Fri, Nov 18, 2022

AMF AFG and ESMA Updates — July 2022

EBA: Updated Guidance on the Collection of Information on High Earners, Pay Practices and Gender Pay Gaps

July 1, 2022

The updated Guidance on the collection of information on high net worth individuals reflects the regulatory developments, in particular, the Capital Requirements Directive and Investment Firms Directive (IFD). They will apply from December 31, 2022: investment firms will be required to submit high-income data to the competent authorities in respect of the 2022 financial year by August 31, 2023.

The Guidance on benchmarking remuneration practices and pay inequalities under the IFD will apply to investment firms also from December 31, 2022 and will be required to submit data for the financial year 2022 to the competent authorities except for pay inequality data, which will relate to the financial year 2023.

Read the article here.

AFG: Guide for the Creation of a SICAV/SPPICAV Fund

July 1, 2022

The AFG has published the Guide for creating a SICAV/SPPICAV to provide the various steps required to set up a collective investment scheme (CIS) in corporate form (SICAV, SPPICAV, etc.). 
It should be noted that the creation of a SICAV must follow the rules of the Commercial Code, the Monetary and Financial Code, and the AMF General Regulation.

Read the article here.

AFG: AFG Responded to the IOSCO Consultation on Best Practices for ETFs

July 5, 2022

The Board of the International Organization of Securities Commissions (IOSCO) presented a report on ETF market practices worldwide and asked stakeholders for their feedback.

The AFG agreed in its response that IOSCO’s 2013 Principles for the Regulation of ETFs are still relevant and that the ETFs structure has shown to be resilient overall. In addition, it stated that it supported the proposed best practices, but as local regulations and markets are different, there should not be a “one-size-fits-all approach.”

Read the article here.

AFG: AFG’s Response to The European Commission’s Consultation on Money Market Funds

July 5, 2022

The AFG responded to the EC’s consultation on money market funds. It pointed out that the pandemic crisis was a “shock to money markets” and highlighted the importance of central banks’ actions and responses.

The AFG highlights two possible reform options:

  • “Allocate the cost of liquidity to redeemers”: The implementation of an anti-dilution method is advocated by the AFG; however, the operational characteristics should be considered. The AFG also advocates in favor of a liquidity fee.
  • “Improve liquidity on the asset side”: The AFG stated that the success of enhancing liquidity on the asset side lies fundamentally with the underlying money markets’ smooth functioning.

The AFG favors asset managers providing a daily list of essential metrics to national competent authorities (NCAs) in periods of stress and NCAs and asset managers continuing to provide stress tests to ESMA.

Read the article here.

ACPR: Dialogue Strengthened by the EU’s New Digital Space

July 6, 2022

A new online space called the EU Digital Finance Platform ( has been created to improve cooperation and dialogue between European supervisory authorities and firms in the fintech ecosystem. This initiative is part of the European Union Digital Finance Strategy. The aim is to increase access to digital financial services. 

In 2023, new functionalities should be added based on users’ feedback.

Read the article here.

AMF: The AMF Publishes a Summary of Its SPOT Inspections on the Theme of Best Execution in Asset Management Companies

July 7, 2022

The AMF conducted a SPOT inspection on best execution and best selection obligations. MiFID required investment firms to act in compliance with the “best execution” rule. The AMF General Regulation, the Monetary and Financial Code, and the Delegated Regulation (EU) No. 231/2013 require similar and “reasonable” actions to be taken in respect of collective investment management activities, depending on whether they are UCITS or AIF.

The AMF selected five asset management firms with different activities and order placement methods. The inspection focused on the following:

  • The completeness of the best execution and best selection policy and procedures
  • Due diligence criteria for selection of brokers and trading venues
  • The monitoring procedures covering best execution, best selection and brokers
  • The policy review criteria
  • The client information obligations
  • The control environment

The AMF report highlights the “good” and “bad” practices observed during the inspections, which may or may not strengthen compliance with the best selection and best execution rules.

The AMF stresses that asset management firms must improve their best selection/execution policies and procedures and also their broker selection and monitoring procedures.

Read the article here

AMF: The AMF Publishes Its 2022 Markets and Risk Outlook

July 8, 2022

The AMF has issued its annual review of vulnerabilities and trends. The Russian invasion of Ukraine and the re-emergence of health risks are leading to increased financial and economic risks, as well as high inflation, volatility and rising commodities prices. 

