Background

The directive 2009/65/EC of the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities ("UCITS") applies since 30 June 2011 (the "UCITS Directive", available here).

The directive 2011/61/EU of the European Parliament and of the Council on Alternative Investment Fund Managers applies since 22 July 2013 (the "AIFMD", available here).

The European Commission has adopted delegated and implementing acts to specify how competent authorities and market participants shall comply with the obligations laid down in the AIFMD and UCITS Directive ("Delegated and Implementing Acts" are respectively available here for AIFMD and here for UCITS Directive).

On 29 March 2019, the European Securities and Markets Authority (the "ESMA") issued the latest version of its questions and answers' document concerning the application of the AIFMD, by adding new Q&As 6 and 7 (on pages 35 and 36) in the Section VII entitled "Calculation of leverage" (ESMA34-32-352 – the "Q&A Document on AIFMD", available here).

On 29 March 2019, the ESMA issued the latest version of its Q&As' document concerning the application of the UCITS Directive, by modifying and adding new Q&As 4b and 4cbis (on pages 14-15; Q&A 4c was deleted) regarding past performance, and new Q&As 8a, 8b, 8c (from pages 17 to 22) regarding disclosure of the benchmark index in the objectives and investment policies, in the Section II entitled "KIID for UCITS" (ESMA34-43-392 – the "Q&A Document on UCITS Directive", available here).

What's new?

On 4 June 2019, the ESMA updated the Q&A Document on AIFMD (ESMA34-32-352 – the "Updated Q&A Document on AIFMD") and the Q&A Document on UCITS Directive in relation to depositary tasks and functions (ESMA34-43-392 – the "Updated Q&A Document on UCITS Directive").

Overall, the Updated Q&A Document on AIFMD includes 5 new Q&As 10 - 14 (on pages 34-35) and the Updated Q&A Document on UCITS Directive includes 5 new Q&As 2 – 6 (on pages 50-52).

In both Q&A Documents, the 5 new Q&As relate to the following:

• Distinction between depositary functions and mere supporting tasks that are not subject to the delegation requirements set out in the AIFMD and UCITS Directive;
• Depositary tasks entrusted to 3rd parties;
• Performance of depositary functions where there are branches in other Member States ("MS");
• Supervision of depositary functions in case of branches in other MS; and
• Delegation of depositary functions to another legal entity within the same group.

For further information, the Updated Q&A Document on AIFMD is available here and the Updated Q&A Document on UCITS Directive is available here.

What's next?

The ESMA will periodically review their Q&As' Documents on AIFMD and UCITS Directive and update them where required.

Background

The Regulation (EU) 2016/1011 of the European Parliament and of the Council on indices used as benchmark in financial instruments and financial contracts applies since 1 January 2018 (the "BMR", available here). The BMR is relevant for any investment fund that uses any benchmark to assess its performance, to define asset allocation of its portfolio, or to compute its performance fees.

In accordance with Article 36 of the BMR, the European Securities and Markets Authority (the "ESMA") shall establish and maintain a public register of benchmark administrators that contains, among other, the information on the identities of the administrators which are (i) authorised or registered pursuant to Article 34 of the BMR, and (ii) recognised in accordance with Article 32 of the BMR (the "ESMA Register of Administrators of Benchmarks", available here).

Article 32 of the BMR, which addresses recognition of an administrator located in a 3rd country, refers to relevant principles of the International Organisation of Securities Commissions (the "IOSCO Principles") including the ones published:

• On 17 July 2013 for financial benchmarks, which form an integral part of IOSCO's work in leading efforts to enhance the integrity, the reliability and the oversight of benchmarks used in financial markets by establishing guidelines for benchmark administrators and other relevant bodies in the following areas: (i) governance, (ii) benchmark quality, (iii) quality of the methodology and (vi) accountability mechanisms (the "Financial Benchmarks Principles", available here); and
• On 5 October 2012 for oil price reporting agencies ("PRAs"), which are intended to enhance the reliability of oil price assessments that are referenced in derivative contracts subject to regulation by IOSCO members (the "PRA Principles," available here). Although the PRA Principles were developed in the context of oil derivatives markets, PRAs have been encouraged to implement them more generally to assessments that are referenced by any commodity derivatives contract.

The general public, financial market participants, competent authorities and other stakeholders can submit to the ESMA questions on the practical application of the BMR requirements. The ESMA provides answers to these questions by publishing updates to its dedicated questions and answers document (ESMA70-145-11 — the "Q&A Document", available here).On 30 January 2019, the ESMA published the version 11 of its Q&A Document adding a new Q&A 4.5 (on pages 10-12) in its Part 4 on the scope of the BMR [Version 12 of the Q&A Document has not been published on the ESMA's website].

What's new?

On 23 May 2019, the ESMA published the version 13 of its Q&A Document (ESMA70-145-11 — the "Updated Q&A Document") including new Q&A in the following parts:

• Part 7 on authorisation, registration, recognition and endorsement
  • Q&A 7.4 (on page 22) concerning the time relevant to determine the Member State of reference in an application for recognition under Article 32(4) of the BMR; and
  • Q&A 7.5 (on pages 22-23) on the role of IOSCO Principles and of external audit in the recognition of 3rd country administrators.
• Part 8 on requirements for users of benchmarks
  • Q&A 8.5 (on page 26) concerning the contact information included in the ESMA Register of Administrators of Benchmarks, in particular, the link to the web page where the administrator publishes or will publish the benchmark statements.

The Updated Q&A Document is available here.

What's next?

The ESMA will periodically review this Q&A Document and update it where required.

Background

On 12 March 2018, the European Commission (the "Commission") published the following directive and regulation proposals in relation to cross-border distribution of collective investment funds ("CIFs") (collectively referred to as the "Proposals"):

• Proposal for a directive of the European Parliament (the "Parliament") and of the Council of the EU (the "Council") amending the UCITS Directive and AIFMD with regard to cross-border distribution of CIFs (COM(2018) 92 final – the "Directive Proposal", available here); and
• Proposal for a regulation of the Parliament and of the Council on facilitating cross-border distribution of CIFs and amending the EuVECA Regulation and the EuSEF Regulation (COM(2018) 110 final – the "Regulation Proposal", available here).

On 5 February 2019, the Council and the Parliament reached a political agreement on the Proposals (the "Political Agreement", available here).

On 16 April 2019, based on the Political Agreement, the Parliament Plenary voted at first reading on the following legislative resolutions (collectively referred to as the "Parliament's Adopted Proposals"):

• Parliament legislative resolution of 16 April 2019 on the Directive Proposal (P8_TA-PROV(2019)0367 – the "Parliament's Adopted Directive", available here); and
• Parliament legislative resolution of 16 April 2019 on the Regulation Proposal (P8_TA-PROV(2019)0368 – the "Parliament's Adopted Regulation", available here).

On 2 May 2019, the General Secretariat of the Council issued an information note on the Parliament's Adopted Directive (ST 8424 2019 INIT ? the "Note 1", available here) and an information note on the Parliament's Adopted Regulation (ST 8426 2019 INIT ? the "Note 2", available here) to the Committee of Permanent Representatives (the "Coreper") of the Council (collectively referred to as the "Notes"). Given that the Parliament's Adopted Proposals reflect the Political Agreement, the Notes state that the Council should therefore be in a position to approve the Parliament's positions adopted at first reading.

What's new?

On 14 June 2019, the Council adopted a directive and a regulation aimed at removing existing barriers to the cross-border distribution of investment funds (respectively 2018/0041 (COD) — the "Council's Adopted Directive" and 2018/0045 (COD) — the "Council's Adopted Regulation").

The Council's Adopted Directive and the Council's Adopted Regulation enhance the current regulatory framework applying to CIFs. They shall facilitate the cross-border distribution of CIFs by eliminating existing regulatory barriers and reducing distribution costs. In particular, the new measures shall:

• Make it easier for EU alternative investment fund managers ("AIFMs") to test the appetite of potential professional investors in new markets;
• Clarify customer service obligations for asset managers in their host Member State;
• Align procedures and conditions for managers of CIFs to exit national markets when they decide to terminate the offering or placement of their funds; and
• Introduce increased transparency and creation of a single online access point for information on national rules related to marketing requirements and applicable fees.

For further information, the Council's Adopted Directive is available here.

The Council's Adopted Regulation is available here.

What's next?

Following the signature of the Council's Adopted Directive and the Council's Adopted Regulation on 20 June 2019, the final texts of the Adopted Directive and the Adopted Regulation will be published in the Official Journal of the EU shortly after and will enter into force 20 days later.

Background

The Regulation (EU) No 909/2014 of the European Parliament and of the Council on improving securities settlement in the EU and on central securities depositories ("CSDs") applies since 1 January 2015 (the "CSDR", available here). The aim of the CSDR is to harmonise certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for CSDs operating securities settlement systems across the EU.

