On March 13 2024, the European Parliament (EP) adopted the Artificial Intelligence (AI) Act.

The Regulation aims to protect fundamental rights, democracy, the rule of law and environmental sustainability from high-risk AI, while boosting innovation and establishing Europe as a leader in the field. The regulation establishes obligations for AI based on its potential risks and level of impact.

The new rules ban certain AI applications that threaten citizens’ rights, including biometric categorisation systems based on sensitive characteristics and untargeted scraping of facial images from the internet or CCTV footage to create facial recognition databases. Emotion recognition in the workplace and schools, social scoring, predictive policing (when it is based solely on profiling a person or assessing their characteristics), and AI that manipulates human behaviour or exploits people’s vulnerabilities will also be forbidden.

The use of biometric identification systems by law enforcement is prohibited in principle, except in exhaustively listed and narrowly defined situations. “Real-time” biometric identification systems can only be deployed if strict safeguards are met, e.g. its use is limited in time and geographic scope and subject to specific prior judicial or administrative authorisation. Such uses may include, for example, a targeted search of a missing person or preventing a terrorist attack. Using such systems post-facto is considered a high-risk use case, requiring judicial authorisation being linked to a criminal offence.

Clear obligations are also foreseen for other high-risk AI systems (due to their significant potential harm to health, safety, fundamental rights, environment, democracy and the rule of law). Examples of high-risk AI uses include critical infrastructure, education and vocational training, employment, essential private and public services (e.g. healthcare, banking), certain systems in law enforcement, migration and border management, justice and democratic processes (e.g. influencing elections). Such systems must assess and reduce risks, maintain use logs, be transparent and accurate, and ensure human oversight. Citizens will have a right to submit complaints about AI systems and receive explanations about decisions based on high-risk AI systems that affect their rights.

General-purpose AI (GPAI) systems, and the models they are based on, must meet certain transparency requirements, including compliance with EU copyright law and publishing detailed summaries of the content used for training. The more powerful GPAI models that could pose systemic risks will face additional requirements, including performing model evaluations, assessing and mitigating systemic risks, and reporting on incidents.

Additionally, artificial or manipulated images, audio or video content (“deepfakes”) need to be clearly labelled as such. Regulatory sandboxes and real-world testing will have to be established at the national level, and made accessible to SMEs and start-ups, to develop and train innovative AI before its placement on the market.

The regulation is still subject to a final lawyer-linguist check and is expected to be finally adopted before the end of the legislature (through the corrigendum procedure). The law also needs to be formally endorsed by the Council.

It will enter into force twenty days after its publication in the Official Journal, and be fully applicable 24 months after its entry into force, except for: bans on prohibited practises, which will apply six months after the entry into force date; codes of practise (nine months after entry into force); general-purpose AI rules including governance (12 months after entry into force); and obligations for high-risk systems (36 months after entry into force).

On March 6 2024, the European Money Markets Institute (EMMI) published the final results of consultation paper on proposed changes to Euribor methodology.

The consultation, which aimed to refine the Euribor hybrid methodology, garnered overwhelmingly positive responses and provided invaluable insights into the future of the benchmark.

According to EMMI, the redefinition of Level 2.3 encompasses various adjustments, including an expanded calculation starting point and a refined Market Adjustment Factor (MAF) to better reflect interest rate fluctuations and changes in perceived credit risks. Additionally, feedback from stakeholders prompted the introduction of an additional control parameter to address exceptionally adverse market conditions, leading to the discontinuation of Level 3 contributions under the previous methodology.

EMMI has announced its decision to implement the new methodology and associated governance framework in a phased manner. The migration of Panel Banks to the revised calculation methodology will occur gradually, and is expected to start around mid-May 2024 and spanning a six-month period. This approach aims to facilitate a smooth transition while minimizing disruptions to market participants.

Furthermore, EMMI will ensure that any public reports reliant on the Euribor methodology undergo necessary adjustments to accommodate the changes.

While the widespread support for the proposed enhancements is encouraging, addressing concerns raised by market participants remains a priority to uphold the benchmark's robustness and integrity. The consultation process has proven instrumental in gathering diverse perspectives, refining the Euribor® methodology, and reinforcing its relevance and reliability in financial markets.

On March 14 2024, the European Fund and Asset Management Association (EFAMA) published a policy viewpoint on impacts of the US move to T+1 settlement in Europe.

Ahead of the US go-live on T+1 implementation on 28 May, EFAMA calls on central banks and regulators to consider the impacts on FX settlement risk. A recent EFAMA survey of European fund managers estimates that 40% of daily FX flows will no longer be able to settle through the Continuous Linked Settlements (CLS) platform. On a regular trading day, this could amount to USD 50-70 billion, whereas in volatile markets this figure could be in the hundreds of billions. Increased FX settlement risk carries systemic implications as previous episodes in history have shown.  

EFAMA urges central banks and regulators to take a more pro-active role in requiring mitigating measures such as an extension of the CLS cut-off time, and improved cut-offs and alignment among the custodial community. This urgency is further compounded by the fact that within days of the US go-live, major indices like MSCI World are set to rebalance (May 31 2024).

On March 12 2024, the European Parliament adopted the Cyber Resilience Act.

The Regulation, already agreed with the Council in December 2023, aims to ensure that products with digital features are secure to use, resilient against cyber threats and provide enough information about their security properties.

Important and critical products will be put into different lists based on their criticality and the level of cybersecurity risk they pose. Products deemed to pose a higher cybersecurity risk will be examined more stringently by a notified body, while others may go through a lighter conformity assessment process, often managed internally by the manufacturers.

MEPs made sure that products such as identity management systems software, password managers, biometric readers, smart home assistants and private security cameras are covered by the new rules. Products should also have security updates installed automatically and separately from functionality updates.

MEPs also pushed for the European Union Agency for Cybersecurity (ENISA) to be more closely involved when vulnerabilities are found 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 identifies a systemic risk, 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 introduced education and training programmes, collaborative initiatives, and strategies to enhance workforce mobility in the regulation.

The legislation will have to be formally adopted by the Council in order to come into law.

On March 19 2024, the European Union published the Regulation (EU) 2024/886 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in euro.

Regulation (EU) No 260/2012 provides the foundation for the single euro payments area (SEPA). To create favourable conditions for increased competition, in particular for payments at the point of interaction (POI), the SEPA project should be continuously updated to reflect innovation and market developments in payments, promote the development of new Union-wide payment products, and facilitate access for new market entrants.

In 2017, a Union-wide scheme for the instant execution of credit transfers in euro was agreed between payment service providers (PSPs) under the auspices of the European Payments Council. The efforts of the European payments industry have not proven sufficient to ensure a high uptake of instant credit transfers in euro at Union level. Only a widespread and rapid increase in such uptake could unlock the full-scale network effects of instant credit transfers in euro, leading to benefits and economic efficiency gains for payment service users (PSUs) and PSPs, reduced market concentration, and increased competition and choice of electronic payments, in particular for cross-border payments at the POI.

Regulation (EU) No 260/2012 established technical and business requirements for credit transfers and direct debits in euro. Instant credit transfers in euro are a relatively new category of credit transfers in euro which emerged on the market only after the adoption of that Regulation. It is therefore necessary to establish specific requirements applicable to instant credit transfers in euro, in addition to the general requirements applicable to all credit transfers, to ensure the proper functioning and integration of the internal market.

Prior to the emergence of instant credit transfers, payment transactions were generally bundled by PSPs and submitted to a retail payment system for processing, clearing and settlement purposes at pre-specified times. However, in retail payment systems currently used to process instant credit transfers in euro, payment transactions are submitted individually and processed round the clock and in real time. To reflect that, it is necessary to amend the definition of the term ‘retail payment system’ in Regulation (EU) No 260/2012.

Ensuring that all PSUs in the Union are able to place payment orders for, and receive, instant credit transfers in euro is a precondition for an increased uptake of such transactions. Therefore, PSPs providing the payment service of sending and receiving credit transfers in euro to their PSUs should be required to offer the payment service of sending and receiving instant credit transfers in euro to all of their PSUs. That requirement should apply with respect to all payment accounts which PSPs maintain for their PSUs, including payment accounts with basic features referred to in Directive 2014/92/EU.

To prevent the initiation of instant credit transfers from payment accounts belonging to persons or entities subject to targeted financial restrictive measures and to immediately freeze funds sent to such payment accounts, PSPs should carry out verifications of their PSUs immediately following the entry into force of a new targeted financial restrictive measure. That obligation should apply to all PSPs sending or receiving instant credit transfers in euro, thereby ensuring that all PSPs comply in an effective manner with their obligations stemming from targeted financial restrictive measures.

PSPs as referred to in paragraph 1 of Article 5a that are located in a Member State whose currency is the euro shall offer PSUs the payment service of receiving instant credit transfers in euro as laid down in Article 5a by January 9 2025, and the payment service of sending instant credit transfers in euro as laid down in Article 5a by October 9 2025.

PSPs as referred to in paragraph 1 of Article 5a that are located in a Member State whose currency is not the euro shall offer PSUs the payment service of receiving instant credit transfers in euro as laid down in Article 5a by January 9 2027, and the payment service of sending instant credit transfers in euro as laid down in Article 5a by July 9 2027.

PSPs that are electronic money institutions or payment institutions that are located in a Member State whose currency is the euro shall offer PSUs the payment service of sending and receiving instant credit transfers in euro by April 9 2027, and those located in a Member State whose currency is not the euro shall also offer PSUs the payment service of receiving instant credit transfers in euro by 9 April 2027 and the payment service of sending instant credit transfers in euro.

Member States shall adopt, publish and apply, by April 9 2025, the laws, regulations and administrative provisions necessary to comply with Articles 3 and 4. This Regulation entered into force on April 8 2024.

On March 6 2024, the European Securities and Markets Association (ESMA) updated the translations of the Guidelines on the stress test scenarios under the Money Markets Funds (MMF) Regulation.

These guidelines apply to NCAs, MMFs and managers of MMFs as defined in the Regulation.

These guidelines apply from two months after the date of publication of the guidelines on ESMA’s website in all EU official languages. 

The purpose is to ensure common, uniform and consistent application of the provisions in Article 28 of the MMF Regulation. In particular, and as specified in Article 28(7), they establish common reference parameters of the stress test scenarios to be included in the stress tests taking into account the following factors specified in Article 28(1) of the MMF Regulation:

• hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF;
• hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events;
• hypothetical movements of the interest rates and exchange rates;
• hypothetical levels of redemption
• hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied; 
• hypothetical macro systemic shocks affecting the economy as a whole

In accordance with Article 28(7), these guidelines will be updated at least every year taking into account the latest market developments. In 2023, sections 4.8 and 5 of these guidelines were in particular updated so that managers of MMFs have the information needed to fill in the corresponding fields in the reporting template referred to in Article 37 of the MMF Regulation, as specified by Commission Implementing Regulation (EU) 2018/708. This information includes specifications on the types of stress tests mentioned in section 5 and their calibration.

The guidelines are structured as follows:

Guidelines on stress test scenarios under Article 28 of the MMF Regulation

• Guidelines on certain general features of the stress test scenarios of MMF;
• Guidelines on stress test scenarios in relation to hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF;
• Guidelines on stress test scenarios in relation to hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events;
• Guidelines on stress test scenarios in relation to hypothetical movements of the interest rates and exchange rates
• Guidelines on stress test scenarios in relation to hypothetical levels of redemption;
• Guidelines on stress test scenarios in relation to hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied;
• Guidelines on stress test scenarios in relation to hypothetical macro systemic shocks affecting the economy as a whole;
• Guidelines on the establishment of additional common reference stress test scenarios (the results of which should be included in the reporting template mentioned in Article 37(4) of the MMF Regulation).

Calibration

• Common reference parameters of the stress test scenarios in relation to hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF;
• Common reference parameters of the stress test scenarios in relation to hypothetical changes in the level of credit risk of the assets held in the portfolio of the MMF, including credit events and rating events;
• Common reference parameters of the stress test scenarios in relation to hypothetical movements of the interest rates;
• Common reference parameters of the stress test scenarios in relation to hypothetical movements of the exchange rates;
• Common reference parameters of the stress test scenarios in relation to hypothetical widening or narrowing of spreads among indexes to which interest rates of portfolio securities are tied;
• Common reference parameters of the stress test scenarios in relation to hypothetical levels of redemption;
• Common reference parameters of the stress test scenarios in relation to hypothetical macro systemic shocks affecting the economy as a whole.

The guidelines apply from May 6 2024.

On March 6 2024, the European Commission published a communication to the Commission on the intention to adopt with amendments the Commission Delegated Regulation supplementing Regulation (EU) 2015/760 with regard to RTS specifying obligations concerning hedging derivatives, redemption policy and LMTs, trading and issue of units or shares of an European long-term investment funds (ELTIF), and transparency requirements and repealing Delegated Regulation (EU) 2018/480.

In its Final Report, ESMA recognises the diversity of ELTIFs, stressing the variety of assets in which ELTIFs may invest and the variety of ELTIFs’ investment strategies. While the Commission notes that one of the objectives of Regulation (EU) 2023/606 is to provide for flexibility to ELTIF managers to pursue a broad range of investment strategies and objectives, in particular as regards their portfolio composition, the Commission believes that ESMA’s draft RTS does not sufficiently cater for the individual characteristics of different ELTIFs.

The main apsects of the amended RTS are as follows:

• Article 4(2) of the draft RTS with respect to material changes to the redemption policy
• Minimum notice period for redemptions (Article 5(5) and (6) of the draft RTS)
• Liquidity requirements related to standardised notice periods requirements (Article 5(6), first sub-paragraph, of the draft RTS)
• Liquidity management tools (Article 5(7) of the draft RTS)
• Redemption gates (Article 5(8) of the draft RTS)
• Common definitions, calculation methodologies and presentation formats of costs (Article 12 of the draft RTS)

On March 25 2024, the European Union published a Commission Delegated Regulation (EU) 2024/911 of 15 December 2023 supplementing Directive 2009/65/EC with regard to RTS specifying the information to be notified in relation to the cross-border activities of management companies and undertakings for collective investment in transferable securities (UCITS).

The scope and content of the information to be notified to competent authorities under Article 17(1), (2), (3), (8) and (9), Article 18(1), (2) and (4), and Article 20(1) and (4) of Directive 2009/65/EC, vary depending on the purpose and form of the notification. It is therefore appropriate to specify the information to be notified by UCTIS and by UCITS management companies for each type of notification.

To ensure that competent authorities are at all times informed of the activities of management companies and to enable competent authorities to properly exercise their supervisory powers, they should be informed about every change in the notified information. That includes any withdrawal of, cancellation of, or change to the authorisation initially granted to a management company.

The International Securities Identification Number (ISIN) and the Legal Entity Identifier (LEI) of the UCITS are extremely important to enable a unique identification of the UCITS by electronic means. This Regulation therefore includes the mandatory notification of the ISIN and the LEI where they have been assigned to the UCITS and are therefore available.

The competent authorities should be provided with information about persons responsible for the management of the branch and their contact details. Persons should be considered responsible for the management of the branch if they have the empowerment to set the branch’s strategy, objectives, and overall direction, to effectively direct the business of the branch or if they are responsible for the day-to-day business of the branch in a managerial capacity. To avoid any gaps, it should be ensured that for every part of the branch’s activities, business areas and management functions, the persons in the respective leading position are notified.

This Regulation entered into force on 14 April 2024 and shall apply from June 25 2024.

On March 25 2024, the European Union published a Commission Delegated Regulation (EU) 2024/912 of December 15 2023 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the information to be notified in relation to the cross-border activities of managers of alternative investment funds (AIFMs).

The scope and content of the information to be notified to competent authorities under Article 33(2) and (3) of Directive 2011/61/EU, vary depending on the purpose and form of the notification. It is therefore appropriate to specify the information to be notified by AIFMs for each type of notification.

To ensure that competent authorities are at all times informed of the activities of AIFMs and to enable those competent authorities to properly exercise their supervisory powers, they should be informed about every change in the notified information. That includes any withdrawal of, cancellation of, or change to the authorisation initially granted to an AIFM.

The competent authorities should be provided with information about persons responsible for the management of the branch and their contact details. Persons should be considered responsible for the management of the branch if they have the empowerment to set the branch’s strategy, objectives, and overall direction, to effectively direct the business of the branch or if they are responsible for the day-to-day business of the branch in a managerial capacity. To avoid any gaps, it should be ensured that for every part of the branch’s activities, business areas and management functions, the persons in the respective leading position are notified.

The International Securities Identification Number (ISIN) and the Legal Entity Identifier (LEI) of an alternative investment fund (AIF) are extremely important to enable a unique identification of the AIF by electronic means. This Regulation therefore includes the mandatory notification of the ISIN and the LEI where they have been assigned to the AIF and are therefore available.

The provisions in this Regulation are closely linked since they deal with the form and content of the information to be exchanged between AIFMs and the national competent authorities of home and host Member States where the AIFM intends to provide cross-border services. To ensure coherence between those provisions, which should enter into force at the same time, and to facilitate a comprehensive view and efficient access for AIFMs and national competent authorities, it is appropriate to include them in a single regulation.

This Regulation enters into force on 14 April 2024 and apply from June 25 2024.

On March 25 2024, the European Union published a Commission Implementing Regulation (EU) 2024/910 of December 15 2023 laying down ITS for the application of Directive 2009/65/EC with regard to the form and content of the information to be notified in respect of the cross-border activities of undertakings for collective investment in transferable securities (UCITS), UCITS management companies, the exchange of information between competent authorities on cross-border notification letters, and amending Commission Regulation (EU) No 584/2010.

The exchange of information between competent authorities is part of the administrative procedures in relation to the notifications of management companies and UCITS wishing to conduct marketing or management activities, to provide services or to establish a branch in host Member States. To close those administrative procedures in a smooth, fast, unbureaucratic, and reliable way, it is necessary to specify and harmonise the exchange of information between competent authorities by the development of harmonised forms, templates, cooperation procedures and the implementation of communication by electronic means.

To transmit the huge amount of information, sent and received in regard of the notifications between the Member States, without loss of time and in a dependable, cost-efficient and unbureaucratic manner, it is essential that the information concerned is provided by electronic means. While such information might be provided by email, it should be possible to provide that information also by other, potentially more advanced electronic technology. It is therefore necessary to set out a detailed procedure for those electronic transmissions and for dealing with technical problems that might occur in the process of the transmission of the information between the competent authorities.

This Regulation enters into force on April 14 2024.

This Regulation shall apply from July 14 2024.

On March 25 2024, the European Union published a Commission Implementing Regulation (EU) 2024/913 of December 15 2023 laying down implementing technical standards for the application of Directive 2011/61/EU 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 (AIFMs) and the exchange of information between competent authorities on cross-border notification letters.

The exchange of information between competent authorities is part of the administrative procedures in relation to the notifications of AIFMs wishing to carry out marketing or management activities, to provide services or to establish a branch in host Member States. To close those administrative procedures in a smooth, fast, unbureaucratic, and reliable way, it is necessary to specify and harmonise the exchange of information between competent authorities by the development of harmonised forms, templates, cooperation procedures and the implementation of communication by electronic means.

To transmit the huge amount of information, sent and received in regard of the notifications between the Member States, without loss of time and in a reliable, cost-efficient and unbureaucratic manner, it is essential that the information concerned is provided by electronic means. While such information might be provided by email, it should be possible to provide that information also by other, potentially more advanced electronic technology. It is therefore necessary to set out a detailed procedure for those electronic transmissions and for dealing with technical problems that might occur in the process of the transmission of the information between the competent authorities.

The provisions in this Regulation are closely linked since they deal with the form and content of the information to be exchanged between AIFMs and the national competent authorities of home and host Member States where the AIFM intends to provide cross-border services. To ensure coherence between those provisions, which should enter into force at the same time, and to facilitate a comprehensive view and efficient access for AIFMs and national competent authorities, it is appropriate to include them in a single regulation.

This Regulation enters into force on April 14 2024.

This Regulation shall apply from April 14 2024.

BACKGROUND

In accordance with Directive 2011/61/EU of the European Parliament and of the Council, the Commission has reviewed the application and the scope of that Directive and concluded that the objectives of integrating the Union market for alternative investment funds (AIFs), ensuring a high level of investor protection and protecting financial stability have, for the most part, been met. However, in its review the Commission also concluded that there is a need to harmonise the rules for the managers of alternative investment funds (AIFMs) managing AIFs which originate loans, as well as a need to clarify the standards applicable to AIFMs that delegate their functions to third parties, to ensure equal treatment of entities providing custody services (‘custodians’), to improve cross-border access to depositary services, to optimise supervisory data collection and to facilitate the use of liquidity management tools across the Union. Therefore, amendments were necessary to address those needs in order to improve the functioning of Directive 2011/61/EU (AIFMD) and consecutively Directive 2009/65/EC (UCTISD).

WHAT'S NEW?

On March 26 2024, the European Union published the Alternative Investment Fund Managers Directive (AIFMD) II and to the Directive relating to undertakings for collective investment in transferable securities (UCITSD) VI.

To increase the efficiency of the activities of AIFMs, the list of ancillary services set out in Article 6(4) of Directive 2011/61/EU (AIFMD) is extended to include the tasks carried out by an administrator in accordance with Regulation (EU) 2016/1011 on the administration of benchmarks, and credit servicing activities in accordance with Directive (EU) 2021/2167. When undertaking the tasks carried out by such an administrator or when providing credit servicing activities, the AIFM should be subject to Regulation (EU) 2016/1011 and Directive (EU) 2021/2167 respectively.

In order to enhance legal certainty for AIFMs and UCITS management companies regarding the services they can provide to third parties, it should be clarified that they are allowed to perform for the benefit of third parties the same functions and activities that they already perform in relation to the AIFs and UCITS they manage, provided that any potential conflict of interest created by the provision of that function or activity to third parties is appropriately managed. Such functions and activities include, for example, corporate services such as human resources and information technology (IT), as well as IT services for portfolio management and risk management. That possibility would also support the international competitiveness of EU AIFMs and UCITS management companies by enabling economies of scale and would help diversify revenue sources.

To ensure the uniform application of the requirements laid down in the AIFMD regarding the necessary human resources of AIFMs, it is necessary to clarify that, at the time of the application for authorisation, an AIFM should provide the competent authorities with information about the human and technical resources that it employs to carry out its functions and, where applicable, to supervise its delegates. At least two natural persons who, on a full-time basis, either are employed by the AIFM or are executive members or members of the governing body of the AIFM, and who are domiciled, in the sense of having their habitual residence, in the Union, should be appointed to conduct the business of the AIFM. Regardless of that statutory minimum, more resources might be necessary depending on the size and complexity of the AIFM and the AIFs it manages.

The marketing of AIFs is not always conducted by the AIFM directly but by one or several distributors either on behalf of the AIFM or on their own behalf. In particular, there could be cases where an independent financial advisor markets an AIF without the AIFM’s knowledge. Most fund distributors are subject to regulatory requirements pursuant to Directive 2014/65/EU or Directive (EU) 2016/97 which define the scope and extent of their responsibilities towards their own clients. Directive 2011/61/EU should therefore acknowledge the diversity of distribution arrangements and distinguish between, on the one hand, arrangements whereby a distributor acts on behalf of the AIFM, which should be considered to be delegation arrangements, and, on the other hand, arrangements whereby a distributor acts on its own behalf when it markets the AIF under Directive 2014/65/EU or through life-insurance based investment products in accordance with Directive (EU) 2016/97, in which case the provisions of Directive 2011/61/EU regarding delegation should not apply, irrespective of any distribution agreement between the AIFM and the distributor. Investment funds providing loans can be a source of alternative financing for the real economy. Such funds can provide critical funding for Union small and medium-sized enterprises, for which traditional lending sources are more difficult to access. However, diverging national regulatory approaches can give rise to regulatory arbitrage and varying levels of investor protection, thereby hindering the establishment of an efficient internal market for loan origination by AIFs. 

Loan origination is not always conducted directly by the AIF. There can be cases where an AIF grants a loan indirectly through a third party or special purpose vehicle that grants the loan for or on behalf of the AIF, or for or on behalf of the AIFM in respect of the AIF, prior to gaining exposure to the loan. In order to avoid circumvention of Directive 2011/61/EU, where that AIF or AIFM is involved in structuring the loan, or defining or pre-agreeing its characteristics, such cases should be considered to be loan-originating activities and should be subject to that Directive.

Where depositaries provide custody services to AIFs, it is necessary to include central securities depositories (CSDs) in the custody chain in order to ensure that, in all cases, there is a stable information flow between the custodian of an AIF’s asset and the depositary. To avoid unnecessary work, the depositaries should not perform ex ante due diligence where they intend to delegate custody to CSDs.

WHAT'S NEXT?

The rules applicable to AIFMs managing AIFs which originate loans should be harmonised in order to improve risk management across the financial market and increase transparency for investors. These provisions applicable to AIFMs that manage AIFs that originate loans should not prevent Member States from laying down national product frameworks that define certain categories of AIFs with more restrictive rules.

Member States shall adopt and publish, by April 16 2026, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall immediately communicate the text of those measures to the Commission.

They shall apply those measures from April 16 2026, with the exception of the measures transposing Article 1(12), and those transposing Article 2(7) with regard to Article 20a of Directive 2009/65/EC, which they shall apply from April 16 2027.

This Directive entered into force on April 15 2024.

BACKGROUND

Currently, trading data is scattered across multiple platforms, such as stock exchanges and investment banks, making it difficult for investors to access the accurate and up-to-date information they need to take decisions.

The new rules will give investors a better access to the market data necessary to invest in financial instruments and increase the global competitiveness of the EU’s capital markets and ensure a level playing field.

WHAT'S NEW?

On March 8 2024, the European Union published new rules on the Markets in Financial Instruments Directive/Regulation (MiFID/R).

Regulation (EU) 2024/791 (MiFIR Review) amends MiFIR as regards enhancing data transparency, removing obstacles to the emergence of consolidated tapes, optimising the trading obligations and prohibiting receiving payment for order flow.

The rules adopted establish EU-level ‘consolidated tapes’, or centralised data feeds for different kinds of assets, bringing together market data provided by platforms on which financial instruments are traded in the EU. The consolidated tapes will aim to publish the information as close as possible to real time.

As a result, investors will have access to up-to-date transaction information for the whole of the EU. This will make it easier for both professional and retail investors to access key information such as the price of instruments and the volume and time of transactions.

