Financial Services Regulation and Compliance - Cross Sectoral and Other December 2023
Financial Services Regulation and Compliance - Cross Sectoral and Other December 2023
CBI publishes ASP feedback statement and guidelines
On 13 December 2023, the CBI published a feedback statement and consolidated guidelines relating to the enhanced administrative sanctions procedure (ASP), with the guidelines effective immediately on publication. This follows a 12-week public consultation period, whereby the CBI sought views on its proposed approach with respect to the ASP and the policies and proposals set out in the ASP Consultation and the accompanying draft ASP guidelines.
The ALG team have prepared a client update that sets out the key changes to the ASP guidelines, which include among other changes to the following areas:
role of the Responsible Authorised Officer
timeframe for responses
use of information
legal professional privilege
publication of the details of the notice of inquiry
management of conflicts of interest
Department of Finance publishes feedback statement following MiCA consultation
On 14 December 2023, the Department of Finance published its feedback statement on its consultation on the transposition of the national discretions available under the Markets in Crypto Assets Regulation (MiCA). The Department of Finance have advised that the feedback statement should be read in conjunction with the public consultation document.
The following decisions on the national discretions were contained in the feedback statement:
Ireland will not exercise its discretion under Article 88(3) which provides that where there has been a delay in the public disclosure of inside information, an explanation need only be required when specifically requested by the national competent authority.
Ireland will not exercise its discretion under Article 111(1) which relates to Member States not laying down the administrative penalties where the associated penalties are subject to criminal penalties in national law. In addition, for financial penalties where the "minimum maximum" penalties amounts are lower in MiCA these penalties should be brought up to the CBI Administrative Sanction Procedure (ASP) minimums. Further, all sanctions available under the CBI ASP regime should be available to the CBI and not just the penalties available under MiCA. Ireland will exercise its discretion under Article 143(1) and reduce the grandfathering period under to 12 months, in line with the recent guidance issued by ESMA.
Ireland will not exercise its discretion under Article 143(6) which provides for a simplified procedure in respect of the authorisation of virtual asset service providers.
The transposition date for MiCA to take effect in Ireland is 30 June 2024. MiCA will then apply from 30 December 2024, with the exception of Titles III and IV of the framework which will apply from 30 June 2024.
Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2023 [S.I. No. 663 of 2023]
On 29 December 2023, the Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2023 (S.I. No. 663 of 2023) came into operation.
S.I. No. 663 of 2023 amends by substitution Schedule 2 to the Central Bank Reform Act 2010 (Sections 20 and 22) Regulations 2011 [S.I. No. 437 of 2011] as amended and deals with pre-approval controlled functions in relation to all regulated financial services providers (other than a certified person within the meaning of section 55 of the Investment Intermediaries Act 1995), specified regulated financial service providers and all regulated financial services providers established outside the State.
Central Bank Reform Act 2010 (Sections 20 and 22 - Holding Company) Regulations 2023 [S.I. No. 664 of 2023]
On 29 December 2023, the Central Bank Reform Act 2010 (Sections 20 and 22 - Holding Company) Regulations 2023 (S.I. No. 664 of 2023) came into operation.
By S.I. No. 664 of 2023, the Central Bank of Ireland, in exercise of the powers conferred by section 20(1) and section 22(2A) of the Central Bank Reform Act 2010, makes regulations applying to and in relation to holding companies within the meaning of section 18 of the Central Bank Reform Act 2010 in respect of holding companies and pre-approval controlled functions in respect of holding companies.
ESAs put forward amendments to sustainability disclosures for the financial sector
On 4 December 2023, the European Supervisory Authorities (ESAs) published their final report amending the draft RTS to the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulation (SFDR). The European Commission will study the draft RTS and decide whether to endorse them within three months.