The European Commission (the "Commission") has adopted delegated and implementing acts to specify how competent authorities ("CAs") and market participants shall comply with the obligations laid down in the CSDR (the "Implementing and Delegated Acts", available here). The Implementing and Delegated Acts include, among other:

• The Commission Delegated Regulation (EU) 2017/391 supplementing the CSDR with regard to regulatory technical standards further specifying the content of the reporting on internalised settlements (the "RTS on Internalised Settlement", available here).
• The Commission Implementing Regulation (EU) 2017/393 laying down implementing technical standards with regard to the templates and procedures for the reporting and transmission of information on internalised settlements in accordance with the CSDR (the "ITS on Internalised Settlement", available here); and
• The Commission Delegated Regulation (EU) 2018/1229 supplementing the CSDR with regard to regulatory technical standards on settlement discipline (the "RTS on Settlement Discipline", available here).

The general public, market participants and CAs can submit to the European Securities and Markets Authority (the "ESMA") questions on the practical application of the CSDR requirements. The ESMA provides answers to those questions by publishing updates to its questions and answers' document on implementation of the CSDR (ESMA70-708036281-2 — the "Q&A Document", available here). On 30 January 2019, the ESMA last updated the Q&A Document by adding 2 Q&A to its Part III on settlement discipline:

• Q&A 3e (on page 25) concerning calculation of cash penalties; and
• Q&A 4a (on page 26) concerning scope of cash penalties.

What's new?

On 23 May 2019, the ESMA updated the Q&A Document by adding 3 new Q&A to its Part IV on internalised settlement reporting requirements (ESMA70-708036281-2 — the "Updated Q&A Document") as follows:

• Concerning the scope
  • Q&A 1a (on pages 26-27) clarifies that, in the case of internalised settlement instructions that require matching, a settlement internaliser should only include matched internalised settlement instructions in the reports; and
  • Q&A 1b (on pages 26-27) confirms that a settlement internaliser should take into account the working days in the country where it is established and, if applicable, any additional days where the settlement internaliser is open for business.
• Concerning the reporting parameters
  • Q&A 2a (on page 27) clarifies that internalised settlement instructions received after the end of the quarter, for settlement in a previous quarter, should be included in the report for the quarter during which the instructions are submitted, and that previously submitted reports should not be updated in such cases.

The Updated Q&A Document is available here.

What's next?

The ESMA will periodically review this Q&A Document and update it where required.

Background

The regulation (EU) No 648/2012 of the European Parliament (the "Parliament") and of the Council of the EU (the "Council") on over-the-counter ("OTC") derivatives, central counterparties ("CCPs") and trade repositories ("TRs") entered into force on 16 August 2012 ("EMIR", available here).

On 4 May 2017, in the context of the regulatory fitness and performance programme ("Refit", available here), the European Commission (the "Commission") introduced a first set of amendments to EMIR (the "Amendments", available here) by means of a proposal for a regulation amending EMIR (COM(2017) 208 final – the "Proposal", available here). The Amendments aim to introduce simpler and more proportionate rules on OTC derivatives that would reduce costs and burdens for market participants, without compromising financial stability.

On 28 May 2019, the regulation (EU) 2019/834 of the Parliament and of the Council of 20 May 2019 amending EMIR as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a CCP, the registration and supervision of TRs and the requirements for TRs ("EMIR Refit") was published in the Official journal of the EU (the "Regulation 2019/834", available here).

The Regulation 2019/834 shall enter into force on 17 June 2019. However, certain provisions of the Regulation 2019/834 will enter into force after a certain delay starting from 18 December 2019 up to 18 June 2021. The European Supervisory Authorities (the "ESAs") shall in-between draft the required technical standards as required by EMIR Refit.

As a reminder, EMIR Refit entails major amendment to the current EMIR provisions, namely:

• The enlargement of the entities in scope of EMIR (incl. AIFs, CSDs and securitisation special purpose entities);
• The creation of a new categorisation of counterparties allowing financial counterparties whose OTC derivative positions do not exceed any of the clearing thresholds ("Financial Counterparties-" or "FCs-") to be exempt from the clearing obligation;
• The introduction of a new category whereby non-financial counterparties whose positions exceed at least one of the clearing thresholds ("Non-Financial Counterparties+" or "NFC+") will be subject to the clearing obligation only for the derivatives belonging to the asset class for which the clearing threshold has been exceeded; and
• The removal of the obligation of backloading (reporting of historic transactions requirements not outstanding on 12 February 2014).

On 28 May 2019, the ESMA last updated its Q&A Document on the implementation of EMIR as amended by Regulation 2019/834 (ESMA70-1861941480-52 – the "Q&A Document", available here).

• In the Q&A Document, the ESMA revised the Part II relating to OTC questions, as follows:
  • Replaced question 2 (on pages 15-18), which covers the procedure for FC and NFC to notify that they exceed or no longer exceed clearing thresholds (applicable from 17 June 2019);
  • Amended question 4 (on pages 23-24), which covers the responsibility for the status of counter-parties (applicable from 17 June 2019);
  • Amended question 20 (on pages 40-41), which covers certain clearing obligation aspects; and
  • Inserted a new question 25 (on pages 44-45), which covers the start clearing date for Category 3 and 4 (applicable from 17 June 2019).
• Besides, the ESMA revised the Part IV relating to the following TR questions:
  • Amended question 36 (on page 100), which covers OTC derivatives novations; and
  • Amended question 42 (on pages 105-106), which covers the population of the field clearing obligation (applicable from 17 June 2019).

What's new?

On 14 June 2019, the ESMA updated the Q&A Document by replacing and adding 2 Q&As, which are applicable from 17 June 2019 (ESMA70-1861941480-52 – the "Updated Q&A Document") as follows:

• In the Updated Q&A Document, the ESMA revised the Part II relating to OTC questions, as follows:
  • Replacing the Q&A 3 (on pages 18-23) on the calculation of positions for the clearing thresholds.
• Besides, the ESMA revised the Part IV relating to the following TR question:
  • Adding the new Q&A 51 (on pages 118-121) regarding the notifications to be made by market participants to their competent authorities to apply an intragroup exemption from reporting.

On 14 June 2019, the ESMA also published its Chair's letter to the Commission concerning an issue related to the implementation of the new EMIR Refit regime with regards to the calculation of the month-end average positions of FCs in non-financial groups, which is then used to determine whether these FCs are subject to the clearing obligation when they are above the clearing thresholds (ESMA70-151-2392 – the "Letter").

For further information, the Updated Q&A Document is available here and the Letter is available here.

What's next?

The Regulation 2019/834 and the above-mentioned Q&As on the implementation of certain EMIR Refit provisions shall enter into force on 17 June 2019.

The ESMA will continue to develop the Q&A Document on EMIR and update it where required.

Background

The regulation (EU) No 648/2012 of the European Parliament (the "Parliament") and of the Council of the EU (the "Council") on over-the-counter ("OTC") derivatives, central counterparties ("CCPs") and trade repositories ("TRs") entered into force on 16 August 2012 ("EMIR", available here).

On 4 May 2017, in the context of the regulatory fitness and performance programme ("Refit", available here), the European Commission (the "Commission") introduced a first set of amendments to EMIR (the "Amendments", available here) by means of a proposal for a regulation amending EMIR (COM(2017) 208 final — the "Proposal", available here). The Amendments aim to introduce simpler and more proportionate rules on OTC derivatives that would reduce costs and burdens for market participants, without compromising financial stability.

On 5 February 2019, the Parliament and the Council reached a political agreement on the Amendments (the "Political Agreement", available here).

On 18 April 2019, based on the Political Agreement, the Parliament Plenary voted at first reading on the following legislative resolution: Parliament legislative resolution on the proposal for a regulation of the Parliament and of the Council amending EMIR as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivatives contracts not cleared by a CCP, the registration and supervision of TRs and the requirements for TRs (P8_TA-PROV(2019)0437 — the "Parliament's Adopted Regulation", available here).

On 14 May 2019, the Council voted in favour of the Parliament's Adopted Regulation (ST 9256 2019 INIT ? the "Voting Result", available here).

What's new?

On 28 May 2019, the regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending EMIR as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a CCP, the registration and supervision of TRs and the requirements for TRs ("EMIR Refit") was published in the OJEU (the "Regulation 2019/834").

As a reminder, EMIR Refit entails major amendment to the current EMIR provisions, namely:

• The enlargement of the entities in scope of EMIR (incl. AIFs, CSDs and securitisation special purpose entities);
• The creation of a new categorisation of counterparties allowing financial counterparties whose OTC derivative positions do not exceed any of the clearing thresholds ("Financial Counterparties-" or "FCs-") to be exempt from the clearing obligation;
• The introduction of a new category whereby non-financial counterparties whose positions exceed at least one of the clearing thresholds ("Non-Financial Counterparties+" or "NFC+") will be subject to the clearing obligation only for the derivatives belonging to the asset class for which the clearing threshold has been exceeded; and
• The removal of the obligation of backloading (reporting of historic transactions requirements not outstanding on 12 February 2014).

For further information, the Regulation 2019/834 is available here.

On 28 May 2019, the ESMA updated its Q&A Document on the implementation of EMIR (ESMA70-1861941480-52 — the "Updated Q&A Document").

