Financial Services Regulation and Compliance - Investment Firms Mar 2020

Domestic

The Revised Shareholders' Rights Directive (SRD II) Comes into Effect in Ireland

Regulations transposing the Revised Shareholders' Rights Directive (EU/2017/828, SRDII) into Irish law have been published and will come into effect from 30 March 2020.

The European Union (Shareholders' Rights) Regulations 2020 (the SR Regulations) introduce, among other things, new transparency requirements for institutional investors and asset managers.

European

ESMA recommends action by financial market participants for COVID-19 impact

Following a Board of Supervisors discussion on the impact of COVID-19 on EU financial markets, ESMA (the European Securities and Markets Authority) has made the following recommendations to financial market participants:

  • business continuity planning: all financial market participants should be ready to apply their contingency plans to ensure operational continuity in line with regulatory obligations
  • market disclosure: issuers should disclose as soon as possible any relevant significant information concerning the impact of COVID-19 on their fundamentals, prospects or financial situation in accordance with their transparency obligations under the Market Abuse Regulation
  • financial reporting: issuers should provide transparency on the actual and potential impacts of COVID-19, based on their business activities, financial situation and economic performance in their 2019 financial report (or in their interim financial reporting disclosures)
  • fund management: asset managers should continue to apply the requirements on risk management and react accordingly

ESMA sets out approach on MiFIR tick-size regime for Systematic Internalisers

ESMA has issued a public statement to ensure coordinated supervisory actions by NCAs on the application of the new tick-size regime for systematic internalisers under MiFIR and the Investment Firms Regulation. This is in response to the impact of the COVID-19 outbreak and related actions being taken by Member States.

ESMA expects competent authorities not to prioritise their supervisory actions in relation to the new tick-size regime from 26 March (the application date) until 26 June 2020, and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.

ESMA consults on Technical Standards on Trade Repositories under EMIR REFIT

ESMA has launched a consultation on draft Regulatory and Implementing Technical Standards under EMIR REFIT (Regulation (EU) 2019/834), covering reporting to Trade Repositories (TRs), procedures to reconcile and validate the data, data access by the relevant authorities, and registration of TRs.

The consultation is open until 19 June 2020.

ESMA consults on Post Trade Risk Reduction Services under EMIR REFIT

ESMA has launched a public consultation on Post Trade Risk Reduction Services (PTRR) under EMIR REFIT. ESMA, in cooperation with the ESRB, is mandated by EMIR REFIT to investigate whether any trades that directly result from PTRR services, including portfolio compression, should be exempted from the clearing obligation.

The consultation paper considers the different types of PTRR services offered, how the function, the risks they aim to reduce and asks for data on the current use of such services. Responses are sought by 15 June 2020, following which ESMA expects to publish a final report to submit to the European Commission.

Commission Delegated Regulation regarding the specification of the treatment of OTC derivatives in connection with securitisations for hedging purposes published in Official Journal

Commission Delegated Regulation (EU) 2020/448 of 17 December 2019 amending Delegated Regulation (EU) 2016/2251 as regards the specification of the treatment of OTC derivatives in connection with certain simple, transparent and standardised securitisations for hedging purposes has been published in the Official Journal of the European Union. The Regulation will apply from 16 April 2020.

Commission Delegated Regulation regarding RTS on the specification of criteria for arrangements to mitigate CCP risk associated with covered bonds and securitisations published in Official Journal

Commission Delegated Regulation (EU) 2020/447 of 16 December 2019 supplementing EMIR (Regulation (EU) No 648/2012) with regard to regulatory technical standards on the specification of criteria for establishing the arrangements to adequately mitigate counterparty credit risk associated with covered bonds and securitisations, and amending Delegated Regulations (EU) 2015/2205 and (EU) 2016/1178 has been published in the Official Journal of the European Union. The Regulation will enter into force and apply from 16 April 2020.

ESMA publishes guidance on financial reporting deadlines under the Transparency Directive

ESMA has issued a public statement in light of the COVID-19 pandemic to promote coordinated action by NCAs regarding issuers’ obligations and deadlines for publishing financial reports which apply to listed issuers under the Transparency Directive, and to provide clarity to issuers.

In the statement, ESMA recommends NCAs to apply forbearance powers towards issuers who need to delay the publication of financial reports beyond the statutory deadline. The statement also recommends that issuers keep their investors informed of any expected publication delay, and reminds issuers that requirements under the Market Abuse Regulation still apply.

ESMA clarifies position on call taping under MiFID II

ESMA has issued a public statement to provide clarity for firms on the MiFID II requirements on the recording of telephone conversations, in light of the effects of COVID-19 outbreak.

In the statement, ESMA recognizes that, considering the exceptional circumstances of COVID-19 outbreak, some scenarios may emerge where, notwithstanding steps taken by the firm, the recording of relevant conversations required by MiFID II may not be practicable. Where due to these circumstances, voice communications are unable to be recorded, ESMA expects firms to consider alternative steps to mitigate risks related to the lack of recording. Firms are required to use all efforts to ensure that these measures remain temporary, and to restore the recording of relevant phone conversations as soon as possible.

For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 6 April 2020