Financial Services Regulation and Compliance Bulletin - Cross Sectoral April 2019
Financial Services Regulation and Compliance Bulletin - Cross Sectoral April 2019
CBI Strategic Work plan in Securities and Markets Supervision
The CBI Strategic Plan 2019-2021 was delivered by Colm Kincaid, the Director of the CBI Securities and Markets Supervision, in his address to the Association of Compliance Officers Ireland. In terms of cross-sectoral updates, the plan addresses Brexit, specifically in relation to its attendant risks and the potential ‘quantum shift’ in the scale of Ireland’s financial services sector that may occur.
CBI 'Dear CEO' Letter: Fitness and Probity
The CBI issued this letter on 8 April 2019 to emphasise the significant compliance obligations placed on Firms by the Fitness and Probity Regime. This CBI letter highlights a general lack of awareness in the industry of obligations under the Fitness and Probity Regime. This letter should be read with the Guidance on Fitness and Probity Standards 2018. The main areas lacking compliance include (among other things):
the failure by firms to provide for the ongoing due diligence obligations
the failure by firms to report Fitness and Probity concerns to the CBI
the failure by firms to observe their obligations to seek approval for PCFs
the failure by firms to conduct adequate due diligence for senior positions
The CBI expects "…that firms review the issues set out in the letter and, together with their boards, review their own fitness and probity policies, procedures and practices and address any shortcomings. Firms should be able to demonstrate how the issues we have raised have been considered, and to explain and evidence any remedial actions taken. We expect to see a demonstrable change in how firms and individuals engage with the process over the coming period."
Department of Finance launches a new strategy for the international financial services sector
The Government launched "Ireland for Finance" at the end of April, a new strategy which envisions Ireland as a top-tier global location of choice for specialist international financial services. This strategy builds on the success of its predecessor “IFS2020” and runs to 2025. The strategy is structured around four pillars: operational environment; technology and innovation; talent; and communications and promotion.
"Boards must get to grips with outsourcing risks"
Speaking at a CBI conference on outsourcing at the end of April, CBI Director General, Derville Rowland presented the view of the CBI on outsourcing and its associated risks. She explained that last year's CBI review on outsourcing within the industry identified significant deficiencies in effective risk management across the board. The conference was held to discuss these evolving risks, how best to both manage and govern them and finally, to determine whether further guidance or policy from the CBI is needed.
CBI publishes template Key Facts Document for Benchmark Administrator Applications
The CBI has published a template key facts document for benchmark administrator applications. The document sets out the high level background which an applicant firm needs to provide to the CBI, including an explanation of the proposed business model and activities. The CBI will publish a guidance document and the relevant forms for potential administrators later in the year.
EU Commission Delegated Regulation (EU) 2019/667 of 19 December 2018 amends the dates of deferred application of the clearing obligation for certain over-the-counter derivative contracts.
The Delegated Regulation of the EU Commission entered in to force on 30 April 2019 and amends three EU Commission Delegated Regulations on the clearing obligation, by extending the deferred dates of application for specific intragroup transactions where one party to the transaction is a third country to 21 December 2020.
Members of the EU Parliament strengthen EU financial watchdogs
On 16 April 2019, the EU Parliament adopted legislation aimed at strengthening EU financial supervision. The legislation is essential for the completion of both the banking and capital markets union (two major projects underway aimed at securing a stronger single market). Among other things, the focal points of these new rules include:
greater empowerment of financial watchdogs
improving the fight against money laundering
EU Commission Proposal on promoting fairness and transparency for business users of online intermediation services
The EU Commission published a proposal for a Regulation which would to set down mandatory rules for the benefit of business users interacting with online intermediation services and online search engines. The proposal contains specific obligations relating to the terms and conditions supplied to customers, the suspension or termination of services and the internal complaints handling systems that must be in place.
ESMA guidance on registering trade repositories
ESMA has issued guidance on the application for registration as a trade repository. The guidance includes instructions on:
the format and submission of the application
the language to be used in the submission
guidance as to the timeline and deadlines associated with the application
various assessments of completeness and compliance
EU Commission Proposal on combating fraud and counterfeiting of non-cash means of payment
The EU Commission has published a proposal for a Directive to update the common minimum rules relating to anti-fraud and counterfeiting non-cash means of payment. The proposed legislation aims to:
expand the scope of the offences
harmonise the rules on penalties
afford greater protection to the victims of crime
provide greater cross-border protection
improve the mechanism of reporting crimes to the enforcement authorities
harmonise the definitions of various online crime offences e.g. hacking or phishing
The European Supervisory Authorities (ESAs) publish Joint Advice on Information and Communication Technology risk management and cybersecurity
On 10 April 2019, the ESAs published two pieces of Joint Advice in relation to: the need for legislative improvements relating to ICT risk management requirements focussing on governance requirements; and the costs and benefits of a coherent cyber resilience testing framework focussing on achieving a minimum level of cyber-resilience.
Developments in the Capital Markets Union (CMU)
The EU Commission have introduced a new proposal which takes a major step in the development of the CMU. It relates to the promotion of an EU covered bonds market and the boosting of a cross-border market for investment funds. The proposal is two-fold, consisting of a Directive and a Regulation. The aim of the proposal is to:
reduce the differing treatment of covered bonds across Member States
focus on best practices and high quality standards
scale down the regulatory barriers that currently hinder the cross-border distribution of investment bonds
It is hoped that this proposal will enhance the use of covered bonds as a cost-effective and stable source of funding for credit institutions and will enable the EU investment funds market to achieve its full potential.
In a keynote speech delivered by EU Commission Vice President Dombrovskis on 11 April 2019, he remarked: "today's proposals are part of a broader strategy to strengthen capital markets and encourage investments in the EU…"
Guidelines on Internalised Settlement Reporting under Article 9 of the Central Securities Depositories Regulation (CSDR)
ESMA issued these guidelines at the end of April and NCAs to whom these guidelines apply must notify ESMA within the next two months on whether they intend to comply. The guidelines ensure a common approach and consistent application of Article 9 of CSDR and apply in relation to internalised settlement reporting and the exchange of information between ESMA and the various competent authorities affected by CSDR.
Brexit and Temporary Permissions Regime
Brexit Exit day is currently defined as 11.00 pm on 31 October 2019. The UK FCA twice extended the notification window for the Temporary Permissions Regime (which will permit from the initial deadline of the end of 28 March 2019 to the end of 11 April 2019 and then until the end of 30 May).
For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.