Dear Readers,
While the dust surrounding the implementation of the Alternative Investment Fund Managers Directive (AIFMD) has slowly settled and day-to-day business has returned to normal for fund managers, the EU Commission is fulfilling its mandate to review the directive in terms of its objectives and impact. KPMG won the tender for the study and has been entrusted with the review.
In addition, regulation does not stop at ongoing updates and new developments. Among other things, Eurex has published a circular with important information regarding the implementation of the future requirements for key information documents by Eurex in accordance with the PRIIPs Regulation.
There are also current developments in connection with FinTechs and the liquidity stress at capital management companies; you will find a corresponding compilation in this issue.
As always, we wish you an insightful read and remain
With best regards
Dr. Ulrich Keunecke
FISMA
AIFMD study by the EU Commission
Not least as a result of the financial crisis, the EU Commission issued the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD) in 2011. The AIFMD was intended to extend investment regulation to control significant risks by introducing harmonized regulation for managers of AIFMs and was to be implemented by the member states in 2013. In accordance with Art. 69 AIFMD, the EU Commission is required to review the AIFMD from July 2017 with regard to its objectives, its implementation and its impact on market participants.
Against this background, the European Commission has launched a call for tenders for a comprehensive study to review the AIFMD. The goal is to evaluate how the policy has performed in practice.
KPMG has won the tender for the AIFMD study.
The assignment includes a study of the rules of the AIFMD and the experience gained in practice with their application. This is complemented by an evidence-based study of the extent to which the rules of the Directive are effective, efficient, relevant and consistent in achieving the objectives of the AIFMD, and what added value they have delivered for the EU. KPMG will summarize the results of the investigation and the study in a single report.
KPMG Law Germany is leading the project, drawing on the expertise of other KPMG practices across Europe and the KPMG EMA Regulatory Center of Excellence. KPMG Law Partner Ulrich Keunecke: “We will use the breadth and depth of skills in the KPMG network to produce a comprehensive and meaningful study. This includes regulatory and statistical analysis, questionnaire design, industry knowledge and an understanding of investors and their business models.”
Further link
The press release can be viewed here.
Eurex
Circular on the PRIIPs Regulation
On October 18, 2017, Eurex published a circular on PRIIPs.
This circular contains important information regarding the implementation of the future requirements for key information documents by Eurex Deutschland (Eurex) in accordance with the Regulation on Packaged Retail and Insurance-based Investment Products (PRIIPs Regulation).
In accordance with the PRIIPs Regulation, Eurex is a PRIIP manufacturer for exchange-traded derivatives and will accordingly provide key information documents (KIDs) for all exchange-traded products in the Eurex product portfolio. KIDs will be made available via the Eurex website www.eurexchange.com. The purpose of this circular is to provide information on the following topics:
- Aggregation level for KIDs;
- Provision of KIDs;
- Language versions of the KIDs;
- Consideration of the target market;
- Information on costs; and
- The next steps.
The link to the Eurex website, where the current versions of all KIDs can be found, as well as further information will be communicated in separate circulars in the course of October 2017.
Further link
The circular can be downloaded here can be viewed here.
BaFin
Consultation 12/2017: Recommendations for liquidity stress tests of German capital management companies
On October 13, 2017, BaFin published a report on the liquidity stress tests of German capital management companies in connection with the topic of liquidity management.
It contains the most important results of a status quo analysis for which BaFin surveyed selected companies in summer 2017. The report also formulates BaFin’s recommendations for the liquidity stress tests of capital management companies. Market participants have until October 27 to comment on the report.
At the beginning of the year, the Financial Stability Board (FSB) published recommendations on the risks posed to financial stability by collective asset management. According to these recommendations, it is necessary for the quality of liquidity management in investment funds that the national supervisory authorities provide guidance to capital management companies on how to carry out liquidity stress tests.
Further link
The report can be downloaded here can be viewed here.
Publication of the draft guidelines on bank licensing and licensing as a FinTech credit institution for consultation
On September 21, 2017, the European Central Bank (ECB) launched a guide to the assessment of applications for authorization as a credit institution in general and a guide to the assessment of applications for authorization as a FinTech credit institution.
