On September 12, the Federal Reserve Board approved final amendments to the liability provisions of Regulation CC to reflect the changes in the check collection system from one that is paper-based to one that is now virtually all electronic. Release.
Following the publication of product intervention measures by ESMA in relation to contracts for difference (“CFDs“) earlier this year, the Financial Conduct Authority (“FCA“) has provided a statement in relation to high risk investments and retail clients.
The FCA noted in its statement that it would work with European regulators (including ESMA) to observe the alternative speculative product market, in particular where retail clients are involved, in order to ensure ESMA’s measures are not being avoided by replacing CFDs with other similar products.
The FCA stated that firms “should pay particular attention to the leverage made available to retail clients and consider whether the product is offered on terms that act in the best interests of the client”.
The full statement is available here.
A paper was jointly published by AFME and ISDA on July 30, 2018 which considered the potential contractual continuity issues which may influence OTC derivative contracts following Brexit.
As has been widely discussed, Brexit will bring an end to the single market passport. The passport currently allows regulated activities to be carried out by the UK in EU countries without additional local licenses. This however will no longer be in place following Brexit. Given that a number of contracts will have been entered into prior to Brexit and will continue thereafter, there is a risk that entities may be carrying out regulated activities in other jurisdictions without having the relevant local licensing requirements in place following Brexit.
The report, the full version of which is available here, looks at possible solutions both for UK entities, as well as regulators, in order to minimize disruption following Brexit.
The European Commission (“EC“) published an open letter to EIOPA and ESMA on August 1, 2018. The letter sought technical advice in relation to sustainable finance, in particular technical advice relating to legislation.
The letter, the full version of which is available here, outlines that the European Commission adopted a package of measures on sustainable finance on May 24, 2018, however they are seeking advice in relation to the possible amendment of legislation such as UCITS, MiFID II and Solvency II.
The aim of the letter, and the possible changes proposed therein, is to incorporate sustainability risks in the decisions taken and processes applied by financial market participants.
The letter asks that EIOPA and ESMA provide their insight by April 30, 2019.
On July 18, 2018, the SEC issued final rules to amend Rule 701, increasing from $5 million to $10 million the threshold in excess of which the issuer is required to deliver additional disclosures to investors. Release.
A letter from the European Commission Vice President was published on June 22, 2018 which sought to clarify the exemption found in Article 2(1)(j) of the MiFID II Directive (the “Exemption“).
The Exemption states that the regulated activities of dealing on own account and providing investment services in relation to commodity derivatives will be exempt from the rules contained in the MiFID II Directive provided that the activities are “ancillary” to the main business.
The letter, addressed to Steven Maijoor, stated that in establishing if the Exemption applies, the MiFID activities that the person is engaged in will be compared with the commercial activities of the person or group which the person forms. This therefore accounts for varying commercial structures whereby business activities of a group may be separated into different legal entities.
The full letter explaining the Exemption and when this applies, is available here.
The International Capital Markets Association (“ICMA“) published an open letter to Jean-Claude Juncker and Theresa May on June 22, 2018. In the letter the ICMA outlined concerns around potential “cliff-edge risks” which may arise upon the UK leaving the EU.
Some of the issues highlighted in letter include data-sharing, restrictions on cross-border fund management and the continuity of contracts. The ICMA states that it is unfeasible for companies to account for the various potential issues. They also explain that many of the risks highlighted in the letter cannot be resolved by unilateral decisions and will require both the EU and UK to take action.
The ICMA requests either the grandfathering of cross-border financial contracts between the EU and UK following Brexit or a separate agreement addressing the various potential risks.
The full letter is available here.
The ICE Benchmark Administration (“IBA“) released issue 5 of the LIBOR code of conduct on June 19, 2018. This document is intended to provide guidance as to the appropriateness of LIBOR as a benchmark rate in agreements, whilst also setting out a framework under which banks are to operate.
The publication of the code of conduct follows the draft version which was circulated in April 2018 and is available here. The code of conduct supersedes the previous issue.
On May 23, 2018, Moody’s published an updated methodology for rating central clearing houses, replacing the one from September 11, 2017. Release.
On May 21, 2018, the President signed into law a bipartisan Congressional resolution disproving a rule in the form of guidance issued by the Bureau of Consumer Financial Protection about indirect lender compliance with the Equal Credit Opportunity Act.
