CSS RegTech Radar
Regulatory compliance news and analysis to keep ahead of regulatory change.
  • HKEX will implement changes to derivatives market position limits on 22 December 2023

    Hong Kong Exchanges and Clearing Limited (HKEX) announced yesterday that new enhancements to position limits will take effect on 22 December 2023. The main amendments are as follows:
    • A 5-tier position limit model will apply to Single Stock Options (SSO) and Single Stock Futures (SSF) contracts;
    • The additional position limits that apply to Hang Seng Index and Hang Seng China Enterprise Index mini derivatives contracts will be removed; and
    • Position limit for selected HKEX’s CNH contracts will be increased.

    For more information, please see HKEX announcement at: https://lnkd.in/gWEBPK3e
    The previous consultation in November 2022 can be found at: https://lnkd.in/gWEBPK3e; and the consultation conclusions in June 2023 at: https://lnkd.in/eZSk2b-E


  • SEC adopts Rule 13f-2 to increase transparency into Short-Selling

    The SEC adopted new Rule 13f-2 to provide greater transparency into Short-Selling. Rule 13f-2 will require institutional investment managers that meet or exceed certain thresholds to report on Form SHO via EDGAR specified short position data and short activity data for equity securities. SEC will subsequently aggregate and publish certain data collected.

    The filing thresholds for reporting issuers will be as follows: a monthly average of daily gross short positions of (i) $10 million or (ii) a monthly average position of 2.5% of issuer’s shares outstanding, and; for non-reporting issuers: $500,000 at the close of any settlement date during calendar month.

    The deadline to submit the short-sale data will be 14 calendar days after each calendar month.

    Rule 13f-2 and Form SHO will become effective 60 days following the date of publication of the adopting release in the Federal Register, while the compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release, with public aggregated reporting to follow 3 months later.

    The Final Rule can be found at https://www.sec.gov/files/rules/final/2023/34-98738.pdf


  • SEC adopts amendments to modernize Beneficial Ownership reporting (Regulation 13D-G)

    The SEC adopted rule amendments governing beneficial ownership reporting under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. The key amendments are as follows:

    • shortening of the deadlines for initial and amended 13D and 13G fillings - there are different deadlines based on the type of investor. New filing “cut-off” time will be 10:00 p.m. Eastern time;

    • clarification on the criteria for group disclosures;

    • use of a structured, machine-readable data language for filings. 

    As Schedule 13D and Schedule 13G haven’t been updated for nearly half a century, the SEC Chair’s statement that “it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company” gives emphasis on the Commission’s endeavors to improve transparency and provide more timely information for shareholders and the market.

    The amendments will become effective 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on September 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on December 18, 2024.

    The Final Rule and the Guidance can be found at https://www.sec.gov/files/rules/final/2023/33-11253.pdf


  • Shareholder Rights Directive

    For investors tracking their shareholder identification obligations required by EU issuers under SRD2:  Note that ESMA and the EBA have published their joint assessment of SRD2’s implementation, following ESMA’s Call for Evidence in 2022 and the EBA’s own consultations.  In their joint Report ESMA and the EBA took stock of stakeholder concerns, and addressed various SRD2 provisions including those relating to proxy advisors, the definition of “shareholder”, shareholder identification, transmission of information, the facilitation of shareholder rights, and intermediary practices. 

    Regarding SRD2’s shareholder identification thresholds – set by each Member State from 0% to 0.5% of issuer outstanding shares, and above which investors holding such amount are subject to being identified by issuers located in the Member State – the joint Report does not propose any legislative changes.  (Instead, ESMA and the EBA encourage the Commission to further investigate how the thresholds affect shareholder engagement before considering any changes.)

    Next steps: the European Commission will consider the joint Report, and then report to the European Parliament and Council on any suggested legislative changes to SRD2. 

    For more industry perspective on how SRD2 could change -- possibly as an “SRD3” – see our Greg Hotaling’s interview with Asset Servicing Times earlier this year.


  • Reopening of comment period for position reporting of large SBSs (proposed new Rule 10B-1) 

    The SEC has recently reopened the comment period for position reporting of large Security-Based Swap (“SBSs”) positions (proposed new Rule 10B-1). In addition, the SEC’s Division of Economic and Risk Analysis released a memorandum which contains supplemental data and analysis regarding the proposed reporting thresholds in the equity security-based swap market.

    The public comment period will remain open until Aug. 21, 2023, or until 30 days after the date of publication of the reopening release in the Federal Register, whichever is later.

    The proposed new Rule 10B-1: https://www.sec.gov/rules/final/2023/34-97656.pdf &

    the memorandum: https://www.sec.gov/comments/s7-32-10/s73210-207819-419422.pdf.


  • SEC adopted rules related to SBS

    Last week, the SEC adopted two new rules related to the security-based swaps (SBS) markets, namely Rule 9j-1 and Rule 15fh-4(c). The former aims at preventing fraud, manipulation, and deception in connection with SBS transactions and the latter at prohibiting undue influence over the Chief Compliance Officer (CCO).

    In its Final Rule release, the SEC noted that it is not yet adopting its proposed Rule 10B-1 on the reporting of large SBS positions. The Commission’s work on that rule continues, and could be finalized by the end of 2023.




  • ESMA has published its 2023 budget

    categorizing its approx. EUR 75 million in total revenue as well as 75 million in total expenses.

    The agency created in 2011 to regulate CRAs (credit rating agencies) is still prioritizing that source of revenue, planning to collect more than EUR 10 million in fees from CRAs. EMIR 2.2 fees are ESMA's next largest fee source, at almost EUR 6 million. Meanwhile, contributions from Member State NCAs and from the EU represent the bulk of its budgeted revenue, at more than EUR 47 million.

    As for expenses, staff is the largest category (EUR 48.5 million), followed by operating expenses (EUR 15 million), infrastructure and administrative expenses (EUR 8.4 million), and delegated tasks and ESAP (European Single Access Point) (EUR 3.4 million). Further details of its 2023 budget, as well as other disclosures, can be found at the following link: https://www.esma.europa.eu/sections/planning-reporting-budget


  • ESMA publishes an Updated Practical Guide on notifications of major holdings under the Transparency Directive

    The European Securities and Markets Authority (ESMA) has published an updated practical guide on notifications of major holdings under the EU Transparency Directive. The Guide summarises the national rules across the European Economic Area (EEA) and serves as an aid to market participants and shareholders with notification obligations under national law in accordance with the Transparency Directive. The first Part of the Practical Guide is a summary of the main rules and practices, presented on a country-by-country basis, while the second Part provides key information regarding the different EEA jurisdictions in the form of comparative tables.

