Corporate & Financial Weekly Digest

Corporate & Financial Weekly Digest

EU and Prudential Regulators Issue Statements on March 1 Compliance With Swap Margin Rules

Posted in Banking, Derivatives, Dodd-Frank Developments

Lacking the ability to issue formal no-action relief from strict compliance with the variation margin rules for uncleared swaps coming into effect on March 1, the Board of Governors of the Federal Reserve System, the Office of Comptroller of the Currency (OCC) and the European Supervisory Authorities (ESA) have each issued statements suggesting that they will exercise some forbearance in enforcing the margin rules after March 1 if a swap dealer subject to their respective regulations is diligently pursuing compliance on that date. The communications from the Federal Reserve Board and the OCC follow the lead of the no-action relief issued by the Commodity Futures Trading Commission on February 13 by pointing to September 1 as the latest date for full compliance. The ESA communication is stricter in tone and does not identify a specific period in which enforcement will be relaxed. (There are no equivalent statements from the other US prudential regulators because they do not regulate any swap dealers and therefore do not have this issue.)

The Federal Reserve Board statement is available here. The OCC statement is available here.

The ESA statement is available here.


UK Private Fund Limited Partnerships

Posted in Financial Markets, UK Developments

HM Treasury has published a revised draft Legislative Reform Order (Order) on amendments to the Limited Partnership Act 1907 (Act), which was laid before parliament on January 16. The Order relates to the new private fund limited partnership (PFLP) structure. The PFLP is designed to reduce the administrative and financial burdens that impact funds under the current limited partnership (LP) structure, thereby making the United Kingdom a more attractive jurisdiction for funds. Further information on the proposal stage of the Order can be found in the Corporate & Financial Weekly Digest edition of August 7, 2015. Continue Reading

ESAs Publish Statement On Variation Margin Exchange

Posted in EU Developments, Financial Markets

On February 23, the European Supervisory Authorities (ESAs), which consist of the European Banking Authority, European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority, published a joint statement (Statement) in response to industry requests relating to operational challenges in meeting the deadline of March 1 for exchanging variation margin imposed by the European Market Infrastructure Regulation (EMIR). Continue Reading

FINRA Proposes Amendments to Rule Pertaining to Communications with the Public

Posted in Broker-Dealer

The Financial Industry Regulatory Authority (FINRA) is seeking comment with respect to proposed amendments (the “Proposed Amendments”) to FINRA Rule 2210 (Communications with the Public). The Proposed Amendments would create an exception to FINRA’s general prohibition on projected performance and would be applicable to all FINRA-member firms. The Proposed Amendments would allow firms to present to prospective and current customers illustrations that show the projected performance of an asset allocation or investment strategy (although it remains impermissible to present the projected performance of individual securities). Continue Reading

SEC Approves Pricing Disclosures for Fixed Income Securities

Posted in Broker-Dealer

The Securities and Exchange Commission has approved amendments to Financial Industry Regulatory Authority (FINRA) Rule 2232 (Customer Confirmations) that require FINRA-member firms to disclose additional information to retail customers with respect to transactions in certain fixed income securities (the “Final Rules”). The Final Rules require the disclosure in customer confirmations of (1) the mark-up or mark-down applicable to certain transactions in corporate or agency debt securities; (2) a reference and hyperlink (if the confirmation is electronic) to the website established by FINRA, which contains publicly available trade data; and (3) the execution time of the transaction such that a customer may locate its individual transactions when accessing FINRA’s website. Continue Reading

FINRA Files Proposed Rules With The SEC To Implement Consolidated Audit Trail Plan

Posted in Broker-Dealer

The Financial Industry Regulatory Authority (FINRA) has filed proposed rules with the Securities and Exchange Commission to adopt FINRA Rule 6800 Series, which is designed to implement the compliance rule regarding the National Market System (NMS) Plan Governing the Consolidated Audit Trail.

Pursuant to Regulation NMS, various exchanges have filed with the SEC a plan to create, implement and maintain a consolidated audit trail (CAT) to capture information related to customers and order events for transactions in NMS securities and over-the-counter (OTC) equity securities. The CAT will capture order information across all markets and throughout the life of an order (from inception to execution). Each exchange must enforce compliance with the plan with respect to its members or trading permit holders. Continue Reading

CFTC Provides Time-Limited Relief for Variation Margin and Minimum Transfer Amount Provisions

Posted in CFTC, Derivatives

On February 13, the Division of Swap Dealer and Intermediary Oversight (Division) of the Commodity Futures Trading Commission (CFTC) provided time-limited no-action relief for failure of a swap dealer (SD) that does not have a prudential regulator to comply with the CFTC’s variation margin requirements by the March 1 compliance date (March 1 Requirements). (There are now a total of 104 swap dealers registered with the CFTC, and 51 of these have a prudential regulator.) Under the CFTC margin rules, SDs must collect and post variation margin with each counterparty that is an SD, major swap participant or financial end user starting March 1. Continue Reading

HM Treasury Publishes Response to the Transposition of MiFID II Consultation

Posted in Financial Markets, UK Developments

On February 9, HM Treasury published its response (Response) to the consultation that ran from March 27, 2015, to June 18, 2015, on the transposition of the revised Markets in Financial Instruments Directive (MiFID II) into UK domestic law. The Response summarizes responses submitted to the consultation by market participants, as well as the government’s position. Continue Reading

ESMA Publishes Revised Draft ITS on MiFID II Position Reporting

Posted in EU Developments, Financial Markets

On February 9, the European Securities and Markets Authority (ESMA) published a revised draft implementing technical standards (ITS) on position reporting under the revised Markets in Financial Instruments Directive (MiFID II).

The ITS were originally published in 2015. Since then, ESMA has identified a number of technical amendments necessary for the correct functioning of the position reporting of commodity derivatives. This includes amendments to the format of position reports. The changes themselves are highlighted in the revised ITS, which has been sent by ESMA to the European Commission for endorsement.

The revised ITS are available here.

ESMA Publishes Letter to the European Commission on Potential Exploitation of MiFID II Systematic Internalizer Regime

Posted in EU Developments, Financial Markets

On February 14, the European Securities and Markets Authority (ESMA) published a letter (Letter), dated February 1, to the European Commission (EC) in relation to the systematic internalizer (SI) regime under the revised Markets in Financial Instruments Directive (MiFID II) and the associated Markets in Financial Instruments Regulation (MiFIR). Continue Reading