Welcome to the February 2021 issue of Indus Valley Partners’ regulatory reporting news bulletin.
This monthly overview is intended to arm managers with the tools and knowledge necessary to support the ongoing compliance of regulatory requirements and updates across the greater part of the alternative investment industry in the United States and Europe.
European Securities and Markets Authority (ESMA)
On February 2nd, ESMA published its annual report on the application of waivers and deferrals for equity instruments under MiFIR. The report includes an analysis based on waivers for equity and equity-like instruments for which ESMA issued an opinion to the competent authority in the period between 1 January and 31 December 2019.
Key findings include:
- Shares are the instrument type for which waivers are requested most frequently.
- The volume under the waivers, both in turnover and number of transactions, is for largely executed in shares.
- ETFs are the instruments with the highest percentage of dark trading with respect to the overall volume traded in those instruments.
- The UK was the country that submitted the highest number of waiver notifications in 2019.
ESMA has indicated that it will publish the next annual reports in the second half of 2021 covering the analysis of the application of the waivers and deferral regimes in 2020.
On January 13th, ESMA published two opinions on position limits regarding commodity derivatives under MiFID II/MIFIR.
ESMA’s opinions agree with the proposed position limits regarding:
On February 3rd, ESMA updated its Questions and Answers regarding market structures issues under MiFID II and MiFIR with the aim to promote common supervisory approaches and practices.
The Q&As provide clarification on:
- The classification of DEA trades
- Matched Principal Trading by investment firms
On January 13th, ESMA issued a Public Statement to remind firms of the MiFID II requirements on the provision of investments services to retail or professional clients by firms not established or situated in the European Union (EU).
- Subject to Article 42 of MiFID II, where a retail client or professional client within the meaning of Section II of Annex II established or situated in the Union initiates at its own exclusive initiative the provision of an investment service or activity by a third-country firm, the requirement for authorisation under Article 39 shall not apply.
- ESMA reminds firms that "where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client."
- When using the services of investment service providers which are not properly authorised in accordance with EU and Member States’ law, investors may lose protections granted to them under EU relevant rules, including coverage under the investor compensation schemes in accordance with Directive 97/9/EC .
U.S. Securities and Exchange Commission (SEC)
On January 21st, the SEC announced that it updated its list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 28 soliciting entities, three impersonators of genuine firms, and six bogus regulators.
- The list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being a victim of fraud.
- The recent additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration.
On January 8th, ESMA published its first Financial Instruments Transparency System (FITRS) file following the end of the Brexit transition period.
- The equity transparency calculation results delta file (DLTECR) contains updated transparency calculation results for equity instruments which previously had a UK venue as the most relevant market.
- In compliance with the deployment of their programs, ESMA would like to remind users to process this file to capture all these updates.
On January 5th, ESMA published its first set of Financial Instruments Reference Data System (FIRDS) files following the end of the Brexit transition period.
The FIRDS delta files (DLTINS) contain information about:
- Termination of all UK financial instruments: (ISIN, MIC) records for MICs in the UK and which were still active have been terminated and their termination date has been set to 31 December 2020 at 22:59:59 UTC.
- Updated Relevant Competent Authority (RCA) for all financial instruments which previously had GB as RCA and which will continue to be traded in the EU.
On January 28th, ESMA updated its Questions and Answers document on practical questions regarding reporting issues under the European Markets Infrastructure Regulation (EMIR).
- A new Q&A for Trade Repositories clarifies the steps to be taken for the due termination of derivatives when the reporting counterparty ceases to exist.
- It also specifies how to deal with non-terminated reports of inactive (dissolved) counterparties to ensure that accurate information is provided to the authorities.
- The purpose of the Q&A document is to promote common supervisory approaches and practices in the application of EMIR. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of the Regulation.
Financial Conduct Authority (FCA)
On January 1st, several Memoranda of Understanding (MoUs) came into effect between the FCA and the European authorities, covering cooperation and exchange of information.
The list of affected MOUs are:
- A Multilateral MoU with EU and EEA National Competent Authorities (NCAs) covering supervisory cooperation, enforcement and information sharing relating to, among others, market surveillance, investment services and asset management activities.
- A MoU with the European Securities and Markets Authority (ESMA) covering supervision of credit rating agencies and trade repositories.
- A Multilateral MoU with EU and EEA NCAs covering supervisory cooperation, enforcement and information exchange between UK and EU/EEA national supervisors in the field of insurance regulation and supervision.
- An MoU with the European Insurance and Occupational Pensions Authority (EIOPA) covering information exchange and mutual assistance between the UK authorities and EIOPA in the field of insurance regulation and supervision.
- A MoU with the European Banking Authority (EBA) covering information exchange and mutual assistance between the UK authorities and the EBA in the field of banking.
Noted within a FCA press release published on January 11th, the LIBOR administrator, ICE Benchmark Administration, is consulting on ceasing publication of all sterling LIBOR settings at the end of 2021, leaving just one year for firms to remove their remaining reliance on these benchmarks.
- In support of this, the Working Group on Sterling Risk-Free Reference Rates (the Working Group) has published an update to its priorities and roadmap for the final year of transition to help businesses to finish planning the steps they will need to take in the coming months.
- The Working Group has recommended that firms no longer initiate new linear derivatives linked to sterling LIBOR after the end of March 2021, other than for risk management of existing positions or where they mature before the end of 2021.
- The Working Group has recommended that, from the end of March 2021, sterling LIBOR is no longer used in any new lending or other cash products that mature after the end of 2021.
- The Working Group welcomes the development of term SONIA reference rates (TSRRs) which are beginning to be made available by various providers.
In a joint statement published on January 27th, taking into account the circumstances arising from the coronavirus pandemic, the FCA and FRC reminded companies of the measures that remain valid today and which provide some flexibility. This includes allowing listed companies an additional two months to publish their audited annual financial reports. With this, the FCA and FRC also:
- Remind audit firms of their regulatory obligations to report, to the appropriate regulator, matters arising from their work on a timely basis.
- Alert investors and other users of financial information, including lenders assessing covenant breaches arising solely because of changes in reporting timetables, that reporting timetables for companies might be extended for these reasons and to view these changes in the context of current events.
Filing Calendar and Deadlines
|Form Name||Type||Due Date|
|PF||Large Hedge Funds||March 1st, 2021|
|Annual Filers||April 30th, 2021|
|CPO-PQR||Large Commodity Pools
Small & Mid-Sized Pools
|March 31st, 2021|
- The AIFMD Denmark portal is now accessible via a new URL with no impact on old filings and submissions. URL: https://adfs.nationalbanken.dk/STS_FIONA/authenticate/AboutExtranet.aspx?ReturnUrl=
- AIFMD reporting in Iceland began this year with requirements for the first report to be submitted before January 31st for the operating year ending December 31st, 2020.
- Clients will have to register on the Icelandic FSA reporting system to be able to file. URL: https://www.matterhorn-rs.com/blog/iceland-aifs-and-the-aifmd-reporting-xml
- The Luxembourg Regulator’s (CSSF) AIFMD errors explanation can be accessed here.
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