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AQMetrics Regulatory Round-Up: June 2020


Welcome to AQMetrics regulatory round-up, a monthly initiative that keeps readers abreast of all the latest regulatory news and events.


The month of June capped off an extremely busy first half for regulators, with the Covid-19 crisis taking centre stage for much of H1. Fortunately, however, the last few weeks have seen something of a return to normalcy of sorts, with regulators better able to focus on some of their planned initiatives once more.In early June, ESMA published its final guidelines on the compliance function, which are designed to establish a consistent application to a number of aspects of the MiFID II compliance function. The European regulator also published a consultation paper on the draft guidelines on outsourcing to cloud providers, with a number of important implications for investment managers, and updated its revised work programme for 2020. AQMetrics will be releasing a broader analysis on the cloud guidelines later this week.Elsewhere, the FCA provided new information on its new data collection platform, which is set to replace its current “Gabriel” system. The FCA also updated its Covid-19 webpage to announce further delays to some of its planned work for 2020, having already put most non-essential items on hold until next year.


3 June – ESMA consults on cloud guidelines

ESMA published a consultation paper, outlining draft guidelines on outsourcing to cloud service providers.The purpose of the draft guidelines, according to the regulator, is to provide guidance on the outsourcing requirements applicable to firms when outsourcing. The proposed guidelines cover governance and oversight; due diligence; exit strategies; notification of national competent authorities (NCAs); and the supervision of NCA’s.AQMetrics is releasing a special detailed analysis, including what it means for SuperMancos later this week.


3 June – FCA Covid-19 financial resilience survey

The FCA published astatementannouncing that it will be carrying out a survey of firms’ financial resilience. ‘We are asking around 13,000 firms to complete a short survey to help us obtain a more accurate view of firms’ financial resilience as a result of coronavirus (Covid-19),’ the regulator said.


4 June – FCA’s expectations for wealth managers

On 4 June, the FCA published aspeechby Megan Butler, the FCA’s Executive Director of Supervision, Investment, Wholesale and Specialists, detailing the FCA’s response to the COVID-19 pandemic and its expectations for 2020 for the wealth management and advice industry.While the FCA said that firms have mostly responded positively to the crisis, it once again outlined its expectations and intentions going forward.


5 June – ESMA provides guidance on the compliance function

ESMA also released itsfinal guidelineson the MiFID II compliance function. The guidelines, which follow a three month long consultation last year, are designed to establish consistent and effective supervisory practices, the regulator said.Under MiFID II, the overall role of compliance has been expanded in certain areas, and include new responsibilities around compliance risk, reporting obligations, internal control functions, and outsourcing due diligence.The new guidelines replace the existing ESMA 2012 guidelines on the same topic, and expand the compliance function role. You can read our analysis of the guidelineshere.


10 June – European Commission assessment of AIFMD

Nine years on from their inception, the European Commission published areportassessing the application and scope of the AIFMD (EU/2011/61) rules. They found that:

  • The AIFMD rules have improved monitoring of risks to the financial system and the cross-border raising of capital;
  • AIFMD has played a role in creating an internal market for AIF funds, and reinforces the regulatory and supervisory framework for fund managers (AIFMs) in the EU;
  • AFMs are subsequently operating with more transparency for investors and supervisors alike.


12 June – FCA updated market abuse website

The UK regulator published an updatedwebpageon how to report suspected market abuse as a firm or trading venue. The page gives an overview of suspicious transaction and order reports (STOR), and explains how to make a STOR report.


15 June – ESMA publishes revised work program

The European regulator published a revisedwork programme for 2020. Key priorities include implementing new mandates, supervisory convergence, risk assessment, developing the single rulebook and direct supervision.


18 June – FCA could extend ban on marketing risky investments

The FCA published aconsultation paperdiscussing whether to make temporary rules on marketing certain high-risk, illiquid investments (including speculative mini-bonds) to retail investors permanent. They are also considering extending the bans to some similar securities.The consultation closes on 1 October 2020.


22 June – FCA provides new info on Gabriel replacement

On 22 June, the FCA published apress releaseproviding new information on its new data collection platform, RegData, which will replace the current Gabriel system. Firms are to move in groups, while the release also details what actions firms should take and some of the benefits of RegData vs the existing Gabriel system.


25 June – FCA announces further delays

The FCA updated its COVID-19webpageto announce further delays to some of its planned work for 2020 as a result of the pandemic. For compliance and regulatory experts, it’s well worth reading the webpage in its entirety.


29 June – CBI says firms must do more to protect investors

The Central Bank of Ireland (CBI) published apress statementdeclaring that firms must enhance measures to protect consumers when selling complex investment products.According to the CBI, their inspections found ‘that a number of firms are not paying sufficient attention to the requirements, instead placing undue reliance upon “box-ticking” to demonstrate compliance.’The CBI also reiterated its expectation that firms gather and assess information on the consumer’s knowledge and experience in order to determine whether the product is appropriate for them. If the product is not appropriate, they said, firms must issue a clear warning to the consumer.