Wed, Aug 10, 2022

AMF and ESMA Updates - June 2022

AMF: Update of Its Doctrine on the Regime for Digital Asset Service Providers

June 1, 2022

The AMF updated its doctrine DOC-2020-07 (questions and answers on the digital asset service providers regime). Some provisions were clarified; other provisions that were transitional or in force before May 1, 2021 were deleted. In particular, the AMF set out that entities registered as DASPs must ensure that the services they offer are based on digital assets. These services and the nature of the assets must be monitored. The AMF also clarified the notion of promotional communication in the context of digital assets and strengthened the substantive criteria used for authorizing DASPs by requiring the use of a language that French customers can understand on communication materials and complaint handling. If an application programming interface (API) is used, asset management companies must conduct an analysis of the services offered on digital assets. The AMF recalls that certain aspects of the DOC-2020-07 could be amended, considering legislative developments.

Read the article here.

European Supervisory Authorities (ESAs): Joint Report on the Withdrawal of Authorization for Serious Breaches of AML/CFT Rules

June 1, 2022

In the framework of the EU Council Action Plan on AML of 2018, the three European supervisory authorities (EBA, EIOPA and ESMA) have clarified certain aspects regarding the breach of AML/CFT standards. The report identifies areas for improvement and clarifies the notion of “serious breach” of AML/CFT rules. Thus, it advocates the adoption of rules at the EU level that would allow national competent authorities (NCAs) to decide whether to revoke licenses on the sole ground of a serious breach of AML/CFT rules. It also encourages NCAs to assess the adequacy of AML/CFT provisions and processes prior to granting any license.

Read the article here.

ESAs: Clarifications on the ESAs’ Draft RTS Under SFDR

June 2, 2022

The ESAs published a statement to provide clarifications on the draft RTS on disclosure requirements under SFDR and Taxonomy, which will be applicable as of January 1, 2023.

The clarifications cover key areas, including the use of ESG indicators, principal adverse impact (PAI) disclosures, financial product disclosures, direct and indirect investments, “do no significant harm” disclosures (DNSH), and disclosures for products with investment options.

Read the article here.

AMF: Response to the European Commission’s Public Consultation on ESG Ratings

June 2, 2022

The AMF published its response to the EC’s public consultation: it reiterated its position for a need to implement a European regulatory framework for providers of ESG data, ratings and related services.

This EU regulatory framework should not be limited to ESG ratings alone but should cover the entire range of nonfinancial data, ratings and services. The rules should include provisions to ensure transparency on methodologies, underlying data used and the objectives of the products. Conflicts of interest, internal control procedures and dialogue with ESG rated companies should also be regulated. Entities wishing to provide ESG ratings, data or services to EU market participants should operate via a permanent establishment based in the EU and be supervised by ESMA.

Read the article here.

ESMA: Final Report on EMIR RTS on the Commodity Derivative Clearing Threshold

June 3, 2022

The final report on EMIR RTS on the commodity derivative clearing threshold published by ESMA sets out that structural changes in the way the clearing threshold should be calculated are needed. To temporarily alleviate the impact of current energy prices on nonfinancial counterparties, ESMA proposes to amend the RTS to increase the clearing threshold (CT) for commodity derivates by EUR 1 bn, i.e., an increase of the commodity derivatives EMIR CT from EUR 3 bn to EUR 4 bn.

ESMA submitted its position on amending the RTS to the European Commission, with a view to adopting these changes in a delegated regulation.

Read the article here.

AFG: Response to the European Commission’s Public Consultation on ESG Ratings

June 8, 2022

AFG advocates the creation of European standards to regulate providers of financial and extra-financial data and ratings. These standards should cover the transparency of the methodologies used, the sources of information and the data obtained, and the costs related to the data. Other requirements would include a liability regime for conflicts of interest and market abuse, and an obligation for third-country providers to have a legal entity based in the EU. Finally, the AFG also pointed out that these new requirements should not lead to a standardization of rating methodologies.

Read the article here.

