Legal Headwinds: Quarterly Report – Q4 2020

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Legal Headwinds focuses on key legal and regulatory developments relevant to clients operating in the asset management sector in the Netherlands. We also cover significant developments more generally within the EU.

Rather than being a retrospective analysis, the report looks at future developments this quarter and beyond (based on information available as at 30 September 2020) and it is not intended to be exhaustive.

Please see the Legal Headwinds Rider here for more information on selected topics.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice in any of the jurisdictions covered. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

This document has been created using the following criteria: Priority: Red; Amber and Green. Region: EU; The Netherlands and Global Relevant Sectors: Asset Managers. Relevant Subsectors: Asset Managers: Hedge funds; Institutional managers; Private equity; Sovereign wealth; Service Providers and Private Clients.

Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

AIFMD

Imposes EU wide regime for oversight of alternative investment funds and managers

Annex IV reporting period for quarterly reporting AIFMs with information to report ended on 30 September 2020 - reports must be submitted to regulators by 31 October 2020

Asset managers

All

G

AIFMD

Cross border distribution of collective investment funds

ESMA to continue development of Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 - new legislation on cross-border distribution of collective investment funds to apply

Asset managers

All

A

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

AIFMD

Integrating sustainability risks and factors

European Commission to adopt measures on integration of sustainability risks and sustainability factors under AIFMD, UCITS Directive and MiFID in due course

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

AIFMD

ESG disclosures under Sustainable Finance Disclosure Regulation (SFDR)

Joint Committee of the ESAs to continue work developing draft Level 2 measures under SFDR

10 March 2021 – most provisions in SFDR due to apply (but likely to be delayed), affecting within scope financial market participants,, including EuSEFs

Asset managers

All

A

AIFMD

Performance fees in UCITS and certain types of AIFs

Q4 2020 – ESMA final Guidelines on performance fees in UCITS and certain types of AIFs expected to be formally published – apply two months after publication

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

R

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

AIFMD

Review of working of AIFMD Q4 2020 – European Commission consultation on review of AIFMD to be published

Q2 2021 European Commission expected to publish proposals (if any) to change text of AIFMD

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

Anti-Money laundering

Sixth Money Laundering Directive (6MLD)

Directive 2018/1673 (6MLD) was published in the Official Journal of the EU on 12 November 2018

Following publication, 6MLD came into force on 2 December 2018

EU Member States to start preparations for implementation of 6MLD

By 3 December 2020 - EU Member States to have implemented 6MLD

All All

R

Anti-Money laundering

EBA call for input on de-risking of customers

11 September 2020 - deadline for responses to call for input

2021 - Input to inform the EBA 2021 Opinion on ML/TF risks and potentially other policy outputs

Financial Institutions

Asset Managers

All

G

Anti-Money Laundering

Reaction to the FinCEN files leak Banks are likely to review information in leaked documents to assess client relationships and possibly make retrospective SARs

Authorities may launch investigations into transactions that proceeded despite reported suspicions. In the UK, the SFO and National Economic Crime Centre are scrutinising involvement of UK banks

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Anti-Money laundering

Implementation Act UBO Registration MLD IV for trusts

This act implements the requirement for trusts and similar legal arrangements (e.g. fondsen voor gemene rekening) to register their UBOs

Awaiting further developments, following expiry of consultation deadline on 15 May 2020

All All

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Anti-Money laundering

Amendment to the Money Laundering and Terrorist Financing (Prevention) Act.

The amendments relate to:

i. a prohibition on cash payments above EUR 3000 for certain parties; and

ii. enabling outsourcing of transaction monitoring.

Advice of Council of State (Raad van State) awaited, before the draft will be submitted to Parliament (Tweede Kamer)

All All

G

Benchmarks Regulation following LIBOR rate-setting revelations

EU Benchmarks Regulation establishing legislative framework regulating production and use of indices serving as benchmarks

03 January 2021 – Commission to endorse RTS on governance arrangements, methodology, reporting of infringements, mandatory administration of critical benchmarks and non-significant benchmarks

Financial Institutions

Asset managers

Wholesale Banks

Retail Banks and other consumer credit providers

Insurance

Hedge funds

Institutional managers

Service providers

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Capital Markets Union

Prospectus Regulation (EU) 2017/1129 a new Regulation to modernise and overhaul Prospectus regime – applies from 21 July 2019

ESMA has updated its 2020 annual work programme revising deadlines for some mandates

17 September 2020: Commission Delegated Regulation (EU) 2020/1272 of 4 June 2020 amending and correcting Delegated Regulation (EU) 2019/979 supplementing Regulation (EU) 2017/1129 with regard to RTS on key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus, and the notification portal entered into force

