The European Banking Authority has published an action plan on sustainable finance, setting out how it intends to deliver on its aims to help combat environmental, social and governance risks and providing clarity on the direction of its policy in this area. The EBA has been mandated to contribute to work on ESG risks under various pieces of EU legislation and will focus on environmental factors and climate change in its initial phase of work. The action plan also sets out the EBA’s projected timelines and milestones on sustainable finance.

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The International Swaps and Derivatives Association has published a letter in which it responds to the Financial Stability Board's November 15, 2019 letter on pre-cessation triggers. The co-Chairs of the FSB's Official Sector Steering Group requested ISDA to include a "pre-cessation trigger" alongside the cessation trigger in its standard language in derivatives contracts, via either definitions for new contracts or in a single protocol (without embedded optionality) for outstanding contracts. The pre-cessation trigger would cause a LIBOR-based contract to fall back to an alternative reference rate in the event that the U.K. Financial Conduct Authority, as the regulator of LIBOR, deemed that LIBOR was no longer representative.

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The U.K. FICC Market Standards Board is consulting on its draft Statement of Good Practice for Participation in Sovereign and Supranational Auctions in Fixed Income Markets. The FMSB is a standards setting body operated by wholesale market participants that was established in 2015. It is mandated to issue Standards that improve conduct in the wholesale Fixed Income, Currencies and Commodities markets. FMSB Member Firms are expected to consider their practices in light of the Standards, but the Standards are not binding and non-compliance will not affect whether a firm is deemed to have met its regulatory obligations.

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The U.K. Financial Conduct Authority has announced that it will introduce temporary product intervention measures for 12 months from January 1, 2020 to December 31, 2020 to combat risks to consumers of the promotion of speculative mini-bonds. The measures follow the high profile failure of mini-bond issuer London Capital & Finance plc, which has prompted an investigation by the FCA into the circumstances surrounding LC&F's collapse and the FCA's supervision of the firm. HM Treasury is also conducting an ongoing investigation into the wider policy questions raised by LC&F's failure, focusing on a review of the regulatory regime governing non-transferable debt securities and an assessment of Innovative Finance ISA rules.

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The U.K. Financial Conduct Authority has published a Policy Statement incorporating its response to the feedback it received on its proposals for the implementation of the Proxy Advisors (Shareholders' Rights) Regulations 2019, together with the final rules. The final rules make amendments to the FCA's Decision Procedure and Penalties Manual and Enforcement Guide, reflecting the new Regulations that came into force on June 10, 2019.

The Regulations implemented new obligations imposed upon proxy advisors by the revised EU Shareholder Rights Directive into the U.K. statutory regime. The FCA has the power to discipline and investigate proxy advisors under the Proxy Advisors Regulations and changes were therefore required to the FCA's rules to take account of these powers. The following new provisions have been included in the Decision Procedures and Penalties Manual:

• the FCA will publish a statement about a proxy advisor who has breached a relevant requirement; it will impose a public censure in contested cases and allow decision makers to use executive powers to decide on settled cases;
• the FCA will decide when to impose a financial penalty on a proxy advisor; and
• the FCA will decide when to impose a restitution requirement.

The FCA has also included a new section in its Enforcement Guide explaining how it will use its powers under the Regulations. The intended approach will broadly mirror that taken by the FCA in conducting investigations, sanctioning and using its regulatory powers under FSMA.

View the FCA's Feedback and final rules.

The U.K. Financial Conduct Authority has published a statement on conduct risk during the LIBOR transition, which is due to be completed by the end of 2021. The statement is in the form of questions and answers and sets out the FCA's expectations of firms relating to governance and accountability, replacing LIBOR with alternative rates in existing contracts, offering new products with alternative rates, communicating with customers about the transition from LIBOR and best practice for firms investing on behalf of clients.

View the FCA's statement.

The European Central Bank has published a report by the working group on euro risk-free rates on €STR fall-back arrangements. The EU Benchmark Regulation requires regulated entities to have put in place written plans on the steps that they would take should a benchmark used in their contracts be materially amended or ceases. The Working Group recommends that instead of selecting an alternative rate, regulated entities should take into account the ECB's regular review of €STR's methodology and the policies and procedures for the possible cessation of €STR, together with the use of contractual fallbacks.

