AMF and ESMA Updates — December 2022

CSSF: FAQ SFDR

December 2, 2022

The Luxembourg-based Commission de Surveillance du Secteur Financier (CSSF) has published an FAQ to provide guidance on the SFDR. The guidance applies to financial market participants (AIFMs, UCITS management companies, managers of a qualifying VC fund registered in accordance with Article 14 of Regulation [EU] No. 345/2013, and managers of a qualifying social entrepreneurship fund registered in accordance with Article 15 of Regulation [EU] No. 346/2013) and to financial products, namely AIFs and UCITS. The document contains Q&A regarding:

• The update of prospectuses and issuing documents 
• Website disclosures 
• Pre-contractual disclosures 
• Periodic disclosures

Read the article here.

ESMA: Assessment of Brexit Relocation Processes

December 8, 2022

ESMA has published its peer review report on National Competent Authorities (“NCAs”) handling of relocation to the EU in the context of the UK’s withdrawal from the EU.” ESMA worked with NCAs to offer guidance on assisting market participants and on the handling of relocation within the EU. The report found that:

• NCAs were allowed to make extensive use of delegation and outsourcing arrangements. 
• Some firms relocated with limited human and technical resources to the EU.

ESMA also made recommendations to strengthen the NCAs’ authorization process.

Read the article here.

ESMA: Guidance for Supervision of Cross-Border Activities

December 14, 2022

ESMA published a supervisory briefing on cross-border activities. ESMA identified the need for NCAs to significantly improve their approach in the authorization, ongoing supervision and enforcement work relating to investment firms’ cross-border activities with retail clients. To this end, the guidance covers:

• Authorization of firms with cross-border plans
• Processing of passport notifications 
• Arrangements in place to carry out ongoing supervisory activities
• Ongoing supervision
• Investigations and inspections

Read the article here.

ESMA: Clarity for Market Participants on Best Execution Reporting

December 14, 2022

ESMA has issued a public statement to promote coordinated action by NCAs regarding the temporary suspension of the obligation on execution venues in Article 27(3) MiFID II. This article requires execution venues to make reports on the quality of execution of transactions publicly available on their venues. The RTS 27 specifies the format and content of these reports.

ESMA notes that RTS 27 reports are rarely read and do not allow for a meaningful comparison of the information they contain. Therefore, the MiFID II amending directive is temporarily suspending these reporting obligations until February 18, 2023. In fact, the MiFID II/MiFIR review proposal contains a proposition to remove the obligation to publish the RTS 27 report. If the legislative procedure is completed after February 28, 2023, this reporting obligation may reapply until the reviewed MiFID II is applicable.

Read the article here.

ESMA Provides Guidance to Applicants Under the DLT Pilot Regime

December 15, 2022

ESMA has published the final report on guidelines on standard templates, forms and formats for applying for permission to operate any type of distributed ledger technology (DLT) market infrastructures. These guidelines also contain minimum instructions to be provided by NCAs to market participants on how to submit applications and how requested information and documents should be provided to the competent authorities.

ESMA has included summaries and analyses of the responses to the public consultation on the topic.

Read the article here.

ESMA: Q&A Updates for AIFMD, DLT, MiFID2 and MiFIR

December 16, 2022

ESMA updated several Q&A as follows:

Alternative Investment Fund Managers Directive: Further clarifications on scenarios where Special Purpose Acquisition Companies qualify as AIFs.

DLT:

• Clarification on scenario where reporting obligations under MiFIR Article 26 and RTS 22 apply to transactions in DLT financial instruments
• Reporting of trade cancellation to NCAs
• Various reportable fields clarifications

MiFID2/MiFIR: Clarification that an investment firm acting as single liquidity providers can operate a systematic internalizer. In such scenarios, however, the investment firm must have distinct management and operational teams as well as physical separation of activities to ensure segregation of execution and potential leakage of information across the two activities.

Read the article here.

ESMA: Positive Opinion on European Commission MiFIR RTS 1 and RTS 2 Amendments

December 19, 2022

ESMA issued a positive opinion on the proposed amendments of RTS 1 and 2 of MiFIR by the European Commission.

RTS 1 and 2 define the standards for equity transparency and non-equity transparency. The main changes are intended to streamline the process for transactions which do not contribute to the price discovery process (e.g., CFD), as well as the post-trade transparency for transactions executed outside of trading.