In the Updated Q&A Document, the ESMA revised the Part II relating to OTC questions, as follows:

• Amended question 2 (from page 16 to 19), which covers the procedure for FC and NFC to notify that they exceed or no longer exceed clearing thresholds;
• Amended question 4 (from page 21 to 22), which covers the responsibility for the status of counter-parties;
• Amended question 20 (from page 38 to 39), which covers certain clearing obligation aspects; and
• Inserted a new question 25 (from page 42 to 43), which covers the start clearing date for Category 3 and 4.

Besides, the ESMA revised the Part IV relating to the following TR questions:

• Amended question 36 (from page 99 to 100), which covers OTC derivatives novations; and
• Amended question 42 (from page 105 to 106), which covers the population of the field clearing obligation.

For further information, the Updated Q&A Document is available here.

What's next?

The Regulation 2019/834 shall enter into force on 17 June 2019 (such entry into force date is also mentioned in the Updated Q&A Document).

However, certain provisions of the Regulation 2019/834 will enter into force after a certain delay starting from 18 December 2019 up to 18 June 2021. Indeed, the European Supervisory Authorities (the "ESAs") shall in-between draft the required technical standards as required by EMIR Refit.

Background

The Regulation (EU) No 345/2013 on European venture capital funds (the "EuVECA Regulation", available here) and the Regulation (EU) No 346/2013 on European social entrepreneurship funds (the "EuSEF Regulation", available here) apply since 22 July 2013 (altogether referred as the "Regulations").

The Regulations provide for a common EU framework for the managers of EuVECA and EuSEF funds, and for harmonised passporting rules in order to manage and market funds in the EU with the specific EuVECA and EuSEF labels. While EuVECA funds support young and innovative companies, EuSEF focus on enterprises whose aim is to achieve positive social impact.

Article 9(5) of the Regulations empowers the European Commission ("Commission") to adopt delegated acts specifying:

• The types of conflicts of interest which managers of qualifying EuVECA and EuSEF need to identify; and
• The steps to be taken by managers of qualifying EuVECA and EuSEF in terms of structure and organisational and administrative procedures in order to identify, prevent, manage, monitor and disclose conflicts of interest.

On 1 February 2019, the Commission published its draft delegated regulation (EU) …/... supplementing the EuSEF Regulation with regard to conflicts of interest, social impact measurement and information to investors in the area of EuSEF (C(2019) 669 final — the "Draft DR on EuSEF", available here).

On 4 February 2019, the Commission published its draft delegated regulation (EU) …/... supplementing the EuVECA Regulation with regard to conflicts of interest in the area of EuVECA (C(2019) 664 final — the "Draft DR on EuVECA", available here).

What's new?

On 22 May 2019, the Commission delegated regulation (EU) 2019/819 supplementing the EuSEF Regulation with regard to conflicts of interest, social impact measurement and information to investors in the area of EuSEF (the "Regulation 2019/819") and the Commission delegated regulation (EU) 2019/820 supplementing the EuVECA Regulation with regard to conflicts of interest in the area of EuVECA (the "Regulation 2019/820") were published in the OJEU (altogether referred as the "Final Regulations").

The Regulation 2019/819 is available here.

The Regulation 2019/820 is available here.

What's next?

The Final Regulations enter into force on 11 June 2019, but shall apply only from 11 December 2019 in order to provide managers of qualifying EuVECA/EuSEF time to adapt to the new requirements.

Background

The regulation (EU) 2016/679 of the European Parliament (the "Parliament") and of the Council of the EU (the "Council") on the protection of natural persons with regard to the processing of personal data and on the free movement of such data entered into force on 24 May 2016 and applies since 25 May 2018 (the "GDPR", available here).

The regulation (EU) 2018/1807 of the Parliament and of the Council on a framework for the free flow of non-personal data in the EU entered into force on 18 December 2018 and applies since 28 May 2019 (the "FFD Regulation", available here).

The GDPR and the FFD Regulation (together — the "Two Regulations") pursue the aim of providing framework for the free movement of data and are building the foundation for the free flow of all data within the EU. In most real-life situations, a dataset is likely to be composed of both personal and non-personal data ("Mixed Dataset").

According to Article 8(3) of the FFD Regulation, by 29 May 2019, the European Commission (the "Commission") shall publish informative guidance on the interaction of the FFD Regulation and the GDPR, especially as regards Mixed Datasets.

What's new?

On 29 May 2019, the Commission published its communication to the Parliament and the Council on guidance on the FFD Regulation (COM(2019) 250 final — the "Guidance").

The Guidance aims to help users - especially small and medium-sized enterprises ("SMEs") - understand the interaction between the Two Regulations. The Guidance therefore particularly addresses:

• The concepts of personal data and non-personal data, and their combination in Mixed Datasets;
• The principles of free movement of data and the prohibition of data localisation requirements under the Two Regulations;
• The notion of data portability; and
• The self-regulatory approaches supporting the free flow of data.

The Guidance is provided by the Commission for information purposes only and does not contain any authoritative interpretation of the FFD Regulation and it does not constitute a decision or position of the Commission.

For further information, the Guidance is available here.

The dedicated FAQ document (MEMO/19/2750) is available here.

What's next?

The Commission shall encourage and facilitate the development of self-regulatory codes of conduct at Union level (the "Codes of Conduct"), in order to contribute to a competitive data economy, based on the principles of transparency and interoperability and taking due account of open standards, covering, inter alia, the aspects listed in Article 6.1 of the FFD Regulation.

The Commission shall also (i) ensure that the Codes of Conduct are developed in close cooperation with all relevant stakeholders, including associations of SMEs and start-ups, users and cloud service providers; and (ii) shall encourage service providers to complete the development of the Codes of Conduct by 29 November 2019 and to effectively implement them by 29 May 2020.

No later than 29 November 2022, the Commission shall submit a report (the "Report") to the Parliament, to the Council and to the European Economic and Social Committee evaluating the implementation of the FFD Regulation, in particular in respect of:

• Its application, especially to Mixed Datasets in the light of market developments and technological developments which might expand the possibilities for de-anonymising data;
• The implementation by Member States of its Article 4(1) concerning prohibition of data localisation requirements, and, in particular, the public security exception; and
• The development and effective implementation of the Codes of Conduct and the effective provision of information by service providers.

Member States shall provide the Commission with the necessary information for the preparation of the Report.

Background

On 29 March 2017, the UK notified the European Council (the "Council") of its intention to withdraw from the EU in accordance with Article 50 of the Treaty on EU (the "TEU", available here). Article 50(3) TEU provides that the EU Treaties will cease to apply with respect to the concerned EU Member State ("MS") from the date of entry into force of the withdrawal agreement or, failing that, 2 years after the notification as referred to in Article 50(2) TEU, unless the Council in agreement with the concerned MS unanimously decide to extend this period (the "Brexit Period"). On 5 April 2019, the UK submitted a request to the Council for an extension of the Brexit period provided for in Article 50(3) TEU. On 11 April 2019, by the decision (EU) 2019/584 (the "Decision 2019/584", available here) the Council, in agreement with the UK, decided to extend the Brexit period until 31 October 2019.

The regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments applies since 3 January 2018 ("MiFIR", available here). Article 23 of MiFIR requires investment firms to conclude transactions in shares admitted to trading on a regulated market ("RM") or traded on an EU trading venue on: (i) RMs, (ii) multilateral trading facilities, (iii) systematic internalisers or (iv) 3rd-country trading venues assessed as equivalent by the European Commission (the "Commission"). Considering the strong ties and interconnections between the UK and the EU27 financial markets, it cannot reasonably be assumed that all shares admitted to trading on a UK regulated market are traded on a non-systematic, ad-hoc, irregular and infrequent basis in the EU27 and are therefore out of the scope of the trading obligation. Hence, the application of the trading obligation for shares ("STO") in the event of the UK leaving the EU without a withdrawal agreement, i.e. a "no-deal" Brexit, has created uncertainty among market participants and may lead to disruptive effects.

On 19 March 2019, the ESMA issued a public statement (ESMA70-155-7329 ? the "Public Statement 1", available here) in order to provide clarity to market participants on the potential impact of a "no-deal" Brexit on the STO under Article 23 of MiFIR and in the absence of an equivalence decision in respect of the UK by the Commission. The guidance provided by the ESMA significantly reduced the scope of the STO under Article 23 of MiFIR. More specifically, the ESMA assumes that:

• EU27 shares (i.e. international securities identification numbers ("ISINs") starting with a country code corresponding to an EU27 MS) and shares with an ISIN from Iceland, Liechtenstein and Norway (altogether "EEA ISINs") are within the scope of the STO; and
• UK shares (i.e. ISINs starting with the prefix "GB") are traded on a non-systematic, ad-hoc, irregular and infrequent basis in the EU27 and thus fall outside of the scope of the STO, unless those shares qualify as liquid in the EU27.

While there are around 23,000 shares that are admitted to trading or traded on a trading venue in the EU, the ESMA's guidance limits the application of the STO to 6,243 shares, among them 14 shares with a GB ISIN.

What's new?

