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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
www.cummingslaw.com
EVENTS
Claire Cummings has been invited to speak at Collyer Bristow’s Winter Breakfast Update on Derivatives on Wednesday 1 March (8.00am – 10.00am at 4 Bedford Row, London WC1R 4TF).
Claire will talk about MiFID II FCA applications and provide an outline of the new instruments and activities which will require authorisation and the deadlines for applications.
Also speaking at the event will be Collyer Bristow partner Robin Henry, who will discuss gold price fixing claims against banks by investors and traders and Collyer Bristow partner Janine Alexander, who will provide an update on recent derivative cases including the recent Court of Appeal decision in the Banco Santander Totta case on the interplay between local law, the Rome Convention and the ISDA provisions.
To attend, please RSVP to events@collyerbristow.com or call Jemima Standen-Jewell on 020 7468 7279
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FCA discussion paper on illiquid assets
The FCA has published a discussion paper (DP17/1) regarding risks that arise when consumers use open-ended investment funds to gain exposure to illiquid assets such as land and buildings, infrastructure, and financial assets such as unlisted securities. One of the key issues discussed in the paper concerns balancing the interests of investors who want to withdraw their money and those who want to remain. The FCA notes that difficulties can arise if investors expect to be able to withdraw their money at short notice, on the basis that many funds offer investors daily dealing opportunities, but hold assets that are not re-valued on a daily basis. The FCA suggests some possible approaches to developing the regulation of liquidity to support fund managers in meeting their obligations and ensure good outcomes for investors. Comments are invited by 8 May 2017.
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EMIR: FCA updates webpage on uncleared derivatives
The FCA has updated its webpage on margin requirements for uncleared derivatives under EMIR, which took effect from 4 February 2017, subject to phase-ins that are based on firms’ categorisation and derivatives volumes. The margin requirements under EMIR require counterparties who are in scope to exchange margin on their OTC derivatives contracts that are not cleared through a central counterparty (CCP). The webpage includes two videos for firms, the first providing an overview of margin requirements and advice on what firms need to do to meet the requirements. The second video provides information on intragroup exemptions from margin and the application process that firms are expected to follow to benefit from the exemption.
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MLD5
The European Data Protection Supervisor (EDPS) has published an opinion on MLD5, which amends MLD4. EDPS analyses the impact of MLD5 on the fundamental rights to privacy and data protection and considers that MLD5 takes a stricter approach to effectively countering money laundering and terrorist financing than that set out in MLD4. It is concerned that the proposed amendments introduce policy purposes other than countering money laundering and terrorist financing, which do not seem clearly identified, such as the fight against tax evasion and the fight against financial crime and enhanced corporate transparency as policy goals. In expanding the purposes of data processing beyond the initial AML and CTF purpose, the EDPS considers that MLD5 introduces a significant degree of uncertainty, which, in its opinion, reduces data protection safeguards.
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Transparency Directive
ESMA has published a practical guide to national rules across the EEA on major holdings notifications under the Transparency Directive. The guide is intended to help market participants navigate the different requirements across the EEA and may be particularly useful to shareholders with notification obligations under national law in accordance with the Transparency Directive. The guide sets out information on rules and practices in table form so that market participants can compare rules across different jurisdictions. ESMA will update the guide as and when necessary to reflect changes to national rules and practices.
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ESMA report on supervision of CRAs, TRs and CCPs
ESMA has published its 2016 annual report relating to its supervision of credit rating agencies and trade repositories and its monitoring of third country central counterparties. The report also outlines ESMA’s main priorities in this regard for 2017. ESMA explains that business strategy will be a key theme for both CRAs and TRs in 2017, particularly in the light of the UK exiting the EU, as well as governance issues (including the quality of senior management and the management of conflicts of interest), the supervision of fees, internal controls and IT issues. In addition, ESMA will also focus on the quality of credit ratings, internal controls, and risk assessments for CRAs and data quality and access by authorities, technology trends and internal controls at TRs.
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FX benchmark review
IOSCO has published a report on its second review of the implementation of its principles for financial benchmarks by WM in respect of the WM/Reuters 4 p.m. closing spot rate. The aim of the review was to assess the extent to which the recommendations from the original review, published in September 2014, had been implemented as of 8 September. The report found that the administrator had made very significant progress, but some room to improve exists. The second review identifies where additional actions would help maintain or improve the effectiveness of the frameworks put in place to address the recommendations. The review makes recommendations relating to audit, as well as opportunities to further clarify policies, or include additional information in publicly-available documentation.
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Investment Association guidelines on audit tenders
The Investment Association has published guidelines on audit tenders, setting out the expectations of its members when companies tender their audits. They are aimed at companies whose shares are admitted to the premium and standard segments of the Official List, trading on AIM, or the High Growth Segment of the Main Market. The guidelines are comprehensive and include, amongst other things, advice on how and when audits should be tendered, who should be responsible for such tenders, how to prioritise tenders and suggested notifications to shareholders.
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Transitional arrangements following Brexit
The Financial Markets Law Committee has sent its comments to the Treasury Select Committee Chair regarding the UK’s financial services industry in the context of the UK’s withdrawal from the EU. The letter has been written in response to the Committee’s inquiry on the UK’s future economic relationship with the EU. The FMLC points out that the UK will lose access to the European single market in financial services and will be considered a third country from the perspective of EU law. It therefore recommends that transitional arrangements be negotiated well in advance of the UK’s withdrawal from the EU and suggests a staged approach, starting with areas where the mutual benefit for both the EU and the UK in preserving current arrangements is clear or uncontroversial, such as the continued use of London-based financial benchmarks for valuation and reference rate purposes by EU supervised entities.
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Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
10 February 2017
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