Source: https://www.caceis.com/regwatch/september-2019/
Timestamp: 2019-11-12 09:35:00
Document Index: 222839850

Matched Legal Cases: ['§23', 'art 2', 'art 3', 'art 5', 'art 4', 'Art. 95', 'Art. 81']

REGWATCH September 2019 September 2019 - CACEIS
• EEA Joint Committee amends annexes to EEA Agreement to incorporate BMR
• ESMA updates compliance table for Guidelines on non-significant benchmarks (Version: 19 September 2019)
• EU Commission issues 6th Brexit preparedness communication
• ESMA publishes the list of CCPs recognized to offer services and activities in the Union
Investment Funds / Collective Investment Schemes (CIS) / Asset Management
• ESMA publishes final Guidelines on liquidity stress testing in UCITS and AIFs
• ESMA publishes stress simulation framework for investment funds
• ESMA analyzes use of derivatives by UCITS equity funds
Markets in financial instruments Directive and Regulation (MiFID II / MiFIR)
• ESMA publishes updated results of the annual transparency calculations for equity and equity-like instruments
Capital requirements / CRD / CRR / Basel III/IV
• National Bank of Belgium keeps the countercyclical buffer rate at 0.5%
• FSMA publishes opinion concerning the calculation method for three-year cycles for the recycling obligation
• National Bank establishes new supervisory expectations for Belgian banks and insurance companies offering mortgage loans
• FSMA publishes biannual report concerning sectorial pension schemes
• FSMA publishes a consultation on a circular project concerning frequent reporting from pension institutions
UCITS V / Alternative investment funds manager directive (AIFMD)
• FSMA publishes Circular 2019_23 on the report of the effective management on internal control of self-managed public UCITS/AIFs
• FSMA publishes Circular 2019_24 on the statement of the effective management on the periodic reports and statistical statements of UCIs
• FSMA publishes Circular 2019_25 on the periodic questionnaire for externally managed public UCI’s
• CNIL publishes Q&A on No-deal Brexit / La CNIL publie des Questions-Réponses sur le Brexit sans accord
Central Securities Depositary Regulation (CSDR)
• AMF declares conformity with ESMA Guidelines ESMA70-151-367 on internalized settlement reporting / L'AMF se déclare conforme aux orientations de l’ESMA 70-151-367 concernant la notification des règlements internalisés
• France adopts Decree No. 2019-944 on third countries settlement systems / La France adopte le Décret n° 2019-944 relatif aux systèmes de règlement livraison des pays tiers
• AMF releases Decree of 28 August 2019 approving amendments to the General Regulation / L'AMF publie l'Arrêté du 28 août 2019 portant homologation de modifications du règlement général de l’Autorité des marchés financiers
• AMF reports on results of the two mystery shopping campaigns conducted under MiFID II / L'AMF publie les résultats des deux campagnes de visites mystère sous MIF 2
• FBF updates its memo on PSD2 / La FBF met à jour son mémo sur DSP2
• AMF clarifies new Prospectus Regulation dispositions / L'AMF précise certaines dispositions du nouveau Règlement Prospectus
• German Ministry of Finance publishes draft law transposing DAC 6 in Germany
Derivative Financial Instruments (Derivatives)
• Germany amends the Derivatives Ordinance (Derivateverordnung) for a second time
• BaFin provides guidance regarding the continued marketing of UK investment funds after Brexit
• BaFin issues Circular 10/2019 (WA) on criteria for management companies to be exempted from audit requirement
• BaFin provides Q&As on Brexit for asset management companies and investment funds
• BaFin issues form for confirming compliance with foreign product intervention measures
• BaFin provides guidance on supervisory treatment of individual features of corporate bonds under the PRIIPs Regulation
Anti-money laundering / Combating the financing of terrorism (AML / CFT)
• SFC issues circular on the publication of Hong Kong’s Mutual Evaluation Report by FATF
• Hong Kong amends Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615)
• SFC revises its Code of Conduct for persons licensed by or registered with the SFC
• SFC updates Q&As on exchange traded funds and listed funds
• SFC issues circular on Mutual Recognition of Funds (MRF) between Switzerland and Hong Kong
Over-the-counter derivatives (OTC)
• SFC issues circular on reporting of OTC derivatives transactions to HKMA trade repository
• Central Bank of Ireland publishes AML/CFT Guidelines for the financial sector
• Irish central bank publishes amendments to UCITS and AIFM regulations
• Irish central bank launches consultation on regulatory framework for the treatment, correction and redress of errors in investment funds
• Government of Ireland provides information on the second stage of the Investment Limited Partnerships (Amendment) Bill 2019
• Italy issues law allowing the MEF to constitute real estate funds
• Banca d'Italia issues the 20th update to Circular No 189 on statistical and supervisory reporting by investment funds
• CSSF reminds UK firms of mandatory notification in the context of Brexit
• CSSF updates Q&As for investment funds to clarify the obligation of professional secrecy
• CSSF informs on eDesk account creation and UCI approval information sessions
• CSSF updates Q&A on alternative investment fund managers
• Dutch Minister of Finance reports on draft law for implementing the BMR
• AFM and DNB share insights about the transition to alternative interest rate benchmarks
Listing / Trading rules
• The Netherlands introduce exemption from license obligation for Singapore and US market operators
Financial Services Act (LSFin)/ Financial Institutions Act (LEFin)
• FDF announces the intended date of entry into force of FinSA and FinIA
• FINMA amends annexes to the cooperation agreement on funds with the Hong Kong SFC
• FINMA publishes Guidance on Monitoring 03/2019
• FCA provides update on the transition from LIBOR
• FCA publishes CP19/27 Quarterly Consultation Paper No 25 on changes to prepare for Brexit
• FCA requires firms to register online to update their firm details
• FCA updates forms for national private placement regime
• FCA publishes Policy statements PS19/24 on Illiquid assets and open-ended funds
• FCA updates its Investment Funds sourcebook
Market Abuse Directive and Regulation (MAD / MAR)
• FCA sets out expectations regarding polling and the Market Abuse Regulation
• FCA publishes multi-firm review findings on MiFID II
• Basel Institute on Governance publishes its AML Index for 2019
• FATF updates its consolidated assessment ratings as of 5 September 2019
• ISDA publishes Q&As on the EURIBOR reform
• ICMA ERCC publishes updated memorandum outlining recommendations for repo market best practice to address transition from EONIA to €STR on 1 October 2019
EEA Joint Committee amends annexes to EEA Agreement to incorporate BMR
On 12 September 2019, Decision of the EEA Joint Committee No 190/2019 of 10 July 2019 amending Annex IX (Financial services) and Annex XIX (Consumer protection) to the EEA Agreement was published in the Official Journal of the EU.
Annexes IX and XIX to the EEA Agreement will incorporate the Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014.
Decision of the EEA Joint Committee No 190/2019 of 10 July 2019
ESMA updates compliance table for Guidelines on non-significant benchmarks (Version: 19 September 2019)
On 19 September 2019. the European Securities and Markets Authority (ESMA) updated the compliance table for its guidelines on non-significant benchmarks, which includes the list of competent authorities complying or intending to comply with the guidelines. According to the list, all EU Member States and all EEA EFTA States comply or intend to comply with the guidelines.
Compliance table for Guidelines on non-significant benchmarks (Version: 19 September 2019)
EU Commission issues 6th Brexit preparedness communication
On 4 September 2019, the European Commission published its 6th Brexit preparedness Communication, reiterating its call on all stakeholders in the EU27 to prepare for a ‘no-deal' scenario.
In light of the continued uncertainty in the United Kingdom regarding the ratification of the Withdrawal Agreement – as agreed with the UK government in November 2018 – and the overall domestic political situation, a ‘no-deal' scenario on 1 November 2019 would remain a possible, although undesirable, outcome.
To help businesses that trade with the UK to make final preparations for such a scenario, the European Commission also published a detailed checklist in addition to its communication. In order to minimize disruption to trade, all parties involved in supply chains with the UK – regardless of where they are based – should be aware of their responsibilities and the necessary formalities in cross-border trade.
In addition to this, the Commission has proposed to the European Parliament and the Council to make targeted technical adjustments to the duration of the EU’s ‘no-deal’ contingency measures in the area of transport. The Commission has also proposed to mirror, for the year 2020, the existing 2019 contingency arrangements for the fisheries sector and for the UK’s potential participation in the EU budget for 2020. These measures are necessary given the decision to extend the Article 50 period to 31 October 2019.
Summing up, the following key documents were provided by the Commission with its communication on Brexit preparedness:
Communication document;
Detailed checklist for businesses;
Brexit timeline;
Press release summarizing the current state of play.
