On October 5, European Securities and Markets Authority (ESMA) published the consultation paper on shortening the settlement cycle.

All interested stakeholders are invited to respond to this consultation paper. In particular, ESMA invites market infrastructures (CSDs, CCPs, trading venues), their members and participants, other investment firms, issuers, fund managers, retail and wholesale investors, and their representatives to provide their views to the questions asked in this paper.

In 2014, CSDR introduced for the first time in the EU a requirement for all transactions in transferable securities which are executed on trading venues to be settled by no later than the second business day after the trading takes place (commonly referred to as a “T+2” settlement cycle). Due to recent developments, the question of shortening the securities settlement cycle has emerged. Through this call for evidence, ESMA is seeking to collect stakeholders’ views as well as quantitative evidence to form a better understanding of the issue and help ESMA to then produce an assessment of the costs and benefits linked to the potential reduction of the securities settlement cycle in the EU. In parallel to this call for evidence, ESMA is consulting central banks as well as the T2S operator on what would be the impact of a shorter settlement cycle for the operation of T2S.

In this call for evidence, ESMA is seeking feedback on the following issues: 

• What would be the impact of the reduction of the securities settlement cycle in the operations of market players; 
• What would be the benefits and the costs that a shorter securities settlement cycle would bring; 
• If it is concluded that a mandatory shorter settlement cycle should be imposed, how and when a shorter settlement cycle could be achieved;
•  What are the impacts on the EU’s capital markets resulting from international developments related to securities settlement.

ESMA will consider all comments received by December 15 2023.

On October 18 2023, the European Central Bank (ECB) published a letter to the Committee on Economic and Monetary Affairs of the European Parliament (ECON) on the digital euro project.

The ECB has decided to proceed to the next phase of the digital euro project, starting on November 1 2023.

Over the last two years, the Eurosystem has developed a high-level product design for a digital euro and related user requirements. Throughout the investigation phase, the ECB has been transparent about their design considerations and the options that were ultimately endorsed. The ECB has engaged closely with the European Parliament and other EU institutions and policymakers, as well as with market participants and prospective users, all of whom have provided valuable input that has fed into ECB’s work and enhanced ECB’s understanding of the needs and the challenges that the digital euro must address.

Building on the conclusions from the investigation phase, the preparation phase will include further in-depth analysis, comprehensive testing and experimentation, and thorough consultation with all stakeholders, to ensure the digital euro meets the highest standards of privacy, quality, security, and usability. This implies, as a first step, (i) further analysis and experimentation on digital euro design aspects and functionalities; (ii) together with market participants, continued work on the draft rulebook for a digital euro scheme; and (iii) starting the selection process for service providers that could potentially develop and later operate the technical solutions. All these activities will be supported by extensive engagement with stakeholders from both the public and the private sector. We will also seek to intensify our external communications on the digital euro project, with a view to increasing public understanding and trust. The actual development of a digital euro and the eventual pilot phase would only be planned at a later stage.

On October 23 2023, the European Securities and Markets Authority (ESMA) published official translations for guidelines (GL) for reporting under European Markets Infrastructure Regulation (EMIR).

These Guidelines will apply to financial and non-financial counterparties to derivatives as defined in Articles 2(8) and 2(9) of EMIR, to trade repositories (TRs) as defined in Article 2(2) of EMIR and to competent authorities.

These Guidelines will apply in relation to the derivatives reporting obligation as stated in Article 9 of EMIR and the TRs’ obligations under Articles 78 and 81 of EMIR. 

These Guidelines will apply from April 29 2024.

These Guidelines are based on Article 16(1) of ESMA’s Regulation. They fulfil several purposes with regards to the harmonisation and standardisation of reporting under EMIR. This is key to ensure high quality of data necessary for the effective monitoring of the systemic risk. Furthermore, increased harmonisation and standardisation of reporting allows to contain the costs along the complete reporting chain - the counterparties that report the data, the TRs which put in place the procedures to verify the completeness and correctness of data, and the authorities, defined in Article 81(3) of EMIR which use data for supervisory and regulatory purposes.

The Guidelines provide clarifications on the following aspects: 

• transition to reporting under the new rules, 
• the number of reportable derivatives, 
• intragroup derivatives exemption from reporting, 
• delegation of reporting and allocation of responsibility for reporting,
• reporting logic and the population of reporting fields,
• reporting of different types of derivatives, 
• ensuring data quality by the counterparties and the TRs, 
• construction of the Trade State Report and reconciliation of derivatives by the TRs,
• data access.

On October 2 2023, the European Market Securities and Markets Authority (ESMA) published a Report on Trends, Risks and Vulnerabilities (TRV) on the ESG names and claims in the EU fund industry.

To ensure that ESG investment products remain attractive, it is crucial that investors have confidence that the sustainable financial products offered to them are accurately described. Thus, as the popularity of ESG investments grows, so do the risks and importance of greenwashing. Tackling greenwashing is one of the key priorities in ESMA’s Strategy on Sustainable Finance, and in this respect our assessment of how investment funds signal themselves (via their name or via their documents) is an important first step in the detection and monitoring of potential greenwashing, given that greenwashing stems – first and foremost – from misleading, confusing, or inaccurate claims.  

In this study, ESMA shows that the share of EU UCITS investment funds with ESG words in their name has increased from less than 3% in 2013 to 14% in 2023. The article further highlights that fund managers tend to prefer using generic language (‘ESG’, ‘Sustainable’) rather than more specific words. This can make it more difficult for investors to verify that the fund portfolio is in line with the name.

To carry out this study ESMA has also used natural language processing techniques to examine the use of ESG-related language in more than 100,000 fund documents. As expected, funds with ESG words in their names, and as well as funds disclosing under Article 9 of the Sustainable Finance Disclosure Regulation (SFDR), tend to use relatively more ESG words in their documentation. However, the results also point to differences between the document types (regulatory document vs. marketing material), suggesting that fund managers adapt their communication based on the expected types of readers.  

The  findings support recent regulatory efforts – both in the EU and abroad – regarding disclosure requirements for investment funds. For example, the evolution of ESG language in fund names demonstrates the usefulness of ESMA’s recent public consultation on guidelines to ensure fund names accurately reflect their portfolio from an ESG perspective. 

Going forward, ESMA will continue to scale up the monitoring and supervision of greenwashing. NLP-based tools have the potential to greatly assist effective supervision across the EU, therefore ESMA will continue to monitor ESG-related disclosures, given the rapid growth and important role of the market for ESG investing.  

On October 16 2023, the European Securities and Markets Authority (ESMA) updated its Directive on Alternative Investment Fund Managers (AIFMD) reporting IT technical guidance revision 6.

The update relates to the information that the changes will be applicable from November 15 2023.

The new IT technical guidance revision 6 introduces new validation rules making more fields mandatory or with stricter rules to improve data quality. The new changes are specified in the tab ‘change history’ of the excel document. Reporting entities should use the version revision 6 to submit reports required under Articles 3(3)(d) and 24(1), (2) and (4) of AIFMD by November 2023. The reference period for the first reporting is Y1, H2,Q4 or X2 2023.

On October 27 2023, the European Securities and Markets Authority (ESMA) updated its questions and answers (Q&A) on Markets in Financial Instruments Directive (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) transparency topics.

The purpose of the document is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR in relation to transparency topics. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of MiFID II and MiFIR. The content of this document is aimed at competent authorities and firms by providing clarity on the application of the MiFID II and MiFIR requirements.

The update relates to the deleting the question on the topic minimum size of orders held in an order management facility for non-equity financial instruments. The question was located under section 5 – “Pre-trade transparency waivers”.

On October 26 2023, the European Fund and Asset Management Association (EFAMA) published a position paper on multiple voting shares directive.

The EU’s Listing Act is a key legislative initiative aimed at enhancing the appeal of EU public markets and facilitating capital access for small-medium enterprises (SMEs). That includes a new proposal by the European Commission for a Multiple Voting Shares Directive (MVSD). EFAMA believes it is of key importance to the European economy to ensure that EU capital markets remain attractive and competitive globally, therefore getting these types of initiatives right is crucial.

Limiting multiple-vote share structures to listings on SME growth markets, as proposed by the European Commission, would ensure that the main goal of the initiative is supported, without broader unintended consequences.

The "one share, one vote" principle is rooted in the belief that voting rights should reflect the economic exposure of an investment in a company. Shareholders, acting as the last resort creditors for a company, have a vested interest in maximizing the company's value. In an era where shareholders are expected to play a more active role as stewards of companies’ sustainable transitions, this principle also aligns with the Shareholders Rights Directive II. Therefore, any consideration of multiple-vote share structures should prioritize and safeguard investors' interests.

Without proper safeguards, the excessive use of controlling rights by majority shareholders may undermine the fragile balance between holding management responsible while, at the same time, fostering thriving  capital markets. EFAMA recommends introducing the following technical safeguards to maintain this essential balance:

• Appropriate boundaries on multipliers, with a preference for a maximum weighted voting rights ratio of 5:1.
• Mandatory inclusion of expiration (sunset) clauses, with rights expiring either after five or seven years.
• Restrictions on the types of decisions where supplementary voting rights can be exercised during general meetings.
• Mandatory shareholder approval for transactions that may present conflicts of interest or raise concerns about fairness (“whitewash” mechanisms).
• Prohibiting the transfer of enhanced voting rights to third parties and reverting enhanced voting shares to ‘one-share, one-vote’ upon transfer.

On October 3 2023, the European Securities and Markets Authority (ESMA) announced the launch of a common supervisory action (CSA) on MiFID II sustainability requirements.

ESMA will launch this CSA with Member State competent authorities (NCAs), with the goal being to assess the progress made by intermediaries in the application of the key sustainability requirements which entered into application in 2022, following the amendments to the MiFID II Delegated Acts.

The CSA will cover:

• How firms collect information on their clients’ “sustainability preferences”.
• Which arrangements firms have put in place to understand and correctly categorise investment products with sustainability factors for the purpose of the suitability assessment.
• How firms ensure the suitability of an investment with respect to sustainability (including the use of a “portfolio approach”).
• How firms specify any sustainability-related objectives a product is compatible with as part of the target market assessment of the investment product.

The CSA follows ESMA’s recent update of two sets of guidelines on suitability and product governance, both of which enter into application today.

ESMA and the NCAs will carry out the CSA during 2024.

On October 24 2023, the European Financial Reporting Advisory Group (EFRAG) published a press release on the launch of the European Sustainability Reporting Standards (ESRS) Q&A platform to support the implementation of ESRS.

The launch of the platform aims to collect and answer technical implementation questions to support preparers and other stakeholders with the implementation of the ESRS.

In its role of technical advisor to the European Commission, EFRAG will provide non-authoritative responses to the questions asked through the Platform. Answers will be provided by EFRAG following its due process.

This supports the European Commission's request to EFRAG to prioritise capacity building for ESRS implementation, in particular the sector-agnostic standards adopted on July 31 2023.

On October 25 2023, the European Securities and Markets Authority (ESMA) published a report on disclosures of climate related matters in the financial statements.

In 2022, ESMA communicated its strategic priorities for the 2023-2028 period. Amongst these priorities, ESMA announced its commitment to enable sustainable finance by promoting high quality sustainability disclosures. While financial reporting was not explicitly referred to in the areas where immediate action was required, ESMA and European national enforcers (enforcers) have identified climate-related matters as a European common enforcement priority (ECEP) for the last three years.

This report aims to assist and to enhance the ability of issuers to provide more robust disclosures and create more consistency in how climate-related matters are accounted for in financial statements drawn up in accordance with IFRS. The report focuses on disclosures related to climate matters included in the 2022 annual financial statements of European non-financial corporate issuers. However, ESMA points out that the report does not set out best practices or prescribe the way in which the disclosure of climate-related matters should be made in the financial statements.

The first three sections outline the background, objectives as well as scope and methodology of this report. The report focuses on topics for which it is likely that climate-related matters have a higher impact. The examples of disclosures included in the report provide practical illustrations on how climate-related matters may be presented in IFRS financial statements. In doing so, ESMA highlights, in each example, key aspects and provides insights that explain why such disclosures may be useful to users of financial statements. Finally, each section includes ESMA’s observations on areas of continued focus.

Finally, ESMA highlights that this report does not address disclosures prepared in accordance with sustainability reporting requirements (notably, their compliance, understandability, relevance, verifiability, comparability, and faithful representation) and to which extent the actions taken or planned by the selected issuers are sufficient to tackle climate change or lead issuers towards a sustainable path.

On October 25 2023, the Financial Services and Markets Authority (FSMA) published a Q&A on Undertakings for the Collective Investment in Transferable Securities (UCITS).

These questions and answers (Q&A) are aimed at Belgian and foreign UCITS. 

Belgian collective investment undertakings with variable number of shares may rely on these Q&A when they are required to apply legal provisions identical to those to which Belgian UCITS are subject.

These Q&As aim to provide support to UCITS and their management companies when applying various legal provisions that they are required to respect, including those provided for by the law of August 3, 2012 relating to collective investment undertakings which meet under the conditions of Directive 2009/65/EC and to debt investment undertakings, as well as by the measures taken for its execution.

The Q&A is structured as follows:

Part I Belgian UCITS

• Key Information Document (KID)
• Prospectus
• Investment policy
• Types of parts
• File for creating a UCITS, a compartment or a class of shares
• Publication of the NAV and press releases
• Periodic reports
• Statistical report

Part II Foreign mutual funds

• Can shares of non-registered foreign ETFs be offered in Belgium?
• Does UPC circular 4/2007 on nominees apply to all UCITS?

On October 3 2023, the Financial Services and Markets Authority (FSMA) published a study on the costs associated with structured debt securities.

The FSMA makes several recommendations to the sector. In order to better inform consumers, the FSMA publishes information to enable them to better understand and assess the costs associated with such products.

The “Retail Investment Strategy Package” of the European Commission, published on May 24, 2023, highlights in particular the importance given, at European level, to the costs of investment products and the impact that they can have on the “Value for Money” of the products. The FSMA also pays particular attention to this subject, in order to avoid products presenting unjustifiable high costs being offered to retail customers. It is in this context that the initiative was taken to undertake an analysis of the costs of structured debt securities. The FSMA studied the costs of structured debt securities offered to the public in Belgium using the “Reduction in yield” (RIY) as a measure. RIY is an annualized measure that indicates the loss of yield due to costs per year.

Analysis of the different factors determining the RIY shows that costs have been on average relatively higher for structured debt securities that:

• are more risky and do not offer the right to reimbursement of 100% of the capital at maturity;
• have a shorter maturity;
• are denominated in foreign currencies;
• have a house or benchmark index as underlying.

However, these findings were not observed to the same extent for the entire sector.

To conclude, the FSMA recommends that issuers and distributors ensure that the additional risk taken by investors is entirely devoted to generating a higher potential return.  In addition, the FSMA wishes to highlight  to the industry that, when designing a product, the customer's interest should always take precedence over any other considerations, and rising rates or improving market conditions should lead issuers and distributors to offer structured debt securities with a higher return potential. 

On October 11 2023, the Chambre des représentants de Belgique adopted a draft Miscellaneous Financial Provisions Bill.

This draft law, which contains various financial provisions, aims to regulate a number of matters that fall within the remit of the National Bank of Belgium, the FSMA, the SFPI and the General Treasury Administration of the FPS Finance. In this draft, these matters are divided into three Titles, Title I "Introductory Provision", Title 2 "Financial Provisions" and Title 3 "Entry into force".

A first amendment aims to amend the law of April 2 1962 to increase the number of members on the audit committee of the SFPI board of directors by providing for a minimum number of 4 members.

Another set of amendments aims to clarify the obligation for the receiver or liquidator to exercise, on behalf of all account holders/clients, the claim to which they are entitled in the event of bankruptcy or assistance of an account holder (e.g. a credit institution or an investment firm) or a central securities depository. This allows for more effective protection for owners of financial instruments.

In addition, a number of amendments are being made to the financial legislation in order to implement:

• Regulation (EU) 2021/23 of the European Parliament and of the Council of December 16 2020 on a framework for the recovery and resolution of CCPs;
• Regulation (EU) 2022/858 of the European Parliament and of the Council of May 30 2022 on a pilot regime for market infrastructures based on distributed ledger technology; and
• Regulation (EU) 2019/1238 of the European Parliament and of the Council of June 20 2019 on a pan-European personal pension product (hereinafter "PEPP Regulation").

It is also provided that the NBB's Sanctions Committee shall determine, in its rules of procedure, rules of procedure and ethics applicable to the handling of administrative penalty cases submitted to it.

The legislation applicable to dormant assets is amended with the aim of authorising the competent federal public service to register and process the National Register of Tenants number of dormant safes in order to be able to assign the amount of realised assets to a national register number within the framework of the legal procedure applicable to dormant safes and thus to facilitate the conduct of the procedure. The amendments also provide for compliance with the applicable law on the protection of personal data.

On October 17 2023, the Financial Services and Markets Authority (FSMA) published an outsourcing handbook for the Undertakings for the Collective Investment in Transferable Securities/Alternate Investment Fund (UCITIS/AIFs).

In the handbook, intended for management companies of UCITS/AIFs and for portfolio management and investment advice companies, the FSMA sets out the principles of sound management of the outsourcing of any function. The text repeals and replaces Circular PPB 2004/5 of the CBFA dated June 22 2004 on sound management practices in outsourcing by credit institutions and investment firms.

On October 5 2023, the Financial Services and Markets Authority (FSMA) published a notice on its implementation of the product governance requirements under MiFID II.

On August 3, 2023, the European Securities and Markets Authority (ESMA) updated its guidelines on MiFID II product governance requirements. The guidelines are intended to achieve better investor protection and more convergence in the interpretation and supervision of the MiFID II requirements as regards product governance, namely, by requiring the manufacturers and distributors to identify the potential target markets for their products.

