1. AIFMD: EXTENSION OF AIFMD PASSPORT TO NON-EU AIFMS AND AIFS
In July 2015, ESMA published its first advice on the extension of the AIFMD passport to non-EU AIFMs and AIFs. The advice covered Guernsey, Hong Kong, Jersey, Switzerland, Singapore and the United States. Following this, the European Commission requested that ESMA complete its review of certain of those jurisdictions and assess a further six non-EU jurisdictions (Australia, Bermuda, Canada, the Cayman Islands, Japan and the Isle of Man). ESMA published this latest advice on 18 July 2016. Read the Client Briefing published by our Asset Management and Investment Funds Group here.
ESMA has published a Call for Evidence on Asset Segregation and Custody Services under AIFMD and the UCITS Directive. It follows an earlier consultation in December 2014. The new Call for Evidence is wider in scope, and in particular, seeks to feedback on how investor protection in the event of insolvency would be ensured under the various models, the issues linked to collateral management/ prime brokerage, and any uncertainties regarding how the depositary delegation rules should apply to central securities depositaries.
2. AML: MLD4
On 5 July 2016, the European Commission adopted a proposal to amend MLD4 and bring forward the transposition date to 1 January 2017. Our recent Client Briefing summarises key aspects of the proposal.
In Ireland, the Minister for Justice signed Regulations designating the Property Services Regulatory Authority as the competent authority for property service providers under Irish AML legislation.
3. BANKING UNION: EBA STRESS TESTS
On 29 July 2016, the EBA published the Results of its 2016 EU-wide banking stress tests. Both AIB and Bank of Ireland were in scope, together with 49 other banks from 14 other EU and EEA countries. The objective of the stress test is to give the market a common framework, within which the ability of EU banks to deal with adverse economic shocks can be assessed.
4. BENCHMARKS REGULATION
The Benchmarks Regulation (which will apply from 1 January 2018) has been published in the Official Journal. EURIBOR has separately been specified (by way of Commission Implementing Regulation) as a 'critical benchmark',
5. BANK RECOVERY AND RESOLUTION DIRECTIVE
A number of additional Level 2 BRRD measures have now been finalised and published in the Official Journal as follows:
Commission Implementing Regulation (EU) 2016/1066
||The procedures, forms
and templates to be used when information is being provided to a
resolution authority to enable it to draw up a resolution
Commission Delegated Regulation (EU) 2016/1075
||The content and
assessment of the recovery plans that institutions must
The content of the resolution plans that resolution authorities must prepare, and how those resolution authorities must assess resolvability.
The conditions for intra-group financial support.
Requirements in relation to independent valuers.
Regarding the contractual provision required by Article 55 BRRD, the liabilities excluded from that requirement, and the contents of that contractual provision.
The organisation of resolution colleges (which will facilitate cross-border cooperation and coordination).
Commission Delegated Regulation (EU) 2016/1401
arising from derivatives.
Commission Delegated Regulation (EU) 2016/1400
||The minimum content for
a business reorganisation plan, and points to be addressed in
related progress reports.
Commission Delegated Regulation (EU) 2016/1434
Commission Delegated Regulation (EU) 2015/63 in relation to ex
ante contributions to resolution financing arrangements.
Commission Delegated Regulation (EU) 2016/1450
||How the minimum
requirement for own funds and eligible liabilities is to be
and will therefore be subject to additional compliance requirements and supervision under the Regulation.
6. COMMODITY DEALERS
The exemption for commodity dealers from large exposure and own funds requirements under the Capital Requirements Regulation has been extended until 31 December 2020.
7. CONTRACTS FOR DIFFERENCE (CFDS)
On 25 July 2016, ESMA published a warning about CFDs, binary options and other speculative products. It highlighted the "risky, complex and speculative" nature of those products, and highlighted that it would consider whether to carry out further work in this area in light of impending implementation of MiFID II in January 2018. On 28 July, the Central Bank noted this warning on its website, and also warned that, in its view, CFDs are not suitable for investors with low-risk appetites due to the volatile nature of the market and the potential for an investor to lose more than originally invested.
Commission Delegated Regulation (EU) 2016/1178 on the clearing obligation under EMIR has been published in the Official Journal, setting out the classes of over-the-counter derivatives subject to the clearing obligation, and the four categories into which counterparties subject to the clearing obligation are to be divided. Article 3 sets out the various dates from which the clearing obligation will take effect and a Corrigendum was then published on 21 July 2016 correcting some of the dates.
ESMA has also consulted on delaying the EMIR clearing obligation for financial counterparties with limited activity volumes. The consultation closed on 5 September, and the outcome is expected to be a 2-year phase-in for financial counterparties categorised as 'Category 3' under certain delegated regulations.
9. FUND ADMINISTRATORS
The Central Bank has published its Feedback Statement on Consultation on Risk Assessment and Capital Planning for Fund Administrators (CP 100). CP100 was a proposal to publish an Investment Firm Rulebook which would consolidate all of the requirements imposed by the Central Bank on investment firms. The Central Bank intends to issue this Rulebook by way of a regulation under the Central Bank (Supervision and Enforcement) Act 2013 later this year or early next year.
10. FUND MANAGEMENT COMPANIES: THIRD CENTRAL BANK CONSULTATION
In July, our Asset Management and Investment Funds Group published a Client Briefing on the Central Bank's consultation on managerial functions and other matters for fund management companies in Ireland that are authorised by the Central Bank (i.e. UCITS management companies, AIFMs, self-managed UCITS investment companies and internally-managed AIFs).