6th Brexit preparedness communication
ESMA publishes the list of CCPs recognized to offer services and activities in the Union
On 20 September 2019, the European Securities and Markets Authority (ESMA) published the updated list of central counterparties (CCPs) that have been recognized to offer services and activities in the Union in accordance with Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories.
List of CCPs (Version: 19 September 2019)
In April 2018, the European Systemic Risk Board (ESRB) published a set of recommendations to address liquidity and leverage risk in investment funds. The ESRB’s recommendation requests the European Securities and Markets Authority (ESMA), in order to promote supervisory convergence, to “develop guidance on the practice to be followed by managers for the stress testing of liquidity risk for individual AIFs and UCITS”.
On 5 February 2019, ESMA published a Consultation Paper (CP) based on the draft Guidelines on liquidity stress testing in UCITS and AIFs in order to fulfil the ESRB recommendations and gather input from stakeholders. The consultation closed on 1 April 2019.
Following the consultation period, on 2 September 2019, ESMA now published the Final Report on the Guidelines on liquidity stress testing in UCITS and AIFs (Guidelines). The Guidelines provide an overview of the feedback received through the responses to CP and explain how ESMA took this feedback into account.
The purpose of the Guidelines is to establish consistent, efficient and effective supervisory practices within the European System of Financial Supervision and to ensure the common uniform and consistent application of Union law. In particular, their primary purpose is to increase the standard, consistency and, in some cases, frequency of liquidity stress tests (LST) of assets and liabilities and promote convergent supervision of LST by national competent authorities (NCAs).
The Guidelines apply to managers, depositaries and NCAs:
Guidelines applicable to managers provide further clarification on the design of the LST models, governance principles for LST, the LST policy, frequency of LST, the use of LST outcomes, adaptation of the LST to each fund, LST scenarios etc.
Depositaries should set up appropriate verification procedures to check that the fund manager has in place documented procedures for its LST program, whereas such verification does not require assessment of the adequacy of the LST.
NCAs may at their discretion request submission of a manager’s LST to help demonstrate that a fund will be likely to comply with applicable rules or other information relating to the LST, including liquidity stress test models and their results.
ESMA expects the Guidelines to be applied by 30 September 2020.
Guidelines on liquidity stress testing in UCITS and AIFs
The European Securities and Markets Authority (ESMA), as the financial supervisor in charge of Europe's securities' markets and fund industry, has developed a framework to be used for stress simulations for the investment fund sector.
The framework constitutes a key element of ESMA’s stress testing strategy, which also includes guidelines on liquidity stress testing and on money market fund stress testing. It is supposed to be an important tool for supervisors to assess risks in the asset management industry, as the methodology developed by ESMA could be applied across the industry’s different sectors.
ESMA developed the framework against the background of a growing importance of the fund sector for the financial stability in Europe, the total net assets managed by EU-domiciled UCITS funds having increased between 2007 and 2018 from EUR 6.2tn to EUR 9.3tn.
The new stress simulation framework for investment funds consists of two steps:
A pure redemption shock where a large number of investors requests to reduce or withdraw their parts in the fund within a short time frame; and
A model of the impact of the funds' liquidation on financial markets (i.e. the impact of a downward pressure on assets prices).
ESMA has applied this methodology to the UCITS bond funds sector, finding that overall most funds would be able to cope with an extreme but plausible redemption shock, as they have enough liquid assets to meet investors’ redemption requests. However, vulnerabilities were identified especially for High Yield (HY) bond funds, of which up to 40% could experience a liquidity shortfall, i.e. a situation in which their holdings of liquid assets alone would not suffice to cover the redemptions assumed in the shock scenario and recourse to less liquid assets would need to be taken.
Regarding the presumed impact of the funds' liquidation on financial markets, ESMA found the overall price impact to be limited for most asset classes, as sales by funds only represent a fraction of aggregate trading volumes. However, for asset classes with more limited liquidity, such as HY bonds and Emerging Markets (EM) bonds, fund sales could have a material impact and generate material second round effects.
The method developed by ESMA can be used by regulators to simulate stress situations for different segments of the fund industry. ESMA has also discussed the underlying data in detail with the relevant national authorities, to ensure the knowledge gained from this case study can benefit the day to day supervision of this sector.
In future, ESMA will use this stress simulation framework as part of its regular risk monitoring to identify risk and assess possible adverse scenarios that might impact the EU fund industry.
Stress simulation for investment funds 2019
ESMA analyzes use of derivatives by UCITS equity funds
On 30 September 2019, the European Securities and Markets Authority (ESMA) published a study on the use of derivatives by UCITS equity funds.
The study uses data collected under the EMIR framework, and finds that the tendency, and frequency, of these funds to trade derivatives is explained to a large extent by asset managers characteristics, such as fund family and fund family size. Over time, cash inflows as well as currency risk seem to have a significant influence, which suggests that derivatives are used for transaction costs or risk reduction purposes.
The analysis included in this study provides new insight into the type of derivatives that are traded by UCITS equity funds, why some of them trade derivatives whilst others do not, what makes some more active traders and to what extend the trading in derivatives is a reaction to daily changes in the market. UCITS equity funds mainly use forward contracts on currencies (80% of trades) and futures or options on equities (26%).
Study on the use of derivatives by UCITS equity funds
ESMA publishes updated results of the annual transparency calculations for equity and equity-like instruments
On 23 September 2019, the European Securities and Markets Authority (ESMA) had made available updated results of the annual transparency calculations for equity and equity-like instruments.
ESMA has started to make available the updated annual transparency calculations for equity and equity-like instruments. Those calculations include:
the liquidity assessment as per Articles 1 to 5 of CDR 2017/567;
the determination of the most relevant market in terms of liquidity (MRM) as per Article 4 of CDR 2017/587 (RTS 1);
the determination of the average daily turnover (ADT) relevant for the determination of the pre-trade and post-trade large in scale (LIS) thresholds;
the determination of the average value of the transactions (AVT) and the related standard market size (SMS); and,
the determination of the average daily number of transactions on the most relevant market in terms of liquidity (ADNT) relevant for the determination of the tick-size regime.
Updated results of the annual transparency calculations
National Bank of Belgium keeps the countercyclical buffer rate at 0.5%
On 16 September 2019, the National Bank of Belgium decided to maintain the countercyclical buffer rate for credit risk exposures to the Belgian private non-financial sector at 0.5 % for the fourth quarter of 2019. This countercyclical buffer rate becomes binding from 1 July 2020.
This measure is subject to mandatory reciprocity and hence applies to all EU banks operating in Belgium, at both the individual and the consolidated level.
NBB decision on countercyclical buffer rate for 2019 Q4
FSMA publishes opinion concerning the calculation method for three-year cycles for the recycling obligation
On 4 September 2019, the Financial Services and Markets Authority (FSMA) published its opinion on the calculation method for three-year cycles for the recycling obligation of the compliance function.
Article 87bis of the Act of 2 August 2002 on the supervision of the financial sector and financial services provides for the approval of compliance officers by the FSMA. A condition of approval by FSMA is that the compliance officers are tracking a continuing education program.
Under Article 3 (3) of the FSMA regulation, certified compliance officers are required to comply at all times with this training condition. In accordance with Article 5 of the FSMA Regulation, it is also the responsibility of the regulated companies to ensure that this obligation of permanent training is respected by the approved compliance officer.
The minimum duration of the approved compliance officer training program on the final list is 40 hours every three years. Compliance department employees, as well as those who have passed the exam and wish to take advantage of it later, must also participate in training for at least 20 hours every three years.
The starting point for three-year cycles varies depending on whether the person concerned has been placed on the definitive list (for approved compliance officers), or entered the function in the compliance department (for employees of the department), or has passed the exam (for those who have passed the exam without being a compliance officer or a member of a compliance department), before or after the 1st June 2018.
On the 1st June 2018, various changes to the regulations of FSMA came into force.
It is from this date that the people who have passed the exam must undergo a permanent training if they wish to keep the validity of their certificate of success. For these people, the first three-year cycle begins to run from the date of the success of their examination or as of 1st June 2018 if they have passed their exam before that date.
As approved compliance officers and employees of the compliance department, continuing education requirement already existed before the 1st June 2018. The continuing training courses will now be calculated from the registration on the final list (for approved compliance officers) and from the start of service (for employees in the compliance department).
This calculation is an evolution from the previous system under which the three-year cycles were calculated from the 1st January of the year following the inclusion in the final list (for compliance officers accredited) and from 1st January of the year following their appointment within the compliance department (for employees of the department).
The new three-year cycle begins when:
a certified compliance officer leaves a regulated company to start his duties in another company which in turn applies for approval,
an employee of the compliance department of a regulated company leaves this regulated company to enter the compliance department of another company,
an employee of the compliance department of a regulated company becomes an approved compliance officer (within this company or within another company).
