Charlie Sheldon

Associate

London


Read full biography at www.orrick.com

Charlie has a broad range of corporate experience and advises clients on cross-border and domestic transactions in the areas of M&A, private equity, venture capital, renewable energy, corporate governance and restructuring.

Charlie frequently acts in the energy, technology and media sectors and is experienced in working with a range of clients, from large corporates, institutional investors and fast growing technology startups on a variety of matters including acquisitions and disposals, public takeovers, corporate restructurings, investments and corporate governance.

Posts by: Charles Sheldon

European Commission’s Review of Consumer Rights Directive

 

The European Commission has published the results of its evaluation of the Consumer Rights Directive (2011/83/EU) (“CRD“).

The evaluation found that the CRD had positively contributed to the functioning of the business-to-consumer internal market and had ensured a high common level of consumer protection across member states of the EU. Areas for improvement were also highlighted. READ MORE

Council of EU Presidency Compromise Proposal on Proposed Regulation Amending CCR

 

The Council of the EU has published the final Presidency compromise proposal on the proposed Regulation amending the Capital Requirements Regulation (Regulation 575/2013) (“CRR“) as regards the transitional period for mitigating the impact on its own funds of the introduction of International Financial Reporting Standard 9 (“IFRS 9“) and the large exposures treatment of certain public sector exposures denominated in nondomestic currencies of member states.

The European Parliament issued a resolution for the adoption of IFRS 9 in September 2016, and in November 2016 the European Commission, as part of its legislative proposals to revise the CRR and the CRD IV Directive (2013/36/EU), suggested transitional arrangements to mitigate the effect of the introduction of IFRS 9 on Common Equity Tier 1 capital resulting from the impairment requirements of IFRS 9. The EBA published an opinion on transitional arrangements and credit risk adjustments due to the introduction of IFRS 9 in March 2017.

ESMA Consults on Guidelines on CCP Conflicts of Interest Management Under EMIR

 

On June 1, 2017, ESMA published a consultation paper (ESMA70-151-291) on guidelines relating to central counterparties (“CCPs“) management of conflicts of interest.

ESMA explains that the European Market Infrastructure Regulation (“EMIR“) only contains generic provisions relating to CCPs’ conflict of interest management. It requires CCPs to act in the best interests of their clearing members and the clients. Therefore, CCPs need to have in place robust organizational arrangements and policies to prevent potential conflicts of interest and to solve them if they occur. ESMA believes that further guidance would be beneficial and further facilitate supervisory convergence on this area.

The purpose of the guidelines is to set out the criteria CCPs should apply to avoid or mitigate the risks of conflicts of interest and to ensure a consistent implementation across CCPs. Areas addressed by the guidelines include:

  • written arrangements to identify and manage any potential conflicts of interest between CCPs, clearing members and clients;
  • where written arrangements are not sufficient, disclosure of conflicts of interest to the clearing member or clients before entering into any new transactions; and
  • possible conflicts with a CCP’s parent undertaking or subsidiary.

The consultation will close on August 24, 2017, upon which ESMA will consider the feedback received to the consultation. ESMA expects to publish a final report on the guidelines by the end of 2017.

EIOPA Publishes Guidance on Authorization and Supervision in Light of Brexit

 

On May 25, 2017, it was reported on Reuters that the European Insurance and Occupational Pensions Authority (“EIOPA“) is to publish guidance directed to national regulators on the principles for authorization and supervision to ensure that they do not undercut one another in their attempts to attract firms moving from London due to Brexit. EIOPA is monitoring developments in this area and will publish guidance in due course.

According to Reuters, the European Securities and Markets Authority (“ESMA“) is also to publish guidelines on this issue before the summer. ESMA’s chairman has said it has discussed the potential risks of new “letter box” companies being set up in the EU, which would delegate key operations to group companies in London. ESMA warns that these arrangements could undermine stability.

European Commission Passes Delegated Regulation on Exempted Entities Under EMIR on Derivatives, Central Counterparties and Trade Repositories

 

On March 2, 2017, the European Commission (the “Commission“) adopted a Delegated Regulation amending the European Market Infrastructure Regulation (“EMIR“) with regard to the list of exempted entities (C(2017) 1324 final).

