Nieuws Asset Management

The final text of the new EU regulation on short selling and certain aspects of credit default swaps  (the “Regulation”) does not materially deviate from that of the European Commission’s proposal. The Regulation 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.

 

Many provisions of the Regulation are to be further implemented by means of delegated acts and technical standards. ESMA has been requested to advise the European Commission in that regard.

On 23 February 2012, the European Securities and Markets Authority (“ESMA”) published a discussion paperon “key aspects” of the Alternative Investment Fund Managers Directive (“AIFMD”). This discussion paper contains ESMA’s draft policy approach concerning the interpretation of certain key aspects of the AIFMD, namely: 

(e)    the range of functions that an Alternative Investment Fund Manager (“AIFM”) must carry out in accordance with the AIFM;
(f)    the criteria based on which national competent authorities can determine whether or not an entity falls under the scope of the definition of “Alternative Investment Fund” (“AIF”) under the AIFMD;

(g)    the interrelation between the AIFMD and the Undertakings for Collective Investment in Transferable Securities Directive, e.g. which services may entities that are authorised under one of these directives, provide under the other;
(h)    clarification concerning the treatment of authorised “investment firms” and “banks” under the AIFMD, in particular the fact that these types of entities may not be authorised under the AIFMD.

In light of the feedback received, ESMA will develop formal proposals for draft regulatory technical standards, which will be submitted to the market by mean of a consultation paper. The results of that public consultation will be used by ESMA in finalising the draft regulatory technical standards to be submitted to the European Commission for endorsement by the end of 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.

On 29 February 2012, the European Securities and Markets Authority (“ESMA”) published the responses to its consultation paper on certain aspects of the "suitability" requirements under the Markets in Financial Instruments Directive (“MiFID”). The draft guidelines set out in that paper are relevant for MiFID-licensed investment firms when performing individual portfolio management or investment advice services under the MiFID. The paper focuses mainly on the need for firms to have in place appropriate policies and procedures in order to know their clients when recommending “suitable” investment choices in accordance with the MiFID. The draft guidelines contain guidance concerning, inter alia, the following topics:

(a)    the firms’ information obligations vis-à-vis their clients regarding the background of the suitability assessment process and the firms’ own responsibilities in that process;
(b)    the adequate policies and procedures investment firms are required to have in place to enable them to understand the essential facts about their clients and the characteristics of the financial instruments available for those clients;

(c)    the variable nature and extent of the information to be collected depending on the services provided, the instruments involved and the level of ‘sophistication’ of the relevant client;
(d)    the level of knowledge and expertise required from staff members involved in material aspects of the suitability;
(e)    the reasonable steps required from investment firms to ensure the information collected is reliable and the procedures required to maintain adequate and updated information about the client; and

(f)    the firms’ record-keeping obligations concerning all stages of the suitability process.

ESMA expects to publish a final report, and final guidelines, in the second quarter of 2012.

On 15 February 2012, the European Securities and Markets Authority (“ESMA”) published a consultation paper regarding its draft technical advice on possible delegated acts in respect of the new regulation on short selling and certain aspects of Credit Default Swaps, of which it is required to submit a definitive version 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 on the technical advice that ESMA proposes to give to the European Commission on a number of possible delegated acts concerning the Regulation. The deadline for stakeholders to submit comments has been set on 9 March 2012.