FSMA opinion on calculation method for three-year cycles for the recycling obligation
National Bank establishes new supervisory expectations for Belgian banks and insurance companies offering mortgage loans
On 5 September 2019, the National Bank of Belgium, in its capacity as macroprudential supervisor of the country’s financial institutions, has decided to establish new, explicit expectations for banks and insurance companies active in the residential real estate market.
It is the intention that these financial institutions integrate these expectations in their internal risk management. This should incite them to be (more) prudent in issuing mortgage loans.
This initiative follows findings by the NBB, similar to those of the European Systemic Risk Board (ESRB) and the European Central Bank (ECB), that there has been a renewed build-up of vulnerabilities in our country’s real estate market in recent years.
Previously, the NBB imposed macroprudential measures with regard to the capital buffers to be increased by Belgian banks against potential mortgage loan losses.
Given the further deterioration in banks’ credit standards, an additional measure by the NBB is required for the continued protection of our country’s financial system against potential risks or shocks.
Over the next weeks, the NBB will consult Belgian banks and insurance companies on this initiative. The macroprudential measure is intended to be finalized in the coming weeks and should apply as from 2020 onwards.
Supervisory expectations for mortgage loans
FSMA publishes biannual report concerning sectorial pension schemes
On 2 September 2019, the Financial Services and Markets Authority (FSMA) published the seventh edition of its biannual report concerning sectorial pension schemes. The numbers for 2016-2017 show that approximately 1.3 million workers were actively affiliated to the sectorial pension scheme. This figure represents an augmentation of 7% compared to the 2015 report.
Biannual Report concerning sectorial pension schemes
FSMA publishes a consultation on a circular project concerning frequent reporting from pension institutions
On 13 September 2019, the Financial Services and Markets Authority (FSMA) published a consultation on a circular project concerning frequent reporting from pension institutions.
This circular project clearly clarifies the pension institutions' prudential reporting requirements, allowing the FSMA and the National Bank of Belgium to be exempted from their own reporting requirements to the ECB and EIOPA.
The consultation ends 15 October 2019.
FSMA_2019_01 of 11 September 2019 on reporting from pensions funds
FSMA publishes Circular 2019_23 on the report of the effective management on internal control of self-managed public UCITS/AIFs
On 11 September 2019, the Financial Services and Markets Authority (FSMA) published Circular 2019_23 concerning conditions under which the effective management of a self-managed public UCITS/AIF must, each year, report to the approved auditor and the FSMA the evaluation of the internal control system. It also sets out the expectations of the FSMA as regards the description of this system.
The updated description of internal control must be sent to the FSMA electronically via eCorporate by 28 February 2020 at the latest.
FSMA Circular 2019_23
FSMA publishes Circular 2019_25 on the periodic questionnaire for externally managed public UCI’s
On 11 September 2019, the Financial Services and Markets Authority (FSMA) published a circular which specifies the content and purpose of the periodic questionnaire submitted to externally managed public UCI’s
FSMA ensures the permanent control of public UCIs with variable numbers of shares which have designated a management company. In order for this permanent control to be as efficient as possible, FSMA should receive certain information on a periodic basis. This is the reason why FSMA has prepared a questionnaire, which will be submitted every year, via the FiMis Survey platform, to those UCIs that have designated a management company. This questionnaire has been drawn up by analogy with the questionnaire to be completed each year as part of the internal control by the effective management of self-managed public UCITS governed by Belgian law.
FSMA will submit the questionnaire annually to UCIs. They will have to complete it no later than one month before the date of their general meeting. This questionnaire will be completed, for the first time, one month before the date of the first general meeting held after December 31, 2019.
FSMA Circular 2019_25
FSMA publishes Circular 2019_24 on the statement of the effective management on the periodic reports and statistical statements of UCIs
On 11 September 2019, the Financial Services and Markets Authority (FSMA) published a Circular concerning the manner in which the effective management of a UCI makes its declaration regarding periodic reports and statistical statements.
The manner in which the effective management of a UCI makes its declaration concerning the periodic reports and the statistical statements has been updated following the publication of the new regulation of the Financial Services and Markets Authority of 16 May 2017 concerning the statistical information to be transmitted by certain public collective investment undertakings with a variable number of shares.
The declarations must be sent to the FSMA electronically via eCorporate.
FSMA Circular 2019_24
CNIL publishes Q&A on No-deal Brexit / La CNIL publie des Questions-Réponses sur le Brexit sans accord
On 10 September 2019, the Commission nationale de l'informatique et des libertés (CNIL) published questions and answers on a "No-deal Brexit".
CNIL raises and answers the following questions:
"No-deal Brexit" : which consequences of a no-deal Brexit on personal data flow?
How to get prepared for a no-deal Brexit?
What tools are available to deal with personal data transfer to the United Kingdom in case of a no-deal Brexit?
Are public authorities concerned?
In a no-deal Brexit scenario, when would these transfer tools be implemented?
In a no-deal Brexit scenario, will there be any exemption to data transfer, in the absence of appropriate guarantees ?
What about received data from the United Kingdom in a no-deal Brexit scenario?
Le 10 septembre 2019, la Commission nationale de l'informatique et des libertés (CNIL) a publié des questions-réponses sur le Brexit sans accord.
La CNIL soulève les questions suivantes:
« No-deal Brexit » : quelles sont les conséquences d’un Brexit sans accord sur les flux de données personnelles vers le Royaume-Uni ?
Quelles sont les étapes à suivre pour me préparer à un Brexit sans accord ?
Les autorités ou organismes publics sont-ils également concernés ?
Q&A on No-deal Brexit
AMF declares conformity with ESMA Guidelines ESMA70-151-367 on internalized settlement reporting / L'AMF se déclare conforme aux orientations de l’ESMA 70-151-367 concernant la notification des règlements internalisés
On 3 September 2019, the Autorité des marchés financiers (AMF) declared being in conformity with ESMA Guidelines ESMA on internalized settlement reporting in view of Article 9 of Central securities depositories regulation (CSDR).
Le 3 septembre 2019, l'Autorité des marchés financiers (AMF) se déclare conforme aux orientations de l’ESMA 70-151-367 concernant la notification des règlements internalisés au titre de l’article 9 de CSDR.
AMF Position - DOC-2019-11
France adopts Decree No. 2019-944 on third countries settlement systems / La France adopte le Décret n° 2019-944 relatif aux systèmes de règlement livraison des pays tiers
On 11 September 2019, the French Official Journal published a decree on the approval of settlement systems.
This decree aims at clarifying the conditions of approval of settlement systems regulated by third countries' laws in the French system as well as the consequences of that approval.
Le 11 septembre 2019, la France a publié le décret no 2019-944 du 9 septembre 2019 relatif à l’homologation des systèmes de règlements interbancaires ou de règlement et de livraison d’instruments financiers régis par le droit d’un pays tiers prévue à l’article L. 330-1 du code monétaire et financier.
Le décret vise à préciser la procédure d’homologation de ces systèmes et la procédure de déclaration de toute modification de son fonctionnement qui pourrait affecter les conditions de son homologation, ainsi que les conséquences qui peuvent en être tirées.
Decree No. 2019-944 on third-country settlement systems
AMF releases Decree of 28 August 2019 approving amendments to the General Regulation / L'AMF publie l'Arrêté du 28 août 2019 portant homologation de modifications du règlement général de l’Autorité des marchés financiers
On 18 September 2019, the Autorité des marchés financiers (AMF) releases Decree of 28 August 2019 approving amendments to the General Regulation published in the Official Journal 10 September 2019.
These amendments concern:
monitoring and interdiction of investment service providers in view of management of privileged information;
introduction of new dispositions on AML/CFT ;
introduction of new dispositions concerning the implementation of the new professional certification that will enter into force 1 January 2020;
clarifications of the notice period of subscription-redemption of UCITS;
updates of dispositions in relation with central depositories.
Le 18 septembre 2019, l'Autorité des marchés financiers (AMF) a publié l'Arrêté du 28 août 2019 portant homologation de modifications du règlement général de l’Autorité des marchés financiers, originellement publié au Journal Officiel le 10 septembre 2019.
Ces modifications portent sur:
la surveillance et l'interdiction des prestataires de services d'investissement dans l'usage d'informations privilégiées;
l'introduction de nouvelles dispositions LBC/FT;
l'introduction de nouvelles dispositions concernant la mise en oeuvre de nouvelles certifications profesionnelles (entré en force au 1 janvier 2020);
certaines précisions sur la période de délai d'abonnement et rachat des organismes de placement collectifs;
des mises à jour des dispositions sur les dépositaires centraux.
Decree of 28 August 2019
AMF reports on results of the two mystery shopping campaigns conducted under MiFID II / L'AMF publie les résultats des deux campagnes de visites mystère sous MIF 2
On 2 September 2019, the Autorité des marchés financiers (AMF) published a report summarizing results from mystery shopping campaigns under MiFID II.
