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1Bite-Sized | 2017 Issue 2
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Alternative Investment Fund Managers Directive (AIFMD)
UK FCA Extends AIFMD Annex IV Reporting to Master Funds
On 26 January 2017 the UK Financial Conduct Authority (FCA) published Handbook Notice No. 40 detailing the feedback it had received with regard to proposals to extend master fund level reporting requirements as set out in the quarterly consultation paper CP 16/17.
The rule changes have been introduced to ensure the FCA is aware of master AIFs that have feeder AIFs which are marketed in the UK and captures:
• Above-threshold non-EEA AIFMs which:
• Manage non-EEA master AIFs; and
• Market a feeder AIF of that master AIF in the UK under Article 42 of AIFMD
• Full-scope UK AIFMs which:
• Manage a non-EEA master AIF which is not marketed in the EEA, where the feeder AIF is:
• An EEA AIF, or
• A non-EEA AIF which is marketed in the EEA
The changes come into effect on 29 June 2017 and only affect non-EEA or UK AIFMs which report on a quarterly basis under Article 110 of the AIFMD Delegated Regulation (EU) No 132/2013.
Link to CP 16/17 here
Link to Handbook Notice No. 40 here
Link to instrument here
Capital Markets Union (CMU)
European Commission Launches Public Consultation on the Capital Markets Union Mid-Term Review
As part of its efforts to achieve a Capital Markets Union (CMU) with tangible impact, the European Commission services launched a public consultation on the planned CMU mid-term review on 20 January 2017.
This consultation offers an opportunity for stakeholders to provide targeted input to complement and advance actions put forward in the CMU Action Plan.
The results of this consultation will feed into the mid-term review of the CMU Action Plan that the European Commission aims to publish in June 2017. The review will seek to strengthen the current policy framework for the development of capital markets by updating the proposed actions and integrating complementary measures in response to key challenges.
Investor Services
Global Fiduciary Services | 2017 Issue 2
Bite-Sized | 2017 Issue 2 2
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Respondents are invited to provide evidence-based feedback and specific suggestions by 17 March 2017 through an online questionnaire. An online fact sheet is also available.
Link to press release here
Link to online questionnaire here
Link to fact sheet here
European Market Infrastructure Regulation (EMIR)
ESMA Consults on Future Guidelines for Portability between Trade Repositories
On 31 January 2017 the European Securities and Markets Authority (ESMA) published a consultation paper on future guidelines on the transfer of data between trade repositories (TRs) authorised in the European Union under the European Market Infrastructure Regulation (EMIR).
The purpose of the proposed guidelines is to:
• Ensure that the competitive multiple-TR environment is guaranteed, and that TR participants can benefit from competing offers;
• Ensure the quality of data available to authorities, including the aggregations carried out by TRs, even when the TR participant changes the TR to which it reports and irrespective of the reason for such a change; and
• Ensure that there is a consistent and harmonised way to transfer records from one TR to another TR and support the continuity of reporting and reconciliation in all cases including the withdrawal of registration of a TR
The proposed guidelines establish high-level principles that would need to be followed by the TR participants, reporting entities, counterparties and central counterparties (CCPs), on the one hand, and the TRs on the other.
ESMA is seeking stakeholders’ views on the draft guidelines by 31 March 2017 and expects to publish a final report of these guidelines by end of Q2/ beginning of Q3 of 2017.
Link to consultation here
ESMA Letter on EMIR Review and Sanctioning Powers to the European Commission
The European Securities and Markets Authority (ESMA) wrote to the European Commission (EC) on 27 January 2017 to ask it to consider a number of issues relating to its supervisory and sanctioning powers under the European Market Infrastructure Regulation (EMIR), in the context of the ongoing review, and also similar issues related to credit rating agencies (CRAs).
The letter follows up on the EC’s recent report on the EMIR Review, for which ESMA had submitted reports in August 2015, and also ESMA’s Technical Advice on the functioning of the CRA market submitted to the EC in October 2015.
Link to ESMA letter here
Changes to EMIR Trade Reporting Requirements
On 21 January 2017 two regulations were published in the Official Journal of the European Union amending existing regulatory technical standards on the minimum details of the data to be reported to trade repositories and implementing technical standards on the format and frequency of trade reports to trade repositories.
Both sets of technical standards will enter into force on 10 February 2017. The RTS on data reporting will apply from 1 November 2017. The ITS on trade reports to TRs will apply from 1 November 2017 with the exception of Article 1(5), which applies from 10 February 2017.
Link to Delegated Regulation 2017/104 here
Link to Implementing Regulation 2017/105 here
Bite-Sized | 2017 Issue 2 3
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
EBA and ESMA Call to Clarify Margin Requirements between CRR and EMIR
On 18 January 2017 the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published a joint report on the functioning of the Capital Requirements Regulation (CRR) with the European Market Infrastructure Regulation (EMIR).
The report calls for the requirements for credit, market, and counterparty credit risk in the CRR to be clarified. This clarification should ensure that only risks not already covered by specific financial resources for activities not related to clearing are to be covered by CRR requirements. This exclusion should also be extended to activities covered by interoperability arrangements.