The guidelines clarify the different elements that both manufacturers and distributors must consider to determine whether the products they sell and the market strategies they employ are in line with the objectives and needs of their clients, depending on the types of products concerned. They take into account the latest regulatory developments, in particular as regards sustainable finance, and the increasing digitalization of marketing and distribution practices.

The FSMA considers that these guidelines allow to provide useful clarifications on the implementation of certain legal and regulatory provisions, and will therefore include it among its supervisory instruments and in its practice.

On October 4 2023, the Banco Central do Brasil (BCB) published the Resolution no. 344 amending AML/CFT rules. 

This Resolution promotes specific adjustments to Circular No. 3,978, of January 23, 2020, which deals with the prevention of money laundering and terrorist financing within the financial system, to contemplate situations of very low risk of using the SFN for the practice of money laundering and terrorist financing, especially as a result of the establishment of federal public programs aimed at reducing household delinquency, such as the recently sanctioned Emergency Program for the Renegotiation of Debts of Delinquent Individuals - Desenrola Brasil.

Specifically, by the change, institutions authorized to operate by the BCB are exempt from carrying out customer qualification and classification procedures when these programs make it clear that:

I - the renegotiated operations are in default on the date of establishment of the respective program;

II - the funds released in the renegotiation operation are transferred directly to the creditor of the renegotiated debt, without any interference from the debtor; and

III - refer to delinquent debts with non-financial legal entities or institutions authorized to operate by the Central Bank that are responsible for the debtor's registration in delinquent registers.

In addition, the change does not include any other provisions of the rule, nor does it apply to the contracting of other products and services by the client benefiting from the renegotiation under the program with the credit granting institution.

It should be noted that the change stems from the difficulties faced by the financial institutions participating in the Program in obtaining, verifying, and validating the information relevant to the qualification and classification of customers, required by Circular No. 3,978/2020, since the debtor may not be a customer with a previous relationship with the institution granting the credit, or even not have been a customer of any other institution that is part of the financial system.

This Resolution enters into force on the date of its publication.

On October 17 2023, the Comissão de Valores Mobiliários (CVM) published a Circular letter on the periodicity for carrying out the self-assessment regarding the Principles for Financial Market Infrastructures (PFMI). 

The document aims to guide institutions operating financial market infrastructures on compliance with the Principles for Financial Market Infrastructure (PFMI) formulated by the Committee on Payments and Market Infrastructure (CPMI) and the International Organization of the Securities and Exchange Commission (IOSCO).

The Circular Letter points out that CVM Resolutions 31 and 135 establish that applicants for authorization to perform the activities of central securities depository and organized securities market administrator must present, as a requirement for granting the authorization, a document proving compliance with the PFMI.

Important information: the technical area considers that the market infrastructure should use the CPMI/IOSCO assessment methodology to conduct formal periodic self-assessments on PFMI compliance. In addition, these assessments should be useful in identifying procedures that require structural improvements and in prioritizing resources for areas where such a need has been identified.

On October 26 2023, the Banco Central do Brasil (BCB) published the Joint Resolution no. 7 on Open Finance and extended the validity period of data sharing. 

This Joint Resolution No. 7 simplifies the process of renewing consents for data sharing in Open Finance. With the aim of making it easier and more convenient for customers, the regulation allows participating institutions to offer longer validity periods than the current limit of 12 months for sharing, while maintaining the stipulation that the customer be allowed to revoke the sharing at any time. It is important to note that the institution receiving the data can notify the customer that their consent is about to expire and suggest renewal, but this will only be done if the customer agrees. And the customer can, as said, manage or revoke all their consents at any time.

Four steps: in order to manage consent, the customer needs to: 

1. access the application or website of the institution, i.e. the bank, cooperative or fintech that received or transmitted your information;
2. enter the Open Finance option in the menu;
3. search for the Open Finance consent management area, which can also be found under "My shares". In this area, the consumer can consult active or expired shares of data received or transmitted, as well as renew or revoke any share. 
4. To renew a share, the customer needs to access the Open Finance management area via the app or website of the institution that received the data and, in the "Received shares" area, choose "Renew share". This will show the data already shared, the purpose and the suggested renewal period, which can be changed by the customer from the options presented. Then simply authorize the renewal.

Currently, in order to renew data sharing, it is necessary to go through all the steps of a new consent. With the changes brought about by the Resolution, the renewal process is simplified, with the person simply accessing the environment of the institution that received their data (recipient) and confirming their desire to renew the sharing. Initially, this simplified renewal process will only be available to individual customers, but will be extended to legal entities from next year. 

The governance structure responsible for implementing Open Finance in Brazil, made up of the main market associations, will develop the technical specifications and the functionalities should be ready to be offered to the public by the end of November 2023.

For the Central Bank, the current maturity of the project allows for these changes. The security standard, which follows international models adopted in other jurisdictions, will not be affected, since the relaxation only applies to renewals, cases in which there is already consent in place, which was given after the traditional steps of request, authentication and confirmation. 

On October 27 2023, the Comissão de Valores Mobiliários (CVM) strengthened its monitoring of crypto assets in the capital market.

The CVM has been strengthening four fronts of opportunities in the capital market: football corporations (SAF), sustainable finance, agribusiness and crypto assets. For the regulator, these agendas are essential for the sustainable, innovative and inclusive development of the capital market, as well as for the democratization of the market with the inclusion of other investment options to expand the access of new issuers and investors to the sector.

With regard to crypto assets, the Authority has presented clarifications to the market on the regulator's performance, indicating the possible ways to regulate, supervise, supervise and discipline market agents in this sphere. CVM Guidance Opinion 40 was made available to the market to clarify these items.

Subsequently, Circular Letters from the Superintendence of Securitization and Agribusiness (SSE) of the CVM were released, in order to provide guidance on the possible characterization of receivables tokens and fixed income tokens as securities.

As a next step, the CVM will initiate communication with institutions in the crypto ecosystem that potentially operate with securities. The objective is to understand its role in this system, its structure and the characteristics of such assets. This work is part of the thematic supervision indicated in the CVM's 2023-2024 Biennial Plan for Risk-Based Supervision (SBR).

As indicated in the SBR 2023-2024 Biennial Plan, the SSR will soon start sending letters to several institutions, with the aim of mapping the digital asset ecosystem, in order to subsidize the CVM with information necessary for the exercise of its mandate.

The CVM remains firm in its purpose of fostering a favorable environment for the development of new technologies such as cryptoassets, with integrity and adherence to the rules of the Authority when applicable.

To this end, the CVM has been maintaining extensive dialogue with crypto market participants, aiming to build an increasingly modern regulatory framework, compatible with the characteristics of these assets and capable of meeting the demands of growth and innovation in the sector. 

On October 2 2023, the Banco Central do Brasil (BCB) inaugurated the investment data sharing phase, Open Investment, as part of the Open Finance initiative. 

Since the first half of 2023, the participating institutions have already disclosed the characteristics of the investment products they sell. This phase did not count on the possibility for customers to share their data on this scope, which is now being opened.

There is no specific application or registration requirement for sharing, and there is no centralized platform for security reasons. All regulated institutions can be participants. All that is needed is for the interested person or company to access the digital channels (app or browser) of the institution with which they would like to share their data and search for "Open Finance" in the options menu. Sharing will only take place between these two institutions.

Participating institutions will only be able to share data and services of customers who have requested sharing after the following steps:

• assent;
• authentication;
• confirmation.

Since Friday (09/29/2023), customers of institutions participating in Open Finance can share their data regarding investment-related products and services. With Open Investment, as the new stage of the open financial system has been called, interested clients will be able to share with the participating institution they want the data of the investment products they have in other institutions that also participate in the ecosystem.

The sharing of investment data marks the beginning of another phase of Open Finance – a broader initiative that already allows customers to share their data from traditional banking products, as well as make payments and transfers between institutions.

The following products are part of this new stage:

• Bank Deposit Certificate (CDB);
• Bank Deposit Receipt (RDB);
• Real Estate Letters of Credit (LCI);
• Agribusiness Letters of Credit (LCA)
• Real Estate Receivables Certificates (CRI);
• Agribusiness Receivables Certificates (CRA);
• Debentures;
• federal government bonds made available by Treasury Direct;
• shares of investment funds (fixed income, equities, foreign exchange and multimarket);
• actions;
• Shares of index funds listed on the stock exchange.

The scope of investments will be accessible to individuals and companies that are clients of institutions that participate in Open Finance in the form of data sharing, all of which are authorized and supervised by the Central Bank. It is worth noting that sharing only happens at the customer's will.

Initially, the offer of this functionality will be made by the participating institutions that already operate in the data sharing modality in Open Finance.

It is worth mentioning that the implementation of the sharing of investment data in Open Finance by institutions authorized by the Central Bank, especially banks, brokerage firms and distributors of securities, does not depend on regulation by the Brazilian Securities and Exchange Commission (CVM).

On October 4 2023, the Banco Central do Brasil (BCB) issued the Resolution no. 343 on the execution of the sharing of information on indications of fraud. 

This resolution provides for the measures necessary to carry out the sharing of data and information on indications of fraud referred to in Joint Resolution No. 6, of May 23, 2023.

Joint Resolution No. 6, of 2023, establishes that financial institutions, payment institutions and other institutions authorized to operate by the Central Bank, with the exception of consortium administrators, must share with other institutions, through an electronic system, data and information on signs of fraud. The measure seeks to reduce the information asymmetry in access to data and information used to support procedures and controls of these institutions for fraud prevention, aiming to reduce the occurrence of such events in the National Financial System and in the Brazilian Payment System.

In this context, in order to standardize the rules and facilitate their implementation, BCB Resolution No. 343 regulates, among others, the minimum scope of data and information to be shared, functionalities for the interoperability of the system, requirements for contracting the data and information sharing service, detailing the parameters related to the service level agreements, as well as the technical safety requirements.

Regarding the minimum scope of data and information, the resolution determines that institutions must consider evidence of fraud occurrences or attempts, at least, in the following activities: opening a deposit account or payment account; provision of payment services; maintenance of a deposit account or payment account; and contracting of credit operations.

For the activity of providing payment services, the following services are initially contemplated: transfers between accounts in the institution itself; Available Wire Transfer (TED); payment transactions with the use of checks; instant payment transactions (Pix); transfers by means of a Credit Document (DOC); payment slips; and cash withdrawals. 

Regarding the deadlines to be obeyed by the institutions, the resolution establishes that they are responsible for recording data and information on evidence of fraud occurrences or attempts in the electronic system within a maximum of 24 hours from the moment of their identification, as well as must make a monthly declaration of compliance of the record in relation to the data and information on evidence of the previous month.

In addition, the standard establishes requirements to enable the implementation of interoperability between electronic systems, such as the requirement of uniqueness of the record, which contributes to the quality of the shared data and efficiency of the system, as well as the availability of standardized layouts of the files, rules, procedures, technologies and other resources necessary for the exchange of information between the systems.

As for service level agreements, the resolution includes parameters for the availability of the electronic system, recovery time, and provides for response times to queries to records. On technical and security requirements, it describes parameters on authentication, encryption, penetration testing, and mechanisms for traceability in access to data and information.

In general, the deadline for implementing the measures set forth in the standard is November 1, 2023, with the exception of the provisions related to service level agreements and the functionality of the declaration of conformity, which will be observed as February 1, 2024.

On October 2 2023, the Comissão de Valores Mobiliários (CVM) published a new Circular letter that clarifies article 134 of CVM Resolution 175 on investment funds.

The objective is to disclose a complementary interpretation of the technical areas on the content of item 1.9 of the Joint Circular Letter CVM/SIN/SSE 2/2023, published on September 27 2023.

This document clarifies that the interpretation of the technical areas is that, in the specific case of public offerings, the submission of a registration request by the fund already characterizes an effective performance of the service providers, in particular by the contracted distributors.

Thus, based on the concept provided for in article 80 of CVM Resolution 175, it is possible to consider that these funds do not need to adapt immediately as a condition for the closing of the offering, and may consider the deadline until December 31 2024 for their adaptation to CVM Resolution 175.

Regulatory Framework for Investment Funds

CVM Resolution 175 was issued on December 23 2022 and entered into force on Monday, October 2 2023, configuring the systematization of 38 rules in a single resolution. The measure, which reflects the innovations introduced in the legal system of investment funds by the Economic Freedom Law, promotes innovations for the investment fund industry and greater security for investors' assets.

CVM Resolution 181, published on March 28 2023, made specific changes to RCVM 175 and established October 2 2023 as the new term of validity of the rule. In May, CVM Resolution 184 made new specific changes to the rule and added nine Normative Annexes to RCVM 175.

On September 27 2023, CVM Resolution 187 was issued, which punctually amended provisions of the general part of the rule and in the Normative Annexes. 

On October 6 2023, the Comissão de Valores Mobiliários (CVM) published a Circular letter for fund mangers supplementing the Resolution 175 on information regarding the level of leverage.

Important information: funds that do not have a margin limit established in the regulation must leave the field blank.

All new funds, registered as of October 2 2023 already within the scope of CVM Resolution 175, must comply with the maximum gross margin limits established in the items of article 73 of the rule.

In the Margin Limit field up to the Blade, the maximum Gross Margin limit (article 73, paragraph 1, of Normative Annex I of the Resolution) established by the regulation or the regulation, if the latter is lower, must be informed.

In the case of funds registered before October 2 2023, the gross margin limit will continue to be that provided for in the regulation, and such funds will not be subject to the maximum limits provided for in article 73 until their adaptation to the Resolution. 

On October 2 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published rules on for the use of liquidity tools for investment funds. 

Standards for "side pocket" and "gates" were approved at a public hearing in September.

New features of CVM Resolution 175, which has just come into force, on the tools for liquidity management in investment funds known as side pocket and gates (barriers to redemption) have gained rules for their use. The goal was to strengthen the governance of the fund industry and bring more transparency to the investor. The initiative is part of ANBIMA's Market Development in Action agenda, a set of initiatives that we have chosen as priorities for the 2023/2024 biennium.

Approved at a public hearing in September, the guidelines were published in the document Rules and Procedures for Liquidity Tools with minor wording adjustments, but no changes to the content.

Detailed summary of the main rules:

From now on, the fund's regulations, the agreement between the essentials and the liquidity management policy must describe the mechanisms that can be used, and which events can trigger the use. The documents must also indicate who is responsible for operating the tool. In addition, it must be notified by means of a material fact whenever the mechanism is triggered.

The fund must warn in its regulations the expected use of the tool, and the possibility of splitting any asset from the portfolio, in addition to describing the conditions for its use. When split, the parcel must have in its name the suffix "special purpose vehicle" and the name of the event that originated the use.

In this case, the liquidity management policy should contain a description of the methodology to operationalize the tool, and the criteria used to trigger and close the barriers.

The rules are linked to our Code of Administration and Management of Third-Party Resources, which compiles best practices for fund managers and administrators. The text has undergone several changes in recent months due to the 175.

In addition to it, the Distribution and Qualified Services codes will also undergo adaptations to the new fund rule.

On October 10 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) informed of a Joint work with CVM on information transparency for portfolios of funds that invest abroad. 

As of October 24, managers will be able to send information on the portfolios of their funds that invest abroad to ANBIMA. With a focus on increasing transparency, the Authority is building a database with assets from the portfolios of these products. At first, it will be a testing phase with voluntary participation so that the market adapts to the new report regime.

The pilot project will run for three months. The submission must be made through ANBIMA Input, its data receiving platform, always between the 16th business day and the last business day of each month.

Positions held by offshore investment funds that are invested by Brazilian funds and that have influence from the local manager must be reported.

After the testing phase, the submission of data will be mandatory for all managers adhering to the Asset Management and Administration Code who invest in funds abroad and have direct or indirect influence on investment decisions.

On October 18 2023, ANBIMA has shared a complete step-by-step manual on how to submit the data in the tool. 

On October 17 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published new rules on the product distribution database.

ANBIMA published the new version of the Distribution Code Rules and Procedures document, which brings together standards for the submission of customer investment data. The update includes new mandatory information for institutions that sell products to retail and/or private companies, with the aim of standardizing information in both segments.

The update of the document, which was approved at a public hearing in July this year, is part of ANBIMA in Action, a set of activities that the Authority has chosen as priorities for the 2023/2024 biennium.

Regarding retail operations, the institution must send ANBIMA data on open pension plans, such as the position of assets and the number of customers, through the statistical form that will be made available on ANBIMA's website close to the period of validity of the change. The same has already been true for other types of investment, such as funds, bonds and securities since 2020.

Institutions will have until January 2 2024 to comply with retail rules. Thus, the data for the month of December must be sent based on the new rule.

As for private activities, data on investments in their products now need to be separated by states. The report must be made through the private banking statistics form, which will also be available on ANBIMA's website. In addition, information about investments in ETFs (Exchange Traded Fund), FMP (Privatization Mutual Funds) and Box (investment technique in the options market) should also be shared.

Institutions with a private audience will have until March 2 2024 to adapt the standard. The data sent in March, however, should contain the retroactive data for the months of February, January and December.

On October 27 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) announced the Consultation on Rules of Basic Duties and Distribution and Services Codes.

The proposed changes in the Rules and Procedures of the Services Code are punctual for adaptation to 175, especially in the rules on the custody of FIDCs (Credit Rights Investment Funds), for example, with the inclusion of class and subclass of these funds.

A new document is available for approval, the Rules and Procedures of Basic Duties, which brings together the common standards for all codes, such as cybersecurity, compliance and internal controls, in addition to the rules for the use of seals.

The basic duties document becomes mandatory for all institutions that follow ANBIMA's codes, with the exception of the Offers code.

There are no changes in the content of the rules that were already valid, except for those on cybersecurity for institutions that follow the Code of Management and Administration of Third-Party Resources. In this case, companies must require a minimum content to hire a data processing and storage service provider.

