Welcome to the March 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.
On February 1st, ESMA announced that it is launching a common supervisory action (CSA) with national competent authorities (NCAs) on the application of MiFID II product governance rules across the European Union.
The CSA, which will be conducted during 2021, will allow ESMA and the NCAs to assess the progress made by manufacturers and distributors of financial products in the application of these key requirements and will also help in the analysis of:
- How manufacturers ensure that financial products' costs and charges are compatible with the needs, objectives and characteristics of their target market and do not undermine the financial instrument's return expectations
- How manufacturers and distributors identify and periodically review the target market and distribution strategy of financial products
- What information is exchanged between manufacturers and distributors and how frequently this is done.
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. It also includes an overview of the deferral regime for equity and equity-like instruments applied across the different EU Member States.
The report’s main findings include:
- The LIS (Large In Scale) waiver is the most used
- 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
- Compared to 2018, the percentage of segment MICs applying the LIS deferral regime slightly fell
- The UK was the country that submitted the highest number of waiver notifications in 2019.
ESMA 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 February 3rd, ESMA updated its Questions and Answers regarding market structures issues under MiFID II and MiFIR.
The Q&As provide clarification on:
- The classification of DEA trades
- Matched Principal Trading by investment firms.
- Promote common supervisory approaches and practices in the application of MiFID II and MiFIR
- Provide responses to questions addressed by the general public and market participants in relation to the practical application of level 1 and level 2 provisions for transparency and market structures topics.
ESMA will continue to develop these Q&As in the coming months and will review and update them where required.
On February 1st, ESMA published a final report on implementing technical standards (ITS) under the Regulation on cross-border distribution of funds.
The final report and draft ITS largely reflect the original consultation proposals, focused on the information to be published on NCAs websites regarding the national rules governing marketing requirements for funds, and the regulatory fees and charges levied by NCAs in relation to fund managers’ cross-border activities.
The draft ITS also include provisions on the communication of information by NCAs to ESMA for the purpose of developing and maintaining a central database listing UCITS and AIFs marketed cross-border on ESMA’s website.
On February 3rd, ESMA sent a letter to the European Commission consultation on the review of the European Long Term Investment Funds (ELTIF) Regulation.
The following amendments are being proposed by ESMA in its letter:
- Eligible assets and investments
- Authorization process
- Portfolio composition and diversification
- Prospectus and cost disclosure.
ESMA has proposed these changes to make ELTIFs a more attractive investment vehicle for professional investors, as well as a potential savings’ placement alternative for retail investors.
Following the consultation of ESMA and stakeholders, the Commission is expected to submit to the EU Parliament and Council a report assessing the functioning of ELTIFs in the context of the CMU project and suggesting a review of the ELTIF Regulation. ESMA is ready to assist the Commission in revising the ELTIF framework.
On February 4th, the Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) delivered to the European Commission (EC) the Final Report on the content, methodologies and presentation of disclosures under the EU Regulation on sustainability-related disclosures in the financial services sector (SFDR).
Entity-level principal adverse impact disclosures
The principal adverse impacts that investment decisions have on sustainability factors should be disclosed on the entity’s website. The disclosure should take the form of a statement showing how investments adversely impact indicators in relation to:
- Climate and environment
- Social and employee matters, respect for human rights, anti-corruption, and anti-bribery aspects.
Product level disclosures
The sustainability characteristics or objectives of financial products are to be disclosed in an annex to the respective sectoral pre-contractual and periodic documentation in mandatory templates and on providers’ websites.
On February 26th, ESMA published 4 new Q&As and modified 11 existing Q&As. ESMA also updated reporting instructions and an XML schema for the templates set out in the technical standards on disclosure requirements.
The new Q&As include instructions on:
- How to report split and merged underlying exposures
- How to report income fields for buy-to-let residential real estate mortgages.
ESMA has also published an XML schema for each of the two standard reports which a registered securitisation repository (SR) must provide in accordance with the regulatory technical standards on securitisation repository operational standards:
- The end-of-day report includes summary information about all securitisations reported to a SR. The report must be made available by SRs on a daily basis.
- The rejection report includes information about data submissions that were rejected by a SR because they failed to meet one or more requirements. The report must be made available by SRs on a weekly basis.
Credit Rating Agency
On February 9th, ESMA announced it had withdrawn the credit rating agency (CRA) registrations of:
- Fitch France
- Fitch Polska
- Fitch Italia
- Fitch Ratings España
The withdrawal decisions follow the official notifications to ESMA by Fitch on 3 June 2020 and on 30 November 2020 of its intention to renounce the specific registrations under the conditions set out in Article 20(1)(a) of the CRA Regulation (CRAR).
Filing Calendar and Deadlines
|Form Name||Type||Due Date|
|CPO-PQR||Large Commodity Pools
Small & Mid-Sized Pools
|March 31st, 2021|
|BE-185||Affiliated & Unaffiliated U.S. Financial Services Providers||March 31st, 2021|
IVP’s Regulatory Reporting Solution
An increasingly strict regulatory environment requires fund managers to manage a complex slate of filings, disclosures and trade reports—daily, monthly, quarterly and annually. But conventional reporting solutions often rely on isolated processes that create an increase in operational overhead, fragmented filings data and inconsistencies.
IVP’s regulatory reporting solution, Raptor, maximizes reporting efficiency by automating regulatory filings worldwide. The solution is designed to handle periodic filings, including Form 13F, Form PF, AIFMD and OPERA. It also manages threshold breach disclosures for short selling and transaction reporting, including CAT. Raptor integrates seamlessly with accounting, risk and data warehousing systems as well as fund administrators. Most importantly, its built-in automation helps to reduce both cost and filing time.