Posts by: Editorial Board

European Commission Adopts Delegated Regulation on RTS on Key Information Documents for PRIIPS

Posted on

On June 30, 2016, the European Commission adopted a Delegated Regulation and related annexes supplementing the Regulation on key information documents (“KIDs”) for packaged retail and insurance-based investment products (PRIIPs) (PRIIPs KID Regulation). The delegated act introduces RTS specifying the content and underlying methodology of the KIDs that will have to be provided to retail consumers when they buy certain investment products.

The RTS specify the exact contents of the KID, which must outline the product’s aims, how risky it is, when investors can get their money back, how much it costs and its expected returns. The information must be set out in a standard way, regardless of the type of investment product.

The European Parliament and Council now have a two-month scrutiny period, which they can extend for a further month, during which to consider the Delegated Regulation. If neither of them objects, it will enter into force 20 days after its publication in the OJ and it will apply from December 31, 2016.

European Commission Adopts Delegated Regulation on RTS Specifying Obligation to Clear Derivatives Traded on Regulated Markets and Timing of Acceptance for Clearing under MIFIR

Posted on

On June 29, 2016, the European Commission adopted a Delegated Regulation supplementing the Markets in Financial Instruments Regulation (“MiFIR”) with regard to RTS specifying the obligation to clear derivatives traded on regulated markets and timing of acceptance for clearing.

Under Article 29, ESMA was required to develop draft RTS to specify the requirements to ensure that cleared derivative transactions concluded on a trading venue or on a bilateral basis are submitted and accepted for clearing as quickly as technologically practicable using automated systems in order to facilitate clearing and trading certainty. The Commission’s Delegated Regulation is based on the draft RTS submitted by ESMA to the Commission in September 2015.

The RTS lay down requirements for the transfer of information, pre-trade checks and timeframes for the transfer of such information for cleared derivative transactions concluded either on a trading venue or on a bilateral basis. It also provides rules on the treatment of cleared derivative transactions which are not accepted for clearing by the CCP.

The Council of the EU and the European Parliament will consider the Delegated Regulation and if neither of them objects, it will enter into force 20 days after its publication in the OJ. It will apply from the date appearing in the second paragraph of Article 55 of MiFIR.

European Commission Adopts Delegated Regulation of RTS for Specifying Information to be Notified by Investment Firms, Market Operators and Credit Institutions under MIFID II

Posted on

On June 29, 2016, the European Commission adopted a Delegated Regulation supplementing the MiFID II Directive with regard to regulatory technical standards (RTS) specifying information to be notified by investment firms, market operators and credit institutions exercising their rights under the freedom to provide services or the freedom of establishment.

ESMA was required to develop an exhaustive list of information to be notified to the relevant competent authority by such investment firms and credit institutions under Articles 34(8) and 35(11) of MiFID II. The Commission’s Delegated Regulation is based on the draft RTS submitted by ESMA to the Commission in June 2015.

The purpose of the RTS are to provide certainty, clarity and predictability in the passport notification process for investment firms and to facilitate the review by competent authorities through the use of harmonized documents.

The Council of the EU and the European Parliament will consider the Delegated Regulation and if neither of them objects, it will enter into force 20 days after its publication in the Official Journal of the EU (OJ).   It will apply from the date appearing in the second sub-paragraph of Article 93(1) of the MiFID II Directive.

Rating Agency Developments

Posted on

On June 21, 2016, Fitch issued a report titled: Rating Non-Financial Corporates Above the Country Ceiling. Press release.

On June 20, 2016, Fitch issued a report titled: Canadian RMBS Loan Loss Model Criteria. Press release.

On June 17, 2016, Fitch issued a report titled: U.S. RMBS Surveillance and Re-REMIC Criteria. Press release.

On June 16, 2016, Fitch issued a report titled: Criteria for Rating U.S. Timeshare Loan ABS. Press release.

On June 16, 2016, Fitch issued a report titled: Criteria for Rating Caps and Limitations in Global Structured Finance Transactions. Press release.

SEC Approves IEX Proposal to Launch National Exchange, Issues Interpretation on Automated Securities Prices

Posted on

On June 17, 2016, the Securities and Exchange Commission (“SEC”) approved the application of Investors’ Exchange LLC (“IEX”) to register as a national securities exchange. Prior to transitioning its operation to a national securities exchange, IEX must satisfy certain standard conditions specified in the SEC’s order, such as “participating in a variety of national market system plans and joining the Intermarket Surveillance Group.”

Additionally, the SEC issued an updated interpretation to the Order Protection Rule under Regulation NMS. The SEC’s updated interpretation determined that a small delay or “speed bump” when accessing automated securities prices will not “prevent investors from accessing stock prices in a fair and efficient manner consistent with the goals of the Order Protection Rule.” Release.