    The Practical Guide can be found at https://www.esma.europa.eu/sites/default/files/library/practical_guide_major_holdings_notifications_under_transparency_directive.pdf.


  • Special Alert:  Continuing Education Deadline Approaching 

    This is a reminder that if you have any investment adviser representatives (“IARs”) registered in a jurisdiction that adopted the model continuing education (“CE”) rule, they are subject to the continuing education requirements before 12/31/2022. This applies to all registered IARs of both state-registered and federal covered investment advisers in that jurisdiction.  

    What happens if you do not complete the CE requirement? The IAR will be noted as ‘CE Inactive’ and if CE is not completed by the end of year, the IAR will be unable to renew his or her registration.  

    The jurisdictions highlighted in green below have implemented an IAR CE requirement and therefore IARs within those jurisdictions must satisfy their 12 credits of continuing education before year-end.  


    • Arkansas (1/1/2023 effective date) 
    • Kentucky (1/1/2023 effective date) 
    • Maryland (1/1/2022 effective date) 
    • Michigan (1/1/2023 effective date) 
    • Mississippi (1/1/2022 effective date) 
    • Oklahoma (1/1/2023 effective date) 
    • South Carolina (1/1/2023 effective date) 
    • Vermont (1/1/2022 effective date) 
    • Washington, D.C. (1/1/2023 effective date) 
    • Wisconsin (1/1/2023 effective date) 

    Beginning in 2022, IARs within the above jurisdictions will need to attain 12 CE credits each year to maintain their IAR registration. A “credit” is a unit that has been designated by NASAA to be at least 50 minutes of educational instruction. The 12 credits must include 6 credits for Products and Practices and 6 credits for Ethics and Professional Responsibility. IARs can monitor and report their IAR CE through FINRA’s FinPro system. Go to https://www.finra.org/registration-exams-ce/finpro to create an account. 

    Here is a link to all the approved IAR CE course providers:  https://www.nasaa.org/industry-resources/approved-iar-ce-providers/

    It is every Advisers responsibility to ensure that their IARs are compliant with continuing education requirements, whether for a professional designation or due to the state CE rule. 


  • Australia consults on a publicly available Beneficial Ownership Register

    The Australian government has opened a consultation on a publicly available beneficial ownership register. On the first phase, the Government is welcoming comments for a proposal to require specified unlisted entities regulated under the Corporations Act 2001 to maintain beneficial ownership registers. It is also seeking comments on proposed amendments to the substantial holding notice and tracing notice regimes in the Corporations Act.

    In the next phases, the Government will consult on the disclosure of beneficial ownership held through other legal vehicles (e.g., trusts) and the centralisation of information in one single public registry.

    The consultation will remain open until 16 December 2022.

    Please see more at https://treasury.gov.au/consultation/c2022-322265


  • The European Commission’s recent report on its consultation on ESG data/ratings providers points out the following:

    • More than 80% of industry respondents -- ESG ratings providers, users, and companies rated -- favor EU regulatory intervention in their industry
    • They strongly support multiple different regulatory goals, including improving transparency on the methodologies used by ESG ratings providers (90%+), avoiding potential conflicts of interest (80%), and improving ESG ratings reliability and comparability (73%)
    • A strong majority (82%) favor a registration/authorization regime for ESG ratings providers
    • Almost all (97%) support disclosure requirements for ESG ratings providers about their methodologies, with most favoring the use of standardized templates
    The Commission expects to adopt an initiative in Q1 of 2023, according to its timeline.


  • The Hong Kong Exchanges and Clearing Limited Publishes its Conclusion on Recent Position Limit Consultation

    The Hong Kong Exchanges and Clearing Limited (HKEX) published yesterday (28.07.2022) conclusions to its consultation on the revision of its position limit regime. More specifically, the HKEX decided that:

    1. two additional tiers (i.e., 200,000 and 250,000 contracts) will be introduced to the existing 3-tier Single Stock Options (SSO) position limit model (i.e., 50,000, 100,000, 150,000 contracts);
    2. the existing 5,000 contracts per expiry month Single Stock Futures (SSF) position limit model will be revised to a 5-tier model with net position limits (i.e., 5,000, 10,000, 15,000, 20,000, and 25,000 contracts). A single contract month limit with two times the net position limit for all contract months combined will also be imposed and;
    3. the additional position limits that apply to flagship-minis contracts will be removed.

    The effective date of the position limits’ amendments will be announced in due course.


  • Global ESG reporting standards are settling, with final days of comment periods at hand

    A consultation by the ISSB (the International Sustainability Standards Board, launched in November at the UN’s COP26), on corporate sustainability reporting, closes this Friday July 29th.  Its two “Exposure Drafts” (EDs) address companies’ (1) disclosure of sustainability-related financial information and (2) climate-related disclosures.  Among the comments submitted are those from EU financial regulator ESMA, which recommended that the ISSB consult closely with the separate GRI standards (established by the Global Sustainability Standards Board) as well as with EFRAG (the European Financial Reporting Advisory Group). 

    For its part, EFRAG has launched a public consultation for its own EDs, which ends on Monday August 8th.  These EDs relate to proposed European Sustainability Reporting Standards (ESRS), mandated under the EU’s proposed Corporate Sustainability Reporting Directive (CSRD).  (Last month, the European Parliament and Council reached a provisional political agreement on the CSRD, under which corporate sustainability reporting requirements will be phased-in starting on 1 January 2024.)  Recently, ESMA’s Securities Markets Stakeholder Group provided advice to ESMA on EFRAG’s consultation, which may offer insight on how these disclosure standards could change before becoming final.