Asset prices have seen a “sharp correction,” and although valuations are still high for some segments, prices are volatile. For this reason, a market correction is not to be ruled out.

Furthermore, it is mentioned that asset management has shown resilience regarding the sanctions adopted against Russia and the Russian countermeasures.

According to the AMF, the level of leverage of alternative investment funds was limited, which did not justify the implementation of Article 25 of AIFMD concerning the possibility of capping leverage in the event of excessive risk-taking.

In addition, the Russian invasion of Ukraine has resulted in a high cyber risk for financial market participants.

The AMF highlights a key challenge, the “funding of the energy transition,” as it implies investments and limited profitability.

Read the article here.

ESMA: ESMA Reminds Stakeholders of Prospectus Supervision Under EU Ukraine War Sanctions

July 8, 2022

ESMA has published a public statement on the supervision of prospectuses in light of EU sanctions due to the Russian invasion of Ukraine. 

ESMA advocates that the EU sanctions constitute a sufficient basis for national competent authorities to refuse approval of a prospectus based on clarity provided by the European Commission regarding the implementation of the EU sanction.

Read the article here.

ESMA: ESMA Consults on Regulatory Technical Standards Under the Benchmarks Regulation

July 8, 2022

The objective of the consultation is to align the information received regarding third-country recognition especially ensuring that the application includes all relevant information.

As such, ESMA suggests the following changes:

  • Transfer the supervisory responsibility over third-country-recognized administrators to ESMA
  • Request further information on some information already part of the RTS

After considering the responses and amending the RTS, ESMA will submit a final draft to the EU Commission for adoption.

Read the article here.

ESMA: ESMA Reviews MiFID II Product Governance Guidelines

July 8, 2022

The product governance requirements for firms manufacturing and distributing financial instruments and structured deposits, introduced by MiFID II, have proven to be essential for investor protection. These firms are required to act in the clients’ best interests throughout the investment product’s life cycle and to identify and review the “target market of end clients” for each product.

ESMA has opened a consultation on the proposed changes to the current guidelines, mainly relating to the following:

  • The specification of any sustainability-related objectives 
  • The practice of identifying a target market per cluster of products instead of per individual product
  • The periodic review of products, including the application of the proportionality principle

The consultation closes on October 7, 2022, with an expected final report in Q1 2023.

Read the article here.

ESMA: ESMA Reviews Clearing and Derivatives Trading Obligations Under the Benchmark Transition

July 11, 2022

ESMA has published a consultation paper introducing draft Regulatory Technical Standards (RTS) to amend the previous RTS on the “clearing obligation (CO) and the derivative trading obligation (DTO).” 

The key points of the proposal are:

  • For the CO, introduction of the overnight index swap (OIS) class referencing TONA (JPY)
  • For the CO, expansion of the maturity in scope of the clearing obligation for the OIS class referencing SOFR (USD)
  • For the DTO, introduction of certain classes of OIS referencing STR (EUR), which have shown increased liquidity

AMF: Summary of the SPOT Inspection Campaign Conducted on Market Abuse Prevention Systems in Asset Management Companies

July 13, 2022 

The AMF has published its summary of SPOT inspections on the anti-market abuse regime in asset management companies (AMCs). The inspections covered the period from 2018 to October 2021 and were conducted at five AMCs that are representative of the industry. The audits focused on the following areas:

  • Organization and governance of the system
  • Procedures
  • Systems
  • Measures for monitoring and detecting suspicious transactions
  • The internal control system (permanent and periodic)

The AMF has defined best practices, including: 

  • The body of procedures should be maintained up to date and define the types of weak signals of potential market abuse, the scope of the tools used to detect suspicious transactions, and rules and thresholds for triggering alerts. The procedures should also define the control system and include personal transactions in the scope of the conflict-of-interest management system.
  • The system for monitoring and detecting suspicious transactions should be strengthened regarding controls and alerts. 
  • Investment and disinvestment decisions should be formalized in the minutes of dedicated committees.
  • Meetings between managers, representatives of issuers and senior clients should be monitored and considered in the alert investigation process.
  • The risks of market abuse should be included in the asset management firm’s risk mapping concerning regulatory, criminal and reputational risks. 
  • Ongoing controls should be at least annual and include both market abuse and related processes (investment process, reporting of thresholds, etc.).

Anti-Fraud: The AMF Participates in the New Prevention Guide of the National Task Force

July 19, 2022

At the start of the pandemic in 2020, government departments and supervisory authorities, including the AMF and the ACPR, set up a national task force to combat scams and fraud. The task force has published an updated prevention guide to help individuals and businesses detect and protect themselves from fraudulent proposals.

