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Conduct of Business Rulebook Revisions

On 4 July 2022 the Authority published a Circular notifying Investment Service Providers of a number of changes carried out in the Conduct of Business rulebook (“COBR”), including the following:

  • Amendments carried out in the rulebook to implement ESMA’s Guidelines on certain aspects of the MiFID II ‘appropriateness’ and ‘execution-only requirements’ which will apply from 12 October 2022, and which seek to harmonise the understanding and application of various areas of ‘appropriateness assessment’ and ‘execution-only requirements’. In particular, the guidelines cover several aspects of the appropriateness assessment such as, inter alia,
    1. information to be provided to clients about the purpose of the assessment;
    2. matching of clients with appropriate products;
    3. the effectiveness of warnings issued to clients; as well as
    4. clarification on the execution-only exemption, the record-keeping requirements and necessary controls.
  • Amendments to the requirements related to the Submission of Conduct-Related Data – wherein a specific proviso has been inserted in the COBR to clarify that regulated persons with a different financial year end from 31 December, shall submit the MiFID Firms Quarterly Reporting 42 days following the end of the reporting quarter, according to its financial year-end; and
  • Other amendments to the rulebook with respect to transactions executed with ‘Eligible Counterparties’ (“ECs”) and the higher level of protection afforded to such ECs upon request.

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

Circular to Investment Firms in relation to the EBA Remuneration Guidelines

On 12 July 2022 the MFSA issued a circular to explain the applicability of certain aspects governing Investment Firms in terms of the EBA Guidelines on sound remuneration policies under the Investment Firm Directive (“IFD”) which became applicable on 30 April 2022. In this regard, Class 2 investment firms shall apply sound remuneration policies to all staff, including gender-neutral policies, and some specific requirements for the variable remuneration of staff whose professional activities have a material impact on their risk profile.

The Management Body within an investment firm has the discretion to decide whether staff have any material impact on the firm’s risk profile or the assets under management.

In terms of the Guidelines, investment firms with an ‘on and off-balance-sheet assets’ valued on average at more than €100 million over a four-year period preceding the relevant financial year is required to establish a remuneration committee. The circular also provides a number of criteria which are to be taken into consideration in determining remuneration policies of the firm and risk management approaches in relation thereto.

In addition, the circular required investment firms to review their position and fill and submit an online form by no later than 7 August 2022.

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

Circular to the Industry on the MFSA’s FinTech Adoption Study – Launch of Questionnaire

In line with its mandate to monitor, assess and understand the developments and use of innovative technology, on 12 July 2022, the MFSA published an online mandatory questionnaire supporting its FinTech Adoption Study (“FAS”). This questionnaire will provide the Authority with the necessary insight to carry out further supervisory engagement and drive policy in the area going forward.

The questionnaire should be submitted by no later than 31 August 2022.

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

Circular on EMIR – Consultation Paper on the Extension of Scope of the Clearing Obligation (‘CO’) and the Derivatives Trading Obligation (‘DTO’)

On 13 July 2022, the MFSA published a circular notifying authorised persons falling in scope of EMIR that ESMA has issued a Consultation Paper with the aim of exploring the extension of the scope of both the CO and the DTO. In this respect, ESMA is proposing the following:

  • The introduction of the Overnight Indexed Swap (OIS) class referencing TONA (JPY) for the CO;
  • The expansion of the maturities in scope of the CO for the OIS class referencing SOFR (USD) for the CO; and
  • The introduction of certain classes of OIS referencing €STR (EUR) for the DTO which have shown a substantial increase in liquidity over the last months.

In this regard, the MFSA encourages interested parties to participate in the ESMA consultation `process by no later than 30 September 2022.

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

ESMA issues Public Statement on results of 2021 CSA of Product Governance

On 18 July 2022 the MFSA published a circular highlighting a number of common findings identified by ESMA through the CSA undertaken in 2021 with respect to Product Governance A number of common findings have been identified and ESMA has published a public statement containing information on the Product Governance CSA and the main findings emanating therefrom have been published.

