CySEC has issued Circular C.346 (available in English here) addressed to Cyprus Investment Firms, UCITS and their Management Companies, Alternative Investment Funds and their Managers, Non-Financial Counterparties and Central securities depositories ('Regulated Entities'). With this Circular, CySEC reminds Regulated Entities of the requirements under the Regulation (EU) 2015/2365 on transparency of securities financing transactions and of reuse ('SFTR'), particularly concerning the reporting obligation. SFTs can be a repurchase transaction, securities or commodities lending and securities or commodities borrowing, a buy-sell back transaction or sell-buy back transaction, or, a margin lending transaction. The aim of the SFTR is to improve the transparency of the European securities financing markets and, of the underlying financial system in general.
SFTR provides for the reporting of details in regards to SFTs conducted by all market participants both in cases of financial and non-financial entities. In the case of a UCITS managed by a management company being the counterparty to SFTs, the management company shall be responsible for reporting on behalf of that UCITS. Similarly, in the case of an Alternative Investment Fund ('AIF'), which has appointed an external Manager ('AIFM'), it will be the AIFM that bears the responsibility for reporting on behalf of that AIF.
SFTR also outlines implementing technical standards on the format and frequency of reports on the details of SFTs to trade repositories. The main provisions include sections on data standards and formats of SFT reports, according to which, the relevant reports shall be provided in a common electronic and machine-readable form. Moreover, they refer to the identification of counterparties and other entities by stipulating that legal entity identifiers ('LEIs') shall be the only means allowable for the purpose of identification of legal entities. The regulation also specifies the details of SFTs to be reported to trade repositories.
Regulated Entities, as a result of new provisions, must comply with the enhanced obligations ahead of following dates:
- 11 April 2020 for investment firms, credit institutions and relevant third party country entities;
- 11 July 2020 for Central Counterparties and Central Securities Depositories and relevant third party country entities;
- 11 October 2020 for insurance companies, AIFs, AIFMs, UCITS, UCITS Management Companies and Institutions for Occupational Retirement Provision and relevant third party country entities; and
- 11 January 2021 for Non-Financial counterparties.
Specific measures to be taken include identification of the products traded which are in the scope of SFTR reporting, amendment of systems and procedures as necessary, and, obtaining legal entity identifiers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.