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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Global | Publication | November 2021
A round up of recent regulatory developments in the EU and UK.
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Title | Date | Comment |
EU | ||
ESMA consults on proposals for a review of the MiFID II best execution reporting regime | September 24, 2021 |
The European Securities and Markets Authority (ESMA) issued a consultation paper setting out proposals for improvements to the MiFID II framework on best execution reports. Article 27 of MiFID II sets out best execution requirements which aim at ensuring that investment firms take all sufficient steps to obtain, when executing client orders, the ‘best possible result’ for their clients. Article 27(10)(a) requires ESMA to develop draft regulatory standards to determine the specific content, the format and the periodicity of data relating to the quality of execution to be published in accordance with Article 27(3), taking into account the type of execution venue and the type of financial instrument concerned. Additionally, Article 27(6) requires ESMA to develop draft regulatory technical standards (RTS) to determine the content and the format of information to be published by investment firms in accordance with Article 27(6). On the basis of these requirements, ESMA has adopted the relevant technical standards which are commonly known as RTSs 27 and 28 and these lay down the reporting requirements intended to achieve the aforementioned best execution objectives. In particular under:
However, in the course of the application of the MiFID II framework, issues with the best execution reporting requirements have been identified, for example in media reports and in ESMA’s exchange with stakeholders. The issues are primarily related to RTS 27 (e.g. relating to venues’ publication of lengthy reports and market participants’ limited use of this information for execution quality assessments) and to a lesser extent also relating to RTS 28 (e.g. limited use of reported information). The consultation paper that ESMA has published seeks to receive technical input from market participants on what a reviewed best execution reporting regime could look like. Its outcome will not lead to any immediate changes toRTSs 27 and 28 but it will be taken into account by ESMA in supporting the European Commission (Commission) in its assessment of the adequacy of the best execution reporting obligations and any subsequent technical work. The deadline for comments on the consultation paper is 23 December 2021. ESMA will consider the responses it receives to this consultation paper in Q4 2021 and plans to send proposals to the Commission, if needed, in the first half of 2022. |
ESMA recommends to Commission to delay buy-in rules |
September 24, 2021 |
ESMA published a letter it had sent to the Commission regarding the implementation of the Central Securities Depositories Regulation (CSDR), urging it to consider a delay of the mandatory buy-in regime. As the final Commission legislative proposal for the review of the CSDR, possibly including changes to the buy-in regime, is not expected before the end of this year, ESMA is in favour of delaying the entry into force of the buy-in requirements – scheduled on 1 February 2022 – while applying the other settlement discipline requirements, such as settlement fails reporting and cash penalties regime, as planned. |
ESMA consults on the review of the Short Selling Regulation | September 24, 2021 |
ESMA issued a consultation paper on the review of the Short Selling Regulation (SSR). In the consultation paper ESMA conducts a systematic review of the provisions of the SSR. Among other things ESMA sets out suggestions for operational improvements and policy clarifications on:
The deadline for comments on the consultation paper is 19 November 2021. ESMA expects to publish a final report by the end of Q1 2022. |
Commission adopts Delegated Regulation amending notification threshold under the Short Selling Regulation | September 28, 2021 |
The Commission adopted a Delegated Regulation amending the SSR as regards to the adjustment of the relevant threshold for the notification of significant net short positions in shares. The objective of the Delegated Regulation is to adjust the relevant threshold for the notification to Member State competent authorities of significant net short positions in shares set out in Article 5, paragraph (2) of the SSR from 0.2 % to 0.1 % (and each 0.1 % above that). The Delegated Regulation enters into force on the twentieth day following that of its publication in the Official Journal of the EU (OJ). |
Commission adopts Delegated Regulations setting out RTS on prudential requirements under IFR | September 28, 2021 |
The Commission adopted the following Delegated Regulations containing RTS relating to prudential requirements for investment firms under the Investment Firm Regulation (IFR):
The Council of the EU and the European Parliament will now scrutinise the Delegated Regulations. If neither object, they will enter into force 20 days after their publication in the OJ. |
ESMA publishes MiFID II/MiFIR review report on algo trading, recommends authorisation of third-country HFT firms | September 28, 2021 | ESMA published its final MiFID II / MiFIR review report on algorithmic trading. The report covers a comprehensive range of topics, including high frequency trading (HFT) and high intraday message rates, Direct Electronic Access (DEA), third-country firms, organisational requirements for investment firms and for trading venues, as well as tick sizes, market making, asymmetric speedbumps and trade feeds.
While the overall conclusion of the report is that the regulatory framework for algorithmic trading as set out by MiFID II and MiFIR has delivered its objectives, ESMA makes some recommendations for targeted amendments to the regime. Some of these should be of particular interest to those market participants engaging in algo/HFT on European trading venues but who themselves are located outside the EU – including in the UK. In terms of next steps, the report will be submitted to the Commission for its consideration in the context of a broader upcoming MiFID II and MiFIR review. |
ESMA seeks stakeholder input on shaping advice on retail investor protection | October 1, 2021 | ESMA issued a call for evidence on a number of retail investor protection topics under MiFID II.