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  • For ESG ratings providers in the EU, those who use that information, and companies rated:

    To get a sense of possible regulations on the horizon, see ESMA’s recent statement on the outcome of its Call for Evidence issued in February.  Among its findings from the industry’s input, ESMA highlights insufficient data, particularly about SMEs and non-listed companies, as fundamentally impacting the usability and relevance of ESG ratings.  Also cited: 

    ·       low transparency of rating methodologies and data sources

    ·       lack of comparable and standardized data

    ·       a misalignment on the definition of “ESG”

    ·       delays in updating or correcting underlying ESG data

    ·       ratings methodologies biased toward larger, listed and U.S.-based companies

    ·       conflict of interest risks

    ESMA notes that the input it received may prove “useful for a possible assessment around the need for introducing regulatory safeguards for ESG rating products”

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  • Investment managers and advisors subject to U.S. rules: Be aware that the SEC has finalized amendments to the following filings, providing for electronic submissions instead of paper filings: 

    ·       Confidential treatment requests for Form 13F (via EDGAR)

    ·       Applications for orders under the Investment Advisers Act of 1940 (via EDGAR)

    ·       Form ADV-NR (via IARD)

    In addition, the changes require additional information and include technical amendments for reporting on Form 13F.  

    The new rules become effective 60 days after publication in the Federal Register, but with a six-month transition period for filers to implement the modified requirements.  The amendments to Form 13F have a separate effective date of 3 January 2023.  For further details, see the SEC’s Press Release and the rule amendments.”

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  • For investors holding EU securities — the long and short of it

    Take note that this month ESMA released an updated list of sanctions applicable to Short Selling Regulation violations, as well as an updated Practical Guide on how to notify regulators for threshold interests held on the long side. Here are the official publications:

    ·       EU SSR sanctions: https://www.esma.europa.eu/document/administrative-measures-and-sanctions-applicable-in-member-states-infringements-short

    ·       Practical Guide to long notifications: https://www.esma.europa.eu/document/practical-guide-notifications-major-holdings-under-transparency-directive

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  • ESG Disclosures by Investment Firms: A Comprehensive Look at the SEC’s Proposal

    Our Greg Hotaling analyzes the SEC’s recent ESG related rulemaking here: https://cssregtech.com/2022/06/esg-disclosures-by-investment-firms-a-comprehensive-look-at-the-secs-proposal

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  • To investment managers with sustainability features in their funds:

    If you are subject to EU rules, don't miss the briefing ESMA issued last week for domestic regulators across the EU, at https://www.esma.europa.eu/press-news/esma-news/esma-provides-supervisors-guidance-integration-sustainability-risks-and

    Not only will review of this document by regulators be important (for their promotion of a common supervisory approach to ESG), but we also recommend it for review by investment managers themselves. The instructive information set forth by ESMA -- including for pre-contractual disclosures, periodic disclosures, fund names, investment policies, website disclosures, sustainability risks within portfolios, and enforcement -- will help you stay in compliance. 

    Note: this briefing is not to be confused with guidance, also published last week, from the ESAs regarding Regulatory Technical Standards under SFDR and the Taxonomy Regulation (which we also recommend for your review -- see https://www.esma.europa.eu/press-news/esma-news/esas-provide-clarifications-key-areas-rts-under-sfdr)

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  • HKEX proposes the revision of position limits & Large Open Position (LOP) reporting requirements

    The Hong Kong Exchanges and Clearing Limited (HKEX) has issued a consultation paper on revising Position Limits and Large Open Position (LOP) reporting requirements. More specifically, HKEX proposes a) the revision of the position limit regime for single stock options (SSO) and futures. The proposal entails the inclusion of  2 additional tiers to the current 3-tier SSO position limit model and the expansion of their position limit; and b) the removal of the additional position limits and the revision of LOP reporting requirements for mini-Hang Seng Index and mini-Hang Seng China Enterprises Index derivatives contracts (“flagship-minis”). 

    The Consultation period will remain open until 30 June 2022.


  • Compliance Solutions Strategies Named to CyberTech100

    CSS awarded for its technology and service offerings which enable clients to take a proactive approach to cybersecurity risk management

    NEW YORK, May 31, 2022 – Compliance Solutions Strategies (“CSS”), a Confluence Company, a leading RegTech platform providing technology-driven solutions which assist financial services firms in meeting their regulatory compliance requirements, today announced its inclusion in the CyberTech100. Compiled by FinTech Global with winners selected by a panel of industry experts and analysts, the annual list recognizes the world’s 100 most innovative providers of digital solutions helping financial services firms fight off cyberattacks and protect their data assets. 

    The CyberTech industry has experienced tremendous growth as recent well-publicized cyberattacks have resulted in extensive disruptions to the global supply chain. A combination of factors is driving increasing levels of vulnerability. As all companies become increasingly reliant on technology and data management infrastructures, cyberattacks are growing in number, complexity and sophistication. 

    CSS addresses regulatory, business and operational risks across the global investment management industry, supporting a broad scope of institutional asset managers, hedge funds, private equity firms and insurance companies as well as retail wealth advisers. With its selection to the CyberTech 100, CSS continues to build momentum and deliver market-leading cybersecurity solutions and services for dark web monitoring, policy and procedure development and review, security testing, cyber training and risk assessments. CSS’s expertise in regulations governing the protection and use of personally identifiable information (PII), such as GDPR and the California Consumer Protection Act (CCPA), as well as CSS’ services to address new cybersecurity risk management rules proposed by the Securities and Exchange Commission, are increasingly being leveraged by investment managers and advisers seeking to implement the controls necessary for properly managing data related to investors and employees. 

    “We’re thrilled to be included among the world’s most innovative cybersecurity companies again,” said E.J. Yerzak, Head of Cyber IT Services at CSS. “CSS uses AI-based technology backed by in-house regulatory and cybersecurity expertise to partner with firms in the development of a comprehensive cybersecurity risk management program. The latest cyber news has accelerated the need for clients to take a more proactive approach to evolving the strength and maturity of their cybersecurity defenses.”

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  • The Securities and Futures Commission (SFC) proposes changes to the position limit regime in Hong Kong

    “A few days ago, the Securities and Futures Commission (SFC) in Hong Kong issued a consultation paper on proposed changes to the position limit regime for listed futures and options contracts. The main proposals therein are as follows:

    • to include additional futures and options contracts bound by position limits, as well as to revise the aggregate position limits and the spot month for certain contracts;
    • to include reportable positions for futures and options contracts traded during holidays (complemented by the launch HKEX Derivatives Holiday Trading program on 9 May 2022);
    • to establish that the statutory prescribed limits and reportable positions should be applied to each unit trust and sub-fund under an umbrella fund as if it were a stand-alone fund;
    • to include a wider range of contracts which may be authorised by the SFC for excess positions;
    • to introduce an authorisation mechanism for a clearing participant (CP) to hold excess positions when providing clearing services and prescribing position limits and reportable positions in relation to certain futures and options contracts launched by the HKEX;
    • to ensure that CPs have no “discretion” in relation to clearing clients’ positions.