View the report.

A Commission Delegated Regulation amending secondary legislation supplementing the Packaged Retail and Insurance-Based Investment Products Regulation has been published in the Official Journal of the European Union. 

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A Commission Delegated Regulation amending the EU Auctioning Regulation has been published in the Official Journal of the European Union. The Delegated Regulation will apply directly in all EU Member States from November 28, 2019. The EU Auctioning Regulation provides for EU emission allowances to be auctioned and specifies key aspects of the auctions, including their design, timing and eligibility requirements. 

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The European Central Bank has published a report by the working group on euro risk-free rates providing high-level recommendations for fall-back provisions in contracts for cash products and derivatives transactions referencing EURIBOR. The recommendations are not legally binding and market participants can decide whether, and to the extent to which, they wish to adopt them. EURIBOR were identified as critical benchmarks for the purposes of the EU Benchmarks Regulation  and the methodology for calculating EURIBOR has been revised to be Benchmark Regulation-compliant, to be implemented by the end of 2019.

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The European Central Bank has published a report by the working group on euro risk-free rates on the financial accounting implications of the transition from EONIA to €STR and the introduction of €STR-based fallbacks for EURIBOR. 

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The International Organization of Securities Commissions has issued a statement confirming that it is possible, depending on their structure, for stablecoins to fall within the scope of securities market regulation. IOSCO has undertaken an in-depth study (not published) of stablecoins and has concluded that each proposed stablecoin, the manner in which it is intended to operate and the rights and obligations conferred on participants needs to be analyzed to assess the risks and benefits of the particular stablecoin. The statement is widely considered to be in response to Facebook's announcement about its proposed stablecoin, Libra. According to IOSCO, certain stablecoins may have features that are similar to securities and accordingly will be within the regulatory perimeter of some countries. IOSCO calls on entities that wish to launch stablecoins to engage with regulators so that any risks associated with the operation of the stablecoin might be mitigated.

View IOSCO's statement.

The U.K. Financial Conduct Authority has published a feedback statement on the discussion paper, “Building a regulatory framework for effective stewardship” that it published in January 2019 together with the Financial Reporting Council. The discussion paper called for input on how best to encourage the capital markets community to engage more actively in “stewardship” of the assets in which they invest. 

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The Joint Committee of the European Supervisory Authorities has published a Supervisory Statement on the scope of application to bonds of the EU Packaged Retail and Insurance-based Investment Products Regulation. The ESAs have issued the Supervisory Statement in an attempt to avoid the adoption of diverse approaches by national regulators across the EU as to when a Key Information Document is required for different types of bonds under the PRIIPs Regulation. The PRIIPs Regulation, directly applicable across the EU since January 1, 2018, imposes a requirement upon issuers of packaged retail and insurance-based investment products to issue KIDs to retail investors describing key features of their products, in order to enhance transparency and improve investor protection in the PRIIPs market.

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The Working Group on Sterling Risk-Free Reference Rates has written to the Prudential Regulation Authority raising issues in the banking prudential regulation regime that, in its view, will require changes and/or regulatory forbearance if a smooth transition from LIBOR to SONIA is to be achieved. Although the letter focuses on the U.K. regime, the issues are likely to be relevant globally.

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The G7 working group on stablecoins has published a report investigating the impact of global stablecoins. The working group is comprised of senior officials from the G7 central banks, the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board, and is chaired by Benoît Cœuré (Chair of the Committee on Payments and Market Infrastructures). 

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The Financial Stability Board has published a report on regulatory issues arising with respect to so-called stablecoins. The FSB defines a stablecoin as "a crypto-asset designed to maintain a stable value relative to another asset (typically a unit of currency or commodity) or a basket of assets" which may be "collateralised by fiat currency or commodities, or supported by algorithms".

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The European Central Bank has published a report on the risk management implications of the upcoming move away from the Euro Overnight Index Average (the overnight reference rate for the euro) and EURIBOR (the term reference rate for the euro) to alternative risk-free rates. Both EONIA and EURIBOR were identified as critical benchmarks for the purposes of the EU Benchmarks Regulation. 

