular attention to the risks resulting from the "links of interest" of the organisation's managers and employees. This vigilance should lead it, depending on the risks identified, to define a procedure for managing conflicts of interest, to which its anti-corruption code of conduct may usefully refer.

In the event of a proven conflict of interest, it is recommended that remedial measures be implemented that are proportionate to the seriousness of the risk posed by the situation in question. These measures must take into account the respect of the fundamental rights of the persons concerned, in particular the right to privacy. 

This practical guide aims to assist organisations, their directors, managers and employees, as well as compliance professionals in understanding the issue of conflicts of interest with regard to the risk of corruption (I), in identifying risk situations (II) and in defining measures to prevent and manage them (III). As the AFA recommendations on which it is based, this guide is not binding and does not create any legal obligation.

Version française

Le 18 novembre 2021, l'Agence française anticorruption (AFA) a publié la version finale du guide sur la prévention des conflits d'intérêts dans l'entreprise.

La convention des Nations Unies contre la corruption du 31 octobre 2003, dite de « Merida », rappelle l’importance pour chaque Etat partie d’adopter des mesures impliquant le secteur privé afin de prévenir le phénomène corruptif.

Le guide traite des conflits d’intérêts sous l’angle du risque de corruption. Aussi n’y sont, par exemple, pas abordés les conflits d’intérêts relatifs à la protection de la clientèle et des investisseurs dont la prévention et la gestion sont déjà prévues par des dispositions législatives et règlementaires spécifiques tant à l’échelon européen qu’à l’échelon national.

La prévention et la gestion des risques de corruption impliquent pour une organisation d’identifier les situations susceptibles de l’exposer à des conséquences juridiques, humaines, économiques et financières préjudiciables. Dans ce contexte, l’exercice de la cartographie constitue, comme le soulignent les recommandations de l’AFA, la pierre angulaire de tout dispositif anticorruption et doit porter une attention particulière aux risques résultant des « liens d’intérêts » des dirigeants et collaborateurs de l’organisation. Cette vigilance doit la conduire, en fonction des risques identifiés, à définir une procédure de gestion des conflits d’intérêts, à laquelle son code de conduite anticorruption peut utilement renvoyer.

En cas de conflit d’intérêts avéré, il est recommandé de mettre en œuvre des mesures de remédiation proportionnées à la gravité du risque induit par la situation en cause. Ces mesures doivent tenir compte du respect des droits fondamentaux des personnes visées, notamment du droit au respect de la vie privée. 

Pragmatique, ce guide vise à accompagner les organisations, leurs administrateurs, leurs dirigeants et collaborateurs, ainsi que les professionnels de la conformité dans l’appréhension de la problématique des conflits d’intérêts au regard du risque de corruption (I), dans l’identification des situations à risques (II) et dans la définition de mesures permettant de les prévenir et de les gérer (III). A l’instar des recommandations de l’AFA sur lesquelles il s’appuie, le présent guide ne revêt aucun caractère contraignant et ne crée pas d’obligation juridique.

On 9 November 2021, the Autorité des marchés financiers (AMF) and the Banque de France publish an update of the inventory of liquidity management tools in French funds.

In July 2020, the Banque de France and the AMF published a joint study on the liquidity management tools (LMTs) of French funds. This follow-up analysis offers a dynamic perspective of their adoption since 2017, and sheds lights on specific patterns observed on some categories of funds, such as ETFs, employee savings scheme funds, and funds predominantly used as units for unit-linked life insurance products. Substantial efforts in LMTs implementation are still needed.

Liquidity management tools in equity, bond, alternative and real estate funds

Anti-dilution levies (ADLs) are used especially in equity funds and « other » funds, swing-pricing is found mainly in bond funds, and to a lesser extent in equity and diversified funds. Gates (redemption caps) are provided for chiefly in alternative funds (31% of fund share chasses and 60% of net assets at end-June 2021). This LMT is also deployed in real estate funds (31% of fund classes and 25% of net assets at end-June 2021).

Findings concerning funds serving for unit-linked insurance products, employee savings scheme funds and ETFs

The equity, bond and diversified funds which are predominantly used for unit-linked insurance products (i.e. serving as units for unit-linked products) are generally characterized by a lower rate of adoption of ADLs, swing-pricing and gates than funds in which unit-linked policies are less predominant.

Employee savings scheme funds have less liquid liabilities, to the extent that these products are marketed via employee savings plans (PEEs) or employee retirement savings plans (PERCOs), respectively locked up in theory for five years and until retirement (except in the case of early release of funds). The rate of adoption of various LMTs is very much lower where these are concerned.

Conversely, ADLs and gates are far more common to equity ETFs than to other equity funds. Equity ETFs offer redemption in kind less often and they do not resort to swing-pricing.

Lastly, the rate of adoption of the various LMTs differs depending on the nature of the funds. UCITS (and especially VaR UCITS) generally make more use of swing-pricing and gates than AIFs.

Version française

Le 9 novembre 2021, l'Autorité des marchés financiers (AMF) et la Banque de France ont publié une mise à jour des recensements des outils de gestion de la liquidité des fonds français.

La Banque de France et l’AMF ont publié en juillet 2020 une étude conjointe sur les outils de gestion de la liquidité des fonds français. Ce nouvel approfondissement de l’analyse permet de mesurer l’évolution de leur déploiement depuis 2017 et les éventuelles spécificités de certaines catégories de fonds comme les ETF, les fonds d’épargne salariale et les fonds servant de support aux unités de compte (UC). Des efforts substantiels restent nécessaires.

Les outils de gestion de la liquidité dans les fonds actions, d’obligations, alternatifs et immobiliers

Les anti-dilution levies (ADL) ou les droits d’entrée/sortie ajustables acquis au fonds sont surtout utilisés dans les fonds actions et la catégorie « autres », tandis que le swing-pricing (ajustement de la valeur liquidative pour refléter le coût de la liquidité) se retrouve principalement dans les fonds obligataires et dans une moindre mesure dans les fonds actions et diversifiés. Les gates (plafonnements des rachats) sont surtout prévues dans les fonds alternatifs soit 31 % des classes de parts et 60 % de l’actif net à fin juin 2021. Cet outil de gestion de la liquidité est également présent dans les fonds immobiliers à hauteur de 31 % des classes de parts et 25 % de l’actif net à fin juin 2021. 

Les constats pour les UC des assureurs, les fonds d’épargne salariale et les ETF

Les fonds actions, obligations et diversifiés avec la plus forte détention par les assureurs au titre des UC sont généralement caractérisés par une moindre adoption des ADL, du swing-pricing et des gates que les fonds chez qui les UC sont moins prédominantes.

Les fonds d’épargne salariale bénéficient d’un passif moins liquide, dans la mesure où ces produits sont commercialisés via des plans d’épargne entreprise (PEE) ou des plans d’épargne retraite en entreprise (PERCO), bloqué théoriquement respectivement pour cinq ans et jusqu’au départ en retraite (sauf cas de déblocage anticipé). L’adoption des différents outils de gestion de la liquidité y est très nettement inférieure.

Inversement, les ETF actions sont beaucoup mieux dotés d’ADL et de gates que les autres fonds actions, mais prévoient moins souvent le remboursement en nature. Ils n’utilisent pas le swing-pricing.

Enfin, l’adoption des différents outils de gestion de la liquidité diffère en fonction de la nature des fonds. Les OPCVM et plus encore les OPCVM en VaR sont en effet généralement mieux équipés de swing-pricing et de gates que les FIA.

On 8 November 2021, the Autorité des normes comptables (ANC) published a Regulation N° 2021-09 of 5 November 2021 on the annual accounts of undertakings for collective investment in real estate, applicable from 1 October 2023.

This document contains two levels of texts:

• on the one hand, the regulatory provisions, which are mandatory, of the articles of ANC regulation 2021-09 of 5 November 2021 on the annual accounts of real estate investment funds. These regulatory elements can be identified by their black colour. 
• On the other hand, these articles are supplemented by non-regulatory comments, identifiable typographically by their blue colour. 

These infra-regulatory comments are classified according to the following five categories: 

• Contextual comments (IR1) which present the context and the reasons for the development of the standard; 
• comments on the scope of an article (IR2) to indicate whether a type of transaction is covered by an article or not 
• comments on the implementation of an article (IR3); 
• illustrative comments (IR4): these are examples; 
• recommendations relating to posting schemes (IR5): these specify how the accounts work.

Version française

Le 8 novembre 2021, l'Autorité des normes comptables (ANC) a publié le Règlement ANC n°2021-09 du 5 novembre 2021 relatif aux comptes annuels des organismes de placement collectif immobilier, applicable à compter du 1er octobre 2023.

Le présent document comporte deux niveaux de textes : 

• d’une part les dispositions règlementaires, à portée obligatoire, des articles du règlement ANC °2021-09 du 5 novembre 2021 relatif aux comptes annuels des organismes de placement collectif immobilier. Ces éléments à portée règlementaire sont identifiables par leur couleur noire.
• d’autre part, ces articles sont complétés de commentaires non réglementaires, identifiables typographiquement par leur couleur bleue. 

Ces commentaires infra-règlementaires sont classés selon les cinq catégories suivantes : 

• commentaires contextuels (IR1) qui présentent le contexte et les motifs ayant prévalu à l’élaboration de la norme ; 
• commentaires relatifs au champ d’application d’un article (IR2) pour indiquer si un type de transaction est concerné par un article ou pas ; 
• commentaires relatifs aux modalités de mise en œuvre d’un article (IR3) ;
• commentaires illustratifs (IR4) : il s’agit d’exemples ; 
• recommandations relatives aux schémas d’écriture (IR5) : il s’agit de préciser le fonctionnement des comptes.

On 10 November 2021, the Autorité de Contrôle Prudentiel et de Résolution (ACPR) published an Instruction 2021-I-14 of 15 October 2021 repealing Instruction 2017-I-09 of 15 June 2017 on the procedure for accepting experts for the valuation of the realisable value of buildings and shares in unlisted real estate or property companies.

Instruction 2017-I-09 of the Autorité de contrôle prudentiel et de résolution is repealed. This instruction shall enter into force on the day following its publication in the Official Register of the Autorité de contrôle prudentiel et de résolution.

Version française

Le 10 novembre 2021, l'Autorité de Contrôle Prudentiel et de Résolution (ACPR) a publié l'Instruction n° 2021-I-14 du 15 octobre 2021 abrogeant l’instruction n° 2017-I-09 du 15 juin 2017 relative à la procédure d’acceptation des experts dans le cadre de l’évaluation de la valeur de réalisation des immeubles et des parts ou actions des sociétés immobilières ou foncières non cotées.

L’instruction n° 2017-I-09 de l’Autorité de contrôle prudentiel et de résolution est abrogée. La présente instruction entre en vigueur le lendemain du jour de sa publication au Registre officiel de l’Autorité de contrôle prudentiel et de résolution.

On 9 November 2021, the Association Française des Marchés Financiers (AMAFI) published a Sustainable Finance Cartography.

The emergence of sustainable finance is a major challenge for financial markets, financial stability and investor protection. In order to support its members in the analysis and monitoring of regulations related to sustainable finance, the AMAFI has drafted this note which aims to provide an overview:

• Provisions of European law; 
• Provisions of French law; 
• Work in progress within the various competent authorities (in particular the Autorité des marchés financiers (AMF) and the European Securities and Markets Authority (ESMA)). 

This document is also presented in Annex 1 in the form of a table.

Version française

Le 9 novembre 2021, l'Association Française des Marchés Financiers (AMAFI) a publié une cartographie réglementaire de la finance durable.

L’émergence d’une finance durable constitue un enjeu majeur pour les marchés financiers, la stabilité financière et la protection des investisseurs. Afin d’accompagner ses adhérents dans l’analyse et le suivi des règlementations liées à la finance durable, l’AMAFI a rédigé la présente note qui vise à fournir un panorama :

• Des dispositions de droit européen ; 
• Des dispositions de droit français ; 
• Des travaux en cours au sein des différentes autorités compétentes (notamment l’Autorité des marchés financier (AMF) et l’Autorité européenne des marchés financiers (ESMA)). 

Ce document est également présenté, en annexe 1, sous forme de tableau.

On 24 November 2021, the Association Française de Gestion (AFG) published a survey on the Impact finance: the practices and challenges of asset management companies in France.

Impact finance has developed significantly since the Paris Climate Agreement. The Paris financial centre is striving to build a coherent and solid expertise with an assumed leadership, but there is still work to be done to reach a consensus in the practices observed.

The AFG and Mazars present their joint study on impact finance. It highlights the level of maturity, expectations and challenges of French asset management companies in terms of impact finance.

The survey identified 5 major challenges that impact finance players will have to face in order to achieve a harmonised practice:

• Challenge 1: The availability, collection, harmonisation and management of impact data. 
• Challenge 2: The implementation of specific governance and processes for impact investing within asset management companies. 
• Challenge 3: Convergence of impact finance market practices following the adoption of a common definition by FFT. 
• 4th challenge: The identification of specific approaches per United Nations Sustainable Development Goals (SDGs), declined according to the types of assets with adequate methodologies and tools. 
• 5th challenge: The definition of transparent and comparable impact reporting in order to limit the risk of impact washing.

Version française

Le 24 novembre 2021, l' Association Française de Gestion (AFG) a publié une enquête sur la Finance à impact : les pratiques et défis des sociétés de gestion en France.

La finance d'impact s'est considérablement développée depuis l'Accord de Paris sur le climat. La place financière de Paris s'efforce de construire une expertise cohérente et solide avec un leadership assumé, mais il reste encore du travail à faire pour parvenir à un consensus dans les pratiques observées.

L’AFG et Mazars présentent leur étude commune sur la finance à impact. Cette étude met en lumière le niveau de maturité, les attentes et les défis des sociétés de gestion françaises en matière de finance à impact.

Cette étude a permis d’identifier 5 défis majeurs que les acteurs de la finance à impact devront relever pour aboutir à une pratique harmonisée :

• 1er défi : La disponibilité, la collecte, l’harmonisation et la gestion de la donnée à impact. 
• 2ème défi : La mise en place au sein des sociétés de gestion d’une gouvernance et de processus spécifiques à l’investissement à impact. 
• 3ème défi : La convergence des pratiques de place de la finance à impact suite à l’adoption d’une définition commune donnée par FFT. 
• 4ème défi : L’identification d’approches spécifiques par Objectifs de Développement Durable des Nations Unies (ODD), déclinées selon les types d’actifs avec des méthodologies et des outils adéquats. 
• 5ème défi : La définition d’un reporting transparent et comparable de l’impact afin de limiter le risque d’impact washing.

