On December 9 2023, the European Commission published a press release on welcoming political agreement on Artificial Intelligence (AI) Act.

The AI Act introduces dedicated rules for general purpose AI models that will ensure transparency along the value chain. For very powerful models that could pose systemic risks, there will be additional binding obligations related to managing risks and monitoring serious incidents, performing model evaluation and adversarial testing. These new obligations will be operationalised through codes of practices developed by industry, the scientific community, civil society and other stakeholders together with the Commission.

In terms of governance, national competent market surveillance authorities will supervise the implementation of the new rules at national level, while the creation of a new European AI Office within the European Commission will ensure coordination at European level. The new AI Office will also supervise the implementation and enforcement of the new rules on general purpose AI models. Along with the national market surveillance authorities, the AI Office will be the first body globally that enforces binding rules on AI and is therefore expected to become an international reference point. For general purpose models, a scientific panel of independent experts will play a central role by issuing alerts on systemic risks and contributing to classifying and testing the models.

The political agreement is now subject to formal approval by the European Parliament and the Council and will entry into force 20 days after publication in the Official Journal. The AI Act would then become applicable two years after its entry into force, except for some specific provisions: Prohibitions will already apply after 6 months while the rules on General Purpose AI will apply after 12 months.

On November 4 2023, the European Securities and Markets Authority (ESMA) published a Euro Risk-Free Rates Working Group’s (EUR RFR WG) final statement announcing the completion of EU Interest Rate Reform.

Regulators, industry bodies and market participants have prepared and cooperated for more than a decade to anchor financial markets to more robust, transparent and sustainable interest rate benchmarks. The Working Group encourages all firms to consider the use of €STR across asset classes and to increase their efforts in adopting €STR-based fallbacks in line with the recommendations of this Working Group, other relevant guidance and regulation.

The global interest rates reform has been a multi-year international effort underpinned by a strong common interest between the private and public sectors. In the EU, the Working Group has represented the forum in which public authorities and market participants (including banks, market infrastructures and industry associations) collaborated towards a common goal: sounder and more resilient interest rate benchmarks. At its meeting on November 13 2023, the Working Group agreed that the current mandate had been completed and that the Group in its current form will cease. However, the ESMA will continue to monitor developments in the EU benchmarks landscape (including in respect of areas noted above where market participants need to take further action) and will contact the Working Group’s participants again in the future where necessary, depending on market developments related to interest rate benchmarks. 

The ESMA encourages industry to ensure that all financial products referencing EURIBOR, including mortgages, embed robust fallback provisions.

On December 15 2023, the European Securities and Markets Authority (ESMA) updated its questions and answers (Q&A) on the Benchmarks Regulation (BMR).

The update relates to the change in the answer A9.3 and modification of answer A4.4.

• Q9.3: In Article 51(5) of the BMR, what does “where the benchmark is already used in the Union” mean
• A9.3: ESMA considers that the meaning of the term “where the benchmark is already used in the Union” in Article 51(5) of the BMR is “where the benchmark is already used in the Union on or before December 31 2025”.
• Q4.4: Does the provision of and contribution to benchmarks that are used outside the European Union only fall within the scope of the BMR?
• A4.4: The scope of the Benchmarks Regulation is defined in Article 2(1) of the BMR. As a general rule Article 2(1) of the BMR provides that the BMR “applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark within the Union”. The term ”provision of a benchmark” is defined in point (5) Article 3(1) of the BMR. The BMR’s objective is to ensure the proper functioning of the European market and a high degree of consumer and investor protection vis-à-vis benchmarks at Union level, as underlined in Recital 6 of the BMR. In contrast, it is not the ambition of the BMR to protect users of benchmarks worldwide, possibly conflicting with any applicable third country regimes. Accordingly, Article 29 of the BMR refers to the use of a benchmark in the Union.

ESMA therefore considers that the BMR does not apply to the provision of indices that are used as benchmarks (i.e. for the purposes referred to in point (3) of Article 3(1) of the BMR) exclusively outside the Union. The same reasoning would apply to the contribution of input data with respect to a benchmark an index that is used as a benchmark exclusively outside the Union. An administrator providing an index exclusively to users outside the Union would have to comply with any applicable third country regimes with respect to benchmarks.

Where an index is used as a benchmark in the Union, BMR will apply unless the administrator is unaware and could not reasonably have been aware it is so used pursuant to Article 2(2)(h).

On December 15 2023, the European Securities and Markets Authority (ESMA) updated its Benchmark Regulation (BMR) Brexit statement.

On January 31 2020, as the EU-UK Withdrawal Agreement entered into force, the UK withdrew from the EU and officially became a third country. The Withdrawal Agreement provided for a transition period which ensured that EU law continued to apply to the UK from 1 February 2020 to 31 December 2020. At the end of the transition period, the UK left the Single Market.

Now that the Brexit transition period has ended, UK based administrators that were initially included in the “ESMA register of administrators and third-country benchmarks” (ESMA register) have been deleted as the BMR is no longer applicable to UK based benchmark administrators. UK based administrators that were originally included in the ESMA register as EU administrators, are now qualified as third country administrators (for which the BMR foresees different regimes to be included in the ESMA register, being equivalence, recognition or endorsement).

However, due to the fact that recently the BMR transitional period, as defined in BMR Article 51(5) has been extended to December 31 2025, the change in the ESMA register does not yet have an effect on the ability of EU27 supervised entities to use the benchmarks provided by any third country administrators, including UK ones. During the BMR transitional period, third country benchmarks can still be used by supervised entities in the Union if the benchmark is already used in the Union as a reference for financial instruments, financial contracts, or for measuring the performance of an investment fund. Therefore, EU supervised entities can until December 31 2025 use third country UK based benchmarks even if they are not included in the ESMA register. In the absence of an equivalence decision by the European Commission, UK based administrators have until the end of the extended BMR transitional period (December 31 2025) to apply for recognition or endorsement in the EU, in order for the benchmarks provided by these UK based administrators to be included in the ESMA register again.

On December 1 2023, the European Parliament published a press release on reaching an informal agreement with the Council of the European Union on the Cyber Resilience Act.

The Members of the European Parliament (MEPs) reached a deal with the Presidency of the Council on new cyber resilience rules to protect all digital products in the EU from cyber threats.

Parliament and Council negotiators reached an informal agreement on the Cyber Resilience Act, which aims to ensure that products with digital features are secure to use, resilient against cyber threats and provide enough information about their security properties.

The rules will put important and critical products into different lists based on their criticality and the level of cybersecurity risk they pose. Two lists will be proposed and updated by the European Commission. During negotiations, MEPs secured an expansion of the list of covered devices with products such as identity management systems software, password managers, biometric readers, smart home assistants and private security cameras. Products should also have security updates installed automatically and separately from functionality ones.

MEPs also pushed for the European Union Agency for Cybersecurity (ENISA) to be more closely involved when vulnerabilities and incidents occur. The agency will be notified by the member state concerned and receive information so it can assess the situation and, if it estimates that the risk is systemic, will inform other member states so they are able to take the necessary steps.

To emphasise the importance of professional skills in the cybersecurity field, MEPs also managed to introduce education and training programmes, collaboration initiatives, and strategies to enhance workforce mobility. The agreed text will now have to be formally adopted by both Parliament and Council in order to come into law. The Industry, Research and Energy Committee will hold a vote on the file in a forthcoming meeting.

On December 22 2023, the European Union published the Regulation (EU) 2023/2854 of the European Parliament and of the Council of December 13 2023 on harmonised rules on fair access to and use of data and amending Regulation (EU) 2017/2394 and Directive (EU) 2020/1828 (Data Act).

In recent years, data-driven technologies have had transformative effects on all sectors of the economy. The proliferation of products connected to the internet in particular has increased the volume and potential value of data for consumers, businesses and society. High-quality and interoperable data from different domains increase competitiveness and innovation and ensure sustainable economic growth. The same data may be used and reused for a variety of purposes and to an unlimited degree, without any loss of quality or quantity.

Barriers to data sharing prevent an optimal allocation of data for the benefit of society. Those barriers include a lack of incentives for data holders to enter voluntarily into data sharing agreements, uncertainty about rights and obligations in relation to data, the costs of contracting and implementing technical interfaces, the high level of fragmentation of information in data silos, poor metadata management, the absence of standards for semantic and technical interoperability, bottlenecks impeding data access, a lack of common data sharing practices and the abuse of contractual imbalances with regard to data access and use.

In order to respond to the needs of the digital economy and to remove barriers to a well-functioning internal market for data, it is necessary to lay down a harmonised framework specifying who is entitled to use product data or related service data, under which conditions and on what basis. Accordingly, Member States should not adopt or maintain additional national requirements regarding matters falling within the scope of this Regulation, unless explicitly provided for herein, since this would affect its direct and uniform application. Moreover, action at Union level should be without prejudice to obligations and commitments in the international trade agreements concluded by the Union.

This Regulation ensures that users of a connected product or related service in the Union can access, in a timely manner, the data generated by the use of that connected product or related service and that those users can use the data, including by sharing them with third parties of their choice. It imposes the obligation on data holders to make data available to users and third parties of the user’s choice in certain circumstances. It also ensures that data holders make data available to data recipients in the Union under fair, reasonable and non-discriminatory terms and conditions and in a transparent manner. Private law rules are key in the overall framework for data sharing. Therefore, this Regulation adapts rules of contract law and prevents the exploitation of contractual imbalances that hinder fair access to and use of data. This Regulation also ensures that data holders make available to public sector bodies, the Commission, the European Central Bank or Union bodies, where there is an exceptional need, the data that are necessary for the performance of a specific task carried out in the public interest. In addition, this Regulation seeks to facilitate switching between data processing services and to enhance the interoperability of data and of data sharing mechanisms and services in the Union. This Regulation should not be interpreted as recognising or conferring any new right on data holders to use data generated by the use of a connected product or related service.

This Regulation lays down harmonised rules, inter alia, on:

• the making available of product data and related service data to the user of the connected product or related service;
• the making available of data by data holders to data recipients;
• the making available of data by data holders to public sector bodies, the Commission, the European Central Bank and Union bodies, where there is an exceptional need for those data for the performance of a specific task carried out in the public interest;
• facilitating switching between data processing services;
• introducing safeguards against unlawful third-party access to non-personal data; and
• the development of interoperability standards for data to be accessed, transferred and used.

This Regulation enters into force on 11 January 2024. It shall apply from 12 September 2025.

On December 6 2023, the Council of the European Union and the European Parliament adopted their negotiating mandates on European Market Infrastructure Regulation (EMIR) Refit before entering trilogues.

The Council adopted a mandate to start negotiations with the European Parliament on a review of the European market infrastructure regulation and directive. The review aims to make the EU clearing landscape more attractive and resilient, to support the EU’s open strategic autonomy and to preserve the EU’s financial stability.

The European Market Infrastructure Regulation (EMIR) lays down rules on over-the-counter (OTC) derivatives, central counterparties (CCPs) and trade repositories. The proposed EMIR review contains several legislative measures to improve EU clearing services, notably by streamlining and shortening procedures, improving consistency between rules, strengthening CCP supervision and requiring market participants subject to a clearing obligation to clear a portion of the products, which have been identified by ESMA as of substantial systemic importance, through active accounts at EU CCPs. The Council ensured that in practice it is feasible for supervisory authorities to apply streamlined supervisory processes, such as authorisation and validation procedures.

It strengthened the role of supervisory frameworks, while ensuring an appropriate division of tasks between national authorities establishing coordination at European level, in particular by establishing a Joint Monitoring Mechanism and providing ESMA with a coordination role in cross-border emergency situations.

The Council set a solid active account requirement (AAR) that will require certain financial and non-financial counterparties to have an account at an EU CCP, which includes operational elements such as the ability to handle the counterparty’s transactions at short notice if need be and activity elements so that the account is effectively used. This is ensured by a number of requirements, which have to be fulfilled by these accounts, including requirements for counterparties above a certain threshold to clear trades in the most relevant sub-categories of derivatives of substantial systemic importance defined in terms of class of derivative, size and maturity.

The Members of the European Parliament (MEPs) want to centralise the supervision of EU CCPs and address the financial stability risks caused by the EU clearing members and clients being exposed to systemically important third-country CCPs. They also want to make clearing services and European CCPs more efficient and competitive.

With their vote, MEPs aim to have an adequate supervisory framework. To this end, they proposed that European Securities and Markets Authority (ESMA) should directly supervise the EU CCPs. They should apply to the ESMA for authorisation and report their risk management data as well as consult and inform ESMA about their recovery and resolution plans. Recognised third country CCPs should annually report to ESMA the scope of their clearing activity.

MEPs agreed that financial counterparties or non-financial counterparties that are subject to the clearing obligation should hold at least one active account at a CCP established in the EU and regularly clear there systematically important products. Given the novelty of the requirement, MEPs also agreed that further measures such as the requirement to clear at least a proportion of trades through the active account should be phased in gradually and only after the Commission carries out a cost-benefit analysis and assess the impact of the requirement on financial stability and international competitiveness of EU counterparties. An account is considered active if it posts initial and daily variation margins, has in place the necessary IT connectivity, internal processes and legal documentation and can demonstrate that its functioning would not be affected in the event of a significant and sudden increase in clearing activity.

CCPs would be subject to streamlined procedures if they provide additional services or changing risks models. Where a CCP intends to clear a new currency or offer a new settlement mechanism, it would be subject to a non-objection procedure. In case a CCP adopts changes on a regular basis ('business as usual') it would notify ESMA before implementing them, instead of being subject to authorisation procedures. This should significantly alleviate the burden on competent authorities, and increase the capacity of CCPs to implement changes that will not modify their risk profile.

On December 20 2023, the European Union published the European Single Access Point (ESAP) Regulation package in the Official Journal (OJ).

ESAP provides centralised access to publicly available information of relevance to financial services, capital markets and sustainability. Such access is needed in order to meet the rising demand for investable and diversified financial products that fall under the environmental, social and governance umbrella and to channel capital towards those products. ESAP is intended to be a forward-looking platform that should allow for the inclusion of public information of relevance to financial services, capital markets, sustainability and diversity stemming from future Union legislative acts, such as a Directive of the European Parliament and of the Council on corporate sustainability due diligence and amending Directive (EU) 2019/1937.

The establishment of a ESAP by 2024 is a main goal of the Capital Markets Union Action Plan adopted by the Commission in September 2020, to help provide EU-wide access to information activities and products of entities that are required to disclose information relevant to capital markets, financial services and sustainable finance.

The following legislative acts are published:

• Regulation (EU) 2023/2859 of the European Parliament and of the Council of December 13 2023 establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability.
• Directive (EU) 2023/2864 of the European Parliament and of the Council of December 13 2023 amending certain Directives as regards the establishment and functioning of the European single access point.
• Regulation (EU) 2023/2869 of the European Parliament and of the Council of December 13 2023 amending certain Regulations as regards the establishment and functioning of the European single access point.

The legislative acts entered into force on January 9 2024.

On December 19 2023, the European Securities and Markets Authority (ESMA) published a final report on draft Regulatory Technical Standards (RTS) for European Long-Term Investment Fund (ELTIF) Regulation.

The draft RTS cover: 

• the circumstances in which the life of a ELTIF is considered compatible with the life cycles of each of the individual assets, as well as different features of the redemption policy of the ELTIF;
• the circumstances for the use of the matching mechanism, i.e. the possibility of full or partial matching (before the end of the life of the ELTIF) of transfer requests of units or shares of the ELTIF by exiting ELTIF investors with transfer requests by potential investors; and
• the costs disclosure.

The RST final report delineates the specific rules that are to be applied providing a detailed framework for aspects such us minimum holding period and maximum redemption frequency, choice of liquidity management tools, notice period and maximum percentage of liquid assets that can be redeemed.

ESMA has considered the feedback received from 23 stakeholders that responded to the last public consultation and agreed amendments. 

ESMA suggest allowing the ELTIF manager to select the minimum holding period that is best adjusted to an individual ELTIF, based on criteria set in the RTS, and upon justifications to the competent authority.

ESMA proposes to include a common standard (maximum quarterly redemption frequency), while allowing the ELTIF manager to deviate from it, upon justifications to the competent authority.

It is suggested the mandatory implementation of at least one anti-dilution mechanism (in addition to notice period), and redemption gates, while allowing the ELTIF manager to deviate from it, in specific circumstances, and upon justifications to the competent authority.

In addition to applying minimum percentages of liquid assets, depending on the length of the notice period, different percentages of maximum amount of liquid assets that can be redeemed are also applied. 

The final RTS seeks to reach a balance by proposing prescriptive rules, while allowing ELTIF managers to deviate from these under specific circumstances.

ESMA submitted the draft technical standards to the European Commission for endorsement and final approval.

On December 19 2023, the European Securities and Markets Authority (ESMA) published a final report on the guidelines on stress test scenarios under the Money Market Funds Regulation (MMFR).

The final report combines an update of the methodology to implement the scenario related to the hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF, with the annual calibration of the risk parameters. 

Based on feedback received from stakeholders, the revised methodology includes parameters reflecting the liquidity stress affecting the money market and a new risk factor to simulate the additional impact of asset sales under stress market conditions. This takes the form of a price impact representing the additional cost incurred by selling a large amount of securities in a market with few buyers.

The 2023 parameter update reflects the prevailing sources of systemic risk identified for the financial system, against the background of a prolonged period of low growth, elevated inflation and higher interest rates. The severity of the parameters of the stress test scenarios in relation to hypothetical movements of the interest rates materially increased compared to the 2022 Guidelines, while other scenarios have been updated with a degree of severity similar to the previous exercise.

In calibrating the new risk parameters ESMA has worked closely with the European Systemic Risk Board and the European Central Bank.

On December 15 2023, the European Commission adopted delegated legislation on cross-border notifications under the Alternative Investment Funds Managers Directive (AIFMD) and Undertakings for Collective Investments in Transferable Securities (UCITS) Directive.

The draft legislation follows a final report that the European Securities and Markets Authority published in December 2022.

The draft legislation comprises of:

• Commission Implementing Regulation laying down implementing technical standards (ITS) for the application of the UCITS Directive with regard to the form and content of the information to be notified in respect of the cross-border activities of UCITS, UCITS management companies, the exchange of information between Member State competent authorities on cross-border notification letters and amending Regulation (EU) No 584/2010 together with annexes.
• Commission Delegated Regulation supplementing the UCITS Directive with regard to regulatory technical standards (RTS) specifying the information to be notified in relation to the cross-border activities of management companies and UCITS.
• Commission Delegated Regulation supplementing the AIFMD with regard to RTS specifying the information to be notified in relation to the cross-border activities of managers of AIFs.
• Commission Implementing Regulation laying down ITS for the application of the AIFMD with regard to the form and content of the information to be notified in respect of the cross-border activities of alternative investment fund managers and the exchange of information between Member State competent authorities on cross-border notification letters together with annexes.

The Council of the European Union and the European Parliament will now scrutinise the draft legislation. If neither object, they will enter into force 20 days after publication in the Official Journal of the European Union and apply 30 days later.

On December 15 2023, the ESMA updated its questions and answers (Q&A) on Markets in Financial Instruments II and Markets in Financial Instruments Regulation (MiFID/MIFIR) investor protection.

The questions relating to the update are as follows:

• When providing information of costs and charges to clients, on which basis should costs be aggregated? What is the level of aggregation that firms need to apply?
• How should investment firms indicate the parts of the total costs and charges paid in or represented in an amount of foreign currency in their ex-ante and ex-post costs and charges disclosure?

On December 5 2023, the European Banking Authority (EBA) updated European Supervisory Authorities’ (ESA’s) consolidated questions and answers (Q&A) on Package Retail and Insurance-based Investment Products (PRIIPs) Key Information Document (KID).

These sections of the Q&As have been updated with answers to the following questions:

General topics

• If a product, linked to a single ISIN code, is available in both the single and recurring premium versions, it is possible to provide a representation of the riskier version of the two by reporting in the other relevant information section the possibility of purchasing the other version of the product?

Market risk assessment – product categories

• Could you confirm if products with recurring premiums are to be modelled as Category 2 PRIIPs or Category 3 PRIIPs? These should be modelled as category 3 because their performance does not depend only on the performance of the underlying at RHP. However, in the case in which a manufacturer shall produce KIDs for PRIIPs available as both single and recurring premium versions, it may lead to KIDs that are not comparable, mainly given to modelling assumptions (for example, the different lengths of the data series for Category 2 and 3 PRIIPs).

Performance scenarios

• In life annuities, should the sum of rents paid up to the period be considered in the minimum scenario?
• Could you confirm that for what concerns the calculation of performance scenarios, as specified in Annex IV, point 7, the manufacturer must always use monthly data even if the NAV is available at higher frequencies (i.e., daily or weekly)?
• In Annex IV, Case 3 for PRIIPs referred to in point 1 of Annex VIII without sufficient historical data and with no benchmark, or with a benchmark without sufficient historical data, or any other Category 2 PRIIPs. In point 13 it is said to use a benchmark regulated by Regulation (EU) 2016/1011 of the European Parliament and of the Council. Is not that a contradiction? In point 15 it is said that in the case in which there is not an appropriate benchmark or proxy with sufficient historical data which meets the criteria set out in point 5 of this Annex for the PRIIP, performance scenarios shall be calculated in accordance with points 21 to 27 of this Annex using 15 years of historical returns of the PRIIP or an appropriate benchmark or proxy. Does that mean we are to treat the PRIIP as a Category 3 product?
• It seems contradictory that the regulation is asking to calculate performance scenarios in accordance with points 21 to 27 with 15 years of historical returns, when we have not been able to obtain 10 years historical data, either from the actual product or its appropriate benchmark.
• If we do not have sufficient data to meet the amended performance scenario calculations, may we treat the PRIIP as Category 1 according to the definition in Annex II, point 4(c). Accordingly, its Moderate, Favourable and Unfavourable performance scenarios should be “reasonable and conservative best estimates of the expected values”. If yes, we would like to clarify if the SRI calculation should be set at a “6” in the case where the product may have sufficient data for SRI calculation (e.g., 5 years monthly), but insufficient data for performance scenario calculation (e.g., 10 years historical returns not available).

Multi-option products

• Could you confirm if manufacturers of insurance-based investment products are allowed to signpost to KIDs produced by fund managers instead of proper SIDs in their IBIP MOPs? What happens when the RHP of the insurance product is not compatible with the RHP of the underlying fund?

Investment funds

• In the case of an investment fund (UCITS or AIF), can the manufacturer of the PRIP be an entity to which collective portfolio management functions, or other functions, have been delegated to by the fund or by the management company (manager) or alternative investment fund manager of the fund (those entities to which functions have been delegated might, for example, be referred to as the fund promoter, sponsor, etc.)?

On December 8 2023, the European Banking Authority (EBA) published European Supervisory Authorities’ (ESAs’) joint consultation on second batch of policy mandates under the Digital Operational Resilience Act (DORA).

The package includes four draft regulatory technical standards (RTS), one set of draft implementing technical standards (ITS) and two sets of guidelines (GL). These policy instruments aim to ensure a consistent and harmonised legal framework in the areas of major ICT-related incident reporting, digital operational resilience testing, ICT third-party risk management and oversight over critical ICT third-party providers.

