The European Securities and Markets Authority has announced that its restrictions on the sale, distribution and marketing of contracts for difference to retail investors will be extended from May 1, 2019, for a further three months. The extension will be on the same terms as the existing product intervention measure.

View ESMA's announcement.

View details of the existing decision.

The European Securities and Markets Authority has issued a Decision renewing the temporary prohibition on the marketing, distribution or sale of binary options to retail clients for a further three months from April 2, 2019. This has now been published in the Official Journal of the European Union. ESMA announced in February this year that the existing restriction would be extended. The binary options Decision applies directly across the EU from April 2, 2019, for a period of three months.

View the decision.

View ESMA's notification.

The Commodity Futures Trading Commission has unanimously approved an interim final rule that will allow swap dealers and major swap participants to, in the event of a no-deal Brexit scenario, transfer legacy swaps entered into before the compliance date of the CFTC's margin requirements for uncleared swaps to an affiliate without triggering such requirements. The CFTC's interim final rule is substantively identical to an interim final rule adopted by the U.S. Prudential Regulators, which provides the same relief for legacy swaps entered into before the compliance date of their margin requirements for uncleared swaps.

Both interim final rules apply only to legacy swaps that are transferred solely for relocation purposes. They do not cover economic changes to legacy swaps, such as amendments that modify payment amount calculation methods, maturity date or notional amount of the uncleared swap.

The interim final rules are each effective immediately upon their respective publication in the Federal Register, and the transfer relief will apply for a period of one year following the U.K.'s withdrawal from the EU in the event of a no deal Brexit.

Read more.

The European Council has published its decision to extend the deadline for the U.K.’s withdrawal from the EU until May 22, 2019, provided that the Withdrawal Agreement passes through the House of Commons by March 29, 2019.

Read more.

A Commission Delegated Regulation and Commission Implementing Regulation setting out technical standards on the reporting of securities financing transactions have been published in the Official Journal of the European Union. These technical standards supplement the EU Securities Financing Transactions Regulation, which requires, amongst other things, all SFTs to be reported to EU-recognized trade repositories. Relevant reports must include details on the composition of collateral, whether collateral is available for reuse or has been reused, the substitution of collateral and any haircuts applied. The reporting obligation will apply to financial and non-financial counterparties, subject to exceptions for central banks and similar bodies. While various parts of the SFTR came into effect on January 12, 2016, the new reporting obligation is brought into force by these new technical standards.

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The Financial Conduct Authority has published a market bulletin that advises issuers and stakeholders of key changes to the Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules that will apply in the event of a no-deal Brexit.

In the event of a no-deal Brexit, the U.K.’s primary market regime will apply to all issuers that have securities admitted to trading, or have applied for admission to trading, on a U.K.-regulated market or admitted to listing in the U.K., or that are making a public offer in the U.K. The rules will apply regardless of the country an issuer is incorporated in.

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The U.K. Prudential Regulation Authority has published details of the temporary permissions regime that will allow PRA-regulated EEA firms to continue providing financial services in the U.K. for a limited period following the U.K’s exit from the EU, in the event that no implementation or transitional period is agreed under the Withdrawal Agreement. The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 brought the TPR into force on November 7, 2018. The TPR applies to EEA firms that are authorized to conduct a regulated activity in the U.K. using passporting rights and have either: (i) applied for U.K. authorization prior to the U.K. withdrawal date; or (ii) notified the relevant U.K. regulator of their intention to continue conducting passported activities. Such firms will be entitled to continue providing financial services for up to three years from the date the U.K. leaves the EU.

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The Bank of England has published details of its prospective new role as supervisor of financial markets infrastructure at the end of the implementation period following the U.K.’s exit from the EU. 

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The U.K. Financial Conduct Authority has published two supplementary Directions under the Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018 specifying that notifications by e-money and payment services firms wishing to take advantage of the FCA’s temporary permissions regime will not be valid if they are withdrawn in writing prior to exit day. The FCA has previously issued Directions setting out how such firms should notify the FCA of their intention to make use of the temporary permissions regime.

