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Regulatory Update

COVID-19: Ongoing Regulatory Reporting Obligations for firms

Posted on 19 Mar 2020

As circumstances regarding the spread of the COVID-19 unfold and firms face increasing market uncertainty, they must also be mindful of the ongoing and continually developing regulatory reporting requirements being placed on them:

ESMA moves shorting disclosure reporting threshold

On 16th March 2020, ESMA moved the short disclosure reporting threshold to 0.10% from 0.20%. This temporary measure now requires “holders of net short positions in shares traded on a EU regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital after the entry into force of the decision.” 

Firms that may not previously have been required to report to NCAs, or have not made such reports to NCAs for some time should, therefore, remind themselves of these obligations and should familiarise themselves with the relevant jurisdictions reporting processes.

A full list of all of each jurisdiction’s regulatory SSR reporting requirement to the relevant NCAs can be found on the ESMA library.

For more information regarding this topic please see the ESMA release (16 March 2020).

SFTR Delayed until July 2020

On 19th March 2019 ESMA issued a statement announcing that the implementation of the Securities Financing Transactions Regulation will be delayed for three months from the initial date of 13th  April 2020. This is in order to “mitigate the impact of COVID-19 on the EU financial markets”.

Competent authorities will now not be obligated to supervise entities subject to Securities Finance Transactions until 13 July 2020.

Temporary bans placed on short-selling of certain shareholdings

Firms should also be aware that France, Italy, Spain, and Belgium have all placed temporary bans on the short-selling of certain shareholdings.

Firms considering or currently making use of short-selling should be aware of these current restrictions in the relevant jurisdiction as the restrictions may likely be updated daily and could grow to include other countries.

The Depreciating Reporting requirement

The Depreciating Reporting requirement, also known as ‘the 10%’ rule which was introduced by MiFID II requires firms who provide investment management services to clients to send notifications to such clients (including both those categorised as retail and professional) when the total value of their portfolio depreciates by 10%. This is measured from the start of the most recent reporting period and then by multiples of 10% thereafter.

Such notifications must be made, “No later than the end of the business day in which the threshold is exceeded”. Discretionary management firms must, therefore, ensure that they have the correct data channels necessary in order to notify not only their clients but that information is available to be provided to underlying clients in a timely manner.

UK schools close

The UK Government has closed schools for all children other than those with at least one parent who is a ‘Key Worker’. This definition includes “staff needed for essential financial services provision (including but not limited to workers in banks, building societies and financial market infrastructure)”.

The 2020 Stewardship Code

On 24 October 2019, the FRC published the 2020 Stewardship Code (the "2020 Code"), which took effect from 1 January 2020 and applies to firms which, “manage assets on behalf of institutional shareholders such as pension funds, insurance companies, investment trusts, and other collective investment vehicles."

While the code itself is voluntary, FCA authorised asset managers are required under the COBS rules to disclose whether, and if so how, they comply with it. This will usually take the form of a statement on the firm's website.

FCA delays open consultation papers

Yesterday, the FCA released the following statement outlining that certain open consultation papers will be delayed until at least 1 October 2020.

Guidance for Mortgage Providers taking part in the Coronavirus Business Interruption Loan Scheme. 

The FCA released a statement outlining its new guidance for mortgage providers and for lenders taking part in the Coronavirus Business Interruption Loan Scheme.

They have also set out their expectation for general insurance firms during the coronavirus (Covid-19) pandemic and that certain open consultation papers will be delayed until at least 1 October 2020.

How can Laven help

At Laven, our consultants are on hand to help identify the actions your firm needs to take to ensure you are compliant and aware of all the risks outlined in this update. Whether this is through assisting with new policies and procedures that need to be put in place or providing online training for staff to make them fully aware of the regulatory burden.

Laven has also built Laven Tech, a unique Regulatory Technology (RegTech) solution that leverages advanced technology combined with our vast subject matter expertise. Our RegTech solution is designed to assist fund managers, service providers and investors to meet today’s growing demands.

If you would like to find out more: