Delegated Regulation

European Commission Adopts Delegated Regulation on RTS on Detailed Records of Financial Contracts under BRRD

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On June 7, 2016, the European Commission adopted a Delegated Regulation supplementing the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD). The Delegated Regulation deals with the regulatory technical standards (RTS) on a minimum set of the information on financial contracts that should be contained in the detailed records, together with the circumstances in which the requirement should be imposed (C(2016) 3356 final).

Following submission of draft RTS by the EBA in December 2015, the Commission is entitled, under Article 71 of the BRRD, to adopt delegated regulations which highlight the methodology for assessing the value of assets and liabilities of institutions or entities. The draft RTS state that, should the relevant conditions for resolution be satisfied, an institution must maintain detailed records of financial contracts where it is foreseen that resolution actions would be applied to the institution concerned. The Annex accompanying the Delegated Regulation highlights the minimum list of information on financial contracts.

It is now for the Council of the EU and the European Parliament to consider the Delegated Regulation. Subject to any objection, it will enter into force 20 days after its publication in the Official Journal of the EU (OJ).

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

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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.

European Commission Adopts Delegated Regulation on Presentation of Investment Recommendations and Disclosure of Conflict of Interest Under MAR

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The European Commission has adopted a Delegated Regulation supplementing the Market Abuse Regulation (“MAR“) with regard to regulatory technical standards for the technical arrangements for the objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflict of interest (under Article 20).

The Delegated Regulation provides for rules on the identity of producers of recommendation; introduces a general standard on objective presentation of recommendations, applicable to any person mentioned in Article 20(1); sets out requirements on the maintenance of records of all recommendations produced on any issuer or financial instrument and disseminated during the preceding 12-month period and determines the general standards and additional obligations relating to disclosure of interests or of conflicts of interest. It also ensures that recommendations include the date and time on which the recommendation was first disseminated and provides for specific arrangements for dissemination of recommendations, their summary or extract and when recommendations are substantially altered.

Once approved by the Council of the EU and the European Parliament, it is expected that the Delegated Regulation will apply from July 3, 2016. The Delegated Regulation can be found here.

Bank Recovery and Resolution Directive; Exceptions to “Bail-In” of Liabilities

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On February 4, 2016, the European Commission adopted a Delegated Regulation (C(2016) 379) which (taking into account advice given by the European Banking Authority in March 2015) specifies where exclusion from the application of write-down or conversion powers is allowed under Article 44(3) of the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD).

The BRRD’s bail-in tool gives a resolution authority the power to bail in all the liabilities of a firm in resolution, subject to exclusions specified in Article 44 of the BRRD. In exceptional circumstances, Article 44(3) permits the resolution authority to exclude certain liabilities from the scope of the bail-in tool, if certain conditions are met. The Commission has the power under Article 44(11) to adopt a delegated act specifying the circumstances in which exclusions from the bail-in tool are necessary under Article 44(3).

The Delegated Regulation:

  • Lays down common rules to be applied whenever a resolution authority considers excluding a liability from the application of the bail-in tool under Article 44(3).
  • Clarifies when a liability can be excluded from bail-in based on the impossibility of bailing-in that liability within a reasonable timeframe.
  • Lays down the elements to determine the reasonable time after which a liability can be excluded from bail-in.
  • Clarifies when a liability can be excluded from bail-in based on the need to preserve certain critical functions and core business lines, to avoid widespread contagion or to avoid value destruction.

The Council of the EU and the European Parliament are now considering 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.

Delegated Regulation Adopted Under Market Abuse Regulation

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On February 26, the European Commission adopted a Delegated Regulation supplementing the Market Abuse Regulation (No. 596/2014) (“MAR“) laying down regulatory technical standards on accepted market practice.

MAR defines “accepted market practice” as a specific market practice that is accepted by a competent authority of a member state (Article 3(1) MAR). ESMA is required to develop draft regulatory technical standards specifying the criteria, procedure and requirements for establishing an accepted market practice and the requirements for maintaining or terminating it or modifying the conditions for its acceptance. The Delegated Regulation provides for a list of “supervised persons” for the purposes of the Delegated Regulation, and lays down requirements for establishing an accepted market practice.

The Council of the EU and European Parliament are expected to review and consider the Delegated Regulation. Provided there are no objections the Delegated Regulation will apply from July 2, 2016.

European Commission Adopts Delegated Regulation on Obligations of Depositaries Required by UCITS V

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The European Commission has adopted a Delegated Regulation (C(2015) 9160) supplementing the UCITS IV Directive (2009/65/EC) on the obligations of depositaries.

The Delegated Regulation sets out provisions relating to issues including:

  1. Minimum requirements for the contract between the management company or the investment company and the depositary (Article 2);
  2. Obligations on the depositary relating to oversight, due diligence, segregation and insolvency protection (Articles 3 to 17);
  3. The conditions and circumstances in which financial instruments held in custody are considered to be lost (Articles 18 and 19); and
  4. Independence requirements for management companies, investment companies, depositaries and third parties to whom the safekeeping function has been delegated (Articles 20 to 24).

The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulation. If neither the Council nor the Parliament object to the Regulation, it will be published in the Official Journal of the EU and enter into force on the 20th day following its publication.