Financial Services Regulation and Compliance - Investment Firms Nov 2021
Financial Services Regulation and Compliance - Investment Firms Nov 2021
CBI Markets Update, Issue 14 2021
On 1 November 2021, the CBI issued its latest markets update, Issue 14 2021. In domestic news, Issue 14 2021 highlights the CBI publication of the Forty-Third Edition of the CBI AIFMD Q&A Document and the Thirty-Fifth Edition of the CBI UCITS Q&A Document, as well as the speech by Director General Derville Rowland at the A&L Goodbody Corporate Crime and Regulation Summit. Internationally, Issue 14 2021 covers, among other topics, ESMA addressing investment recommendations made on social media platforms, ESAs proposing new rules for taxonomy-related product disclosures, ESAs publishing sectoral reports on the supervisory independence of competent authorities, ESMA seeking stakeholder input on shaping advice on retail investor protection and EBA publishing final draft regulatory technical standards on disclosure of investment policy by investment firms.
CBI Markets Update, Issue 15 2021
On 17 November 2021, the CBI issued its latest markets update, Issue 15 2021. In domestic news, Issue 15 2021 covers the CBI processes for pre-contractual documentation updates in relation to the Taxonomy Regulation and Level 2 measures in relation to the Sustainable Finance Disclosure Regulation and the Anti-Money Laundering Bulletin on Funds and Fund Management Companies. Internationally, Issue 15 2021 highlights the ESMA publishing technical standards on crowdfunding, ESMA making new bond liquidity data available and publishing data for the systematic internaliser calculations, and European enforcers targeting COVID-19 and climate-related disclosures.
Public statement - European common enforcement priorities for 2021 annual financial reports (ESMA32-63-1186)
On 1 November 2021, ESMA issued its annual public statement setting out the European common enforcement priorities for the 2021 annual financial reports of listed companies. ESMA, together with national enforcers, will pay particular attention to the following areas when monitoring and assessing the application of the relevant reporting requirements:
Impact of COVID-19
Climate related matters
Expected credit losses
In addition, enforcers will continue to focus on issues that are material for the individual reports examined. Based on the examinations performed, enforcers will take enforcement actions whenever material misstatements are identified and ESMA will report subsequently on their findings. In addition to these European priorities, enforcers may also set national priorities. ESMA underlines the responsibility of management and supervisory bodies of issuers as well as the importance of the oversight role of audit committees which is key to ensure the overall internal consistency of the annual financial report and contribute to high-quality annual financial reports.
ESMA publishes latest edition of its newsletter
On 5 November 2021, ESMA published its latest edition of its Spotlight on Markets Newsletter, focusing on new Chair, Verena Ross and on the EU-wide campaign on investment recommendations on social media.
EBA issues requirements on institutions’ Pillar 3 disclosure of interest rate risk exposures
On 10 November 2021, the EBA published its first draft implementing technical standards (ITS) on Pillar 3 disclosure of institutions’ exposures to interest rate risk on positions not held in the trading book (IRRBB). The final draft ITS put forward comparable disclosures that will help stakeholders assess institutions’ IRRBB risk management framework as well as the sensitivity of institutions’ economic value of equity and net interest income to changes in interest rates. The standards will amend the comprehensive ITS on institutions’ public disclosures, in line with the strategic objective of developing a single and comprehensive Pillar 3 package that should facilitate implementation by institutions and further promote market discipline. These final draft ITS were submitted to the European Commission for adoption.
EBA and ESMA consult on framework for the supervisory review and evaluation process of investment firms
On 18 November 2021, the EBA and ESMA launched a public consultation on their guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP). The EBA is also consulting on draft regulatory technical standards (RTS) on the additional own funds requirements that could be determined by competent authorities for investment firms. Both regulatory products are based on the Investment Firms Directive and aim at consistent supervisory practices with regard to the review and evaluation of investment firms. The consultations run until 18 February 2022.
ESMA publishes its preliminary report on the EU carbon market
On 18 November 2021, ESMA published its preliminary report on the EU carbon market. The report responds to the request made by the European Commission to ESMA in its communication on energy prices for a preliminary analysis of European emission allowances (EUAs) and derivatives on EUAs. The report presents an overview of the financial regulatory environment for the carbon market under MAR, MiFID II and EMIR and the tools available to securities supervisors to fulfil their responsibilities. ESMA will conduct an in-depth analysis of the EU carbon market based on data sources available to securities regulators under European legislation. ESMA will deliver its final report to the European Commission in early 2022. The European Commission, taking into account ESMA’s final report, will assess whether there is a need for targeted actions in the EU carbon market.
ESMA publishes draft commodity derivative technical standards under MiFID II Recovery Package
On 22 November 2021, ESMA published its final report on draft regulatory technical standards (RTS) for commodity derivatives under the MiFID II Recovery Package. The draft RTS include proposals on the application procedure for position limit exemptions, a methodology to determine position limits and position management tools for trading venues, which will contribute to stable and orderly commodity derivative markets at a time of heightened scrutiny. The European Commission has three months to decide whether to endorse the draft technical standards. The revised MiFID II regime for commodity derivatives will apply at the end of February 2022.
ESMA publishes its 2020 annual report on the EU market abuse sanctions
On 24 November 2021, ESMA published its annual report on administrative and criminal sanctions, as well as other administrative measures, issued across the European Union under the Market Abuse Regulation (MAR) in 2020. The report found that National Competent Authorities and other authorities imposed a total of €17.5m in fines related to 541 administrative and criminal actions under MAR. The report describes an increase in the number of administrative sanctions and measures in 2020 compared to 2019, reaching 541 from 279 the preceding year. However, it also found that the financial penalties imposed are significantly lower, reaching only €17.5m in 2020, compared to €82m in 2019. The number of criminal sanctions, and their aggregated value, also decreased compared to 2019: only 18 criminal sanctions were imposed across the EU with economic sanctions worth €246,000.
EBA publishes final draft technical standards on how to calculate risk weighted exposure amounts for exposures towards collective investment undertakings
On 24 November 2021, the EBA published its final draft regulatory technical standards (RTS) specifying the methodology to apply to calculate the risk-weighted exposure amounts, in the context of the mandate-based approach when there are some missing inputs. In particular, the final draft RTS provide clarification on the regulatory treatment for missing inputs when the underlying risk of derivatives is unknown, as well as for the computation of the exposure value for counterparty credit risk. The RTS also account for situations where the notional amount of a netting set needs to be computed or for when the identification of netting sets is not feasible.