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Circular on Updates to the Q&As on Regulation N0 2015/2365 – Securities Financing Transactions Regulation (‘SFTR’)

On 5th January 2022, the Authority issued a circular notifying market participants that ESMA has updated its Q&A document relating to reporting under SFTR, namely financial and non-financial counterparties as defined in Article 3 of the SFTR. The update relates to the ‘Currency for the Overview Report’.

In this respect, Trade Repositories should calculate and express the aggregate positions in SFTs in the EUR equivalent value, irrespective of whether the position captures SFTs featuring the same or different currencies.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/Circular-on-Updates-to-the-QAs-on-Regulation-No-2015-2365-Securities-Financing-Transactions-Regulation.pdf

 

ESMA Updates on Appropriateness and Execution-Only Requirements and Q&As on Investor Protection Topics

On 6th January 2022, the Authority issued a circular notifying investment firms that on 3rd January 2022 ESMA published its final report on its Guidelines on certain aspects of the MiFID II appropriateness and execution only requirements. These requirements constitute an important element of investor protection in the provision of investment services other than investment advice or portfolio management. Investment firms providing non-advised services are required to request information on the knowledge and experience of clients or potential clients to assess whether the investment service or product envisaged is appropriate.  Exemptions are allowed in certain conditions only.

The purpose of the ESMA Guidelines is to encourage convergence in the application of the appropriateness and execution-only requirements whilst also addressing several key-aspects of the appropriateness process, including the information to be provided to clients regarding the objective of the appropriateness assessment the arrangements required to comprehend clients and products, the matching of clients with appropriate products and the effectiveness of warnings. Six months from when the Guidelines are translated and published on ESMA’s website such amendments will be incorporated in the Conduct of Business Rulebook.

ESMA has also updated its Q&As on the implementation of investor protection requirements under MiFID II and MiFIR. The Q&As provide new answers on product governance that aim to give guidance on whether bonds embedding a make-whole clause are exempt from the MiFID II product governance requirements.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/ESMA-Updates.pdf

 

Common Fund Reporting Issues with regards to the CBM Investment Funds Statistical Return

On 18th January 2022, the Authority together with the Central Bank of Malta (“CBM”) issued a circular aimed at providing direction and information to Investment Funds on the compilation of the statistical return required by the CBM.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/Common-Fund-Reporting-Issues-with-regards-to-the-CBM-Investment-Funds-Statistical-Return.pdf

 

Enhancement to the Trusts Ultimate Beneficial Ownership Register

On 20th January 2022, the Authority issued a circular addressed to Trustees who are account holders on the Trusts Ultimate Beneficial Ownership Register (“TUBOR”) about a new feature which has been added to the platform. This enhancement relates to the addition of a field to cater for Body Corporate settlors which would have been struck off at the time of reporting of a beneficial ownership declaration on TUBOR, or thereafter. Presently Trustees must report whether the settlor is a Body Corporate. The new field would require Trustees to report whether the Body Corporate settlor has been struck off. In addition, there are a number of fields which will still need to be completed for a Body Corporate Settlor who has been struck off.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/Enhancement-to-the-Trusts-Ultimate-Beneficial-Ownership-Register.pdf

 

ESMA launches a Common Supervisory Action on the valuation of UCITS and open-ended AIFs across the EU

On 21st January 2022, the Authority issued a circular notifying relevant licence holders that ESMA has announced the launch of a Common Supervisory Action (“CSA”) with National Competent Authorities on the valuations of UCITS and open-ended AIFs across the EU. In this respect, the MFSA will be actively contributing to this initiative, and will assess the governance structures, policies and procedures in the context of valuation of assets, particularly assets with lower liquidity and, to this effect, the MFSA will be reaching out to relevant licence holders in due course in line with the methodology provided by ESMA.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/ESMA-launches-a-Common-Supervisory-Action-on-the-valuation-of-UCITS-and-open-ended-AIFs-across-the-EU.pdf

 

ICT Outsourcing Arrangements – Sector Specific Guidelines and Updated Registers

On 24 January 2022, the Authority issued a circular reminding respective authorised persons of their obligations to comply with the ‘EBA Guidelines on Outsourcing Arrangements’, the ‘ESMA Guidelines on Outsourcing to Cloud Service Providers’ and the ‘MFSA Guidance on Technology Arrangements, ICT and Security Risk Management and Outsourcing Arrangements’, including  the requirement to maintain an updated register of information on all outsourcing arrangements at the authorised firm and, where applicable, at sub-consolidated and consolidated levels. In the event of any inconsistency or conflict between this Guidance Document and any applicable Acts, Regulations, rules or sector-specific guidelines, the provisions of the said Acts, Regulations, rules or sector-specific guidelines shall always prevail.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/ICT-Outsourcing-Arrangements-Sector-Specific-Guidelines-and-Updated-Registers.pdf

 

Circular addressed to Newly Authorised Company Service Providers which fall under the category of ‘Under Threshold Class A CSP’ or ‘Under Threshold Class B CSP’ in relation to the Regulatory Submissions due on 31 January 2022

On 26 January 2022, the MFSA issued a circular containing important information with respect to newly authorised company service providers (“CSPs”) which were classified as ‘Under Threshold Class A CSP’ or ‘Under Threshold Class B CSP’ in November 2021, following submission of an application for authorisation in terms of the transitory periods set out by the amendments to the Company Service Providers Act, by virtue of Act L of 2020.

In terms of the rulebook, CSPs are required to submit, on an annual basis, a Certificate of Compliance and to the newly introduced requirement whereby Under Threshold Class A CSPs and Under Threshold Class B CSPs are required to submit a self-declaration confirming that they still fall within the applicable thresholds to qualify for their classification.

In exercising proportionality, the Authority communicated that newly authorised Under Threshold Class A and Under Threshold Class B CSPs will not need to submit the above-mentioned deliverables in 2022.  The Authority would like to emphasize that this is a one-time waiver only.

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/Circular-addressed-to-Newly-Authorised-Company-Service-Providers-Class-A-and-Class-B.pdf

 

Circular on Short-Selling Regulation – ESMA Requires to Report Net Short Positions between 0.1% and 0.2% During Transition

On 27 January 2022, the MFSA issued a circular making reference to ESMA’s statement with respect to the reporting of Net Short Positions (“NSPs”) between 28 and 31 January 2022 when the reporting threshold changes from, 0.2% to 0.1%. The last day of application of the old reporting threshold (0.2%) will be in relation to NSPs entered into on Friday, 28 January 2022

For further information, reference should be made to the circular on the MFSA’s website:

https://www.mfsa.mt/wp-content/uploads/2022/01/Circular-on-Short-Selling-Regulation-ESMA-requires-to-report-net-short-positions-between-0.1-and-0.2-during-transition.pdf

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