Through DORA the ESAs are mandated to jointly develop a total of 13 policy instruments, presented in two batches. This second batch comprises the following:

• RTS and ITS on content, timelines and templates on incident reporting
  With regard to the reporting timelines, the draft RTS proposes harmonised timelines for financial entities within the scope of DORA. Accordingly, the proposed timelines for reporting major incidents are as follows: the initial report within 4 hours from the moment of classification of the incident as major, but no later than 24 hours from the time of detection of the incident; an intermediate report within 72 hours from the classification of the incident as major, or when regular activities have been recovered and business is back to normal; the final report shall be submitted no later than 1 month from the classification of the incident as major.

• GL on aggregated costs and losses from major incidents
  The draft Guidelines specify the estimation of aggregated annual costs and losses caused by major ICT-related incidents. The calculation of the annual costs and losses under the Guidelines is aligned with the assessment of the costs and losses of each incident under the technical standards incident reporting. In particular, the Guidelines introduce a reporting covering the gross costs and losses, financial recoveries and of the net costs and losses by major ICT-related incident. The Guidelines also propose to focus the reference period for the aggregation to an accounting year in order to rely on available figures from the validated financial statements.

• RTS on subcontracting of critical or important functions
  The draft RTS provides further specifications on how to determine and assess when subcontracting ICT services supporting critical or important functions can be performed. In line with the mandate the draft RTS focuses on ICT services supporting critical or important functions or material parts of them provided by ICT subcontractors. The draft RTS follows the lifecycle of arrangements between financial entities and ICT third-party service providers when subcontracting ICT services supporting critical or important functions, and sets key requirements to financial entities on the use of subcontracted services supporting critical or important functions or material parts thereof, covering: the risk assessment before allowing ICT services supporting critical or important functions to be subcontracted; requirements on the contractual arrangements; on the monitoring of subcontracting arrangements; on information of material changes; and on exit and termination rights.

• RTS on oversight harmonization
  The primary goal of the draft RTS is to bring harmonization of requirements across regulations and instore efficient oversight conditions vis-à-vis critical third party service providers, financial entities, and supervisory authorities across the Union in order to avoid legislative fragmentation, all while ensuring the stability of the financial sector.

• GL on oversight cooperation between ESAs and competent authorities
  The draft guidelines cover the cooperation and information exchanges between ESAs and competent authorities only. Hence, the cooperation with financial entities, critical ICT third-party service providers, competent authorities under Directive (EU) 2022/2555, among competent authorities, among the ESAs and with other EU institutions is outside the scope of the guidelines.

• RTS on threat-led penetration testing (TLPT)
  Article 26 of DORA requires certain financial entities to carry out at least every 3 years advanced testing by means of TLPT. Article 26(11) of DORA mandates the ESAs, ‘in agreement with the European Central Bank to develop draft regulatory technical standards ‘in accordance with the TIBER-EU framework’ to specify further the criteria used for identifying financial entities required to perform TLPT, the requirements and standards governing the use of internal testers, the requirements in relation to scope, testing methodology and approach for each phase of the testing, results, closure and remediation stages and the type of supervisory and other relevant cooperation needed for the implementation of TLPT and for the facilitation of mutual recognition.

The public consultation on all mandates included into the second batch will last until March 4 2024.

On December 18 2023, the European Securities and Markets Authority (ESMA) published its sixth market report on costs and performance of EU retail investment products.

The report provides an overview of key developments up to the end of 2022, a year characterised by elevated inflation and subdued returns. Similarly to previous editions, this year’s analysis covers Undertakings for Collective Investment in Transferable Securities (UCITS), retail Alternative Investment Funds (retail AIFs), and Structured Retail Products (SRPs). Compared with the previous edition, the ESMA provides a more in-depth analysis of equity UCITS costs and performance by strategy and for the first time a preliminary analysis of AIF costs. Improvements in data availability continue, but significant data issues persist. For UCITS, entry and exit costs are still subject to limitations, while no data is avalable for distribution costs. In case of AIFs, the information on costs is very scarce.

The key findings in the report are:

• UCITS Costs: Costs have declined, but investors should continue to consider fund fees carefully in their investment decisions. Despite costs of active equity funds decreasing, this category of funds remained more expensive than passive funds and ETFs, such that their net performance was on average lower in comparison. 
• Investment value and value-for-money: Investors paid around 2,000€ in costs for an investment in UCITS of 10,000€ over ten years. The returns of the market led to a net value of 14,850€ after this period, and to a net real value of 13,500€, when inflation is taken into account. 
• ESG UCITS: ESG funds underperformed on average their non-ESG equivalents in 2022, a likely consequence of the energy crisis. However, ESG funds still outperformed their non-ESG equivalents on the three-year investment horizon. In 2022, ongoing costs of ESG funds were lower than or similar to the ongoing costs of non-ESG equivalents.
• AIFs: The market for AIFs remained dominated by professional investors with the share of retail investors reaching around 14% at the end of 2022. Retail investors invested mainly in funds of funds, “other” AIFs and real estate funds. Among those three categories of funds, real estate funds were the only category with positive gross and net returns in 2022. However, real estate markets face significant challenges since 2022, which is likely to affect the performance of real estate funds going forward, given the further increase of interest rates in 2023.
• Structured Retail Products (SRPs): Costs, largely charged in the form of entry costs, rose in 2022 for a majority of product types and issuers, although they vary substantially by payoff type and country. The analysis of performance scenarios shows that the returns of one in eight SRPs would be negative even in a moderate scenario. 

On December 13 2023, the European Commission published a draft Commission Delegated Regulation (EU) supplementing Securitisation Regulation (Regulation (EU) 2017/2402) with regard to regulatory technical standards specifying the performance-related triggers and the criteria for the calibration of those triggers.

Article 26c(5) of Regulation (EU) 2017/2402 as amended by the Regulation (EU) 2021/557 empowers the Commission to adopt, following submission of draft standards by the European Banking Authority (EBA), and in accordance with Articles 10 to 14 of Regulation No (EU) 1093/2010, regulatory technical standards specifying the minimum performance-related triggers for STS on-balance-sheet securitisation transactions; and, where relevant, calibrating them.

In accordance with Article 10(1) of Regulation No (EU) 1093/2010 establishing the EBA, the Commission shall decide within three months of receipt of the draft standards whether to endorse the drafts submitted. The Commission may also endorse the draft standards in part only, or with amendments, where the Union's interests so require, having regard to the specific procedure laid down in those Articles.

The technical standards specify the two mandatory triggers under point (a) of Article 26c(5), third subparagraph of Regulation (EU) 2017/2402, set out the additional mandatory backward-looking trigger under point (b) and the mandatory forward-looking trigger under point (c). The technical standards also set out criteria to be fulfilled by the parties to the securitisation in order to set the level of the mandatory triggers.

On December 4 2023, the European Banking Authority (EBA) published European Supervisory Authorities’ (ESAs’) final report on draft Regulatory Technical Standards (RTS) on the review of principal adverse impacts (PAI) and financial product disclosures in the Sustainable Finance Disclosure Regulation (SFDR) Delegated Regulation.

The final report responds to a mandate sent by the European Commission to review certain aspects of the operation of Commission Delegated Regulation 2022/1288 including the disclosures of PAI of investment decisions on sustainability factors and to introduce disclosure of financial products’ decarbonisation targets. The ESAs published a consultation paper in April 2023 and having considered the feedback to the consultation the ESAs have adjusted the draft RTS in several areas.

The draft RTS cover the following topics as requested in the Commission’s mandate:

• An extension of the social PAI indicators.
• Other changes to the PAI disclosure framework.
• A new financial product disclosure of greenhouse gas emission reduction targets.

The ESAs are also proposing some improvements and simplifications to the financial product templates, contained in Annexes II-V of Commission Delegated Regulation 2022/1288, including a new “dashboard” with a simple summary of key information.

In addition, the ESAs are proposing minor technical amendments to Commission Delegated Regulation 2022/1288 relating to:

• Enhanced disclosure of how sustainable investments comply with the “do not significantly harm” principle.
• Revision of the provisions for products with investment options such as multi-option products.
• Other technical changes including harmonised calculation of sustainable investments and a requirement to produce the disclosures in machine-readable format.

The Commission will study the draft RTS and decide whether to endorse them within three months. The draft RTS would be applied independently of the comprehensive assessment of the SFDR announced by the Commission in September 2023 and before changes resulting from that assessment would be introduced.

On December 4 2023, the Committee on Economic and Monetary Affairs (ECON) adopted significant changes to draft rules on Environmental, Social and Governance (ESG) ratings.

Rating providers should refrain from aggregating the E, S and G scores, as this could obscure poor performance on any of these individual metrics. In particular, ESG ratings providers should disclose whether E, S, or G factors are taken into account, or an aggregation thereof, the rating given to each relevant factor, and the weighting each of these factors is given in the aggregation.

Moreover, ESG ratings providers should provide information on whether the rating considers, amongst others, the alignment with the objectives set in the Paris agreement for the “E” factor, the compliance with International Labour Organisation core conventions on Right to Organise and Collective Bargaining for the “S” factor, and the alignment with international standard on tax evasion and avoidance for the “G” factor.

The adopted report adds provisions to ensure that the rating products should explicitly disclose the rated entity’s materiality, i.e. whether the delivered rating addresses both material financial risk to the rated entity and the material impact of the rated entity on the environment and society, or whether it takes into account only one of these. In this way, ESG raters are encouraged to address the material impact of the rated entity on the environment and society in general more than is currently the case.

ESG rating providers should also disclose information to the public on the methodologies, models and key rating assumptions which those providers use in their ESG rating activities and in each of their ESG ratings product. In a bid to encourage competition among ESG rating providers and fostering an environment where smaller rating providers can enter the market, an entity seeking to obtain more than one ESG rating should choose at least one ESG rating provider with a market share below 15%.

On December 13 2023, the European Commission published a draft report and call for feedback on EU taxonomy-aligning benchmarks.

With the introduction of these voluntary benchmarks, the Platform on Sustainable Finance (PSF) aims to initiate a discourse on the pivotal role the Taxonomy could assume in shaping climate and environmental benchmarks. The suggested benchmarks do not discard alternative approaches to leveraging the Taxonomy in the development of benchmarks. Innovation in this domain is imperative for effectively channeling capital towards sustainable investments and realising our goals in mobilising financial resources for financing the transition to a net zero, resilient, circular, and environmentally sustainable future.

The EU Taxonomy-Aligning Benchmarks without and with exclusions (EU TAB and EU TABex) are inspired by the success of EU Paris-Aligned Benchmarks (EU PABs), which grew to €116bn in assets under management in less than three years. Since 2019, Paris Aligned Benchmarks (PABs) have played a significant role in financial markets, aiming to facilitate the shift towards a low-carbon economy. They achieve this by directing capital towards sustainable options, selecting and weighting companies within PAB indices to collectively adhere to a decarbonisation trajectory aligned with the Paris Agreement's goal of limiting global temperature rise to 1.5°C above pre-industrial level.

The main objectives of the proposed benchmarks are to:

• show how a significant level of comparability of Taxonomy-aligning benchmarks methodologies could be achieved while leaving benchmarks’ administrators with an important level of flexibility in designing their methodology;
• provide investors with an appropriate tool to align the Taxonomy with their investment strategy; 
• increase transparency on investors’ impact, specifically with regard to climate change and the environmentally sustainable Capital Expenditures (CapEx) required for the energy transition; and
• disincentivise greenwashing. 

Ultimately, the Platform on Sustainable Finance aims at supporting the development of innovative tools that contribute to the decarbonisation and greening of investment portfolios.

The call for feedback will be open until March 13 2024.

On December 13 2023, the European Securities and Markets Authority (ESMA) announced the launch and participation in Common Supervisory Action (CSA) on environmental, societal and governance (ESG) disclosures under the Benchmarks Regulation (BMR).

The CSA will focus on supervised benchmarks administrators, located either in the Union or in a third country, that have acquired an authorisation, registration, recognition or endorsement of their benchmarks under the BMR. The goal of the CSA will be to assess compliance of the supervised Benchmarks Administrators with the ESG disclosure requirements in the BMR. 

The CSA will cover the following aspects: 

• disclosure of ESG factors in the benchmarks statement and in the benchmarks methodology; 
• specific disclosure requirements regarding climate benchmarks methodology. 

ESMA and the National Competent Authorities (NCAs) will carry out the CSA during 2024 and until Q1 2025.  As part of the CSA, ESMA and the NCAs will share knowledge and experiences to foster convergence in how they supervise ESG disclosure requirements for benchmark administrators.

On December 14 2023, the Council of the European Union and the European Parliament reached a provisional deal on the Corporate Sustainability Due Diligence Directive (CSDDD).

The due diligence directive will set obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners.

The due diligence directive lays down rules on obligations for large companies regarding actual and potential adverse impacts on the environment and human rights for their business chain of activities which covers the upstream business partners of the company and partially the downstream activities, such as distribution or recycling.

The directive also lays down rules on penalties and civil liability for infringing those obligations; it requires companies to adopt a plan ensuring that their business model and strategy are compatible with the Paris agreement on climate change. The provisional agreement reached today between the two co-legislators frames the scope of the directive, clarifies the liabilities for non-compliant companies, better defines the different penalties, and completes the list of rights and prohibitions that companies should respect.

The agreement fixes the scope of the directive on large companies that have more than 500 employees and a net worldwide turnover of €150 million. For non-EU companies it will apply if they have a €300 million net turnover generated in the EU, three years from the entry into force of the directive. The Commission will have to publish a list of non-EU companies that fall under the scope of the directive.

The provisional agreement reached with the European Parliament now needs to be endorsed and formally adopted by both institutions.

On December 14 2023, the European Securities and Markets Authority (ESMA) provided an update on status of ESMA’s guidelines on Environmental, Social and Governance (ESG) and sustainability-related terms in fund names.

Funds’ names are a powerful marketing tool. In order not to mislead investors, ESMA believes that ESG- and sustainability-related terms in funds’ names should be supported in a material way by evidence of sustainability characteristics or objectives that are reflected fairly and consistently in the fund’s investment objectives and policy.

On November 18 2022 ESMA launched a consultation on Guidelines on funds’ names using ESG or sustainability-related terms. The consultation closed on February 20 2023. ESMA received 125 responses, mainly from asset managers and their industry associations, NGOs and consumer representatives.

ESMA has decided to postpone the adoption of the Guidelines to ensure that the outcome of these reviews may be fully considered. In particular, the text of the provisional agreement resulting from the interinstitutional negotiations contains two new mandates for ESMA to develop guidelines specifying the circumstances where the name of an Alternative Investment Fund (AIF) or Undertakings for the Collective Investment in Transferable Securities (UCITS) is unclear, unfair, or misleading.

While the scope of the Guidelines remains unchanged, the following amendments have been introduced:

• Threshold for sustainable investments.
• Adaptation to transition.

ESMA intends to adopt the future Guidelines (in line with the key changes highlighted above) following the outcome of the review of the AIFMD and UCITS Directive and the expected entry into force of the new mandates.

On December 21 2023, the European Union published the amendments adopted by the European Parliament on June 1 2023 on the proposal for a directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937.

The documents contains the amendments 1 to 381 as well as the text proposed by the Commission.

On December 22 2023, the European Union published a Commission Delegated Regulation (EU) 2023/2772 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards.

Directive 2013/34/EU, as amended by Directive (EU) 2022/2464 of the European Parliament and of the Council, requires large undertakings, small and medium-sized undertakings with securities admitted to trading on the EU regulated markets, as well as parent undertakings of large groups, to include in a dedicated section of their management report or consolidated management report the information necessary to understand the undertaking’s impacts on sustainability matters, and the information necessary to understand how sustainability matters affect the undertaking’s development, performance and position. Undertakings are to prepare this information in accordance with sustainability reporting standards starting from the financial year indicated in Article 5(2) of Directive (EU) 2022/2464 for each category of undertakings.

The Commission is required to adopt by June 30 2023 a first set of standards specifying the information that undertakings are to report in accordance with Article 19a(1) and (2), and Article 29a(1) and (2) of that Directive, including at least the information that financial market participants need in order to comply with the disclosure obligations of Regulation (EU) 2019/2088 of the European Parliament and of the Council.

The Commission has taken into account the technical advice provided by the EFRAG. EFRAG’s independent technical advice meets the criteria set out in Article 49(3b), first, second and third subparagraphs, of Directive 2013/34/EU. To ensure proportionality and to facilitate the correct application of the standards by undertakings, the Commission has introduced modifications to EFRAG’s technical advice as regards the materiality approach, the phasing-in of certain requirements, the conversion of certain requirements into voluntary datapoints, the introduction of flexibilities in a number of disclosure requirements, the introduction of technical modifications to ensure coherence with the Union’s legal framework and a high degree of interoperability with global standard-setting initiatives, as well as editorial modifications.

These sustainability reporting standards meet the requirements set out in Article 29b of Directive 2013/34/EU.

The sustainability reporting standards that undertakings are to use for carrying out their sustainability reporting in accordance with Articles 19a and 29a of Directive 2013/34/EU following the timetable set out in Article 5(2) of Directive (EU) 2022/2464 are set out in Annexes I and II of this Regulation.

This Regulation enters into force on December 25 2023. It shall apply from January 1 2024 for financial years beginning on or after January 1 2024.

On December 21 2023, the European Commission adopted a guidance document which addresses frequently asked questions on the interpretation and implementation of the Taxonomy Disclosures Delegated Act.

The guidance document considers the:

• Scope of entities subject to the reporting obligations.
• Reporting obligations of large financial undertakings and financial undertakings admitted to trading on EU markets relating to how they finance, invest in or insure taxonomy-aligned activities.
• Taxonomy assessment of specific exposures such as to retail clients, local authorities and exposures to individual undertakings and groups.
• Rules pertaining to the verification and evidence of compliance with the EU taxonomy.

It also contains targeted questions specifically related to credit institutions, insurance undertakings, and asset managers.

On December 21 2023, the Financial Data Exchange Templates (FinDatEx) published a new version of the European ESG Template (EET) V1.1.2.

As a reminder, FinDatEx was established by representatives of the European financial services sector in 2019 to support the development and use of standardised technical templates for the exchange of data between product manufacturers, distributors and other stakeholders when applying EU legislation. FinDatEx members include European asset managers, banks, insurance companies and distributors.

The use of this template is not compulsory.  It has been designed by and is the official latest version of FinDatEx data exchange template for ESG data as defined by applicable EU regulation (SFDR, Taxonomy, IDD, MiFID).

This new version of EET (V1.1.2) presents a minor update and includes the following:

• typo corrections,
• transition from M/C to O of transitional scope 1, 2 data fields, and
• two new data fields 103 (Frequency of providing information on PAI) and 616 (Snapshot list of invested countries in the sovereign sub part of the portfolio).

EET V1.1.2 does not contain any structural change in comparison to previous versions. V1.1.2 can be used from 31 December 2023 and should be delivered before end of March 2024 for SFDR entity level reporting.

Major amendments to the EET (such as removing unused columns, clarifying the use of the section on exclusions, and increasing the readability of the template by restructuring the data fields) have been postponed to a later date yet to be determined. This is mainly against the background of the currently unclear adoption of the reviewed SFDR RTS as delegated legislation by the European Commission and how the non-objection period will proceed at the upcoming end of the legislative cycle.

On December 22 2023, the European Financial Reporting Advisory Group (EFRAG) published three draft European Sustainability Reporting Standards (ESRS) Implementation Guidance (IG) documents for public feedback.

The EFRAG prioritised three documents, to cover the most challenging aspects of ESRS implementation:

• Draft EFRAG IG 1: Materiality assessment implementation guidance. 
• Draft EFRAG IG 2: Value chain implementation guidance.
• Draft EFRAG IG 3: Detailed ESRS datapoints implementation guidance and accompanying explanatory note. 

These documents are non-authoritative and support implementation as follows: 

• Draft IG 1, the materiality assessment IG describes the reporting requirements on the materiality assessment including the illustration of possible steps of the process. It also contains FAQs on the double materiality assessment to provide implementation guidance from a practical perspective.
• Draft IG 2, the value chain IG describes the reporting requirements on the value chain during the materiality statement, for impacts, risks and opportunity management as well as metrics and targets. It discusses the reporting boundary of the group for sustainability reporting including operational control. The VCIG also contains FAQs to provide further information and the 'value chain map' summarises the VC implications per disclosure requirement.
• Draft IG 3, the draft List of ESRS datapoints presents the complete list of the detailed requirements contained in each Disclosure Requirement and related Application Requirements in an Excel format. The file has additional information (columns) useful to navigate and filter the content (i.e., the corresponding paragraph and sub-paragraphs of each item). This list can form a basis of a data gap analysis.   

Stakeholders can provide feedback by accessing the relevant surveys by February 2 2024.

On December 8 2023, the Financial Services and Markets Authority (FSMA) published a press release on the International Monetary Fund’s (IMF) assessment of the Belgian financial sector and its supervision.

In 2023, Belgium underwent a five-year assessment of its financial sector and supervision under the IMF's Financial Stability Assessment Program (FSAP). The FSMA has been closely involved in this work as part of its statutory surveillance tasks and welcomes the IMF's conclusions.

The mission found that the FSMA has a well-developed framework for supervising the products and conduct of banks, and that the regulatory framework for supervising the conduct of insurance undertakings is comprehensive.

Based on a liquidity stress test, the Belgian investment fund sector, where liquidity management tools are widely available, is able to absorb significant shocks. The FSMA will carry out this type of assessment periodically, as recommended by the IMF, in order to quickly identify any structural vulnerabilities in the investment fund sector.

The NBB and the FSMA have acted on the IMF's recommendation to extend data-sharing agreements on investment funds.

On December 27 2023, Belgium published a Royal Decree transposing the Undertakings for Collective Investment in Transferable Securities Directive (UCITS) and Directive on alternative investment fund managers (AIFMD) directives with regards to the prudential requirements and periodic information relating to them in the Moniteur Belge.

This Regulation ensures transposition of:

(i) Directive 2009/65/EC of the European Parliament and of the Council of July 13 2009 on Undertakings of Collective Investment in Transferable Securities (UCITS); and

(ii) Directive 2011/61/EU of the European Parliament of June 8 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No. 1095/2010.

The FSMA Regulation of November 15, 2023 concerning the prudential requirements applicable to management companies of collective investment undertakings which meet the conditions of the Directive 2009/65/EC and to management companies of alternative collective investment undertakings and the FSMA Regulation of November 15 2023 concerning periodic information relating to the prudential requirements applicable to management companies of collective investment undertakings which meet the conditions of the Directive 2009/65/EC and to management companies of investment undertakings collective alternatives, are approved.

This Decree is in force from December 27 2023.

On December 26 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published a new version of the public offerings code.

The activities of public offering coordinators and securitization companies now have rules of good practice in our Public Offering Code. Other changes were also published in the document, which now includes all securities offerings linked to CVM Resolution 160 and became a more principled text, that is, with more guidelines and fewer checklists.

The rules for both activities seek to create a minimum governance for the progress of the activities, which previously had no self-regulatory norm. The novelty brings guidelines that improve the identification of conflicts of interest, the qualification of the technical team and the disclosure of information to investors.