Both Codes on the Distribution and the Qualified Services have undergone structural changes, becoming principles in a self-regulatory framework. Thus, two documents related to them were created, bringing together the operational and detailed standards of each one: Rules and Procedures of the Distribution Code and the Rules and Procedures of the Qualified Services Code.

The document referring to the Distribution Code provides for:

• the exclusion of the requirement to apply the suitability score table for exclusive funds and managed portfolios. Thus, each institution must establish a policy for verifying the mandates of investments, taking into account the client's profile.
• the change in the minimum investment amount to consider a client in the private segment: the suggestion is to go from R$ 3 million to R$ 5 million, in line with the market practice.

On October 24 2023, the Autorité des marchés financiers (AMF) published the results of a SPOT (Supervision of Operational and Thematic Practices) control campaign on the processes for producing, controlling and transmitting regulatory reports to the AMF. The findings show that management companies need to be more vigilant about the quality of the data transmitted.

Asset management companies are subject to reporting obligations to the AMF, stemming in particular from national regulations. In this context, they must submit to the regulator an annual information sheet, supplemented by an annual internal control report, and answer the questionnaire relating to the anti-money laundering and countering the financing of terrorism regime. In addition, in January 2021, the AMF rolled out the ROSA extranet, in which asset management companies are responsible for keeping their information and documents up-to-date and complete.

The SPOT audit campaign conducted by the AMF focused on a panel of five asset management companies of different sizes, organisations and activities. In concrete terms, the AMF has analysed the following elements of the system for producing, monitoring and transmitting the data submitted to the AMF through the regulatory reports cited above:

• organization and governance;
• the associated procedural body;
• operational implementation;
• the permanent and periodic control work carried out.

For all the companies in the panel, the head of compliance and internal control is involved either in the preparation or in the review of the first versions of the product reports, before validation by a responsible manager, then transmission to the AMF. Formal operating procedures describe the successive steps of this process. In addition, they are subject to a robust audit trail.

On the other hand, the tests carried out by the monitoring mission led to the identification of several anomalies in the quality of the data reported. These include assets under management, clients, recommendations made by internal control and the teams of the audited companies.

Four of the five companies in the panel assessed the risk of error in the communication of regulatory reports to the AMF as "high". However, none of them has carried out permanent monitoring work on the analysed system since January 2020. Three of these companies carried out periodic monitoring of this process, but this did not lead to the identification of the anomalies found during the tests carried out by the inspection mission.

Several examples of good practice are highlighted in this summary in order to strengthen the system analysed. However, despite the variable level of materiality of the anomalies observed, the AMF highlights their high number. Such a level of error is not compatible with the crucial importance of the data transmitted to the Authority in the context of its supervisory mission. It calls for a significant and rapid strengthening of the control system in place over the processes for producing these reports.

Version française

Le 24 octobre 2023, l'Autorité des marchés financiers (AMF) a publié les résultats d'une campagne de contrôle SPOT (Supervision des Pratiques Opérationnelles et Thématiques) portant sur les processus de production, de contrôle et de transmission des rapports réglementaires à l'AMF.

Les résultats montrent que les sociétés de gestion doivent être plus vigilantes sur la qualité des données transmises.

Les sociétés de gestion de portefeuille sont soumises à des obligations de déclaration auprès de l'AMF, découlant notamment des réglementations nationales. Dans ce cadre, ils doivent remettre au régulateur une fiche d'information annuelle, complétée par un rapport annuel de contrôle interne, et répondre au questionnaire relatif au régime de lutte contre le blanchiment et le financement du terrorisme. Par ailleurs, l'AMF a déployé en janvier 2021 l'extranet ROSA, dans lequel les sociétés de gestion de portefeuille ont la responsabilité de tenir à jour et complets leurs informations et documents.

La campagne d'audit SPOT menée par l'AMF a porté sur un panel de cinq sociétés de gestion de portefeuille de tailles, d'organisations et d'activités différentes. Concrètement, l’AMF a analysé les éléments suivants du dispositif de production, de suivi et de transmission des données soumises à l’AMF au travers des rapports réglementaires cités ci-dessus :

• organisation et gouvernance ;
• l'organe procédural associé ;
• mise en œuvre opérationnelle ;
• les travaux de contrôle permanent et périodique effectués.

Pour toutes les sociétés du panel, le responsable de la conformité et du contrôle interne intervient soit dans l'élaboration, soit dans la revue des premières versions des rapports produits, avant validation par un responsable, puis transmission à l'AMF. Des procédures opérationnelles formelles décrivent les étapes successives de ce processus. De plus, ils sont soumis à une piste d’audit robuste.

En revanche, les tests effectués par la mission de suivi ont permis d'identifier plusieures anomalies dans la qualité des données remontées. Il s’agit notamment des actifs sous gestion, des clients, des recommandations émises par le contrôle interne et des équipes des sociétés auditées.

Quatre des cinq sociétés du panel ont évalué le risque d'erreur dans la communication des rapports réglementaires à l'AMF comme « élevé ». Cependant, aucune d'entre elles n'a effectué de travail de surveillance permanente sur le système analysé depuis janvier 2020. Trois de ces sociétés ont effectué une surveillance périodique de ce processus, mais cela n'a pas permis d'identifier les anomalies constatées lors des tests effectués par la mission d'inspection.

Plusieurs exemples de bonnes pratiques sont mis en avant dans cette synthèse afin de renforcer le système analysé. Toutefois, malgré le niveau de matérialité variable des anomalies constatées, l’AMF souligne leur nombre élevé. Un tel niveau d'erreur n'est pas compatible avec l'importance cruciale des données transmises à l'Autorité dans le cadre de sa mission de contrôle. Elle appelle à un renforcement significatif et rapide du système de contrôle en place sur les processus d'élaboration de ces rapports.

On October 27 2023, the Autorité des marchés financiers (AMF) and the Commodity Futures Trading Commission (CFTC) signed a Memorandum of Understanding (MOU) regarding cooperation and the exchange of information in the supervision and oversight of certain regulated firms that operate on a cross-border basis in the United States and in France.

Through the MOU, the AMF and CFTC express their willingness to cooperate in the interest of fulfilling their respective regulatory mandates in the context of supervising firms within the scope of the MOU. The MOU establishes a framework for cooperation, contemplates the sharing of information, and provides procedures for examinations.

Version française

Le 27 octobre 2023, l'Autorité des marchés financiers (AMF) et la Commodity Futures Trading Commission (CFTC) ont signé un accord (MOU) concernant la coopération et l'échange d'informations en matière de surveillance de certaines entreprises réglementées qui opèrent sur un marché d'une base transfrontalière aux États-Unis et en France.

A travers cet accord, l'AMF et la CFTC expriment leur volonté de coopérer dans l'intérêt de remplir leurs mandats réglementaires respectifs dans le cadre de la surveillance des entreprises prévu dans l'accord. L'accord établit un cadre de coopération, envisage le partage d'informations et fournit des procédures d'examen.

On October 4 2023, the Autorité de contrôle prudentiel et de résolution (ACPR) issued a notice regarding additional national specificities to be provided in the context of applications for approval for credit institutions providing investment services.

In accordance with articles L. 511-10 and R. 511-2-1 of the Monetary and Financial Code, and in accordance with instruction 2023-I-12, individuals requesting approval as a credit institution providing investment services must submit an application for approval. This approval will be granted by the European Central Bank (ECB), based on the proposal of the Prudential Supervision and Resolution Authority (ACPR).

The form and additional documents, properly filled out and signed, should be submitted through the ECB's IMAS portal at the following address: imas.ecb.europa.eu. This form is then automatically transferred by the ECB to the ACPR's Authorizations portal.

This form contains national specificities according to French law that must be filled out by the applicants for approval.

Version française

Le 4 octobre 2023, l'Autorité de contrôle prudentiel et de résolution (ACPR) a publié un avis concernant les spécificités nationales complémentaires à prévoir dans le cadre des demandes d'agrément des établissements de crédit prestataires de services d'investissement.

Conformément aux articles L. 511-10 et R. 511-2-1 du Code monétaire et financier, et conformément à l'instruction 2023-I-12, les personnes sollicitant l'agrément en qualité d'établissement de crédit prestataire de services d'investissement doivent introduire une demande d'approbation. Cet agrément sera accordé par la Banque centrale européenne (BCE), sur proposition de l'ACPR.

Le formulaire et les documents supplémentaires, dûment remplis et signés, doivent être soumis via le portail IMAS de la BCE à l'adresse suivante : imas.ecb.europa.eu. Ce formulaire est ensuite automatiquement transféré par la BCE vers le portail Autorisations de l'ACPR.

Ce formulaire contient les spécificités nationales selon la loi française qui doivent être complétées par les demandeurs d'approbation.

On October 26 2023, the Autorité des marchés financiers (AMF) amended its instruction DOC-2016-02 concerning the AMF's information on loans granted by alternative investment funds (AIFs), following the approval of the amendments to its General Regulation.

As a reminder, AIFs compatible with Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (ELTIF Regulation) may be authorised as ELTIFs and grant loans under the conditions of this Regulation. In the case of non-ELTIF authorised AIFs, only AIFs that are specifically authorised by national rules may grant loans (specialised professional funds (SPFs), professional private equity funds (FPCIs), securitisation undertakings (SOs) and specialised financing undertakings (SFOs)).

Portfolio management companies authorised in France that manage SPF, FPCIs, TOs or FSOs, whether or not authorised ELTIFs, and granting loans must provide the AMF with information on unmatured loans granted on a quarterly basis. Foreign management companies that manage such French AIFs that are not ELTIF authorised and grant loans are subject to the same obligation.

In order to improve data-driven supervision, and following the amendments to its General Regulation by the Order of 21 July 2023, the AMF amends its instruction DOC-2016-02 and extends these reporting obligations to the following players:

• asset management companies managing and granting loans to "Other AIFs" authorised ELTIFs, and
• foreign management companies that manage ELTIF-approved SPFs, FPCIs, TOs or FSOs and grant loans, or manage "Other AIFs" authorised ELTIFs and grant loans.

Portfolio management companies authorised in France and foreign management companies that manage French AIFs that lend will now have to provide new, more granular information on loans granted directly in the ROSA extranet, and no longer through the GECO database.

The deadline for the transmission of this information remains unchanged, as it must be sent within two months of the end of each quarter of the calendar year.

The new reporting format to the AMF will be applicable from November for lending activity for the third quarter of 2023. The reporting procedures will be specified in the ROSA extranet.

Version française

Le 26 octobre 2023, l'Autorité des marchés financiers (AMF) a modifié son instruction DOC-2016-02 relative à l'information de l'AMF sur les prêts accordés par les fonds d'investissement alternatifs (FIA), suite à l'approbation des modifications de son règlement général.

Pour rappel, les FIA compatibles avec le Règlement (UE) 2015/760 du Parlement européen et du Conseil du 29 avril 2015 relatif aux fonds européens d'investissement à long terme (Règlement ELTIF) peuvent être agréés en tant qu'ELTIF et accorder des prêts dans les conditions du présent Règlement. Pour les FIA non agréés ELTIF, seuls peuvent octroyer des prêts les FIA spécifiquement agréés par les règles nationales (fonds professionnels spécialisés (SPF), fonds professionnels de capital investissement (FPCI), organismes de titrisation (SO) et organismes de financement spécialisés (SFO)).

Les sociétés de gestion de portefeuille agréées en France qui gèrent des SPF, des FPCI, des TO ou des FSO, agréés ou non en ELTIF, et accordant des prêts doivent communiquer trimestriellement à l'AMF les informations sur les prêts non échus. Les sociétés de gestion étrangères qui gèrent de tels FIA français non agréés ELTIF et accordent des prêts sont soumises à la même obligation.

Afin d'améliorer la surveillance basée sur les données, et suite aux modifications de son règlement général par l'ordonnance du 21 juillet 2023, l'AMF modifie son instruction DOC-2016-02 et étend ces obligations de déclaration aux acteurs suivants :

• les sociétés de gestion de portefeuille gérant et accordant des prêts aux ELTIF agréés « Autres FIA », et
• les sociétés de gestion étrangères gérant des SPF, FPCI, TO ou FSO agréés ELTIF et accordant des prêts, ou gérant des « Autres FIA » agréés ELTIF et accordant des prêts.

Les sociétés de gestion de portefeuille agréées en France et les sociétés de gestion étrangères qui gèrent des FIA français prêteurs devront désormais fournir une nouvelle information plus granulaire sur les prêts accordés directement dans l'extranet ROSA, et non plus via la base de données GECO.

Le délai de transmission de ces informations reste inchangé, puisqu'elles doivent être envoyées dans les deux mois suivant la fin de chaque trimestre de l'année.

Le nouveau format de reporting à l'AMF sera applicable à partir de novembre pour l'activité de crédit du troisième trimestre de 2023. Les modalités de reporting seront précisées dans l'extranet ROSA.

On October 19 2023, the Autorité des marchés financiers (AMF) published a guide for professionals on the terms they should use to make it easier for their customers to understand and compare fees. The AMF has launched a new section on fees on its website, providing educational content and tools to help retail investors better understand the costs they may be charged.

More than half of French retail investors say they are uncomfortable assessing the impact of investment fees on returns, according to the AMF's latest Savings and Investment Barometer. Yet this impact can be significant. In addition, the AMF's recent campaign of mystery shopping to branches showed that information on fees is not systematic and often fragmented.

The AMF pays close attention to the transparency of fees for financial products and services and urges professionals to make fees clearer and easier to understand for retail investors. It concluded that the terminology used should be harmonised. In March, following work with the Financial Sector Consultative Committee (FSCC), which brings together all stakeholders including representatives of retail investors and professionals in France, the AMF presented proposals for the fees’ presentation it supported at the European level as part of the preparatory discussions on the EU Retail Investment Strategy.

In line with these proposals, the AMF is publishing a professional guide, with a detailed glossary, for investment services providers and financial investment advisors. It invites professionals to adopt the recommended terminology in the next update of any document informing customers about costs and fees.

Simultaneously, the AMF is expanding the retail investor section of its website with a new dedicated section on fees. Retail investors will find a glossary explaining the different types of fees likely to be charged, as well as articles, infographics and tools, including a stock market fee simulator. Retail investors can also read the overview of fees charged on different types of funds (equity, bond, diversified, ETFs, employee savings schemes) and the fees charged by investment service providers for stock market orders, which the AMF publishes each year in its Household Savings Observatory.

Version française

Le 19 octobre 2023, l'Autorité des marchés financiers (AMF) a publié un guide destiné aux professionnels sur les termes à utiliser pour faciliter la compréhension et la comparaison des frais par leurs clients.

L'AMF a lancé une nouvelle rubrique sur les frais sur son site Internet, proposant des contenus pédagogiques et des outils pour aider les investisseurs particuliers à mieux comprendre les frais qui peuvent leur être facturés.

Plus de la moitié des investisseurs particuliers français se disent mal à l'aise quant à l'impact des frais d'investissement sur les rendements, selon le dernier baromètre d'épargne et d'investissement de l'AMF. Pourtant, cet impact peut être important. Par ailleurs, la récente campagne de visites mystères menée par l'AMF auprès des agences a montré que l'information sur les tarifs n'est pas systématique et souvent fragmentée.

L'AMF porte une attention particulière à la transparence des tarifs des produits et des services financiers et invite les professionnels à rendre les tarifs plus clairs et plus compréhensibles pour les investisseurs particuliers. Elle conclut que la terminologie utilisée devrait être harmonisée. En mars, à la suite des travaux du Comité consultatif du secteur financier (CCSF), qui rassemble toutes les parties prenantes, y compris les représentants des investisseurs particuliers et des professionnels en France, l'AMF a présenté des propositions de présentation des tarifs qu'elle a soutenus au niveau européen dans le cadre des travaux préparatoires sur la stratégie européenne d’investissement dans le commerce de détail.

Dans la continuité de ces propositions, l'AMF publie un guide professionnel, accompagné d'un glossaire détaillé, à destination des prestataires de services d'investissement et des conseillers en investissements financiers. Elle invite les professionnels à adopter la terminologie recommandée lors de la prochaine mise à jour de tout document informant les clients sur les coûts et honoraires.

Parallèlement, l'AMF enrichit la rubrique destinée aux investisseurs particuliers de son site internet d'une nouvelle rubrique dédiée aux frais. Les investisseurs particuliers y trouveront un glossaire expliquant les différents types de frais susceptibles d'être facturés, ainsi que des articles, des infographies et des outils, dont un simulateur de frais boursiers. Les investisseurs particuliers peuvent également consulter le récapitulatif des frais appliqués aux différents types de fonds (actions, obligations, diversifiés, ETF, épargne salariale) et des frais facturés par les prestataires de services d'investissement pour les ordres de bourse, que l'AMF publie chaque année dans son Observatoire de l'épargne.

On October 25 2023, France published the Decree No. 2023-978 of October 23 2023 on fees due to the Autorité des marchés financiers (AMF).

The decree applies to companies whose shares are admitted to trading on a regulated market or on a multilateral trading facility.

The purpose of the decree is to change the date of payment of contributions paid each year by companies listed on the AMF. These two contributions are calculated in proportion to the market capitalization and the amounts of shares repurchased by the companies. This change is the result of both an evolution of the AMF's cash management policy and a modernization of the contribution payment system.

The text entered into force on October 26 2023.

Version française

Le 25 octobre 2023, la France a publié le décret n° 2023-978 du 23 octobre 2023 relatif aux redevances dues à l'Autorité des marchés financiers (AMF).

Le décret s'applique aux sociétés dont les actions sont admises aux négociations sur un marché réglementé ou sur un système multilatéral de négociation.

Le décret a pour objet de modifier la date de paiement des cotisations versées chaque année par les sociétés cotées à l'AMF. Ces deux cotisations sont calculées proportionnellement à la capitalisation boursière et aux montants des actions rachetées par les sociétés. Ce changement résulte à la fois d'une évolution de la politique de gestion de trésorerie de l'AMF et d'une modernisation du système de paiement des cotisations.