The new rules also impose a general ban on ‘payment for order flow’ (PFOF), a practice through which brokers receive payments for forwarding client orders to certain trading platforms. Member states where the practice of PFOF already existed may allow investment firms under its jurisdiction to be exempt from the ban, provided that PFOF is only provided to clients in that member state. However, this practice must be phased out by June 30 2026.

The review also introduces new rules on commodity derivatives.

WHAT'S NEXT?

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by September 29 2025.

The Regulation and Directive entered into force on March 28 2024.

ESMA received numerous questions from stakeholders on the provisions applicable on the date of entry into force of the revised MiFIR. ESMA acknowledges that public guidance is necessary, notably, on the application of Article 54(3) MiFIR which foresees the continued application of the delegated acts in place beyond March 28 2024 until these delegated acts have been revised. ESMA will undertake to further provide as much clarity as possible on the transition to the revised MiFIR, including the impact on the ESMA IT-systems and registers. ESMA also aims at providing such guidance of the revised MiFIR as soon as possible. However, ESMA expects that further and more detailed guidance going beyond the topics covered in the initial communication is likely to be necessary. ESMA will proceed with developing draft technical standards in a swift and transparent manner, thereby contributing to the alignment of the Commission delegated regulations with the revised MiFIR as soon as possible. 

On March 27 2024, the European Commission published a communication on the approval of content of the draft Commission Notice on the interpretation and implementation of the transitional provision laid down in the Markets in Financial Instruments Regulation (MiFIR) Review. The Commission Notice clarifies that, pursuant to Article 54(3) MiFIR, the existing Commission delegated regulations, as applicable before March 28 2024, continue to apply, together with the provisions that they supplement, in all cases where the MiFIR provisions are to be supplemented by new or amended Commission delegated regulations to become fully operational and cannot be supplemented adequately by the existing Commission delegated regulations only. It further identifies the volume cap mechanism (Article 5 MiFIR), the deferred publication of the details of transactions in respect of bonds, structured finance products or emission allowances and deferred publication of the details of transactions in respect of derivatives (Articles 11 and 11a MiFIR), the obligation to make pre-trade and post-trade data available on a reasonable commercial basis (Article 13 MiFIR), the quotation rules for systematic internalisers in equity instruments (Article 14 MiFIR), and the obligation to report transactions (Article 26 MiFIR).

On March 15 2024, the Financial Data Exchange Templates (FinDatEx) published a consultation on European MiFID Template (EMT) 4.2.

The EMT4.2 integrates the V4.1 with a supplementary UK specific section linked to detailed on-going costs.

This template applies to activities which are in the scope of MiFID II. The target market specifications of this template apply for stand-alone proposals of products and do not need to be taken into consideration in case of providing investment advice adopting a portfolio approach and/or portfolio management for diversification and/or hedging purpose.

The template transports accurate information of the target market and the costs by the manufacturers. Agreements between manufacturers and distributors remain unaffected. 

The consultation ended on April 5 2024.

On March 11 2024, the European Securities and Markets Authority (ESMA) updated its Q&A on Markets in Financial Instruments Directive (MiFID II).

The question contained in the update is as follows:

- When conducting the negative target market assessment for a product that does not consider sustainability factors, should a firm also consider any clients’ sustainability-related objectives the product is not compatible with?

Yes. According to Article 9(9) and 10(2) of Commission Delegated Directive 2017/593, any clients’ sustainability-related objectives shall be considered when specifying the type(s) of clients whose needs, characteristics and objectives the product is compatible with (‘positive target market assessment’). This also applies to the identification of any group(s) of clients whose needs, characteristics and objectives the product is not compatible with (‘negative target market assessment’). In practical terms, whether, and if so, which sustainability-related objectives may be relevant for the identification of the negative target market for a particular product that does not consider sustainability factors, will depend on the characteristics of the product. Indeed, firms are required to consider whether the product would be incompatible with some sustainable related objectives but this evaluation might conclude, in some specific situations, that there is no incompatibility with those objectives, so no negative target market would be determined in those specific situations for the criterion “sustainability related objective”. Reversely, in other situations the consideration should lead to the identification of a negative target market in relation to the product’s sustainability-related objectives.

On March 25 2024, the European Parliament published a report on the proposal for a regulation amending the packaged retail and insurance-based investment products (PRIIPs) Regulation as regards the modernisation of the key information document (KID).

A core objective of the Capital Markets Union (CMU) is to ensure that consumers can fully benefit from the investment opportunities offered by capital markets. To be able to do so, consumers must be supported by a regulatory framework that empowers them to take investment decisions that correspond to their needs and aims and adequately protects them in the single market. The package of measures under the EU Retail investment strategy seeks to address the identified shortcomings, including those in the area of information available to retail investors.

Article 4, point (1), of Regulation (EU) No 1286/2014 defines PRIIPs as investments where, regardless of the legal form of the investment, the amount repayable to the retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor. The ability for the manufacturer to redeem the investment early by triggering a make-whole clause should not in itself be considered as such a fluctuation. That fact should be reflected in the definition of PRIIPs.

The KID aims to ensure comparability between PRIIPs. So far, it has been difficult for retail investors to compare PRIIPs by using the KID. Retail investors should however be able to easily access reliable and independent sources of information, in order to be able to make informed investment decisions on the basis of a comprehensive comparison of the different investment options available in the Union. It is therefore necessary to enable ESMA and EIOPA to develop an independent Union online comparison tool, based on key information document data that will be available under the European Single Access Point. 

This should allow retail investors to compare products, provided that they are comparable. The comparison tool should allow the retail investor to filter categories of products by Member State. A link to this tool should be disclosed in the KID once the tool is available. This tool should facilitate the participation of retail investors in capital markets as it would provide them with a more convenient, transparent and reliable source of information regarding all the relevant qualitative features, costs, risk and return on investment of each commercialised product.

In order to avoid undermining the comprehensibility and meaningfulness of the information, the ESAs should allow for more flexibility in their recommendations on the nature of the information to be provided in the performance section of the KID. In the majority of cases, the KID should include forward-looking performance scenarios. However, in a limited number of cases, when such scenarios could be misleading, past performance should be included in the KID for relevant PRIIPs

Increased digitalisation provides opportunities to modernise and simplify the provision on making PRIIPs KIDs available by establishing a preference for KIDs to be provided in electronic format, while clarifying that the client may request a paper version of the PRIIPs KID free of charge. For the purposes of this Regulation, a website that fulfils certain requirements could be considered as a durable medium. Increased digitalisation also provides opportunities to present key features of PRIIPs in a more attractive way.

On March 15 2024, the European Securities and Markets Authority (ESMA) published its updated consolidated Q&A on the Packaged Retail and Insurance-based Investment Products (PRIIPs) Key Information Document (KID).

The update relates to the following questions:

• Please clarify the term "PRIIPs open to subscription"?
• What is the difference between a "benchmark" and a "proxy" within the meaning of the Delegated Regulation? If an AIF does not have a sufficient historical price time-series and the PRIIP manufacturer therefore calculates the MRM class and/or performance scenarios using the historical prices of a comparable AIF, is the other AIF a benchmark that must be disclosed in the section "What is this product?" of the key information document according to Article 2(2a)(d) of the Delegated Regulation? And in this case, is the past performance of the other AIF to be published on the website of the PRIIP manufacturer pursuant to Annex VIII, Point 11 of the Delegated Regulation?
• Does point 5(b) of Article 2 of the RTS – ‘an indication of whether the PRIIP manufacturer is entitled to terminate the PRIIP unilaterally’ concern i) market circumstances or ii) client specific circumstances (in which case the product would end for this client alone) or both?
• When sufficient history for the SRI calculation is not available to cover 5 years of data for a daily share class, can the PRIIP manufacturer decide to use a benchmark/proxy to cover up to 5 years of history or should this only be used for the minimum 2 years requirement? Similarly, if a daily share class has 3 years of history can a PRIIP manufacturer choose to include 2 years of benchmark/proxy data and base the calculation on a 5 year range?
• Could an artificially created “synthetic” proxy be considered an appropriate proxy in accordance with the PRIIPs RTS Annex II and Annex IV?
• Is currency risk described by Risk Element C applicable to investment funds, or should currency risk generally be considered by wrapper products / multi-option products only? In case currency risk is applicable to investment funds, at which level shall currency risk be determined – the portfolio/sub-fund level or at the share class level – in relation to the currency of the investor in the EU member state?
• Should a KID disclose cost information and scenario information about 1 year and half the RHP in case the investors may not be allowed to exit a PRIIP before the end of the RHP?
• Taking into account Article 23(3) of Commission Regulation (EU) No. 583/2010, should the information on past performance in accordance with Article 8(3), first subparagraph of the PRIIPs Delegated Regulation be published no later than 35 business days after December 31 each year?
• Should the costs disclosed in table 1 (cost over time) and table 2 (total cost) be aligned for year 1?

BACKGROUND

Following the delegated acts package adopted on February 22 2024, the Commission has adopted three new regulatory technical standards (RTSs). 
The RTSs complement the EU regulatory frameworks on cybersecurity matters for the financial sector.

WHAT'S NEW?

On March 13 2024, the European Commission adopted the first batch of Regulatory Technical Standards (RTS) on Digital Operational Resilience Act (DORA).

The RTS published are as follows:

• RTS specifying ICT risk management tools, methods, processes, and policies and the simplified ICT risk management framework.
  Title I Chapter I establishes the main principle and elements to consider when developing and implementing the ICT security policies, procedures, protocols and tools (Article 1).
  Title II Chapter II lays down the conditions for the further harmonisation of ICT risk management tools, methods, process and policies, establishing: general elements of ICT security policies, procedures, protocols and tools (section 1); specific elements of ICT security policies, procedures, protocols and tools (section 2): risk tolerance level, methodologies to conduct the ICT risk assessment, ICT risk treatment measures; a policy on management of ICT assets (section 3); a policy on encryption and cryptographic controls (section 4); an ICT operations security policy (section 5); a network security management policy (section 6); an ICT project management policy (section 7); a physical and environmental security policy to preserve the availability, authenticity, integrity and confidentiality of data (section 8). Chapter II establishes all the ICT security elements the financial entities shall include in the development of their human resources and access control policies. Chapter III establishes all the elements of an ICT-related incident detection and response policy financial entities shall develop and implement. Chapter IV establishes the content and the format of the report on the review of the ICT risk management framework the financial entities are required to prepare and submit.
  Title III sets out a simplified ICT risk management framework, focusing on establishing a governance and control framework (chapter I); access and control mechanism and requirements (chapter II); establishing an ICT business continuity plan (chapter III); setting out the content and the format of the report on the review of the ICT risk management framework the financial entities are required to prepare and submit (chapter IV).
  Title IV contains the final provisions on entry into force of the act (article 42).
• RTS specifying the detailed content of the policy regarding contractual arrangements on the use of ICT services supporting critical or important functions provided by ICT third-party service providers.
  Article 1 sets out the elements of increased or reduced risk or complexity that financial entities’ policy on the use of ICT services supporting critical or important functions provided by ICT third-party service providers (“the policy”) shall take into account.
  Article 2 sets out how to apply the rules when a financial entity belongs to a group.
  Article 3 lays down rules on governance arrangements.
  Article 4 specifies the requirements the policy should contain for each main phase of the lifecycle of the contractual arrangement.
  Article 5 sets out that the policy shall require financial entities to conduct a risk assessment before concluding a contractual arrangement with a third-party provider of ICT services.
  Article 6 sets out that the policy shall contain a process for selecting and assessing prospective ICT third-party service providers before entering into a contractual arrangement.
  Article 7 sets out that the policy should lay down measures to identify, prevent and manage actual or potential conflicts of interest arising from the use of ICT third-party service providers.
  Article 8 lays down rules on how the policy should address contractual clauses.
  Article 9 lays down rules on how the policy should monitor contractual arrangements.
  Article 10 sets out that the policy shall contain requirements for a documented exit plan for each contractual arrangement and for the periodic review and testing of the documented exit plan.
  Article 11 sets out the entry into force.
• RTS specifying the criteria for the classification of ICT-related incidents and cyber threats, setting out materiality thresholds and specifying the details of reports of major incidents.
  Chapter I sets out the criteria for classifying incidents for clients, financial counterparts and transactions (Article 1), reputational impact (Article 2), duration and service downtime (Article 3), geographical spread (Article 4), data losses (Article 5), criticality of services affected (Article 6) and economic impact (Article 7).
  Chapter III covers significant cyber threats, laying down the materiality thresholds for determining when a cyber threat is significant (Article 10).
  Chapter IV lays down rules for determining whether a major incident is relevant to competent authorities in other Member States (Article 11) and how to share details of major incidents with other competent authorities (Article 12).
  Chapter V contains the final provisions on entry into force (Article 13).

WHAT'S NEXT?

The RTS, which were submitted by the European Supervisory Authorities (ESAs) to European Commission on January 17 2024, will be subject to scrutiny by the Council and European Parliament. Both institutions will have three months to formulate objections, extendable by an additional three months if requested. In the event both institutions do not raise any objections, the acts will enter into force.

On March 25 2024, the European Securities and Markets Association (ESMA) published its third consultation package under the Markets in Crypto-Assets Regulation (MiCA).

MiCA was published in the Official Journal of the EU on 9 June 2023. The ESMA has been empowered to develop technical standards and guidelines specifying certain provisions. ESMA published a first consultation package in July 2023, a second in December 2023 and two additional standalone consultation papers in January 2024. This latest consultation package (no. 3) includes all remaining mandates with an 18-month deadline. The aim of these public consultations is to collect views, comments, and opinions from stakeholders, investors and market participants on the appropriate implementation of MiCA.

This paper contains 4 sections (chapters 3 – 6): 

• prevention and detection of crypto-asset market abuse; 
• suitability requirements applicable to the provision of advice and portfolio management services in crypto-assets and the format of the periodic statement to be provided for portfolio management services; 
• transfer services for crypto-assets; and 
• maintenance of systems and security access protocols. 

An aggregated list of consultation questions can be found in Annex I. Annex II includes the draft RTS and guidelines.

ESMA will consider the feedback received during this consultation and expect to publish a final report and submit the draft technical standards to the European Commission for endorsement by December 2024.

The consultation runs until June 25 2024.

On March 25 2024, the European Securities and Markets Authority (ESMA) finalised the first rules on crypto-asset service providers (CASPs).

On July 12 2023, ESMA published a Consultation Paper to seek stakeholders’ views on ESMA’s proposals for 5 RTSs and 2 ITSs. The consultation period closed on September 20 2023. 

Sections 2 to 5 sets out the feedback statements relating to five of the six draft technical standards related to investor protection topics which were included in the aforementioned ESMA public consultation.

The final report relating to the technical standards on conflicts of interest for CASPs (in accordance with Article 72(5) of MiCA) will be published at a later stage to allow the European Banking Authority (EBA) to conclude its consultation process and thus allow ESMA and EBA to cooperate closely and ensure maximum alignment.

Section 6 consists of seven Annexes. Annex I contains the costs/benefit analyses undertaken in relation to the draft technical standards. Annex II contains the advice received by ESMA from the Securities and Markets Stakeholder Group (SMSG). Annexes III to VII contain the draft technical standards.

The draft technical standards are submitted to the European Commission for adoption. In accordance with Articles 10 and 15 of Regulation (EU) 1095/2010, the European Commission shall decide whether to adopt the technical standards within 3 months.

On March 3 2024, the European Commission (EC) published a draft delegated regulation supplementing the Securitisation Regulation by specifying, for Simple, Transparent and Standardised (STS) non-Asset-Backed Commercial Paper (ABCP) traditional securitisation and on-balance-sheet securitisation, the content, methodologies and presentation of information related to the principal adverse impacts (PAI) of the assets financed by the underlying exposures on sustainability factors.

The second sub-paragraphs of Articles 22(4) and 26d(4) of Regulation (EU) No 2017/2402 (Securitisation Regulation), as amended by the Capital Markets Recovery Package Regulation (EU) 2021/557, provide originators of STS securitisations with the option to disclose available information related to the PAI on sustainability factors of the assets financed by residential loans, auto loans or leases. This disclosure would be voluntary. Should originators choose to fulfil it, it would derogate them from the requirement to disclose the available information related to the environmental performance of the assets financed by residential loans, auto loans or leases.

The delegated act seeks to ensure as much consistency as possible with the ESAs’ work in respect of sustainability-related disclosures in financial services under the Sustainable Finance Disclosure Regulation (SFDR), which sets out sustainability-related disclosure requirements. Although securitisations are not “financial products” as defined by the SFDR, they are indirectly subject to the SFDR through the entity-level disclosure requirements for financial market participants and when financial products invest in securitisation positions.

The RTA apply to STS securitisations where the underlying exposures are residential loans, auto loans or leases and distinguishes between mandatory indicators and additional indicators. Originators of STS securitisations can decide to comply with either the original disclosure requirements set out in the first subparagraph of Articles 22(4) and Article 26d(4) of the Securitisation Regulation or with the alternative disclosure set out in this delegated act.

On March 1 2024, the European Financial Reporting Advisory Group (EFRAG) published a second set of technical explanations on the European Sustainability Reporting Standards (ESRS).

The 12 Explanations released are grouped in chapters according to their nature (cross-cutting, environment, social, and governance).

The questions included in the publication are as follows:

• Can an impact be material if it is material from a positive impact perspective only? EFRAG considers that the question should be reworded in the following way to be clearer: Can a sustainability matter be material from a positive impact perspective only?
• Can you provide a more detailed explanation on how the expression ‘as opposed to’ is to be interpreted in the context of the Disclosure Requirement SBM-3 of ESRS 2?
• Please clarify with examples what is meant by ‘administrative, management and supervisory bodies’ as a collective versus ‘management’ and ‘management-level position’ versus ‘senior executive management’.
• Companies that become ‘large undertakings’ for the first time: do they benefit from the Phase-In Requirements?
• Is it an absolute requirement in paragraph 30 that 90-95% of GHG emission reduction needs to be performed before giving the option to work with GHG Removals?
• Is this a three-way split or are non-guaranteed hours employees part of temporary/permanent employees?
• Separating HR policies (ESRS S1-1), action plans (ESRS S1-4), targets (ESRS S1-5) and metrics (ESRS S1-9 to S1-17) is not efficient for the understanding of users. Can we put into one chapter, for each material issue (e.g., health and safety), the policy with the targets, the action plan, and the metrics?
• Can you please specify if for the below indicators: (a) the gender pay gap, defined as the difference of average pay levels between female and male employees, expressed as percentage of the average pay level of male employees; should we include variable components of salary or only gross wage?
• When mentioning ‘material impacts’ in paragraph 43 of ESRS S1-4, it is unclear if you mean ‘all’ material impacts or ‘own workforce’ material impacts.
• Can you clarify the ‘global percentage reported at the country level’ in ESRS S1 paragraph 63?
• Can you explain and give more context to the datapoint in ESRS S1 paragraph 50(f)?
• Should an undertaking prepare its ESRS consolidated sustainability statement following the requirements relating to prudential consolidation laid down in Part One, Title II, Chapter 2 of the Capital Requirements Regulation (EU) 575/2013?

On March 12 2024, the European Commission (EC) published a communication on managing climate risks.

The communication responds to the first ever European Climate Risk Assessment (EUCRA), a scientific report by the European Environment Agency. Together, they are a call to action for all levels of government, as well as the private sector and civil society. They set out how all major sectors and policy areas are exposed to climate-related risks, how severe and urgent the risks are, and how important it is to have clarity on who has the responsibility to address the risks.

Investing upfront in reducing vulnerabilities to climate risk will incur much lower costs than the sizable sums required to recover from climate impacts like droughts, floods, forest fires, diseases, crop failures or heat waves. By conservative estimates, these damages could otherwise reduce EU GDP by about 7% by the end of the century. Investments in climate-resilient buildings, transport and energy networks could also create significant business opportunities and benefit more widely the European economy, generating highly skilled jobs, and affordable clean energy.

To help the EU and its Member States to manage climate risks, the communication identifies four main categories of action:

• Improved governance: Ensure that the risks and responsibilities are better understood, informed by best evidence and dialogue. Identifying the ‘risk owners' is a critical first step. Calls for closer cooperation on climate resilience between national, regional and local levels to ensure that knowledge and resources are made available where they are most effective. Climate resilience is increasingly addressed across all sectoral policies, but shortcomings persist in planning and implementation at national level. Member States have taken the first steps to include climate resilience in their National Energy and Climate Plans (NECPs).
• Better tools for empowering risk owners: Policymakers, businesses, and investors need to better understand the interlinkages between climate risks, investment, and long-term financing strategies. This can provide the right market signals to help bridge the current resilience and protection gaps. The Commission and the European Environment Agency will provide access to key granular and localised data, products, applications, indicators and services. To help with emergencies, in 2025 the Galileo Emergency Warning Satellite Service (EWSS) will become available to communicate alert information to people, businesses and public authorities even when terrestrial alert systems are down. More broadly, the Commission will promote the use of available monitoring, forecasting and warning systems.
• Harnessing structural policies: Three structural policy areas hold particular promise for managing climate risks across sectors: better spatial planning; embedding climate risks in planning and maintaining critical infrastructure; linking EU-level solidarity mechanisms, like the UCPM, the EU Solidarity Fund, and Cohesion policy structural investments, with adequate national resilience measures. The civil protection systems and assets must be future-proofed, through investing in EU and Member State disaster risk management, response capacities and expertise that can be rapidly deployed across borders. This should fully integrate climate risks in the disaster risk management processes.
• Right preconditions for financing climate resilience: Mobilising sufficient finance for climate resilience, both public and private will be crucial. To ensure that EU spending is resilient to climate change, the Commission will integrate climate adaptation considerations in the implementation of EU programmes and activities as part of the ‘do no significant harm' principle. The Commission calls on Member States to take account of climate risks when including environmental sustainability criteria in competitive public procurement tenders, for instance through the Net-Zero Industry Act.

On March 12 2024, the European Parliament adopted its position on Green Claim Directive, meaning establishing a verification and pre-approval system for environmental marketing claims to protect citizens from misleading ads.

The Green Claims Directive would oblige companies to submit evidence about their environmental marketing claims before advertising products as “biodegradable”, “less polluting”, “water saving” or having “bio based content”. EU countries would have to assign verifiers to pre-approve the use of such claims, to protect buyers from unfounded and ambiguous advertising.

Parliament wants claims and their evidence to be assessed within 30 days, but simpler claims and products could benefit from quicker or easier verification. Micro enterprises would not be covered by the new rules, and SMEs would have an extra year to be in compliance compared to larger businesses. Companies that break the rules may face penalties, for example they could be temporarily excluded from public procurement tenders and face fines of at least at 4% of their annual turnover.

Green claims based solely on carbon offsetting schemes will remain banned. Companies could, however, mention offsetting and carbon removal schemes in their ads if they have already reduced their emissions as much as possible and use these schemes for residual emissions only. The carbon credits of the schemes must be certified and be of high integrity, such as those established under the Carbon Removals Certification Framework.

Green claims about products containing hazardous substances should remain possible for now, but the Commission should reassess in the near future whether they should be banned entirely.

The Directive will be followed up by the new Parliament after the elections.

On March 19 2024, the European Parliament Legal Affairs Committee (JURI) adopted the proposal for the Corporate Sustainability Due Diligence Directive (CSDDD).

The JURI approved the bill, agreed with EU governments, requiring firms to mitigate their negative impact on human rights and the environment. The adopted text relates to new, so-called “due diligence” rules, obliging firms to alleviate the adverse impact their activities have on human rights and the environment, including slavery, child labour, labour exploitation, biodiversity loss, pollution and destruction of natural heritage. The requirement to prevent, end or mitigate their negative effects also concerns companies’ upstream partners working in design, manufacture, transport and supply, and downstream partners, including those dealing with distribution, transport and storage.

Firms will be liable if they do not comply with their due diligence obligations and will have to fully compensate their victims. They will also have to adopt complaints mechanisms and engage with individuals and communities adversely affected by their actions.

Member states will designate a supervisory authority in charge of monitoring, investigating and imposing penalties on companies that do not comply. These can include fines of up to 5% of companies’ net worldwide turnover. Foreign companies will be required to designate their authorised representative based in the member state in which they operate, who will communicate with supervisory authorities about due diligence compliance on their behalf. The Commission will establish the European Network of Supervisory Authorities to support cooperation among supervisory bodies.

Persons who work for companies subject to due diligence obligations under this Directive or who are in contact with such companies in the context of their work-related activities can play a key role in exposing breaches of the national measures transposing this Directive. They can thus contribute to preventing and deterring such breaches and strengthening the enforcement of this Directive. Directive (EU) 2019/1937 should therefore apply to the reporting of all breaches of the national measures transposing this Directive and to the protection of persons reporting such breaches.

To enhance legal certainty, the applicability, pursuant to this Directive, of Directive (EU) 2019/1937 to reports of breaches of the national measures transposing this Directive and to the protection of persons reporting such breaches, should be reflected in that Directive (EU) 2019/1937. The Annex to Directive (EU) 2019/1937 should therefore be amended accordingly. It is for the Member States to ensure that that amendment is reflected in their transposition measures adopted in accordance with Directive (EU) 2019/1937.

The Directive will be voted on by the European Parliament in Plenary session on April 24, the final step of the legislative process.

On March 19 2024, the Chambre des représentants published a draft law amending Books I, XV and XVII of the Code of Economic Law, and transposing Directive (EU) 2020/1828 of the European Parliament and of the Council of November 25 2020 on representative actions to protect the collective interests of consumers and repealing Directive 2009/22/EC.

The bill transposes, on the one hand, Directive (EU) 2020/1828 of the European Parliament and of the Council of November 25 2020 on representative actions aimed at protecting the collective interests of consumers and repealing Directive 2009/22/ CE in Book XVII of the Code of Economic Law (CDE), entitled “Special jurisdictional procedures”.

On the other hand, the bill makes modifications following the difficulties identified in case law and doctrine concerning both the action for injunction and the action for collective reparation, and implements certain improvements.

On March 29 2024, the Chambre des représentants published a draft law implementing Regulation (EU) 2022/868 on European data governance and amending Regulation (EU) 2018/1724.

This bill implements Regulation (EU) 2022/868 of 30 May 2022 on European data governance and amending Regulation (EU) 2018/1724. 