On 15 November 2021, the Autorité des marchés financiers (AMF) published a warning to listed companies, corporate officers and investors about the risks associated with equity line and OCABSA financing.

Since the beginning of the year, the AMF has noted an increase in calls from individuals who have lost a large part of their investment in listed companies that use equity line or OCABSA (notes with warrants) financing. This type of financing can create strong downward pressure on the share price of the companies concerned and result in a considerable dilution of investors.

The AMF urges issuers and corporate officers to be particularly vigilant before resorting to this type of financing and draws their attention to their responsibility in implementing these instruments.

The AMF is also warning retail investors about the risks of investing in companies that use this type of financing.  Investments such as these are complex, risky and rarely suited to retail investors.

Lastly, the AMF reminds shareholders that such financing is generally set up pursuant to delegations of authority granted by the general meeting to the board of directors. Shareholders are therefore invited to be vigilant when the agenda is published on the resolutions that will be debated and voted on at the general meetings, particularly those aimed at cancelling their preferential subscription rights.

Version française

Le 15 novembre 2021, l'Autorité des marchés financiers (AMF) a alerté les sociétés cotées, les mandataires sociaux et les investisseurs sur les risques associés aux financements sous forme d’equity lines et d’OCABSA.

Depuis le début de l’année, l’Autorité des marchés financiers constate une recrudescence des appels émanant de particuliers ayant perdu une grande partie de leur investissement dans des sociétés cotées ayant recours à des financements sous forme d’equity lines ou d’OCABSA. Ce type de financement peut créer une forte pression baissière sur le cours de bourse des sociétés concernées et conduire à une dilution significative des investisseurs.

L’AMF invite les émetteurs et les mandataires sociaux à être particulièrement vigilants avant de recourir à ce type de financements et attire leur attention sur la responsabilité qui leur incombe dans la mise en œuvre de ces instruments.

L’AMF met également en garde les épargnants vis-à-vis des risques associés aux investissements dans des sociétés ayant recours à ce type de financement. De tels investissements sont complexes, risqués et rarement adaptés à un investissement des particuliers.

L’AMF rappelle enfin aux actionnaires que ces financements sont généralement mis en place sur le fondement de délégations de compétence consenties par l'assemblée générale au conseil d'administration. Les actionnaires sont donc invités à être vigilants lors de la publication de l'ordre du jour sur les résolutions qui seront débattues et votées lors des assemblées générales, particulièrement celles visant à supprimer leur droit préférentiel de souscription.

On 9 November 2021, the Chambre des représentants de Belgique proposed an amendment to the Draft Law amending the Law of 8 July 2018 on the organisation of a central contact point for financial accounts and contracts and on the extension of access to the central file of seizure, delegation, assignment, collective debt settlement and protest notices.

The bill under consideration aims to address the opinions of the Data Protection Authority (DPA) on the latest amendments to the PCC Act. On 26 December 2020, the Data Protection Authority issued a highly critical opinion (DPA Opinion No. 122/2020) on the disclosure of account balances to the PCC. Article 5(1)(c) of the GDPR provides that personal data must be adequate, relevant and limited to what is necessary for the purposes for which it is processed ('data minimisation'). 

The application of a minimum amount is part of this proportionality control. The present amendment provides that the King is again required to provide for a minimum amount below which account balances do not have to be communicated to the central contact point.

On 23 November 2021, the Financial Services and Markets Authority (FSMA) published a communication FSMA_2021_18 on statutory auditors' training.

The 2021 continuing education will be organized in a “remote” format, through webinars, and will be divided into two sessions of approximately 1h30 each (excluding questions answers) :

• Thursday, December 9, 2021 from 1 p.m. to 3 p.m .: Training for collective investment undertakings and management companies of collective investment undertakings;
• Thursday, December 16, 2021 from 2 p.m. to 4 p.m .: Training for retirement institutions professional.

On 18 November 2021, the Belgium Chamber of representatives adopted a Draft law amending the law of 25 April 2014 on the status and supervision of credit institutions and securities firms in order to ensure the transposition of Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issuance of covered bonds and the public oversight of covered bonds, and also amending the law of 11 March 2018 on the status and supervision of payment institutions and electronic money institutions, access to the activity of payment service provider, and to the activity of issuing electronic money, and access to payment systems.

This bill ensures the partial transposition into Belgian law of Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issuance of covered bonds and the public oversight of covered bonds and amending Directives 2009/65/EC and 2014/59/EU (the Covered Bond Directive). 

To this end, this bill makes a number of amendments to the law of 25 April 2014 on the status and supervision of credit institutions and securities firms. In addition, the opportunity is taken to make a number of technical and legalistic corrections to the aforementioned law in order to clarify the supervisory regime of covered bonds by the competent authorities and the readability of the applicable rules. Some technical corrections are also made to the law of 11 March 2018 on the status and supervision of payment and electronic money institutions, access to the activity of payment service provider, and to the activity of issuing electronic money, and access to payment systems.

The text adopted by the plenary session is identical to the text adopted by the committee (DOC 55 2224/003).

On 10 November 2021, the BaFin informed it fully implements the revised AML/CFT EBA guidelines.

BaFin commented within the framework of the usual comply-or-explain procedure. In its interpretation and application instructions (General Section), it adopts the revised version of the guidelines. In addition, it explicitly points out to obligated parties that they must fully comply with the requirements for risk analysis (Chapter 2.3.).

On 10 November 2021, the BaFin published Circular 15/2021 updating the list of third countries that have strategic AML/CFT deficiencies in their systems.

Circular 15/2021 (GW) concerns third countries that have strategic deficiencies in their systems for combating money laundering and terrorist financing that pose significant risks to the international financial system (high-risk countries).

The circular is addressed to all obligated parties under BaFin in accordance with the AMLA in the Federal Republic of Germany.

On 25 November 2021, the Deutsche Bundesbank published the Financial Stability Review 2021.

The German financial system has functioned well during the pandemic; the extensive government measures have shielded the financial sector from losses. This is the conclusion reached by the Bundesbank in its Financial Stability Review 2021. At the presentation of the report, Bundesbank Vice-President Claudia Buch noted that, at the same time, vulnerabilities to adverse macroeconomic developments had built up continually, especially risks associated with real estate financing. “Now is the right time to take preventive action against future risks,” stressed Ms Buch. 

The report also studies the impact of climate risk, establishing that the German financial system appears to be only moderately vulnerable to valuation adjustments resulting from rising carbon prices.

On 30 November 2021, the BaFin announced the medium-term objectives and actions from 2022 to 2025.

In order to fulfil this task as effectively as possible, following a preventive approach towards supervision, BaFin has set itself ten medium-term objectives, which are all given equal priority. These objectives are to guide BaFin’s actions from 2022 to 2025. BaFin formulated the objectives based on the current risks in the financial sector as well as risks that may arise in future. Over the coming years, BaFin intends to make significant progress in all of the fields of activity identified.

1. Stability and security
2. Operational resilience
3. Problem companies (problematic business models, inadequate control systems or insufficient governance)
4. Money laundering prevention
5. Consumer protection
6. Market supervision
7. Sustainability
8. Innovation
9. Modernisation and a bold supervisory culture
10. Human resources development.

On 25 November 2021, the BaFin published the form for pre-marketing advertisements in accordance with Section 306b ( 3) of the KAGB.

On 18 November 2021, the BaFin provided for the Executive Summary of BaFin’s Status Survey on Sustainability Risks.

The topics of climate change and sustainability are omnipresent and public attention is increasingly focusing on the financial sector as well in this context. A survey by BaFin initiated in April 2021 on the subject of sustainable finance was intended to find out where the entities under its supervision currently stand and what developments they are planning for the future.

Of the 399 entities in the banking, insurance and securities sectors surveyed, 381 provided responses that could be evaluated following a quality-check. The Survey Report analyses all results in detail and also contains a reference to BaFin´s Guidance Notice on Dealing with Sustainability Risks. Based on the self-assessment provided by the entities, it is clear that the first steps have been taken but that there is a need for further action.

The results of the survey show that nearly all of the entities surveyed are making efforts to address the topic of sustainability risks, although the progress made in implementing the necessary measures is heterogeneous. Many entities have some catching up to do on risk management procedures, in particular relating to the use of internal stress tests but also in strategic and organisational decision-making. Going forward, BaFin will continue to expect entities under its supervision to deal appropriately with sustainability risks and take the necessary measures. The report on the survey may also help the entities to assess their own progress, including in relation to their peers, and identify any need for action.

Towards the end of the year, BaFin is also planning to publish a supplementary report which will contain a more in-depth analysis of the treatment of sustainability risks by the insurance sector.

On 3 November 2021, the Securities and Futures Commission (SFC) published a Circular concerning latest FATF statements:

(1)  FATF Statement on High-Risk Jurisdictions subject to a Call for Action

(2)  FATF Statement on Jurisdictions under Increased Monitoring

(3)  Outcomes from the FATF Plenary, 19-21 October 2021

On 25 November 2021, the Securities and Futures Commission (SFC) published Circular to Licensed Corporations and Associated Entities - Anti-Money Laundering / Counter-Financing of Terrorism Early Alert on United Nations Sanctions.

The sanctions committee of the United Nations Security Council (“UNSC”) which administers the sanctions regime for ISIL (Da’esh) and Al-Qaida added one individual to its sanctions list on 23 November 2021 (New York time).

Licensed corporations (“LCs”) and associated entities (“AEs”) should update their screening databases with the above changes made by the UNSC sanctions committee for sanctions screening of customers and payments.  LCs and AEs are reminded to refer to our circular on United Nations Sanctions issued on 7 February 2018 which sets out our expectations on actions that LCs and AEs should take regarding sanctions imposed by the UNSC.

On 26 November 2021, the Securities and Futures Commission (SFC) published Circular to Licensed Corporations and Associated Entities - Anti-Money Laundering / Counter-Financing of Terrorism United Nations Sanctions (Mali) Regulation 2019 (Amendment) Regulation 2021.

The United Nations Sanctions (Mali) Regulation 2019 (Amendment) Regulation 2021 (“Mali Amendment Regulation”), made under the United Nations Sanctions Ordinance (Cap. 537) (“UNSO”), was published in the Gazette (L.N. 238 of 2021) on 26 November 2021 with immediate effect.

The Mali Amendment Regulation implements sanctions against Mali as renewed by the United Nations Security Council under Resolution 2590, which include, inter alia, prohibition against making available to certain persons or entities any economic assets, or dealing with economic assets of such persons or entities, except with a licence.

Licensed corporations (“LCs”) and associated entities (“AEs”) are reminded to refer to Chapter 6 of the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) (“AML Guideline”) which contains guidance on the appropriate measures that LCs and AEs should take to ensure compliance with the regulations made under the UNSO.

On 5 November 2021, the Securities and Futures Commission (SFC) published G.N. 6932 / 2021 - Notice under ss.169 and 399 of SFO publishing amendments to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, which concerns:

• Appointment
• Booking and placing activities in equity capital market & debt capital market transactions
• Types of CMI
• Obligations and expected standards of conduct

These amendments shall become effective on 5 August 2022.

On 2 November 2021, the Securities and Futures Commission (SFC) published Circular to licensed corporations - Cancellation of Quarantine Exemption Arrangements.

The SFC informed that On 1 November 2021, the Hong Kong Special Administrative Region (HKSAR) Government announced the cancellation of quarantine exemption arrangements for certain categories of persons in the financial services sector in accordance with the Compulsory Quarantine of Certain Persons Arriving at Hong Kong Regulation (Cap. 599C) and the Compulsory Quarantine of Persons Arriving at Hong Kong from Foreign Places Regulation (Cap. 599E) with effect from 12 November 2021.  

Accordingly, the SFC will not accept any new applications under the Exemption Scheme with immediate effect.

On 19 November 2021, the Hong Kong Monetary Authority (HKMA) published Guidance on Sharing Customer Data by Authorized Institutions for Direct Marketing by Third Parties.

This guidance is applicable to provision of customers’ personal data by AIs to third parties, including group companies of AIs (collectively referred to as “third parties”), for the purpose of usage by the third parties for direct marketing. There should not be distinction in collection or provision of customers’ personal data between different processes of banking products or services, such as during or subsequent to account opening and application process for banking products or services; nor distinction between different business lines (e.g. retail banking or commercial banking, etc.)

On 9 November 2021, the Securities and Futures Commission (SFC) published Circular to Intermediaries - Implementation of enhanced competency framework.

The SFC reminds industry practitioners that the enhanced entry requirements for licence applicants and the ongoing competency standards for intermediaries and individual licensees will come into effect on 1 January 2022.

Amongst the enhanced measures, individual licensees advising on corporate finance (Type 6 regulated activity) who intend to advise on matters or transactions falling within the ambit of the Codes on Takeovers and Mergers and Shares Buy-backs will be required to pass the new Licensing Examination Paper 17 (LE Paper 17) not more than three years prior to and not later than six months after the date of their first engagement in such work, unless otherwise exempted.

On 11 November 2021, the Securities and Futures Commission (SFC) published Circular to management companies of SFC-authorized unit trusts and mutual funds - enhanced fund data reporting.

This circular supplements the 2018 Circular and sets out the SFC’s refined requirements on enhanced fund data covering periodic reporting of the Fund’s information in the following areas:

• Liquidity profile
• Subscription and redemption
• Asset allocation and leverage exposure
• Securities financing transactions and securities borrowing transactions.

On 19 November 2021, the Securities and Futures Commission (SFC) published G.N. 7176 / 2021 Notice under s.399 of SFO publishing amended Code on Pooled Retirement Funds.

The amended Code on Pooled Retirement Funds, with effect from 1 December 2021, shall supersede all the previous versions of such code.

On 19 November 2021, the Securities and Futures Commission (SFC) published G.N. 7177 / 2021 Notice under s.402 of SFO specifying form to be used for the purpose of submission to the Commission.

The form "Application form for revised offering documents that incorporate changes falling within 10.1 of the Code on Pooled Retirement Funds that require SFC's prior approval" needs to be submitted from 1 December 2021.

On 5 November 2021, the Securities and Futures Commission (SFC) published a Circular to Licensed Corporations - Updated Technical Specifications for OTC Derivatives Trade Reporting.

The SFC informed that the Hong Kong Monetary Authority issued a notice (Notice) about updated technical specifications for over-the-counter (OTC) derivatives trade reporting under the Hong Kong Trade Repository (HKTR). The corresponding macro program of the Administration and Interface Development Guide (AIDG) version 1.8 is published on the HKTR website. 

