The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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UK Prudential Regulation Authority Publishes Policy Statement on Definition of an Interim Capital Regime Firm
November 29, 2024
The U.K. Prudential Regulation Authority has published its final policy statement and statement of policy relating to the definition of an Interim Capital Regime firm and an ICR consolidation entity. The policy statement explains the means by which ICR-eligible firms can join the ICR. Joining the ICR will enable eligible firms to preserve their current capital requirements from the implementation date (i.e., January 1, 2026) of the Basel 3.1 standards, until the implementation of the permanent Small Domestic Deposit Taker capital regime. The PRA is currently consulting on proposals to revoke the ICR when the SDDT capital regime is implemented.
Read more.Topic : Prudential Regulation -
Bank of England System-Wide Exploratory Scenario Exercise and 2024 Central Counterparty Supervisory Stress Test
November 29, 2024
The Bank of England has published the final report on its system-wide exploratory scenario. The SWES was a 'system-wide' exercise, incorporating a wide range of financial firms and business models, focusing not on the resilience of individual participants, but the impact on important U.K. financial markets.
Through running the SWES, the BoE, working closely with and with the full support of the U.K. Prudential Regulation Authority, Financial Conduct Authority, and the Pensions Regulator, has drawn key financial stability conclusions, including that actions taken by authorities and market participants following recent market shocks have improved gilt market resilience, but further work is required given the other vulnerabilities highlighted by this exercise. The BoE considers that the SWES has proven to be an effective tool to understand system-level vulnerabilities. The BoE, alongside the FCA, will use the experience as a framework for future system-wide analysis and embed it into how market-wide surveillance is conducted. To support this the BoE will invest in its in-house capacity to model system-wide dynamics, supported by continuing engagement with market participants.
The BoE also published the results of its 2024 CCP Supervisory Stress Test. In the core credit stress test, the BoE found that all three U.K. CCPs have adequate pre-funded resources to cover a severe stress scenario and the default of the 'Cover-2' members—the two members whose default generates the greatest depletion of mutualized resources at the CCP. The BoE identified that in some very extreme but plausible scenarios there may be a risk to CCPs, and will follow-up with CCPs to probe how they capture the risks identified by these hypothetical scenarios via their own stress testing. -
Bank of England Amends Approach to Stress Testing UK Banking System
November 29, 2024
The Bank of England has updated its approach to stress testing the U.K. banking system. From 2025 onwards, the BoE will move from an annual to a biennial frequency for its main bank capital stress test. This will be a test of risks related to the financial cycle in which the largest and most systemic U.K. banks participate and will be used to inform the setting of capital buffers for the banking system and individual banks. In the intervening years, the BoE will use stress testing when appropriate to supplement its assessment of the resilience of the banking system to cyclical risks. The BoE will continue to use exploratory exercises as a means of assessing other risks, including structural and emerging risks that are not closely linked to the financial cycle. The scope of firms involved in the tests in intervening years will depend on the risks being assessed. When deciding on the timing of these exercises, the BoE will consider the risk environment and the sequencing and timing of the stress tests described above. The next bank capital stress test will take place in 2025.Topic : Prudential Regulation -
European Commission Publishes Draft FAQs on EU Taxonomy Regulation
November 29, 2024
The European Commission has published a draft notice containing a set of FAQs on the interpretation and implementation of certain legal provisions of the EU Taxonomy Environmental Delegated Act, the EU Taxonomy Climate Delegated Act and the EU Taxonomy Disclosures Delegated Act. Topics covered include: (i) the application of general taxonomy requirements and technical screening criteria for specific activities included in the Taxonomy Climate and Environmental Delegated Acts; (ii) the generic 'do no significant harm' criteria; and (iii) the reporting obligations for activities covered by the Climate Delegated Act and the Environmental Delegated Act. The Commission hopes that the document will improve the usability of the framework.
The draft notice has been approved in principle by the Commission and will be formally adopted once versions in all EU languages are ready.Topic : Sustainable Finance -
International Organization of Securities Commissions Publishes Final Report on Evolution of Market Structures
November 29, 2024
The International Organization of Securities Commissions has published its final report on the evolution in the operation, governance, and business models of exchanges. The Report focuses on equity exchanges, but IOSCO considers that it may be of relevance to other types of trading venues and trading in other classes of financial instruments. In the report IOSCO describes and analyzes the changes in the structure and organization of exchanges and, in particular, their business models and ownership structure. IOSCO then outlines the impact of these changes on market structure, emphasizing the shift from traditional models to more competitive, cross-border, and diversified operations, whereby exchanges have become part of larger corporate groups, leading to resource-sharing and process consolidation. Finally, IOSCO discusses regulatory considerations and potential risks and challenges and outlines good practices that regulators may consider in the supervision of exchanges, particularly when they provide multiple services and/or are part of an exchange group. The good practices are complemented by a non-exhaustive list of regulatory and supervisory tools currently used in IOSCO jurisdictions to address the issues under discussion, which may serve as examples to other regulators. -
New UK Financial Conduct Authority Direction for the Derivatives Trading Obligation
November 29, 2024
The U.K. Financial Conduct Authority has published a new direction for the U.K. derivatives trading obligation, together with an explanatory memorandum. The FCA's existing direction modifying the U.K. DTO using its Temporary Transitional Power expires on December 31, 2024. This allows firms subject to the U.K. DTO, trading with, or on behalf of, EU clients subject to the corresponding obligation under EU MiFIR, namely the EU DTO to be able to transact or conclude those trades on EU trading venues, providing that certain conditions are met. The purpose of this new direction is to provide continuity in the outcomes achieved through the TTP. In the continuing absence of mutual equivalence between the U.K. and the EU for the purposes of the U.K. DTO and EU DTO, certain market participants would be caught by a conflict of law between the U.K. DTO and EU DTO—in particular branches of EU firms in the U.K.—unless a new direction is issued. The new direction set out the same conditions as the existing direction, however the new direction only applies to derivatives subject to the DTO in both the U.K. and the EU. The new direction takes effect on the expiry of the previous one. -
UK Financial Conduct Authority Policy Statement on Changes to Financial Crime Guide
November 29, 2024
The U.K. Financial Conduct Authority has published a policy statement on changes to its financial crime guide, following its consultation in April. The changes cover the following areas: (i) sanctions—to reflect information learnt from assessments of firms' sanctions' systems and controls following Russia's invasion of Ukraine in 2022; (ii) proliferation financing—to ensure that proliferation financing is explicitly referenced throughout the guide, where appropriate. This includes highlighting a 2022 change to the MLRs, which requires firms to conduct proliferation financing risk assessments; (iii) transaction monitoring—to provide further guidance on how firms can implement and monitor transaction monitoring systems. This includes supporting responsible innovation and new technological approaches; (iv) cryptoasset businesses—to make clear that cryptoasset businesses registered under the MLRs should refer to the guide; (v) Consumer Duty—to clarify that firms should consider whether their systems and controls are consistent with their obligations under the Duty; and (vi) consequential changes—includes replacing expired links, updating outdated references to EU rules and refreshing case studies based on more recent FCA enforcement notices.