The second chapter of the bill completes the implementation of the second chapter of the regulation relating to the reuse of certain categories of protected data held by public sector bodies, after the implementation was initiated in the bill amending the law of August 15 2012 relating to the creation and organization of a federal service integrator. 

The third and fourth chapters of the regulation, relating respectively to data intermediation services and altruistic data organizations, are implemented in the third chapter of the bill amending the Code of Economic Law in order to integrate these two new economical actors.

Regulation 2022/868 (Data Governance Act) is the first legislative tool announced in the European Commission's communication “European Data Strategy” of 19 February 2020. The European Data Strategy aims to establish a single European market for data. To do this, various obstacles must be removed and several problems must be addressed, including the availability of data which must be improved in order to allow innovative use and create added value.

This strategy is based on four key points:

• establish a horizontal regulatory governance framework for access to and use of data;promote investments in data and the strengthening of European capacities and infrastructures for hosting, processing and use of data and interoperability;
• strengthen the skills of people and SMEs in general data education and use;
• establish common European data spaces in strategic sectors and areas of public interest.

The main objective of this Regulation 2022/868 is to establish a European governance framework that strengthens trust in the voluntary sharing of data, strengthens mechanisms to increase the availability of data and removes technical obstacles to the reuse of data.

On March 12 2024, the Chambre des représentants published a draft law amending Book XV of the Code of Economic Law.

This bill aims to modify the provisions of books I, VII, VIII, X, XV and XIX of the Code of Economic Law, the Social Penal Code and the following laws:

• law of December 21 1998 relating to product standards aiming to promote sustainable production and consumption patterns and protect the environment, health and workers;
• law of June 13 2005 relating to electronic communications; 
• law of March 22 2006 relating to intermediation in banking services and investment services and the distribution of financial instruments; 
• law of April 4 2014 relating to insurance;
• law of November 21 2017 relating to the sale of package holidays, related travel services and travel services; 
• law of March 27 2023 protecting the profession and the title of expert surveyor and creating an Order of expert surveyors.

Changes relate to (non-exhaustive):

• A reference to Directive 2014/92/EU regarding payment account fees, switching accounts, and basic account access (PAD), in partial transposition of Article 16(2)(3) of that directive, is added. 
• The definition of credit intermediary is adapted. The same is done for "responsible of distribution" , distinguishing between roles within intermediaries and lenders. It ensures that a distribution responsibility within a credit intermediary cannot involve a lender's management or employees, aligning with the insurance sector's definition.
• Introduction of parts on the fight against banking exclusion, with the reminder that it is essential to guarantee basic banking services for all individuals in Belgium, including Belgians living abroad.
• Technical amendments.

On March 26 2024, the Banco Central do Brasil (BCB) published the Normative Instruction to create and amend accounting items in accounts of Accounting Standard of Institutions Regulated by the BCB (COSIF).

The changes implemented aim to adapt COSIF to the precepts of Law No. 9,703, of November 17, 1998, which provides for judicial and extrajudicial deposits of federal taxes and contributions, in light of the changes promoted by the Constitutional Amendments nos. 94 of 15 December 2016 and 99 of 14 December 2017.

In turn, CMN Resolution No. 5,119, of February 1, 2024, which improved the criteria for issuing the Guaranteed Real Estate Letter (LIG), the Real Estate Letter of Credit (LCI) and the Agribusiness Letter of Credit (LCA), provided differentiated treatment to these securities according to the date of issue. Thus, it is necessary to amend the COSIF in order to provide it with the corresponding control items of these financial instruments, by date of issuance.

In response to the demand of other units of this Central Bank and of the regulated institutions themselves, the attributes of some accounting items were changed in order to allow adequate bookkeeping by financial institutions and other institutions authorized to operate by this agency, as provided for in CMN Resolution No. 4,858, of 2020. It should be noted, however, that, as provided for in article 10 of this Resolution, the existence of an attribute does not presuppose permission to practice of operations or services prohibited by law, regulation or administrative act, or dependent on prior authorization from this Central Bank.

The normative instruction proposed is exempt from the elaboration of a regulatory impact analysis (RIA).

On March 11 2024, the Comissão de Valores Mobiliários (CVM) released the Financial Action Task Force (FATF) statement on countries with potential risk to the financial system.

FATF statement deals with the FATF's communication against Money Laundering and the Financing of Terrorism regarding countries and jurisdictions that have strategic deficiencies in the prevention of this type of crime.

The measure allows market participants to have access to up-to-date subsidies in the indispensable and constant process of rationalization and monitoring of their operations and their customers.  

CVM emphasizes that the disclosure of this Report and the Group's communiqués is part of the articulation of the Center for the Prevention of Money Laundering, Terrorist Financing and Financing of the Proliferation of Weapons of Mass Destruction of the General Superintendence (SGE) of the Autarchy with the Superintendencies of Market Relations and Intermediaries (SMI), Supervision of Institutional Investors (SIN) and Securitization and Agribusiness (SSE).

On March 21 2024, the Brazilian Financial and Capital Markets Association (ANBIMA) announced its investment in preventive actions and guidance to self-regulatory institutions.

Preventive actions and guidance activities for institutions that follow the codes of best practice have evolved in the first year of the new structure of its market supervision. The change led to supervision work with a preventive approach and proximity to institutions, in addition to monitoring trends and data governance.

With the new work model, guidance letters are replaced by prevention and warning letters. These are instruments that have greater assertiveness in supervisory actions and facilitate understanding by institutions.

With the reformulation of the supervision structure started in 2022, a new model of visits to newcomers to self-regulation was adopted. In addition to face-to-face meetings, institutions that adhere to ANBIMA codes have a personalized visit itinerary based on the characteristics of the vehicles under management.

The main objective is to prevent the occurrence of failures in the most critical processes of each institution, giving the opportunity for adaptation much earlier. ANBIMA also brings educational materials to companies, opens meetings and has created formal communication channels to clarify doubts and provide support to the market in terms of self-regulation.

For the self-regulatory changes, a mechanism for sending forms to the participating institutions was implemented, mainly with themes of new rules. The initiative aims to map the industry and reflect on future actions that help institutions comply with and understand the rules. With this, it has already been possible to implement actions related to various topics: ESG and crypto-asset rules, intermediation service abroad, mandate/framework, FIDCs (PDD and financial statements), report methodologies for FIPs, analysis and monitoring of private credit assets, policies and others.

With the collection of this information, the actions are elaborated and directed to specific audiences, thus facilitating the monitoring of the industry in relation to the clarity of the market in the face of the new rules, as well as a greater approximation with the participating institutions, complements the superintendent.

Another extremely relevant initiative is related to the digital transformation process. This new approach increasingly involves the intensive use of data through specific tools, in addition to the search for systems and solutions in the market.

On March 15 2024, the Banco Central do Brasil (BCB) published news on open Finance, tokenization, artificial intelligence and prudential measures.

The Central Bank disclosed its priorities for the regulation of the National Financial System (SFN) in 2024. BCB understands that innovation is key to increasing the efficiency of the financial system, in its various dimensions: inclusion, competition, development of products and services. Another fundamental aspect is the deepening regulatory agenda focused on prudential aspects.

BCB have already recorded 1.4 billion calls for information exchange, millions of consents, and various products and services being offered. Open Finance is a powerful tool for transforming the financial system.

Several products and services are emerging within the financial system that involve the tokenization process. According to the Director of Regulation, the Central Bank does not yet intend to issue any rule on the subject, but it may do so if it identifies its need.

Artificial intelligence is a topic that has been widely debated, not only in the financial system, but throughout the economy. Central Bank will also observe the impacts from a prudential point of view and from the point of view of the agenda to combat financial fraud.

During this year, the Central Bank's Regulation area will deepen efforts to implement the prudential rules of Basel III. 

Another advance refers to the sustainability agenda, which provides for the improvement of the requirements for the disclosure of information on social, environmental and climate risks of financial institutions, in their quantitative aspects.

BACKGROUND

The CVM Resolution 175 constitutes the new regulatory framework for investment funds in Brazil.

The extension of the deadline for completing the adaptation to CVM Resolution 175 responds to requests made to the CVM by associations representing agents in the investment fund industry. Among the reasons presented are operational challenges related to the tax reform that affected investment funds, combined with the complexity and depth of the new fund regulations.

WHAT'S NEW?

On March 12 2024, the Comissão de Valores Mobiliários (CVM) published the CVM Resoultion 200 which postpones deadlines set out in CVM Resolution 175.

• Adaptation of the stock of funds in operation when the resolution was published, from December 31 2024 to June 30 2025
• Adaptation of the stock of investment funds in credit rights (FIDC) in operation when the resolution was published, from April 1 2024 to November 29 2024
• Entry into force of §1 of art. 140, from April 1 2024 to November 1 2024
• Entry into force of §2 and 4 of art. 140, from April 1 2024 to October 1 2024

The CVM also decided to promptly amend Normative Annex III of CVM Resolution 175, in order to incorporate into the regulation the changes in the legislation on real estate investment funds made in Law 8,668, which now allows Real Estate Investment Fund (FII) ) and Investment Fund in Agroindustrial Chains (Fiagro) use assets as guarantee for operations in their portfolios, as well as constituting real liens on properties in the portfolio.

WHAT'S NEXT?

The CVM Board advised that the superintendencies that deal with the supervision of investment funds (Superintendences of Supervision of Institutional Investors - SIN and Securitization and Agribusiness - SSE) actively monitor the agents' efforts to adapt to the rule, with the aim of reinforcing compliance with the new deadlines, which were established definitively and will not be subject to further extension.

The CVM Resolution 200 came into force on March 12 2024.

On March 18 2024, the Brazilian Financial and Capital Markets Association (ANBIMA) announced that it will have new certifications for those who work in the distribution of investment products.

In line with its ongoing commitment to boost the qualification of financial market professionals, ANBIMA has begun a broad review process of the CPA-10, CPA-20 and CEA certifications that will change the way of evaluating and certifying those who work in the area of investment distribution.

A crucial part of this change is the launch of new certifications, which will replace the current ones from January 2026. The initiative takes place in the wake of the rapid evolution of the market, which has started to demand new functions and skills from professionals.

ANBIMA's proposal is that distribution certifications will be granted according to the activities of professionals – and no longer based on institutions, positions or market segments (retail and high income) served.

On March 19 2024, the Brazilian Financial and Capital Markets Association (ANBIMA) announced that trading of private securities will have a new post-trading flow at B3.

As of April 1 2024, registration and trading operations of debentures, CRAs (Agribusiness Receivables Certificate), CRIs (Real Estate Receivables Certificate) and CFFs (Closed-End Investment Fund Quotas) will have a new post-trading flow at B3.

With this change, the validation of these operations, made by the manager by phone or email, must be carried out via the Trader trading platform. Non-compliance will be subject to penalties, according to article 235 of the B3 Branch Regulations.

The novelty meets CVM's regulatory requirements and reduces manual interventions. In addition, it standardizes the exchange of information between market participants (banks, brokers, fund managers, custodians, among others).

On March 12 2024, the Autorité des marchés financiers (AMF) applied two directions from the European Banking Authority (EBA) regarding AML/CFT.

The first directions completes existing ones on ML/TF risk factors using specific dispositions in relation to non-profit organization qualifying clients (OBNL ). The second directions relating to ML/TF risk management policies and controls when providing access to financial services, aim to limit risk mitigation practices resorting to the exclusion of certain types of clients.

The AMF modified its position in DOC-2019-14 regarding risk factors and published a new one in DOC-2024-02 on granting access to financial services to take into account the two directions of the EBA. These positions are applicable to any entity or actor mentioned in 2° of I of article L. 561-36 of the monetary and financial code under the AMF supervision in regards to AML/CFT as of March 12 2024.

Version française

Le 12 mars 2024, l'Autorité des marchés financiers (AMF) a appliqué deux instructions de l'Autorité bancaire européenne (ABE) en matière de LBC/FT.

Les premières orientations complètent celles existantes sur les facteurs de risque BC/FT en utilisant des dispositions spécifiques relatives aux clients éligibles des organisations à but non lucratif (OBNL). Les secondes orientations relatives aux politiques et contrôles de gestion des risques BC/FT lors de la fourniture d'accès aux services financiers, visent à limiter les pratiques d'atténuation des risques recourant à l'exclusion de certains types de clients.

L'AMF a modifié sa position dans le DOC-2019-14 concernant les facteurs de risque et en a publié une nouvelle dans le DOC-2024-02 sur l'octroi de l'accès aux services financiers pour tenir compte des deux orientations de l'ABE. Ces positions sont applicables à toute entité ou acteur mentionné au 2° du I de l'article L. 561-36 du code monétaire et financier placé sous le contrôle de l'AMF en matière de LBC/FT à compter du 12 mars 2024.

On March 6 2024, the Autorité des marchés financiers (AMF) published the results of their SPOT controls on the temporary dissolution of property.

In accordance with the supervisory priorities of the Autorité des marchés financiers (AMF) for 2023, a series of short thematic “SPOT” inspections relating to the marketing of shares in civil companies of real estate investment (SCPI) in temporary dismemberment of property was carried out between April and August 2023. The investigations focused on a panel of four investment service providers (PSI) and covered a period from January 1 2020 to December 31 2022.

The controls highlight the lack of attention for the specificities of a temporary dismemberment of property, a particular method of subscription which makes it possible to split the right of ownership between bare ownership and usufruct, in the marketing of REIT shares which add a layer of complexity to an investment on an already complex financial instruments. 

The AMF publishes their observations, including best and  bad practices, in the hope of encouraging distributors to reinforce their commercialization systems. 

The best practices include:

• Have a training module for customers covering specific conditions temporary dismemberment of property
• Plan for the intervention of a wealth management specialist before proposing the modality to the client special subscription which constitutes the temporary dismemberment of property
• Trace the information provided to the client on the specifics of the temporary dismemberment of property and in particular informing him (or tracing the information) of the impacts of a different dismemberment duration of the recommended holding period
• Set up a system to recover the updated values ??of the dismemberment keys as well as associated controls

The bad practices include: 

• Not clearly materializing, in the adequacy report, the absence of income received over the period of dismemberment in the event of subscription in bare ownership
• Not clearly demonstrating the absence of recurring costs for the bare-owner customer during the period of dismemberment
• Not regularly updating the distribution agreements concluded with the SGPs managing the SCPIs whose shares are distributed
• Do not frame the theme of temporary dismemberment of property in the documentation contractual agreement put in place with the management companies of the SCPIs marketed, providing in particular the dismemberment durations offered to customers, the determination and possible transmission of keys distribution, potential conflicts of interest or additional information to be provided to customers regarding this particular subscription method
• Do not inform clients, in the event that the search for the counterparty is entrusted to the management company of the SCPI, that the counterparty may be an entity belonging to the same group as the SGP which sets also the dismemberment keys
• Do not inform the client of the possibility that he is linked not to one but to several counterparties, which will make a possible transfer of its shares more difficult due to the existence of a right preferential subscription of counterparties: he must in fact contact upstream of the transfer not one but all of the counterparties due to their preferential subscription rights
• Not monitoring the methods of searching for counterparties for each SCPI marketed by listing the different possible scenarios

Version française

Le 6 mars 2024, l'Autorité des marchés financiers (AMF) a publié les résultats de ses contrôles SPOT sur la dissolution provisoire des biens.

Conformément aux priorités de surveillance de l'Autorité des marchés financiers (AMF) pour 2023, une série de contrôles thématiques courts « SPOT » relatifs à la commercialisation de parts de sociétés civiles de placement immobilier (SCPI) en démembrement temporaire de propriété a été réalisée. réalisées entre avril et août 2023. Les investigations ont porté sur un panel de quatre prestataires de services d’investissement (PSI) et ont couvert une période allant du 1er janvier 2020 au 31 décembre 2022.

Les contrôles mettent en évidence le manque d'attention portée aux spécificités du démembrement temporaire, mode particulier de souscription qui permet de partager le droit de propriété entre nue-propriété et usufruit, dans la commercialisation des parts de SIPC qui ajoute une couche de complexité. à un investissement sur des instruments financiers déjà complexes.

L'AMF publie ses constats, bonnes et mauvaises pratiques, dans l'espoir d'inciter les distributeurs à renforcer leurs systèmes de commercialisation.

Les meilleures pratiques incluent :

• disposer d'un module de formation pour les clients couvrant les conditions spécifiques de démembrement temporaire de propriété
• prévoir l'intervention d'un spécialiste en gestion de patrimoine avant de proposer au client la modalité de souscription particulière qui constitue le démembrement temporaire de propriété
• retracer l'information fournie au client sur les spécificités du démembrement temporaire du bien et notamment l'informer (ou tracer l'information) des impacts d'une durée de démembrement différente de la durée de détention recommandée
• mettre en place un système de récupération des valeurs mises à jour des clés de démembrement ainsi que des contrôles associés

Les mauvaises pratiques incluent :

• ne matérialisant pas clairement, dans le rapport d'adéquation, l'absence de revenus perçus sur la période de démembrement en cas de souscription en nue-propriété
• ne démontrant pas clairement l'absence de frais récurrents pour le client nu-propriétaire pendant la période de démembrement
• ne pas mettre à jour régulièrement les contrats de distribution conclus avec les SGP gérant les SCPI dont les parts sont distribuées
• ne pas encadrer la thématique du démembrement temporaire de propriété dans la documentation contractuelle mise en place avec les sociétés de gestion des SCPI commercialisées, prévoyant notamment les durées de démembrement proposées aux clients, la détermination et la transmission éventuelle des clés de distribution, les conflits potentiels de intérêt ou informations supplémentaires à fournir aux clients concernant cette méthode d’abonnement particulière
• ne pas informer les clients, dans le cas où la recherche de la contrepartie est confiée à la société de gestion de la SCPI, que la contrepartie peut être une entité appartenant au même groupe que la SGP qui fixe également les clés de démembrement
• ne pas informer le client de la possibilité qu'il soit lié non pas à une mais à plusieurs contreparties, ce qui rendra plus difficile un éventuel transfert de ses actions du fait de l'existence d'un droit préférentiel de souscription des contreparties : il doit en effet prendre contact en amont. du transfert non pas une mais toutes les contreparties en raison de leur droit préférentiel de souscription
• ne pas suivre les modalités de recherche de contreparties pour chaque SCPI commercialisée en listant les différents scénarios possibles

On March19 2024, the Autorité des marchés financiers (AMF) announced modification of their general regulations with a view to making the “retail” tranche optional in Initial public offerings "IPOs".

This intention takes the form of the removal of the obligation which requires companies which request, on the occasion of their IPO, the admission of their shares to trading on the regulated market of Euronext Paris to provide a tranche intended for individual investors, known as the tranche “retail”.

This French obligation imposed undue constraints on issuers who plan to be listed on the regulated market in Paris as it lengthened and complicated the process. This posed a risk for IPO projects considering Paris to be conducted abroad instead and in turn for retail investors investment opportunities to become limited.

However, in order to protect savings, the AMF decided to maintain certain provisions, so that, in the event that an issuer wishes to address, as part of its IPO on the regulated market, any category of investors, including individual investors, the lead service provider must try to to avoid a manifest imbalance, to the expense of individual investors, between the service of the demand that they formulate and the service of the demand of institutional investors.

The AMF plans to conduct a study in three years in order to assess the impact of these changes, notably, on retail investors.

Version française

Le 19 mars 2024, l'Autorité des marchés financiers (AMF) a annoncé une modification de son règlement général en vue de rendre facultative la tranche « retail » dans les introductions en bourse « introductions en bourse ».

Cette intention se traduit par la suppression de l'obligation qui impose aux sociétés qui demandent, à l'occasion de leur introduction en bourse, l'admission de leurs actions aux négociations sur le marché réglementé d'Euronext Paris, de fournir une tranche destinée aux investisseurs particuliers, dite tranche « détail ».

Cette obligation française impose des contraintes excessives aux émetteurs qui envisagent d'être cotés sur le marché réglementé de Paris car elle allonge et complique le processus. Cela présentait un risque pour les projets d'introduction en bourse envisageant Paris d'être menés à l'étranger et, par conséquent, pour les opportunités d'investissement des investisseurs particuliers de devenir limitées.

Toutefois, afin de protéger l'épargne, l'AMF a décidé de maintenir certaines dispositions, afin que, dans le cas où un émetteur souhaiterait s'adresser, dans le cadre de son introduction sur le marché réglementé, à toute catégorie d'investisseurs, y compris les investisseurs individuels, le principal Le prestataire de services doit s'efforcer d'éviter un déséquilibre manifeste, au détriment des investisseurs individuels, entre le service de la demande qu'ils formulent et le service de la demande des investisseurs institutionnels.

L'AMF prévoit de mener une étude dans trois ans afin d'évaluer l'impact de ces changements, notamment sur les investisseurs particuliers.

On March 1 2024, Germany published a Ordinance on the Reporting of Payment Accounts for the Comparison Website in accordance with the Payment Accounts Act (Comparison Website Reporting Ordinance — VglWebMV).

The VglWebMV provides further details and clarifications for the imminent amendments to sections 16 et seqq. of the Payment Accounts Act. These amendments will be rolled out through the Financing for the Future Act (Zukunftsfinanzierungsgesetz) in adherence to the guidelines stated in the Payment Accounts Directive (Directive 2014/92/EU). 

As per these upcoming revisions, BaFin will be responsible for maintaining a comparison website that features payment accounts available to consumers in Germany. Furthermore, payment service providers will be mandated to supply specific comparison-related data to BaFin.

This Ordinance lays down rules for the following:

• for the reporting of data for the comparison website in accordance with the Payment Accounts Act, and 
• to specify and supplement the comparison criteria.

The reporting obligation pursuant to Section 17 (2) of the Payment Accounts Act shall include the following data for each payment account offered to consumers by a payment service provider:

1. the name of the payment service provider; 
2. the broader name of the payment service provider or the branch of the payment service provider under which it offers the payment account; 
3. the internet address of the payment service provider; 
4. a means of contact for a consumer report to the payment service provider, 
5. the product name of the payment account, 
6. the date of the notification, and 
7. the comparison criteria set out in the Annex and the data to be reported in accordance with those benchmarks in accordance with the Annex.

The reporting obligation pursuant to Section 17 (2) sentences 2 and 3 of the Payment Accounts Act also includes the reporting of data for the correction of incorrectly reported data.

The payment service provider must compile all data relating to the payment accounts offered in each case, which it is obliged to report pursuant to Section 17 (2) sentence 1 of the Payment Accounts Act in conjunction with Section 2, in a uniform and complete data set. In a uniform and complete data set, the following must also be combined: 

1. the reports pursuant to § 17 (2) sentences 2 and 3 of the Payment Accounts Act in conjunction with § 2 and 
2. the notifications for the correction of incorrectly reported data displayed on the comparison website. 

The notification must be made electronically via the reporting platform of the Federal Financial Supervisory Authority. The specialist procedure provided for this purpose must be used for reporting.

This Ordinance enters into force on March 2 2024.

On 14 March 2024, the Federal Financial Supervisory Authority (BaFin) published an explanatory memorandum to the Annex to the Ordinance on Notification of Payment Accounts for the Comparison Website under the Payment Accounts Act.

The appendix determines the data on the binding comparison criteria to be reported in accordance with Section 2 Paragraph 1 Number 7. This ensures that all payment service providers proceed in a uniform manner and that the respective information on the comparison criteria can be compared. All information is therefore mandatory. For each criterion, it is necessary to indicate whether the service in question is available and whether it is included in the monthly fee for account management. If this is not the case, the amount of additional fees and costs incurred, including any minimum charges, must be specified. It must also be stated whether fees and costs change if further conditions are met. The specific content to be reported results from the published information pursuant to Section 5 (2) No. 4.

The memorandum provides explanations for the following points:

• Point 1:

The provision specifies the criterion of Section 17 (1) No. 2 of the Payment Accounts Act.

The postal code must be indicated for each branch in order to enable consumers to search specifically for branches in a specific area.

The branch network pursuant to Section 17 (1) No. 2 of the Payment Accounts Act includes domestic branches, which an institution is required to notify the Federal Financial Supervisory Authority and the Deutsche Bundesbank in accordance with Section 24 (1a) No. 4 of the German Banking Act.

The reporting period for changes and updates for the branch network is set out in Section 17 (2) sentence 2 of the Payment Accounts Act.

• Point 2:

The provision specifies the criterion of Section 17 (1) No. 3 of the Payment Accounts Act.

For consumers, the use of ATMs depends on how many ATMs can be used free of charge using a debit card or credit card. The comparison criterion also applies to ATMs of other institutions where the cash dispensing function is used free of charge, for example within an ATM network or other cooperation.

The term "ATM" does not include cash deposit and withdrawal options, such as those offered at the supermarket checkout, at the gas station checkout or through app services.

The reporting period for changes and updates to the ATM network is set out in Section 17 (2) sentence 3 of the Payment Accounts Act.

• Point 3:

For consumers, it is essential how their deposits in the payment accounts are secured. The statutory deposit guarantee schemes in Europe are harmonised by European requirements. In addition to the minimum requirements laid down therein, states in the EEA still have the option of deviating slightly from this. The information on deposit insurance also differentiates between statutory and voluntary deposit guarantee schemes.

• Point 4:

The reporting obligation also applies to basic accounts under the Payment Accounts Act. It is often not clear to consumers whether the payment account offered is a basic account under the Payment Accounts Act or a "normal" current account. Therefore, the comparison criterion "basic account according to the ZKG" must be specifically selected.

• Points 5,6 and 7:

The criteria for the type of account management are intended to make it easier for consumers to choose a payment account that is geared to their preferred type of account management. In the case of the criteria branch account, online account, banking app, multiple entries are possible. This also makes it possible to map payment accounts that are not assigned to just one category.

• Point 8:

With regard to the authentication procedure for the online use of payment services and access to the payment account, it must be stated whether there is at least one authentication procedure included in the monthly fee or whether an additional fee is charged. Typically, this authentication is carried out by means of a smartphone app, SMS, or a separate device.

• Point 9:

The criteria for special conditions for opening an account allow consumers to limit the account comparison to those account models for which consumers meet the requirements, such as: Student or salary account. This information is necessary in order to verify whether the consumer belongs to the group of persons to whom this specific account model is offered.

• Point 10:

The monthly fee for account management is an essential criterion when choosing a payment account. Accordingly, individual services associated with a payment account will be asked whether the fees for this are included in the package offered and thus in the fee for account management or whether a separate fee is charged in each case.