The call for evidence follows a letter that ESMA received from the Commission in July this year asking for assistance in the preparation of legislative proposals implementing aspects of the retail investment strategy. More specifically, the Commission invited ESMA to provide advice on a number of focused areas including disclosures, digital disclosures and digital tools and channels. ESMA will consider all comments received by 2 January 2022. ESMA will hold a public hearing in Q4 2021 and registration for the hearing will be available in the relevant section of the ESMA website in due course. The views received will feed into ESMA’s technical advice to the Commission on the development of its retail investment strategy. ESMA is due to deliver its technical advice by 30 April 2022. |
ECON and ENVI Members voted jointly on Taxonomy objections | October 7, 2021 | On 7 October 2021, the European Parliament issued a press release stating that ECON and ENVI Members had voted jointly to reject a Commission Delegated Regulation which supplements the Taxonomy Regulation by specifying the technical screening criteria under which certain economic activities qualify as contributing substantially to climate change mitigation and climate change adaptation and for determining whether those activities cause significant harm to any of the other relevant environmental objectives. A draft motion for a resolution has also been tabled. |
Commission Delegated Regulation supplementing MAR with regard to RTS containing a template document for cooperation arrangements with third countries | October 11, 2021 | There was published in the OJ Commission Delegated Regulation (EU) 2021/1783 of 2 July 2021 supplementing the Market Abuse Regulation (MAR) with regard to RTS containing a template document for cooperation arrangements with third countries.
Article 26(1) of MAR requires the competent authorities of Member States where necessary to conclude cooperation arrangements with supervisory authorities of third countries concerning the exchange of information and the enforcement of obligations arising under that Regulation in third countries. In concluding new cooperation arrangements and updating existing cooperation arrangements with third-country authorities, the competent authorities where possible are to use the template document adopted pursuant to Article 26 of MAR. The Annex to the Delegated Regulation sets out the requirements for the template document: introduction; definitions; content of the assistance to be provided; general provisions – denial of assistance; sending and processing requests for assistance; permissible uses of information; confidentiality restrictions; general provisions – identification of a contact point; general provisions – revision clause; and other provisions – miscellaneous. The Delegated Regulation enters into force on 31 October 2021. |
UK | ||
A regulatory perspective: measuring and assessing culture, now and in the future, the role of purpose and the importance of D&I | September 24, 2021 | The FCA published a speech by Sheldon Mills (Executive Director, Consumers and Competition, FCA) entitled A regulatory perspective: measuring and assessing culture, now and in the future, the role of purpose and the importance of D&I.
Highlights in the speech include:
|
FCA Dear CEO letter – Wealth Management and Stockbroking Supervision Strategy | September 30, 2021 | The FCA published a Dear CEO letter (dated 16 September 2021) which it had sent to firms active in the wealth management and stockbroking sector. The Dear CEO letter follows up on the FCA’s earlier strategy letter published in June 2019 and provides an update on the regulator’s view of the key harms in the sector, its expectations of firms and a summary of the work it intends to do.
In particular, the Dear CEO letter covers:
|
PRA / FCA: Dear Senior Management Function letter: 2021 CBEST thematic findings | September 30, 2021 | There was published a letter that the Bank of England, PRA and FCA had sent to the senior management function (SMF) holder with responsibility for cyber of those firms that had participated in the latest annual cycle of CBEST assessments.
CBEST is a framework for intelligence-led penetration testing which focuses on an organisation’s security controls and capabilities when faced with a simulated cyber-attack. The simulated attacks used in testing are tailored to the threat and vulnerability profile of each organisation and represent an evidence-based and robust testing approach. The letter sets out the results of the latest CBEST assessment so that the relevant SMF holder may ensure that their firm is able to benefit from the identification of the weaknesses found and thereby address potential similar weakness in their firm. The relevant SMF holder should also raise awareness in their senior executive team and use the letter to inform the work of their firm’s risk and internal audit functions. For firms that have participated in the latest CBEST cycle, the remediation plans that have been agreed with supervisors will remain the primary focus for addressing their cyber resilience issues. The thematic feedback included in the letter may provide additional information that can be incorporated in these plans. |
New FCA webpage – Remote or hybrid working expectations for firms | October 11, 2021 | The FCA published a new webpage concerning remote or hybrid working expectations for firms.
The expectations on the webpage apply to existing firms, firms applying to be regulated and firms proposing to submit further applications, such as a waiver, variation of permission, change of control etc. In relation to existing firms the webpage explains that firms considering remote or hybrid working will be evaluated by the FCA on a case-by-case basis. Firms should consider how they operate their business and be able to prove that the lack of centralised location or remote working does not or is unlikely to cause detriment to consumers or impact its ability to meet the threshold conditions. Firms must also prove that there is satisfactory planning. This includes that there is a plan in place, which has been reviewed before making any temporary arrangements permanent and is reviewed periodically to identify new risks. |
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