INVESTMENT SERVICES & CAPITAL MARKETS
MIFID and MIFIR
ESMA discussion paper on MiFID II investor protection topics linked to digitalisation
On 14 December 2023, ESMA published a Discussion Paper on the digitalisation of retail investment services and related investor protection considerations.
ESMA is seeking stakeholders input by 14 March 2024 on recommendations regarding online disclosures, digital tools, and marketing practices.
In the Discussion Paper ESMA explores the evolving landscape of retail investments. This includes examining the recent surge in the adoption of digital tools and social media by firms and retail investors following the Covid-19 pandemic, and an exploration of how technology impacts retail investor behaviour and decision-making.
Based on the supervisory experience of the National Competent Authorities (NCAs) and relevant academic literature, ESMA assesses both the opportunities and the potential risks linked to digitalisation.
ESMA’s recommendations cover the following main topics:
- Layering and accessibility of information
- Digital marketing communications and practices
- The use of influencers
- Social features of investment apps
- Gamification
- Nudging techniques
- Dark patterns
ESMA will consider all comments received by 14 March 2024.
The feedback to this Discussion Paper will support ESMA’s convergence work and prepare it for potential mandates for technical advice/ standards in these areas.
ESMA updates Q&As on MIFID II and MIFIR investor protection topics
On 15 December 2023, ESMA updated its Q&As on investor protection and intermediaries under MIFID II Directive and MIFIR.
ESMA has: (i) updated the Q&A on aggregating costs and charges to clarify the requirement in relation to all in-fees; and (ii) added a new question explaining how investment firms should indicate the parts of the total costs and charges paid in or represented in an amount of foreign currency in their ex-ante and ex-post costs and charges disclosure.
Central Securities Depositories Regulation
ESMA consults on potential changes to the CSDR penalty mechanism
On 15 December 2023, ESMA published a Consultation Paper on Technical Advice to the European Commission on the CSDR penalty mechanism. The consultation runs until 29 February 2024.
The aim of the consultation is to collect evidence and data from stakeholders on the effectiveness of the current penalty mechanism in discouraging settlement fails and incentivising their rapid resolution. In addition, it seeks feedback on ESMA’s preliminary proposals regarding:
- alternative parameters, when the official interest rate for overnight credit charged by the central bank issuing the settlement currency, is not available;
- the treatment of historical reference data for the calculation of late matching fail penalties; and
- alternative methods for calculating cash penalties, including progressive penalty rates.
The public consultation is open until 29 February 2024. The feedback it receives will feed into ESMA’s Technical Advice, which is expected to be sent to the European Commission by the end of September 2024.
CSDR Refit Regulation published in the Official Journal
On 27 December 2023, the Regulation amending the CSDR as regards settlement discipline, cross-border provision of services, supervisory cooperation, provision of banking-type ancillary services and requirements for third-country central securities depositories (CSDR Refit), was published in the OJ. the Council of the EU announced that it has adopted the proposed Regulation amending the CSDR (CSDR Refit).
The CSDR Refit aims to reduce the financial and regulatory burden on CSDs and improve their ability to operate across borders, while also strengthening financial stability. Among other changes, the Council highlights that it shall:
- clarify and simplify the passporting rules, reducing the barriers to cross-border settlement and easing the administrative and financial burden;
- make supervision of CSDs more effective by improving cooperation between supervisors;
- improve settlement efficiency by amending certain elements of the settlement discipline regime, including the preconditions for applying so-called mandatory buy-ins. Such buy-ins will only be introduced as a measure of last resort, where the rate of settlement fails in the EU is not improving and is presenting a threat to financial stability;
- provide conditions under which CSDs can access banking-type services, including through other CSDs.
The CSDR Refit will be published in the Official Journal and will enter into force 20 days after its publication.
Reporting
Draft ECON report on proposed Regulation to facilitate data sharing and re-use by financial sector authorities
On 22 December 2023, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report (dated 19 December) on the proposal for a Regulation amending the ESRB Regulation, EBA Regulation, EIOPA Regulation, ESMA Regulation and InvestEU Regulation as regards certain reporting requirements in the fields of financial services and investment support.