As a result, coordinators now have specific obligations to ensure transparency and veracity of information when structuring public offerings: it will be mandatory, for example, to disclose them publicly and explain any conflicts of interest for the investor. Securitization companies, on the other hand, will have governance rules in the protection of assets separate from their securitization operations, in addition to due diligence in hiring third parties.

The update of the code, which completed 25 years this month, went through a public hearing in November of this year, and comes into force on February 9, 2024. 

Here are the other changes:

• Trustee
  It is now the agent's duty to disclose more robust information, such as the financial statements of companies and privately held companies that act as issuers.
• Expansion of securities
  The new version also covers the offerings of CRIs (Real Estate Receivables Certificates), CRAs (Agribusiness Receivables Certificates) and CR (Receivables Certificates - of any nature) aimed at professional investors, regardless of the type of investor.
• Investment Funds
  Now, the code also includes the guidelines for the public offering of closed-end funds, which were previously contained in another self-regulatory code.
• New Document
  A specific offering material for those intended exclusively for professional investors was prepared in line with CVM Resolution 160. The document is used for securitization, equities, fixed income and closed-end fund offerings.

On December 6 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published a note of clarification on the ANBIMA Hub and the Greyhound System.

ANBIMA Hub is a platform that will exclusively replace the Fundos Website in sending daily data on funds to ANBIMA. 

ANBIMA Hub will not have any impact on the users of the Greyhound System, who will continue to report data through this channel. The ANBIMA Hub will be used only by institutions that currently report data through the Funds website.

On December 14 2023, the Brazilian Financial and Capital Markets Association (ANBIMA) published its priorities for 2024.

The four pillars of Investor Centrality are: 

• To improve the investor's journey and experience; 
• To conduct a study to harmonize the transparency of investment products; 
• To contribute to the connection between Open Investment and the Open Capital Market; and
• To establish an action plan for the development of long-term savings on two fronts: literacy and investments. 

On the Structuring Agenda are topics with the potential to transform the industry and make an impact on the business of the investment industry. They are sustainability, innovation and education. The first provides for the implementation of the agenda of the ANBIMA Sustainability Network, launched in September. The Network has established four major themes on which it will direct efforts: climate change and diversity; human rights; governance and leadership; ESG financial instruments. To move forward, the group must make use of instruments such as:

• cooperation with other entities;
• education and literacy;
• tools, such as manuals and dashboards;
• self-regulation and advocacy work.

Within the Service Agenda, the initiatives relate to pricing, analytical products, professional qualification and communication with the associate. ANBIMA wants to move forward in the pricing of credit derivatives and commercial notes. In 2024, ANBIMA will continue to improve analytical products by carrying out the second stage of ANBIMA Data, which will feature customized fund data, which will allow the availability of databases already adapted to 175. ANBIMA will also have the second phase of the capital markets data platform, with an expansion of the scope to new assets – in addition to the debentures, CRI and CRA that began in 2023 (phase 1).

The Market Development Agenda brings together strategic initiatives to foster the institutional agenda and the business agenda, in addition to looking at regulatory and self-regulatory priorities. On the institutional side, ANBIMA will promote Brazil's financial and capital markets abroad in two ways: expanding our operations with market entities and investors; and bringing us closer to international regulators. ANBIMA also wants to work actively with the Legislature, always in partnership with the CNF (National Confederation of Financial Institutions), to contribute to the formation of the G-20 agenda for financial instruments.

At the same time, ANBIMA will foster business with an agenda that will:

• Facilitate agribusiness' access to the capital market
• Promote the development of the private credit market
• Fostering the ESG agenda
• Tracking the impact of innovations on the activities we represent
• Contributing to the development of market infrastructures
• Work with the new coordinators of public offerings

On the regulatory front, there are four major priorities:

• to contribute to the implementation of investment portability; 
• to promote the modernization of the regulation of Fiagros, ETFs, FIPs and FIIs;
• to develop the regulation of the carbon credit market; and
• to influence the modernization of the regulation of non-resident investors.

In the field of self-regulation, ANBIMA plans to improve the rules of negotiation, management and transparency to adapt them to changes in regulation.

On December 15 2023, the Comissão de Valores Mobiliários (CVM) published a review of the Biennial Plan for Risk-Based Supervision 2023-2024.

The revision is due to the fact that the technical areas of the Authority identify the need for changes in the current plan after its execution throughout 2023, in order to make it more aligned with the reality of the activities, in addition to reflecting changes in the regulatory environment of the Securities Market. The changes were approved by CVM's Risk Management Committee (CGR) on December 8 2023.

The main changes in the document are as follows:

• Change in the name of the SMI 36 risk event: from acting as an independent investment agent in disregard of the rules in force to acting as an investment advisor in breach of the rules in force.
• Change in the name of the SMI 23 risk event: from failures in the processes of intermediaries (monitoring and analysis of atypical operations) on AML/CFT (prevention and combating of money laundering and financing of terrorism and proliferation of weapons of mass destruction), in the stock market to failures in the processes of anti-money laundering and counter-terrorism financing (AML/CFT) of intermediaries in organized markets.
• Increase in risk level of SIN 15 risk event: Failures in AML/CFT processes by resource administrators and service providers in the third-party resource management industry.
• Inclusion of CVM 10 risk: Issuance of audit reports that do not reflect accounting non-conformities, in disagreement with the professional standards of independent auditing, related to the existence and pricing of assets in Foreign Institutional Investors (FIIs) and Financial Information Provider (FIP) investment entities in the list of priority risks, and their respective SNC 5 risk event (with the same name), due to the reassessment of its level of risk, in order to prioritize it within the scope of the Risk-Based Supervision.

On December 7 2023, the Comissão de Valores Mobiliários (CVM) published its 2024 Regulatory Agenda.

The agenda lists the regulatory priorities for the coming year.

The specific regulation of the Investment Fund in Agroindustrial Chains (Fiagro) is one of the regulatory priorities for 2024. The new standard will replace CVM Resolution 39, published in 2021, with an experimental nature that enabled the initial development of the industry.

The standard for the portability of securities is also foreseen. The goal is to smooth out or eliminate the difficulties and inefficiencies faced by investors trying to port their investments into securities. The subject is directly related to Open Capital Markets, with a focus on simplifying the investor's investment journey, promoting security, agility and transparency.

In addition to these, there are also rules involving shareholders' meetings and remote voting ballots, takeover bids and limits on the participation in the capital stock of an organized market management entity.

The CVM 2024 Regulatory Agenda will continue two important themes brought up in 2023: inclusion and sustainability.

The following are planned:

• Edition of a rule referring to investment funds for recycling projects (ProRecicle – Law 14.260), whose resources are destined to recycling projects and to the establishment of the National Commission for Recycling Incentive.
• Inclusion of details of PWD (person with disabilities) in the Reference Form (FRe) of the companies.

Several topics for public consultation have already had the notices published, including the most recent, on public offers for the acquisition of shares of a publicly-held company – OPA, released on December 6 2023, and digital influencers, released on November 30 2023. The study on the subject was also published this year.

Another highlight of 2023 is the public consultation to discuss the proposal for a specific rule for Investment Funds in Agribusiness Production Chains (FIAGRO), opened in October 2023. The new rule will replace CVM Resolution 39, published in 2021, and suggestions and comments can be sent until January 31 2024. Also on the agenda throughout this year were: the portability and revision and updating of CVM Resolution 81.

Several norms that were not provided for in the Agenda were also issued:

• CVM Resolution 180: amended Resolutions 80 (publicly-held companies) and 60 (offerings).
• CVM Resolution 181: amended Resolution 175 and extended its effective date.
• CVM Resolution 184: amended Resolution 175 and its normative annexes.
• CVM Resolution 185: amended Resolution 9 to modernize the registration deadlines for rating agencies.
• CVM Resolution 187: amended Resolution 175.
• CVM Resolution 192: final repeal of market rules that had not yet been expressly revoked.

Within the scope of the topics to be developed by the Authority in 2023, sustainability was one of the CVM's focuses for this year. Also in January, the CVM released its Sustainable Finance Policy, which aims to assist in strengthening the attributions, consolidation, organization and structuring of the Agency's sustainable finance work, as well as to improve the dissemination and communication of the results of the activities.

On December 20 2023, the Banco Central do Brasil (BCB) published rules and timetable for control points of the Open security profile change process Finance.

The Heads of the Supervision Department of Cooperatives and Non-Banking Institutions (Desuc) and the Department of Banking Supervision (Desup), in the exercise of the powers conferred on them by Article 23, item I, item "a" of the Internal Regulations of the Central Bank of Brazil, annex to BCB Resolution 340, of September 21, 2023, with based on Articles 46, item II and 51, items IX and XI, both of the Resolution Joint No. 1, of May 4, 2020.

Subject is to disseminate rules and calendar for control points of the Open Finance security profile change process.

• Article 1: This Normative Instruction discloses rules and Calendar for One-Step Checkpoints in the Change Process security profile of Open Finance, which, in compliance with the Instruction BCB Normative 305, of September 15, 2022, establishes the guidelines for security and interoperability that should be applied to APIs (Applications Programming Interface) of Open Finance.
• Article 2: In one of the stages of the implementation of the creation of the new security profile, as established by the Open Finance Governance Structure, DCMs must be carried out (Dynamic Client Management), in which, bilaterally, the Institutions inform the standards used and recognized by each Institution. This step is critical for the proper interoperability of Open Finance and must comply with the rules and control points established in this Instruction Normative.

On December 15 2023, the Comissão de Valores Mobiliários (CVM) updated its 2024 calendar with deadlines for submission of information by regulated companies.

The CVM 2024 Calendar is available on the website of the Brazilian Securities and Exchange Commission (CVM), with deadlines for submission of information by market participants regulated by the Authority.

The calendar is a support and consultation tool, in which it is possible to seek, quickly and objectively, the necessary content to comply with the obligations required by the CVM, reducing the number of punitive fines for non-delivery of such information, acting correctly and transparently with the market.

The table of contents for the calendar is as follows:

• Investment banking; Multiple bank with investment portfolio; Brokers; Distributors; Organized securities market; Securities bookkeeper; Custodian of securities.
• Participatory investment electronic platform service provider.
• Trustees.
• Independent Auditor.
• Incentivized Company (fiscal year ended on 31/03).
• Incentivized Company (fiscal year ended on 31/12).
• Publicly-held Company (fiscal year ended on 28/2).
• Publicly-held Company (fiscal year ended on 31/3).
• Publicly-held Company (fiscal year ended on 30/6).
• Publicly-held Company (fiscal year ended on 31/12).
• Foreign Company (fiscal year ended on 31/12).
• Portfolio Managers; Consultants; Rating Agencies.
• Non-Resident Investors.
• ICVM 555 Investment Funds.
• Real Estate Investment Trusts (FIIs).
• Receivables Investment Funds (FIDCs) and Non-Standardized FIDCs.
• Market Index Investment Funds (ETFs).
• Real Estate Receivables Certificate (CRI) and Agribusiness Receivables Certificate (CRA).
• Private Equity Investment Funds (FIPs).
• Municipalities issuing Certificates of Additional Construction Potential (CEPAC), which have an ongoing Consortium Urban Operation registered with the CVM (Mayor or his Representative).
• Securitization Companies.
• FIAGRO - FII.
• FIAGRO - FIDC.
• Coordinators of Public Offerings of Securities.

On December 28 2023, the Comissão de Valores Mobiliários (CVM) disclosed a new metric of capital risk exposure of funds.

The CVM released the CVM/SIN Circular Letter 10/2023, which deals with the capital risk exposure of FIFs (Financial Investment Funds).

The agency clarified that FIFs can use a new metric to measure capital risk and established the concept of RCF (Fund Capital Risk). The new metric, which had the active participation of ANBIMA in the discussions, was developed by B3 in coordination with CVM's technical area.

The decision responds to the market's request to use a metric that represents the market risk of the fund's portfolio in controlling the maximum gross margin limits in FIFs instead of the required margin.

This is one of several actions by ANBIMA to assist the market in adapting to CVM Resolution 175 and is part of ANBIMA in Action Market Development Agenda.

On December 28 2023, the Comissão de Valores Mobiliários (CVM) published a circular letter on the capital risk exposure of financial investment funds.

The purpose of this Circular Letter is to provide clarifications on the capital risk exposure of financial investment funds regulated by Normative Annex I of CVM Resolution No. 175, of December 23, 2022 ("Resolution"). 

Article 73 of the Resolution provides that the funds' exposure to capital risk must comply with maximum limits on the use of gross margin, to be controlled by the fund managers, according to the classification of the fund's class. Paragraph 1 of the aforementioned article 73 establishes that gross margin is considered to be the sum of the coverage and guarantee margins, required and potential, employed by the class in relation to the operations of its portfolio. 

The purpose of such limits is to ensure that the capital risk exposure of funds is adherent to their class, through active management. 

A fund's capital risk is a function of its exposure to potential price changes from risk factors underlying the positions it holds. The materialization of this risk occurs when the variation in the price of risk factors is reflected in variations in the prices of assets and derivatives, leading to a negative variation in the equity value of the fund.

On the other hand, in the domestic market, B3 is the market management entity that exercises, in practice, the calculation and control of the margins deposited by investment funds based on their risk exposures to the central counterparty managed by them.

On December 20 2023, the Comissão de Valores Mobiliários (CVM) published the Resolution 196 which extended the date of entry into force of amendments to CVM Resolution No. 35 resulting from CVM Resolution No. 179.

The CVM Resolution 179 was issued in conjunction with CVM Resolution No. 178 and both brought relevant innovations on the transparency of remuneration received by intermediaries and investment advisors in the offer of products and services to investors.

Among other measures, the CVM Resolution No. 179 provided that intermediaries should:

• Provide clients, in the franchised environment for the transmission of investment or divestment orders ("logged-in area"), with information on the form of their remuneration, including amounts and percentages actually practiced (section III of Chapter VII-A inserted in CVM Resolution No. 135); and
• To send quarterly to its clients statements with the remuneration earned in the period due to investments in securities made by them (section IV of Chapter VII-A inserted in CVM Resolution No. 135)

Such measures require system adaptations and, with this in mind, including by virtue of comments made in the public consultation that preceded the issuance of CVM Resolution No. 179, the rule established a longer period for the entry into force of the provisions that brought the aforementioned obligations. 

Thus, while for most of the new rules introduced by CVM Resolution No. 179 the effective date was set at June 1, 2023, for the provisions of sections III and IV of Chapter VII-A of CVM Resolution No. 135, this date was set at January 2, 2024.

However, ANBIMA (Brazilian Association of Financial and Capital Markets Entities) recently submitted a request for an extension of the deadline for the effective date of the provisions scheduled to come into force from January 2024. ANBIMA claims that the term of office should only begin on November 1, 2024, i.e., a 10-month extension in relation to the originally fixed date.

On December 26 2023, the Comissão de Valores Mobiliários (CVM) published a joint circular letter about the interpretation of provisions of the CVM Resolution No. 30.

CVM Resolution No. 30 determines, among other issues, that persons qualified to act as members of the distribution system and securities advisors verify whether "the product, service or operation is appropriate to the client's investment objectives", and also whether "the client has the necessary knowledge to understand the risks related to the product" (Article 3, I and III, of CVM Resolution No. 30).

Thus, considering the current context of the Brazilian capital market and the formatting of the products already offered to investors, added to the commercial appeal that securities structured in the market have, the best compliance with the provisions of article 3, I and III, of CVM Resolution No. 30, requires intermediaries and consultants to map and know the profile of their clients also from the perspective of their appetite and interest in securities with "sustainable" objectives (or any other term related to sustainable finance), in order to ensure that, in the process of recommending to them the most varied options available, also under this hue the intermediary can recommend (or the advisor can suggest) those that correspond in the most appropriate way possible to the clients' profile.

In addition, securities intermediaries and advisors must certify, under the best-efforts regime and within the limits of their attributions, that a given security or security recommended through them is effectively adherent to an ESG objective in order to avoid any greenwashing practices harm the clients they serve, by inducing them to invest in alternatives that do not comply with the investment objectives sought by them.

Thus, for example, before recommending a particular investment fund, persons qualified to act as members of the distribution system and consultants must verify that the fund complies with the discipline provided for in article 49 of CVM Resolution No. 175; as well as whether it adheres to the self-regulatory rules applicable to this type of product. The same rationale also applies to publicly offered securities identified as "green, social or sustainable" (or related terms), pursuant to CVM Resolution No. 160; as well as in relation to the provisions of Article 4 of Supplement A to Resolution C VM No. 60.

On December 26 2023, the Comissão de Valores Mobiliários (CVM) has issued a joint circular letter advising on the integration of environmental, social, and governance (ESG) factors into suitability procedures.

The objective is to disseminate the interpretation of the technical areas on the provisions of CVM Resolution 30, which provides for the duty to verify the adequacy of products, services and operations to the customer's profile.

The circular letter clarifies to regulated agents that, considering the growth of environmental (including climate), social and governance ESG products in the market, within the scope of this investor profile assessment, this variable must also be taken into account, so that the products offered are suitable for such customers.

In addition, the document reinforces that securities intermediaries and advisors must certify, under the best efforts regime and within the limits of their attributions, whether a given security or security recommended through them is effectively adherent to an ESG objective. The objective is to prevent any greenwashing practices from harming the clients they serve, by inducing them to invest in alternatives that do not comply with the investment objectives they seek.

On December 12 2023, the Banco de la República published a circular on the deposit account system.

Banco de la República administers the Deposit Account System (CUD), a High Value Payment System that settles in gross form and in real time against the deposit accounts, the money transfer orders received from the participating entities, including the external systems. The CUD provides various functionalities, such as online and real-time transfers in national and foreign currency, settlement of transfer orders by files for external systems, online consultation of balances, movements and statements, printing of reports and generation of files in XML format.

The Circular is replaced to incorporate:

•  The Crisis Protocol of the Securities and Foreign Exchange Market Infrastructures approved by Resolution No. 674 of 2020 of the Financial Superintendence of Colombia (CFS); 
• The rules corresponding to the application of the provisions of paragraph m) of article 2.12.1.1.2. of the Single Regulatory Decree 2555 of 2010 in relation to the settlement of transactions on non-business days; 
• The rules related to the obligations of participants when incidents are reported in the CUD service that prevent the processing of transactions or the obtaining of deposit account information and the communication of such incidents by the Bank; and 
• The rules related to the settlement of transactions with a value date of the previous day and the limits of extension of hours of provision of the CUD service.

On December 21 2023, the Autorité des marchés financiers (AMF) issued the Summary of N°3 SPOT (Supervision of Operational and Thematic Practices) controls relating to the cybersecurity system of 5 asset management companies - 2023.

This work is in line with that carried out in 2019 and 2020 and in the context of the entry into force, in January 2023, of the DORA (Digital Operational Resilience Act) regulation on the digital operational resilience of the financial sector, which will be applicable to French financial entities from January 2025. In this regard, technical standards will be published on several subjects, including the use of IT service providers by institutions subject to this regulation. This SPOT control campaign also echoes the AMF's risk mapping published on July 6 2023, the summary of which recalled the high level of cyber risk for financial market participants. It encourages asset management companies to strengthen these systems and to take a more proactive approach to this type of risk.

The AMF focused its analysis on the services provided by key IT service providers, in particular those providing cloud computing services. It also looked at the IT channels for exchanging sensitive data set up with the other partners of the panel companies, i.e. custodians, valuators, custodians, statutory auditors, business introducers and distributors. The AMF's points of attention focused on:

• the organization and governance of cybersecurity, as well as the associated procedures;
• the selection and contracting process with IT service providers and partners;
• the control device of the assembly.

In its summary document, the AMF notes that the majority of audited asset management companies have formalised an exhaustive mapping of their sensitive IT service providers, including an assessment of the level of risk for each of them. However, this mapping exercise was not carried out identically on the perimeter of the other partners. As a result, management companies have not put in place all the necessary supervisory tools to ensure that their employees systematically use the appropriate IT channels for exchanges according to the level of sensitivity of the data exchanged.

The AMF also notes that insufficient consideration is taken of the criteria relating to the robustness of the cybersecurity, incident management and business continuity systems associated with the services provided during the selection and contracting phase of IT service providers and other partners. However, the panel's management companies deploy a posteriori controls targeting the effectiveness of these devices. These checks take the form of user checks and permanent or periodic checks, the latter of which may include technical tests.

The entities examined have adopted a more reactive than proactive approach to cyber risks associated with outsourced services, which is not in line with the approach advocated by the European Digital Operational Resilience Act (DORA), which will apply from 17 January 2025, and which includes key risk management principles related to IT service providers. DORA proposes a balance between reactive measures (incident review mechanism, business continuity strategy) and proactive measures (prior classification of sources of cyber risks, development of an information security policy).

This third series of checks marks the end of the educational phase initiated by the AMF in 2019 on cyber risks. 

Version française

Le 21 décembre 2023, l'Autorité des marchés financiers (AMF) a publié la Synthèse des contrôles SPOT N°3 (Supervision des Pratiques Opérationnelles et Thématiques) relative au dispositif de cybersécurité de 5 sociétés de gestion de portefeuille - 2023.

Ce travail s'inscrit dans la continuité de celui mené en 2019 et 2020 et dans le cadre de l'entrée en vigueur, en janvier 2023, du règlement DORA (Digital Operational Resilience Act) sur la résilience opérationnelle numérique du secteur financier, qui sera applicable aux entités financières françaises à partir de janvier 2025. A cet égard, des normes techniques seront publiées sur plusieurs sujets, dont le recours à des prestataires informatiques par les établissements soumis à ce règlement. Cette campagne de contrôle SPOT fait également écho à la cartographie des risques de l'AMF publiée le 6 juillet 2023, dont la synthèse rappelait le niveau élevé de risque cyber pour les acteurs des marchés financiers. Elle encourage les sociétés de gestion de portefeuille à renforcer ces dispositifs et à adopter une approche plus proactive face à ce type de risques.

L’AMF a concentré son analyse sur les services fournis par les principaux prestataires de services informatiques, notamment ceux proposant des services de cloud computing. Elle a également examiné les canaux informatiques d'échange de données sensibles mis en place avec les autres partenaires des sociétés du panel, à savoir les dépositaires, les évaluateurs, les conservateurs, les commissaires aux comptes, les apporteurs d'affaires et les distributeurs. Les points d’attention de l’AMF ont porté sur :

• l'organisation et la gouvernance de la cybersécurité, ainsi que les procédures associées ;
• le processus de sélection et de contractualisation avec les prestataires et partenaires informatiques ;
• le dispositif de commande de l'ensemble.

Dans son document de synthèse, l'AMF constate que la majorité des sociétés de gestion auditées ont formalisé une cartographie exhaustive de leurs prestataires informatiques sensibles, incluant une évaluation du niveau de risque pour chacun d'entre eux. Cependant, cet exercice de cartographie n'a pas été réalisé à l'identique sur le périmètre des autres partenaires. De ce fait, les sociétés de gestion n'ont pas mis en place tous les outils de contrôle nécessaires pour s'assurer que leurs collaborateurs utilisent systématiquement les canaux informatiques adaptés aux échanges en fonction du niveau de sensibilité des données échangées.