17 September 2020: Commission Delegated Regulation (EU) 2020/1273 of 4 June 2020 amending and correcting Delegated Regulation (EU) 2019/980 supplementing Regulation (EU) 2017/1129 as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market entered into force

15 July 2020: ESMA Final Report on Guidelines on Disclosure Requirements published – they will become effective two months after their publication on ESMA’s website in all official languages

Q4 2020 – ESMA intends to launch new Prospectus Register

Financial Institutions

Asset Managers

All

All

All issuers of, investors in and other market participants in relation to capital markets products, in particular equities, corporate bonds and securitisations A

Capital Markets Union

Securitisation Regulation (EU) 2017/2402 introduces a single uniform regulatory framework for securitisation and also creates a new class of simple, transparent

ESMA Final Report on Guidelines on securitisation repository data completeness and consistency thresholds to be translated into official EU languages and published on ESMA's website. ESMA will consider the

Level 2 measures continue to be developed

Q1 2021: Joint Committee of ESAs to publish report on a) implementation of STS requirements (b) actions that Competent Authorities have

Financial Institutions

Wholesale Banks

Retail Banks and other consumer

R

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

and standardised (STS) securitisation

Securitisation Regulation (EU) 2017/2402 of 12 December 2017 apply from 01 January 2019 (SR)

06 May 2020 - The EBA final report on STS Framework for synthetic securitisation under Article 45 of the SR setting out criteria for this type of securitisation

23 September 2020: Commission Delegated Regulations relating to the Securitisation Regulation published in the Official Journal of the EU and enter into force on this date

Capital Requirements Amending Regulation (CRR Amending Regulation) (EU) 2017/2401 recalibrates calculation of risk weights for securitisation positions and introduces lower risk weights for STS securitisations

CRR Amending Regulation (EU) 2017/2401 of 12 December 2017 apply from 01 January 2019

guidelines for the purpose of its supervision as of 1 January 2021

undertaken (c) functioning of due diligence and transparency requirements and level of transparency of securitisation market in European Union, and (d) risk retention requirements

Asset Managers

credit providers

Fin-tech

Wealth

All

All originators and sponsors of, investors in and other market participants in relation to securitisations

CCP - Central Counterparty Clearing Houses - Recovery and Resolution Regulation

In November 2016, the European Commission adopted a proposal for new rules for Central Clearing Counterparties (CCPs) Recovery & Resolution

The European Parliament and Council reached political agreement in June 2020

Trilogues expected to take place

H2 2020/ H1 2021 – CCP Recovery & Resolution Regulation likely to be finalised and published in the OJ

Trilogues to continue but date of application currently unclear

H1 2022 – CCP Recovery & Resolution Regulation likely to apply in the EU

Financial Institutions

Asset Managers

All

All G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Central Securities Depositories

Regulation on improving securities settlement and regulating central securities depositories (CSDR)

CSDR officially entered into force on 17 September 2014

Level 2 measures for CSD requirements (except technical standards on settlement discipline) published in Official Journal and apply from 30 March 2017

Commission Delegated Regulation (EU) 2020/1212 of 8 May 2020 delays entry into force of settlement discipline to 01 February 2021. However, ESMA has published final report on draft RTS postponing the date of entry into force until 01 February 2022

01 January 2023 - Article 3(1) of Regulation, under which relevant issuers must arrange for relevant securities to be represented in book-entry form, to apply to transferable securities issued after that date

01 January 2025 – Article 3(1) to apply to all other transferable securities

Financial Institutions

Asset Managers

All

All

All

Issuers of, holders of, and those entering into transactions regarding, securities held in settlement systems

G

Consumer credit

European Commission review of the Consumer Credit Directive (CDD)

Q2 2021 - European Commission proposal to amend CDD expected

Financial Institutions

Asset Managers

All

All

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Consumer protection

Fitness Check of six major EU consumer protection laws, including Unfair Terms Directive and Unfair Commercial Practices Directive

The review found the Directives fit for purpose overall, but that they should also be better applied

On 11 April 2018, European Commission adopted New Deal for Consumers package, including two Proposals for Directives

17 January 2020 - Regulation on cooperation between national authorities responsible for enforcement of consumer protection laws to apply

Trilogue negotiations for Directive on collective redress to take place

28 November 2021 – Deadline for EU member states to adopt measures complying with Enforcement and Modernisation Directive

28 May 2022 – Deadline for application of measures implementing Enforcement and Modernisation Directive

Financial Institutions

Asset Managers

All

All

A

Corporate governance

Women on Boards Draft Directive

European Commission proposal for draft directive on gender equality on boards of listed companies in EU, published on 14 November 2012

Proposal currently being blocked by the Council of the EU

Timing for implementation uncertain. Current Commission President has stated that she will seek to unblock Directive during her term (2019-2024)