Two mystery shopping campaigns were conducted between December 2018 and February 2019: a so-called "risk-loving" campaign covering potential clients or new clients with relatively high incomes and capable of sustaining losses, and the other so-called "risk-averse" campaign covering potential client or new client profiles holding less liquid assets and displaying a more pronounced aversion to risk. These mystery shopping campaigns have been organized recurrently since 2011.
Le 2 septembre 2019, l'Autorité des marchés financiers (AMF) a publié un rapport résumant les résultats des deux campagnes de visites mystère sous MIF 2.
Les deux campagnes ont été réalisées entre décembre 2018 et février 2019 ; une dite « risquophile » regroupant des visites de prospects ou nouveaux clients aux revenus relativement élevés et capables de subir des pertes, et l’autre dite « risquophobe » regroupant des profils de prospects ou nouveaux clients disposant de moins de liquidités et plus averses aux risques. Ces campagnes de visites mystère sont organisées de façon récurrente depuis 2011.
AMF report on mystery shopping
FBF updates its memo on PSD2 / La FBF met à jour son mémo sur DSP2
On 20 September 2019, the Fédération Bancaire Francaise (FBF) published its updated memo on PSD2, applicable from 13 January 2018.
The FBF clarifies the following:
What is included in PSD2?
What are the stakes in term of security and safety of clients' data and payment systems?
What are the solutions to guarantee this safety?
What are the main modalities to go through the transition of strong authentication?
Le 20 septembre 2019, la Fédération Bancaire Francaise (FBF) a publié une mise à jour de son mémo sur DSP2, applicable au 13 janvier 2018.
La FBF précise les questions suivantes:
En quoi consiste la DSP2 ?
Quels sont les enjeux en termes de sécurité pour les données des clients et les systèmes de paiement ?
Quelles sont les solutions pour garantir cette sécurité ?
Quelles sont les modalités du passage à l’authentification forte ?
Updated memo on PSD2
AMF clarifies new Prospectus Regulation dispositions / L'AMF précise certaines dispositions du nouveau Règlement Prospectus
On 27 September 2019, the Autorité des marchés financiers (AMF) published clarifications on some new Prospectus Regulation dispositions applicable from 21 July 2019.
New Prospectus dispositions modify rules on crowdfunding and admission of securities by a regional or local authority, or securities guaranteed unconditionally and irrevocably by a Member State. Indeed, these issuers do not have the possibility to submit a prospectus on a voluntary basis.
Le 27 septembre 2019, l'Autorité des marchés financiers (AMF) a publié des précisions sur certaines dispositions du nouveau Règlement Prospectus applicable au 21 juillet 2019.
Les nouvelles dispositions Prospectus modifient les règles relatives aux offres au public ou à l’admission de valeurs mobilières réalisées par une autorité régionale ou locale, ou portant sur des valeurs mobilières garanties inconditionnellement et irrévocablement par un Etat membre ou une autorité régionale ou locale. Ces émetteurs n’ont plus la possibilité de réaliser un prospectus sur une base volontaire.
AMF clarifications on Prospectus Regulation
German Ministry of Finance publishes draft law transposing DAC 6 in Germany
On 27 September 2019, the German Federal Ministry of Finance published the draft law transposing DAC 6.
Tax arrangements are becoming more sophisticated and often take advantage of the increased mobility of capital, persons and intangible assets. Cross-border structures regularly exploit the differences in the tax laws of several countries, which often results in a significant decrease in tax revenues in the EU Member States.
This draft law establishing an obligation to communicate cross-border tax arrangements is intended to transpose the DAC 6 Directive into national law and to introduce a notification obligation for certain cross-border tax arrangements. The information should also be exchanged between Member States. This should enable Member States to identify tax avoidance practices and profit shifting in a timely manner. At the same time, however, the possibilities of responding to the financial authorities of the Member States are also to be improved.
Draft law transposing DAC 6
Germany amends the Derivatives Ordinance (Derivateverordnung) for a second time
On 5 September 2019, the Second Ordinance amending the Derivatives Ordinance (Derivateverordnung, DerivateV) of 14 August 2019 was published in the German Official Journal.
The following amendments are introduced:
The eligibility of management companies for using the simplified method to calculate the investment limits pursuant to §23 (1) DerivateV is clarified, i.e. only management companies of specialized open German AIFs with fixed investment conditions may exclude the specified instruments from their calculations;
The transitional arrangements are revoked.
The Ordinance enters into force on the day after its publication, i.e. on 6 September 2019.
Second Ordinance amending the Derivatives Ordinance
BaFin provides guidance regarding the continued marketing of UK investment funds after Brexit
On 11 September 2019, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) provided guidelines applicable to investment funds domiciled in the UK that have been granted marketing authorization under the EU product passporting regime before Brexit and intend to continue marketing their products in Germany after Brexit.
BaFin clarifies that UK investment funds can continue to be marketed in Germany if in each case a notification procedure is completed for the marketing of third-country funds under section 320, 329 or 330 of the German Investment Code (Kapitalanlagegesetzbuch, KAGB).
Despite the lack of clarity with regard to Brexit, BaFin states that it is already accepting the corresponding applications.
The following bilateral marketing notification procedures are available depending on the circumstances in each individual case:
Procedure under section 320 of the KAGB;
Procedure under section 330 of the KAGB; and
Procedure under section 329 of the KAGB.
In addition, BaFin published the annex to the guidance notice which provides specific guidance with regard to Brexit. It applies to UK UCITS domiciled in the UK that have been granted marketing authorization in the Federal Republic of Germany under the EU passporting regime before Brexit and intend to continue marketing their products in Germany after Brexit.
As a general principle, the guidance notice on section 320 of the KAGB applies to such UK UCITS. However, in light of the fact that UCITS have already been marketed in Germany, BaFin is allowing for certain simplifications, contrary to the guidelines set out in the guidance notice. For example, a copy instead of the original version of the auditors' report signed by hand is regarded as sufficient to be handed-in as supplement to the marketing authorization application.
Guidance regarding the continued marketing of UK investment funds after Brexit
BaFin issues Circular 10/2019 (WA) on criteria for management companies to be exempted from audit requirement
On 16 September 2019, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published Circular 10/2019 (WA) which outlines the prerequisites that must be met in order to exempt capital management companies from the obligation to have the auditor perform a separate audit of the services and ancillary services provided.
Insofar as external capital management companies provide services and ancillary services, the auditor must examine these in particular. This audit also includes examining the compliance with certain provisions of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG). Upon request, BaFin may refrain, in whole or in part, from examining these provisions, insofar as this special reasons are given, such as the specific nature and extent of the transactions conducted. However, no exemption can be granted from the audit of Section 84 WpHG .
Circular 10/2019 ( WA ) replaces Circular 16/2009 ( WA ) of 22 September 2009 and adapts it to the provisions of the Capital Investment Code (Kapitalanlagegesetzbuch, KAGB), but does not contain any fundamental content changes.
Circular 10/2019 (WA)
BaFin provides Q&As on Brexit for asset management companies and investment funds
In 2016, the British people decided in a public vote that the United Kingdom (UK) should leave the European Union (EU). Brexit, i.e. the withdrawal of the UK from the EU, was originally due to happen on 29 March 2019. That was two years after Prime Minister Theresa May had triggered Article 50 - the formal process to leave - and kicked off negotiations with the EU. Yet, the Brexit date has been delayed twice and is now planned for 30 October 2019.
According to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Brexit could have considerable consequences not only for financial companies but also for non-financial companies that have business relationships with UK financial services providers. To prevent market distortions and help financial firms prepare for the UK's withdrawal from the EU, BaFin has answered frequently asked questions on Brexit. These questions are relevant in particular for UK banks and insurers which would like to open branches or establish subsidiaries in Germany. In addition, some important information for providers and issuers of securities is provided by BaFin.
On 17 September 2019, BaFin issued a set of questions and answers on Brexit addressed to asset management companies and investment funds.
More specifically, BaFin clarified that:
it will be possible for German asset management companies to continue outsourcing the tasks of portfolio management and risk management to UK companies after Brexit;
UK investment funds can continue to be marketed in the Federal Republic of Germany after Brexit, provided they complete a (further) marketing notification procedure; and that
applications as part of the marketing notification procedures for UK investment funds can be submitted to BaFin already before Brexit.
BaFin has established a special contact address for financial services firms wishing to move their registered office or operations to Germany and will respond to all enquiries within two business days. This contact facility is particularly aimed at firms considering relocation from the UK to continental Europe due to Brexit. However, the new contact address can be used by all foreign financial firms interested in Germany as a financial center and in the supervision BaFin provides.
Questions & Answers Brexit
BaFin issues form for confirming compliance with foreign product intervention measures
On 12 September 2019, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published a form which should be used by institutions engaged in cross-border activities to notify BaFin of their compliance with foreign product intervention measures.