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Second Financial Conduct Authority Consultation on Proposals for the Publication of Enforcement Measures
November 28, 2024
The U.K. Financial Conduct Authority has published its second consultation on a proposed new approach to publicising its enforcement investigations and changes to its Enforcement Guide. The FCA first consulted on these changes in February. However, following feedback that raised significant concerns, the FCA has published a further consultation which re-drafts the original proposals to try and address the concerns raised and give more clarity on how they would work in practice. Responses may be submitted until February 17, 2025 and the FCA board plans to decide on the proposals in Q1 2025.
Read more. -
Basel Committee on Banking Supervision Publishes Report on Countercyclical Capital Buffer
November 28, 2024
The Basel Committee on Banking Supervision has published a report on the range of practices in implementing a positive neutral countercyclical capital buffer. The CCyB aims to ensure that banking sector capital requirements take account of the macro-financial environment in which banks operate, in order to increase the resilience of the banking sector and maintain the flow of credit to the real economy during periods of stress. A positive neutral CCyB is a CCyB that is set at a rate above zero at a time when risks are judged to be neither subdued nor elevated. The Basel Committee observes that authorities that have introduced a positive neutral CCyB have found it helpful for banks in their jurisdictions to have buffers of capital in place that can be released in the event of sudden shocks, including those unrelated to the credit cycle, such as the Covid-19 pandemic.
The report builds on prior publications on the same topic by examining the observed range of practices adopted by jurisdictions which have chosen to implement a positive neutral CCyB. It considers the different jurisdictional frameworks for implementing a positive neutral CCyB, describes the various observed approaches to the calibration and operation of the buffer, and discusses reciprocity considerations. The Basel Committee emphasizes that the adoption of a positive neutral CCyB approach is not required, and the report does not seek to discuss or opine on the merits or demerits of a positive neutral CCyB relative to other macroprudential measures or tools. Some jurisdictions may use tools other than the positive neutral CCyB to address similar risks, based on their specific jurisdictional circumstances.Topic : Prudential Regulation -
UK Financial Conduct Authority Consults on the MiFID Organisational Regulation
November 27, 2024
The Financial Conduct Authority has published a consultation paper on the Markets in Financial Instruments Directive Organisational Regulation (MiFID Org Reg). The FCA is consulting on proposals to transfer the firm-facing requirements of the MiFID Org Reg into FCA Handbook rules when HM Treasury commences the repeal of the MiFID Org Reg. The FCA is proposing to retain the current substance of the requirements to provide continuity for firms. Provisions that the FCA is not replacing in regulatory rules will either be restated or repealed by HM Treasury to coincide with the Handbook rules coming into force, and HM Treasury will publish a draft statutory instrument setting out how the Government will deal with the non-firm-facing elements.
The consultation paper also includes a discussion chapter about further reform, either now or in the future, to make the rules better suited to the range of U.K. licensed firms and their clients. This includes in circumstances where the Consumer Duty does not apply. It considers how the FCA could rationalize or improve MiFID II derived conduct and organizational rules, including for Article 3 firms. The FCA also discusses whether and how the client categorization rules could work more effectively.
Read more.Topic : MiFID II -
Basel Committee on Banking Supervision Consults on Hedging of Counterparty Credit Risk Exposures
November 27, 2024
The Basel Committee on Banking Supervision has published a consultation on technical amendments on the hedging of counterparty credit risk exposures. The interpretative issues addressed relate to the circumstance where a bank has a derivative exposure and uses a guarantee or credit default swap to hedge the CCR arising from the derivative counterparty. While the CCR rules include a specific approach for the recognition of collateral, the recognition of guarantees or credit derivatives, such as CDSs, is not explicitly addressed, suggesting that banks may use the substitution approach of the credit risk mitigation framework. To address this inconsistency, the Basel Committee proposes amendments to the credit risk and CCR standards, which aim to better align the treatment of guarantees and credit derivative protection with the treatment of eligible collateral in the CCR framework. The proposed amendments do not affect the need for banks to check whether the requirements in CRE22.81 and CRE40 are met and need to be applied accordingly. Responses may be submitted until January 31, 2025.Topic : Prudential Regulation -
Basel Committee on Banking Supervision Finalizes Various Technical Amendments to the Basel Framework
November 27, 2024
The Basel Committee on Banking Supervision has published a document on the finalization of various technical amendments to the Basel framework. The amendments relate to: (i) the definition of specialized lending in the standardized approach to credit risk (to better align it with the definition in the internal ratings-based approach); and (ii) the curvature charge for Group 2a cryptoassets in the cryptoasset exposure standard to align the treatment with other asset classes. Basel Committee members have agreed to implement the technical amendments set out in this document as soon as practical, within three years at the latest. The technical amendment to SCO60.80 will be implemented as part of the final cryptoasset exposures standard, i.e., from January 1, 2026. The amendments were published for consultation in July and have been finalized as originally proposed.Topic : Prudential Regulation -
UK Financial Conduct Authority Discusses Strategy for 2025 to 2030
November 26, 2024
The U.K. Financial Conduct Authority has published a speech by Emily Shepperd, FCA Chief Operating Officer, on the FCA's strategy for 2025 to 2030. In the speech, Ms. Shepperd sets out the four main themes of the FCA's strategy. Ms. Shepperd emphasises that trust in both the FCA and the financial services sector underpins these themes and will be crucial as the FCA looks to pursue growth, alongside ensuring proportionality in regulation and encouraging innovation. She also explains that the FCA has decided to set its ambitions on 2030, a five-year strategy, learning from its first 3-year strategy that it takes time to deliver and cement change.
