Financial Services Regulation and Compliance – Investment Firms October 2022


CBI Releases Revised Monthly Client Asset Report Template and Guidance Note

On October 5, 2022, the CBI released a revised Monthly Client Asset Report (MCAR) template in Excel format. The revised MCAR model is now available on the IWC website. The revised model contains rules and data validation. The CBI has also issued a guidance note to accompany the revised MCAR template.

Investment firms are not required to start using this template for MCAR reporting at this time and should continue to submit the existing MCAR until further notice.


ESMA and ACER create a joint working group on energy market surveillance and energy derivatives

On October 18, the European Agency for the Cooperation of Energy Regulators (ACER) and ESMA set up a new joint working group to strengthen market surveillance and enforcement in the energy market. energy and energy derivatives. Regulatory oversight of potential market abuse in the trading of energy and financial products falls under two EU regulatory frameworks, namely the EU Regulation on Wholesale Energy Market Integrity and Transparency ( REMIT) and the Market Abuse Regulation (MAR). ACER and ESMA are also ready to cooperate in other areas in the future, such as in the context of the possible new LNG standard currently under consideration by the European Commission, and with enhanced risk monitoring. in energy markets, helping to preserve financial stability in EU markets.

ESMA announces its strategic priorities for the next five years (ESMA71-99-2022)

On October 10, 2022, ESMA Chair Verena Ross said that “ESMA’s 2023-2028 strategy is centered on three priorities and two thematic drivers. Fostering the efficiency and stability of EU markets and strengthening the protection of retail investors, and doing both through oversight strengthened, are at the heart of ESMA’s mission.The two main drivers of sustainable development and technological and data innovation are also now integrated into all areas of the organization..

The main elements of the strategy are:

  1. promote market efficiency and financial stability
  2. strengthen the supervision of EU financial markets
  3. strengthen the protection of retail investors
  4. enable sustainable finance
  5. facilitate technological innovation and the effective use of data

ESMA’s Central Counterparty Supervisory Board publishes strategic objectives for 2023-2025 to drive supervisory activities

On October 11, 2022, the CCP Supervisory Board published three strategic objectives in line with the strategic objectives published by ESMA for 2023-2028. These strategic objectives are identified for ESMA in relation to central counterparties:

  1. strengthen the EU’s resilience to CCPs
  2. deal with cross-border risks of third-country central counterparties
  3. deepen risk and data-based surveillance.

ESMA to work on ESG disclosures as a new strategic EU supervisory priority

On October 27, 2022, ESMA announced that it was amending its Union Supervisory Strategic Priorities (USSP) to include ESG disclosures alongside market data quality. ESMA aims to foster transparency of ESG disclosures in key segments of the sustainable finance value chain and to combat greenwashing. ESMA also aims to progressively promote greater scrutiny of ESG information through effective and consistent oversight. Within the framework of the second USSP, the quality of market data, ESMA has already developed and applied common methodologies and thematic reviews. ESMA and NCAs will continue to engage in further targeted and concerted supervisory work. With regard to the costs and performance of retail investment products, ESMA and CRAs have carried out major actions such as:

  • common prudential action (CSA) on costs and fees in the context of UCITS
  • CSA on MiFID II Costs and Charges Information
  • mystery shopping exercise (with some CNAs)
  • CSA on MiFID II suitability requirements and product governance
  • interpretation aids (guidelines, questions and answers)
  • draft regulations and technical advice
  • annual statistical report monitoring cost performance

ESMA publishes a call for input on the implementation of the revised Shareholder Rights Directive (SRD2)

On October 11, 2022, ESMA sent a call for evidence to people and entities directly or indirectly impacted by SRD2, including investors, issuers, intermediaries, proxy advisors and other entities such as consultants. and service providers in investor communication and voting. industry. Responses should be submitted by 28 November 2022 at the latest. ESMA will take into account the comments received when preparing its contribution to the SRD2 review which will be submitted to the European Commission by July 2023.

The European Commission publishes the Commission Delegated Regulation containing the RTS on the contractual model of liquidity contracts for shares of issuers on the SME Growth Market – MAR

On 18 October 2022, Commission Delegated Regulation (EU) 2022/1959 on regulatory technical standards (RTS) establishing a contractual model for liquidity contracts for the shares of issuers whose financial instruments are admitted to trading on a Small or Medium Enterprise (SME) Growth Market under the Market Abuse Regulation (596/2014/EU) has been published in the Official Journal of the EU. The delegated regulation will enter into force on November 7, 2022.

ESMA 2023 work program focuses on sustainability, technological change and retail investor protection

On October 10, 2022, Verena Ross, Chair of ESMA, said that the Annual Work Program (AWP) 2023 is the first work program developed under ESMA’s strategy for 2023-2028 and will see the ‘ESMA achieve, among other things, the priorities we have defined in the roadmap for sustainable finance, adapting to the digitization of financial markets and improving access to and quality of prudential data. A core part of ESMA’s mission is to further improve retail investor protection and ESMA will achieve this by promoting convergence of supervisory and regulatory practices across the EU.

Given the current challenging market conditions, ESMA will continue to closely monitor financial markets, including central counterparties. In this context, and in connection with the measures to combat the current energy crisis, it also plans to carry out work to revise and clarify the existing rules for these markets. In 2023, ESMA will take on new responsibilities in regulating the impact of new technologies on financial markets through mandates under the DORA, MiCA and DLT regime. ESMA will continue to oversee several key market infrastructures with a view to fostering market efficiency and financial stability in the EU.

EBA report on the integration of ESG risks in the supervision of investment firms – report supplementing EBA/REP/2021/18 (EBA/REP/2022/26)

On October 24, 2022, the EBA published its report on the integration of ESG risks into the supervision of investment firms. The report provides a first assessment for the purposes of prudential supervision within the framework of the FDI. The report covers the assessment of the business model of investment firms, internal governance and risk management, as well as risks such as capital risk and liquidity risk.

Proportionality is a key element of the report, which highlights the need to integrate ESG considerations in a proportionate way where ESG factors and risks could affect the risk profile of the investment firm. This integration should be carried out taking into account not only the business model, the size, the internal organization of an investment firm and the nature, scale and complexity of its services and activities, but also the materiality of its exposure to ESG risks.