View the FCA's supplementary Direction on withdrawal of notifications by e-money services firms.

View the FCA's supplementary Direction on withdrawal of notifications by payment services firms. 

View details of the FCA’s Directions for notifications by e-money and payment services firms.

May 29, 2019 update: ESMA's guidance of March 19, 2019 has been superseded by revised guidance issued, details of which are available here.

The European Securities and Markets Authority has published a statement on the impact of a no-deal Brexit on the trading obligation for shares. The Markets in Financial Instruments Regulation requires investment firms to conclude transactions in shares admitted to trading on a regulated market or traded on an EU trading venue, i.e. namely regulated markets, multilateral trading facilities, systematic internalisers and equivalent third-country trading venues. The requirement is not applicable to transactions in shares traded in the EU on a non-systematic, ad-hoc, irregular and infrequent basis. ESMA's statement is relevant should there be a no-deal Brexit (currently set for March 29, 2019) and there is no equivalence decision for the U.K.

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The Working Group on Sterling Risk-Free Rates has published a discussion paper aimed at raising awareness for market participants of the conventions for referencing SONIA in new financial contracts. The paper focuses on the most significant conventions for contracts that reference SONIA directly. The paper concludes with a series of questions for market participants, who should submit responses by April 30, 2019.

Read more.

The U.K. Financial Conduct Authority has published a statement confirming that the EU regime for credit rating agencies is "at least as stringent" as the U.K.'s regime, post-Brexit. The U.K. CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings for certain regulatory purposes if a rating is issued by a third-country CRA under the endorsement regime. The FCA considers that the EU regime meets the conditions for endorsement. This will allow U.K.-registered CRAs to endorse credit ratings into the U.K. from EU affiliates for regulatory use under the U.K. CRA Regulation. The European Securities and Markets Authority has announced today that the U.K. regime has been positively assessed for endorsement under the EU CRA Regulation.

In addition, in preparation for a no-deal Brexit, the U.K. is establishing (i) a conversion regime for U.K. and third-country CRAs currently registered or certified by ESMA; and (ii) a temporary registration regime for newly established U.K. entities that are part of a group of CRAs with an existing ESMA registration before exit day.

View the FCA's statement on endorsement of EU credit ratings.

View details of ESMA's statement on endorsement of U.K. credit ratings.

The European Securities and Markets Authority has published a further statement on the implications of a no-deal Brexit for U.K. credit rating agencies. The CRA Regulation provides that banks, investment firms, insurers, reinsurers, management companies, investment companies, alternative investment fund managers and CCPs may use credit ratings only for certain regulatory purposes if a rating is issued by: (i) an EU CRA registered with ESMA; or (ii) a third-country CRA under the endorsement regime or the equivalence/certification regime. U.K. CRAs will lose their EU registration when the U.K. leaves the EU on a "hard Brexit."

Read more.

The European Commission has published its latest progress report on building of the Capital Markets Union. The CMU is an EU initiative which aims to deepen and further integrate the capital markets of Member States, further safeguard financial stability, strengthen the international role of the euro and diversify sources of finances for small and medium enterprises. The CMU aims to allow consumers to buy cheaper and better investment products, and enable financial services providers to scale up by offering services in other Member States.

The progress report notes that the CMU is an important Single Market project that will give increased access to capital for both companies and citizens, especially in smaller countries. A well-developed CMU increases the EU’s attractiveness to foreign investment and complements the EU’s agenda of free and fair trade. Broadly, the Commission has delivered measures that it had committed to take forwards at the beginning of the mandate and put in place certain "building blocks" of the CMU. However, the report notes that it may take time for the impact of the Commission’s actions to be realized.

Read more.

The European Commission has adopted a draft Delegated Regulation containing Regulatory Technical Standards on requirements for:

• key financial information to be set out in the summary of a prospectus;
• the publication of a prospectus;
• the classification of prospectuses and practical arrangements to ensure machine readability of the classifications;
• advertisements and their dissemination;
• situations where the publication of a supplement to the prospectus is required; and
• technical arrangements necessary for the functioning of the notification portal.

The adopted RTS will repeal Commission Delegated Regulation (EU) No 382/2014 on the publication of supplements to a prospectus and Commission Delegated Regulation (EU) 2016/301 on the approval and publication of the prospectus and dissemination of advertisements.

The adopted RTS will enter into force 20 days after they are published in the Official Journal of the European Union, which will take place once it is approved by the European Parliament and the Council of the European Union. The adopted RTS will apply directly across the EU from July 21, 2019, which is when the remainder of the Prospectus Regulation applies.

View the adopted RTS.

View the annexes to the adopted RTS.

The U.K. Financial Conduct Authority has published a Supervisory Statement on the operation of the transparency regime under the Markets in Financial Instruments Directive post-Brexit. The Statement sets out how the FCA will operate the pre- and post-trade transparency regime for the secondary markets in the event of a no-deal Brexit on March 29, 2019. The U.K.'s onshored MiFID II provides the FCA with transitional powers, for a period of four years, on how to run the transparency regime as the FCA does not yet have the technology to make the same calculations and assessments that ESMA carries out.

View the FCA's statement.

The European Commission has adopted a draft Delegated Regulation 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. The draft Delegated Regulation is based on the technical advice provided to the Commission by the European Securities and Markets Authority in April 2018. The draft Regulation will repeal the existing Implementing Regulation under the existing Prospectus Directive (which will be finally repealed in July 2019) on the form and content of prospectuses.

Read more.

While speaking before the D.C. Blockchain Summit, Commodity Futures Trading Commission Chairman J. Christopher Giancarlo discussed the relationship between technology, regulation and markets, and described the steps the CFTC has taken to stay in step with innovations that have posed regulatory challenges.

Chairman Giancarlo touted the potential for such technological innovations, including blockchain and digital ledger technology, to transform the way that regulators gather information and lower operational costs for financial institutions. Interestingly, Chairman Giancarlo argued that blockchain and DLT could have helped regulators gather real-time trading data during the 2008 financial crisis, which he believes at a minimum could have prompted "better-informed" and "more calibrated regulatory intervention."

Read more.

The U.K. Prudential Regulation Authority has opened a consultation proposing changes to the Pillar 2 capital requirements for banks and large investment firms.

Responses to the consultation may be submitted until June 13, 2019. The PRA is proposing to implement the changes from October 1, 2019.

The Pillar 2 capital for firms comprises Pillar 2A and Pillar 2B. Pillar 2A is a firm's capital requirement for certain risks, including credit risk, market risk, operational risk, counterparty credit risk, credit concentration risk and interest rate risk in the non-trading book. Pillar 2B is the PRA's buffer for each firm, in addition to the buffers required under the Capital Requirements Directive. The PRA's proposals relate to changes needed to its approach to setting the Pillar 2B buffer as a result of the Bank of England's changes to the stress testing framework. The proposals also aim to: (i) clarify the PRA's approach to assessing weaknesses in risk management and governance under Pillar 2B; and (ii) explain the process for updating the benchmarks used to calculate the Pillar 2A requirement for credit risk.

The changes would be implemented by updates to:

• Statement of Policy, "The PRA's methodologies for setting Pillar 2 capital";
• Supervisory Statement, "The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)" (SS31/15); and
• Supervisory Statement, "Implementing CRD IV: Capital buffers" (SS6/14).

View the consultation paper.

The Financial Conduct Authority and the Prudential Regulation Authority have published press releases following the first meeting of the Climate Financial Risk Forum on March 8, 2019. The CFRF is a joint forum established by the PRA and FCA in late 2018. The CFRF aims to encourage financial sector approaches towards managing the financial risks from climate change as well as supporting green finance. The CFRF will develop practical tools and approaches to reduce the barriers for firms looking to adopt a strategy for minimizing financial risks from climate change. The regulators are concerned with both the impact of climate change itself and the transition to supporting a low carbon economy. Both the FCA and the PRA consulted in late 2018 on the impact of climate change. The PRA consulted on a draft Supervisory Statement on managing the financial risks from climate change and the FCA consulted on climate change and green finance and the potential changes to its regulatory approach to these issues. The FCA consultation set out specific actions that the FCA intends to take in the short term in four areas - capital markets disclosures, public reporting requirements, green finance and pensions.

Read more.

The Financial Conduct Authority has published a "Dear CEO" letter addressed to loan-based peer-to-peer crowdfunding platforms requesting the platforms to review their wind-down arrangements. The FCA implemented rules regulating FCA-authorized firms operating investment-based and loan-based crowdfunding platforms on April 1, 2014. Investment-based crowdfunding is governed by the Markets in Financial Instruments package and the Alternative Investment Fund Managers Directive, as transposed into U.K. law. The regime for P2P lending is a national one and is less detailed and prescriptive.

Read more.

The European Securities and Markets Authority has published a statement on its approach to certain provisions of the Markets in Financial Instruments package and the Benchmarks Regulation in the event of a no-deal Brexit.

Read more.

The U.K. Prudential Regulation Authority has published final rules and an updated Supervisory Statement alongside a Policy Statement on the definition of default for credit risk. The EU Capital Requirements Regulation's risk quantification provisions set out that a default occurs when an obligor is past due more than 90 days on any material credit obligation to a firm, its parent or any of its subsidiaries. The materiality of the credit commitment is to be assessed against a threshold set by the national regulator according to its view of a reasonable level of risk.

The European Banking Authority developed a roadmap in 2016 to address concerns about the variability of own funds requirements arising from the internal models that firms use to calculate their minimum credit risk capital requirements under the CRR. The PRA is adopting a two-stage approach to implementing the EBA's roadmap. This first stage concerns the definition of default. The PRA will consult later on implementation of the second stage on PD and LGD estimation, once the EBA's regulatory products on this topic have been finalized.

Read more.

The European Banking Authority has published a report and final Guidelines on the estimation of LGD appropriate for an economic downturn in compliance with the Capital Requirements Regulation, the Regulatory Technical Standards on the internal ratings-based assessment methodology and the final draft RTS on the specification of an economic downturn.

The Guidelines will apply from January 1, 2021 and firms should incorporate these requirements in their rating systems by that time. However, national regulators may bring forward, at their discretion, this deadline. The EBA Guidelines remind firms that the use of own estimates of LGD appropriate for an economic downturn is subject to approval by their home state regulator.

The Guidelines specify how LGD estimates appropriate for an economic downturn - identified in accordance with the draft RTS on economic downturn - should be quantified, taking into account the specificities of firm processes, underwriting standards and general response to adverse economic conditions. The Guidelines supplement the existing EBA Guidelines on Probability of Default, LGD estimation and treatment of defaulted assets.

The publication of these Guidelines marks the completion of the EBA's 2016 roadmap, designed to address concerns about the variability of own funds requirements arising from the internal models that firms use to calculate their minimum credit risk capital requirements under the CRR.

View the final report and guidelines.

View details of the EBA's consultation on the guidelines.

In its Interim Report on green bonds, the Technical Expert Group has made a proposal for an EU Green Bond Standard. Green bonds are bonds specifically earmarked to be used for climate-related and environmental projects. The aim of the consultation was, in light of the European Commission’s Action Plan on Financing Sustainable Growth published in March 2018, to create a standard that would further improve the credibility of green bonds and help the EU market mature.

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The Basel Committee on Banking Supervision and the International Organization of Securities Commissions have published a joint statement on the final implementation of the margin requirements for derivatives not cleared through a CCP. In March 2015, the Basel Committee and IOSCO published a revised version of their policy framework for the exchange of margin for uncleared derivatives. The main revisions were to delay the phase-in period for the obligations relating to both initial margin and variation margin and were aimed at harmonizing the key principles across jurisdictions.

Read more.

An EU Delegated Regulation under the Bank Recovery and Resolution Directive has been published in the Official Journal of the European Union. The Delegated Regulation sets out Regulatory Technical Standards specifying the criteria for assessing the impact of a bank or investment firm's failure on financial markets, on other institutions and on funding conditions.

Under the BRRD, where a national regulator or resolution authority is determining whether to grant simplified obligations to a bank or investment firm, it must assess the impact that the failure of the institution could have by reference to a number of factors specified in the BRRD. The Delegated Regulation sets out a two-stage test based on quantitative and qualitative criteria to determine whether an institution is eligible for simplified obligations. Different criteria apply depending on whether the institution is a bank or an investment firm. Institutions meeting quantitative criteria at stage one must then meet qualitative criteria at stage two to be assessed as eligible.
Only institutions that meet the quantitative criteria (i.e., the impact of their failure is not assessed as requiring the full obligations to apply) will proceed to the second stage.

The Delegated Regulation will be directly applicable across the EU from March 24, 2019.

View the Delegated Regulation.

On February 27-28^th, the Basel Committee on Banking Supervision met to discuss policy and supervisory issues, and the extent to which members had implemented post-financial crisis reforms.

The Committee noted the implementation status of margin requirements for uncleared derivatives and it will publish in March a joint statement with the International Organization of Securities Commissions on certain implementation aspects of margin requirements.

Read more.

The European Banking Authority has published a consultation paper concerning proposed guidelines on credit risk mitigation for firms using the advanced internal ratings based approach with own estimates for loss given default. The consultation follows the EBA's report on the CRM framework, published in March 2018, which should be read in conjunction with the consultation paper. Responses to the consultation should be submitted by May 25, 2019. 

Read more.

The European Banking Authority has published revised Guidelines on outsourcing arrangements. The guidelines are intended to update and replace outsourcing guidelines issued in 2006 (by the EBA's predecessor, the Committee of European Banking Supervisors) on outsourcing by credit institutions. The EBA Guidelines have a wider scope, applying to all financial institutions that are within the scope of the EBA's mandate, namely credit institutions and investment firms subject to the Capital Requirements Directive, as well as payment institutions and electronic money institutions. The investment firms within scope, provided that the new Investment Firm Regulation and Directive and related changes to CRD and the Capital Requirements Regulation have entered into force, will only be the largest investment firms (Class 1 Investment Firms). The Guidelines also integrate the recommendation on outsourcing to cloud service providers that was published by the EBA in December 2017. Both the 2006 guidelines and the December 2017 recommendations will be repealed when these new Guidelines enter into force.

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Following a consultation process in November 2018, the European Banking Authority has published a Handbook on valuation for purposes of resolution. The Handbook, which is addressed to national and EU resolution authorities, aims at fostering the convergence and consistency of valuation practices as well as the interaction with independent valuers across the EU.

The Handbook is the result of close cooperation with national resolution authorities and the Single Resolution Board. It is intended to bridge the resolution regulatory approach with valuation practices, by: (i) providing concrete guidance on the practical steps of the valuation process and the specific valuation criteria applicable to the various resolution tools; and (ii) with a view to facilitating the adoption of an informed decision by the resolution authority, indicating the content that is expected to be included in the valuation report. The Handbook focuses on valuations before resolution and as such supports resolution decisions, which immediately impact shareholders and creditors. However, it also covers valuations after resolution, aimed to determine the "no creditor worse off" principle, which provides that no creditor or shareholder shall incur greater losses than they would have incurred if the institution had been wound up under normal insolvency proceedings.

View the Handbook on valuation for resolution.