In the Report, the EBA and ESMA have focused their analysis on a list of specific issues concerning the mandate of article 515(1) of the CRR, and in particular with regard to institutions operating a central counterparty (CCP). The recommendations included in the Report aim at avoiding duplication of requirements for derivative transactions and thereby avoid increased regulatory risk and increased costs for monitoring by Competent Authorities. In particular, the following topics have been addressed in the Report:
(a) Capital requirements for CCPs holding a banking licence;
(b) Leverage and liquidity for CCPs;
(c) Large exposures;
(d) Difference in MPoR application; and
(e) Clients’ exposures to clearing members
Link to joint press release here
FinTech
SWIFT Explores Blockchain as part of its Global Payments Innovation Initiative
On 12 January 2017 SWIFT, the global messaging platform, announced the launch of a Proof of Concept (PoC) to explore whether distributed ledger technologies can be used by banks to improve the reconciliation of their nostro databases in real time.
Under the current correspondent banking model, banks need to monitor the funds in their overseas accounts via debit and credit updates and end-of-day statements. The PoC will test whether distributed ledgers may be able to help banks reconcile those nostro accounts more efficiently and in real time, lowering costs and operational risk.
Link to press release here
MiFID II/MiFIR
UK FCA publishes MiFID II – Application and Notification User Guide
On 13 January 2017 the UK Financial Conduct Authority published MiFID II – Application and notification user guide.
The guide is designed to help firms decide which applications and notifications they should make and to explain how to do so. Links to the relevant forms are also included in the guide.
The user guide is aimed at a very broad audience and covers:
• What firms need to consider
• Key changes
• Investment firms
• Fees
• Article 3 MiFID exempt firms
• Approved persons
Bite-Sized | 2017 Issue 2 4
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
• Structured deposits
• Data reporting services providers (DRSP)
• Market data processor (MDP) on-boarding and market data reporting
• Market infrastructure providers
• Passport notifications and tied agents
• Commodity regime
• Transparency waivers and deferrals
• Non-discriminatory clearing access for financial instruments
In advance of when the MiFID II regime comes into effect on 3 January 2018, firms must ensure they have the correct permissions in place to carry out the relevant regulated activities from that date.
Firms will be able to apply for authorisation and variations of permission (VoPs) from 30 January 2017, and for passport notifications from 31 July 2017.
Link to MiFID II – Application and notification user guide here
ESMA calls for Consistent Application of MiFIR Product Intervention Powers
On 12 January 2017 the European Securities and Markets Authority (ESMA) issued an Opinion regarding the scope of the product intervention powers under the Markets in Financial Instruments Regulation (MiFIR). These powers can be exercised by both national competent authorities (NCAs) and ESMA from 3 January 2018.
Currently, the powers will only apply to MiFID investment firms marketing products which pose risks to retail investors, market integrity, and financial stability in the EU, but do not cover UCITS management companies and Alternative Investment Fund Managers (AIFMs). ESMA is concerned about the potential for regulatory arbitrage and the potential reduction in effectiveness of future intervention measures, and believes that the EU institutions should address this issue.
The Opinion outlines the potential consequences linked to the exclusion of fund management companies from the scope of the powers, including the risk of arbitrage where a type of fund that is restricted or banned under MiFIR could be distributed through fund management companies if they decided to market or distribute the funds themselves.
Link to ESMA Opinion here
ESMA finds Improvement in Regulators’ Supervision of MiFID Best Execution Requirements
On 11 January 2017 the European Securities and Markets Authority (ESMA) published a follow-up report to its peer review on best execution published in 2015.
ESMA found that national regulators are giving greater attention to best execution requirements under the Markets in Financial Instruments Directive (MiFID). Best execution refers to the obligation under article 21 of MiFID for investment firms to execute orders on terms most favourable to their clients as an investor protection measure.
ESMA conducted its initial peer review on how national regulators supervised and enforced these provisions for 29 countries in the European Economic Area from 1 January 2011 to 31 December 2012 and published its findings in 2015. The peer review found that the level of implementation of best execution provisions, as well as the level of convergence of supervisory practices by regulators, was relatively low. In particular, 15 regulators were found not to apply or only partly apply criteria considered essential for ensuring effective best execution.
Bite-Sized | 2017 Issue 2 5
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Consequently, ESMA launched its follow-up work in September 2016 to assess whether national regulators have taken steps to address the shortcomings identified in the peer review. In its report, ESMA finds there are clear improvements in the level of attention paid to the supervision of best execution requirements and that in general, regulators are adopting a more pro-active supervisory approach to monitoring compliance.
Link to ESMA report here
UCITS
ESMA Advocates Common Principles for Setting up Share Classes in UCITS Funds
On 30 January 2017 the European Securities and Markets Authority (ESMA) issued an Opinion on the extent to which different types of units or shares (share classes) of the same UCITS fund (either stand alone or sub-fund/compartment) can differ from one another, having found diverging approaches in different EU countries.
