The European Parliament has published a briefing on the potential impact of Brexit on the UK and EU financial services industry. The European Parliament President has written to the European Council President to express concerns about the European Parliament's secondary role in Brexit negotiations. The European Commission has published an overview of Level 2 measures relating to various EU financial services legislation.

1.
Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services industry
in Europe.
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
www.cummingslaw.com
Brexit: European Parliament briefing
The European Parliament has published a briefing on the impact of Brexit on the financial services
industry. The briefing provides an overview of the UK financial services industry and its connections
with the other 27 EU member states. It considers the potential impact of Brexit on a number of
sectors, considering the EU legislation under which each of the sectors operates and the potential
impact of the loss of passporting rights. The sectors include asset management, market infrastructure,
banking (covering wholesale banking, retail banking and private banking and wealth management)
and other professional services. The briefing can be found at:
http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/587384/IPOL_BRI(2016)587384_EN.pdf.
Brexit: European Parliament letter to Donald Tusk
The European Parliament President Martin Schulz has written to European Council President Donald
Tusk to express disappointment at the contents of the draft statement of the 27 Heads of State or
Government on the Brexit negotiation process. President Schulz is concerned that the draft statement
and its annex relegates the European Parliament to a secondary position in the Brexit negotiation
process and urges President Tusk to modify the annex to make it clear that the European Parliament
is very closely involved in the negotiations, pointing out that the European Parliament must consent
to all agreements struck with the UK. President Schulz warns that should the Parliament's secondary
role be confirmed, then it may wish to draw up its own detailed arrangements governing its
interaction with the future common EU negotiator and the UK Government. The draft statement, as
yet unpublished, was due to be approved at the meeting of the remaining 27 Member States on 15
December 2016.

2. European Commission publishes overview of Level 2 measures
The European Commission has published an overview of its Level 2 measures in the area of financial
services. The initiatives listed (in table format) set out Level 2 measures in preparation, or adopted,
relating to Level 1 legislation in respect of the following: the AIFMD, CRD IV, EMIR, Market Abuse
Regulation, MiFiD II, UCITS IV and the Benchmarks Regulation. The overview can be found at:
http://ec.europa.eu/finance/general-policy/docs/level-2-measures/level2-measures_en.pdf.
EMIR: ESMA consults on draft RTS on data
EMIR has published a consultation paper on draft RTS on data to be made publicly available by trade
repositories (TRs) under EMIR. Article 81(5) of EMIR requires ESMA to develop RTS specifying
the frequency and the details of the information to be made available to the relevant authorities and
the information to be published by TRs. ESMA fulfilled its original mandate in September 2012 but
decided to keep the wording of the RTS sufficiently flexible to accommodate further developments in
international standards. The practical implementation of EMIR reporting, and the experience gained
so far, has shown several shortcomings and limitations that need to be addressed. ESMA's aim in
developing the draft RTS is therefore to ensure the data published by TRs under EMIR can be better
used by the general public, as well as allowing the publication of certain figures required under EU
financial services legislation, including MiFID II and the Benchmarks Regulation. Comments are
invited by 15 February 2017.
MLD5 update
The EU Council has published its fourth compromise proposal on the proposed MLD5, which amends
MLD4. Among other things, the Presidency proposes that the MLD5 amendments to MLD4 should
be transposed by Member States within 12 months of MLD5 being published in the Official Journal
of the EU (OJ). The deadline was six months in the previous compromise proposal. The Commission
published MLD5 in July 2016.
List of high-risk third countries under MLD4
The EU Council has published the minutes of an Economic and Financial Affairs Council (ECOFIN)
meeting which confirm that the Council will not object to the Delegated Regulation which allows the
identifying of high-risk third countries with strategic deficiencies. MLD4 empowers the Commission
to adopt delegated acts identifying high-risk third countries.
RTS on co-operation and exchange of information for passporting under PSD2
The European Banking Authority has published final draft RTS on passport notifications under the
revised Payment Services Directive (PSD2). PSD2 requires an authorised payment institution to
inform the competent authorities of its home Member State if it wishes to provide payment services
for the first time in one or more Member States other than its home Member State. The directive also
gives the EBA a mandate to develop draft RTS and specify method, means and details of the cross-
border co-operation between competent authorities in the context of passport notifications of payment
institutions. The RTS must include the scope of information to be submitted, a common terminology
and standard templates to ensure that the process is consistent and efficient.

3. AIM Rules and social media
AIM Regulation has published an update on how social media (such as "twitter", the company's
website and other non-regulatory news feeds) interacts with the disclosure obligations under the AIM
Rules. It clarifies that these forms of communication are subject to the same rules regarding disclosure
of regulatory information. Disclosure by social media alone will not meet an AIM company's
disclosure obligations; it is not a substitute for making a notification under the AIM Rules and
traditional means of regulatory dissemination (such as regulatory information service (RIS)) will take
precedence. AIM Rule 31 requires an AIM company to have in place sufficient procedures, resources
and controls to enable it to comply with the AIM rules. AIM regulation states that such systems,
procedures and resources should take into account the use of social media and other electronic
communication.
House of Lords report on Brexit and financial services
The House of Lords EU Sub-Committee on Financial Affairs has published its ninth report on Brexit
and financial services, with the aim of identifying the issues the UK government will have to address
as it attempts to reach deals on the UK’s withdrawal terms and its future relationship with the EU.
The key findings of the report include the following: (i) it calls for an early commitment to an
adequate transition period from both sides in the negotiation to avoid a "cliff edge", both at the
moment of withdrawal following the Article 50 process and as the UK and the EU move towards a
new relationship; (ii) non-EEA third-country equivalence provisions in EU legislation are not a
substitute for passporting rights and if the current passporting regime is not maintained, the
government should seek a deal to bolster the current equivalence arrangements for third-country
access; (iii) the ability to access highly-qualified staff and easily transfer them between the UK and
the EU is a key issue for the financial services industry; and (iv) the wider EU economy relies on the
financial services currently provided in the UK, which may not be easily replicated elsewhere in the
EU, such as euro-denominated clearing; thus, the difficulties associated with replicating the services
currently provided in the UK give the committee some hope that a deal might be reached that would
be in the mutual economic interest of both the UK and the EU.