The proposed amendments in the report include the introduction of new social indicators and a streamlined framework for the disclosure of the principal adverse impacts of investment decisions on the environment and society. The ESAs also suggest new product disclosures regarding “greenhouse gas emissions reduction” targets. Further technical revisions proposed by the ESAs include among others:
improvements to the disclosures in respect of how sustainable investments are reported to “Do No Significant Harm” to environmental and societal factors
the ESAs are also proposing to streamline the pre-contractual and periodic disclosure templates for financial products
ESA consultation on guidelines on information system for assessing fitness and propriety
On 6 December 2023, the ESAs published a second consultation paper on draft guidelines on the system established by the ESAs 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 Member State competent authorities.
The ESAs first published a consultation paper on a draft of the guidelines in January 2023. This second consultation paper now covers amendments extending the scope of the joint guidelines to legal persons, and the information to be exchanged relating to them. The consultation runs until 15 January 2024. The ESAs aim to finalise the guidelines in early 2024.
ESAs launch second batch of DORA policy mandates
On 8 December 2023, the ESAs launched a public consultation on the second batch of technical standards under the Digital Operational Resilience Act (DORA). The second batch of policy mandates includes four draft regulatory technical standards (RTS), one set of draft implementing technical standards (ITS) and two sets of guidelines (GL) as noted below.
RTS and ITS on content, timelines and templates on incident reporting
GL on aggregated costs and losses from major incidents
RTS on subcontracting of critical or important functions
RTS on oversight harmonisation
GL on oversight cooperation between ESAs and competent authorities
RTS on threat-led penetration testing
The consultation will run until 4 March 2024, with the second draft of technical standards to be finalised and submitted to the European Commission for adoption by 17 July 2024.
Council and Parliament agree to create new AMLA authority
On 13 December 2023, it was announced that a provisional political agreement was reached between the Council and the European Parliament on the establishment of a new Anti-Money Laundering Authority (AMLA). AMLA is aimed at boosting the efficiency of the AML/CFT framework, by creating an integrated mechanism with national supervisors to ensure obliged entities comply with AML/CFT-related obligations in the financial sector.
AMLA will be charged with supervising the most high-risk obliged entities in the financial sector and will have direct and indirect supervisory powers over these entities. Under the agreement, AMLA will carry out a selection of high-risk credit and financial institutions in several member states. These selected obliged entities will then be supervised by joint supervisory teams led by AMLA, who will among other things, carry out assessments and inspections. In certain serious cases AMLA will also have the power to impose pecuniary sanctions on the selected obliged entities.
AML/CFT supervision will remain primarily at national level for non-selected obliged entities.
AMLA will also have a supporting role in relation to non-financial sectors and will carry out reviews, investigate possible breaches in the application of the AML/CFT framework and have the power to issue non-binding recommendations.
The text of the provisional agreement will now be finalised and presented to member states’ representatives and the Parliament for approval. Once approved, the Council and the Parliament will then need to formally adopt the texts.
ESAs publish report on the recommended steps to improve activities of innovation facilitators
On 11 December 2023, the European Supervisory Authorities (ESAs) published a report on innovation hubs and regulatory sandboxes, which are referred to as 'innovation facilitators' throughout the report.
The report describes the new activities and features of innovation facilitators and provides an update on the benefits and challenges in respect of the design and operation of innovation facilitators as well as observed practices, challenges and limitations faced by National Competent Authorities (NCAs). The ESAs have also set out several considerations and recommendations addressed to NCAs, the European Commission and the ESAs themselves, all of which are aimed at improving the operation of innovation facilitators and enhancing the experience for the participating firms.
A number of recommendations have been made to NCAs in order to improve the operation of innovation facilitators and to enhance the experience of participating firms, with the press release on the report inviting NCAs to:
improve their understanding of the concerns and interests of participating firms
broaden the scope of innovations captured, including at the cross-sectoral level
ensure an effective collaboration among NCAs
continuously evaluate the functioning of innovation hubs and regulatory sandboxes
In order to improve the functioning of the European Forum for Innovation Facilitators (EFIF) framework, the report has set out a number of actions that the ESAs are encouraged to take. Finally, the report also proposes that the European Commission undertake a comprehensive reflection on the EU-wide strategy to support financial innovation and the operation of innovation facilitators.