In its Opinion, addressed to national regulators, ESMA sets out four high-level principles which UCITS must follow when setting up different share classes in order to ensure a harmonised approach across the EU:
• Common investment objective: Share classes of the same fund should have a common investment objective reflected by a common pool of assets. ESMA considers that hedging arrangements at share class level – with the exception of currency risk hedging – are not compatible with the requirement for a fund to have a common investment objective;
• Non-contagion: UCITS management companies should implement appropriate procedures to minimise the risk that features specific to one share class could have a potentially adverse impact on other share classes of the same fund;
• Pre-determination: All features of the share class should be pre-determined before the fund is set up; and
• Transparency: Differences between share classes of the same fund should be disclosed to investors when they have a choice between two or more classes
To mitigate the impact on investors in share classes established prior to this Opinion, which do not comply with these principles, ESMA is of the view that they should be allowed to continue. However, such share classes should be closed for investment by new investors within 6 months of publication of the Opinion, and for additional investment by existing investors within 18 months of its publication.
Link to ESMA Opinion here
ASIA
Singapore: Financial Reporting for Business Trusts and Collective Investment Schemes
On 19 January 2017 the Monetary Authority of Singapore (MAS) announced that registered business trusts will adopt a new Singapore financial reporting framework that is identical to the International Financial Reporting Standards (IFRS), while authorised collective investment schemes will continue to prepare financial statements using accounting practices recommended by the Institute of Singapore Chartered Accountants (ISCA).
In 2014 the Accounting Standards Council (ASC) announced that Singapore listed companies must apply the new Singapore financial reporting framework for accounting periods beginning on or after 1 January 2018, with the exception of registered business trusts and authorised collective investment schemes.
Taking into account feedback from the industry and having considered practices in comparable jurisdictions, MAS has decided that:
(i) Registered business trusts will be required to prepare financial statements in accordance with the new reporting framework for annual periods beginning on or after 1 January 2018; and
Bite-Sized | 2017 Issue 2 6
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
(ii) Authorised CIS should continue to prepare financial statements according to the Statement of Recommended Accounting Practice 7: Reporting Framework for Unit Trusts (RAP 7), issued by Institute of Singapore Chartered Accountants. This treatment for Authorised CIS is consistent with practices in other major fund jurisdictions such as the United Kingdom and the United States of America
Link to press release here
Hong Kong: SFC signs MoU with SEC to Enhance Supervision of Cross-border Regulated Entities
On 18 January 2017 the Securities and Futures Commission (SFC) entered into a memorandum of understanding with the US Securities and Exchange Commission (SEC) providing for consultation, cooperation and exchange of information related to the supervision and oversight of regulated entities that operate on a cross-border basis in Hong Kong and the United States of America. The MoU covers exchanges and other trading venues, market intermediaries, investment funds or companies, clearing agencies and credit rating agencies.
Link to SFC press release here
Link to MoU here
Hong Kong: Consultations on Legislative Proposals to Enhance Regulatory Regime for Combating Money Laundering and Terrorist Financing
On 6 January 2017 the Financial Services and the Treasury Bureau (FSTB) launched two consultations on legislative proposals to enhance the regulatory regime for combating money laundering and terrorist financing.
• Enhancing Transparency of Beneficial Ownership of Hong Kong Companies
The FSTB proposes to enhance the transparency of corporate ownership by requiring companies incorporated in Hong Kong under the Companies Ordinance to provide beneficial ownership information or declare that there are no people with significant control. As far as transparency of beneficial ownership is concerned, the FATF requires member jurisdictions to take measures to prevent the misuse of legal persons for money laundering and terrorist financing, and to ensure that there is adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities.
• Enhancing Anti-Money Laundering Regulation of Designated Non-Financial Businesses and Professions (DNFBPs)
This consultation sets out the framework and key parameters of a legislative proposal to enhance the regulation of DNFBPs (solicitors, accountants, real estate agents and trust or company service providers(TCSPs)) in an effort to meet prevailing international standards to combat money laundering and terrorist financing by recommending that DNFBPs should implement customer due diligence measures to identify and verify customers, and maintain records on customer identification and transactions for at least five years. FSTB also propose the introduction of a licencing regime for TCSPs for the purpose of overseeing their compliance with AML/CFT requirements, whereby they will be required to apply for a licence from the Registrar of Companies and satisfy a “fit-and-proper” test before they provide trust or company service as a business for the public.
Both consultations close on 5 March 2017
Link to FSTB press release here
Link to Consultation for enhancing transparency of beneficial ownership here
Link to Consultation for enhancing anti-money laundering regulation here
Bite-Sized | 2017 Issue 2 7
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Singapore: Implementation of the Common Reporting Standard
On 30 December 2016, the Inland Revenue Authority of Singapore notified all financial institutions in Singapore that the Income Tax (International Tax Compliance Agreements) (Common Reporting Standard) Regulations 2016 (CRS Regulations) would come into effect on 1 January 2017.