ESMA: Update of Its Report on Trends, Risks and Vulnerabilities

June 9, 2022

ESMA published its risk assessment update to take into account the Russian-Ukrainian crisis and the deteriorating economic environment. It notably highlights that funds and investors with exposure to Russia face valuation issues; that commodity prices and their derivatives are volatile; that inflation is weighing on performance, driving investors to take on more risk; and observes that crypto assets are volatile and recorded significant declines in value. The level of risk criticality therefore remains very high. Below is a table, from the ESMA report, summarizing the evolution of risks:

  AMF Updates – June 2022  

Read the article here.

FATF: Consolidated Assessment Ratings

June 9, 2022

Through its nine FATF-style regional bodies, the FATF has updated its assessment ratings of 205 jurisdictions that have implemented the FATF’s AML/CFT Recommendations. The assessment provides a summary table of the results of the FATF’s assessment on the effectiveness of the measures implemented by jurisdictions and their compliance with the FATF Recommendations.

This tool will enable asset management companies to update their geographical risk assessment in accordance with the AMF’s policy

Read the article here

AMF: Adoption of ESMA’s Guidelines on Suitability and Execution-Only Requirements Under MiFID II

June 9, 2022

The AMF published its position DOC-2022-03 to incorporate ESMA’s guidelines on “certain aspects relating to the suitability and execution-only requirements under MiFID II.” It will apply from October 12, 2022 for investment firms and asset management companies that provide an RTO service on behalf of third parties, or which receive and transmit orders. From that date, the AMF’s positions DOC-2013-02 and DOC-2017-08 on collecting “know-your-client” information will be abrogated.

EDPB: Proposition of a New Regulatory Framework on AML/CFT in Light of the GDPR

June 9, 2022

Following the European Commission’s proposal to adopt a new regulatory framework on AML/CFT in July 2021, the EDPB sent a public letter to the European institutions to clarify the issues and principles raised by the GDPR that need to be taken into account in the elaboration of this regulation. In particular, the rules governing the processing of personal data must be defined, additional safeguards must be provided for sensitive data, the sources of information used by stakeholders concerned by the regulation must be defined, etc. The EDPB requested to be involved in the European discussions on the development of the AML/CFT regulation (European legislation, RTS, guidelines and recommendations).

Read the article here.

AMF: Assessment on Money Market Funds (MMF) Between March 31, 2020 and March 31, 2021

June 10, 2022

Based on the MMF regulatory reports submitted by money market fund managers on March 31, 2022, the AMF updated its analysis of money market funds. It includes a number of graphs that show market trends, covering assets under management, weighted average life of assets (WAL), weighted average maturity of assets (WAM), liquidity buffer, performance, etc.

Read the article here.

ACPR-AMF: 2021 Annual Report

June 15, 2022

The ACPR-AMF Joint Unit published its annual report on 2021. This report outlined a context of uncertainty on markets savings, notably due to inflation, a drop in valuations and a rise in volatility. The main issues addressed in 2021 and to be dealt with in 2022 are financial scams, digitalization, sustainable finance, vulnerable persons and fees applicable to financial products.

Read the article here.

European Commission: Publication of The European Pilot Regime Regulation Regarding Market Infrastructures on Blockchain Technology

June 16, 2022

The EU regulation (EU) 2022/858 of May 30, 2022, on a pilot regime for market infrastructures, will enter into force in March 23, 2023 and apply to market infrastructures based on distributed ledger technology. With an initial duration of three years, it sets out regulatory exemptions to MiFID II and Settlement Finality Directive, and to the CSDR regulation on central securities depositories, to experiment with blockchains in the context of market activities. These exemptions only concern certain financial instruments with a cap on their market value.

Before the regulation comes into force, ESMA must amend the regulatory technical standards (RTS) of the MiFID and CSDR regulations and the EU member states must designate the competent national authorities on the subject, set up the procedures for granting authorizations and regulatory exemptions, and adapt national regulations.

Read the article here.

AFG: 2021 Annual Report

June 20, 2022

According to the AFG, 2021 was “a record year with indices increasing strongly and steadily” for the financial markets. A section is dedicated to extra-financial issues.