Notification form for compliance with foreign product intervention measures
BaFin provides guidance on supervisory treatment of individual features of corporate bonds under the PRIIPs Regulation
On 19 September 2019, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) released a notice Guidance on the supervisory treatment of individual features of corporate bonds under the PRIIPs Regulation.
In July 2018, the Joint Committee of the European Supervisory Authorities analyzed the treatment of corporate bonds under the PRIIPs Regulation and requested the European Commission to publicly clarify the scope of the Regulation or to confirm this analysis. The European Commission replied by way of a letter dated 14 May 2019.
There is still continuing uncertainty about the applicability of Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) to corporate bonds. Therefore the Securities Supervision has set out its position in a Guidance Notice.
This Guidance outlines BaFin’s administrative practice regarding the supervisory treatment of corporate bonds in relation to the interpretation of the PRIIPs Regulation. The individual features of a corporate bond must be considered on a case by case basis in order to assess whether the bond must be treated as a PRIP or not.
Guidance notice - PRIIPs
SFC issues circular on the publication of Hong Kong’s Mutual Evaluation Report by FATF
On 6 September 2019, the Securities and Futures Commission (SFC) informed the public of the publication by the Financial Action Task Force (FATF) of the Mutual Evaluation Report of Hong Kong.
According to the report, Hong Kong’s anti-money laundering and counterfinancing of terrorism (AML/CFT) regime would have been assessed to be compliant and effective overall, making it the first jurisdiction in the Asia-Pacific region to have achieved an overall compliant result in the current round of FATF mutual evaluations.
The SFC highlights certain focus areas deemed important for further increasing the effectiveness of Hong Kong's AML/CFT regime.
the deepening of the understanding of money laundering and terrorism-financing risks;
the strengthening of the implementation of AML/CFT measures; and
the strengthening of the suspicious transactions monitoring and reporting.
For the future, the SFC states its intention to continue employing a broad range of supervisory and enforcement measures to facilitate and ensure effective implementation of policies, procedures and controls for compliance with AML/CFT requirements by securities intermediaries.
Circular on Hong Kong's Mutual Evaluation Report by FATF
Hong Kong amends Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615)
On 23 September 2019, the amended Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) was published in Hong Kong's Official Gazette.
The following provisions were updated:
Part 2 Requirements Relating to Customer Due Diligence and Record-keeping,
Part 3 Supervision and Investigations,
Part 5 Regulation of Operation of Money Service,
Schedule 1 Interpretation,
Schedule 2 Requirements Relating to Customer Due Diligence and Record-keeping.
Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) as amended
SFC revises its Code of Conduct for persons licensed by or registered with the SFC
On 1 September 2019, the Securities and Futures Commission (SFC) has published a revised version of its Code of Conduct for persons licensed by or registered with the SFC. The current version is the twenty-fourth edition of the Code and applies with immediate effect.
The SFC will be guided by this Code of Conduct in considering whether a licensed or registered person satisfies the requirement that it is fit and proper to remain licensed or registered, and in that context, will have regard to the general principles, as well as the letter, of the Code.
In this context, the SFC recognizes that conduct of business principles should be flexible enough to differentiate between professional and non-professional investors and some provisions of the Code need not be observed in the case of professionals.
The Code does not have the force of law and should not be interpreted in a way that would override the provision of any law.
Code of Conduct (Version: 1 September 2019)
SFC issues circular on Mutual Recognition of Funds (MRF) between Switzerland and Hong Kong
On 16 September 2019, the Securities and Futures Commission (SFC) published its Circular on the Mutual Recognition of Funds (MRF) between Switzerland and Hong Kong.
MRF operates on the principles that, in respect of a fund that has been authorized or approved by the relevant authority in one jurisdiction (Home Jurisdiction) and is seeking or has received authorization or approval for Public Offering in the other jurisdiction (Host Jurisdiction):
a. the fund should meet the eligibility requirements in accordance with this Circular;
b. the fund should remain authorized or approved by the relevant authority in the Home Jurisdiction and is allowed for Public Offering within the Home Jurisdiction;
c. the fund should generally operate and be managed in accordance with the relevant laws and regulations in the Home Jurisdiction and its constitutive documents;
d. the sale and distribution of the fund in the Host Jurisdiction shall comply with the applicable laws and regulations in the Host Jurisdiction;
e. the fund will comply with the additional rules released by the relevant authority in the Host Jurisdiction governing the authorization or approval, post-authorization and ongoing compliance, and the sale and distribution of the fund in the Host Jurisdiction;
f. the management company of the fund shall ensure holders of both the Home Jurisdiction and Host Jurisdiction receive fair and the same treatment, including in respect of investor protection, exercise of rights, compensation and disclosure of information; and
g. ongoing disclosure of information on the fund shall be made available to the investors in the Home Jurisdiction and the Host Jurisdiction at the same time.
Circular on MRF between Switzerland and Hong Kong
SFC updates Q&As on exchange traded funds and listed funds
On 19 September 2019, the Securities and Futures Commission (SFC) published an updated version of its questions and answers (Q&As) on exchange traded funds and listed funds.
The Q&As are aimed to provide basic information to market practitioners in respect of exchange traded funds (ETFs) and listed funds, which are subject to the SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products, including the Code on Unit Trusts and Mutual Funds effective on 1 January 2019.
In the current update, Question 16 has been added. It clarifies what ETF managers should note regarding an SFC-authorized ETF with multiple listed share classes. More specifically, it is explained that in general, the offering of an accumulating share class by an ETF in addition to its existing distributing share class (or vice versa) is not subject to the SFC’s prior approval. Yet, to provide clarity to investors, ETF managers managing ETFs with multiple listed share classes should ensure that information relating to each listed share class is clearly disclosed in the offering documents.
Questions & Answers ETFs and listed funds
SFC issues circular on reporting of OTC derivatives transactions to HKMA trade repository
On 2 September 2019, the Securities and Futures Commission (SFC) published a circular to Licensed Corporations (LCs), informing them of revised technical specifications for the reporting of over-the-counter (OTC) derivatives transactions to the Hong Kong Trade Repository (HKTR).
More specifically, the SFC states that refinements to the existing technical specifications in the Administration and Interface Development Guide (AIDG) have been made to reflect changes since 21 April 2017.
Other changes have also been made to the AIDG for the introduction of the new SWIFT WebAccess solution on 17 February 2020. The HKTR is said to have scheduled a series of simulation and connectivity tests for this system enhancement.
The revised AIDG (version 1.5.3) can be downloaded at the following page of the Hong Kong Monetary Authority (HKMA)’s website: hktr.hkma.gov.hk/ContentDetail.aspx
The SFC expects that LCs subject to mandatory reporting or planning to access the HKTR via SWIFT WebAccess will pay attention to the information on this matter issued by the HKMA and will take appropriate action to ensure the continued compliance with the reporting obligation.
Circular on derivatives reporting
In 2015, the 4th European Anti-Money Laundering Directive (AMLD 4 or Directive (EU) 2015/849) was adopted to strengthen EU rules on anti-money laundering (AML) and combating the financing of terrorism (CFT) by taking into account the 2012 Recommendations of the Financial Action Task Force (FATF).
The Directive was to be transposed by EU member states within a two-year time frame. In Ireland, this transposition into national law was achieved via amendments to the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (CJA 2010).
On 6 September 2019, the Central Bank of Ireland now published AML and CFT Guidelines for the financial sector which set out the expectations of the Central Bank in respect of credit and financial institutions' compliance with their AML/CFT obligations under Part 4 of the CJA 2010.
The purpose of the provided guidance is to assist firms with the factors that they should take into account when identifying, assessing and managing money-laundering (ML) / terrorism-financing (TF) risks.
More specifically, the Guidelines are focused on the following topics:
Legal and Regulatory Framework, both at national and international level;
Precise definition of money laundering and terrorist financing;
Requirements for an appropriate risk management such as applying a risk-based approach, conducting a business risk assessment, taking a holistic view as regards risk factors, identifying customer and country or geographic risk, assessing the risk of a firm's products, services or transactions, considering channel/distribution risk and assessing the overall ML/TF risk;
Customer due diligence requirements;
Governance, e.g. the role and responsibilities of the senior management and the three lines of defense model;
Reporting of suspicious transactions;
Record-keeping; and
International financial sanctions, including both UN and EU provisions.
The Central Bank will update or amend the Guidelines from time to time, as deemed appropriate.
AML/CFT Guidelines
Irish central bank publishes amendments to UCITS and AIFM regulations
On 9 September 2019, the Central Bank of Ireland has updated the recently published European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2019 and the European Union (Alternative Investment Fund Managers) (Amendment) Regulations 2019, which came into force on 13 August 2019.