Le texte est entré en vigueur le 26 octobre 2023.

On October 23 2023, the Federal Finance Ministry published a draft law on the digitalisation of the financial market (Financial Market Digitalisation Act - FinmadiG).

Digital financial services are an integral part of a future-oriented and competitive economy. With the use of innovative technologies, such as distributed ledger technology, efficiencies can be increased and costs reduced. At the same time, measures must be taken to increase digital resilience and counter new money laundering risks in order to strengthen trust in new digital financial infrastructures. This also serves the integrity and stability of the financial system. This requires uniform solutions in a European single market. In 2020, the European Commission therefore presented an EU Strategy for Digital Finance (COM(2020) 591 final). In particular, this strategy aims to promote Europe's competitiveness and innovation in the financial sector.

The draft bill for a law on the digitalisation of the financial market is intended to amend the European Regulation MiCA (Markets in Crypto Assets, Regulation (EU) 2023/1114), the new version of the EU Transfer of Funds Regulation (Regulation (EU) 2023/1113) as well as the European DORA package (Digital Operational Resilience Act, Regulation (EU) 2022/2554 and Directive (EU) 2022/2556) summarised in a Financial Market Digitalisation Act.

The MiCA Regulation establishes an independent and innovative European regulatory framework on markets for crypto-assets, which replaces the previous national framework for the regulation of crypto-assets. The draft bill provides that the MiCA Regulation can be implemented in Germany by means of a new Crypto Market Supervision Act (KMAG). It bundles the supervisory powers of the Federal Financial Supervisory Authority (BaFin) over crypto assets and crypto-asset service providers in one law.

The EU Transfer of Funds Regulation aims to revise existing rules on the transfer of information in the case of transfers of funds and to extend their scope to transfers of crypto-assets. In addition, existing laws are to be amended in order to continue to guarantee the obligated status of MiCA institutions under the Anti-Money Laundering Act.

For the first time, the DORA package aims to establish uniform requirements for the security of information and communication technologies (ICT) for the entire financial sector. To this end, competences are to be transferred to the competent supervisory authorities of the federal and state governments so that they can fulfil their tasks under the directly applicable DORA.

On October 13 2023, the Bundesregierung informed on the Newly Adopted Law on Representative Actions.

On July 7 2023, the Deutscher Bundestag strengthened the protection of the collective interests of consumers by voting in favour of a draft law of the Federal Government on the implementation of Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers.

The draft law is intended to transpose the aforementioned EU directive into German law. The Directive aims to strengthen the protection of the collective interests of consumers across the EU, as many consumers are regularly harmed by business practices that are contrary to consumer law. To protect them, it is necessary to put an end to illicit practices across the board and to remedy them, according to the draft law.

The Directive obliges EU Member States to provide for two types of representative actions. Associations must have the right to bring injunctions in their own name to put an end to infringements of consumer law and redress actions to enforce consumer rights.

The Federal Government assumes that the new regulations will lead to relief for citizens, the economy and the courts of the federal states. It anticipates 15 remedial actions by associations against companies every year, but 22,500 individual lawsuits are to be eliminated.

On October 18 2023, the Guernsey Financial Services Commission (GFSC) published the 2023 Financial Crime Risk Return Reminder.

The GFSC reminds all financial services and prescribed businesses that the 2023 Financial Crime Risk Return (FCRR) is due for submission by October 31 2023.

Firms which are required to complete the FCRR will find it available via the Commission’s Online Submissions Portal. Should you see a FCRR on your firm’s Online Submissions Portal timeline which you do not believe is required to be completed, please email amlcft@gfsc.gg 

The Guidance should be red prior to submission. A template showing all questions within the FCRR is also available to assist with completion.

On October 2 2023, the Guernsey Financial Services Commission (GFSC) issued in final form guidance for registered directors on their anti-money laundering and counter terrorist financing obligations.

No changes have been made to the text from the draft guidance issued on August 9 2023. Registered directors are reminded that the AML/CFT obligations upon them, which are contained in Schedule 3 of the Criminal Justice (Proceeds of Crime) ( Bailiwick of Guernsey) Law, 1999, took effect from October 1 2023.

This guidance is for registered directors only as it reflects the very limited activity they can undertake.

On October 27 2023, Hong Kong published the Securities and Futures (Contracts Limits and Reportable Positions) (Amendment) Rules 2023.

The main object of these Rules is to amend the Securities and Futures (Contracts Limits and Reportable Positions) Rules (Cap. 571 sub. leg. Y) (principal Rules) by imposing reporting requirements for holiday contracts, providing for the application of prescribed limits and reporting requirements in respect of funds, providing for the authorization of certain clearing participants to hold or control contracts in excess of the prescribed limits, and setting prescribed limits and reporting levels for certain futures contracts and stock options contracts.

Section 3 amends section 2 of the principal Rules to amend, repeal, substitute and add various definitions used in the principal Rules.

Section 4(1) of the principal Rules prohibits a person (subject to exceptions in section 4(2) and (3) of the principal Rules) from holding or controlling futures contracts or stock options contracts in excess of the prescribed limit. Section 4 of these Rules adds a note to section 4(1) of the principal Rules to guide the reader to the new section 7A of the principal Rules for compliance with this requirement by certain persons holding or controlling contracts in respect of funds. Section 4 of these Rules also adds references to the new section 4F of the principal Rules to section 4(3), (4) and (5) of the principal Rules so that, under section 4(3) of the principal Rules, a person may hold or control futures contracts or stock options contracts in excess of the statutory prescribed limit if the person is authorized by the Securities and Futures Commission (Commission) to do so under the new section 4F, subject to the ambit set out in section 4(4) and (5) of the principal Rules.

Section 5 amends section 4A of the principal Rules to provide that a clearing participant of HKFECC or SEOCH who clears futures contracts or stock options contracts for a person who is specified in section 4A(a), (b), (c) or (d) of the principal Rules and is authorized under the rules of the recognized exchange company concerned to hold or control futures contracts or stock options contracts in excess of the prescribed limit may apply for authorization for the purposes of section 4(2) of the principal Rules to hold or control futures contracts or stock options contracts in excess of the prescribed limit.

Section 6 adds new section 4F to the principal Rules. The new section 4F sets out the Commission’s power to authorize, subject to certain criteria, a clearing participant to hold or control specified contracts that it clears for persons that have been authorized by the Commission to hold or control specified contracts in excess of the prescribed limit under section 4C, 4D or 4E of the principal Rules.

Section 6(1) of the principal Rules requires a person who holds or controls a reportable position to notify the recognized exchange company concerned within a specified period. Section 7 adds a note to section 6(1) of the principal Rules to guide the reader to the new section 7A of the principal Rules for compliance with this requirement by certain persons holding or controlling contracts in respect of funds. Section 7 also amends section 6 of the principal Rules to provide for the reporting requirement in respect of holiday contracts and to clarify the information that must accompany a notice of a reportable position. Definitions of holiday contract and holiday contract trading day which are used in the new section 6(1A) of the principal Rules are added.

Section 8 adds new section 7(4) and (5) to the principal Rules. The new section 7(4) provides that a clearing participant of HKFECC or SEOCH is not to be regarded as having discretion in relation to contracts the clearing participant holds or controls for another person if its power to acquire or dispose of those contracts may only be exercised in the event of the other person’s default in meeting a contractual obligation. The new section 7(5) disapplies section 7 of the principal Rules from futures contracts or stock options contracts held or controlled by a person in respect of funds as the requirements relating to prescribed limits and reportable positions in respect of funds are provided by the new section 7A of the principal Rules.

Section 9 adds new section 7A to the principal Rules. The new section 7A sets out how the prescribed limits and reporting levels apply to a person holding or controlling futures contracts or stock options contracts in respect of funds as well as sub-funds of umbrella funds. The new section 7A also sets out the information that must accompany a notice of a reportable position.

Section 10 amends Schedule 1 to the principal Rules to:

• add or remove certain futures contracts; 
• standardize the description of certain stock index futures contracts, stock index options contracts and stock index futures options contract, and set out the respective prescribed limits and reporting levels of such contracts in a generic way to cover contracts with different contract periods or contract multipliers; and
• revise the prescribed limits for certain futures contracts.

Section 11 amends Schedule 2 to the principal Rules to increase the prescribed limits for stock options contracts.

These rules come into operation on December 22 2023.

On October 20 2023, the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) published a joint circular on intermediaries’ virtual asset-related activities.

The SFC and HKMA have received an increasing number of enquiries from intermediaries about distributing virtual asset-related products (VA-related products) to investors. Intermediaries are also interested in providing virtual asset dealing services to their clients.

When the SFC formulated its regulatory approach for virtual assets in 2018, it imposed an overarching “professional investors only” restriction on various types of activity, including the distribution of virtual asset funds (VA funds). Since then, the virtual asset landscape has evolved rapidly and begun to expand into mainstream finance. A broader range and larger number of investment products are now available which provide investors, whether retail or professional, with exposure to virtual assets. In particular, the SFC has allowed SFC-licensed virtual asset trading platforms (VA trading platforms) to serve retail investors and has authorized virtual asset futures exchange traded funds for public offering in Hong Kong.

The SFC and the HKMA have reviewed their existing policy provided for intermediaries which wish to engage in virtual asset-related activities (VA-related activities). The policy is updated in light of the latest market developments and enquiries from the industry seeking to further expand retail access through intermediaries and to allow investors to directly deposit and withdraw virtual assets to/from intermediaries with appropriate safeguards. For the avoidance of doubt, this updated circular will supersede the January 28 2022 joint circular on intermediaries’ virtual asset-related activities.

On October 25 2023, the Securities and Futures Commission (SFC) published a circular on disclosure / use of annualised returns for money market funds.

This circular sets out the requirements for the presentation of annualised returns based on periods of less than one year for money market funds authorised by the Securities and Futures Commission (SFC) under Chapter 8.2 of the Code on Unit Trusts and Mutual Funds (UT Code) (MMFs).

Paragraph 16 of the Advertising Guidelines Applicable to Collective Investment Schemes Authorised under the Product Codes (Advertising Guidelines) provides that annualised returns are only acceptable for presentation of performance figures for periods of more than one year. The SFC has recently received enquiries from the industry regarding the presentation of annualised returns based on periods of less than one year for MMFs, say a seven-day period, due to increasing demand for such information from investors.

It has been observed that the performance of MMFs is more stable and predictable than other types of funds given their substantial investments in short-term and high- quality money market investments. Also, a number of major jurisdictions allow annualised returns based on periods of less than one year for money market funds, subject to proper safeguards and requirements.

On October 24 2023, the Securities and Futures Commission (SFC) published a circular on distributors providing additional returns and other services or arrangements when marketing SFC-authorised funds.

This circular summarises the SFC recent observations of licensed corporations’ practices in offering and promoting SFC- authorised funds. Intermediaries who distribute these funds (distributors) have been offering additional returns or other incentives that may divert the client’s focus from properly considering the risks and features of the underlying funds. This circular also highlights the legal and regulatory requirements to be met by distributors.

In some cases, distributors promoted SFC-authorised funds (often via online platforms) and offered or imposed additional or distinct features or restrictions (eg, “guaranteed returns” or “lock-up periods”) beyond the product features set out in the funds’ offering documents.

In other cases, distributors asked clients to provide a mandate or standing instruction to invest in one or more SFC-authorised funds under specific circumstances, eg, using idle money in a client’s securities trading account with an aim to generate additional returns, albeit without any guaranteed or specific rates.

These SFC-authorised funds and services were often promoted by the distributors to the public through aggressive and high-profile marketing campaigns.

On October 27 2023, Hong Kong published the Securities and Futures (OTC Derivative Transactions— Clearing and Record Keeping Obligations and Designation of Central Counterparties) (Amendment) Rules 2023.

The object of these Rules is to amend the Securities and Futures (OTC Derivative Transactions—Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules (Cap. 571 sub. leg. AN) (principal Rules) for the purposes of the clearing obligation and record keeping obligation by:

• removing OTC derivative transactions that have LIBOR (i.e. London Interbank Offered Rate) as their floating rate index from Tables 1 and 2 of Schedule 1 to the principal Rules such that they are no longer specified for the purposes of rules 4 and 5 of the principal Rules; and
• updating the list of overnight index swaps specified in Table 3 of Schedule 1 to the principal Rules, that is to remove overnight index swaps that have EONIA (i.e. Euro Overnight Index Average) as their floating rate index;
• to add overnight index swaps that have €STR (i.e. Euro Short-Term Rate), TONA (i.e. Tokyo Overnight Average Rate), SOFR (i.e. Secured Overnight Financing Rate) or HONIA (i.e. Hong Kong Dollar Overnight Index Average) as their floating rate index; and
• to revise the tenor of overnight index swaps that have SONIA (i.e. Sterling Overnight Index Average) as their floating rate index.

Rule 3 amends Tables 1, 2 and 3 of Schedule 1 to the principal Rules.

These Rules come into operation on July 1 2024.

On October 31 2023, the Securities and Futures Commission (SFC) published a report on the fact-finding exercises on environmental, social, governance (ESG) ratings and data products providers and a press release on supporting and sponsoring the development of an industry-led voluntary code of conduct for ESG ratings and data products providers.

The Voluntary Code of Conduct (VCoC) will be developed via an industry-led working group, namely the Hong Kong ESG Ratings and Data Products Providers VCoC Working Group (VCWG).

The SFC also welcomes the International Capital Market Association (ICMA) to act as the Secretariat of the VCWG. The Secretariat will convene and lead the VCWG, which comprises representatives from local, Mainland and other international ESG ratings and data products providers as well as key users from the local financial industry.

The proposed VCoC will align with international best practices as recommended by the International Organization of Securities Commissions (IOSCO) and relevant expectations introduced in other major jurisdictions. The SFC, the Hong Kong Monetary Authority and the Insurance Authority will sit as observers to the VCWG.

The initiative is the culmination of the SFC’s fact-finding exercise and industry outreach conducted since mid-2022 to understand matters related to the ESG ratings and data products providers, which are not regulated by the SFC. The exercise found that surveyed asset managers highlighted common concerns about data quality, transparency, and conflicts of interest management of the providers, and that the IOSCO recommendations should be encouraged for adoption by ESG ratings and data product providers. The key observations from the exercise and proposed way forward for these providers are summarised in the report.

The proposed VCoC, which will be open for ESG ratings and data products providers to sign up voluntarily, is expected to provide a streamlined and consistent basis for asset managers to conduct due diligence or on-going assessment on ESG service providers.

On October 4 2023, the Central Bank of Ireland (CBI) updated the Guidance on the Orion applications on the website.

A short introduction has been added to each document explaining its purpose and the changes are in the following areas

• An update to the Orion General User Guide to bring it up to date with new processes, including naming convention requirements for documentation submitted on ORION for UCITS and RIAIF applications;
• A change of name for the ‘2018 Orion Release Notes’ to an ORION Common Troubleshooting guide with some new information and guidance; and
• Updates to the ORION Comments User Guide, specifically in relation to naming convention requirements when responding to comments at later drafts of the UCITS/RIAIF application.

On October 24 2023, the Houses of the Oireachtas (Ireland's National Parliament) approved the Screening of Third Country Transactions Bill 2022 No. 77 of 2022.

The Law provides for a process to allow for certain transactions that may present risks to the security or public order of the State to be reviewed by the Minister for Enterprise, Trade and Employment, to empower the Minister to require the provision of information from certain persons for reviewing, and to make decisions and take certain actions in relation to, transactions that present risks to the security or public order of the State, to provide for a process for appealing certain decisions of the Minister with due regard to the potentially sensitive nature of the subject matter of the appeal, and to give further effect to Regulation (EU) 2019/452 of the European Parliament and of the Council of March 19 2019 establishing a framework for the screening of foreign direct investments into the Union.

The Law requires a notification to be made for transactions to be made by foreign non-EU legal or physical persons acquiring (substantial) control of state assets.

On October 12 2023, the Irish Ministry of Finance published the General Scheme of the Future Ireland Fund and Infrastructure, Climate and Nature Fund.

This follows the announcement made in Budget 2024 to establish two new funds:

• The Future Ireland Fund; and
• The Infrastructure, Climate and Nature Fund.

The Future Ireland Fund will help deal with future recognised expenditure pressures including ageing, climate, digitalisation and other fiscal and economic challenges. Its purpose is to support Government expenditure in strategic areas that have been flagged as inevitable strains on the public finances with no limit on the potential size of this Fund. Contributions will be made to the Future Ireland Fund until 2035.

The Infrastructure, Climate & Nature Fund will seek to deal with the pro-cyclicality of capital spending. A reserve of funding will be established over time to provide for resources for capital spending in a future downturn to support capital expenditure through the business cycle. 

This would, in turn, avoid generating backlogs in capital projects due to a lack of spending during downturns. It is intended that €2 billion will be invested in this fund each year from 2024 to 2030, building a fund of up to €14 billion. That €14 billion figure equates to the average annual amount of capital expenditure under the National Development Plan over 2023-2028.

The resources of the Future Ireland Fund and the Infrastructure, Climate & Nature Fund – will amongst other uses help to support climate related initiatives over the medium and long term. It has been agreed that a second avenue of access to the Infrastructure, Climate & Nature Fund, be developed, specifically related to the achievement of climate goals. 

As part of these changes the National Reserve Fund will be dissolved and its resources transferred to both funds. It is intended that responsibility for investment of the funds will be allocated to the National Treasury Management Agency (NTMA), where the Ireland Strategic Investment Fund (ISIF) is already situated. This will deal with all the investment related issues including Environmental, Social and Governance (ESG), governance and accountability issues.

On 9 October 2023, Italy published a Decree introducing the register of beneficial owners. 