The U.K. Financial Conduct Authority has published a statement on onshoring of the European Securities and Markets Authority's temporary product intervention measures on retail contracts for difference and binary options products.

In June 2018, ESMA issued decision notices prohibiting the marketing, distribution or sale of binary options to retail clients and restricting the marketing, distribution or sale of CFDs to retail clients. These decisions have been renewed by ESMA and are currently due to expire on April 1, 2019 for binary options and April 30, 2019 for CFDs. Under the European Union (Withdrawal) Act 2018, the decisions will become part of U.K. domestic law on March 29, 2019, if the U.K. leaves the EU on that date without a ratified Withdrawal Agreement.

Read more.

The Financial Action Task Force has published the outcomes from its Plenary meeting that took place in Paris on February 20-22, 2019. The FATF considered key issues such as the operations and streamlining of the FATF, major and other strategic initiatives and mutual evaluations.

One of the major strategic initiatives covered by the Plenary was the FATF's work on mitigating money laundering and terrorist financing risks associated with virtual asset activities. The FATF published an amended Recommendation 15 in October 2018, clarifying that its standards apply to exchanges, wallet providers and providers of financial services for Initial Coin Offerings. The FATF has now published a draft Interpretative Note to Recommendation 15 to further clarify how the FATF Standards apply to activities involving virtual assets. The Interpretative Note has been finalized except for one section, which will be the subject of a public consultation in May this year. That section concerns the duty of virtual asset service providers to obtain and hold originator and beneficiary information on virtual asset transfers and submit such information to beneficiary service providers and counterparts (if any) as well as provide it on request to appropriate authorities. Following the consultation, the FATF intends to fully finalize the Interpretative Note and adopt it in June 2019.

Read more.

The U.S. Conference of State Bank Supervisors (CSBS), the nationwide organization of financial regulators from all fifty U.S. states, the District of Columbia, Guam, Puerto Rico, American Samoa, and the U.S. Virgin Islands, has released a series of action items to implement recommendations received from the CSBS Fintech Industry Advisory Panel. The panel was established in 2017 to help streamline multistate regulation of FinTech businesses and other nonbanks, and comprises thirty-three companies, including FinTech firms like SoFi, Ripple, and Circle. The panel also contains two subgroups: one focused on the lending industry; and the other focused on the payments industry.

Read more.

HM Treasury has published guidance on the availability of the exemption from the clearing obligation for Pension Scheme Arrangements under the European Market Infrastructure Regulation in a post-Brexit no deal scenario. The U.K. government has been publishing statutory instruments (U.K. secondary legislation) onshoring and amending EU regulations for Brexit. This is being done under the European Union (Withdrawal) Act 2018, so as to ensure a workable U.K. statute book after Brexit. The U.K.'s onshoring legislation has been drafted so as to come into operation on exit day if there is a "no deal" scenario where the U.K. leaves the EU without a ratified withdrawal agreement. The onshoring legislation includes various statutory instruments to onshore the EU EMIR.

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The Board of Supervisors of the European Banking Authority has nominated José Manuel Campa (Global Head of Regulatory Affairs at Santander) as the new Chair of the EBA. Subject to any objection by the European Parliament within one month, José Manuel Campa will succeed Andrea Enria as the new Chair of EBA for a renewable term of five years.

View the EBA announcement.

The EU Single Resolution Board has published a Framework for Valuation, setting out the principles upon which valuations for resolutions for Eurozone banks under the Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation should be based. BRRD and the SRMR require resolution authorities to ensure a fair, prudent and realistic valuation of a relevant institution’s assets and liabilities is conducted by an independent valuer prior to resolution or write-down. The Framework is intended to provide an indication of best practices for independent valuers and the general public, but should not be taken to limit the independence of valuers when performing a valuation in a specific case.

Read more.

The European Securities and Markets Authority has announced that its prohibition on the marketing, distribution or sale of binary options to retail clients will be extended for a further three months from April 2, 2019. ESMA's ban has been in effect since July 2, 2018.

