The document provides a summary of recent legal and regulatory developments in the financial services industry from Cummings Law. It discusses speeches and reports from ESMA on MiFID II, EMIR and risk mitigation techniques. It also mentions the European Commission extending the transitional period for capital requirements and responses to consultations on the capital markets union. Finally, it briefly outlines appointments at the FCA and upcoming publications from the European Parliament and IOSCO.

1.
Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services
industry.
Listen to this week's Legal Shorts on CLTV by going to http://vimeo.com/cummingslaw
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
ESMA speech on MiFID II and EMIR
ESMA has published a speech by its Executive Director, Verena Ross, on ESMA’s work on
MiFID II and EMIR. With regard to MiFID II, Ms Ross explained that ESMA is still at the rule-
making stage and comments in particular on the transparency regime for derivatives, position
limits for commodity derivatives and the trading obligation for derivatives and the "problematic"
timetable envisaged in MiFIR. With regard to EMIR, Ms Ross said that ESMA is at the
implementation stage, commenting in particular on the clearing obligation, which is expected to
be implemented in the coming months, and the review of EMIR reporting requirements. ESMA
expects to submit draft technical standards to the European Commission at the end of the summer
and the revised ESMA standards should become applicable in the second half of 2016.
Commission extends transitional period for capital requirements
The European Commission has extended the transitional period for capital requirements for EU
banking groups' exposures to CCPs under the Capital Requirements Regulation, which was due to
expire on 15 June 2015. The Commission has stated that capital charges for exposures to CCPs
are higher if the CCP is not authorised or recognised under EMIR (i.e. for a CCP not considered
as "qualifying"). Since the authorisation and recognition processes take time, the CRR provides a
transitional period during which the higher capital requirements will not be applied, to ensure a
level playing field for EU CCPs. As the authorisation and recognition processes for existing CCPs
serving EU markets will not be fully completed by 15 June 2015, the Commission has extended
the transitional phase to 15 December 2015.

2. AIMA response to CRD IV remuneration guidelines
AIMA has published its response to the European Banking Authority's (EBA) consultation on
remuneration guidelines, which was issued in March 2015. In its response, AIMA strongly
disagrees with the EBA's interpretation of the proportionality principle and encourages the EBA
to retain the possibility for firms to neutralise certain provisions of the remuneration principles,
on a case-by-case basis, where it is proportionate for them to do so. This echoes the concerns in
the British Bankers' Association’s response, published last week. The European Fund and Asset
Management Association (EFAMA) expresses similar concerns regarding the proposals relating
to the proportionality principle and the scope of the guidelines on remuneration. It calls on the
EBA to work with ESMA to issue a joint consultation on the applicability of the proportionality
principle to ensure a co-ordinated approach on their respective remuneration guidelines.
New FCA appointments
The FCA has announced the following key appointments as part of its implementation of its new
strategic approach. Mark Steward, currently head of enforcement at the Hong Kong Securities and
Futures Commission, will be the new Director of Enforcement and Market Oversight. His new
role will bring together the FCA's enforcement function with a new market oversight division
(created following the incorporation of the UKLA and market monitoring functions). Barbara
Frohn has been appointed as the new Director of Risk and Compliance. The new Risk and
Compliance Oversight Division provides a strategic approach to the management of internal and
external risk and a direct link between the risk function and the Chief Executive for the first time.
Mr Steward and Ms Frohn are expected to take up their new roles in the early autumn 2015.
EMIR: second consultation on risk mitigation techniques
The Joint Committee of the European Supervisory Authorities (ESAs) have published a second
consultation paper on draft RTS on risk mitigation techniques for OTC derivative contracts not
cleared by a CCP under EMIR. The second consultation paper builds on the proposals outlined in
the Joint Committee's first consultation paper, which was published in April 2014. In the second
consultation paper, the Joint Committee are seeking feedback on a narrow set of topics as most of
the issues that arose from the last consultation paper have been addressed in the amended version
of the RTS, which are set out in the second consultation paper. Comments are invited by 10 July
2015.
Responses to CMU
The European Commission has published the responses it has received to its green paper on the
capital markets union (CMU), published in February this year. The consultation closed to
comments in May and respondents include the FCA, HM Treasury and the Bank of England. The
Commission has also published responses it has received to its consultations on the Prospectus
Directive and on an EU framework for simple, transparent and standardised securitisation. In each
case, the Commission will publish a summary of responses at a later stage.
Lord Hill’s next steps for CMU
Following the consultation exercise, Lord Hill has announced that the Commission plans to
publish its action plan on the CMU in September 2015, drawing on the first findings from the
consultations, and that concrete proposals will follow the action plan. Early actions will include:
(i) a comprehensive package on securitisation, with updated calibrations for the Solvency II

3. Directive and the Capital Requirements Regulation; (ii) the definition of infrastructure and revised
calibrations for Solvency II; and (iii) proposals to review the Prospectus Directive. Lord Hill said
that he hopes that these can be fast-tracked in order to get early momentum, build confidence,
and set a clear sense of direction.
FCA quarterly consultation
The FCA has published its ninth quarterly consultation paper (CP15/19), which sets out the
FCA’s proposals to amend its rules and guidance, including in relation to the following: (i) to
transpose the UK Corporate Governance Code: (ii) to make technical amendments relating to HM
Treasury's small and medium-sized business (SME) finance measures under the Small and
Medium Sized Business Act 2015; and (iii) to make minor technical changes to the regulatory
capital framework for SIPP operators. The deadline for responses to CP15/19 is either 5 July
2015 or 5 August 2015, depending on the proposals to which responses relate.
SFT Regulation
The European Parliament has updated its procedure file on the proposed Regulation on reporting
and transparency of securities financing transactions (SFT Regulation). The procedure file
indicates that the Parliament will consider the SFT Regulation in its plenary session to be held
from 5 to 8 October 2015. The Parliament had previously indicated that it would consider the
legislative proposals in its plenary session to be held from 7 to 10 September 2015.
IOSCO report on reducing reliance on CRAs
IOSCO has published its final report following its consultation on reducing reliance on credit
rating agencies (CRAs) in asset management. IOSCO stresses in the report the importance of
asset managers having appropriate expertise and processes in place to assess and manage the
credit risk associated with their investment decisions and has developed a set of eight good
practices as a result. The good practices are addressed to national regulators, investment managers
and investors (where applicable) and are aimed at addressing any potential remaining over-
reliance by asset managers on credit ratings. The good practices are set out in Appendix A to the
report.
ESMA risk dashboard
ESMA has published a risk dashboard for Q1 2015, which analyses liquidity, market, contagion
and credit risks in European financial markets. ESMA concludes that EU systemic stress
remained around the levels of the end of the fourth quarter of 2014. Market risk increased, while
contagion, liquidity, and credit risk remained high but stable. There was an increase in volatility
for most markets, signalling increasing market concerns, which was caused by weak economic
prospects and intensified geopolitical uncertainty both inside and outside the EU. ESMA
considers that key future risk concerns in the EU include: high asset valuations driven by search-
for-yield, weak economic prospects, a resurgence of public debt policy issues in a number of
members states and geopolitical uncertainty in the EU's vicinity.

4. http://safemailer.safeserve.com/admin/index.php?Page=Newsletters&Action=View&id=4595[12/06/2015 14:26:05]
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
12 June 2015