SEC Proposes Rules to Modernize Property Disclosures for Mining Registrants

Posted on

On June 16, 2016, the Securities and Exchange Commission (“SEC”) announced that it had proposed rules to update the disclosure requirements for mining properties. The proposed revisions are meant to align disclosure requirements with “current industry and global regulatory practices and standards.” The proposed rules would, among other updates, revise Regulation S-K to include in a new subpart the SEC’s mining property disclosure requirements. The proposed rules would also rescind Industry Guide 7. Release.

ESMA Reminds Firms of their Responsibilities when Selling Bail-In Securities

Posted on

On June 2, 2016, ESMA issued a statement (ESMA/2016/902) reminding banks and investment firms of their responsibility to act in their clients’ best interests when selling bail-in-able financial instruments.  The statement clarifies how credit institutions and investment firms should apply the requirements under the Markets in Financial Instruments Directive (2004/39/EC) (MiFID) governing the distribution to clients of financial instruments subject to the BRRD resolution regime under the Bank Recovery and Resolution Directive (2014/59/EU).

The statement stresses that firms must comply with their obligations under MiFID and the importance of:

  • Providing investors with up-to-date, complete information drafted under the supervision of the compliance function.
  • Managing potential conflicts of interest, in particular, when a firm sells its own bail-in financial instruments directly to its customers (self-placement).
  • Ensuring the product is suitable and appropriate for the investor, which may entail collecting more in-depth information about the client than usual to reflect the fact a client could lose money without the firm entering into insolvency.

In an accompanying press release, ESMA explained that under the BRRD rules, which came into force in January 2016, firms are likely to issue a significant amount of potentially loss-bearing instruments to fulfil their obligations and raised its concern that investors (in particular retail investors) are unaware of the risks they may face when buying these instruments.

European Commission Adopts MiFIR Delegated Regulation on RTS on Access to Benchmarks

Posted on

On June 2, 2016, the European Commission adopted a Delegated Regulation supplementing the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR) with regard to regulatory technical standards (RTS) on access in respect of benchmarks (C(2016) 3203 final).

MiFIR provides for the non-discriminatory access for central counterparties (CCPs) and trading venues to licences of, and information relating to, benchmarks that are used to determine the value of some financial instruments for trading and clearing purposes.

The Delegated Regulation lays down the list of information to be provided to a trading venue or CCP, the conditions under which access must be granted as well as specifications on non-discriminatory treatment. It also sets out the standards for determining how a benchmark can be considered to be new, and hence benefit from transitory arrangements.

Following adoption of the Delegated Regulation by the Commission, it will be considered by the Council of the EU and the European Parliament. If neither of them objects, the Delegated Regulation states that it will enter into force 20 days after its publication in the Official Journal of the EU (OJ) and will apply from the date referred to in the fourth paragraph of Article 55 of MiFIR.

Commission Adopts Proposal to Incorporate ESAs into EEA Agreement

Posted on

On June 2, 2016, the European Commission published a press release announcing that it had adopted a proposal for a Council decision on the position to be taken by the EU on the incorporation of the Regulations on the European Supervisory Authorities (ESAs), and some of the related Regulations and Directives, into the Agreement on the European Economic Area (EEA).

The acts to be incorporated into the EEA Agreement include the ESAs Regulations (EBA, EIOPA and ESMA Regulations), the European Systemic Risk Board Regulation, the Alternative Investment Fund Managers Directive and related Delegated Acts, the Short Selling Regulation and related delegated acts, the European Markets Infrastructure Regulation (‘EMIR’) and the Credit Ratings Agency Regulations.

This is an important step towards the extension of the European System of Financial Supervision (ESFS) to the EEA EFTA countries: Norway, Iceland and Liechtenstein. The Commission explained that incorporating these acts into the EEA Agreement would ensure strong and co-ordinated financial supervision throughout the EEA.

Council of EU Adopts Regulation Extending Exemptions for Commodity Dealers under CRR

Posted on

On May 30, 2016, the Council of the EU published a press release confirming that it has adopted a Regulation amending the Capital Requirements Regulation (Regulation 575/2013) (CRR) to extend an exemption from certain requirements for commodity dealers.

The expiry date for the exemption of commodity dealers from large exposure requirements and from own funds requirements has been pushed back under the amending Regulation from December 31, 2017 to December 31, 2020.

The CRR requires the European Commission to prepare reports on the prudential supervision of commodity dealers and of investment firms in general. Since the review is still underway, it is likely that new legislation that may be required would only be adopted after the initial expiry date for the exemption. The purpose of the extension is therefore to provide commodity dealers with a stable regulatory environment in the meantime.

The European Parliament adopted the amending Regulation on May 11, 2016. It will enter into force 20 days after its publication in the Official Journal of the EU (OJ).