View ESMA's announcement.

View details of the existing product intervention measure for binary options.

The European Securities and Markets Authority has announced that in the event of a no-deal Brexit, it will recognize three U.K.-established CCPs for the purposes of providing services in the EU, namely - LCH Limited, ICE Clear Europe Limited and LME Clear Limited. ESMA has adopted recognition decisions for each of the U.K. CCPs, which will take effect on the day after the U.K. leaves the EU. This follows the European Commission's earlier determination of U.K. equivalence for CCPs.

View ESMA's announcement.

The Financial Stability Board has issued a report assessing the potential impacts of certain FinTech market developments on financial stability. Specifically, the report examines the potential implications of: (i) FinTech firms competing with traditional financial services providers; (ii) the provision of financial services by some of the world's largest technology companies (referred to as "BigTech" firms); and (iii) reliance on third-party providers for cloud services.

Although the report finds that the relationship between FinTech firms and financial institutions has been mostly complementary to this point, it also shows that FinTech firms have started to chip away at financial institutions' market share in certain industries, such as credit provision and payments. Further, the report posits that the entry of BigTech firms into the financial services space could also have significant competitive impacts, as such firms often have large, established customer bases, brand recognition, strong financial positions and access to low-cost capital, which could allow them to quickly achieve scale in the space. While this could lead to greater competition in the short-term, the FSB hypothesizes that cross-subsidization could allow BigTech firms to operate with lower margins and gain greater market share, which could in the long run lead to a less competitive market (e.g. China, where two firms account for 94% of the mobile payments market). Additionally, according to the report, increased competition over time could also press incumbent financial institutions to take on additional risk in order to maintain margins and profitability, which could have subsequent effects on financial stability.

Read more.

The European Securities and Markets Authority has published its final guidelines on the periodic information that credit rating agencies should submit to ESMA. The guidelines amend the existing requirements that are intended to structure and specify more clearly the information that agencies should submit to ESMA to enable it to carry out its supervisory activities. The information submitted by CRAs also allows ESMA to calculate their supervisory fees and market share.

Read more.

The U.K. Competition and Markets Authority has published for consultation a draft Investment Consultancy and Fiduciary Management Market Investigation Order 2019. The draft Order is intended to implement the remedies proposed by the CMA in its Final Report on the Investment Consultancy and Fiduciary Management Market Investigation, published on December 12, 2018. Any feedback on the draft Order should be provided by March 13, 2019.

View the draft Order.

View the explanatory note to the draft Order.

View the notice of an intention to make an Order.

View details of the CMA's Final Report.

The Joint Committee of European Supervisory Authorities has published a Final Report following their consultation on targeted amendments to the Key Information Document for Packaged Retail and Insurance-based Investment Products. Since January 1, 2018, the EU PRIIPs Regulation has required manufacturers of PRIIPs to prepare and publish a stand-alone, standardized Key Information Document for each of their PRIIPs. Those advising retail investors on PRIIPs, or selling PRIIPs to retail investors, must provide retail investors with a KID in good time before the transaction is concluded. The PRIIPs Regulation exempts, until December 31, 2019, management and investment companies and persons advising on or selling Undertakings for Collective Investment in Transferable Securities from the obligation to produce and provide a PRIIPs KID. This is because the UCITS Directive separately requires these entities to provide investors with a Key Investor Information Document, with different but broadly similar contents requirements. As a result, if there were no changes made to the EU legislation, UCITS would be subject to duplicative information requirements from January 1, 2020. To address this situation, the ESAs proposed amending the Regulatory Technical Standards under the PRIIPs Regulation by moving the UCITS KIID requirements to the PRIIPs RTS.

Read more.

The European Securities and Markets Authority has published a revised list of thresholds below which an offer of securities to the public will not need a prospectus in EU member states. The Prospectus Regulation introduced a new threshold of €1 million, below which an offer does not require a prospectus. A Member State may decide to raise the threshold to a maximum of €8 million, provided that the offer cannot be passported to another Member State. ESMA has drawn up this list to create transparency across the various regimes adopted in the EU.