L’AMF constate également que les critères relatifs à la robustesse des systèmes de cybersécurité, de gestion des incidents et de continuité d’activité associés aux prestations fournies lors de la phase de sélection et de contractualisation des prestataires informatiques et autres partenaires sont insuffisamment pris en compte. Toutefois, les sociétés de gestion du panel déploient des contrôles a posteriori visant l'efficacité de ces dispositifs. Ces contrôles prennent la forme de contrôles utilisateurs et de contrôles permanents ou périodiques, ces derniers pouvant comprendre des essais techniques.

Les entités examinées ont adopté une approche plus réactive que proactive face aux risques cyber liés aux services externalisés, ce qui n'est pas conforme à l'approche prônée par la loi européenne sur la résilience opérationnelle numérique (DORA), qui s'appliquera à partir du 17 janvier 2025, et qui comprend des principes clés de gestion des risques liés aux fournisseurs de services informatiques. DORA propose un équilibre entre mesures réactives (mécanisme d'examen des incidents, stratégie de continuité d'activité) et mesures proactives (classification préalable des sources de cyber-risques, élaboration d'une politique de sécurité de l'information).

Cette troisième série de contrôles marque la fin de la phase pédagogique initiée par l’AMF en 2019 sur les risques cyber.

On December 14 2023, the Autorité des marchés financiers (AMF) updated its AMF Position-Recommendation DOC-2012-19: Guide for the preparation of the activity programme of portfolio management companies and self-managed collective investment schemes.

The Position-recommendation DOC-2012-19 indicates how to fill in the sections of the approval file (including the programme of activities) and the additional sheets. In particular, it provides details on the "four eyes" rule, access to market membership, credit analysis, delegation and outsourcing, capital requirements and the internal control system.

In a post-Brexit and health crisis context, it has become necessary to modernise the organisational schemes of asset management companies with an international activity, particularly with regard to the requirements applicable to the location of the financial managers who make up the investment committees as well as the terms and conditions for attaching certain financial managers to the portfolio management company.

Asset management companies have the option of having financial managers located in France or, within the framework of the European passport, in a branch established in another Member State of the European Union or party to the Agreement on the European Economic Area.

In order to support the international development and investment strategies of certain asset management companies that may justify the local presence of some of their financial managers, the AMF specifies in its doctrine the conditions under which financial managers who are members of investment committees taking investment decisions in a collegial manner may not be French residents or established in a branch of another Member State of the Union or party to the Agreement on the European Economic Area.

The conditions for the functioning of decision-making bodies (such as an investment committee or management committee) in charge of investment decisions in a collegial manner are as follows:

• the rules governing the functioning of this decision-making body are formalised in its programme of activities (voting members, quorum rules, chairmanship, etc.);
• the financial managers are attached to the portfolio management company in accordance with the terms and conditions set out in the point below;
• more than half of the financial managers actually involved in the investment decision are resident or physically present in France or in a branch of the asset management company established in another Member State of the European Union or party to the Agreement on the European Economic Area.

The location requirements for financial managers who are empowered to make investment decisions on their own remain unchanged.

Under the doctrine in force until now, financial managers must be attached to a portfolio management company by means of an employment contract, a corporate mandate or a provision agreement. The AMF specifies that a financial manager may also prove its affiliation by means of any agreement specifying that these natural persons and the services made available to the asset management company are, in accordance with its activity programme, placed under the control and authority of the latter.

These changes are accompanied by clarifications on the fact that compliance with all the rules applicable in the countries where the managers are established or with French rules relating in particular to labour law and tax law remain the responsibility of the asset management company.

Version française

Le 14 décembre 2023, l'Autorité des marchés financiers (AMF) a mis à jour sa Position-Recommandation AMF DOC-2012-19 : Guide pour l'élaboration du programme d'activité des sociétés de gestion de portefeuille et des organismes de placement collectif autogérés.

La Position-recommandation DOC-2012-19 indique comment remplir les sections du dossier d'agrément (incluant le programme d'activités) et les fiches complémentaires. Il fournit notamment des détails sur la règle des « quatre yeux », l'accès à l'adhésion au marché, l'analyse de crédit, la délégation et l'externalisation, les exigences en matière de capital et le système de contrôle interne.

Dans un contexte post-Brexit et de crise sanitaire, il est devenu nécessaire de moderniser les schémas organisationnels des sociétés de gestion de portefeuille ayant une activité internationale, notamment en ce qui concerne les exigences applicables à la localisation des responsables financiers qui composent également les comités d'investissement. ainsi que les modalités de rattachement de certains responsables financiers à la société de gestion de portefeuille.

Les sociétés de gestion de portefeuille ont la possibilité d'avoir des gestionnaires financiers situés en France ou, dans le cadre du passeport européen, dans une succursale établie dans un autre Etat membre de l'Union européenne ou partie à l'accord sur l'Espace économique européen.

Afin d'accompagner les stratégies de développement international et d'investissement de certaines sociétés de gestion de portefeuille pouvant justifier la présence locale de certains de leurs directeurs financiers, l'AMF précise dans sa doctrine les conditions dans lesquelles les directeurs financiers membres de comités d'investissement prenant des décisions d'investissement en de manière collégiale ne peuvent être résidents français ou établis dans une succursale d'un autre État membre de l'Union ou partie à l'accord sur l'Espace économique européen.

Les conditions de fonctionnement des organes de décision (tels qu'un comité d'investissement ou un comité de direction) chargés de prendre les décisions d'investissement de manière collégiale sont les suivantes :

• les règles régissant le fonctionnement de cet organe de décision sont formalisées dans son programme d'activités (membres votants, règles de quorum, présidence, etc.) ;
• les responsables financiers sont rattachés à la société de gestion de portefeuille selon les modalités précisées au point ci-dessous ;
• plus de la moitié des gestionnaires financiers effectivement impliqués dans la décision d'investissement sont résidents ou physiquement présents en France ou dans une succursale de la société de gestion de portefeuille établie dans un autre Etat membre de l'Union européenne ou partie à l'accord sur l'Espace économique européen.

Les exigences de localisation pour les gestionnaires financiers qui sont habilités à prendre eux-mêmes des décisions d'investissement restent inchangées.

Selon la doctrine en vigueur jusqu'à présent, les responsables financiers doivent être rattachés à une société de gestion de portefeuille par le biais d'un contrat de travail, d'un mandat social ou d'une convention de mise à disposition. L'AMF précise qu'un gestionnaire financier peut également justifier de son affiliation au moyen de toute convention précisant que ces personnes physiques et les services mis à la disposition de la société de gestion de portefeuille sont, conformément à son programme d'activité, placés sous le contrôle et l'autorité de cette dernière. .

Ces changements s'accompagnent de précisions sur le fait que le respect de toutes les règles applicables dans les pays où les gestionnaires sont établis ou des règles françaises relatives notamment au droit du travail et au droit fiscal restent de la responsabilité de la société de gestion de portefeuille.

On December 20 2023, the Autorité des marchés financiers (AMF) updated its Position - AMF Recommendation DOC-2020-03: Information to be provided by collective investment schemes incorporating non-financial approaches.

Position-Recommendation DOC-2020-03 details the information related to the consideration of extra-financial criteria that may be communicated by French collective investment schemes and foreign UCITS and ELTIFs (European Long Term Investment Funds) marketed in France to non-professional clients. These provisions are set out in the various regulatory documents (key investor information documents, prospectuses) and commercial documents.

Other AIFs that have at least one unitholder or non-professional shareholder are therefore subject to it, unlike Other AIFs referenced in unit-linked securities with an equivalent general public clientele. This situation generates a risk of misleading communication vis-à-vis these end investors and introduces an unjustified difference in treatment on the consideration of extra-financial criteria between different types of funds.

The AMF extends the scope of Position-Recommendation DOC-2020-03 to Other AIFs referenced in unit-linked securities in the context of life insurance contracts with non-professional clients when they wish to be able to communicate centrally or to a reduced extent on their extra-financial characteristics. This doctrine applies to the regulatory and commercial documentation of collective investment schemes. Insurers' communication with their customers is governed by ACPR Recommendation 2022-r-02.

This extension of the scope of the doctrine therefore aims to ensure consistency in terms of the expectations applicable in terms of extra-financial disclosure of collective investment schemes ultimately intended for non-professional clients and to strengthen investor protection.

Version française

Le 20 décembre 2023, l'Autorité des marchés financiers (AMF) a mis à jour sa Position - Recommandation AMF DOC-2020-03 : Informations que doivent fournir les organismes de placement collectif intégrant des approches extra-financières.

La Position-Recommandation DOC-2020-03 détaille les informations liées à la prise en compte des critères extra-financiers qui peuvent être communiquées par les organismes de placement collectif français et les OPCVM et ELTIF (Fonds Européens d'Investissement à Long Terme) étrangers commercialisés en France auprès d'une clientèle non professionnelle. Ces dispositions sont précisées dans les différents documents réglementaires (documents d'informations clés pour l'investisseur, prospectus) et commerciaux.

Les autres FIA comportant au moins un porteur de parts ou actionnaire non professionnel y sont donc soumis, contrairement aux Autres FIA référencés en unités de compte ayant une clientèle grand public équivalente. Cette situation génère un risque de communication trompeuse vis-à-vis de ces investisseurs finaux et introduit une différence de traitement injustifiée sur la prise en compte des critères extra-financiers entre les différents types de fonds.

L'AMF étend le champ d'application de la Position-Recommandation DOC-2020-03 aux Autres FIA référencés en unités de compte dans le cadre de contrats d'assurance vie avec des clients non professionnels lorsqu'ils souhaitent pouvoir communiquer de manière centralisée ou dans une mesure réduite sur leurs caractéristiques extra-financières. Cette doctrine s'applique à la documentation réglementaire et commerciale des organismes de placement collectif. La communication des assureurs avec leurs clients est régie par la recommandation ACPR 2022-r-02.

Cette extension du champ d'application de la doctrine vise donc à assurer la cohérence des attentes applicables en matière d'information extra-financière des organismes de placement collectif destinés in fine à une clientèle non professionnelle et à renforcer la protection des investisseurs.

On December 14 2023, Germany published the Future Financing Act.

The Future Financing Act (Zukunftsfinanzierungsgesetz), aims to improve conditions for start-ups and small and medium-sized businesses, modernise the German financial sector, and foster a stronger shareholder culture in Germany. The Future Financing Act aims to mobilise more private capital and to make Germany more attractive to the financial sector as a place to do business. The legislation implements agreements set out in the German government’s Start-up Strategy and in the coalition agreement between the governing parties. Its provisions focus especially on new, innovative start-ups, but also target other small and medium-sized businesses that account for a significant proportion of the German economy.

Developing capital markets is not an end in itself. Rather, the new legislation is designed to boost the real economy. Strong capital markets facilitate growth in all sectors of the economy, because they are a key source of financing for long-term investments in areas like research and development. In addition, they play a crucial role in creating opportunities for growth-stage companies.

The new legislation includes the following specific improvements:

• Better conditions for start-ups and small and medium-sized businesses
  By enacting attractive tax rules, the Act wants to improve the conditions for employee share ownership, making Germany more attractive to start-ups. The tax allowance for employee shares will be raised from €1,440 to €2,000 per year.
• Easier access to capital markett
  The Act is making it easier for companies to access capital markets by reducing the minimum capital required for an initial public offering (IPO) from €1.25m to €1m, which will help smaller business in particular.
  The Act also plans to simplify regulatory requirements. In the future, stock exchanges will be able to waive co-applicant requirements for IPOs in certain segments of regulated markets. This will help to reduce the cost of an IPO.
  In addition, companies will be permitted to issue multiple-vote shares (also known as dual class shares) with voting rights of up to 10 votes per share.
• Updating Germany’s financial sector
  The Act is pressing forward with the digitalisation of capital markets by adding electronic shares to the scope of the Electronic Securities Act. Under the new rules, registered shares will in future be issued and transferred electronically via a centralised securities register or via a cryptosecurities register that may be based on distributed ledger technology.
• Better government support for equities saving schemes and home-ownership-related saving schemes
  The Act will double the income thresholds for the savings allowance for investments under employee savings schemes.
  The Act entered into force on December 15 2023.

On December 11 2023, Germany published the Ordinance on the Notification and Submission of Documents under the German Securities Institutions Act.

This Ordinance contains the following sections:

• Section 1 Submission Procedure, Recognition of Legal Entity, Credit Notification
• Section 2 Display of persons
• Section 3 Activity in the third country and outsourcing
• Section 4 Notification of Participation, Notification of Unification
• Section 5 Authorisation Procedure
• Section 6 Financial information and reporting pursuant to Regulation (EU) 2019/2033

In order to be identified in the reporting system, the following undertakings require a legal entity identification:

• Securities institutions,
• Investment holding companies as defined in point (23) of Article 4(1) of Regulation (EU) 2019/2033 on prudential requirements for investment firms and amending Regulations, and
• Mixed financial holding companies as defined in point (40) of Article 4(1) of Regulation (EU) 2019/2033.

The legal entity identifier shall be issued by a registrar that is part of an internationally recognised legal entity identification system by supervisory authorities.

Notifications pursuant to Section 64 (1) number 12 and (2) of the Securities Institutions Act must contain information on the amount and method of calculating the percentage applicable pursuant to Section 64 (1) number 12 of the Securities Institutions Act.

The Ordinance entered into force on December 12 2023.

On December 11 2023, Germany published the Ordinance on the audit of the annual financial statements of Investment Institutions and on the Reports to be prepared (Securities Institution Audit Report Ordinance).

The general provisions are as follows:

• Scope of application
• Reporting period
• Risk orientation and materiality
• Type and scope of reporting
• Form and deadline of reporting
• Audit findings
• Appendices
• Concluding remarks
• Reporting cycle

This Regulation lays down the following rules:

• the subject matter and date of the audit pursuant to Section 78 of the Securities Institutions Act for Small and Medium-Sized Securities Institutions within the meaning of Section 2 (16) and (17) of the Securities Institutions Act, and
• the content of the audit reports within the meaning of Section 76 (1) sentence 3 of the Securities Institutions Act and the form in which audit reports are to be submitted to the Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank.

The period covered by the audit (reporting period) is generally the financial year ending on the reporting date of the annual financial statements (balance sheet date) (reporting year). In the case of reporting periods that differ from the financial year, the audit must cover at least the financial year ending on the balance sheet date.

This Regulation entered into force on December 12, 2023.

On December 12 2023, the Federal Financial Supervisory Authority (BaFin) published information on the reporting procedure for significant outsourcing.

The Securities Institution Notification Ordinance was promulgated on December 11 2023 and entered into force on December 12 2023. Now that BaFin has temporarily suspended the obligation to submit outsourcing notifications, which has already been in force since June 26 2021, the circumstances that are subject to notification pursuant to Section 64 (1) No. 13 of the Securities Institutions Act (WpIG) must now be reported via BaFin's MVP portal by June 30 2024.

As of January 1 2022 and June 26 2021 respectively, companies in the financial sector are obliged to notify BaFin of significant outsourcing due to the Financial Market Integrity Strengthening Act (FISG) and the WpIG.

In accordance with the existing legal regulations as well as the new legal regulations as a result of the FISG and the WpIG, the reporting obligation includes the following in almost all business areas of BaFin in the context of existing or intended (significant) outsourcing:

• the intention to,
• enforcement,
• significant changes, and
• serious incidents.

On December 22 2023, the Federal Financial Supervisory Authority (BaFin) published its webpage on sustainable finance.

Under the new heading on its website, the BaFin offers a insight into the topic of "Sustainable Finance". 

Interested parties can find information on the following topics:

• EU Disclosure Regulation.
• EU Taxonomy Regulation.
• Sustainability Reporting.
• Query of sustainability preferences.
• Greenwashing.
• Risk management.

BaFin plans to continuously expand the topic area and take current developments into account.

On December 21 2023, Hong Kong updated its Deposit Protection Scheme (Representation on Scheme Membership and Protection of Financial Products under Scheme) Rules.

The updated provisions are as follows:

• Part 1 Preliminary
• Part 2 Disclosure as to Scheme Membership
• Part 3 Disclosure as to Financial Products not Protected by Scheme
• Part 4 Disclosure as to Deposits Qualified for Protection by Scheme
• Part 5 Other Disclosure Requirements
• Part 6 Miscellaneous
• Schedule

On December 20 2023, the Securities and Futures Commission (SFC) published a guidance note on position limits and large open position reporting requirements.

Section 35(1) of the Securities and Futures Ordinance (Cap. 571) (SFO) empowers the SFC to make rules to:

• prescribe limits on the number of futures contracts or options contracts that may be held or controlled by a person; and 
• require a person holding or controlling a reportable position to notify the recognized exchange company or the SFC.

The Securities and Futures (Contracts Limits and Reportable Positions) Rules were made by the SFC under Section 35(1) of the SFO to prescribe limits and reporting levels applicable to futures contracts and stock options contracts traded on the recognized exchange company.

This Guidance Note is issued to help market participants better understand how the Rules are intended to operate in practice and explain compliance requirements of the Rules.

The Guidance Note is intended to clarify the SFC’s policy intent and position on issues raised by the industry and does not have the force of law. The SFC will revise the Guidance Note to clarify its position in response to market developments and to reflect legislative changes in the future.

On December 8 2023, the Securities and Futures Commission (SFC) published a circular to intermediares on joint product survey 2023 with the Hong Kong Monetary Authority (HKMA).

As an annual exercise to collect information about the selling activities of intermediaries in Hong Kong, the SFC and the HKMA will launch the 2023 joint survey on the sale of non-exchange-traded investment products by licensed corporations (LCs) and registered institutions (RIs) that are licensed or registered for Type 1 or 4 Regulated Activity. The survey will cover 2023.

The survey covers the sale of non-exchange-traded investment products (such as collective investment schemes, debt securities, structured products, swaps, swaptions and repos) to investors (In-scope Clients) who are not institutional professional investors or certain corporate professional investors for which intermediaries have been exempted from the suitability obligation.

On December 19 2023, the Securities and Futures Commission (SFC) announced that its amendments to the Securities and Futures (Contracts Limits and Reportable Positions) Rules to take effect on December 22 2023.

The amendments will enhance the position limit regime in several ways. These include clarifying the application of the Rules to asset managers who manage funds or sub-funds of umbrella funds and the regulatory expectations for trustees in respect of the Rules’ requirements, expanding the list of “specified contracts” for granting excess position limits, introducing an excess position limit regime for clearing participants, raising the statutory position limits for certain futures and options contracts, prescribing position limits and reporting levels for some new contracts, and imposing large open position reporting requirements for holiday trading contracts.  

The changes aim to give more clarity on regulatory requirements related to funds, facilitate compliance and provide more flexibility to the market. 

To help market participants understand the amendments, the SFC has also published an FAQ and updated the guidance note on related regulatory requirements.

On December 29 2023, the Securities and Futures Commission (SFC) published a Circular to Management Companies of SFC-authorised Exchange Traded Funds (ETFs), list of potential events triggering ongoing disclosure.

Under 11.1B of the Code on Unit Trusts and Mutual Funds (UT Code), management companies should provide holders with reasonable prior notice, or inform holders as soon as reasonably practicable of any information concerning the scheme which is necessary to enable holders to appraise the position of the scheme.

Under Appendix E3 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), a scheme shall inform the Exchange immediately of, among other things, any other information necessary to enable the holders of interests to appraise the position of the scheme and to avoid the establishment of a false market in the interests of the scheme.

To assist management companies of ETFs to comply with the disclosure obligations under the UT Code and Listing Rules and without prejudice to the notification obligation under 11.1A of the UT Code, the following are non-exhaustive examples of events that may trigger the above on-going disclosure requirements where any of them would have a material impact on an ETF:

Changes falling within 11.1 or 11.1B of the UT Code

• Filing of winding up petitions, the issuing of winding up orders or the appointment of receivers or provisional liquidators, or the institution of disciplinary proceedings in respect of its licence or registration to conduct any regulated activity, or proceedings analogous to the above, against any of the trustee, custodian, or management company;
• Replacement of the underlying index or indices, or changes of the index calculation methodology;
• Litigation brought against the ETF or any of the trustee, custodian, or management company;
• Where the ETF adopts a synthetic replication strategy:
• The cessation of market making activity (including the resignation of the last market maker) for units (traded in any counter) of the ETF;
• Suspension of creation and / or redemption of units in the ETF;
• Changes in tax or regulatory requirements that may impact upon the net asset value of the ETF; or
• Material breaches of the constitutional documents of the ETF.

On December 22 2023, the Securities and Futures Commission (SFC) published a Circular to management companies of SFC-authorised unit trusts and mutual funds, updated guidance on streamlined measures for SFC-authorised funds.

The SFC regularly reviews its operational processes and guidance to ensure their efficiency and fitness for purpose without compromising investor interests and protection.

Following a recent review and engagement with market participants, the SFC has updated its guidance (Updated Guidance) to set out and clarify a number of streamlined measures to enhance the operational efficiency and approval processes of SFC-authorised funds in implementing changes and fulfilling the disclosure and reporting requirements for such funds.

The Updated Guidance covers the following key streamlined measures:

• Appointment of investment delegates – Classification of an application to appoint new investment delegate(s) by a new fund seeking the SFC’s authorisation as a “standard application” or an existing SFC-authorised fund as a “simple application”, which will be processed by the SFC within a shorter targeted approval time; removal of the SFC’s prior approval requirement for a fund’s appointment of an investment delegate which is managing other SFC-authorised funds.
• UCITS funds – Removal of the reporting requirement for the pricing errors of UCITS funds which have no Hong Kong investors during the affected period; the adoption of a streamlined reporting requirement for breaches by UCITS funds that are under their home regulator’s supervision, subject to fund managers filing a standard form with the SFC.
• Post-authorisation notifications – Streamlining of the notification requirements for post-authorisation matters, including informing investors of the suspension of a fund’s dealings on the fund’s website, a shorter prior notice to investors regarding changes where written consents from all affected investors have been obtained, and dispensation with the need for a separate notice to inform investors of the fund’s annual report publication where the fund’s offering documents contain relevant disclosures.
• Derivative investments – Dispensation with the SFC’s prior approval for a reduction in a fund’s derivative investments; provision of further guidance in the SFC’s Guide on the Use of Financial Derivative Instruments for Unit Trusts and Mutual Funds on the calculation of funds’ net derivative exposure.

Disclosure guidance – Clarification that the disclosure guidance set out in the Guide on Practices and Procedures for Application for Authorization of Units Trusts and Mutual Funds is non-mandatory and for reference only, with an aim to facilitate the preparation of funds’ offering documents.

The streamlined measures set out in the Updated Guidance will take immediate effect.

On December 22 2023, the Securities and Futures Commission (SFC) published a Circular on SFC-authorised funds with exposure to virtual assets.

This circular sets out the requirements under which the Securities and Futures Commission (SFC) would consider authorising investment funds with exposure to virtual assets (VA) of more than 10% of their net asset value (NAV) for public offerings in Hong Kong (SFC-authorised VA Funds) under sections 104 and 105 of the Securities and Futures Ordinance.

This circular supersedes the Circular on Virtual Asset Futures Exchange Traded Funds issued on October 31 2022. Globally, the VA landscape has been evolving rapidly. A broader range and a larger number of investment products providing exposure to VA, including VA-related exchange traded funds (ETFs) offered in major overseas markets, are now available to both retail and professional investors, and have become increasingly popular. Demand for these products has also increased in Hong Kong.