On 29 May 2019, the ESMA issued another public statement (ESMA70-154-1204 ? the "Public Statement 2") to further mitigate potential adverse effects of a "no-deal" Brexit on the STO under Article 23 of MiFIR. The ESMA has given additional attention to the risk of disruption that conflicting EU27 and UK STOs may potentially create, for UK branches of EU27 investment firms and for EU27 branches of UK investment firms. The ESMA concluded that an approach to the STO based only on the ISIN of the share would be more likely to minimise the risk of disruption in the interest of orderly markets. This means that the EU27 STO would not be applied to the aforementioned 14 GB ISINs.

The ESMA's revised approach based only on the ISIN of the share should avoid overlaps if the UK adopts an approach that does not include the EEA ISINs under the UK STO. According to the ESMA, this would provide a balanced, objective and easily identifiable dividing line between EEA and UK shares. Should EEA ISINs however be included in the scope of the UK STO, this would introduce overlapping obligations and potentially damaging consequences for market participants. The scope of the UK STO is currently still unclear.

For further information, the Public Statement 2 is available here.

What's next?

Given the impact of a "no-deal" Brexit on the STO under Article 23 of MiFIR, the ESMA will consider, in light of possible market developments, whether to review its approach at the latest 12 months after a "no-deal" Brexit. The ESMA will assess whether its approach needs to be adjusted and will inform the public accordingly, in case the final timing and conditions of Brexit change or in case there are developments on the application of the STO in the UK.

Background

The Directive 2004/39/EC of the European Parliament (the "Parliament") and of the Council of the EU (the Council") on markets in financial instruments was applicable from 31 January 2007 till 2 January 2018 (the "MiFID", available here). The MiFID was repealed by the Directive 2014/65/EU of the Parliament and of the Council on markets in financial instruments, which applies since 3 January 2018 (the "MiFID II", available here).

The European Commission has adopted delegated and implementing acts to specify how competent authorities and market participants shall comply with the obligations laid down in MiFID II (the "MiFID II Delegated and Implementing Acts", available here). They include the Commission Delegated Regulation (EU) 2017/565 supplementing MiFID II as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of MiFID II (the "Delegated Regulation 2017/565", available here).

Article 25(3) of MiFID II and Articles 55 and 56 of the Delegated Regulation 2017/565 set out the MiFID II appropriateness requirements. Article 25(4) of MiFID II and Article 57 of the Delegated Regulation 2017/565 cover the 'execution-only' element of the appropriateness regime. The aim of the requirements is to increase investor protection in respect of 'non-advised' services.

On 19 December 2012, the European Securities and Markets Authority (the "ESMA") published its supervisory briefing on appropriateness and execution-only (ESMA/2012/851 — the "2012 Briefing", available here). It was designed for supervisors as an introduction to the MiFID appropriateness rules, and as a starting point when deciding on areas of supervisory focus. It summarised the key elements of the rules and explained the associated objectives and outcomes.

One of the most important requirements for investor protection in MiFID framework is the assessment of suitability. It applies to the provision of any type of investment advice and portfolio management. Investment firms providing investment advice or portfolio management must provide suitable personal recommendations to their clients or have to make suitable investment decisions on behalf of their clients. The MiFID II confirmed the importance of the suitability assessment for the protection of investors under MiFID and further strengthened and detailed the obligations.

On 28 May 2018, the ESMA published its guidelines on certain aspects of the MiFID II suitability requirements (ESMA35-43-869 — the "2018 Guidelines on Suitability", available here) which largely confirmed and broadened the ESMA guidelines on certain aspects of the MiFID suitability requirements issued on 21 August 2012 (ESMA/2012/387 – the "2012 Guidelines on Suitability", available here).

On 4 April 2019, the ESMA published an updated version of the 2012 Briefing taking into account the 2018 Guidelines on Suitability with respect to aspects also relevant to the appropriateness rules (ESMA35-36-1640 — the "2019 Briefing", available here). The 2019 Briefing applies in relation to Article 25(3) and 25(4) of MiFID II and Articles 55, 56 and 57 of the Delegated Regulation 2017/565. It is designed to help supervisors to make judgements and is structured around the following elements:

• Determining situations where the appropriateness assessment is required;
• Obtaining information from clients;
• Assessment of appropriateness;
• Warnings to clients;
• Qualification of firm’s staff; and
• Record-keeping.

Each element refers to the relevant legislation as well as provides examples of the sort of questions that supervisors could ask themselves, or firms, when assessing firms' approaches to the application of the MiFID II rules and assessing whether the outcomes of the appropriateness rules are being met by the firms. The content of 2019 Briefing is not subject to any 'comply or explain' mechanism for national competent authorities ("NCAs") and is non-binding.

What's new?

On 3 June 2019, the ESMA announced that it is launching a common supervisory action ("CSA") which will focus on the application of the MiFID II requirements on the assessment of appropriateness, a topic of the 2019 Briefing that will serve as a starting point for the CSA (the "Press Release"). NCAs that will participate in the CSA will assess the application of the appropriateness requirements by a sample of investment firms under their supervision.

In the Press Release, the ESMA reasons that the correct application of the MiFID II requirements on the assessment of appropriateness is key to ensuring the protection of investors in the case of transactions that are not accompanied by investment advice.

The Press Release is available here.

What's next?

Participant NCAs will carry out CSA simultaneously, in the second half of 2019.

The ESMA believes this initiative, and the related sharing of practices across NCAs, will help ensure consistent implementation and application of EU rules and enhance the protection of investors as well as improve the mutual understanding of supervisory approaches by NCAs, in line with ESMA objectives.

Background

The Directive 2014/65/EU and the Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments apply since 3 January 2018 (respectively "MiFID II" and "MiFIR", available here and here).

The European Commission has adopted delegated and implementing acts to specify how competent authorities ("CAs") and market participants shall comply with the obligations laid down in MiFID II and MiFIR (the "MiFID II and MiFIR Delegated and Implementing Acts", available here and here). They include, among other, the Commission delegated regulations supplementing MiFID II with regard to regulatory technical standards ("RTS"):

? (EU) 2017/575 - concerning the data to be published by execution venues on the quality of execution of transactions ("RTS 27", available here); and

? (EU) 2017/576 - for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution ("RTS 28", available here).

The general public, market participants and CAs can submit to the ESMA questions in relation to the MiFID II and MiFIR framework. Since 10 October 2016, the ESMA provides answers to questions on MiFID II and MiFIR investor protection and intermediaries topics by publishing updates to its dedicated questions and answers' document (ESMA35-43-349 — the "Q&A Document", available here).

On 28 March 2019, the ESMA last updated the Q&A Document by:

• Modifying Q&As in the following sections:
  • Section 2 on suitability and appropriateness; and
  • Section 9 on information on costs and charges.
• Adding new Q&As in the following sections:
  • Section 1 on best execution;
  • Section 2 on suitability and appropriateness;
  • Section 9 on information on costs and charges;
  • Section 13 on provision of investment services and activities by 3rd country firms;
  • Section 15 on other issues; and
  • Section 16 on product governance.

What's new?

On 29 May 2019, the ESMA updated the Q&A Document (ESMA35-43-349 — the "Updated Q&A Document"). The Updated Q&A Document includes new Q&As in the following sections:

• Section 1 on best execution
  • Q&A 21 (on page 32) on the reporting for venues on the 'trading mode' according to RTS 27;
  • Q&A 22 (on page 32-33) on the reporting for venues and firms on template fields of RTS 27 and RTS 28 if the required content is not applicable to their activities;
  • Q&A 23 (on page 33) on the reporting on 'passive' and 'aggressive' orders for firms using quote-driven systems to have client orders executed; and
  • Q&A 24 (on page 33) on the RTS 28 reporting and execution venues.
• Section 9 on information on costs and charges
  • Q&A 27 (on page 92-93) on the ex-ante information in case of sell orders;
  • Q&A 28 (on page 93-94) on the ex-ante information in case of telephone trading;
  • Q&A 29 (on page 94) on the use of assumed investment amounts for ex-ante information in relation to investment services and/or products with non-linear charging structures; and
  • Q&A 30 (on page 94) on the use of ranges and maximum amount/percentages for ex-ante information.

For further information, the Updated Q&A is available here.

What's next?

The ESMA will continue to develop the Q&A Document and update it where required.

Background

The Directive 2004/39/EC of the European Parliament (the "Parliament") and of the Council of the EU (the Council") on markets in financial instruments was applicable from 31 January 2007 till 2 January 2018 (the "MiFID" or "MiFID I", available here). The MiFID I was repealed by the Directive 2014/65/EU of the Parliament and of the Council on markets in financial instruments (the "MiFID II", available here). The Regulation (EU) No 600/2014 of the Parliament and of the Council on markets in financial instruments (the "MiFIR", available here) and the MiFID II apply since 3 January 2018.

The European Commission has adopted delegated and implementing acts to specify how competent authorities and market participants shall comply with the obligations laid down in MiFID II and MiFIR (the "MiFID II and MiFIR Implementing and Delegated Acts", available here and here).

The general public, market participants and competent authorities can submit to the European Securities and Markets Authority (the "ESMA") questions in relation to MiFID II/MiFIR framework. Since 3 October 2016, the ESMA has published updates to its questions and answers' document on MiFID II/MiFIR transparency topics (ESMA70-872942901-35 — the "Q&A Document", available here).

What's new?

On 3 June 2019, the ESMA published its updated Q&A Document (ESMA70-872942901-35 — the "Updated Q&A Document").

