AMIC Regulatory Update

Latest developments

ICMA’s Asset Management and Investors Council (AMIC) publishes its first Review of 2020, featuring articles on Sustainable Finance, Fund Liquidity and Primary Markets. This bi-annual publication highlights the role of the buy-side community within ICMA, reminds readers of AMIC’s objectives and priorities and outlines the activities of its working groups, alongside some enduring AMIC topics.


ICMA Asset Management and Investors Council (AMIC) Regulatory Update

Risk Management

9 March 2020 ESMA publishes minutes of latest joint meeting of the Board of Supervisors and the SMSG

ESMA has published the minutes of the latest Joint meeting of the Board of Supervisors and the Securities and Markets Stakeholder Group (SMGS).

The document provides a summary the conclusions reached on topics such as: Fund Liquidity, the ESMA strategic orientation and the Euro Risk Free Rate transition.

11 March 2020 Letter from Chancellor to the Governor requests a report on the Non-bank financial sector

The Bank of England (BoE) has published a letter from the Chancellor to the Governor, Remit and Recommendations for the Financial Policy Committee – March 2020. On the Non-bank financial sector, the letter noted the Committee has also broadened its focus to include systemic risks to, or stemming from, other sectors such as financial market infrastructure, investment funds and insurance, as communicated twice annually in its Financial Stability Report. Given the importance of being able to effectively monitor, assess and take action to mitigate risks to the stability of the whole (or significant part) of the UK financial system, the Chancellor recommended that the Committee publishes a more detailed assessment of the oversight and mitigation of systemic risks from this sector by end 2020. He would like to receive the preliminary findings of this work by July, either in response to this remit letter or in the July FSR.

11 March 2020 ESMA recommends action by financial market participants for COVID-19 impact

The European Securities and Markets Authority (ESMA) has recommended action by financial market participants for COVID-19 impact.

ESMA, together with National Competent Authorities (NCAs), have been closely monitoring the situation in view of the continuing impact of the COVID-19 outbreak on financial markets in the European Union (EU).
ESMA has announced that it is making the following recommendations to financial market participants:

  • Business Continuity Planning;
  • Market Disclosure;
  • Financial reporting; and
  • Fund Management.

Sustainable Finance

9 March 2020 Commission welcomes expert group reports on EU taxonomy and the EU Green Bond Standard

The Commission has welcomed the publication by the Technical Expert Group on Sustainable Finance of a report on the EU's classification of green economic activities or taxonomy and a report on the EU Green Bond Standard.

The report on taxonomy contains recommendations on the design of the EU's green list, including guidance on how companies and financial institutions can use it.


9 March 2020 ESMA consults on MiFIR transparency regime for non-equity instruments

The European Securities and Markets Authority (ESMA) has launched a Consultation Paper (CP) reviewing the transparency regime for non-equity instruments and the trading obligation for derivatives under the Market in Financial Instruments Regulation (MiFIR).

The CP contains ESMA’s proposals for possible amendments to the transparency regime based on in-depth data analyses of the effects of the current regime since January 2018.

ESMA will consider all comments received by 19 April 2020.


9 March 2020 FCA begins review on data in wholesale markets

The Financial Conduct Authority (FCA) has begun a review into the use and value of data and advanced analytics in wholesale financial markets.

The FCA is using its Call for Input (CFI) to better understand how data and advanced analytics are being accessed and used, the value offered to market participants and whether they are competitively sold and priced. The FCA will use its CFI to determine whether it needs to do further work to address any harm that it identifies.


6 March 2020 ARRC proposal for New York State legislation

The US Alternative Reference Rates Committee (ARRC) has released a proposal for New York State legislation, which includes draft legislative proposal text. The legislation is intended to minimize legal uncertainty and adverse economic impacts associated with LIBOR transition. This follows a high-level summary of such legislative proposal that was included in the minutes of the ARRC's November 2019 meeting. The ARRC will hold a webinar on the legislative proposal in the coming weeks.

9 March 2020 £RFR Working Group statement on bond market conventions

The Sterling Risk-Free Rate Working Group has published a statement on bond market conventions: use of the SONIA Index and weighting approaches for observation periods. The key messages are:

  • The Working Group welcomes the Bank of England discussion paper on 26 February 2020 announcing that it intends to publish a daily SONIA Compounded Index from July 2020. Market participants are encouraged to respond to the discussion paper by 9 April 2020;
  • In the SONIA bond market, use of the SONIA Compounded Index should standardise and simplify the calculation method for SONIA-linked instruments and could be referenced in documentation. It should also reduce operational risk by facilitating reconciliation of interest amounts between market counterparties, thereby potentially encouraging scalability of the use of compounded SONIA across products, including loans;
  • Use of the SONIA Compounded Index would be compatible with any financial product that uses a backward-shifted observation period which weights the SONIA rate according to the number of days that apply in the observation period (the “shift approach”). But it should have no impact on bond issues using the “lag approach”, which weights the SONIA rate according to the number of days that apply in the interest period; and
  • The Working Group does not make any recommendation as to whether one approach should be preferred to the other.

9 March 2020 ESMA consults on draft technical standards for benchmarks

The European Securities and Markets Authority (ESMA) has launched a consultation on draft Regulatory Technical Standards (RTS) under the Benchmarks Regulation (BMR) covering governance, methodology, infrigements reporting and critical benchmarks.

The outcome of the ESAs Review, Article 5 of Regulation (EU) 2019/2175, introduced changes to the BMR including a new mandate for ESMA to develop draft RTS to further specify certain of the BMR's requirements.

UK Funds

11 March 2020 UK HMT Budget announcement mentions future review of UK’s funds regime during 2020

Her Majesty Treasury (HMT) has announced during its March 2020 budget that the government will undertake a review of the UK’s funds regime during 2020. This will cover direct and indirect tax as well as relevant areas of regulation, with a view to considering the case for policy changes. The review will include a consultation on whether changes to the tax treatment of companies used by funds to hold assets could make the UK a more attractive location for these companies. It will also consider the VAT treatment of fund management fees and other aspects of the UK’s funds regime.


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