Read more. -
UK Regulators Consult on Compensation Reform
November 26, 2024
The U.K. Prudential Regulation Authority and Financial Conduct Authority have published a joint consultation on compensation reform. The consultation paper sets out proposed amendments to the remuneration part of the PRA Rulebook, Supervisory Statement SS2/17 and the FCA's associated non-Handbook Guidance relating to compensation for dual-regulated firms. The proposals complement previous compensation regime changes enhancing proportionality for small firms, and removing the bonus cap.
Read more. -
UK Regulations Amending Temporary Recognition and Marketing Regimes for CCPs and Collective Investment Schemes
November 26, 2024
The Collective Investment Schemes (Temporary Recognition) and Central Counterparties (Transitional Provision) (Amendment) Regulations 2024 have been published, alongside an explanatory memorandum. The Regulations amend the Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 to remove the requirement that a CCP must continue to be recognized in the EU to remain in the temporary recognition regime for overseas CCPs.
The Regulations also make amendments to the Collective Investment Schemes (Amendment etc.) EU Exit Regulations 2019 (CIS EU Exit Regulations), which established the temporary marketing permissions regime for EEA investment funds. Amendments include extending the duration of the TMPR from five to six years (that is, until December 31, 2026). This reflects an HM Treasury policy announcement made in January 2024. In addition, technical amendments are made to the TMPR to ensure that sub-funds are able to transition smoothly to the Overseas Funds Regime on direction by the Financial Conduct Authority where they are in scope of the U.K. government's equivalence decision concerning EEA states or alternatively apply for recognition. The FCA published guidance in October 2024 to assist firms in making an application for an overseas investment fund to be recognized under the OFR.
The Regulations come into force with immediate effect, that is November 26, 2024. -
International Organization of Securities Commissions Report on Principles for the Regulation and Supervision of Commodity Derivatives Markets
November 25, 2024
The International Organization of Securities Commissions has published a report on a targeted implementation review on principles for the regulation and supervision of commodity derivatives markets. In October, IOSCO conducted a targeted implementation review of five selected principles: Principles 9, 12, 14, 15, and 16 that aim to address excessive commodity market volatility, OTC derivatives transparency, and orderly functioning of the commodity derivatives markets. IOSCO believes that an appropriate implementation of the selected principles would help mitigate the impact of external factors which may disrupt commodity markets, as recently experienced. As such the report sets out IOSCO's recommendations to its members for improving the implementation of specific elements of the selected principles, as well as the intention to conduct further work in the OTC markets area.
Overall, the survey results show that the majority of respondents were broadly compliant with the selected principles. However, both regulators and exchanges identified significant challenges in implementing certain elements of the selected principles within OTC markets. Based on the results of the review, IOSCO anticipates additional work related to the issues with the ability of exchanges and certain regulators to collect and aggregate, on both an ad hoc and regular basis, information about OTC positions. The specifics of this work are still being determined, but IOSCO is committed to ensuring that any future developments align with IOSCO's strategic goals. -
International Organization of Securities Commissions' Final Report on Post Trade Risk Reduction Services
November 25, 2024
The International Organization of Securities Commissions has published its final report on post trade risk reduction services. The report highlights potential policy considerations and risks associated with the using and offering of PTRRS and presents seven sound practices in this area as guidance to IOSCO members and regulated users of PTRRS. The seven sound practices cover the following areas: (i) transparency, governance, comprehensibility, and fairness of the algorithm; (ii) operational risk; (iii) data integrity and security and regulatory data; (iv) legal certainty; (v) considerations of potential counterparty risk by IOSCO members and PTRRS users; (vi) market concentration and competition; and (vii) standardization and predictability of runs and file formats. The sound practices are designed to improve and complement existing market practices. The report reflects the results of the public consultation launched in January. -
Speech: UK government's Approach to Tokenization and Regulation
November 25, 2024
HM Treasury has published a speech given on November 21, 2024, by Tulip Siddiq, Economic Secretary to the Treasury, on the U.K. government's approach to tokenisation and regulation. In the speech, Ms. Siddiq confirms that HM Treasury intends to implement the proposal for the financial services regulation of cryptoassets in the U.K. in full. The proposals were published in October 2023 and included proposals for the creation of various new regulated activities for cryptoassets, as well as associated regimes for both admissions to trading and market abuse. HM Treasury also intends to proceed with removing the legal uncertainty over whether cryptoasset staking services constitute a collective investment scheme under financial services law. HM Treasury is also proceeding with the proposals for new regulated activities for stablecoin. Ms. Siddiq explains that the regulated activity for stablecoin issuance will ensure that the FCA can properly manage stablecoin specific risks, most notably those associated with management of the backing assets. This proposal will be implemented to the same timetable as the rest of the regulatory regime for cryptoassets.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
UK Securitisation (Amendment) (No. 2) Regulations 2024 Published
November 22, 2024
The Securitisation (Amendment) (No. 2) Regulations 2024 were published on legislation.gov.uk, alongside an explanatory memorandum. At present, U.K. investors in U.K. - or EU-origin Simple, Transparent, and Standardised securitizations can benefit from preferential prudential treatment, due to a temporary arrangement. The time by which EU STS securitizations can enter the temporary arrangement was set to expire on December 31, 2024. The Regulations extend the time by which such EU-origin STS securitizations can enter the temporary arrangement to June 30, 2026. The U.K. government is aiming to provide continuity and certainty to investors, until a non-time-limited assessment is undertaken.Topic : Securities -
EU Responses to Consultation on Macro-Prudential Policies for Non-bank Financial Intermediation
November 22, 2024
The European Central Bank has published the Eurosystem's response to the European Commission's consultation on macroprudential policies for non-bank financial intermediation. This is on behalf of the ECB and the national central banks of member states in the eurozone. On the same day, the European Securities and Markets Authority published its response to the consultation.
Read more. -
UK Financial Conduct Authority Finalized Guidance for Payment Firms that Enables a Risk-Based Approach to Processing Suspected Fraudulent Payments
November 22, 2024
The Financial Conduct Authority has published finalized guidance for payment service providers that enables a risk-based approach to processing suspected fraudulent payments. Following the publication of the Payment Services (Amendment) Regulations 2024, the amount of time that a PSP has to process an outbound payment when there are reasonable grounds to suspect fraud or dishonesty was extended to up to four business days. To support these regulations, HM Treasury asked the FCA to issue guidance to explain how it expects PSPs to apply these legislative changes, taking into account feedback from stakeholders.