The first document, the draft guidelines for the assessment of license applications, refers to the general procedure and requirements for the assessment of such applications. The second document, the draft guidelines for the assessment of applications for authorization as a FinTech credit institution, is aimed at companies with a FinTech business model that wish to apply for a banking license.
The aim of the two guidelines is to increase the transparency of the application process and to support applicants in their preparations. The guidelines are also intended to further standardize the assessment of licensing applications, whereby the supervisory standards for the licensing of new credit institutions are all maintained.
The consultation on the guidelines will take place from September 21 to November 2, 2017. The two draft guides and a compilation of questions and answers can be found on the ECB’s banking supervision website.
Further link
The draft guidelines can be downloaded here can be viewed here.
Joint report of the European Supervisory Authorities on risks and weaknesses of the European financial system
On September 21, 2017, the Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA – ESA) published its Autumn 2017 Report on risks and vulnerabilities in the European Union’s financial system.
The report highlights the risks to the stability of the European financial sector in an uncertain political and economic environment, not least in light of the UK’s withdrawal from the EU. The report also points to a persistent valuation risk with an uncertain return outlook and states that financial institutions continue to face profitability challenges despite recent improvements.
The rapid developments in FinTech open up new opportunities, but also challenges for financial institutions and end users. The report also includes regulatory and supervisory initiatives to monitor and mitigate the identified risks.
Further link
The report can be downloaded here can be viewed here.
ESA
Publication of guidelines on the prevention of money laundering and terrorist financing in electronic payment transactions
On September 22, the Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESA) published guidelines to prevent the misuse of payment transactions for the purpose of terrorist financing and money laundering.
The guidelines are part of the ESAs’ broader work to promote a coherent approach to anti-money laundering and combating the financing of terrorism (AML/CFT) and promote a common understanding of payment service providers’ obligations in this area.
The common guidelines have been drawn up in accordance with Article 25 of Regulation (EU) 2015/847, which requires the ESAs to provide guidance to competent authorities and payment service providers on the measures that the latter should take to comply with Regulation (EU) 2015/847, in particular Articles 7, 8, 11 and 12 thereof.
Further link
The guidelines can be downloaded here can be viewed here.
EBA / ESMA
Publication of guidelines for assessing the suitability of members of management and holders of key positions
On September 26, 2017, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published their joint guidelines on the assessment of the suitability of members of management bodies and key function holders.
These guidelines aim to harmonize and improve fit and proper assessments in the EU financial sectors and to ensure sound governance arrangements in financial institutions in accordance with the Capital Requirements Directive (CRD IV) and the Markets in Financial Instruments Directive (MiFID II). The guidelines emphasize the importance for institutions of assessing the extent to which candidates have the necessary knowledge, qualifications and skills to ensure the proper and prudent management of the institution.
The guidelines also promote more diverse management bodies and thus contribute to improved risk oversight and resilience of institutions.
Further link
The guidelines can be downloaded here can be viewed here.
CPMI / IOSCO
Publication of the joint final report on the standardization of a unique product identifier for OTC derivatives
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published their joint report “Harmonisation of the Unique Product Identifier” on 28 September 2017.
The report provides authorities with technical guidance on a standardized global Unique Product Identifier (UPI) applicable to OTC derivatives transactions.
The role of the UPI is to uniquely identify each OTC derivative product involved in a transaction that a trade repository authority requires or may require in the future, in line with the G20 Leaders’ commitment to a more transparent OTC derivatives market. Globally consistent UPIs facilitate consistent global aggregation and analysis of transaction data on OTC derivatives reported through trade repositories, which authorities can use to meet their legal obligations and regulatory requirements.
Further link
The press release on the report can be found here can be viewed here.
ESMA
Consultation on guidelines for non-significant benchmarks
On September 29, 2017, the European Securities and Markets Authority (ESMA) launched a consultation on guidelines that elaborate on the obligations that apply to non-significant benchmarks under the Benchmarks Regulation (BMR).