Amendments are expected to enter into force in January 2024.

Read the article here.

ESMA: Published Guidelines for Reporting Under EMIR Refit

December 20, 2022

ESMA published guidelines for reporting under European market infrastructure regulation (EMIR) refit. The guidelines clarify following aspects:

• Transition to reporting under the new rules
• The number of reportable derivatives
• Intragroup derivatives exemption 
• Delegation of reporting 
• Reporting logic and the population of reporting fields
• Construction of the Trade State Report and reconciliation of derivatives by the trade repositories

The guidelines reaffirm that foreign exchange spot and crypto derivatives are in scope. They also specify that open transactions will not require a new unique trade identifier “UTI” after the transition even though the new UTI format is different from the existing one.

Read the article here.

Commission National de l’Informatique et des Libertés « CNIL »: BRC-C: The EDPB Recommendations

December 20, 2022

The binding corporate rules (BCRs) is a transfer tool used by companies engaged in a common economic activity or groups of undertakings to transfer personal data outside the European Economic Area to processors or controllers in the same group. The BCRs create rights and establish commitments to set data protection equivalent to that provided by GDPR.

The European Data Protection Board (EDPB) has published recommendations on the application for approval and on the elements and principles to be found in controller BCRs. The recommendations offer additional guidance to ensure a level playing field for BCR applicants. The objective of these recommendations is to:

• Have a standard application form for approval of BCR for controllers (BCR-Cs)
• Define the BCR-Cs content and provide explanations
• Determine what type of information should be presented to the data protection authority in the BCR section of the application and what should be included in the BCR-Cs

Read the article here.

AMF: Proposal for Open Finance Framework

December 20, 2022

The EU Commission may soon propose legislation on an open finance framework. The AMF has therefore presented its views on this subject. The main objective is to serve the interests of investors through innovative financial services that offer added value.

The regulatory framework for data openness should stimulate competition and ensure secure use of data stored by financial service providers.

Read the article here.

AMF: Policy on DASPs Concerning Good Repute and Skills and Promotional Communications

December 21, 2022

The AMF has reviewed its policy regarding the regime of digital asset service providers (DASPs) to clarify expectations concerning the skills and good repute of the managers and holders of control of these service providers. In addition, the AMF provided detail on client relations and promotional communications and made recommendations on these points for registered DASPs.

The documents requested by the AMF relating to the skills and good repute of applicants for DASP registration have also been adjusted.

The following documents have been updated:

• Position-Recommendation AMF DOC-2020-07 
• Instruction AMF DOC-2019-23
• AMF Position-Recommendation DOC-2006-23

Read the article here.

CNIL: Transfer of Data Outside The EU: Standard Contractual Clauses Are No Longer Valid

December 21, 2022

Data importers and exporters can no longer rely on the European Commission’s standard contractual clauses. These clauses are model contracts for transferring personal data and were updated in June 2021.

From now on, data importers and exporters will have to switch to new clauses or use another transfer tool.

Read the article here.

ESMA: Final ITS and RTS For Cross-Border Activities Under UCITS And AIFM Directives

December 21, 2022

ESMA published the final Implementing Technical Standards and Regulatory Technical Standards for cross-border activities under UCITS and AIFMD. The RTS details the information to be provided by management companies and AIFM to the host member(s). The ITS contain the template for management companies, UCITS and AIFMs that intend to carry out their activities in host member states.

Read the article here.

AMF: The AMF Enforcement Committee Fines an AMC for Failing to Comply with Its Professional Obligations

December 22, 2022

The portfolio asset management company was fined €150,000. The committee found that:

• The liquidity risk management procedure was not adequate nor operational, and the company had not established and maintained an effective compliance function to manage this type of risk.
• The framework for detecting and monitoring market abuse was not operational, and the company failed to comply because:
  
  • It had not conducted due diligence. 
  • It had not fulfilled its reporting obligations and complied with its obligations to refrain from trading in securities on the prohibited securities list.
• The compliance and internal control officer failed to fulfill his obligation to centralize information on market abuse.
• The AML/CFT procedures, the risk mapping and the client onboarding procedure were insufficient to identify and assess money laundering risks.
• The company failed to comply with its obligation to put in place an operational procedure to ensure that KYC checks on business relationships were carried out.

Read the article here.