International Organisation of Securities Commission
Work Programme – IOSCO publishes 2021-2022 Work Programme – 26 February 2021
The International Organisation of Securities Commissions (IOSCO) has published its 2021-2022 Work Programme which is intended to further its core objectives of protecting investors, maintaining fair, efficient and transparent markets and addressing systemic risks.
The IOSCO Board (the Board) has agreed five focus areas: (i) structural resilience of capital markets; (ii) data gaps and information sharing; (iii) new insights into investor protection; (iv) the role of securities markets in capital formation; and (v) financial innovation. The Work Programme includes work in relation to two new priorities: (i) financial stability and systemic risks of non-bank financial intermediation activities; and (ii) risks exacerbated by COVID-19, including misconduct risks, fraud and operational resilience.
IOSCO will continue to focus its efforts on the six specific priorities identified by the Board for 2020 and the 2021-2022 Work Programme will be reviewed and refreshed as appropriate at end 2021.
IOSCO Work Programme 2021-2022
Press release
Official Journal of the European Union
MiFID II and CRD V – OJ publishes Directive amending MiFID II Directive – 26 February 2021
The Official Journal of the EU (OJ) has published the Directive amending the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) to aid the EU’s economic recovery from COVID-19.
The Directive forms part of the European Commission’s capital markets recovery package. It includes amendments to client information and product governance requirements, and to requirements relating to the energy derivatives markets. It also extends the transposition deadline for the Capital Requirements Directive V ((EU) 2019/878) (CRD V) to 26 June 2021.
The Directive was adopted by the Council of the EU on 15 February 2021 and by the European Parliament on 11 February 2021. It entered into force on 27 February 2021.
Directive (EU) 2021/338
European Supervisory Authorities
Sustainable Finance Disclosure Regulation – Joint Committee of ESAs publishes supervisory statement – 26 February 2021
The European Supervisory Authorities (ESAs) (namely the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA)) have each published a supervisory statement made by the Joint Committee of the ESAs on the application of the Sustainable Finance Disclosure Regulation ((EU) 2019/2088) (SFDR).
The majority of the provisions on sustainability-related disclosure set out in the SFDR apply from 10 March 2021. However, the envisaged application date for the regulatory technical standards (RTS) supplementing the SFDR on the content, methodologies and presentation of such disclosures is currently 1 January 2022.
The statement recommends that national competent authorities (NCAs) indicate to financial market participants and financial advisers that they should use the draft RTS when applying SFDR provisions during the period between the application of the SFDR (on 10 March 2021) and the application of the RTS (22 January 2022).
An Annex to the statement sets out: (i) specific guidance on the application of timelines of some specific provisions of the SFDR, including the application timeline for entity-level principal adverse impact disclosures and for final products’ periodic reporting; and (ii) a summary table of the relevant application dates of the SFDR, the EU Taxonomy Regulation ((EU) 2020/852) and the draft RTS.
Joint ESA Supervisory Statement on the application of the Sustainable Finance Disclosure Regulation
Press release
European Securities and Markets Authority
Crowdfunding Regulation – ESMA consults on draft technical standards – 26 February 2021
ESMA has published a consultation on draft technical standards under the European Crowdfunding Service Providers Regulation ((EU) 2020/1503) (the Crowdfunding Regulation).
The Crowdfunding Regulation requires ESMA to develop eight draft regulatory technical standards (RTS) and four implementing technical standards (ITS) on several topics. The RTS cover: (i) complaints handling; (ii) conflicts of interest; (iii) business continuity plans; (iv) arrangements for authorisation applications; (v) information to clients on the default rate of projects; (vi) arrangements relating to the entry knowledge test and simulation of the ability to bear loss; and (vii) key investment information sheets. The ITS focus on reporting by crowdfunding service providers to national competent authorities (NCAs) and ESMA; and notifications to ESMA of national provisions concerning marketing requirements.
The text of the draft technical standards is set out in Annexes III to XI of the consultation.