    Written comments on the proposals may be submitted until 27 June 2022. After the end of the consultation period, a consultation conclusions paper will be published.”

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  • The UK’s FCA shares a provisional timeline for UK EMIR Refit

    The FCA have indicated in a round table with trade associations a rough timeline for when they expect to issue supporting documentation and validation rules ahead of a full go-live of the new EMIR reporting requirements.

    The FCA  have indicated that they expect to have published the supporting documentation and validation rules in or around Q4 2022. Following this and given the 18-month implementation period, the FCA have outlined provisionally that they expect go-live to occur around September/October 2024. Please note that these are merely indications from the FCA and may be subject to change.

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  • European Commission revised RTSs detailing ESG disclosures

    Financial advisors and market participants take note: Last week the European Commission bundled and published revised RTSs detailing ESG disclosures required under SFDR and the Taxonomy Regulation. Minor changes affect the templates you need for your SFDR "principal adverse impact" statements, pre-contractual disclosures and periodic statements. The revised RTSs, expected to be approved by the European Parliament and Council in due course, are scheduled to apply from 1 January 2023. For further information, see the Commission's information page and the new RTSs here.

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  • Final Report on the Review of the SSR

    Yesterday, ESMA published the Final Report on the Review of the SSR. There are three focal areas on the Report:

    1. Based on the emergency measures taken during the COVID-19 outbreak, an empirical analysis of their impacts is presented. ESMA proposes amendments to the rules for RCAs to issue long-term and short-term bans and for ESMA to adopt intervention powers;
    2. The current framework for the calculation of NSPs, the list of exempted shares and the so called “locate rule” to be met when short selling are reviewed;
    3. The framework for transparency and publication of Net Short Positions (NSPs) is being assessed in the context of the recent market events. The introduction of an ESMA-centralised system for publication and disclosure to the public of NSPs is proposed, as well as an EU-wide obligation for RCAs to periodically publish aggregated NSPs per issuer, integrating all individual positions reaching or exceeding the notification and the publication thresholds.

    Should the EC decide to proceed with a review of the SSR, ESMA is ready to provide technical guidance.

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  • ESMA suggests that the EC could consider the introduction of position limits on carbon derivatives and the amendment of EUA position reporting

    On March 28th, 2022, ESMA published its Final Report on the EU Carbon Market (ESMA, “Final Report on Emission allowances and associated derivatives”). In this Report, ESMA invites the EC to consider the introduction of position limits on the open position a person may hold in European Union Allowance (“EUA”) derivatives and economically equivalent OTC contracts. To this effect, ESMA presents the arguments in favour and against their application. Moreover, ESMA recommends, inter alia, the amendment of EUA position reporting. ESMA’s Report will serve as a basis for the EC’s, the Council’s of the EU and the European Parliament’s decision of whether additional measures to regulate the carbon market are deemed necessary. ESMA will assist with the implementation measures and with additional data analysis or advice that could be useful in future deliberations on the EU carbon market.

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  • New bill will be introduced by year-end in New Zealand

    Earlier this week, it was announced that a bill will be introduced by year-end in New Zealand to increase the transparency of company beneficial ownership. The bill aims at fighting money laundering, tax evasion and the financing of terrorism. Companies and limited partnerships will be required to determine who their beneficial owners are, to obtain high-level information about them, and to provide that information to the Companies Register. The information will be made publicly available. A transitional period (ranging from 6 to 18 months) will be provided to companies, limited partnerships, directors, general partners and beneficial owners to meet the new obligations.

    According to the bill, a unique identifier number will be assigned not only to all beneficial owners but also to directors and general partners of limited partnerships. The unique identifier could take the form of a number, certificate, or digital code and in that way the individual’s involvement in different corporate entities can be linked and tracked over time. The bill will be introduced by the end of 2022, after the end of a consultation period.

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  • ESG disclosure takes a step forward in the United States

    Today the SEC proposed rules to enhance climate-related disclosures, modeled in part on the widely used recommendations of the FSB's Task Force on Climate-Related Financial Disclosures. The rules would apply to SEC registrants with respect to their registration statements and periodic reports, amending existing SEC rules under the Securities Act and the Exchange Act. The proposed phased-in compliance dates would apply beginning for fiscal year 2023. A public comment period remains open for 30 days after publication in the Federal register, or 60 days after the date of issuance and publication on sec.gov, whichever is longer. See the press release at https://www.sec.gov/news/press-release/2022-46?utm_medium=email&utm_source=govdelivery, and the fact sheet at https://www.sec.gov/files/33-11042-fact-sheet.pdf.


  • ASIC’s Corporate Governance Priorities and the Year Ahead

    For ESG investment managers with Australian products in their portfolios, ASIC notes the following about what lies ahead. Acknowledging that jurisdictions such as the UK and New Zealand move toward mandatory climate-related reporting for listed companies, ASIC "will engage closely with listed companies and investor groups throughout 2022 as the International Sustainability Standards Board climate standards develop", will focus on greenwashing which it defines as "the potential for an entity to overrepresent the extent to which its practices are environmentally friendly, sustainable or ethical", and is reviewing whether promoted 'ESG' or 'green' funds fulfill those labels. You can read the full speech by ASIC Chair Joe Longo here.

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  • Consultation on the Listing Act

    Background read - in case you missed it: Investment compliance offices might take note of proposed regulatory changes that would affect SME growth markets in the EU (or "Multilateral Trading Facilities" in MiFID II parlance). The European Commission has recently concluded a consultation on the Listing Act, intended to further address "the underdevelopment of market-based finance in the EU". EU regimes potentially affected include the Prospectus Regulation, the Market Abuse Regulation, MiFID II and the Listing Directive. Shareholders, including investment managers, should also note that the potential changes could impact the Transparency Directive, requiring them submit "major holdings" notifications for their investments in issuers listed on SME growth markets (in addition to the Regulated Markets currently provided for) across the EU.

    View the full consultation here.