In light of these developments, the SFC has introduced regimes that allow the offering of certain VA products to the Hong Kong public with appropriate investor protection safeguards. For example, the SFC started accepting applications in October 2022 for ETFs that obtain exposure to VA primarily through futures contracts. The SFC’s licensing regime of virtual asset trading platforms (VATPs) also became effective in June 2023, enabling Hong Kong investors to directly access large-cap spot VA, subject to certain eligibility requirements and robust investor protection safeguards. This circular sets out the requirements for SFC-authorised funds to:

• invest directly in the same spot VA tokens accessible to the Hong Kong public for trading on SFC-licensed VATPs (i.e., direct exposure); and/or
• acquire indirect investment exposure to such VA (i.e., indirect exposure), for example, through futures traded on conventional regulated futures exchanges and other exchange-traded products.

On December 22 2023, the Securities and Futures Commission (SFC) published a joint circular on intermediaries’ virtual asset-related activities with the Hong Kong Monetary Authority (HKMA).

When the SFC formulated its regulatory approach for virtual assets in 2018, it imposed an overarching “professional investors only” restriction on various types of activities, including the distribution of funds investing in virtual assets. Since then, the virtual asset landscape has evolved rapidly and begun to expand into mainstream finance. A broader range and a larger number of investment products are now available, and provide both retail and professional investors 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 authorised virtual asset futures exchange-traded funds (VA futures ETFs) for public offering in Hong Kong.

The SFC and the HKMA have reviewed their existing policy 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, where the SFC has authorised VA futures ETFs and is prepared to accept applications for the authorisation of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds (VA spot ETFs). 

Specifically, this updated circular:

• clearly specifies the requirements applicable to intermediaries when they distribute VA-related products; and
• sets out the standards of conduct expected of intermediaries when distributing VA funds authorised by the SFC.

For the avoidance of doubt, this circular will supersede the joint circulars on intermediaries’ VA-related activities issued on October 20 2023 and January 28 2022.

On December 22 2023, Hong Kong published the Securities and Futures (Contracts Limits and Reportable Positions) Rules.

These Rules apply to futures contracts and stock options contracts that are traded through the facilities of a recognized exchange company in accordance with the rules of the recognized exchange company.

The contents are as follows:

• Interpretation.
• Application.
• Restrictions on number of contracts held or controlled.
  
  Authorization under rules of recognized exchange company to hold or control contracts in excess of prescribed limit.
  Authorization by Commission to hold or control contracts in excess of prescribed limit in special circumstances.
  Authorization by Commission to hold or control contracts in excess of prescribed limit for purposes of facilitating provision of services to clients.
  Authorization by Commission to hold or control contracts in excess of prescribed limit for purposes of index arbitrage activity.
  Authorization by Commission for asset manager to hold or control contracts in excess of prescribed limit for purposes of asset management activity.
  Authorization by Commission for clearing participants.

• Prescribed limits
• Notice of reportable positions
• Compliance by certain persons
• Compliance by persons with respect to funds
• Penalties

On December 13 2023, the Central Bank of Ireland (CBI) issued a Feedback Statement and Guidelines after the conclusion of the Consultation on enhanced Administrative Sanctions Procedure (ASP).

The ASP Consultation set out the Central Bank’s proposed approach to important changes introduced by the Central Bank (Individual Accountability Framework) Act 2023 (the IAF Act), and additional changes to reflect the Central Bank’s experience of using the ASP for over a decade.

In some circumstances, the Central Bank can now take direct enforcement actions against individuals, and where a settlement is agreed and is based on admissions, a High Court order is required to confirm the sanctions imposed. Other practical changes include allowing for earlier disclosure of documents to subjects of investigations; and the Central Bank has now published the methodologies for determining monetary penalties. Additional safeguards were incorporated to further fortify the Central Bank’s existing process and in recognition of the expanded population of individuals coming within the scope of the ASP under the IAF Act.

The ASP Consultation was launched on June 22 and concluded on September 14 2023. The Feedback Statement responds to submissions from stakeholders, describes changes made to the Central Bank’s approach to the ASP in response to those submissions, and announces the publication of the final ASP Guidelines, which came into force on December 13 2023.

The Guidelines are not an exhaustive guide to the ASP, which is set out in the relevant legislation. In the event of a conflict between the Guidelines and the legislation, the legislation will prevail.

On December 21 2023, the Irish Department of Finance published the Funds Sector 2030: A Framework for Open, Resilient & Developing Markets Progress Update.

A total of 193 submissions were received in response to the Funds Review public consultation which ran from June 22 to September 15 2023.

The Central Bank of Ireland (Central Bank) also submitted a comprehensive response setting out, from their perspective, the five priority areas that should guide the future development of the investment  funds  sector  in  Ireland:

1. Delivering  Positive  Outcomes  for  the  Domestic Economy and Investors
2. Developing a Macroprudential Framework for Investment Funds
3. Maintaining Regulatory Effectiveness
4. Sustainable Finance
5. Digital Transformation

This  synopsis  report  will  highlight  the  main  trends, risks and challenges and opportunities facing the funds industry in Ireland in the period to 2030, as identified by respondents. It summarises common issues and proposals raised under the three recommendations arising from the Commission on Taxation and Welfare Report:

1. an examination of  the taxation regime for funds, life assurance policies and other related investment products, with the goal of simplification and harmonisation where possible; and to do so with a net revenue-raising or neutral mandate
2. an examination of the regimes for Real Estate Investment Trusts (REITs) the Irish Real Estate Funds (IREFs) and their role in the property sector, including how they support housing policy objective
3. the use and scope of the Section 110 regime, both in the context of the property sector and  more  generally  so  as  to  ensure  that  the  regime  is  fit  for purpose  and  meeting agreed policy objectives

Immediate work will focus on:

(1) further understanding the commercial rationale for an unauthorised product structure for private assets and reviewing other structures used for such investment strategies.

(2) seeking additional detail on the impact of technological change and policy changes which could be considered.

(3) sourcing data to better understand the savings landscape in Ireland including its size and existing distribution channels etc.

(4) reviewing tax-advantaged savings and investment schemes available in other jurisdictions, such as the UK and  Sweden.

(5) examining  the  structured  finance/asset  holding  company  regimes  in  other countries,  especially  Luxembourg  and  the  UK.

(6) soliciting  additional  views  on  potential alternatives, if any, to the existing IREF and REIT regimes;

(7) seeking additional data on the  impact  of  the  institutional  sector,  including  investment  funds,  on  the  property  market, especially housing.

On December 20 2023, Ireland laid the Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2023 (S.I. No. 663 of 2023) before the Houses of the Oireachtas (Ireland's National Parliament).

In these Regulations, “Principal Regulations” means the Central Bank Reform Act 2010 (Sections 20 and 22) Regulations 2011 [S.I. No. 437 of 2011] as amended. Schedule 2 to the Principal Regulations is amended by the substitution of the Schedule Pre-Approval Controlled Functions to these Regulations. These Regulations came into operation on December 29 2023.

Pre-Approval Controlled Functions is required in relation to all regulated Financial Service Providers (other than a certified person within the meaning of section 55 of the Investment Intermediaries Act 1995).

In the case of a regulated financial service provider that is a body corporate incorporated in the State, a person who holds or performs the duties of any of the following positions or offices in the regulated financial service provider:

(a) the office of:

(i) executive director (PCF-1),

(ii) non-executive director (PCF-2A),

(iii) independent non-executive director (PCF-2B)

(b) the office of chair of the board (PCF-3), 

(c) the office of chair of the audit committee (PCF-4),

(d) the office of chair of the risk committee (PCF-5),

(e) the office of chair of the remuneration committee (PCF-6),

(f) the office of chair of the nomination committee (PCF-7),

(g) the office of chief executive (PCF-8),

(h) the office of chief operating officer (PCF-42).

In the case of a regulated financial service provider that is a partnership established in the State, each member of the partnership except limited partners within the meaning of section 3 of the Investment Limited Partnerships Act 1994 (PCF-9). In the case of a regulated financial service provider that is a natural person and where that provider has its principal place of business in the State, that person (PCF-10). In the case of each regulated financial service provider established in the State: 

(a) Head of Finance (PCF-11),

(b) Head of Compliance (PCF-12),

(c) Head of Internal Audit (PCF-13),

(d) Chief Risk Officer (PCF-14),

(e) Branch Manager of a branch established outside the State but only where the business arising from the branch amounts to 5% or more of, as applicable, the assets or revenues or gross written premium of the regulated financial service provider (PCF-16),

(f) Head of Retail Sales (PCF-17),

(g) Chief Information Officer (PCF-49),

(h) Head of Anti-Money Laundering and Counter Terrorist Financing Compliance (PCF-52).

Pre-Approval Controlled Functions is required in relation to Specified Regulated Financial Service Providers.

A person who performs one or more of the following functions in respect of a regulated financial service provider established in the State:

1. In respect of: 

a) an Insurance Undertaking or a Reinsurance Undertaking within the meaning of the European Union (Insurance and Reinsurance) Regulations 2015 or the Finance (Miscellaneous Provisions) Act 2015, other than a Captive Insurance Undertaking, a Captive Reinsurance Undertaking or a Special Purpose Reinsurance Vehicle:

i. Head of Underwriting (PCF-18),

ii. Head of Investment (PCF-19),

iii. Head of Claims (PCF-43),

iv. Head of Material Business Line (PCF-54) where such a material business line satisfies either of the following quantitative criteria:

i. has gross total technical provisions (whether positive or negative) equal to or in excess of €10 billion; or

ii. accounts for 25 per cent or more of the insurance undertaking’s gross earned premium, if that gross earned premium is above €1 billion per annum.

b) an Insurance Undertaking or a Reinsurance Undertaking within the meaning of the European Union (Insurance and Reinsurance) Regulations 2015, other than a Special Purpose Reinsurance Vehicle:

i. Head of Actuarial Function (PCF-48).

2. In respect of a Credit Institution within the meaning of the European Union (Capital Requirements) Regulations 2014:

a) Head of Treasury (PCF-21),

b) Head of Credit (PCF-22),

c) Head of Asset & Liability Management (PCF-23),

d) Head of Material Business Line (PCF-50) where such a material business line satisfies either of the following quantitative criteria:

i. has gross total assets equal to or in excess of €10 billion; or

ii. accounts for 10 per cent or more of the firm’s gross revenue.

e) Head of Market Risk (PCF-51) in credit institutions which exceed either of the following metrics:

i. €500m of market risk (including Credit Valuation Adjustment ) Risk Weighted Assets; or

ii. €100bn of notional derivatives traded.

f) Head of Client Asset Oversight (PCF-53)

3. In respect of a Market Operator of a Regulated Market within the meaning of the European Communities (Markets in Financial Instruments) Regulations 2007:

a) Head of Traded Markets (PCF-24), 

b) Head of International Primary Markets (PCF-25), 

c) Head of Regulation (PCF-26),

d) Head of Operations (PCF- 27).

4. In respect of :

(a) an Investment Firm within the meaning of the European Communities (Markets in Financial Instruments) Regulations 2007 or an Investment Business Firm authorised or required to be authorised under section 10 of the Investment Intermediaries Act 1995 other than: 

• an investment business firm which solely carries on the business of an investment product intermediary (within the meaning of section 25 of the Investment Intermediaries Act 1995); or

• an entity authorised or required to be authorised under section 10 of the Investment Intermediaries Act 1995 which solely carries out:

- the administration of collective investment schemes, including the performance of valuation services or fund accounting services or acting as a transfer agent or a registration agent for such schemes; or- custodial operations involving the safekeeping and administration of investment instruments; or

(b) an alternative investment fund manager within the meaning of the European Union (Alternative Investment Fund Managers) Regulations 2013:

i. Branch Managers within the State (PCF-28), 

ii. Head of Trading (PCF-29),

iii. Chief Investment Officer (PCF-30)

iv. Head of Client Asset Oversight (PCF-45),

v. Head of Investor Money Oversight (PCF-46).

vi. Head of Material Business Line (PCF- 55) where such a material business line satisfies either of the following quantitative criteria:

a. has gross total assets equal to or in excess of €5 billion; or

b. accounts for 10 per cent or more of the investment firm’s gross revenue

5. In respect of: 

(a) an entity authorised or required to be authorised under section 10 of the Investment Intermediaries Act 1995 which carries out:

• the administration of collective investment schemes, including the performance of valuation services or fund accounting services or acting as a transfer agent or a registration agent for such schemes; or

• custodial operations involving the safekeeping and administration of investment instruments; or

(b) trustees within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 or the Unit Trusts Act 1990 or Part XIII of the Companies Act 1990 or Custodians within the meaning of the Investment Limited Partnerships Act 1994 or the Investment Funds, Companies and Miscellaneous Provisions Act 2005; or

(c) an alternative investment fund manager within the meaning of the European Union (Alternative Investment Fund Managers) Regulations 2013:

i. Branch Managers within the State (PCF-32),

ii. Head of Transfer Agency (PCF-33),

iii. Head of Accounting (Valuations) (PCF-34),

iv. Head of Trustee Services (PCF-35),

v. Head of Custody Services (PCF-36);

vi. Head of Investor Money Oversight (PCF-46)

6. In respect of: 

(a) a UCITS Self-Managed Investment Company or Management Company within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011; or 

(b) Management Company within the meaning of the Unit Trusts Act 1990 or Part XIII of the Companies Act 1990 or Investment Funds, Companies and Miscellaneous Provisions Act 2005; or 

(c) General Partner within the meaning of the Investment Limited Partnerships Act 1994; or

(d) Internally managed AIFs or alternative investment fund manager within the meaning of the European Union (Alternative Investment Fund Managers) Regulations 2013

i. Head of Transfer Agency (PCF-37),

ii. Head of Accounting Valuations (PCF-38),

iii. Designated Person to whom the board of a UCITS Self Managed Investment Company or Alternative Investment Fund Manager or UCITS Management Company or a Management Company of an AIF delegates the performance of any of the following managerial functions:

I. Designated Person with responsibility for Capital and Financial Management (PCF-39A);

II. Designated Person with responsibility for Operational Risk Management (PCF-39B);

III. Designated Person with responsibility for Fund Risk Management (PCF-39C);

IV. Designated Person with responsibility for Investment Management (PCF-39D);

V. Designated Person with responsibility for Distribution (PCF-39E);

VI. Designated Person with responsibility for Regulatory Compliance (PCF-39F).

iv. Head of Investor Money Oversight (PCF-46).

7. In respect of a Payment Institution authorised or required to be authorised under the European Communities (Payment Services) Regulations 2009 or an E-Money Institution within the meaning of the European Communities (Electronic Money) Regulations 2011:

a) Branch Managers within the State (PCF-40)

8. In respect of a Retail Credit Firm within the meaning of the Central Bank Act 1997:

a) Head of Credit (PCF-47).

9. A reference to UCITS Self Managed Investment Company shall be taken to mean an investment company within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 which has not designated a management company.

Pre-Approval Controlled Functions is required in relation to all regulated Financial Service Providers established outside the State and concerning the manager of a branch in the State of a regulated financial service provider established in a country that is not an EEA country (PCF-41).

On December 14 2023, the Irish Department of Finance published the Markets in Crypto Assets Regulation (MiCAR) Consultation Feedback Statement.

Noting that Titles III and IV of MiCAR will apply will apply from June 30 2024 and the full regulation will apply from December 2024, the transposition date for MiCAR to take effect in Ireland is June 30 2024.

The discretion under Article 111(1) will not be exercised. For financial penalties, where the 'minimum maximum' amounts are lower in MiCAR (e.g. €700k for natural persons), these should be brought up to the Administrative   Sanctions   Procedure (ASP) minimums. All  sanctions  under  the  ASP  (section 33Q  of  the Central  Bank  Act 1942) should be available to the CBI in respect of sanctioning breaches of MiCAR obligations, and not just the minimum list of penalties contained in Article 111 of MiCAR.

On December 18 2023, the Commissione Nazionale per le Societa e la Borsa (CONSOB) updated its 2022-2024 Strategic Plan. 

Approximately 2/3 of the three-year period of reference of the current Strategic Plan, the Commission has reconsidered its priorities, in the light of the actions carried out and the new reference context.

The new strategic guidelines will be developed along two Guidelines, one internal and one external, which will be associated with nine strategic objectives starting from 2024: Directorate 1 called "Consob reform: technology and organization" and Directive 2 called "Capital market competitiveness: Innovation, sustainability and protection of savings".

Guideline 1 envisages the achievement of four strategic objectives:

• Enhance data-driven supervision, applying Artificial Intelligence, and the adoption of risk-based supervisory models;
• Modernize IT infrastructures and enhance Cybersecurity;
• Adopt a new organizational model, promote a culture of change, make operational processes more efficient and reduce their time;
• Adopt a new model for planning and monitoring results.

Guideline 2 envisages the achievement of five strategic objectives:

• To promote the access of companies to the Italian capital market;
• To strengthen the ability to guide the process of writing new EU standards;
• Incentivise innovation in the financial industry (FinTech), protecting investors in the digital market;
• Promote sustainable finance (ESG) and combat greenwashing;
• Strengthen dialogue with stakeholders (communication and financial education).

The Strategic Plan associates each objective with several key actions that identify the areas on which Consob intends to act.

With the formulation of the new strategic objectives, Consob intends to pursue objectives of supporting growth and protecting savings, also by addressing the internal changes necessary to enhance its capabilities in innovation, data governance, risk control, planning and management efficiency.

On December 11 2023, the Commissione Nazionale per le Societa e la Borsa (CONSOB) adopted the regulation for finance on Distributed Ledger Technology (DLT) platforms.

CONSOB, after a public consultation, has adopted the Regulation on the issuance and circulation of financial instruments on DLT provided for by the FinTech Decree.

The Regulation:

• Defines the principles and criteria relating to the formation and maintenance of the list of persons responsible for the digital circulation of financial instruments and the related forms of advertising; 
• Regulates the procedures for submitting the application for registration of those responsible for the register and the procedure for inclusion in the list, identifying possible causes for suspension and requiring an explanatory technical report including a risk analysis; 
• Regulates the activity of the Controller by establishing the minimum content of the information on the operating methods of the Register.

For the issuance of financial instruments in digital form that are not traded on a trading venue and, therefore, not included in the scope of the "Pilot Regime Regulation" (EU Regulation 858/2022) which established a pilot regime for DLT market infrastructures, the national legislator has provided for the need to make use of registers for digital circulation kept by registry managers registered in a special list kept by CONSOB.

The FinTech Decree regulates the conditions for the authorisation and operation of the new figure of the head of the register and the related liability regime.

The Regulation confirms the structure envisaged to the market during the public consultation, albeit with amendments and additions with regard to the procedure for inclusion in the list, the content of the list kept by CONSOB and the documentation to be prepared when applying for inclusion in the list.

On December 18 2023, the Commissione Nazionale per le Societa e la Borsa (CONSOB) published a consultation on amendments to the issuers' regulation relating to the applications for approval of prospectuses.

These amendments are aimed in particular at streamlining the content and procedures for filling in applications for approval of prospectuses, relating to offers to the public or admission to trading, of securities (both equity and non-equity, including units or shares of Undertakings for the Collective Investment in Transferable Securities (UCITS), by preparing application forms in electronic format, which they can be easily compiled in all their parts (thus reducing the possibility of compilation errors). Each model also lists the documents to be attached to the application for approval, eliminating the attachments not required by the relevant European legislation.

The application form has been structured both with options that allow the guided choice between predefined alternatives (so-called drop-down menus), and with special fields to be filled in. This method has eliminated the need to repeat the various facsimiles of the application for approval provided for by the document submitted to CONSOB (single prospectus, registration, information/summary note) and made it possible to overcome the distinction of demand by type of transaction (offer to the public and/or admission to trading), as provided for in Annexes 1A and 1C of the Issuers' Regulation. The new model allows the application for approval to be signed digitally.

Comments on the consultation document must be sent to CONSOB by January 29 2024.

On December 21 2023, the Jersey Financial Services Commission (JFSC) confirmed a fee increase for registry activities.

Following consultation and feedback on Registry fees, JFSC confirmed that fees will increase for Registry activities from January 1 2024, limited to Jersey’s latest Retail Price Index (RPI) of 10.9%.

On December 1 2023, the Commission de Surveillance du secteur financier (CSSF) published the Circular CSSF 23/846 on the application of the Guidelines of the European Securities and Market Authority (ESMA) on the reporting under the European Market Infrastructure Regulation (EMIR).

The Guidelines apply as from April 29 2024 in the context of the entry into force of the EMIR Refit Reporting Technical Standards.

The Guidelines fulfil several purposes with regard to the harmonisation and standardisation of reporting under EMIR. This is key to ensure high quality of data necessary for the effective monitoring of systemic risk. Furthermore, increased harmonisation and standardisation of reporting facilitates the containment of costs along the complete reporting chain - the counterparties that report the data, the trade repositories (TR) which put in place the procedures to verify the completeness and correctness of data, and the authorities under Article 81(3) of EMIR which use data for supervisory and regulatory purposes. 

The Guidelines provide clarifications on the following aspects: 

a) transition to reporting under the new rules;

b) the number of reportable derivatives;

c) exemption from intragroup derivatives reporting;

d) delegation of reporting and allocation of responsibility for reporting;

e) reporting logic and the population of reporting fields;

f) reporting of different types of derivatives;

g) ensuring data quality by the counterparties and the TRs;

h) construction of the Trade State Report and reconciliation of derivatives by the TRs;

i) data access.

Version française

Le 1er décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a publié la circulaire CSSF 23/846 relative à l'application des lignes directrices de l'Autorité européenne des marchés financiers (ESMA) concernant le reporting au titre du règlement européen sur les infrastructures de marché (EMIR).

Les Lignes directrices s’appliquent à compter du 29 avril 2024 dans le cadre de l’entrée en vigueur des normes techniques EMIR Refit Reporting.

Les lignes directrices remplissent plusieurs objectifs en matière d’harmonisation et de standardisation du reporting dans le cadre d’EMIR. Ceci est essentiel pour garantir la haute qualité des données nécessaires à un suivi efficace du risque systémique. En outre, une harmonisation et une standardisation accrues du reporting facilitent la maîtrise des coûts tout au long de la chaîne de reporting : les contreparties qui déclarent les données, les référentiels centraux (TR) qui mettent en place les procédures pour vérifier l'exhaustivité et l'exactitude des données, et les autorités. en vertu de l’article 81, paragraphe 3, d’EMIR, qui utilisent des données à des fins de surveillance et de réglementation.

Les lignes directrices apportent des précisions sur les aspects suivants :

a) transition vers la déclaration selon les nouvelles règles ;

b) le nombre de dérivés à déclarer ;

c) exemption de déclaration intragroupe sur les dérivés ;

d) délégation du reporting et répartition des responsabilités en matière de reporting ;

e) la logique de reporting et le remplissage des champs de reporting ;

f) déclaration de différents types de produits dérivés ;

g) assurer la qualité des données par les contreparties et les TR ;

h) construction du Trade State Report et rapprochement des produits dérivés par les TR ;

i) accès aux données.

On December 18 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ on Virtual assets - FAQ Virtual Assets – Undertakings for collective investment (UCIs).

The update relates to Question 3: Do Luxembourg Investment Fund Managers need any authorisation for the management of virtual assets?