Licensed Corporations that may be subject to mandatory reporting obligation are advised to refer to the Notice.

On 26 November 2021, the Securities and Futures Commission (SFC) published a Circular to Intermediaries:

1) Technical Information Paper for the Over-the-counter Securities Transactions Reporting Regime (OTCR); and

2) Frequently Asked Questions about the Hong Kong Investor Identification Regime (HKIDR) and the OTCR.

On 26 November 2021, the Securities and Futures Commission (SFC) published Circular to Licensed Corporations on the Updated Technical Specifications for OTC Derivatives Trade Reporting.

The SFC informed that the Hong Kong Monetary Authority issued a notice (Notice) about updated technical specifications for over-the-counter (OTC) derivatives trade reporting under the Hong Kong Trade Repository (HKTR).

Licensed Corporations that may be subject to mandatory reporting obligation are advised to refer to the Notice.

On 5 November 2021, the S.I. No. 573 of 2021 - European Union (Restrictive Measures concerning Iran) (No. 2) Regulations 2021 was published in the Irish Statute Book.

The purpose of these regulations is to give full effect to Council Regulation (EU) No 267/2012 of 23 March 20121, as amended.

On 16 November 2021, the Central Bank of Ireland (CBI) published Anti-Money Laundering Bulletin - Issue 7 / November 2021.

The Central Bank expects Firms to have implemented effective governance, risk and control functions and to be able to demonstrate to the Central Bank: 

• Sufficient oversight of the AML/CFT/FS framework to ensure compliance with the requirements of CJA 2010; 
• The identification and management of ML/TF/FS risks to which they are exposed is an iterative and ongoing cornerstone of the Firm’s AML/CFT/FS framework; and 
• Continual review and assessment of existing processes and procedures to enhance the AML/CFT/FS framework on an ongoing basis, so that firms are well-positioned to respond to emerging risks, legislative changes and regulatory guidance. 

The Central Bank will continue to conduct supervisory engagements with Firms in this sector and expects Firms to be in a position to demonstrate that they have reviewed the findings and expectations detailed in this bulletin and, where gaps/weaknesses are identified by firms, sufficient steps have been taken to remediate the identified gaps/weaknesses. In instances where firms fail to demonstrate the necessary remediation to ensure compliance, the Central Bank will determine the appropriate action to undertake, within its full range of its regulatory tools, including where necessary utilising its enforcement powers.

On 1 November 2021, the Central Bank of Ireland updated on the application of ESEF Regulation under COVID-19 flexibility measures.

The CBI reminds that issuers who wish to publish their annual financial reports in accordance with the ESEF Regulation in 2021 (for financial years beginning between 1 January 2020 and 31 December 2020) will still be able to proceed.  Where an issuer chooses to publish their annual financial reports in ESEF in 2021, all relevant requirements of the Transparency Regulations and the ESEF Regulation will need to be complied with.

On 9 November 2021, the S.I. No. 576 of 2021 - European Union (Covered Bonds) Regulations 2021 was published in the Irish Statute Book.

• A designated credit institution shall, when it issues asset covered securities entitled to use the label ‘European Covered Bond’ or the label ‘European Covered Bond (Premium)’ notify the Authority as soon as practicable after such issue that it has issued such asset covered securities.
• A designated credit institution shall apply to the Authority for permission for a covered bond programme.

The amendments to this Act effected by the certain provisions of the European Union (Covered Bonds) Regulations 2021 (S.I. No. 576 of 2021) shall not apply in respect of asset covered securities which are issued before 8 July 2022 and which meet the criteria for bonds under Regulation 70(3)(a) of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 ( S.I. No. 352 of 2011 ) as it applied on the date of their issue.

On 3 November 2021, the Central Bank of Ireland published its letter to regulated financial services providers regarding climate and other ESG issues.

The letter highlights the statutory obligations and related supervisory expectations relating to climate and sustainability issues.

In the letter the CBI acknowledged that addressing these issues will be challenging for firms, but climate change requires action from all participants in the financial sector, and ownership of the climate agenda by regulated financial service providers is now critically important.

On 17 November 2021, the Central Bank of Ireland published process clarifications for UCITS and AIFs pre-contractual documentation updates in relation to the Taxonomy Regulation and  Level 2 measures in relation to the SFDR.

The document answers following questions:

• What documents need to be filed with the Central Bank for UCITS and AIFs (RIAIFs and QIAIFs)? 
• Is there a prescribed format for the email submissions? 
• Is there a prescribed format or form for the attestation?
• When must filings be made to ensure compliance (noting) by Taxonomy Regulation Deadline?
• When must filings be made to ensure compliance (noting) by SFDR RTS Deadline?
• Is it possible to make other changes to the prospectus, as well as the Taxonomy Regulation/SFDR Level 2 as part of the fast-track process?
• Firm has made a submission to the Central Bank for the authorisation of a new fund / sub-fund. Can the firms qualify for the fast-track process?
• After 1 January 2022, will the fast-track process be available for Taxonomy Regulation related updates?
• After 1 July 2022, will the fast-track process be available for SFDR Level 2 related updates?

On 8 November 2021, CONSOB with Resolution no. 22054 issued a Regulation for the adoption of measures provided for by the MEF Decree n. 100/2021, establishing the Sandbox regulation for the FinTech sector.

The first time window for submitting applications for admission to the Regulatory sandbox kicks off on 15 November, 2021 and will close on 15 January 2022.

On 24 November 2021, CONSOB published a notice with which it revoked six communications adopted during the term of the Directive.

These are, in particular, the following communications:

• CONSOB Communication no. 1031710 of 27 April 2001, "Communication of offers' results and stabilization activities "
• Communication n. 11021864 of 24 March 2011, concerning "Advertising messages relating to offers to the public and / or admissions to trading on a regulated market of non-equity financial products - Applicable regulations and recommendations "
• Communication n. 12054742 of 29 June 2012, concerning  "Entry into force of Regulation (EU) no. 486/2012 - Prospectus, final terms and summary - Operating instructions "
• Communication no. 13028158 of 4 April 2013, "Communication regarding information to be published in case of operations to strengthen capital, of an amount overall lower than the threshold after which the Informative prospect should be published"
• Communication no. 13037777 of 3 May 2013, "Communication containing guidelines for the preparation of the document to be submitted to an equivalence judgment pursuant to art.34-ter and 57 of CONSOB Regulation no. 11971 of May 14, 1999 "
• Communication no. 0010807 of 10 February 2014, subject "Method of publication of the offer price where this has been omitted from the prospectus".

On 11 November 2021, Banca d'Italia published a Communication on “Servicers in securitization transactions - risk profiles and lines of supervision ", in which the attention profiles that characterize the sector have been recalled, and recommendations have been formulated on the controls to adopt in this activity.

In addition, a collection of information on the securitization operations has been launched, which integrates the information set to be shared periodically by introducing two ad hoc templates, one for securitization transactions assisted by public guarantee and one for the other managed operations, which will be made available on the INFOSTAT platform by the end of the current month, with the related operating instructions.

The templates will be sent by banking and financial servicers on a regular basis, every six months, by the 20th day following the reference date. The first survey must refer to the date of 31 December 2021.

On 4 November 2021, the Commission de Surveillance du Secteur Financier (CSSF) published Circular CSSF 21/786 regarding the following two FATF statements.

Regarding high-risk jurisdictions on which enhanced due diligence and, where appropriate, counter-measures continue to be inmposed on Democratic People's Republic of Korea and Iran.

Concerning jurisdictions under increased monitoring of the FATF, it concerns Albania, Barbados, Burkina Faso, Cambodia, Haiti, Cayman Islands, Jamaica, Jordan, Mali, Malta, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Turkey, Uganda, Yemen and Zimbabwe.

As a result of the substantial efforts made by Botswana and Mauritius, these jurisdictions are no longer subject to the enhanced monitoring process, but continue to work with the respective FATF regional style body.

This circular repeals CSSF circular 21/775 of 5 July 2021. 

On 30 November 2021, Luxembourg published the Grand-Ducal decree of 10 November 2021 establishing an inter-ministerial steering committee for the fight against money laundering and terrorist financing. 

An interministerial steering committee on the fight against money laundering and terrorist financing, referred to as the "Steering Committee", will be established within the Ministry of Justice.

The Steering Committee will be responsible for:

• proposing to the government the main guidelines and strategic priorities of the national policy to combat money laundering and terrorist financing;
• proposing to the government any measures to mitigate money laundering and terrorist financing risks and related data protection issues; and
• reporting to the government on the progress made in the implementation of the national AML/CFT policy.

On 24 November 2021, the Chambre des députés - Luxembourg published draft law 7916 amending the amended law of 23 September 2020 on measures concerning the holding of meetings in companies and other legal persons.

In view of the uncertain evolution of the pandemic situation, it is proposed to extend the measures of the amended law of 23 September 2020 on measures concerning the holding of meetings in companies and other legal persons 31 December 2022.

On 4 November 2021, the Commission nationale pour la protection des données (CNPD) published Q&As on data protection and the CovidCheck.

Implementing CovidCheck in the workplace: what can the employer do?

1. Can the employer impose the implementation of CovidCheck? Yes.
2. What happens if an employee/agent presents an invalid certificate or refuses to present his certificate? The consequences of an employee refusing to present his/her certificate, or presenting an invalid certificate, are a matter of labour law, for which the CNPD has no jurisdiction.
3. Can the employer collect data related to the vaccination status of employees, customers or suppliers? No.
4. Can the employer link the result of the validity of a certificate to the access badge of employees or implement a system that facilitates the entry/exit of a Covidcheck area on a daily basis? Yes, under certain strict conditions.
5. Can the employer ask for an identity document from a person outside the company (visitor, supplier, etc.) when scanning their QR code in order to verify the identity of the holder? No.
6. Who can verify the authenticity of the certificate and under what conditions? The CNPD advises that the employer defines a limited number of persons who can verify the validity of the certificate.
7. In case of malfunctioning of the application, can the employer check the certificate manually (i.e. check the paper version, containing all the personal data)? Yes, in exceptional cases.
8. Can the employer ask his employees to fill in a medical questionnaire about their vaccination status or to carry out a survey to find out the percentage of vaccinated people in the company? In principle, no.

Implementation of CovidCheck and data protection

1. Is the scan of a QR code via the CovidCheck.lu application considered as personal data processing? Yes.
2. Is the green or red quadrant that appears after scanning the QR code on the CovidCheck.lu application considered as health data? Yes.
3. What data is visible during verification via the CovidCheck.lu application? The data visible during the CovidCheck verification via the covidcheck.lu application are: a green or red quadrant, depending on the validity of the scanned certificate, the first and last name of the person in whose name the certificate was issued.
4. What data can a restaurant or event organiser who applies the CovidCheck scheme consult? Only the data visible during the CovidCheck verification, as described in question 3 above.
5. Is it allowed to ask people (customers, employees, volunteers, etc.) to send their certificate by email in advance? No.

BACKGROUND

On 8 February 2021, the Commission de Surveillance du Secteur Financier (CSSF) published a communication "Financial Innovation: a challenge and an ambition for the CSSF", announcing and embracing the challenges raised by financial innovation such as virtual assets. The CSSF reaffirmed its commitment to promote an open, technology neutral and prudent risk-based regulatory approach.

The new and evolving sector around virtual assets raises numerous questions from professionals under the supervision of the CSSF and professional associations as to the opportunities and concrete possibilities to engage in activities involving virtual assets in the broadest sense of the term. Many of these questions notably concern investments in virtual assets by investment funds, direct investments (as opposed to indirect investments using derivative instruments) in virtual assets or depository duties in the context of virtual assets.

WHAT'S NEW?

On 29 November 2021, the Commission de Surveillance du Secteur Financier (CSSF) published a communication on the guidance and FAQs for Undertakings for Collective Investment (UCIs) on virtual assets.

With this current communication, the CSSF presents the intrinsic characteristics and functions of the virtual assets that will determine their risks and possibilities for a professional of the financial sector to get involved in them. The annexed FAQs will therefore, for ease of reference, mention for each question the type of professional and type of virtual asset that is targeted.

Any activity involving virtual assets entails specific risks pertaining to their volatility, liquidity, technological risk, counterparty, custody or even reputation. Any entity under the prudential supervision of the CSSF interested in pursuing an activity involving virtual assets bears the responsibility to carry out a thorough due diligence and to carefully weigh up the risks and benefits associated with the proposed virtual assets activity with respect to the entity’s existing business model and risk appetite.

Internal governance must ensure a sound and prudent management of all the activities of the entity and the internal governance arrangements shall include a clear risk-taking process including a risk appetite that is formally and precisely defined in all the business areas and a rigorous decision-making process.

The management body of the entity is thus responsible for developing:

• A business strategy with respect to the activities involving virtual assets. The development and maintenance of a sustainable business model requires that all specific risks pertaining to virtual assets are properly considered.
• The risk strategy concerning virtual assets, including notably the definition of the risk appetite and the overall framework for risk-taking and risk management.

WHAT'S NEXT?

The CSSF will publish FAQs on virtual assets for credit institutions in the second half of December 2021 and ensures both FAQs (UCIs and credit institutions) will be regularly updated, with the aim to provide professionals with concise answers to the main practical issues they are facing.

Entities are further reminded of the need to closely follow any regulatory developments and in particular those concerning the prudential treatment of virtual assets and the related practical implications for their investments and customers. The CSSF reminds professionals should proactively engage with the CSSF when planning any activity involving virtual assets.

Professionals will remain obliged to carefully weigh up the risks and benefits associated with the proposed virtual assets activities considering current regulations. Professionals should also consider and adapt their business and operational arrangements activities to concrete foreseeable regulatory developments, as for example those under the upcoming European Markets in Cryptoasset Regulation (MICA) that will regulate certain virtual assets which until now have fallen outside of the scope of existing legislation.

On 3 November 2021, the Commission de Surveillance du Secteur Financier (CSSF) published a technical document regarding the implementation guide on TIBER-LU (Threat Intelligence-based Ethical Red Teaming  in Luxembourg).

TIBER-LU’s adoption is consecutive to the publication in May 2018 of the European framework TIBER-EU by the European Central Bank (ECB). The TIBER-EU framework aims at i) testing the resilience of financial markets’ entities, ii) facilitating tests for cross-border entities that are subject to the supervision by several authorities, iii) helping entities to better assess their protection, detection and response capabilities and to fight against cyber-attacks. In this context, the TIBER-EU framework sets out a harmonized European approach for the conduct of threat-led penetration tests that mimic the tactics, techniques and procedures of real-life threat actors and that simulate a cyber-attack on critical functions and underlying systems of an entity.