The ESMA amended Section 7 on the SI regime as follows:

• Modified Q&A 11 (on pages 63-65) on the mandatory SI regime;
• Added a new Q&A 11a (on pages 65-66) on the voluntary SI regime; and
• Added a new Q&A 11b (on page 66) on quoting obligation for SI in non-TOTV (i.e. trading on a trading venue in the EU) instruments.

The ESMA also deleted or amended obsolete Q&As such as those addressing issues pertaining to either 3 January 2018, or the following 12 months. This concerns 5 Q&As in the following sections:

• Section 2 on general Q&As on transparency topics
  • Modified Q&A 13 (on page 28) on reporting of a new International Securities Identification Number in Financial Instruments Reference Data System and Financial Instruments Transparency System following a corporate action;
• Section 5 on pre-trade transparency waivers
  • Modified Q&A 1 (on page 42) on pre-trade transparency waivers under the MiFID I;
• Section 6 on the double volume cap mechanism
  • Deleted Q&A 1 (on pages 50 - 51) on first calculations to be published on 3 January 2018 - shares admitted to trading on regulated market;
  • Deleted Q&A 2 (on pages 51-52) on first calculations to be published on 3 January 2018 – Multilateral Trading Facility only shares, depositary receipts, certificates; and
• Section 7 on the SI regime
  • Q&A 6(b) (on pages 60-61) on compliance with the SI regime and notification to national competent authorities.

The Updated Q&A Document is available here.

What's next?

The ESMA will continue to develop the Q&A Document and update it where required.

Background

The Regulation (EU) No 600/2014 of the European Parliament and of the Council of the EU on markets in financial instruments applies since 3 January 2018 (the "MiFIR", available here).

On accordance with Article 34 of the MiFIR, the European Securities and Markets Authority (the "ESMA") shall maintain a public register to inform market participants on the trading obligation for derivatives (the "Public Register"). The Public Register provides clarity to market participants on the application of the trading obligation under MiFIR and in particular on:

• The classes of derivatives subject to the trading obligation;
• The trading venues (EU and 3rd country) on which those derivatives can be traded; and
• The dates on which the obligation takes effect per category of counterparties.

The European Commission has adopted delegated and implementing acts to specify how competent authorities and market participants shall comply with the obligations laid down in the MiFIR (the "MiFIR Implementing and Delegated Acts", available here). Those include the Commission Delegated Regulation (EU) 2017/2417 supplementing the MiFIR with regard to regulatory technical standards on the trading obligation for certain derivatives which entered into force on 23 December 2017 (the "Delegated Regulation 2017/2417", available here).

Pursuant to the Delegated Regulation 2017/2417, several classes of interest rate derivatives denominated in EUR, GBP and USD as well as several classes of credit derivatives denominated in EUR are required to be traded on regulated markets, multilateral trading facilities, organised trading facilities or 3rd-country venues established in 3rd-country in respect of which the Commission has adopted an equivalence decision, as:

• Commission implementing decision (EU) 2017/2238 on the equivalence of the legal and supervisory framework applicable to designated contract markets and swap execution facilities in the United States of America in accordance with the MiFIR (the "USA Equivalence Decision", available here); and
• Commission implementing decision (EU) 2019/541 on the equivalence of the legal and supervisory framework applicable to approved exchanges and recognised market operators in Singapore in accordance with the MiFIR (the "Singapore Equivalence Decision", available here).

What's new?

On 13 June 2019, the ESMA updated the Public Register of those derivative contracts that are subject to the trading obligation under the MiFIR (ESMA70-156-300 — the "Updated Public Register").

The Updated Public Register includes several added United Kingdom's venues where some of the classes of derivatives subject to the trading obligation are available for trading.

The Updated Public Register is available here.

Background

The regulation (EU) 2017/2402 of the European Parliament and of the Council laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised ("STS") securitisation applies since 1 January 2019 (the "Securitisation Regulation", available here).

On 22 August 2018, the ESMA issued its final report concerning draft technical standards on disclosure requirements pursuant to Articles 7 and 17 of the Securitisation Regulation (ESMA33-128-474 — the "Final Report", available here). In a letter dated 30 November 2018, the European Commission ("Commission") informed the ESMA that it intends to endorse those draft technical standards only once certain amendments are introduced (the "EC Letter", available here). The Commission requested the ESMA to examine whether the 'No Data' option could be available for additional fields of the draft templates (especially for asset-backed commercial paper ("ABCP") securitisation). In addition, the Commission requested the ESMA to closely monitor the use of and need for these 'No Data' options in each template field, as part of its future contribution to the Joint Committee's report mandated in Article 44 of the Securitisation Regulation. Based on the EC Letter, the ESMA may amend the draft technical standards presented in the Final Report within 6 weeks and submit them in a formal opinion to the Commission.

On 31 January 2019, the ESMA issued an opinion containing a revised set of draft regulatory and implementing technical standards ("Draft Disclosure RTS/ITS") under the Securitisation Regulation, which concern the details of a securitisation to be published by the originator, sponsor and Securitisation Special Purpose Entity ("SSPE"), as well as the relevant format and templates (ESMA33-128-600 — the "Opinion", available here). In this context, the ESMA agrees with the above-mentioned Commission's requests to amend its Draft Disclosure RTS/ITS and substantially expanded the ability for reporting entities to use the 'No Data' options in the respective disclosure templates (especially for ABCP securitisation). The ESMA also adjusted the content of certain fields in the templates, where it considered that this could more appropriately address the EC Letter. The ESMA also clarified the templates to be used to provide any inside information, as well as information on significant events affecting the securitisation, in accordance with Article 7(1) (f) and (g) of the Securitisation Regulation.

Moreover, based on the feedback received to the Final Report, the ESMA issued a set of questions and answers in order to provide a comprehensive package of clarifications for market participants. (ESMA33-128-563 — the "Q&As Document").

What's new?

On 27 May 2019, the ESMA issued an updated version of the Q&As Document (ESMA33-128-563 — the "Updated Q&As Document"). The following Q&As were modified under the Section 5. "Q&As on Disclosure Requirements and Templates":

• Q&A 5.1.1.1 ("Timelines");
• Q&As 5.1.2.2, 5.1.2.4 ("General questions of relevance to the disclosure technical standards");
• Q&A 5.1.3.6 ("Questions related to several fields in several templates");
• Q&As 5.1.4.5 - 5.1.4.6, 5.1.4.10 ("Questions related to groups of fields or whole sections which appear in multiple templates");
• Q&As 5.1.5.4, 5.1.5.13, 5.1.5.14 ("Questions related to individual fields which appear in multiple templates");
• Q&As 5.12.1, 5.12.3 - 5.12.6 ("Annexes 12 and 13: Investor Reports"); and
• Q&A 5.13.4 ("Annexes 14 and 15: Inside Information or Significant Event Information").

Furthermore, the following Q&As were added under the Section 4. "Q&As on STS Notifications" (i.e. Q&As 4.1 - 4.4) and the Section 5:

• Q&As 5.1.2.5 - 5.1.2.12 ("General questions of relevance to the disclosure technical standards"); 
• Q&As 5.1.3.7 - 5.1.3.8 ("Questions related to several fields in several templates");
• Q&As 5.1.4.14 - 5.1.4.19 ("Questions related to groups of fields or whole sections which appear in multiple templates");
• Q&As 5.1.5.15 - 5.1.5.22 ("Questions related to individual fields which appear in multiple templates");
• Q&A 5.2.2 ("Annex 2: Underlying Exposures - Residential Real Estate");
• Q&As 5.3.1 - 5.3.5 ("Annex 3: Underlying Exposures - Commercial Real Estate");
• Q&A 5.4.3 ("Annex 4: Underlying Exposures - Corporate");
• Q&A 5.7.2 ("Annex 7: Underlying Exposures - Credit Cards");
• Q&A 5.10.1 ("Annex 10: Underlying Exposures - Non-Performing Exposures");
• Q&A 5.11.2 ("Annex 11: Underlying Exposures - ABCP");
• Q&As 5.12.2, 5.12.9 - 5.12.13 ("Annexes 12 and 13: Investor Reports"); and
• Q&A 5.13.5 - 5.13.10 ("Annexes 14 and 15: Inside Information or Significant Event Information").

For further information, the Updated Q&As Document is available here.

What's next?

Noteworthy is that the Updated Q&As Document states that further Q&As will be provided in due course under the following sections:

• Section 3 ("Q&As on general matters");
• Section 5.6 ("Annex 6: Underlying Exposures - Consumer");
• Section 5.8 ("Annex 8: Underlying Exposures - Leasing"); and
• Section 5.9 ("Annex 9: Underlying Exposures - Esoteric").

Background

The regulation (EU) 2017/2402 of the European Parliament and of the Council, which lays down a general framework for securitisation and creates a specific framework for simple, transparent and standardised ("STS") securitisation, applies since 1 January 2019 (the "Securitisation Regulation", available here).

