Selected EU Regulatory Developments. Lugano Fund Forum, 23rd November 2015 Delphine Calonne, Senior Legal Counsel SFAMA

Transcription

1 Selected EU Regulatory Developments Lugano Fund Forum, 23rd November 2015 Delphine Calonne, Senior Legal Counsel SFAMA

2 Table of contents I. EMIR / FMIA II. MiFID II III. AIFMD IV. UCITS V

3 EMIR / FMIA

4 Why EMIR?

5 Why FMIA?

6 What is new under FMIA? General Section for all financial market infrastructures NEW Financial Market Infrastructures PARTIALLY NEW Implementation of the principles agreed at the G20 summit in 2009 Pittsburgh NEW Other market rules of conduct CORRESPONDING TO THE EXISTING SESTA RULES (disclosures, public takeovers and insider trading / market manipulation).

7 FMIA at a glance Exchanges Multilateral trading systems Swiss participants Foreign participants Foreign trading systems Organised trading systems Central counterparties Foreign central counterparties Central securities depository Swiss transaction register Foreign transaction register Payment systems Financial market infrastructures Insider / Manipulation Derivatives Disclosures Banks Securities dealers Insurance and reinsurance companies Parent company of a financial or insurance group/conglomerate Fund management companies and asset managers of collective investment schemes Collective investment schemes pursuant to CISA Pension institutions and investment foundations (48 BVG) Non-financial counterparties (companies that are not financial counterparties) Any market participant who, with at least conditional intent, uses insider information or shares such information with others. Any market participant who, with at least conditional intent, makes information public in a prohibited manner. Any market participant who engages in purchase or sales transactions that are prohibited. Takeovers Any person making a public bid for shares in companies that are domiciled and listed in Switzerland, or domiciled abroad, but whose main share listing is at least partially in Switzerland Direct or indirect purchaser Alone or in collaboration with third parties Shares or purchase or sales rights in: A company domiciled in Switzerland A company domiciled abroad but whose main share listing is in Switzerland In so far as the voting rights exceed a given threshold

8 Swiss v. EU derivatives rules (1/2) ISSUES TIMING DIFFERENCES Clearing, reporting and operational risk mitigation rules begin later than EU rules. Concerning margin requirements: BCBS-IOSCO timetable for the phase-in of margin requirements with a modification for variation margin. Rules on platform trading and position limits do not have a specified start date. PRODUCT SCOPE Physically settled FX Forwards and swaps exempt from most of the Swiss rules (except reporting). COUNTERPARTY FC divided into two sub-categories (FC+ and FC-) with FC- being subject to less onerous obligations. BRANCHES Swiss law applies to locally incorporated entities and all their foreign branches, plus Swiss branches of foreign entities (unless they are subject to equivalent regulation).

9 Swiss v. EU derivatives rules (1/2) ISSUES CLEARING DIFFERENCES No equivalent EU frontloading requirement. REPORTING Only single sided reporting. INTRAGROUP TRANSACTIONS Exemption from clearing and margin requirements but Swiss rules do not require prior notification to or approval from the relevant regulator nor include a requirement in the context of cross-border transactions for the foreign entity to be established in an equivalent jurisdiction. CROSS BORDER TRANSACTIONS Regime of recognition of foreign CCP and TR + substituted compliance regime and cross-border exemption.

10 FMIA Cross-border transactions and equivalence assessments Transactions between an EU and a non EU counterparty are subject to clearing, reporting and risk mitigation requirements. However the Swiss rules and the EU rules contain some provisions with the purpose of facilitating cross-border compliance. EMIR Recognition of foreign CCP and trade repositories Mechanism to avoid duplicative or conflicting rules FMIA Recognition of foreign CCP and trade repositories Substituted compliance regime Cross border exemption On 13 November 2015: the Swiss supervision of central counterparties has been recognised by the EU Commission as equivalent to the relevant provisions applicable within the EU. This decision provides a basis for Swiss central counterparties to access cross-border markets in the EU.

11 General timeline (FMIA Draft FMIO) 2 October 30 June /1 July Process Reporting of new Consultation period FMIO, FMIO-FINMA, NBO financial market infrastructures to FINMA (art. 159 para 2 FMIA) January Planned commencement of FMIA, FMIO, FMIO- FINMA and NBO Application of documentation requirement 1 January 1. Compliance with FMIA requirements and submission of an authorization or recognition request to FINMA for existing financial market infrastructures (art. 159 para 1 FMIA) 2. Foreign participants comply with legal requirements (art. 166 FMIA) 3. Regulations on pre- and post trading transparency obligations must be fulfilled at the latest 12 months of their entry into force (art. 126 draft FMIO)

12 Timeline Derivatives trading (FMIA - Draft FMIO) 2 October Process Consultation period FMIO, FMIO-FINMA, NBO July Start Risk Mitigation obligations for Derivatives (other than Margin) (art. 128 para 1 draft FMIO) Start reporting obligations, six months after TR is authorized (art. 127 draft FMIO) 1 January Planned commencement of FMIA, FMIO, FMIO- FINMA and NBO Application of documentation requirement Clearing obligation at the earliest in 2016 with a phase-in up to 3 years (for NFC) Art. 81 FMIO 1 September 2016 Variation margin - counterparties with aggregated positions for March, April and May 2016 of more than 300 bn. CHF) 1 September 2017 Variation margin - All other counterparties regarding transactions entered into after 1 st March 2017 Phase-in over a period of 4 years starting from September 2016 Initial margin

13 Further specifications: FMIO - FINMA FMIO - NBO - 2 August 2015 until 2 October 2015: hearing relative to the FMO, FINMA FMO and NBO. - SFAMA has issued a position regarding EFD and FINMA consultation which is published under: October 2015: Referendum deadline expired. Referendum process not been activated November 2015: FMIO has been discussed at the Swiss Parliament (CEAT Commission) November 2015: Adoption by the Federal Council? - End of November 2015: The ordinances should be published. - December 2015: SFAMA will produce a useful document to the attention of the SFAMA members. - 1 January 2016: Entry into force of FMIA and ordinances with probably generous transitional provisions.

