UK/EU Investment Management Update (November 2024)
1. UK — Enforcement and Litigation
3. UK — Non-Financial Misconduct
4. UK — New Rules Replacing UK PRIIPs Regulation
11. EU — Securitisation Regulation
14. EU — ESG
1. UK — Enforcement and Litigation
FCA publishes warning notice against Crispin Odey
On 1 November 2024, the FCA published a warning notice (the Notice) against Crispin Odey, founder of Odey Asset Management LLP (OAM), noting its intention to take action in respect of Odey’s conduct during the period from December 2021 to November 2022. During this period, Odey was a certified employee of OAM and, at times, held senior management functions.
In the Notice, the FCA contends that Odey breached Individual Conduct Rule 1 of the FCA Code of Conduct, which required him to act with integrity.
The Notice sets out Odey’s course of dealings with OAM’s Executive Committee (ExCo), with regard to a disciplinary hearing ExCo had initially scheduled in late 2021, to consider whether Odey had breached a final written warning issued to him in February 2021 in relation to inappropriate behaviour.
The Notice details Odey’s use of his majority shareholding in OAM to remove and replace the members of the ExCo on two separate occasions. The FCA states that it considers Odey demonstrated a lack of integrity, in that his actions:
- were deliberately designed to frustrate OAM’s ongoing disciplinary process into his conduct, in order to protect his own interests; and
- showed a reckless disregard for OAM’s governance and caused OAM to breach certain regulatory requirements.
The FCA states further that Odey’s behaviour towards both OAM and the FCA lacked candour and that the reasons he gave for his dismissal of ExCo and his conduct in his dealings with the FCA also support the finding that he lacks integrity.
FCA fines senior manager £350,000 for failing to disclose tax issues to FCA
The FCA has fined Kristo Käärmann, the chief executive officer (CEO) of Wise plc, for breaching a senior manager conduct rule by failing to notify the FCA of significant tax issues.
In 2021, Käärmann paid a fine of £365,651 to HM Revenue & Customs (HMRC) for deliberately failing to notify HMRC of a capital gains tax liability regarding a share disposal. Käärmann was subsequently added to HMRC’s public tax defaulters list.
Käärmann did not notify these tax issues to the FCA. The FCA became aware of these matters upon being contacted by a journalist for comment.
The FCA considers these matters to have been relevant to the FCA’s ongoing assessment of Käärmann’s fitness and propriety as a senior manager of certain FCA-regulated firms.
The FCA expected Käärmann, as a senior manager, to have self-notified to the FCA any matters that may have been significant to his fitness and propriety.
In failing to do so, the FCA determined that Käärmann was in breach of senior manager Conduct Rule 4, which states that “You must disclose appropriately any information of which the FCA would reasonably expect notice.”
The FCA fined Käärmann £350,000, which included a 30% discount under the FCA’s procedures for early settlement. It is notable that while Käärmann’s conduct was found to have fallen below the standards expected of a senior manager, the FCA did not withdraw or otherwise seek to impose any restriction on his approval as a senior manager.
Elliott Associates loses appeal in London Metal Exchange litigation
On 7 October 2024, the Court of Appeal handed down judgment dismissing an appeal by Elliott Associates L.P. and Elliott Associates International L.P. (together, Elliott) against the decision of the Divisional Court in November 2023.
The Divisional Court had dismissed Elliott’s application for a judicial review of the London Metal Exchange (LME) and LME Clear decision to cancel US$12 billion worth of nickel future trades in March 2022 in response to disorderly trading conditions following Russia’s invasion of Ukraine.
Elliott claimed losses of US$456 million in net profits as a result of the decision to cancel trading and alleged that this decision had been ultra vires, procedurally unfair and irrational, and also brought a damages claim under the Human Rights Act 1998 (HRA) for interference with their “possessions.”
Contrary to the Divisional Court, the Court of Appeal found that the trades in question were “possessions” for the purposes of the HRA. Aside from this, the Court of Appeal largely affirmed the reasoning of the Divisional Court, finding that in making the decision to cancel the trades, the LME had acted within its powers, and the decision had been procedurally fair.
