Regulators’ approach to reporting obligations during the COVID-19 outbreak

FCA: Delaying annual company accounts during the coronavirus crisis

The FCA has introduced temporary relief measures allowing listed companies that need the extra time to complete their audited financial statements, an additional two months in which publish them is granted.

Currently, under the Transparency Directive, companies have four months from their financial year end in which to publish audited financial statements. Under the temporary relief the FCA will, among other things, forbear from suspending the listing of companies if they publish financial statements within six months of their year-end.

FCA: Extended deadlines to publishing fund reports and account

Extra two months for annual reports

Where the authorised fund managers of UK UCITS schemes and non-UCITS retail schemes need extra time to complete their fund’s annual reports, this temporary relief will permit an additional two months to publish them. Firms need to inform the FCA if they are using this extension.

PRA: Regulatory reporting and disclosure amendments

Up to two months delay for annual reports and accounts

Annual report and accounts

Up to one month delay for other PRA-owned regulatory reporting

PRA 108 – Memorandum items up to one month delay

FSA 015 – Sectoral information

Quarterly returns for credit unions

Ring fenced bodies returns – RFB001 to RFB003

PRA 104-107 Forecast financial statements

Up to one month delay for CRR and BRRD reporting

COREP Solvency

FINREP

Liquidity – Stable funding

Large exposures and concentration risk

Leverage ratio

Asset encumbrance

Resolution plan reporting (excluding liability structure)

The PRA will be flexible in its expectations of firms’ publication timeline for Pillar 3 disclosures and  understands that:

• For many firms there may be a lag time between the publication of financial statements and Pillar 3 disclosures.
• As the deadline for publication of firms’ financial statements has been delayed by up to two months, it follows that firms’ Pillar 3 disclosures, which are published at the same time or a reasonable amount of time after the financial statements, will also be delayed significantly compared to the usual publication date.

For quarterly, half-yearly or annual disclosures that firms would normally expect to disclose on or before May 31, 2020, the PRA will take a flexible approach to assessing the reasonableness of any delay to the publication of the Pillar 3 disclosure. Where firms reasonably anticipate that publication of their Pillar 3 reports will be delayed, the PRA expects that firms will inform supervisors and market participants of the delay, the reasons for such delay and to the extent possible the estimated publication date.

The PRA has clarified that where firms follow the EBA’s recommendation to assess the need for additional disclosures regarding the impact of COVID-19 and in that context, choose to make additional disclosures relating to the Liquidity Coverage Requirement, these should be calculated using the average of 12 monthly endpoints as specified in the EBA Guidelines on the LCR Disclosure.

FCA: Market trading and reporting

Impact on general MiFID record-keeping obligations

The FCA has noted that as firms are moving to alternative sites and working from home arrangements, they must consider the broader control environment in these new circumstances.              

Telephone recording

Firms should continue to record calls, but the FCA accepts that some  scenarios may emerge where this is not possible. Firms should make the FCA aware if they are unable to meet these requirements. The FCA expects firms to consider what steps they could take to mitigate outstanding risks if they are unable to comply with their obligations to record voice communications. This could include enhanced monitoring, or retrospective review once the situation has been resolved.

Submission of regulatory data

Firms may experience difficulties in submitting their regulatory data, in which case the FCA expects them to maintain appropriate records during this period and submit the data as soon as possible. Firms should not unnecessarily delay these submissions. If firms have concerns, they should contact the FCA as soon as possible.

Market abuse monitoring

Firms should continue to take all steps to prevent market abuse risks. This could include enhanced monitoring, or retrospective reviews. The FCA will continue to monitor for market abuse and, if necessary, take action.

Whilst the FCA supports ESMA’s recent statement regarding upcoming changes to the tick size regime for certain firms, required by the EU Investment Firms Regulation, it is not intending to prioritise supervision of the new requirements at this time. Instead, the FCA expects firms to focus on minimising the potential for operational disruption. The FCA intends to keep this situation, and its position, under review.

FCA: Client assets

CASS audit reports

Some firms are concerned the current situation could lead to additional breaches needing to be reported and costs of the CASS audit reports could increase.

CASS auditors usually group multiple breaches in their reports, avoiding the need for extensive repetition and additional cost. If an audit firm subject to SUP 3.10.4R is not able to submit a particular CASS audit report to the FCA within the four-month deadline it should follow the ‘late reporting’ rules in SUP 3.10.8, sending an email to CASSAudit@fca.org.uk setting out:

• The name and FRN of the regulated firm
• The period covered by the audit report
• A full account of the reasons for the delay
• When it expects to be able to report

If the audit firm is aware of any significant matters with the firm’s CASS compliance, it should also notify the FCA by emailing CASSAudit@fca.org.uk, under its ‘statutory duty to report’.

Physical asset reconciliations

Some firms subject to CASS 6 have reported difficulties reconciling physical safe custody assets as they cannot access the location where the assets are held.