The task force members have proposed prevention sheets to help detect and avoid fraudulent propositions concerning bank check scams, General Data Protection Regulation (GDPR) scams and Personal Training Account (CPF) scams. The sheets on savings and credit scams covering notably fake money transfer orders and fraudulent donation appeals have been updated.

Furthermore, the task force stressed the importance of remaining vigilant about purchases or subscriptions to services promoted on social networks.

Read the article here.

ESMA and EBA: Guidance on the Assessment of Suitability of Members of the Management Body and Key Posts Under the CRD and MiFID II

July 19, 2022

Per Regulation 1093/2010/EU, national competent authorities must inform the EBA and ESMA whether they comply or intend to comply with the Guidance on the assessment of the suitability of members of the management body and individuals in key positions. In this context, the EBA and ESMA have published a table showing the compliance of each national competent authority, including the AMF, the ACPR and the CSSF, with these Guidelines.

The ACPR declared itself noncompliant, particularly concerning the assessment of the suitability of certain key functions (CFO and internal controller), as this assessment is not explicitly provided for in the provisions of the CRD or French law. The ACPR applies the provisions of the Monetary and Financial Code that define the suitability requirements for management bodies. Similarly, the AMF has declared itself noncompliant on the grounds that neither the CRD IV nor MiFID II contains provisions on the appointment, renewal and evaluation of key functions. As for the CSSF, it indicated that it tries to comply with the Guidelines as far as the legal and regulatory provisions allow.

Read the article here.

ESMA: ESMA Publishes Annual Peer Review of EU CCP Supervision

July 19, 2022

ESMA has published its report on the peer review of NCAs’ supervisory practices regarding the “authorization and supervision” of EU central counterparties (CCP). This report is to be published annually in accordance with EMIR.

The report states that the analysis of the CCP colleges’ functioning is generally positive and that participating NCAs have fulfilled “supervisory expectations.”
It was also noted that CCPs were able to explain the scope of risk-based “penetration testing” and how remote access risks are tackled. In addition, ESMA advises to consider “extreme scenarios” in which remote working would allow business continuity.

The report includes 10 best practices on NCAs’ supervisory approaches and activities.

Read the article here.

ESMA: New Q&As Available

July 19, 2022

ESMA has updated its Questions and Answers on the following:

  • MiFIR data reporting: ESMA has introduced Question 1, 2 and 3 of section 19 concerning the reporting of emission allowances.
  • MiFID II and MiFIR market structures topics: ESMA has updated Question 33 on algorithmic trading and automated order managing, updated Question 34 on compliance with algorithmic trading requirements, and introduced a new question 35 on trading venues for setting up instrument level trading hours at subset instrument level.
  • SFTR data reporting: ESMA has introduced two new questions:
    • 13 on construction of the trade state report by Trade Repositories
    • 14 regarding reporting valuation and collateral on the last day of an SFT and for overnight transactions.

Read the article here.

ESMA: ESMA and EBA Publish Guidelines to Harmonize the Supervisory Review and Evaluation Process of Investment Firms

July 21, 2022

ESMA and the European Banking Authority (EBA) have published guidelines setting out “common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.” 

The SREP is a supervisory tool that allows authorities to have an overview of the risk profile, business model, sustainability, and viability of firms. The SREP guidelines detail the criteria and process for assessing certain SREP elements, in particular, “business model, governance arrangements, firm-wide controls, risks to capital and capital adequacy, liquidity risk and adequacy.”

The “criteria for the assessment of risks” in the guidelines are consistent with the requirements of the Investment Firms Directive and the Investment Firms Regulation (IFD/IFR).

Read the article here.

AMF: The AMF and the ARPP Are Stepping up Their Cooperation to Promote Clear and Responsible Advertising of Financial Products

July 21, 2022

The AMF and ARPP (Autorité de régulation professionnelle de la publicité) have amended their partnership agreement to include crypto-assets, services on crypto-assets, and the practices of social network influencers in the investment field. 

Priority projects for 2022 and 2023 include updating ARPP’s recommendations on financial and investment products and services, which will include the AMF’s policy on sustainable finance communications, updating its recommendations on leveraged financial contracts and atypical investments, and drafting ARPP’s recommendations on communications relating to crypto-assets and token offerings.

Read the article here.