Following a consultation in September, the finalized guidance sets out:- the requirements for delaying outbound payments and determining whether the threshold for "reasonable grounds to suspect" has been met;
- how PSPs should use the payment delay window;
- obligations on PSPs if they delay an outbound transaction; and
- the treatment of suspicious inbound payments.
The FCA has amended its payment services and electronic money approach document to include the new finalized guidance. The guidance came into effect on November 22, 2024. -
UK Financial Conduct Authority Consults on Further Temporary Changes to Handling Rules for Motor Finance Complaints
November 21, 2024
The U.K. Financial Conduct Authority has published a consultation on further temporary changes to handling rules for motor finance complaints. The FCA explains that following the Court of Appeal's recent judgment on motor finance commission, it is proposing new complaint handling rules. It is likely that the judgment will result in an increase in motor finance non-discretionary-commission-arrangement (non-DCA) commission complaints. This will create additional pressures on firms and the Financial Ombudsman Service. The FCA therefore considers that there is a strong case for introducing complaint handling rules that give firms extra time to deal with motor finance non-DCA commission complaints not currently covered by the DCA complaint handling rules. Extending the time firms have to deal with these complaints will also allow time to see the outcome of any appeals for permission to appeal the Court of Appeal's judgment to the Supreme Court.
Read more.Topic : Consumer / Retail -
HM Treasury Publishes Prudential Regulation of Credit Institutions (Meaning of CRR Rules and Recognised Exchange) (Amendment) Regulations 2024
November 21, 2024
HM Treasury has published the Prudential Regulation of Credit Institutions (Meaning of CRR Rules and Recognised Exchange) (Amendment) Regulations 2024, together with an explanatory memorandum.
The Regulations have two primary purposes: (i) Regulations 2 and 3 make amendments to primary legislation in connection with the revocation of the U.K. Capital Requirements Regulation, which currently forms part of assimilated law on financial services. Regulation 2 amends the definition of "CRR rules" in the Financial Services and Markets Act 2000 to include rules made by the U.K. Prudential Regulation Authority as part of Basel 3.1 implementation to replace CRR provisions revoked under the Financial Services and Market Act 2023. Regulation 3 makes a related amendment to section 5 of the Financial Services Act 2021 to ensure that certain requirements apply to those rules; and (ii) Regulation 4 amends the definition of "recognized exchange" as contained in the CRR. This will support an expansion of investment exchanges that fall within the definition of a "recognized exchange". The Regulations specify that investment exchanges can qualify as a "recognized exchange" if they are: (a) U.K.-based investment exchanges that are considered to be regulated markets; (b) in the register of Recognized Overseas Investment Exchanges, a regime owned by the FCA; or (c) an investment exchange, which meets certain conditions as set out in the PRA's rulebook. For this purpose, the PRA expects to make rules on the proposed "conditions", which will help firms identify a "recognized exchange". The PRA plans to consult on its conditions shortly. The Regulations come into force on November 22, 2024.Topic : Prudential Regulation -
HM Treasury Publishes Consumer Composite Investments (Designated Activities) Regulations 2024
November 21, 2024
HM Treasury has published the Consumer Composite Investments (Designated Activities) Regulations 2024, together with an Explanatory Memorandum.
The Regulations: (i) replace assimilated law in relation to the Packaged Retail and Insurance-based Investment Products Regulation, establishing a new legislative framework for the regulation of Consumer Composite Investments, formerly PRIIPs; (ii) define key concepts including a CCI and retail investor to support interpretation, tailoring definitions established in the PRIIPs Regulation to U.K. markets and law; (iii) specify activities relating to CCIs as designated activities for the purposes of the Financial Services and Markets Act 2000 and provide the U.K. Financial Conduct Authority rule-making and certain supervision and enforcement powers to enable it to set the regulatory provisions that apply to persons carrying out designated activities relating to CCIs; (iv) make transitional provisions and consequential amendments to other legislation to ensure the CCI regime remains operable; and (v) establish civil liability for breaches of FCA rules made under the Regulations. The provisions providing the FCA with the necessary powers to make rules, give directions or guidance, and issue statements of policy come into force on November 22, 2024. The remaining provisions come into force on the day on which the revocation of the U.K. PRIIPs Regulation comes into force. -
Bank of England and UK Financial Conduct Authority Findings on Third Survey of Artificial Intelligence and Machine Learning in UK Financial Services
November 21, 2024
The Bank of England published the findings of its third joint survey with the U.K. Financial Conduct Authority on the use of Artificial Intelligence and machine learning in financial services. The survey aims to build on existing work to further the BoE's and FCA's understanding of AI in financial services, in particular by providing ongoing insight and analysis into AI use by BoE and/or FCA-regulated firms.
Read more.Topic : Artificial Intelligence -
International Organization of Securities Commissions Publishes Consultation Report on Pre-Hedging
November 21, 2024
The International Organization of Securities Commissions has published a consultation report on pre-hedging. The report assesses potential conduct and market integrity issues associated with the practice of pre-hedging. IOSCO proposes a definition of pre-hedging and a set of recommendations to guide regulators in determining acceptable pre-hedging practices and managing the associated conduct risks effectively.
IOSCO seeks feedback on the proposed definition, and a minimum set of recommendations as guidance which are broadly applicable in most circumstances. IOSCO additionally seeks feedback on whether the proposed recommendations need to be adapted to specific circumstances. For example, IOSCO particularly requests feedback in relation to the differences in the proposed recommendations between bilateral non-electronic transactions and pre-hedging in the context of electronic trading, including competitive requests for quotes. The deadline for comments is February 21, 2025. IOSCO anticipates providing a final report with recommendations to IOSCO members in 2025. -
Outcome of Basel Committee on Banking Supervision November 2024 Meeting
November 20, 2024
The Basel Committee on Banking Supervision has set out the outcomes from its meeting on November 19-20, 2024. Key takeaways include:- implementation of Basel III—committee members unanimously reaffirmed their expectation of implementing all aspects of the Basel III framework in full, consistently and as soon as possible;
- non-bank financial intermediation—the BCBS approved a final set of guidelines that seek to address weaknesses in banks' counterparty credit risk management exposed in recent episodes of NBFI distress. The finalized guidelines will be published next month;
- 2023 banking turmoil—an update on the BCBS's work to develop a suite of practical tools to support supervisors in their day-to-day work as part of its efforts to strengthen supervisory effectiveness in light of the lessons learned from last year's banking turmoil will be published in early 2025;
- macroprudential policy—the BCBS will publish a report on existing practices to support jurisdictions that wish to apply positive cycle-neutral rates when risks are judged to be neither subdued nor elevated. The report will be published next month; and
- climate-related financial risks—the BCBS anticipates finalizing its proposed Pillar 3 disclosure framework in H1 2025.