The TIBER-EU framework, which was designed to be adopted by national and European authorities and for entities that are essential to the functioning of the financial infrastructure, can be used by all types of entities of the financial sector and also by entities of other sectors. In line with the TIBER-EU framework, each jurisdiction adopts the European framework at national level by adapting its implementation to national specificities.

This present implementation guide described in general terms how the TIBER-EU framework will be applied in Luxembourg for the entities participating in a TIBER test, and which optional elements of the TIBER-EU Framework have been adopted, as set out in Annex 1. 

This document is not a detailed prescriptive method. It should therefore be consulted alongside other relevant TIBER-LU and TIBER-EU materials, which will be provided by the TIBER cyber team (TCT) to TIBER-LU participants.  Moreover, this guide only details the TIBER-LU test process but, not how to implement a TIBER program. 

On 8 November 2021, LuxSE announced the admission of CACEIS as a new trading member with immediate effect.

As a trading member, CACEIS aims to enable its institutional and asset managers clients to execute transactions on shares, bonds, warrants and certificates listed on LuxSE.

On 2 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the Investment vehicle EMIR Questionnaire.

This Investment vehicle Questionnaire - EMIR shall be updated and resubmitted to the CSSF within undue delay, in case of changes in either the EMIR classication or use of derivative contracts or organisational model.

BACKGROUND

On 8 December 2015, the Commission de Surveillance du Secteur Financier (CSSF) published FAQs concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investment. It regularly reviews (once a year) the FAQs to keep them in line with the ever evolving legislation.

The CSSF updates Q&As in order to clarify the circumstances and the extent to which UCITS are allowed to hold ancillary liquid assets, i.e. ancillary liquid assets should be limited to bank deposits at sight and the holding is limited to 20% of the net assets of a UCITS. This 20% limit shall only be temporarily breached and under exceptional circumstances.

WHAT'S NEW?

On 3 November 2021, the Commission de Surveillance du Secteur Financier (CSSF) published the updated version of the Q&A on the law of 17 December 2010 on undertakings for collective investments.

The updated Q&A (questions 14 to 17) contains information on the holding of ancillary liquid assets by undertakings for collective investment and transferable securities (UCITS) foreseen under article 41 (2) b) of the Law of 17 December 2010. 

The CSSF clarified that a UCITS should clearly disclose in its investment policy the categories of eligible assets in which it is authorised to invest: in order to achieve its investment goals; for treasury purposes; and in case of unfavourable market conditions. 

If a UCITS invests in a category of assets that is not foreseen in its investment policy, the provisions of Circular CSSF 02/77 apply.

The CSSF also clarified diversifications rules of monetary market funds (MMF), money market instruments and bank deposits. Only the ones that meet the criteria of article 41(1) of the Law of 2010 qualify as eligible assets for a UCITS. Other money market instruments may also constitute eligible investments for a UCITS under the trash ratio UCITS are expected to comply with the conditions described in these questions as soon as possible and by 31 December 2022 at the latest, considering the best interests of investors.

In the second Q&A on MMFR, a new question has been added:

"Does the 10% limit in deposits made with the same credit institution under article 17(1) (b) of the MMFR apply to the holding of ancillary liquid assets under article 9 (3) of the MMFR?"

The CSSF answers : Yes. As ancillary liquid assets are limited to deposits at sight with banks, the 10% limit applicable to deposits under article 17(1) (b) MMFR applies to ancillary liquid assets. The maximum holding of ancillary liquid assets by a MMF is limited to 20% of its net assets".

WHAT'S NEXT?

The CSSF will review and update the current FAQs in the future.

On 4 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the application form for an authorisation as a European Long-Term Investment Fund (ELTIF) and an authorisation to manage the ELTIF. 

On 9 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the application questionnaire for the set up of a fully licensed alternative investment fund manager.

On 10 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the form for any notification regarding branch establishment and amendments to the information included in such a notification as regards to Article 17 of UCITS Directive and Article 33 of AIFMD.

On 10 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the form for any notification regarding the free provision of services and amendments to the information included in such a notification, as regards to Article 18 of UCITS Directive and Article 33 of AIFMD.

On 10 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the FAQ concerning U 1.1. Reporting. 

“U1.1 reporting” is a monthly financial reporting that has to be submitted according to the circular 15/627.

The monthly information that has to be submitted to the CSSF by the UCITS, UCIs subject to part II of the UCI law, SIFs and SICARs in accordance with Article 147 of the UCI law, Article 58 of the SIF law and Article 32 of the SICAR law will be used by the CSSF for statistical and supervisory purposes.

On 17 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the form for Fund Pre-Inception Readiness Review.

On 19 November 2021, the Commission de Surveillance du Secteur Financier (CSSF) published a communication to undertakings for collective investment (UCIs) and investment fund managers (IFMs)  in the context of the imminent cessation of the major used interest benchmarks EONIA and LIBOR.

In light of the imminent cessation of the major used interest benchmarks EONIA and LIBOR, the CSSF expects UCIs and IFMs to ensure that they have taken all necessary action in view of a smooth transition to alternative rates.

The CSSF expects moreover that UCIs and IFMs are aware of the need to have in place robust fallback provisions covering a possible cessation of any other benchmarks used by them (if any), in accordance with Article 28(2) of the EU Benchmarks Regulation. Please be reminded that UCIs and IFMs shall, upon request, provide the CSSF with information about such fallback provisions and shall reflect them in the contractual relationship with investors.

In case UCIs or IFMs face any difficulties with regard to the transition to alternative rates, they should contact the CSSF in this respect (email: benchmarks@cssf.lu).

On 19 November, the Commission de Surveillance du Secteur Financier (CSSF) published a communication on New registration form for meetings with UCI Departments of the CSSF. 

The CSSF drew the attention to a new procedure for requesting meetings with the UCI Departments:

• meetings with UCI Departments will, in principle, be scheduled daily between 10 a.m. and 12 p.m. and between 2 p.m. and 4 p.m. on Tuesdays and Thursdays;
• for a proper preparation of meeting conduct, the applicant is invited to send the form “Registration Form for Meetings with UCI Departments of the CSSF” to meetings@cssf.lu. The information collected through this form is primarily contextual and organisational in nature (attendees, agenda, etc.).

On 26 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the form for any notification regarding the free provision of services and amendments to the information included in such a notification, as regards to Article 18 of UCITS Directive and Article 33 of AIFMD. 

On 26 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the form for any notification regarding branch establishment and amendments to the information included in such a notification, as regards to Article 17 of UCITS Directive and Article 33 of AIFMD.

On 26 November 2021, the Commission de Surveillance du secteur financier (CSSF) updated the application form in case of outsourcing of UCI depositary tasks. 

Within the framework of this questionnaire, outsourcing shall mean the complete or partial transfer of operational functions, activities or provision of (support) services of a UCI depositary, as provided for in the sectoral regulation on UCIs, to an external service provider, whether or not it is part of the group to which the depositary belongs, other than a delegation. 

If this application concerns several outsourced entities, specific answers for each outsourced entity shall be provided. 

On 2 December 2021, the Commission de Surveillance du secteur financier (CSSF) published a communication on the regulatory requirements and fast track procedure in relation to Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investments and Regulation 2019/2088 on sustainability-related disclosures in the financial services sector.

The CSSF hereby reminds impacted financial market participants of this deadline of 1 January 2022 under the Taxonomy Regulation (TR) and informs those of the financial market participants, which have not yet submitted to the CSSF the required updates to the pre-contractual documents of UCITS and/or AIFs in accordance with Article 5, 6 and 7 of the TR, that the CSSF has put in place a TR FastTrack procedure to facilitate the submission of the prospectus/issuing document updates to the CSSF.

Under this TR FastTrack procedure, each updated UCITS prospectus submitted for visa stamp will have to be accompanied by a confirmation letter. A template of the said confirmation letter in relation to UCITS is available on the CSSF website . For any complete and TR compliant submissions under this TR FastTrack procedure received by the CSSF by 17 December 2021 at the latest, the CSSF will endeavour to release the visa stamp prior to 31 December 2021.

In relation to AIFs,

• Luxembourg based authorised AIFMs should submit to the CSSF, for each AIF managed, the specific information required under SFDR and TR that has to be disclosed to investors, on the basis of article 6(3) of SFDR, in the disclosures to investors referred to article 23(1) of Directive 2011/61/EU. The information communicated to the CSSF in this regard should be strictly limited to the said specific information and sent to the following email address: opc@cssf.lu.
• In their communication to the CSSF, Luxembourg based AIFMs should also clearly indicate where the said specific information has been disclosed to investors. Any future updates in this regard should be communicated to the CSSF in due time via the email addreopc@cssf.luss indicated above.
• The same procedure applies to Luxembourg based managers registered by the CSSF in accordance with the Regulation (EU) No 345/2013 or No 346/2013.
• Necessary updates in the prospectus of existing Luxembourg ELTIFs will be swiftly handled on a case by case basis.
• The above requirements also apply to AIFs managed by a Luxembourg registered AIFM.
• All Luxembourg based AIFs managed by an AIFM not authorised or registered by the CSSF, should apply the requirements imposed by the AIFM’s competent authority.

On 10 November 2021, the Switzerland publishes the revised Federal Law on Combating Money Laundering and the Financing of Terrorism (Money Laundering Law, AMLA) in the Official Journal.

In its last country review, the FATF identified weaknesses in legislation and in the effectiveness of anti-money laundering measures and issued corresponding recommendations. The new features of the revised AMLA are as follows: 

• Explicit obligation for financial intermediaries to check the details of the beneficial owner. 
• Depending on the risk represented by the contracting party, regular checks will be carried out to ensure that customer data is up to date. 
• Registration in the commercial register of associations that are primarily involved in the collection and distribution of funds for charitable purposes abroad. 

The referendum period for this Act expired on 8 July 2021 without being used. The following shall enter into force on 1 January 2022:

• Article 42 paragraph 2 of the Money Laundering Act (No. I); 
• the final provisions of the amendment of 15 June 2018 to the Precious Metals Control Act (Annex 1 No. 3); 
• the title following Art. 43, Art. 43a para. 1 and Art. 43b para. 1 of the Financial Market Supervision Act (Annex 1 no. 4)
• The other provisions shall enter into force at a later date.

1) Obligation to verify the identity of the beneficial owner (Art. 4 AMLA)

"The financial intermediary must, with the diligence required by the circumstances, identify the beneficial owner and verify his identity, in order to ensure that he knows who the beneficial owner is.”

2) Periodic updating of the documentation (Art. 7 AMLA)

"The financial intermediary shall periodically check whether the required documents are up-to-date and update them if necessary. The periodicity, extent and method of checking and updating shall be determined by the risk represented by the contracting party.”

3) Concept of founded suspicion (Art. 9 AMLA)

"The financial intermediary shall immediately inform the Money Laundering Reporting Office (MROS) within the meaning of Art. 23 if he knows or presumes, on the basis of the clarifications carried out pursuant to Art. 6 paragraph 2 letter d, that the data concerning a person or organisation transmitted on the basis of Art. 22a paragraph 2 or 3 is consistent with that concerning a contracting party, a beneficial owner or an authorised signatory of a business relationship or a transaction."

4) Processing of reports and required conduct

"FINMA, the SFGB, the inter-cantonal authority, the central office and the supervisory bodies shall immediately notify the MROS if there are well-founded suspicions". The provisions of the MLA concerning the processing of reports by MROS and the conduct to be adopted by the financial intermediary have been partially amended.

Version française

Le 10 novembre 2021, la Suisse publie dans le Journal officiel la loi fédérale révisée sur la lutte contre le blanchiment d'argent et le financement du terrorisme (loi sur le blanchiment d'argent, LBA).

Lors de son dernier examen par pays, le GAFI a identifié des faiblesses dans la législation et dans l'efficacité des mesures de lutte contre le blanchiment d'argent et a émis des recommandations correspondantes. Les nouvelles caractéristiques de la LBA révisée sont les suivantes: 

• obligation explicite pour les intermédiaires financiers de vérifier les données de l'ayant droit économique. 
• en fonction du risque représenté par le cocontractant, des contrôles réguliers seront effectués pour s'assurer que les données du client sont à jour. 
• inscription au registre du commerce des associations qui s'occupent principalement de la collecte et de la distribution de fonds à des fins caritatives à l'étranger. 

Le référendum a expiré le 8 juillet 2021 sans avoir été utilisé. La loi entre en vigueur le 1er janvier 2022 :

• l'article 42 alinéa 2 de la loi sur le blanchiment d'argent (n° I) ; 
• les dispositions finales de la modification du 15 juin 2018 de la loi sur le contrôle des métaux précieux (annexe 1 n° 3) ; 
• le titre suivant les art. 43, l'art. 43a al. 1 et de l'art. 43b al. 1 de la loi sur la surveillance des marchés financiers (annexe 1 n° 4).
• les autres dispositions entreront en vigueur à une date ultérieure.

1) Obligation de vérifier l’identité de l’ayant droit économique (art. 4 LBA)

« L’intermédiaire financier doit, avec la diligence requise par les circonstances, identifier l’ayant droit économique et vérifier son identité, afin de s’assurer de savoir qui est l’ayant droit économique. »

2) Mise à jour périodique de la documentation (art. 7)

« L’intermédiaire financier vérifie périodiquement si les documents requis sont actuels et les met à jour si nécessaire. La périodicité, l’étendue et la méthode de vérification et de mise à jour sont fonction du risque que représente le cocontractant ».

3) Concept de soupçon fondé (art. 9)

« L’intermédiaire financier informe immédiatement le Bureau de communication en matière de blanchiment d’argent au sens de l’art. 23 s’il sait ou présume, sur la base des clarifications effectuées en vertu de l’art. 6, al. 2, let. d, que les données concernant une personne ou une organisation transmises sur la base de l’art. 22a, al. 2 ou 3, concordent avec celles concernant un cocontractant, un ayant droit économique ou un signataire autorisé d’une relation d’affaires ou d’une transaction. »

4) Traitement des communication et comportement requis

« La FINMA, la CFMJ, l’autorité intercantonale, le bureau central et les organismes de surveillance préviennent immédiatement le bureau de communication lorsque des soupçons fondés permettent de présumer ». Les dispositions de la LBA concernant le traitement des communications par le MROS et le comportement à adopter par l'intermédiaire financier ont été partiellement modifiées.