The final UCITS regulations:
Amend the European Union (Undertakings for Collective Investment in Transferable Securities) Regulations (S.I. No. 352 of 2011)
Construe the expressions “investment firm” and “investment firms” contained in Article 10 of the MIFID II, any of the relevant provisions, or Regulation 119 or Regulation 129(2) of the MIFID II Regulations, as “management company” and “management companies” respectively
Amend that in the event of the insolvency of a depositary, or any third party, located in the Union – (a) to which custody of UCITS assets has been delegated, or (b) which holds cash assets of a UCITS, neither the assets of a UCITS held in custody nor the cash assets shall be available for distribution among, or redistribution among, or realization for the benefit of, creditors of the depositary or third party concerned.
The final AIFM regulations:
Amend the definitions of “financial instrument”, “host Member State of the AIFM”, "“issuer" and “non-listed company”;
Update references of the regulations/acts that an AIFM which provides individual portfolio management services should comply with;
Require the depositary to be also a company incorporated in the State which is authorized as an investment business firm under the Investment Intermediaries Act 1995 and is wholly owned by an institution in a third country, provided the liabilities of the company are guaranteed by the institution and the institution has a paid up share capital which is not less than the limits specified in section 9E of the Central Bank Act 1971;
Rule that in the event of the insolvency of a depositary, or any third party, located in the Union neither the assets of an AIF held in custody nor the cash assets held shall be available for (re)distribution among or realization for the benefit of creditors of the depositary or third party concerned;
Demand the assets of an Irish AIF to (a) belong exclusively to the AIF, and (b) be segregated from the assets of the depositary or its agents or both and not used to charge directly or indirectly liabilities or claims against any other undertaking or entity;
Require the auditor of an AIF, in case there is any reason to believe that a fact or decision concerning an AIF is liable, to report the matter to the central bank in writing without delay; and
Amend the conditions for Irish AIFMs managing EU AIFs established in other Member States and for AIFMs from other Member States managing Irish AIFs.
EU UCITS Amendment Regulations 2019
Irish central bank launches consultation on regulatory framework for the treatment, correction and redress of errors in investment funds
On 9 September 2019, the Central Bank of Ireland published its consultation on a regulatory framework that establishes rules and guidance in relation to the treatment, correction and redress of errors in investment funds.
The Central Bank considers that the guiding principle for any such framework should be that where an error occurs, the fund and/or the investor must be Appropriately Rectified. The concept of ‘Appropriately Rectified’ will be applied broadly to include reporting of errors, notification to investors and Payment of Redress obligations. Where this has been done effectively, the fund / investor is restored to the position that it / they would have been in had the relevant issue not arisen.
The Central Bank considers that a Fund Management Company is ultimately responsible for ensuring that the error is Appropriately Rectified and the depositary has a role in ensuring that this is the case. The Central Bank is consulting on the basis of a regulatory framework which comprises of the following distinct components:
Treatment – how errors should be treated when they arise, including when such errors should be considered as material;
Correction – how errors should be corrected, including what reporting and notification obligations should apply; and
Redress – how the fund and / or investors should be Appropriately Rectified following an error
CP130 - Treatment, correction and redress of errors in investment funds
Government of Ireland provides information on the second stage of the Investment Limited Partnerships (Amendment) Bill 2019
On 20 September 2019, the Government of Ireland updated about the Investment Limited Partnership (Amendment) Bill 2019 which aims to improve regulatory landscape for private funds completes Second Stage on 18 September 2019.
The Bill will modernize the Investment Limited Partnership Act, which was first introduced in 1994, and align it with more recent domestic and EU legislation, such as the Companies Act 2014 and the EU Alternative Investment Funds Managers Directive (AIFMD).
The Investment Limited Partnership Act is on the Government's priority legislation list and its amendment forms part of the Ireland for Finance Strategy. The aim of the Bill is to make Ireland a more attractive domicile for private equity funds and in turn broaden the offering of Ireland’s investment funds sector, which supports thousands of jobs directly and many more indirectly.
Press release on Investment Limited Partnership (Amendment) Bill 2019
Italy issues law allowing the MEF to constitute real estate funds
On 24 September 2019, Italy issued on the official journal a law enabling the Minstero dell'Economia e delle Finanze (MEF) to constitute collective investment funds investing in real estate.
The property transfer of uildings of the State not used for institutional purposes is now allowed via these vehicles that can be set up by the MEF.
Law allowing the MEF to constitute real estate funds
Banca d'Italia issues the 20th update to Circular No 189 on statistical and supervisory reporting by investment funds
On 17 September 2019, Banca d'Italia issued the 20th amendment to Circular No 189 of 21 October 1993 on the statistical and supervisory reporting by investment funds.
The amendment concerns an item regarding the status of the counterparty, as per the section I.4.1 of the circular.
Amendments will enter into force as of January 2020.
20th amendment to Circular No 189 of 21 October 1993
CSSF reminds UK firms of mandatory notification in the context of Brexit
On 4 September 2019, the Commission de Surveillance du Secteur Financier (CSSF) published a press release, reminding investment firms of the mandatory notification in the context of Brexit.
The dedicated eDesk portals for this purpose were opened on 2 August 2019 for a limited period of time.
UK firms that are planning to continue to serve existing contracts in Luxembourg under the transitional regime will need to notify the CSSF accordingly no later than 15 September 2019.
Mandatory notification in the context of Brexit
CSSF updates Q&As for investment funds to clarify the obligation of professional secrecy
The Commission de Surveillance du Secteur Financier (CSSF) has issued different sets of Questions and Answers (Q&As) to highlight some of the key aspects of the laws and regulations governing investment funds in Luxembourg.
Each Q&A set focuses on a different type of investment fund, i.e. the CSSF covers:
• Undertakings for collective investment (UCIs);
• Alternative investment funds (AIFs);
• Specialized investment funds (SIFs);
• Investment companies in risk capital (SICARs); and
• Professionals of the financial sector (PFS).
On 2 September 2019, the CSSF updated its Q&As for UCITS, AIFMs, SIFs, SICARs and PFSs to clarify the subject of professional secrecy.
More specifically, the CSSF explains that, in case of a data transfer, a service provider (SP) acting as central administration or depository bank (a credit institution, an investment firm or a professional of the financial sector) must obtain consent from its clients for outsourcing the services in scope, the type of information transmitted in the context of the outsourcing and the country of establishment of the entities providing outsourced services, pursuant to Article 41 (2a) of the Law of 5 April 1993 on the financial sector, as amended.
The Board of Directors (BoD), the management body or the fund manager (depending on the respective setting) should inform and obtain consent from investors to the transfer of their personal and confidential data through the following means:
• Communication to existing investors (letter explaining the transfer of data with a possibility to object within a reasonable time frame);
• Immediate change/modification of the subscription form in order to seek consent from future investors;
• At the first occasion: modification of the prospectus (disclosing the necessary information regarding the data transfer).
Before outsourcing the services in scope, the SP should also obtain the commitment of the respective responsible entity that investors have been informed of and consented to the transfer of their personal and confidential data.
The Q&A documents will be updated from time to time and the CSSF reserves the right to alter its approach to any matter covered therein at any time.
Questions & Answers UCITS
CSSF informs on eDesk account creation and UCI approval information sessions
On 5 September 2019, the Commission de Surveillance du Secteur Financier (CSSF) published a press release, informing the public of the launch of its portal "eDesk" and outlining some organizational considerations with respect to applying for UCI approval via the portal.
The CSSF reminds stakeholders that after 1 November 2019, the only possible channel to submit requests for UCI approvals will be the eDesk portal.
CSSF press release on eDesk
CSSF updates Q&A on alternative investment fund managers
The Commission de Surveillance du Secteur Financier (CSSF) has issued a set of Questions and Answers (Q&As) to highlight some of the key aspects of the European Alternative Investment Fund Manager Directive (AIFMD) from a Luxembourg perspective.
The document is primarily addressed to managers of alternative investment funds (AIFMs) and alternative investment funds (AIFs) that are established in Luxembourg.
As of today, it comprises questions on 25 different topics, covering - amongst others - the scope of the Law of 12 July 2013, the authorization and registration regimes applicable to AIFMs, delegation requirements, depositary aspects, reporting, valuation, transaction costs as well as the definition of marketing and reverse solicitation.
On 27 September 2019, the CSSF updated its Q&As on the Luxembourg Law of 12 July 2013 on AIFMs, supplementing them with information on the Key Information Document (KID) for Packaged Retail Investment and Insurance-based Products (PRIIPs).
The CSSF clarified that, under certain conditions, the Luxembourg retail AIFs may issue a UCITS-like KID in order to be exempted from the obligations of the PRIIPs Regulation until 31 December 2021.