EU central banks and public bodies tasked with managing and intervening in public debt are exempted from EMIR. As per article 1(6) of EMIR, the Commission is empowered to adopt delegated acts in accordance with Article 82 to amend the list of entities to which EMIR will not apply.

The Commission has accordingly assessed the treatment of central banks and public bodies managing public debt by a number of third countries where the implementation of OTC derivative reforms were sufficiently advanced, or which had specifically requested an assessment. As part of the process, the Commission consulted the six jurisdictions under assessment to gather information on their legal frameworks with respect to OTC derivatives and on the treatment, within those frameworks, of central banks and public bodies charged with or intervening in the management of the public debt. The Commission also consulted the Expert Group of the European Securities Committee, comprising member state representatives.

The Commission has concluded that central banks and public bodies charged with or intervening in the management of the public debt from Australia, Canada, Hong Kong, Mexico, Singapore and Switzerland should be exempt from the clearing and reporting requirements set out in EMIR. Article 1 of the Delegated Regulation therefore amends article 1(4)(c) of EMIR to add the central banks and public bodies of these jurisdictions to the list of exempted entities under EMIR. The Commission has previously exempted from EMIR the central banks and public bodies charged with or intervening in the management of the public debt in Japan and the United States of America

The Delegated Regulation will enter into force 20 days after it has been published in the Official Journal of the EU (OJ).

ESMA Publishes Final Report and Delegated Regulation Containing Final Draft RTS on Package Orders Under MIFID II

 

On February 28, 2017, the European Securities and Markets Authority (“ESMA“) published a final report on final draft Regulatory Technical Standards (“RTS“) on the treatment of package orders under Article 9(6) of the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“). Included in the report, ESMA has published a draft Commission Delegated Regulation supplementing MiFIR with regard to package orders. The draft Delegated Regulation is based on ESMA’s final draft RTS.

Article 9(6) of MiFIR requires ESMA to draft RTS to establish a methodology for determining whether there is a liquid market for a package order as a whole, assessing in particular whether packages are standardized and frequently traded.

ESMA consulted on an earlier draft of the RTS between November 2016 and January 2017. The final report presents a revised version of the draft RTS that takes into account the feedback received to the consultation. Annex I to the final report provides a detailed feedback summary.

The majority of respondents supported ESMA’s proposed methodology based on qualitative criteria that are characteristic for packages that are standardized and frequently traded. ESMA has decided to take forward this methodology as it continues to believe it is superior to a methodology relying on quantitative criteria. The chosen approach identifies package orders that are liquid as a whole based on general criteria (that is, criteria that identify standardized and liquid package orders across asset classes) as well as asset-class specific criteria (that is, criteria that reflect specificities of package orders traded in different classes of derivatives).

However, to accommodate respondents’ concerns that the qualitative approach would also consider potentially illiquid strategies within the concept of package orders that have a liquid market, ESMA has further refined the qualitative criteria and, in particular, enriched the approach by further asset-class specific criteria.

ESMA intends to provide guidance in the form of Q&As on the application of the systematic internalizer (“SI“) obligations under article 18 of MiFIR in the context of package orders. In the consultation, ESMA proposed to apply the SI obligations at the package order level where an investment firm is an SI in at least one component instrument of the package order. Around half of respondents agreed with this proposal. The other half of respondents disagreed and considered that the SI obligations should only apply where an investment firm is an SI in all components of the package. ESMA has indicated that it will be guided by the consultation responses received in relation to this issue as it decides on the appropriate approach.

ESMA also received various questions from respondents requesting more guidance on the application of pre- and post-trade transparency for package orders in general (that is, beyond the scope of the RTS on package orders). It intends to clarify these issues through Q&As in the coming months.

ESMA submitted the final report and final draft RTS to the European Commission on February 27, 2017. The Commission has three months to decide whether to endorse the draft RTS.

Bank of Tokyo-Mitsubishi UFJ and MUFG Securities Fined by PRA

 

On February 9, 2017, the Prudential Regulation Authority (“PRA“) issued a notice imposing fines of £17.75m and £8.925m on Bank of Tokyo-Mitsubishi UFJ (“BTMU“) and MUFG Securities EMEA (“MUFG“), respectively, for failing to be open and cooperative. The fines related to enforcement action by the New York Department of Financial Services (“NYDFS“) against both BTMU and MUFG, following which the PRA deemed that the two banks were in breach of the PRA Fundamental Rules.