CASS 6.6.22 R requires a firm to reconcile physical safe custody assets as often as is necessary and, in any event, every six months. Where there are logistical difficulties in relation to this requirement arising from coronavirus, the FCA expects firms to take such mitigating steps as are possible in the circumstances, to ensure that clients assets remain protected.

CASS 6.6.57 R (5) requires a firm to notify the FCA if it is unable to conduct a physical asset reconciliation.

Delays to improvement programmes

FCA: Amended threshold for reporting under Short Selling Regulation (the SSR)

The FCA is following ESMA’s approach of temporarily amending the threshold for notifying net short positions to Competent Authorities under the SSR from 0.2% of issued share capital to 0.1%, in respect of shares for which the FCA is the relevant competent authority.

The FCA has now made the necessary changes to its systems to reflect this approach. Firms are not required to amend and resubmit notifications submitted to us between March 16, 2020 and April 3, 2020. However, the FCA expects them to make best efforts to report at the lower threshold.

On March 31, 2020, ESMA issued a Public Statement in which it encouraged national competent authorities “not to prioritise supervisory action” in respect of the general best execution reports  that were due to be published by execution venues by March 31, 2020 (for a period  from October 1 to December 31, 2019) and firms by April 30, 2020 (annual information regarding the reporting period of 2019). 

Note: execution venues to publish their reports as soon as reasonably practicable. 

On March 27, 2020, ESMA issued a Public Statement  in which it called on national competent authorities “not to prioritise supervisory actions against issuers in respect of the upcoming deadlines” set out in Transparency Directive and regarding – (1) annual financial reports referring to a year-end occurring on or after December 31, 2019 but before April 1, 2020  (T+2M) and (2) half-yearly financial reports referring to a reporting period ending on or after December 31, 2019 but before April 1, 2020 (T+1M).

In accordance with ESMA’s Public Statement of March 31, 2020 (please see above) firms can delay publication of RTS 28 reports on the annual information regarding the reporting period of 2019. 

Publication of half-yearly financial reports by issuers

Issuers of shares or debt securities, whose obligation to make public a half-yearly financial report covering the first six months of the financial year was due on March 31, 2020, must make such report public.

Publication of annual financial reports + audited financial statements

Issuers whose securities are admitted to trading on a regulated market are required to publish their annual financial reports, accompanied by audited financial statements.

Publication of MiFID II best execution reports by execution venues and by firms

Latest  possible date for execution venues to publish their RTS 27 reports that were due on March 31, 2020.  New deadline for firms to publish their RTS 28 reports that were due on April 30, 2020.

Credit institutions, investment firms and relevant third-country entities to start reporting SFTs.

On March 12, the EBA issued a Supervisory Statement on actions to mitigate the impact of COVID-19 on the EU banking sector, in which the EBA announced the following:

• Postponement of EU-wide stress testing until 2021 - this will allow banks to focus on and ensure continuity of their core operations, including support for their customers. For 2020, the EBA will carry out an additional EU-wide transparency exercise in order to provide updated information on banks’ exposures and asset quality to market participants.
• Encouraging competent authorities to plan supervisory activities, including on-site inspections, in a pragmatic and flexible way, and possibly postpone those deemed non-essential. Competent authorities could also give banks some leeway in the remittance dates for some areas of supervisory reporting, without putting at stake the crucial information needed to monitor closely banks’ financial and prudential situation.
• A flexible approach to putting in place effective capital and liquidity buffers - Competent authorities are encouraged, where appropriate, to make full use of the flexibility already embedded in the existing regulatory framework.

Supervisory reporting

On March 31, the EBA issued a further Statement on supervisory reporting and Pillar 3 disclosures in light of COVID-19:

• Competent and resolution authorities should assess the extent to which a delayed submission of all the data or subsets of the data included in the EBA reporting framework would be justified in these extraordinary circumstances. For the time being, such supervisory actions are only being considered for submissions due between March and end of May 2020.
• In general, institutions should be allowed up to one additional month for submitting the required data. However, this exemption does not cover:
  • Information on the liquidity coverage ratio and on the Additional Monitoring Metrics and data sets identified as priority by the competent or resolution authority.
  • Reporting for resolution planning purposes: Information on the institution’s liability structure, including intra-group financial connections should be reported to resolution authorities by the set date in the applicable reporting standard (April 30, 2020 or earlier if set by the resolution authority).
• Reporting in accordance with version 2.9 should therefore start, as envisaged by the adopted Implementing Act amending Regulation, with the reference date March 31, 2020.
• The EBA suggests that competent and resolution authorities do not prioritise their supervisory actions towards ad-hoc data collections that are not specifically needed to monitor institutions in the context of the COVID-19 outbreak.
• The EBA has decided to cancel the QIS exercise based on June 2020 data.

• The EBA encourages competent authorities to be flexible when assessing the institutions’ compliance with the deadlines for the publication of their Pillar 3 reports as set out in accordance with Article 106 (1) CRD IV.
• Competent authorities and institutions should assess the need for additional Pillar 3 disclosures on prudential information that may be necessary in order to properly convey the risk profile of the institution in the context of the COVID-19 outbreak.