The draft report, prepared by Rapporteur Othmar Karas, contains the draft European Parliament legislative resolution, which sets out the suggested amendments to the proposed Regulation, as well as an explanatory statement.
The Rapporteur welcomes the proposed Regulation, as it is an important revision on cutting red tape in the financial sector and shows that the EU is always working to reduce unnecessary bureaucracy and inefficient duplication of reporting and disclosure requirements. However, the Rapporteur is convinced that further changes are necessary to significantly improve the impact of the intended effects on the entire financial sector.
The Rapporteur proposes the following amendments:
- expanding the scope to the entire financial sector. While the European Commission proposes to amend only the ESRB and ESAs Regulations, Mr. Karas proposes to also capture AML authorities, resolution authorities and the supervisory functions of central banks;
- introducing the “report once principle” by default. Mr. Karas suggests that authorities should only request information from entities, if they have not already reported this information to other authorities;
- avoiding “Gold plating”, cross-sector inconsistencies and ensuring proportionality. While the European Commission proposes that the ESAs should review level 2 measures in this respect, Mr. Karas suggests a broader mandate;
- the establishment of a Single Integrated Reporting System. Mr. Karas suggests that the relevant authorities should establish a Single Integrated Reporting System by 31 December 2026; and
- the removal of legal obstacles for data exchange. Mr. Karas proposes to include a mandate to all authorities responsible for supervision in the financial sector to report these legal obstacles to the European Commission by 31 December 2024. The European Commission should, by 30 June 2025, propose a legislative proposal to remove the legal obstacles.
EU Single Access Point (ESAP)
ESAP legislation published in Official Journal
On 20 December 2023, the legislative package relating to the EU Single Access Point (ESAP) was published in the Official Journal.
The package consists of the ESAP Regulation, the ESAP Omnibus Directive and the ESAP Omnibus Regulation. The ESAP will offer a single access point for public financial and sustainability-related information about EU companies and EU investment products. The ESAP Regulation, ESAP Omnibus Regulation and ESAP Omnibus Directive will each enter into force on 9 January 2024 (the twentieth day following publication).
Member states have until 10 January 2026 to transpose the ESAP Omnibus Directive into national law, except for Article 3 (which relates to the Transparency Directive), in respect of which the deadline is 10 July 2025.
Credit Ratings Agencies Regulation
ESMA 2023 CRA Market Share Report
On 20 December 2023, ESMA published the 2023 CRA Market Share Report. Article 8d of the Credit Ratings Agencies Regulation (CRA) requires issuers or related third parties, who intend to appoint two or more CRAs to rate an issuance or entity, to consider appointing at least one CRA with no more than 10% of the total market share in the EU.
Where an issuer or related third party does not chose to appoint a CRA with a less than 10% total market share, the CRA Regulation (Article 8d) requires this decision to be documented. The Market Share Report contains a list of registered CRAs and the types of credit ratings they issue, together with a calculation of CRAs’ revenues from credit rating activities and ancillary services at group level to assist firms in complying with the requirement.
EMIR
ESAs propose extending the EMIR equity option exemption
On 20 December 2023, the three European Supervisory Authorities (EBA, EIOPA and ESMA – the ESAs) published the joint draft regulatory technical standards (RTS) under the European Market Infrastructure Regulation (EMIR) where they are proposing a two-year extension to the equity option exemption from bilateral margining, as well as issue a no-action opinion.
The draft RTS provides clarity to market participants on how to handle equity options as from 4 January 2024, the date on which the current temporary exemption is set to expire. More specifically, the ESAs are proposing to extend the temporary exemption and are issuing a no-action Opinion which includes clarifications on the supervisory expectations.
This interim solution comes in the context of the still ongoing EMIR Review negotiations, which should provide a decision regarding the treatment of equity options with respect to bilateral margining, and follows the letter sent by the ESAs on 13 June 2023 to the European Commission and the co-legislators, highlighting the need to have a clear decision as part of the ongoing EMIR Review.
The ESAs take note of the amendments to EMIR agreed by the European Parliament’s Committee on Economic and Monetary Affairs (ECON Committee) on 28 November 2023 and at Coreper on 6 December 2023. These texts introduce specific provisions on equity options, including a permanent exemption.