FCA writes to Novus Black Fund investors
On 23 October 2024, the FCA announced that it had written to investors in Novus Black Fund UK Ltd (the Fund), a UK alternative investment fund, noting that it believed the Fund had experienced significant financial losses that had not been reported to investors.
On 25 October 2024, the FCA published a further update noting that the Fund’s manager, MCI Global Investment Advisors Limited (MCI), which is authorised by the FCA as a small alternative investment fund manager, had entered into creditors’ voluntary liquidation. The FCA’s update set out guidance for investors concerned about their investments in the Fund, including how to contact the liquidator if they believe they have a claim against the firm.
The FCA notes that MCI has agreed to ensure that no new activity was conducted on any trading accounts held by the Fund, arrange for all open investment positions on these accounts to be closed, and notify investors of these restrictions.
FCA takes action against illegal “finfluencers”
In a statement published on 22 October 2024, the FCA noted that it is interviewing 20 “finfluencers” under caution, using its criminal powers, whom it considers may be promoting financial services products illegally.
“Finfluencers” are social media personalities who uses their platform to promote financial products and share insights and advice with their followers.
The FCA notes that there has been a significant increase in finfluencers over recent years and that they are not FCA-authorised and are unqualified to be giving financial advice to younger and often very impressionable people who follow them.
The FCA notes further that it has issued 38 alerts against social media accounts operated by finfluencers that may contain unlawful financial promotions.
This follows the FCA’s broader crackdown on unlawful promotion of financial services products on social media — including, notably, the charges it brought against nine individuals in May this year in relation to an unauthorised foreign exchange trading scheme promoted on social media.
Changes to guidance on the controller regime
On 1 November 2024, the FCA published its finalised guidance (FG24/5) on the prudential assessment of acquisitions and increases in control (the Controller Guidance).
The Controller Guidance sets out how firms, and those acquiring or increasing control in firms, are expected to identify controllers for the purposes of the Financial Services and Markets Act 2000.
The FCA’s expectations for submitting change in control notifications, its assessment criteria, and how it expects to use its statutory powers to impose conditions on the approval of a controller are also set out in the Controller Guidance.
With effect from 1 November 2024, the Controller Guidance replaced the EU Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector, which had continued to apply as guidance for the purposes of the UK controller regime following Brexit.
The FCA Handbook (notably, the rules and guidance in the FCA Supervision Sourcebook (SUP) in relation to controllers and close links) have also been amended to refer to the Controller Guidance. Guidelines on aggregation rules and deemed voting power that had been included in SUP 11 Annex 6G have been deleted.
Firms should familiarise themselves with the new guidelines in the Controller Guidance for the purposes of identifying their controllers from time to time, including for the purposes of their annual controller reports.
3. UK — Non-Financial Misconduct
FCA publishes results of non-financial misconduct survey
On 25 October 2024, the FCA published the results of a survey on how firms record and manage non-financial misconduct allegations.
The survey examined recorded incidents of non-financial misconduct at over 1,000 wholesale financial services firms over the period 2021 to 2023.
The findings are being shared as a peer analysis against which firms can benchmark the adequacy of their own reporting and detection processes.
The survey found that the number of allegations reported increased from 2021 to 2023. The most recorded complaints were bullying and harassment (26%) and discrimination (23%).
The total number of confidentiality and settlement agreements signed by complainants fell over the survey period. Discrimination had the highest percentage of incidents resulting in the complainant signing either a settlement or confidentiality agreement (23%).
Firms used a range of methods to detect misconduct, the most prevalent being reactive routes such as grievances or similar formal processes (50%), and through alternative reporting routes such as whistleblowing.
Disciplinary or “other” actions were taken in 43% of cases. In the remainder, cases were either not investigated or unable to conclude, not upheld, upheld with no other action, or investigations were ongoing.
The survey shows the FCA’s continued focus on non-financial misconduct in financial services firms.
