Financial Services Regulation and Compliance - Investment Firms Aug 2020

DOMESTIC          

FAQ for regulated firms: Can MiFID investment firms continue to pay distributions and variable remuneration in the current circumstances?

The CBI has updated its COVID-19 Q&A for regulated financial service providers, with a focus on MiFID investment firms. The CBI noted that the impact of COVID-19 on MiFID firms is uncertain and that such firms should exercise a high degree of caution when considering making any distributions on dividends, or giving irrevocable consent to making dividend distributions or buying back shares.

MiFID firms should be highly certain of their forecasts of costs and projected revenues should they wish to make a distribution, and should engage with the CBI before proceeding. MiFID firms should take the same approach in relation to variable remuneration policies if they are subject to CRR/CRD IV. The CBI referred to the ESRB recommendation on distributions of 27 May 2020, and to the fact that MiFID firms are "medium-high" on the CBI's PRISM risk assessment system, meaning they should exercise strong restraint from making any distributions until 1 January 2021.

Markets Update, Issue 8 2020

The CBI has published issue 8 of its Markets Update for 2020. In domestic news, this issue focuses on the payment of distributions by investment firms, outlined above, and touches on the findings of last month's inspection of investment firms' compliance with consumer protection guidelines when selling complex investment products or engaging in unregulated activities. Internationally, the issue focused on a multitude of ESMA updates, as discussed below.

EUROPEAN

ESMA agrees position limits under MiFID II

The European Securities and Markets Authority (ESMA) published 12 opinions on 6 August 2020, which address position limits for commodity derivatives under MiFID II.

ESMA agreed with the proposed position limits and found they are consistent with the objective of MiFID II for the following categories:

  • the EEX Panamax Freight contracts
  • the EEX Capesize TC5 Freight contracts
  • the EEX Capesize C7 Freight contracts
  • the EEX Supramax TC10 Freight contracts
  • the EEX NCG Gas contracts
  • the EEX GPL Gas contracts
  • the EEX CEGH-VTP Gas contracts
  • the EEX PSV Gas contracts
  • the EEX PEG Gas contracts
  • the ICE Endex Italian Power Base contracts
  • the ICE Endex German Power Base contracts
  • the ICE Endex NGC Gas contracts

ESMA issues latest double volume cap data

On 7 August 2020, ESMA updated its public register with the latest set of double volume cap (DVC) data under MiFID II. The update includes DVC data and calculations for the period 1 July 2019 to 30 June 2020 as well as updates to already published DVC periods.

There were 56 new breaches in total, of which 33 were equities for the 8% cap, applicable to all trading venues, and 23 were equities for the 4% cap, which applies to individual trading venues. Trading under the waivers for all new instruments in breach of the DVC thresholds should be suspended from 12 August 2020 to 11 February 2021. The instruments for which caps already existed from previous periods will continue to be suspended. As of 7 August 2020, there is a total of 309 instruments suspended.

ESMA postpones entry into force of RTS on the settlement discipline regime for the Central Securities Depositaries Regulation

ESMA has definitively postponed the date of entry into force of the Regulatory Technical Standards (RTS) on settlement discipline regime for the Central Securities Depositaries Regulation until 1 February 2021.  This postponement is due to the impact of the Covid-19 pandemic on Central Securities Depositaries and a wide range of market participants.

ESMA publishes list of thresholds for shareholder identification

ESMA has published a document listing the thresholds above which shareholders can be identified in the various Member States of the European Union. 

The document contains information provided by national competent authorities setting out:

  • national thresholds for shareholder identification in Member States that have established such a threshold
  • relevant national legislation and rules
  • the Member States where the revised Shareholder Rights Directive has not yet been transposed into national law

For more information on these topics please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 4 September 2020