Global Financial Regulatory Blog

UK Delays Decision on Adopting EU Sustainable Finance Taxonomy

Posted in Environmental, Social and Governance (ESG)

The delay may complicate the regulatory landscape for sustainable finance as the EU moves toward a standardized classification system. 

By Paul A. DaviesNicola Higgs, and Michael D. Green

The UK government (government) has delayed a decision on whether it will adopt the EU’s taxonomy of sustainable finance activities (the Taxonomy) as the UK approaches the end of its post-Brexit transition period.

The European Commission’s Technical Expert Group (TEG) on Sustainable Finance, which developed the Taxonomy, published its final report on the document in March 2020. The resulting Taxonomy follows from consultations with more than 200 industry experts and scientists

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European Commission Report Assesses AIFMD Application and Scope

Posted in Markets and Investments

The European Commission has published its long awaited report that assesses the application and scope of AIFMD.

By Carl Fernandes and Kishore Bhindi

On 10 June 2020, the European Commission published a report assessing the application and scope of the Alternative Investment Fund Managers Directive (AIFMD). The report was prepared pursuant to Article 69 of the AIFMD and follows an earlier report prepared by KPMG in January 2019. (For more information on the AIFMD, see Latham & Watkins’ Client Alert European Commission Report on the Operation of the AIFMD.) However, whether the Commission will ultimately suggest any proposals for change remains to be seen. Continue Reading

ESMA Draft Guidelines on Outsourcing to Cloud Service Providers

Posted in Conduct of Business

The new guidelines reflect the European Commission’s aim to provide additional certainty for regulated entities outsourcing to cloud services.

By Rob Moulton, Fiona M. Maclean, Becky Critchley and Anna Lewis-Martinez

On 3 June 2020, ESMA published a consultation paper on draft guidelines regarding outsourcing to cloud service providers.

The purpose of the proposed guidelines is to provide guidance on the outsourcing requirements applicable to firms where they outsource to cloud service providers. The draft guidelines are intended to help firms identify, address, and monitor the risks that may arise from their cloud outsourcing arrangements (from making the decision to outsource, selecting a cloud service provider, and monitoring outsourced activities, to providing for exit strategies). Continue Reading

MiFID’s Transparency Rules: ESMA Confirms Equivalence of Numerous Non-EU Venues

Posted in Conduct of Business, Markets and Investments

Implications for users of third-country trading venues as ESMA confirms the list of venues who meet the criteria in its updated opinions on transparency and position limits.

By Rob Moulton and Anna Lewis-Martinez

On 3 June 2020, ESMA published updated versions of its opinions on post-trade transparency and position limits for third-country trading venues (TCTVs) under MiFID II and MiFIR. ESMA had received requests to assess more than 200 TCTVs against the criteria set out in the opinions published in 2017. ESMA has now completed reviewing the information provided by the TCTVs and, as a result, has published:

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Hong Kong SFC Refines OTC Derivatives Licensing Regime

Posted in Derivatives

By Simon Hawkins and Kenneth Hui

The SFC’s consultation conclusions carve out non-financial groups and multilateral portfolio compression services.

On 12 June 2020, the Securities and Futures Commission (SFC) published its conclusions (Consultation Conclusions) on its December 2017 consultation paper that proposed modifications to the scope of regulated activities (i.e., activities for which a licence from the SFC is required) that will apply to dealing in, advising on, and providing clearing services for over-the-counter (OTC) derivatives.

The Consultation Conclusions set out the SFC’s final proposals to refine the scope of regulated activities in relation to the OTC derivatives licensing regime by implementing various amendments, clarifications, and carve-outs to the scope of applicable regulated activities. Continue Reading

Key Regulatory Developments in Hong Kong and Singapore: May 2020

Posted in Regulatory Reform

Regulators seek to address “rolling bad apples”, bank culture reform, and cryptocurrency derivatives.