The Common Reporting Standard (CRS) is an internationally agreed standard for the automatic exchange of financial account information (AEOI), endorsed by the Organisation for Economic Co-operation and Development and the Global Forum for Transparency and Exchange of Information for Tax Purposes, to deter and detect tax evasion through the use of offshore bank accounts. More than 100 jurisdictions, including major financial centres such as Hong Kong, Luxembourg and Switzerland, have endorsed the CRS and will commence AEOI in either 2017 or 2018.
The CRS Regulations empower and require all financial institutions (FIs) to put in place necessary processes and systems to obtain CRS information from account holders (known as the Wider Approach) that open a new account with the FIs from 1 January 2017. FIs will have to establish the tax residency status of all their account holders using the information they have and transmit to the Inland Revenue Authority of Singapore in 2018 the CRS information of account holders that are tax residents of jurisdictions that Singapore has a Competent Authority Agreement for CRS with.
Link to notice here
Link to Inland Revenue Authority of Singapore CRS webpage here
INTERNATIONAL
FSB publishes Reports on the Re-hypothecation of Client Assets and Collateral Re-use
On 25 January 2016 the Financial Stability Board (FSB) published two reports on the Re-hypothecation and Collateral Re-use: Potential Financial Stability Issues, Market Evolution and Regulatory Approaches and Non-Cash Collateral Re-use: Measure and Metrics.
Re-hypothecation and Collateral Re-use: Potential Financial Stability Issues, Market Evolution and Regulatory Approaches
This report describes potential financial stability issues associated with, and explains the evolution of market practices and current regulatory approaches relating to, re-hypothecation of client assets and collateral re-use. It examines the possible arguments for and challenges of harmonising regulatory approaches to re-hypothecation of client assets, and also describes possible residual financial stability risks associated with collateral re-use.
Based on these observations, the FSB concluded that there is no immediate case for harmonising regulatory approaches to re-hypothecation. At the same time, however, the FSB encourages jurisdictions to implement Recommendation 7 in its Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos published in August 2013, which provides a common basis for authorities to design their regulations with respect to re-hypothecation of client assets.
Non-Cash Collateral Re-use: Measure and Metrics
This report incorporates input from the early-2016 consultation and finalises the measure and metrics of non-cash collateral re-use in securities financing transactions that authorities will monitor for financial stability purposes. The FSB will collect from FSB members national aggregated data related to the measure and metrics from January 2020 as part of its global securities financing data standards.
Bite-Sized | 2017 Issue 2 8
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
The FSB furthermore encourages authorities to consider monitoring collateral re-use activities beyond securities financing transactions as appropriate. Since market practices evolve, the FSB highlights the need to review the scope, measure and metrics of collateral re-use. This is planned to be undertaken five years after the launch of the global data collection with regard to non-cash collateral re-use, with a continued discussion with market participants as appropriate.
Link to press release here
FSB publishes Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities
On 12 January 2017 the Financial Stability Board (FSB) published its policy recommendations to address structural vulnerabilities from asset management activities.
The document sets out 14 final policy recommendations to address the following structural vulnerabilities from asset management activities that could potentially present financial stability risks:
• Liquidity mismatch between fund investments and redemption terms and conditions for open-ended fund units;
• Leverage within investment funds;
• Operational risk and challenges at asset managers in stressed conditions; and
• Securities lending activities of asset managers and funds
The FSB published proposed policy recommendations for consultation in June 2016. The final recommendations reflect a number of changes to the proposed recommendations to incorporate responses to the consultation, for example the recommendations on liquidity have been revised to encourage authorities to develop consistent reporting requirements, to better distinguish the information that is useful to authorities and investors, and to emphasise the exploratory nature of system-wide stress testing at this time. The purposes and uses of leverage measures also have been clarified.
Link to press release here
IRELAND
Amendments to Central Bank UCITS Regulations
On 19 January 2017 the Central Bank of Ireland published its feedback statement in CP 105 – Consultation on amendments to the Central Bank UCITS Regulations.
The feedback statement covers:
• Feedback on amendments consequential to the implementation of UCITS V, including:
• Clarification for cash booked into accounts for ancillary liquidity purposes;
• Future publication of guidance on the approval to establish a subsidiary of a UCITS;
• Disclosure of the names of UCITS subsidiaries in the UCITS’ annual report;
• Introduction of Regulation 114A applying the depositaries safekeeping obligations where assets of a UCITS are held through a subsidiary
• Feedback on technical amendments including typographical errors;
• Simplification of the disclosure of open derivatives positions in UCITS annual and half-yearly reports;
• Timing of the submission of periodic reports; and
• Other feedback
Bite-Sized | 2017 Issue 2 9
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
The Central Bank will proceed to amend its UCITS Regulations in line with the changes described in the feedback statement. It is anticipated that the amendments (as the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) (Amendment) regulations 2017) will be issued in Q1 2017.