In accordance with Article 27(2) of the Securitisation Regulation, the originator, sponsor or Securitisation Special Purpose Entity ("SSPE") may use the service of a third party authorised under Article 28 to check whether a securitisation complies with Articles 19 to 22 or Articles 23 to 26. However, the use of such a service shall not, under any circumstances, affect the liability of the originator, sponsor or SSPE in respect of their legal obligations under the Securitisation Regulation.

Pursuant to Article 28(4) of the Securitisation Regulation, the ESMA submitted its final report on draft regulatory technical standards ("RTS") concerning the authorisation of firms providing STS verification services to the European Commission (the "Commission") on 16 July 2018 (ESMA33-128-473 — the "Final Report", available here).

The information to be provided by a 3rd party seeking authorisation to assess the compliance of securitisations with the STS criteria should enable a competent authority ("CA") to evaluate whether and to what extent the applicant meets the conditions of Article 28(1) of the Securitisation Regulation. Given that an authorised 3rd party will be able to provide STS assessment services across the EU, the application for authorisation should comprehensively identify that 3rd party, any group to which it belongs as well as the scope of its activities. With regard to the STS assessment services to be provided, the application should include the envisaged scope of the services to be provided as well as their geographical scope.

What's new?

On 29 May 2019, based on the Final Report, the Commission delegated regulation (EU) 2019/885 which supplements the Securitisation Regulation with regard to RTS specifying information to be provided to CA in an application for authorisation of a 3rd party assessing STS compliance (the "Regulation 2019/885") was published in the OJEU.

The Regulation 2019/885 is available here.

What's next?

The Regulation 2019/885 entered into force on 18 June 2019.

Background

The Directive 2014/95/EU of the European Parliament (the "Parliament") and of the Council amending the Directive 2013/34/EU (available here) as regards disclosure of non-financial and diversity information by certain large undertakings and groups, entered into force on 5 December 2014 (the "Non-Financial Reporting Directive", available here). The Non-Financial Reporting Directive requires large public interest entities with over 500 employees (e.g. listed companies, banks and insurance companies) to disclose certain non-financial information.

Against this background, the European Commission's (the "Commission") guidelines on non-financial reporting were published in the OJEU on 5 July 2017 (2017/C 215/01 – the "General Guidelines", available here). The 6 key principles of the General Guidelines specify how disclosed information should be (i) material, (ii) fair, balanced and understandable, (iii) comprehensive but concise, (iv) strategic and forward-looking, (v) stakeholder oriented, and (vi) consistent and coherent.

In June 2017, the FSB Task Force on Climate-related Financial Disclosures (the "TCFD") released its final recommendations, which provide a framework for companies and other organisations to develop more effective climate-related financial disclosures through their existing reporting processes (the "TCFD Recommendations", available here).

On 8 March 2018, the Commission adopted its sustainable finance action (COM(2018) 97 final – the "Action Plan", available here). On 24 May 2018, based on the Action Plan, the Commission published the following 3 legislative proposals in relation to sustainable finance:

• Proposal for a regulation of the Parliament and of the Council on the establishment of a framework to facilitate sustainable investment (COM(2018) 353 final – the "Taxonomy Proposal", available here);
• Proposal for a regulation of the Parliament and of the Council on disclosures relating to sustainable investments and sustainability risks and amending directive (EU) 2016/2341 (COM(2018) 354 final – the "Disclosure Proposal", available here); and
• Proposal for a regulation of the Parliament and of the Council amending regulation (EU) 2016/1011 on low carbon benchmarks and positive carbon impact benchmarks (COM(2018) 355 final – the "Benchmarks' Proposal", available here).

On 9 January 2019, the Technical Expert Group (the "TEG") on sustainable finance closed its consultation on developing the EU taxonomy (the "Taxonomy Consultation", available here).

On 10 January 2019, the TEG issued its final report on climate-related disclosures (the "Disclosure Report", available here).

On 7 April 2019, the TEG closed its consultation on the interim report proposing an EU Green Bond Standard (the "GBS Consultation", available here).

Besides, the TEG has been working on defining minimum standards for the methodologies of the "EU Climate Transition" and "EU Paris-aligned" benchmarks (respectively the "EU CTBs" and the "EU PABs"), addressing the risk of green-washing in the Benchmarks' Proposal.

What's new?

On 18 June 2019, the Commission issued the following guidelines and welcomed the following 3 TEG reports:

• Based mostly on the Disclosure Proposal and on the Disclosure Report, the Commission communicated on the "Guidelines on non-financial reporting - Supplement on reporting climate-related information" (C(2019) 4490 final – the "Supplementary Guidelines", available here)
  • The Supplementary Guidelines accompany and are consistent with the Non-Financial Reporting Directive;
  • The Supplementary Guidelines shall be read in conjunction with the General Guidelines, which remain fully applicable;
  • The Supplementary Guidelines integrate the TCFD Recommendations;
  • The Supplementary Guidelines (as the General Guidelines) are not legally binding - Companies may chose alternative approaches to the reporting of climate-related information, provided they meet legal requirements; and
  • For further information, the dedicated Press Release and FAQ are respectively available here and here.
• Based mostly on the Taxonomy Proposal and on the Taxonomy Consultation, the Commission welcomed the TEG report on EU taxonomy (the "Taxonomy Report");
  • The Taxonomy Report presents a list of economic activities which can make a "substantial contribution" to climate change mitigation and criteria to "do no significant harm" to other environmental objectives;
  • The Taxonomy Report describes a framework for evaluating substantial contribution to climate change adaptation;
  • The list of economic activities covered in the Taxonomy Report is not exhaustive and additional activities should be added to the taxonomy in the future;
  • The Taxonomy Report emphasises that improvements in company disclosure of climate-related information will be necessary for the proposed taxonomy to function effectively – The Supplementary Guidelines shall help to fill the gap; and
  • For clarity purposes, the TEG published a supplement to the Taxonomy Report on how to use the taxonomy (the "Supplement to Taxonomy Report", available here).
• Based mostly on the GSB Consultation, the Commission welcomed the TEG report on EU GBS (the "GBS Report", available here); and
  • The TEG is proposing 10 recommendations, 3 of which relate to the establishment of the EU GBS, and the others relate to ways how EU governments, EU Institutions, market participants and other stakeholders can support and monitor the implementation of the EU GBS;
  • With reference to the 2nd recommendation, the EU GBS should comprise 4 core components: (i) alignment of green projects with the EU taxonomy, (ii) green bond framework, (iii) reporting and (iv) verification by accredited verifiers; and
  • The TEG has prepared a draft of the EU GBS attached in Annex 1 to the GBS Report.
• Based mostly on the Benchmarks' Proposal, the Commission welcomed the TEG interim report on climate benchmarks and benchmarks' ESG disclosures (the "Benchmarks Interim Report", available here).
  • Section 3 of the Benchmarks Interim Report details technical advice on minimum disclosure requirements to improve transparency and comparability of information across benchmarks not only regarding climate-related information, but also on a variety of ESG indicators; and
  • Sections 4 and 5 of the Benchmarks Interim Report provide detailed technical guidance on minimum standards recommended for the EU CTBs and the EU PABs.

What's next?

With regards to the Supplementary Guidelines, companies should be able to use them for reports published in 2020, which cover the financial year 2019. The services of the Commission expect to gather feedback on the use of the Supplementary Guidelines in the 2nd half of 2020.

With regards to the Taxonomy Report, the TEG should launch a call for feedback early July 2019 and will advise the Commission on how to take the feedback forward.

With regards to the GBS Report, no additional call for feedback is foreseen. The TEG will further work on its proposal for the accreditation of external verifiers, as well as monitor the latest developments in parallel on-going initiatives, both at EU level (e.g. taxonomy, EU ecolabel) and internationally (e.g. ISO work), so as to advise on consistency with the proposed EU GBS.

With regards to the Benchmarks Interim Report, a 6-week call for feedback has been launched in parallel. Taking into account the feedback received, the TEG is expected to publish the final version of the Benchmarks report by the end of September 2019. Following the publication of such final report, the Commission will develop a delegated act building on the TEG work. The Commission will conduct a formal consultation on this delegated act.

Background

On 26 November 2013, the Directive 2013/50/EU (available here) amending the Directive 2004/109/EC of the European Parliament and of the Council (the "Transparency Directive", available here) on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, entered into force. For ease of reading, the consolidated version of the Transparency Directive is available here.

In accordance with Article 4(7) of the Transparency Directive, issuers whose securities are admitted to trading on a regulated market shall prepare all annual financial reports in a single electronic reporting format by 1 January 2020.

Against this background, the ESMA was mandated to develop draft regulatory technical standards ("RTS") to specify the electronic reporting format, with due reference to current and future technological options. On 18 December 2017, the ESMA published its final report on the draft RTS (ESMA32-60-204 — the "Final Draft RTS", available here) on the European Single Electronic Format ("ESEF"), the ESEF reporting manual on preparation of annual financial reports (ESMA32-60-254 — the "Reporting Manual", available here) and a specific briefing note on preparing for 2020: ESEF field tests and the Reporting Manual (ESMA71-99-671 — the "Briefing Note", available here).

