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Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services industry in Europe.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.


Claire Cummings

020 7585 1406


Updated privacy policy for Cummings Law

Cummings Law has updated its privacy policy in relation to the GDPR, which comes into force on the 25th May 2018. Our privacy policy can be found on our website at the following link:


FCA to review information on website on "minded to refuse" letters

The FCA has published a response to a report by the Complaints Commissioner relating to the FCA's use of "minded to refuse" letters. If the FCA decides to refuse an application for the approval of an individual, it will issue a minded to refuse letter, setting out its concerns about the application. This gives the applicant the opportunity to withdraw the application, before the FCA's Regulatory Transaction Committee issues a warning notice concerning the application. The complainant argued that the FCA's use of minded to refuse letters in his case had left him tainted. The Commissioner did not uphold the complaint on the grounds that it fell outside the scope of the complaints scheme: under the complaints scheme, regulators will not investigate a complaint that they consider could have been more appropriately dealt with in another way and, in this case, a challenge to the recommendation to refuse approval should have been raised with the RTC. The Commissioner, however, raised concerns that he had received a number of complaints involving confusion about minded to refuse letters and that there was a lack of clear information on the FCA's website about the process for these letters. He stated that he was separately pursuing with the FCA how this process might be improved. In its response, the FCA states that, following the Commissioner's comments, it will review the information on its website concerning minded to refuse letters.


BoE Governor speech on responsible openness in financial sector

The BoE has recently published the speech given at the Mansion House by Mark Carney, BoE Governor. In the speech, Dr Carney argues, among other things, that the increased opening of emerging market economies could significantly boost UK prosperity, provided that the associated risks of an open system are managed responsibly. He suggests that responsible openness rests on three pillars: (i) strong global standards; (ii) deep supervisory co-operation, which requires international authorities to work together and share relevant information; and (iii) ending "too big to fail", through mechanisms such as the BoE's resolution regime. Dr Carney believes that, with the three pillars in place, an open, resilient global financial system is possible. On the issue of Brexit, Dr Carney comments that the BoE's view remains that an ambitious future financial services relationship, founded on commitments to achieving equivalent outcomes and supervisory co-operation, is both feasible and is in the interests of the UK, the EU and the world.


EBA consults on guidelines on outsourcing

The EBA has published a consultation paper setting out draft guidelines on outsourcing, together with an annex relating to the minimum content of the register in which a firm should document its outsourcing. The guidelines are designed to establish a more harmonised framework for outsourcing arrangements of a range of financial institutions, including credit institutions and investment firms subject to the CRD IV Directive, payment institutions subject to the revised Directive on payment services and electronic money institutions subject to the second Electronic Money Directive. They provide a definition of outsourcing and specify the criteria for assessing whether or not an outsourced activity, service, process or function is critical or important. The current Committee of European Banking Supervisors guidelines on outsourcing, which were issued in December 2006, will be repealed after the EBA guidelines come into force. The consultation closes on 24 September 2018.


Memorandum of understanding on financial relationship between HM Treasury and BoE

HM Treasury and the BoE recently published a memorandum of understanding (MoU) on their financial relationship. The MoU sets out the key responsibilities of the BoE in managing its financial framework and documents the practical arrangements and day-to-day working relationship with HM Treasury. Among other things, the MoU considers: (i) information-sharing and co-operation between the BoE and HM Treasury; (ii) the BoE's financial framework, including the annual budget of the BoE itself and the PRA; (iii) the BoE's cash ratio deposit (CRD) scheme; and (iv) key milestones and meetings between HM Treasury, the BoE and the PRA relating to the BoE's financial framework. The MoU supersedes a previous MoU agreed between HM Treasury and the BoE in 1972 and an update to that MoU made in 2001.


FCA form and checklist for MMF Regulation applications

The FCA has updated its fund authorisation webpage to add the following:

  1. Form MMF. This is the form to be used by a UK AIFM or an EEA AIFM to apply for the authorisation of a new fund under the Regulation on money market funds (MMF Regulation) (or for a UK AIFM to additionally apply for approval to manage the MMF under the AIFMD. It can also be used by a UK AIFM or an EEA AIFM to apply for authorisation or approval to manage an existing MMF and to apply for FCA authorisation of a non-EU AIFM as an MMF.

  2. A checklist for completing Form MMF.

The FCA's webpage on its MMF Regulation consultation has also been updated with a "next steps" section to remind managers of existing MMFs that they will need to apply for authorisation by 21 January 2019.


ESMA speech on PRIIPs Regulation implementation issues

The Joint Committee of the European Supervisory Authorities (ESAs) has published a speech by Steven Maijoor, ESMA Chair, on consumer protection. Among other things, the speech contains a section about the implementation of the Regulation on KIDs for PRIIPs. Mr Maijoor confirms that the ESAs are working on identifying and addressing implementation issues, including:

  1. The scope of the PRIIPs Regulation. The ESAs are of the view that there is a need to provide clarity to market participants, notably in relation to corporate bonds or "non-structured" securities. The ESAs are currently liaising with the European Commission on this topic, with the aim of making public guidance available.

  2. Performance scenarios. The ESAs will soon publish information to provide clarity on the issue of the presentation and calculation of performance scenarios for PRIIPs with a recommended holding period of less than one year. The ESAs are also working to ensure consistency in the approach taken by PRIIPs manufacturers and distributors on the issue of the use of past performance in performance scenarios.

  3. Transaction costs. The ESAs have requested data from the fund industry to assess whether the methodology on negative transaction costs and high transaction costs needs to be amended.


ESMA speech on implementation of MiFID II

ESMA has published a speech given by Stephen Maijoor, ESMA Chair, on implementation of MiFID II and MiFIR. The speech includes comments on: (i) implementation of trade transparency requirements; (ii) Organised trading facilities and systematic internalisers; (iii) double volume cap mechanism; (iv) tick size regime and third-country issues; and (v) third-country trading venues.


European Commission clarifies ancillary activity test under MiFID II

ESMA published a letter from Valdis Dombrovskis, European Commission Vice President, to Steven Maijoor, ESMA Chair, relating to the exemption in Article 2(1)(j) of the MiFID II Directive. Mr Dombrovskis responds to a letter from Mr Maijoor requesting clarification on this exemption. His main points are summarised below.

  1. Article 2(1)(j) of the MiFID II Directive exempts a person from the regulated activities of dealing on own account and providing investment services in relation to commodity derivatives provided that these two activities are ancillary to that person's (or its group's) main business. The ancillary assessment must apply to both MiFID activities individually, and on an aggregate basis. If a person undertakes both activities, it must pass the ancillary activity test with respect to both MiFID activities and cannot be exempt by passing the test for just one of them. Article 2(1)(j) applies the ancillary activity test by comparing the MiFID activities that a person is engaged in with the commercial activities of the person or its group.

  2. In line with Article 2(1)(j), the reference to "persons within a group" in Delegated Regulation 2017/592 (regulatory technical standard (RTS) 20) requires that the ancillary activities test needs to be calculated by each person within a group that engages in either of the two relevant MiFID activities. Therefore, the ancillary activities test must be calculated as many times as necessary for each separate person who trades in commodity derivatives within a group. This approach reflects the fact that a MiFID II authorisation cannot be obtained by a group of entities which, taken together, do not have a single legal personality, but should be obtained by the relevant entity (or entities) within that group.


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Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

25 05 2019

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