Digital Operational Resilience Act (DORA)
Joint Committee of ESAs consultations on the second batch of policy products under DORA
On 8 December 2023, the Joint Committee of ESAs published a series of consultation papers on draft RTS, ITS and guidelines under DORA.
The consultation paper includes:
- draft RTS to specify the elements which a financial entity needs to determine and assess when subcontracting ICT services supporting critical or important functions as mandated by Article 30(5) of DORA;
- draft joint guidelines on the estimation of aggregated annual costs and losses caused by major ICT-related incidents;
- draft RTS on the harmonisation of conditions enabling the conduct of the oversight activities under Article 41(1) points (a), (b) and (d) of DORA;
- draft RTS on the content and timings of the notification and reports for major incidents and significant cyber threats and draft ITS on the standard forms, templates and procedures for financial entities to report a major incident and to notify a significant cyber threat;
- draft joint guidelines on the oversight cooperation and information exchange between the ESAs and the competent authorities under DORA; and
- draft RTS specifying elements related to threat led penetration tests.
Alongside the consultations, the ESAs also published an overview document, explaining the context and timelines for the second batch of policy products. The deadline for comments is 4 March 2024. The ESAs plan to submit the draft RTS, ITS and guidelines to the European Commission on 17 July 2024.
FINANCIAL CRIME
Anti-money laundering
European Commission adopts Delegated Regulation amending list of high-risk third countries under MLD4
On 12 December 2023, the European Commission adopted a Delegated Regulation amending the list of high-risk countries under the Fourth Money Laundering Directive (MLD4) identified as having strategic deficiencies in their AML/CTF regimes that post significant threats to the EU financial system.
The Delegated Regulation removes the Cayman Islands and Jordan from the list, reflecting FATF amendments made in October to its list of ‘Jurisdictions under Increased Monitoring’.
The Delegated Regulation will be submitted to the Council of the EU and the European Parliament for review. If neither object, it will enter into force on the twentieth day following its publication in the Official Journal.
Council of the EU and European Parliament agree to create a new EU money-laundering watchdog AMLA
On 13 December 2023, the Council of the EU and European Parliament announced they had reached a provisional agreement on creating a new European authority for countering money laundering and financing of terrorism (AMLA).
AMLA will have direct and indirect supervisory powers over high-risk obliged entities in the financial sector. The Council and European Parliament are currently negotiating the principles of the selection process of the AMLA’s seat location.
The provisional agreement gives AMLA powers to supervise directly certain types of credit and financial institutions, including cryptoasset service providers, if they are considered high-risk or operate across borders. AMLA will carry out a selection of credit and financial institutions that represent a high risk in several member states, to be supervised by joint supervisory teams led by AMLA.
For non-selected obliged entities, AML/CFT supervision will remain primarily at national level. For the non-financial sector, AMLA will have a supporting role. AMLA will monitor internal policies and procedures of selected obliged entities to ensure the implementation of targeted financial sanctions, asset freezes and confiscations.
The provisional agreement also introduces a reinforced whistle-blowing mechanism whereby AMLA will deal with reports from the financial sector for obliged entities. AMLA will also be given the power to settle disagreements with a binding effect in the context of financial sector colleges and, in any other case, upon the request of a financial supervisor.
The text of the provisional agreement will now be finalised and presented to member states’ representatives and the European Parliament for approval. If approved, the Council and the European Parliament will formally adopt the texts.
The Council and European Parliament agree on procedure to select seat for new authority
On 18 December 2023, the Council and the European Parliament representatives reached a common understanding on the process for selecting the seat of the future European authority for countering money laundering and terrorist financing (AMLA).
The new authority is the centrepiece of the reform of the EU’s anti-money laundering framework. The authority will have direct and indirect supervisory powers over obliged entities and the power to impose sanctions and measures. In mid-December, the co-legislators reached a provisional agreement on the design of AMLA.
Regarding the location of the authority, the Council and the Parliament have worked together to ensure a selection process that is transparent, fair and equitable to all candidates.
