CSS RegTech Radar
Regulatory compliance news and analysis to keep ahead of regulatory change.
  • 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.   

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  • 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.

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  • 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.

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  • 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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