Issue: 10/2022


On 1 September 2022, Cyprus Securities and Exchange Commission (CySEC) issued Circular C528 in order to remind the Regulated Entities of the Announcement that the Department of the Registrar of Companies and Intellectual Property published on 25 November 2021. The Announcement was notifying the publication of the Companies (Amendment) Act of 2021 (N.150(I)/2021) in the Official Gazette, where specific provisions regarding Variable Capital Investment Companies (VCIC) were introduced.

CySEC wanted as well to draw the attention to Articles 370Θ (1)-(3) and 370ΙΕ(1)-(3) of N.150(I)/2021 aiming to the Regulated Entities to take actions, where applicable.

On 7 September 2022, Cyprus Securities and Exchange Commission (CySEC) reminded with an announcement all trustees of express trusts or persons holding an equivalent position in similar legal arrangements, of their legal obligation to provide to Cyprus Beneficial Ownership Register of Express Trusts and Similar Legal Arrangements (CyTBOR) with the information based on the Directive, from the paragraphs 5(3),(4), (5) and (6) and with the deadline on 7 October 2022.

Investment Services & Regulated Markets

On 5 September 2022, the European Securities and Markets Authority (ESMA) updated their Q&As on transparency topics. The new amendment is on the section mentioning the third country issues, where they have to confirm that their transactions are no subject to transparency.

On 21 September 2022, the European Commission (EC) announced that it is adopting a package of infringement decisions as a consequence of the absence of communication by Member States of measures taken to transpose EU directives into national law.

The EC is sending a letter of formal notice to those Member States which have failed to notify national measures transposing directives. There are 24 Member States that have not yet notified full transposition measure for ten EU directives whose transposition deadline expired between 1 July and 31 August 2022. These Member States have now two months to reply to the letters of formal notice and complete their transposition, or the EC may decide to issue a reasoned opinion.

On 23 September 2022, the European Securities and Markets Authority (ESMA) updated their Q&As on structures topics. The new amendment is on the section with the direct electronic access and algorithmic trading where a trading venue shall set specific trading hours which they are only applicable to a specific financial instrument.

On 23 September 2022, European Securities and Markets Authority (ESMA) updated its Q&As on commodity derivatives topics under MiFID and MiFIR.

Mainly the amendments introduced by the Recovery Package for commodity derivatives are reflected in the revised Q&A document, including those as well introduced by the entry into force of the latest technical standards and the Commission Delegated Regulation on the ancillary activity criteria (CDR 2021/1833) replacing RTS 20 which became applicable in November 2021.

The Recovery Package for commodity derivatives introduced important changes to the EU commodities derivatives framework, which include mainly:

  • Amendment of the criteria to be met for the ancillary activity exemption and deletion of and the yearly notification of eligibility by the market participant to the relevant National Competent Authority (NCA).
  • Limitation on position limits to agricultural commodity derivatives and to significant or critical contracts.
  • Introduction of new exemptions to the position limits regime.
  • Exclusion of securitised derivatives based on commodities or commodity indices from position limits and position reporting.

On 23 September 2022, The European Securities and Markets Authority (ESMA) published its Final Report on Guidelines on certain aspects of the MiFID II suitability requirements.

The Guidelines reflect inter alia, the changes implemented on the Delegated Regulation (EU) 2021/1253 in connection with sustainability factors, regarding the following:

  • Information to clients on the sustainability preferences - Firms will be responsible for helping the clients understand the concept of sustainability preferences as well as for explaining the difference between products with and without sustainability features in a clear manner and avoiding technical language.
  • Collection on information from clients on sustainability preferences - Firms will need to collect information from clients on their preferences in relation to the different types of sustainable investment products and to what extent they want to invest in these products.
  • Assessment of sustainability preferences - Once Firms have identified the range of suitable products for the client, in line with the criteria of knowledge and experience, financial situation and other investment objectives, an investment strategy that fulfils the client's sustainability preferences shall be identified.
  • Organizational requirements - Firms are required to ensure that appropriate training on sustainability topics shall be provided to the relevant personnel as well as an adequate level of skills, knowledge and expertise.

It is noted that the Guidelines will be translated into the official languages of the EU and published on ESMA's website. The Guidelines will apply six months after the date of the publication on ESMA's website in all EU official languages and the previous ESMA guidelines on suitability requirements will cease to apply on the same date.

On 26 September 2022, the European Securities and Markets Authority (ESMA) published a consultation paper where it provides guidance on how the trading venues must communicate with market participants whenever there is an outage.

The consultation paper set out ESMA's expectations on how National Competent Authorities (NCA) should ensure that trading venues have relevant communication protocols in place to ensure the communication to the members and participants and the public during an outage.