The final decision on the location of AMLA’s seat should be made by the co-legislators in an informal inter-institutional meeting at political level, where the Parliament’s and the Council’s representatives will vote together at the same time with the same number of votes attributed to each co-legislator.
Nine member states submitted applications to host AMLA: Belgium (Brussels), Germany (Frankfurt), Ireland (Dublin), Spain (Madrid), France (Paris), Italy (Rome), Latvia (Riga), Lithuania (Vilnius) and Austria (Vienna).
The Commission was tasked to assess the eligibility of the candidacies. The release of the assessment is expected for January 2024. The next step is to proceed with the selection. The location of the seat resulting from the process will be included in the AMLA regulation and formally adopted as part of the text.
FUNDS
UCITS and AIFs
RTS and ITS on cross-border activity notifications under UCITS Directive and AIFMD
On 15 December 2023, the European Commission adopted four pieces of secondary legislation relating to the UCITS Directive and AIFMD:
- Delegated Regulation supplementing the AIFMD with regard to RTS specifying the information to be notified in relation to the cross-border activities of managers of AIFMs under Article 33 of the AIFMD;
- Delegated Regulation supplementing the UCITS Directive with regard to RTS specifying the information to be notified in relation to the cross-border activities of management companies and UCITS under Articles 17, 18 and 20 of the UCITS Directive;
- Implementing Regulation laying down ITS for the application of the AIFMD with regard to the form and content of the information to be notified in respect of the cross-border activities of AIFMs and the exchange of information between competent authorities on cross-border notification letters; and
- Implementing Regulation laying down ITS for the application of the UCITS Directive with regard to the form and content of the information to be notified in respect of the cross-border activities of UCITS, UCITS management companies, the exchange of information between competent authorities on cross-border notification letters, and amending Regulation 584/2010.
The Council and the European Parliament will now scrutinise the draft legislation. If neither object, they will enter into force 20 days after publication in the Official Journal and apply 30 days later.
Money market funds
ESMA updates the parameters and methodology for MMF stress testing
On 19 December 2023, ESMA published the Final Report on the Guidelines on stress test scenarios under the Money Market Funds Regulation (MMFR).
The Final Report combines an update of the methodology to implement the scenario related to the hypothetical changes in the level of liquidity of the assets held in the portfolio of the MMF, with the annual calibration of the risk parameters.
Based on feedback received from stakeholders, the revised methodology includes parameters reflecting the liquidity stress affecting the money market and a new risk factor to simulate the additional impact of asset sales under stress market conditions. This takes the form of a price impact representing the additional cost incurred by selling a large amount of securities in a market with few buyers.
The 2023 parameter update reflects the prevailing sources of systemic risk identified for the financial system, against the background of a prolonged period of low growth, elevated inflation and higher interest rates. The severity of the parameters of the stress test scenarios in relation to hypothetical movements of the interest rates materially increased compared to the 2022 Guidelines, while other scenarios have been updated with a degree of severity similar to the previous exercise.
In calibrating the new risk parameters ESMA has worked closely with the European Systemic Risk Board and the European Central Bank.
The new 2023 parameters set out in the updated Guidelines and the revised methodology will have to be used for the purpose of the first reporting period following the start of the application of the updated Guidelines.
The section of the Guidelines related to the common reference parameters of the stress test scenarios will keep being updated at least every year considering the latest market developments.
SUSTAINABLE FINANCE
Corporate Sustainability Reporting Directive (CSRD)
Corporate due diligence rules agreed to safeguard human rights and environment
On 14 December 2023, the Council of the EU and the European Parliament announced that a provisional deal on the Corporate Sustainability Due Diligence Directive, which aims to enhance the protection of the environment and human rights in the EU and globally.
The Directive will set obligations for large companies in relation to actual and potential adverse impacts on human rights and the environment, with respect to the operations of the company itself, its subsidiaries and its business partners.
