Latest issue - May 2019
Overview of the key regulatory changes impacting the financial services industry
- Authorization dossier for management companies
- Publication of EMIR Refit in the Official Journal of the European Union (OJ)
- ESMA updates Q&As on MiFiD II and MiFiR investor protection and intermediaries
- This newsletter in PDF
- Previous issues
Highlights in this issue
Authorization dossier for management companies
On 10 May, the Financial Services and Markets Authority (FSMA) published a communication FSMA_2019_09 on the authorisation dossier for management company of undertakings for collective investment (UCI) or of alternative investment funds (AIFs) (NL/FR) accompanied by a checklist (NL/FR). The latter contains an overview of the information and documents that must be included in the authorization dossier of candidates that wish to apply for authorization as a management company of UCI or of AIFs. It also clarifies for every document at which moment it should be delivered to the FSMA:
- at start: document to delivered upon request for authorization;
- progressive: policy to be delivered upon request for authorization, procedures to be held available for the FSMA for a period of 12 months upon receiving authorization; and
- deferred: document to be held available for the FSMA for a period of 12 months upon receiving authorization.
It is important to note that the fact that certain documents should only be made available to the FSMA after 12 months, does not dismiss management from its obligation to apply appropriate procedures to ensure compliance from the beginning.
Publication of EMIR Refit in the Official Journal of the European Union (OJ)
On 28 May, the Regulation (EU) 2019/834 of the European Parliament and of the Council of 20 May 2019 amending the European Market Infrastructure Regulation (EMIR) as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty, the registration and supervision of trade repositories (TRs) and the requirements for TRs (EMIR Refit) was published in the OJ.
EMIR Refit, also referred to as EMIR 2.1, makes some targeted revisions to the clearing, risk mitigation, reporting and TR rules in EMIR. While some of the EMIR Refit revisions aim to make rules simpler and more proportionate, others in effect are likely to increase the regulatory burden already faced by firms. How significant the impact of these modifications is likely to be will depend on a firm’s derivatives trading model, as well as other factors, such as whether it transacts with non-financial counterparties (NFCs), whether is a clearing member, or has EU-established alternative investment funds in the group.
Key areas likely to increase requirements for firms are:
- expansion of the definition of a financial counterparty;
- risk management procedures for uncleared derivatives; and
- delegation of reporting.
Key areas likely to reduce requirements for firms are:
- introduction of an exemption from clearing for small financial counterparties;
- selective clearing for NFCs; and
- variation margin on physically settled FX products.
The Regulation entered into force and applies since on 17 June 2018 except for the following provisions:
- provisions set out in points (10) and (11) of Article 1 regarding initial margin models simulation tools and information on the initial margin models used and regarding national insolvency laws that shall not prevent a CCP from acting according to default procedures envisaged under EMIR will from 18 December 2019;
- provisions set out in points (7)(b) of Article 1 regarding reporting obligation will apply from 18 June 2020; and
- provisions set out in points (2)(b) and (20) of Article 1 regarding fair, reasonable, non-discrminatory and transparent commercial terms (FRANDT principle) and regarding general requirements for TRs will apply from 18 June 2021.
ESMA updates Q&As on MiFiD II and MiFiR investor protection and intermediaries
On 29 May, the European Securities and Markets Authority (ESMA) updated its questions and answers (Q&As) on the implementation of investor protection topics under the Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR). The updated Q&As cover four new questions on best execution and four new questions on information on costs and charges.
Best execution (new questions 21 – 24)
- reporting for venues on the ‘trading mode’ according to regulatory technical standards (RTS) 27;
- reporting for venues and firms on template fields of RTS 27 and 28 if the required content is not applicable to their activities;
- reporting on ‘passive’ and ‘aggressive’ orders for firms using quote-driven systems to have client orders executed; and
- RTS 28 reporting and execution venues.
Information on costs and charges (new questions 27 – 30)
- ex-ante information in case of sell orders;
- ex-ante information in case of telephone trading;
- use of assumed investment amounts for ex-ante information in relation to investment services and/or products with non-linear charging structures; and
- use of ranges and maximum amount/percentages for ex-ante information.
Furthermore in this issue
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- Financial Crime & Market Integrity
- Governance & Risk Management
- Capital & Liquidity
- Disclosure & Reporting
- Crisis Management
- Market Stability and Financial Markets Infrastructure
- Regulatory Perimeter
- Technology & Innovation
Regulatory Radar series
Regulatory Radar is a publication series focusing on regulation for the financial services industry. Each issue provides an update on the latest highlights in the financial services industry, followed by an overview of normative, consultative and informative documents issued for the financial services industry, credit institutions and investment firms, investment products and asset management, insurance, reinsurance and pensions.