Financial Services Regulation and Compliance - Investment Firms September 2022

Domestic

Statistical Release - Special Purpose Entities Statistics Q2 2022

On 8 September 2022, the CBI published a statistical release regarding special purpose entities. The CBI collects this comprehensive information on Irish-resident special purpose entities engaged in securitisation activity. The data details stock and transactions on a quarterly basis, with information on the scale, composition, geographical and sectoral exposures of vehicles’ assets and liabilities. An accompanying press release details headline observations derived from the most recent quarterly data. This data is transmitted to the Central Statistics Office (CSO) and the ECB to feed into Irish and euro area balance of payments and national accounts statistics. The data also feeds the measurement of shadow banking based on Financial Stability Board definitions.

European

Public statement to investment firms on the impact of inflation in the context of investment services to retail clients

On 27 September 2022, the European Securities and Markets Authority (ESMA) published a statement reminding firms to consider inflation and inflation risk when applying relevant MiFID II requirements in the interest of investor protection.

ESMA noted that rising interest rates and growth in inflation is impacting households in daily life and in their investment decisions. The authority issued the statement to remind firms of relevant MiFID II requirements as it believes that investment firms may play a role in considering inflation and inflation risk, both when manufacturing and distributing investment products and when providing investment services to retail clients. 

ESMA and the national competent authorities will continue to closely monitor financial markets and their participants in the interest safeguarding the stability of the EU's financial system by enhancing the protection of investors and promoting stable and orderly financial markets.

ESMA publishes report on the DLT pilot regime

On 27 September 2022, ESMA published its report on the distributed ledger technology pilot regime (DLT Pilot). In the report, ESMA provides guidance on certain technical elements and makes recommendations on compensatory measures on supervisory data to ensure a consistent application by DLT market infrastructures from the start of the regime.

The report presents ESMA’s proposed way forward and includes the feedback received following a call for evidence launched in January and a workshop held in March 2022. ESMA concludes that there is no need to amend the RTS on transparency and data reporting requirements before the DLT pilot starts applying in March 2023.

Final Report - Guidelines on certain aspects of the MiFID II suitability requirements

On 23 September 2022, ESMA published its final report on guidelines on certain aspects of the MiFID II suitability requirements. The assessment of suitability is one of the most important requirements for investor protection in the MiFID framework. It applies to the provision of any type of investment advice, whether independent or not, and to portfolio management.

The main amendments introduced to the MIFID II Delegated Regulation and reflected in the guidelines on the topic of sustainability are:

  • Information to clients on the sustainability preferences – firms will need to help clients understand the concept of sustainability preferences and explain the difference between products with and without sustainability features in a clear manner and avoiding technical language.
  • Collection of information from clients on sustainability preferences – firms will need to collect information from clients on their preferences in relation to the different types of sustainable investment products and to what extent they want to invest in these products.
  • Assessment of sustainability preferences – once the firm has identified a range of suitable products for client, in accordance with the criteria of knowledge and experience, financial situation and other investment objectives, the firm shall identify the product(s) that fulfil the client’s sustainability preferences.
  • Organisational requirements – firms need to give staff appropriate training on sustainability topics and keep appropriate records of any sustainability preferences of the client, if appropriate, and of any updates of these preferences.

ESMA conducted a public consultation on these guidelines to gather the views of relevant stakeholders. The final report includes a feedback statement summarising the responses received and highlighting the amendments and clarifications introduced in the final guidelines to consider the feedback received during this consultation. The guidelines will now be translated into the official languages of the EU and published on ESMA's website. National competent authorities must notify ESMA whether they comply or intend to comply with the guidelines within two months of publication.

Sanctions imposed in response to the crisis in the Ukraine

Since February, the EU imposed a number of sanctions in response to the crisis in the Ukraine. Given that the crisis is developing and sanctions are continuing to evolve, the CBI is publishing details of new restrictive measures/sanctions that are adopted in this regard, as well as any associated EU/UN guidance, on their dedicated webpage.

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

Date published: 17 October 2022