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  • New Rule 13f-2 Proposed by SEC

    SEC proposed new Rule 13f-2 and amendments to Regulation SHO and CAT to increase market transparency regarding short selling, in the aftermath of the GameStop fiasco last year. Under the proposed changes, certain institutional investment managers would be required to collect and submit certain short sale-related data to the SEC on a monthly basis. SEC then would make aggregate data about large short positions, including daily short sale activity data, available to the public for each individual security. More specifically, institutional money managers would be required to file confidential Proposed Form SHO with the Commission via EDGAR, within 14 calendar days after the end of each calendar month, with regard to each equity security and all accounts over which the manager meets or exceeds certain thresholds.


  • Timeline of ESG Regulation Effective Dates

    Financial market participants take note: in the EU, ESMA just posted a convenient timeline of ESG regulation effective dates (dated Feb 21st, on the heels of its Sustainable Finance Roadmap 2022-2024 published on Feb 11th). The timeline addresses SFDR, the Taxonomy Regulation, CSRD, and sectoral regimes including MiFID, AIFMD, IDD and UCITS.


  • Hot New Rules from the SEC

    • Reduce 13D / 13G filing deadlines to 5 days
    • Require annual cyber security plan reviews
    • Require private fund advisers to provide detailed financial reporting quarterly to investors and eliminate conflicts of interest
    • Require event driven reporting of information in Form PF beyond current quarterly/annual cycles, and expand reporting requirements

    See the details, including links to releases, press releases and fact sheets on our blog post, click here.


  • SEC Propose Amendments to Modernize Beneficial Ownership Reporting (13D and 13G Rules)

    SEC proposed certain amendments to modernize Beneficial Ownership Reporting (13D and 13G Rules). More specifically, SEC proposed: i) new shorter filing deadlines for 13D & 13G Rules, ii) the expansion of the application of Regulation 13D-G to certain derivative securities, iii) the clarification of "Group" formation and related Exemptions and iv) the use of a structured, machine-readable data language which would apply to all information disclosed on Schedules 13D and 13G. The public comment period will remain open for 60 days following publication of the proposing release on the SEC's website or 30 days following publication of the proposing publication of the proposing release in the Federal Register, whichever period is longer.


  • New ESMA Q&A on PRIIPs KID

    A new Q&A on the PRIIPs KID has just been released from ESMA. View it here. Some key updates include:

    • Clarification on the monitoring of changes in the moderate performance and the scenarios that will trigger a KID update
    • Clarification of how to categorize an AIF investing in linear return profile securities with variable levels of leverage
    • Clarification of treatment of funds with pricing frequencies not specifically called out in the RTS
    • Clarification of how stress scenario should be calculated for a fund that is Category 1 according to Point 4.(c)
    • Clarifications for non-fund type products and cost updates
    • Clarification of how total cost should be shown on the KID

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  • Adoption of Investment Adviser Representative Continuing Education Requirements

    As a follow up to our Coffee & Regs Podcast episode found here, we wanted to advise RIA that the Securities Division of the Vermont Department of Financial Regulation announced the adoption of Vermont Securities Regulations (S-2016-01) amended effective on December 16, 2021, which requires both state-registered and federal covered investment adviser representatives to complete annual continuing education requirements. Regulation S-2016-01 requires every investment adviser representative (IAR) to annually complete 12 CE credits to maintain their IAR registration. The 12 credits must include 6 credits of Products and Practices courses and 6 credits of Ethics and Professional Responsibility courses. IARs must complete courses delivered by course providers that meet specific criteria established by the North American Securities Administrators Association (NASAA). This information can be found on NASAA’s website, and we recommend frequent viewing of the website for updates and information related to course availability. In addition to Vermont, Maryland has also just announced the adoption of the CE requirement for RIAs.

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  • SFDR and Taxonomy Regulation Technical Standards Delayed Six Months

    Important ESG news for EU market participants: The European Commission, by letter to the EU Parliament and Council, has delayed the date of application of SFDR and Taxonomy Regulation technical standards, from 1 July 2022 to 1 January 2023. This gives financial firms six more months to prepare and submit their first ESG disclosures that must conform to templates and detailed requirements set forth in those standards. The Commission added that disclosures of "principal adverse impacts" under the technical standards, with respect to the "reference period" of calendar year 2022, must be submitted by 30 June 2023.

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  • ESMA Publishes Final Report on Draft RTS of Commodity Derivatives Under MiFID II Recovery Package

    On 22 November 2021, ESMA published its Final Report on its draft RTS relating to commodity derivatives under the MiFID II Recovery Package. The Final Report includes proposals on the application procedure for position limit exemptions, as well as a methodology for national competent authorities to determine position limits under the MiFID II Recovery Package (whereby limits will apply only to agricultural commodity derivatives and to critical or significant commodity derivatives). This new draft RTS 21a will repeal the existing RTS 21. The European Commission has three (3) months to decide whether to endorse the draft RTS. The changes will apply from 28 February 2022.

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  • MiFIR Transaction Reporting Validation Rules Update

    ESMA has recently published a document outlining updated validation rules for MiFIR Transaction Reporting. The changes are applicable from Q2 2022 with the exact date for go live to be confirmed at a later stage. Most of the updated validation rules are minor tweaks and clarifications including checks that the date of birth fields of the Buyer/Seller and Buyer/Seller decision should not be later than the trade date, that the MIC also needs to be valid in the reference data on transaction date, and that the 'EntityStatus' shall be active on trading date for Buyer/Seller and Buyer/Seller Decision Maker ID codes. The ESMA update, including a change log with all updated validations, can be found here.

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  • Update on UK PRIIPs 2.0

    Good news from the FCA Policy Statement where it was confirmed the proposed effective date for the proposed UK PRIIPs RTS would no longer be 1st January 2022. The FCA indicated they will publish the outcome of their consultation on PRIIPs in Q1 2022 - when we will receive an update on the RTS and new effective data for compliance for this RTS.


  • FinDatEx Opens Consultation on EPT Version 2.0

    The FinDatEx TWG (Technical Working Group) for PRIIPs has published the proposed changes to the EPT template to account for the new draft RTS published by the European Commission on 7 September 2021, as well as the changes needed to account for the ending of the UCITS grandfathering period. In line with the typical governance of the template adjustment process, the proposed version EPT 2.0 is now under public consultation until 22 November 2021. The template is available here and feedback can be sent to directly to the TWG via email to priips@findatex.eu.

