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Investment Funds Update

UK/EU Investment Management Update (November 2020)

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摘要
In this Update we cover, among other things, the latest on Brexit, a COVID-19 update, HM Treasury’s consultation on the Future Regulatory Framework Review, the European Commission (Commission) consultation on the Alternative Investment Fund Managers Directive (AIFMD), the Financial Conduct Authority’s (FCA) first fine under the EU Short Selling Regulation, an extension to certain deadlines under the Senior Managers and Certification Regime (SMCR) regime, market abuse risks arising from home working, the U.S. Securities and Exchange Commission (SEC) return to registration of UK-based managers, developments in the environmental, social, and governance (ESG) space, and the latest on the London interbank offered rate (LIBOR) transition.

1. Brexit update

MiFIR Share Trading Obligation — ESMA final position

On 26 October 2020, the European Securities and Market Authority (ESMA) released a public statement clarifying the application of the EU share trading obligation (EU STO) under Article 23 Markets in Financial Instruments Regulation (MiFIR), following the end of the Brexit transition period on 31 December 2020. The FCA responded with its own statement on 4 November 2020 (see next section).


2. HM Treasury consults on UK Financial Services Future Regulatory Framework

On 19 October 2020, HM Treasury launched its initial Phase II Consultation on the Future Regulatory Framework (FRF) Review. The consultation remains open to the public for three months, closing on 19 January 2021.

3. COVID-19 update

CSDR — European Commission further postpones settlement discipline regime

On 23 October 2020, the European Commission adopted a Delegated Regulation to delay the entry into force of the Central Securities Depositories Regulation (CSDR) settlement discipline regime, from 1 February 2021 to 1 February 2022.

4. AIFMD — European Commission consultation on the AIFMD

On 22 October 2020, the European Commission launched its Consultation on the AIFMD. This marks the next step in the Commission’s formal review of the AIFMD, which may culminate in a legislative proposal for AIFMD II next year.

The Consultation is wide ranging and addresses a number of key aspects of the AIFMD. Of particular note to UK and other non-EU fund managers is that the Commission asks important questions relating to delegation by EU alternative investment fund managers (AIFMs) (including to broadening the AIFMD’s third-country reach) and the national private placement regimes for the marketing of non-EU AIFs. This reflects the Commission’s concerns regarding the post-Brexit EU fund management landscape under the current AIFMD framework.

Please see our Update, where we provide detailed commentary on the Consultation.

5. EU Short Selling Regulation

FCA issues first fine for net short position reporting failure

On 14 October 2020, the FCA issued a Final Notice, imposing a fine of £873,118 on Asia Research and Capital Management for its failure to notify the FCA under the EU Short Selling Regulation (SSR) of net short positions it held in Premier Oil plc between February 2017 and July 2019.

Please see our Update on this landmark fine, where we discuss the case and the implications for holders of short positions.

6. SFTR Reporting

SFTR reporting obligations now apply to buy-side firms

On 12 October 2020, the third phase of reporting under the EU Securities Financing Transactions Regulation (SFTR) went live. From that date, EU investment funds, pensions funds, and (re)insurance undertakings are subject to SFTR reporting obligations, joining sell-side firms, central clearing counterparties, and central securities depositories, which have already been reporting for three months (since July 2020, a date that had been delayed from the original April 2020 start date because of COVID-19).

The International Capital Market Association (ICMA) has issued detailed Recommendations for Reporting under SFTR to ensure consistency in firms’ implementation efforts. ICMA publishes consolidated SFTR data on a weekly basis, which can be found on its SFTR public data page.


7. SMCR

FCA extension of SMCR deadlines

On 28 October 2020, the FCA published Policy Statement PS20/12 (the Policy Statement) on the extension of certain implementation deadlines for solo-regulated firms under the Senior Managers and Certification Regime (SMCR).


8. Market Abuse

FCA speech on “Market abuse in a time of coronavirus”

On 12 October 2020, Julia Hoggett, Director of Market Oversight at the FCA, gave a speech titled “Market abuse in a time of coronavirus” at the City Financial Global event.

The speech addressed the growing threat of market abuse as the financial sector continues to work remotely. Hoggett emphasised the FCA’s focus on maintaining clean and orderly markets and firms’ role in that process.

9. SEC lifts moratorium on registration of UK-based managers

Recent communications from the SEC indicate that it is again considering registration of advisers located in the UK. Accordingly, it has begun contacting pending UK-based registrants to confirm their continued interest in registering and to update any information that has changed since their initial filing (i.e., their initial Form ADV).

10. ESG

European Commission defers introduction of regulatory technical standards on sustainability-related disclosures

On 20 October 2020, the European Commission wrote to the European Supervisory Authorities (ESAs), confirming that the introduction of regulatory technical standards (RTS) on the EU Sustainable Finance Disclosure Regulation (SFDR) will be deferred until an as yet unspecified date.


11. LIBOR transition

Launch of ISDA IBOR Fallbacks Supplement and Protocol

On 23 October 2020, ISDA published the 2020 IBOR Fallbacks Protocol and Supplement 70 to the 2006 ISDA Definitions, both of which will be effective 25 January 2021.

As of that date, all new derivatives contracts that (i) incorporate the 2006 ISDA Definitions and (ii) reference one of the covered benchmarks will automatically contain the new fallbacks. Existing derivatives contracts will include the new fallbacks only if all parties have adhered to the protocol or otherwise bilaterally agreed to incorporate the replacement rates in their contracts. The protocol will remain open for adherence after the 25 January 2021 effective date.


Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.

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