This month’s regulatory round-up pulls together some interesting regulatory developments we have tracked throughout June. The past month brought a number of important developments, particularly on the EU Money Market Fund Regulation, with ESMA publishing updated reporting instructions, and translations to the MMF guidelines.
ESMA also set out their priority to ensure EU NCAs provide a more consistent approach to supervision of undue costs in UCITS and AIFs. It is clear that we are seeing a convergence with the UK Assessment of Value requirements at a European level.
We also reported on a number of noteworthy developments in the shareholder disclosure space, where we saw extensions to short selling bans, the renewal of the 0.1% EU short selling notification threshold, and changes to notifications requirements in Germany and Sweden.
Click here for a full list of the developments tracked throughout this month.
ESMA Guidelines on Outsourcing to Cloud Service Providers
The European Securities and Markets Authority (ESMA) published a consultation paper on guidelines on outsourcing to cloud service providers. The guidelines provide guidance on the outsourcing requirements applicable to financial market participants when they outsource to cloud service providers.
The proposed guidelines set out:
- The governance, documentation, oversight and monitoring mechanisms that firms should have in place;
- The assessment and due diligence which should be undertaken prior to outsourcing;
- The minimum elements that outsourcing and sub-outsourcing agreements should include;
- The exit strategies and the access and audit rights that should to be catered for;
- The notification to competent authorities; and
- The supervision by competent authorities.
Read more here.
ESMA Promotes Convergence in the Supervision of Costs in UCITS and AIFs
At the start of the month, ESMA published a supervisory briefing on the supervision by National Competent Authorities (NCAs) of costs applicable to Undertakings for the Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs). The briefing was in response to the need to improve convergence across NCAs in the approach to undue costs.
To promote convergence in relation to the supervision of costs in UCITS and AIFs, ESMA has developed criteria to support NCAs in:
- Assessing the notion of “undue costs”; and
- Supervising the obligation to prevent undue costs being charged to investors
More on this available on our Blog.
ESMA Updates Reporting Instructions for MMF Reporting
The European Securities and Markets Authority (ESMA), published updated reporting instructions to be used for reporting under the Money Market Fund Regulation (MMFR).
ESMA has implemented amendments on the XML schema and reporting instructions in a new version, v1.1. As indicated in the announcement published on 31 March this update follows feedback received by market participants after the publication of the first version of the XML schema (v.1.0) and an assessment of the technical committee.
Reporting entities should use the version v1.1 to submit reports required under Article 37 of MMF regulation by September 2020.
The following documents have been updated:
- Reporting Instructions (updated on 04 June 2020);
- Validations (updated on 04 June 2020); and
- Schemas (updated on 04 June 2020)
Read more here.
ESMA Publishes Translations for Guidelines on the Reporting to Competent Authorities under Article 37 of the MMF Regulation
On 22nd June 2020, ESMA issued the official translations of its guidelines on standardised procedures and messaging protocols.
National Competent Authorities (NCAs) to which these Guidelines apply must now notify ESMA whether they comply or intend to comply with the Guidelines, within two months of the date of publication by ESMA of the Guidelines in all EU official languages.
Read more here.
ESMA renews its decision requiring net short position holders to report positions of 0.1% and above
ESMA renewed its decision to temporarily require the holders of net short positions in shares traded on a European Union (EU) regulated market to notify the relevant national competent authority (NCA) if the position exceeds 0.1% of the issued share capital.
The measure applies from 17 June 2020 for a period of three months.
Read more here.
EC Report on assessing the application and scope of Directive 2011/61/EU on Alternative Investment Fund Managers
The European Commission has published a report on the application and the scope of Directive 2011/61/EU of the European Parliament and of the Council on Alternative Investment Fund Managers.
The report assesses whether the specific rules of the AIFMD are effective, efficient, coherent and relevant, and if they supported EU measures to achieve the general, specific and operational objectives of the Directive.
The report highlights the impact on AIFs/AIFMs on investors; on monitoring and assessment of systemic risk; of rules on investment in private companies and in/or for the benefit of developing countries.
Read more here.
FCA Proposes New “Value for Money” Assessments on Workplace Pensions
The FCA have published a new Consultation Paper to promote value for money for members of workplace personal pension schemes.
The FCA want to promote a consistent approach to assessing VfM and have proposed the following new requirements on providers to ensure their Independent Governance Committees:
- Take into account 3 key elements of value: charges and costs; investment performance; and services provided (including member communications).
- Assess and report on VfM, in particular through comparison with some reasonably comparable options on the market, or if available in the future relevant benchmarks (as this will only apply if they are available in the future, this is not set out in the proposed requirements).
- As far as they are able, to consider whether an alternative scheme would offer lower administration charges and transaction costs and inform the pension provider if so. If the IGC is unsatisfied with the pension provider’s response, the IGC should also inform the relevant employer.