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European Supervisory Authorities Publish Joint Guidelines on System for Exchange of Information Relevant to Fit and Proper Assessments
November 20, 2024
The European Supervisory Authorities (the European Securities and Markets Authority, European Banking Authority, and European Insurance and Occupational Pensions Authority) published joint guidelines on the system for the exchange of information relevant to the assessment of the fitness and propriety of holders of qualifying holdings, directors, and key function holders of financial institutions and financial market participants by competent authorities. The ESAs have developed a system, which consists of a cross-sectoral database (ESAs Information System) and these joint guidelines, with the aim of fostering a timely exchange of information between competent authorities. The ESAs Information System will hold limited information on persons who are subject to a fitness and propriety assessment under Union sectoral provisions. The competent authorities performing such assessments will include the relevant information consistent with these guidelines in the ESAs Information System. The aim of the ESAs Information System is to support competent authorities in identifying other competent authorities that have conducted such an assessment process for a person of interest, thereby enhancing the efficiency of the fit and proper assessments.Topic : Conduct and Culture -
European Securities and Markets Authority Consults on EMIR 3 Active Account Requirement
November 20, 2024
The European Securities and Markets Authority has published a consultation on the conditions of the Active Account Requirement under the amended European Market Infrastructure Regulation (EMIR 3). The active account requirement requires EU counterparties active in certain derivatives to hold an operational and representative active account at a Central Counterparty authorized to offer services and activities in the EU.
ESMA is seeking stakeholder input on several key aspects of the active account requirement, including the: (i) three operational conditions to ensure that the clearing account is effectively active and functional, including stress-testing; (ii) representativeness obligation for the most active counterparties; and (iii) reporting requirements to assess their compliance with the active account requirement. The deadline for comments is January 27, 2025. ESMA will then consider the feedback it receives to this consultation in Q1 2025 and expects to publish a final report and submission of the draft technical standards to the EC for endorsement as soon as possible. -
International Organization of Securities Commissions Publishes Roadmap to Enhance Retail Investor Online Safety
November 19, 2024
The International Organization of Securities Commissions has launched a new roadmap for retail investor online safety. The strategic initiative aims to safeguard retail investors worldwide from fraud, excessive risk, and misinformation as digital trading and social media reshape the retail financial market.
Read more. -
UK Financial Conduct Authority Revises Market Cleanliness Statistic Methodology
November 19, 2024
The U.K. Financial Conduct Authority has announced that it is revising the market cleanliness statistic used in its annual report to measure insider trading. In future, the FCA will: (i) detect abnormal price movements that happen on the same day as an announcement because the price information used is more frequent; (ii) introduce a market comparison test to ensure the statistic is less affected by market volatility, for example, that caused by the Covid pandemic or Russia's invasion of Ukraine; and (iii) include more announcements from firms with multiple takeover offers. The revised measure is higher, reflecting the scope of the statistic now including potential insider trading on the day of an announcement. In addition, the new methodology makes the statistic more robust to periods of market volatility. Based on the insights received from reports, alerts, and market intelligence, the FCA has not seen an increase in market abuse. The FCA welcomes feedback from the public, industry and academic community on these changes.Topic : Financial Crime and Sanctions -
Council of the European Union Adopts new Regulation on Environmental, Social, and Governance Rating Activities
November 19, 2024
The Council of the European Union has adopted the proposed Regulation on ESG rating activities. The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations that ESG ratings providers carry out, and by preventing potential conflicts of interest. In particular, ESG rating providers established in the EU will need to be authorized and supervised by ESMA. They will have to comply with transparency requirements, in particular with regard to their methodology and sources of information. The Regulation introduces as a principle a separation of business and activities in order to prevent conflicts of interest. The European Parliament approved the proposed Regulation in October. The Regulation will now be published in the Official Journal of the European Union, enter into force 20 days later and apply 18 months after its entry into force.Topic : Sustainable Finance -
European Supervisory Authorities and European Central Bank Publishes Results of "Fit-For-55" Climate Stress Test
November 19, 2024
The European Supervisory Authorities (European Securities and Markets Authority, European Banking Authority, and European Insurance and Occupational Pensions Authority) and the European Central Bank have published the results of the one-off "Fit-For-55" climate scenario analysis. The EU's Fit-for-55 package aims to stimulate investment and innovation in the transition to a green economy and plays a crucial role in the EU's goal to achieve an emissions' reduction of 55% by 2030 and climate neutrality by 2050. The climate stress test was conducted against three scenarios developed by the European Systemic Risk Board, with the support of the ECB. The scenarios incorporate transition risks as well as macroeconomic factors, under the assumption that the Fit-for-55 package is implemented as planned. Under the scenarios examined, transition risks alone are unlikely to threaten financial stability. However, when transition risks are combined with macroeconomic shocks, they can increase losses for financial institutions and may lead to disruptions. The report therefore calls for a coordinated policy approach to financing the green transition and the need for financial institutions to integrate climate risks into their risk management in a comprehensive and timely manner. The report notes that given the novelty of the methodological approaches and the data-related challenges, the results are subject to a large margin of uncertainty.Topic : Sustainable Finance -
HM Treasury Updates High-Risk Third Countries List under Money Laundering Regulations
November 19, 2024
HM Treasury has updated its money laundering advisory notice on high-risk third countries. Under the U.K. Money Laundering Regulations, the U.K. regulated sector must apply enhanced customer due diligence in relation to high-risk third countries. This obligation is in addition to the requirement to apply enhanced customer due diligence where there is an assessed high risk of money laundering or terrorist financing, including geographic risk based on credible sources. High-risk third countries are those named by the Financial Action Task Force on either its "High-Risk Jurisdictions subject to a Call for Action" or "Jurisdictions under Increased Monitoring" lists. On October 25, 2024, the FATF published its most recent update to its lists of jurisdictions, which firms are advised to consider.Topic : Financial Crime and Sanctions -
Bank of England Consults on Fundamental Rules for Financial Market Infrastructure Firms
November 19, 2024
The Bank of England has published a consultation on fundamental rules for financial market infrastructure firms. The BoE proposes to introduce a set of fundamental rules for FMIs incorporated in the U.K. The aim of the proposed rules is to increase the resilience of FMIs through providing a clear and transparent articulation of the desired outcomes of the BoE's policy framework. The BoE intends to support FMIs' compliance with the relevant regulatory regime and their supervisory engagement with the BoE, and so U.K. financial stability. For central counterparties and central securities depositories, the fundamental rules will take the form of rules made under the Financial Services and Markets Act 2000. For recognized payment service operators and specified service providers, they will take the form of a binding Code of Practice pursuant to the powers given to the BoE under Part 5 of the Banking Act 2009. The BoE intends to apply the fundamental rules to systemic stablecoins in due course. The fundamental rules will form the foundation of a broader BoE rulebook for FMIs, as the BoE uses its new rulemaking power over U.K. CCPs and CSDs to replace detailed firm-facing requirements currently in U.K. primary legislation. The deadline for comments is February 19, 2025. The BoE proposes a six-month implementation period between the publication of the final rules and their application. The BoE welcomes views on what an appropriate implementation period would be.Topic : Financial Market Infrastructure -
Bank of England Updates Approach to Financial Market Infrastructure Supervision
November 19, 2024
The Bank of England has updated its approach to financial market infrastructure supervision. The BoE states that its approach to supervision continues to be underpinned by four core principles: (i) its supervisors rely on judgement in taking decisions; (ii) the BoE assesses firms not just against current risks, but also against those that could plausibly arise further ahead; (iii) the BoE focuses on those issues and firms that are likely to pose the greatest risk to its objectives; and (iv) it applies proportionality to ensure that its interventions do not go beyond what is necessary in order to achieve its objectives.
