Q2 2023 Global Regulatory Update

EMEA

Environmental, social, and corporate governance:

• The ESAs (EBA, ESMA and EIOPA) published a set of consolidated Q&As on the Sustainable Finance Disclosure Regulation (“SFDR”) and on Commission Delegated Regulation, which supplements the SFDR with regard to RTS on content and presentation of information.
• They also published a joint consultation paper on proposed amendments to the RTS on content and presentation of principal adverse impacts (“PAI”) and financial product disclosures as well as progress reports on greenwashing.
• The European Commission published a consultation on two proposed delegated regulations relating the establishment of a framework to facilitate sustainable investment (“Taxonomy Regulation”).
• The European Commission issued, on June 13, 2023, a Sustainable Finance Package with several additional ESG measures (Environmental Delegated Act, amendments to the EU taxonomy climate Delegated Act and ESG rating activities).
• On the ESMA side, we noted updates to Q&As on SFTR data reporting and a call for evidence on sustainability in suitability and product governance.

Financial Service regulatory and directives Updates:

• The European Securities and Markets Authority (“ESMA”) published a final report on amendments to Commission Delegated Regulation (EU) 2018/1646 supplementing the Benchmarks Regulation (“BMR”) with regard to regulatory technical standards (“RTS”) on the information that EU benchmark administrators must provide in applications for authorisation and registration.
• On the AIFMD/UCITS fronts, we noted ESMA published the final report on its common supervisory action (“CSA”) with national competent authorities across the EU on supervision of the asset valuation rules under the UCITS Directive and the AIFMD. ESMA also published an updated version of its Q&A on the AIFMD and another one on the UCITS Directive. Finally, the regulatory authority also issued its opinionto the European Commission on undue costs of UCITS and alternative investment fun
• Crypto assets saw several key updates, notably through Council of the EU releasing a press release announcing it has adopted the proposed regulation on markets in crypto assets (“MiCA”). The European Systemic Risk Board (“ESRB”) published a report on the systemic implications of, and policy options for, crypto assets and decentralised finance while the EBA launched a public consultation on AML/CFT Guidance seeking to encompass Crypto Asset Service Providers (CASPs) within its scope. Read our insights for further details.
• ESMA published a consultation paper on draft RTS relating to the European Long-Term Investment Funds (“ELTIF”) Regulation.
• The ESAs published a set of consolidated Q&As on the PRIIPs Regulation and related Delegated Acts. We also saw the European Parliamentary Research Service releasing a briefing focusing on the European Commission’s retail investor package.
• Q2 also saw a few updates relating to securitisations in the EU, notably through the EBA issuing a consultation on its draft guidelines on the criteria for on-balance-sheet securitisations to be eligible as simple, transparent and consistent, ESMA updating its Q&A on data reporting under the SFTR and the International Capital Markets Association issuing updated recommendations for reporting under SFTR.
• Moving to MiFID II, we saw ESMA launching a CSA on the application of MiFID II disclosure rules with regard to marketing communications and promotion of financial products.
• Other noteworthy updates include: ESMA releasing its 2022 Annual Report, a follow-up report to the peer review on the guidelines on ETFs and other UCITS issues, an article on the stress testing results Money Market Funds in the EU, the EU Council agreeing its negotiating mandate on the EU Listing Act as well as a statement from ESMA on the risks arising from the provision of unregulated products and services by investment firms.

Country updates

UK

• Moving to the UK, HM Treasury published the text of the draft version of the memorandum of understanding (“MoU”) on UK-EU regulatory cooperation in financial services. The European Commission published a press release announcing that it has adopted this draft MoU.
• HMT also issued a press release announcing the re-establishment of its Asset Management Taskforce.
• The FCA announced the widening of the Long Term Asset Funds (“LTAF”) to retail and pensions The regulator also issued a few other updates, such as a policy statement(PS23/4) setting out final rules to improve the functioning of equity secondary markets, guidance and recommendations for liability driven investment (“LDI”) asset managers as well as a consultation, introducing amendments to the Prudential Sourcebook for MiFID Investment Firms, to provide more clarity on the scope of the ban on offering incentives to invest in high-risk investments and proposals relating to the introduction of a post-trade reporting deferral for exchange traded fund transactions.
• We also noted the FCA updated its regulatory framework reforms webpage to provide information about its new secondary international competitiveness and growth
• The crypto asset industry also saw a few updates, including the House of Commons Treasury Committee issuing a reporton regulating crypto assets and the FCA publishing a Policy Statement on financial promotion rules for crypto assets.
• On the tax front, HMRC issued a consultation on a law reform in transfer pricing, permanent establishment and Diverted Profits Tax.
• Other noteworthy updates in the UK include the Government issuing its 2023 Green Finance Strategy, the FCA Vote Reporting Group’s consultation on shareholder vote reporting, the Financial Reporting Council’s consultation paper on changes to the UK Corporate Governance Code and Companies House’s policy paper reform failure to prevent fraud offence.

