On December 18, 2018, the European Securities and Markets Authority ("ESMA") published a letter from the European Commission (the "Commission") to ESMA. In the letter, the Commission stated that it will endorse the draft technical standards on disclosure requirements under the EU Securitization Regulation only after certain amendments have been made.
As described more fully in a Cadwalader Memorandum, the Commission stated that it agrees with ESMA's approach presented in the draft disclosure technical standards, but cautioned that the standards could place an onerous burden on the reporting entity, especially since they represent the first comprehensive EU-wide disclosure regime for securitizations. The Commission emphasized the importance of proportionality in making sure there exists a balance between giving users the available information, on the one hand, and fostering a well-functioning securitization market consistent with objectives of the Securitization Regulation, on the other. Further, the Commission requested that ESMA examine whether, "at the present juncture," the "No Data" option could be available for further fields in the draft templates. The Commission's letter requested that ESMA supervise the use of, and need for, the "No Data" options in each template field as part of its contributions to the future reports of the Joint Committee of the European Supervisory Authorities on the Securitization Regulation.
The letter was written in accordance with the legislative procedure providing that, where the Commission intends to endorse draft regulatory technical standards with amendments, it is required to send them back to ESMA, explaining the reasons for those amendments. The Commission stated that it intends to endorse the draft disclosure technical standards only after amendments have been made by ESMA.
Cadwalader attorneys stated that the Commission's decision not to endorse ESMA's draft disclosure technical standards in the current form was expected. They said that the potential for market disruption from the proposed rushed adoption of complex and detailed reporting requirements has been recognized by the Commission. The attorneys stated that, in a sensible manner, the Commission is asking ESMA to reevaluate these proposals, particularly with respect to the use of the No Data options where information is not available.
The memorandum was authored by Stephen Day, Claire Puddicombe, David Quirolo, Nick Shiren, Daniel Tobias, Jeremiah Wagner, Suzanne Bell, Robert Cannon, Assia Damianova, Neil Macleod and Sabah Nawaz.
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