In particular, it was deemed that they had breached Fundamental Rule 6, which states “a firm must organize and control its affairs responsibly and effectively,” and Fundamental Rule 7, which outlines “a firm must deal with its regulators in an open and cooperative way and must disclose to the PRA appropriately anything relating to the firm of which the PRA would reasonably expect notice.”

It was found by the PRA that BTMU failed to put in place appropriate procedures, systems and controls for communicating information relating to the NYDFS action, and failed to deal with the PRA openly following it. This was despite the action being linked to BTMU’s conduct in New York.

MUFG was fined by the PRA for a similar offense, as it was deemed to have not been open and cooperative in relation to a NYDFS investigation into an individual at the firm. It was deemed that the PRA had not been informed in a timely manner and was therefore deprived the opportunity to rule on the fitness of the individual.

This is the first time the PRA has issued a fine in breach of Fundamental Rules 6 and 7, and this sends out a warning that the PRA should be informed of any sanctions by the regulator in a timely manner, irrespective of the jurisdiction of the regulator.

The full notice is available here.

ESMA Issues Report on Distributed Ledger Technology

 

On February 7, 2017, the European Securities and Markets Authority (“ESMA“) published a report regarding distributed ledger technology (“DLT“).

DLT is a developing technology that has the potential to significantly alter and bring a number of benefits to securities markets. These benefits include, among others, enhanced efficiency in post‑trade processes, enhanced reporting and reduced costs. With these prospective benefits, however, come potential risks and legal questions.

ESMA has therefore issued a report that summarizes its position on DLT, with a note that it will continue to monitor this dynamic technology and consider whether a regulatory response may become a necessity.

The full report is available here.

ESMA Publishes Guide on Major Holdings Notifications

 

On February 3, 2017, a guide was published by ESMA that looked at major holdings notifications under the Transparency Directive. The Transparency Directive established a minimum level of information that needed to be provided to the public in relation to securities across the EU, and the recently issued guide discusses requirements that vary from country to country within the EEA and will assist readers in establishing the different requirements.

The guide, which is available here, summarizes the national requirements in relation to making and publishing notifications of major holdings.

The Financial Services Aspects of the Brexit White Paper

 

On February 2, 2017, the Department for Exiting the European Union, the department of the UK government tasked with extricating the UK from the EU, published a white paper on the UK’s exit from and new partnership with the EU. The white paper contains further detail on the UK government’s approach to financial services in sections 8.22 to 8.26.

The white paper states that the UK government will target the following aims in its negotiations with the EU in respect of the financial services sector:

  • Achieving the “freest possible trade” in financial services between the UK and EU member states.
  • Establishing strong co-operation and oversight arrangements with the EU, reflecting the interconnectedness of financial markets. The paper suggest that the UK will continue to support and implement international financial standards.
  • Negotiating on the UK’s future status and arrangements with regard to EU agencies, including the European Supervisory Authorities (ESAs) (that is, ESMA, EIOPA and the EBA).
  • Agreeing on a “phased process of implementation” to allow for the UK and the EU to prepare for the new arrangements that will apply following the UK’s departure from the EU. It is suggested that the phased process might relate to the future legal and regulatory framework for business. In any event, the UK government will take steps to mitigate the impact on economic and other functions, including passing legislation if necessary.

The UK government argues that factors such as the UK’s legal system, language and infrastructure will help to ensure that it remains a preeminent global financial center after the implementation of Brexit.

Further to the publishing of the white paper, the Financial Markets Law Committee published a letter on February 3, 2017, addressed to Andrew Tyrie, Treasury Select Committee chair, commenting on the UK’s financial services industry in the context of the UK’s withdrawal from the EU. The letter has been written in response to the Committee’s inquiry on the UK’s future economic relationship with the EU. The letter notes that post-Brexit, the UK will lose access to the European single market in financial services and will become a third country from the perspective of EU law. The letter notes that there are serious uncertainties as to the conditions that the UK and regulators will have to satisfy as a third country. As such, staged transitional arrangements negotiated well in advance of the UK’s withdrawal from the EU will be valuable in promoting legal certainty and minimizing disruption.