14 MiFID II

15 Source: EFAMA MiFID II Level 2 / Next Steps

16 Source: EFAMA MiFID II Level 2 / Next Steps

17 Overview of Level 2 Measures Delegated Acts (DAs) Investor Protection & Distribution Inducements & quality enhancement Identified Target Market Execution-only Capital Markets Investment research FX contract Micro-Structural issues Transparency for equities and equity-like Reasonable Commercial basis Others Publication duties for transmitting or placing orders with other entities for execution Best-execution Regulatory Technical Standards (RTS) & Implementing Technical Standards (ITS) Capital Markets FX contract Micro-Structural issues Transparency for equities and equity-like Reasonable Commercial basis Best-execution Suspension and removal of financial instruments from trading on a trading venue, Notification and provision of information for data reporting services providers (DRSPs) Weekly aggregated position reports for commodity derivatives, issue allowances and derivatives Source: EFAMA

18 Key implications of MiFID II EU Trends (1/2) KEY ISSUES TRENDS CLIENTS PRODUCTS - With the new product governance, more costs, rationalisation of the products ranges, increase of passive products. - With the new appropriatness test rules: more non-complex products. DISTRIBUTION - Ban of commission payments, distribution and advice become more expensive, increase of non-advised distribution via platforms. MARKETS - New trading venue for non equities (OTF) and more robust regime for Sis. - Trading obligation for certain equities and derivatives, more transparency for non equities reduction in OTC trading with more trading taking place on venues.

19 Key implications of MiFID II EU Trends (2/2) KEY ISSUES TRENDS INVESTMENT RESEARCH - If rules implemented in their current form, price of research more transparent increase of scrutiny of the quality of research and decrease of the research budgets, increase of boutique research providers focusing on niche areas. TRANSACTION REPORTING - Increase of scope of products. - In-House reporting (delegation in case of small investment managers). COSTS AND PRICING - Increase of costs and reduction of margins OPERATING MODEL - EU less attractive location for investment management activities? - Outsourcing?

20 AIFMD Passport

21 AIFMD Passport / Timeline On 30 July 2015: ESMA published its Advice in relation to the application of the AIFMD passport to non-eu AIFMs and AIFs (ESMA Advice) and its Opinion on the functioning of the passport for EU AIFMs and the national private placement regimes (ESMA Opinion). Switzerland s efforts have been positively acknowledged by ESMA On 13 October 2015: EU Commission agreed at the ECON Committee Meeting to follow ESMA s advice to delay the decision whether or not to extend the passport to third country AIFMs. March 2016 : New deadline for ESMA to emit an opinion.

22 Routes to market / managing EU AIFs EU Passport Reverse solicitation PPR (until 2018?) EU-AIFM (2013) Non EU-AIFM (2015?) CH Delegate CH AIFM? EU EU Marketing E EU Marketing -

23 UCITS V Level 2

24 Level UCITS V published in Official Journal UCITS V Timeline UCITS V formally Enters into force UCITS V applies across EU Q3 / 2014 Q4 / 2014 Q1 / 2015 Q2 / 2015 Q3 / 2015 Q4 / 2015 Q1 / 2016 Level 2 Depositaries ESMA consultation period opens Sanctions ESMA consultation period closes. Responses received ESMA publishes Final Report Q EU Commission to adopt Level 2 depositaries Level 2 measures come into force ESMA publishes Final Report Q EU Commission to adopt Level 2 measures on sanctions Level 3 Q3 / 2014 Q4 / 2014 Q1 / 2015 Q2 / 2015 Q3 / 2015 Q4 / 2015 Q1 / 2016 Remuneration ESMA publishes Consultation Paper on sound remuneration policies Consultation closes Q ESMA to publish Remuneration guidelines Level 3 measures come into force Q3 / 2014 Q4 / 2014 Q1 / 2015 Q2 / 2015 Q3 / 2015 Q4 / 2015 Q1 / 2016

25 UCITS V / Level 2 Remuneration rules SFAMA participated in the EFAMA Working Group UCITS V Remuneration rules. EFAMA Position - Supporting the alignment of the UCITS guidelines with the existing AIFMD guidelines. - Defending the application of the principle of proportionality (fiduciary nature of the business of professional management of client funds credit institutions and thoroughly regulated UCITS regime). - Insisting on the danger that the UCITS brand could be undermined if ESMA guidelines were not to replicate the same degree of proportionality as in AIFMD. - Defending that the pro-rata approach is not practical. - Insisting on the importance to have sufficient time to implement the future remuneration requirements.

26 Thank you very much for your attention