International Organization of Securities Commissions
COVID-19 - IOSCO reprioritises its 2020 work program - 8 April 2020
The International Organization of Securities Commissions (IOSCO) has announced that it has agreed to reprioritise and delay some of its planned work for 2020, as set out in its 2020 work program. This is to allow it to focus its resources on addressing the challenges that securities markets regulators are facing in light of the economic impact of the COVID-19 pandemic.
IOSCO confirms that its work on the following topics will be delayed or paused: (i) IOSCO’s analysis of the use of artificial intelligence and machine learning by market intermediaries and asset managers; (ii) the impact of the growth of passive investing and potential conduct issues in index provision; and (iii) issues relating to market data, outsourcing and implementation monitoring.
IOSCO intends to continue to proceed with its work on good practices for deference and other projects that are near completion which will not burden limited regulatory or industry resources. IOSCO also plans to examine any specific investor protection issues, market integrity or conduct risks that may arise in the context of the COVID-19 crisis.
Press release: IOSCO reprioritises 2020 work program in light of COVID-19
European Commission
BMR - European Commission consults on draft Implementing Decision on the equivalence of Japanese benchmarks - April 2020
The European Commission has published for consultation a draft Implementing Decision on the equivalence of the legal and supervisory framework applicable to benchmarks in Japan under the Benchmarks Regulation (EU) 2016/1011 (BMR).
The draft Implementing Decision states that the legal and supervisory framework applicable to benchmarks administered in Japan, such as the Japanese Yen Tokyo interbank offered rate (TIBOR) and Euroyen TIBOR, are equivalent to the requirements of the BMR. In making such an assessment, the Commission has considered several factors, including: (i) whether the legal framework and supervisory practice of a third-country ensures compliance with the IOSCO principles for financial benchmarks; and (ii) whether the relevant specific administrators or benchmarks are subject to effective supervision and enforcement on an ongoing basis in that third-country.
The Commission intends to adopt cooperation arrangements alongside the Implementing Decision to ensure the effective exchange of information, and coordination of supervisory activities, between the European Securities and Markets Authority (ESMA) and the Japanese Financial Services Agency.
The consultation period closes on 4 May 2020.
European Commission consultation on draft Implementing Decision on the equivalence of benchmarks in Japan under the BMR
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European Securities and Markets Authority
EMIR - ESMA publishes consultation on clearing solutions for pension scheme arrangements - 2 April 2020
The European Securities and Markets Authority (ESMA) has published for consultation its report on central clearing solutions for pension scheme arrangements (PSAs) under the European Market Infrastructure Regulation (648/2012/EU) (EMIR). The report discusses the issues faced by PSAs in clearing their contracts, studies the rationale for the use of derivatives by PSAs and explores the different solutions already envisaged to allow PSAs to centrally clear their over-the-counter (OTC) derivatives. In particular, the consultation seeks detailed feedback on:
- the structure of PSAs’ portfolios and on the potential reduction of portfolios’ investment returns from increasing their cash holdings; and
- solutions still being explored, such as relying on the ancillary services of collateral transformation of clearing members, a market-based repo solution or access to alternative emergency liquidity arrangements.
In line with its obligations under the EMIR Refit Regulation (EU) 2019/834, which extended the exemption from the clearing obligation for PSAs, ESMA also seeks to investigate whether central counterparties (CCPs), clearing members and PSAs have developed viable technical solutions to facilitate PSAs’ participation in central clearing by posting cash and non-cash collateral as variation margins, including the implications of those solutions for market liquidity and pro-cyclicality, and their potential legal implications.
The consultation period closes on 15 June 2020. Following the receipt of stakeholders’ feedback, ESMA plans to publish a second report and submit it to the European Commission by the end of 2020.
ESMA consultation report on central clearing solutions for pension scheme arrangements under EMIR
Press release
Consultation practices - ESMA publishes updated statement - 3 April 2020
ESMA has published an updated version of its Public Statement of Consultation Practices, taking into account amendments made to the ESMA Regulation (1095/2010/EU) by the European Supervisory Authorities (the European Banking authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and ESMA) (ESAs).
The statement summarises ESMA’s consultation practices, including: (i) publishing an annual work programme; (ii) launching calls for evidence; (iii) publishing reasoned consultative proposals and facilitating consultation with stakeholders; and (iv) publishing a summary of the responses received.
ESMA Statement of Consultation Practices
Press release
Financial Innovation Standing Committee - ESMA publishes Terms of Reference - 7 April 2020
ESMA has published the Terms of Reference, dated 13 March 2020, for its Financial Innovation Standing Committee. The Committee was established by ESMA’s Board of Supervisors with the aim of considering how to: (i) increase the number of retail investors in order to develop the Capital Markets Union; (ii) promote sustainable finance and long-term oriented capital markets; (iii) develop digital finance as an opportunity for market participants and regulators; and (iv) achieve a proportionate approach in response to these objectives.
Terms of Reference for ESMA’s Financial Innovation Standing Committee
Financial Conduct Authority
COVID-19 - FCA publishes Statement of Policy on listed companies’ share issuances - 8 April 2020
The FCA has published a Statement of Policy setting out a series of new measures which aim to assist listed companies in raising new share capital in response to the economic impact of the COVID-19 pandemic, but also retain an appropriate degree of investor protection. The measures include a combination of temporary policy interventions and reminders of existing options for companies and their current and prospective shareholders.
Among other things, the Statement of Policy:
- sets out the FCA’s new, temporary approach to the preparation of working capital statements in share prospectuses and shareholder circulars published by premium listed companies where the Listing Rules require such statements. Under this approach key modelling assumptions underpinning the ‘reasonable worst-case scenario’ will be permitted to be disclosed in an otherwise clean working capital statement, provided that: (i) such assumptions are COVID-19-related, clear, concise and comprehensible; and (ii) there is an accompanying statement that the working capital statement has otherwise been prepared in accordance with ESMA’s Recommendations and the FCA’s technical supplement to this policy;
- modifies the FCA’s Listing Rules in relation to Class 1 transactions (LR 10.5.1R(2)) and related party transactions (LR 11.1.7R) to temporarily allow firms to obtain shareholder consent without the requirement to hold a general meeting, reflecting the government guidelines on social distancing;
- welcomes recent industry work to agree pragmatic steps to balance the pre-emption rights of existing shareholders with the need for share issuances to be completed as efficiently as possible in light of the current economic environment;
- encourages eligible companies to make use of the new simplified prospectus, introduced by the Prospectus Regulation (EU) 2017/1129, which recognises that investors already have access to a range of information on the issuer and removes the need to include information such as organisational structure, capital resources, remuneration and benefits, and board practices; and
- reiterates that no changes have been made to the application of the Market Abuse Regulation (596/2014/EU) (MAR) and that it remains in force.
The FCA confirms that the policy set out in the statement is intended to be temporary in response to the disruption caused by the COVID-19 pandemic. The policy interventions regarding working capital statements and general meeting requirements will apply until further notice. Although the guidance applies from 8 April 2020, the FCA welcomes stakeholders’ feedback on the measures taken.
FCA Statement of Policy on listed companies’ share issuances in light of COVID-19
FCA Technical Supplement on working capital statements
FCA Technical Supplement on general meeting requirements under the Listing Rules
Press release