According to this Decree, all corporations, entities with legal personality (associations, foundations and other private institutions with legal personality) and trusts in Italy are required to report their beneficial owner information through a dedicated telematics procedure, which will be used to register with the Register of Beneficial Owners established at the Chambers of Commerce. The deadline for compliance is 11 December 2023. 

This obligation is indicated in the Decree, which confirms the full operation of the system of reporting data and information on the beneficial owner, as stipulated in Article 3 of Ministerial Decree 55/2022. This Decree finally implements the provisions of the European Anti-Money Laundering Directive 2015/849 (in the text in force following the amendments made by Directives 2018/843 and 2019/2177) and in particular recitals 14 and 17 and Articles 30 and 31, and Article 21 of Legislative Decree 231/2007, as amended in 2017 (Legislative Decree 90/2017) implementing the Directive in Italian law. 

The data in the register of beneficial owners will be freely available to the authorities, those entities required by law to comply with anti-money laundering regulations, the public, and all individual and legal entities.

A ‘beneficial owner’ is identified as a natural person who owns (directly or indirectly) a legal entity, controls it, or is a beneficiary of it. If the beneficial owner cannot be identified according to these criteria, the qualification falls on the natural person or persons holding the powers of legal representation, administration or management of the legal entity.

With a view to the concrete implementation of money laundering prevention legislation, the new measure establishes the obligation to report the data and information on beneficial ownership to the Register of Companies at the territorially competent Chamber of Commerce with a digitally signed file.

Persons required to comply with the Decree include directors of corporations, founders, representatives and administrators of private legal entities and trustees of trusts. Proxies or assignments to third parties are not permitted to digitally sign the beneficial owner disclosure form.

The new Decree also introduces the obligation to report any changes in the data of the beneficial owner to the Companies Register no later than 30 days after the changes have been made. Within 12 months from the aforementioned communication, those required to do so must confirm the identity of the beneficial owner or communicate the new beneficial owner, as the case may be.

For non-compliance with the legislative provisions regarding the communication of data and changes, penalties will be issued ranging from EUR 103 to EUR 1,032 for each obligated person.

On October 9 2023, Italy published the Law containing urgent provisions for the protection of users regarding economic and financial activities and strategic investments (Asset Decree).

The legislative decree of August 10 2023, n.104, containing urgent provisions for the protection of users, regarding economic and financial activities and strategic investments, is converted into law with the amendments reported in the annex to this law. It implements the Investment Strategic Programs

The Law follows the logic of the Regulation (EU) 2019/452 on foreign direct investments, and requires authorisation of foreign investments in Italy of one billion euros and above.

This law came into force on October 10 2023.

On October 2 2023, the Commissione Nazionale per le Societa e la Borsa (CONSOB) published a notice regarding the update of the guidelines issued by European Markets and Securities Authority (ESMA) on product governance obligations under Markets in Financial Instruments Directive II (MIFID II).

On August 3 2023, ESMA published on its website the "Guidelines on MiFID II product governance requirements" – adopted by the European Authority, pursuant to Article 16 of Regulation no. 1095/2010/EU (so-called "ESMA Regulation"), on March 27, 2023.

In continuity with ESMA's previous guidelines on the subject, the Guidelines provide operators with updated guidance in the light of regulatory developments, especially with regard to the integration of sustainability profiles into product governance processes, as well as on the basis of the experience gained in the application of the requirements introduced under MiFID II. In addition, attached to the Final Report, a list of "Good practices" emerged from the supervisory activity which, although not an integral part of the Guidelines, is aimed at promoting the harmonisation of operational practices at EU level.

In compliance with paragraph 3 of the aforementioned article 16 of the ESMA Regulation, CONSOB has informed the European Authority that it complies with the Guidelines in question, integrating them into its supervisory practices.

Intermediaries subject to CONSOB supervision are therefore required to comply with the application guidelines provided by ESMA through the Guidelines covered by this notice – according to the terms established by paragraph 3 of the same Guidelines – starting from October 3 2023, replacing the previous ones, issued in June 2017.

On  October 5 2023, the Jersey Financial Services Commission (JFSC) updated its Guidance Note for a Manager of a Managed Entity (MoME) and certain managed entities to align it with the current Fund Services Business Code (FSB Code).

There have been material changes to the FSB Code since the original Guidance Note was issued in 2009. This updated Guidance Note reflects those changes and includes changes to Code numbering.

Revised Appendix 1 is also particularly important. It provides updated guidance on complying with the Core Principles of the Fund Services Business Code. The JFSC especially draws the attention to the following:

• Core Principle 5, which says that "A registered person must maintain, and be able to demonstrate the existence of, both adequate financial resources and adequate insurance”. Regarding the requirement for "adequate insurance", the previous guidance was that nothing but the managed entity requirements were relevant. This is no longer the case. Parts of the detailed Code are now relevant if there are no alternative appropriate measures in place.
• Newly inserted Core Principle 8, which says that "A registered person must, where relevant, comply with the applicable sections of the AIF (Alternative Investment Funds) Code.

On October 20 2023, the Jersey Financial Services Commission (JFSC) published an update to the Financial Services (Jersey) Law 1998 (FS(J)L) / Collective Investment Fund (CIF) Material Change application form.

Following feedback from industry on the need for a centralised view of all activities to do with their respective entities, a new FS(J)L/CIF Material Change application form has been created on myJFSC which allows to submit the following types of material changes:

• Accounts Extension Request
• AIF Attestation
• Cessation of Business Plan
• Change of Accounting Period
• Change of Auditor
• Change of ownership / control
• Change of Manager of Managed Entity
• CIF Change of Service Provider
• CIF Prospectus Consent
• CIF Prospectus Notification
• CIF Constituent Documents / Agreements
• Derogation / Variance Request
• Other Material Change
• Request to Amend Registration Conditions
• Subordinated Loan
• Transfer Scheme

As part of the application process, the JFSC has created a chat functionality in myJFSC which allows all communication and any further documents/questions around your application to be managed through myJFSC - ensuring a clear audit history on the application record.

The JFSC has also increased visibility on the stage in the process in which the application form is in to include:

• Submitted
• In Review
• Decision Pending
• Complete

On October 13 2023, Jersey Financial Services Commission (JFSC) published a proposal to increase the Registry fees by 22.3% in 2024, except for local businesses who will receive the same rate next year.

It is proposed to increase all Registry fees by 22.3%, rounded to the nearest £5, except for annual confirmation or annual administration fees for ordinarily administered entities, which will have this fee set at £75.

The Government of Jersey proposes to increase the levy to be paid on providing an annual confirmation statement by RPI (22.3%) to £175, with the exception of ordinarily administered entities, where the existing £145 levy will be retained.

The JFSC has launched a consultation to explore this proposed Registry fee increase with stakeholders, creating an opportunity to gather feedback and noting the increase does not apply to local businesses. Any comments must be received by November 24 2023 to Jersey Finance Limited or the JFSC using the contact details in the consultation paper.

On October 25 2023, the Commission de Surveillance du secteur financier (CSSF) requested particular vigilance in the context of terrorist financing attempts in light of the ongoing war in Israel.

The Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) calls on the financial sector and the public to increase their vigilance towards terrorist financing attempts in light of the ongoing war and state of emergency.

Appropriate preparation and maximum vigilance are required of the financial sector in general and reporting entities in particular. Special attention must be paid towards financial activity whose purpose is to finance and support terrorist activity and to assist terrorist organizations.

Since the beginning of the Iron Swords war, IMPA has been in continuous contact with its partners and FIUs in other countries and are working jointly with its partners in the law enforcement and security agencies to freeze/block accounts and other financial activities for which there is an indication that they are being used to raise funds for the terrorist organizations. 

Therefore, IMPA wishes to increase vigilance and devote all the necessary resources towards monitoring, locating and reporting of potential terror support and terror financing activities to IMPA in an effective and immediate manner. This includes any information on international and cross-border activity with an emphasis on the factors and/or platforms involved in the funding as well as any terrorist activity.

Version française

Le 25 octobre 2023, la Commission de Surveillance du secteur financier (CSSF) a demandé une vigilance particulière dans le contexte des tentatives de financement du terrorisme dans le contexte de la guerre en cours en Israël.

L’Autorité israélienne d’interdiction du blanchiment d’argent et du financement du terrorisme (IMPA) appelle le secteur financier et le public à accroître leur vigilance à l’égard des tentatives de financement du terrorisme, à la lumière de la guerre en cours et de l’état d’urgence.

Une préparation appropriée et une vigilance maximale sont requises de la part du secteur financier en général et des entités déclarantes en particulier. Une attention particulière doit être accordée aux activités financières dont le but est de financer et de soutenir des activités terroristes et d'aider des organisations terroristes.

Depuis le début de la guerre des Épées de Fer, l'IMPA est en contact permanent avec ses partenaires et les CRF d'autres pays et travaille conjointement avec ses partenaires des forces de l'ordre et des agences de sécurité pour geler/bloquer les comptes et autres activités financières pour lesquelles il existe des restrictions. une indication qu’ils sont utilisés pour collecter des fonds pour les organisations terroristes.

Par conséquent, l’IMPA souhaite accroître sa vigilance et consacrer toutes les ressources nécessaires à la surveillance, à la localisation et au signalement des activités potentielles de soutien au terrorisme et de financement du terrorisme à l’IMPA de manière efficace et immédiate. Cela inclut toute information sur les activités internationales et transfrontalières, en mettant l’accent sur les facteurs et/ou les plateformes impliqués dans le financement ainsi que sur toute activité terroriste.

On October 24 2023, the Luxembourg Stock Exchange (LuxSE) marked the listing of the very first financial instrument issued on a Distributed Ledger Technology (DLT) and admitted to trading in the European Union (EU).

The EUR 100 million Digital Native Note (DNN), issued by the World Bank (International Bank for Reconstruction and Development) using Euroclear’s new Digital Securities Issuance (D-SI) service and admitted on LuxSE’s EU-regulated market, marks the first time a digitally native security issued on a DLT infrastructure is admitted to trading on a market falling under the scope of MiFID II.

The D-SI service is part of Euroclear's new Digital Financial Market Infrastructure (D-FMI), a new DLT-based technological component of Euroclear Bank’s securities settlement system, which aims to foster the advancement of digital infrastructure throughout financial markets. It is directly connected to the legacy component of Euroclear's securities settlement system for secondary market operations, enabling investors which are not directly connected to the D-FMI to trade digitally native securities which were issued on D-FMI with a CSD in accordance with the Central Securities Depositories Regulation (CSDR).

The adoption of DLT is expected to significantly enhance global debt capital market operations and benefit market participants by streamlining and speeding up processes, reducing costs, and fostering direct and transparent engagement between issuers and investors. In parallel, it can also help increase the security and transparency of transactions.

Version française

Le 24 octobre 2023, la Bourse de Luxembourg (LuxSE) a marqué la cotation du tout premier instrument financier émis sur une technologie de grand livre distribué (DLT) et admis à la négociation dans l'Union européenne (UE).

Le Digital Native Note (DNN) de 100 millions d'euros, émis par la Banque mondiale (Banque internationale pour la reconstruction et le développement) à l'aide du nouveau service Digital Securities Issuance (D-SI) d'Euroclear et admis sur le marché réglementé par l'UE de LuxSE, marque la première fois qu'un les titres numériquement natifs émis sur une infrastructure DLT sont admis aux négociations sur un marché entrant dans le champ d'application de MiFID II.

Le service D-SI fait partie de la nouvelle infrastructure numérique des marchés financiers (D-FMI) d'Euroclear, un nouveau composant technologique basé sur le DLT du système de règlement de titres d'Euroclear Bank, qui vise à favoriser l'avancement de l'infrastructure numérique sur l'ensemble des marchés financiers. Il est directement connecté au composant existant du système de règlement-livraison de titres d'Euroclear pour les opérations sur le marché secondaire, permettant aux investisseurs qui ne sont pas directement connectés au D-FMI de négocier des titres numériquement natifs qui ont été émis sur le D-FMI avec un CSD conformément à la réglementation centrale. Règlement sur les dépositaires de titres (CSDR).

L’adoption du DLT devrait améliorer considérablement les opérations sur les marchés mondiaux des capitaux d’emprunt et bénéficier aux acteurs du marché en rationalisant et en accélérant les processus, en réduisant les coûts et en favorisant un engagement direct et transparent entre les émetteurs et les investisseurs. En parallèle, cela peut également contribuer à accroître la sécurité et la transparence des transactions.

On 27 October 2023, the Association of the Luxembourg Fund Industry (ALFI) responded to the EU Commission’s ‘have your say’ on the proposal for a regulation on a framework for Financial Data Access (FiDA) and amending Regulations (EU) No 1093/2010, (EU) No 1094/2010, (EU) No 1095/2010 and (EU) 2022/2554.

The evaluation of the impact on the fund industry of the application of the current proposal largely rely on a conjectural assessment due to the absence of manifest case studies and concrete applications. Nevertheless, ALFI’s analysis has highlighted considerations and recommendations pertaining to the open finance framework when applied to investment fund managers and their stakeholders. These considerations relate to:

I. Customer definition encompassing natural and legal persons

II. Effective costs and compensation

III. Scope of data to be exchanged

IV. Fragmented request possible

V. Potential side effect

VI. Timing for implementing schemes

Version française

Le 27 octobre 2023, l'Association luxembourgeoise de l'industrie des fonds d'investissement (ALFI) a répondu à la demande « donnez votre avis » de la Commission européenne sur la proposition de règlement relatif à un cadre pour l'accès aux données financières (FiDA) et modifiant le règlement (UE) n° 1093/ 2010, (UE) n° 1094/2010, (UE) n° 1095/2010 et (UE) 2022/2554.

L'évaluation de l'impact sur le secteur des fonds d'investissement de l'application de la proposition actuelle repose en grande partie sur une évaluation conjecturale en raison de l'absence d'études de cas manifestes et d'applications concrètes. Néanmoins, l’analyse de l’ALFI a mis en évidence des considérations et des recommandations relatives au cadre de finance ouverte lorsqu’elles sont appliquées aux gestionnaires de fonds d’investissement et à leurs parties prenantes. Ces considérations concernent :

I. Définition du client englobant les personnes physiques et morales

II. Coûts effectifs et compensation

III. Portée des données à échanger

IV. Demande fragmentée possible

V. Effet secondaire potentiel

VI. Calendrier de mise en œuvre des programmes

On October 10 2023, the Commission de Surveillance du secteur financier (CSSF) published an evaluation of diversity practices through a data collection analysis.

Following a survey launched in April 2023 on the theme of diversity within management bodies within less significant institutions (“LSI”), the CSSF observed that market practice regarding diversity hasn't evolved/improved.  Almost a quarter of LSIs did not have a diversity policy as of December 31, 2022. Nearly 97% of them have management bodies composed mainly of men. As of December 31, 2022, a quarter of LSIs had no women on their management bodies.

In addition, it emerged from the data collection exercise of the European Banking Authority (“EBA”) on diversity practices, diversity policies and the gender pay gap conducted in 2022 that women represented, as of December 31, 2021, only 23.8% of non-executive directors and 16.3% of executive directors of the entities in the sample (credit institutions and investment companies). Women represented a little more than a third, respectively almost 38%, of newly appointed executive and non-executive directors of the entities in the sample between 2018 and 2021.

Generally speaking, women occupy on average 16.3% of management positions in credit institutions, investment firms and financial payment/electronic money institutions. They are 16.4% in the management bodies in their supervisory function and 16.2% in the management bodies in their management function.

Market-wide awareness of the crucial issue of diversity within management bodies does not translate into reality.

Consequently, the CSSF considers that the market must accelerate its transition in terms of diversity in compliance with current regulations. The CSSF intends to inform the market that, from now on, it will monitor the progress in implementing diversity with particular attention through regular surveys and controls. If, following a call addressed to the LSI concerned, the CSSF notes an absence of a diversity policy, it will take strict measures or even sanctions.

Also, LSIs whose diversity policy does not include gender must comply without delay. Furthermore, the CSSF expects the LSIs to implement planning of career paths and measures guaranteeing equality of opportunity and treatment so to

promote and maintain a set of candidates with diverse profiles available for succession planning for members of management bodies.

It is thus fundamental for LSIs to prepare for the future and implement practices now aimed at:

• facilitate access to diverse profiles at all levels of the hierarchy;
• guarantee equal treatment and opportunities, particularly in terms of promotions and training; 
• plan and implement elements of career planning.

The effective implementation of diversity policies must result in significant improvement in diversity within LSI management bodies, both in terms of gender and with regard to other diversity criteria, but also by the implementation of measures enshrining equality of opportunity, treatment and elements of career planning. These measures must make it possible to constitute a pool of diversified profiles with a view to successive members of management bodies.

Version française

Le 10 octobre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié une évaluation des pratiques en matière de diversité à travers une analyse de collecte de données.

Suite à une enquête lancée en avril 2023 sur le thème de la diversité au sein des organes de direction des établissements moins importants (« LSI »), la CSSF a constaté que les pratiques de marché en matière de diversité n'ont pas évolué/améliorées. Près d’un quart des LSI ne disposent pas de politique diversité au 31 décembre 2022. Près de 97 % d’entre elles disposent d’instances de direction composées majoritairement d’hommes. Au 31 décembre 2022, un quart des LSI ne comptent aucune femme dans leurs instances de direction.

Par ailleurs, il ressort de l’exercice de collecte de données de l’Autorité bancaire européenne (« ABE ») sur les pratiques de diversité, les politiques de diversité et l’écart salarial entre hommes et femmes mené en 2022 que les femmes ne représentaient, au 31 décembre 2021, que 23,8 % des non-salariés. -des dirigeants exécutifs et 16,3% des dirigeants exécutifs des entités de l'échantillon (établissements de crédit et sociétés d'investissement). Les femmes représentaient un peu plus d’un tiers, respectivement près de 38 %, des administrateurs exécutifs et non exécutifs nouvellement nommés des entités de l’échantillon entre 2018 et 2021.

