Headlines
ALFI KID implementation project: Updated Q&A DocumentALFI has published issue 7 of its Q&A Document with questions and proposed answers about Key Investor Information Document (KID) implementation. Both Part 3 on CESR’s guidelines on the methodology for calculation of the ongoing charges figure in the KID and Part 4 on using KID in distribution networks have been further completed. Changes compared to the previous issue are shown in mark-up. Practical information on ALFI’s KID implementation project is mentioned on page 2 of the Q&A Document. Back to top Alternative Investment Fund Managers Directive (AIFMD) adopted by the CouncilThe AIFMD has been adopted by the EU Council last Friday, 27 May 2011. The adoption of the text follows an agreement reached with the European Parliament in November 2010. The directive will now be published in the coming days in the Official Journal and it will enter into force on the 20th day following its publication. The text of the AIFMD as adopted can be consulted on the Council website. The press release summarizing the main key points has also been included to the Council website. Back to top Presidency compromise proposal on EMIRThe Presidency of the Council of the European Union has published a further Presidency compromise proposal, dated 29 April, on the proposed Regulation on OTC derivative transactions, central counterparties and trade repositories (EMIR). The proposal was discussed at the meeting of the Working Party of Financial Services Attachés on 3 May. Back to top EMIR proposal adopted by European Parliament’s Economic Affairs CommitteeThe proposal for a Regulation on over-the-counter derivatives (OTCs), central clearing parties (CCPs) and trade repositories (also known as the European Market Infrastructure Regulation, EMIR) has been adopted by the European Parliament’s (EP’s) Economic Affairs Committee. It is now subject to adoption by the full Parliament on 5th July.
The legislative proposal includes provisions in respect of:
- Supervision. The European Securities and Markets Authority (ESMA) is expected to work closely with national supervisory authorities, play an important role in authorising new CCPs to the market and should be permitted to carry out on-site inspections.
- Narrow scope, few exemptions. MEPs rejected suggestions by some Member States that EMIR obligations should apply to all derivatives and limited the scope to OTC derivatives, although reporting obligations should apply to all derivatives. The Committee’s report is strict regarding exemptions to the clearing obligation. For pension funds there will be a special regime providing a guarantee similar to cleared contracts.
- Interoperability option. Interoperability (whereby traders could chose where their contacts are cleared) is limited to cash securities. A CCP has to have functioned in line with the standards for a minimum of three years prior to applying for authorisation for interoperability.
- Consideration of retroactivity. Clearing will only be mandatory from the moment the Regulation comes into force. However, reporting obligations may be retroactive; therefore, the EP has asked ESMA to assess how reporting retroactivity could be introduced in the event the information in question is essential to the supervisory authorities.
Press release. Back to top Transparency: A common interest representative register for the European Commission and the European ParliamentIn June 2008, in addition to the European Parliament register for interest representatives seeking access to its premisses in place since 1996, the European Commission launched its own register for organisations (companies, trade associations or professional firms) seeking to represent their interests in Brussels. In the latter, organisations have to provide a certain amount of information including details on interests, staff and, budget. ABBL and ALFI are registered in the Commission register and some of their staff in the EP register that gives access to the permanent visitor badge. For the past three years, the Parliament and the Commission have been in talks to put in place a common register. Both institutions have now negotiated an inter-institutional agreement setting the details of this common register, the main features that are expected to change are as follow: - A single register that replaces both registers. The switchover to the new register is to take place over a transition period of 12 months from the conclusion of the agreement. The register is to be reviewed no later than 2 years following its entry into force;
- Main legislative proposals covered in the preceding year are to be added to the current list of information.
As part of its work on this inter-institutional agreement, the European Parliament has also shown its will to go further on certain areas that have not been agreed on so far, and suggests the following changes for the future: - The register to be mandatory;
- In the Parliament, the rapporteur to list all lobbyists he/she has met in his report ("legislative footprint");
- The Council to join the register.