Enforcement: The AMF Enforcement Committee Fines a Depositary for Breaches of Its Professional Obligations

July 25, 2022

The AMF Enforcement fined a credit institution €500,000 in addition to issuance of a warning. The breaches for failure to exercise proper depositary control, as well as irregular and deficient monitoring of cash flow, were committed between 2016 and 2019 on the provision of depositary bank services provided to UCITS and AIF. The decision may be appealed.

Read the article here.

AMF: Sustainability Requirements in the Distribution of Financial Instruments: Update on Upcoming Legislation and Its Implementation Dates

July 25, 2022

The Delegated Regulation (EU) 2021/1253, amending directive MiFID II, came into force on August 2, 2022. It set out the integration of sustainability factors, risks and preferences into organizational requirements for Investment Service Providers (ISPs) from the beginning of August 2022.

Delegated Directive (EU) 2021/1269 requires the integration of suitability factors and objects concerning product governance requirements for ISPs by November 22, 2022.

A French framework derogating from MiFID II applies to Financial Investment Advisers (FIAs) and applies certain rules like those applicable to ISPs. The AMF proposed in its public consultation of May 2022 to apply sustainability requirements to FIAs under certain conditions. The AMF suggested that the new requirements should apply from January 2023.

ESMA has also launched public consultations in January and July 2022 on the review of its guidelines on suitability assessment requirements and product governance requirements.

Read the article here.

AFG: Publication of the Delegated Regulation Consolidating the RTS SFDR in the Official Journal of the European Union (OJEU)

July 26, 2022

The Commission Delegated Regulation (EU) 2022/1288, which complements Regulation (EU) 2019/2088 (SFDR), has been published. Its application date is set for January 1, 2023.

This Commission Delegated Regulated covers the content and presentation of information on the principle of “do no significant harm”; the methodology, content and presentation of information regarding “adverse sustainability impacts” and “sustainability indicators”; and the content and presentation of information concerning “sustainable investment objectives” and “the promotion of environmental or social characteristics” in reports, on websites and in pre-contractual documents.

Read the article here.

AFG: AFG’s response—Consultation on the Financial Action Task Force (FAFT) Revision of Recommendation 25

July 26, 2022

Recommendation 25 (R.25) on transparency and beneficial ownership (BO) of legal arrangements was reviewed by the Financial Action Task Force (FATF) to strengthen the recommendation and prevent the improper use of legal mechanisms related to money laundering or terrorist financing. A public consultation was held, and the AFG responded. It indicated that it would support a trust register as it exists in France, in which trustees declare to the tax authorities the events impacting the trust and the value of the trust’s “property, rights and proceeds.” 

The AFG mentioned that registers are the “best way” to get accurate information and address the non-transparency of trusts.

Read the article here.

AMF: Crypto-Asset Markets: Agreement Reached on the European Crypto-Assets Regulation (MiCA)

July 27, 2022

Provisional agreement has been reached on the draft Regulation on markets in crypto-assets (“MICA”). This Regulation is intended to “regulate crypto-assets that are not covered by existing regulations on financial instruments.” It will establish a harmonized EU framework and replace existing national frameworks, including the French “Loi Pacte.”

The key aspects of the regulation:

  • All financial institutions will need to obtain an authorization, except for credit institutions.
  • The regulation covers utility tokens, asset-referenced tokens (stable coins referencing multiple underlying) and e-money (stable coins referencing one fiat currency—replacing fiat currency in payment).
  • The regulation imposes capital requirement for firms in scope.
  • The requirements vary based on the nature of services provided.

Non-fungible tokens (NFTs) are not concerned by this regulation.

The AMF expressed its satisfaction with the development of an appropriate framework for the cryptocurrency market. The Council and the European Parliament still have to approve this provisional agreement.

Read the article here.

AMF: AMF’s Response to the International Sustainability Standards Board’s Consultation on the Exposure Drafts on International Sustainability Disclosures

July 27, 2022

The AMF responded to the International Sustainability Standards Board (ISSB) consultation and supported the initiative to establish “global baseline standards for sustainability disclosures.” The AMF also stressed the importance of “convergence and consistency” between international and European standards, namely those being developed by the European Financial Reporting Advisory Group (EFRAG).

The AMF mentions that ISSB should implement a “double materiality approach” to consider stakeholders’ needs and interests. In addition, the AMF states that the ISSB shall cover a wide range of ESG topics.