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  • ESAs to Review PRIIPs

    The European Supervisory Authorities (ESAs) are calling for industry input to a review of PRIIPs. The input provided will feed into the ESAs’ technical advice to the European Commission on a review of the key information document (KID) for PRIIPs. The ESAs are requesting information from stakeholders on a range of topics, including the practical application of the existing KID such as its use by financial advisors or the use of digital media, the scope of the PRIIPs regulation and the degree of complexity and readability of the KID. The call for evidence is open until Thursday 16 December 2021. See here for more details.

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  • UK Announces Sustainable Disclosure Regime for Funds

    UK divergence from Brexit has now led to a different regime to SFDR in the UK called the Sustainable Disclosure Regime (SDR). it will also include a UK concept aligned to the EU Taxonomy for green finance. Under the SDR regime, investment products will need to set out consumer-focused disclosures showing the impact, risks and opportunities of the activities they finance on sustainability. Read about the full framework here.

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  • News for Short Position Holders on EU Markets

    Big news for short position holders on EU markets. European Commission adopts lowering of reporting threshold to 0.1%. Entry into force: 20 days after publication in the Official Journal of the European Union. See more here.

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  • Third-Country Markets Considered as Equivalent to a Regulated Market in the Union for OTC Derivatives Reporting

    ESMA has released an updated list of third-country markets considered as equivalent to a regulated market in the Union for the purposes of reporting exchange-traded derivatives under EMIR. It is worth noting that amongst the five regulated markets added to the list, ESMA has included crypto asset derivatives markets as equivalent to a regulated market, certainly in preparation of EMIR REFIT. EMIR firms trading in derivatives on any of the newly added exchanges will have to comply with the validations relating to fields 2.15 “venue of execution,” 2.5 “product identification type,” 2.34 “clearing obligation” and 2.38 “intragroup.”

    The full list of exchanges considered as equivalent to a regulated market can be found here.

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  • What’s Next for PRIIPs?

    Here's a quick update on the various moving parts on PRIIPs and the RTS as it moves through the EU legislative process. In our last update, we announced the milestone of PRIIPs being approved by the Commission (7 September 2021). This now kick starts the co-legislative scrutiny period which typically is two months, with the option for an additional month's review. In the interim, there is intense advocacy and lobbying persisting to have a 12 month run into the effective date. If successful, this would push the date in the RTS from 1 July 2022 to 1 January 2023. The outcome of this lobbying will become clearer as we progress through the scrutiny period.

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  • PRIIPs RTS Adopted By EU Commission

    Today (September 7, 2021) the EU Commission announced the adoption of the PRIIPs RTS with the effective transition date for UCITS KIID to PRIIPs KID confirmed for July 1, 2022.

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  • ESMA Issues National Rules on Notifications of Major Holdings

    Holders of securities on European markets: Today ESMA issued a new edition of its must-have reference for investment managers notifying national regulators of their shareholdings at threshold levels. The Practical Guide contains each EU country's rules on notification deadlines, whom to notify, what form to use, how to send the disclosure, and other key information.

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  • CFTC Cracks Down on Position Limit Violations

    The CFTC imposed a $1.5 million fine on a major global food processor for position limit and related violations. See the details here.

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  • SEC Charges Firms for Cybersecurity Deficiencies

    SEC charges three firms for cyber deficiencies when phishing attacks and credential stuffing resulted in the firms' cloud-based email accounts being compromised and client PII exposed. Enforcement penalties ranged from $200k to $300k per firm, revealing that the SEC means business when it comes to enforcing expectations for cyber controls.

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  • ESMA Publishes New SFTR Validation Rules

    ICYMI - ESMA has published new SFTR validation rules and an updated version of the ISO 20022 xml-schema applicable from 31 Jan 2022. The changes in new versions are minor and include a number of clarifications around loan and collateral data fields, generally mandating a greater degree of granularity in the reporting. The new validation rules include a number of fields becoming mandatory for additional action types, clarification that issuer LEI must not be branch LEI as well as a number of additional clarifications. The new schemas and validation rules are available here.

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  • PRIIPs and UCITS Update

    On the 15 July 2021 an 8-week consultation was kicked off by The European Commission that closes on 9 September 2021 regarding the expected proposals to amend the PRIIPs Regulation and handle the UCITS KIID to PRIIPs KID transition.

    The proposal has two quick fixes - one each for PRIIPs and UCITS:

    The proposals outline the transition plan to replace the UCITS KIID disclosure document with the revised PRIIPs KID based on the RTS adopted by the ESAs in February earlier this year. They are also expected to confirm the transition date of 1 July 2022 - which delays the transition by six months, originally slated for 31 December 2021.

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  • Changes to the Technical Specification of Form N-PORT

    On Monday, August 23, 2021, the SEC released proposed changes to the technical specification of form N-PORT. Changes are part of the XML Schema document (XSD). As per this release, the following two sections will be introduced on the form.

    • Section B.9: If the Fund is excepted from the rule 18f-4 [17 CFR 270.18f-4] program requirement and limit on fund leverage risk under rule 18f-4(c)(4) [17 CFR 270.18f-4(c)(4)], it should provide derivative exposure in percentage of Fund’s NAV, its currency and interest rate exposure and number of days for which the fund’s derivative exposure exceeded 10% of its NAV
    • Section B10: Funds subject to the limit on fund leverage risk described in rule 18f-4(c)(2) [17 CFR 270.18f-4(c)(2)] must provide median daily VaR during reporting period. Funds subject to Relative VaR test should also provide name of fund’s designated Index, Index identifier and median VaR ratio

    The SEC has also published changes in technical specifications of form N-CEN. EDGAR release 21.3 has updated enumeration RELY_ON_RULE which now has 7 additional elements increasing total count to 20.

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  • EU Short Selling Regulation’s Disclosure Threshold

    On August 12, the European Commission concludes its public feedback period, for a proposed lowering of the EU Short Selling Regulation’s disclosure threshold to 0.1% (from the 0.2% threshold currently in effect). You can catch up on developments and see feedback at the Commission’s status page here.

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  • Bill to Shorten Window of 13F Filings

    On July 29, the US House Financial Services Committee voted to advance a new bill that would shorten the 13F filing window and require short-seller disclosures to the floor of the House of Representatives. Bill HR 4618 – also known as the Short Sale Transparency and Market Fairness Act – would require asset managers responsible for more than $100M in assets under management to file ownership reports with the SEC no later than 10 days after the end of each month. Current rules require asset managers to file 13Fs with the SEC within 45 days after the end of each quarter. Read more here.

