MONTHLY REGULATORY updates
C538 - Guidance in relation to the requirement to raise capital from investors within a specified time period (link)
On 13 December 2022, the Cyprus Securities and Exchange Commission (CySEC) issued Circular C538 to remind AIFMs the Circular C321 regarding the raising of capital from investors within a specified time frame.
In accordance with the provisions of Articles 14(1)(a), 129(1)(a) and 136 of the AIF Law, the minimum amount of capital is required to be raised by an AIF, an AIFLNP and a RAIF ('the Funds') within 12 months from the date of authorization/registration.
For the purposes of the Circular, the term Funds refers to investment compartments, therefore the requirement applies to each investment compartment when a Fund is an Umbrella fund.
The Circular also offers advice for demonstrating compliance with articles 14, 129 and 136 of the AIF Law and for filing a report with CySEC, i.e., the Form 124-00-02, when the required amount of capital is raised.
In cases where AIFMs do not raise the minimum amount of capital within the timeframe and do not request a revocation of the Funds authorisation, CySEC may decide to initiate a revocation process, involving a call for representations.
Announcement regarding Renewal of registration in the Certification Registers for 2023 (link)
On 21 December 2022, the Cyprus Securities and Exchange Commission (CySEC) published an announcement regarding the renewal of the registrations in the Certification Registers.
Through this announcement, CySEC informs the certified persons on the following:
- Renewal period is 1 January 2023 until 28 February 2023.
- The application will be completed online through the CySEC website.
- The annual renewal fee is €80.
- Continuous professional training seminars on topics falling within the relevant legislation applied to them have been completed by the end of 2022.
Failure of renewing the registration will lead to deregistration from the Certification Registers.
Investment Services & Regulated Markets
MiFIR & MiFID
Proposal for a Directive amending Directive 2014/65/EU to make public markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC (link)
On 7 December 2022, the European Commission published a proposal for a Directive amending MiFID II to make public markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises (SMEs) and repealing the Listing Directive.
This proposal is part of the Listing Act package and is in line with the main objective of the Capital Markets Union (CMU) to improve access to market-based sources of financing for EU companies at every stage of their development, including for smaller companies.
Proposal for a Regulation amending Regulations (EU) 201/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises (link)
On 7 December 2022, the European Commission published a proposal for a Regulation amending the Prospectus Regulation, the Market Abuse Regulation and the Markets in Financial Instruments Regulation to make public capital markets in the Union more attractive for companies and to facilitate access to capital from small and medium-sized enterprises (SMEs).
This proposal is part of the Listing Act package and is in line with the core aim to improve access to market-based sources of financing for EU companies at every stage of their development, including for smaller companies.
ESMA provides Guidance for supervision of cross-border activities of Investment Firms (link)
On 14 December 2022, the European Securities and Markets Authority (ESMA) published a Supervisory Briefing in order to ensure convergence across the European Union (EU) in the supervision of the cross-border activities of Investment Firms (IFs).
As the free provision of services in the EU depends on the supervision of the home National Competent Authorities (NCAs) and on the cooperation between home and host supervisors, the Briefing covers the following areas:
- Authorisation of firms with cross-border plans
- Processing of passport notifications and their impact on the supervisory approach applied to firms
- Arrangements in place to carry out ongoing supervisory activities
- Carrying out of ongoing supervision, and
- Carrying out of investigations and inspections
The content of this Supervisory Briefing is not subject to any 'comply or explain' mechanism for NCAs and is non-binding.
The Briefing is going to help promote supervisory convergence across the EU, in line with the recommendations made by ESMA in its peer review report, published on 10 March 2022.
ESMA promotes clarity to market participants on Best Execution Reporting (link)
On 14 December 2022, the European Securities and Markets Authority (ESMA) issued a Public Statement to promote coordinated action by National Competent Authorities (NCAs) under MiFID II.
More specifically, ESMA expects NCAs to deprioritise supervisory actions towards execution venues relating to the periodic reporting obligation on them to publish the RTS 27 reports, from 1 March 2023 until the forthcoming legislative amendment to the relevant Article of MiFID II applies.
The obligation is temporarily suspended until 28 February 2023 under the Capital Markets Recovery Package, however it is proposed to be permanently deleted under the European Commission's review of MiFID II/MiFIR.
ESMA Q&As on MiFID II and MiFIR market structures topics (link)
On 16 December 2022, the European Securities and Markets Authority (ESMA) published its updated Q&As on MiFID II and MiFIR market structures topics.
The new Q&A added on the document, specifically under the Multilateral and Bilateral Systems section, concerns whether an investment firm acting as single liquidity provider on a Regulated Market (RM) and/or a Multilateral Trading Facility (MTF) can operate a Systematic Internaliser (SI).
Council of the European Union (EU) Press Release: Agreement on negotiating mandate on proposal to strengthen market transparency (link)
On 20 December 2022, the Council of the European Union (EU) published the texts, dated 16 December 2022, of its general approach on the proposed Regulation and Directive amending MiFIR and MiFID II.
The Representatives of the EU member states agreed on a mandate to start negotiations with the European Parliament aiming to reach a final agreement on the future legislation.