The CSSF furthermore confirmed that the PRIIPs Regulation does not apply to manufacturers of and persons advising on or selling Luxembourg AIFs solely intended for professional investors. The CSSF is strongly recommending such AIFs to amend their offering documents in order to include a reference to the fact that their units are solely advised on, offered or sold to professional investors and that, as a consequence, no PRIIPs KID shall be issued.
Finally, the CSSF reminded stakeholders that all SIFs, Part II UCIs and SICARs are required to complete an online assessment available on the eDesk portal as specified in Circular 19/721(Dematerialisation of requests) to the CSSF.
The Q&A document will be updated from time to time and the CSSF reserves the right to alter its approach to any matter covered therein at any time.
Questions & Answers AIFMs
Dutch Minister of Finance reports on draft law for implementing the BMR
On 6 September 2019, a parliamentary document was published in the Dutch Gazette which contains the Dutch Minister of Finance's answers to questions on the draft law for implementing the Regulation (EU) No 2016/1011, the European Benchmarks Regulation (BMR), in the Netherlands.
In his report, the Minister explains the differences between the new draft law and the previous regulations under the Financial Markets Amendment Act 2015. In addition, he clarifies that the BMR - as a European regulation - is applicable since 1 January 2018, although the proposed rules specific to the Netherlands are not yet in force as the draft law has not yet been approved.
Report by Minister of Finance on BMR
AFM and DNB share insights about the transition to alternative interest rate benchmarks
On 25 September 2019, the Autoriteit Financiële Markten (AFM) and De Nederlandsche Bank (DNB) published their feedback on the transition to alternative benchmarks. They advice financial companies to prepare well for the transition to alternative interest rates. Market parties must analyze the risks of the transition and take appropriate action. The regulators encourage market parties to switch to suitable replacement interest benchmarks as soon as they are available.
In April, the AFM and DNB asked banks, insurers and pension funds how they handle the interest rate benchmark market. This gave the supervisors more insight into the preparations by companies. Among the companies addressed, and the rest of the market, this increased awareness of the impact of the transition.
The AFM and DNB now share their insights with the entire market. They provide an overview of the use of interest rate benchmarks, the identified risks and the actions taken, based on the information provided. In addition, the regulators share best practices and current information about the transition. With regard to information provision, the emphasis is on the European interest benchmarks Euribor and EONIA.
Due to developments in the interbank markets and in regulations, it is necessary that the use of frequently used interest benchmarks such as Euribor, LIBOR and EONIA by financial companies is examined. LIBOR and EONIA may no longer be published after 2021. Euribor is currently being reformed. Alternatives to these interest rate benchmarks are worked out by international working groups, such as the Euro Short-Term Rate (€STR), a new interest rate benchmark that has been designated as an alternative to EONIA. All users of interest rate benchmarks must identify which benchmarks they use and how they are affected by the transition.
Feedback on transition to alternative benchmarks
The Netherlands introduce exemption from license obligation for Singapore and US market operators
On 4 September 2019, the Dutch Minister of Finance published a Regulation adding a new provision to the Exemption Regulation AFS (Act on Financial Supervision) containing an exemption from the Dutch license obligation for Singapore and US market operators that operate trading venues (organized trading facilities and multilateral trading facilities) in the Netherlands.
The Regulation stipulates that the exemption will only be available insofar as the following two conditions are met:
only derivatives are being traded on the trading venue; and
the trading venue must be listed in Implementing Decision (EU) 2019/541 (where it concerns Singapore) or Implementing Decision (EU) 2017/2238 (where it concerns the US).
The Regulation entered into force on the date of its publication, i.e. on 4 September 2019.
Regulation of 28 August 2019 on exemption from license obligation
FDF announces the intended date of entry into force of FinSA and FinIA
At the start of November 2015, the Federal Council adopted the dispatch on the Financial Services Act (FinSA) and on the Financial Institutions Act (FinIA), which will create uniform competitive conditions for financial intermediaries and improve client protection. The FinSA contains code of conduct provisions with which financial service providers must comply vis-à-vis their clients. It also provides for prospectus duties and requires an easily understandable key information document (KID) for financial instruments. The FinIA essentially harmonizes the authorization rules for financial service providers. The Swiss Parliament adopted both bills in the final votes on 15 June 2018.
Relative to the Federal Council dispatch, changes and adjustments were made to the bills in the following areas in particular:
Insurance activities were removed from the scope of the FinIA, as the regulations are to be included in the Insurance Oversight Act in a separate revision;
Simplifications for clients in civil proceedings regarding financial market disputes were dropped;
FINMA grants authorization to independent asset managers and trustees and has full enforcement powers over these, while the ongoing supervision of independent asset managers and trustees is to be performed by non-governmental supervisory organizations authorized by FINMA;
The insolvency provisions in the Banking Act proposed by the Federal Council in the annex to the FinIA are to be included in a separate consultation; and
A new authorization category for companies (in particular in the FinTech area) which accept public funds of between CHF 1 mn and CHF 100 mn was created in the Banking Act, so that simpler requirements apply for these companies under certain conditions.
On 9 September 2019, the Swiss Federal Council informed the public that the Federal Department of Finance (FDF) had notified it of its intention to bring the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) - together with the Federal Council's implementing ordinances - into force on 1 January 2020. Transitional periods of two years would be anticipated in principle.
The Federal Council is expected to take the final decision on the texts of the ordinances and their entry into force at the beginning of November 2019.
Federal Council press release of 9 September 2019
FINMA amends annexes to the cooperation agreement on funds with the Hong Kong SFC
On 16 September 2019, the Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht, FINMA) published the amended annexes to the cooperation agreement on funds between FINMA and the Securities and Futures Commission of Hong Kong (SFC) concluded on 2 December 2016.
Amending the technical implementation provisions contained in the annexes was necessary due to the revision of the Hong Kong Code on Unit Trusts and Mutual Funds (UT Code), the provisions of which the cooperation agreement relates to.
As a result of the amendments, the requirements for Hong Kong funds to be approved for distribution in or from Switzerland remain equivalent to those for securities funds. At the same time, FINMA amended the application template for the approval of Hong Kong funds and transferred it to the FINMA survey and application platform (EHP).
Appendix to cooperation agreement on funds with Hong Kong
FINMA publishes Guidance on Monitoring 03/2019
On 24 September 2019, the Eidgenössische Finanzmarktaufsicht (FINMA) published a Guidance on the Recognition of equivalence of CFTC risk mitigation obligations for transactions in OTC derivatives that are not cleared centrally.
FINMA will observe the overarching objective of the FMIA of equivalence with the European regulations. FINMA recognizes the law of the United States with regard to risk mitigation obligations including initial and variation margin for transactions in non-centrally cleared OTC derivatives that are regulated and supervised by the CFTC as equivalent in accordance with Art. 95, let. a FMIA and Art. 81 FMIO.
Guidance on Monitoring 03/2019
FCA provides update on the transition from LIBOR
On 4 September 2019, the Financial Conduct Authority (FCA) published a dedicated session about ongoing transition initiatives and actions FCA is taking to facilitate the transition.
The London Interbank Offered Rate (LIBOR) is currently produced in 7 tenors (overnight/spot next, one week, one month, two months, three months, six months and 12 months) across 5 currencies. It is based on submissions provided by a panel of 20 banks. These submissions are intended to reflect the interest rate at which banks could borrow money on unsecured terms in wholesale markets.
Update on benchmark transition
FCA publishes CP19/27 Quarterly Consultation Paper No 25 on changes to prepare for Brexit
On 6 September 2019, the Financial Conduct Authority (FCA) proposed some miscellaneous amendments to its Handbook. Some of the proposed Brexit changes will only come into effect if the UK leaves the EU on 31 October 2019 without an implementation period. These small changes are:
minor amendments to chapter 15 of the Supervision manual (SUP) related to Alternative Investment Fund Managers Directive (AIFMD) Forms
amendments to the Collective Investment Schemes (COLL) source book
minor Handbook amendments to update references to the UK Corporate Governance Code
changes to DTR to implement the European Single Electronic Format
to implement the changes made by Treasury to domestic legislation to reflect the amendments brought by the European Commission’s Regulatory Fitness and Performance Programme (REFIT) to the European Market Infrastructure Regulation EMIR (EMIR) and make firms aware of the FCA’s new powers set out in the amended domestic legislation
further Brexit-related changes to Handbook & BTS following extension of Article 50, which will only come into effect if the UK leaves the EU without an implementation period
to seek views from interested stakeholders about whether the Lending Standards Board’s Standards of Lending Practice for business customers meet the Codes Recognition Criteria
modifications to periodic fees rules for Recognized Overseas Investment Exchanges that are also European Economic Area market operators.
changes to regulatory reporting requirements
to modify ‘wake-up’ pack and annuity information prompt rules to reflect the policy intention
changes to the Training and Competence (TC) source book list of appropriate qualifications.