In light of experience, and the new powers and responsibilities set out in the Financial Services and Markets Act 2023, the BoE has aimed to make its approach more risk-based and flexible, updated its potential impact and risk assessment frameworks so that they can better accommodate the current risk environment, made greater use of horizontal supervisory work to assess the risks posed across sectors, and continued to embed the use of horizon scanning to identify areas of potential vulnerability. The BoE sets out its processes for identifying and assessing risks posed by each FMI and its approach to supervising FMIs in practice, including the degree of intensity of supervision and the tools and legal and enforcement powers available to it.Topic : Financial Market Infrastructure -
Council of the European Union Adopts Revised EMIR 3 Package
November 19, 2024
The Council of the European Union has adopted the Regulation amending the European Market Infrastructure Regulation, the Capital Requirements Regulation, and the Money Market Funds Regulation as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets (EMIR 3) and the Directive amending the UCITS Directive, the Capital Requirements Directive, and the Investment Firms Directive as regards the treatment of concentration risk arising from exposures towards central counterparties and of counterparty risk in centrally cleared derivative transactions. The legislation will be published in the Official Journal of the European Union before entering into force 20 days later. EMIR 3 will apply from that date, subject to certain provisions which will not apply until the date of entry into force of certain technical standards. Member States are expected to implement the amending Directive 18 months after the date it enters into force.Topic : Financial Market Infrastructure -
European Securities and Markets Authority Finalizes Advice on Central Securities Depositories Regulation Penalty Mechanism
November 19, 2024
The European Securities and Markets Authority has finalized its technical advice for the European Commission on the Central Securities Depositories Regulation penalty mechanism. ESMA hopes to incentivize all actors in the settlement chain to improve settlement efficiency, also in view of the potential move to T+1 in the EU.
The report outlines ESMA's advice to improve the application of the CSDR penalty mechanism on three main aspects: (i) alternative parameters to calculate the penalties due to lack of cash, when the official interest rate for overnight credit charged by the central bank issuing the settlement currency is not available; (ii) the treatment of historical reference prices for the calculation of late matching fail penalties; and (iii) the design and level of the penalty rates for each asset class. ESMA proposes to maintain the design of the current penalty mechanism—for example, not introducing fundamental changes to the methods for calculating penalties—and to introduce an overall moderate increase of the penalty rates, in full alignment with the current types of settlement fails and targeting most asset classes. The Commission will take into account ESMA's technical advice when amending the Commission Delegated Regulation (EU) 2017/389. The revised penalty mechanism will become applicable once the amended Commission Delegated Regulation has been adopted by the Commission, scrutinized by the European Parliament and the Council of the European Union, and published in the Official Journal of the European Union.Topic : Financial Market Infrastructure -
Financial Stability Board Publishes Letter to G20 Leaders and 2024 Annual Report
November 18, 2024
The Financial Stability Board has published a letter sent to the G20 leaders ahead of their meeting on November 18, 2024, together with the FSB 2024 annual report. The letter warns of ongoing vulnerabilities within the global financial system, illustrated by recent episodes of market turmoil and the failure of several banks and non-banks in recent years. The letter stresses the importance of effective implementation of the FSB's policies, emphasizing that authorities must not only put policies into national laws and regulations, but also build the capacity to operationalize them.
In the annual report, the FSB provides an overview of its work in its key priority areas, which include: (i) addressing lessons from the March 2023 banking turmoil; (ii) enhancing the resilience of non-bank financial intermediation; (iii) addressing financial risks from climate change; (iv) improving cross-border payments; (v) responding to technological innovation; and (vi) enhancing the resolvability of central counterparties. Looking ahead, the FSB will continue to focus on these priority areas and will also place an emphasis on: (a) implementation monitoring of its recommendations on crypto-asset activities and global stablecoin arrangements; (b) further work on resolution reforms; and (c) regular monitoring and progress reports on financial stability issues.
For more information on the issues and developments relating to FinTech, see our blog A&O Shearman on fintech and digital assets. -
European Securities and Markets Authority Published Report on its Assessment of the Shortening of the Settlement Cycle to T+1
November 18, 2024
The European Securities and Markets Authority has published a final report on its assessment of the shortening of the settlement cycle in the EU to T+1. The report highlights that the increased efficiency and resilience of post-trade processes that should be prompted by a move to T+1 would facilitate achieving the objective of further promoting settlement efficiency in the EU, contributing to market integration and to the Savings and Investment Union objectives. ESMA recommends that the migration to T+1 occurs simultaneously across all relevant instruments and that it is achieved in Q4 2027.
Considering the different elements assessed by ESMA, in particular the difficulties linked to the go-live of such a big project in November and December, and the challenges linked to the first Monday of October (just after the end of a quarter), ESMA recommends October 11, 2027, as the optimal date for the transition to T+1 in the EU. ESMA suggests following a coordinated approach with other jurisdictions in Europe.