On 17 December 2018, the European Commission (the "Commission") issued its draft delegated regulation supplementing the Transparency Directive with regard to RTS on the specification of a single electronic reporting format (C(2018) 8612 final — the "Draft Delegated Regulation", available here). In particular, the Draft Delegated Regulation contained the following provisions:

• Issuers shall prepare their entire annual financial reports in eXtensible HyperText Markup Language ("XHTML") format;
• For issuers filing International Financial Reporting Standards ("IFRS") consolidated financial statements, there is an obligation to mark them up using the eXtensible Business Reporting Language ("XBRL"), in accordance with the taxonomy and specifications laid down in the Annexes;
• The extent to which the content of annual financial reports shall be marked up with XBRL with a gradual approach (2020 for detailed tagging of the primary financial statements, and 2022 for block tagging of the notes to IFRS consolidated financial statements);
• Provisions in relation to the marking up of parts of an issuer's financial reports other than IFRS consolidated financial statements, which is allowed If the Member State of incorporation of such issuer provides a taxonomy for such purpose; and
• Issuers incorporated in third countries shall not mark up any parts of their annual financial reports other than IFRS consolidated financial statements.

The Draft Delegated Regulation had 6 Annexes (the "Annexes", available here) as follows:

• Annex I — Legend for Tables 1 and 2 of Annex II, and for the Tables of Annexes IV and VI;
• Annex II — Mandatory mark-ups;
• Annex III — Applicable Inline XBRL specifications;
• Annex IV — Marking up and filing rules;
• Annex V — XBRL taxonomy files; and
• Annex VI — Schema of the core taxonomy.

On 21 March 2019, the ESMA published taxonomy files to facilitate implementation of the requirements set out by the Final Drat RTS (ESMA32-60-440 — the "Taxonomy Files", available here and dedicated "Press Release", available here).

What's new?

On 29 May 2019, the Commission delegated regulation (EU) 2018/815 supplementing the Transparency Directive with regard to RTS on the specification of a single electronic reporting format was published in the OJEU (the "Delegated Regulation 2018/815").

On the same day, the Commission published a memo with frequently asked questions on the ESEF, as specified in the Delegated Regulation 2018/815 (the "FAQ Document").

For further information, the Delegated Regulation 2018/815 is available here.

The FAQ Document is available here.

What's next?

The Delegated Regulation 2018/815 shall enter into force on 18 June 2019. It shall apply to annual financial reports containing financial statements (the use of ESEF for the preparation of annual financial reports will become mandatory) for financial years beginning on or after 1 January 2020. Depending on the length of the financial year, most companies’ reports in ESEF will be published for the first time in 2021 in relation to annual financial reports of fiscal year 2020.

The Delegated Regulation 2018/815 will be amended on a yearly basis to reflect possible updates made in the IFRS taxonomy. The Reporting Manual will be updated if need be for clarification purposes and in the case of technical amendments to the Delegated Regulation 2018/815.

On 7 June 2019, the ESMA published its final report on the draft RTS amending the Delegated Regulation 2018/815 on the updates of the taxonomy to be used for the ESEF (ESMA32-60-474 — the "Final Draft RTS Amending the Delegated Regulation 2018/815", available here). As the core taxonomy currently included in the Delegated Regulation 2018/815 is the 2017 IFRS taxonomy, the Final Draft RTS Amending the Delegated Regulation 2018/815 aims to replace that version with the most recent one published by the 2019 IRFS Taxonomy 2019 (available here). This update is a purely technical amendment to the Delegated Regulation 2018/815.

The FAQ Document informs that the ESEF is the first step in the digitalisation of public corporate financial information. Other initiatives – such as the activation of a European Electronic Access Point ("EEAP") – are meant to complement the ESEF in the digitalisation of public corporate reporting. In the context of both the fitness check on public reporting by companies and a pilot project called the European Financial Transparency Gateway (the "EFTG"), the Commission is exploring the role of digitalisation in making information more accessible and more usable for users/investors (more information on the EFTG is available here).

Background

In the context of the mandatory first completing of the Ultimate Beneficial Owners register (“UBO Register”) introduced by the Belgian law of 18th September 2017 on prevention of money laundering and terrorist financing and on limitation of the use of cash, the Federal Public Service Finance (“FPS Finance”) and the Federation of Enterprises in Belgium (“FBE”) recently published guidelines advising the relevant entities on several steps to follow for a correct registration of ultimate beneficial owners.

What's new?

The Booklet splits the registration process in five steps, also reminds criteria to identify direct and indirect ultimate beneficial owners and enumerates the information to collect by the relevant entities.

What's next?

As a reminder, the relevant entities must register their beneficial owners on the FPS Finance website before 30th September 2019. Failure to register triggers a risk of administrative fine from 250 to 50.000 EUR.

Background

On 28th May 2019, the FSMA published a Communication 2019_11, which provides some precisions on the mandatory periodic questionnaire on the prevention of ML/FT (“periodic AML Survey”). This communication concerns in particular Belgian AIFM, Belgian non-public self-managed AIF, branches of foreign AIFM, branches of foreign non-public self-managed AIF, and clarifies several questions in order to avoid any wrong understanding.

What's new?

The FSMA addresses thirteen points for consideration, e.g. “political exposed person(s)”, “internal reports”, “overall assessment of risks”, “self-assessment”, “identification and verification of the clients’, directors’ and ultimate beneficial owners’ identity”, and clarifies the meaning and scope of relating questions to ensure appropriate answers.

What's next?

As a reminder, the periodic AML Survey is available on FiMiS platform since 3rd June and must be completed before 7th July 2019.

Background

The Directive 2001/97/EC of the European Parliament and of the Council of 4 December 2001 amending Council Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering (the "AMLD", available here) was transposed in Luxembourg by the Law of 12 November 2004 on the fight against money laundering and financing or terrorism ("AML/CFT"), which, in its Articles 4 and 5, address group-wide policies and procedures as well as cooperation requirements with the authorities concerning AML/CFT (the "Law", as amended available here).

The Grand-ducal regulation of 1 February 2010 providing details on certain provisions of the Law (the "Grand-ducal Regulation", available here) in its Article 7 addresses appropriate internal management requirements including the development of appropriate compliance management arrangements, e.g. the appointment of at least one AML/CFT compliance officer at the management level.

The CSSF regulation 12-02 of 14 December 2012 on the fight against money laundering and terrorist financing ("ML/FT") (the "CSSF Regulation 12-02", available here) in its Article 40(1) refers to Articles 4(1) and 5(1) of the Law and Article 7(2) of the Grand-ducal Regulation and addresses appointment of persons responsible for the control of the AML/CFT ("AML/CFT Compliance Officers").

What's new?

On 23 May 2019, the Commission de Surveillance du Secteur Financier ("CSSF") published a communication (the "Communication") stating that it has put in place an on-line template collecting standardised key information concerning ML/FT to which the professionals under its supervision are exposed and the implementation of related risk mitigation and targeted financial sanctions measures (the "AML/CFT Investment Fund Questionnaire").

The AML/CFT Investment Fund Questionnaire is complementary to the current application questionnaire already available on the CSSF website and:

• Must be completed when sending a licencing application for setting up a specialised investment fund ("SIF"), undertakings for collective investment ("UCI") Part II fund, investment company in risk capital ("SICAR") or European long-term investment fund ("ELTIF");
• Should be completed by the AML/CFT Compliance Officer for the fund, as designated in accordance with Article 40(1) of CSSF Regulation 12-02; and
• Contributes to the CSSF’s ongoing assessment of ML/FT risks present in the investment fund industry and forms part of the AML/CFT risk-based supervision approach put in place by the CSSF over recent years.

The Communication is available here.

The AML/CFT Investment Fund Questionnaire is available on the CSSF website here under the relevant forms, depending on the type of fund intended to be launched.

What's next?

The CSSF notes that it must receive the AML/CFT Investment Fund Questionnaire by email before it acknowledges receipt of the corresponding licensing application file.

Background

The Regulation (EU) No 909/2014 of the European Parliament and of the Council on improving securities settlement in the EU and on central securities depositories ("CSDs") applies since 1 January 2015 (the "CSDR", available here). The aim of the CSDR is to harmonise certain aspects of the settlement cycle and settlement discipline and to provide a set of common requirements for CSDs operating securities settlement systems across the EU.

The European Commission (the "Commission") has adopted delegated and implementing acts to specify how competent authorities ("CAs") and market participants shall comply with the obligations laid down in the CSDR (the "Implementing and Delegated Acts", available here). The Implementing and Delegated Acts include, among other:

• The Commission Delegated Regulation (EU) 2017/391 supplementing the CSDR with regard to regulatory technical standards further specifying the content of the reporting on internalised settlements (the "RTS on Internalised Settlement", available here); and
• The Commission Implementing Regulation (EU) 2017/393 laying down implementing technical standards with regard to the templates and procedures for the reporting and transmission of information on internalised settlements in accordance with the CSDR (the "ITS on Internalised Settlement", available here).

According to Article 9(1) of the CSDR, settlement internalisers shall report to the CAs of their place of establishment, on a quarterly basis, the aggregated volume and value of all securities transactions that they settle outside securities settlement systems. CAs shall transmit the information received to the European Securities and Markets Authority (the "ESMA") and shall inform the ESMA of any potential risk resulting from that settlement activity.