Each Luxembourg authorised Investment Fund Manager (“IFM”) which intends to manage an alternative investment fund, regulated or not (“AIF”), investing directly or indirectly in virtual assets, needs to obtain prior authorisation from the CSSF for the strategy “Other-Other Fund-Virtual assets”. 

In this context, the CSSF expects to receive, among others, the following information/documents:

• A description of the project and of the different services providers/delegates involved;
• Information on whether or not the investments in virtual assets will be made directly or indirectly;
• An updated risk management policy including in particular how the risks in relation to the virtual assets are managed;
• An updated valuation policy including the rules as to how the value of the virtual assets will be determined;
• A description regarding the experience of the portfolio manager (and other involved entities in the investment management process) in virtual assets;
• A description of how the custody of the assets will be organised by the depositary;
• Information regarding the targeted investors, as well as any information on the distribution channels of the AIF;
• The IFM’s AML/CTF analysis on the assets side.

In addition, the CSSF expects that each initiator of an AIF which intends to invest in virtual assets presents its project beforehand to the CSSF.

Particular emphasis should be put on assessing:

• the conditions under which the IFM (or any participant in the fund business operations) is involved in the safekeeping of VA including the control of the virtual assets by means of access to/control over the cryptographic keys, 
• the provision by the IFM of discretionary portfolio management.

In general, an analysis of the services performed needs to be conducted considering the activities listed under Article 1 (20c) of the AML/CTF Law. Should the IFM (or any other participant) provide these virtual asset services, a complete application file for registration as a virtual asset service provider (“VASP”) needs to be submitted to the CSSF before commencing the activity.

Version française

Le 18 décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ sur les actifs virtuels -FAQ Actifs virtuels – Organismes de placement collectif (OPC).

La mise à jour concerne la Question 3 : Les gestionnaires de fonds d'investissement luxembourgeois ont-ils besoin d'une autorisation pour la gestion d'actifs virtuels ?

Chaque gestionnaire de fonds d'investissement (« GFI ») agréé au Luxembourg qui entend gérer un fonds d'investissement alternatif, réglementé ou non (« FIA »), investissant directement ou indirectement dans des actifs virtuels, doit obtenir l'autorisation préalable de la CSSF pour la stratégie « Autres -Autres Fonds-Actifs virtuels ».

Dans ce contexte, la CSSF attend de recevoir, entre autres, les informations/documents suivants :

• une description du projet et des différents prestataires/délégués impliqués ;
• des informations indiquant si les investissements dans des actifs virtuels seront effectués directement ou indirectement ;
• ine politique de gestion des risques actualisée incluant notamment la manière dont sont gérés les risques liés aux actifs virtuels ;
• une politique d'évaluation mise à jour comprenant les règles sur la manière dont la valeur des actifs virtuels sera déterminée ;
• une description concernant l'expérience du gestionnaire de portefeuille (et d'autres entités impliquées dans le processus de gestion des investissements) dans les actifs virtuels ;
• une description de la manière dont la garde des actifs sera organisée par le dépositaire ;
• des informations concernant les investisseurs ciblés, ainsi que toute information sur les canaux de distribution du FIA ;
• l'analyse LBC/FT du GFI du côté des actifs.

Par ailleurs, la CSSF attend que chaque initiateur d'un FIA qui envisage d'investir dans des actifs virtuels présente au préalable son projet à la CSSF.

Un accent particulier devrait être mis sur l’évaluation :

• les conditions dans lesquelles le GFI (ou tout participant aux opérations commerciales du fonds) est impliqué dans la garde des VA, y compris le contrôle des actifs virtuels au moyen de l'accès/du contrôle des clés cryptographiques,
• la fourniture par le GFI d'une gestion discrétionnaire de portefeuille.

De manière générale, une analyse des services rendus doit être menée en tenant compte des activités énumérées à l'article 1 (20c) de la loi LAB/CFT. Si le GFI (ou tout autre participant) fournit ces services sur actifs virtuels, un dossier complet de demande d’enregistrement en tant que prestataire de services sur actifs virtuels (« VASP ») doit être soumis à la CSSF avant de commencer l’activité.

On December 15 2023, the Commission de Surveillance du secteur financier (CSSF) updated its request form for a European Long-Term Investment Fund (ELTIF).

The revised ELTIF Regulation (Regulation (EU) 2023/606 of 15 March 2023) was published in the Official Journal of the European Union on March 20 2023. It came into force on 9 April 2023 and will apply as of January 10 2024.

The CSSF underlines that the updated ELTIF application form aims to facilitate and thereby accelerate new ELTIF authorisation requests as well as subsequent requests for amendment.

In this regard, the updated ELTIF application form includes various thematic sheets. Some sheets contain key questions that trigger further questions to respond to. Depending on the answer to a key question, form fields will be greyed out or not. For example, if an ELTIF is not intended to be marketed to retail investors, most sections in sheet “RETAIL PROFESSIONAL” will be greyed out.

This will allow the CSSF to clarify key points at an early stage of the ELTIF authorisation process. This also requires that the ELTIF application form is completed with the necessary care and diligence. The column titled “Footnotes” is intended to help to complete the ELTIF application form correctly.

The updated ELTIF application form must be used for any new authorisation request submitted as from 15 December 2023. It should also be used for opt-in notifications and the communication of substantial changes to an initial application.

All authorisation requests should be sent to setup.uci@cssf.lu. All notification requests should be sent to amendments.uci@cssf.lu and all amendment requests to amendments.uci@cssf.lu

Version française

Le 15 décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour son formulaire de demande de Fonds européen d'investissement à long terme (ELTIF).

Le règlement ELTIF révisé (Règlement (UE) 2023/606 du 15 mars 2023) a été publié au Journal officiel de l'Union européenne le 20 mars 2023. Il est entré en vigueur le 9 avril 2023 et sera applicable à compter du 10 janvier 2024.

La CSSF souligne que le formulaire de demande ELTIF mis à jour vise à faciliter et ainsi accélérer les nouvelles demandes d’agrément ELTIF ainsi que les demandes de modification ultérieures.

A cet égard, le formulaire de candidature ELTIF actualisé comprend différentes fiches thématiques. Certaines fiches contiennent des questions clés qui déclenchent d’autres questions auxquelles il faudra répondre. En fonction de la réponse à une question clé, les champs du formulaire seront grisés ou non. Par exemple, si un ELTIF n’est pas destiné à être commercialisé auprès des investisseurs particuliers, la plupart des sections de la feuille « RETAIL PROFESSIONAL » seront grisées.

Cela permettra à la CSSF de clarifier les points clés à un stade précoce du processus d’agrément ELTIF. Cela nécessite également que le formulaire de demande ELTIF soit rempli avec le soin et la diligence nécessaires. La colonne intitulée « Notes de bas de page » est destinée à vous aider à remplir correctement le formulaire de demande ELTIF.

Le formulaire de demande ELTIF mis à jour doit être utilisé pour toute nouvelle demande d’autorisation introduite à partir du 15 décembre 2023. Il doit également être utilisé pour les notifications opt-in et la communication de modifications substantielles par rapport à une demande initiale.

Toutes les demandes d'autorisation doivent être envoyées à setup.uci@cssf.lu. Toutes les demandes de notification doivent être envoyées à Amendments.uci@cssf.lu et toutes les demandes de modifications à Amendments.uci@cssf.lu

On December 19 2023, the Commission de Surveillance du secteur financier (CSSF) re-published its Guidelines on cross-border marketing notification and de-notification procedures.

The guide contains the steps to be followed for a request of authorisation for cross-border marketing for European Long-Term Investment Funds (ELTIFs), European Social Entrepreneurship Funds (EuSEFs), and European venture capital funds (EuVECA) funds.

Version française

Le 19 décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a republié ses Lignes directrices sur les procédures de notification et de dénotification de commercialisation transfrontalière.

Le guide contient les étapes à suivre pour une demande d'autorisation de commercialisation transfrontalière des fonds européens d'investissement à long terme (ELTIF), des fonds européens d'entrepreneuriat social (EuSEF) et des fonds européens de capital-risque (EuVECA).

On December 21 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ regarding the AML/CFT Market Entry Form (Funds and IFMs).

This publication refers to a list of questions/answers (FAQ) in relation to the completion of the AML/CFT Market Entry Form (Funds and IFMs) in eDesk.

Q1. When should a Market Entry Form be completed?

• Set-up of a UCITS, UCI Part II, SIF, SICAR, or when asking authorisation of a label, including ELTIF
• Approval of (a) new sub-fund(s) in an existing Fund

Set-up of:

• management companies authorised under the Law of 17 December 2010
• alternative investment fund managers authorised under the Law of 12 July 2013
• alternative investment fund managers registered under the Law of 12 July 2013 (including registration of EUSEF/EUVECA managers)

In the above cases, the eDesk Request Type to be used is the Initial Market Entry.

Q2. When should an Initial Market Entry be submitted?

The Initial Market Entry must be submitted ONLY if the Fund (or ELTIF) or the IFM is NOT already authorised/registered by the CSSF. 

Version française

Le 21 décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ concernant le formulaire d'entrée sur le marché LBC/FT (Fonds et GFI).

Cette publication fait référence à une liste de questions/réponses (FAQ) relatives au remplissage du formulaire d'entrée sur le marché LAB/CFT (Fonds et GFI) dans eDesk.

T1. Quand faut-il remplir un formulaire d’entrée sur le marché ?

• Constitution d'un OPCVM, UCI Partie II, FIS, SICAR, ou lors d'une demande d'agrément d'un label, dont ELTIF
• Approbation d'un (des) nouveau(s) compartiment(s) dans un Fonds existant

Mise en place de :

• les sociétés de gestion agréées par la loi du 17 décembre 2010
• les gestionnaires de fonds d'investissement alternatifs agréés par la loi du 12 juillet 2013
• les gestionnaires de fonds d'investissement alternatifs enregistrés au titre de la loi du 12 juillet 2013 (y compris l'enregistrement des gestionnaires EUSEF/EUVECA)

Dans les cas ci-dessus, le type de demande eDesk à utiliser est l’entrée initiale sur le marché.

Q2. Quand faut-il soumettre une entrée initiale sur le marché ?

L’entrée initiale sur le marché doit être soumise UNIQUEMENT si le Fonds (ou l’ELTIF) ou le GFI n’est PAS déjà agréé/enregistré par la CSSF.

On December 29 2023, the Commission de Surveillance du secteur financier (CSSF) updated the FAQ concerning the Luxembourg Law of 12 July 2013 on alternative investment fund managers (AIFM) – version 21.

The update refers to the replacement of the term "Central Administration" by "UCI administrator" in line with the CSSF Circular 22/811 (question 25), the repeal of the question 23. B, the deletion of questions 23. C, 23. G, 23. H, 23. O, 23. P and 23. Q, and the publication of question 23. L.

Article 15 of Commission Delegated Regulation (EU) 2017/653 requires PRIIP manufacturers to review the information contained in the PRIIPs KID at least every 12 months following the date of the initial publication of the PRIIPs KID without providing for a specific yearly timeline for such annual update. Therefore, no specific yearly timeline applies in connection with the annual update of PRIIPs KID for Luxembourg AIFs.

Version française

Le 29 décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour la FAQ concernant la loi luxembourgeoise du 12 juillet 2013 relative aux gestionnaires de fonds d'investissement alternatifs (AIFM) – version 21.

La mise à jour fait référence au remplacement du terme « Administration centrale » par « administrateur d'OPC » conformément à la Circulaire CSSF 22/811 (question 25), à l'abrogation de la question 23. B, à la suppression des questions 23. C, 23. .G, 23. H, 23. O, 23. P et 23. Q, et la publication de la question 23. L.

L'article 15 du règlement délégué (UE) 2017/653 de la Commission exige que les fabricants de PRIIP examinent les informations contenues dans le KID PRIIPs au moins tous les 12 mois suivant la date de publication initiale du KID PRIIPs, sans prévoir de calendrier annuel spécifique pour cette période annuelle. mise à jour. Par conséquent, aucun calendrier annuel spécifique ne s’applique dans le cadre de la mise à jour annuelle du KID PRIIPs pour les FIA luxembourgeois.

On December 29 2023, the Commission de Surveillance du secteur financier (CSSF) updated the FAQ concerning the Luxembourg Law of December 17 2010 relating to undertakings for collective investment (UCIs) – version 17.

The update refers to the replacement of the term “Central Administration” by “UCI administrator” in line with CSSF Circular 22/811 (question 8.1), the repeal of questions 6.2 and 6.5 and the publication of questions 6.7 ii) and iii).

Article 15 of Commission Delegated Regulation (EU) 2017/653 requires PRIIP manufacturers to review the information contained in the PRIIPs KID at least every 12 months following the date of the initial publication of the PRIIPs KID without providing for a specific yearly timeline for such annual update. However, PRIIPs manufacturers are encouraged to annually update the PRIIPs KID for UCITS and to subsequently submit such document to the CSSF within 35 business days after 31 December of each year. 

The website or the document where past performance is made available (in accordance with Article 8(3) of Delegated Regulation (EU) 2017/653) shall be updated within 35 business days after December 31 of each year. However, in case the PRIIP manufacturer has chosen to include the past performance data in the PRIIPs KID itself, then the latter needs to be updated and submitted to the CSSF within such same period of time.

Version française

Le 29 décembre 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour la FAQ concernant la loi luxembourgeoise du 17 décembre 2010 relative aux organismes de placement collectif (OPC) – version 17.

La mise à jour fait référence au remplacement du terme « Administration centrale » par « administrateur d'OPC » conformément à la Circulaire CSSF 22/811 (question 8.1), à l'abrogation des questions 6.2 et 6.5 et à la publication des questions 6.7 ii) et iii).

L'article 15 du règlement délégué (UE) 2017/653 de la Commission exige que les fabricants de PRIIP examinent les informations contenues dans le KID PRIIPs au moins tous les 12 mois suivant la date de publication initiale du KID PRIIPs, sans prévoir de calendrier annuel spécifique pour cette période annuelle. mise à jour. Toutefois, les émetteurs de PRIIPs sont encouragés à mettre à jour annuellement le KID PRIIPs pour les OPCVM et à soumettre ultérieurement ce document à la CSSF dans un délai de 35 jours ouvrés après le 31 décembre de chaque année.

Le site Internet ou le document dans lequel les performances passées sont mises à disposition (conformément à l'article 8, paragraphe 3, du règlement délégué (UE) 2017/653) sera mis à jour dans les 35 jours ouvrables après le 31 décembre de chaque année. Toutefois, dans le cas où le fabricant du PRIIP a choisi d'inclure les données de performances passées dans le KID du PRIIP lui-même, celui-ci doit alors être mis à jour et soumis à la CSSF dans le même délai.

On December 13 2023, the Securities Commission Malaysia (SC Malaysia) updated its equity guidelines.

The accelerated transfer of listing is part of a slew of capital market measures introduced by the SC Malaysia to improve stock market vibrancy and reduce market friction. 

The Guideline was revised to facilitate the introduction of a transfer of listing of a corporation listed on the ACE Market to the Main Market via an accelerated transfer process.

The key amendments include incorporating the eligibility criteria in respect of the application for a transfer of listing to the Main Market via the accelerated transfer process as well as other operational requirements to facilitate such transfer process.

Additional amendments were made to provide greater clarity and consistency.

Transferring to the Main Market, which is the prime market for established companies, demonstrates that the ACE Market public listed companies (PLCs) have achieved the standards in terms of quality, size and operations.

The framework will take effect on 1 January 2024 through amendments to the equity guidelines.

In December 2023, the Securities Commission Malaysia (SC Malaysia) published the sustainable and responsible investment (SRI) guide for private markets.

The SRI Guide for Private Markets aims to provide guidance for venture capital management corporations/private equity management corporations (VCMCs/PEMCs) and equity crowdfunding and peer-to-peer financing (ECF/P2P) platform operators in Malaysia to effectively incorporate sustainability considerations into their investment and due diligence processes. By applying the recommendations outlined in this Guide, VCMCs/PEMCs and ECF/P2P financing platform operators are encouraged to enhance their approach to incorporating sustainability considerations, thereby fostering SRI practices within the private markets industry.

VCMCs/PEMCs and ECF/P2P financing platform operators are encouraged to actively contribute to the industry's development by sharing their experiences and promoting good practices among their peers. By engaging in knowledge sharing and collaboration, VCMCs/PEMCs and ECF/P2P financing platform operators can collectively drive the adoption and implementation of sustainability considerations, further solidifying Malaysia's position as a regional leader in SRI. 

While the adoption of this Guide is on a voluntary basis, the VCMCs/PEMCs and ECF/P2P financing platform operators are encouraged, on a best endeavour basis, to adopt the same as this will facilitate the assessment of the sustainability status of portfolio companies and fundraising campaigns.

On December 20 2023, the Autoriteit Financiële Markten (AFM) highlighted that clearer information is required for savings products.

Financial companies do not always comply with the legal requirements for advertising and other information in savings/wealth accumulation. For example, it is not always clear whether there is a question of saving or investing and what the costs of the product are. It is also often difficult for consumers to understand which conditions apply to a certain interest rate.

A financial enterprise operating in the Netherlands is obliged to provide a consumer with information that is relevant to a proper assessment of a product and/or service. This information must be correct and clear so that consumers know where they stand. During a brief exploration of savings products, the AFM has established that this is not always the case and calls on providers to comply with the statutory requirements. Providers must ensure that information about the product and/or service is clear and does not mislead consumers. This also applies to advertisements. It must therefore be absolutely clear whether there is a question of saving or investing. 

In 2024, the AFM will continue to pay attention to the provision of information by providers of savings and investment products.

On December 22 2023, the Rijksoverheid (Government of the Netherlands) informed of a new Bill to allow General meetings to be conducted fully online.

Legal entities under private law, such as private limited companies, public limited companies, associations, cooperatives and owners' associations, are again allowed to meet entirely digitally. During the corona pandemic, this was temporarily allowed. The Council of Ministers agreed to submit a bill on this subject to the House of Representatives.

Fully digital meetings enable low-threshold meetings and decision-making and reduce the regulatory burden for the business community. Legal entities can decide whether they want to hold meetings completely digitally.

Many legal entities are required to meet with their members or shareholders at least once a year. Until now, these meetings were required by law to be physical or partly physical and partly digital. 

In addition, the bill simplifies an electronic call for a general meeting, such as an e-mail. 

The bill will be submitted to parliament shortly. The aim is for the law to enter into force on January 1 2025.

On December 28 2023, Spain published the Royal Decree 1180/2023, of December 27, which modifies the Royal Decree 948/2001, of August 3, on investor compensation systems, and the Regulations for the development of Law 35/2003, of November 4, of collective investment institutions, approved by Royal Decree 1082/2012, of July 13, in the Boletin Oficial del Estado.

Law 6/2023, of March 17, on Securities Markets and Investment Services, and Royal Decree 813/2023, of November 8, on the legal regime of investment services companies and other entities that provide investment services incorporate into Spanish Law the main aspects of Directive (EU) 2019/2034 of the European Parliament and of the Council, of November 27, 2019, on the prudential supervision of investment services companies and which modifies Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU.

One of the new features of the new prudential regime for investment services companies is the modification of initial capital requirements. In this way, Directive (EU) 2019/2034 of the European Parliament and of the Council, of November 27, 2019, establishes harmonized requirements between investment services companies in order to avoid fragmentation at the level of the European Union and the regulatory arbitration between jurisdictions.

National advisory companies (EAFN) are now included in the scope of the Investment Guarantee Fund (FOGAIN), whereas money market and securities targeting professional investors are excluded. The annual contribution has been reduced and in search of stability in the sector, and two additional modifications have been introduced ; firstly, a formula by which the volume of assets is determined from which the progressive reduction of the contributions that must lead to carried out by the participating entities; secondly, an adjustment is carried out in the formula used to calculate the assets that will trigger the suspension of certain contributions. Consequently, and with the aim of facilitating the proper application of these modifications, a voluntary and progressive regime for adapting entities to the new legal contribution regime is introduced.

The calculation of net asset value becomes flexible, as it is no longer required to be biweekly and a greater frequency is allowed if the planned investments require it. The prospectus can determine notice periods with other deadlines and amounts different from those already included in the regulation (10 days and 300,000 euros), provided that they are justifed by the investment policy, and that it is a maximum of that established for calculating the net asset value of the units.

Furthermore, this royal decree incorporates in the Regulation 35/2003, of November 4, on collective investment institutions, approved by the Royal Decree 1082/2012, a set of regulatory changes aimed at improving the competitiveness and functioning of collective investment institutions in Spain, thus completing the reforms in this area initiated by the Law 18/2022, of September 28, on the creation and growth of companies, and the Law 6/2023 on Securities Markets and Investment Services.

This Law comes into force on January 17 2024.

On 21 December 2023, the Swiss Federal Council announced that Switzerland and the United Kingdom signed a mutual recognition agreement in the field of financial services. This agreement increases the competitiveness of the two major international financial centres and strengthens their already close cooperation.

At the end of a negotiation process that lasted more than two years, the head of the Federal Department of Finance and the British Chancellor of the Exchequer, Jeremy Hunt, signed an agreement that stands out internationally in its approach and scope. It aims to intensify cooperation between the two major financial centres. In a difficult economic environment, the Berne Financial Services Agreement sends a strong signal in favour of open and resilient financial markets and demonstrates Switzerland's ability to act on the international stage.

This is the first time that two States have mutually recognized, after thorough assessments, the equivalence of their regulatory and supervisory frameworks in certain segments of the financial sector through the signing of an international convention. In this way, they enable or facilitate access to their financial market for the other party. The agreement also strengthens regulatory and supervisory cooperation, ensuring the stability and integrity of the financial market and ensuring the protection of customers.

Federal Councillor Karin Keller-Sutter expressed her satisfaction with the outcome of the negotiations: "This agreement will help to maintain and increase the international competitiveness of the Swiss financial sector in the long term."

The agreement covers the recognition of equivalence in the areas of banking, investment services, insurance, asset management and financial market infrastructures for professional clients. With regard to financial services, in particular asset management, Swiss providers will be allowed to carry out cross-border business activities. On the basis of this agreement, they will therefore be able to provide cross-border services directly to UK private clients with assets in excess of £2 million.

The Bern Financial Services Agreement also covers certain segments of non-life insurance for large commercial customers, allowing UK insurance companies to provide cross-border services in this area. In particular, it excludes accident, sickness, motor vehicle liability and all types of monopoly insurance that are provided to professional policyholders. The United Kingdom allows Swiss companies to offer cross-border insurance services to large business customers in accordance with current UK law. Unrelated UK insurance intermediaries will be exempted from the whereabouts requirement under the revised Insurance Supervision Act, which will come into force on 1 January 2024.

In the area of asset management, the agreement confirms market access for advertising activities and offers relating to collective investment schemes, as well as for the delegation of portfolio management and risk management. Finally, with regard to financial market infrastructures, the Berne Financial Services Agreement recognises the equivalence of the regulatory framework applicable to CCPs, confirms the existing framework for trading venues and facilitates the fulfilment of certain obligations for cross-border OTC derivatives transactions.

Once the agreement has been signed, the Federal Council will draw up a dispatch and submit it to Parliament. The agreement must be approved by the parliaments of both countries before it can enter into force.