The provisional agreement frames the Directive’s scope, clarifies the liabilities for non-compliant companies, better defines the different penalties, and completes the list of rights and prohibitions that companies should respect. The agreed scope includes large companies that have more than 500 employees and a net worldwide turnover of €150 million. For non-EU companies it will apply if they have a €150 million net turnover generated in the EU, three years from the entry into force of the Directive, and the European Commission will publish a list of in-scope non-EU companies. However, according to the deal reached between the co-legislators, the financial sector will be temporarily excluded from scope, but there will be a review clause for a possible future inclusion of this sector based on a sufficient impact assessment. The provisional agreement needs to be endorsed and formally adopted by both institutions.
ESMA consults on draft guidelines for supervision of corporate sustainability information
On 15 December 2023, ESMA launched a consultation on a set of draft Guidelines on Enforcement of Sustainability Information and is inviting comments from interested stakeholders by 15 March 2024.
The main goals of the draft Guidelines are to:
- Ensure that national competent authorities carry out their supervision of listed companies’ sustainability information under the Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards and Article 8 of the Taxonomy Regulation in a converged manner; and
- Establish consistency in, and equally robust approaches to, the supervision of listed companies’ sustainability and financial information; this will facilitate increased connectivity between the two types of reporting.
The consultation paper will be of interest to listed companies required to publish sustainability information by the CSRD and Article 8 of the Taxonomy Regulation, to investors and other users of sustainability information and to auditors and independent assurance services providers.
ESMA will consider the feedback received and expects to publish the final Guidelines in Q3 2024.
Delegated Regulation setting out first set of EU sustainability reporting standards published in Official Journal
On 22 December 2023, Delegated Regulation (EU) 2023/2772 as regards EU sustainability reporting standards (ESRS) was published in the Official Journal.
The Delegated Regulation sets out the first set of ESRS under the CSRD. Annex I of the Delegated Regulation contains two sets of cross-cutting ESRS. The first covers general requirements and the second covers general disclosures. Annex I also contains a set of specific ESRS on environmental disclosures, on social disclosures and on governance. Annex II contains a list of acronyms found in the ESRS and a glossary of terms defined in the ESRS. The Delegated Regulation came into force on the third day following its publication in the Official Journal. It applies from 1 January for financial years beginning on or after 1 January 2024.
Sustainable finance
ESMA issues an update on the guidelines on funds’ names using ESG or sustainability-related terms
On 14 December 2023, ESMA published an update on the status of ESMA’s guidelines on ESG and sustainability-related terms in fund names, including details on the timing of their publication.
Since the launch of the work on the guidelines, the AIFMD and UCITS Directive reviews have progressed. As such, ESMA has decided to postpone the adoption of the guidelines to ensure that the outcome of these reviews may be fully considered. In particular, the text of the provisional agreement resulting from the interinstitutional negotiations contains two new mandates for ESMA to develop guidelines specifying the circumstances where the name of an AIF or UCITS is unclear, unfair, or misleading.
ESMA plans to adopt the guidelines shortly after the date of entry into force of the amended legal texts and is publishing this statement to highlight the key content of the guidance that it intends to provide in the forthcoming guidelines.
The guidelines are expected to be approved and published in Q2 2024, subject to the timing of the publication of the AIFMD and UCITS Directive revised texts. The guidelines would apply three months after the date of their publication on the website in all EU official languages. Managers of new funds would be expected to comply with the guidelines in respect of those funds from the date of application of the guidelines. Managers of funds existing before the date of application of the guidelines should comply with the guidelines in respect of those funds six months from the application date.
EBA proposes a voluntary EU green loan label to help spur markets
On 15 December 2023, the European Banking Authority (EBA) published its response to the European Commission’s call for advice on green loans and mortgages.
The EBA proposes the introduction of a voluntary EU label for green loans based on a common EU definition and the integration of the concept of green mortgage and its key sustainability features in the Mortgage Credit Directive.
The EBA’s response provides an overview of green lending and associated practices in the banking sector, and outlines issues identified in green loans market. Green lending currently represents a limited share of the overall lending by the banking sector. Loans for the renovation of buildings to improve energy efficiency and for small and medium-sized enterprises are currently not at sufficient levels to achieve the EU’s sustainability objectives.
To facilitate a more active participation by banks in the green loans market, the European Commission is advised to make available a voluntary EU definition and label for green loans based on the use of the loan proceeds. These initiatives should leverage current market practices and industry standards that are in line with the EU’s environmental objectives.
