The Front Page, Asset Management & Investment Funds: EU & International Developments

UCITS V implementing technical standards (ITS) on penalties and measures

The European Securities and Markets Authority (ESMA) issued its implementing technical standards (ITS) on penalties and measures under UCITS V to the European Commission for endorsement.

UCITS V requires national competent authorities (NCAs) to provide ESMA annually with aggregated information on all the penalties and measures they impose on companies and persons in respect of infringements under UCITS. In addition, when NCAs make public any administrative penalties or measures, they must report this information to ESMA at the time of publication. These technical standards set out the procedures and forms NCAs must use when submitting this information to ESMA.  UCITS V and these technical standards are to apply from 18 March 2016.

AIFMD Memorandum of Understanding (MoU)

ESMA issued an updated list of AIFMD MoUs which have been signed by EU authorities for the purposes of AIFMD

The Central Bank has signed MoUs with all listed jurisdictions other than the Maldives and Turkey.

IOSCO report on peer review of regulation of money market funds

The International Organization of Securities Commissions (IOSCO) published its final report following its peer review of the regulation of money market funds (MMFs). IOSCO looked at the progress of adopting legislation, regulation and other policies relating to MMFs in the following areas:

  • Scope of the regulatory reform, including the definition of MMFs in regulation.
  • Limitations to the types of assets of, and risks taken by, MMFs.
  • Valuation practices of MMFs.
  • Liquidity management for MMFs (to ensure that MMFs maintain adequate liquidity resources in normal business conditions as well as in stressed market conditions).
  • Consideration of MMFs that offer a stable net asset value, with a view to addressing the risks and issues that may affect the stability of those MMFs.
  • Use of ratings in the MMF industry.
  • Disclosure to investors.
  • MMF practices relating to repurchase agreement transactions.

The review found that the 31 participating jurisdictions (including Ireland) had made progress in introducing implementing measures across all of the reform areas. The progress varied between jurisdictions and reform areas.

ESMA work schedule

Steven Maijoor, Chair of ESMA, delivered  his annual 2015/1349 Statement ECON Hearing with 2015/1348 Annex Statement ECON Hearing to the Economic and Monetary Affairs Committee (ECON) of the European Parliament. The statement looks at ESMA's achievements over the last 12 months in the pursuit of its objectives of enhancing investor protection and promoting stable and orderly financial markets in the EU, including its activities in relation to the single rulebook, supervisory convergence, enforcement and financial stability and also looks forward in the context of ESMA’s 2016-2020 strategy.

As the current Chair of the Joint Committee of the three European Supervisory Authorities (ESAs), for securities (ESMA), banking (EBA), and insurance and occupational pensions (EIOPA), Steven Maijoor gave a further two statements to the ECON: one on the overall work of the Joint Committee between September 2014 and September 2015 2015/1380 Statement ESAs Joint Committee - ECON Hearing  with 2015/1381 Annex ESAs Joint Committee - ECON Hearing and one JC 2015 056 Statement ECON Scrutiny session on PRIIPs on the ongoing Joint Committee work under the Regulation on Packaged Retail and Insurance-based Investment Products (PRIIPs).

ESMA issued a revised organigramme which reflects the changes ESMA is making to support the objectives set out in its 2016-2020 Strategic Orientation. The revised structure will take effect on 16 November 2015. The key changes to ESMA’s organigramme are:

  • A Supervision Department which will integrate Credit Rating Agencies (CRAs) and Trade Repositories (TRs) supervision. CRA policy work will be integrated into the renamed Investors & Issuers Department, previously Investment & Reporting Division, while TR policy work will remain with the Markets Department;
  • A Risk Analysis & Economics Department as the central function for risk assessment and statistical capabilities. The department will develop innovative and practical analytical tools for the purpose of financial stability, investor protection and market functioning  and provide a unified overview of, and approach to, data; and
  • A new Corporate Affairs Department which will bring together the stakeholder management, communication, internal governance, planning and control functions.

