Financial Services Regulation & Compliance - Investment Firms April 2018

DOMESTIC

CBI Director General, Financial Conduct says Bank to focus on culture and addresses binary options, CFDs

CBI Director General of Financial Conduct Derville Rowland stressed that, internationally, regulators are increasingly focused on culture within banks and financial services firms. She outlined that the CBI has been robustly challenging Pre-Approval Controlled Functions on fitness and/ or probity grounds, causing 45 proposed appointments to be withdrawn. She added that the CBI is working with the Dutch Central Bank on this issue - Dutch officials are participating in onsite inspections of lenders carried out by the CBI. On binary options and Contracts for Difference (CFDs), Director General Rowland said that the ESMA has concluded that such products pose an investor protection concern, prompting a prohibition on their marketing or distribution to retail investors and a restriction intended to cap the amount that retail investors can lose on CFDs.

EUROPEAN

ESMA Chair addresses unresolved questions in CCP resolution and recovery

Steven Maijoor, Chair of the EMSA, discussed the upcoming EU regulation for the resolution and recovery of CCPs at Goethe University, Frankfurt. The regulation includes a proposal for the ESMA to directly supervise systematically important CCPs and would allow CCPs that comply with regulations in their home jurisdiction to apply for 'comparable compliance', permitting them to operate under EMIR.

The proposed regulation also sets out when a resolution authority should intervene. Where the authority determines that the CCP is failing or likely to fail, where alternative private sector actions are unavailable, and where resolution is necessary to preserve financial stability. Additionally, the proposal states that public funds should only support a CCP resolution as a last resort.

ESMA publishes final report on Guidelines on Internalised Settlement Reporting under Article 9 of the Central Securities Depository Regulation (CSDR)

The ESMA finalised its guidelines on how investment firms and credit institutions providing custody services for financial instruments should report internalised settlement under the CSDR to national regulatory authorities. The guidelines set out the extent and process of internalised settlement reporting and clarify how information is to be exchanged between national authorities and ESMA.

ESMA updates its MiFID II Q&As on market structures and transparency topics

The ESMA's updated Q&As provide clarification on topics such as the trading obligation for derivatives, the default tick size regime, and fee structures. The Q&A's respond to queries regarding MiFID II's level 1 and level 2 provisions concerning transparency and market structures. In providing answers, the ESMA aims to encourage harmonised supervision approaches in the application of MiFID II and MiFIR.

ESMA proposes simplified prospectus format and content

The ESMA is proposing simplifications to the format and content of the prospectus as part of the Technical Advice it publishes under the Prospectus Regulation. The proposals focus on removing costs and administrative burdens in using a prospectus and cutting additional disclosure requirements. The ESMA has also created a new Universal Registration Document for securities issuers listed on a regulated market or an MTF. The advice proposes standard criteria for assessing the completeness, comprehensibility, and consistency of the prospectus. It also covers the format and content of disclosure requirements for the EU Growth Prospectus.

ESMA  publishes opinion on the Accepted Market Practice (AMP) notified by the French Autorité des Marchés Financiers (AMF), which replaces the AMP under the Market Abuse Directive (MAD) established in March 2005. 

This AMP refers to liquidity contracts by which a credit institution or an investment firm (financial intermediary) provides quotes at certain French trading venues on behalf of the issuer, with a view to enhancing the liquidity of a particular share and its regular trading.

The regular functioning of this AMP implies that these liquidity contracts should operate according to limits on the resources allocated to them and on the prices and volumes quoted. However, this AMP also foresees that for an initial two-year transitional period both issuers and financial intermediaries may not be bound by those limits in case undefined “market conditions” occur. Contrary to issuers, financial intermediaries are not obliged to disclose publicly when they are operating out of those limits.

ESMA updates MiFID II Transitional Transparency Calculation

The update relates to the liquidity assessment for bond instruments except for ETCs and ETNs. Trading venues are expected to apply the new results from 23 April 2018.

For further information please contact a member of the Financial Regulation team.

Date Published: 4 May 2018