The AMF also highlighted some major points that would help achieve “interoperability” in the EU, such as the importance of defining the “boundaries of sustainability” and ensuring consistency of concepts. Moreover, certain elements should be reviewed, such as the transition plans definition and the presentation of emission offset, to ensure coordinated and quality reporting.

Read the article here.

AMF: AMF’s Response to the EFRAG Consultation on the Draft European Sustainability Reporting Standards

July 27, 2022

The AMF welcomes the European Financial Reporting Advisory Group (EFRAG) initiative to create standards that cover a wide scope of ESG issues and implement a “double materiality approach.”

The AMF also encourages EFRAG to collaborate with the International Sustainability Standards Board (ISSB) in the interest of international interoperability. Moreover, the AMF believes that there should be more “prioritisation of disclosure requirements,” as “disclosure overload” could lead to a decrease in the quality of information. Thus, the AMF believes the solution is to progressively introduce the requirements or “optionality” into the reporting requirements.

In addition, the AMF points out that materiality is central to “corporate financial and sustainability reporting,” as it helps to limit information overload and ensure that investors only receive “material information.” Therefore, the AMF suggests that EFRAG create guidelines to help firms introduce materiality assessments in sustainability information and ensure that materiality analysis is a key part of the reports. The AMF also proposed to EFRAG to ensure harmony with European legislations.

Read the article here.

ESMA: ESAs Issue Report on the Extent of Voluntary Disclosure of Principal Adverse Impact Under the Sustainable Finance Disclosure Regulation

July 28, 2022

Article 18 of the Sustainable Finance Disclosure Regulation (SFDR) requires EBA, EIOPA and ESMA (the European Supervisory Authorities, “ESAs”) to report annually “on best practices and make recommendations towards voluntary reporting standards.” Accordingly, the three ESAs issued an indicative and non-exhaustive overview of best practices of voluntary disclosures and less good voluntary disclosures. Recommendations were based on the survey conducted by the national competent authorities (NCAs) on voluntary disclosures (Article 4 (1) point (a) of SFDR).

The ESAs provided examples of best practices, such as disclosing information on the website and ensuring its visibility. 

Read the article here.

AMF: Public Consultation on the End of Life of Private Equity Funds Intended for Retail Investors

July 28, 2022 

The AMF has launched a public consultation on the end of life of private equity funds (FPCIs, FIPs and FCPRs) intended for retail investors. The AMF has noted an increase in the number of reports to the AMF and number of cases referred to the ombudsman due to the failure of investment management companies to comply with the end of life of these funds. The aim is to amend the applicable regulatory framework. The 19 proposed amendments cover the framework for liquidation transactions, information for unitholders, and AMF oversight with a six-monthly report on the status of liquidation of funds that have exceeded their lifetime, etc.

Read the article here.

ESMA: ESMA Launches Call for Evidence on Pre-hedging

July 29, 2022

ESMA has published a “Call for Evidence on pre-hedging.” This document describes pre-hedging and explains the arguments for and against the practice to understand whether it may be covered under the Market Abuse Regulation (MAR) and MiFID/MIFIR. It also aims to promote discussion between market participants on this topic. Finally, the document will enable ESMA to create guidance on the practice.

Pre-hedging is not defined in European Union law. ESMA states that pre-hedging “takes place when a dealer acting as principal undertakes a trade in anticipation of a client order in order to manage the risk associated with a possible trade stemming from that order.” ESMA further clarifies that pre-hedging may indeed be covered by the scope of insider trading in certain situations.

One of the main arguments against pre-hedging is that it may involve risk of market abuse. An argument in favor is that it can reduce market risk.

Read the article here.

AFG: Response to the ISSB Consultation on Extra-Financial Standards

July 29, 2022

The AFG responded to the ISSB’s consultation on sustainability reporting. It expressed its support for the initiative to establish global standards for sustainability disclosures and suggested the following:

  • Establish a working group to establish dialogue on improving compatibility across jurisdictions regarding sustainability disclosures.
  • Consider the “double materiality” encouraged by the European Commission. Also, ensure that the scope of disclosure covers all ESG topics, not just “climate-related information.”
  • Include mandatory indicators in the requirements, such as the “Principal Adverse Impacts” of the Sustainable Finance Disclosure Regulation, to allow firms to comply with their regulatory requirements.
  • Distinguish between certain terms related to transition plans and carbon offsets, such as “emissions offsetting” and “GHG emissions reduction targets,” in the Exposure Draft.
  • Define “sustainability-related” financial information, “material” and “significant” in the Exposure Draft.

Read the article here.

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