The FCA intends to publish a policy statement on tackling non-financial misconduct in the financial sector towards the end of 2024, according to the latest update to the Regulatory Initiatives Grid published by the Financial Services Regulatory Initiatives Forum.
4. UK — New Rules Replacing UK PRIIPs Regulation
Publication of draft Consumer Composite Investments (Designated Activities) Regulations 2024
On 10 October 2024, HM Treasury published the draft Consumer Composite Investments (Designated Activities) Regulations 2024 (the CCI Regulations).
As discussed in our October 2024 Update, the CCI Regulations will establish the legislative framework for a new UK retail disclosure regime for investment products — termed consumer composite investments (CCI) — replacing the current regime derived from the PRIIPs Regulation.
Like the PRIIPs Regulation, the CCI framework will be of relevance to managers of funds (as well as certain other investment products) made available to UK retail investors.
Among other matters, the draft CCI Regulations set out the definition of a CCI — in terms substantially similar to the current “PRIIP” definition — and designate the manufacture, advising on, offering or selling a CCI to UK retail investors as “designated activities,” subject to FCA rule-making powers (on which the FCA is due to consult).
The new CCI regime is expected to be in place in H1 2025, subject to Parliamentary approval and the FCA consultation process.
FCA publishes Market Watch 80
On 9 October 2024, the FCA published Market Watch 80, its newsletter on market conduct and transaction reporting issues.
Market Watch 80 addresses how firms can ensure compliance with Section 6.1.1R of the Senior Management Arrangements, Systems and Controls sourcebook (SYSC), when dealing with overseas clients who operate aggregated accounts that provide no visibility of the ultimate beneficial owners (UBOs).
While addressed primarily to broker-dealers, the FCA’s comments are of relevance to firms executing trades in the UK and highlight the importance of ensuring the firm can identify the UBOs of its services.
SYSC 6.1.1R requires firms to establish and maintain policies and procedures to ensure compliance with their regulatory obligations, including countering the risk of being used to further financial crime.
The FCA notes that firms often accept instructions to execute trades from “aggregated” accounts administered by both FCA-authorised and overseas firms. In such cases, the UBOs of these trades may be withheld from the executing firm (which the FCA refers to as “obfuscated overseas aggregated accounts” (OOAAs)).
Some firms have unknowingly executed trades for UBOs, via OOAAs, where the UBO in question had had their trading account with the executing firm terminated due to suspected market abuse.
The FCA suggests that firms take extra precautions when onboarding and trading with OOAAs, including requiring detailed information about the OOAA’s systems and controls to prevent market abuse (such as surveillance arrangements and the nature of underlying clients).
FCA speech on “rising to the occasion” on private markets
On 29 October 2024, Nikhil Rathi, FCA Chief Executive, delivered a speech at the Investment Association Annual Dinner addressing the growth of private markets and how the FCA intends to address this.
Rathi notes how private markets are growing globally. Furthermore, while the UK has seen significant growth — with private market assets under management almost trebling in the decade to 2023 —
he notes that this is not to the scale seen in the U.S.
Rathi therefore asks whether the UK should aim to move sharply in the direction of the U.S., to deepen financing options for UK corporates, and what such a move would take.
The FCA can support private market growth, according to Rathi, in the following ways:
- Risk and opportunity. Rathi notes the focus of international regulatory discourse on concerns that growing private markets create risks outside the banking system. Rathi states that the narrative should shift to one of opportunities but in a way that is not oblivious to risk.
- Technological and product innovation. Product innovations, such as private market exchange-traded funds, are noted alongside reforms to inherited EU regimes to introduce more flexibility and proportionality to address this — such as the CCI framework discussed above.
- Proportionate regulation. Rathi notes that the FCA will work with asset managers in 2025 on data collections in its Alternative Investment Fund Managers Directive (AIFMD) review to ensure it does not end up with something “half-baked.”
- Nurturing talent. Rathi notes the UK’s reputation as a centre of talent, which needs nurturing, including by promoting diversity (he notes that only an estimated 12% of fund managers are women — a statistic that has barely changed in recent years).
