European Union: Investment Firms Quarterly Legal And Regulatory Update: 1 October 2015 To 30 December 2015

Last Updated: 18 January 2016
Article by Dillon Eustace


Markets in Financial Instruments Directive ("MiFID")

(i) ESMA publishes Guidelines on the application of definitions C6 and C7 of Annex 1 of MiFID

On 21 October 2015, ESMA published a translation of its Guidelines on the application of the definition of commodity derivatives and their classification under C6 and C7 listed in Section C, Annex I of MiFID (the "Guidelines"). The purpose of these Guidelines is to ensure a common, uniform and consistent application of these definitions.

The Guidelines can be accessed via the following link:

(ii) ESMA makes available pan-EU data on suspensions and removals from trading

On 17 November 2015, ESMA launched a new database providing information on suspensions and removals from trading. The database also makes available details of restoration which national supervisory authorities must notify under MiFID. The database covers European regulated markets and provides a list of the current suspensions in these markets, however, it does not provide details of suspensions linked to them. The system also allows for the search of an instrument to consult the key details relating to the suspension.

The database can be accessed via the following link:

Markets in Financial Instruments Directive ("MiFID II")

(i) European Commission, ESMA and the European Parliament acknowledge that it may be necessary to delay the implementation of MiFID II by a year

Speaking at the ECON Scrutiny Hearing on MiFID II on 10 November 2015, the Chair of ESMA, Steven Maijoor, called for a one year delay to the implementation of MiFID II, from January 2017 to January 2018.

Maijoor stated that "the timing for stakeholders and regulators to implement the rules and build the necessary IT systems is extremely tight...there are a few areas where the calendar is already unfeasible". Majoor further states that "it will take well into 2016 before the text of the RTS will be stable and final and the building of some complex IT systems can only really take off when the final details are firmly set in the RTS". Furthermore, some of the most complex IT systems will need at least a year to be built.

A European Commission official confirmed ESMA's misgivings about the initial deadline and acknowledged that a delay may be required. In considering the delay, the European Commission cited the sheer complexity of the legislation, the accompanying technical standards and the vast amount of work regulators and companies will need to do before the new system can run efficiently.

Since the start date for the new market rules is set in law, changing it would require a legislative amendment that both the European Parliament ("EP") and the Council of the European Union would have to approve.

On 27 November 2015, the EP's MiFID II negotiating team informed the European Commission on its stance on the potential delay of entry into force of MiFID II.

The EP's Rapporteur for MiFID II, Markus Ferber, MEP, explained:

"The European Parliament's negotiation team has informed the European Commission that we are ready to accept a one-year delay of the entry into force of MiFID II. However, this only applies if the Commission finalises the implementing legislation swiftly and thereby takes into account the European Parliament's priorities. Furthermore, the Commission and ESMA need to come up with a clear roadmap on the implementation work and especially for setting up the IT-systems. Naturally, I expect that the European Parliament will be informed regularly and comprehensively about any progress in the implementation work."

Steven Maijoor's speech and the EP's press release can be accessed via the following links:

(ii) ESMA publishes Final Report on Guidelines on Complex Debt Instruments and Structured Deposits in MiFID II

On 26 November 2015, ESMA published its Final Report on Guidelines on Complex Debt Instruments and Structured Deposits under MiFID II (the "Final Report") following its consultation in March 2015.

According to Article 25(10) of MiFID II, the guidelines are developed for the assessment of:

  • Bonds, other forms of securitised debt and money market instruments incorporating a structure which makes it difficult for the client to understand the risk involved; and
  • Structured deposits incorporating a structure which makes it difficult for the client to understand the risk of return or the cost of exiting the product before term.

The guidelines also cover debt instruments embedding a derivative.

The Final Report can be accessed via the following link:

(iii) ESMA publishes further draft Implementing Technical Standards under MiFID II

On 11 December 2015, ESMA published its final report on draft implementing technical standards ("ITS") under the MiFID II Directive and the Markets in Financial Instruments Regulation ("MiFIR") (the "Final Report")

The Final Report deals with technical standards from the following areas:

  • Standard forms, templates and procedures for cooperation arrangements in respect of a trading venue whose operations are of substantial importance in a host Member State;
  • Format and timing of the communications and the publication regarding the suspension and removal of financial instruments from trading on a Regulated Market, a Multilateral Trading Facility or an Organised Trading Facility;
  • Standard forms, templates and procedures for the authorisation of data reporting services providers;
  • Position reporting;
  • Format and timing of weekly position reports;
  • Standard forms, templates and procedures for competent authorities to cooperate in supervisory activities, on-site verifications, and investigations and for the exchange of information;
  • Standard forms, templates and procedures for the consultation of other competent authorities prior to granting an authorisation; and
  • Procedures and forms for submitting information on sanctions and measures.

The European Commission has three months (this period can be extended by one additional month) to decide whether to endorse the technical standards.

The Final Report can be accessed via the following link: _draft_implementing_technical_standards_under_mifid_ii.pdf

(iv) ESMA publish Final Report – Guidelines for the Assessment of Knowledge and Competence

On 17 December 2015, ESMA published their Final Report - Guidelines for the Assessment of Knowledge and Competence (the "Guidelines").

The Guidelines are intended to enhance investor protection by increasing the knowledge and competence of natural persons giving investment advice or providing information about financial instruments, investment services or ancillary services to clients on behalf of investment firms.

As required under Article 25(9) of MiFID II, the Guidelines specify the criteria for the assessment of the necessary knowledge and competence requirements of investment firms' staff. The Guidelines have been developed to enable firms to fulfil their obligations under Articles 24 and 25 of MiFID II, such as meeting general conduct of business principles, information and reporting to clients, and suitability and appropriateness requirements, through the attainment of appropriate qualifications and appropriate experience by their staff.

The Guidelines include summaries of industry responses received to an original consultation paper published on 23 April 2015 (ESMA/2015/753) and ESMA's feedback statements.

The Guidelines will come into effect on 3 January 2017 and can be accessed via the following link:

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