Link to feedback statement here
LUXEMBOURG
New Reporting Template for UCIs, UCITS and SIFs
On 3 January 2017 the Commission de Surveillance du Secteur Financier (CSSF) published Circular 02/77 detailing a mandatory template to be used by undertakings for collective investment subject to the Law of 17 December, 2010 (UCIs and UCITS) and to specialized investment funds governed by the Law of 13 February, 2007 (SIFs) to transmit details NAV calculation errors and breaches of investment restrictions.
The requirement to report errors was introduced in 2002 (CSSF circular 02/77) but the format was at the discretion of the operator of the fund. From 1 March 2017 reports must be submitted using a mandatory Excel file, which is available from the CSSF website, to ensure uniform reporting standards and electronic submission.
Link to CSSF press release here (in French)
Link to circular 02/77 here (in English)
Link to notification form here
NORTH AMERICA
CFTC’s Enforcement Division Issues New Advisories on Cooperation
On 19 January 2017 the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Enforcement issued two new Enforcement Advisories outlining the factors the Enforcement Division will consider in evaluating cooperation by individuals and companies in the agency’s investigations and enforcement actions.
To improve the quality and effectiveness of the cooperation it receives, the CFTC’s Division of Enforcement is issuing a new Enforcement Advisory outlining the cooperation factors it will evaluate for individuals who want to receive the benefits of cooperation and updating the existing Enforcement Advisory for cooperation by companies.
As set forth in the Advisories, the Division may in its discretion consider the following several factors in assessing whether a company’s or individual’s cooperation warrants credit:
• The value of the cooperation to the Division’s investigation(s) and enforcement action(s);
• The value of the cooperation to the Commission’s broader law enforcement interests;
• The culpability of the company or individual and other relevant factors; and
• Uncooperative conduct that offsets or limits credit that the company or individual would otherwise receive
The Advisories emphasise that the Division looks for more than ordinary cooperation or mere compliance with the requirements of law. The potential rewards for cooperation can range from the Division recommending no enforcement action to recommending reduced charges or sanctions in connection with enforcement actions.
The Division’s assessment of cooperation in any matter is a discretionary function of the Division’s Director and staff and requires a case-by-case analysis of the specific facts and circumstances of each matter.
Link to press release here
Bite-Sized | 2017 Issue 2 10
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
SEC Announces 2017 Examination Priorities
On 12 January 2017 the U.S. Securities and Exchange Commission (SEC) announced its Office of Compliance Inspections and Examinations’ (OCIE) 2017 priorities.
The 2017 examination priorities address issues across a variety of financial institutions, including investment advisers, investment companies, broker-dealers, transfer agents, clearing agencies, private fund advisers, national securities exchanges, and municipal advisors. Areas of examination focus include:
• Retail Investors – Protecting retail investors remains a priority in 2017. OCIE will continue several 2016 initiatives to assess risks to retail investors seeking information, advice, products, and services. It also will undertake examinations to review firms delivering investment advice through electronic mechanisms, sometimes referred to as “robo-advising,” as well as wrap fee programs in which investors are charged a single bundled fee for advisory and brokerage services
• Senior Investors and Retirement Investments – OCIE also is continuing its focus on public pension advisers and expanding its focus on senior investors and individuals investing for retirement. OCIE is broadening its Retirement-Targeted Industry Reviews and Examinations (ReTIRE) initiative to include reviews of investment advisers and broker-dealers that offer variable insurance products to investors with retirement accounts as well as those advisers that offer and manage target-date funds. OCIE also will focus more specifically on registrants’ interactions with senior investors, including with respect to identifying financial exploitation
• Market-Wide Risks – To help fulfil the SEC’s mission of maintaining fair, orderly, and efficient markets, OCIE will continue its focus on registrants’ compliance with the SEC’s Regulation Systems Compliance and Integrity (SCI) and anti-money laundering rules. New initiatives for 2017 include an evaluation of money market funds’ compliance with the SEC’s amended rules, which became effective in October 2016
• FINRA – Consistent with OCIE’s goal of enhancing oversight of FINRA to protect investors and the integrity of our markets, it will continue conducting inspections of FINRA’s operations and regulatory programs, and focus resources on assessing the examinations of individual broker-dealers
• Cybersecurity – OCIE will continue its ongoing initiative to examine for cybersecurity compliance procedures and controls, including testing the implementation of those procedures and controls at broker-dealers and investment advisers
The published priorities for 2017 are not exhaustive and may be adjusted in light of market conditions, industry developments, and ongoing risk assessment activities. OCIE selected the priorities in consultation with the Commission, the SEC’s policy divisions and regional offices, the Division of Enforcement, the SEC’s Investor Advocate, and other regulators.
Link to press release here
UNITED KINGDOM
FCA publishes CP17/2: CASS 7A and the Special Administration Regime Review
On 23 January 2017 the Financial Conduct Authority (FCA) published a consultation paper seeking feedback on a number of aspects of the client assets regime, in particular regarding the client money distribution rules and their interaction with the special administration regime.
The consultation is a result of DP16/2 which discussed possible changes to CASS, in particular CASS 7A, as a result of a review (the Bloxham Review), commissioned by HM Treasury, into its special administrations regime (SAR).