• Point 11:

The bank statement is an important piece of information for consumers about the transactions made to their payment account. This is the only way they can check booking items. Therefore, payment service providers have to report the fees for the different types of account statements.

• Point 14, 15 and 16:

The criteria for credit transfers are largely the same as the information on the different types of credit transfers, i.e. at the counter, online transfers, transfers at the terminal, etc., which are already required to be published by payment service providers under the previous legal situation.

• Points 17 and 18:

Consumers can make regularly recurring payments by direct debit or via a standing order. Direct debit and standing orders are important tools to streamline payment transactions and prevent late payments. In the case of standing orders, a distinction is made between paper-based and paperless set-up or modification of a standing order as well as any fees for execution.

• Points 19 and 20:

These fees apply if a payment service provider legitimately fails to honour a direct debit in euros from EEA countries or justifiably fails to execute a transfer order in euros to EEA countries.

• Points 21 and 22:

The criterion is used to ask whether a cash deposit or withdrawal is possible at the counter. The fees incurred for this are also queried.

• Point 23:

Debit cards are those payment cards that are linked to the customer's payment account and where the amount of each transaction is debited directly and in full from the customer's account through the use of that payment card.

If different types of debit cards are offered for a payment account, payment service providers can also record several debit cards.

For the comparison, the possibilities and the respective fees for cash deposits, options for cash withdrawals at own ATMs, in the ATM network or at third-party ATMs as well as in euros or foreign currencies are queried. Furthermore, the possibility and the respective fee for the use of the debit card to pay in euros or in foreign currency is recorded. The use of the debit card to pay in euros is a frequently used payment service, so the fee for it is a key comparison criterion for consumers.

• Point 24:

Credit cards are those payment cards that are linked to the Customer's account and for which the total amount of the transactions is debited in full or in part from the Customer's account by using that payment card within an agreed period of time on a specified date.

If different types of credit cards are offered for a payment account, payment service providers can also record several credit cards.

• Points 25 and 26:

The indication of the borrowing interest rate for granted or tolerated overdrafts implements the requirement pursuant to Section 17 (1) No. 4 of the Payment Accounts Act.

• Point 27:

The indication of any contractual penalties implements the requirement pursuant to Section 17 (1) No. 1 of the Payment Accounts Act.

On March 22 2024, the Federal Financial Supervisory Authority (BaFin) updated its overview on authorisation procedure.

Anyone wishing to provide credit services in Germany on a commercial basis or to an extent that requires a business operation set up in a commercial manner generally requires written or electronic permission from BaFin in accordance with Section 10 (1) of the Secondary Credit Market Act (KrZwMG).

Companies with a registered office or head office in Germany that intend to provide credit services must apply for a licence from BaFin for this purpose.

Only companies in the legal form of a legal entity or commercial partnership can obtain a permit. They must have an appropriate organisation and a reliable and technically suitable management. The holders of significant shareholdings in the credit service institution must also be reliable. A managing director or a person appointed by the company must also meet the theoretical and practical expertise set out in Section 12 (1) (2) in conjunction with Section 11 (1) and Section 12 (3) of the Legal Services Act.

The official language is German. In addition to the submission in German, applications and documents can also be submitted in English in full or in part in accordance with § 4j FinDAG. The other provisions of § 4j FinDAG must be observed.

On the basis of the documents submitted with the licence application, BaFin examines the application on the basis of, inter alia, the following criteria:

• - General licensing requirements, in particular business plan: In particular, pursuant to section 10 (3) sentence 1 no. 7 KrZwMG, a viable business plan must be submitted, which specifies the nature of the planned transactions, the organisational structure and information required to assess the proper business organisation of the credit service institution.
  In BaFin's view, a viable business plan should consist of a business plan with planned balance sheets (3-year horizon) and information on the type of credit service intended as well as any existing focal points of the business with regard to certain groups of credit buyers or borrowers. Companies that submit an application for authorisation pursuant to section 46 (2) sentence 2 in conjunction with section 10 KrZwMG must also submit the most recent annual financial statements.
• Managing Directors: The managers of the credit service institution must be professionally qualified (theoretical knowledge and practical experience) to manage a credit service institution, reliable and devote sufficient time to the performance of their duties. If none of the managing directors has a certificate of competence in accordance with the Legal Services Act, this must be provided by another natural person of the credit service institution.
• Supervisory bodies (if any): Where administrative or supervisory bodies are provided for or required by law, these members must have adequate knowledge and experience to carry out their supervisory function and to be able to assess and monitor the company's operations. Members must be reliable and devote sufficient time to the performance of their duties.
• Holders of significant shareholdings: In addition, any natural or legal person who holds a significant stake in the credit service institution is also examined individually by BaFin as part of the authorisation procedure. In particular, a significant shareholding exists if the person concerned, alone or in cooperation with other persons or companies, directly or indirectly, holds 10% or more of the capital and/or voting rights in the credit service institution or can otherwise exercise significant influence over the management of the institution.

The issuance of a permit is subject to a fee. The fee for issuing a permit is charged according to the time spent.

BaFin and the Deutsche Bundesbank will jointly supervise credit service institutions in Germany.

On March 1 2024, the Federal Financial Supervisory Authority (BaFin) published a file on notification procedure of German Investment Code for investment management (KAGB) and German Investment Management Company (KVG).

Filling instructions are as follows:

• the table to be filled out contains four lines: a table header (column label),
• a description line (format specification of the input), 
• a sample line (line 3), and 
• a line that is to be filled out by the KVG (line 4).

The table to be filled out contains various color-coded column blocks: 

• KVG master data 
• Information on the audit reports/fiscal years
• Information about the business managers (fields are provided for 4 business managers; if there is only 1 manager, only the first block needs to be filled out).

On March 20 2024, the Federal Financial Supervisory Authority (BaFin) updated its fact sheet on the data maintenance of registered alternative investment fund (AIF) management companies.

This fact sheet is aimed at AIF asset management companies that are registered in accordance with Section 2 (4) German Investment Code (KAGB). It discusses reporting obligations, data maintenance notifications and the submission of audit reports. This leaflet explains the course of the reporting procedure, in particular the reporting channel. 

Registration as an AIF asset management company pursuant to Section 2 (4) KAGB entails the following reporting obligations:

• Registered asset management companies (KVGs) are subject to the reporting obligations pursuant to section 35 KAGB (in conjunction with section 44 (1) no. 4 and (7) KAGB); 
• Registered AIFMs are obliged to keep the information on the correspondence address and the managing directors up to date (§ 44 para. 1 no. 2 KAGB);
• Registered AIFMs are subject to the annual audit obligation and the obligation to report the auditor. In accordance with section 45a (1) sentence 2 KAGB, the audit must be carried out by 30 September of the following year at the latest. The report on the audit of the asset management company pursuant to section 45a (1) KAGB must be submitted to BaFin immediately after completion of the audit; 
• Once an AIF has been issued, registered AIFs are subject to reporting obligations to the Deutsche Bundesbank in the context of the statistics on investment funds; the reporting obligation stems from Regulation (EU) No 1073/2013 of the European Central Bank of 18 October 2013 on statistics on the assets and liabilities of investment funds.

Changes to the KVG master data (change of business address or change of management) must be made immediately via the MVP Portal to BaFin in the specialist procedure "Notification procedure KAGB - KVG".

The regular submission of the audit reports of the asset management company is also carried out via the MVP Portal in the specialist procedure "Submissions by auditors and auditing associations".

If they have not already done so, new AIF asset management companies should register for the corresponding MVP specialist procedures ("AIFMD Reporting" and "Notification Procedure KAGB – KVG").

For the first-time data reconciliation in 2024, the Excel file via the MVP Portal is to be submitted to BaFin under "Notification procedure KAGB - KVG".

On March 6 2024, the Federal Financial Supervisory Authority (BaFin) published an announcement on submitting documents separately and electronically.

With immediate effect, the financial supervisory authority BaFin asks that documents relating to persons, companies or facts should no longer be submitted in bulk, but exclusively separately and in each case with a separate letter or e-mail.

BaFin is obliged to preserve the integrity of incoming documents and to comply with data protection requirements. In the case of collective submissions, it cannot comply with these provisions in internal further processing.

BaFin also calls on companies and institutions to submit documents electronically if possible, unless the written form is required by law. BaFin wants to communicate with the supervised entities exclusively online as far as possible in order to speed up processes and make them more efficient.

On March 22 2024, the Securities and Futures Commission (SFC) published a Circular on the waiver of annual licensing fees.

To support the industry, the SFC will continue to waive the annual licensing fees of all intermediaries and licensed individuals for the coming year (i.e. between April 1 2024 and March 31 2025). The SFC will consider the market situation and its financial positions next year in reviewing the annual licensing fees for 2025-26.

The SFC will not issue the usual demand for annual licensing fee payment, which would ordinarily become payable during this one-year period. Payments of all other fees, including for licence applications and transfers, will not be affected.

On March 1 2024, the Securities and Futures Commission (SFC) published a press release on the Green Fintech Map launch.

The Green and Sustainable Finance Cross-Agency Steering Group (Steering Group) launched the Prototype Hong Kong Green Fintech Map with Cyberport and Invest Hong Kong (InvestHK) to help corporates and financial firms identify green and sustainable financial technology (Green Fintech) solutions that meet their business needs.

The Map is a directory of Green Fintech firms operating in Hong Kong and includes over 50 firms as of today. 

Their product offerings cover: 

• ESG data and analytics;
• ESG disclosures and regulatory reporting;
• climate risk modelling and assessment;
• green digital finance and investments; and
• carbon credit trading and analytics.

On March 7 2024, the Central Bank of Ireland (CBI) issued the CP158 - Consultation Paper on Consumer Protection Code.

The Consultation Paper is the second of three steps the Central Bank is taking to modernise, clarify and integrate the Code, as well as to enhance its accessibility.

The Consultation Paper is an opportunity for stakeholders to provide feedback on how the Central Bank is proposing to update the Consumer Protection Code, which is being undertaken in 3 phases:

• Discussion Paper Phase (complete)
• Public Consultation Phase (commencing today)
• Finalisation of revised Consumer Protection Code (early 2025)

The purpose of the review is to deliver an updated and modernised Consumer Protection Code which is centred around firms’ securing customers’ interests. This is the key to delivering positive consumer outcomes.

CBI is also proposing a targeted package of protections that reflects how consumers are accessing financial services today.

This package includes proposals relating to:

• Digitalisation
• Informing effectively
• Mortgage credit and switching
• Unregulated activities
• Frauds and scams
• Vulnerability, and
• Climate Risk.

The proposals focus on modernising, clarifying, and integrating consumer protections to ensure they are accessible for consumers and firms. The revised Code will be contained in two new Central Bank Regulations. The first will set out Standards for Business, complemented by Supporting Standards for Business, which will replace the existing General Principles of the Code. The second will set out General Requirements, which will include new protections, and existing requirements set out on a cross-sectoral and sector specific basis.

More particularly, they aim at:

• Ensuring firms effectively incorporate customers’ interests into their strategy and decision making,
• Providing clarity for firms on their consumer protection obligations,
• Supporting consumers and firms in accessing and navigating the Consumer Protection Code through the provision of online supports, guides and explainers.

Finally, the CBI is proposing to introduce a requirement for firms to facilitate customers who wish to do so, to provide the name and contact information of someone - a trusted contact person - who a firm may communicate with where there is difficulty supporting a customer, or where financial abuse, including fraud, is suspected.

The consultation period will be open for 3 months until 7 June 2024.

On March 8  2024, the Central Bank of Ireland (CBI) updated on Funds Authorisations. 

UCITS and RIAIF umbrella applications are now to be submitted via the Portal (not via email). Standalone UCITS/RIAIFs and new Sub-funds of existing UCITS/RIAIF umbrellas will continue to be submitted through ORION.

The Central Bank has also updated the Section 1 UCITS Application Form.

All QIAIF, UCITS and RIAIFs (whether it is solely a new authorisation or also contains post authorisation amendment(s) will submit final authorisation documents by 5.00 pm on the day prior to the proposed authorisation day).

For UCITS and RIAIFs this will mean the Authorisation Team will require dated documentation to be received no later than 10am on the day prior to the proposed authorisation day but ideally submitted as early as possible. 

On March 8 2023, the Central Bank of Ireland (CBI) published the second edition of its Prospectus Regulatory Framework Questions & Answers document.

This second edition includes updates to a number of Q&As to better reflect the Central Bank’s processes and the current regulatory regime. A number of Q&As that are no longer relevant have also been deleted.

Section 3 of the Central Bank Guidance on Prospectus Regulatory Framework addresses the submission process from the first draft until approval of the prospectus document.

ID 1037. Q. Can I file documents to be incorporated by reference in a format other than pdf? 

The ESEF Regulation introduced a single electronic reporting format for the annual financial reports of issuers with securities admitted to trading on EU regulated markets. It applies to annual financial reports containing financial statements for financial years beginning on or after January 1 2021. The Prospectus Rules generally require that documents to be incorporated in a prospectus by reference be submitted in portable document format (pdf). However, annual financial reports required to be prepared in the format prescribed by the ESEF Regulation may also be incorporated by reference in a prospectus in that format and submitted to the Central Bank for that purpose.

BACKGROUND

The AIF Rulebook is the Central Bank’s rulebook in relation to AIFs which contains chapters concerning Retail Investor AIFs, Qualifying Investor AIFs, European Long-Term Investment Funds, AIF Management Companies, Fund Administrators, Alternative Investment Fund Managers and AIF Depositaries.

On March 11 2024, the Central Bank of Ireland (CBI) also published a Feedback Statement to Consultation Paper 155 – ELTIF chapter in the AIF Rulebook.

The Feedback Statement sets out additional information on the submissions received to the consultation and the subsequent revisions that have been made to the ELTIF chapter in the AIF Rulebook. Overall, the respondents were supportive of the substance of the revised ELTIF Regulation 2023/606/EU, and welcomed the publication of the Central Bank’s CP 155 with its proposal to include an ELTIF chapter in the AIF Rulebook while setting out a number of suggested clarifications and changes.

In relation to the proposed restriction on an ELTIF acquiring shares carrying voting rights enabling it to exercise significant influence over an issuing body, respondents commented that this provision does not fully take account of the concentration and diversification limits that can be disapplied for professional-only ELTIFs. The ELTIF Regulation sets out strict requirements in relation to concentration limits that also address the underlying risk and on this basis, the CBI has amended the ELTIF chapter to remove the restriction on acquiring shares carrying voting rights.

The Central Bank removed the requirements in relation to investment through subsidiaries throughout the ELTIF chapter to ensure there is no overlap with the ELTIF Regulation or duplicative requirements.

The Central Bank considered that removing the provisions relating to offer periods is proportionate, given the overall liquidity profile of ELTIFs. This change is reflected through the incorporation of the Central Bank guidance on Share class features of closed-ended QIAIFs within the ELTIF chapter.

The Central Bank removed the deadline for notification to the Central Bank of proposals to replace the AIFM, management company, general partner or third parties, to ensure the requirements are in line with other AIFs.

The provisions relating to ELTIFs acquiring real estate have been removed, as the ELTIF Regulation does not distinguish between asset types acquired by ELTIFs and the requirements related to valuation are already set down in the regulatory framework.

The Central Bank has removed the provisions relating to redemption in specie as requirements related to redemption payments are provided for in the ELTIF Regulation. 

The Central Bank considered it appropriate to remove the risk disclosure provision relating specifically to investment in emerging stock exchanges and markets, as existing ELTIF requirements already specify that investment in an ELTIF should form a small part of an investor’s portfolio and such investments are subject to the MiFID suitability test.

WHAT'S NEW?

On March 11 2024, the Central Bank of Ireland (CBI) updated the AIF Rulebook to include an European Long Term Investment Funds (ELTIFs) Chapter 6.

The authorisation process for ELTIFs will vary depending on the targeted investor type (Retail, Qualified or Professional). All ELTIF applications must be made through the Portal. 

All ELTIF applications (whether it is solely a new authorisation or also contains post authorisation amendment(s)) need to submit final authorisation documents by 5.00 pm on the day prior to the proposed authorisation day. For Retail Investor ELTIFs this will mean the Authorisation Team will require dated documentation to be received no later than 10am on the day prior to the proposed authorisation day but ideally submitted as early as possible.

The ELTIF shall not raise capital from the public through the issue of debt securities. This restriction does not operate to prevent the issue of notes by ELTIFs, on a private basis, to a lending institution to facilitate financing arrangements. Details of the note issued must be clearly provided in the prospectus.

The ELTIF shall ensure that the calculation of performance fees must be verified by the depositary or a competent person appointed by the AIFM and approved for the purpose by the depositary. The depositary of an ELTIF may not be replaced without the approval of the Central Bank. The ELTIF shall attach rights in proportion to the fraction of a unit held except for voting rights which can only be exercised by whole units. The ELTIF shall ensure that the certificates are signed by the depositary. 

The ELTIF shall specify, in its trust deed, deed of constitution, management agreement, AIFM agreement or partnership agreement, the maximum annual fee charged by, as relevant, an AIFM, a management company and/or a general partner of the ELTIF. The maximum annual fee shall not be increased without approval on the basis of at least 75% of votes cast at 

general meeting. In the event of an increase in the annual fee a reasonable notification period must be provided by the ELTIF to enable unitholders redeem their units prior to the implementation of the increase. This applies to the annual fee charged by an investment manager as well where this fee is paid directly out of the assets of the ELTIF.

The ELTIF shall, in the articles of association, prescribe the nature of the costs to be borne by the investment company.

An ELTIF may establish side pocket share classes into which assets which have become impaired, illiquid or difficult to value may be placed provided that the ability to establish these share classes has been provided for in the ELTIF’s constitutional document and has been disclosed to unitholders in advance. The ELTIF must, in its constitutional document, prescribe the parameters which will apply to the creation of side pocket share classes. The ELTIF shall, at all times, be able to demonstrate that any assets placed in side pocket share classes comply with the approved parameters. The ELTIF must specify in its prospectus a clear and unambiguous description of the proposed side pocket arrangements and information on the action which will be taken in the event that the assets within the side pockets are not re-admitted to trading or otherwise increase in value and/or liquidity as anticipated. The ELTIF shall, in advance of establishing a side pocket share class, provide in conjunction with its depositary written confirmation to the Central Bank that the proposed establishment is in accordance with the ELTIF’s constitutional document and takes into account the interests of all unitholders.

An umbrella ELTIF which is an investment company shall, in its prospectus, include the words: "An umbrella fund with segregated liability between sub-funds".

The ELTIF shall only enter into a transaction with a management company, general partner, depositary, AIFM, investment manager or by delegates or group companies of these where it is negotiated at arm’s length. Transactions must be in the best interests of the unitholders. Transactions permitted are subject to: 

(a) certified valuation by a person approved by the depositary, or the ELTIF in the case of transactions involving the depositary, as independent and competent; or 

(b) execution on best terms on organised investment exchanges under their rules; or 

(c) where (a) and (b) are not practical, execution on terms which the depositary, or the ELTIF in the case of transactions involving the depositary, is satisfied conform to the principles outlined in paragraph 1 of this section.

The ELTIF shall notify the Central Bank in advance of proposed amendments to material agreements entered into with third parties.

An umbrella AIF or umbrella ELTIF shall not permit a sub-fund to invest in the units of another sub-fund within the same umbrella, by way of transfer for consideration, without prior notification to the Central Bank. 

Where an ELTIF provides for a minimum subscription of €100,000 and only accepts subscriptions from an investor who meets the criteria set out in the definition of a Qualified Investor ELTIF, it may avail of the Central Bank QIAIF authorisation process and market itself as a Qualified Investor ELTIF.

Where the ELTIF is an investment company it shall ensure that it does not have directors in common with the board of directors of its depositary and that each of its directors is required to disclose to the board of the ELTIF any concurrent directorships which they hold. A minimum of two directors must be Irish resident.

The ELTIF shall, in its prospectus, disclose the details of service providers.

The ELTIF shall only acquire assets pursuant to a warehousing arrangement where the use of such arrangements is fully disclosed in its prospectus, including details of any fee payable in relation to such arrangements.

Where the ELTIF charges fees and expenses, including management fees, to capital. its prospectus shall include the following disclosures:

(a) indicate that fees and expenses, including management fees, or a portion thereof, may be charged to capital;

(b) a description of the effects of the charging of fees and expenses, including management fees, to capital i.e. that capital may be eroded.

WHAT'S NEXT?

The Central Bank has included provisions within the ELTIF chapter to allow the authorisation of ELTIF sub-funds under umbrella AIFs as this is compliant with the ELTIF Regulation. The use of an umbrella structure to establish ELTIF sub-funds will further support the establishment of ELTIFs in Ireland by offering ELTIFs the possibility to establish under a new umbrella or an existing umbrella and realise the benefits and efficiencies associated with such structures.

The Central Bank has extended the requirements in relation to the establishment of side pocket share classes for assets that become illiquid or difficult to value to include assets that may become impaired. This provision will permit ELTIFs to create side-pocket share classes in exceptional circumstances where their assets become impaired or are otherwise no longer able to be held in the ELTIF’s portfolio.

The Central Bank will not exempt ELTIFs listed and traded on an EU regulated market from the obligation to keep a prospectus up to date.

The Central Bank has amended the ELTIF chapter to specify that an ELTIF shall only change its investment objectives, or effect a material change to its investment policies, with the approval of at least 75% of votes cast at a general meeting. Reasonable notification period must be provided to unitholders to enable redemption of units prior to the implementation of these changes. 

The Central Bank can from this moment onwards accept applications for approval of Irish domiciled ELTIFsunder condition that they comply with the provisions set in the ELTIF Regulation and Chapter 6 of the AIF Rulebook.

On March 13 2024, the Banca d'Italia published amendments to Circulars no. 285, 286 and 288 on securitisation rules.

The amendments made to Chapter 6 of Part Two of Circular No. 285/2013 implement the new European framework on securitisations introduced by Regulation (EU) No 2402/2017 (SECR), transposed in Italy through the provisions contained in Articles 4-septies.2 and 190-bis.2 of the Consolidated Law on Finance in Italy (TUF), which introduces a supervisory and sanctioning regime for securitisation transactions. 

Art. 4-septies.2 designated the Bank of Italy as the competent authority to supervise compliance with the requirements introduced by the SECR in all transactions in which a bank acts as originator, original lender or sponsor. 

The amendments implemented to Art. 4-septies.2 TUF : 

• Include in the secondary provisions the content of the Bank of Italy's communication of 21 December 2022 containing the operational indications for proceeding with the notifications of securitisation transactions to the Bank of Italy  
• Specify the procedures for the exercise of the Bank of Italy's supervisory powers in transactions involving non-supervised entities among the recipients of the SECR's obligations (mixed transactions). 

Further interventions of mere alignment with the new regulatory framework on securitisations, including the regulation of the prudential treatment of securitisations provided for by SECR, concern the update of regulatory references and the provision of new administrative procedures.

With the amendments, the following administrative procedures are introduced:

• Prohibition of using the calculation method provided for in Article 248 CRR;
• Prohibition of using: External-ratings-based approach (SEC-ERBA) instead of securitisation exposures using a standardised approach (SEC-SA) for the purpose of calculating the exposure for all rated securitisation positions or positions for which an inferred rating may be used;
• Authorisation of the use of alternative approaches for positions falling within the scope of the internal valuation approach for intermediaries authorised to use the internal valuation approach;
• Authorisation to include securitisation positions as underlying exposures in a securitisation. The following administrative procedures are also repealed:
• Authorisation for the use of a derogation conversion factor in revolving securitisation;
• Authorisation of the use of the supervisory formula for banks other than the originator;
• Authorisation to use the look-through approach for unrated positions in ABCP
• programmes under the Internal Valuation Approach;
• Authorisation to use specific parameters as part of the supervisory formula applied to securitisations of retail exposures;
• Authorisation to apply a derogation to the calculation of the weighted value of securitised exposures in the form of liquidity facilities. 

The lists of administrative supervisory procedures published on the Bank of Italy's website are updated accordingly.

Circular No. 288/2015, Chapter 8 of Title IV concerning the provisions on securitization transactions for financial intermediaries is also amended.

Art. 4-septies.2 designated the Bank of Italy as the competent authority to supervise compliance with the requirements introduced by the European Securities Committee Recommendation (ESCR) in all transactions in which a financial intermediary acts as originator or original lender.

The amendments implemented to Art. 4-septies.2 TUF : 

• Include in the secondary provisions the content of the Bank of Italy's communication of 21 December 2022 containing the operational indications for proceeding with the notifications of securitisation transactions to the Bank of Italy;
• Specify the procedures for the exercise of the Bank of Italy's supervisory powers in transactions involving non-supervised entities among the recipients of the SECR's obligations (mixed transactions).

In addition, Sections I (Administrative Proceedings), II (Applicable Rules) and III (Specific Provisions) are updated to align secondary provisions with the new regulatory framework established by the SECR and to extend to financial intermediaries the rules on the prudential treatment of securitisations provided for in SECR.

With the amendments, the following administrative procedures are introduced:

• Prohibition of recognising significant risk transfer for prudential purposes;
• Prohibition of using the calculation method provided for in Article 248 CRR;
• Prohibition of using Securitisation: External-ratings-based approach (SEC-ERBA) instead of securitisation exposures using a standardised approach (SEC-SA) for the purpose of calculating the exposure for all rated securitisation positions or positions for which an inferred ratingmay be used;
• Authorisation of the use of alternative approaches for positions falling within the scope of the internal valuation approach for intermediaries authorised to use the internal valuation approach;
• Authorisation to include securitisation positions as underlying exposures in a securitisation. The following administrative procedures are also repealed:
• Authorisation for the use of a derogation conversion factor in revolving securitisations;
• Authorisation to use the supervisory formula for financial intermediaries other than the originator;
• Authorisation to use the look-through approach for unrated positions in Asset-Backed Commercial Paper (ABCP) programmes under the Internal Valuation Approach;
• Authorisation to use specific parameters as part of the supervisory formula applied to securitisations of retail exposures;
• Authorisation to apply a derogation to the calculation of the weighted value of securitised exposures in the form of liquidity facilities.

The changes apply from July 1 2024.

