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Financial Markets Lawyers

Financial Markets Lawyers

ESMA publishes first consultation paper on short-selling of certain instruments

ESMA consults with the market in connection with the elaboration of technical standards in relation to the new European regulation on short-selling.

On 24 January 2012, the European Securities and Markets Authority (“ESMA”) published a consultation paper on draft technical standards in respect of the new regulation on short selling and certain aspects of Credit Default Swaps (the “Regulation”), of which it is required to submit definitive versions to the European Commission by 31 March 2012.
The Regulation will enter into force on 1 November 2012. It provides for a harmonised European framework governing short selling of certain listed instruments. Among others the Regulation:
(f) prohibits the use of ‘uncovered’ Credit Default Swaps (“CDs”) in sovereign debt, i.e. transactions where no underlying long position exists in the relevant sovereign bond are no longer permitted (Member States are however allowed to suspend the prohibition in their own jurisdiction in certain circumstances);
(g) imposes certain ‘certainty of settlement’-requirements in relation to uncovered short selling of shares and sovereign bonds;
(h) introduces an harmonised notification and reporting regime for shares, whereby holders of net short positions must notify these privately to the regulator when they exceed 0.2% of the issued share capital of the issuer company and must publicly disclose these (on a named basis) when they exceed 0.5%. In each case, further notification or reporting is required at each 0.1% above the initial threshold;
(i) provides national competent authorities and ESMA with additional powers to intervene in the markets in times of stress; and
(j) excludes sales under a repo agreement or futures contracts from the definition of short sales in shares and debt instruments.

 

The consultation is designed to obtain comments from stakeholders concerning the draft technical standards that ESMA proposes to submit to the European Commission for endorsement by the end of March 2012. The deadline for stakeholders to submit comments has been set on 13 February 2012.

ESMA publishes consultation papers in connection with future European regulation on short-selling of certain instruments

ESMA consults with the market in connection with the draft technical standards pursuant to the new European regulation on short-selling

On 24 January 2012, the European Securities and Markets Authority (“ESMA”) published a consultation paper on draft technical standards in respect of the new regulation on short selling and certain aspects of Credit Default Swaps, of which it is required to submit definitive versions to the European Commission by 31 March 2012.
The new regulation will enter into force on 1 November 2012. It provides for a harmonised European framework governing short selling of certain listed instruments. Among others the Regulation:
(a)    prohibits the use of ‘uncovered’ Credit Default Swaps (“CDs”) in sovereign debt, i.e. transactions where no underlying long position exists in the relevant sovereign bond are no longer permitted (Member States are however allowed to suspend the prohibition in their own jurisdiction in certain circumstances);
(b)    imposes certain ‘certainty of settlement’-requirements in relation to uncovered short selling of shares and sovereign bonds;
(c)    introduces an harmonised notification and reporting regime for shares, whereby holders of net short positions must notify these privately to the regulator when they exceed 0.2% of the issued share capital of the issuer company and must publicly disclose these (on a named basis) when they exceed 0.5%. In each case, further notification or reporting is required at each 0.1% above the initial threshold;
(d)    provides national competent authorities and ESMA with additional powers to intervene in the markets in times of stress; and
(e)    excludes sales under a repo agreement or futures contracts from the definition of short sales in shares and debt instruments.

 

The consultation is designed to obtain comments from stakeholders concerning the draft technical standards that ESMA proposes to submit to the European Commission for endorsement by the end of March 2012. The deadline for stakeholders to submit comments has been set on 13 February 2012.

Dutch government publishes its views on the regulations on Venture Capital Funds regulation and Social Entrepeneurship Funds

On 20 January 2012, the government published a letter setting out its preliminary views on the Commission’s proposals for regulations on smaller Venture Capital Funds and Social Entrepreneurship Funds.