De manière générale, les femmes occupent en moyenne 16,3% des postes de direction dans les établissements de crédit, les entreprises d'investissement et les établissements de paiement financier/de monnaie électronique. Ils sont 16,4% dans les organes de direction dans leur fonction de contrôle et 16,2% dans les organes de direction dans leur fonction de direction.

La prise de conscience à l'échelle du marché de la question importante de la diversité au sein des organes de direction ne se traduit pas dans la réalité.

En conséquence, la CSSF considère que le marché doit accélérer sa transition en termes de diversité dans le respect de la réglementation en vigueur. La CSSF entend informer le marché qu'elle suivra désormais les progrès réalisés dans la mise en œuvre de la diversité avec une attention particulière au travers d'enquêtes et de contrôles réguliers. Si, suite à un appel adressé au LSI concerné, la CSSF constate une absence de politique de diversité, elle prendra des mesures strictes, voire des sanctions.

De plus, les LSI dont la politique de diversité n’inclut pas le genre doivent s’y conformer sans délai. Par ailleurs, la CSSF attend des LSI qu'ils mettent en œuvre une planification des parcours professionnels et des mesures garantissant l'égalité des chances et de traitement afin de promouvoir et maintenir un ensemble de candidats aux profils diversifiés disponibles pour la planification de la succession des membres des organes de direction.

Il est donc fondamental pour les LSI de préparer l’avenir et de mettre en œuvre des pratiques visant désormais à :

• faciliter l'accès à des profils diversifiés à tous les niveaux de la hiérarchie ;
• garantir l'égalité de traitement et des chances, notamment en termes de promotions et de formation ;
• planifier et mettre en œuvre les éléments de planification de carrière.

La mise en œuvre effective des politiques de diversité doit se traduire par une amélioration significative de la diversité au sein des instances dirigeantes de LSI, tant en termes de genre qu'au regard des autres critères de diversité, mais également par la mise en œuvre de mesures consacrant l'égalité des chances, de traitement et des éléments de planification de carrière. Ces mesures doivent permettre de constituer un vivier de profils diversifiés en vue des membres successifs des organes de direction.

On October 19 2023, the Commission de Surveillance du secteur financier (CSSF) published the IFM – Tied agent notification forms.

The "IFM – Tied agent notification form – Additional information to be provided" must always be attached to any notification of the use of a tied agent, together with the "IFM – Tied agent notification and change of tied agent particulars notification form".

The "IFM – Tied agent notification form for the cessation of the use of a tied agent in another Member State" must always be attached to any notification of the use of a tied agent, together with the "IFM – Tied agent notification form – Additional information to be provided" form.

Version française

Le 19 octobre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié les formulaires de notification IFM – Agent lié.

Le « Formulaire de notification IFM – Agent lié – Informations complémentaires à fournir » doit toujours être joint à toute notification de recours à un agent lié, accompagné du « Formulaire de notification IFM – Notification agent lié et changement des coordonnées de l'agent lié ».

Le « Formulaire de notification IFM – Agent lié pour la cessation du recours à un agent lié dans un autre État membre » doit toujours être joint à toute notification de recours à un agent lié, accompagné du « Formulaire de notification IFM – Agent lié – Informations supplémentaires informations à fournir".

On 26 October 2023, the Association of the Luxembourg Fund Industry (ALFI) published a Statement on the conclusion of trialogue negotiations on the review of the AIFMD.

While the original discussions essentially focused on managers of alternative investment funds, many provisions of the UCITS Directive were also revised as a result.

ALFI generally welcomes that the European Commission opted for a targeted approach, which confirmed that the AIFMD is working well overall. Although the formal adoption and linguistic revision of the texts are still pending, it is worth mentioning some of the key points that will change.

ALFI clearly welcomes the extended list of ancillary services, and that it will be possible to perform non-core services without also being authorised to provide discretionary portfolio management. Practitioners were also relieved to see that the AIFMD and UCITS Directive did not go at this stage for set rules on undue costs.

ALFI welcomes that policymakers did not opt for a depositary passport, because the presence of the depositary in the home country of the fund is a stable and valuable point of contact for the regulator, which overall helps the proper implementation of the AIFMD’s requirements.

The risk retention requirement of 5% was not only maintained, but extended to a period of at least 8 years.

An AIFM managing an open-ended AIF or UCITS management company must select from a pre-defined list at least two LMTs, which must be suitable to the pursued investment strategy, the liquidity profile and the fund’s redemption policy. For money market funds, one LMT is sufficient

The changes to the directives will lead to enhanced information requirements upon authorisation of an AIFM or UCITS management company. This should provide authorities with a clear picture on the (sub-)delegates and on how the managers perform periodic due diligence on them. 

Version française

Le 26 octobre 2023, l'Association luxembourgeoise de l'industrie des fonds d'investissement (ALFI) a publié une déclaration sur la conclusion des négociations en trilogue sur la révision de la Directive AIFM.

Alors que les discussions initiales portaient essentiellement sur les gestionnaires de fonds d'investissement alternatifs, de nombreuses dispositions de la directive OPCVM ont également été révisées en conséquence.

L’ALFI salue de manière générale le choix de la Commission européenne pour une approche ciblée, qui confirme le bon fonctionnement global de la directive AIFM. Bien que l’adoption formelle et la révision linguistique des textes soient encore en attente, il convient de mentionner certains des points clés qui vont changer.

L'ALFI se félicite clairement de l'extension de la liste des services auxiliaires et du fait qu'il sera possible de fournir des services non essentiels sans être également autorisé à assurer une gestion discrétionnaire de portefeuille. Les praticiens ont également été soulagés de constater que les directives AIFM et OPCVM ne prévoyaient pas, à ce stade, d'établir des règles sur les coûts indus.

L’ALFI se félicite que les décideurs politiques n’aient pas opté pour un passeport de dépositaire, car la présence du dépositaire dans le pays d’origine du fonds constitue un point de contact stable et précieux pour le régulateur, ce qui contribue globalement à la bonne mise en œuvre des exigences de la directive AIFM.

L'exigence de rétention des risques de 5 % a non seulement été maintenue, mais étendue à une période d'au moins 8 ans.

On November 2 2023, the Commission de Surveillance du secteur financier (CSSF) published the Circular CSSF 23/844 on the reporting obligations for Alternative Investment Fund Managers (repeal of Circular CSSF 14/581).

The CSSF requires that the reporting files be submitted according to the specifications detailed in the "AIFM Reporting – Technical Guidance" document issued on September 22 and updated on November 2 with the New ESMA rules (applicable from November 15 2023) covering the procedure to register as a sender.

In order to submit the AIFM reporting on behalf of a reporting entity via API, this link must be first registered at CSSF. 

To do so, an email needs to be sent at edesk@cssf.lu with the following information:

• The name and identification number of the reporting entity you act on behalf
• Full name of a contact person 
• Phone number of a contact person 
• E-mail address of a contact person 

The method to register as a sender via external channels can be found on:

www.cssf.lu/en/Document/methods-of-transmitting-reports-via-external-channels-naming-convention/

Version française

Le 2 novembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié la Circulaire CSSF 23/844 relative aux obligations de déclaration des gestionnaires de fonds d'investissement alternatifs (abrogée la circulaire CSSF 14/581).

La CSSF exige que les dossiers de reporting soient soumis selon les spécifications détaillées dans le document « AIFM Reporting – Technical Guidance » publié le 22 septembre et mis à jour le 2 novembre avec les nouvelles règles de l'ESMA (applicables à partir du 15 novembre 2023) régissant la procédure d'enregistrement. en tant qu'expéditeur.

Afin de soumettre le reporting AIFM pour le compte d'une entité déclarante via API, ce lien doit être préalablement enregistré auprès de la CSSF.

Pour ce faire, un email doit être envoyé à edesk@cssf.lu avec les informations suivantes :

• le nom et le numéro d'identification de l'entité déclarante pour le compte de laquelle vous agissez.
• nom complet d'une personne de contact
• numéro de téléphone d'une personne à contacter
• adresse e-mail d'une personne de contact

La méthode pour s’inscrire en tant qu’expéditeur via des canaux externes peut être trouvée sur :

www.cssf.lu/en/Document/methods-of-transmitting-reports-via-external-channels-naming-convention/

On October 13 2023, the Commission de Surveillance du secteur financier (CSSF) published the Circular CSSF 23/841 on the:

1. Application of the Guidelines of the European Securities and Markets Authority (“ESMA”) on certain aspects of the MiFID II remuneration requirements (ESMA35-43-3565)
2. Repeal of Circular CSSF 14/585
3. Modification of Circular CSSF 07/307

These guidelines apply to investment firms, as defined in point 9) of Article 1 of the amended law of April 5, 1993 relating to the financial sector (“LSF”), to credit institutions, to UCITS management companies, and to managers of alternative investment funds.

These guidelines apply in relation to the remuneration requirements set out in Article 27 of the MiFID II Delegated Regulation as well as, on the one hand, the conflicts of interest requirements set out in Articles 16(3) and 23 of MiFID II and Article 34 of the MiFID II Delegated Regulation in the area of remuneration; and on the other hand, the conduct of business rules set out in Article 24(1) and (10) of MiFID II. In addition, these guidelines clarify the application of the governance requirements in the area of remuneration under Article 9(3) of MIFID II.

These guidelines are based on Article 16(1) of the ESMA Regulation. The purpose of these guidelines is to ensure the common, uniform and consistent application of the MiFID II remuneration requirements set out in Article 27 of the MiFID II Delegated Regulation as well as, on the one hand, the conflicts of interest requirements set out in Articles 16(3) and 23 of MiFID II and Article 34 of the MiFID II Delegated Regulation in the area of remuneration; and on the other hand, the conduct of business rules set out in Article 24(1) and (10) of MiFID II. In addition, these guidelines clarify the application of the governance requirements in the area of remuneration under Article 9(3) of MIFID II.

ESMA expects these guidelines to promote greater convergence in the interpretation of, and supervisory approaches to, the MiFID II remuneration requirements as well as the MiFID II conflicts of interest and conduct of business requirements in the area of remuneration by emphasising a number of important issues, and thereby enhancing the value of existing standards. By helping to ensure that firms comply with regulatory standards, ESMA anticipates a corresponding strengthening of investor protection. 

The Guidelines do not reflect absolute obligations. For this reason, the word ‘should’ is often used. However, the words ‘shall’, ‘must’ or ‘required to’ are used when describing a MiFID II or MiFID II Delegated Regulation requirement.

Guideline 1 

When designing remuneration policies and practices in accordance with the requirements under Article 27 of the MiFID II Delegated Regulation and, especially, where remuneration comprises variable components, firms should define appropriate criteria to align the interests of the relevant persons and of the firms with that of the clients. Such criteria aligning the interests of the relevant persons and of the firms with that of the clients should allow the firms to assess the performance of relevant persons.

Qualitative criteria used by firms in their remuneration policies and practices should be sufficiently and clearly defined and documented to ensure that they are not being used to indirectly reintroduce quantitative commercial criteria that may create conflicts of interests or incentives that may lead relevant persons to favour their own interests or their firm’s interests to the potential detriment of any client. 

Regarding quantitative criteria, firms should ensure to take into account criteria that do not create conflicts of interests or incentives that may lead relevant persons to favour their own interests or their firm’s interests to the potential detriment of any client. 

When designing remuneration policies and practices in accordance with the requirements under Article 27 of the MiFID II Delegated Regulation, firms should consider all relevant factors such as, but not limited to, the role performed by relevant persons, the type of products offered, and the methods of distribution (e.g. advised or non-advised, face-to-face or through telecommunications/electronic communications) in order to prevent potential conduct of business and conflict of interest risks from adversely affecting the interests of their clients and to ensure that the firm adequately manages any related residual risk. 

Regarding variable remuneration, firms should avoid setting performance targets that may incentivise the relevant persons to adopt behaviours focused on short-term gains to meet the relevant thresholds such as “all or nothing targets” when those might create a conflict of interest or impair clients’ interests. 

When designing and implementing their remuneration policies, firms should take into account possible conflicts of interests or risks of impairing clients’ interests stemming from cross-selling objectives imposed on relevant persons.

In light of the broad definition of remuneration provided in the MiFID II Delegated Regulation, firms’ remuneration policies and practices should also ensure that the criteria used to assess wage increases and promotions comply with the MiFID II remuneration requirements.

Before launching a new product, firms should assess whether the remuneration features related to the distribution of that product comply with the firm’s remuneration policies and practices and therefore do not pose conduct of business and conflicts of interest risks. This process should be appropriately documented by firms. 

The remuneration of control functions’ staff should be based on function-specific objectives.

Where firms are permitted to combine internal control functions with operational functions, they nonetheless remain subject to their MiFID II conflicts of interests and conduct of business obligations. 

Firms should also ensure that the structure of the remuneration of members of the management body and of the senior management of the firm, as well as the criteria used to assess performance, should not create conflicts of interest or incentives that may lead members of the management body or senior management of the firm or relevant persons in the firm to favour their own interests or the firm’s interests to the potential detriment of any client.

Examples of good practice: 

a. References used in the calculation of variable remuneration of relevant persons are common across products sold. 

b. In the case of an open-ended investment with no investment term, the remuneration is deferred for a set number of years or until the encashment of the product. 

Guideline 2 

Proper documentation on the remuneration policy as well as the decision-making process and procedures that lead to its approval or amendment should be maintained in a clear and transparent manner and made available to the management body and senior management as well as other control functions involved in the design, monitoring and/or review of the remuneration policy and procedures. Firms should ensure that the compliance function has access to all relevant documents and information enabling it to discharge its responsibilities.

Senior management is responsible and should retain the ultimate responsibility for the day-to-day implementation of the remuneration policy and the monitoring of compliance risks related to the policy.

Firms should ensure that they have appropriate and transparent reporting lines in place across the firm or group to assist in escalating issues involving risks of non-compliance with the MiFID II remuneration, conflicts of interest and conduct of business requirements. 

Guideline 3

The controls should be implemented throughout the firm and be subject to periodic review. Such controls should include assessing the quality of the service provided to the client - for example, monitoring calls for telephone sales, sampling of advice and client portfolios provided to check suitability or going through other client documentation on a periodic basis. 

When outsourcing the provision of investment services, firms should have in mind the best interests of the client. Where a firm is seeking to use another firm for the provision of services it should check that the other firm’s remuneration policies and practices follow an approach consistent with these guidelines. In addition, firms should avoid setting overly complicated outsourcing or distribution structures (including through the use of tied agents) where the remuneration policies or practices applicable to such structures make it difficult for the firm to monitor the compliance risks with these guidelines and with the conflicts of interest and conduct of business policies and procedures in the area of remuneration or increase the risk of detriment to clients’ interests.

Examples of good practice: 

a. In order to assess whether its incentive schemes are appropriate, a firm undertakes a programme of contacting a sample of clients shortly after the completion of a sale involving a face-to-face sales process where it is not able to monitor recorded telephone sales conversations, so as to test if the salesperson has acted honestly, fairly and professionally in accordance with the best interests of the client. 

b. Top earners and performers are recognised as being potentially higher risk and, as a result, additional scrutiny is given to them; and information such as previous compliance results, complaints or cancellation data is used to direct compliance checking. The outputs have an impact on the design/review of the remuneration policy and practices.

The Annex includes illustrative examples of remuneration policies and practices that would create strong incentives to sell specific products and for which firms would therefore have difficulties demonstrating compliance with the MiFID requirements.

Version française

Le 13 octobre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié la Circulaire CSSF 23/841 relative à :

1. l'application des lignes directrices de l'Autorité européenne des marchés financiers (« ESMA ») sur certains aspects des exigences de rémunération sous MiFID II (ESMA35-43-3565)
2. l'abrogation de la circulaire CSSF 14/585
3. la modification de la circulaire CSSF 07/307

Les présentes lignes directrices s'appliquent aux entreprises d'investissement, telles que définies au point 9) de l'article 1er de la loi modifiée du 5 avril 1993 relative au secteur financier (« LSF »), aux établissements de crédit, aux sociétés de gestion d'OPCVM et aux gestionnaires d'actifs alternatifs. fonds d'investissement.

Ces lignes directrices s'appliquent en ce qui concerne les exigences de rémunération énoncées à l'article 27 du règlement délégué MiFID II ainsi que, d'une part, les exigences en matière de conflits d'intérêts énoncées aux articles 16 (3) et 23 de MiFID II et à l'article 34. du Règlement Délégué MiFID II en matière de rémunération ; et d’autre part, les règles de conduite énoncées à l’article 24, paragraphes 1 et 10, de MiFID II. En outre, ces lignes directrices clarifient l'application des exigences de gouvernance dans le domaine de la rémunération au titre de l'article 9, paragraphe 3, de MIFID II.

Ces lignes directrices sont basées sur l’article 16, paragraphe 1, du règlement ESMA. L'objectif de ces lignes directrices est d'assurer l'application commune, uniforme et cohérente des exigences de rémunération MiFID II énoncées à l'article 27 du règlement délégué MiFID II ainsi que, d'une part, des exigences en matière de conflits d'intérêts énoncées aux articles 16(3) et 23 de MiFID II et article 34 du Règlement Délégué MiFID II en matière de rémunération ; et d’autre part, les règles de conduite énoncées à l’article 24, paragraphes 1 et 10, de MiFID II. En outre, ces lignes directrices clarifient l'application des exigences de gouvernance dans le domaine de la rémunération au titre de l'article 9, paragraphe 3, de MIFID II.