This agreement was approved by the European Parliament on 11th May and the register is expected to be online as of June 2011. The Council is expected to make a declaration in July this year, to announce its willingness to join in this initiative. European Parliament decision of 11 May 2011 Registers of Interest Representatives / Lobbyists Back to top Report on prices, costs and volumes of trading and post-trading servicesA report entitled “Monitoring prices, costs and volumes of trading and post-trading services” which was prepared for the European Commission (DG Internal Market and Services) has been published. The study looks at the impact of recent changes in the industry on the costs of trading and post-trading services and concentrates on the identification of trends in the prices and costs of transactions in securities by comparing the prices of transactions (domestic as well as cross-border) undertaken by the same firms in the same financial centres over time. The report sets out an analysis based on data collected from intermediaries (fund managers, custodians and brokers) and infrastructure providers (trading platforms, central securities depositories and central counterparties) operating in 18 financial centres in Europe covering the period from 2006 to 2009. Back to top European Commission: Reinforcing sanctioning regimes in the financial sectorOn 8 December 2010, the European Commission published a consultation document on sanctioning regimes in the financial sector and invited the stakeholders to respond by 18 of February 2011. The Commission received 63 replies. The Commission’s feedback statement summarises the contributions received and informs the public about the next steps. Back to top European Commission: European financial stability and integration report 2010The Commission regularly monitors developments in the EU financial sector. Beginning of April 2011, it published the 2010 European Financial Stability and Integration Report which looks into the close links between stability and integration of the financial sector that have become apparent in this new phase of the crisis. Chapters 1 and 2 provide an account of market developments in the financial sector and the EU policy response during 2010. In addition, the report takes a forward-looking approach in an attempt to cast a glimpse into the future shape of the European financial sector once the crisis is overcome. It shows how the ensuing crisis has not only undermined economic and financial stability, but also led to cross-border financial disintermediation during the crisis and diverging trends unfolding in certain market segments. The deleveraging process in the banking sector that accompanied the crisis has affected more prominently the cross-border flow of capital, not only in Europe but also on a global scale. Disruptions in the functioning of the inter-bank and wholesale money markets also suggest that integration in these markets was not as solid and advanced as often assumed before the crisis. In the policy process, the year 2010 marked decisive progress in moving from short-term crisis responses to implementing a policy agenda oriented towards re-building a sounder financial sector able to foster sustainable growth. More attention is paid now to improving the efficiency of the financial sector for the benefit of its users. Policy developments are also benefiting from increased attention towards qualitative aspects. Finally, in parallel to the EU policy response to the financial crisis, the financial sector has itself started to adjust to the recent crisis experiences and emerging regulatory requirements. The report’s special feature is based on the replies of eight large pan-European banks to a questionnaire on issues related to their funding functions and risk management. Back to top Swiss Funds Association (SFA): standardized information for all financial products in the retail sectorAs part of the consultation process on FINMA’s Distribution Report, the Swiss Funds Association SFA has called for a level-playing field with regard to the quality of information provided to retail investors. The SFA also supports the proposal of the Swiss Financial Market Supervisory Authority FINMA for improving the transparency of certain financial products at the point of sale. In addition to standardized information quality and sufficient protection for retail investors, the focus in this area should also be on harmonizing the disclosure obligations for all financial products distributed in Switzerland, and in particular on introducing a standardized description for all products comparable to the KID for EU investment funds (UCITS). Please click on the following links for the English, French and German version of the SFA statement. Back to top EFAMA code for external governance and report on responsible investmentThe European Fund and Asset Management Association (EFAMA) has published the following two documents: - Code for External Governance. This contains a framework of high-level principles and best practice recommendations to assist investment management companies engage with the companies in which they invest. The principles are aimed at improving the quality of the communication with investee companies and to foster creation of value to investors by dealing effectively with concerns over a company’s performance.
- Report on Responsible Investment (RI). EFAMA conducted an analysis of approaches to RI by Member States and concluded that the concept cannot be captured by a single regime, thus requiring various approaches to be allowed. When an investment management company provides RI products, it should take due regard to transparency so as to allow investors to make an informed decision. Therefore, there should be increased transparency of client reporting, communication of investment approaches and selection methods.