By Farhana Sharmeen, Simon Hawkins, Kenneth Hui, and Marc Tan

This blog post summarises key regulatory developments that took place in Hong Kong and Singapore in May 2020, as regulators in both jurisdictions issued regulatory pronouncements across a spectrum of topics — from the Hong Kong Monetary Authority (HKMA) consulting on proposals to address the so-called “rolling bad apples” phenomenon in the banking sector, to the Monetary Authority of Singapore (MAS) publishing proposals for a regime to regulate certain cryptocurrency derivatives. Continue Reading

Staying Inside — FCA’s New Guidance on Market Conduct During COVID-19

Posted in Markets and Investments

New guidance for issuers and market participants on capital raising events and alternative working arrangements, and additional time allowed for filing half-yearly financial reports.

By James Inness, Nicola Higgs, Connor Cahalane, and Anna Lewis-Martinez

On 27 May 2020, the FCA published its Primary Market Bulletin 28, which provides an update for issuers on temporary relief for the timing of the publication of half-yearly financial reports, going concern assessments, and shareholder engagement.

Additionally, the FCA has published its Market Watch 63 newsletter on market conduct and transaction reporting issues, setting out its expectations for issuers and market participants in relation to identifying, handling, and disclosing inside information in the context of increased capital raising events, alternative working arrangements, and the additional challenges created by the pandemic. The FCA has also provided guidance on short selling activities, managing conflicts, and market conduct in relation to credit default swaps. Continue Reading

Singapore: Payment Token Derivatives – to Offer or Not to Offer?

Posted in Fintech and Cryptocurrency, Payments

MAS confirms regulatory approach for derivative contracts on payment tokens.

By Farhana Sharmeen and Marc Jia Renn Tan

On 15 May 2020, the Monetary Authority of Singapore (the MAS) issued its response to feedback about its proposed regulatory approach for derivative contracts that reference payment tokens as underlying assets (Payment Token Derivatives), confirming that it will regulate Payment Token Derivatives offered to Singapore investors through approved exchanges. (See MAS’ current list of approved exchanges.) The MAS considers it crucial that it has effective oversight of products offered on approved exchanges due to the systemic importance of such trading facilities and the risk of contagion to the wider financial system. Continue Reading

UK Firms Should Share Customer Information Cross-Border Intra-Group to Fight Money Laundering and Terrorist Financing

Posted in Regulatory Reform

UK government encourages regulated firms to share customer information within corporate groups, highlighting interaction with firms’ obligations under the Proceeds of Crime Act 2002 and GDPR.

By Rob Moulton, Jonathan Ritson-Candler, Fiona Maclean, and Olga Phillips

The UK government has published a statement endorsing the Financial Action Task Force’s (FATF’s) recommendations that regulated financial institutions should be required to implement group-wide anti-money laundering (AML) and counter-terrorist financing (CTF) programmes that provide a framework for information to be shared within the group for AML and CTF purposes. The statement agrees with the FATF’s position that cross-border information sharing:

  • By the private sector is a key component of a well-functioning AML and CTF regime
  • On a group-wide basis is a useful tool to prevent, recognise, investigate, and ultimately report specific cases of money laundering or terrorist financing
  • Enables firms to perform effective global risk assessments of customer relationships and avoids information being “siloed” within a particular group entity
  • Ensures firms are better able to perform customer due diligence, identify suspicious activity more readily, and file higher quality Suspicious Activity Reports (SARs) that take account of all of a customer’s transactions with group members

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UK Government Publishes Draft UK-EU Free Trade Agreement With Financial Services Chapter

Posted in Conduct of Business, Regulatory Reform

The government sets out a bold and ambitious arrangement for financial services, including free market access and a new Financial Services Committee.

By Rob Moulton and Anna Lewis-Martinez

On 19 May 2020, the UK government published draft legal texts of 12 documents, and an accompanying letter, setting out its approach to the UK’s future relationship with the European Union, including its outline of a UK-EU Free Trade Agreement (FTA). The proposed FTA is nearly 300 pages long and includes a chapter on financial services. The European Commission published its version of an agreement two months ago, and the UK’s draft FTA seems only to highlight the significant differences between the two sides.

The financial services section of the proposed FTA is contained in Chapter 17 and marks the first time that the government has spelt out clearly its expectations for financial services in the UK’s future relationship with the EU. Key financial services elements to note in the draft FTA include: Continue Reading