The consultation closes on 28 May 2021. The remaining technical standards are due to be delivered to the European Commission by 10 May 2022.
Consultation Paper on the draft technical standards
Webpage
Press release
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EU Taxonomy Regulation – ESMA publishes final report on Article 8 – 26 February 2021
ESMA has published a report on key performance indicators (KPIs) for the disclosure of how, and to what extent, the activities of non-financial undertakings and asset managers falling within the scope of the Non-Financial Reporting Directive (2014/95/EU) (NFRD) qualify as environmentally sustainable in accordance with the EU Taxonomy Regulation ((EU) 2020/852) (Taxonomy Regulation). The report responds to a call for advice from the European Commission to all the ESAs (namely, ESMA, the EBA and EIOPA).
ESMA’s proposals focus on how to further specify the three KPIs set out in Article 8(2) of the Taxonomy Regulation for such non-financial undertakings and asset managers:
- non-financial undertakings: the proposals set out the definitions that should be used for the calculation of the turnover KPI, the CapEx KPI and the OpEx KPI. These are complemented with the minimum information that should accompany these disclosures and the methodology, including the level of granularity, for the reporting of the three metrics; and
- asset managers: the proposals set out the KPI that asset managers should disclose, the methodology to be applied to that KPI and recommendations for the development of a coefficient methodology to assess Taxonomy alignment of investments in investee companies that do not report under the NFRD.
ESMA also proposes that non-financial undertakings and asset managers should use standardised templates for their reporting under Article 8 in order to facilitate comparability of these disclosures and enhance their accessibility to investors who will reuse this information.
Please see the Banking and Finance, and Insurance, sections respectively for similar reports from the EBA and EIOPA.
ESMA Report: Advice on Article 8 of the Taxonomy Regulation (ESMA30-379-471)
Press release
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Securitisation reporting – ESMA updates Q&As, templates and technical instructions – 26 February 2021
ESMA has published revised Q&As on the Securitisation Regulation ((EU) 2017/2402) (Securitisation Regulation) since their last update in October 2020, which include four new questions and revisions to existing questions.
The new Q&As cover requirements in relation to: (i) disclosure and disclosure templates; (ii) underlying exposures in residential real estate and in relation to employment status; and (iii) inside information and significant inside information.
ESMA has also published revised versions of its reporting instructions, the XML schema and validation rules in relation to the disclosure templates, which were last updated in December 2020. These are designed to help market participants comply with the disclosure requirements under the Securitisation Regulation and must be used from 1 September 2021.
ESMA Press release: ESMA Updates Q&As, Templates and Technical Instructions for Securitisation Reporting
Updated Q&As
Updated Technical Reporting Instructions
Webpage including links to updated XML schema and validation rules
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MiFID II - Annual transparency calculations – ESMA publishes results – 1 March 2021
ESMA has published the results of the annual transparency calculations for equity and equity-like instruments which are subject to the calculations under the Markets in Financial Instruments Directive (2014/65/EU) and the Markets in Financial Instruments Regulation ((EU) 600/2014) (MiFID II).
Market participants are invited to monitor the release of the transparency calculations for equity and equity-like instruments on a daily basis to obtain the estimated calculations for newly traded instruments and the four-week calculations applicable to newly traded instruments after the first six-weeks of trading.
The transparency calculations apply from 1 April 2021 until 31 March 2022. From 1 April 2022 the next annual transparency calculations for equity and equity-like instruments, to be published by 1 March 2022, will become applicable.
Transparency calculation results
EU Transparency Directive – ESMA proposes improvements after the Wirecard case – 26 February 2021
ESMA has published its letter sent to the European Commission proposing improvements to the Transparency Directive (EU) (2004/109/EC) in light of the Wirecard case. ESMA feels that the case underlines the importance of timely and effective financial information enforcement in ensuring investor protection and confidence in capital markets.