Please see related press release. Back to top EFAMA reports on the evolving investment strategies of UCITSThe European Fund and Asset Management Association (EFAMA) has published a report entitled “The evolving investment strategies of UCITS – EFAMA report on the so-called “Newcits” phenomenon”. Increasingly undertakings in collective investments in transferable securities (UCITS) funds are using a greater range of techniques and instruments to manage the trade-off between risk and return, for example, through the increased use of derivative techniques in order to generate “absolute” returns to investors. The media has coined the label “Newcits” to refer to this type of activity and some regulators have expressed concerns around the emergence of this type of UCITS product. EFAMA has convened a working group to examine the nature of those reservations and concerns. This work has shown that the current UCITS legislation provides a robust framework with strong retail investor protection and is due to be improved by the UCITS IV requirements (which come into force on 1 July 2011). EFAMA concludes that “Newcits” are neither new products nor a new category of funds, rather they are UCITS that can be described as aiming actively to manage the risk-return trade-off. They are subject to and are managed in compliance with the UCITS framework and as such they offer the same level of investor protection as other UCITS. Back to top EFAMA Asset Management Report 2011On 30th May 2011, the European Fund and Asset Management Association (EFAMA) published its 4th Annual Review Asset Management in Europe: Facts and Figures. The review provides a snapshot of the industry, looking at its overall size, general structure, asset allocation and client base. Peter De Proft, Director General of EFAMA, comments: “This new EFAMA report provides for the first time hard figures about the key role played by European asset managers in helping governments, corporations and banks meet their short-term funding needs and long-term capital requirement. Even if the figures are estimations, their order of magnitude confirms the essential contribution of European asset managers to the overall development of the European economy”. Back to top Objectives of new regulatory initiatives and their impact on ESMA’s organisation and regulated financial firmsSteven Maijoor, Chair of the European Securities and Markets Authority (ESMA), has given a speech at the International Capital Market Association conference in which he set out the main objectives of the new EU regulatory initiatives and their impact on ESMA’s organisation and the regulated financial firms in question.
The main objectives of the new EU regulatory initiatives consist of (i) transparency; (ii) financial stability; and (iii) enhanced international co-ordination of regulation and supervision.
With regard to the impact on ESMA’s organisation, Mr Maijoor highlighted that ESMA has a very different structure from its predecessor, the Committee of European Securities Regulators, and in relation to its regulatory role, the main change is in respect to the mandates that are being introduced in the new pieces of legislation for ESMA to draft technical standards.
Mr Maijoor explained that these changes will translate into higher costs for financial firms in the short term. However, the benefits achieved through greater transparency, stability and better international co-ordination, and, therefore, the ability to prevent future crises, should outweigh the short term costs.
Read more.
Back to top IOSCO principles on dark liquidityThe Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a final report, Principles on Dark Liquidity, containing principles to assist securities markets authorities in dealing with issues concerning dark liquidity. The principles are designed to: - minimise the adverse impact of the increased use of dark pools and dark orders in transparent markets on the price discovery process by generally promoting pre-trade and post-trade transparency and encouraging the priority of transparent orders;
- mitigate the effect of any potential fragmentation of information and liquidity by generally promoting pre-trade and post-trade transparency and consolidation of such information;
- help to ensure that regulators have access to adequate information to monitor the use of dark pools and dark orders for market monitoring/surveillance purposes and to enable an appropriate regulatory response to market developments; and
- help to ensure that market participants have sufficient information so that they are able to understand the manner in which orders will be handled and executed.
The Technical Committee, in developing these principles, focused on a number of areas of regulatory concern which may adversely impact the market including transparency and price discovery, market fragmentation, knowledge of trading intentions, fair access; and the ability to assess actual trading volume in dark pools. The principles establish that pre- and post-trade transparency are central to promoting the efficiency of the market and the integrity of the price formation process. In addition they recognise that a one size fits all approach may not be appropriate for all types of trading or platforms and therefore implementation of the principles may vary according to the type of trading and platform. The Technical Committee recommends that regulators consider the structure of their respective markets as a whole to determine how best to implement these principles. Regulators should implement the principles in such a way as to maintain the efficiency of the market, the integrity of the price formation process and, where appropriate, to allow for the use of dark pools and dark orders for specific needs/trades. Back to top UK offshore fund taxation regime: Amending regulations finalisedHMRC has published the final version of amending regulations. The final regulations amending the UK’s offshore funds taxation regime were made last week and will come into force on 27 May 2011. Back to top Fondation de Luxembourg publishes its first annual reportPlease see the Annual Report 2010 and the press release. Back to top LFF MediawatchPlease see LFF Mediawatch from 30 April to 16 May 2011 and from 17 May to 31 May 2011. Back to top
|