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Le 21 décembre 2023, le Conseil fédéral suisse a annoncé que la Suisse et le Royaume-Uni avaient signé un accord de reconnaissance mutuelle dans le domaine des services financiers. Cet accord accroît la compétitivité des deux grandes places financières internationales et renforce leur coopération déjà étroite.

Au terme d'un processus de négociation qui a duré plus de deux ans, le chef du Département fédéral des Finances et le chancelier britannique de l'Échiquier, Jeremy Hunt, ont signé un accord qui se démarque au niveau international par son approche et sa portée. Il vise à intensifier la coopération entre les deux grandes places financières. Dans un environnement économique difficile, l'Accord de Berne sur les services financiers envoie un signal fort en faveur de marchés financiers ouverts et résilients et démontre la capacité de la Suisse à agir sur la scène internationale.

C'est la première fois que deux États reconnaissent mutuellement, après des évaluations approfondies, l'équivalence de leurs cadres de régulation et de surveillance dans certains segments du secteur financier à travers la signature d'une convention internationale. De cette manière, ils permettent ou facilitent l’accès de l’autre partie à leur marché financier. L'accord renforce également la coopération en matière de réglementation et de surveillance, garantissant la stabilité et l'intégrité du marché financier et garantissant la protection des clients.

La conseillère fédérale Karin Keller-Sutter s'est déclarée satisfaite du résultat des négociations: "Cet accord contribuera à maintenir et à accroître à long terme la compétitivité internationale du secteur financier suisse."

L'accord porte sur la reconnaissance d'équivalences dans les domaines de la banque, des services d'investissement, de l'assurance, de la gestion d'actifs et des infrastructures des marchés financiers pour la clientèle professionnelle. En ce qui concerne les services financiers, notamment la gestion de fortune, les prestataires suisses seront autorisés à exercer des activités commerciales transfrontalières. Sur la base de cet accord, ils pourront donc fournir des services transfrontaliers directement aux clients privés britanniques disposant d'actifs supérieurs à 2 millions de livres sterling.

L'accord de Berne sur les services financiers couvre également certains segments de l'assurance non-vie destinée aux grands clients commerciaux, permettant aux compagnies d'assurance britanniques de fournir des services transfrontaliers dans ce domaine. Elle exclut notamment les assurances accident, maladie, responsabilité civile automobile et tous les types d'assurance monopolistique proposées aux assurés professionnels. Le Royaume-Uni autorise les entreprises suisses à proposer des services d'assurance transfrontaliers aux grandes entreprises clientes, conformément à la législation britannique en vigueur. Les intermédiaires d’assurance britanniques indépendants seront exemptés de l’obligation de localisation en vertu de la loi révisée sur le contrôle des assurances, qui entrera en vigueur le 1er janvier 2024.

Dans le domaine de la gestion d'actifs, l'accord confirme l'accès au marché pour les activités de publicité et les offres relatives aux placements collectifs, ainsi que pour la délégation de gestion de portefeuille et de gestion des risques. Enfin, en ce qui concerne les infrastructures des marchés financiers, l'Accord de Berne sur les services financiers reconnaît l'équivalence du cadre réglementaire applicable aux contreparties centrales, confirme le cadre existant pour les plates-formes de négociation et facilite le respect de certaines obligations pour les transactions transfrontalières sur dérivés de gré à gré.

Une fois l'accord signé, le Conseil fédéral rédigera un message et le soumettra au Parlement. L'accord doit être approuvé par les parlements des deux pays avant de pouvoir entrer en vigueur.

On December 4 2023, the Eidgenössische Finanzmarktaufsicht (FINMA) implemented NGFS recommendations on managing the financial risks of climate change and nature degradation.

The Network for Greening the Financial System (NGFS) published a statement on its contribution to the goals of the UN Climate Change Conference 2023 (COP28). FINMA has been a member of this network since 2019. Since then, FINMA has been gradually integrating climate-related financial risks into its supervisory activities in a strategic, proportional and risk-based manner.

FINMA’s measures are based on the non-binding NGFS recommendations as well as the requirements and guidelines of international standard-setting bodies such as the Basel Committee on Banking Supervision (BCBS) and the International Association of Insurance Supervisors (IAIS) (FINMA Guidance 01/2023). Together with its efforts to combat greenwashing, FINMA is thus contributing to a more sustainable financial centre. FINMA is currently pursuing the following priority measures. 

New circular on climate- and nature-related risks

FINMA is currently drafting a new FINMA circular on nature-related financial risks, which will apply to banks and insurance companies. FINMA is thus seeking to specify the risk management requirements for institutions with regard to climate and other nature-related financial risks. The circular will incorporate the current recommendations of the international standard setters, in particular the BCBS and the IAIS, as well as parts of the NGFS recommendations. FINMA will start a public consultation on the circular in the first quarter of 2024. 

Transparency about climate risks

In 2024, FINMA will also review whether a revision of the current FINMA disclosure requirements is necessary due to the many developments in the area of climate and sustainability reporting. FINMA already supported the increase in climate risk transparency called for by the NGFS and other international bodies in 2021 by specifying the requirements for the disclosure of climate-related financial risks for larger banks and insurance companies.

From 2024, numerous banks and insurance companies in Switzerland will also implement the new ordinance on climate reporting. The new ordinance requirements are based on the Swiss Code of Obligations and are in some cases more extensive than the existing FINMA requirements (e.g. “dual materiality”, obligation to disclose transition plans), but are compatible with them. FINMA is not responsible for monitoring compliance with and enforcing the civil law obligations of supervised institutions. However, systematic compliance with the relevant obligations under civil law by the supervised parties is part of the supervisory requirement of proper business conduct. The institutions must therefore be organised and managed in such a way that compliance with their obligations under civil law is guaranteed overall. 

Strengthening the data basis for assessing climate risks

Like the supervised institutions, FINMA also needs data to assess climate risks. To this end, it is currently developing a data collection in this area. This should cover various features and transmission channels of climate risks. The data collection will be carried out for the first time in 2024 and only at larger institutions (supervisory categories 1 to 3). It also serves as an important basis for fulfilling FINMA’s reporting obligation on climate risks as planned by Parliament in the CO2 Act. 

Integrated view of nature risks

FINMA shares the assessment of the NGFS that an integrated approach to climate risks and other nature-related risks such as the loss of biodiversity makes sense. Climate change and biodiversity loss are closely linked, as stated for example in the 2021 report entitled “Biodiversity and climate change” published by the IPCC and IPBES, and represent drivers of potentially relevant financial risks for financial institutions. FINMA will increasingly integrate this comprehensive view of nature-related risks into its practice where appropriate and possible, for example in the above-mentioned circular.

Version française

Le 4 décembre 2023, l'Eidgenössische Finanzmarktaufsicht (FINMA) a mis en œuvre les recommandations du NGFS sur la gestion des risques financiers liés au changement climatique et à la dégradation de la nature.

Le Réseau pour un système financier plus vert (NGFS) a publié une déclaration sur sa contribution aux objectifs de la Conférence des Nations Unies sur les changements climatiques 2023 (COP28). La FINMA est membre de ce réseau depuis 2019. Depuis lors, la FINMA intègre progressivement les risques financiers liés au climat dans ses activités de surveillance de manière stratégique, proportionnelle et basée sur les risques.

Les mesures de la FINMA s'appuient sur les recommandations non contraignantes du NGFS ainsi que sur les exigences et directives des organismes de normalisation internationaux tels que le Comité de Bâle sur le contrôle bancaire (BCBS) et l'Association internationale des contrôleurs d'assurance (IAIS) (FINMA Guidance 01/ 2023). En luttant contre le greenwashing, la FINMA contribue ainsi à rendre la place financière plus durable. La FINMA poursuit actuellement les mesures prioritaires suivantes.

Nouvelle circulaire sur les risques liés au climat et à la nature

La FINMA élabore actuellement une nouvelle circulaire FINMA sur les risques financiers liés à la nature, qui s'appliquera aux banques et aux assurances. La FINMA souhaite ainsi préciser les exigences des établissements en matière de gestion des risques en matière de risques financiers liés au climat et à la nature. La circulaire intégrera les recommandations actuelles des normalisateurs internationaux, notamment le BCBS et l'IAIS, ainsi qu'une partie des recommandations du NGFS. La FINMA lancera une consultation publique sur la circulaire au premier trimestre 2024.

Transparence sur les risques climatiques

En 2024, la FINMA examinera également si une révision des exigences actuelles de la FINMA en matière de publicité est nécessaire en raison des nombreux développements dans le domaine du reporting sur le climat et le développement durable. La FINMA a déjà soutenu en 2021 l’augmentation de la transparence sur les risques climatiques souhaitée par le NGFS et d’autres organismes internationaux en précisant les exigences en matière de divulgation des risques financiers liés au climat pour les grandes banques et compagnies d’assurance.

À partir de 2024, de nombreuses banques et compagnies d’assurance en Suisse mettront également en œuvre la nouvelle ordonnance sur le reporting climatique. Les nouvelles exigences de l'ordonnance s'appuient sur le Code des obligations suisse et sont dans certains cas plus étendues que les exigences existantes de la FINMA (par exemple « double matérialité », obligation de publier les plans de transition), mais sont compatibles avec celles-ci. La FINMA n'est pas chargée de contrôler le respect et le respect des obligations de droit civil des assujettis. Toutefois, le respect systématique des obligations pertinentes du droit civil par les entités surveillées fait partie des exigences prudentielles liées à la bonne conduite des affaires. Les institutions doivent donc être organisées et gérées de manière à garantir globalement le respect de leurs obligations en vertu du droit civil.

Renforcer la base de données pour évaluer les risques climatiques

Tout comme les assujettis, la FINMA a également besoin de données pour évaluer les risques climatiques. A cette fin, il développe actuellement une collecte de données dans ce domaine. Cela devrait couvrir diverses caractéristiques et canaux de transmission des risques climatiques. La collecte de données sera effectuée pour la première fois en 2024 et uniquement auprès des établissements de grande taille (catégories de surveillance 1 à 3). Il constitue également une base importante pour remplir l’obligation d’annonce de la FINMA sur les risques climatiques, comme le prévoit le Parlement dans la loi sur le CO2.

Vision intégrée des risques naturels

La FINMA partage l’évaluation du NGFS selon laquelle une approche intégrée des risques climatiques et d’autres risques liés à la nature, comme la perte de biodiversité, est logique. Le changement climatique et la perte de biodiversité sont étroitement liés, comme indiqué par exemple dans le rapport 2021 intitulé « Biodiversité et changement climatique » publié par le GIEC et l'IPBES, et représentent des facteurs de risques financiers potentiellement pertinents pour les institutions financières. La FINMA intégrera de plus en plus cette vision globale des risques liés à la nature dans sa pratique lorsque cela est approprié et possible, par exemple dans la circulaire mentionnée ci-dessus.

On December 22 2023, the Swiss Federal Council concluded that the EU Corporate Sustainability Due Diligence Directive (CSDDD) will have consequences on Swiss companies.

This is the conclusion of an external study that the Federal Council took note of at its meeting on December 22 2023. The study will be updated as soon as the European directive is adopted. On the basis of the results presented to it, the Federal Council will decide in due course on the next steps.

The popular initiative for responsible business was rejected at the ballot box on November 29 2020. Parliament's indirect counter-proposal then entered into force on January 1 2022. Large Swiss companies are required to report on the risks posed by their business and to report on environmental, social, personnel, human rights and anti-corruption issues; They must also describe the measures taken to manage these risks. In addition, companies operating at risk in the sensitive areas of child labour and conflict minerals and metals must also comply with extensive due diligence and transparency.

Direct and indirect consequences

By adopting these regulations, Switzerland has chosen to harmonize its legislation with the rules applicable at the international level. An EU directive on new corporate due diligence is about to be adopted.

Due to the close economic ties between the EU and Switzerland, both large and small Swiss companies will be affected by these changes. As the new directive has not yet been formally adopted, it is not possible at this stage to know exactly what the repercussions will be.

A study commissioned by the Federal Department of Justice and Police (FDJP) and the Federal Department of Economic Affairs, Education and Research (EAER) concludes that the EU directive would have a direct impact on several hundred companies in Switzerland. Many thousands more would be indirectly affected, because the companies directly affected will pass on the requirements they will have to meet to their suppliers.

Preliminary results

At its meeting on December 22 2023, the Federal Council took note of the provisional results of this study and instructed the FDJP and the EAER to update it as soon as the directive was adopted. It will decide on the way forward once it has the final elements and once it knows how Member States will implement the directive.

The EU has already strengthened the obligation to disclose sustainability information. To ensure that Swiss law keeps pace with these developments, the Federal Council has instructed the FDJP to prepare a draft that can be submitted for consultation in the summer of 2024.

Version française

Le 22 décembre 2023, le Conseil fédéral suisse a conclu que la directive européenne sur le devoir de diligence en matière de durabilité des entreprises (CSDDD) aura des conséquences sur les entreprises suisses.

C’est la conclusion d’une étude externe dont le Conseil fédéral a pris connaissance lors de sa séance du 22 décembre 2023. L’étude sera mise à jour dès l’adoption de la directive européenne. Sur la base des résultats qui lui seront présentés, le Conseil fédéral décidera en temps utile des prochaines étapes.

L'initiative populaire pour une entreprise responsable a été rejetée lors des urnes le 29 novembre 2020. Le contre-projet indirect du Parlement est ensuite entré en vigueur le 1er janvier 2022. Les grandes entreprises suisses sont tenues de rendre compte des risques liés à leur activité et de rendre compte des mesures environnementales. , les questions sociales, de personnel, de droits de l'homme et de lutte contre la corruption ; Ils doivent également décrire les mesures prises pour gérer ces risques. En outre, les entreprises opérant à risque dans les domaines sensibles du travail des enfants et des minerais et métaux de conflit doivent également se conformer à une diligence raisonnable et à une transparence approfondies.

Conséquences directes et indirectes

En adoptant cette réglementation, la Suisse a choisi d'harmoniser sa législation avec les règles applicables au niveau international. Une directive européenne sur le nouveau devoir de diligence des entreprises est sur le point d’être adoptée.

En raison des liens économiques étroits entre l’UE et la Suisse, les grandes et petites entreprises suisses seront concernées par ces changements. La nouvelle directive n’ayant pas encore été formellement adoptée, il n’est pas possible à ce stade de savoir exactement quelles en seront les répercussions.

Une étude commandée par le Département fédéral de justice et police (DFJP) et le Département fédéral de l'économie, de la formation et de la recherche (DEFR) conclut que la directive européenne aurait un impact direct sur plusieurs centaines d'entreprises en Suisse. Des milliers d'autres seraient indirectement concernés, car les entreprises directement concernées répercuteraient sur leurs fournisseurs les exigences auxquelles elles devront répondre.

Résultats préliminaires

Lors de sa séance du 22 décembre 2023, le Conseil fédéral a pris connaissance des résultats provisoires de cette étude et a chargé le DFJP et le DEFR de l'actualiser dès l'adoption de la directive. Elle décidera de la voie à suivre une fois qu'elle aura les éléments finaux et une fois qu'elle saura comment les États membres mettront en œuvre la directive.

L'UE a déjà renforcé l'obligation de divulguer des informations sur la durabilité. Afin que le droit suisse suive cette évolution, le Conseil fédéral a chargé le DFJP d'élaborer un projet qui pourra être soumis à la consultation à l'été 2024.

On December 1 2023, the Financial Conduct Authority (FCA) published a notice of first decision on the 3-month sterling LIBOR.

Pursuant to Article 21(3) of the Benchmarks Regulation (BMR), the FCA has decided to compel ICE Benchmark Administration Limited (IBA) to continue publishing 3-month sterling LIBOR for a period of 3 months starting immediately after the publication of the LIBOR Version on December 29, 2023 and ending immediately after the final publication on March 28, 2024.

The FCA has decided to exercise its power under Article 21(3) of the BMR to compel the administrator of LIBOR, IBA, to continue publishing the LIBOR Version for a further 3 months under the existing changed, ‘synthetic’, methodology, in order that the LIBOR Version may be ceased to be provided in an orderly fashion.

This is to ensure that market participants have the time to complete their transition plans for the outstanding mortgage contracts, in order that the LIBOR Version may be ceased to be provided in an orderly fashion.

The FCA does not intend to use its powers to compel IBA to continue to publish the LIBOR Version beyond March 28 2024.

On December 21 2023, the UK Government signed a first of its kind financial services agreement with Switzerland.

Berne Financial Services Agreement provides access to the Swiss market that no other country will have, while also providing certainty for businesses and upholding high standards of regulation.

The agreement sets sectors where the UK and Switzerland will mutually recognise each other’s domestic laws and regulations on financial services, making it easier for corporate and high net worth clients in the two markets to do business with each other.

The Berne Financial Services Agreement enables the frictionless, cross-border provision of financial services between the UK and Switzerland across areas such as asset management, banking, and investment services. For certain sectors it means that a firm based in the UK will be able to serve clients in Switzerland while largely following UK rules, and vice versa.

The agreement also secures unique access for British insurance brokers to the Swiss market. From the start of 2024, Switzerland will require any non-Swiss firms to establish a base in the country before serving Swiss clients. The UK will be the only country in the world not required to do this, putting British brokerage firms at a significant advantage to international competitors as they can continue to do business as they always have done.

The Berne Financial Services Agreement will make open access in financial services legally binding between the UK and Switzerland for decades to come, all while maintaining high standards of regulation, market fairness and investor protection. Both countries will also have the freedom to revise or introduce new domestic regulation as they see fit.

The agreement provides an opportunity for the UK and Switzerland to work together to strengthen international financial standards. It will also help level the playing field for some smaller firms, who will no longer have to invest time and money in navigating unfamiliar Swiss rules.

Financial advisors will also benefit. British financial advisers to high-net-worth individuals will no longer need to be registered by Swiss registration bodies to serve Swiss clients. This will remove requirements to sit Swiss examinations or provide documentation evidencing suitability, cutting red tape for the UK’s financial advisory industry.

On December 19 2023, the United Kingdom published the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) (No. 2) Order 2023.

This Order amends the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529), the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (S.I. 2001/1060) (CIS Order) and the Financial Services and Markets Act 2000 (Exemptions from Financial Promotion General Requirement) Regulations 2023 (S.I. 2023/966) (the Financial Promotion Gateway Exemptions Regulations).

Article 6 makes minor amendments to article 48 of the Financial Promotion Order to remove references to a high net worth individual being “certified” and adds an additional requirement that the promoter provide contact information to the investor.

Article 7 makes minor amendments to article 50A of the Financial Promotion Order and adds an additional requirement that the promoter provide contact information to the investor.

Article 9 substitutes the investor statements contained in Schedules 1 and 2 for completion and signature. The investor statement at Schedule 1 contains increased income and asset thresholds for an individual to be considered a “high net worth individual”. The investor statement in Schedule 2 contains an increased annual company turnover threshold for the directors of companies to be considered a “self-certified sophisticated investor”. The investor statement in Schedule 2 no longer provides an exemption for individuals who have made an investment in an unlisted company in the previous two years. The format of the investor statements is also amended.

Article 12 makes minor amendments to article 21 of the CIS Order to remove references to a high net worth individual being “certified” and adds an additional requirement that the promoter provide contact information to the investor.

Article 13 makes minor amendments to article 23A of the CIS Order and adds an additional requirement that the promoter provide contact information to the investor.

Article 15 substitutes the investor statements contained in Schedules 3 and 4 for completion and signature. The investor statement at Schedule 3 contains increased income and asset thresholds for an individual to be considered a “high net worth individual”. The investor statement in Schedule 4 contains an increased annual company turnover threshold for the directors of companies to be considered a “self-certified sophisticated investor”. The investor statement in Schedule 4 no longer provides an exemption for individuals who have made an investment in an unlisted company in the previous two years. The format of the investor statements is also amended.

Articles 16 to 18 make consequential amendments to other legislation to reflect the changes made by the preceding provisions of this Order.

Article 19 of this Order corrects a defect in the Financial Promotion Gateway Exemptions Regulations. The effect of this correction is that the exemptions in regulation 3(b) and 3(c) of those regulations are expanded so that, as with regulation 3(a) of those regulations, following the approval of the content of a communication by an authorised person in the circumstances provided for in regulation 3(b) and (c), any unauthorised person may communicate the financial promotion.

This Order comes into force on January 31 2024.

On December 14 2023, the United Kingdom published the Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations 2023.

These Regulations, which are made under the Financial Services and Markets Act 2023 (c. 29), provide for the testing of the use of developing technology in the carrying on of financial market infrastructure (FMI) activities. These provisions are referred to as a digital securities sandbox (DSS).

Regulation 3(2) lists the types of financial market infrastructure entity that are eligible to apply to participate as a sandbox entrant. Under regulation 3(3) the appropriate regulator may determine that other persons established in the UK may apply to participate as a sandbox entrant.

Regulation 3(4) specifies three categories of person connected with the activities of a sandbox entrant who may participate in the DSS.

Regulation 3(5) lists the types of FMI activity that may be carried on in the FMI sandbox arrangements.

Regulation 3(6) provides for certain ancillary activities to be subject to the FMI sandbox arrangements.

Regulation 3(7) describes the types of instrument that may be used in connection with the FMI activities.

Regulation 3(8) identifies the appropriate regulators.

Regulation 4(1) provides for an application for approval to participate to be submitted to the appropriate regulator.

Regulation 4(2) concerns information that may be required to be submitted by an applicant.

Regulations 5(1) to (3) require the appropriate regulator to determine an application by written notice.

Under regulation 5(4) if an application is varied or rejected, the appropriate regulator must include reasons for doing so in its written notice to the applicant.

Under regulation 5(5), an applicant that is approved to participate in the DSS will be issued with a sandbox approval notice (SAN). The information that the appropriate regulator must include in the SAN is described in regulation 5(5) and what may be included is described in regulation 5(6).

Regulation 5(7) permits a sandbox entrant to apply to the appropriate regulator to modify, suspend or cancel its SAN, and the procedure described in regulation 5(1) to (6) will apply.

Regulation 6(1) provides that the relevant enactments specified in the Schedule have effect with the modifications specified in the Schedule in relation to the Bank and the FCA, a sandbox entrant and other persons participating under regulation 3(4).

Regulation 6(2) provides that the appropriate regulator may continue to exercise its powers in connection with the DSS activities of a sandbox entrant or a person described in regulation 3(4) after either of them have ceased to be in the FMI sandbox arrangements, where necessary.

Regulation 6(3) imposes a requirement on sandbox entrants to make the public aware of its participation in the FMI sandbox arrangements.

Under regulation 6(4), the Treasury may impose restrictions on the overall FMI activities or ancillary FMI activities within the DSS.

Regulation 7(1) to (3) and (7) confers on the appropriate regulator the power to make rules that apply to a sandbox entrant and persons described in regulation 3(4) for the purpose of implementing and operating the FMI sandbox arrangements.

Under regulation 7(4) to (6) the appropriate regulator may also waive or modify its rules.

Regulation 8 provides that the appropriate regulator may modify technical standards for the purpose of implementing and operating the FMI sandbox arrangements.

Regulation 9(1) requires the appropriate regulator to supervise the operation of the FMI sandbox.

Under regulation 9(2) the appropriate regulator must supervise the performance of individual sandbox entrants, which may include modifying the SAN of a sandbox entrant.

