Charles Sheldon

Senior Associate

London

csheldon@orrick.com

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 public and private M&A, equity capital markets, private equity, venture capital, renewable energy and corporate governance.

Charlie frequently acts in the energy, technology and media sectors and is experienced in working with a range of clients, from large private and listed corporates, institutional investors and fast growing technology startups. Charlie advises on a variety of matters including acquisitions and disposals, public takeovers, direct listings and admissions on the London Stock Exchange, SPAC transactions, corporate restructurings, investments and corporate governance.

Posts by: Charles Sheldon

European Commission Adopts Delegated Regulation on RTS on Risk Mitigation Techniques for Uncleared OTC Derivative Contracts under EMIR

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On October 4, 2016, the European Commission adopted a Delegated Regulation supplementing EMIR (the Regulation on OTC derivatives, CCPs and trade repositories) (Regulation 648/2012) with regulatory technical standards (“RTS”) on risk mitigation techniques for uncleared OTC derivative contracts, together with related Annexes (C(2016) 6329 final).

The Delegate Regulation sets out the levels and types of collateral that OTC derivatives counterparties must exchange bilaterally if the transaction is not cleared through a central counterparty (“CCP”). In the event that one counterparty to the transaction defaults, the margin collected will protect the non-defaulting counterparty against resulting losses.

The Joint Committee of the European Supervisory Authorities (ESAs) submitted the final draft RTS to the Commission in March 2016. In July 2016, the Commission informed the European Banking Authority that it intended to endorse the draft RTS with some amendments, including in relation to the concentration limits for pension scheme arrangements and the timeline for.

The Council of the EU and the European Parliament will now consider the Delegated Regulation. If neither of them objects to it, the Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the EU.

ESMA Issues Final Guidelines on Inside Information and Commodity Derivatives under MAR

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On September 30, 2016, the European Securities Markets Authority (“ESMA“) published final guidelines (ESMA/2016/1412) on information relating to commodity derivatives disclosable under the Market Abuse Regulation (Regulation 596/2014) (“MAR“).

Article 7(5) of MAR requires ESMA to issue guidelines to establish a non-exhaustive list of information that is reasonably expected or required to be disclosed in accordance with legal or regulatory provisions in EU or national law, market rules, contract, practice or custom, on the relevant commodity markets or spot markets.

ESMA expects market participants, investors and regulators to take the list of examples provided in the guidelines into account when assessing whether information is “inside” information. It should be noted that other conditions of the definition not covered by the new guidelines should also be taken into account.

ESMA also explains that the guidelines do not create any further information disclosure requirements, as the concept of “required to be disclosed” refers to existing or future disclosure requirements (such as, under national law), independent of the guidelines.

National competent authorities (“NCAs“) have two months from the issuance of the different language versions of the guidelines to confirm whether or not they intend to comply with them. If a NCA does not comply or does not intend to comply, it will have to inform ESMA, stating its reasons.

ESMA consulted on the guidelines in March 2016 (ESMA/2016/444).

ESMA Consults on SFT Regulation and Amendments to EMIR RTS

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On September 30, 2016, ESMA published a consultation paper (ESMA/2016/1409) on draft regulatory technical standards (“RTS“) and draft implementing technical standards (“ITS“) implementing the Regulation on reporting and transparency of securities financing transactions ((EU) 2015/2365) (the “SFT Regulation“).

The SFT Regulation will require market participants to report details of securities financing transactions (“SFTs“) to an approved EU trade repository (“TR“). The main issues addressed are:

  • RTS and ITS procedure and criteria for registration as a TR;
  • RTS and ITS on the use of internationally agreed reporting standards, the reporting logic and main aspects of the structure and content of SFT reports;
  • RTS requirements relating to transparency of data, data collection, aggregation and comparison; and
  • RTS on access levels for different competent authorities.

ESMA also proposes amendments to existing technical standards implementing requirements relating to TRs under the European Markets Infrastructure Regulation (“EMIR“). ESMA states that the amendments are needed to ensure a level playing field for market participants in respect of registration and access rules. ESMA is consulting on the following:

  • consolidated amended text of RTS on registration of TRs under EMIR; and
  • amendments to RTS on access levels under EMIR.

The consultation will close on November 30, 2016. ESMA will use the feedback it receives to finalize its draft technical standards, which are to be submitted to the European Commission for endorsement by the end of Q1 or beginning of Q2 2017. It is expected that the finalized implementing measures will become applicable from 2018.

EBA Provides Final RTS and Guidelines on the Definition of Default under CRR

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On September 28, 2016, the European Banking Authority (“EBA“) published final reports on the documents relating to the definition of default under Article 178 of the Capital Requirements Regulation (Regulation 575/2013) (“CRR“):

  • Guidelines on the application of the definition of default under Article 178 (EBA/GL/2016/07) – the guidelines clarify all aspects related to the application of the definition of default, which is used for the purpose of both the internal ratings based approach (IRB approach) and for the standardized approach. The guidelines apply from January 1, 2021, although the EBA is encouraging firms to implement relevant changes in their internal procedures and IT systems before that date.
  • Draft regulatory technical standards (RTS) on the materiality threshold for credit obligations past due under Article 178 (EBA/RTS/2016/06) – Article 178 specifies that a default shall be considered to have occurred when an obligor has past more than 90 days on any material credit obligation to the firm, the parent undertaking or any of its subsidiaries. The draft RTS, which were mandated by Article 178(6) of the CRR, specify the conditions according to which a competent authority should set the materiality threshold for credit obligations that are past due.

The EBA has also published a report setting out the results of a qualitative and quantitative impact study (“QIS“) that assessed the impact on the regulatory capital requirements of selected policy options to harmonize the definition of default. The EBA states that the results of the QIS are the basis for the impact assessment carried out on the guidelines and the draft RTS.

The EBA consulted on these draft RTS and guidelines in October 2014 and September 2015 respectively (see Legal updates, EBA consults on draft RTS on materiality threshold of credit obligation past due and EBA consults on draft guidelines on application of default definition under CRR). According to an EBA press release, they form part of the EBA’s broader regulatory review of the internal ratings based (IRB) approach announced in February 2016.