Euro shorts 19.06.15 including mi fid ii and esma launches new strategy
Legal shorts 13.09.13
1. Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services
industry.
If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
AIFMD: Remuneration guidance
The FCA has published draft guidance on the AIFMD remuneration rules, which is designed to
assist firms in interpreting ESMA’s guidelines on sound remuneration policies. The guidance
confirms that the FCA will substantively comply with ESMA’s guidelines and sets out the FCA’s
proposed approach in relation to three key issues, namely: (i) the manner in which the FCA
intends to apply the remuneration rules on the basis of AIFMD proportionality provisions; (ii) the
application of the remuneration rules to LLPs; and (iii) the requirements for provisions equivalent
to the remuneration rules to be applied to delegates of UK AIFMs. Comments on the consultation
are invited by 6 November 2013.
FCA quarterly consultation (CP13/9)
The FCA has published its second quarterly consultation inviting comments on its proposed
amendments to the FCA Handbook. The amendments include: (i) changes to COLL 10 to
incorporate ESMA guidelines on ETFs and UCITS; (ii) changes to SYSC 19B, by adding several
guidance provisions on the AIFMD remuneration code and ESMA guidelines; (iii) changes to EG
11 to reflect the FCA’s powers under domestic legislation relating to EMIR; (iv) changes to PR 5
to clarify the timing and method of filing a prospectus with the FCA; and (v) changes to Training
and Competence to add four new qualifications to the appropriate qualifications list and amend
the details of three existing qualifications. Comments are invited either by 6 October 2013.
FCA: Competition and conduct regulation
The FCA has published a new webpage relating to its statutory objective to promote effective
competition in the interests of consumers. It has also published a speech by Christopher Woolard
focussing on this and conduct regulation, in which he stated that the FCA’s goal was to achieve
orderly and competitive financial markets and outlined the actions the FCA intends to take in
relation to competition. He added that the FCA will be proactive about encouraging competition
and will also be active in investigating where it identifies competition issues and will attempt to
2. address issues before they become entrenched problems. The FCA will be carrying out a
wholesale strategic review on competition from spring 2014.
EMIR
The FCA has published a statement on broker-operated systems trading physically settled gas and
power forwards. According to the statement, physically settled gas and power forwards that are
traded on MTFs are financial instruments for the purposes of MiFID and OTC derivatives or
OTC derivative contracts for the purposes of EMIR. The FCA is also in discussions with the
relevant brokers requiring that they review their systems to ensure clear distinctions between the
MTF and non-MTF services they provide. Any changes required to differentiate between their
MTF and non-MTF services following this review must be implemented by 16 December 2013.
G20: Financial services and shadow banking declarations
The G20 has published a declaration following the recent G20 summit setting out the agreements
reached by the G20 on a number of financial sector issues, including: systemic risk and too big to
fail, Basel III, cross border issues in relatin to derivatives trading, benchmarks and money
laundering and terrorist financing. The G20 has also published a declaration that it has agreed on
a roadmap to progress strengthened oversight and regulation of shadow banking. The roadmap
consists of a timeline of tasks for each of IOSCO, the Financial Stability Board (FSB) and the
Basel Committee on Banking Supervision. The European Commission has also published the
final version of its Communication on shadow banking.
Insider dealing regulation
The European Parliament has passed a legislative resolution adopting at first reading the
Commission's proposal for a new regulation on insider dealing and market manipulation (MAR).
There are a number of amendments to the original proposal from the Commission, including: (i)
identifying categories of behaviour that will not give rise to a presumption of insider dealing,
including the legitimate activities of market makers; (ii) introducing a safe harbour for market
soundings provided certain conditions are met; (iii) reinstating the concept of accepted market
practices in the context of market manipulation; (iv) new provisions relating to the content and
maintenance of insider lists; and (v) new requirements for issuers to make insiders aware of their
responsibilities under the market abuse regulation.
Money market funds regulation
The European Commission has published final versions of its proposed Regulation on money
market funds (MMFs), together with an impact assessment and executive summary. The aim of
the Regulation is to ensure that MMFs can better withstand redemption pressure in stressed
market conditions, by enhancing their liquidity profile and stability. It is envisaged that the
proposed Regulation could be directly applicable throughout the EU towards the end of 2014.
3. Financial Transaction Tax (FTT)
The legal advisors to the Council of Ministers of the EU have provided a (non-binding) opinion
concluding that the FTT would go beyond Member States’ legal powers. The opinion vetoes the
FTT, which proposes to impose levies on financial transactions, and includes a challenge to the
‘residence principle’. Quoted highlights include a conclusion that the definition of where a group
is established exceeds Member States’ jurisdictions for taxation, a comment that the FTT is not
compatible with EU treaties by infringing on the tax competence of non-participating Member
States and a finding that the provision was discriminatory and likely to lead to distortion of
competition to the detriment of non-participating Member States. Germany has responded,
however, by advocating a swift introduction of the FTT, saying that the legal concerns must be
cleared up and dispelled as quickly as possible.
MiFID
ESMA has published a list of responses it has received to its July 2013 consultation on draft RTS
on information requirements for the assessment of acquisitions and increases in holdings in
investment firms under MiFID. Respondents include the following: IMA, ECVA, the European
Fund and Asset Management Association (EFAMA) and the European Federation of Financial
Advisers and Financial Intermediaries (FECIF). ESMA is required to submit the draft RTS to the
Commission for endorsement by 1 January 2014.
ISDAFix inquiry
The FCA has confirmed that it is carrying out an inquiry into the potential manipulation of
ISDAFix. The FCA has previously been assisting a US investigation in this respect, but its own
inquiry now has formal status. ISDAFix is the leading benchmark for annual swap rates for swap
transactions globally, providing average mid-market swap rates for six major currencies (namely,
the euro, HK dollar, Japanese yen, Sterling, Swiss franc and the dollar) at selected maturities on a
daily basis. The manipulation is believed to involve traders at Wall Street banks, who instructed
ICAP brokers to buy or sell as many interest rate swaps as necessary to move the ISDAFix rate to
a predetermined level.
High Court ruling on illegal collective investment schemes
The High Court has held that the FSA had jurisdiction to bring a petition to wind up a property
investment company under section 367 of FSMA, on the grounds that the company had carried
on an illegal land bank by operating a collective investment scheme (CIS) without FSA
authorisation. The judgement includes the court's reasoning as to why the arrangements operated
by the defendant fell within the definition of a CIS under section 235 of FSMA and will be
released in due course.