Bite-Sized | 2017 Issue 2 11
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
The consultation seeks feedback on proposed changes to CASS affecting the return of client assets. This includes re-consulting on some CASS 7A changes previously consulted on in CP13/5. It also explains why certain proposals in CP13/5 and DP16/2 are not being taken forward.
In addition, this consultation seeks feedback on minor consequential changes to the client money rules (CASS 7) and CASS 7A to address the forthcoming indirect clearing requirements the European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Regulation (MiFIR) Regulatory Technical Standards (RTS). However the FCA notes that, as at the date of publication, the RTS have not been adopted by the European Commission.
The consultation period closes in two stages:
• 23 February 2017 in relation to the EMIR and MiFIR RTS proposals (chapter 3)
• 24 April 2017 in relation to all other proposals (chapter 2)
Link to web page here
Link to CP 17/2 here
Link to DP16/2 here
Link to CP13/5 here
Bite-Sized | 2017 Issue 2 12
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Publication Release date Link
International
G20 Research Group publishes G20 International Financial Institution Reform Commitments and Compliance
5 January 2017 Link to report here
The Legal Entity Identifier Regulatory Oversight Committee (LEI ROC) publishes an update on developments within the LEI System
12 January 2017 Link to update here
Speech by Mark Carney Governor of the Bank of England, Chair of the Financial Stability Board, at Deutsche Bundesbank G20 conference on “Digitising finance, financial inclusion and financial literacy”, Wiesbaden entitled The Promise of FinTech – Something New Under the Sun?
25 January 2017 Link to speech here
Bank for International Settlements: The Basel Committee on Banking Supervision today published responses to frequently asked questions (FAQs) on the standard Minimum capital requirements for market risk
26 January 2017Link to press release here
Link to FAQ here
Asia
Korea: Financial Services Commission publishes Financial Policy Direction for 2017 5 January 2017 Link to press release here
Hong Kong: Securities and Futures Commission updates user guide to short position reporting (from 15 March 2017)
10 January 2017 Link to short position reporting webpage here
Hong Kong: International Monetary Fund Executive Board Concludes 2016 Article IV Consultation Discussions with People’s Republic of China—Hong Kong Special Administrative Region
12 January 2017
Link to IMF press release here
Link to Hong Kong government press release here
Singapore: Speech by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at UBS’ Wealth Insights Conference entitled "Global Economic Outlook: Renewed Optimism, Higher Uncertainty"
16 January 2017 Link to speech here
Hong Kong: Mandatory Provident Fund Schemes Authority welcomes the Government’s proposal to progressively abolish “offsetting”
18 January 2017 Link to press release here
Hong Kong: Keynote speech by Ms Julia Leung Executive Director, Intermediaries, Securities and Futures Commission at AIMA APAC Annual Forum 2017 entitled Manager-In-Charge initiative: Fostering accountability and a compliance culture
19 January 2017 Link to speech here
Hong Kong: Securities and Futures Commission issues guideline to sponsors, underwriters and placing agents involved in the listing and placing of Growth Enterprise Market stocks
20 January 2017 Link to press release here
Hong Kong: Securities and Futures Commission publishes Research Paper No. 60: A Review of the Global and Local Securities Markets in 2016
20 January 2017 Link to research paper here
Korea-Hong Kong Agreement on Automatic Exchange of Financial Account Information Signed 23 January 2017
Link to Korean press release here
Link to Hong Kong press release here
North America
Statement of CFTC Chairman Timothy Massad on his Resignation as Chairman 3 January 2017 Link to statement here
Statement of Commissioner Sharon Y. Bowen on Chairman Timothy G. Massad’s Announcement 3 January 2017 Link to statement here
Statement of Commissioner Chris Giancarlo regarding the Resignation of Chairman Tim Massad 3 January 2017 Link to statement here
Statement by Mary Jo White Chair U.S. Securities and Exchange Commission: A U.S. Imperative: High-Quality, Globally Accepted Accounting Standards
5 January 2017 Link to statement here
CFTC Issues Order of Registration for ICE Endex Markets B.V. to Permit Trading by Direct Access from the U.S.