CP19/27 Quarterly Consultation Paper No 25
FCA requires firms to register online to update their firm details
On 13 September 2019, the Financial Conduct Authority (FCA) has informed firms that they need to register for FCA's online Connect platform. Firms will need to send FCA firm details - also known as a mandatory annual update. This will be a requirement from January 2020.
From January 2020, firms will be required to review and confirm the accuracy of firm details annually, in line with their Accounting Reference Date (ARD). Even if firm's details have not changed from the previous year, they will still need to log-on to Connect and confirm that the information is up to date.
FCA press release on registering for "Connect" platform
FCA updates forms for national private placement regime
On 3 September 2019, the Financial Conduct Authority (FCA) updated both the notification form and the Material Change Form regarding the national private placement regime (NPPR).
EEA AIFMs marketing AIFs under Regulation 57 of the of the Alternative Investment Fund Managers Regulations 2013 (as amended) need to submit notifications using this to inform the FCA of their initial registration and the subsequent registration of new AIFs.
The notification form is for authorized full scope EEA AIFMs that market in the UK:
non-EEA AIFs; or
feeder AIFs that are UK AIFs or EEA AIFs where the master fund is managed by a non-EEA AIFM or is a non-EEA AIF.
Also, AIFMs must notify the FCA of any material changes to information the company previously submitted to the FCA (including, but not limited, to the cease marketing and transfer management of AIFs) using the relevant form: EEA AIFMs Only – Regulation 57 Material Change Form.
The completed NPPR forms must be emailed to Nppreea57new@fca.org.uk.
Notification form NPPR
FCA updates its Investment Funds sourcebook
On 9 September 2019, the Financial Conduct Authority (FCA) updated Section 10.5 - National private placement in its Investment Funds sourcebook.
To market under NPPR in the UK, an AIFM must meet a number of conditions before making a notification, as detailed in regulations 57, 58 and 59 of the UK AIFM Regulations.
The notification must include a declaration from the AIFM that the management of the AIF complies with the relevant conditions in the UK AIFM Regulations. As a result of marketing an AIF in the UK under NPPR, the requirements that an AIFM must meet may change, e.g. it might need to report additional information to the FCA.
Investment Funds sourcebook - Chapter 10
FCA publishes Policy statements PS19/24 on Illiquid assets and open-ended funds
On 30 September 2019, the Financial Conduct Authority (FCA) published Policy Statement PS19/24 which summarizes the feedback received to FCA's consultation on illiquid assets and open-ended funds. It sets out FCA's final rules relating to disclosure, liquidity management and suspension of dealing, as originally proposed in CP18/27.
The FCA has changed its Handbook in 3 broad areas:
Suspension of dealing in units
Improving the quality of liquidity risk management
Increased disclosure.
The measures are focused on non-UCITS retail schemes (NURSs), as these are a key type of fund which can invest in inherently illiquid assets, and in which retail investors can invest.
This policy statement applies to Those with an interest in open-ended funds, in particular NURSs, that invest in inherently illiquid assets, such as property, should read this paper. This includes fund managers, depositaries, ancillary service providers, intermediaries and investors. The remedies also have implications for those communicating financial promotions of funds investing mainly in illiquid assets to retail clients.
Rules and guidance introduced should be complied by 30 September 2020. Fund managers and depositaries may wish to consider whether it would be in customers’ interests to adopt some of the measures, such as increased disclosure and improved liquidity management, ahead of the coming into force date, where these do not conflict with the rules applicable until that date.
Policy statements PS19/24 on Illiquid assets and open-ended funds
FCA sets out expectations regarding polling and the Market Abuse Regulation
On 3 September 2019, the Financial Conduct Authority (FCA) has set out how it expects firms and individuals to handle any information that has the potential to be inside information. The document is a response to questions on how the Market Abuse Regulation (MAR) might apply to information obtained via electoral polling.
Determining whether information is inside information requires judgement based on the facts at the time. The FCA encourages firms, where appropriate, to take legal advice on specific questions and actions which should be applied on a case by case basis.
It is important to note that all firms and individuals – regardless of whether they carry out regulated financial services activities – fall in scope of FCA's regulatory remit on market abuse.
FCA expectations for polling and MAR
FCA publishes multi-firm review findings on MiFID II
On 25 September 2019, the Financial Conduct Authority (FCA) published multi-firm review findings indicating the Markets in Financial Instruments Directive’s (MiFID II) research unbundling rules have improved asset managers’ accountability over costs, saving millions for investors.
The FCA’s review found that, following MiFID II, most asset managers have chosen to pay for research from their own revenues, instead of using their clients’ funds. Firms have also improved their accountability and scrutiny of both research and execution costs, including where firms have chosen to charge research costs to clients.
FCA's findings, and research and inducement rules, are particularly relevant for:
traditional and alternative asset managers (the ‘buy-side’)
investment firms providing execution and research services, including investment banks and brokers (the ‘sell-side’)
It will also be of interest to:
independent research providers
consumer bodies.
The FCA also intends to carry out further work in this area in 12 to 24 months’ time to assess firms’ ongoing compliance with FCA rules.
MiFID II – multi-firm review results
Basel Institute on Governance publishes its AML Index for 2019
In September 2019, the Basel Institute on Governance published its report on Anti-Money Laundering (AML), comprising a country ranking and a review of money laundering (ML) and terrorist financing (TF) risks around the world (version August 2019).
This report accompanies the eighth edition of the Basel AML Index, which has been published by the Basel Institute on Governance since 2012. The Public Edition of the Basel AML Index 2019 and the analysis in this report, cover 125 countries with sufficient data to calculate a reliable ML/TF risk score. It focuses on five domains:
Quality of AML/CFT Framework;
Financial Transparency and Standards;
Public Transparency and Accountability; and
Legal and Political Risks.
The Basel Institute has conducted extensive research and calculated the risk scores following academic best practices. The methodology is reviewed every year by an international and independent panel of peer reviewers to ensure that the ranking is accurate, plausible and continues to capture the latest developments in ML/TF risks. The Basel AML Index is developed and maintained by the Basel Institute’s International Centre for Asset Recovery (ICAR).
AML Index 2019
FATF updates its consolidated assessment ratings as of 5 September 2019
On 5 September 2019, the Financial Action Task Force (FATF) updated its table of consolidated assessment ratings. This table provides an up-to-date overview of the ratings that the assessed countries obtained for effectiveness and technical compliance. These should be read in conjunction with the detailed mutual evaluation reports, which are available on the FATF's website.
The ratings are based on the peer reviews conducted on an ongoing basis by the FATF and its nine FATF-Style Regional Bodies (FSRBs) to assess how effectively their respective members' AML/CFT measures work in practice, and how well they have implemented the technical requirements of the FATF Recommendations.
Consolidated assessment ratings - 5 September 2019
ISDA publishes Q&As on the EURIBOR reform
On 10 September 2019, the International Swaps and Derivatives Association (ISDA) published Questions & Answers (Q&As) on the EURIBOR benchmarks reform. These Q&As may be updated occasionally and contain questions concerning the nature of EURIBOR, the benchmarks methodology and authorization, the eligible transactions with the corresponding transition period as well as information on further upcoming reforms.
Questions & Answers EURIBOR reform
ICMA ERCC publishes updated memorandum outlining recommendations for repo market best practice to address transition from EONIA to €STR on 1 October 2019
On 27 September 2019, the International Capital Market Association (ICMA) published an updated memorandum outlining recommendations for repo market best practice to address the transition from EONIA to €STR on 1 October 2019.
Updated memorandum on repo market best practice
This publication is produced by the Projects & Regulatory Monitoring teams as well as experts from the Legal Department and the Compliance Department of CACEIS entities, together with the closed support of the Communications Department.
Gaëlle Kerboeuf, CACEIS Group Legal Manager - Projects & Regulatory Monitoring
Pauline Fieni, CACEIS Compliance - General secretary, Projects & Regulatory Monitoring
Permanent Editorial Committee
Corinne Brand, Group Communications Manager
Local Expert Correspondents
Jennifer Yeboah, Team Manager Legal (CACEIS Belgium)
François Honnay, Head of Legal and Compliance (CACEIS Bank Belgium Branch)
Tania Deltchev, Head of Legal (France)
Stefan Ullrich, Head of Legal (Germany)
Fernand Costinha, Head of Legal (Luxembourg)
Gérald Stadelmann, Head of Legal (Luxcellence Luxembourg)
Michele Tuen, Head of Trustee and Legal (Hong Kong)
Mireille Mol, Legal & Compliance (the Netherlands)
Alessandra Cremonesi, Legal Fund Structuring (Switzerland)
Robin Donagh, Legal Advisor (Ireland)
Elbaz Yves, Head of Compliance & Risk (UK)
Costanza Bucci, Head of Legal & Compliance (Italy)
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