Financial Services Regulation and Compliance - Investment Firms November 2022

Domestic

CBI MiFID firms webpage updated for forms for MiFID firms

On 9 November 2022, the CBI has updated its MiFID firms webpage to include a specific page for forms for MiFID firms on 9 November 2022. The webpage now includes all forms relevant to MiFID investment firms.

European

Annual Report 2022 on the application of waivers and deferrals

On 22 November 2022, the ESMA published its annual report on waivers and deferrals. In the report, ESMA provides a picture of the European trading landscape in 2021, encompassing the net effect of Brexit and the relocation process from the UK to the EU.

The report's key findings and recommendations are as follows:

  • Trading under waivers and deferrals is significant in the EU, specifically for shares and interest rate derivatives. In addition, trading volumes, both in terms of total turnover and in the number of transactions, have significantly increased from 2020 to 2021 for equity instruments as a consequence of Brexit.
  • For the analysis on non-equity instruments, ESMA identified a number of significant issues in the data received via the ad-hoc data collection exercise. In light of this, the analysis of non-equity instruments is limited to the trading activity under waivers and deferrals. Taking note of these data quality issues, ESMA included a recommendation in the report to amend MiFIR to allow ESMA to request data on the use of waivers and deferrals via the financial instruments transparency system (FITRS) also for non-equity instruments.
  • Finally, ESMA included other recommendations such as streamlining the current deferral regime via a targeted set of amendments, deleting the SSTI waiver and deferral for non-equity instruments, and increasing the pre- and post-trade transparency LIS threshold for exchange-traded funds.

ESMA consults on rules for passporting for investment firms under Markets in Financial Instruments Directive (MiFID II)

On 17 November 2022, the ESMA announced that it is seeking input on the review of the technical standards under Article 34 of MiFID II, covering the provision of investment services across the EU.

The main amendments proposed add the following items to the information that investment firms are required to provide at the passporting stage:

  • the marketing means the firm will use in host Member States
  • the language(s) for which the investment firm has the necessary arrangements to deal with complaints from clients from each of the host Member States in which it provides services
  • in which Member States the firm will actively use its passport as well as the categories of clients targeted
  • the investment firm’s internal organisation in relation to the cross-border activities of the firm

Lately, ESMA and NCAs have noted the continued increase in cross-border activities to retail clients provided under the MiFID II free provision of services regime. This increase results from several factors, including the development of the single market and the digitalisation of financial services, which further facilitates firms to provide services across borders. The pandemic has also created conditions that contributed to an increase in retail investors’ exposure to securities markets, including cross-border.

EBA publishes final technical standards on the measurement of liquidity risks for investment firms

On 15 November 2022, the EBA published its final regulatory technical standards (RTS) on specific liquidity measurement for investment firms under the Investment Firms Directive (IFD). These RTS will ensure that all competent authorities follow the same harmonised approach when adopting the decision to impose further liquidity requirements to an investment firm. 

In particular, competent authorities will have to assess:

  • all elements specific to each service provided by the investment firm under the Markets in Financial Instruments Directive (MiFID)
  • other elements that could have a material impact, such as external factors, group structure, operational or reputational risks

For small and non-interconnected investment firms, competent authorities are expected to assess only a limited set of those elements. This aims at preserving the proportional approach envisaged by the IFR and IFD.

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 13 December 2022