L'ESMA s'attend à ce que ces lignes directrices favorisent une plus grande convergence dans l'interprétation et les approches de surveillance des exigences de rémunération de MiFID II ainsi que des exigences de MiFID II en matière de conflits d'intérêts et de conduite des affaires dans le domaine de la rémunération en mettant l'accent sur un certain nombre de questions importantes, et valorisant ainsi la valeur des normes existantes. En contribuant à garantir que les entreprises respectent les normes réglementaires, l’ESMA anticipe un renforcement correspondant de la protection des investisseurs.

Les Lignes directrices ne reflètent pas d’obligations absolues. C’est pour cette raison que le mot « devrait » est souvent utilisé. Cependant, les mots « doit », « doit » ou « tenu de » sont utilisés pour décrire une exigence de MiFID II ou du règlement délégué MiFID II.

Ligne directrice 1

Lors de la conception des politiques et pratiques de rémunération conformément aux exigences de l'article 27 du règlement délégué MiFID II et, en particulier, lorsque la rémunération comprend des éléments variables, les entreprises devraient définir des critères appropriés pour aligner les intérêts des personnes concernées et des entreprises sur ceux des les clients. De tels critères alignant les intérêts des personnes concernées et des entreprises sur ceux des clients devraient permettre aux entreprises d'évaluer la performance des personnes concernées.

Les critères qualitatifs utilisés par les entreprises dans leurs politiques et pratiques de rémunération devraient être suffisamment et clairement définis et documentés pour garantir qu'ils ne sont pas utilisés pour réintroduire indirectement des critères commerciaux quantitatifs susceptibles de créer des conflits d'intérêts ou des incitations susceptibles d'amener les personnes concernées à favoriser les leurs. intérêts ou les intérêts de leur entreprise au détriment potentiel de tout client.

Concernant les critères quantitatifs, les entreprises doivent veiller à prendre en compte des critères qui ne créent pas de conflits d’intérêts ou d’incitations pouvant conduire les personnes concernées à favoriser leurs propres intérêts ou ceux de leur entreprise au détriment potentiel de tout client.

Lors de la conception de politiques et de pratiques de rémunération conformément aux exigences de l'article 27 du règlement délégué MiFID II, les entreprises doivent prendre en compte tous les facteurs pertinents tels que, sans toutefois s'y limiter, le rôle joué par les personnes concernées, le type de produits proposés et la méthodes de distribution (par exemple, conseillées ou non, en face-à-face ou par télécommunications/communications électroniques) afin d'éviter que la conduite des affaires potentielle et les risques de conflit d'intérêts n'affectent négativement les intérêts de leurs clients et de garantir que le cabinet gère adéquatement tout risque résiduel connexe.

En matière de rémunération variable, les entreprises devraient éviter de fixer des objectifs de performance susceptibles d'inciter les personnes concernées à adopter des comportements axés sur les gains à court terme pour atteindre les seuils pertinents, tels que les objectifs « tout ou rien », lorsque ceux-ci pourraient créer un conflit d'intérêts ou nuire à la performance des intérêts des clients.

Lors de la conception et de la mise en œuvre de leurs politiques de rémunération, les entreprises doivent tenir compte des éventuels conflits d’intérêts ou des risques de porter atteinte aux intérêts des clients découlant d’objectifs de ventes croisées imposés aux personnes concernées.

À la lumière de la définition large de la rémunération fournie dans le règlement délégué MiFID II, les politiques et pratiques de rémunération des entreprises devraient également garantir que les critères utilisés pour évaluer les augmentations de salaire et les promotions sont conformes aux exigences de rémunération de MiFID II.

Avant de lancer un nouveau produit, les entreprises doivent évaluer si les éléments de rémunération liés à la distribution de ce produit sont conformes aux politiques et pratiques de rémunération de l’entreprise et ne présentent donc pas de risques liés à la conduite des affaires et aux conflits d’intérêts. Ce processus doit être correctement documenté par les entreprises.

La rémunération du personnel des fonctions de contrôle devrait être basée sur des objectifs spécifiques à la fonction.

Lorsque les entreprises sont autorisées à combiner des fonctions de contrôle interne avec des fonctions opérationnelles, elles restent néanmoins soumises à leurs conflits d’intérêts et à leurs obligations de conduite commerciale selon MiFID II.

Les entreprises devraient également veiller à ce que la structure de rémunération des membres de l'organe de direction et de la haute direction de l'entreprise, ainsi que les critères utilisés pour évaluer les performances, ne créent pas de conflits d'intérêts ou d'incitations qui pourraient conduire les membres de la direction l'organe ou la haute direction du cabinet ou les personnes concernées au sein du cabinet pour favoriser leurs propres intérêts ou ceux du cabinet au détriment potentiel de tout client.

Exemples de bonnes pratiques :

• les références utilisées dans le calcul de la rémunération variable des personnes concernées sont communes à tous les produits vendus.
• dans le cas d'un placement à durée indéterminée et sans durée de placement, la rémunération est différée pendant un nombre d'années déterminé ou jusqu'à l'encaissement du produit.

Ligne directrice 2

Une documentation appropriée sur la politique de rémunération ainsi que sur le processus de prise de décision et les procédures qui conduisent à son approbation ou à sa modification doivent être conservées de manière claire et transparente et mises à la disposition de l'organe de direction et de la haute direction ainsi que des autres fonctions de contrôle impliquées dans la conception, le suivi et/ou la révision de la politique et des procédures de rémunération. Les entreprises devraient veiller à ce que la fonction de conformité ait accès à tous les documents et informations pertinents lui permettant de s'acquitter de ses responsabilités.

La haute direction est responsable et devrait conserver la responsabilité ultime de la mise en œuvre quotidienne de la politique de rémunération et du suivi des risques de non-conformité liés à cette politique.

Les entreprises doivent s’assurer qu’elles disposent de lignes hiérarchiques appropriées et transparentes au sein de l’entreprise ou du groupe pour aider à faire remonter les problèmes impliquant des risques de non-conformité à la rémunération MiFID II, des conflits d’intérêts et des exigences de conduite des affaires.

Ligne directrice 3

Les contrôles doivent être mis en œuvre dans toute l’entreprise et faire l’objet d’un examen périodique. Ces contrôles devraient inclure l'évaluation de la qualité du service fourni au client - par exemple, le suivi des appels pour les ventes par téléphone, l'échantillonnage des conseils et des portefeuilles clients fournis pour vérifier leur adéquation ou l'examen périodique d'autres documents clients.

Lorsqu’elles externalisent la fourniture de services d’investissement, les entreprises doivent garder à l’esprit le meilleur intérêt du client. Lorsqu’une entreprise cherche à faire appel à une autre entreprise pour la fourniture de services, elle doit vérifier que les politiques et pratiques de rémunération de cette autre entreprise suivent une approche conforme à ces lignes directrices. En outre, les entreprises devraient éviter de mettre en place des structures d'externalisation ou de distribution trop compliquées (y compris par le recours à des agents liés) lorsque les politiques ou pratiques de rémunération applicables à ces structures rendent difficile pour l'entreprise de surveiller les risques de non-conformité avec ces lignes directrices et avec les conflits. d'intérêt et la conduite des politiques et procédures commerciales dans le domaine de la rémunération ou augmenter le risque de préjudice aux intérêts des clients.

Exemples de bonnes pratiques :

• afin d'évaluer si ses programmes d'incitation sont appropriés, une entreprise entreprend un programme consistant à contacter un échantillon de clients peu après la conclusion d'une vente impliquant un processus de vente en face à face où elle n'est pas en mesure de suivre les conversations de vente téléphoniques enregistrées. afin de vérifier si le vendeur a agi de manière honnête, équitable et professionnelle conformément au meilleur intérêt du client.
• les salariés les plus performants et les plus performants sont reconnus comme présentant un risque potentiellement plus élevé et, par conséquent, ils font l'objet d'un examen plus approfondi ; et des informations telles que les résultats de conformité antérieurs, les plaintes ou les données d'annulation sont utilisées pour diriger la vérification de la conformité. Les résultats ont un impact sur la conception/révision de la politique et des pratiques de rémunération.

L'annexe comprend des exemples illustrant des politiques et pratiques de rémunération qui créeraient de fortes incitations à vendre des produits spécifiques et pour lesquelles les entreprises auraient donc des difficultés à démontrer leur conformité aux exigences de la MiFID.

On October 25 2023, the Commission de Surveillance du secteur financier (CSSF) informed on the launch of the ESMA Common Supervisory Action (CSA) on MiFID II sustainability requirements.

On October 3 2023, the European Securities and Markets Authority (ESMA) announced the launch of a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on the integration of sustainability in credit institutions as well as investment firms’ MiFID II suitability assessment and product governance processes and procedures in 2024.

The methodology of this CSA will be developed by ESMA and aims to ensure a common supervisory approach among NCAs.

The CSA will cover:

• How firms collect information on their clients’ “sustainability preferences”
• Which arrangements have been put in place by firms to understand and correctly categorise investment products with sustainability factors for the purpose of the suitability assessment
• How firms ensure the suitability of an investment with respect to sustainability (including the use of a “portfolio approach”)
• How firms specify any sustainability-related objectives a product is compatible with as part of the target market assessment of the investment product.

The CSSF will contact a sample of supervised entities.

Version française

Le 25 octobre 2023, la Commission de Surveillance du secteur financier (CSSF) a informé du lancement de l'action de surveillance commune (CSA) de l'ESMA sur les exigences de durabilité de MiFID II.

Le 3 octobre 2023, l'Autorité européenne des marchés financiers (ESMA) a annoncé le lancement d'une action de surveillance commune (CSA) avec les autorités nationales compétentes (ANC) sur l'intégration de la durabilité dans les établissements de crédit ainsi que sur l'évaluation de l'adéquation MiFID II des entreprises d'investissement. et les processus et procédures de gouvernance des produits en 2024.

La méthodologie de ce CSA sera développée par l’ESMA et vise à garantir une approche de surveillance commune parmi les ANC.

Le CSA couvrira :

• comment les entreprises collectent des informations sur les « préférences en matière de développement durable » de leurs clients
• quelles dispositions ont été mises en place par les entreprises pour comprendre et catégoriser correctement les produits d'investissement comportant des facteurs de durabilité aux fins de l'évaluation de l'adéquation
• comment les entreprises s'assurent de l'adéquation d'un investissement au regard de la durabilité (y compris l'utilisation d'une « approche de portefeuille »)
• comment les entreprises spécifient les objectifs liés au développement durable avec lesquels un produit est compatible dans le cadre de l'évaluation du marché cible du produit d'investissement.

La CSSF contactera un échantillon d’entités surveillées.

On October 23 2023, the Bank Negara Malaysia (BNM)'s Joint Committee on Climate Change (JC3) announced five key initiatives to expedite the transition of businesses and farmers towards low-carbon practices.

It underlines JC3’s commitment to pursue accelerated climate action and emphasises the critical role of the financial industry in enabling a sustainable agenda for the country. The collaborations encompass:

1. Greening Industrial Parks
2. Greening Value Chain programme with Bursa Malaysia
3. RM1 billion portfolio guarantee scheme for ESG financing
4. ESG jump-start portal
5. Green AgriTech

The JC3 has also issued the 2023 Climate Data Catalogue (DC), reflecting the latest set of data needs and sources. The 2023 DC is more comprehensive, incorporating additional data items compared to the first version issued in December 2022. The latest release features a total of 249 granular data items mapped to 399 data sources from 135 data providers. The availability of required data items in terms of sources, time-series and granularity has also improved. 

On October 16 2023, the Securities Commission Malaysia (SC Malaysia) informed on the Association of Southeast Asian Nations (ASEAN) Capital Markets Forum (ACMF).

The Meeting endorsed the ASEAN Transition Finance Guidance which serves as a common standard guidance for what constitutes a credible, transparent, and inclusive transition with a focus on aligned and aligning transition finance opportunities. The Guidance complements the ASEAN Taxonomy and the ACMF intends to consult and further refine the Guidance taking into account stakeholder consultation feedback in future.

Acknowledging the role of voluntary carbon market in accelerating decarbonization in ASEAN, ACMF is determined to continue its study on voluntary carbon market.

To facilitate the cross-border offerings of ASEAN Sustainable and Responsible Funds (SRF) under the existing ASEAN CIS Framework, the Meeting endorsed the Handbook for cross-border offerings of ASEAN Sustainable and Responsive Funds under the ASEAN CIS Framework (“Handbook for ASEAN CIS-SRF”) which will be published on the ACMF website.

The Meeting approved the revised ASEAN Corporate Governance Scorecard (ACGS) to align with the revised G20/OECD Principles of Corporate Governance where sustainability-related governance is among the key revisions.

The Meeting witnessed the signing of the protocol for ACMF-IFRS Foundation Dialogue on IFRS Sustainability Disclosure Standards (AID) by ACMF Chair 2023 and an ISSB Board Member, on behalf of IFRS Foundation. The protocol serves as a guide for ACMF’s future engagements with ISSB. As part of ACMF’s objective to promote consistent and comparable sustainability disclosures across jurisdictions, it is assessing the feasibility of adopting IFRS Sustainability Disclosures Standards, taking into account each jurisdiction’s own legal and regulatory arrangements. 

Under the ASEAN Green, Social, and Sustainability (GSS) Bond Standards introduced in 2017 and 2018, as of September 29 2023, US$41.36 billion ASEAN-labelled green, social, or sustainable bond/sukuk have been issued.

On October 4 2023, the Autoriteit Financiële Markten (AFM) published its Guideline on sustainability claims.

With this guideline, the AFM provides guidance to financial companies and pension administrators for making correct, clear and non-misleading sustainability claims.

In the Guideline on sustainability claims, financial companies and pension providers find tools to comply with the existing disclosure standards. The guideline does this on the basis of three overarching principles:

1. accurate, representative and up-to-date;
2. concrete and well-founded; and
3. understandable, appropriate and findable.

On October 4 2023, the Netherlands Authority for Consumers and Markets (ACM) drew up new rules on sustainability agreements between businesses.

ACM does not want competition rules to stand in the way of agreements that contribute towards a more sustainable society. This policy rule is in line with recently revised European rules, and replaces previous draft guidelines of ACM on sustainability agreements between businesses.

The policy rule follows the approach to sustainability agreements that the European Commission explains in its Guidelines regarding horizontal cooperation agreements. The policy rule also explains that ACM will not take enforcement action in two additional situations if all conditions are met. This provides businesses with more opportunities to collaborate.

This policy rule will be published in the Dutch Government Gazette, and enter into force the day after. With the entry into force of this policy rule, the (second) draft Guidelines on Sustainability Agreements, the 2014 Vision Document on Competition and Sustainability as well as the 2016 Basic Principles for the Oversight of Sustainability Agreements will be replaced.

In October 2023, the Banco de España (BdE) adopted the European Banking Authority (EBA) Guidelines (revised) on methods for calculating contributions to deposit guarantee schemes under the Directive 2014/49/EU, repealing and replacing the Guidelines EBA/GL/2015/10.

These Guidelines of the EBA are addressed to deposit guarantee schemes (DGSs), competent authorities and designated authorities as defined in Article 2(1)(1), (17) and (18) of Directive 2014/49/EU (and as referred to in Article 4(2), points (i) and (iv) of Regulation (EU) 1093/2010). 

The EBA published the English version of these revised Guidelines on February 21 2023 and the Spanish version was released on July 12 2023. The Guidelines apply from July 3 2024. 

The revised Guidelines repeal the previous Guidelines EBA/GL/2015/10 and Guideline 21 of the Guidelines on the delineation and reporting of available financial resources of DGSs (EBA/GL/2021/17) (which is incorporated into Guideline 17 of the revised Guidelines) with effect from the date of application of the revised Guidelines. The revised Guidelines fulfil the mandate given to the EBA under the Article 13(3) of Directive 2014/49/EU11, to issue Guidelines to specify methods for calculating contributions to DGSs.

The Executive Commission of Banco de España, in its role of competent authority responsible for developing the calculation method for contributions to the Deposit Guarantee Fund (DGF), adopted these Guidelines as their own, without prejudice to their application no later than July 3 2024 by means of the appropriate regulatory provisions, on September 18 2023, with the exception of Guidelines 35, 42, 45 and 49, in relation to contributions to the DGF by credit institutions belonging to an institutional protection scheme (IPS) as referred to in Article 113(7) of Regulation (EU) No 575/2013 which has established an ex ante fund ensuring that the IPS has funds directly at its disposal for liquidity and solvency support measures and which contribute to the prevention of resolution.

On October 11 2023, the Comisión Nacional del Mercado de Valores (CNMV) published a public statement on adopting the ESMA’s (European Securities and Markets Authorities) Markets in Financial Instruments Directive (MIFID II) Product Governance Requirements.

It shall therefore take them into account and pay attention to their application by entities producing or distributing products within the scope of its supervisory powers. The product governance requirements introduced by MiFID II have proven to be one of the most important elements of the investor protection framework, with the aim of ensuring that financial products are only produced and/or distributed in the best interests of clients.

The aim of these guidelines is to update those published in 2017 to incorporate recent supervisory experience as well as new regulatory developments. They include the obligation for producers and distributors to justify and document decisions taken on their product governance mechanisms, including Target market identification and distribution strategies Corresponding. They establish additional criteria on the periodic review to be carried out to determine if the products and services are reaching the target market.

The guidelines, which apply from October 3, incorporate the following regulatory developments and recent supervisory experience: 

• the amendments to MiFID II resulting from the European Commission's capital markets recovery package, 
• the sustainability amendments to MiFID II Delegated Directive 2017/593 introduced in April 2021
• recommendations on guidelines issued by ESMA's Proportionality Committee, and 
• the conclusions of the 2021 joint supervisory action coordinated by ESMA on product governance.

On October 26 2023, the Ministry of Economic Affairs and Digital Transformation published a press release on the Markets in Crypto-assets Regulation (MiCA) application period.

The Government will bring forward by six months the application of the MiCA for its implementation in Spain in December 2025 in order to create a stable regulatory and supervisory framework that provides legal certainty and protects investors in relation to the provision of crypto-asset services.