Anti-Money Laundering and Countering the Financing of Terrorism

According to the annex to the ESA's Joint Committee statement (mentioned above), the Joint Committee has established various workstreams aiming at delivery of the envisaged ESAs’ regulatory mandates pursuant to the Fourth Money Laundering Directive   (4MLD) and the revised Wire Transfer Regulation, which include one Joint Opinion, three Guidelines and two RTSs. First public consultations are expected in October 2015.

  • Draft RTS on appointment and functions of the Central Contact Point (4MLD)
  • Guidelines on Simplified and Enhanced Due Diligence (4MLD)
  • Guidelines on Risk-Based Approach to AML Supervision (4MLD)
  • Joint Opinion on the Risk of Money Laundering and Terrorist Financing affecting the Financial Sector (4AMLD)

The Wolfsberg Group is an association of 13 leading international financial institutions. It aims to develop frameworks and guidance for the management of financial crime risks, particularly with regard to AML, CTF and know your customer (KYC) policies.

The Wolfsberg Group issued Frequently Asked Questions on Risk Assessments for Money Laundering, Sanctions and Bribery & Corruption. The FAQs cover issues including:

  • The purpose, frequency and organisation of risk assessments.
  • The responsibility within a firm for conducting a risk assessment.
  • The scope of a money-laundering risk assessment and, in particular, whether it should extend to bribery and corruption.
  • The methodology for risk assessments.
  • The approach firms should take to the issues highlighted during a risk assessment.
  • The impact of a risk assessment on a firm's risk appetite.


ESMA market risk indicator at highest level

ESMA issued its Trends, Risks and Vulnerabilities Report No. 2 for 2015 on European Union securities markets, covering market developments from January to June 2015. It also published its Risk Dashboard No. 3 for 2015

Overall, market risks for the European securities markets have increased. ESMA’s risk indicator for market risk is now at its highest level “very high”. This increase is due to high volatilities and fluctuating performances across asset classes – all of which translates into elevated risks for investors, market infrastructures and the financial system at large. ESMA’s report also monitors possible vulnerabilities which are provided through specific in-depth analyses.

ESMA updates its report semi-annually, complemented by its quarterly Risk Dashboard. The results of the report are shared with the European Commission, Parliament and Council.

ESAs see continued risks in EU financial markets and call for rigorous action on assets and liabilities

The ESAs issued their August 2015 Joint Committee Report on Risks and Vulnerabilities in the EU financial system. The joint risk report informs on risks in the EU financial system (banking, securities and insurance sector), with a particular focus on cross-sectoral vulnerabilities and developments. The joint risk report identifies that risks to the EU financial system have persisted since March 2015. Risks resulting from low interest rates, search for yield and low profitability of financial institutions remain present, along with risks related to reductions in market liquidity and their possible implications for asset managers.

IOSCO report on Sound Practices for Investment Risk Education

IOSCO published its report on Sound Practices for Investment Risk Education. Based on an analysis of the approaches adopted by the members of the IOSCO Committee 8 on Retail Investors, the sound practices for investment risk education initiatives include those detailed below.

  1. Focus on influencing retail investor attitudes and behaviour, as well as knowledge.
  2. Develop initiatives that take an evidence-based approach in response to the needs of retail investors.
  3. Test initiatives with the target audience.
  4. Develop initiatives that reach people close in time to the making of investment decisions and that are promoted in a variety of ways to expand reach and interaction.
  5. Send clear messages that are adapted for different target groups (e.g. beginner and more savvy investors) and for the different ways people access information.
  6. Use engaging content and delivery styles.
  7. Design activities that are current and up to date with emerging new technologies and developments in financial markets.
  8. Where relevant, develop investor education initiatives that complement regulatory actions to enhance impact.
  9. Develop evaluation frameworks and measures at the outset and seek to evaluate outputs and outcomes.

For more information please contact Nollaig Greene or a member of the Asset Management & Investment Funds Team.

Date published: 24 September 2015