11 January 2017 Link to press release here
Remarks of Chairman Timothy Massad before the London School of Economics 10 January 2017 Link to speech here
CFTC Unanimously Approves Proposal to Amend Recordkeeping Requirements 12 January 2017 Link to press release here
Bite-Sized | 2017 Issue 2 13
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Publication Release date LinkStatement of Chairman Timothy Massad on the Notice of Proposed Rulemaking to Amend Regulation 1.31
12 January 2017 Link to statement here
CFTC Unanimously Approves Proposals on Swaps Data and Other Amendments 13 January 2017 Link to press release here
Statement of Chairman Timothy Massad on Proposed Amendments to the Swap Data Access Provisions
13 January 2017 Link to statement here
CFTC Grants Order to LCH.Clearnet Limited Permitting Portfolio Margining of Customer Positions in Futures, Foreign Futures, and Cleared Swaps
13 January 2017 Link to press release here
Speech by Mary Jo White, Chair U.S. Securities and Exchange Commission at the Economic Club of New York entitled “The SEC after the Financial Crisis: Protecting Investors, Preserving Markets”
17 January 2017 Link to speech here
Keynote Remarks of Chairman Timothy Massad at SEFCON VII 18 January 2017 Link to speech here
Keynote Address of CFTC Commissioner J. Christopher Giancarlo Before SEFCON VII - Making Market Reform Work for America
18 January 2017 Link to speech here
Financial Industry Regulatory Authority publishes report on the potential implications of Blockchain for the securities industry
18 January 2017Link to press release here
Link to the report here
Enforcement Director Aitan Goelman to Leave CFTC 19 January 2017 Link to press release here
CFTC Names J. Christopher Giancarlo Acting Chairman 20 January 2017 Link to press release here
CFTC Extends Public Comment Period for the Supplemental Proposal for Regulation Automated Trading
23 January 2017 Link to press release here
The Securities and Exchange Commission announces that Marc Wyatt, Director of the Office of Compliance Inspections and Examinations, will leave the agency
30 January 2017 Link to press release here
Remarks of Commissioner Sharon Y. Bowen before the Commodity Markets Council - “Transitions Present Opportunities”
30 January 2017 Link to speech here
Europe
Publication of the Programme of the Maltese Presidency of the Council of the European Union 1 January 2017 Link to programme here
Ireland: Central Bank updates the AIF rulebook 3 January 2017 Link to the AIF Rulebook here
Luxembourg: Global situation of undertakings for collective investment at the end of October 2016 (English version)
5 January 2017 Link to press release here
Keynote speech by Yves Mersch, Member of the Executive Board of the European Central Bank, at the French Payments Committee conference on “Technological innovations in payments and beyond”, Banque de France
6 January 2017 Link to speech here
MiFID II: The Futures Industry Association (FIA) publishes due diligence questionnaire for IT outsourcing and procurement
9 January 2017 Link to questionnaire here
Luxembourg: Guidelines of the European Securities and Markets Authority (ESMA) in relation to the factors, the steps and the records that the persons receiving the market soundings shall consider and implement according to Article 11(11) of Regulation (EU) No 596/2014 on market abuse (MAR)
11 January 2017 Link to circular here (in French)
The European Banking Authority (EBA) published today an amended Recommendation on the equivalence of confidentiality regimes.
11 January 2017 Link to press release here
CRR: RTS on data waiver permissions for IRB approach published in Official Journal 14 January 2017 Link to delegated
regulation 2017/72 here
Luxembourg: Enforcement of the 2016 financial information published by issuers subject to the Transparency Law
16 January 2017 Link to press release here
The European Securities and Markets Authority issues two opinions regarding the exemption of Swedish pension schemes from the obligation to centrally clear OTC derivative contracts under the European Market Infrastructure Regulation (EMIR).
16 January 2017 Link to article here
Bite-Sized | 2017 Issue 2 14
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Publication Release date LinkThe European Securities and Markets Authority (ESMA) issues briefing on transaction reporting requirements under MiFID II
16 January 2017 Link to briefing note here
Speech by Patrick Armstrong, Senior Risk Analysis Officer, Innovation and Products Team, ESMA, at Oslo Børs ASA: Stock exchange and Securities Conference entitled Financial Technology: Applications within the Securities Sector
18 January 2017 Link to speech here
The European Banking Authority publishes DPM and XBRL taxonomy 2.6 for remittance of supervisory reporting
18 January 2017 Link to press release here
Keynote speech by Steven Maijoor, Chair, European Securities and Markets Authority at the PRIME Finance 6th Annual Conference
23 January 2017 Link to speech here
The European Securities and Markets Authority (ESMA) issues an opinion regarding the exemption of Spanish pension schemes from the obligation to centrally clear OTC derivative contracts under the European Market Infrastructure Regulation (EMIR).
25 January 2017 Link to press release here
Speech by Gabriel Bernardino, Chairman, European Insurance and Occupational Pensions Authority (EIOPA) at Sueddeutsche Zeitung Insurance Day 2017 entitled The future of the European insurance industry in a digital era: Turning challenges into opportunities
25 January 2017 Link to speech here
The European Securities and Markets Authority publishes Summary of Conclusions from 14 December 2016 Board of Supervisors
26 January 2017 Link to summary here
Luxembourg: Global situation of undertakings for collective investment at the end of November 2016 (English version)
26 January 2017 Link to press release here
The European Securities and Markets Authority publishes a new Questions and Answers (Q&A) document, comprising six questions, on the implementation of its Guidelines on the Alternative Performance Measures for listed issuers.
27 January 2017 Link to Q&A here
The European Securities and Markets Authority publishes regulatory work programme 27 January 2017 Link to work
programme here
The European Banking Authority (EBA) recalls the key deadlines Competent Authorities should comply with for the submission of data needed to perform the 2017 supervisory benchmarking exercise.