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The Financial Stability Board has published a letter to G20 Finance Ministers and Central Bank Governors describing the progress of post-financial crisis reforms and key focus areas for the future. Over the past ten years, the FSB has proposed a number of reforms to the global financial system, working with international organizations on implementation to improve financial stability.

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The European Securities and Markets Authority has published a final report and final Guidelines on standardized procedures and messaging protocols for investment firms under the Central Securities Depositaries Regulation.

CSDR requires investment firms to take steps to limit settlement fails, including by ensuring that they have all the necessary transaction data on the day of the transaction. Investment firms must also have in place arrangements with their professional clients to ensure prompt communication of an allocation of securities to the transaction, confirmation of that allocation and confirmation of the acceptance or rejection of the terms in good time before the intended settlement date. The content of the messages and deadlines for sending them is contained in the Regulatory Technical Standards on settlement discipline (Commission Delegated Regulation (EU) 2018/1229). The Guidelines clarify the scope of these requirements and provide guidance on the standardized procedures and messaging standards to be used for firms to comply with the requirement.

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The European Securities and Markets Authority has issued four public statements on its preparations for a no-deal Brexit in the event the U.K. fails to agree a deal with the EU or extend the Brexit deadline before October 31, 2019. In its public statement on preparations for a possible no-deal Brexit, ESMA notes that it had already put in place no-deal contingency plans ahead of the U.K.’s previous Brexit deadline extension on April 10, 2019. 

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The EU Economic and Financial Committee sub-Committee on EU sovereign debt markets (the ESDM) has launched a consultation on its proposals to mandate the introduction of single-limb collective action clauses into euro area government securities issued from January 1, 2022. The ESDM has released a draft of the proposed CAC together with an explanatory note and seeks input on its proposals from selected market participants by October 28, 2019.

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The Joint Committee of the European Supervisory Authorities has published its 2020 work program, outlining revisions to the Joint Committee’s scope of work and the matters it will focus on in 2020. The Joint Committee consists of representatives from the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority, the European Commission and the European Systemic Risk Board. 

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The European Securities and Markets Authority has published Guidelines on risk factors under the EU Prospectus Regulation that will provide guidance to Member State national regulators when reviewing prospectuses. The Guidelines will apply from December 4, 2019. Within two months of the date of publication of the guidelines in all EU official languages, national regulators must notify ESMA whether they comply with the guidelines and, if they do not, whether they intend to comply. If they do not intend to comply, national regulators must explain why that is the case.

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The European Securities and Markets Authority has published its Annual Work Programme for 2020. The Work Programme sets out ESMA’s focus areas for 2020 and provides details of expected outputs within each of the areas. In 2019, the European Council, Parliament and Commission agreed on new tasks for ESMA, meaning that ESMA will take on an enhanced role in areas including direct supervision, supervisory convergence and investor protection. The final Regulations amending the scope of the European Supervisory Authorities’ work mandates are expected to be published in the second half of 2019.

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Following its previous two consultations, the International Swaps and Derivatives Association has launched a consultation on the proposed final parameters that will apply to alternative risk-free rates if derivatives fall backs are triggered. Responses to the consultation should be provided by October 23, 2019. ISDA will amend the 2006 ISDA Definitions based on the feedback and also intends to publish a protocol so that market participants can include fall backs in legacy IBOR contracts, if needed. Both documents are expected to be finalized before the end of 2019, ready for implementation in 2020.

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The UK Law Commission has published a Call for Evidence on the system for intermediated securities. The Call for Evidence will inform the Commission's scoping study to assess the current state of the law and issues arising from intermediation, which the Department for Business, Energy & Industrial Strategy has requested. Intermediated securities are shares and bonds held electronically through computerized credit entries. The Call for Evidence describes how intermediated securities are held and recorded, noting the advantages of the system. It also raises practical issues with the system and presents some potential solutions.

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The Working Group on Sterling Risk-Free Reference Rates has published a summary of the responses it received to its March 2019 discussion paper on conventions for referencing SONIA in new financial contracts.