Luxembourg

• On the Luxembourg side, we saw the CSSF issuing guidance summarising national provisions governing the marketing requirements for AIFs as well as an update to its resolution reporting and notification requirements.
• ESG was also addressed through the CSSF’s communiqué issuing its priorities in the area of sustainable finance.
• Virtual assets were also a key topic in the Grand-Duchy, which saw the regulator issuing an FAQ focusing on virtual assets in the context of undertakings for collective investment vehicles and with the aim of providing professionals with concise answers to the main practical issues they are facing.

Malta

• In Malta, the MFSA released its 2022 Annual Report Highlighting the Industry’s Continued Resilience. The regulator also issued a consultation seeking feedback on proposed amendments related to the establishment of a new framework for Notified Professional Investor Funds (“NPIFs”). Read our insights for further details.
• Finally, the MFSA’s Investment Services Supervision & Conduct Supervision published an Initial study assessing compliance with the SFDR’s sustainability-related website disclosures.

Americas

USA

• In the US, key updates included the SEC adopting Amendments to enhance Private Fund Reporting, as well as introducing changes to Form PF.
• The regulator also adopted final rules amending Regulation M to remove its references to credit ratings, replace them with alternative measures of creditworthiness and impose related record-keeping obligations on broker-dealers.

Cayman Islands

• Moving to the Cayman Islands, the Cayman Islands Monetary Authority (“CIMA”) issued new regulatory measures for regulated entities, including investment funds. CIMA has also published rules and a statement of guidance in respect of Corporate Governance as well as rules and a statement of guidance and Rules on Internal Controls.
• On the tax side, the Department for International Tax Cooperation (“DITC”) updated its list of CRS Participating and Reportable Jurisdictions.

Bermuda

• The Bermuda Monetary Authority issued a consultation discussing a proposal to enhance the supervisory powers within the Investment Fund Act (2006). The regulator also issued a subsequent stakeholder letter.
• On the digital assets side, the BMA released an updated Code of Practice relating to its Digital Assets Act 2018.
• Other noteworthy updates include a consultation paper on draft statutory financial statements templates for commercial insurers and groups and another consultation on proposed recovery planning rules for Bermuda Commercial Insurers.

Asia- Pacific

Hong Kong

• In Hong Kong, the Hong Kong Monetary Authority issued consultation on a prototype for a Green Classification Framework.
• The Securities and Futures Commission (“SFC”) released guidelines on AML and CFT and Prevention of Money Laundering and Terrorist Financing for Associated Entities of Licensed Corporations and SFC-licensed Virtual Asset Service Providers. Keeping in the virtual assets theme, the SFC also released two circulars focusing new licensing regime for virtual asset trading platforms, with one dedicated to transitional arrangements of the and another one on the implementation of that new regime.
• The regulatory authority also published Frequently Asked Questions relating to Open-ended Fund Companies
• Finally, HKEX issued a consultation on proposed climate-related reporting requirements for listed companies.

Singapore

• In Singapore, the Monetary Authority of Singapore (“MAS”) published a report proposing a framework for designing open, interoperable networks for digital assets. The regulator also released an open-source toolkit to enable the responsible use of Artificial Intelligence (“AI”) in the financial industry as well as released proposed Standards for Digital Money.
• The regulator also issued FAQs on the Notice on Business Conduct Requirements for Corporate Finance Advisers.
• The Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 came into effect on July 1, 2023.
• Another noteworthy update relates to the Ministry of Finance merging the accountancy-related units (the Accounting and Corporate Regulatory Authority, the Singapore Accountancy Commission and the Accounting Standards Council secretariat) into a strengthened accountancy function under one entity.