Following the results of the CSA, ESMA has decided to review its Guidelines on the MiFID II Product Governance requirements to address the most relevant areas where a lack of convergence has emerged and to complement the Guidelines with relevant examples of good practices.  ESMAhas therefore issued a Consultation Paper on the revised guidelines. This consultation closes on 7 October 2022.

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

Circular on Updated to the Q&As on the SFTR

On 20 July 2022, the Authority issued a circular to inform market participants that ESMA has updated its Q&A Document relating to ‘reporting under SFTR’. Specifically, this update relates to the inclusion of Question 13 and Question 14 which relate to the construction of and the reporting of valuation and collateral on the last day of an SFT, respectively.

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

Various Amendments to the Investment Services Rulebooks (“ISRs”)

On 27 July 2022, the MFSA published a circular with the aim of notifying licence holders on certain amendments that have been made to the Investment Services Rulebooks, namely:

  1. Various amendments to the ISRs for ISPs, Part BI: Rules applicable to Investment Services Licence Holders which qualify as MiFID Firms (‘ISR ISP Part BI’):
    • Amendments to the Recovery and Resolution Plans;
    • Miscellaneous changes and updated cross references to correct inconsistencies.
  2. Inclusion of a definition in the (ISRs for Alternative Investment Funds (AIFs), Notified Alternative Investment Funds (NAIFs), and Professional Investor Funds (PIFs);
  3. Removal of all instances of fees where figures are present from Part A of the Investment Services Rules for AIFs, Investment Services Providers, PIFs, and Retail Collective Investment Schemes.

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

Circular on SFTR – Update to the industry

On 28 July 2022 the Authority issued a circular to notify the industry that it intends to undertake several supervisory meetings during the second half of . The intention of such meetings is to ensure that the respective counterparties are not finding any difficulties in ensuring compliance with the requirements emanating from the SFTR. During these supervisory meetings, specific emphasis will be given to the reporting requirements emanating from SFTR. Entities are expected to prove proper and full adherence to the respective requirements emanating from SFTR and its delegated and implementing regulations.

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

Provisional Agreement Reached on the Digital Operational Resilience Act (DORA)

The purpose of this circular is to notify authorised persons that on 23 July 2022 a provisional agreement was reached and DORA is now expected to go through a process of voting and adoption and is expected to come into force in the first quarter of next year and to become fully applicable by the first quarter of 2025.

At EU-level, policy work on DORA continues, as the Regulation introduces a series of Regulatory and Implementing Technical Standards and Guidelines.

DORA introduces provisions – subject to different layers of proportionality – on financial entities in the areas of ICT risk management framework, ICT-related incidents, digital operational resilience testing (including advanced testing) managing of risk associated with the use of ICT-third party providers, EU-level oversight framework of critical ICT-third party providers and an optional provision on information sharing between financial entities.

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

Conduct of Business Rulebook Revisions

On 29 July 2022, the MFSA published a circular to inform Licence Holders falling in scope of the COBR that a number of changes will be carried out in the COBR to implement all the changes aimed at integrating sustainability issues and considerations, in particular through:

  • the implementation of the Sustainability-related Disclosures Regulation (“SFDR”) requirements for financial market participants, financial advisers and financial products;and
  • the integration of sustainability issues and considerations into several EU legislative regimes, including MiFID II.

The amendments also include the requirements emanation from <insert title of the directive>> Commission Delegated Directive (EU) 2021/1269 which shall become applicable from 22 November 2022, In the amended COBR, footnotes are being inserted for appropriate cross-reference to the relevant rules and the above-mentioned directive.

Licence holders are to take the necessary steps to ensure compliance and enhance their operational preparedness in complying with all the Amending Delegated Acts which are being implemented within the COBR.

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