UK Regulatory

FCA updates website for implementation of MiFID II

The FCA has published several updates to its website in light of MiFID II coming into force on 3 January 2018. These include:

  • updates to the transaction reporting web page [03.01.2018] which contains sections on "data quality", "errors and omissions notifications" and "who can submit transaction reports?" as well as additional resources;
  • a list of Technical Standards under MiFID II and MiFIR has been added to the "MiFID II" web page [03.01.2018];
  • updated change in controller forms to add separate forms where the target firm is authorised under MiFID, for: corporate; partnership; individual; and trust controllers; and to use in internal reorganisations for intragroup transactions [02.01.2018]; and
  • Change of legal status page contains newly issued application forms for Change of Legal Status for MiFID firms (including Article 3 exemption firms) [03.01.2018]. The FCA will accept applications begun in draft on the previous forms but, after 1 April 2018, applicants must use the new forms. Those that started to prepare applications for MiFID firms on the old forms should consider switching to the new forms the FCA says.  

FCA publishes response to ESMA's statement on temporary measures where LEIs are not available from clients and non-EU issuers

The FCA has published its response to ESMA's statement on LEI implementation under MiFID II containing some temporary measures for LEIs for legal persons and issuers [20.12.2017]. For a six month temporary period ESMA will allow investment firms to provide services for which they are to submit a transaction report to the client, even if they do not have an LEI from that client, on condition that, before doing so, the investment firm obtains the necessary documents from the client to apply for an LEI on the client's behalf. This temporary six month period runs from 3 January 2018. The arrangement for trading venues, also for a temporary period of six months, is for them to report their own LEI codes (instead of those of non-EU issuers) while informing such non-EU issuers of the need for a LEI (under MiFIR and/or MAR as applicable). The FCA has stated in relation to LEIs for clients that are legal persons that it will "temporarily amend a validation rule in our transaction reporting system [...] as soon as possible, but that change will not be made by 3 January." It will provide more information to executing firms and ARMs at a later date. Regarding issuers, it has stated that "Venues should continue their efforts to populate missing LEI data for issuers. Supervisors will be in contact with venues to discuss their progress in reducing the number of missing LEIs."

FCA and BoE grant transitional periods for open access for exchange-traded derivatives

ICE Futures Europe and the London Metal Exchange have been granted transitional periods by the FCA [03.01.2018] until 3 July 2020, until which date they will not be required to consider open access requests under article 36 MiFIR in relation to exchange-traded derivatives. For more information, please see our Out-law article. The Bank of England, the UK's competent authority for CCPs based in the UK decided, for the same period, that the access rights under Article 35 MiFIR will not apply to ICE Clear Europe Limited and to LME Clear Limited in relation to exchange traded derivatives. 

FCA summarises AIFMD transparency reporting requirements

On its AIFM reporting page, the FCA has uploaded [20.12.2017] its document: Reporting Annex IV transparency information under the Alternative Investment Fund Managers Directive. summarising transparency reporting requirements for AIFMs. The document does not constitute FCA rules or guidance but covers the various requirements, procedures for reporting, where more information is to be found and the FCA's approach to missed or late transparency reporting. The page also contains the FCA's Q&A document: Reporting transparency information to the FCA and a link to the FCA's updated AIFMD data guide page [19.12.17].

FCA Instrument: PRIIPs enforcement

The FCA has adopted the Enforcement (PRIIPs Regulations 2017) Instrument 2018 (FCA 2018/1) [03.01.2018] which came into force on 4th January 2018, following a consultation under CP14/32 (see our earlier update here). The new instrument updates the EG and the DEPP manual in the FCA Handbook. A new section in the EG at 19.36 sets out the FCA's approach to and powers for enforcing the PRIIPs Regulations 2017. The instrument also contains additions to the DEPP 2 annexes on warning notices and decision notices; and supervisory notices, to reflect the PRIIPs Regulations 2017.

EU Regulatory 

ESMA publishes updated Q&As and data and registers changes update in light of MiFID II/MiFIR implementation

In light of MiFID II/MiFIR coming into force on 3 January 2018, ESMA has published the following updated MiFID II and MiFIR Q&As:

  • Post-Trading Issues [14.12.2017] to include a new indirect clearing Q&A on the segregation level for indirect clearing accounts;
  • Transparency and Market Structures [18.12.2017], including in respect of transparency: updated Q&A on equity transparency, non-equity transparency and pre-trade transparency waivers; and for market structure topics, amendments to one of the questions on the tick size regime and updated Q&A on the application of MiFID II after 3 January 2018.
  • Data Reporting under MiFID II and MiFIR [18.12.2017], updated Q&A on the date and time of the request of admission and admission and on Transaction Reporting;  and
  • Investor Protection Topics [18.12.2017], the update includes 10 new Q&A in the sections on: suitability and appropriateness; inducements; provision of investment services and activities by third country firms; and the application of MiFID II after 3 January 2018, including "late transposition" issues.