- Set out their overall assessment in their reports about whether the scheme or pathway investment provides value for money.
- Explain how they have assessed VfM in their reports and keep relevant evidence they relied upon for at least 6 years.
Read more here.
Firms to Prepare for Phased Move to FCA’s New Data Collection Platform RegData
The FCA announced that they are preparing to gradually move firms across to their new data collection platform, which replaces Gabriel. The new name of the platform is RegData. Since April, firms have been registering for RegData through a one-off activity when accessing Gabriel.
In advance of the moving date, the FCA has requested firms check they have:
- Up-to-date contact details in Gabriel
- Nominated the correct principal user and assigned administrator rights correctly in Gabriel
- Accurate information in Gabriel about all other active users – with any non-active users disabled
Read more here.
FCA to make permanent its ban on the mass-marketing of speculative illiquid securities
The FCA published a consultation on proposals to make permanent its ban on the mass-marketing of speculative illiquid securities, including speculative mini-bonds, to retail investors. The FCA introduced the ban without consultation in January following concerns that speculative mini-bonds were being promoted to retail investors who neither understood the risks involved, nor could afford the potential financial losses.
In introducing the rules permanently, the FCA is proposing a small number of changes and clarifications to the ban introduced in January. This includes bringing listed bonds with similar features to speculative illiquid securities and which are not regularly traded within the scope of the ban.
Read more here.
CSSF Reporting Instructions under Article 37 of the Money Market Funds Regulation
Following the publication of ESMA’s amended XML schema (version 1.1) and reporting instructions for MMF reporting on its website, the CSSF published the national specifications to be respected by the entities under its supervision in order to submit the reporting of money market funds:
The CSSF has implemented the amended XML schema with the transmission channels and will issue a separate communication once reporting entities may use the amended XML schema to provide the reporting files.
Read more here.
AFM Views on the Review of the Alternative Investment Fund Directive
Towards the end of June, the Dutch AFM published a paper highlighting some areas which it considers to be relevant for the public consultation and for the AIFMD review. The AFM is generally satisfied with the AIFMD and the way it works out in practice. However, in their assessment whether the objectives of the AIFMD are fully achieved, they still see room for improvements in a number of areas.
These include:
- The co-existence of the Third Country passport and National Private Placement Regimes (NPPRs);
- The improvement of data quality;
- The option to include potential new macro prudential instruments in light of the current discussions on the need for such tools;
- Improvements regarding the EU management and marketing passport;
- Equal interpretations of AIFMD definitions and provisions; and
- Amendments to the rules on private equity transparency notifications and asset stripping.
Read more here.
Hong Kong SFC Proposes Changes to the Code on Real Estate Investment Trusts
The Securities and Futures Commission (SFC) has begun a two-month consultation on proposals to amend the Code on Real Estate Investment Trusts (REITs) to provide Hong Kong REITs with more flexibility in making investments.
The proposed changes include allowing REITs to make investments in minority-owned properties and in property development projects in excess of the existing limit of 10% of gross asset value (GAV) subject to unitholders’ approval , as well as increasing the borrowing limit for REITs from 45% to 50% of GAV.
The consultation is open until 10th August 2020.
Read more here.
Shareholder Notifications to Bafin and Issuers
From 1 July 2020 submission notifications to BaFin and to the company must be made electronically. The notification to BaFin has to be submitted through BaFin’s MVP-Portal.
An overview of voting rights in listed companies can be found in a database on the BaFin website.
The FAQs on mandatory electronic submissions has also been updated.
Read more here.
FIN-FSA Imposes Penalty on Evli Fund Management Company Ltd for Late Major Shareholdings Notification
On 16th June 2020, the Finnish Financial Supervisory Authority (FIN-FSA) announced that it had imposed a penalty payment of EUR 45,000 on Evli Fund Management Company Ltd for failure to comply with the deadline laid down in the Securities Markets Act for notifying major shareholdings and proportions of voting rights.
The notification must be made without undue delay, whereas in this case, the delay was 20 trading days.
Read more here.
Short Selling Ban Extended
On 26th June 2020, the Securities Commission Malaysia (SC) and Bursa Malaysia Berhad announced they had decided to further extend the temporary suspension of short selling to 31 December 2020.
The temporary suspension, which began on 24 March 2020 was extended on 28 April 2020, and was initially scheduled to expire on 30 June 2020.
Read more here.
New Reporting System for Short Selling
On 30th June 2020, Finansinspektionen (FI) announced that it will introduce a new reporting system later this year for net short selling notifications.
Holders of net short positions and rapporteurs for these position holders will be able to use the Short Selling Online Reporting tool to report information on the positions to FI. The information will be stored in a database, and the information that must be published by regulatory mandate will be made available on a new website at fi.se. It will also be possible to see in the system positions that were reported earlier and recall incorrectly reported positions.
Read more here.