The next update amends the reporting regulations of financial intermediaries pursuant to Article 106 of the Consolidated Law on Banking – Circular no. 286/2013 "Instructions for the compilation of prudential reports for supervised entities" – to adapt them to the amendments made to the rules on securitisations since the 6th update of Circular 288 of 3 April 2015.

In line with the decision taken for the supervisory arrangements to extend the prudential rules on securitisation for banks to financial intermediaries, the reporting frameworks for financial intermediaries are aligned with those in force for banks. Financial intermediaries will therefore have to produce securitisation reports using version 3.2 of the Data Point Model (DPM) reporting scheme. 

This version of the reporting template is also adopted for reporting on own funds, credit risk and counterparty credit risk.

In line with the general framework of the reporting rules for financial intermediaries, the new provisions refer to the COREP reporting schemes as governed by the implementing regulation with which the European Commission adopted the implementing technical standard on prudential reporting.

In order to take into account the peculiarity of financial intermediaries, some specific rules have been provided for in the update and some simplifications have been introduced. In particular, the provisions:

• With regard to own funds, exclude certain information provided for in the reporting template DPM 3.2 referring to aspects of the prudential framework that do not apply to financial intermediaries; 
• On internal credit risk models (IRBs), exempt financial intermediaries from completing forms C 8.3, C 8.4, C 8.5, C 8.5.1. and C 8.7 in accordance with the principle of proportionality.

This update is applicable as of the reporting as of September 30 2024.

On March 20 2024, the Luxembourg Ministry of Justice published Luxembourg's Stage 4 Assessment Report by the OECD on transnational corruption.

The evaluation report identifies several positive developments, while encouraging Luxembourg to actively intensify its efforts to implement the recommendations relating to the prevention, investigation and prosecution of bribery of foreign public officials in commercial transactions international institutions, as well as to better understand the risks of transnational corruption that Luxembourg companies could face.

More particularly, the OECD working group welcomes that Luxembourg has put in place an ambitious new law establishing a whistleblower protection regime broadly aligned with international standards, the introduction of a system of judgments on agreement aimed at simplifying the resolution of complex financial matters and strengthening its legislative framework on mutual legal assistance, thus consolidating Luxembourg's position as an effective partner for the signatory countries of the Convention. The task force also welcomed the constitutional reform regarding the status of magistrates as well as the measures aimed at broadening and making more effective the confiscation regime. In addition, the introduction of a provision allowing legal entities to be held liable in the event of a lack of supervision or control that facilitated the commission of an offense was also welcomed.

In accordance with the OECD Phase 4 evaluation procedures, Luxembourg is invited to submit, in March 2026, a written report on the implementation of the recommendations and follow-up questions addressed to it under this assessment.

Version française

Le 20 mars 2024, le ministère luxembourgeois de la Justice a publié le rapport d'évaluation luxembourgeois de phase 4 de l'OCDE sur la corruption transnationale.

Le rapport d'évaluation identifie plusieurs évolutions positives, tout en encourageant le Luxembourg à intensifier activement ses efforts pour mettre en œuvre les recommandations relatives à la prévention, aux enquêtes et aux poursuites en matière de corruption d'agents publics étrangers dans les transactions commerciales des institutions internationales, ainsi qu'à mieux comprendre les risques de corruption transnationale. corruption à laquelle les entreprises luxembourgeoises pourraient être confrontées.

Plus particulièrement, le groupe de travail de l'OCDE se félicite que le Luxembourg ait mis en place une nouvelle loi ambitieuse établissant un régime de protection des lanceurs d'alerte largement aligné sur les normes internationales, l'introduction d'un système de jugements d'accord visant à simplifier la résolution des questions financières complexes et à renforcer son cadre législatif sur l'entraide judiciaire, consolidant ainsi la position du Luxembourg en tant que partenaire efficace pour les pays signataires de la Convention. La task force a également salué la réforme constitutionnelle concernant le statut des magistrats ainsi que les mesures visant à élargir et à rendre plus efficace le régime de confiscation. Par ailleurs, l'introduction d'une disposition permettant de tenir les personnes morales responsables en cas d'absence de surveillance ou de contrôle ayant facilité la commission d'une infraction a également été saluée.

Conformément aux procédures d'évaluation de Phase 4 de l'OCDE, le Luxembourg est invité à soumettre, en mars 2026, un rapport écrit sur la mise en œuvre des recommandations et des questions de suivi qui lui sont adressées dans le cadre de cette évaluation.

On March 5 2024, the Commission nationale pour la protection des données (CNPD) published a call for contributions to a questionnaire on how organisations are implementing the right of access.

In 2023, the European Data Protection Board (EDPB) adopted Guidelines on data subject rights - Right of access to help organisations respond to data access requests from individuals in line with the requirements set out in the GDPR. The EDPB subsequently selected the right of access for its third coordinated enforcement action.

The results of the joint initiative will be analysed to generate deeper insight into the topic. The EDPB and the CNPD will publish a report on the outcome of this survey, including relevant conclusions drawn from the questionnaire as well as potential lessons learned resulting from it. The goal is to understand how companies implement the right of access in practice. 

Participants should complete the questionnaire file and submit it through their secure CNPD filing area.

Version française

Le 5 mars 2024, la Commission nationale pour la protection des données (CNPD) a publié un appel à contributions à un questionnaire sur la manière dont les organisations mettent en œuvre le droit d'accès.

En 2023, le Comité européen de la protection des données (EDPB) a adopté des lignes directrices sur les droits des personnes concernées – Droit d'accès pour aider les organisations à répondre aux demandes d'accès aux données des particuliers, conformément aux exigences énoncées dans le RGPD. L’EDPB a ensuite sélectionné le droit d’accès pour sa troisième mesure coercitive d’exécution.

Les résultats de l’initiative conjointe seront analysés pour générer une compréhension plus approfondie du sujet. L'EDPB et la CNPD publieront un rapport sur les résultats de cette enquête, comprenant les conclusions pertinentes tirées du questionnaire ainsi que les enseignements potentiels qui en découlent. L’objectif est de comprendre comment les entreprises mettent en pratique le droit d’accès.

Les participants doivent remplir le fichier du questionnaire et le soumettre via leur espace de dépôt sécurisé CNPD.

On March 14 2024, the Chambre des députés published a proposal to transpose the NIS 2 directive into Luxembourg law.

The NIS 2 Directive introduces the following:

1. Focus on essential and important entities which will have to put in place cybersecurity risk management measures and notify of any important incident within the required timeframe. 

Essential entities: large companies active in highly critical sectors in Annex I (energy, transport, banking, fiancial market infrastructures, healthcare, drinkable water, used water, digital infrastructures, ICT management, public administration and space).

Important entities: medium companies active in highly critical sectors of Annex I and large to medium companies active in the other highly critical sectors of Annex II (postal and export services, waste management, the manufacturing, production and distribution of chemical product, the manufacturing, production, transformation and distribution of food products, manufacturing, network providers and research.).

Exceptions: Any entity considered as critical no matter its size. This includes any entity critical under the CER , qualified trust service providers, trust registers top-level domain names, DNS service providers, providers public electronic communications networks which constitute medium-sized businesses or public administration entities

2. Set-up a national cybersecurity framework 

• The competent authorities will be the ILR and CSSF.
• The HCPN will be responsible for creating a national cybersecurity strategy, will be the point of contact for cross-border cooperation and will be the authority managing cyber crises.

3. Reinforce European cooperation on cybersecurity. These provisions were set-out under NIS 1 and will not be transposed into Luxembourg law as they are sufficient at European level.

• Cooperation group to exchange information between member states.
• CSIRT for operational cooperation between member states.
• European network for preparation and management of cyber crises.

For the purpose of this transposition, DORA is considered as an equivalent sectoral legislative act. This means that measures on cybersecurity risk management, mandatory notification, supervision and execution under this law don't apply to entities under the scope of DORA.

Version française

Le 14 mars 2024, la Chambre des députés a publié une proposition visant à transposer la directive NIS 2 en droit luxembourgeois.

La directive NIS 2 introduit ce qui suit :

1. Se concentrer sur les entités essentielles et importantes qui devront mettre en place des mesures de gestion des risques de cybersécurité et notifier tout incident important dans les délais requis.

Entités essentielles : grandes entreprises actives dans des secteurs très critiques de l'annexe I (énergie, transports, banque, infrastructures des marchés financiers, santé, eau potable, eaux usées, infrastructures numériques, gestion des TIC, administration publique et espace).

Entités importantes : moyennes entreprises actives dans les secteurs hautement critiques de l'annexe I et grandes et moyennes entreprises actives dans les autres secteurs hautement critiques de l'annexe II (services postaux et d'exportation, gestion des déchets, fabrication, production et distribution de produits chimiques, fabrication, production, transformation et distribution de produits alimentaires, fabrication, réseaux de prestataires et recherche.).

Exceptions : Toute entité considérée comme critique quelle que soit sa taille. Cela inclut toute entité critique en vertu du CER , les fournisseurs de services de confiance qualifiés, les noms de domaine de premier niveau enregistrés dans les registres de confiance, les fournisseurs de services DNS, les fournisseurs de réseaux publics de communications électroniques qui constituent des entreprises de taille moyenne ou des entités de l'administration publique.

2. Mettre en place un cadre national de cybersécurité

• Les autorités compétentes seront l'ILR et la CSSF.
• Le HCPN sera chargé de créer une stratégie nationale de cybersécurité, sera l'interlocuteur de la coopération transfrontalière et sera l'autorité de gestion des crises cyber.

3. Renforcer la coopération européenne en matière de cybersécurité. Ces dispositions ont été prévues sous NIS 1 et ne seront pas transposées en droit luxembourgeois car elles sont suffisantes au niveau européen.

• Groupe de coopération pour échanger des informations entre les États membres.
• CSIRT pour la coopération opérationnelle entre les Etats membres.
• Réseau européen de préparation et de gestion des cyber-crises.

Aux fins de cette transposition, le DORA est considéré comme un acte législatif sectoriel équivalent. Cela signifie que les mesures relatives à la gestion des risques de cybersécurité, à la notification obligatoire, à la surveillance et à l'exécution en vertu de cette loi ne s'appliquent pas aux entités relevant du champ d'application de DORA.

On March 14 2024, the Commission de Surveillance du secteur financier (CSSF) reminded of the obligation to declare seized assets.

With regard to the “Bureau de gestion des avoirs” (BGA), the CSSF would like to draw the attention to the obligations that derive from the Law of 22 June 2022 on the management and recovery of seized or confiscated assets which came into force on July 5 2022. The Law established the BGA, responsible for handling all amounts seized in Luxembourg during national or international criminal proceedings, including cash or credit balances in an account, debts or virtual assets.

In accordance with Article 18 of the Law, any garnishee holding monies, debts or virtual assets seized as part of a national or foreign criminal proceeding, before Article 18 of the Law entered into force (i.e., October 1 2022), to declare them to the BGA. In particular, credit institutions and virtual asset service providers must comply with their legal obligations and thus, declare the monies, debts or virtual assets seized before October 1 2022.

A six-month transition period starting on October 1 2022 expired on March 31 2023.

For practical details consult: guichet.public.lu/en/entreprises/gestion-juridique-comptabilite/avoirs-saisis/declaration-bureau-gestion-avoirs.html

For any further question, please contact the BGA directly via info@bga.etat.lu.

Version française

Le 14 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a rappelé l'obligation de déclarer les biens saisis.

S’agissant du Bureau de gestion des avoirs (BGA), la CSSF attire l’attention sur les obligations qui découlent de la loi du 22 juin 2022 relative à la gestion et au recouvrement des biens saisis ou confisqués entrée en vigueur le 5 juillet 2022. La loi crée le BGA, chargé de gérer tous les montants saisis au Luxembourg lors de procédures pénales nationales ou internationales, y compris les espèces ou les soldes créditeurs d'un compte, les dettes ou les actifs virtuels.

Conformément à l'article 18 de la Loi, tout tiers-saisi détenant des sommes, des dettes ou des biens virtuels saisis dans le cadre d'une procédure pénale nationale ou étrangère, avant l'entrée en vigueur de l'article 18 de la Loi (soit le 1er octobre 2022), de les déclarer le BGA. En particulier, les établissements de crédit et les prestataires de services sur actifs virtuels doivent respecter leurs obligations légales et ainsi déclarer les sommes, dettes ou actifs virtuels saisis avant le 1er octobre 2022.

Une période transitoire de six mois commençant le 1er octobre 2022 a expiré le 31 mars 2023.

Pour les détails pratiques consulter : guichet.public.lu/en/entreprises/gestion-juridique-comptabilite/avoirs-saisis/declaration-bureau-gestion-avoirs.html

Pour toute question complémentaire, veuillez contacter directement le BGA via info@bga.etat.lu.

On March 21 2024, the Commission de Surveillance du secteur financier (CSSF) published the Circular CSSF 24/855 on the application of the Guidelines of the European Securities and Markets Authority on transfer of data between Trade Repositories under EMIR and SFTR.

The following guidelines in relation to EMIR are of particular interest:

Guideline 33:

The timing and overall process should be managed as per the specifications detailed in Guideline 11. 

• When transferring records of a TR participant, FCs need to verify and confirm with the old and new TR on the following aggregate information regarding the SFTs subject to transfer:
• Total number of outstanding SFTs, identified by the unique combo of fields "Reporting counterparty", "Other counterparty", and "Unique Transaction Identifier", along with the corresponding collateral on a net basis, margin reports, and re-use reports.
• Total number of reports related to lifecycle events of these SFTs for transaction, margin, and re-use reports if transferred. The identification for each type of report varies:
  - Loan and collateral report: identified by the unique combination of SFTR fields "Reporting counterparty", "Other counterparty", and "Unique Transaction Identifier" or "Master agreement type".
  - Margin report: identified by the unique combo of SFTR fields "Reporting counterparty", "Other counterparty", and "Portfolio code".
  - Re-use report: identified by the unique combination of SFTR fields "Reporting counterparty" and "Entity responsible for the report".
• Total number of records relating to terminated and matured SFTs for loan, collateral, margin, and re-use reports in the last five years, for which there is a record-keeping obligation under Article 4(4) of SFTR (if transferred).
• Total number of records relating to errored SFTs for loan, collateral, margin, and re-use reports in the last five years, for which there is a record-keeping obligation under Article 4(4) of SFTR (if transferred).

Guideline 34: 

For cases where an FC and a NFC report to two different TRs outstanding in relation to OTC derivatives subject to transfer:

• When an NFC- chooses not to self-report, the outstanding derivatives should be transferred to the FC's TR, if the FC doesn't want to use the NFC’s TR for reporting the concluded derivatives.
• If an NFC changes its status from NFC+ to NFC- and chooses not to self-report, it will have to transfer its outstanding derivatives with the FC to the FC's TR from the date of the status change, unless the FC chooses to use the NFC's TR. If an NFC changes its status from NFC- to NFC+, the outstanding derivatives with the FC should be transferred back to the NFC's TR, unless the NFC opts to use the FC's TR.
• Neither the NFC nor the FC (or any entity reporting on their behalf) are anticipated to onboard each other's TRs for data transfer purposes. The implication here is to promote efficiency and avoid unnecessary complexity in reporting arrangements.

The following guidelines in relation to SFTR are of particular interest:

Guideline 33 :

The timing and overall process should be managed as per the specifications detailed in Guideline 11. 

• Confirm the total number of outstanding Securities Financing Transactions (SFTs). Each SFT should be identified by the unique combo of “Reporting counterparty”, “Other counterparty”, and “Unique Transaction Identifier”, supplemented with the net basis collateral, margin reports, and re-use reports.
• Confirm the total number of reports on lifecycle events of these SFTs for transaction, margin, and re-use reports, if they are to be transferred. Each type of report should be uniquely identified:
  - Loan and collateral by “Reporting counterparty”, “Other counterparty”, and either “Unique Transaction Identifier” or “Master agreement type”.
  - Margin reports: by “Reporting counterparty”, “Other counterparty”, and “Portfolio code”.
  - Re-use reports: by “Reporting counterparty” and “Entity responsible for the report".
• If being transferred, confirm the total number of records for terminated and matured SFTs for loan, collateral, margin, and re-use reports from the last five years, complying with the record-keeping duty under Article 4(4) of SFTR.
• If being transferred, confirm the aggregate number of errored SFTs records for loan, collateral, margin, and re-use reports from the past five years, in accordance with the record-keeping obligation under Article 4(4) of SFTR.

Guideline 34:

For cases where an FC and a SME NFC report to two different TRs outstanding in relation to SFTs subject to transfer:

• If the SME NFC chooses not to self-report, its outstanding SFTs should be transferred to the FC's TR. This applies unless the FC opts to become a client of the SME NFC's TR, and reports the SFTs concluded with the SME NFC to its TR.
• If an NFC transitions from a non-SME NFC to an SME NFC and opts not to self-report its SFTs, it should transfer its outstanding SFTs with the FC to the FC's TR from the date of status change. This holds unless the FC chooses to become a client of the SME NFC's TR. If an NFC changes status from SME NFC to non-SME NFC, the outstanding SFTs with the FC should revert back to the NFC's TR, unless the NFC decides to become client of the FC's TR.
• For data transfer operations, neither the NFC nor FC, or any entity reporting on their behalf, is anticipated to onboard the TRs of the other party. The intent is to streamline operations and avoid unnecessary complexities in the reporting structure.

Version française

Le 21 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a publié la circulaire CSSF 24/855 relative à l'application des lignes directrices de l'Autorité européenne des marchés financiers sur le transfert de données entre référentiels centraux dans le cadre d'EMIR et de SFTR.

Les lignes directrices suivantes concernant EMIR sont particulièrement intéressantes :

Ligne directrice 33 :

Le calendrier et le processus global doivent être gérés conformément aux spécifications détaillées dans la ligne directrice 11.

• - Lors du transfert des enregistrements d'un participant TR, les FC doivent vérifier et confirmer auprès de l'ancien et du nouveau TR les informations globales suivantes concernant les SFT soumises au transfert :
• - Nombre total d'OFT en cours, identifiés par la combinaison unique de champs « Contrepartie déclarante », « Autre contrepartie » et « Identifiant unique de la transaction », ainsi que la garantie correspondante sur une base nette, les rapports de marge et les rapports de réutilisation.
• - Nombre total de rapports liés aux événements du cycle de vie de ces SFT pour les rapports de transaction, de marge et de réutilisation en cas de transfert. L'identification de chaque type de rapport varie :
  - déclaration de prêt et de collatéral : identifié par la combinaison unique des champs SFTR "Contrepartie déclarante", "Autre contrepartie" et "Identifiant unique de transaction" ou "Type de contrat-cadre".
  - rapport de marge : identifié par la combinaison unique des champs SFTR « Contrepartie déclarante », « Autre contrepartie » et « Code du portefeuille ».
  - déclaration de réutilisation : identifiée par la combinaison unique des champs SFTR « Contrepartie déclarante » et « Entité responsable de la déclaration ».
• Nombre total d'enregistrements relatifs aux SFT résiliés et arrivés à échéance pour les rapports de prêt, de garantie, de marge et de réutilisation au cours des cinq dernières années, pour lesquels il existe une obligation de tenue de registres en vertu de l'article 4(4) du SFTR (en cas de transfert).
• Nombre total d'enregistrements relatifs aux SFT erronés pour les rapports de prêt, de garantie, de marge et de réutilisation au cours des cinq dernières années, pour lesquels il existe une obligation de tenue de registres en vertu de l'article 4, paragraphe 4, du SFTR (en cas de transfert).

Ligne directrice 34 :

Pour les cas où un FC et un NFC déclarent deux TR différents en cours concernant des dérivés OTC soumis au transfert :

• lorsqu'une NFC choisit de ne pas déclarer elle-même, les dérivés en cours doivent être transférés au TR de la FC, si la FC ne souhaite pas utiliser le TR de la NFC pour déclarer les dérivés conclus.
• si une NFC change son statut de NFC+ à NFC- et choisit de ne pas s'auto-déclarer, elle devra transférer ses encours de dérivés auprès du FC vers le TR du FC à compter de la date du changement de statut, sauf si le FC choisit d'utiliser le Le TR de NFC. Si une NFC change son statut de NFC- à NFC+, les dérivés en cours auprès du FC doivent être retransférés vers le TR du NFC, à moins que la NFC choisisse d'utiliser le TR du FC.
• ni le NFC ni le FC (ou toute entité déclarant en leur nom) ne devraient intégrer les TR de chacun à des fins de transfert de données. L’implication ici est de promouvoir l’efficacité et d’éviter une complexité inutile dans les modalités de reporting.

Les lignes directrices suivantes concernant le SFTR sont particulièrement intéressantes :

Ligne directrice 33 :

Le calendrier et le processus global doivent être gérés conformément aux spécifications détaillées dans la ligne directrice 11.

• Confirmer le nombre total d'opérations de financement sur titres (SFT) en cours. Chaque SFT doit être identifiée par la combinaison unique de « Contrepartie déclarante », « Autre contrepartie » et « Identifiant de transaction unique », complétée par la garantie sur base nette, les rapports de marge et les rapports de réutilisation.
• Confirmer le nombre total de rapports sur les événements du cycle de vie de ces SFT pour les rapports de transactions, de marge et de réutilisation, s'ils doivent être transférés. Chaque type de rapport doit être identifié de manière unique :
  - prêt et garantie par « Contrepartie déclarante », « Autre contrepartie » et soit « Identifiant unique de transaction » soit « Type de contrat-cadre ».
  - rapports de marge : par « Contrepartie déclarante », « Autre contrepartie » et « Code du portefeuille ».
  - réutilisation des déclarations : par « Contrepartie déclarante » et « Entité responsable de la déclaration ».
• En cas de transfert, confirmer le nombre total d'enregistrements pour les SFT résiliés et arrivés à échéance pour les rapports de prêt, de garantie, de marge et de réutilisation des cinq dernières années, en conformité avec l'obligation de tenue de registres en vertu de l'article 4 (4) du SFTR.
• En cas de transfert, confirmer le nombre total d'enregistrements SFT erronés pour les rapports de prêt, de garantie, de marge et de réutilisation des cinq dernières années, conformément à l'obligation de tenue de registres en vertu de l'article 4 (4) du SFTR.

Ligne directrice 34 :

Pour les cas où une FC et une PME NFC déclarent à deux TR différents en cours en relation avec des SFT sujettes au transfert :

• -si la PME NFC choisit de ne pas s'auto-déclarer, ses SFT en cours doivent être transférés au TR de la FC. Ceci s'applique sauf si le FC choisit de devenir client du TR de la PME NFC, et déclare à son TR les SFT conclues avec la PME NFC.
• si une NFC passe d'une NFC non-PME à une NFC PME et choisit de ne pas auto-déclarer ses SFT, elle doit transférer ses SFT en cours auprès du FC vers le TR du FC à compter de la date du changement de statut. Ceci est valable à moins que le FC choisisse de devenir client du TR de la PME NFC. Si une NFC change de statut de NFC PME à NFC non PME, les SFT en cours auprès du FC devraient revenir au TR du NFC, à moins que le NFC ne décide de devenir client du TR du FC.
• pour les opérations de transfert de données, ni le NFC ni le FC, ni aucune entité déclarant en leur nom, ne devraient intégrer les TR de l'autre partie. L’intention est de rationaliser les opérations et d’éviter des complexités inutiles dans la structure hiérarchique.

On March 26 2024, the Commission de Surveillance du secteur financier (CSSF) published a reminder on EMIR Refit reporting going live April 29 2024.

In this context, the CSSF wants to draw the attention of counterparties to the following elements, with a particular emphasis on the importance of testing mentioned under point 8:

1. ESMA website which contains critical information for the proper implementation of EMIR REFIT: www.esma.europa.eu/data-reporting/emir-reporting

2. Previous CSSF press release on EMIR REFIT: www.cssf.lu/wp-content/uploads/PR22_33_EMIR_Refit_reporting_standards_211222.pdf

3. Entities shall notify the CSSF of significant errors and omissions following Article 9 of the ITS on reporting.

4. The CSSF will monitor the volume of currently submitted trades, including variations in the volumes of reported transactions.

5. Should an entity cease to exist, it must close trades (i) from a contractual point of view and (ii) with appropriate termination messages to the relevant Trade Repositories.

6. Should another entity take over the reporting on behalf of one counterparty, that counterparty must ensure that no trades are either forgotten or reported twice.

7. Counterparties are required to monitor the reporting they submit, or the reporting submitted on their behalf and must ensure its accuracy. For illustration purposes, the CSSF reminds counterparties to implement internal controls such as (non-exhaustive list):

a. Identification of outliers (e.g. caused by bad comma placement, bad currency conversion, bad input data)

b. Application of the correct action type (e.g. MODI vs CORR)

c. Identification and removal of duplicates

d. Timeliness checks (e.g. ensure timely reporting)

e. Consistency between the trading activity and the reporting (e.g. an entity only dealing with EQ derivatives should make sure that only EQ derivatives are reported)

f. Consistency over time of the reporting with the real activity (e.g. volume, amounts, counterparties)

8. Trade Repositories have made their platforms available for testing. The CSSF insists that all participants ensure their ability to submit their trades prior to the go-live date.

The CSSF wishes to reiterate that there has been sufficient time for stakeholders to implement the changes required for EMIR REFIT.

Version française

Le 26 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a publié un rappel concernant la mise en ligne du reporting EMIR Refit le 29 avril 2024.

Dans ce contexte, la CSSF souhaite attirer l’attention des contreparties sur les éléments suivants, avec un accent particulier sur l’importance des tests mentionnés au point 8 :

1. Site Internet de l'ESMA qui contient des informations critiques pour la bonne mise en œuvre d'EMIR REFIT : www.esma.europa.eu/data-reporting/emir-reporting

2. Précédent communiqué de presse CSSF sur EMIR REFIT : www.cssf.lu/wp-content/uploads/PR22_33_EMIR_Refit_reporting_standards_211222.pdf

3. Les entités notifient à la CSSF les erreurs et omissions significatives conformément à l'article 9 de l'ITS sur le reporting.

4. La CSSF surveillera le volume des transactions actuellement soumises, y compris les variations des volumes de transactions déclarées.

5. Si une entité cesse d'exister, elle doit clôturer les transactions (i) d'un point de vue contractuel et (ii) avec des messages de résiliation appropriés aux référentiels centraux concernés.

6. Si une autre entité prend en charge la déclaration pour le compte d'une contrepartie, cette contrepartie doit veiller à ce qu'aucune transaction ne soit oubliée ou déclarée deux fois.