On 26 November 2021, the Asset Management Association Switzerland (AMAS) published Recommendations on Minimum Requirements and Transparency for Sustainable Investment Approaches and Products.

Investments in sustainable financial products are continuing to grow, but there can be discrepancies between clients’ expectations and the actual features of a product in relation to sustainability goals. The Asset Management Association Switzerland (AMAS) and Swiss Sustainable Finance (SSF) are committed to ensuring the integrity of sustainable investment products and have therefore drafted recommendations for minimum requirements to help the asset management industry build investors’ trust in the Swiss financial center.

“The Recommendations on Minimum Requirements and Transparency for Sustainable Investment Approaches and Products”, drafted jointly by SSF and AMAS, follow on from the Key Messages and Recommendations for Sustainable Asset Management published in 2020 and represent a further effort to reconcile the interests and goals of asset managers, other financial service providers, and end investors in the context of sustainable investment products on the Swiss market.

The recommendations are focused on sustainable products developed by the fund and asset management industry and sold to investors by financial service providers. 

They have three main aims:

• to define the various sustainable investment approaches more precisely and set minimum requirements for implementing each of them;
• to set minimum requirements for informing investors about the various investment approaches and instruments;
• and to explain which sustainable investment approaches are best suited to meeting investors’ different objectives.

Version française

Le 26 novembre 2021, l'Asset Management Association Switzerland (AMAS) a publié des Recommandations concernant les exigences minimales et la transparence pour les produits d’investissement durables.

Les investissements dans les produits financiers durables continuent d’augmenter. Il peut y avoir des écarts entre les attentes des clients et les caractéristiques des produits en termes d’objectifs de durabilité. L’Asset Management Association Switzerland (AMAS) et Swiss Sustainable Finance (SSF) s’engagent résolument pour l’intégrité des produits d’investissement durables et s’adressent donc à l’industrie de l’Asset Management en formulant des recommandations concernant les exigences minimales pour les produits d’investissement durables afin de renforcer la confiance des investisseurs dans la place financière suisse.

“The Recommendations on Minimum Requirements and Transparency for Sustainable Investment Approaches and Products” élaborées conjointement par SSF et l’AMAS constituent, à la suite du document «Asset Management durable : les messages essentiels et les recommandations de la SFAMA et de SSF» publiés en 2020, une autre étape importante sur la place financière suisse afin de concilier les intérêts et les objectifs des asset managers, des autres prestataires de services financiers et des investisseurs finaux en matière de produits d’investissement durables.

Elles ont trois objectifs principaux :

• définir plus précisément les différentes approches en matière d’investissement durable ainsi que les critères minimaux pour la mise en oeuvre de ces approches.
• définir les exigences minimales relatives à l’information des investisseurs sur les différentes approches et outils d’investissement.
• expliquer quelles approches d’investissement durable répondent au mieux aux différents objectifs des investisseurs.

On 3 November 2021, FINMA published two communications on sustainable finance.

1. FINMA indicated its commitment to implementing relevant NGFS recommendations.

The Network for Greening the Financial System (NGFS) published a declaration outlining its contribution to the deliverables of the UN Climate Change Conference in Glasgow (COP 26). As a member of the NGFS, the Swiss Financial Market Supervisory Authority FINMA reiterates its active support of the NGFS's goal to better understand and manage the financial risks of climate change. FINMA is strongly committed to the implementation of relevant NGFS recommendations within its mandate, as evidenced by current and planned activities.

FINMA is actively integrating climate-related financial risks into its supervisory practices in a strategic, proportional and risk-based manner. FINMA is currently developing concepts to adequately supervise climate risk management by banks and insurers. The concepts will be implemented in a phased and proportionate approach, starting in 2022. Furthermore, FINMA is exploring quantitative methods to measure climate-related financial risks. FINMA and the Swiss National Bank (SNB) will shortly complete their initial pilot project to identify and measure risk concentrations at Switzerland’s systemically important banks in respect of sectors that are vulnerable to transition risks. The exercise includes an exposure analysis as well as forward-looking climate scenario analysis.

Moreover, FINMA has recently specified disclosure requirements based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for the largest financial institutions. The financial institutions concerned must comply with these requirements starting in 2022.

Finally, FINMA is actively supporting the Swiss federal offices in the implementation of NGFS recommendations directed at policy makers, such as bridging the data gaps, as these are also key elements for addressing relevant climate-related risks and tackling greenwashing issues in the provision of financial products and services to clients.

2. FINMA published a Guidance 05/2021 on preventing and combating greenwashing.

In its Guidance 05/2021 on preventing and combating greenwashing, FINMA sets out its expectations and current practice regarding the management of sustainability-related collective investment schemes at fund and institutional level. In addition, it warns financial service providers who offer sustainability-related financial products of potential greenwashing risks in the advisory process and at the point of sale.

Version française

Le 3 novembre 2021, la FINMA a publié deux communications sur la finance durable.

1. La FINMA a indiqué son engagement à mettre en œuvre les recommandations clés du NGFS.

Le Network for Greening the Financial System (NGFS) a publié ce jour une déclaration sur sa contribution aux travaux de la Conférence des Nations Unies sur les changements climatiques (COP 26), qui se tient à Glasgow. En tant que membre du NGFS, l’Autorité fédérale de surveillance des marchés financiers FINMA réaffirme sa volonté de soutenir activement le NGFS dans la réalisation de son objectif, qui est de mieux comprendre et gérer les risques financiers liés au changement climatique. La FINMA s’engage résolument – dans les limites de son mandat – pour la mise en œuvre des recommandations clés du NGFS, comme en témoignent ses activités présentes et à venir.

La FINMA intègre activement les risques financiers liés au climat dans ses pratiques de surveillance, selon une approche stratégique basée sur les risques et compte tenu du principe de proportionnalité. Elle élabore actuellement des concepts visant à garantir une surveillance appropriée de la gestion des risques climatiques par les banques et les assurances. Ces concepts seront mis en œuvre de manière échelonnée et en suivant une approche proportionnée à partir de 2022. La FINMA explore en outre des méthodes quantitatives permettant de mesurer ces risques. Avec la Banque nationale suisse (BNS), elle mène un projet pilote initial qui est à bout touchant. Ce projet vise à identifier et mesurer les concentrations de risques dans les banques suisses d’importance systémique se rapportant à des secteurs vulnérables aux risques de transition. Il inclut l’analyse de l’exposition aux risques ainsi que l’analyse d’un scénario climatique prospectif.

De plus, se fondant sur les recommandations de la Task Force on Climate-related Financial Disclosures (TCFD), la FINMA a récemment défini des exigences de publication des risques financiers liés au climat, applicables aux principaux établissements financiers. Ces derniers devront les remplir à partir de 2022.

Enfin, La FINMA soutient activement les offices fédéraux dans la mise en œuvre des recommandations du NGFS destinées aux décisionnaires politiques, notamment en comblant les lacunes des données. Les données sont en effet essentielles pour gérer les risques liés au climat et s’attaquer au problème de l’éco blanchiment (greenwashing), qui affecte parfois la fourniture de produits et de services financiers.

2. La FINMA a publié une communication sur la surveillance consacrée à la prévention et à la lutte contre l’éco blanchiment.

Dans sa communication sur la surveillance 05/2021 consacrée à la prévention et à la lutte contre l’éco blanchiment, la FINMA informe sur les grandes lignes de ses attentes ainsi que sur l’état actuel de la pratique concernant la gestion des placements collectifs se référant à la durabilité aux niveaux des fonds et des établissements. Elle attire également l’attention des prestataires de services financiers offrant des produits financiers se référant à la durabilité sur les potentiels risques d’éco blanchiment durant le processus de conseil ainsi qu'au point de vente.

Federal Council publishes three communications on sustainable finance

1. On 3 November 2021, the Federal Council adopted the report “Sustainable financial products. Release the brakes”. The latter came to the conclusion that it would not be wise to abolish stamp duties on sustainable financial products in order to promote the transition to a greener economy.

The proposed deletion would reduce the current differences in the tax treatment of various means of financing for sustainable financial products (e.g. between financing through a bank and financing in the capital market), but would not eliminate legal inequalities for non-environmentally friendly products. However, the tax savings made by private investors would remain very modest. There is an even reason to doubt that the measure has any incentive effect. The consequences in the event of financing a company by capital increase would not, for example, be the same as in the case of self-financing or financing by third parties. In general, small businesses would hardly benefit from the abolition of stamp duties, even if their trade policy takes environmental issues into account.

In addition, the objective of the postulate of promoting sustainable financial products could only be achieved if the Federal Council knew exactly which products are truly climate-friendly and which only give the illusion (greenwashing). In December 2020, the Federal Council therefore instructed the Federal Department of Finance to carry out an investigation. If changes in financial market law were necessary, they would have to be implemented first.

2. On 17 November 2021, the Federal Council announced it strives to be international leader in sustainable finance with climate transparency.

The Federal Council recommends that financial market players use comparable and meaningful climate compatibility indicators to help create transparency in all financial products and client portfolios. This can be done with implied temperature indicators, for example. Here, the production plans of companies included in the portfolios are compared with a pathway that is needed to limit maximum warming to 1.5° Celsius. Such indicators provide clients with a straightforward understanding of how financial products can be classified in terms of their impact on the climate. At the same time, the Federal Council is encouraging the financial sector to join net-zero international alliances and is working towards industry agreements with this in mind. Net zero means that global emissions of greenhouse gases may not exceed the amount that can be absorbed by natural and technical sinks. 

The Federal Council has also instructed the Federal Department of Finance (FDF), in cooperation with the Federal Department of the Environment, Transport, Energy and Communications (DETEC), to inform it by the end of 2022 of the extent to which the financial sector has implemented the above-mentioned recommendations and to propose measures if need be. Finally, the Federal Council has instructed the FDF, in cooperation with the DETEC and FINMA, to propose by the end of 2022 how financial market legislation could be amended – particularly with regard to transparency – in order to avoid greenwashing.

3. On 17 November 2021, the Federal Council announced it wishes to show its commitment to sustainability with green Confederation bonds.

The Federal Council has decided to lay the foundations to enable the Confederation to issue green bonds as well. The issuance of such "green Confederation bonds" should enhance the application of international standards in Switzerland. In this way, the Federal Council can help to encourage those in the private sector to issue green bonds. Green Confederation bonds will not have a direct environmental impact on their own: political decisions are needed for concrete measures to protect the climate and the environment.

Version française

Le Conseil fédéral publie trois communications sur la finance durable

1. Le 3 novembre 2021, le Conseil fédéral a adopté le rapport «Produits financiers durables. Desserrer les freins». Ce dernier arrive à la conclusion qu'il ne serait pas judicieux de supprimer les droits de timbre sur les produits financiers durables dans l'objectif de promouvoir le passage à une économie plus verte.

La suppression proposée viendrait réduire les différences actuelles dans le traitement fiscal des divers moyens de financement pour les produits financiers durables (par ex. entre le financement par l'intermédiaire d'une banque et celui sur le marché des capitaux), mais n'éliminerait pas les inégalités de droit pour les produits non respectueux de l'environnement. Les économies fiscales réalisées par les investisseurs privés resteraient toutefois très modestes. Il y a même lieu de douter que la mesure ait un quelconque effet incitatif. En outre, ses effets se déploieraient de manière trop indifférenciée. Les conséquences en cas de financement d'une société par augmentation de capital ne seraient, par exemple, pas les mêmes qu'en cas d'autofinancement ou de financement par des tiers. De manière générale, les petites entreprises ne profiteraient guère de la suppression des droits de timbre, et ce même si leur politique commerciale tient compte des enjeux environnementaux.

De plus, l'objectif du postulat de promouvoir les produits financiers durables ne pourrait être atteint que si l'on savait exactement quels produits sont réellement respectueux du climat et lesquels en donnent uniquement l'illusion (éco blanchiment). En décembre 2020, le Conseil fédéral a donc chargé le Département fédéral des finances d'effectuer une enquête. Si des modifications du droit des marchés financiers s'avéraient nécessaires, il faudrait d'abord les mettre en œuvre.

2. Le 17 novembre 2021, le Conseil fédéral a annoncé son intention de faire de la Suisse un leader mondial en matière de placements durables grâce à la transparence climatique.

Le Conseil fédéral recommande aux opérateurs du marché financier de créer de la transparence dans tous les produits financiers et les portefeuilles des clients à l'aide d'indicateurs de compatibilité climatique comparables et significatifs. Cette transparence peut, par exemple, être assurée au moyen d'indicateurs de hausse de température implicite, instrument qui permet d'évaluer les plans de production des entreprises figurant dans les portefeuilles en les comparant avec les mesures requises pour limiter le réchauffement climatique maximal à 1,5 °C. Ces indicateurs montrent de manière simple aux investisseurs comment les produits financiers doivent être classés en fonction de leur impact sur le climat. Le Conseil fédéral invite par ailleurs le secteur financier à adhérer à des alliances internationales «net zéro» et entend encourager la conclusion d'accords sectoriels à cette fin. Le terme «zéro net» ou «zéro émission nette» signifie qu'il ne peut y avoir, au niveau mondial, plus de gaz à effet de serre émis que ce qui peut être absorbé par des moyens naturels ou techniques.

Le Conseil fédéral a en outre chargé le Département fédéral des finances (DFF), en collaboration avec le Département fédéral de l’environnement, des transports, de l’énergie et de la communication (DETEC), de lui présenter jusqu'à la fin 2022 un état de la mise en œuvre des recommandations susmentionnées par le secteur financier et, le cas échéant, de lui soumettre des propositions de mesures. Enfin, le Conseil fédéral a chargé le DFF, en collaboration avec le DETEC et la FINMA, de lui faire des propositions d'ici à la fin 2022 sur la manière dont le droit des marchés financiers pourrait être adapté, notamment en matière de transparence, pour éviter l'éco blanchiment.

3. Le 17 novembre 2021, le Conseil fédéral a annoncé son souhait d'encourager la durabilité en émettant des emprunts fédéraux verts.

Le Conseil fédéral a décidé de poser les bases qui permettront à la Confédération d'émettre aussi des emprunts verts. L'émission de ces emprunts vise à renforcer l'application des normes internationales en Suisse. De cette manière, le Conseil fédéral peut contribuer à encourager les acteurs du secteur privé à émettre eux aussi des emprunts verts. À eux seuls, les emprunts fédéraux verts n'auront pas d'impact environnemental direct: des décisions politiques s'imposent en vue d'adopter des mesures concrètes qui auront des effets directs pour la protection du climat et de l'environnement.

