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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


PERG publishes updated guidance on good practice reporting by portfolio companies

PERG has published an updated version of its guidance on good practice reporting by private equity portfolio companies under the Walker Guidelines. Save for an additional good practice attribute relating to financial risks, whereby PERG expects to see more discussion around taxation, the guidance remains in substantively the same form as the 2017 version, although the examples from practice have been updated. The guidance highlights the following: (i) the description of a company's past performance should include forward-looking information; (ii) risks should not be considered in isolation as this tends to provide a static, boiler plate discussion; (iii) integration is the key to achieving corporate reporting that is strategically focussed – strategy, risk and KPIs should be coherently linked; (iv) there is an ever-increasing focus on disclosures relating to employee matters, human rights and gender diversity information; and (v) transparency of ownership is a significant theme in how stakeholders assess businesses that they work with.


FCO publishes Sanctions and Anti-Money Laundering Bill exceptions and licences policy note

The Foreign and Commonwealth Office (FCO) recently published a policy note setting out the government's intended approach to exceptions and licenses under the Sanctions and Anti-Money Laundering Bill 2017-19 when the UK becomes responsible for implementing its own sanctions regimes. The note sets out the government's intended approach and indicates how this impacts the most frequently used sanctions including: (i) asset freezing: maintain a similar framework to the existing licensing grounds and keep aligned with Europe; (ii) counter-terrorism: operate the same licensing arrangements for domestic counter-terrorism sanctions as are currently in place under the Terrorist Asset Freezing Act; (iii) restrictions on financial activities and investment: continue with the same types of licensing grounds and authorisations as in current EU regulations; (iv) export or movement of goods and provision of services: employ the same types of licensing grounds as in current EU regulations; (v) restrictions relating to transport: transport licences will be needed to allow the entry into port of a designated vessel in an emergency; (vi) travel bans: the Bill provides for a power to exempt individuals or groups of individuals from the effects of a travel ban; and (vii) national security and serious crime: the Bill allows for exceptions to prohibitions for activity carried out the purposes of national security or the prevention or detection of serious crime.


EMMI launches testing phase of hybrid methodology for EURIBOR and announces next steps

The European Money Markets Institute (EMMI) recently published a press release providing an update on the development of a hybrid methodology for EURIBOR and setting out the next steps in the process. The proposed hybrid methodology, on which EMMI is currently consulting, comprises a three-level waterfall, which leverages on market transactions whenever available, in line with regulatory requirements. In the press release, EMMI confirms that the three-month testing phase of the hybrid methodology has started as planned and will run until 31 July 2018. During this period, EMMI will conduct an in-depth data analysis under a number of scenarios and assess panel banks' transactions-based level 1 and level 2 submissions. This will enable EMMI to gain a better understanding of panel banks' level 3 determination and overall contribution patterns.


First ESMA liquidity assessment for bonds under MiFID II trade transparency rules

ESMA recently published on its Financial Instruments Transparency System (FITRS) the first liquidity assessment for bonds subject to the pre- and post-trade transparency requirements under MiFIR.

ESMA states in an accompanying press release that its assessment of the EU bond market for the first quarter of 2018 found 220 bonds (out of 71,000 that were assessed) to be sufficiently liquid to be subject to the MiFIR transparency requirements. It explains that the liquidity assessment is based on a quarterly assessment of quantitative liquidity criteria, such as the daily average trading activity and number of days traded per quarter. The accuracy of the assessment depends on the data that has been submitted to ESMA, and the data received so far for the first quarter of 2018 is not fully complete for most instruments. ESMA warns that this has resulted in a lower number of liquid instruments being identified compared to ESMA's earlier transitional transparency calculations ESMA will update its bond market liquidity assessments quarterly (or more frequently if it receives additional or corrected data). The transparency requirements for bonds currently deemed liquid will apply from 16 May 2018 to 15 August 2018. ESMA will continue to address the data quality issues and work to make the publication process more robust.


BEIS consultation on reform of limited partnership law

The Department of Business, Energy & Industrial Strategy (“BEIS”) recently published a consultation paper seeking views on proposals to reform the law of limited partnerships.

The proposals include: (i) requiring anyone presenting an application for an LP to provide evidence of supervision under money laundering regulations; (ii) requiring LPs to do business or maintain a service address in the UK; (iii) requiring all LPs to file an annual confirmation statement confirming that the information on the register is correct; (iv) giving the Registrar powers to strike off LPs in the circumstances that mirror those in place for limited companies (voluntary strike off and non-operating strike off). The government states that the following measures will not form part of this consultation: increased regulation of formation agents; LP registration fees; and allowing LPs to be registered electronically.


FCA publishes feedback on recovering the costs of OPBAS

The Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations created a new entity within the FCA, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). OPBAS oversees the AML and CTF supervision of the 22 self-regulatory organisations within the accountancy and legal sectors known as Professional Body Supervisors (PSBs). The FCA has the power to recover the costs of OPBAS's supervisory activities from the PSB. The FCA launched a consultation on the fee structure to recover the costs of the OPBAS and has published its response. The response confirms: (i) the FCA will retain an application fee of £5,000; (ii) the minimum fee will be subject to further review, but the FCA are inclined to set it at £5,000; and (iii) set-up costs, totaling £500,000, will be recovered over two years. The FCA has proposed the next steps: (i) writing to all PSBs asking them to submit data for fees purposes by 2 July 2018; (ii) using the data to calculate a fee-rate for 2018/19; (iii) a consultation on the fee-rate in the autumn, which will be finalised in December 2018; and (iv) from April 2019, the OPBAS fee will be integrated into the standard fees consultation cycle.


IOSCO launches consultation on good practices in supporting audit quality.

IOSCO has published for consultation proposed good practices for audit committees in supporting audit quality. Proposals for audit committees of issuers of listed securities are made in relation to the appointment of an auditor, assessing potential and continuing auditors, setting audit fees, facilitating the audit, assessing auditor independence and communicating with the auditor.

EC publishes proposal for amending directive on cross-border company conversions, mergers and divisions

The EC has published a proposal for a directive amending Directive (EU) 2017/1132 on cross-border conversions, mergers and divisions. The proposal includes new harmonised rules on cross-border conversions, to enable companies to convert cross-border by changing their legal form of one member state into a similar legal form of another member state.


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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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