7. Les contreparties sont tenues de contrôler les déclarations qu'elles soumettent ou celles qu'elles soumettent en leur nom et doivent s'assurer de leur exactitude. A titre d’illustration, la CSSF rappelle aux contreparties de mettre en place des contrôles internes tels que (liste non exhaustive) :

un. Identification des valeurs aberrantes (par exemple causées par un mauvais placement des virgules, une mauvaise conversion de devise, de mauvaises données d'entrée)

b. Application du type d'action correct (par exemple MODI vs CORR)

c. Identification et suppression des doublons

d. Vérifications de ponctualité (par exemple, assurer la production de rapports en temps opportun)

e. Cohérence entre l'activité de négociation et le reporting (par exemple, une entité ne traitant que des dérivés EQ doit s'assurer que seuls les dérivés EQ sont déclarés)

F. Cohérence dans le temps du reporting avec l'activité réelle (ex : volume, montants, contreparties)

8. Les référentiels centraux ont mis leurs plateformes à disposition pour des tests. La CSSF insiste pour que tous les participants s'assurent de leur capacité à soumettre leurs transactions avant la date de mise en service.

La CSSF souhaite réitérer que les parties prenantes ont disposé de suffisamment de temps pour mettre en œuvre les changements requis par EMIR REFIT.

On March 13 2023, the Commission de Surveillance du secteur financier (CSSF) updated its FAQ on the submission of the closing documents and financial information by Investment Fund Managers (IFMs).

Depending on the scope of the IFM authorisation, some or all of the documents listed in Annex I are to be submitted. 

If no changes have been made to the organisation chart of the group, the previous organisation chart of the group must be resubmitted. The required group organisation chart is the one referred to in Sub-chapter 2.1, point 10 of Circular CSSF 18/698, i.e. a chart that identifies the direct shareholders and every indirect shareholder having a qualifying holding in the IFM. In any case, the final beneficial owner of the IFM must be identified. The organisation chart must highlight the possible holdings/subsidiaries and branches of the IFM and, in principle, all the entities which are part of the group.

 The following document types have been deleted from the list in Annex I:

• Report of the compliance officer (Responsable du Contrôle (RC)) in charge of controlling compliance with the professional AML/CFT obligations
• Minutes of the meetings of the governing body (board of directors or management board)
• Minutes of the meetings of the conducting officers’ meetings during the year and during which AML/CFT topics have been discussed
• Proof that all the conducting officers and board members of the IFM followed AML/CFT training

Version française

Le 13 mars 2023, la Commission de Surveillance du secteur financier (CSSF) a mis à jour sa FAQ sur la transmission des documents de clôture et des informations financières par les gestionnaires de fonds d'investissement (GFI).

En fonction de la portée de l'agrément IFM, tout ou partie des documents énumérés à l'annexe I doivent être présentés.

Si aucune modification n’a été apportée à l’organigramme du groupe, l’organigramme précédent du groupe doit être soumis à nouveau. L'organigramme du groupe requis est celui visé au sous-chapitre 2.1, point 10 de la circulaire CSSF 18/698, c'est-à-dire un organigramme identifiant les actionnaires directs et chaque actionnaire indirect détenant une participation qualifiée dans le GFI. Dans tous les cas, le bénéficiaire effectif final du GFI doit être identifié. L'organigramme doit mettre en évidence les éventuelles participations/filiales et succursales du GFI et, en principe, toutes les entités qui font partie du groupe.

Les types de documents suivants ont été supprimés de la liste figurant à l'annexe I :

• rapport du Responsable du Contrôle (RC) chargé de contrôler le respect des obligations professionnelles LBC/FT
• procès-verbaux des réunions de l'organe directeur (conseil d'administration ou directoire)
• procès-verbaux des réunions des bureaux directeurs au cours de l'année et au cours desquelles les sujets LBC/FT ont été abordés
• preuve que tous les dirigeants et membres du conseil d'administration de l'IFM ont suivi une formation LBC/FT

On March 21 2024, the Commission de Surveillance du secteur financier (CSSF) published the post liquidation form for multiple sub-funds.

The CSSF specifies that the person submitting the form in the context of a liquidation will recognise that they are authorised to do so on behalf of the sub-funds in the liquidation and that the information is true, accurate ,complete, coherent and in line with the information of the investor as well as prospectus.

Version française

Le 21 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a publié le formulaire post liquidation pour plusieurs compartiments.

La CSSF précise que la personne soumettant le formulaire dans le cadre d'une liquidation reconnaîtra qu'elle est autorisée à le faire au nom des compartiments en liquidation et que les informations sont véridiques, exactes, complètes, cohérentes et conformes aux les informations de l’investisseur ainsi que le prospectus.

BACKGROUND

On 27 November 2002, the CSSF had published the Circular CSSF 02/77 on NAV calculation errors and investment breaches.

It sets guidelines to be followed by investment management professionals in case of errors in the administration or management of a UCI such as NAV calculation errors, non-compliance with the investment rules applicable to UCI, errors at the level of the payment of costs and fees and swing pricing that may occur at the level of a UCI.

WHAT'S NEW?

On March 29 2024, the Commission de Surveillance du secteur financier (CSSF) published the reform of Circular CSSF 02/77 on investor protection in the event of a NAV calculation error, non-compliance with investment rules and other errors.

The Circular also aims at clarifying the roles and responsibilities of the Industry to ensure investor protection and risk-based supervision.

The CSSF is further codifying its NAV errors rules to bring clarity into the responsibilities of each party involved and to broaden the scope to all types of supervised Fund types, including SIFs and SICARs. RAIFs qualifying as MMFs, ELTIFs, EuVECA or EuSEF and supervised by the CSSF also fall into the scope of the Circular.

Significant NAV errors amount for a significant impact on the NAV. The CSSF needs to be notified should a NAV percentage overpasses the tolerance threshold set. This must be corrected based on the rules provided for in Chapter 4.

The tolerance thresholds depend on the investment strategy chosen:

• MMFs = 0,2% NAV
• Bond, Mixed, and UCIs in shares targeting retail = O,5% NAV
• UCIs investing in other assets = 1% NAV
• AIF and ELTIF UCIs investing in RE = possibly higher threshold
• AIFs, ELTIFs, SIFs, SICARs, EuVECA, EuSEF = defined by Board but no higher than 5% NAV

The circular introduces the idea of passive non-compliance (acts or events outside the control of the UCI) and active non-compliance (voluntary acts or operations or the absence of such acts), as well as the two correction methods (accounting and economic).

4 types of “other errors” have been introduced, namely: 

• Swing pricing
• Non-compliance of costs and charges 
• Cut-off rule
• Allocation errors at the investment level

The procedure for the compensation for damages from investor loss and UCI compensation perspective, as well as the de minimis rule for such compensation are defined.

A three-step procedure for auditor intervention in case of significant NAV errors and compliance breaches is also defined.

The depositary must have appropriate procedures in place to guarantee compliance with its monitoring and control missions following risk assessment of its IFMs. The occurrence of errors/non-compliance must be communicated to the depositary. When the depositary notices such errors/non-compliance, it is required to inform the Fund Board or the IFM. If the depositary realises that they do not remedy the error, the depositary must notify the CSSF.

WHAT'S NEXT?

The circular contains a consolidated version of all guidance given by the CSSF on the topic and will enable the CSSF to further develop and implement its risk-based supervision of UCIs. Any error/non-compliance under the scope of the Circular must be notified to the CSSF using the designated notification form on the CSSF website.

The Circular CSSF 24/856 replaces Circular CSSF 02/77 and will take effect as from January 1 2025. 

Version française

BACKGROUND

Le 27 novembre 2002, la CSSF avait publié la Circulaire CSSF 02/77 relative aux erreurs de calcul de la VNI et aux manquements en matière d'investissement.

Elle fixe les lignes directrices à suivre par les professionnels de la gestion en cas d'erreurs dans l'administration ou la gestion d'un OPC telles que des erreurs de calcul de la valeur liquidative, le non-respect des règles d'investissement applicables aux OPC, des erreurs au niveau du niveau de paiement des frais et taxes et du swing pricing pouvant intervenir au niveau d’un OPC.

WHAT'S NEW?

Le 29 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a publié la réforme de la circulaire CSSF 02/77 relative à la protection des investisseurs en cas d'erreur de calcul de la VNI, de non-respect des règles d'investissement et autres erreurs.

La Circulaire vise également à clarifier les rôles et responsabilités du secteur afin d'assurer la protection des investisseurs et une surveillance basée sur les risques.

La CSSF codifie davantage ses règles relatives aux erreurs de VNI afin de clarifier les responsabilités de chaque partie impliquée et d'élargir le champ d'application à tous les types de fonds surveillés, y compris les FIS et les SICAR. Les FIAR qualifiés de MMF, ELTIF, EuVECA ou EuSEF et supervisés par la CSSF entrent également dans le champ d'application de la Circulaire.

Les erreurs significatives de la VNI ont un impact significatif sur la VNI. La CSSF doit être informée si un pourcentage de VNI dépasse le seuil de tolérance fixé. Ceci doit être corrigé selon les règles prévues au chapitre 4.

Les seuils de tolérance dépendent de la stratégie d'investissement choisie :

• fonds monétaires = 0,2% VNI
• obligations, Mixtes et OPC en actions à destination du retail = O,5% VNI
• OPC investissant dans d'autres actifs = 1% VNI
• OPC FIA et ELTIF investissant dans les RE = seuil éventuellement plus élevé
• FIA, ELTIF, SIF, SICAR, EuVECA, EuSEF = définis par le Conseil mais pas supérieur à 5% de la VNI

La circulaire introduit la notion de non-conformité passive (actes ou événements échappant au contrôle de l'UCI) et de non-conformité active (actes ou opérations volontaires ou absence de tels actes), ainsi que les deux méthodes de correction (comptable et économique). ).

4 types d’« autres erreurs » ont été introduits, à savoir :

• tarification swing
• -non-respect des frais et charges
• -règle de coupure
• -erreurs d'allocation au niveau des investissements

La procédure d'indemnisation des dommages dus à la perte de l'investisseur et du point de vue de l'indemnisation des OPC, ainsi que la règle de minimis pour une telle indemnisation sont définies.

Une procédure en trois étapes pour l'intervention de l'auditeur en cas d'erreurs significatives de VNI et de manquements à la conformité est également définie.

Le dépositaire doit disposer de procédures appropriées pour garantir le respect de ses missions de surveillance et de contrôle suite à l’évaluation des risques de ses GFI. La survenance d’erreurs/non-conformités doit être signalée au dépositaire. Lorsque le dépositaire constate de telles erreurs/non-conformités, il est tenu d'en informer le Conseil du Fonds ou le GFI. Si le dépositaire se rend compte qu'il ne remédie pas à l'erreur, il doit en informer la CSSF.

WHAT'S NEXT?

La circulaire contient une version consolidée de toutes les orientations données par la CSSF sur le sujet et permettra à la CSSF de développer et de mettre en œuvre davantage sa surveillance basée sur les risques des OPC. Toute erreur/non-conformité relevant du champ d’application de la Circulaire doit être notifiée à la CSSF au moyen du formulaire de notification prévu à cet effet sur le site Internet de la CSSF.

La Circulaire CSSF 24/856 remplace la Circulaire CSSF 02/77 et entrera en vigueur à compter du 1er janvier 2025.

On March 25 2024, the Commission de Surveillance du secteur financier (CSSF) launched a new web page dedicated to the Digital Operational Resilience Act (DORA).

The Digital Operational Resilience Act (DORA) which will be applicable to no less than 20 types of financial entities as from January 17 2025.

The objective of the web page is to provide financial entities with an introduction to DORA, as well as continuous updates on the latest developments.

Version française

Le 25 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a lancé une nouvelle page web dédiée à la Loi sur la résilience opérationnelle numérique (DORA).

Le Digital Operational Resilience Act (DORA) qui sera applicable à pas moins de 20 types d’entités financières à compter du 17 janvier 2025.

L'objectif de la page Web est de fournir aux entités financières une introduction à DORA, ainsi que des mises à jour continues sur les derniers développements.

BACKGROUND

Circular CSSF 24/847 requires entities subject to the supervision of the CSSF to notify the CSSF of major ICT-related incidents. These notifications are required to be submitted either via an eDesk procedure, called “Major ICT-related Incident Notification” procedure, or via an API (S3 protocol), both established by the CSSF.

To help Supervised Entities with the submission of their notifications a detailed user guide on Major ICT-related Incident Notification has been developed and is available on the eDesk Portal. This user guide explains the procedures for completing and submitting the ICT-related incident notifications with both channels.

WHAT'S NEW?

On March 27 2024, the Commission de Surveillance du secteur financier (CSSF) published additional guidance regarding the new reporting procedure for ICT-related incident reporting according to Circular CSSF 24/847.

Notifications shall be submitted via one of the two below methods:

• Dedicated procedure on CSSF eDesk Portal
• Application Programming Interface (“API”) solution S3

The eDesk Portal allows Supervised Entities to:

a) fill in and submit major ICT-related incident notifications with attachments online in three phases: Initial notification (“Initial information”); Intermediate notification (“Incident cause, classification and impact”); and Final notification (“Root cause, follow up and additional information”)

b) exchange comments with the CSSF regarding each notified major ICT-related incident

c) submit updates of notifications when applicable.

The S3 protocol allows Supervised Entities to perform a) and c) above. 

Each section of a notification form can be accessed by clicking on the corresponding name of the section in the navigation Menu.

1. Initial information: This section gathers the general information about the incident.

2. Incident cause, classification and impact: This second section provides a more detailed description of the incident, its consequences and the corrective measures that were taken to recover.

3. Root cause, follow up and additional information: This third section provides information regarding the root cause analysis, lessons learned and any other relevant information. When submitting this information, the Supervised Entity shall review the other sections and update these, where appropriate.

The section “Initial information” of a notification shall be submitted first, followed by the section “Incident cause, classification and impact”, and lastly the section “Root cause, follow up and additional information”. 

The user shall always save the filled in information by clicking on the “Save” button at the bottom of the section prior to submitting any section of an incident notification. Any saved section will have the status “Draft” and will not yet be visible by the CSSF.  

If the Supervised Entity has updates to an incident report already submitted, an updated version of the form may be submitted. In this case, the user shall click on the action “Modify”, that is only available at status “Submitted”. 

An incident notification with the status “Closed” can no longer be modified. New document(s) or comment(s) can however still be added and submitted.

In case the incident no longer fulfils the criteria to be considered as major, the user can reclassify the incident notification in the system. The incident shall then be reclassified as minor by ticking the dedicated box at the top of the “Initial notification” section of the notification form. Supervised entities must provide the date and an explanation of the reasons for this reclassification. This option is only available after the initial submission of the notification form. 

The “Comments” part allows the CSSF and supervised entities to exchange comments about the information submitted in the form. 

The “Save” button will only save a draft version of a comment but will not send the comment to the CSSF. To send a comment to the CSSF, the user shall click on the “Publish” icon and confirm the action in the pop-up window. Once the comment is published to the CSSF it can no longer be edited or deleted.  

To submit data using S3, Supervised Entities must enrol themselves using the “IT Expert” role. Please refer to the S3 User Guide “Methods of transmitting reports via S3 Application Programming Interface - Technical guidance” available for detailed explanations on how S3 works and the enrolment process: www.cssf.lu/en/methods-of-transmitting-reports-via-api/ Data concerning Major ICT-related Incident Notification for Supervised Entities shall be reported in JavaScript Object Notation (JSON) format file with the extension “.json”. The S3 submission can either be done via a single file containing the 3 sections1 of the form, or via separated files containing only certain sections of the form. 

Major ICT-related Incident Notifications submitted through S3 can also be completed or corrected via the eDesk platform and vice-versa. 

It is up to the submitting entity to monitor transmission correctness. A feedback file in JSON format is systematically generated for each file submitted to the CSSF via the S3 protocol and is made available in the “feedback” folder of the Supervised Entity. This “feedback” folder is automatically created after an initial transmission of file to the CSSF. The JSON schema for the feedback file is available here:  edesk.apps.cssf.lu/edeskdashboard/docs/epi/jsonschema/v1_0_0/mictir-feedback-jsonschemav1_0_0 The Supervised Entity shall ensure that a feedback file has been received for the last file sent to the CSSF before submitting a new file.  Note that feedback generation could take some time. If the Supervised Entity does not receive a response within one working day, please contact our dedicated technical support team at edesk@cssf.lu. 

When at least one of the technical validation rules has not been met, the “status” is “Rejected”. Note that even though a CSSF file reference (i.e. Tracking code) is assigned to the rejected notification, it is not considered as being correctly submitted to the CSSF. A rejected notification cannot be updated, the Supervised Entity shall correct the file and upload it again. In such case, a new CSSF file reference will be assigned to the new submission. 

WHAT'S NEXT?

CSSF reminds Supervised Entities that Circular CSSF 24/847 entered into force on April 1 2024 and on June 1 2024 for the two types of Supervised Entities, and on these dates repeals and replaces Circular CSSF 11/504 on “Frauds and incidents due to external computer attacks”. 

Version française

BACKGROUND

La circulaire CSSF 24/847 impose aux entités soumises à la surveillance de la CSSF de notifier à la CSSF les incidents majeurs liés aux TIC. Ces notifications doivent obligatoirement être introduites soit via une procédure eDesk, dite procédure de « Major ICT-Related Incident Notification », soit via une API (protocole S3), toutes deux établies par la CSSF.

Pour aider les entités supervisées à soumettre leurs notifications, un guide d'utilisation détaillé sur la notification des incidents majeurs liés aux TIC a été élaboré et est disponible sur le portail eDesk. Ce guide d'utilisation explique les procédures pour remplir et soumettre les notifications d'incidents liés aux TIC avec les deux canaux.

WHAT'S NEW?

Le 27 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a publié des orientations supplémentaires concernant la nouvelle procédure de déclaration des incidents liés aux TIC selon la circulaire CSSF 24/847.

Les notifications doivent être soumises via l’une des deux méthodes ci-dessous :

• procédure dédiée sur le portail CSSF eDesk
• solution d'interface de programmation d'application (« API ») S3

Le portail eDesk permet aux entités supervisées de :

a) remplir et soumettre en ligne les notifications d'incidents majeurs liés aux TIC avec pièces jointes en trois phases : notification initiale (« informations initiales » ); Notification intermédiaire (« Cause de l'incident, classification et impact ») ; et Notification finale (« Cause fondamentale, suivi et informations supplémentaires »)

b) échanger des commentaires avec la CSSF concernant chaque incident majeur lié aux TIC notifié

c) soumettre des mises à jour des notifications, le cas échéant.

Le protocole S3 permet aux entités supervisées d'effectuer les opérations a) et c) ci-dessus.

Chaque section d'un formulaire de notification est accessible en cliquant sur le nom correspondant de la section dans le menu de navigation.

1. Informations initiales : Cette section rassemble les informations générales sur l'incident.

2. Cause, classification et impact de l'incident : Cette deuxième section fournit une description plus détaillée de l'incident, de ses conséquences et des mesures correctives qui ont été prises pour récupérer.

3. Cause fondamentale, suivi et informations supplémentaires : Cette troisième section fournit des informations concernant l'analyse des causes profondes, les enseignements tirés et toute autre information pertinente. Lors de la soumission de ces informations, l'entité surveillée examinera les autres sections et les mettra à jour, le cas échéant.

La section « Informations initiales » d'une notification doit être soumise en premier, suivie de la section « Cause, classification et impact de l'incident » et enfin de la section « Cause fondamentale, suivi et informations supplémentaires ».

L'utilisateur doit toujours sauvegarder les informations renseignées en cliquant sur le bouton « Enregistrer » en bas de la section avant de soumettre une section d'une notification d'incident. Toute section enregistrée aura le statut « Projet » et ne sera pas encore visible par la CSSF.

Si l'entité supervisée dispose de mises à jour d'un rapport d'incident déjà soumis, une version mise à jour du formulaire peut être soumise. Dans ce cas, l'utilisateur devra cliquer sur l'action « Modifier », qui n'est disponible qu'au statut « Soumis ».

Une notification d'incident ayant le statut « Fermé » ne peut plus être modifiée. De nouveaux documents ou commentaires peuvent toutefois toujours être ajoutés et soumis.

Dans le cas où l'incident ne remplit plus les critères pour être considéré comme majeur, l'utilisateur peut reclasser la notification d'incident dans le système. L’incident sera alors requalifié en mineur en cochant la case dédiée en haut de la rubrique « Notification initiale » du formulaire de notification. Les entités surveillées doivent fournir la date et une explication des raisons de ce reclassement. Cette option n'est disponible qu'après la soumission initiale du formulaire de notification.

La partie « Commentaires » permet à la CSSF et aux entités surveillées d’échanger des commentaires sur les informations soumises dans le formulaire.

Le bouton « Enregistrer » sauvegardera uniquement une version brouillon d’un commentaire mais n’enverra pas le commentaire à la CSSF. Pour envoyer un commentaire à la CSSF, l'utilisateur doit cliquer sur l'icône « Publier » et confirmer l'action dans la fenêtre pop-up. Une fois le commentaire publié à la CSSF, il ne peut plus être modifié ou supprimé.

Pour soumettre des données à l'aide de S3, les entités supervisées doivent s'inscrire elles-mêmes en utilisant le rôle « Expert informatique ». Veuillez vous référer au guide de l'utilisateur S3 « Méthodes de transmission de rapports via l'interface de programmation d'application S3 - Conseils techniques » disponible pour des explications détaillées sur le fonctionnement de S3 et le processus d'inscription : www.cssf.lu/en/methods-of- transmission-reports-via-api/ Les données concernant la notification d'incidents majeurs liés aux TIC pour les entités supervisées doivent être signalées dans un fichier au format JavaScript Object Notation (JSON) avec l'extension « .json ». La soumission S3 peut se faire soit via un fichier unique contenant les 3 sections1 du formulaire, soit via des fichiers séparés ne contenant que certaines sections du formulaire.

Les notifications d'incidents majeurs liés aux TIC soumises via S3 peuvent également être complétées ou corrigées via la plateforme eDesk et vice versa.

Il appartient à l'entité soumettante de contrôler l'exactitude de la transmission. Un fichier feedback au format JSON est systématiquement généré pour chaque dossier soumis à la CSSF via le protocole S3 et est mis à disposition dans le dossier « feedback » de l’Entité Supervisée. Ce dossier « feedback » est automatiquement créé après une première transmission de fichier à la CSSF. Le schéma JSON pour le fichier de feedback est disponible ici : edesk.apps.cssf.lu/edeskdashboard/docs/epi/jsonschema/v1_0_0/mictir-feedback-jsonschemav1_0_0 L'entité supervisée doit s'assurer qu'un fichier de feedback a été reçu. pour le dernier dossier transmis à la CSSF avant de soumettre un nouveau dossier. Notez que la génération de commentaires peut prendre un certain temps. Si l’Entité Supervisée ne reçoit pas de réponse dans un délai d’un jour ouvrable, veuillez contacter notre équipe d’assistance technique dédiée à edesk@cssf.lu.

Lorsqu’au moins une des règles techniques de validation n’est pas respectée, le « statut » est « Rejeté ». Notez que même si une référence de fichier CSSF (c'est-à-dire un code de suivi) est attribuée à la notification rejetée, elle n'est pas considérée comme correctement soumise à la CSSF. Une notification rejetée ne peut pas être mise à jour, l'entité surveillée corrigera le fichier et le téléchargera à nouveau. Dans ce cas, une nouvelle référence de fichier CSSF sera attribuée à la nouvelle soumission.

WHAT'S NEXT?

La CSSF rappelle aux Entités surveillées que la Circulaire CSSF 24/847 est entrée en vigueur le 1er avril 2024 et le 1er juin 2024 pour les deux types d’Entités surveillées, et à ces dates abroge et remplace la Circulaire CSSF 11/504 relative aux « Fraudes et incidents dus à des causes externes ». attaques informatiques ».

BACKGROUND

Ensuring greater convergence in the supervision of risks stemming from incorrect and misleading disclosures is central to the effort to foster transparency and is identified as one of the Union Strategic Supervisory Priorities for NCAs. The CSA will promote this goal by improving the comprehensibility of ESG disclosures by asset managers across key segments of the sustainable finance value chain. In addition, the preliminary findings on the identification of greenwashing risks at entity and product level will provide input to ESMA’s Final Report on greenwashing.

The CSA follows a two-stage process where in the first stage (which is now completed), the CSSF requested a sample of UCITS Managers and AIFMs to complete a questionnaire focusing more closely on greenwashing risks.

WHAT'S NEW?

On March 22 2024, the Commisssion de Surveillance du secteur financier (CSSF) announced the second stage of the ESMA Common Supervisory Action (CSA) on sustainability risks and disclosures in the investment fund sector.

The aim of the CSA is to investigate how UCITS Managers and AIFMs comply with the relevant provisions in the Sustainable Finance Disclosure Regulation, the Taxonomy Regulation and relevant implementing measures, including the relevant provisions in the UCITS and AIFMD implementing acts on the integration of sustainability risks.

In the second stage, the CSSF will request the same UCITS Managers and AIFMs as in the first stage to complete a questionnaire dedicated to the integration of sustainability risks and factors in their organisational arrangements and to the transparency disclosures at IFM and product level.

On March 19 2024, the CSSF contacted by email the Luxembourg-based UCITS Managers and AIFMs that are in scope of this CSA. The UCITS Managers and AIFMs that did not receive an email from the CSSF on March 19 2024 on this subject matter are not involved in this exercise. Technical information and deadlines have been shared with the selected entities on a bilateral basis.

WHAT'S NEXT?

Until Q3 2024, the CSSF will undertake supervisory activities and share knowledge and experiences with ESMA to foster convergence in how it supervises sustainability-related disclosures and sustainability risk integration in asset managers. 

Version française

BACKGROUND

Garantir une plus grande convergence dans la surveillance des risques découlant de déclarations incorrectes ou trompeuses est au cœur des efforts visant à favoriser la transparence et est identifié comme l’une des priorités stratégiques de l’Union en matière de surveillance pour les ANC. Les ACVM promouvront cet objectif en améliorant la compréhensibilité des informations ESG fournies par les gestionnaires d’actifs dans les segments clés de la chaîne de valeur de la finance durable. En outre, les conclusions préliminaires sur l’identification des risques de greenwashing au niveau de l’entité et du produit alimenteront le rapport final de l’ESMA sur le greenwashing.