The Central Bank has published a Discussion Paper on the Payment of Commission to Intermediaries, seeking feedback by 18 October from interested parties on the risks and benefits to consumers of product producers paying commission to intermediaries for the sale of their products.
12. INVESTMENT FIRMS
The Central Bank has announced the results of onsite inspections into client reporting by investment firms (MiFID investment firms, MiFID branches passporting into Ireland and UCITS Managers/AIFMD firms providing MiFID equivalent activity were in-scope for the review), and has written to industry members highlighting (at Appendix 1) examples of good practices encountered as part of that review.
13. MARKET ABUSE
The new Market Abuse Regulation came into force in Ireland on 3 July 2016. The Department of Finance also published the European Union (Market Abuse) Regulations 2016, transposing the related directive on criminal sanctions, and the Central Bank published its related Market Abuse Rules and Guidance on Market Abuse Regulatory Framework.
For further information, read the briefings issued by our Capital Markets and Listings Groups on New Market Abuse Regime: Impact on issuers of MSM-listed debt securities and Issuers of debt securities on GEM to be subject to new market abuse regime.
14. MARKET OPERATORS
The Central Bank has published its Feedback Statement on its Consultation on a Capital Requirement Framework for Market Operators (CP101). Market operators of regulated markets are not subject to CRD IV, so CP101 proposed a risk-based capital requirement which the Central Bank intends to put in place by way of regulation under the Central Bank (Supervision and Enforcement) Act 2013.
15. MIFID II
The Department of Finance has issued a Consultation Paper on national discretions under MiFID II (including in relation to the third country regime), seeking responses by 21 September 2016.
Following official confirmation of agreement on delaying MiFID II implementation until January 2018, a minor correction was made to the Markets in Financial Instruments Regulation (correcting a minor referencing point) and a further correction was made to the definition of "structured deposit" in the MiFID II Directive (again, simply correcting a cross-reference).
16. MINIMUM COMPETENCY CODE
The Central Bank has indicated that it will be undertaking a review of its Minimum Competency Code in Q4 2016 in light of recent EU financial services legislation dealing with knowledge and competency requirements (most likely the Mortgage Credit Directive and MiFID II).
17. MORTGAGES: RESOLVING THE MORTGAGE ARREARS CRISIS
The July 2016 edition of our quarterly "Resolving the Mortgage Arrears Crisis" Client Briefing discusses:
- legislative proposals relating to caps on variable mortgage rates and a special court to hear mortgage arrears and personal insolvency cases;
- the mortgage arrears-related proposals contained in the Programme for Partnership Government;
- the Report of the Oireachtas Committee on Housing and Homelessness; and
- recent statistics published by the Department of Finance and the Central Bank of Ireland in relation to arrears levels and repossessions.
In more recent developments:
- the Court of Appeal held that the Circuit Court does not have jurisdiction to hear possession proceedings in relation to non-rateable residential properties which are neither principal private residences nor housing loan mortgages (for further detail, read our recent Client Briefing); and
- the Department of Justice and Equality has launched a Scheme of Aid and Advice on Home Mortgage Arrears, aimed at helping those who are struggling to pay their debts, and are at risk of losing their homes due to mortgage arrears. The Scheme, expected to run for 3 years at a cost of up to €15 million, makes five different fixed packages of professional financial or legal advice and help available, free of charge, to borrowers.
18. MORTGAGES: VARIABLE RATE MORTGAGE HOLDERS
On 21 July 2016, the Central Bank announced that holders of variable rate mortgages will be granted further protections from 1 February 2017. The new protections will benefit personal consumers (i.e. individuals acting outside their trade, business or profession) in relation to variable rate mortgages (excluding tracker mortgages). Regulated lenders (banks and retail credit firms) will be required to prepare a summary statement of their policy on setting variable mortgage rates, provide additional information to relevant borrowers in their statements of account, and provide additional information to relevant borrowers when variable mortgage rates change. For further information, read our recent Client Briefing.
19. PAYMENT ACCOUNTS DIRECTIVE
The Department of Finance has published its proposed course of action following its recent consultation on the transposition of the Payment Accounts Directive. Among other points, it confirmed that An Post, credit unions and friendly societies are out of scope. It will now begin to draft the relevant transposing legislation in conjunction with the Central Bank.
20. PAYMENT SERVICES DIRECTIVE (REVISED)
The Department of Finance has consulted on Ireland's transposition of PSD2, with a closing date of 15 September 2016. We will be publishing a further briefing on PSD2 later this year which will cover any proposed course of action published by the Department in light of responses received.
21. PACKAGED RETAIL AND INSURANCE-BASED INVESTMENT PRODUCTS
The EU Council has formally objected to the European Commission's proposed delegated regulation relating to the presentation, content, review and revision of key information documents under the PRIIPS Regulation. The concerns raised relate, among other matters, to proposed formulas for predicting investment performance and whether these could be misleading.
22. SME REGULATIONS: NOW IN FORCE
The new SME Regulations came into force on 1 July 2016. On 27 May 2016, some final changes were made to those Regulations (in particular in relation to the conditions that must be met for an enterprise to be a micro and small enterprise or a medium-sized enterprise) – details of those final changes are summarised in our Client Briefing. For a reminder of the changes made by the new SME Regulations, read our original February 2016 Client Briefing (which was updated to take account of those final changes).
23. STRUCTURED RETAIL PRODUCTS
The Central Bank has announced the results of an inspection of the offering of complex structured retail products to consumers. It carried out a desk-based review of 20 investment and stockbroking firms and banks, followed by on-site inspections of 5 of those firms. It found that there has been a move away from capital protected deposit-based products towards more complex, capital-at-risk products, with weak product governance arrangements identified in several firms.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.