Rathi concludes by reinforcing the FCA’s aim to support the growth of private markets.
FCA speech on “predictable volatility”
On 8 October 2024, Rathi gave a speech to the FCA International Capital Markets Conference on the topic of “predictable volatility.”
Rathi notes that market volatility has become a constant that regulators and market participants must expect to face.
Rathi notes that the FCA intends to address this under five broad headings:
- Nurture liquidity. Rathi references adjustments to wholesale market rules and the potential to “reduce barriers to entry for specialised trading firms that do not hold retail deposits” as examples of ways to achieve this;
- Proactive regulation. Rather than responding to crises, the FCA aims to regulate proactively to create an environment that helps firms compete and grow. Global collaboration on the transition from the London Inter-Bank Offered Rate to risk-free rates is cited as an example;
- A new mindset towards risk. Rathi notes that UK markets stay relevant by openness to reform, citing the recent reforms to the FCA’s listing rules as an example;
- Invest in infrastructure. Rathi references the potential move to T+1 settlement (already adopted by the U.S., Canada, India, and others), and the introduction of a consolidated tape for fixed income markets as examples of reforms in the area of infrastructure. On artificial intelligence (AI), rather than “rushing to new rules,” Rathi notes an intention to rely on existing frameworks where appropriate; and
- Deep engagement. The FCA intends to continue to engage with market participants across all corners of the industry.
FCA issues update on extension of the Sustainability Disclosure Requirements regime to portfolio managers
On 27 September 2024, the FCA provided an update on its consultation (CP24/8) on extending the Sustainability Disclosure Requirements (SDR) regime to portfolio management. For a discussion of CP24/8, see our May 2024 Update.
In its update, the FCA noted that it intends to publish a policy statement and further information about implementation of the proposed changes in Q2 2025.
The FCA also notes that it is aware that it is taking longer than expected for some asset managers to comply with the SDR and labelling regime and of the potential impact this might have on portfolio managers, which was highlighted in the feedback to CP24/8 and industry engagement.
FCA publishes disclosure examples for SDR and investment labels regime
On 1 November 2024, the FCA published illustrative examples and approaches across a selection of investment labels to show how firms can meet the pre-contractual disclosure requirements under the SDR. The FCA also lists certain examples of poor disclosure practices that do not meet its SDR requirements (such as failure to disclose a manager override for asset selection where one exists).
The FCA notes that the examples are based on its experience of applications to date and are non-exhaustive but are intended to aid applicants for the SDR investment labels as they prepare their documentation.
For further details on the SDR, please see our Update Final Rules on UK Sustainability Disclosure Requirements and Investment Labels — Key Takeaways for Asset Managers.
FCA issues statement on first “Project Guardian” report on tokenisation in the asset management sector
On 4 November 2024, the FCA published a statement welcoming the first industry report on tokenisation (the Tokenisation Report) published by “Project Guardian.”
Project Guardian is an international collaboration of industry and regulators, led by the Monetary Authority of Singapore (MAS), that explores the use of fund and asset tokenisation.
The FCA is a member of Project Guardian’s policymaker group and is part of its asset and wealth management workstream, which delivered the Tokenisation Report.
The Tokenisation Report sets out a vision for the use of distributed ledger technology in asset management and discusses potential industry and regulatory standards needed to scale tokenisation use-cases and enable firms and investors to benefit from the technology.
The FCA notes further that it intends to collaborate with the MAS in 2025 to explore the regulatory considerations for tokenisation within the asset and wealth management sector. The review will cover regulatory and supervisory principles that could apply to tokenisation use-cases to support consumers and market integrity and any potential regulatory barriers to continuing maturity of tokenisation concepts.
FCA AI Lab
On 17 October 2024, the FCA announced the launch of its new “AI Lab,” designed to allow the FCA, firms, and other stakeholders to engage on insights, discussions and case studies regarding the use of AI in UK financial markets.
There are four components to the AI Lab:
- AI Spotlight. This will highlight practical solutions demonstrating how firms are experimenting with AI in financial services. Selected projects will be featured on a Digital Spotlight webpage.