On 29 November 2021, the Autoriteit Financiële Markten (AFM) requested financial service providers to register in the new AFM portal.

The portal is the meeting place for communicating changes in an organization. Registration is also necessary to complete questionnaires, such as the Market Monitor . 

Of more than 5000 financial service providers who did not yet have an account for the new portal, approximately 4200 parties have recently received an e-mail from the AFM.

In the coming week, the rest of the companies will also be contacted.

On 2 November 2021, the Netherlands transposed the cross-border distribution of collective investment undertakings by publishing the Act of 13 October 2021 amending the Financial Supervision Act implementing Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019 amending Directives 2009/65/EC and 2011/61/EU with regard to the cross-border distribution of collective investment undertakings (OJEU 2019, L 188) (Wet implementation of the directive on the cross-border distribution of investment institutions and UCITS) in the Official Gazette of the Kingdom of the Netherlands.

On 8 November 2021, the Autoriteit Financiële Markten (AFM) called on the asset management sector to report all significant changes.

Reports are important for mapping out the behavior of parties and the resulting risks in the sector.

Any change that has an impact on the information provided to the AFM for licensing or registration must be reported. These are significant changes. Examples include mergers and acquisitions, changes in outsourcing contracts, changes in terms and conditions of services and products. But also restructuring processes or changes in business model, company structure, management, risk management or investment policy.

Daily supervisory practice and discussions with market parties show that these changes are not always communicated, despite the legal obligation. Investment firms in particular seem to be insufficiently aware of this. Notifications of significant changes are also regularly received too late, because they are only communicated well after the change.

Notifications are an important source of information for the AFM's supervision of individual institutions and financial markets. Notifications provide insight into the professionalism of asset management parties. The AFM assesses reports on a risk-driven basis and will contact the reporting party if it deems this necessary. This allows us to make timely adjustments to changes in the operational management of institutions. In addition, the AFM looks at changes in the number and type of notifications and combines the notifications with other information at its disposal in order to obtain as complete a picture as possible of individual institutions and the behavior of parties in financial markets. The AFM determines the priorities for its supervision on the basis of this picture.

The AFM defines asset management parties as: investment firms, managers of investment institutions, managers of institutions for collective investment in securities (UCITS) and custodians.

Significant changes must be reported to the following email addresses as soon as they are known, before the changes take effect:

• Investment firms, custodians, UCITS managers to supervision_am@afm.nl
• Managers of investment institutions to reportedaifmd@afm.nl

On 30 November 2021, the Autoriteit Financiële Markten (AFM) published a Guidance and study on advisory and asset management services.

Investment providers would do well to review the suitability test. The points for attention from research conducted by the Netherlands Authority for the Financial Markets (AFM) can help. This research shows, for instance, that it is not always clear how much risk the clients are willing to take, especially regarding the risk of not achieving their goal. Companies can also improve their processes to ensure a logical link between customer information and investment portfolio. The AFM sees that much is going well too. Companies are aware of the regulations and have immediately implemented improvements based on the survey results.

With the publication of this report "Outcomes of the suitability test", the AFM also wants to give the companies that were not involved in the survey points for attention for the design and implementation of their suitability test. The "Guideline for advisory and asset management services" is also helpful in this regard. This is an update and combination of earlier guidance documents on the suitability test. 

Link between client information and investment needed

The survey shows that there is not always a consistent link between all the relevant, specifically gathered client information in the suitability test and the recommended or managed investments. This happened with the point system, but also when the provider relies on his professional assessment. There is a risk that the investment will not suit the client. Companies turned out to be able to explain the system in most cases. However, they had to take steps to improve their processes in order to guarantee consistency.

The AFM also questions the realism of sometimes very high expected returns on defensive and neutral (model) portfolios. Partly for this reason, the AFM also launched an investigation this year into the investment policies of investment firms. The focus is on the calculation of the expected return and the use of risk criteria for the composition of portfolios.

Suitability statement often general in nature

Almost all firms made no or insufficient link in their suitability statement to the characteristics of the client. This makes the suitability statement too general in nature and provides little added value for the client.

On 22 November 2021, the Autoriteit Financiële Markten (AFM) indicated it sees no technical barriers for the implementation of a consolidated tape for fixed income.

The Dutch Authority for the Financial Markets (AFM) sees no technical barriers for the implementation of a consolidated tape (CT) for fixed income. In anticipation of the review of the Markets in Financial Instruments Regulation (MiFIR) by the European Commission (EC), expected on 23 November, the AFM has provided market participants access to the AFM’s Innovation Hub to stimulate the development of a CT. Based on initial findings, no technical barriers or adverse development costs have been identified. The AFM encourages further participation of data infrastructure providers and trading venues in the Innovation Hub. 

In brief:

• Initial findings show no technical barriers or adverse development costs for a fixed income CT.
• Market participants have access to AFM’s Innovation Hub to stimulate CT development.
• AFM encourages further participation of data infrastructure providers and trading venues in Innovation Hub.
• The AFM has identified four overarching CT use cases that underline how a CT can provide wide-ranging benefits to a wide variety of markets participants.
• The CT use cases clearly demonstrate a CT is an essential element of the Capital Markets Union (CMU).

On 16 November 2021, the Autoriteit Financiële Markten (AFM) published two market reports on financial service providers.

More than 7,000 financial service providers in the Netherlands are increasingly working together with other parties. That offers opportunities, but they should make sure that when outsourcing agreements, for example of IT services, they are put in writing. Also, many financial service providers are still wrongly paying freelancers their variable salary. 

In short:

• Not recording agreements is a risk
• Majority of financial service providers have not published controlled remuneration policy 
• Market has over 7000 financial service providers.

The AFM calls upon the sector to take note of the findings and the points for attention that have been formulated.

On 5 November 2021, the Regulation of De Nederlandsche Bank NV of 28 October 2021 containing rules regarding the calculation of the solvency requirement from the Regulation on prudential requirements for investment firms for managers of investment funds and UCITS that also provide investment services, and rules regarding the implementation of specific provisions from the Prudential Requirements Directive for Investment Firms and the implementation of specific provisions of the Capital Requirements Regulation (Regulation on specific provisions IFR and IFD) was published in the Official Gazette of the Kingdom of the Netherlands.

This regulation consists of three chapters. Chapter 1 contains general definition and scope provisions. Chapter 2 elaborates on the calculation of the solvency requirement for managers under the IFR. Chapter 3 is reserved for a further specification of options and discretions that DNB exercises under the IFR and IFD. DNB has chosen to center the elaboration of solvency requirements for managers under the IFR and the elaboration of options and discretions under the IFR and IFD in the same regulation. The reason for this is to increase the findability of the scheme for the sector and to simplify its maintenance.

On 10 November 2021, the Regulation of De Nederlandsche Bank NV of 28 October 2021 amending the Regulation on statements of financial undertakings under the Wft 2011 was published in the Official Gazette of the Kingdom of the Netherlands.

The IFR/IFD introduces new European reporting rules for investment firms within the meaning of the Investment Firms Directive. A number of reporting requirements relating to available capital, capital requirements, liquidity requirements and concentration risk follow directly from Articles 54 and 55 of the IFR. These requirements are similar to the current COREP reporting under the CRR. The reporting templates and reporting dates are based on a draft by the EBA and will be determined by the European Commission via technical implementing standards.

Based on article 3:18aa(4) Wft, DNB has the power to lay down rules with regard to the statements referred to in article 3:72 Wft and the reports pursuant to the IFR, providing that additional information is included therein by investment firms within the meaning of the Directive on the prudential supervision of investment firms or that the statements or reports by these investment firms are provided more frequently, if this is necessary for the evaluation referred to in article 3:18aa(1) Wft.

Through this scheme, DNB exercises the power given in Section 3:18aa(4) Wft. With this scheme, DNB establishes that investment firms report additional financial information regarding the balance sheet and profit and loss account, also known as FINREP, to DNB and provides the frequencies and deadlines for this. Most investment firms were already required to provide FINREP reports to DNB in the past. The FINREP reports are an important source of information for DNB on the financial status of the investment firm. FINREP enables DNB to verify and check data from other reports on regulatory capital and capital requirements and to gain more insight into the risks to which an investment firm is exposed. FINREP reports are therefore of great importance to DNB in carrying out the evaluation referred to in Section 3:18aa(1) Wft. In addition, FINREP reports are important for assessing whether an evaluation as referred to in Section 3:18aa(1) Wft is necessary with regard to a small and non-intertwined investment firm, as referred to in Article 12(1) of the IFR, and for determining the intensity and frequency of these evaluations. The FINREP reports do not overlap with the reports based on Articles 54 and 55 IFR. In order to be able to perform the evaluation referred to in Section 3:18aa(1) Wft, it is important for DNB that the FINREP reports are provided to it on a quarterly basis.

If an EU parent investment firm, EU parent holding company or EU parent mixed financial holding company is required under Article 7 of the IFR to report on a consolidated basis to DNB, or under Article 8 of the IFR is required to report on the group capital test applicable to it, it shall also report the FINREP reports on a consolidated basis to DNB. This information is necessary for DNB to perform the assessment referred to in Section 3:18aa(1) Wft on a consolidated basis.

Managers of an investment institution or managers of a UCITS who provide an investment service under Article 2:67a(2) and Article 2:69c(2) of the Act must also report the information referred to in Article 54 of the IFR to DNB on the basis of Article 130(10), second sentence, of the Decree. This obligation is in addition to the existing obligation arising from the first sentence of the tenth paragraph of Article 130 of the Decree. Managers must also provide FINREP reports to DNB, in line with investment firms. The deadlines for the submission of the COREP and FINREP reports by administrators correspond to the deadlines for investment firms.

On 25 November 2021, an Implementation decree on prudential supervision of investment firms was published in the Official Gazette of the Kingdom of the Netherlands.

This Decree, together with the proposal for the Implementation Act on the Directive on Prudential Supervision of Investment Firms (hereinafter: the Implementation Act), implements Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ 2019 L 314). 

As a result of the implementation of the Directive, this Decree provides for amendments to the Prudential Rules Decree (Bpr), the Decree on the Implementation of the Capital Requirements Directive (Besluit uitvoering publicatieverplichtingen Richtlijn kapitaalvereisten), the Decree on Conduct of Financial Undertakings (BGfo) and the Decree on Administrative Penalties in the Financial Sector (Bbbfs). 

The Directive must be implemented in national laws and regulations on 26 June 2021.That is also the date on which the main part of the accompanying Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on prudential requirements for investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (OJ 2019 L 314) will apply.

The implementation of the Regulation is provided for in a separate decree, the Implementing Decree on Prudential Requirements for Investment Firms, which largely came into force on 10 July 2021.

On 2 November 2021, Spain adopted Royal Decree-Law 24/2021 transposing into Spanish law several EU directives, including Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and covered bond public supervision and amending Directives 2009/65/EC and 2014/59/EU.

These are the key aspects of the Royal Decree-law:

• It groups together in a single legal instrument the previously dispersed regime for covered bonds.
• It specifies which entities can issue covered bonds (credit institutions) and provides a single definition of “covered bonds.”
• It harmonizes the criteria and sets the conditions for issuing bonds, and it determines the cover pool serving as collateral, the rules applicable in the event of insolvency and liquidation of the issuer, the cover pool monitor and the requirement to have a liquidity buffer.
• It provides for intragroup pooled covered bond structures, the use of joint funding and extendable maturity structures.
• It implements new rules on mortgage notes and mortgage transfer certificates.

On 12 November 2021, the CNMV published QAs on the regulation of CIIs, RCIs and other closed-end collective investment vehicles.

One of the most relevant recent regulatory developments in the field of collective investment was the approval of Directive 2011/61/EU, of the European Parliament and of the Council, of June 8, 2011, on Alternative Investment Fund Managers (hereinafter AIFMD), which aims to subject these managers to authorization, regulation, supervision and reporting to the regulator, provided that they exceed certain thresholds of assets under management, all with the aim of monitoring and controlling the systemic risk they may pose in the financial markets.

The transposition of the AIFMD into Spanish law affected the two laws that regulate collective investment in Spain: the LIIC and the LCR. The former regulates open-ended collective investment vehicles, while the LCR is reserved for closed-end vehicles. 

The transposition was carried out by Law 22/2014, of November 12, which came into force on 14/11/2014. This law repealed the former LCR (Law 25/2005, of November 24, 2005, regulating venture capital entities and their management companies), due to the

significant impact of the AIFMD on it, and in turn amended the LIIC in order to adapt it to the requirements of this Directive. This amendment of the LIIC, as well as the approval of Royal Decree 83/2015, amending Royal Decree 1082/2012 approving the Regulations for the development of Law 35/2003, of November 4, on collective investment institutions (hereinafter, RIIC), also served to incorporate most of the provisions of Directive 2014/91/EU of the European Parliament and of the Council, of July 23, 2014, amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions (hereinafter UCITS V), which regulates in a similar manner to AIFMD the depositary regime and the remuneration policies of managers.

The new questions and answers included or modified are clearly identifiable since the date on which they were included or modified appears next to the question. In parentheses, there is also the correspondence, if any, with those published in 2009, given that in 2016 there was a renumbering.

On 15 November 2021, the Comicion Nacional del Mercado del valores (CNMV) published the interpretative criteria on the regime for the communication of related transactions.

The document answers the 13 questions received from listed companies that have been considered most relevant and widely applicable, together with the criteria that the CNMV considers most appropriate for their correct interpretation.

On 12 November 2021, the Comicion Nacional del Mercado del valores (CNMV) published QAs on the sustainability regulations applicable to financial products: Regulation 2019/2088 (SFDR) and Regulation 2020/852 (taxonomy) .

The CNMV has been in contact with the main industry associations related to the management of investment vehicles and the provision of investment services in order to identify and compile the issues that may raise doubts or concerns about its interpretation following the entry into force of Regulation 2019/2088 (hereinafter SFDR) on March 10, 2021. Such doubts have their origin both in the novel nature of said regulation, as well as in the fact that a large part of its contents are still being developed at STR level and in the fact that there are issues in this regard that have not yet been clarified by the European Commission.

The CNMV's Activity Plan for 2021 includes the dissemination of criteria on the application of new European ESG (Environmental, Social and Governance) regulations.

Accordingly, this document sets out the interpretative criteria considered appropriate. Therefore, the criteria contained in this document may be subject to revision as more information becomes available, and any new consultations that may arise may be added, identifying in this case, the date of update.