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  • FINRA Whitepaper on Cloud Computing

    FINRA releases a whitepaper exploring the current state of cloud computing in the financial services industry including key benefits achieved and the challenges firms are facing. Read it here.

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  • Cyprus Securities and Exchange Commission & AIFMD

    Cyprus Securities and Exchange Commission (the ‘CySEC’) reminding AIFMs to ensure compliance with their reporting obligations under the AIFMD. Read the full memo here.

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  • SEC Cracks Down on Form CRS

    The SEC twice reminded 27 RIAs and BDs to meet Form CRS requirements before starting enforcement actions. The firms have all now been fined for failing to file and deliver Form CRS last year. Fines ranged from $10,000 to $97,523, and all come with new required disciplinary disclosures for each of the firms. The firms now all need a "Yes" answer to the disciplinary question. Read the latest.

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  • FCA Publishes UK PRIIPs Consultation Paper

    On July 20, 2021, the FCA published Consultation Paper CP21/23 to collate industry view points on proposed amendments to the PRIIPs regulation as it applies in the UK - the FCA are doing this as they "want to address the lack of clarity on the PRIIPs scope and address concerns with performance scenarios, summary risk indicators and elements of the transaction costs methodology." The proposal sets out options with respect to replacement of existing Annex IV (Performance Scenarios), and puts out options such as replacement with a narrative description of performance, a 10Y past performance analysis and a proposal to enable a firm to up-rate its SRI if they feel it is understating risk. The CP also doubles down on the FCAs' continued support for the slippage calculation approach to transaction costs, but it does outline tweaks to the transaction cost methodologies as specified in the current legislation "to address issues arising from transaction cost reporting in specific contexts." The comment form for the CP can be found here.

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  • ESMA Launches Consultation Paper on MiFIR Transparency Requirements

    ESMA has launched a consultation paper on RTS 1 and RTS 2 on MiFIR transparency requirements. The consultation paper covers technical issues and addresses topics that do not require a prior change to MiFID II/MiFIR, and aims to provide more robust guidance for reporting firms around topics such as commodity derivatives, clarity around fields for post-trade transparency and reference data and clarity around non-price forming transactions. The deadline is 1 October 2021. The full release and consultation paper can be found here.

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  • Q&A on the Application of AIFMD

    ESMA released an updated version of Q&A on the Application of the AIFMD (europa.eu). There are 2 new items included, but none related to Annex IV reporting.

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  • 13F and 13D – Changes on the Horizon?

    Chair Gensler has been beating a drum signaling that changes to the U.S. transparency regimes are likely.

    In prepared remarks for City of London Week (published June 23, 2021), Gensler indicated that he had asked SEC staff to propose updates to beneficial ownership reporting, including possibly shortening the reporting deadlines. Currently, under Section 13D, beneficial owners of more than five percent of a public company’s equity securities who have control intent have 10 days to report their ownership.

    In addition, Gensler indicated that increased transparency was warranted around short selling and derivatives (e.g. security-based swaps that provide exposure to a company without traditional equity ownership).

    These remarks are in line with Gensler’s May 2021 testimony to the House Financial Services Committee (HSFC) in the GameStop-related hearings, in which he indicated his support for expansion of Form 13F to include disclosure of derivatives - specifically mentioning the lack of current reporting on securities-based swaps.

    In the same hearings, Gensler noted that Dodd-Frank had charged the Commission with updating 13F reporting to require monthly reporting of aggregate information in the short-selling market. This mandate - now 12 years old - is one of only three mandatory rulemaking provisions on which the SEC has yet to act. (67 have already been adopted; eight others are in the proposal stage; three remain.)

    Congress is marching in the same direction.

    Gensler’s recent remarks are very much in line with draft bills Congress released for discussion in May in connection with the GameStop related hearings. For example, the Capital Markets Engagement and Transparency Act of 2021 proposed modifying Section 13(f) to redefine the scope of the rule to cover both shorts and derivatives, and also to increase the frequency of reporting -- it would require monthly reporting within 5 business days after the end of each month. Current Form 13F is due within 45 days after the end of each quarter. 

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  • Pete Driscoll to Leave the SEC Examinations Division; Dan Kahl to be Acting Director

    The SEC announced that Peter Driscoll, the Director of the Division of Examinations, will leave the SEC on August 14, 2021.  Pete Driscoll has a long and distinguished career at the SEC, being the recipient of the Mission Award and the Distinguished Service Award, the Agency’s highest honor.

    Mr. Driscoll was well known for his leadership and transparent style, frequently speaking at industry events. Pete was the keynote featured speaker at CSS’ s “Fireside Chat with Pete Driscoll” in December 2020.  Joining him was Stephanie Monaco, Partner at Mayer Brown, and Jim Anderson, Partner at Willkie Farr & Gallagher, along with expert compliance panelists in the industry discussion panel.   

    Daniel Kahl will be the Acting Director of the Division of Examinations upon Mr. Driscoll’s departure.  Dan has been Deputy Director since 2018, and the Division’s Chief Counsel since 2016.  Previously, Dan led the Office of Investment Adviser Regulation in the Division of Investment Management.   


  • EMIR REFIT Update from ESMA

    Today, ESMA released a consultation paper on EMIR REFIT Reporting Guidelines. The consultation paper includes draft guidelines on topics relating to reportability, field-by-field reporting rules, TR reconciliation and TR data access under EMIR REFIT.

    The consultation paper also covers EMIR REFIT draft XML schema for reporting, clarifying interdependencies between data fields and how the rules apply to reporting scenarios in scope. The closing date for responses is 30 September 2021.

    This update consultation gives the industry much welcome clarity on how ESMA aims to implement the new EMIR reporting rules and guidelines, and provides firms with a detailed framework for further preparation ahead of the regulation go live.

    The consultation paper, the draft validation rules and draft XML schema for reporting can be found here.

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  • AIFMD Filings Update for The Netherlands

    AIFMD filings to The Netherlands are to be submitted through the AFM Portal as per July 1, 2021, replacing the DNB DLR portal. More information can be found here. To our knowledge, third country managers are still not requested to submit.