- AI Sprint. An “AI Sprint” will be hosted at the FCA’s London office on 29 and 30 January 2025, to bring together various stakeholders to informally discuss the FCA regulatory approach to AI.
- AI Input Zone. Stakeholders will be able to provide feedback on the future of AI in UK financial services through the “AI Input Zone,” which will serve as an online platform for sharing views on the FCA’s current framework and areas for future adaptation.
- Supercharged Sandbox. Focusing on AI-centred TechSprints, the FCA intends to build on its Digital Sandbox infrastructure through a “Supercharged Sandbox,” featuring improved AI testing capabilities and datasets.
On 30 November 2024, the UK Chancellor delivered the new Labour government’s first Budget.
The Budget announced £40 billion in tax hikes and some very significant (but well-trailed) changes to the UK’s “non-domiciled” tax regime.
The Budget materials also included HM Treasury’s response to this summer’s Call For Evidence on the UK tax treatment of carried interest, which reveals the shape of the government’s intentions for carried interest within the UK tax regime.
Carried interest will (to the extent it reflects underlying capital gains) be taxed at a higher rate of 32% from April 2025, but much broader technical reform is anticipated from April 2026 to (in effect) bring carried interest within the scope of UK income tax and National Insurance at a ‘concessionary’ combined rate of around 34%.
Our UK tax team will shortly release a more detailed update on these proposals and the Budget more generally for asset managers.
11. EU — Securitisation Regulation
Commission consults on the EU securitisation framework
On 9 October 2024, the Commission launched a targeted consultation on the functioning of the EU securitisation framework (the SECR Consultation).
The Commission states that it aims at reviving the European securitisation market as well as strengthening the lending capacity of European banks, creating deeper capital markets, building the European savings and investments union, and increasing the EU’s competitiveness.
Stakeholder views are invited on a range of topics, including the effectiveness of the securitisation framework, the scope of the EU Securitisation Regulation (SECR) due diligence requirements, and transparency requirements.
Of particular interest to asset managers, the Commission requests feedback on whether the current jurisdictional scope of the SECR should be set out more clearly in the legislation.
In its introductory commentary to the relevant questions, the Commission refers to the European Supervisory Authorities (ESAs) Opinion to the Commission on the Jurisdictional Scope of Application of the SECR, which discussed, among other things, the application of the due diligence requirements under Article 5 of the SECR to non-EU entities.
The Commission refers to these issues as having been “clarified” in the subsequent 2022 Commission report on the functioning of the SECR (the Commission Report).
The Commission notes that notwithstanding the Commission Report, some market participants have commented that the absence of a clear jurisdictional scope set out in the SECR creates considerable legal uncertainty in cases where not all parties to the securitisation are located in the EU. For further discussion of the Commission Report, see our Update of November 2022.
Feedback is also sought on making the due diligence requirements more principles based, as well as introducing more principles-based “Article 7 reporting” obligations on sponsors, without the requirement for a more prescribed template.
These proposals will be of interest to EU institutional investors in scope of the SECR.
In particular, the obligation on EU institutional investors to ensure, as part of their due diligence obligations, that Article 7 reporting is provided on the basis of the prescribed templates has given rise to issues when such investors seek to invest in U.S. and other non-EU securitisations. For further discussion of this issue, please see our Update, U.S. Securitizations – Implications of New Guidance Clarifying EU Investors’ Reporting Requirements.
The deadline for responding to the SECR Consultation is 4 December 2024. We are advising on the response being prepared by one of the main investment fund trade associations.
ESMA publishes first consolidated report on regulatory sanctions and measures
On 11 October 2024, ESMA published its first consolidated report on sanctions and measures imposed by EU Member State regulators in 2023 as well as certain historic periods (the Sanctions Report).
The Sanctions Report discusses the sanctions and measures imposed by EU financial services regulators in 2023 and analyses trends over historic periods based on data reported to ESMA. The Sanctions Report covers sanctions imposed under the AIFMD, the European Market Infrastructure Regulation (EMIR), the EU Market Abuse Regulation (MAR), EU MiFID, and the EU Markets in Financial Instruments Regulation (MiFIR).
