1.1 EuSEF and EuVECA Regulations - European Commission's review

The European Commission has been reviewing the EU Social Entrepreneurship Funds and the EU Venture Capital Funds Regulations in order to improve the uptake of these funds. Proposed amendments include:

  • removal of the minimum investment limit, which is currently EUR 100,000 (in order to increase the investor base);
  • allowing authorised AIFMs to manage EuSEFs and EuVECAs. Currently, only sub-threshold AIFMs are able to manage EuSEFs and EuVECAs. The consultation has now closed and a response paper is due from the Commission.

1.2 UCITS Directive - ESMA's consolidated Q&As

The European Securities and Markets Authority (ESMA) has published a new Q&A document on the application of the UCITS Directive, as amended.

The document includes new questions about the additional documentation that are required in relation to the remuneration and depositary requirements of UCITS V. It also repeals and replaces four Q&A on UCITS that ESMA has previously issued.

1.3 Closet index tracking - ESMA statement on supervisory work

ESMA has published a statement on its supervisory work in relation to "closet index tracking" (ie when a fund is claimed to be actively managed but in reality stays close to a benchmark). According to ESMA, 5-15% of UCITS are potentially closet index trackers.

1.4 MiFID II will not come into effect until January 2018

The Commission has announced that the revised Markets in Financial Instruments Directive and Regulation (known as MiFID II) will not come into effect until January 2018.

The reason for the extension is the complex IT infrastructure that is required to be in place under MiFID II. ESMA has to collect data from about 300 trading venues on about 15 million financial instruments. To achieve this result, ESMA must work closely with national competent authorities and the trading venues themselves. However, ESMA has said that neither competent authorities, nor market participants, would have the necessary systems ready by 3 January 2017 (when MiFID II was initially scheduled to become operational).

Further MiFID II developments will be set out in our weekly Financial Institutions Group bulletin (please click here for subscriptions).

1.5 Market Abuse Regulation (MAR): ESMA consults on guidelines

ESMA has published a consultation paper on draft guidelines clarifying the implementation of the Market Abuse Regulation (MAR). MAR will apply directly in EU Member States from 3 July 2016, amending the previous Market Abuse Directive. ESMA is seeking feedback on the draft guidelines:

  • from investors receiving market soundings (ie information before the announcement of a transaction, in order to gauge their interest in a possible transaction), including the factors for them to assess whether the information they receive amounts to inside information, the steps to take if inside information has been disclosed to them and the records to maintain in order to demonstrate such compliance; and
  • on legitimate interests of issuers to delay disclosure of inside information and on situations in which the delay of disclosure is likely to mislead the public.

Comments are requested by 31 March 2016.

Various parts of the UK regulatory and legal system will change as a result of MAR. FCA Handbook and the AIM rules must be made compatible with MAR and the Handbook will contain guidance on matters covered by MAR (but MAR itself will include the rules). MAR will mainly have an impact on the following areas of the FCA Handbook:

Code of Market Conduct (to be preserved as far as possible), the Model Code (will change to guidance) and the Disclosure rules. The Financial Services and Markets Act will also change (see further our briefing).

Further MAR developments will be set out in our weekly Financial Institutions Group bulletin. Please click here for subscriptions.

1.6 European Commission call for evidence on the EU regulatory framework for financial services: HM Treasury and AIMA responses

HM Treasury has published the UK Government's response to the European Commission's September 2015 call for evidence on the EU regulatory framework for financial services, which it strongly supports.

The response provides an overview of the UK Government's main points, including the need for:

  • synchronisation of reporting and disclosure requirements;
  • uniformity of definitions;
  • connecting legislation;
  • regulatory proportionality.

The UK Government also considers that the follow issues merit sustained collective consideration:

  • the long-term decline in market liquidity and its implications for market making and the efficiency of financing the real economy;
  • building on the work done in the capital markets union on how financial services regulation can support long-term investment across the sector including banks, funds and insurers; and
  • how best to support the openness of European and global markets as they adjust to new regulatory regimes.

AIMA has also responded and calls for rules to allow greater participation by asset managers in securitisations, which would provide non-bank finance to small and medium-sized enterprises (SMEs); please see full list of responses.

1.7 ESMA has published responses to the Consultation on PRIIPs Key Information Documents

ESMA has published responses to the Consultation of the Joint Committee of the European Supervisory Authorities (ESAs) on packaged retail and insurance-based investment products (PRIIPs) Key Information Documents (KIDs).

To read this Bulletin in full, please click here.

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