30 January 2017 Link to press release here
The European Securities and Markets Authority updates two Questions and Answers (Q&A) documents on implementation issues relating to transparency and market structure topics under the revised Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR)
31 January 2017 Link to press release here
UK
Financial Conduct Authority publishes Our future Mission: key themes from your feedback 3 January 2017 Link to press release here
Investment Association Circular 003-17: Final Response to FCA CP16/29: MiFID II Implementation - Consultation Paper III
5 January 2017 Link to circular here (members only)
Investment Association Circular 004-17: Final response to FCA transaction cost disclosure CP16/30
5 January 2017 Link to circular here (members only)
Investment Association Circular 007-17: Final response: IA response to ESMA Consultation on MiFID II Product Governance / Target Market draft guidelines
6 January 2017 Link to response here (members only)
Investment Association Circular 008-17: Consultation: The IA issues a revised paper on Operational and Enterprise Risk Principles - for comment
6 January 2017 Link to consultation here (members only)
HM Treasury: Legislative Reform Order to change partnership legislation for private equity investments
16 January 2017 Link to draft legislation here
Department for Business, Energy and Industrial Strategy: Review of limited partnership law – call for evidence
16 January 2017 Link to call for evidence here
Speech given by Mark Carney, Governor of the Bank of England, at the London School of Economics entitled Lambda
16 January 2017 Link to speech here
Bite-Sized | 2017 Issue 2 15
QUICK LINKS
• Alternative Investment Fund Managers Directive (AIFMD)
• Capital Markets Union (CMU)
• European Market Infrastructure Regulation (EMIR)
• FinTech
• MiFID II/MiFIR
• UCITS
• ASIA
• INTERNATIONAL
• IRELAND
• LUXEMBOURG
• NORTH AMERICA
• UNITED KINGDOM
Publication Release date LinkPrudential Regulation Authority and Financial Conduct Authority publishes CP17/1 - CP1/17: Financial Services Compensation Scheme – management expenses levy limit 2017/18
16 January 2017 Link to CP17/1 - CP1/17 here
Prudential Regulation Authority publishes PRA Rulebook: Administration Instrument 2017 16 January 2017 Link to instrument here
Speech by Hannah von Dadelszen, Joint Head of Fraud, Serious Fraud Office at the Fighting Fraud and Eliminating Error Conference entitled The serious business of fighting fraud
19 January 2017 Link to speech here
Speech by Mark Steward, Director of Enforcement and Market Oversight at the FCA, delivered at the Practicing Law Institute’s annual seminar on securities regulation in Europe entitled Practical implications of US law on EU practice
19 January 2017 Link to speech here
Financial Conduct Authority publishes CP17/7: CASS 7A and the special administration regime review 23 January 2017 Link to CP17/2 here
Speech by Chris Salmon Executive Director of Markets, Bank of England, at the OMFIF City Lecture entitled Market Functioning
24 January 2017 Link to speech here
Statement by HM Government not to opt in to the Justice and Home Affairs (JHA) provision within the European Commission’s “Proposal for a regulation on the prospectus to be published when securities are offered to the public or admitted to trading”
24 January 2017 Link to statement here
Financial Conduct Authority publishes excepts from a lecture by FCA Chief Economist Peter Andrews, delivered to a conference on behavioural finance held by Queen Mary University of London School of Business, Lancaster Business School and Santa Clara University, 14 June 2016.
25 January 2017 Link to speech here
Investment Association Circular 039-17: Consultation: UK fund trading & settlement initiative – fund trading survey
26 January 2017 Link to consultation here
Speech by Andrew Bailey, Chief Executive of the FCA, at the Economic Council Financial Markets Policy Conference entitled Free trade in financial services and global regulatory standards: friends not rivals
26 January 2017 Link to speech here
Investment Association Circular 037-17: Spring Budget 2017 Representations 25 January 2017 Link to circular here
(members only)
Financial Conduct Authority publishes Regulation round-up January 2017 26 January 2017 Link to Regulation
round-up here
Chairman of the Treasury Select Committee writes to Chancellor of the Exchequer on prudential reform proposals
27 January 2017 Link to press release here
Financial Conduct Authority updates Market data reporting and MDP webpage 30 January 2017 Link to webpage here
Financial Conduct Authority publishes CP17/3: Proposed Handbook changes to reflect the new regulatory framework for Insurance Linked Securities
21 January 2017 Link to CP17/3 here
Investment Association Circular 041-17: FCA Future Mission – final response 30 January 2017 Link to IA Circular here
(members only)
Investment Association Circular 044-17: Fourth Money Laundering Directive – Update 31 January 2017 Link to IA Circular here
(members only)
Investment Association Circular 045-17: Ministry of Justice calls for evidence on corporate liability for economic crime
31 January 2017 Link to IA Circular here (members only)
Prudential Regulation Authority publishes PRA Regulatory Digest January 2017 1 February 2017 Link to digest here
Financial Conduct Authority and Prudential Regulation Authority publish final changes to enhance enforcement decision-making processes
1 February 2017 Link to press release here
Bite-Sized | 2017 Issue 2 16
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Bite-Sized | 2017 Issue 2 1717
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