Notable points include the following:
- More than 970 sanctions and measures were imposed across EU Member States in 2023. The aggregate value of these fines amounted to more than €71 million, with the highest fine amounting to €26 million.
- The highest amounts of fines were imposed under MAR (299, with a total value just under €45 million) and MiFID (289, with a total value just over €18 million). While the number of fines under MiFID trails those under MAR by only 10, the total value of MAR fines notably amounts to more than double those under MiFID.
- The highest fine (€27.3 million) was issued by the French regulator in respect of a breach of the prohibition on market manipulation under Article 15 of MAR.
- In respect of MAR:
- Fines totalling c. €212 million were issued over the period 2018 to 2022.
- The largest number of sanctions was imposed for breaches of the prohibition of insider dealing and unlawful disclosure of inside information (Article 14), followed by the requirement on an issuer to disclose inside information on that issuer to the public as soon as possible (Article 17).
- France issued the highest aggregate fines, followed by the Netherlands and Germany.
- In respect of the AIFMD:
- Since its coming into force in 2013 until the end of 2023, a total of 1,190 administrative sanctions and measures have been imposed, with fines totalling c. €103,5 million.
- During this period, the highest aggregate amount of fines under AIFMD was issued by France in 2021 (€38 million).
- The highest number of fines was issued for breaches of effective resources and procedures under Article 12 — applicable only to EU-authorised alternative investment fund managers (AIFMs). However, breaches of regulatory “Annex IV” reporting and annual investor reporting also featured among the most sanctioned breaches. Given these requirements apply to both EU AIFMs and non-EU AIFMs marketing to EU investors under National Private Placement Regimes, it is unclear to what extent such fines were issued to EU and non-EU AIFMs, respectively (albeit we are not aware of any of our non-EU AIFM clients having been fined for such breaches).
- In respect of MiFID/MiFIR, 289 sanctions were issued in 23 Member States in 2023. Denmark issued the highest number of sanctions (42), followed by Cyprus (38) and Bulgaria (30).
- In respect of EMIR, 2023 saw a significant increase in sanctions compared with prior years (22 sanctions, compared with nine over the period 2017 to 2020). Sanctions have been imposed for breaches of reporting obligations under Article 9 and breaches of risk-mitigation requirements for uncleared over-the-counter derivative contracts (Article 11).
The Sanctions Report does not provide a full picture of national enforcement activities; for example, these may also include more informal actions, and not all criminal sanctions are included in the scope of the report. Likewise, certain frameworks under ESMA’s remit — including, notably, the EU Short Selling Regulation — are not covered in the Sanctions Report.
ESMA concludes that there is a need for greater convergence among EU regulators but acknowledges that sanctions are not the only key to effective supervision, and the tools used by regulators may vary.
EU Listing Act package adopted
On 8 October 2024, the Council of the EU adopted the Listing Act package.
The Listing Act package will make amendments to MiFID, the EU Prospectus Regulation, and MAR (among others), with the aim of making EU capital markets more attractive for, and facilitate the listing of, companies of all sizes.
Notable changes include the following:
- MiFID
- The investment research regime for EU investment firms will be amended to introduce the option to make joint payments for execution services and research, irrespective of the market capitalisation of the issuer to which the research relates. The joint payment option in its current form (as introduced in 2021 under the Capital Markets Recovery Package) is restricted to research on issuers below €1 billion market capitalisation.
- The new joint payment option will be subject to a number of guardrails, including that the firm have an agreement with the third-party provider, inform its clients about the payment method and policy, and assess the quality and value of research annually. This has some similarities with the joint payment option recently introduced by the FCA for UK investment firms — as noted further below.
- MAR
- EU-listed issuers will no longer be required publish inside information on intermediate steps in a protracted process, only the final event or circumstances.
- The conditions for delaying the disclosure of inside information by EU-listed issuers where such delayed disclosure is unlikely to mislead the public will also be amended to require that such delay is permitted where it is not in contrast with the latest public announcement regarding the matter.