The consultation paper proposes reduced requirements for non-significant benchmarks, their administrators and their supervised contributors in relation to four areas:
- Procedures, characteristics and positioning of the supervisory function;
- Appropriateness and verifiability of the input data;
- Transparency of the methodology; and
- Governance and control requirements for supervised contributors.
The first three areas apply to administrators of non-significant benchmarks, while the fourth is directly applicable to monitored contributors to non-significant benchmarks.
ESMA welcomes feedback from stakeholders, which it will take into account when drafting the final guidelines. The deadline for comments is November 30, 2017.
Further link
The consultation can be accessed here can be viewed here.
ESMA
Publication of guidelines for the assessment of management bodies of market participants and service providers for data transmission
On September 28, 2017, the European Securities and Markets Authority (ESMA) published its guidelines for the management body of market operators and data reporting service providers.
The guidelines clarify the criteria for assessing whether the management body of market operators and DRSPs and each of their members is fit and proper to ensure the sound and prudent management of the undertakings and to exercise effective stewardship over the activities of those undertakings.
Further link
The guidelines can be downloaded here can be viewed here.
WPK
Combating money laundering – instructions on internal security measures (Section 6 (9) GwG) and on the appointment of an anti-money laundering officer (Section 7 (3) sentence 1 GwG)
At its meeting on September 27, 2017, the Executive Board of the German Chamber of Public Accountants (WPK) adopted the instructions to adapt the internal security measures and to appoint an anti-money laundering officer to the new Money Laundering Act, which came into force on June 26, 2017.
The size criteria according to which a practice is exempt from the internal security measures specified in the directive or the obligation to appoint an anti-money laundering officer remains unchanged (activity of 10 or 30 professionals for the practice).
There are material changes in the following areas:
- The order on internal security measures was supplemented by the new regulations in the catalog of Section 6 GwG, so that an exemption also applies in this respect if the above-mentioned size criterion (10 professionals) is not exceeded.
- Internal security measures in accordance with Section 6 (6) GwG (inquiries by the Central Office for Financial Transaction Investigations regarding the identity of persons with whom a business relationship has been maintained and the nature of the business relationship) are excluded.
- With regard to the exemption from internal security measures pursuant to Section 6 para. 2 no. 3 GwG (creation of group-wide procedures pursuant to Section 9 GwG), the number of professionals working in the group (Section 1 para. 16 GwG) must be taken into account.
- The question of whether an anti-money laundering officer must be appointed for all entities belonging to the group also depends on the number of professionals working in the group.
For further details, please refer to the explanations of the orders.
Further link
The order can be downloaded here can be viewed here.
EIOPA
Publication of guidelines on execution-only sales of insurance-based investment products
On October 11, 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published guidelines for insurance-based investment products (IBIPs) where the associated risks are difficult for the customer to see.
The guidelines aim to minimize the risk of consumer detriment due to mis-selling of IBIPs. At the same time, they have created a suitable framework to enable execution-only product sales. With these guidelines, EIOPA supports national competent authorities (NCAs) and insurance distributors in assessing products against this framework.
Further link
The guide can be downloaded here can be viewed here.
ESMA
Update of the list of central counterparties according to EMIR
On 9 October 2017, the European Securities and Markets Authority (ESMA) updated its list of recognized central counterparties (CCPs) in third countries.
The update affects:
- Indian Clearing Corporation Limited;
- National Securities Clearing Corporation Limited; and
- MCX-SX Clearing Corporation.
The European Market Infrastructure Regulation (EMIR) provides for CCPs from third countries to be recognized by ESMA in order to operate in the European Union.
Further link
The list can be downloaded here can be viewed here
European Commission
Related link
Publication of the implementing decision on the recognition of equivalence under EMIR of derivatives transactions in the USA
The European Commission Implementing Decision on the recognition of the equivalence of the legal, supervisory and enforcement arrangements of the United States of America for derivatives transactions subject to the oversight of the Commodity Futures Trading Commission with certain requirements of Article 11 of Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories was published in the Official Journal of the European Union of 14 October L 265/23.
Further link
The decision can be found here can be viewed here.
