Financial Services Regulation and Compliance - Investment Firms June 2019
DOMESTIC
Speech by Michael Hodson, Director of Asset Management and Investment Banking of the CBI on "Scanning the Horizon: A Regulatory Perspective"
On 13 June 2019, Director of Asset Management and Investment Banking Michael Hodson delivered a keynote speech at a Financial Services Ireland and City of London Dialogue event. The director delivered remarks about how the CBI aims to future proof its regulatory approach. The CBI is conducting a thematic review on investment research under MiFID II. An industry letter will be issued in the coming months in relation to compliance, risk, audit services, specific trends and changes such as the market activity in Ireland. The director examined growth of wholesale and the CBI's engagement with institutions. The CBI intends to develop a framework for wholesale market conduct supervision over the coming months which will be used as a guide for supervision of conduct in supervisory markets.
The Director also spoke about the CBI's increasing focus on:
- sustainability and addressing climate related financial risks
- monitoring operational resilience of firms in relation to IT risks
- data and reporting
EUROPEAN
ESMA launches a Common Supervisory Action (CSA) with NCAs on MiFID II appropriateness rules
On 3 June 2019, ESMA launched a CSA which will be run in the second half of 2019 to focus on the correct application of MiFID II by assessing compliance with the appropriateness requirements of a sample of investment firms under ESMA supervision in conjunction with NCAs.
ESMA now intends to issue supervisory guidance on pre-trade transparency and the price determination process of FBAs.
ESMA and NCA's in EU 27 launch common supervisory action on securities selling
On 3 June 2019, ESMA announced that it plans to review how national competent authorities apply regulatory requirements applicable to securities selling in the EU.
ESMA updates MiFID II Q&As on Transparency Issues
On 4 June 2019, ESMA provided clarification on some issues regarding the following area:
- the mandatory systematic internaliser regime
- the voluntary SI regime
- quoting obligation for SI in non-TOTV instruments
ESMA issues latest double volume cap data under MiFID II
On 7 June 2019, ESMA updated its public register with the latest set of double volume cap (DVC) data under MiFID II. The update included DVC data and calculations for the period from 1 May 2018 to 30 April 2019, as well as updating already published data. There have been 40 new breaches in this period and as of 7 June; there are a total of 275 instruments currently suspended.
ESMA to address regulatory concerns over Frequent Batch Auctions (FBA)
On 12 June 2019, ESMA published its final report on FBAs under MiFID II and MiFID. The report identifies four main characteristics of FBA trading systems;
- limited pre-trade transparency
- short auction duration
- price determination within the best bid and offer price
- self-matching features
Questions and Answers - Implementation of the Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (EMIR) (ESMA70-1861941480-52)
On 13 June 2019, ESMA published an updated questions and answers document relating to EMIR. The questions relate to specificities of the EMIR trade reporting obligation and the clearing threshold under EMIR.
ESMA updates register of derivatives to be traded on-venue under Markets in Financial Instruments Regulation (MiFIR)
On 13 June 2019, ESMA updated the public register of those derivative contracts that are subject to the trading obligation under MiFIR.
The register provides clarity to market participants on the application of the trading obligation under MiFIR and in particular on:
- the classes of derivatives subject to the trading obligation
- the trading venues on which those derivatives can be traded
- the dates on which the obligation takes effect per category of counterparties
EU Commission Delegated Regulation (EU) 2019/979 and 2019/980
On 21 June 2019 EU Commission Delegated Regulation (EU) 2019/979 and EU Commission Delegated Regulation (EU) 2019/980 were published in the Official Journal of the EU. EU Commission Delegated Regulation (EU) 2019/979 relates to:
- regulatory technical standards on key financial information in the summary of a prospectus
- the publication and classification of prospectuses
- advertisements for securities
- supplements to a prospectus
- the notification portal
EU Commission Delegated Regulation (EU) 2019/980 addresses the format, content, scrutiny and approval of prospectuses. Both Delegated Regulations will apply from July 21, 2019.
ESMA publishes updated results of the annual transparency calculations for equity and equity-like instruments under MiFID II
On 21 June 2019, ESMA published updated results of the annual transparency calculations for equity and equity-like instruments.
The updates results show 1,379 liquid shares and 370 liquid equity-like instruments other than shares, subject to MiFID II/MiFIR transparency requirements.
EU Commission Delegated Regulation (EU) 2019/1011 of 13 December 2018 amending EU Commission Delegated Regulation (EU) 2017/565 published
On 21 June 2019, the EU Commission Delegated Regulation (EU) 2019/1011 of 13 December 2018 amending the EU Commission Delegated Regulation (EU) 2017/565 with regards to certain registration conditions to promote the use of Small and Medium Enterprise (SME) growth markets for the purposes of Directive 2014/65/EU of the European Parliament and of the Council was published in the Official Journal of the EU.
The Delegated Regulation sets out the requirements an SME issuer must meet to qualify as an SME and to trade its securities. These include: that the free float requirement can be expressed either as an absolute value or as a percentage of the total issued share capital and the free float requirement is only applicable to the first admission of the shares to trading (that is, an IPO).
A non-equity issuer can now qualify as an SME if the nominal value of its debt issuances over the previous calendar year, on all trading venues across the EU, does not exceed €50m.
ESMA ceases renewal of product intervention measure relating to binary options
On 1 July 2019, ESMA announced their decision not to renew the temporary prohibition on the marketing, distribution or sale of binary options to retail clients in the EU. ESMA had taken product intervention measures regarding binary options, but this was not renewed as most NCAs introduced permanent measures that are at least as stringent as ESMA's measures. Thus, ESMA had no need to renew the measures and they expired on 1 July 2019.
For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.
Date published: 10 July 2019