Read more.Topic : Financial Market Infrastructure -
Mansion House: UK Financial Conduct Authority and Financial Ombudsman Service Call for Input on Modernizing the Redress System
November 15, 2024
The U.K. Financial Conduct Authority and the Financial Ombudsman Service have launched a joint call for input on modernizing the redress system. The two main concerns of the FCA and the FOS are mass redress events and FCA-FOS cooperation. Mass redress events occur when there are large numbers of complaints about the same issue. If mass redress events involve sudden and unexpected increases in complaints, this creates operational difficulties for both firms and the FOS and delays for the consumers. In some cases, they can lead to disorderly firm failures with costs absorbed by the rest of the industry through the Financial Services Compensation Scheme levy or, if there is no FSCS cover, by consumers in lost redress.
The FCA and the FOS are hoping to better understand: (i) how the current redress framework could be modernized; (ii) the problems that mass redress events and the redress system in general cause firms, consumers, and their representatives; (iii) what changes could be made to the redress framework to enable the FCA and the FOS to better identify and manage mass redress events to ensure better outcomes for consumers, firms, and the market; (iv) what changes could be made to how the FCA and the FOS work together to ensure their views on regulatory requirements are consistent; and (v) if there need to be any changes for complaints brought to the FOS by professional representatives such as complaints management companies. The call for input considers a number of short-, medium-, and long-term options that may address the issues identified. The deadline for responses is January 30, 2025. The FCA and the FOS intend to set out next steps in H1 2025.Topic : Consumer / Retail -
Mansion House: UK Financial Conduct Authority Feedback on Advice Guidance Boundary Review and Next Steps
November 15, 2024
The U.K. Financial Conduct Authority has published feedback to its December 2023 advice guidance boundary review. The review included a number of proposals to improve how people can access help with their pensions and retail investments.
The FCA highlights that: (i) most respondents agreed that the FCA's proposals are a positive step towards improving consumer outcomes and agreed with the proposals outlined in the paper; (ii) the Financial Services Consumer Panel challenged the FCA to realize the full ambition of this review and encouraged the FCA to keep an open mind on what may be needed to achieve the strategic aims of the review; and (iii) there was concern about the risks of developing new forms of regulated help, including the need to ensure people fully understood the support they were being offered and what protections would be provided.
The FCA plans to consult: (a) in December on targeted support for pensions savers; and (b) in H1 2025 on draft FCA rules to apply across retail investments and pensions. The FCA has also issued a joint statement with the Pensions Regulator and the Information Commissioner's Office to provide guidance to firms on communicating with their pensions and retail investments customers.Topic : Consumer / Retail -
Mansion House: New Remit Letters for UK Financial Conduct Authority and Prudential Regulation Authority to Focus on Growth
November 15, 2024
HM Treasury has published remits and recommendations for the U.K. Financial Conduct Authority and Prudential Regulation Authority, set out in a letter sent from Rachel Reeves, Chancellor of the Exchequer, to Nikhil Rathi, FCA Chief Executive, and in a letter sent by Ms. Reeves to Andrew Bailey, Bank of England Governor.
The letter to Mr. Bailey formally relates to recommendations for the Prudential Regulation Committee, the BoE committee that exercises its functions as the PRA. Ms. Reeves calls for the regulators to fully embed the secondary competitiveness and growth objective and, while pursuing their respective primary objectives, to consider how they can enable informed and responsible risk-taking by authorized firms. Ms. Reeves outlines her priorities, which include ensuring that: (i) innovative new firms are supported to enter the market, and existing firms are enabled to innovate and invest in new technologies, including the safe adoption of AI; (ii) customers can access appropriate advice and products; (iii) U.K. financial services firms are supported to play a significant role in supporting the Net Zero transition globally; and (iv) firms have a positive experience of engaging with the regulators from the point of initial application or inquiry, and that administrative burdens on firms are streamlined as far as possible, while maintaining high regulatory standards and a reputation as responsive and agile regulators. -
Mansion House: HM Treasury Publishes Remit and Recommendations Letter for Financial Policy Committee
November 15, 2024
HM Treasury has published a letter from Rachel Reeves, Chancellor of the Exchequer, to Andrew Bailey, Governor of the Bank of England, setting out the remit and recommendations for the Financial Policy Committee for 2024/25.
In the letter, Ms. Reeves states that: (i) the FPC should continue to prioritize its work to address systemic vulnerabilities in market-based finance and ensure that the BoE continues to cooperate with relevant authorities and across jurisdictions to increase resilience in a way that is consistent with supporting sustainable economic growth; (ii) the FPC should continue to focus on cyber and operational risks, noting the evolving threat landscape, including how this might increase these risks, and other potential impacts for financial stability; and (iii) the FPC should assess and identify areas where there is potential to increase the ability of the financial system to contribute to sustainable economic growth without undermining financial stability.
The letter sets out: (a) the matters that the FPC should regard as relevant to the BoE's financial stability objective, and the responsibility of the FPC in relation to the achievement of that objective; (b) the responsibility of the FPC in relation to support for the U.K. government's economic policy; and (c) matters to which the FPC should have regard in exercising its functions. The FPC must respond to the government, describing any action it has taken or intends to take in response to a specific recommendation. -
UK Financial Conduct Authority Publishes Discussion Paper on Improving the UK Transaction Reporting Regime
November 15, 2024
The U.K. Financial Conduct Authority has issued a discussion paper on potential options for improving the U.K. transaction reporting regime. The FCA has two primary objectives: to improve the usefulness of transaction reporting data through better data quality and to support the competitiveness of U.K. markets by ensuring requirements remain proportionate for firms. The discussion paper asks firms to consider: (i) the overall shape of the transaction reporting regime, seeking feedback on the relative merits of simplification against the cost of change. The FCA is also seeking feedback on areas of the regime that are most burdensome for firms, as well as the role it could play in accommodating the development of new and existing technologies; (ii) the scope of firms subject to transaction reporting obligations and the scope of financial instruments captured by the requirements. The FCA considers the scope of reporting obligations for over-the-counter derivatives and identifiers for these instruments; and (iii) potential changes to the fields contained in RTS 22 to improve data quality. The FCA considers where it could add new fields to improve use of data, where existing fields could be removed to streamline reporting, and trading scenarios where clearer guidance may be needed to improve outcomes. The deadline for comments is February 14, 2025.Topic : Financial Market Infrastructure -
UK Financial Ombudsman Service Publishes Feedback to Consultation on Charging Claims Management Companies and other Professional Representatives
November 15, 2024
The U.K. Financial Ombudsman Service published a feedback statement to its consultation on its proposals to charge fees to claims management companies and other professional representatives. The statement summarizes the feedback and provides a high-level summary of the FOS's response to the feedback received.