Joint ECB/ESRB report on Banks and insurance key role to play in reducing climate-related financial stability risk
On 18 December 2023, the European Central Bank (ECB) and the European Systemic Risk Board (ESRB) published a joint report on the impact of climate change on the European Union (EU) financial system.
The report sets out detailed frameworks for addressing risk to the financial system by (i) gathering evidence on the most important financial stability indicators via a surveillance framework and accompanying Chartbook, (ii) leveraging this evidence to develop a macroprudential strategy for addressing climate risk, and (iii) extending the scope from climate-related risks to broader nature-related risks.
Banks have a key role to play within the financial system when it comes to managing and reducing risks to financial stability that arise from emissions of the EU economy, the report finds. This is because banks lend disproportionately to sectors with high exposure to climate-related risk. The share of high-emitting sectors in bank lending is around 75% higher than its equivalent share in economic activity, meaning that these sectors are over-represented in banks’ loans. Similarly, 60-80% of all mortgage lending in the euro area is to high-emitting households.
Climate change is an increasingly salient topic, not only because of an already visible increase in the frequency and severity of climate hazards, but also because plans for a European green transition are becoming more concrete. Reassessing and repricing climate risk could create financial instability through numerous channels with high exposure to climate-related risk. This includes the transmission of climate shocks through global value chains and the potential for financial contagion as both banks and financial markets seek to simultaneously reposition their asset portfolios against the backdrop of a significant insurance protection gap.
The report makes the case for a robust macroprudential strategy to tackle these risks. A system-wide prudential approach would focus on managing risks not only for the banking sector but also for borrowers. Moreover, it would tackle risks in non-bank financial intermediation, notably gaps in insurance protection and information, including the need for reliable disclosures and robust green labels. It would also complement ongoing microprudential efforts, including ECB Banking Supervision’s work on climate-related and environmental risk. This approach could draw on existing instruments in the EU macroprudential toolkit. Systemic risk buffers or risk concentration limits, in particular, could facilitate tackling climate-related financial stability risk in a targeted and scalable manner.
The report also looks in detail at how the degradation of nature potentially poses additional risks for financial stability. An in-depth look at the exposures of EU financial institutions suggests that 75% of bank loans and over 30% of insurer investments in corporate bonds and equity are in economic sectors heavily reliant on at least one ecosystem service, with particular dependence on services relating to surface and ground water, mass stabilisation and erosion control, and flood and storm protection.
Council agrees negotiating mandate on ESG ratings
On 20 December 2023, the Council reached an agreement on its negotiating mandate on a proposal for a regulation on environmental, social and governance (ESG) ratings, with the aim of boosting investor confidence in sustainable products.
ESG ratings provide an opinion on a company’s or a financial instrument’s sustainability profile, by assessing its exposure to sustainability risks and its impact on society and the environment. ESG ratings have an increasingly important impact on the operation of capital markets and on investor confidence.
The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations of ESG ratings providers, making ratings more comparable and preventing potential conflicts of interests.
Under the proposed rules, ESG rating providers will need to be authorised and supervised by the European Securities and Markets Authority (ESMA) and comply with transparency requirements, in particular with regard to their methodology and sources of information. Providers will be subject to specific measures to prevent and manage conflicts of interests.
The European Parliament agreed on its negotiating mandate in the plenary session held between 11 and 14 December 2023. The agreement on the Council mandate paves the way to interinstitutional negotiations that are expected to start in January 2024.
Taxonomy
European Commission draft notice on interpretation and implementation of Disclosures Delegated Act
On 21 December 2023, the European Commission published a draft notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of the EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets.
The notice sets out guidance to financial undertakings in the form of replies to FAQs on the reporting of their key performance indicators (KPIs) under the Disclosures Delegated Act. The guidance is intended to help the financial market participants concerned prepare their first mandatory reporting exercise in 2024. It covers topics including: (i) the scope of covered entities; (ii) the scope of consolidation of disclosures; (iii) the taxonomy-assessment of exposures to individual undertakings, of groups, and of specific exposures; and (iv) specific questions related to credit institutions, insurance undertakings and asset managers.