Le CSA suit un processus en deux étapes. Dans la première étape (qui est désormais terminée), la CSSF a demandé à un échantillon de gestionnaires d'OPCVM et de gestionnaires de fonds alternatifs de remplir un questionnaire plus axé sur les risques de greenwashing.

WHAT'S NEW?

Le 22 mars 2024, la Commission de surveillance du secteur financier (CSSF) a annoncé la deuxième étape de l'action de surveillance commune (ASC) de l'ESMA sur les risques et informations en matière de durabilité dans le secteur des fonds d'investissement.

L'objectif de l'ASC est d'examiner comment les gestionnaires d'OPCVM et les GFIA se conforment aux dispositions pertinentes du règlement sur la divulgation d'informations en matière de finance durable, du règlement sur la taxonomie et des mesures d'exécution pertinentes, y compris les dispositions pertinentes des actes d'exécution des OPCVM et des GFIA sur l'intégration des risques de durabilité.

Dans un deuxième temps, la CSSF demandera aux mêmes gestionnaires d'OPCVM et gestionnaires de fonds alternatifs que lors de la première étape de remplir un questionnaire dédié à l'intégration des risques et facteurs de durabilité dans leurs dispositifs organisationnels et aux informations de transparence au niveau du GFI et des produits.

Le 19 mars 2024, la CSSF a contacté par email les gestionnaires d'OPCVM et les gestionnaires de FIA basés au Luxembourg qui relèvent du champ d'application de la présente ASC. Les gestionnaires d'OPCVM et les GFIA n'ayant pas reçu de courrier électronique de la CSSF le 19 mars 2024 à ce sujet ne sont pas concernés par cet exercice. Les informations techniques et les délais ont été partagés avec les entités sélectionnées sur une base bilatérale.

WHAT'S NEXT?

Jusqu’au troisième trimestre 2024, la CSSF entreprendra des activités de surveillance et partagera ses connaissances et ses expériences avec l’ESMA afin de favoriser la convergence dans la manière dont elle supervise les informations liées à la durabilité et l’intégration des risques de durabilité dans les gestionnaires d’actifs.

On March 22 2024, the Commission de Surveillance du secteur financier (CSSF) published their supervisory priorities in the area of sustainable finance.

The focus areas are the following:

• Supervisory priorities for credit institutions
  1. Transparency and disclosures
  2. Risk management and governance
  3. MiFID rules related to sustainability
• Supervisory priorities for the asset management industry
  1. Organisational arrangements of IFMs, including the integration of sustainability risks by financial market participants
  2. Verification of the compliance of pre-contractual and periodic disclosures
  3. Verification of the consistency of information in fund documentation and marketing material
  4. Verification of the compliance of product website disclosures
  5. Portfolio analysis
• Supervisory priorities for investment firms
  1. Transparency and Disclosures
  2. Risk management and governance
  3. MiFID rules related to sustainability
• Supervisory priorities for issuers
  Monitoring and assessing the application of the relevant reporting requirements.

Lastly, the CSSF reiterates its intention to participate into the international cooperation in sustainable finance and provides a schedule of supervision exercises at the initiative of the European authorities.

Version française

Le 22 mars 2024, la Commission de Surveillance du secteur financier (CSSF) a publié ses priorités de surveillance en matière de finance durable.

Les domaines d’intervention sont les suivants :

• Priorités de surveillance des établissements de crédit
  1. Transparence et divulgations
  2. Gestion des risques et gouvernance
  3. Règles MiFID liées à la durabilité
• Priorités de surveillance du secteur de la gestion d'actifs
  1. Dispositions organisationnelles des GFI, y compris l'intégration des risques de durabilité par les acteurs des marchés financiers
  2. Vérification de la conformité des informations précontractuelles et périodiques
  3. Vérification de la cohérence des informations contenues dans la documentation du fonds et dans les supports marketing
  4. Vérification de la conformité des informations fournies sur les sites Internet des produits
  5. Analyse du portefeuille
• Priorités de surveillance des entreprises d'investissement
  1. Transparence et divulgations
  2. Gestion des risques et gouvernance
  3. Règles MiFID liées à la durabilité
• Priorités de surveillance des émetteurs
  Surveiller et évaluer l’application des exigences de reporting pertinentes.

Enfin, la CSSF réitère son intention de participer à la coopération internationale en matière de finance durable et propose un calendrier d'exercices de surveillance à l'initiative des autorités européennes.

BACKGROUND

The new CSRD Directive constitutes a real paradigm shift compared to the pre-existing regime, namely that arising from Directive (EU) 2014/95 as regards the publication of non-financial information and information relating to diversity by certain large companies and certain groups (NFRD). CSRD must be transposed into law by Member States by July 6 2024 at the latest.

Given the high inflation which marked the years 2021 and 2022, and more generally inflation over the ten-year period from 2013 (adoption of Accounting Directive 2013/34/EU) to 2023, the thresholds referred to in Article 3, paragraphs 1 to 7, of the Accounting Directive have been adjusted by 25% and rounded up by CSRD.

CSRD provides that the (consolidated) sustainability information to be published by companies and groups is established according to a set of standards, the European Sustainability Reporting Standards (ESRS). 

CSRD considerably broadens the scope of application for the obligation to provide information regarding sustainability aiming in particular:

• all large companies (including those whose securities are not admitted trading on a regulated market);
• all SMEs – with the exception of micro-enterprises – including securities admitted to trading on a regulated market;
• all parent companies at the head of a large group;
• Companies from third countries whose securities admitted to trading on an EU regulated market;
• companies from third countries which carry out a significant activity in the EU territory and which exceed certain thresholds.

CSRD therefore targets all SMEs whose securities are admitted to trading on a regulated market.

CSRD obliges the auditor of the legal entity to issue, on the basis of a limited assurance mission, an opinion on the compliance of the (consolidated) information on sustainability with CSRD and in particular with:

• the ESRS standards for SMEs;
• the process implemented by the company or group to determine the information published in accordance with ESRS;
• the requirement for marking out (consolidated) information regarding sustainability;
• the published information requirements provided for in Article 8 of Regulation (EU) 2020/852 (Taxonomy Regulation).

WHAT'S NEW?

On March 29 2024, the Chambre des députés of Luxembourg laid a Bill transposing Directive (EU) 2022/2464 as regards corporate sustainability reporting (CSRD).

The Bill also transposes the Commission Delegated Directive (EU) 2023/2775 as regards the adjustment of the size criteria for micro, small, medium and large companies or groups and modifies the amended Law of December 19 2002 on the Trade and Companies Register and the accounting and annual accounts of companies, the amended Law of August 10 1915 concerning commercial companies, the amended Law of June 17 1992 on the annual accounts and consolidated accounts of credit institutions, the amended Law of April 5 1993 on the financial sector, the amended Law of December 8 1994 on the annual accounts and consolidated accounts of insurance and reinsurance undertakings, the amended Law of January 11 2008 on issuers' transparency obligations, the amended Law of December 7 2015 on the insurance sector, and the amended Law of July 23 2016 on the audit profession.

In Luxembourg, the statutory auditor in charge of the limited assurance mission on the (consolidated) sustainability information can be the statutory auditor of the company or group (réviseur d’entreprises agréé) or another statutory auditor as the one in charge of the audit of the financial statements. Luxembourg does not allow to exercise the  option allowing independent service providers other than a statutory auditor to carry out the limited assurance mission on the (consolidated) sustainability information.

Companies whose securities are admitted to trading on an EU regulated market may be subject to administrative sanctions by their national authority competent authority (NCA) (CSSF in Luxembourg). Where applicable, criminal sanctions may also apply. With regard to companies and parent companies covered by CSRD other than those whose securities are admitted to trading on an EU regulated market, they will not be subject to enforcement by the CSSF as the NCA. Nevertheless, these companies may see criminal sanctions imposed in the event of failure to fulfill their obligations relating to (consolidated) sustainability information. Beyond criminal sanctions, non-compliance with provisions relating to (consolidated) sustainability information by the company or group  could be accompanied by a reputational risk vis-à-vis civil society, by a market risk with regard to its value chain and above all a risk of interruption of access to sources of financing vis-à-vis bankers and other lenders.

Companies and parent companies will have to:

• establish their (consolidated) management report in xHTML,
• mark (“tagging”) their (consolidated) sustainability information, including information to be published provided for in Article 8 of Taxonomy Regulation (EU) 2020/852, in accordance with iXBRL.

In Luxembourg, the annual accounts are filed with the RCS either in PDF or in XML format (for part of the accounting package), the submission of the (consolidated) management report and its (consolidated) sustainability information will require adaptation of the RCS filing platform to receive a new format of data. The advantage of using this European electronic information format lies in the fact that this information will be directly usable by machine, which will promote quantitative exploitation of the data present in the (consolidated) management reports and in the (consolidated) sustainability information.

Article 150 of the Bill aims to modify article 39 of the law of July 23, 2016. Article 39 relating to the quality assurance system is amended to include the assurance of sustainability information mission and thus extend the mission of the CSSF to implement a system from quality assurance to sustainability information assurance. For example, it is planned that the CSSF inspectors satisfy certain criteria, including the fact of having a professional training and relevant experience with regard to sustainability information. The quality assurance examination will therefore also cover the files selected in the future.

When the recommendations of the CSSF (article 40, paragraph 1) have not been implemented, or when the quality examination carried out by the CSSF reveals breaches of legal and regulatory requirements relating to the legal audit of accounts or even the assurance of sustainability information, the CSSF can, depending on the aim pursued and the seriousness of the breach, impose preventive measures falling under Article 42 and/or sanctions or other administrative measures in accordance with Article 43. Article 40, paragraph 2 confirms that the CSSF may pronounce, alternatively or cumulatively, preventive measures. These will always be followed by a case-by-case assessment in light of the principle of proportionality.

This results, for example, if an approved auditor who has not implemented the recommendations made by the CSSF or who is guilty of a breach of the legal and regulatory requirements relating to the statutory audit of accounts or even the assurance of sustainability information could both be the subject of a specific monitoring measure for a maximum duration of 18 months (preventive measure aimed at ensuring that the approved company auditor will demonstrate more diligence in the future, when he controls the accounts and will not commit any other breaches) and be fined.

The CSSF may also impose a temporary ban for a maximum period of three years against the approved company auditor, the approved audit firm or the main partner in matters of sustainability to carry out assurance of sustainability information and, where applicable, to sign assurance reports on sustainability information. The CSSF can impose a declaration indicating that the sustainability information assurance report does not meet the requirements of article 35bis of the law of July 23, 2016. The CSSF must immediately communicate to the Committee of European Auditing Oversight Bodies (CEAOB) all temporary bans imposed.

In the absence of a decision of equivalence of the European Commission in relation to auditing standards and ethical rules of third countries applicable to the audit of annual or consolidated financial statements and to the assurance of sustainability information annual or consolidated, the CSSF will assess this equivalence.

WHAT'S NEXT?

European Securities and Markets Authority (ESMA) will publish guidelines to promote convergent supervision among Member States. 

Until December 31, 2025, the persons responsible for public supervision of the audit who carry out quality assurance reviews relating to the assurance of sustainability information are exempted of the requirement to have relevant experience in relation to sustainability information, assurance in relation to sustainability information or other sustainability-related services. This  concerns CSSF staff assigned to this task. 

CSRD provides for a gradual approach to its application. The dates vary depending on each category of companies or parent companies:

• 01/01/2024: Large companies and parent companies whose transferable securities are admitted to trading on an EU regulated market and which employ more than 500 employees.
• 01/01/2025: Large companies exceeding at least two of the three criteria: 
• 01/01/2026: SMEs whose transferable securities are admitted to trading on an EU regulated market and are not microenterprises, small and non-small credit institutions and insurance and reinsurance companies which are large companies or SMEs (excluding microenterprises) whose securities are admitted to trading on a regulated market.
• 01/01/2018: Third country companies achieving at least EUR 150 million net sales figures in the EU, having at least a large subsidiary company or a subsidiary SME whose securities are admitted to the trading on an EU regulated market, without a branch making more than EUR 40 million in net sales.

Version française

BACKGROUND

La nouvelle Directive CSRD constitue un véritable changement de paradigme par rapport au régime préexistant, à savoir celui issu de la Directive (UE) 2014/95 en matière de publication d'informations extra-financières et d'informations relatives à la diversité par certaines grandes entreprises et certains groupes ( NFRD). La CSRD doit être transposée dans la loi par les États membres au plus tard le 6 juillet 2024.

Compte tenu de l'inflation élevée qui a marqué les années 2021 et 2022, et plus généralement de l'inflation sur la période décennale allant de 2013 (adoption de la directive comptable 2013/34/UE) à 2023, les seuils visés à l'article 3, paragraphes 1 à 7 , de la Directive Comptable ont été ajustés de 25% et arrondis par CSRD.

Le CSRD prévoit que les informations (consolidées) en matière de durabilité à publier par les entreprises et les groupes sont établies selon un ensemble de normes, les European Sustainability Reporting Standards (ESRS).

Le CSRD élargit considérablement le champ d’application de l’obligation d’information en matière de durabilité visant notamment :

• toutes les grandes entreprises (y compris celles dont les titres ne sont pas admis aux négociations sur un marché réglementé) ;
• toutes les PME – à l'exception des micro-entreprises – y compris les titres admis aux négociations sur un marché réglementé ;
• toutes les sociétés mères à la tête d'un grand groupe ;
• les sociétés de pays tiers dont les titres sont admis à la négociation sur un marché réglementé de l'UE ;
• les entreprises de pays tiers qui exercent une activité significative sur le territoire de l'UE et qui dépassent certains seuils.

Le CSRD s'adresse donc à toutes les PME dont les titres sont admis aux négociations sur un marché réglementé.

CSRD oblige le commissaire aux comptes de la personne morale à émettre, sur la base d'une mission d'assurance limitée, une opinion sur la conformité des informations (consolidées) en matière de durabilité avec CSRD et notamment avec :

• les normes ESRS pour les PME ;
• Le processus mis en œuvre par la société ou le groupe pour déterminer les informations publiées conformément à l'ESRS ;
• l'obligation de baliser les informations (consolidées) concernant la durabilité ;
• les exigences d'information publiée prévues à l'article 8 du règlement (UE) 2020/852 (règlement taxonomie).

WHAT'S NEW?

Le 29 mars 2024, la Chambre des députés du Luxembourg a déposé un projet de loi transposant la directive (UE) 2022/2464 en matière de reporting développement durable des entreprises (CSRD).

Le projet de loi transpose également la directive déléguée (UE) 2023/2775 de la Commission en ce qui concerne l'ajustement des critères de taille pour les micro, petites, moyennes et grandes entreprises ou groupes et modifie la loi modifiée du 19 décembre 2002 relative au registre du commerce et des sociétés et au registre du commerce et des sociétés. comptabilité et comptes annuels des sociétés, la loi modifiée du 10 août 1915 relative aux sociétés commerciales, la loi modifiée du 17 juin 1992 relative aux comptes annuels et aux comptes consolidés des établissements de crédit, la loi modifiée du 5 avril 1993 relative au secteur financier, la loi modifiée Loi du 8 décembre 1994 relative aux comptes annuels et aux comptes consolidés des entreprises d'assurance et de réassurance, la loi modifiée du 11 janvier 2008 relative aux obligations de transparence des émetteurs, la loi modifiée du 7 décembre 2015 relative au secteur des assurances et la loi modifiée du 23 juillet 2016 sur la profession d'audit.

Au Luxembourg, le commissaire chargé de la mission d'assurance limitée sur les informations (consolidées) en matière de durabilité peut être le réviseur d'entreprises agréé de la société ou du groupe ou un autre commissaire aux comptes comme celui en charge de l'audit de les états financiers. Le Luxembourg n'autorise pas l'exercice de la possibilité permettant à des prestataires de services indépendants autres qu'un commissaire aux comptes d'effectuer la mission d'assurance limitée sur les informations (consolidées) en matière de durabilité.

Les sociétés dont les titres sont admis à la négociation sur un marché réglementé de l'UE peuvent faire l'objet de sanctions administratives de la part de leur autorité nationale compétente (ANC) (CSSF au Luxembourg). Le cas échéant, des sanctions pénales peuvent également s'appliquer. En ce qui concerne les sociétés et sociétés mères couvertes par la CSRD autres que celles dont les titres sont admis aux négociations sur un marché réglementé de l'UE, elles ne seront pas soumises à l'application de la CSSF en tant qu'ACN. Néanmoins, ces entreprises peuvent se voir imposer des sanctions pénales en cas de manquement à leurs obligations en matière d'informations (consolidées) en matière de durabilité. Au-delà des sanctions pénales, le non-respect des dispositions relatives aux informations (consolidées) en matière de durabilité par l'entreprise ou le groupe pourrait s'accompagner d'un risque de réputation vis-à-vis de la société civile, d'un risque de marché au regard de sa chaîne de valeur et surtout d'un risque d’interruption de l’accès aux sources de financement vis-à-vis des banquiers et autres prêteurs.

Les sociétés et sociétés mères devront :

• établir leur rapport de gestion (consolidé) en xHTML,
• marquer (« tagging ») leurs informations (consolidées) en matière de durabilité, y compris les informations à publier prévues à l'article 8 du règlement taxonomie (UE) 2020/852, conformément à iXBRL.

Au Luxembourg, les comptes annuels sont déposés au RCS soit au format PDF soit au format XML (pour une partie du progiciel comptable), la remise du rapport de gestion (consolidé) et de ses informations (consolidées) en matière de durabilité nécessitera une adaptation du dépôt au RCS plateforme pour recevoir un nouveau format de données. L'avantage d'utiliser ce format d'information électronique européen réside dans le fait que ces informations seront directement exploitables par machine, ce qui favorisera l'exploitation quantitative des données présentes dans les rapports de gestion (consolidés) et dans les informations (consolidées) de durabilité.

L'article 150 du projet de loi vise à modifier l'article 39 de la loi du 23 juillet 2016. L'article 39 relatif au système d'assurance qualité est modifié pour inclure la mission d'information d'assurance de durabilité et ainsi étendre la mission de la CSSF pour mettre en œuvre un système de de l'assurance qualité à l'assurance des informations sur la durabilité. Par exemple, il est prévu que les inspecteurs de la CSSF satisfassent à certains critères, parmi lesquels le fait de disposer d'une formation professionnelle et d'une expérience pertinente en matière d'informations en matière de durabilité. L’examen d’assurance qualité portera donc également sur les dossiers sélectionnés à l’avenir.

Lorsque les recommandations de la CSSF (article 40, paragraphe 1) n'ont pas été mises en œuvre, ou lorsque l'examen de qualité réalisé par la CSSF révèle des manquements aux exigences légales et réglementaires relatives au contrôle légal des comptes ou encore à l'assurance des informations en matière de durabilité, la CSSF peut, en fonction du but poursuivi et de la gravité du manquement, imposer des mesures préventives relevant de l'article 42 et/ou des sanctions ou autres mesures administratives conformément à l'article 43. L'article 40, paragraphe 2 confirme que la CSSF peut prononcer, alternativement ou cumulativement, des mesures préventives. Celles-ci seront toujours suivies d’une évaluation au cas par cas à la lumière du principe de proportionnalité.

Cela se produit par exemple si un réviseur d'entreprises agréé qui n'a pas mis en œuvre les recommandations formulées par la CSSF ou qui s'est rendu coupable d'un manquement aux exigences légales et réglementaires relatives au contrôle légal des comptes ou encore à l'assurance des informations en matière de durabilité pourrait à la fois être faire l'objet d'une mesure de surveillance spécifique d'une durée maximale de 18 mois (mesure préventive visant à garantir que le réviseur d'entreprise agréé fera preuve à l'avenir de plus de diligence, lorsqu'il contrôlera les comptes et ne commettra pas d'autres manquements) et sera sanctionné.

La CSSF peut également imposer une interdiction temporaire, pour une durée maximale de trois ans, au réviseur d'entreprise agréé, au cabinet d'audit agréé ou à l'associé principal en matière de développement durable de procéder à l'assurance des informations en matière de développement durable et, le cas échéant, de signer des rapports d'assurance sur informations sur la durabilité. La CSSF peut imposer une déclaration indiquant que le rapport d'assurance des informations en matière de durabilité ne satisfait pas aux exigences de l'article 35bis de la loi du 23 juillet 2016. La CSSF doit immédiatement communiquer au Comité européen des organismes de surveillance de l'audit (CEAOB) toutes les interdictions temporaires prononcées.

En l’absence de décision d’équivalence de la Commission européenne en matière de normes d’audit et de règles de déontologie des pays tiers applicables à l’audit des comptes annuels ou consolidés et à l’assurance des informations en matière de durabilité annuelles ou consolidées, la CSSF appréciera cette équivalence.

WHAT'S NEXT?

L'Autorité européenne des marchés financiers (ESMA) publiera des lignes directrices visant à promouvoir une surveillance convergente entre les États membres.

Jusqu'au 31 décembre 2025, les personnes chargées du contrôle public de l'audit qui effectuent des examens d'assurance qualité relatifs à l'assurance des informations en matière de durabilité sont dispensées de l'exigence d'avoir une expérience pertinente en matière d'informations en matière de durabilité, d'assurance en matière d'informations en matière de durabilité ou d'autres services liés au développement durable. Cela concerne le personnel de la CSSF affecté à cette tâche.

Le CSRD prévoit une approche progressive de son application. Les dates varient en fonction de chaque catégorie de sociétés ou sociétés mères :

• 01/01/2024 : Grandes entreprises et sociétés mères dont les valeurs mobilières sont admises aux négociations sur un marché réglementé de l'UE et qui emploient plus de 500 salariés.
• 01/01/2025 : Grandes entreprises dépassant au moins deux des trois critères :
• 01/01/2026 : PME dont les valeurs mobilières sont admises aux négociations sur un marché réglementé de l'UE et ne sont pas des microentreprises, petits et grands établissements de crédit et entreprises d'assurance et de réassurance qui sont de grandes entreprises ou PME (hors microentreprises) dont les titres sont admis aux négociations sur un marché réglementé.
• 01/01/2018 : Entreprises de pays tiers réalisant au moins 150 millions d'euros de chiffre d'affaires net dans l'UE, ayant au moins une grande filiale ou une filiale PME dont les titres sont admis à la négociation sur un marché réglementé de l'UE, sans succursale réalisant plus de 40 millions d'euros de chiffre d'affaires net.

On March 27 2024, the Malaysian House of Representatives approved the Cyber Security Act 2024.

This Bill seeks to enhance the national cyber security by requiring compliance of certain measures, standards and processes in the management of the cyber security threats and cyber security incidents to national critical information infrastructures. This is due to the extensive use of information and communications technology systems and devices in 

executing various functions and businesses of the public sectors and private sectors. For these purposes, the proposed Act provides, among others, for the establishment of the National Cyber Security Committee, the duties and powers of the Chief Executive of the National Cyber Security Agency, the appointment of the national critical information infrastructure sector leads and the designation of national critical information infrastructure entities as well as licensing of cyber security service providers.

Where any person who commits an offence under this Act is a company, limited liability partnership, firm, society or other body of persons, a person who at the time of the commission of the offence was a director, compliance officer, partner, manager, secretary or other similar officer may be charged severally or jointly in the same proceedings, if the company, limited liability partnership, firm, society or other body of persons is found guilty of the offence, shall be deemed to be guilty of the offence and shall be liable to the same punishment or penalty 

This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette.

On March 27 2024, the Securities Commission Malaysia (SC Malaysia) published Version 3 of ASEAN Taxonomy for Sustainable Finance.

Rapid industrialisation in the Association of Southeast Asian Nations (ASEAN) has led to social and environmental challenges, including climate change impacts, poor air quality, and waste management. The ASEAN Taxonomy Board (ATB) was established in March 2021 to develop, maintain, and promote an ASEAN Taxonomy to be science-based, inclusive method of classifying Activities according to their contribution to the environment in the region.

The ASEAN Taxonomy is a guide designed to enable a just transition towards sustainable finance adoption by ASEAN Member States (AMS). It provides alignment on underlying principles and helps harmonise the classification of sustainable activities and assets across ASEAN. The taxonomy was conceived based on five principles and offers two assessment approaches - the Foundation Framework (FF) and Product Screening (PS), - to cater to diverse potential users across the AMS. Six Focus Sectors and three Enabling Sectors have been identified as being particularly important in the ASEAN sustainability journey and are covered under the PS.

The ASEAN Taxonomy is based on four Environmental Objectives (EOs): 

• Climate Change Mitigation;
• Climate Change Adaptation,;
• Protection of Healthy Ecosystems and Biodiversity; and 
• Resource Resilience and the Transition to a Circular Economy.

To be classified under the ASEAN Taxonomy, any Activity must demonstrate that it contributes to at least one of these EOs and does not have any adverse effects to other EOs. 

• EO1 focuses on decarbonisation pathways for Activities, requiring them to align with decarbonisation trajectories in line with the Paris Agreement. 
• EO2 concentrates on reducing the negative effects of climate change and increasing resilience through implementing processes or actions. 
• EO3 concentrates on protecting the natural ecosystem and biodiversity, promoting sustainable use of natural resources, and minimising adverse impacts on the environment.
• EO4 focuses on promoting resource resilience and the transition to a circular economy through principles such as minimising resource use, optimising resource yield, and closing resource loops through effective waste management, which can be achieved by adjusting business operations and implementing circular economy principles via adapted products, production, technologies, and processes.

The ASEAN Taxonomy requires any activity to fulfil three Essential Criteria (EC) for classification: 

• Do No Significant Harm (DNSH);
• Remedial Measures to Transition (RMT); and 
• Social Aspects (SA).

The ASEAN Taxonomy Version 2 and subsequent versions centre around the classification of Activities. An Activity takes place when resources such as capital, goods, labour, manufacturing 14 techniques or intermediary products are combined to produce specific goods or services. An Activity is not the same as the facilities used to conduct the Activity.

The PS in future versions of the ASEAN Taxonomy will expand their coverage to a wider list of Activities across all focus sectors identified in Version 1, with subsequent versions incorporating qualitative process and/or practice-based criteria. Future versions will expand the coverage of Activities in all focus sectors and provide more qualitative process and/or practice-based criteria. Users may also assess entities and portfolios by aggregating Activity assessments, which will be discussed in subsequent versions of the ASEAN Taxonomy. Financial instruments may make use of similar procedures as described in the ASEAN Green Bond Standards, and future versions of the ASEAN Taxonomy will provide a system for classifying entities and portfolios based on an aggregation of Activities.