The texts include a proposal for a Regulation amending MiFIR and a proposal for a Directive amending MiFID II.
The proposals intend to:
- empower in particular smaller investors, giving them easier access to the necessary data to invest in shares or bonds.
- make EU market infrastructures more robust.
- increase market liquidity, thus making it easier for companies to get funding from capital markets.
Anti-Money Laundering (AML) & Financial Crime
EBA Consultation on Guidelines on money laundering and terrorist financing (link)
On 6 December 2022, the European Banking Authority published a Consultation on new Guidelines on the effective management of money laundering and terrorist financing (ML/TF) risks when providing access to financial services. EBA's aim through these Guidelines is to ensure that customers, especially the most vulnerable ones, are not denied access to financial services without valid reason.
The new Guidelines identify further policies, procedures and controls that credit and financial institutions should have in place to mitigate and effectively manage ML/TF risks according with Article 8(3) of Directive (EU) 2015/849, including in situations where provisions in Article 16 of Directive (EU) 2014/92 apply, which introduces the right of individuals to open and maintain a payment account with basic features.
The two new sets of Guidelines cover the following areas:
- General requirements
- Adjusting the intensity of monitoring measures
- Targeted and proportionate limitation of access to products or services
- Information on complaint mechanisms
The deadline for the submission of comments is 6 February 2023. The EBA will finalise these Guidelines once the consultation responses have been assessed.
EuReCA approaching 1-year anniversary (link)
On 16 December 2022, the European Banking Authority announced that EuReCA, the European Reporting System for AML/CFT material weaknesses, which launched in January 2022, is the only EU central database that brings together in one space information on serious deficiencies in individual financial institutions' systems and controls that expose these institutions to money laundering and terrorist financing risk.
The competent authorities that are legally required to report to EuReCA include the following:
- AML/CFT authorities
- Prudential authorities
- Resolution authorities
- Deposit guarantee schemes
- Conduct of business authorities
- Payment institutions authorities.
EuReCA holds information on the measures that competent authorities imposed on financial institutions to correct deficiencies. The competent authorities can obtain data from EuReCA by submitting 'reasoned requests' to inform their supervisory activities. The EBA as well shares information from EuReCA with competent authorities, as necessary.
EuReCA received 303 submissions from competent authorities by 1 December 2022.
Commission Delegated Regulation (EU)/ … amending Delegated Regulation (EU) 2016/1675 as regards adding Democratic Republic of the Congo, Gibraltar, Mozambique, Tanzania and United Arab Emirates to the table I of the Annex to Delegated Regulation (EU) 2016/1675 and deleting Nicaragua, Pakistan and Zimbabwe from that table (link)
On 19 December 2022, the European Commission adopted a Delegated Regulation amending the list of high-risk third countries with Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) deficiencies produced under Article 9(2) of the 4th EU Anti-Money Laundering Directive (MLD4).
The Delegated Regulation will amend the Annex to Delegated Regulation (EU) by adding the following third countries to the list as having strategic AML/CFT deficiencies: Democratic Republic of the Congo, Gibraltar, Mozambique, Tanzania and the United Arab Emirates.
Nicaragua, Pakistan and Zimbabwe will be removed from the table in Annex as they no longer present strategic AML and CFT deficiencies.
The Delegated Regulation will be submitted to the Council of the European Union and European Parliament for approval and will enter into force on the 20th day following that of its publication in the Official Journal of the European Union.
Consolidated assessment ratings (link)
On 21 December 2022, the Financial Action Task Force (FATF), through its nine FATF-Style Regional Bodies (FSRBs), published an article regarding consolidated assessment ratings for a global network of 205 jurisdictions which have each committed at the highest political level, to implementing the FATF Recommendations.
Peer reviews are conducted by FATF and FSRBs on an ongoing basis in order to assess how effectively their respective members' AML/CFT measures work in practice and how well they have implemented the technical requirements of the FATF Recommendations.
The table with the consolidated assessment ratings lays out an up-to-date overview of the ratings that assessed countries obtained for effectiveness and technical compliance. These ratings should be read in conjunction with the detailed mutual evaluation reports.
Other Regulatory Updates
FCA highlights continuing concerns about problem firms in the CFD sector (link)
On 1 December 2022, the Financial Conduct Authority (FCA) issued a Dear CEO letter regarding its contracts for difference (CFD) strategy.
The FCA has sent this letter out to remind firms offering CFDs that CFDs are highly leveraged derivatives and adverse price movements in relevant markets can lead to substantial losses for the clients.
The FCA has undertaken an extensive programme of work and has set out the standards it expects the CFD firms to demonstrate in order to protect clients and ensure market integrity. The letter also covers areas of poor practice under the following categories:
- Scam/churn activities
- Circumvention of FCA Rules
- Affiliate marketers/ introducers
The FCA with this letter reminded as well the CFD firms that they should be putting clients first and consider their obligations under the new Consumer Duty (the Duty). The areas of the Consumer Duty that may be most relevant to CFD firms are:
- Cross-cutting rules on acting in good faith
- Rules on price and value
- Rules on customer services, and
- Rules on communications.
By end-January 2023, the FCA expects all CEOs to have discussed this letter with their fellow directors and/or Board and to have agreed actions and/or next steps.