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The U.K. Financial Conduct Authority has published a Policy Statement and final Guidance on Crypto-assets. The Policy Statement summarizes the feedback received to the FCA's consultation on draft Guidance and sets out the FCA's response to that feedback. The final Guidance is, for the most part, the same as that on which the FCA consulted, except the FCA has made some drafting changes to provide further clarity and has added some guidance on stablecoins and airdrops. In addition, the FCA has revised the taxonomy by making a distinction between: (i) unregulated tokens, which are exchange tokens and utility tokens; and (ii) regulated tokens, which are security and e-money tokens.

The Guidance is intended to clarify the FCA's expectations for firms carrying on crypto-asset activities within the U.K. by providing insight for market participants on whether certain crypto-assets are within the FCA's regulatory perimeter or are otherwise regulated. The FCA highlights that the Guidance should be used by firms to understand the regulatory status of their crypto-asset activities, but assessing whether a crypto-asset or related activity is within the regulatory perimeter can only be done on a case-by-case basis. Firms should also refer to the FCA's Perimeter Guidance Manual (PERG) in its Handbook, and where firms need further clarification, they should contact the FCA and/or obtain external legal advice.

The Guidance provides an overview of the U.K. regulatory perimeter and discusses relevant concepts, such as "by way of business." It also refers to the territorial scope of the regulatory perimeter, referring to the detailed guidance in PERG and highlighting that where part of an activity is carried on outside the U.K., a firm may still be carrying on a regulated activity in the U.K.

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Two equivalence decisions under the EU Benchmark Regulation have been published in the Official Journal of the European Union. The first decision declares as equivalent to the EU regime the legal and supervisory framework of Australia applicable to the administrators of financial benchmarks that are declared significant benchmarks by the Australian Securities and Investments Commission. The second decision declares as equivalent to the EU regime the legal and supervisory framework of Singapore applicable to the administrators of financial benchmarks that are designated as designated benchmarks by means of the Securities and Futures (Designated Benchmarks) Order 2018. Both decisions will enter into force on August 19, 2019.

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The U.K. Financial Conduct Authority has launched a consultation on draft technical standards on the content and format of STS notifications under the U.K.'s onshored Securitization Regulation. The consultation closes on August 27, 2019. Unless Brexit is delayed further, the FCA intends to publish the final or near-final technical standards on or very near to Exit day, which is currently due to be October 31, 2019.

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The European Money Markets Institute has announced that EONIA will be published daily at or soon after 9:15 CET, as from October 2, 2019.

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The European Money Markets Institute has published a Benchmark Statement on the administration of Euro Interbank Offered Rate (Euribor). Earlier in July this year, the EMMI obtained authorization as the administrator of Euribor, which is a critical benchmark under the EU Benchmark Regulation. EMMI has made reforms to Euribor in order to ensure it meets the requirements of the Regulation, including adopting a new hybrid methodology, the phased implementation of which will be completed by the end of 2019.

View EMMI's announcement and the Benchmark Statement.

Following its consultation earlier this year, the working group charged with implementing the European market's move away from EONIA, has published a recommended legal action plan for new and legacy contracts referencing EONIA. The implementation of the recommended legal measures is intended to address issues arising from the transition from EONIA to the euro short-term rate (known as €STR). €STR is a risk-free rate and, with a fixed spread, will replace EONIA as a reference rate in a variety of euro-denominated financial contracts, including derivatives, collateral remuneration for derivatives and cash products such as commercial paper, repurchase agreements and default interest payable under syndicated loans.

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Fulfilling its mandate under the European Commission's FinTech Action Plan to map the current authorization and licensing approaches for innovative FinTech business models in Europe, the European Securities and Markets Authority has published a report on the licensing of FinTech business models. The report sets out the key conclusions identified from the information collected from national regulators through two surveys that ESMA conducted in the last two years, and some of the actions that have been taken to address the emerging challenges. The report does not make any recommendations, but instead refers to previous advice and reports that make recommendations for an EU-level response to the issues.