ESMA to launch and participate in CSA on ESG disclosures for benchmark administrators
On 13 December 2023, the European Securities and Markets Authority (ESMA) announced that it will launch a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on ESG disclosures under the Benchmarks Regulation. This will mark the first CSA for ESMA in its role as a direct supervisor of benchmarks administrators. In a press release, EMSA states that the CSA will focus on the following aspects:
disclosure of ESG factors in the benchmarks statement and in the benchmark methodology
specific disclosure requirements regarding climate benchmarks methodology
The CSA will be carried out during 2024 and until Q1 2025. As part of the CSA, ESMA and the NCAs will share knowledge and experiences in order foster convergence as to how they supervise ESG disclosure requirements for benchmark administrators.
EBA guidelines assessing knowledge and experience of the management or administrative organ of credit servicer
On the 15 December 2023, the EBA published final guidelines on the assessment of adequate knowledge and experience of the management or administrative organ of a credit servicer Directive (EU) 2021/2167 (the Credit Servicing Directive). The guidelines specify common criteria while taking into account the principle of proportionality, to assess the collective adequate knowledge and experience of the management or administrative organ, on the basis of the individual knowledge and experience of the members of these organs.
These guidelines will apply to competent authorities and credit servicers irrespective of their governance structures and will apply three months after they are published on the EBA’s website in all official languages of the EU.
ESMA consults on draft guidelines for supervision of corporate sustainability information
On 15 December 2023, ESMA announced that it has launched a consultation on a set of draft guidelines on the enforcement of sustainability information. In a press release, ESMA stated that the main goals of the draft guidelines are to:
Ensure that national competent authorities carry out their supervision of listed companies’ sustainability information under the Corporate Sustainability Reporting Directive, the European Sustainability Reporting Standards and Article 8 of the Taxonomy Regulation in a converged manner.
Establish consistency in, and equally robust approaches to, the supervision of listed companies’ sustainability and financial information; this will facilitate increased connectivity between the two types of reporting.
The deadline for comments on the consultation is 15 March 2023. ESMA is expected to publish the final guidelines in Q3 of 2024.
Financial Services and Pensions Ombudsman (Amendment) Bill 2023 published
On 19 December 2023, the Financial Services and Pensions Ombudsman (Amendment) Bill 2023 was published. Amendments to the bill were required in order to enable the Financial Service and Pensions Ombudsman (FSPO) to continue carrying out its function in accordance with the Constitution. The need for such amendments arose following the Supreme Court Zalewski decision which held that the powers exercised by an adjudication officer was the administration of justice which subsequently led to the Workplace Relation Committee being granting the ability to continue to exercise its functions.
Of particular note in the Bill are the following amendments:
mediations will be held in private
the FSPO will now be required to decide whether oral hearings should be held in private
clarification in respect of the process surrounding oath-taking and affirmations in oral hearings
The Bill also provides that customers of financial-service providers who have left the Irish market will continue to be able to access the existing services and consumer protections afforded by the FSPO. In addition, the FSPO will have the power to investigate firms that may no longer be regulated.
EBA publishes final guidelines on the benchmarking of diversity practices under the Capital Requirements and Investment Firms Directives
On 18 December 2023, the EBA published the guidelines on the benchmarking of diversity practices under the Capital Requirements and Investment Firms Directives. In a press release, the EBA confirmed that the guidelines are intended to provide a higher level of transparency in respect of the EBA’s work on the topics of diversity and gender equality and will also improve the quality of date collected and awareness of stakeholders in this area.
In accordance with the guidelines, data will be collected from a representative sample of institutions and investment firms in respect of their diversity policies, diversity practices and the gender pay-gap at the level of the management body every three years.
The new reporting format will apply for the collection of data in 2025 with a reporting date 31 December 2024.