On 19 November 2021, the Financial Conduct Authority (FCA) confirmed under its code recognition scheme that it is:

• Recognising the updated FX Global Code (the FX Code) - maintained and updated by the Global Foreign Exchange Committee, this Code sets principles of good practice standards for the global foreign exchange (FX) market, promoting the integrity and effective functioning of the wholesale FX market.
• Recognising the Global Precious Metals Code (the PM Code) - maintained and updated by the London Bullion Market Association, setting out principles to promote the integrity and effective functioning of the global precious metals market. 

Individuals subject to the Senior Managers and Certification Regime (SM&CR) need to meet requirements for market conduct, for both regulated and unregulated activities. Behaviour that is in line with an FCA recognised code will tend to indicate a person subject to the SM&CR is meeting their obligation to observe ‘proper standards of market conduct’ in relation to unregulated markets (FSMA, UK legislation and FCA rules and guidance outline proper standards of conduct in regulated markets). The FCA expects firms and individuals to consider both the spirit and letter of code provisions to make sure they fully meet ‘proper standards of market conduct’.

On 25 November 2021, the Financial Conduct Authority (FCA) published CP21/31: FCA and Bank of England consult on changes to reporting requirements under UK EMIR. The consultation is open for three months, closing on 17 February 2022.

The proposals in this CP apply to:

• counterparties in scope of the reporting requirements under UK EMIR
• TRs registered, or recognised, under UK EMIR
• third party service providers who offer reporting services to counterparties subject to UK reporting under EMIR.

Proposal 1: 

a. The FCA and the BoE propose to amend the table of reportable fields in the relevant technical standards under UK EMIR, primarily so it aligns with international guidance issued by CPMI-IOSCO. This will ensure that UK authorities have access to a comprehensive derivatives data set so authorities in the G20 jurisdictions can monitor systemic risk in a globally consistent manner. The FCA and the BoE also propose specific changes to reportable fields to provide clarity to counterparties and TRs where there are existing uncertainties. 

b. The FCA and the BoE propose notifications and reconciliation processes for counterparties. These will help ensure that errors and omissions are notified to the appropriate regulator, and reconciliation breaks are resolved quickly, helping to maintain accurate and high-quality data. 

c. The FCA and the BoE propose to introduce specific requirements for the mandatory delegated reporting requirements under UK EMIR in the relevant technical standards. UK EMIR requires non-financial counterparties (NFCs) who benefit from mandatory delegated reporting when trading derivatives with a financial counterparty (FC) to provide information to the FC that the FC would not otherwise be expected to know. Our proposals set out the arrangements the FC should put in place for the timely provision of relevant information by the NFC. This is to ensure that FCs have the necessary information to meet the mandatory delegated reporting requirements. 

d. The FCA and the BoE propose that counterparties should use standardised XML schemas when submitting details of their derivatives trades to a TR. To ensure consistency of reporting, the XML schemas will be based on the end-to-end reporting solutions in the ISO 20022 standards.

e. The FCA and the BoE propose specific requirements for the use of global identifiers, including the use of Legal Entity Identifiers (LEIs), Unique Trade identifiers (UTI) and Unique Product Identifiers (UPIs). These proposals look to promote consistency among counterparties in how global identifiers are used, helping to improve overall data quality.

Proposal 2: The FCA proposes certain amendments to the registration process for TRs to streamline the process for TRs that are already registered or recognised under the Securities Financing Transactions Regulation (UK SFTR) and to incorporate the payment of the relevant registration fees. These changes are aimed at aligning the registration processes under UK EMIR and UK SFTR.

Proposal 3: The FCA proposes new requirements for TRs aimed at improving data quality and promoting consistency of reporting. The proposals will ensure procedures and policies are in place for the effective reconciliation of data between TRs; to verify that the reported data is complete and correct; and the orderly transfer of data between TRs.

On 1 November 2021, the Financial Conduct Authority (FCA) published its fourth edition of the Regulatory Initiatives Grid.

Amongst the initiatives included in the Grid are new climate related additions around introducing Sustainable Finance Disclosure regime, Net Zero Transition Plans and work on environmental, social and governance (ESG) issues in capital markets.

On 9 November 2021, the UK Government launched a consultation on the proposals for adapting the UK regulatory framework for financial services. This consultation closes at 11:45pm on 9 February 2022.

The consultation’s key proposals are as follows:

• Introduce new, statutory secondary objectives focused on competitiveness and economic growth, for the FCA and PRA.
• Amend the existing FSMA regulatory principles (NB, these are different to the FCA’s principles for businesses) to ensure that the sustainable growth principle is consistent with the government’s commitment to achieve a net zero economy by 2050.
• Give the UK’s financial services regulators responsibility for setting many of the direct regulatory requirements which are currently set out in retained EU law. This means that increasing amounts of regulation will, in time, be transferred away from statute and into the regulators’ rule books.
• Grant the BoE general rulemaking powers over central counterparties (CCPs) and central securities depositories (CSDs), where they currently have only limited rulemaking powers.
• Introduce a new statutory requirement for the PRA and the FCA to notify the relevant Parliamentary committee when they publish a consultation on any matter, and for the regulators to respond in writing to formal responses to statutory consultations from Parliamentary committees.
• Strengthen the engagement mechanisms that exist between HMT and the regulators.
• Introduce a requirement for regulators to consider the potential impacts on deference arrangements (such as equivalence decision) and assess compliance with relevant trade agreements, as a matter of course when making rules and when setting general policy on supervision.
• Require the regulators to publish a statement on their approach to the recruitment of regulatory panel members, to ensure that their membership represents a truly diverse range of stakeholder views. 
• Put the FCA’s Listing Authority Advisory Panel and the PRA Practitioner Panel’s insurance sub-committee on a statutory footing, in line with the PRA’s and FCA’s other panels.
• Introduce a requirement for regulators to publish their Cost Benefit Analysis (CBA) frameworks. The government also proposes the creation of a new statutory panel designed to review, and make recommendations on, the regulators’ production of CBA in order to improve the processes.
• Introduce a new statutory requirement for the PRA and the FCA to publish and maintain a framework for how they conduct rule reviews.
• Give HMT the ability to apply activity-specific “have regards” provisions, to place obligations on the regulators to make rules in relation to specific areas of regulation.

On 26 November 2021, the Financial Conduct Authority (FCA) updates following forms:

• Certification Form A - Application for a periodical publication certificate
• Certification - Form B - Application for a TV or radio service certificate
• Certification - Form C - Application for news or information service certificate
• Cancellation of Part 4A permission form
• Variation of Permission (VOP) for Investment Business
• Variation of Permission (VOP) for Investment Business - Notes
• Variation of Permission (VOP) for Consumer Credit - Notes
• Variation of Permission (VOP) for Mortgage and General Insurance - Notes
• Variation of Permission (VOP) for Home Finance Mediation and General Insurance Distribution Activities
• Variation of Permission (VOP) for Consumer Credit
• Variation of Permission (VOP) for Claims Management
• Variation of Permission (VOP) for Insurance Business, Banking, Electronic Money, Lloyd's Market and Funeral Plan Providers 
• Variation of Permission (VOP) for Claims Management - Notes 
• Form E - Internal transfer of a permission performing a controlled function for solo-regulated firms 
• Form E - Internal transfer of a permission performing a controlled function for dual-regulated firms 
• Variation of Permission application for Insurance Business, Banking, Electronic Money, Lloyd's Market and Funeral Plan Providers - Notes 
• Variation of Permission (VOP) for funeral plan providers and funeral plan intermediaries
• Variation of Permission (VOP) for funeral plan providers and funeral plan intermediaries - Notes
• Form I - Application to add, vary or remove a conditional approval for the performance of a senior management function.

On 12 November 2021, the Financial Conduct Authority (FCA) published its summary on the amendments to the IFPR Instrument 2021 since publishing the near-final version.

Following provisions that have been amended:

• MIFIDPRU 4.14.1R(2)(b) and 4.14.2G
• MIFIDPRU 7.9.5R(5)
• MIFIDPRU 9 Annex 2G (Guidance notes on data items in MIFIDPRU 9 Annex 1R): MIF002 guidance notes
• MIFIDPRU TP10.2R(4)(a) and MIFIDPRU TP 10.9G
• SUP 16.12.17R
• Application and notification forms
• Glossary definition of ‘UK parent investment firm’

On 19 November 2021, the Financial Conduct Authority (FCA) published following MIFIDPRU application forms under the IFPR:

• Application under MIFIDPRU 2.3.1R to be exempt from disclosure requirements in MIFIDPRU 8 (Disclosure by investment firms) for SNI firms in consolidated insurance groups
• Application under MIFIDPRU 3.3.2R for permission to include interim or year-end profits as common equity tier 1(CET1) capital before the firm has taken a formal decision confirming the final profit and loss for the year
• Application under MIFIDPRU 3.6.2R for permission to reduce own funds instruments where neither condition in MIFIDPRU 3.6.3R applies
• Application under MIFIDPRU 4.5.9R for permission to rebase fixed overhead requirement
• Application under MIFIDPRU 4.11.9R
• Application for a permission under MIFIDPRU for which there is no dedicated application form
• Application under MIFIDPRU 4.12.6R
• Application under MIFIDPRU 4.12.4R for permission to use an advanced internal market risk model
• Application under MIFIDPRU 4.12.66R.

On 26 November 2021, the Financial Conduct Authority (FCA) published PS21/17: A new UK prudential regime for MiFID investment firms??.

The current prudential regime for FCA investment firms is based on requirements designed for globally active systemically important banks. The main aim of that regime is to protect depositors by ensuring that it is difficult for a bank to fail. Investment firms do not have depositors that need to be protected. This means that the current requirements are not designed to address the potential harm posed by investment firms to their clients and the markets in which they operate. 

By contrast, the IFPR considers the harm these firms can cause to others based on the activities that they carry out. It also considers the amount of own funds and liquid assets a firm should hold so that if it does have to wind down, it can do so in an orderly manner. 

Introducing the IFPR means that there will be a single prudential regime for all FCA investment firms. It should reduce barriers to entry and allow for better competition between investment firms. Some FCA investment firms will have meaningful capital and liquidity requirements for the first time, commensurate with the potential harm they can cause. The rules in this PS, covering a miscellaneous set of topics, complete this change to the new regime.

On 5 November 2021, the Financial Conduct Authority (FCA) updated the UK MiFID transparency calculations and the latest published data.

The latest quarterly liquidity assessment for bonds for the UK has been published. The results will be applicable from 16 November 2021 to 15 February 2022 and are available in the FCA FITRS.

There are currently 150 liquid bonds subject to UK MiFID transparency requirements.

On 30 November 2021, the Financial Conduct Authority (FCA) published PS21/20: Changes to UK MiFID’s conduct and organisational requirements.

The new inducement rules relating to research: 

• Exempt research on small and mid-cap listed or unlisted companies (SMEs) who have a market capitalisation below £200m from the inducement rules. This means that research on firms below this threshold could be provided by brokers to asset managers on a bundled basis (where asset managers make a single commission payment to brokers covering execution and research) or for free and would not constitute an inducement under our rules. 
• Exempt third party research on fixed income currencies and commodities (FICC) instruments from the inducement rules allowing it to be provided on a bundled basis and would not constitute an inducement under our rules. 
• Exempt research providers from our inducement rules who do not provide execution services and are not part of a group that includes a firm offering execution services. 
• Clarify that openly available written research would not fall within the scope of the inducement rules. 

The rules on reporting obligations will remove: 

• the obligation on execution venues to publish a report on a variety of execution quality metrics to enable market participants to compare execution quality at different venues (known as RTS 27 reports) 
• the obligation on investment firms who execute orders to produce an annual report setting out the top 5 venues used for executing client orders and a summary of the execution outcomes achieved (known as RTS 28 reports).

From 1 December 2021, firms will no longer be required to prepare RTS 27 and RTS 28 reports. From 1 March 2022, asset managers and research firms can exercise the options on exempting the following from FCA’s inducement rules on research: research on SMEs below a market capitalisation of £200m, FICC research, research provided by research providers who not provide execution services and are not part of a group that offer execution services and openly available research.

On 3 November 2021, the Financial Conduct Authority (FCA) published:

• DP21/4: Sustainability Disclosure Requirements and investment labels
• FCA’s new ESG Strategy.

With DP 21/4, the FCA aims to seek initial views on new sustainability disclosure requirements for asset managers and FCA-regulated asset owners, as well as a new classification and labelling system for sustainable investment products. This DP seeks feedback on potential approaches to the design of:

• sustainable investment labels 
• consumer-facing disclosures for investment products 
• client- and consumer-facing entity- and product-level disclosures by asset managers and FCA-regulated asset owners.

The FCA's environmental, social and governance (ESG) strategy sets out the target outcomes and the actions the FCA expects to take to deliver these. FCA's aim is to support the financial sector in driving positive change, including the transition to net zero.

On 18 November 2021, the US Commodity Futures Trading Commission (CFTC) announced that they are extending previously granted temporary no-action relief in connection with the withdrawal of the United Kingdom (UK) from the European Union (EU), known as Brexit. 

On February 25, 2019, the CFTC issued a statement in conjunction with the Bank of England, including the Prudential Regulation Authority, and the Financial Conduct Authority to provide for the continuity of derivatives trading and clearing activities between the UK and United States.  

In keeping with the joint statement, DMO & MPD issued CFTC Staff Letter No. 20-39 to provide a temporary no-action position benefiting certain swap dealers, as well as certain multilateral trading facilities (MTFs), organised trading facilities (OTFs), and their market participants.

In August 2021, DMO issued CFTC Staff Letter No. 21-17 to amend its no-action position provided in CFTC Staff Letter 20-39 in order to expand its scope to include certain additional MTFs and OTFs.

The CFTC staff letters maintained the status quo for UK entities of certain CFTC comparability determinations and exemptive orders the CFTC originally issued for EU entities while the Commission worked with the relevant UK authorities to analyze relevant UK law and, where appropriate, replicate these actions for UK entities. These efforts continue between the CFTC and the relevant UK authorities, therefore, the divisions are extending the temporary no-action positions already provided.

BACKGROUND

The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency (collectively, agencies) recognize that the emerging crypto-asset sector presents potential opportunities and risks for banking organizations, their customers, and the overall financial system.  As supervised institutions seek to engage in crypto-asset-related activities, it is important that the agencies provide coordinated and timely clarity where appropriate to promote safety and soundness, consumer protection, and compliance with applicable laws and regulations, including anti-money laundering and illicit finance statutes and rules.

