January started off the new year with several important regulatory developments in the investment funds and asset management industry. The most notable developments include:
- The proposed amendments to Form PF
- ESMA launching a Common Supervisory Action on the valuation of UCITS and AIFs across the EU
- The EU lowering of the reporting threshold for net short positions from 0.2% to 0.1%
- The Irish Takeover Panel proposal to amend the Takeover and Substantial Acquisition Rules
Continue reading below to find out more about these and the many other recent regulatory developments tracked through January.
The European Systemic Risk Board (ESRB) has published a policy recommendation aimed at increasing the resilience of money market funds. In view of the forthcoming revision of the Money Market Fund Regulation, the ESRB recommends that the European Commission:
- Reduce threshold effects that increase first-mover advantages, including by amending the features that make money market funds similar to deposit-taking institutions;
- Reduce liquidity transformation by diversifying asset portfolios and improving their liquidity through requirements to hold public debt assets and by making sure that such liquidity can be used when needed;
- Facilitate the use of liquidity management tools that impose trading costs on redeeming investors;
- Enhance monitoring and stress-testing frameworks.
The ESRB has published a detailed report explaining the economic rationale for its recommendation and providing an impact assessment for its main proposals.
ESMA is consulting on certain aspects of suitability requirements under the Markets in Financial Instruments Directive (MiFID II), in order to update its guidelines following amendments to MiFID II relating to sustainability.
On the 26th January 2022, the Securities and Exchange Commission (SEC) voted to propose amendments to Form PF.
The proposed amendments would apply to large hedge fund advisers, private equity advisers, and large liquidity fund advisers. The proposals are designed to enhance FSOC’s ability to monitor systemic risk, bolster the Commission’s regulatory oversight of private fund advisers, and enhance investor protection efforts.
The SEC proposed amendments to Form PF include:
- New current reporting of certain events for large hedge fund advisers and advisers to private equity funds;
- Decreasing the reporting threshold for large private equity advisers; and
- Revising the reporting requirements for large private equity advisers and large liquidity fund advisers.
More on the amendments here:
On 20th January 2022, ESMA launched a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on the valuation of UCITS and open-ended Alternative Investment Funds (AIFs) across the EU.
The CSA aims to assess compliance of supervised entities with the relevant valuation-related provisions in the UCITS and AIFMD frameworks, in particular the valuation of less liquid assets, and will be conducted throughout 2022.
The CSA will focus on authorised managers of UCITS and open-ended AIFs investing in less liquid assets i.e.: unlisted equities, unrated bonds, corporate debt, real estate, high yield bonds, emerging markets, listed equities that are not actively traded, bank loans.
FinDatEx has announced that as a consequence of the deferral by the European Commission of the application date of the SFDR RTS to 1 January 2023, and in view of the application of the delegated acts complementing MiFID II and IDD as of 2 August 2022, FinDatEx intends to make available to the public the European ESG Template (EET) v1.0 as well as a corresponding update of the European MiFID Template (EMT) v4.0 in time so that product manufacturers can start providing completed templates by 1 June 2022.
As part of the Financial Services Act 2021, Parliament legislated to extend the Undertakings for the Collective Investment in Transferable Securities (UCITS) exemption in The Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (as enacted in retained EU law) by 5 years – from 31 December 2021 to 31 December 2026. This extension means that UCITS funds offered to UK retail investors can continue to supply either a PRIIPs key information document or a UCITS key investor information document.
The FCA intend to make consequential amendments to the UK PRIIPs Regulatory Technical Standards and the associated Handbook guidance to reflect the new end date of the UCITS exemption in the UK’s PRIIPs Regulation. The FCA will make the required consequential amendments to:
- Article 18 of the PRIIPs Regulatory Technical Standards onshored via the Commission Delegated Regulation (EU) 2017/653 legislation
- COLL 4.7.1A G (1)(b)
- COBS 13.1.1B G (1)
The Canadian Securities Administrators (CSA) has published guidance for investment funds on their disclosure practices that relate to environmental, social and governance (ESG) considerations, particularly funds whose investment objectives reference ESG factors and other funds that use ESG strategies.
The guidance is based on existing regulatory requirements and addresses areas of disclosure, including investment objectives, fund names, investment strategies, risk disclosure, continuous disclosure and sales communications.
The CSSF have updated the FAQs regarding Virtual Assets. The following questions have been amended:
Question 2. May an AIF invest in virtual assets?
Question 5. May a Luxembourg depositary act as depositary for investment funds investing directly in virtual assets?
The Spanish Official State Gazette (BOE) has published the new CNMV Circular on the advertising of crypto-assets for investment purposes, which establishes the rules, principles and criteria to which this advertising activity must be subject. The aim is to ensure that the advertising of the products offers true, understandable and not misleading content, and includes a prominent warning of the associated risks.
The European Commission has published rules to permanently lower the initial net short position reporting threshold from 0.2 per cent to 0.1 per cent under the EU Short Selling Regulation (EU SSR).
The lower disclosure threshold of 0.1 per cent took effect on 31 January 2022.
The Irish takeover Panel has published a consultation setting out proposals to amend the Irish Takeover Panel Act 1997, Takeover Rules, 2013 (the “Rules”) and the Irish Takeover Panel Act 1997, Substantial Acquisition Rules, 2007 (the “SARs”).
The current disclosure regime under the Rules is based on “dealings” undertaken by persons subject to the regime and not “positions” held by them. In order to provide greater transparency as to where voting control of relevant securities lies it is proposed, in line with the Code, to introduce a requirement for certain parties to make a public opening position disclosure disclosing their positions.
On 11th January 2022, the FSC published a notice of draft amendments to Article 43-1, Article 178-1, and Article 183 of the Securities and Exchange Act.
The amendment revises the threshold for the declaration and announcement of large shareholdings from the current 10% to 5%. In order to allow sufficient time to prepare and respond to the formulation or amendment of relevant supporting laws and regulations and the adjustment of external practical operations, a one-year buffer period has been proposed.
It has also been proposed that the upper limit of fines imposed by securities firms, securities service enterprises and securities-related institutions be increased from NT$4.8 million to NT$6 million.