Australia

• The Australian Government is making progress with its Nature Positive Plan with the introduction of the Nature Repair Market Bill 2023, while the Treasury published its second consultation on climate-related financial disclosure.
• On the AML/CTF front, the Attorney General released a consultation paper on proposed reforms of Australia’s AML/CFT regime which includes the proposal to extend the existing legislation to capture additional ‘tranche two’ high risk entities. A second paper is expected late in 2023.
• The latest APRA stakeholder survey results provided strong backing for their focus on enhancing risk management across the banking, insurance and superannuation industries. They also provided an update on the implementation of new operational risk standard.
• ASIC continued its focus on two of its strategic priorities: further action was taken in relation the greenwashing and Report 763 was released; Report 762 was also released summarising ASIC’s key observations on how investment product issuers are meeting their design and distribution obligations (“DDO”) as well as further interim stop orders issued to product providers under this regime.
• The ALRC handed down its final report (Interim Report C) as part of the review of the legislative framework for Corporations and Financial Services Regulation. The report focus was on potential changes to the framework and structure of Chapter 7 of the Corporations Act and Par 2 Div 2 of the ASIC Act. Submissions on the report are now open and the final report is due in November 2023.

Middle East

United Arab Emirates

• The Securities and Commodities Authority (“SCA”) has given its approval to a proposal which grants an exemption from certain fees for companies seeking to list their green bonds and sukuks in the local market. The SCA also announced it started processing license applications from businesses seeking approval to offer virtual asset services.
• Whilst mentioning virtual assets, the Virtual Assets Regulatory Authority (“VARA”) published its Virtual Assets Transfer and Settlement Services Rulebook, while the Central Bank of the UAE issued guidance to Licensed Financial Institutions (“LFIs”) on the risks related to virtual assets and Virtual Asset Service Providers (“VASPs”).
• Finally, the SCA, in partnership with Morgan Lewis, issued additional guidelines on marketing foreign funds in mainland UAE following the enactment of SCA Decision No. (02/RM) of 2023, Decision No. (03/RM) of 2023, and Decision No. (04/RM) of 2023. The SCA confirms the extension (subject to a case-by-case basis by the SCA) of binding promotion contracts allowing the promotion of foreign funds to retail investors until March 31, 2024.

DIFC

• In the Dubai International Financial Centre, the DFSA released Consultation Paper No.151 , focusing on proposed changes to the DFSA’s AML Module. Other consultations related to fixed penalty notices (Consultation Paper No.149) and proposals relating to money services, crypto tokens and crowdfunding (Consultation Paper No.150).
• The DFSA Board made several Rulemaking Instruments come into force effective June 1, 2023. One of the updates included in this change relates to Single Family Offices, which are now subject to DFSA regulations.
• The Prudential Returns Module (PRU) has been updated.

ADGM

• The Financial Services Regulatory Authority (‘FSRA’) published the Financial Services and Markets (Amendment No.1) Regulations 2023 and issued amendments to Private Credit Funds Rules and Regulations.
• The ADGM also expanded its jurisdiction to Al Reem Island, increasing its footprint
• Late in Q1 2023, the ADGM issued a public consultation paper seeking views concerning proposed enhancements to its regulatory framework in relation to client classification, client asset and certain conduct requirements relating to the investment business.

Global

• The International Organization of Securities Commissions (“IOSCO”) published a consultation report (CR01/2023) on policy recommendations for crypto and digital asset markets.
• The IOSCO also published a final report on good practice relating to the implementation of its Principles for the Regulation of Exchange Traded Funds (“ETFs”), as well as a report on Special Purpose Acquisition Companies (“SPACs”).
• The IOSCO released a report to develop a Global Assurance Framework for Sustainability-related Corporate Reporting (multi-sector). Other sustainability related updates involve the Financial Stability Board releasing a report on climate-related financial risk factors in compensation frameworks. Towards the end of June 2023, the International Sustainability Standards Board issued its first two IFRS Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.
• Staying within sustainable finance, the Association of Southeast Asian Nations (“ASEAN”) updated its sustainable finance taxonomy for financial institutions.
• On the AML/CFT side, the Financial Action Task Force released two updates focusing on high risk jurisdictions and jurisdictions under increased monitoring.