To that end, the agencies recently conducted a series of interagency “policy sprints” focused on crypto-assets. Similar to a “tech sprint” model, agency staff with various backgrounds and relevant subject matter expertise conducted preliminary analysis on various issues regarding crypto-assets.

WHAT'S NEW?

On 23 November 2021, the Federal Reserve System (FED) published agencies joint statement on crypto-asset policy initiative summarizing the work undertaken during the policy sprints and provides a roadmap of future planned work.

The emerging crypto-asset sector presents potential opportunities and risks to banking organizations, their customers, and the overall financial system. The interagency sprints quickly advanced and built on agencies' combined knowledge, which helped identify and assess key issues related to potential crypto-asset activities conducted by banking organizations.

The focus of the sprint work included: 

• Developing a commonly understood vocabulary using consistent terms regarding the use of crypto-assets by banking organizations. 
• Identifying and assessing key risks, including those related to safety and soundness, consumer protection, and compliance, and considering legal permissibility related to potential crypto-asset activities conducted by banking organizations. 
• Analyzing the applicability of existing regulations and guidance and identifying areas that may benefit from additional clarification.

Staff reviewed and analyzed a number of crypto-asset activities in which banking organizations may be interested in engaging including:

• Crypto-asset custody. 
• Facilitation of customer purchases and sales of crypto-assets. 
• Loans collateralized by crypto-assets. 
• Activities involving payments, including stablecoins.
• Activities that may result in the holding of crypto-assets on a banking organization’s balance sheet.

The statement from the agencies does not alter any existing agency rules or regulations.

WHAT'S NEXT?

Throughout 2022, the agencies plan to provide greater clarity on whether certain activities related to crypto-assets conducted by banking organizations are legally permissible, and expectations for safety and soundness, consumer protection, and compliance with existing laws and regulations related to: 

• Crypto-asset safekeeping and traditional custody services. 
• Ancillary custody services. 
• Facilitation of customer purchases and sales of crypto-assets. 
• Loans collateralized by crypto-assets. 
• Issuance and distribution of stablecoins. 
• Activities involving the holding of crypto-assets on balance sheet. 

The agencies also will evaluate the application of bank capital and liquidity standards to cryptoassets for activities involving U.S. banking organizations and will continue to engage with the Basel Committee on Banking Supervision on its consultative process in this area. 

The agencies continue to monitor developments in crypto-assets and may address other issues as the market evolves. Further, the agencies will continue to engage and collaborate with other relevant authorities, as appropriate, on issues arising from activities involving crypto-assets.

On 18 November 2021, the Federal Reserve System (FED) announced the approval of a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system. The final rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cyber incident has occurred. Notification is required for incidents that have materially affected—or are reasonably likely to materially affect—the viability of a banking organization's operations, its ability to deliver banking products and services, or the stability of the financial sector.

In addition, the final rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect banking organization customers for four or more hours.

Compliance with the final rule is required by May 1, 2022.

On 18 November 2021, the U.S. Securities and Exchange Commission (SEC) proposed updates to electronic recordkeeping requirements.

The SEC’s broker-dealer electronic recordkeeping rule requires firms to preserve electronic records exclusively in a non-rewriteable, non-erasable format (otherwise known as write once, read many). The proposed amendments would add an audit-trail alternative. Under this alternative, electronic records could be preserved in a manner that permits the recreation of an original record if it is altered, over-written, or erased. The audit-trail alternative is designed to provide broker-dealers with greater flexibility in configuring their electronic recordkeeping systems so they more closely align with current technologies and practices while also protecting the authenticity and reliability of original records.

The proposed amendments would require nonbank SBSDs and MSBSPs to preserve electronic records using either of the above alternatives that would be available to broker-dealers. The amendments also would require broker-dealers and all types of SBSDs and MSBSPs to produce electronic records to securities regulators in a reasonably usable electronic format. This proposal is designed to facilitate examinations and make them more efficient.

The proposals will be published on SEC.gov and in the Federal Register. The comment period will remain open for 30 days after publication in the Federal Register.

On 3 November 2021, the Comissão de Valores Mobiliários (CVM) informed on the FATF's communication on the countries at risk to the financial system.

The monitoring by obliged persons of FATF/FATF communications on jurisdictions with strategic deficiencies in PLD/FTP is an integral part of the requirements provided for in CVM Resolution 50.

It is worth mentioning that the lists began to be disseminated to obliged persons working in the capital market through the CVM Report: FATF Communication, and no longer through joint circular letter SMI-SIN, as clarified in Circular Letter CVM/SMI-SIN 01/21.

On 9 November 2021, the Conselho Monetário Nacional (CMN) informed that he Executive Secretariat of the Chamber of Foreign Trade (SE-Camex) of the Ministry of Economy has been working on the development of public policies and initiatives that increasingly stimulate the adoption of high standards of sustainability in the private sector, which includes the Agendas of Responsible Business Conduct (ASG) and Environmental, Social and Governance (ESG) Criteria.

A first area of activity involves the promotion of principles and standards of Responsible Business Conduct (CER), responsibility of the National Contact Point (PCN) for the Guidelines of the Organization for Economic Cooperation and Development (OECD) and for Multinational Companies (Guidelines). The Guidelines are the main instrument of existing CER, having a broad thematic scope and government support. The PCN is an institutional representation responsible for acting for the implementation of these Guidelines in each of the 50 acceding countries.

Another front of action is the elaboration of an Action Plan on Responsible Business Conduct (PACER). PACER's completion is scheduled for August 2022, and will have as its main objective to propose and promote public policies and initiatives related to international sustainability standards aligned with the principles and ASG criteria. This initiative will not only promote a greater insertion of Brazilian companies in the international market, but will also attract more and more qualified investments to the country.

On 25 November 2021, the Banco Central do Brasil (BACEN) published Resolution CMN No 4968 -  internal control systems of financial institutions and other institutions authorized to operate by BACEN.

The institutions must implement and maintain internal control systems compatible with their nature, size, complexity, structure, risk profile and business model.

The internal control systems must aim to achieve the objectives of:

I - performance: related to the efficiency and effectiveness in the use of resources in the developed activities;

II - information: related to voluntary or mandatory disclosure, internal or external, of financial, operational and managerial information, which are useful for the decision-making process; and

III - compliance: related to compliance with legal and regulatory provisions and provided for in internal policies and codes.

On 30 November 2021, the Banco de la República published a Financial Stability Report - II semester of 2021.

The main objective of the Banco de la República is to preserve the purchasing power of the currency, in coordination with the general economic policy, understood as one that aims to stabilize the product and employment at their long-term sustainable levels.

This Financial Stability Report fulfills the objective of presenting Banco de la República's diagnosis on the recent performance of the financial system and its debtors, as well as on the main risks and vulnerabilities that could have an effect on the stability of the Colombian economy. With this objective, it is intended to inform participants in financial markets and citizens, in addition to promoting public debate on trends and risks that affect the system. The results presented here also serve the monetary authority as a basis for making decisions that allow promoting financial stability in the general context of its objectives.

On 12 November 2021, the Sovereign Ordinance No. 8.882 of 4 November 2021 amending Sovereign Ordinance No. 15.320 of 8 April 2002 on the suppression of the financing of terrorism as amended was published in the Journal de Monaco – Bulletin Officiel de la Principauté.

The first point of the second indent of Article 1 of Sovereign Ordinance No. 15.320 of 8 April 2002, as amended, referred to above, is amended as follows:

"Any act referred to in Title III of Book III of the Penal Code or any public provocation to commit a terrorist act referred to in articles 15 and 16 of Law No. 1.299 of 15 July 2005, as amended, referred to above."

On 12 November 2021, the Ministerial Order No. 2021-703 of 8 November 2021 on the list of States or territories whose anti-money laundering, terrorist financing or corruption measures have strategic deficiencies, referred to in Article 14-1 of Law No. 1.362 of 3 August 2009 as amended was published in the Journal de Monaco – Bulletin Officiel de la Principauté.

Pursuant to article 14-1 of Law No. 1.362 of 3 August 2009, as amended, referred to above, the list of States or territories whose anti-money laundering, terrorist financing or corruption measures have strategic deficiencies is as follows:

• Afghanistan
• Bahamas
• Barbados
• Botswana
• Cambodia
• Ghana
• Iraq
• Jamaica
• Mauritius
• Myanmar/Burma
• Nicaragua
• Uganda
• Pakistan
• Panama
• Syria
• Trinidad and Tobago
• Vanuatu
• Yemen
• Zimbabwe

On 10 November 2021, the Financial Action Task Force (FATF) updated its Recommendations on International Standards On Combating Money Laundering And The Financing Of Terrorism & Proliferation.

The following amendments have been made:

• Revision of the Glossary definition of ‘designated categories of offences’ to clarify the types of offences which fall within the ‘environmental crime’ category (Glossary – page 120); and
• Revision of R.23 to clarify obligations on DNFBPs to apply group-wide programmes. Clarification that the Glossary definition of ‘financial group’ is not limited to Core Principles institutions and a minor consequential amendment to INR.26 (INR 22 & 23, Glossary and INR 26 - pages 88, 98, 122).

On 24 November 2021, the Financial Action Task Force (FATF) published the annual report 2020-2021. 

This Plenary year, the FATF has continued to face the unprecedented challenges of the COVID-19 pandemic. As millions struggle to cope with its devastating impact, the FATF was able to carried out crucial work.

Among this year's achievements: 

• Digital transformation - two public reports on the opportunities and challenges of new technologies in the fight against money laundering and terrorist financing.
• Money laundering from environmental crime - a milestone report, followed by a public webinar on this growing problem which is plundering the world's natural resources. 
• Trade-based money laundering - a detailed report on one this method of money laundering, one of the most frequently used, complemented by risk indicators and a public webinar.  
• Ethnically or racially motivated terrorism - a report that identifies common structural characteristics and patterns of the funding behind this complex phenomenon.
• New Guidance - a proliferation financing risk assessment and mitigation guidance, as well as a risk-based supervision guidance and a report on virtual assets - red flag indicators of money laundering and terrorist financing. 
• Mutual evaluations - despite a pause in its assessment programme due to COVID-19, the FATF was able to have virtual discussions of the mutual evaluations of three of its members and complete the publication of one of these assessments. The FATF also published follow-up reports of six of its members. 

On 25 November 2021, the Financial Action Task Force (FATF) updated the consolidated assessment ratings.

This is an up-to-date overview of the ratings on both effectiveness and technical compliance for all countries assessed against the 2012 FATF Recommendations and using the 2013 Assessment Methodology. 

On 15 November 2021, the International Organization of Securities Commissions (IOSCO) launched a consultation on revised Principles for the regulation and supervision of commodity derivatives markets to reflect recent market developments. The consultation closes on  17 January 2022.

The revised Principles seek to ensure that commodity derivatives markets continue to facilitate price discovery and hedging, while remaining free from manipulation and abusive practices.

The Principles will assist relevant Market Authorities in constructing an appropriate regulatory and supervisory approach that furthers these objectives and fosters proper conduct in commodity derivatives markets.

On 9 November, the International Swaps and Derivatives Association (ISDA) published European Market Infrastructure Regulation (EMIR) reporting best practices. 

The best practice matrix has been established based on the EMIR validation table, (as published by ESMA), which contains the Regulatory Technical Standards (RTS), the Implementation Technical Standards (ITS) and validation rules.

The intention is for these EMIR Reporting Best Practices to be widely accepted as standard market practice which complements the EMIR reporting RTS and ITS. Where possible these guidelines are designed to be consistent with other published reporting guidelines, such as EMIR Q&A documents, and are designed to adhere to the published EMIR validation rules. The best practices have been shared with ESMA and several NCAs to preview before being published, but for the avoidance of doubt, these best practices are not an official regulatory reporting document which are endorsed by regulators. The best practices may be updated periodically, for example when an updated EMIR Q&A document is published or to add practices to further fields, but where possible the guidelines, once set, will remain consistent over time. 

The Validation rules define fields as being either 'Mandatory', 'Conditional' or 'Optional'. These categories relate to the checks Trade Repositories are to perform on a field and do not refer to whether the reporting party as the option to populate the field or not. Specifically, where a field is identified as 'Optional', the field must be populated if it is relevant for the contract being reported, i.e. all fields are mandatory when they are relevant to the contract.

As well as the main 'Industry Best Practice matrix', additional best practices based on specific scenarios are captured with the tabs and/or via links within the main matrix.

The EU-EMIR and UK-EMIR reporting fields – along with their related best practices – have been set out on separated tabs.

For the avoidance of doubt, although they may be some overlap between the EMIR reporting requirements and the reporting requirements of other global reporting regimes, these best practices are specific to EMIR reporting.

On 2 November 2021, the International Organization of Securities Commissions (IOSCO) published Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management.

This Final Report (the Report), drafted by the IOSCO Task Force on Sustainable Finance (STF), follows the Consultation Report titled Recommendations on Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset Management that was published on 30 June 2021 (the Consultation Report). 

This Report aims to improve sustainability-related practices, policies, procedures and disclosures in the asset management industry through five recommendations for securities regulators and policymakers. These recommendations are designed to provide a list of potential areas for consideration as regulators and policymakers consider developing sustainability-related rules and regulations, consistent with their mandates and domestic regulatory frameworks.

The final recommendations are:

1. Asset Manager Practices, Policies, Procedures and Disclosure. Securities regulators and/or policymakers, as applicable, should consider setting regulatory and supervisory expectations for asset managers in respect of the: (a) development and implementation of practices, policies and procedures relating to material sustainability-related risks and opportunities; and (b) related disclosure.
2. Product Disclosure. Securities regulators and/or policymakers, as applicable, should consider clarifying and/or expanding on existing regulatory requirements or guidance or, if necessary, creating new regulatory requirements or guidance, to improve product-level disclosure in order to help investors better understand: (a) sustainability-related products; and (b) material sustainability-related risks for all products.
3. Supervision and Enforcement. Securities regulators and/or policymakers, as applicable, should have supervisory tools to monitor and assess whether asset managers and sustainability-related products are in compliance with regulatory requirements and enforcement tools to address any breaches of such requirements.
4. Terminology. Securities regulators and/or policymakers, as applicable, should consider encouraging industry participants to develop common sustainable finance related terms and definitions, including relating to ESG approaches, to ensure consistency throughout the global asset management industry.
5. Financial and Investor Education. Securities regulators and/or policymakers, as applicable, should consider promoting financial and investor education initiatives relating to sustainability, or, where applicable, enhance existing sustainability related initiatives.