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The European Securities and Markets Authority has launched a consultation on its proposed guidelines on compliance with disclosure requirements under the new EU Prospectus Regulation. The Consultation Paper may be of particular interest to investors, issuers, offerors or persons asking for admission to trading on a regulated market and any market participant who is affected by the new Prospectus Regulation. Responses to the consultation should be submitted by October 4, 2019. ESMA intends to publish a final summary of all consultation responses and a final version of the guidelines in Q2 2020.

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The Prospectus Regulation Rules Instrument 2019 has been published, setting out the new FCA Prospectus Regulation Rules sourcebook. The Instrument also makes amendments to certain other sections of the FCA Handbook as well as to the FCA's Enforcement Guide and Perimeter Guidance manual. The new rules aim to align the U.K. rules with the EU Prospectus Regulation and will take effect from July 21, 2019.

Any prospectus approved by the FCA before July 21, 2019 will be governed by national law under the old Prospectus Directive regime until either: (i) the end of the prospectus' validity; or (ii) July 21, 2020. Prospectuses submitted for approval on or after July 21, 2019 must be in line with the EU Prospectus Regulation and the FCA's new Prospectus Regulation Rules sourcebook.

View the Prospectus Regulation Rules Instrument 2019.

View details of the FCA Policy Statement on the Prospectus Regulation Rules sourcebook.

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority have issued a joint statement clarifying how their traditional regulatory approaches would apply to how broker-dealers handle their customers' digital asset securities and transactions. Specifically, the statement focuses on how certain SEC and FINRA rules apply to broker-dealers that wish to take custody of digital asset securities or perform other noncustodial activities involving such assets.

The SEC and FINRA staffs (collectively, the "Staffs") said that a number of firms have applied to FINRA to engage in broker-activities involving digital asset securities, and a number of registered broker-dealers have also submitted applications to expand their businesses to include digital asset securities services. Many of these applications cover proposed business models that would involve the applicant taking custody of digital asset securities, while others would involve certain noncustodial activities.

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The European Commission's Technical Expert Group on sustainable finance has launched a call for feedback on the taxonomy for sustainable economic activities. The TEG's Report on Taxonomy was published on June 18, 2019, alongside the Commission's Guidelines on reporting climate-related information, an interim TEG report on EU climate benchmarks and a TEG report on an EU green bond standard. The Report on Taxonomy links to the EU's proposed Regulation on the establishment of a framework to facilitate sustainable investment.

Feedback on the TEG's Report on Taxonomy should be submitted by September 13, 2019.

View the Report on Taxonomy.

View further details on the call for feedback.

View the Commission's Guidelines on reporting climate-related information.

The Chair of the Supervisory Board of the European Central Bank, Andrea Enria, has written a "Dear CEO" letter to the larger Eurozone banks on their preparation for the transition from interest rate benchmarks to risk-free-rates. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism. The ECB is seeking assurance from these banks that they have plans in place to address the transition from interest rate benchmarks to risk-free-rates, focusing on the transition from the Euro overnight index average, EONIA, to the Euro short-term rate - €STR - as a euro risk-free rate. EONIA will be calculated as €STR plus a fixed spread, from October 2, 2019, which is when €STR will be launched. EONIA is due to cease entirely from the beginning of 2022.

The ECB is requesting the significant Eurozone banks to provide: (i) a summary of the key risks to the reform of benchmarks; (ii) a detailed action plan on how to address those risks and pricing issues as well as implement process changes; and (iii) contact details for those at the firm overseeing the transition.

View the letter.

View details of the new EONIA methodology.

The U.K. Financial Conduct Authority has published a statement setting out its reasons for failing to act in accordance with the European Securities and Markets Authority's Opinion on the FCA's measures restricting the sale of Contracts for Difference and CfD-like options to retail customers. Where a national regulator takes product intervention measures under the Markets in Financial Instruments Regulation, ESMA must adopt an opinion on whether those measures are justified and proportionate. If ESMA's opinion states that the measures are not justified and proportionate and a national regulator declines to take action on the basis of ESMA's opinion, the national regulator must immediately publish a statement on its website explaining why it has adopted that course of action.

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The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019 have been formally published and will come into force on July 21, 2019.