The FOS proposes to, broadly as consulted on: (i) continue with the option to implement a fee of £250 per case, reducing to £75 where the case is determined in favor of the complainant represented by the CMC; (ii) avoid vested financial interest in the outcome of any individual complaint by reducing the fee payable by the respondent firm by £175 where the complaint is not successfully upheld against them. The FOS would retain £75 in every case, regardless of outcome, as this broadly equates to the cost of setting the case up on its systems; (iii) increase the free case limit from three to ten per financial year for each CMC, so they could test cases raising new issues and learn from them; with a view to this informing their own due diligence for subsequent cases of that type which they may wish to bring; (iv) utilize fees gathered to improve its outreach and engagement; and (v) implement the arrangements as soon as possible, subject to Parliamentary and U.K. Financial Conduct Authority stages, which the FOS now accepts is likely to be early 2025. The recent General Election means that the FOS is still awaiting the necessary secondary legislation to advance proposals. Depending on the outcome of the relevant approvals required, the FOS will publish a separate policy statement in due course, upon further development of the affirmative procedure by Parliament and appropriate final consideration by the FCA. On November 19, 2024 the FOS published a letter sent to the FCA to confirm the FO's position.Topic : Consumer / Retail -
Financial Stability Board Report on Financial Stability Implications of Artificial Intelligence
November 14, 2024
The Financial Stability Board has published a report outlining recent developments in the adoption of AI in finance and their potential implications for financial stability. The report notes that AI offers benefits from improved operational efficiency, regulatory compliance, personalised financial products, and advanced data analytics. However, AI may also amplify certain financial sector vulnerabilities and thereby pose risks to financial stability. According to the FSB, AI-related vulnerabilities with the potential to increase systemic risk include: (i) third-party dependencies and service provider concentration; (ii) market correlations; (iii) cyber risks; and (iv) model risk, data quality, and governance. In addition, GenAI could increase financial fraud and disinformation in financial markets. Misaligned AI systems that are not calibrated to operate within legal, regulatory, and ethical boundaries can also engage in behaviour that harms financial stability. From a longer-term perspective, AI uptake could drive changes in market structure, macroeconomic conditions, and energy use that may have implications for financial markets and institutions.
The report notes that existing regulatory and supervisory frameworks address many of the vulnerabilities associated with AI adoption. However, more work may be needed to ensure that these frameworks are sufficiently comprehensive.
Read more.Topic : Artificial Intelligence -
EU Final Guidance on Implementation of EU And National Sanctions
November 14, 2024
The European Banking Authority has finalized two sets of guidelines setting common standards on the governance arrangements and the policies, procedures, and controls that financial institutions should have in place to be able to comply with EU and national restrictive measures. Restrictive measures applicable to financial institutions comprise targeted financial sanctions and sectoral measures, e.g., economic and financial measures. Both sets of guidelines will apply from December 30, 2025.
The first set of guidelines is addressed to all institutions within the EBA's supervisory remit, i.e., those regulated and supervised under the Capital Requirements Directive, the Payment Services Directive, and the Electronic Money Directive. These guidelines set out the governance and risk management systems that financial institutions should implement to address the risk of potentially breaching or evading restrictive measures.
The second set of guidelines is specific to restrictive measures under the Wire and Cryptoasset Transfer Regulation. The guidelines specify what payment service providers and crypto-asset service providers should do to be able to comply with restrictive measures when performing transfers of funds or crypto-assets.Topic : Financial Crime and Sanctions -
UK High Court Finds London Capital & Finance Plc to be a Ponzi Scheme
November 14, 2024
The U.K. High Court has handed down judgement in the civil case of London Capital & Finance Plc (in administration) and others v Michael Andrew Thomson and others [2024] EWHC 2894 (Ch). London Capital & Finance was an investment firm regulated by the Financial Conduct Authority. It was also registered as an ISA manager with HM Revenue and Customs. LCF collapsed into administration in 2019, resulting in losses of around £237 million to around 11,500 mostly retail investors. LCF and its administrators brought a civil claim against those responsible for running and administering LCF's business, alleging (among other things) that: (i) representations made to LCF bondholders regarding LCF's activities were false; (ii) the defendants misappropriated sums of over £136 million from LCF and/or associated companies; and (iii) LCF was operated as a Ponzi scheme and as a result, the defendants were knowingly party to fraudulent trading and should be liable to compensate the claimants for their losses.
The court found for that: (i) LCF had made misrepresentations which amounted to fraudulent conduct of business; (ii) there had been fraudulent misappropriation of LCF's assets; and (iii) LCF had been operated fraudulently as a Ponzi scheme. As a result, the defendants were liable to LCF for knowing participation in the fraudulent conduct of LCF's business and LCF and its administrators had established equitable proprietary claims against certain of the defendants. A subsequent hearing will be held to decide the level of compensation payable by the defendants.
Read more.Topic : Consumer / Retail -
EU Listing Act Package Published in Official Journal of the European Union
November 14, 2024
The following legislation that comprises the EU Listing Act package has been published in the Official Journal of the European Union:- Regulation (EU) 2024/2809 amending the EU Prospectus Regulation, the EU MAR and EU MiFIR (the "Listing Regulation");
- Directive (EU) 2024/2811 amending MiFID II and repealing Directive 2001/34/EC (the "Listing Directive"); and
- Directive (EU) 2024/2810 on multiple-vote share structures (the "Multiple-Vote Shares Directive").
The Listing Regulation and Directive aim to streamline the rules applicable to companies, particularly SMEs, going through a listing process or companies already listed on EU public markets, by alleviating administrative burdens and costs, while preserving a sufficient degree of transparency, investor protection and market integrity. The Listing Directive also amends the EU requirements on how payments are made for investment research. EU firms will be permitted to choose whether to make joint or separate payments for third-party research and execution services. This follows the U.K. change to its rules, which took effect in August. We discuss the EU and U.K. changes in our note, "UK allows bundled payments for third-party research and trading commissions."
Read more.