On March 5 2024, the Banco de México (Banxico) published exceptions to the restrictions on the use of the 28-day Equilibrium Interbank Interest Rate in national currency (TIIE) as an underlying in swaps during 2025.

The Central Bank considered it necessary to restrict the use of TIIE to maturities greater than one banking business day as a reference for new derivative operations, and to recognize the use of the TIIE de Fondeo within the derivative operations standardized in the rules for the conduct of derivative operations, contained in Circular 4/2012.

The Bank of Mexico has resolved to establish exceptions to the restrictions for the use of the 28-day TIIE as underlying for new specific derivative operations that will be held during 2025, by allowing institutions to:

• agree on new swaps that use the TIIE as an underlying swap for a term of 28 days, from January 1 2025 to December 31 2025, provided that the maturity date of such swaps is less than or equal to December 31 2025
• use the 28-day TIIE as an underlying in the basis swaps market (contracts in which the parties to the transaction exchange money flows calculated on the basis of the level of two variable rates) as an underlying 28-day TIIE, temporarily, from January 1 2025 to December 31 2025, regardless of the maturity date of such transactions.

Banco de México continues to rigorously urge all market participants to use the TIIE de Fondeo as a reference for new derivative operations, in accordance with the global principles of good practices, in order to facilitate the orderly transition to the use of reference rates determined based on real transactions in Mexico.

On March 21 2024, the Banco de México (Banxico) announced that the target for the 1-day Interbank Interest Rate (target rate) decreases by 25 basis points.

The Board of Governors of Banco de México decided to reduce the target for the Overnight Interbank Interest Rate by 25 points to a level of 11.00%, effective March 22, 2024.

On March 25 2024, the Netherlands published the Decree on EU Regulations under the Financial Supervision Act.

The decree provides clarifications and changes to the Financial Supervision Act:

Designation of Competent Authorities

• The European Central Bank is designated as the competent authority, replacing the Netherlands Bank, as per Regulations (EU) No 1024/2013.
• The Dutch Central Bank is designated as the resolution authority in certain cases listed in the annexes.

Enforcement

• To comply with the requirements set out in the annexes, the competent authority may impose regulations.
• A competent authority can use various instruments for enforcement. These include orders, subjected to periodic penalty payments, and administrative fines.

Out-of-court dispute resolution

• Certain regulations require out-of-court dispute resolution, and member states need to designate a body for this purpose. The Financial Services Complaints Institute has been designated as this body.
• The scope of out-of-court procedures provided in the regulation is not limited to disputes with consumers only. For a good implementation of the regulation, rules on non-consumer disputes have been introduced.

The decree also introduces amendments to

• Decree on the Supervision of the Conduct of Financial Undertakings under the Financial Supervision Act
• Decree on Prudential Rules under the Financial Supervision Act
• Market Abuse Decree under the Financial Supervision Act
• Financial Markets Amendment Decree 2023

An accompanying amendment sets the entry into force as April 1 2024.

On March 19 2024, the Government approved a bill for the creation of the Financial Customer Protection Authority, which completes the financial protection and inclusion system.

The Council of Ministers has approved the bill for the creation of the Financial Customer Protection Authority, which will be sent to Parliament for parliamentary processing.

The project, a priority for the Ministry of Economy, Trade and Business, completes the system of protection and inclusion of financial customers, following the adoption of financial inclusion protocols for the elderly and in rural areas and the approval of the Codes of Good Practices, which expanded the preventive framework of support for families.

The creation of this Authority complements the institutional system for resolving complaints in the financial field, which is currently articulated at three levels: firstly, the customer services of the financial institutions themselves; in a second stage, the out-of-court complaint resolution services of the supervisory bodies and, finally, the judicial bodies.

The text, which was already approved by the Congress of Deputies in the last legislature and fell before its final adoption due to the call for elections, begins its parliamentary processing again, including the main changes introduced in the Congress of Deputies. 

The approved text includes the modifications included in the parliamentary procedure and which had the support of the majority of deputies, such as the financing of the new Authority by financial institutions and the possibility of appealing the binding resolutions it issues before the civil jurisdiction, thus guaranteeing the protection of financial customers.

Through the Authority, customers will be able to submit their complaints free of charge in the banking, insurance and financial investment fields to a single body, which will result in a better analysis of conflicts and speed in the service and to this end will centralise the current complaints services of the Bank of Spain. the National Securities Market Commission (CNMV) and the Directorate-General of Insurance and Pension Funds.

The text includes the objectives and scope of action of the new Authority, as well as the set of entities that may be the subject of complaints, including supervised entities, fintech and crypto-asset services and consumer lending services, regardless of who they are supervised by.

On March 12 2024, the Comisión Nacional del Mercado de Valores (CNMV) published questions and answers (Q&A) on collective investment schemes (CIS), venture capital firms and management companies of closed-ended CIS.

One of the most relevant recent regulatory developments in the field of collective investment was the approval of Directive 2011/61/EU of the European Parliament and of the Council of June 8 2011 on alternative investment fund managers (AIFMD), the objective of which is to make such managers subject to authorisation, regulation, supervision and reporting to the regulator. provided that they exceed certain thresholds of assets under management, all with the aim of monitoring and controlling the systemic risk they may pose in the financial markets.

The transposition of the AIFMD into Spanish legislation affected the two laws that regulate collective investment in Spain: the Law 35/2003, of November 4, 2003, on Collective Investment Schemes (LIIC)and the LCR. The first regulates open-ended collective investment vehicles, reserving the Law 22/2014, of November 12, 2014, which regulates venture capital entities. other closed-end collective investment undertakings and management companies of closed-ended collective investment undertakings (LCRs) for closed-ended vehicles.

The transposition was carried out by Law 22/2014, of 12 November, which came into force on 14/11/2014. This law repealed the old LCR (Law 25/2005, of November 24, 2005, regulating venture capital entities and their management companies), due to the significant impact of the AIFMD on it, and in turn amended the LIIC in order to adapt it to the requirements of this Directive. This amendment of the LIIC, as well as the approval of Royal Decree 83/2015, amending Royal Decree 1082/2012 approving the Regulation implementing Law 35/2003, of November 4, on collective investment schemes (RIIC), also served to incorporate most of the provisions of Directive 2014/91/EU of the European Parliament and of the Council. of July 23 2014 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and penalties (UCITS V), which regulates the depositary regime and the remuneration policies of managers in a similar way to the AIFMD.

Having highlighted the main regulatory changes, it should be noted that the questions and answers have been grouped into three sections: 

• issues related to the LIIC and implementing regulations; 
• issues relating to the LCR; and 
• cross-border issues.

Given the relevance of the regulatory developments and the period of time that has elapsed since September 2009, when the "CIS Regulatory Questions and Answers " were published, an update of the CIS Regulations was published in October 2016 in order to adapt them to the new regulations and include issues that respond to the regulatory changes. to the evolution of the sector itself, as well as to the publication by ESMA (European Securities Market Authority) of certain Guidelines and Q&A.

The latest updates are intended to include new questions and answers in order to disseminate to the sector criteria derived from the supervisory practice carried out by the CNMV. New or modified questions and answers are clearly identifiable because the date they were included or modified appears next to the question. In parentheses, there is also the correspondence, if any, with those published in 2009, given that in 2016 there was a renumbering.

From now on, the Q&A will be updated by adding new issues that may arise to the current text, as well as, where appropriate, by amending existing ones.

The new questions contained in the document are as follows:

• According to ESMA's Supervisory briefing "On the supervision of costs in UCITS and AIFs" (ESMA34-39-1042), management companies should develop and periodically review a structured pricing process that takes into account whether the costs borne by the fund are sustainable taking into account the fund's expected net return based on its risk profile and investment strategy. In relation to the review of the procedure to be carried out by the management companies, would it be sufficient for this aspect to be considered only at the initial moment of the design of the product or would a periodic review of this aspect be necessary?
• Royal Decree 1180/2023 has amended article 5 of the RIIC in relation to the performance management fee models. When will the new performance fee model provided for in Article 5.3 of the RIIC begin to apply to funds that have already established a performance fee with reference net asset values in accordance with the previous model?
• The CNMV's communication of January 23 2015 includes, among the measures applicable to investment funds with a specific objective of return, that "the CNMV will assess the need to request additional warnings at the time of the verification of the prospectus, in those cases in which the financial structure implies that a substantial part of the returns of the fixed income portfolio will be absorbed by the costs passed on to the fund, so that the added value for the investor is questionable." What are the criteria used by the CNMV to require such warnings? Are they applicable to buy-and-hold fixed income funds? What about equivalent foreign CIUs marketed in Spain?
• Does Technical Guide 1/2023 on strengthening transparency from CIUs apply to fixed-income CIUs in which, although a fixed-income portfolio is initially purchased, this portfolio may not remain stable until the maturity of the strategy, not only because of the fulfilment of the fiduciary duty that every manager has to look after the interests of the unitholders, but that the investment strategy is not limited to holding the portfolio to maturity? What are some examples?
• Point 3 of Technical Guide 1/2023 on strengthening the transparency of CIIs with a specific performance objective and fixed income CIUs with a buy-and-hold strategy establishes that, when the investment and marketing strategy of fixed-income CIUs with a buy-and-hold strategy allows a reasonable estimate of the net APR (i.e. deducting the commissions and expenses attributable to the CII) that the unitholder or shareholder will obtain in the event of maintaining their investment until the expiry of the time horizon of the CIS, they must be informed, prior to the subscription of the CIS, of said estimated net APR. When is the estimate of the APR considered reasonable and therefore must the unitholder or shareholder be informed of it prior to subscription?
• Given that the second section of Technical Guide 1/2023 establishes that in fixed-income CIUs with a buy-and-hold strategy, unitholders must be informed of the net estimated APR (provided that it is possible to make a reasonable estimate), can advertising campaigns be carried out in which this APR is disseminated not including other scenarios?
• In relation to the Sustainability Annex to the annual report to be published by the products of articles 8 and 9 of the SFDR, is this Annex part of the Annual Accounts of the product? Does the auditor need to carry out any kind of check on it?
• SGIIC have the possibility (article 17.5 of the LIIC) not to give the details of the portfolio in the semi-annual reports of the CIS managed with respect to a maximum of 30% of the assets. In relation to this aggregated information, what criteria should be followed for the selection of such values that would not be individually identified in the semi-annual reports?
• What aspects should be taken into account by IL CIUs that intend to invest significant percentages (greater than 10% of equity) in unlisted securities or other illiquid assets per se, and that offer investors the possibility of periodic subscriptions and redemptions?
• Can an EAFN advise a CIU on investments in derivative instruments? What about in the case of a non-professional advisor
• Can asset managers or persons or entities related to them acquire assets prior to the registration of CR vehicles in order to transfer them to them? subsequently?
• In the case of ECRs/EICCs that are marketed only to professionals and the investment of retail clients can be made on their own initiative, would there be an obligation to draw up the DFI of PRIIPs, in the absence of the assumption of marketing?
• How should a management company, or marketing entities, carry out the assessment of retail investors who request to be considered professional investors, in accordance with the provisions of Article 195 of the LMVSI, in the field of the marketing of ECR/EICC? Are the investors listed in article 75.4 of the LCR considered as professionals?
• In the case of an SGEIC or financial intermediary authorised to market an ECR to retail clients, when is subscription considered at the customer's initiative?
• Can foreign IICs that are ETFs from third countries be incorporated into the websites of Spanish financial intermediaries, so that they can be acquired by investors who are interested in these products and who want to acquire them on their own initiative, without it being necessary, therefore, to register them for their commercialization in Spain?

On January 31 2024, Spain published the Royal Decree 117/2024 which develops the rules and procedures of due diligence in the field of the mandatory automatic exchange of information communicated by platform operators, and modifies the General Regulation of actions and the tax management and inspection procedures and the development of common standards for tax application procedures, approved by Royal Decree 1065/2007, transposing Council Directive (EU) 2021/514 of March 22, 2021 (DAC7), amending Directive 2011/16/EU on administrative cooperation in the field of taxation, and other tax regulations, in its Boletín Oficial del Estado.

Those actions that must be carried out by "platform operators obliged to communicate information" aimed at obtaining, verifying and determining information related to "sellers" will be considered due diligence rules and procedures. A "reporting platform operator" may choose to carry out due diligence procedures only with respect to "active sellers". A "platform operator obliged to communicate information" may use a third party to comply with the due diligence rules and procedures regulated in this royal decree. In no case will compliance by the third party exclude the operator's responsibility for compliance with its due diligence obligations.

Council Directive (EU) 2023/2226, of October 17, 2023, amending Directive 2011/16/EU relating to administrative cooperation in the field of taxation (DAC 8), modified the wording of certain provisions of DAC 7 before they were transposed into Spanish Law. Consequently, this Decree, in terms of transposition of DAC 7, also implements the precepts of DAC 8 that affect and rewrite certain provisions of DAC 7. 

In this sense, in the case of direct confirmation of identity and the residence of the "seller" through an identification service made available by the Member States or the European Union, the operator will continue to be required to obtain such data from the seller through due diligence procedures. In these cases, although the data is collected from the "seller" by the "platform operator obliged to communicate information", it does not have to be communicated to the Tax Administration.

It is also introduced in the General Regulation of actions and procedures for tax management and inspection and for the development of common standards for tax application procedures, approved by Royal Decree 1065/2007, of July 27 (RGAT), an additional provision regarding the processing of personal data.

In order to obtain the data that must be communicated by the platform operators, they must implement the corresponding due diligence procedures from a double perspective. On the one hand, they must deploy an activity to collect identifying data from sellers who use the platforms they operate. Secondly, the data must be verified, with importance being given to clarifying the residence of the seller, since said identification determines the Member States or other jurisdictions to which the information will be transmitted.

A prior element to verify is the consideration of sellers as "excluded sellers", using two instruments for these purposes: if the exclusion is based on the configuration of the excluded entity, public or listed, the verification can be carried out through information publicly available or confirmed by the "entity" itself. If the exclusion is based on the configuration of the activity carried out by the seller, the analysis can be based on the records available by the operator.

A new information obligation is established, by virtue of which "platform operators obliged to communicate information" must declare to the Tax Administration certain information related to the activity carried out through the platform they operate. This platform allows "sellers" to contact other users to carry out a "relevant activity", directly or indirectly, for those users. It also includes any form of collection and payment of “consideration” in respect of the “relevant activity”.  This information will also be required in the rehabilitation of the tax identification number. 

The legal regime of the obligation to provide information on cross-border tax planning mechanisms is modified in the RGAT, following the subscription by Spain of the Multilateral Agreement between Competent authorities on automatic exchange of information. 

The obligation of the intermediary exempted from the information obligation due to the duty of professional secrecy to communicate his exemption to the rest of the intermediaries or interested tax obligors who are not his clients is eliminated.

This royal decree will come into force on the day following its publication in the Official Journal. Nevertheless, due diligence rules and procedures will apply from January 1, 2023.

On March 5 2024, the Financial Conduct Authority (FCA) published a letter to Chief Executive Officers (CEOs) on action needed in response to common control failings identified in anti-money laundering (AML) frameworks.

The fight against financial crime is a significant focus for both the FCA and the UK. It is important that firms have appropriate policies, controls and procedures in place to reduce and prevent money laundering, terrorist financing and proliferation financing (Financial Crime). The FCA supervises firms to help ensure they comply with the relevant legal and regulatory requirements, which includes testing of their policies, controls and procedures.

The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs) define financial institutions with a variety of different business models that provide services in the UK as Annex 1 financial institutions (Annex 1 firms).

As part of its supervision work, the FCA undertakes the assessments of Annex 1 firms’ Financial Crime policies, controls and procedures. The FCA uses a data-led approach to identify the firms that are selected for review. The firms the FCA assesses are informed of the findings and supervisory action is taken with those firms based on those findings. The FCA has enhanced the monitoring of Annex 1 firms, and the FCA is increasing the proactive work in this area.

From the firms selected for review, the FCA observed common weaknesses in the following critical areas:

• Business Model: discrepancies between firms’ registered and actual activities, and lack of Financial Crime controls to keep pace with business growth;
• Risk Assessment: weaknesses in Business Wide Risk Assessments and Customer Risk Assessments;
• Due Diligence, Ongoing Monitoring and Policies and Procedures: lack of detail in policies creating ambiguity around actions staff should take to comply with their obligations under the MLRs;
• Governance, Management Information and Training: lack of resources for Financial Crime, inadequate Financial Crime training and absence of a clear audit trail for Financial Crime related decision-making.

The issues summarised in this letter reflect the key areas where firms assessed have fallen short of the requirements set out in the MLRs.

The impact of poor Financial Crime controls can be significant. It can lead to criminals abusing the financial system to launder the proceeds of crime, supporting further criminal activity and damaging the integrity of the UK financial market. The FCA has a range of tools which we may use when we identify poor Financial Crime policies, controls and procedures leading to the risk of material harm. These range from requiring third-party reviews to enforcement action that can result in outcomes such as fines and removal of Annex 1 firm registration.

On March 15 2024, the Financial Conduct Authority (FCA) published a press release on review of firms' treatment of customers in vulnerable circumstances.

Under the Consumer Duty, firms should act to deliver good outcomes for all customers, including those with characteristics of vulnerability.

The FCA will conduct a review into how firms are acting to understand and respond to the needs of customers in vulnerable circumstances, and share their findings by the end of 2024. This is in line with the FCA’s 2021 commitment.

The review will look at firms’ understanding of consumer needs, the skills and capability of staff, product and service design, communications and customer service, and whether these support the fair treatment of customers in vulnerable circumstances.  

The FCA will also look at the outcomes consumers in vulnerable circumstances receive and whether they’re as good as the outcomes of other consumers.  

The FCA will conduct consumer research as well as gather information from firms and consumer representatives to make this assessment.

Rather than conduct a separate piece of work focused solely on age related issues, as the FCA indicated they would in 2017, the review will look more broadly at how firms treat customers, including older customers, in vulnerable circumstances.  

This will enable the FCA to understand whether those consumers most susceptible to harm are receiving good outcomes.

On March 1 2024, the Financial Conduct Authority (FCA) published draft questions and answers (Q&As) on changes to UK European Market Infrastructure Regulation (EMIR) reporting requirements.

The Q&As the FCA is consulting on have already been informed by discussions with trade associations, reporting counterparties, trade repositories (TRs) and central counterparties (CCPs) via the UK EMIR Reporting Industry Engagement Group. The group, co-chaired by us and the Bank, provides a forum for discussing derivatives reporting issues with industry to help ensure consistent reporting. 

On February 24 2023, the FCA published a joint Policy Statement (PS23/2) with the Bank of England confirming changes to the derivative reporting framework under UK EMIR. The majority of the new requirements are applicable from 30 September 2024, with a transition period for some aspects.

As part of the original consultation process, the FCA received requests for supporting guidance on how the updated UK derivatives reporting framework will be implemented.

In response, the FCA is providing guidance to support the implementation of the updated UK EMIR reporting requirements that go live on September 30 2024. This guidance is in the form of Q&As grouped into topics. Before the FCA finalise sthese Q&As, they are consulting on them jointly with the Bank of England to get feedback from industry.

The Q&As will be divided up into the following topics. In this first consultation, we'll cover topics 1 to 5:  

1. Transitional Arrangements  
2. Reconciliations 
3. Errors and Omissions 
4. Derivative Identifiers 
5. Action and Events 
6. Venues 
7. Exchange Traded Derivatives 
8. Margin and Collateral 
9. Clearing 
10. Post Trade Risk Reduction  
11. Position Level Reporting 
12. Asset Class and Product Specific.

The period for feedback closes on March 28 2024.

On March 1 2024, the Financial Conduct Authority (FCA) published a letter to CEOs on FCA’s asset management & alternatives supervisory strategy.

The areas of focus that the FCA highlights below are consistent with the multi-year plan the FCA sets out previously and are intended to give clarity on FCA’s areas of regulatory focus for the year ahead. 

Asset managers faced heightened uncertainty and several market shocks in 2023. As a result, firms have been experiencing challenges in raising and maintaining assets. Responses in the sector to these challenges include cost cutting and consolidation, while evaluating new opportunities present in the environment. While there are some signs of improvement in the outlook, a volatile geopolitical and economic environment continues, and the full impact of challenges faced over previous periods may still be felt over the course of this year. There is a high volume of significant business and regulatory change to be delivered in 2024. This change is likely to impact business models, products and services, as well as customer outcomes and markets. Engagement with your firms and with industry bodies is important to inform any future regulatory change so that we can assess the outcomes that will be delivered.

The FCA’s supervisory approach will continue to focus on assessing the effectiveness of firms’ governance arrangements in assigning senior accountability for the risks identified below, oversight by governance bodies, and ensuring appropriate management information about those risks support good decision making.

The sections of the letter are as follows:

• Setting and testing higher standards: This year the FCA will continue to work for consumers to make sure that governance bodies of our portfolio firms are looking after investors’ interests particularly in periods of market disruption, stressed market conditions and through consolidations occurring in industry.
• Reducing and preventing serious harm: The FCA will be building on work done over the last year to strengthen horizon scanning for emerging risk, making sure firms in the portfolio meet threshold conditions, closely monitoring those firms with significant market impact, that present idiosyncratic risks to the system or are identified as outliers. The FCA expects firms to have systems and controls in place to counter the risk that they might be used to further financial crime. This includes compliance with the UK sanctions regime, where a failure to be compliant could result in breaching threshold conditions and relevant Handbook rules.
• Supporting Innovation: Technological and digital innovation is occurring across the value chain. This offers opportunities to positively transform business models and improve outcomes. Firms need to consider how technological innovation can be safely and effectively implemented in the sector so that potential benefits are realised whilst risks are managed.
• Promoting competition and positive change: The asset management and alternatives sector in the UK is an international, globally competitive sector. High standards have contributed to the trust and confidence enjoyed in the UK market, which has in turn facilitated international competitiveness and growth.

The CEOs should discuss the letter with the Board and Executive Committee and consider whether the risks of harm above are present in the firm and adopt strategies for mitigating them.

On March 5 2024, the United Kingdom published the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment and Transitional Provision) Order 2024.

This Order amends the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (S.I. 2001/1060) (PCIS) and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529) (FPO).

Article 3 substitutes the statements in the Schedule to the PCIS with amended statements. Article 4 substitutes the statements in Schedule 5 to the FPO with amended statements.

In relation to the high net worth individual investor statements, for the purposes of the PCIS and FPO respectively: the annual income condition has been reduced from £170,000 or more to £100,000 or more, and the net assets condition has been reduced from £430,000 or more to £250,000 or more.

In relation to the self-certified sophisticated investor statements, for the purposes of the PCIS and FPO respectively: the condition of having been a director of a company that has a turnover of at least £1,600,000, has been reduced to at least £1,000,000, and a provision has been inserted so that an individual can be considered a self-certified sophisticated investor if they have made two or more investments in an unlisted company in the two years prior to the date when the statement is completed and signed and they state how many such investments they have made in that time.

Article 5 makes transitional provisions. Paragraphs (1) to (4) set out that before 31st January 2025, the statements appended to the Schedule to the PCIS and Schedule 5 to the FPO (as they are prior to being substituted by this Order) will have effect as alternative statements to those inserted by this Order. Paragraph 5 provides that paragraphs (1) to (4) have no effect for any purpose after January 30 2025.

The Order came into force March 27 2024.

On March 11 2024, the Financial Action Task Force (FATF) published a guidance on beneficial ownership and transparency of legal arrangements.

Following the February 2023 revisions to FATF Recommendation 25 on Beneficial ownership and transparency of legal arrangements, the FATF has updated its risk-based guidance for this Recommendation. The guidance complements the existing guidance on Recommendation 24 on legal persons and aims to help stakeholders from the public and private sectors to implement the new requirements more effectively.

The Guidance aims to assist countries and the private sector to better understand how transparency requirements apply to legal arrangements.  It sets out practical guidance on how to understand and assess the money laundering and terrorist financing risks associated with trusts and similar legal arrangements. It explains the FATF’s requirements to obtain adequate, accurate and up-to-date beneficial ownership information for express trusts and similar legal arrangements, and highlights mechanisms to verify this information.  The Guidance highlights the importance of international co-operation, given that such arrangements may potentially be abused to facilitate cross-border money laundering or terrorist financing.

The guidance reflects input from public consultations and extensive engagement with the private sector and other stakeholders. The guidance completes a comprehensive body of work aimed at improving transparency of beneficial ownership globally. FATF’s strengthened standards and guidance in this area will help identify the corrupt actors, sanctions evaders, money launderers and tax evaders who hide or launder their criminal property or activities in shell companies or other complex structures as well as trusts or other legal arrangements. 

The FATF will assess countries’ implementation of these requirements during its upcoming round of mutual evaluations.

On March 6 2024, the International Swaps and Derivatives (ISDA) published the Euroyen TIBOR Cessation Guidance.

ISDA provides the guidance for parties to over-the-counter (OTC) derivative transactions that are affected by the announcement made on March 6, 2024 by JBA TIBOR Administration (JBATA) relating to the future cessation of all Euroyen TIBOR tenors (Euroyen TIBOR Cessation Announcement). 

On March 6, 2024, JBATA announced that, following public consultation, calculation and publication of all tenors (i.e. 1-week, 1-month, 3-month, 6-month and 12-month tenors) of the Euroyen Tokyo Interbank Offered Rate (“Euroyen TIBOR”) will cease immediately following a final publication on December 30, 2024 and that the last day of publication for Euroyen TIBOR will be December 30, 2024. 

ISDA is issuing this guidance in the interest of mitigating market risk and the promotion of orderly and consistent application of triggers and fallbacks by market participants. This guidance is not legal advice and market participants should consult their legal advisors as appropriate. Market participants should not rely on this guidance for any purpose but should review the contractual terms of each affected transaction in order to understand the effects of the events described above. ISDA does not assume any responsibility for this guidance and it is not intended to set a precedent. Parties are not obliged to follow this guidance. 

For cleared transactions and transactions executed on electronic confirmation platforms, market participants should refer to the contractual terms of the applicable clearing house or confirmation platform, as applicable.