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Two Commission Delegated Regulations supplementing the EU Prospectus Regulation have been published in the Official Journal of the European Union. The first Regulation is on the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. It will supplement the requirements in the Prospectus Regulation on: (i) the review, approval and filing of the universal registration document and any amendments; (ii) the format of the prospectus, the base prospectus and the final terms; (iii) the specific information to be included in a prospectus, the minimum information to be included in the universal registration document and the reduced information to be included under the simplified disclosure regime for secondary issuances; (iv) the reduced content, standardized format and the sequence of the EU Growth prospectus; (v) the reduced content and standardized format of the specific summary; and (vi) the review and approval of prospectuses by national regulators. The Regulation also repeals, from July 21, 2019, the existing Implementing Regulation under the existing Prospectus Directive on the form and content of prospectuses.

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The International Organization for Securities Commissions has published a report studying the effect of stressed market conditions on liquidity in corporate bond markets. The report arose out of concerns about liquidity in the corporate bond market in the years since the global financial crisis and, in particular, the possibility that a significant sell-off could trigger price volatility and temporarily depress prices. The report is based upon a review of existing studies of corporate bond markets, an examination of historic periods of market stress and discussions with industry stakeholders.

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An amending Commission Delegated Regulation to the existing Commission Delegated Regulation (Regulation 2017/1799), which specifies that third-country central banks may be exempted from certain transparency requirements under the Markets in Financial Infrastructure Regulation, has been published in the Official Journal of the European Union. The amendment means that the People's Bank of China will be added to the list of counterparty institutions whose transactions will not be subject to trade transparency requirements under MiFIR to the extent that those transactions are in pursuit of monetary, foreign exchange or financial stability policy. The amending Delegated Regulation will come into force and apply directly across the EU from July 10, 2019.
 
View the amending Commission Delegated Regulation.
 
View Commission Delegated Regulation 2017/1799.

The European Commission has published new, non-binding Guidelines on reporting climate-related information. The new Guidelines are supplementary to the guidelines issued by the Commission in 2017 on reporting non-financial information. The new Guidelines are intended to assist large public entities (with over 500 employees) to report climate-related information under the EU Non-Financial Reporting Directive. The new Guidelines incorporate the recommendations of the Financial Stability Board's taskforce on climate-related financial disclosures, taking into account the EU's forthcoming taxonomy on sustainable activities. The new Guidelines include guidance on reporting of climate-related information related to business models, key performance indicators, risks and their management. Further guidelines for banks and insurance companies are set out in the annex.

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The European Securities and Markets Authority has postponed its review of the operation of transparency requirements laid out under Regulatory Technical Standards issued under the Markets in Financial Instruments Regulation. MiFIR's transparency regime obliges those providing investment services in the EU to disclose details of their transactions in bonds, structured finance products, emission allowances and derivatives both prior to, and following, trades. The detail of how participants should comply with this transparency regime is set out in the related delegated acts and technical standards published under MiFIR. Under the MiFIR RTS, ESMA is obliged to submit a report on the operation of thresholds for the liquidity and trade percentiles of certain financial instruments by July 30 each year. However, given the continuing uncertainties over Brexit, ESMA considers it would be inappropriate to perform the review by the usual deadline, particularly as the results of its review may lead to a tightening of the relevant rules. No new deadline for performing the review has yet been established.

View ESMA's letter.

View the transparency RTS.

The Law Commission has been appointed to review potential legal issues with the U.K. intermediated securities system. Intermediated securities are shares and bonds held electronically through computerized credit entries.

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The Financial Stability Board has published a report on the use of decentralized financial technologies and the implications these may have for financial stability, regulation and governance. The report has been delivered to G20 Finance Ministers and Central Bank Governors ahead of the G20 meeting on June 8-9, 2019.

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The Growth and Emerging Markets Committee, a committee of the International Organization of Securities Commissions that aims to promote the development and efficiency of emerging securities and futures markets, has published a series of recommendations on the development of sustainable finance in emerging markets and the role that securities regulators play in this arena. The report also contains an overview of sustainability-related regulatory initiatives in emerging markets and market trends arising in the sustainability sector.

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