Regulation 10 concerns co-operation between the appropriate regulators.

Regulation 11 requires the appropriate regulators to provide information on the performance of the FMI sandbox arrangements by a specified date to allow the Treasury to satisfy its reporting obligations under section 14(4) of the Act.

Regulation 12(1) provides that the appropriate regulators may exercise certain powers, in addition to existing powers under the relevant enactments, in connection with the implementation and operation of the FMI sandbox. This power extends to modifying, suspending or cancelling a sandbox approval notice.

Regulation 12(3) requires that a sandbox entrant be notified if it is to be affected by a power exercised by the appropriate regulator under regulation 12(1).

Regulation 13 specifies the date on which these regulations are to cease to have effect.

Part 1 of the Schedule specifies the relevant enactments for the purposes described in regulation 6.

Parts 2 to 5 of the Schedule contain modifications to the following relevant enactments: Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories (UK CSDR), the Financial Services and Markets Act 2000 (c. 8), the Companies Act 2006 (c. 46) and the Uncertificated Securities Regulations 2001 (S.I. 2001/3755).

These Regulations came into force on January 8 2024.

On December 8 2023, the Financial Conduct Authority (FCA) published a document on preparing for the future of consumer investments.

This document sets out some of the common aims of the FCA’s forthcoming consumer investments policy initiatives. It aims to outline the direction of travel so that stakeholders can understand the FCA’s strategy.

There are five topics that the FCA mentions:

• Accessible support
  The FCA’s joint work with HMT on the Advice Guidance Boundary Review (AGBR) will explore potential changes to the regulatory framework to improve the provision of support to help consumers make more effective investment decisions. The FCA will ensure any reforms align with other initiatives including the Consumer Duty, Pensions Dashboards, the Compensation Framework Review and disclosure reform and will consult fully on any proposed rule changes and new regulatory frameworks.
• Diverse products and services
  The FCA wants a market where consumers have access to a broad range of investments across the spectrum of risk. The FCA also wants to ensure proportionate protections help consumers find products that are right for their circumstances and risk tolerance. The FCA want consumers’ needs to be met by regulated firms, minimising the influence of unregulated providers that don’t offer adequate consumer protection.
• Realistic approach to risk
  Regulation should support consumers to distinguish between legitimate investment risk and fraudulent products. Consumers can only be expected to take responsibility where firms enable them to understand the features and risks of the products and services being offered, and the implications of any decisions. The FCA’s work needs to ensure that this is the case.
• Useful information
  Consumers should have access to information to help them make good decisions. It should be proportionate to the complexity of the investment and the decision. This information should be given at the right point – making sure the consumer is not overloaded with information, and not put off.
• Appropriate protections
  Consumer protection starts with firms treating customers fairly. The FCA expects consumers to take responsibility for their own decisions, but investment products should be made available, marketed, and sold to consumers in a way that allows them to make informed choices.

On December 6 2023, the Financial Conduct Authority (FCA) published a consultation paper on updating the regime for Money Market Funds (MMF).

MMFs play an important role in the economy and investors need to be able to rely on their ability to redeem cash at short notice. However, in a severe market stress, investors may not be able to get their money back from a MMF quickly, or not without a noticeable and unanticipated loss. MMFs typically use liquid assets (essentially ready cash) to return money to redeeming investors. If a MMF runs out of liquid assets and investors are still demanding the return of their investment, it would either need to ‘fire sale’ assets in stressed markets and pass the resulting losses on to investors or be ‘suspended’ (temporarily stop returning investors’ money). Investors who redeem first in a stress are more likely to get paid out without unanticipated delays or losses, so there is a ‘first-mover advantage’ in MMFs which can itself also drive additional investor demands for their money back.

The FCA is proposing 2 significant changes to current MMF regulation that are important in reducing the vulnerability of MMFs. Both aim to increase the usable liquidity of MMFs, so that in severe but plausible market stresses, MMFs do not reach a point at which they are unable to meet continuing investor demands for their money back without fire-selling assets:

• A significant increase in the minimum proportion of highly liquid assets that all MMF types have to hold. This will ensure that MMFs have enough liquid assets to withstand large amounts of withdrawals over a short period in severe but plausible market stresses and will significantly reduce the first-mover advantage.
• The removal of an existing regulatory requirement for important types of MMF which ‘links’ the levels of liquid assets in those MMFs with the need for the MMF manager to impose or consider imposing tools that, if used, would reduce the ability of investors to get their money back without unanticipated delays or losses. This proposed policy change is known as ‘delinking’ and works to reduce the additional first-mover advantage the ‘links’ can cause for these types of MMF as their liquid asset levels decrease.

The FCA is proposing a series of further changes that will enhance MMF resilience. Overall, all of the FCA’s proposals prioritise strengthening the existing regulatory regime for MMFs while maintaining the broad current MMF operating model.

In addition to increased financial stability, these measures also have the potential to strengthen the long-term competitiveness of the UK MMF sector, by increasing investor confidence in UK domiciled funds.

The consultation runs until March 8 2024.

On December 6 2023, the UK Government published a policy note and draft statutory instrument (SI) on Money Market Funds Regulation (MMFR).

This SI is part of UK Government’s programme to build a Smarter Regulatory Framework (SRF) for financial services which is tailored to the UK.

The Financial Services and Markets Act 2023 repeals retained EU law (REUL) relating to financial services. This enables the government to deliver a Smarter Regulatory Framework for financial services. Retained EU law will be repealed and replaced with rules set by the independent and expert regulators, operating within a framework set by government and Parliament.

Legislation will also govern how the UK interacts with financial services regimes in overseas jurisdictions. Where relevant, legislation that covers overseas regimes will enable the Government to recognise the regulatory approach of an overseas jurisdiction for specific purposes. The Government is publishing a near final version of this SI, alongside an explanatory policy note. 

The Government welcomes any technical comments on the draft SI by January 24 2024.

On December 5 2023, the Financial Conduct Authority (FCA) published a policy statement and finalised guidance on remuneration.

The policy statement is published jointly by the Prudential Regulation Authority (PRA) and the FCA

This policy statement provides feedback to responses to the PRA’s consultation paper (CP) 5/23 – Remuneration: Enhancing proportionality for small firms and the FCA’s CP23/11 – Remuneration: Enhancing proportionality for dual-regulated firms.

The regulators have considered the responses to feedback independently of one another, and in accordance with their statutory objectives. Final policy is being published jointly to avoid unnecessary duplication and familiarisation costs for firms.

Alongside the policy statement, the FCA has made consequential amendments to the FCA’s existing non-Handbook guidance to reflect these rules changes. Specifically, the:

• Dual-regulated firms Remuneration Code (SYSC 19D) – Frequently asked questions on remuneration (FG23/4)
  This guidance gives firms some practical guidance to understanding how the EBA Guidelines apply to them, and gives additional clarification on our Dual-regulated firms Remuneration Code. While these frequently asked questions may refer to existing remuneration rules and guidance or to the EBA Guidelines, they do not provide a complete summary of them. Firms should use this guidance as a supplement to the Dual-regulated firms Remuneration Code, Proportionality Guidance and the EBA Guidelines to help understand how the requirements apply to them.
• General Guidance on Proportionality (FG23/5)
  The Dual-regulated firms Remuneration Code requires a firm to apply requirements in SYSC 19D.3 to Dual-regulated firms Remuneration Code staff. However, in order to ensure the rules apply in a proportionate way, SYSC 19D.3.2BR provides that where certain criteria are met (including criteria in relation to groups) a firm will be exempt from some of the requirements outlined in SYSC 19D. This guidance provides a framework for the FCA’s supervisory approach and a broad indication of our expectations and explains how the FCA determines which firms fall within each proportionality level.
• General guidance on the application of ex-post risk adjustment to variable remuneration (FG23/6)
  The main purpose of this guidance is to set out the FCA’s expectations of the way in which firms comply with the requirements on ex-post risk adjustment (also referred to as performance adjustment). Where firms consider an alternative approach to be justified in meeting the requirements on ex-post risk adjustment in the Dual-regulated firms Remuneration Code or the MIFIDPRU Remuneration Code, this should be consistent with the general requirement to promote sound and effective risk management set out in SYSC 19D.2.1R and SYSC 19G.2.8R.

The changes came into force on December 8 2023 and apply to a firm’s performance year starting on or after that date. The PRA supervisory statement and FCA non-Handbook guidance changes also apply from December 8 2023.

On December 14 2023, the Financial Conduct Authority (FCA) published a press release on welcoming the launch of industry code of conduct for Environmental, Social and Governance (ESG) ratings and data products providers.

The International Capital Market Association (ICMA) and the International Regulatory Strategy Group (IRSG) have launched a voluntary code of conduct for ESG ratings and data products providers.

The code is owned and maintained by the ICMA. In 2022, the FCA appointed the ICMA and IRSG to convene an industry group to develop a globally consistent voluntary code for those providing the third-party data and ratings increasingly relied upon by the market.

The FCA, the Treasury and other national and international financial regulators acted as observers as the code was agreed. In line with International Organization of Securities Commissions’ (IOSCO’s) recommendations, the code focuses on promoting transparency, good governance, management of conflicts of interest, and strengthening systems and controls in the sector.

On December 19 2023, the United Kingdom published the Financial Services and Markets Act 2023 (Consequential Amendments) Regulations 2023.

Section 1 of the Financial Services and Markets Act 2023 (c. 29) revokes (or, where appropriate, repeals) retained EU law which is referred to in Schedule 1 to the Act.

These revocations and repeals include:

• the revocation of Article 92b of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012;
• the revocation of legislation relating to Long-Term Investment Funds (LTIFs);
• Part 2 of, and Schedules 1 and 2 to, the Payment Accounts Regulations 2015 (S.I. 2015/2038); and
• the repeal of legislation containing certain restrictions on powers of the Financial Conduct Authority to make rules that modify, amend or revoke retained direct EU legislation.

Those particular revocations and repeals took effect on January 1 2024 by virtue of Regulation 5 of the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023 (S.I. 2023/779 (C. 40)).

Regulations 2 to 4, 6 to 9, 11, 13 to 16 and 18 make consequential amendments in connection with those revocations and repeals.

These Regulations also make various other amendments that are consequential on the Act or provision made under it. Regulation 5 amends section 50(12) of the Act in consequence of section 21(4)(b) of the Act, to provide that the required content of the Bank of England’s annual report on its regulation of financial market infrastructure is consistent with its regulatory obligations.

Regulation 10 amends the Payment Card Interchange Fee Regulations 2015 (S.I. 2015/1911) (PCIFRs) in consequence of the amendments made to the PCIFRs by regulation 3 of the Electronic Money, Payment Card Interchange and Payment Services (Amendment) Regulations 2023 (S.I. 2023/790), which were made under section 3 of the Act.

Regulations 12, 17, 19 and 20 amend the Financial Services and Markets Act 2000 (Markets in Financial Instruments Regulations) 2017 (S.I. 2017/701), Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (MiFIR) and two related delegated Regulations. The amendments to these instruments are consequential on the omission of Article 5 of MiFIR by paragraph 5 of Schedule 2 to the Act.

These Regulations came into force on January 1 2024.

On December 1 2023, the International Swaps and Derivatives Association (ISDA) updated its over-the-counter (OTC) derivatives compliance calendar.

The update relates to the global calendar of compliance deadlines and regulatory dates for the OTC derivatives space.

On December 4 2023, the International Swaps and Derivatives Association (ISDA) published a press release on the update of the Common Domain Model (CDM).

The Fintech Open Source Foundation (FINOS), in partnership with the ISDA, International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA), has announced the launch of version 5.0 of the Common Domain Model (CDM), released in November. This major release, hosted on FINOS, features a multitude of technical, product and event improvements.

The CDM aims to unify a series of actions, lifecycle events and product definitions through the development of a single language or code. CDM 5.0, a production release, is the culmination of development releases from the second and third quarters of 2023 since the CDM was made an open-source project at FINOS in February of this year. The open project hosted at FINOS offers a unique opportunity for members from ISDA, ICMA, ISLA and the broader financial services community to collaborate and drive industry standards forward in a transparent and inclusive manner.

Key Contributions for ISDA:

• The CDM has been extended to cover exchange-traded derivatives and commodity derivatives.
• Coverage of collateral management has been enhanced with the addition of a functional model for assessing collateral eligibility. The model also now allows users to select from a group of triparty agents used to manage collateral on a trade.
• Multiple enhancements have been made to support ISDA’s Digital Regulatory Reporting initiative, including amendments to trade date and time and trade valuations.
• The CDM is now available via Excel code generation.

Key Contributions for ICMA:

• Addition of lifecycle events for partial delivery, repricing, adjustment and substitution. Repo rolls, re-rate, interest payment, pair-off and shaping were released previously.
• Additional functions to simplify access to repo data elements for collateral price, collateral quantity and purchase price.
• Ability to define GC baskets with collateral eligibility criteria.

Key Contributions for ISLA:

• Master agreements can now be modelled using a generic structure, allowing clauses, variants, and additional criteria to be represented in a CDM object.
• Lenders can distribute lists of their available securities in a standardized format, supporting a general broadcast of their availability to the market or specific quantities targeted at individual counterparties or agents.
• Borrowers can use the new Borrower Locate structure to request securities from lenders.

On December 6 2023, the International Capital Market Association (ICMA) published an updated Master Regulatory Reporting Agreement (MRRA).

The report is a result of collaboration with  the Association for Financial Markets in Europe (AFME), the Futures Industry Association (FIA), the International Swaps and Derivatives Association (ISDA) and the International Securities Lending Association (ISLA).

Originally published in 2019, the MRRA provides users with a template agreement for documenting regulatory reporting arrangements in relation to derivatives and securities financing transactions entered into under industry standard documentation, such as the Global Master Repurchase Agreement (GMRA). 

The MRRA sets out common terms governing mandatory and delegated reporting of derivatives transactions under European Market Infrastructure Regulation (EMIR), compatible with changes introduced via EMIR Refit, as well as securities financing transactions under the Securities Financing Transactions Regulation (SFTR).

The updates to the 2023 version of the MRRA include changes to address the fact that UK SFTR and UK EMIR are now operational, and that UK SFTR does not apply to Non-Financial Counterparties (NFCs).

On December 20 2023, the International Organization of Securities Commissions (IOSCO) published a guidance for effective implementation of the recommendations for liquidity risk management for collective investment schemes.

In 2021, IOSCO and the Financial Stability Board (FSB) jointly analysed liquidity risk and its management in open-ended funds (OEFs) during the Covid-19 induced market turmoil. They found that while the ‘dash-for-cash’ was a main driver of OEF redemptions and manager decisions to sell assets in March 2020, determining the materiality and economic impact of the liquidity mismatch vulnerability contributing to the market stress is difficult. To the extent that proper asset valuation and use of liquidity management tools (LMTs) do not remove the liquidity mismatch vulnerability, redeeming investors may benefit at the expense of remaining investors. 

In parallel, IOSCO’s Assessment Committee conducted a thematic review 2 completed in 2022 of the extent to which participating IOSCO member jurisdictions implemented regulatory measures regarding the key IOSCO Liquidity Risk Management Recommendations. In 2022, the FSB undertook an assessment of the FSB Recommendations 3 regarding financial stability risks arising from liquidity mismatch in OEFs in light of recent experience. The FSB noted in its assessment report that there was material variation in how anti-dilution LMTs were used. Both the FSB and IOSCO observed in their respective assessments that there is scope for greater uptake of LMTs, in particular anti-dilution LMTs.

Investor protection and financial stability concerns could arise when transacting investors in OEFs do not bear the costs of liquidity associated with fund subscriptions/redemptions, which disadvantages existing/remaining investors. Anti-dilution LMTs can address these concerns by passing on the costs of liquidity to transacting investors by adjusting the price at which they transact. These tools form an important part of an overall liquidity risk management framework for OEFs.

In particular, the greater inclusion of anti-dilution LMTs in OEF constitutional documents, and their greater and more consistent use in both normal and stressed market conditions were specifically highlighted in the FSB assessment as having relevance and benefits to ongoing efforts to support global financial stability.

The IOSCO is providing in this Final Report the following guidance to responsible entities:

• Responsible entities should have appropriate internal systems, procedures and controls in place at all times in compliance with applicable regulatory requirements for the design and use of anti-dilution LMTs as part of the everyday liquidity risk management of their OEFs to mitigate material investor dilution and potential first-mover advantage arising from structural liquidity mismatch in OEFs
• As part of their liquidity risk management framework, responsible entities should consider and use appropriate anti-dilution LMTs for OEFs under management mitigate material investor dilution and potential first-mover advantage arising from structural liquidity mismatch in OEFs
• Anti-dilution LMTs used by responsible entities should impose on subscribing and redeeming investors the estimated cost of liquidity, i.e., explicit and implicit transaction costs of subscriptions or redemptions, including any significant market impact of asset purchases or sales to meet those subscriptions or redemptions. Independently of the anti-dilution LMT used, responsible entities should be able to demonstrate to authorities (in line with the authorities’ supervisory approaches) that the calibration of the tool is appropriate and prudent for both normal and stressed market conditions.
• If responsible entities set thresholds for the activation of anti-dilution LMTs, those thresholds should be appropriate and sufficiently prudent so as not to result in any material dilution impact on the fund.
• Responsible entities should have adequate and appropriate governance arrangements in place for their liquidity risk management processes, including clear decision-making processes for the use of anti-dilution LMTs.
• Responsible entities should publish clear disclosures of the objectives and operation (including design and use) of anti-dilution LMTs to improve awareness among investors and enable them to better incorporate the cost of liquidity into their investment decisions and mitigate potential adverse trigger effects.

On December 20 2023, the Financial Stability Board (FSB) published revised policy recommendations to address structural vulnerabilities from liquidity mismatch in open-ended funds (OEFs).

This report sets out the Revised Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities in relation to liquidity mismatch in open-ended funds. The Revised FSB Recommendations supersede Section 2 of the FSB’s 2017 Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities. The Revised FSB Recommendations form part of the FSB’s work programme on non-bank financial intermediation (NBFI) and should be read in conjunction with the IOSCO Guidance on Anti-Dilution Liquidity Management Tools (LMTs).

The Revised FSB Recommendations are addressed to financial regulatory and supervisory authorities and set out the key objectives that an effective regulatory and supervisory framework should achieve to address the vulnerabilities arising from liquidity mismatch in OEFs, to the extent jurisdictions’ liquidity regulations are not yet consistent with the Revised FSB Recommendations. The goal of the Revised FSB Recommendations, combined with the new IOSCO Guidance on Anti-Dilution LMTs, is a significant strengthening of liquidity management by OEF managers compared to current practices. A substantial improvement in addressing the liquidity mismatch in OEFs, greater use of - and greater consistency in the use of  anti-dilution LMTs, and a step change of the status quo are expected.

In addition, the FSB published summary of consultation responses and changes to address them.

The FSB’s consultation report with policy proposals to address structural vulnerabilities from liquidity mismatch in OEFs was published on 5 July and the comment period closed on 4 September 2023. The objective of the consultation was to get stakeholder feedback on the proposed manner of implementing the recommendations on follow-up policies, as described in the report on the assessment of the effectiveness of the FSB’s 2017 recommendations on liquidity mismatch in open-ended funds.

The note provides a summary of the feedback received on the consultation report and informs how it has been addressed in the final report.

Most respondents, including those from the asset management industry, generally supported the policy objective to better align the liquidity of fund assets with fund structures, dealing terms and liquidity management tools (LMTs) available to fund managers. Some of them agreed that enhancing investor protection and enhancing financial stability are complementary objectives, and strengthening liquidity management practices in OEFs would help achieve both. Respondents generally supported the exclusion of money market funds and exchange-traded funds from the scope of the Recommendations, as well as the proposal not to include minimum regulatory requirements for liquid asset holdings across the fund sector.

On December 4 2023, the Financial Stability Board (FSB) published a final report on enhancing third-party risk management and oversight.

The developments in recent years have both brought benefits and introduced different types of risks to financial institutions. If such risks are not appropriately managed, these relationships could lead to risks to financial stability.

In response to concerns over the risks related to outsourcing and third-party service relationships, the FSB has developed a toolkit for financial authorities and financial institutions for enhancing their third-party risk management and oversight. 

Recognising differences across jurisdictions and financial institutions, the FSB has developed a flexible and risk-based set of tools (toolkit), which financial authorities and financial institutions may consider based on their circumstances, including the legal framework and specific features of the financial services sector in their jurisdictions. At the same time, the toolkit seeks to promote comparable and interoperable approaches across jurisdictions.

The toolkit comprises:

• a list of common terms and definitions to improve clarity and consistency regarding third-party risk management across financial institutions, enhancing communication among relevant stakeholders.
• tools to help financial institutions identify critical third-party services and manage potential risks throughout the lifecycle of a third-party service relationship.
• tools for supervising how financial institutions manage third-party risks, and for identifying, monitoring and managing systemic third-party dependencies and potential systemic risks.

The toolkit is designed to complement and build on relevant existing standards and guidance by international standard-setting bodies (SSBs) and financial authorities, but not replace them.

On December 4 2023, the International Organization of Securities Commissions (IOSCO) published a final report on supervisory practices across its members to address greenwashing.

The final report provides a mapping of the regulatory and supervisory approaches and practices (current or planned) by regulators to address greenwashing in the areas of asset managers and environmental, social and governance ratings (ESG) ratings and data product providers, including challenges and data gaps hindering the implementation of the 2021 IOSCO recommendations on sustainability-related practices, policies, procedures, and disclosure in asset management.

The final report is based on the responses received to a survey covering 22 jurisdictions and discussions held through various roundtables, both with industry participants and regulators. The final report also incorporates the feedback received from IOSCO’s affiliate members consultative committee about the steps taken by industry participants to implement the November 2022 call for action on good sustainable finance practices.

Among other things the final report notes that:

• There is no global definition of greenwashing.
• Most jurisdictions have in place supervisory tools and mechanisms to address greenwashing in the area of asset managers and their products.
• Educational, awareness measures and capacity building activities are also used as proactive tools to prevent greenwashing. Some regulators provide guidance or establish some requirements about the knowledge asset manager staff are expected to have for handling and offering sustainable finance products to retail investors.
• The market for ESG ratings and data products is in a phase of rapid growth. The final report notes that the ESG ratings and data products market remains largely unregulated although a few jurisdictions are currently developing mandatory or voluntary policy frameworks for ESG ratings and data products providers. The final report sets out the key elements of these new frameworks.
• The cross-border nature of sustainable finance investments requires adequate cross-border cooperation. Securities regulators have put in place different mechanisms and tools to assist each other throughout the regulatory cycle (i.e., licensing, supervision/oversight, and enforcement).
• Greenwashing will remain a high risk to the reputation of global sustainable finance markets until the quality and reliability of information available to investors improve.

On December 20 2023, the International Accounting Standards Board (IASB) published amendments to Sustainability Accounting Standards Board (SASB) Standards.

These amendments were intended to help preparers apply the SASB Standards regardless of the jurisdiction in which they operate or the type of generally accepted accounting principles (GAAP) they use without substantially altering the SASB Standards’ structure or intent. The SASB Standards facilitate the implementation and application of International Financial Reporting Standards (IFRS) S1 for preparers.