AMF: Application of The EU Regulation on Short Selling

June 21, 2022

The rules on short selling that have applied in France since 2011 have been replaced by the requirements set out in Regulation 236/2012. It establishes European transparency rules on net short positions. No significant changes are to be noted.

To prevent delivery defaults, the location requirements relating to securities subject to short selling have been strengthened. The purchase of sovereign credit default swaps without correlated exposure has been prohibited.

The competent authority must be notified when a legal or natural person holds a short position of 0.1% or more of a company’s share capital (the shares must be tradable on a European trading platform and the principal market of the share must be in Europe). Other disclosure requirements have been added to the regulatory framework. ESMA’s website provides a tool for companies to find the competent authority.

Council and European Parliament: Provisional Agreement on the Corporate Sustainability Reporting Directive (CSRD)

June 21, 2022

The European Council and Parliament reached a provisional agreement on the CSRD which sets out new rules on sustainability reporting by companies. It notably amends the 2014 non-financial reporting directive (NFRD) by introducing more requirements for nonfinancial disclosures and widening the scope of application. It will apply to all large companies* and all listed companies (including SMEs)** on regulated markets.

The implementation of the regulation is staggered as follows:

  • From January 1, 2024 for companies already subject to the NFRD
  • From January 1, 2025 for large companies that were not subject to the NFRD
  • From January 1, 2026 for listed SMEs

* A “large company” is any company that meets at least two of the following criteria: at least 250 employees, a net turnover of at least EUR 40 million and/or a balance sheet total of at least EUR 20 million.

** Only micro-companies that meet at least two of the following criteria are exempted from the obligations imposed by the CSRD: any company with a maximum of ten employees, a balance sheet total of EUR 350,000 and/or a maximum net turnover of EUR 700,000.

Read the article here.

AFG: Response to The Targeted Consultation on Digital Euro

June 22, 2022

The AFG responded to the European Commission’s consultation on the digital euro, a form of electronic money to be issued by the Eurosystem and accessible to all. The implementation of this currency is supported by the AFG. Funds would be able to invest in crypto assets issued by blockchains for which settlements would be made in digital euros, as would subscriptions and redemptions of fund units, which could be settled in this currency.

Read the article here.

European Commission: Entry into Force of the Transitional Regime of the PRIIPs Regulation for Undertakings for Collective Investment (UCIs)

June 24, 2022

The European supervisory authorities informed stakeholders that the European Commission has published the Delegated Act of March 17, 2022 in the Official Journal. The transitional regime of the PRIIPs Regulation provided for in Article 32, initially set until December 31, 2019, has been extended until December 31, 2022. Thus, UCITS subject to the transitional period are not subject to the PRIIPs KID until January 01, 2023. As of this date, a PRIIP KID will be deemed to meet the requirements of the UCITS KIID for retail investors. For other categories of investors, investment companies and UCITS management companies will be able to choose whether to provide a UCITS KIID or a PRIIPs KID.

Read the article here.

ESMA: Results of Its Call for Evidence on ESG Ratings

June 27, 2022

ESMA published a letter to the European Commission to provide its findings from the public consultation on ESG rating providers in the EU. The market was found to be immature but growing. A total of 59 ESG rating and service providers were identified in the EU.

Read the article here.

France Invest: Annual Study on the Net Performance of Private Equity in France

June 28, 2022

The report reveals that by the end of 2021, long-term performance is consolidated at a high level, showing that private equity would outperform other asset classes. However, the report does not consider the context of uncertainty due to the current geopolitical situation (Ukrainian crisis, inflation, increase in commodity prices, rise in interest rates, etc.); adjustments must therefore be made by stakeholders.

Read the article here.

Article 29 of the Energy and Climate Law Reporting

June 30, 2022

Companies subject to the ESG reporting obligation under Article 29 of the Energy and Climate Law had until June 30, 2022 to submit their reports to ADEME for the financial year 2021. This report must also be published on the website.

The AFG published a professional guide, updated in May 2022, on the Article 29 LEC reporting obligation.

Read the article here.

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