It included as well ESMA's guidance on how NCAs should ensure that trading venues have arrangements in place to avoid that an outage affects the closing auction and where an outage prevents the trading venue from running the closing auction, to ensure that the market is provided with an official closing price.

The consultation paper also sought feedback from stakeholders on measures that a trading venue should have in place to ensure that it has the ability to run its closing auction and on whether the lack of reference price raises any concern in an outage context.

It, lastly, covered outages on no-equity markets.

ESMA will consider the feedback it will receive to this consultation and will anticipate publishing a final report by Q1 2023.

On 27 September 2022, The European Securities and Markets Authority (ESMA) published a statement in order to remind firms to consider inflation and inflation risk when applying relevant MiFID II requirements in the interest of investor protection.

Households in the EU, and in the rest of the world, have been impacted both in their daily lives and in their investments and investment decisions due to the high inflation rates over the past months.

ESMA considers that some of the retail investors will not fully appreciate the link between inflation and financial markets and that may not fully understand how considerations on inflation should be factored in when they make saving and investment decisions. Consequently, ESMA notes that this trend will create a risk for the retail market, from an investor protection perspective.

The purpose of the Statement is to remind firms of relevant MiFID II requirements as ESMA believes that investment firms may play a role in considering inflation and inflation risk, both when manufacturing and distributing investment products and when providing investment services to retail clients. ESMA also believes that investment firms can help raising clients' awareness of inflation risk.

Anti-Money Laundering (AML) & Financial Crime

On 1 September 2022, the European Banking Authority (EBA) published its second report on the functioning of anti-money laundering and counter-terrorist financing (AML/CFT) supervisory colleges in the EU. The report showed that although competent authorities are committed to implementing the AML/CFT colleges framework, more needs to be done in ensuring ongoing collaboration and proactive information exchange within colleges.

The EBA's report set out findings and observations from EBA staff participation in AML/CFT college meetings and from its monitoring activities. Through this report, the EBA presented its observations of good practices, with an aim to help competent authorities to enhance their effectiveness in future, as well as areas for improvement, pointing out that AML/CFT colleges are not yet fully embedded in supervisory processes due to their immaturity.

The report also emphasized the need for colleges to be organised in a more risk-sensitive manner with more frequent meetings being held for those cross-border institutions that are exposed to higher risks of ML/TF.

Market Abuse

On 23 September 2022, the European Securities and Markets Authority (ESMA) updated its Q&A on the Market Abuse Regulation (MAR). The Updated Q&A intents to promote common supervisory approaches and practices in the application of MAR and its implementing measures, by providing responses to questions posed by the general public and competent authorities.

The document includes two new questions on the topic of disclosure of inside information concerning:

  1. Financial guidance and disclosure of inside information (Q5.11)
  2. Market analysts' expectations and the identification of inside information (Q5.12)

The content of this document aims at competent authorities to ensure that their supervisory activities and their actions are converging along the lines of the responses adopted by ESMA as well as at helping issuers, investors and other market participants by providing clarity on the content of the market abuse rules, rather than creating an extra layer of requirements.

Sustainable Finance

On 9 September 2022, the European Supervisory Authorities (ESAs) submitted to the European Commission further queries relating to the interpretation of Union law with reference to Regulation (EU) 2019/2088 (the Sustainable Finance Disclosure Regulation "SFDR").

The queries that were added and are related to the interpretation of SFDR are:

  • How the definition of "sustainable investment" under Article 2(17) of the SFDR applies to investments in funding instruments that do not specify the use of proceeds, such as the general equity or debt of an investee company;
  • How should "investment in an economic activity that contributes to an environmental objective" or "investment in an economic activity that contributes to a social objective" in Article 2(17) of the SFDR be interpreted;
  • What the interpretation of Article 9(3) of the SFDR is (relating to carbon emissions reductions and benchmarks);
  • What the meaning of "consider" in Article 7(1)(a) of the SFDR is and how should it be interpreted;
  • How the 500 employee principal adverse impacts ("PAI") threshold referenced in Articles 4(3) and 4(4) of the SFDR should be understood; and
  • Whether financial market participants ("FMP") in scope provide a quarterly (with exceptions according to Article 60 of Regulation 2017/565) periodic report based on the SFDR templates for portfolio management, or whether the FMPs can use one of the quarterly reports to present a yearly report based on the SFDR templates for portfolio management.
On 16 September 2022, European Securities and Markets Authority (ESMA) published its updated sustainable finance implementation timeline, which covers the key pieces of legislation under the EU sustainable finance framework: SFDR, Taxonomy Regulation, Corporate Sustainability Reporting Directive, MiFID, Insurance Distribution Directive, UCITS and AIFMD.