Once the Regulation is published, Member States have to take a decision on the period of application of the rule in each country, as if no decision is taken, the Regulation would apply from July 2026 as regards crypto-asset service providers, with a total transitional period of up to 36 months.

With the decision adopted by Spain, there will be a transitional period of 18 months, from the publication of the Regulation in June of this year, during which ESMA and the EBA will approve technical standards for the development of MiCA, and a subsequent period of one year during which the Comisión Nacional del Mercado de Valores (CNMV) will be able to start granting authorisations to companies that want to provide crypto-asset services shortening the total period by six months.

This option, which is in line with the request that ESMA has been making to the Member States, allows the application of MiCA in Spain to be brought forward, allowing the CNMV to start supervision earlier, which will provide legal certainty and greater protection to Spanish investors in this type of asset.

On October 4 2023, the Asset Management Association Switzerland (AMAS) published its Swiss Stewardship Code.

The "Swiss Stewardship Code" provides guidance for asset managers, asset owners and financial service providers. It was put in place by the Asset Management Association Switzerland and Swiss Sustainable Finance ("SSF") to promote the active exercise of shareholder rights by investors in Switzerland. Investor stewardship is fundamental to effective investing and to the promotion of sustainable enterprises.

Through sustainable investments, more and more investors in Switzerland are committed to making a significant contribution to achieving the sustainability targets set by the Federal Council, in the process positioning Switzerland as a leading hub for sustainable finance. Sustainable financial investments and services not only help reduce investment risks, but also positively support desired economic, societal and environmental changes. Investor stewardship, which requires active dialogue with companies and the exercising of investor voting rights, is a key approach for achieving this goal and is becoming increasingly important not just in Switzerland, but on an international level.

AMAS and SSF, supported by pension funds, asset managers and service providers, have responded by developing the Swiss Stewardship Code as the standard for the Swiss financial centre. The Code defines what contemporary investor stewardship entails and lays the foundation for more proactive exercising of shareholder voting rights by Swiss financial actors, as well as providing greater transparency and improved comparability.

Integrating stewardship into the investment processes of the Swiss investment industry promotes a more sustainable and value-enhancing economy, and also helps increase the long-term return for investors, adjusted for sustainability risks. The Code consequently makes an important contribution to the measures for a sustainable financial centre outlined by the Federal Council.

The Swiss Stewardship Code is applicable on a voluntary basis and serves as a recommendation and guidance for integrating stewardship into the investment process. The Code includes nine principles and describes the most important elements for effective and successful implementation. It is aligned with the Global Stewardship Principles of the International Corporate Governance Network (ICGN), the Principles for Responsible Investment (PRI) and the UK Stewardship Code, which together set an international benchmark for investors’ stewardship activities.

Version française

Le 4 octobre 2023, l'Asset Management Association Switzerland (AMAS) a publié son Swiss Stewardship Code.

Le « Swiss Stewardship Code » fournit des lignes directrices aux gestionnaires de fortune, aux propriétaires de fortune et aux prestataires de services financiers. Il a été mis en place par l'AMAS et la Swiss Sustainable Finance (« SSF ») pour promouvoir l'exercice actif des droits d'actionnaire par les investisseurs en Suisse. La gestion des investisseurs est fondamentale pour un investissement efficace et pour la promotion d’entreprises durables.

Par le biais d'investissements durables, de plus en plus d'investisseurs en Suisse s'engagent à apporter une contribution significative à la réalisation des objectifs de durabilité fixés par le Conseil fédéral, positionnant ainsi la Suisse comme une plaque tournante de la finance durable. Les investissements et services financiers durables contribuent non seulement à réduire les risques d’investissement, mais soutiennent également positivement les changements économiques, sociétaux et environnementaux souhaités. La gestion des investisseurs, qui nécessite un dialogue actif avec les entreprises et l'exercice des droits de vote des investisseurs, constitue une approche clé pour atteindre cet objectif et prend de plus en plus d'importance non seulement en Suisse, mais au niveau international.

L'AMAS et la SSF, soutenus par des caisses de pension, des gestionnaires de fortune et des prestataires de services, ont réagi en élaborant le Swiss Stewardship Code comme norme pour la place financière suisse. Le Code définit ce qu'implique la gestion contemporaine des investisseurs et jette les bases d'un exercice plus proactif des droits de vote des actionnaires par les acteurs financiers suisses, tout en assurant une plus grande transparence et une meilleure comparabilité.

L'intégration de la gestion responsable dans les processus d'investissement du secteur suisse de l'investissement favorise une économie plus durable et créatrice de valeur, et contribue également à augmenter le rendement à long terme pour les investisseurs, ajusté aux risques de durabilité. Le Code apporte ainsi une contribution importante aux mesures pour une place financière durable définie par le Conseil fédéral.

Le Swiss Stewardship Code est applicable sur une base volontaire et sert de recommandation et d’orientation pour intégrer la gestion responsable dans le processus d’investissement. Le Code comprend neuf principes et décrit les éléments les plus importants pour une mise en œuvre efficace et réussie. Il est aligné sur les principes de gouvernance mondiale de l’International Corporate Governance Network (ICGN), les principes pour l’investissement responsable (PRI) et le UK Stewardship Code, qui établissent ensemble une référence internationale pour les activités de gestion des investisseurs.

On October 10 2023, the Swiss Federal Council amended the Federal Act on the Security of Information in the Confederation.

The purpose of this Act is to guarantee the security of the processing of information under the competence of the Confederation and the security of its IT resources and increase Switzerland's resilience to cyber threats. It applies to organisations governed by public or private law which operate critical infrastructure.

Information from third parties that the National Cyber Security Centre (NCSC) becomes aware of in its activity of receiving and analysing reports in accordance with Chapter 5 may not be made accessible under the Copyright Act.

The following definitions apply:

• cyber incident: an event occurring during the use of IT means and resulting in a breach of the confidentiality, availability or integrity of information or the traceability of its processing;
• cyber-attack: a cyber-incident caused intentionally;
• cyber threat: any circumstance or event that may lead to a cyber incident;
• Vulnerability: A cyber threat due to flaws or errors in IT resources.

Authorities and organisations may process personal data relevant to information security, in particular in the information security management systems provided for this purpose (ISMS applications). They may exchange personal data with each other as well as with national, international or foreign organisations governed by public law, if this is useful for information security, it does not breach any legal or contractual obligation to maintain secrec, the provisions of the Federal Data Protection Act are complied with, the organization receiving the data assumes legal tasks in the field of information security that correspond to those of the authority or organization making the communication.

They can link their information systems, including ISMS applications, and exchange data automatically or on demand through interfaces and may administer electronic forms for submitting or processing information security requests and reports and link them to their ISMS applications or other information systems.

Insofar as this is necessary to deal with information security breaches or to eliminate vulnerabilities, they may perform the following actions with sensitive data within the meaning of Art. 5, let. c, the Federal Act of 25 September 2020 on Data Protection (FADP) relating to persons who are involved in such breaches or vulnerabilities or who are or could be affected by them, treat them or exchange them with each other as well as with national, international or foreign organisations governed by public law.

They can retain sensitive data for up to two years after information security breaches have been handled or vulnerabilities have been eliminated, but no more than ten years. The archiving of data is governed by the provisions of the archiving legislation. The processing of personal data by the NCSC in the performance of its tasks is governed by Articles 75 to 79.

They may, in accordance with Art. 34 para. 1, Telecommunications Act of 30 April 1997 (LTC), have a disruptive facility in security zones where information classified as 'secret' is frequently processed or IT assets of the security category 'very high protection' are operated.

Version française

Le 10 octobre 2023, le Conseil fédéral suisse a modifié la loi fédérale sur la sécurité de l'information dans la Confédération.

L'objectif de cette loi est de garantir la sécurité des traitements d'informations relevant de la compétence de la Confédération et la sécurité de ses ressources informatiques et d'accroître la résilience de la Suisse face aux cybermenaces. Elle s’applique aux organismes de droit public ou privé qui exploitent des infrastructures critiques.

Les informations provenant de tiers dont le Centre national de cybersécurité (NCSC) a connaissance dans le cadre de son activité de réception et d'analyse de rapports conformément au chapitre 5 ne peuvent pas être rendues accessibles en vertu de la loi sur le droit d'auteur.

Les définitions suivantes s'appliquent :

• incident cyber : un événement survenu lors de l’utilisation d’un moyen informatique et entraînant une violation de la confidentialité, de la disponibilité ou de l’intégrité d’une information ou de la traçabilité de son traitement ;
• cyber-attaque : un cyber-incident provoqué intentionnellement ;
• cybermenace : toute circonstance ou événement pouvant conduire à un cyberincident ;
• Vulnérabilité : Cybermenace due à des failles ou des erreurs dans les ressources informatiques.

Les autorités et les organisations peuvent traiter des données personnelles pertinentes pour la sécurité de l'information, notamment dans les systèmes de gestion de la sécurité de l'information prévus à cet effet (applications ISMS). Ils peuvent échanger des données personnelles entre eux ainsi qu'avec des organisations nationales, internationales ou étrangères de droit public, si cela est utile à la sécurité de l'information, cela ne viole aucune obligation légale ou contractuelle de secret, les dispositions de la loi fédérale sur les données. Conformément à la loi sur la protection des données, l'organisme destinataire des données assume des tâches juridiques dans le domaine de la sécurité de l'information qui correspondent à celles de l'autorité ou de l'organisme émetteur de la communication.

Ils peuvent relier leurs systèmes d'information, y compris les applications ISMS, et échanger des données automatiquement ou à la demande via des interfaces et peuvent administrer des formulaires électroniques pour soumettre ou traiter des demandes et des rapports sur la sécurité de l'information et les lier à leurs applications ISMS ou à d'autres systèmes d'information.

Dans la mesure où cela est nécessaire pour remédier à des violations de la sécurité de l'information ou pour éliminer des vulnérabilités, ils peuvent effectuer les actions suivantes avec des données sensibles au sens de l'art. 5c, la loi fédérale du 25 septembre 2020 sur la protection des données (LPD) concernant les personnes impliquées dans de telles violations ou vulnérabilités ou qui en sont ou pourraient être concernées, les traitent ou les échangent entre elles ainsi qu'avec les autorités nationales, organisations internationales ou étrangères de droit public.

Ils peuvent conserver les données sensibles jusqu'à deux ans après que les failles de sécurité des informations ont été traitées ou que les vulnérabilités ont été éliminées, mais pas plus de dix ans. L'archivage des données est régi par les dispositions de la législation sur l'archivage. Le traitement des données à caractère personnel par le NCSC dans l'exercice de ses missions est régi par les articles 75 à 79.

Ils peuvent, conformément à l'art. 34 par. 1, de la loi du 30 avril 1997 sur les télécommunications (LTC), disposent d'une installation perturbatrice dans les zones de sécurité où des informations classées « secrètes » sont fréquemment traitées ou des actifs informatiques de la catégorie de sécurité « très haute protection » sont exploités.

On October 10 2023, the Swiss Federal Council amended the Financial Market Infrastructure Act (FMIA).

The Act of June 19 2015 on Financial Market Infrastructure is amended as follows:

• A fine of up to CHF 500,000 is imposed on anyone who intentionally provides false or incomplete information in the prospectus or advance announcement (Art. 127 and 131 (a)).

If the offender acts negligently, he or she is punished by a fine of up to 150,000 francs.

Version française

Le 10 octobre 2023, le Conseil fédéral a modifié la loi sur l'infrastructure des marchés financiers (LIMF).

La loi du 19 juin 2015 relative aux infrastructures des marchés financiers est modifiée comme suit :

• Une amende pouvant aller jusqu'à CHF 500'000 est infligée à quiconque fournit intentionnellement des informations fausses ou incomplètes dans le prospectus ou le préavis (art. 127 et 131 (a)).

Si le contrevenant fait preuve de négligence, il est puni d'une amende pouvant aller jusqu'à 150 000 francs.

On October 26 2023, the UK Government announced that Economic Crime and Corporate Transparency Bill receives Royal Assent.

The Economic Crime and Corporate Transparency Bill follows the Economic Crime (Transparency and Enforcement) Act 2022 and similarly seeks to address the threat of illicit finance whilst maintaining the ease of doing business for legitimate commerce.

The Bill is made up of six Parts:

• the first deals with amendments to the Companies Act 2006 to reform Companies House processes and furnish the Registrar with new statutory functions and objectives;
• the second makes reforms to bring the law applicable to limited partnerships up to date and to bring greater alignment with the law applicable to companies;
• the third introduces new provisions relating to the Register of Overseas Entities, which was introduced by the earlier 2022 Act;
• the fourth makes changes to the law relating to the seizure of cryptoassets;
• the fifth makes further reforms to the legal framework that makes up the anti-money laundering regime; and
• the sixth and last contains general provisions.

On October 25 2023, the Financial Conduct Authority (FCA) published a warning on common issues with crypto marketing.

Since October 8 2023, when the FCA began supervising firms against the new regime, it has identified 3 common issues with crypto asset financial promotions including:

• Promotions making claims about the ‘safety’, ‘security’ or ease of using crypto asset services without highlighting the risk involved.
• Risk warnings not being visible enough due to small fonts, hard to read colouring or non-prominent positioning.
• Firms are failing to provide customers with adequate information on the risks associated to specific products being promoted.

The FCA reminds authorised firms approving the financial promotions of crypto asset firms that it expects them to take their regulatory obligations seriously. Where this is not happening, the FCA will take action and has already placed restrictions on an authorised firm to restrict it from approving crypto asset financial promotions. Furthermore, the FCA is also continuing to identify and act against firms that are illegally promoting crypto assets to UK consumers. Since the regime went live, the FCA has issued 221 alerts. This list will be continually updated as the FCA identifies firms which may be illegally communicating crypto asset promotions and are failing to engage with it constructively.

On October 27 2023, the Financial Conduct Authority (FCA) published its Handbook Notice No.113.

This Handbook Notice describes the changes to the FCA Handbook and other material made by the FCA Board under its legislative and other statutory powers.

On September 12 2023, the FCA Board made changes to the FCA Handbook, as set out in the instrument listed below:

• CP22/28: Senior Management Arrangements, Systems and Controls (Remuneration Codes) (No 9) Instrument 2023 

In summary, this instrument makes changes to the FCA Handbook to strengthen the effectiveness of the remuneration regime by increasing the proportion of compensation that can be subject to the incentive setting tools within the framework. Over time, these changes should also help to remove unintended consequences of the bonus cap, particularly the growth in the proportion of the fixed component of total remuneration, which reduces a firm’s ability to adjust costs to absorb losses or for material poor performance or misconduct that subsequently comes to light.

Changes effective as of October 31 2023.

On October 16 2023, the FCA Board made the relevant changes to the Handbook as set out in the instrument listed below:

• CP22/27: Financial Promotion (Approver Permission) Instruments 2023 – Changes effective as of November 6 2023.

In summary, this instrument makes changes to the FCA Handbook to implement the regulatory gateway for all authorised persons that want to approve financial promotions for unauthorised persons (the section 21 gateway). The gateway and our accompanying approach to firms that apply are designed to strengthen our oversight of approvals and improve the standard of approved financial promotions.

The instrument comes into force on 6 November 2023. Feedback was published in PS23/13 (Introducing a gateway for firms who approve financial promotions), along with a near-final version of the instrument. Since PS23/13 was published, a small number of minor and consequential changes have been made to the instrument, which has now been made. The only change of substance is to add an additional field to the rules on notifying approvals of amendments to, or withdrawals of approval of, financial promotions for reasons of a notifiable concern (SUP 16.31.6R). The additional field requires the notifying firm to indicate the date on which the relevant promotion was first approved.

On October 30 2023, the Financial Conduct Authority (FCA) published a feedback statement on long-term asset funds (LTAFs) financial services compensation scheme coverage (FSCS).

This feedback statement (FS23/7) summarises the feedback received to the FCA’s Policy Statement PS23/7 on LTAFs, which was published in June 2023. In PS23/7, the FCA set out new rules to enable a broader range of retail investors and pension schemes to appropriately assess LTAFs whilst ensuring understanding of the risks involved. In PS23/7, the FCA also asked for views on whether it might be appropriate to remove the FSCS cover for regulated activities relating to LTAFs, as a first step toward change with a broader consideration of FSCS coverage for non-standard assets to follow.

The FCA stated in PS23/7 that following the consultation, if it decided to exclude LTAFs from FSCS coverage, it would consult on detailed rules later in 2023. The consultation closed on August 10.

In light of the feedback received, the FCA confirms in FS23/7 that it has decided not to take forward the proposal to exclude FSCS cover for regulated activities relating to LTAFs at this time. It now proposes to consider any changes to the scope of FSCS protection for retail investments in the round, rather than excluding activities relating to certain investment products in isolation.

On October 9 2023, the Financial Conduct Authority (FCA) updated its webpage on landing slots for funds in temporary marketing permissions regime (TMPR).

The temporary permissions regime (TPR) enables relevant EEA firms and funds who were using the passporting regime to transition to the UK full regulatory regime.

The webpage explains that the process of exiting the TMPR and the notification of landing slots is still under review. If the Treasury makes regulations under the Financial Service Act 2021, section 271A ("s271A FSMA") approving certain countries or territories, the FCA expects to contact fund operators, shortly afterwards, with information on landing slots for exiting the TMPR. A decision about whether to make regulations under s271A FSMA is for HM Treasury to make. No regulations have been made at this time.

As the process is still under review, operators of UCITS in the TMPR should ensure that the FCA holds the correct contact email address (as shown on the FS Register) as this will be used to communicate with them regarding details of the process and landing slot. This email address should be for the operator and not an external consultancy firm or other third-party. 

Finally, if funds registered under TMPR are no longer marketing in the UK they should be removed via the FCA’s form TMPR CH.