- Prospectus Regulation
- Certain exemptions from the obligation to publish a prospectus for public securities offers in the EU will be broadened.
- For example, the exemption for offers with a total consideration less than €1 million (over a 12-month period) will have its threshold increased to €12 million, although Member States will have discretion to reduce that threshold to €5 million.
The Listing Act will be published in the Official Journal of the European Union at some point during Q4 2024 and will become law 20 days later.
The requirements will be phased in in a staggered fashion. With regard to the MiFID research regime, for example, Member States will be required to implement the amendments within 18 months of the amending directive coming into force.
ESMA seeks input on changes to MiFID investment research regime
On 28 October 2024, ESMA launched a consultation on amendments to the investment research provisions of the MiFID delegated directive in the context of the Listing Act (the Research Consultation).
As noted above, the Listing Act will amend the MiFID “level 1” text with regard to the research payment regime.
The MiFID delegated directive sets out the conditions that the provision of third-party research to an EU investment firm must meet in order not to be regarded as an inducement.
The Research Consultation includes proposals to amend the MiFID delegated directive to align it with the new payment option introduced under the Listing Act.
The EU’s addition of a new joint payment option for research comes at a time when UK investment firms may be considering whether to implement the FCA’s corresponding joint payment option, introduced in August 2024.
While the EU’s payment option includes a number of conditions similar to those applicable under the FCA’s corresponding option, the EU’s proposal is on the whole less prescriptive than that of the FCA. For further discussion of the FCA’s joint payment option, see our Update Implications of Final UK FCA Rules on Payment for Investment Research.
Responses to the consultation paper are due by 28 January 2025. ESMA plans to provide its draft technical advice to the Commission in Q2 2025.
ESMA consults on transaction reporting and order book data
On 3 October 2024, ESMA launched a consultation on proposed amendments to regulatory technical standards (RTS) regarding MiFIR transaction reporting (RTS 22) and the maintenance of order book data (RTS 24) (the TR Consultation).
The TR Consultation was mandated under amendments made to MiFIR that entered into force on 28 March 2024.
Regarding RTS 22, the TR Consultation requests feedback on matters including: new reporting fields, alignment with international standards (e.g. the ISO 20022 methodology), identification of transactions in distributed ledger technology instruments and amendments to current exemptions (including narrowing the current scope of exempted derivatives novations to those “having clearing purposes”).
Regarding RTS 24, the TR Consultation requests feedback on amendments to the format and common template according to which order book data must be maintained and provided to regulators.
Responses are due by 3 January 2025. ESMA aims to publish a final report and submit the draft RTS to the Commission in Q1 2025.
ClientEarth files greenwashing complaint against an asset manager with French regulator
On 17 October 2024, environmental law organisation ClientEarth announced that it had filed a complaint against an asset manager with the Autorité des Marchés Financiers (AMF), the French financial markets regulator, for alleged greenwashing.
The complaint relates to 18 actively managed retail investment funds marketed by the asset manager in France with “sustainable” in their names.
Building on analysis from French organisation Reclaim Finance, the claim notes that these funds collectively hold over US$1 billion of fossil fuel investments, the majority of which represents fossil fuel expansion.
ClientEarth intends that the action tests what is meant by “sustainable” in investment fund marketing and hopes to set a new standard for investment funds in relation to both fossil fuel financing and sustainable finance.
ESAs publish third annual report on principal adverse impact disclosures under the SFDR
On 30 October 2024, the ESAs published their third annual report (the Report) on principal adverse impact (PAI) disclosures under the EU Sustainable Finance Disclosure Regulation (SFDR).
PAI disclosures under the SFDR aim to show the negative impact of investments on sustainability factors and the actions that financial institutions take to mitigate them. The Report discusses both entity and product-level PAI disclosures.
The Report finds that positive progress has been made in the quality of the information disclosed in respect of financial products, and, in general, in the quality of the PAI statements.
A few regulators also reported slight improvements in the compliance with the SFDR disclosures in their national markets.
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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