Financial Services Regulation and Compliance – Investment Firms Nov 2021


CBI Markets Update, Issue 14 2021

On November 1, 2021, the CBI released its latest Markets Update, Issue 14 2021. In national news, Issue 14 2021 highlights the CBI’s release of the forty-third edition of the CBI AIFMD Q&A and the Thirty-Fifth Edition of the CBI UCITS Question & Answer Document, as well as Managing Director Derville Rowland’s speech at the A&L Goodbody Corporate Crime and Regulation Summit. Internationally, Issue 14 2021 covers, among other topics, ESMA addressing investment recommendations made on social media platforms, ESAs proposing new rules for taxonomy-related product disclosures, AES publishing sectoral reports on the supervisory independence of competent authorities, ESMA seeking stakeholder input on the development of advice on the protection of retail investors and publication by the EBA of final draft technical standards for regulations on the publication of investment policy by investment firms.

CBI Markets Update, Issue 15 2021

On November 17, 2021, the CBI released its latest Markets Update, Issue 15 2021. In national news, Issue 15 2021 covers the CBI’s processes for updates to pre-contract documentation in relation to the regulation on taxonomy and level 2 measures in relation to sustainable finance. Disclosure Regulation and Anti-Money Laundering Bulletin on Funds and Fund Management Companies. Internationally, Issue 15 2021 highlights ESMA publishing technical standards on crowdfunding, ESMA making new bond liquidity data available and publishing data for systematic internaliser calculations, and authorities policies targeting COVID-19 and climate-related disclosures.


Public statement – Common European enforcement priorities for the 2021 annual financial reports (ESMA32-63-1186)

On November 1, 2021, ESMA published its annual public statement setting out common European enforcement priorities for the 2021 annual financial reports of listed companies. ESMA, together with national enforcement authorities, will pay particular attention to the following areas when monitoring and assessing the application of the relevant reporting requirements:

  1. Impact of COVID-19
  2. Climate issues
  3. Expected credit losses
  4. Disclosures related to taxonomy

In addition, the authorities will continue to focus on issues important to the individual reports under review. Based on the reviews carried out, supervisors will take enforcement action whenever material misstatements are identified and ESMA will subsequently report their findings. In addition to these European priorities, supervisory authorities can also set national priorities. ESMA stresses the responsibility of the management and supervisory bodies of issuers as well as the importance of the supervisory role of audit committees, which is essential to ensure the overall internal consistency of the annual financial report and contribute to annual financial reports of high quality.

ESMA publishes the latest edition of its newsletter

On November 5, 2021, ESMA published its latest edition of its Spotlight on Markets newsletter, dedicated to the new President, Verena Ross, and the European campaign on investment recommendations on social networks.

EBA publishes requirements for institutions’ disclosure of Pillar 3 interest rate risk exposures

On 10 November 2021, the EBA published its first draft implementing technical standards (HIS) on the publication under Pillar 3 of institutions’ exposures to interest rate risk on positions not held in the trading book (IRRBB). ITS’ final draft offers comparable information that will help stakeholders assess institutions’ IRRBB risk management framework as well as the sensitivity of institutions’ economic value of equity and net interest income to changes in rates of interest. The standards will modify the comprehensive ITS on institutions’ public information, in line with the strategic objective of developing a single, comprehensive set of Pillar 3 which should facilitate implementation by institutions and further promote market discipline. This final draft TSI has been submitted to the European Commission for adoption.

EBA and ESMA consult on the framework for the prudential review and evaluation process for investment firms

On 18 November 2021, EBA and ESMA launched a public consultation on their guidance on common procedures and methodologies for the supervisory review and evaluation process (SREP). The EBA is also consulting on draft regulatory technical standards (RTS) on additional own funds requirements that could be determined by competent authorities for investment firms. Both regulatory products are based on the Investment Firms Directive and aim at consistent supervisory practices with regard to the review and assessment of investment firms. Consultations run until February 18, 2022.

ESMA publishes its preliminary report on the European carbon market

On November 18, 2021, ESMA published its preliminary report on the European carbon market. The report responds to the request made by the European Commission to ESMA in its communication on energy prices for a preliminary analysis of European emission allowances (USA) and derivatives on EUAs. The report provides an overview of the financial regulatory environment for the carbon market under MAR, MiFID II and EMIR and the tools available to securities supervisors to fulfill their responsibilities. ESMA will conduct an in-depth analysis of the EU carbon market based on data sources available to securities regulators under EU law. ESMA will submit its final report to the European Commission in early 2022. The European Commission, taking into account ESMA’s final report, will assess whether there is a need for targeted actions on the carbon market of l EU.

ESMA publishes draft technical standards on commodity derivatives as part of the MiFID II Recovery Package

On November 22, 2021, ESMA published its final report on the draft Regulatory Technical Standards (RTS) for Commodity Derivatives under the MiFID II Recovery Package. The draft RTS includes proposals on the procedure for applying for position limit exemption, a methodology for determining position limits and position management tools for trading venues, which will contribute to the stability and the order of commodity derivatives markets at a time of heightened scrutiny. The European Commission has three months to decide whether or not to approve the draft technical standards. The revised MiFID II regime for commodity derivatives will apply at the end of February 2022.

ESMA publishes its 2020 annual report on European sanctions for market abuse

On November 24, 2021, ESMA published its annual report on administrative and criminal sanctions, as well as other administrative measures, issued across the European Union under the Market Abuse Regulation (TUE) in 2020. The report found that national competent authorities and other authorities imposed a total of €17.5 million in fines related to 541 administrative and criminal actions under MAR. The report describes an increase in the number of administrative sanctions and measures in 2020 compared to 2019, reaching 541 against 279 the previous year. However, it also found that the monetary penalties handed down are significantly lower, reaching just €17.5 million in 2020, compared to €82 million in 2019. The number of criminal penalties, and their aggregate value, have also decreased compared to 2019: only 18 criminal sanctions were imposed across the EU with economic sanctions worth €246,000.

EBA publishes final draft technical standards on how to calculate risk weighted exposure amounts for exposures to collective investment undertakings

On 24 November 2021, the EBA published its final draft regulatory technical standards (RTS) specifying the method to be applied to calculate the risk-weighted exposure amounts, in the context of the mandate-based approach, when certain data are missing. In particular, the final draft of RTS provides clarifications on the regulatory treatment of missing data when the underlying risk of derivatives is unknown, as well as on the calculation of the value exposed to counterparty credit risk. The RTS also takes into account situations where the notional amount of a netting set needs to be calculated or where identification of netting sets is not possible.