On 25 February 2019, the Luxembourg Financial Sector Supervisory Commission (the "CSSF") published its circular 19/709 concerning introduction of quarterly internalised settlement reporting requirements pursuant to Article 9(1) of the CSDR (the "CSSF Circular 19/709", available here).

On 30 April 2019, the ESMA published the translations of guidelines on internalised settlement reporting under Article 9 of the CSDR translated in all EU official languages (ESMA70-151-367 – the "ESMA Guidelines", available here).

On 23 May 2019, the ESMA published its technical guidance for settlement internalisers – report validation rules (ESMA65-8-6448 — the "ESMA Technical Guidance", available here).

What's new?

On 14 June 2019, the CSSF published the "CSDR Article 9 handbook", which describes the reporting principles to be used by the settlement internalisers in order to report activity to the CSSF as the CA for Luxembourg (the "Handbook").

The information detailed in the Handbook relates to:

• Reporting obligations including the description of the details to report;
• Technical overview of the reporting system;
• Data and file format of the reports; and
• Exchange and encryption protocols.

Any instruction given by the CSSF in the Handbook is based on the aforementioned legal framework and the ESMA Technical Guidance.

The Handbook is available here.

What's next?

The collection of data on internalised settlements will be performed by the CSSF and sent to the ESMA.

In this context, the CSSF will be collecting data from:

• Settlement internalisers established and operating within Luxembourg jurisdiction, reporting their internalised settlement activity, including the activity of their branches in the Luxembourg jurisdiction;
• Settlement internalisers established in the Luxembourg jurisdiction, reporting the internalised settlement activity of their branches operating in the jurisdiction of other CAs within the EU;
• The branches operating in the EU of settlement internalisers established outside the EU, reporting on their internalised settlement activity within the Luxembourg jurisdiction;
• Settlement internalisers established within the Luxembourg jurisdiction, reporting the internalised settlement activity of their non-EU branches in an aggregated report with the settlement internaliser country code of operation set to "TS" (i.e. third-country States).

In accordance with Article 1(1) of the ITS on Internalised Settlement, the first internalised settlement reporting should be sent to the CSSF via the transmission channels E-File or SOFiE within 10 working days starting from the end of the Q2 2019.

Background

The directive (EU) 2016/1148 of the European Parliament and of the Council concerning measures for a high common level of security of network and information systems across the Union entered into force on 8 August 2016 (the "NIS Directive", available here). Member States had to transpose the NIS Directive into national legislation by 9 May 2018 and identify operators of essential services ("OES") by 9 November 2018.

The NIS Directive has 3 main objectives:

• Improving national cybersecurity capabilities;
• Building cooperation at EU level; and
• Promoting a culture of risk management and incident reporting among key economic actors, especially OES for the maintenance of economic and societal activities and Digital Service Providers ("DSPs").

In accordance with the Article 4(4) and Annex II (3) and (4) of the NIS Directive, the following entities subject to certain conditions shall be in scope of the NIS Directive:

• Credit institutions as defined in point (1) of Article 4(1) of the Regulation (EU) No 575/2013 ("CRR", available here);
• Operators of trading venues as defined in Article 4(24) of the Directive 2014/65/EU ("MiFID II", available here); and
• Central counterparties ("CCPs") as defined in Article 2(1) of the Regulation (EU) No 648/2012 ("EMIR", available here).

On 6 June 2018, the Luxembourg Government submitted the bill 7314 transposing certain provisions of the NIS Directive to the Luxembourg Parliament (the "Bill 7314", available here only in French). All the legislative steps on the adoption of the Bill 7314 by the Luxembourg Parliament are available here (only in French).

What's new?

On 31 May 2019, based on the adopted Bill 7314, the Luxembourg law of 28 May 2019 transposing the NIS Directive was published in the Memorial A372 ("Transposition Law").

In particular, Article 3(1) of the Transposition Law designates the CSSF as the national competent authority for the OES and DSPs in relation to the sectors "Banking" and "Financial Market Infrastructures". Besides, pursuant to Article 14 of the Transposition Law, where the CSSF finds a breach of the obligations laid down in Articles 8, 9, 11 and 12 of the Transposition Law or by measures taken pursuant to the Transposition Law, it may impose one or several of the following sanctions to the concerned OES or DSP under its remit:

• A warning;
• A reprimand; or
• A fine up to EUR 125'000 (the fine may be imposed only if the relevant breaches are not subject to a criminal sanction).

For further information, the Transposition Law is available here (only in French).

What's next?

The Transposition Law will enter into force on 1 July 2019.

Background

Professional investors could soon benefit of a new type of fund. Last autumn, the Swiss Federal Council instructed the Federal Department of Finance to draw up a proposal for a legislative revision which will facilitate the launch of new innovative products. The new provisions aim at improving Switzerland’s competitiveness with regard to competing foreign financial centers.

With the introduction in the Collective Investment Schemes Act (“CISA”) of a category of funds which are not subject to approval by FINMA, Switzerland’s position as a location for funds and asset management will be strengthened through:

• a flexible collective investment scheme under Swiss law,
• a low-cost alternative with a short time to market.

What's new?

The draft revision of the CISA has been presented by the Federal Department of Finance and, during its meeting on 26 June 2019, the Federal Council opened the consultation procedure.

A new category of funds (Limited Qualified Investment Funds or L-QIF) has been included in the amendment to the CISA. Access to this type of funds will be limited to qualified investors as defined by CISA, which will be referenced as professional clients (such as pension funds and insurance companies) with the introduction of the new Financial Services Act and Financial Institutions Act in 2020.

No FINMA approval will be required for L-QIF, but these funds will benefit of indirect supervision via FINMA-approved fund management companies and fund administrators. This element satisfies the needs of qualified investors in terms of clients protection while providing a guarantee of quality and security. Of course, it will be possible to request product approval at a later stage.

In terms of audit, fund-specific audits also for L-QIF will apply.

What's next?

The consultation period on CISA revision started on 26 June 2019 and will continue until 17 October 2019. Between June and October the Swiss Funds and Asset Management Association (SFAMA) will draft its response.

It is likely that the adoption of a dispatch by the Federal Council will take place during the first quarter 2020 and the deliberation process of the chambers should be completed by summer 2020, aiming at an entry into force of the revised CISA on 1 January 2021.

https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-75601.html

https://www.newsd.admin.ch/newsd/message/attachments/57520.pdf

Background

Article 307bis, §3 of the Income tax code of 1992 states that corporate entities subject to the Belgium corporate tax must file their declaration by electronic way.

What's new?

The Royal Decree dated 26th May 2019 has been adopted and published. It introduced a new declaration form for Belgian corporate tax. The Decree applies as from its publication.

What's next?

This new declaration form must be used for the 2019 financial year by corporate entities subject to corporate tax.

Background

The Organisation for Economic Co-operation and Development ("OECD") has developed the Common Reporting Standard ("CRS") as a global reporting standard to achieve a comprehensive and multilateral automatic exchange of information ("AEoI") framework which impacts a wide variety of financial and non-financial institutions.

CRS imposes obligations on Financial Institutions to collect information to establish their customers’ country of tax residence and to report account holder information to their local tax authorities who will then exchange this information with the tax authorities of countries where the account holder is resident.

On 24 December 2015, the Luxembourg Parliament transposed in national law the Directive 2014/107/EU amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (the "Law", available here).

On 17 May 2019, the 2019 updated list of participating jurisdiction ("Juridictions partenaires") and jurisdiction subject to declaration in the framework of CRS has been published in the Memorial A – N° 316 of 17 May 2019 (the "2019 Updated list"). The Updated list is included in the Grand-Ducal Regulation dated 16 May 2019 and modifying the Grand-Ducal Regulation dated 15 March 2016.

What's new?

On 3 June 2019, the Luxembourg tax authorities (Administration des contributions directes) published a Frequently Asked Question document (the "FAQ") related to CRS.

The FAQ is available here (only in French).

What's next?

Further clarifications / updated FAQ might be expected.

Background

In January 2016, the Commission launched a three-step process for establishing the common EU list of non-cooperative jurisdictions as part of its broader agenda to curb tax evasion and avoidance. This initiative was justified by the fact that a common EU list of non-cooperative jurisdictions will carry much more weight than the existing patchwork of national lists when dealing with non-EU countries that refuse to comply with international tax good governance standards.

On 5 December 2017, the ECOFIN Council published its conclusions on the EU common list of non-cooperative jurisdictions in tax matters, also referred to as the "blacklist". This initiative forms part of the EU’s broader agenda on furthering tax transparency, fair taxation and the implementation of anti-BEPS measures with the dual aim of raising the level of good global governance and tackling tax fraud, evasion and avoidance.

On 21 March 2018, guidelines have been adopted which marked the first step in stopping the transit of EU funds through non-cooperative tax jurisdictions.

What's new?

On 14 June 2019, the ECOFIN Council decided to remove Dominica from the EU list of non-cooperative jurisdictions for tax purposes (the "Decision") as Dominica completed the necessary steps to sign and ratifies the OECD multilateral convention on mutual administrative.

The Decision is available here.

What's next?

The countries that are still blacklisted should continue to reform their legislation in order to comply with the new international standards.