Financial Services Regulation and Compliance – Investment Firms August 2022


CBI releases model outsourcing register

On August 9, 2022, the CBI published Guidance Notes on the Model Outsourced Register for Market Undertakings or Regulated Financial Services Providers (DPs).

The guidance notes set out the CBI’s expectations regarding company registration of relevant outsourcing arrangements and reporting of outsourcing to the CBI. All RFSPs are requested to submit their completed registration template to the CBI via the online reporting system by the close of business on 7 October 2022. RFSPs must submit their register with all outsourcing arrangements in place by 31 December 2021 and include only written contracts/agreements. with a start date prior to this date. The proposed deadline for submission from 2023 will be the end of February each year, with a reference date of December 31 of the previous year.


ESMA proposes improvements to EU third-country benchmark regime

On August 19, 2022, ESMA published its response to the European Commission’s consultation on the regime applicable to the use of benchmarks administered in a third country (CT). ESMA has commented on the functioning of the current regime and proposes improvements to the regulatory and supervisory framework as well as to the European Union (EU) reference labels. Key recommendations include:

  • removing restrictions on the use of TC credentials using a risk-based approach while ensuring a level playing field between EU and TC administrators;
  • the introduction of an EU ESG benchmark label as an additional support tool against greenwashing; and
  • support for the proposal to create a new category of “strategic” benchmarks.

ESMA pointed out that while the Benchmark Regulation (BMR) covers a wide range of benchmarks used in the EU, so far very few jurisdictions have followed a similar regulatory approach to the provision and use of benchmarks. Therefore, the broad scope of BMR would lead to the undesirable result of limited availability of TC benchmarks to EU investors as opposed to their non-EU counterparts.

Report from the European Commission on the treatment of central counterparty (CCP) capital in the write-down and conversion tool under the CCP Recovery and Resolution Regulation

On August 10, 2022, the European Commission published a report on the treatment of the central counterparty (CCP) equity in the amortization and conversion tool provided for in Regulation (EU) 2021/123. The report assesses whether there was a need for further changes to the application of the write-down and conversion tool in a CCP resolution, in combination with other resolution tools that lead to financial losses for members compensators. The report concluded that as technical work is still ongoing and practical experience is limited, the European Commission cannot make any recommendation to amend Article 27(7) of Regulation (EU) 2021 /123 for now. The European Commission has noted that there is a need to clarify these issues to ensure the legal soundness of the EU CCP recovery and resolution regime. The European Commission will continue its work on this issue and share the findings with the European Parliament and the Council no later than 12 February 2026.

Call for evidence from ESMA on pre-hedging

On July 29, 2022, ESMA published a call for submissions on pre-hedging. The call for evidence illustrates the arguments for and against such a practice, and solicits input from stakeholders to properly delineate its admissibility in the context of market abuse regulation and MiFID/MiFIR. The call for testimonials is open until September 30, 2022.

EBA Guidelines on Criteria for Exempting Investment Firms from IFR Liquidity Requirements

On 29 July 2022, the EBA published its final guidelines on the criteria for the exemption of investment firms from liquidity requirements in accordance with Article 43(4) of Regulation (EU) 2019/2033 (the Investment Funds Regulation). The guidelines ensure a harmonized approach to the granting of exemptions by competent authorities and address three main elements:

  1. all the investment services and activities which make an investment firm eligible for the exemption
  2. the set of criteria that a competent authority must assess before granting the exemption, and
  3. advice to the competent authorities when granting and withdrawing the exemption.

Sanctions imposed in response to the crisis in Ukraine

Since February, the EU has imposed a number of sanctions in response to the crisis in Ukraine. As the crisis develops and sanctions continue to evolve, the CBI publishes details of new restrictive measures/sanctions that are adopted in this regard, along with any associated EU/UN guidance, on their dedicated website. Web page.