ESMA’s recommended amendments to the Directive aim to meet four goals:
- enhancing cooperation between national competent authorities (NCAs) and other authorities, including by removing confidentiality impediments that prevent the effective exchange of information by developing regulatory technical standards (RTS) on cooperation and information exchange;
- enhancing the coordination of financial information enforcement nationally, including by requiring that national transposition measures clarify responsibilities, reporting obligations and roles when delegation or designation models are implemented;
- strengthening the independence of NCAs, including by not allowing outsourcing of the task of regular examinations of financial information to audit firms and by ensuring that the central competent authority, designated authorities and delegated entities are independent from market participants and governments; and
- strengthening the harmonised coordination of information across the EU, including by ensuring that enforcement powers are harmonised, with binding power to request information and to require corrective information.
ESMA letter to the European Commission on the next steps following Wirecard
Press release
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Prospectus Regulation – ESMA publishes guidelines on disclosure requirements – 4 March 2021
ESMA has published its final guidelines on disclosure requirements under the Prospectus Regulation (EU) 2017/1129 (Prospectus Regulation). The guidelines aim to establish consistent, efficient and effective supervisory practices among competent authorities when assessing the completeness, comprehensibility and consistency of information in prospectuses. They also seek to ensure the common, uniform and consistent application of the disclosure requirements set out in Commission Delegated Regulation (EU) 2019/980 (the Commission Delegated Regulation).
The guidelines will apply from two months after the date of their publication on ESMA’s website in all official languages of the EU. Within those two months competent authorities must notify ESMA whether they comply with the guidelines, or if they intend to comply with the guidelines.
ESMA guidelines on disclosure requirements under the Prospectus Regulation
HM Treasury
Listing Rules – review published by HM Treasury – 3 March 2021
HM Treasury has published its review of the UK Listing Rules, launched in November 2020, which seeks to enhance the UK’s position as an international destination for equity listings.
The review examines how companies raise equity capital on UK public markets and makes a number of recommendations to improve the process. Among other things, key recommendations include:
- modernising the Listing Rules to allow dual class share structures in the London Stock Exchange’s (LSE) premium listing segment, giving directors enhanced voting rights on certain decisions, with safeguards to maintain high corporate governance standards;
- reducing free float requirements from 25% to 15% and allowing companies to use other measures to demonstrate liquidity;
- reviewing the prospectus regime so that admission to a regulated market and offers to the public are treated separately in the future; and
- liberalising the rules regarding special purpose acquisition companies.
The government will now examine the review’s recommendations and set out its next steps.
The FCA has also published a statement welcoming the report, describing it as a “valuable contribution” in how UK markets and regulation can continue to meet their objectives. The FCA also notes that it will carefully consider recommendations for changes to the Listing Rules and, where appropriate, will act quickly with the aim of publishing a consultation paper by summer.
HM Treasury UK Listings Review
FCA statement on the listing review report
Updated webpage
Press release
Financial Conduct Authority
UK MiFIR – FCA updates statement on operation of double volume cap mechanism – 4 March 2021
The FCA has published an updated statement of policy on its power to suspend the use of pre-trade transparency waivers for a trading venue under the double volume cap (DVC) mechanism. The DVC mechanism is set out in Article 5(3B) of the retained EU law version of the Markets in Financial Instruments Regulation (600/2014) (UK MiFIR).
The DVC limits the level of dark trading — where trading takes place without pre-trade transparency — to a certain proportion of total trading in an equity. The FCA has a temporary power under UK MiFIR to choose to apply the DVC if it considers it necessary to advance its integrity objective, for example if dark trading is making it difficult for market participants to make well-informed decisions.
In December, the FCA announced that it would not automatically apply the DVC to UK equities and it is now extending this to all equities. The revised statement explains that the FCA is willing to use its temporary powers flexibly and amend its approach to the DVC if another jurisdiction makes an equivalence decision in respect of the UK.
FCA statement of policy on operation of UK MiFIR double volume cap mechanism
Statement