ESMA has also made certain data available to national competent authorities and market participants on its website, to facilitate the smooth running of the new MiFID II/MiFIR regime [04.01.2018]. As a result of the new regime some existing registers (under MiFID I) are to be updated, some new registers are needed and a number of existing registers will become obsolete, as shown on the ESMA MiFID II Registers Update page showing changes from 3 January 2018 and in their Registers and Data list. ESMA is working on a new registers release for its website in Q1 2018. Until that is available ESMA will publish fortnightly, as excel documents, the register information then available to it. The new regime under MiFID II/MiFIR affects the following registers: the Regulated Markets; Multilateral Trading Facilities and Systematic Internalisers registers (now obsolete and replaced by the TV SI DRSP (MiFID II/MiFIR Trading venues/Systematic Internalisers/Data Reporting Service providers) register); Organised Trading Facilities (new register); Approved Publication Arrangements (new register); Consolidated Tape Providers (new register); Approved Reporting Mechanisms (new register); Suspension and Restorations (SARIS) (file to be made available weekly as a pdf); Central counterparties (obsolete with data no longer available); and shares admitted to trading on EU regulated markets (replaced by the FIRDS) (Financial Instruments Reference Data System).

Commission decisions on equivalence under MiFID II of the legal and supervisory framework applying to Swiss stock exchanges

The European Commission has recently published its equivalence decision on trading venues in Switzerland [21.12.2017] under the procedure in article 25(4)(a) MiFID II. This requires assessment of a third country's legal and supervisory framework to ensure that trading venues in that third country comply with binding, legal requirements equivalent to those under MiFID II, MiFIR, MAR and the Transparency Directive for the third country trading venue to be recognised as equivalent. Equivalence decisions are for one year, by the end of which reassessment is required. The decision relates to SIX Swiss Exchange AG and BX Swiss AG and expires on 31 December 2018. For more information, see the Commission's press release here which mentions equivalence decisions were also adopted for the United States, Hong Kong and Australia [13.12.17].

ESMA lists trading venues exempt temporarily from access provisions under MIFIR as annual notional amount of ETDs traded below threshold

ESMA has published a list of venues from which they have received notification in respect of the opt-out from access provisions under MiFIR for exchange-traded derivatives (ETDs) based on their annual notional amount traded being below the specified threshold. The venues listed are: MEFF Sociedad Rectora del Mercado de Productos Derivados S.A.U. (Spain); Oslo Børs ASA (Norway); Giełda Papierów Wartościowych w Warszawie S.A. (Poland); Athens Exchange S.A. (Greece); and Nasdaq Stockholm AB (Sweden). The list also identifies any CCP connected to the trading venue by close links.

EIOPA publishes Q&A on IBIP comprehension alert

EIOPA has published a Q&A [19.12.2017] on the "comprehension alert" which the PRIIPs KID Delegated Regulation requires to be included in the KID document for insurance-based investment products (IBIPs), which do not meet the requirements on non-complexity. These requirements can be found in the IDD and are supplemented by criteria on non-complex IBIPs in the IDD Delegated Regulation and further clarified by EIOPA's Guidelines (see our previous update for more on the Guidelines).

Brexit

HM Treasury's approach to domesticating EU regulatory framework

In a letter from the Economic Secretary to the Treasury to the Chair of the Commons Treasury Select Committee [12.12.2017] published on 19.12.2017, HM Treasury outlined its proposal for how to "domesticate" the existing EU regulatory legislation and framework for financial services in the EU Withdrawal Bill. The proposal is for level 1 and level 2 legislation (except certain Level 2 technical rules, the Binding Technical Standards (BTS)) to become the responsibility of UK ministers and Parliament. The BTS are to be taken over by UK regulators subject to a specific mandate by Parliament for developing them so "the regulators will only be able to make BTS for those specific purposes approved by Parliament." Affirmative secondary legislation is proposed to sub-delegate to the regulators "the ability to make fixes to BTS" if any corrections are needed to adapt them for the UK and so they are "consistent with the legislative changes that Parliament oversees". Affirmative SIs will be used to transfer "any other relevant functions" now carried out by the EU Supervisory Authorities, to UK regulators. This section of the Investment Management Brief contains Parliamentary information licensed under the Open Parliament Licence v3.0.

Recent Pinsent Masons publications

Read the latest edition of our Insurance Briefing here and our Banks Briefing here.

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