Read more.

The European Securities and Markets Authority published a document listing the thresholds below which an offer of securities to the public does not need a prospectus in the various Member States of the EU. The document contains information, provided by national regulators, setting out: (i) a short description of the national thresholds below which no prospectus is required; (ii) a summary of any national rules that apply to offers below that threshold; and (iii) hyperlinks to the relevant national legislation and rules. 

View the report.

The European Commission issued a call for advice to each of the European Supervisory Authorities requesting evidence and possible advice on potential undue short-term pressure by financial service participants on corporations. The call for advice relates to Action 10 of the EU's Sustainable Finance Action Plan, which aims to foster transparency and long-termism in financial and economic activity by exploring possible drivers of undue short-termism. The Commission wants the ESA's report to: (i) provide evidence of any short-termism and, if any, the consequences thereof; (ii) assess the drivers of such short-termism, including the effects of regulation on financial market participants, for example, the guidance on remuneration practices; (iii) identify existing regulations that either mitigate or exacerbate short-term pressures; and (iv) evaluate the need for regulatory or policy action and propose specific areas where action is needed.

The Commission considers that pressure of this kind could lead corporations to overlook long-term risks and opportunities, such as those related to climate change and other factors related to sustainability. Companies facing short-term pressure could, as a result, forgo investment in areas important for a successful transition towards a sustainable economy. The ESAs are due to publish their report in December 2019.

View the call for advice.

On February 5, 2019, the Council of the European Union and the European Parliament reached a preliminary agreement on the draft Regulation amending the European Market Infrastructure Regulation, known as EMIR Refit or EMIR 2.1. The final text is likely to be published in the Official Journal of the European Union in April or May this year. Subject to a few exceptions, the changes will apply directly in all EU member states 20 days from that publication date. There may be minor drafting changes as the text is vetted by technicians and translated prior to its publication, but the legal position should be unaffected by this.

Read more.

The European Securities and Markets Authority has published a consultation paper on its proposed guidelines for liquidity stress testing in Alternative Investment Funds and Undertakings for Collective Investment in Transferable Securities. The paper has been published in response to the European System Risk Board's 2018 Recommendation on mitigating liquidity and leverage risks in investment funds, which requires that ESMA produces guidance on the practice to be followed by managers for the stress testing of liquidity risk for AIFs and UCITS. 

Read more.

The European Securities and Markets Authority has published a statement on the impact of a hard Brexit on the reporting obligation under the EU European Market Infrastructure Regulation. The statement considers the following counterparty scenarios: (i) EU27-EU27; (ii) EU27-U.K.; (iii) U.K.-EU27; and (iv) U.K.-U.K. The statement clarifies the position should the U.K. leave the EU without a deal and without a transition period, including reporting by CCPs and counterparties; reconciliation and recordkeeping by trade repositories, access by EU27 authorities to reported data and portability and aggregation by trade repositories. ESMA's statement clarifies that:

• to continue to comply with their reporting obligation, EU27 counterparties and CCPs should report their derivatives to an EU-recognized or registered trade repository;
• U.K. counterparties are not expected to report to an EU trade repository on or after March 29, 2019, including derivatives rejected as of March 29, 2019 and amendments to derivatives concluded before March 29, 2019;
• EU27 counterparties and CCPs should consider any risks if they delegate their report submissions to a non-EU entity; and
• U.K. trade repositories should ensure the full transfer of all data to an EU27 trade repository before March 29, 2019.

View ESMA's statement.

The International Organization of Securities Commissions has launched a consultation on sustainable finance in emerging markets and the role of securities regulators. The consultation discusses the challenges affecting the development of sustainable finance in capital markets, focusing on sustainable assets in emerging markets and measures to facilitate market development in this area. Responses to the consultation can be submitted by April 1, 2019.

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