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  • EU Further Delays SFDR Level 2 for Asset Managers

    The EU has delayed the SFDR Level 2 requirements by six months to July 2022. John Berrigan, head of the European Commission's financial services unit, said in a letter to the European Parliament that a further delay of six months was needed to avoid a last minute rush for market participants and due to the complexities of the ESG regulation.

    "Due to the length and technical detail of those regulatory technical standards ... we deem it necessary to facilitate the smooth implementation of the standards by product manufacturers, financial advisers and supervisors," Berrigan said in his letter. This would mean that the disclosures detailed in the Level 2 would not be published before 1 July 2022. It remains to be seen what the impact of the delay will be on the timeline for the Taxonomy Regulation Level 2.

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  • UK Suggests More Pronounced Split From EU Financial Services Rules, Post-Brexit

    Today the Chancellor of the Exchequer, Rishi Sunak, stated in a speech in London: "[O]ur ambition had been to reach a comprehensive set of mutual decisions on financial services equivalence. That has not happened. Now, we are moving forward, continuing to cooperate on questions of global finance, but each as a sovereign jurisdiction with our own priorities. We now have the freedom to do things differently and better, and we intend to use it fully." See the full text of the speech here.

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  • ESMA Upcoming Milestones

    Financial entities affected by EU law: Take note of ESMA's handy summary of upcoming deadlines for submitting consultation feedback. Check it out here.


  • SEC Adopts the Changes in the Technical Specifications of Form N-CEN

    On Monday, June 21, 2021, SEC adopted the changes in the Technical Specifications of the form N-CEN. All changes are part of XML schema definitions (XSD) that defines the N-CEN submissions. EDGAR Release 21.2 has introduced updates related to enumeration RELY_ON_RULE which now has two additional elements – “Rule 12d1-4 (17 CFR 270.12d1-4)” and “Section 12(d)(1)(G) of the Act (15 USC 80a-12(d)(1)(G))” - increasing total count to 13. Similarly, element UNIT_INVESTMENT_TRUST_TYPE has the following new elements - “isRule12D1Dash4Reliance” and “isRule12D1GReliance”.

    More information about this can be found here.

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  • Problems with PRIIPs KIDs

    On Thursday 17 June 2021, the Belgian regulator (FSMA) issued a feedback statement (here) to PRIIPs manufacturers and distributors in Belgium warning them of issues they observed over a three-year review of KID documents used in the Belgian market. The statement concluded that "the KID is intended to be a useful document for investors" and that the "main objective of the PRIIP Regulation is to enable retail investors to compare products and to make an informed investment decision" however the FSMA found that the "way in which some manufacturers apply this legislation means that the KID does not always achieve a sufficiently high quality to achieve those objectives." The statement of findings also called out differences between different market participants' commitment in terms of energy and resource into drawing up the KIDs as they would into their marketing documents.

    In fact, the FSMA study concluded that "the majority of the KIDs examined did not enable investors to be adequately informed of a product, its features or risks." The FSMA has contacted each of the manufacturers where deficiencies were noted and have asked them to make the necessary changes to the KID documents. The FSMA further indicated it will continue to review the KIDS notified to it, and that it expects sustained effort on the part of the sector to improve the clarity and comprehensibility of these documents. Stayed tuned as the PRIIPs saga continues...

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  • Colorado Passes Privacy Act

    The Colorado Legislature recently strengthened personal data privacy rights with the passing of the Colorado Privacy Act (Bill SB21-190), becoming just the third U.S. state to recently modernize its privacy regulation in a manner similar to the EU’s General Data Protection Regulation (GDPR). The bill seeks to meet the changing needs for data protection due to technological advances. Consumers are given the ability to opt-out of having businesses process and share their personal information. The bill requires companies to ensure they are protecting personal data through performing assessments of their processing activities and ensuring customers have consented to data collection. The Attorney General and district attorneys have the authority to enforce this bill. It is expected to go into effect in July of 2023.


  • SEC Publishes Regulatory Agenda

    The SEC has proposed a busy regulatory agenda. Among the topics listed are:

    • ESG (proposal stage)
    • Cybersecurity risk disclosure (proposal stage)
    • Amendments to the custody rule (proposal stage)
    • Amendments to Form PF (proposed stage)
    • Streamlined shareholder reporting for registered funds (final rulemaking)

    Read the full agenda

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  • New Gartner Report on the State of Privacy Regulations

    Gartner predicts that by 2023, 65% of the global population will be covered by privacy regulations and by 2024, over 80% of global companies will be subject to modern data protection rules. The "CCPA Effect" continues to be felt in the U.S. as more states have proposed legislation mirroring California's privacy act.

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  • Post-Brexit Divergence for PRIIPs

    The UK government has extended the exemption for UCITS funds from the rules governing packaged retail investment and insurance-based products (PRIIPs) for five years in one of the first signs of a post-Brexit divergence from EU fund regulations. Read the full story here.

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  • Data Breach Investigations Report Released

    As cybersecurity continues to be the hottest topic right now with another data breach reported from the world's largest meat processing company, VZ's hotly anticipated annual data breach investigations report for 2021 is now available. 85% of breaches involved a human element and 61% of breaches involved credentials. Once again, breach data shows the importance of regular phishing testing, dark web monitoring, and security awareness training to keep your firm from becoming a statistic. Financial gain continues to increase as the #1 motive of hackers, indicating that compromised data has a monetary value. http://verizon.com/dbir

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  • ESG Regulations in Europe Become a Blueprint for the U.S.

    On May 3, Investment News Magazine published an editorial titled "ESG Regulations in Europe map a clear path for the U.S." This editorial provides excellent insight on the future direction of ESG and on current SEC findings during examinations concerning ESG. U.S. asset managers need to prepare now for what's to come in a similar path to the EU SFDR. Read the full story.

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  • Position Limits Changes in the EU

    Commodity derivative investors: More big changes on the horizon for position limits in Europe. As we anticipated, we know the EU’s position limits regime under MiFID II is easing some of its regulatory burdens. The latest? ESMA is launching a consultation on revising many of its regulatory technical standards (RTS), including exemptions for financial entities and for liquidity provision, treatment of cross-listed products, calculation of the limit levels by local regulators, and more. Public responses to ESMA’s proposed new RTS are due by 23 July 2021, after which ESMA will consider those responses and submit its Final Report for European Commission approval by November 2021. Read more here.

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