 On 20 January 2012 the government published a letter to the Lower House setting out its preliminary views regarding the European Commission proposals for a European regulation on European Venture Capital Funds(“VCFs”) and a European regulation on European Social Entrepreneurship Funds (“SEFs”). These proposals provide for a European framework (including passporting rights) for the marketing to “professional investors” of VCFs and SEFs that are exempted under the Alternative Investment Fund Managers Directive (“AIFMD”) due to their size (i.e. ‘registration only’ regime due to assets under management not exceeding €500 million or €100 million for non-leveraged, five-year close-end funds). The government is positive concerning the proposal for a European regulation on VCFs. In contrast, it does not consider it necessary to establish a European framework for SEFs. In the government’s opinion, the practical implications of both proposals and potential implementation issues should be carefully looked into. Furthermore, implementation should not result in excessive administrative costs. Due attention should be given to the relation between the AIFMD and the proposed regulations, notably in terms of potential inconsistencies.

Banks and insurance companies have improved their supervision on distribution channels

According to research conducted by the Dutch Authority for the Financial Markets in 2011, providers of financial products have improved their supervision on intermediaries.

In 2010, the Dutch Authority for the Financial Markets (“AFM”) has identified significant shortcomings with regard to chain control executed by banks and insurance companies. Providers of financial products are responsible to ensure that the distribution channels act in compliance with the legal requirements. Subsequently, said providers are obliged to guarantee the quality of the distribution channel. According to the AFM, a number of intermediaries have not been compliant with the legal requirements relating to:

customer duty of care;
integrity; and
expertise.
In 2011, the AFM has reassessed the manner in which providers of financial products have picked up their responsibilities with regard to chain control. Said research has resulted in the following conclusions: (i) the banks and insurance companies that have participated in the survey have taken measures to improve their chain control. For example, said providers have been responding more alertly when licenses of intermediaries have been revoked by the supervisory authorities; (ii) providers have taken measures enabling them to closely monitor the quality of intermediaries. However, the AFM has identified significant differences between measures taken by providers; and (iii) settlement of portfolios resulting from the revocation of the license of an intermediary by the supervisory authority must take place within three months.

New Dutch “suitability” requirements for policy-makers of financial undertakings

From expertise to suitability: future changes in the pre-appointment screening criteria for policy-makers of financial undertakings will enter into force on 1 July 2012

On 3 February 2012 the Royal Decree (the “Decree”) establishing the date of entry into force of the new “suitability” requirements for daily policy-makers and supervisory officers of financial undertakings was published in the Dutch Government gazette (Staatscourant). Pursuant to that decree, the new rules holding, inter alia, replacement of the current “expertise” (deskundigheid) criterion by a “suitability” (geschiktheid) criterion will enter into force on 1 July 2012. According to the explanatory statements to the relevant legislative proposal, the “suitability” criterion is broader than the “expertise” criterion, because it encompasses not only the knowledge and experience of the relevant person, but also the person’s overall skills and professional behavior.

The Decree contains different transitional provisions with respect to persons that are already in office at the time of entry into force of the Decree. The applicable transitional regime depends on the function of the relevant person and on the type and size of the relevant financial undertaking.

AFM investigates consumer credit websites

The Dutch Authority for the Financial Markets concludes that the information provision by providers of consumer credit and intermediaries should be improved.

An EU-wide investigation of websites offering consumer credit has taken place to assess whether consumers receive the information to which they are entitled before signing a consumer credit contract. The investigation has been initiated in order to assess how the market is applying the Consumer Credit Directive (as implemented in the national legislation), which aims to make it easier for consumers to understand and compare credit offers. Subsequently, the Dutch Authority for the Financial Markets (“AFM”) has conducted research with regard to the information provided on the websites offering consumer credit. One of the goals was to check if the websites did not contain misleading advertisement for consumer credit. Furthermore, the AFM has assessed whether the credit table (which provides information regarding debit interest rate or other information regarding credit costs) included in the advertisement regarding consumer credit was complete and correct.

According to apress release of the AFM of 10 January 2012, , the information provided by a number of providers of consumer credit and intermediaries is currently insufficient. The most prominent insufficiencies were the credit tables that were incorrect or even had no reference to the availability of standard information. This conclusion was based on a research conducted by the AFM amongst forty-five websites related to consumer credit regarding the information provided on the relevant websites. The AFM has been requested to report back regarding its findings to the European Commission by autumn 2012.