The draft was approved in principle by the European Commission on 21 December and its formal adoption in all the official languages of the EU will take place as soon as the language versions are available.
CySEC DEVELOPMENTS
Circular C606: EBA Guidelines on the criteria for the exemption of investment firms from liquidity requirements in accordance with Article 43(4) of Regulation (EU) 2019/2033
On 1 December 2023, CySEC issued Circular C606 (the ‘Circular’) to bring to the attention of CIFs the EBA Guidelines on the criteria for the exemption of investment firms from liquidity requirements in accordance with Article 43(4) of Regulation (EU) 2019/2033 (EBA/GL/2022/10) (the ‘Guidelines’).
The Guidelines specify the criteria which competent authorities may take into account when exempting investment firms referred to in Article 12(1) of Regulation (EU) 2019/2033 (i.e. Class 3 CIFs) from liquidity requirements in accordance with Article 43 of Regulation (EU) 2019/2033 and are applicable since 28/11/2022.
Circular C607: MOKAS’ Strategic Analysis Report 2020 – 2022
On 8 December 2023, CySEC issued Circular C607 (the ‘Circular’), to inform its Regulated Entities of the publication of the first extended Strategic Analysis Report 2020-2022 (the ‘Report’) by the Financial Intelligence Unit of Cyprus (‘MOKAS’).
The Report aims to provide important information and feedback to Regulated Entities regarding money laundering and terrorist financing trends and patterns, as observed from the context and nature of the Suspicious Transactions Reports (STRs)/ Suspicious Activity Reports (SARs) submitted to MOKAS by obliged entities during the period 2020-2022, Requests and Spontaneous Disclosures from foreign Financial Intelligence Units as well as Requests from Cyprus Police Authorities and from the Cyprus Customs and Excise Department.
CySEC considers the Report to be of useful assistance to Regulated Entities, especially when it comes to enhancing their understanding of SARs and STRs, in order to further improve the quality of information provided to MOKAS and Law Enforcement Authorities, i.e., the Police.
Circular C609: ΕΒΑ Guidelines on Information and Communication Technology (ICT) and security risks management (EBA/GL/2019/04)
On 18 December 2023, CySEC issued Circular C609 (the ‘Circular’), following the CySEC Circular C571 regarding the EBA Guidelines on Information and Communication Technology (ICT) and security risks management (EBA/GL/2019/04) (the “Guidelines”). CySEC provides certain clarifications in relation to paragraph 11 (assigning responsibility for managing and overseeing ICT and security risks to a control function) and paragraph 25 (auditing CIF’s governance, systems and processes for its ICT and security risks) of the said Guidelines.
Circular 612: Cross Border Data Collection Exercise, Freedom to Provide Investment Services and Activities (Cross Border Activity)
On 22 December 2023, CySEC issued Circular C612 (the ‘Circular’), to inform all CIFs that ESMA is launching the exercise for the collection of data regarding cross border activity of investment firms for the year 2023.
This exercise is in line with the exercise that had been conducted last year through the CBRT-CIF form. However, reporting will be done via EU’s online platform having the format of an online questionnaire. Participating firms will receive an invitation link to access and submit the questionnaire.
The online questionnaire had to be completed by all CIFs that were authorised by December 31, 2023, and which had at least 50 retail clients, (including clients treated as professionals on request according to Section II of Annex II of MiFID II) (therein ‘retail clients’), in at least one host Member State (i.e. excluding Cyprus).
- CIFs that fulfilled the conditions (as set out in section 1.1 of the Circular) had to provide a valid email address to CySEC to which the invitation link would have been forwarded to, by sending an email to riskstatistics.cifs@cysec.gov.cy , by the 29th of December 2023.
A forthcoming Circular will provide detailed information on the completion of the online questionnaire, along with the stipulated deadline for submission.
- CIFs that did not meet the conditions (as set out in section 1.1 of the Circular) i.e. CIFs that did not reach the materiality threshold of 50 retail clients in at least one host Member State should have informed CySEC accordingly, by sending an email to riskstatistics.cifs@cysec.gov.cy by the 29th of December 2023, in order to be exempted from this exercise.