All All

EU listed companies

G

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Corporate governance

SRD II

3 September 2020 - SRD II provisions that allow companies to request information from intermediaries so that they can identify their shareholders and require intermediaries to transmit information without delay between companies and shareholders; facilitate exercise of shareholder rights and publicly disclose any charges for providing these services took effect

3 September 2020 – Implementing regulation on minimum requirements and standardised formats to be used when issuer asks for information to identify its shareholders and for sending information between issuer and its shareholders through intermediaries applies

1 September 2020 – joint letter from a number of trade associations to the EU Commission and ESMA warning that many parties will be forced to exchange information in a non-compliant manner because one or more of their clients, counterparties or service providers will not be able to issue or to accept fully SRD II-compliant messaging and requesting that certain actions are taken, including confirmation that:

• a single regulated entity has to report non-compliance with SRD II requirements only to one single national competent authority, and not to 27 national competent authorities, and sanctions, penalties and fines will not apply, at least until 3 September 2021

All All EU listed companies/intermediaries

R

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Cross-Border Payments – Regulation (CBPR)

European Commission’s Consumer Financial Services Action Plan (March 2017) proposed variety of measures intended to help break down cross-border barriers preventing consumer access to products from other member states, resulting in high fees on foreign transactions, switching and comparisons, and lessen benefits of digitisation

In March 2018, European Commission adopted proposed Regulation amending Regulation on cross-border payments with aim of reducing charges for cross-border transactions in Member States

On 04 March 2019, the European Commission adopted the Level 1 text of the Regulation on cross-border payments. The Regulation was published in the OJ on 29 March 2019, entering into force on 18 April 2019, the twentieth day following publication. The Regulation applied from 15 December 2019.

October 2020 – FSB’s Stage 3 Report on enhancing cross-border payments to be published

In context of review of Payment Accounts Directive in 2019, European Commission to analyse behavioural, legal, and commercial obstacles preventing consumers from switching providers

19 April 2021 – card issuers to send electronic messages to payers informing them of currency conversion charges

19 April 2021 – payment service providers to inform the payer about the cost of currency conversions in connection with online-initiated credit transfers

19 April 2022 – European Commission to submit to the European Parliament, the Council, the ECB and the European Economic and Social Committee a report on the application and impact of the Regulation

In context of review of Cross-border Payments Regulation, European Commission to consider:

i. extending the equal charge rule to all Union currencies;

ii. improving transparency and comparability of currency conversion charges; and

iii. disabling and enabling the option of accepting currency conversion by parties other than the payer's payment service provider

20 April 2021 – new codified Regulation on cross-border payments expected to enter into force

Financial Institutions

Asset Managers

All

All

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Cross-Border Payments – Regulation (CBPR2)

The Cross-Border Payments Regulation (924/2009) was amended by Regulation 2019/528 (CBPR2) came into force on 18 April 2019.

CBPR2 is the product of a review of the original Payment Services Directive and requires payment service providers (PSPs) to make a significant number of changes to existing operations including (i) ensuring equality of charges non-euro denominated cross-border payments and euro-denominated cross-border payments (applies from 15 December 2019); (ii) transparency requirements (19 April 2021).

April 2021 – obligations of electronic messages (card-based transactions) enter into force

Financial Institutions

Asset Managers

All

All

G

Cybersecurity

"Directive on Security of Network and Information Systems" ("NIS Directive") entered into force on 08 August 2016

On 25 June 2020, the European Commission adopted an Inception Impact Assessment (“IIA”) announcing amendments to the NIS Directive. The Commission considers that cyber security capabilities in member states are still unequal and there is an insufficient level of protection in the EU.

The IIA will assess the functioning of the NIS Directive according to the level of security of network and information systems in member states. The IIA sets out various policy options but chooses adoption of a Directive as a preference. It also states that an Impact Assessment will be undertaken to help prepare the policy initiative.

By end 2020 – European Commission to review the NIS Directive

02 October 2020 - European Commission consultation on revision of NIS Directive closes

Organisations should continue to monitor developments of the IIA. Pursuant to Article 23(2) of the NIS Directive, the Commission must review the functioning of the Directive and report to the European Parliament and the Council by 9 May 2021

All All

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

In the UK, the Directive has been implemented via the Network and Information Systems Regulations 2018 (the “NIS Regulations”) which came into force on 10 May 2018

NIS Regulations apply to critical organisations within society (Operators of Essential Services (“OESs”)) as well as online marketplaces, online search engines and cloud computing services (Digital Service Providers, “DSPs”). The NIS Regulations are designed to ensure the availability of systems and networks for such organisations

NIS Regulations describe OESs as providers of essential services only in the following subsectors: electricity, oil, gas, air transport, water transport, road transport, healthcare, drinking water supply and distribution, and digital infrastructure. Threshold requirements further limit the entities that are likely to be in scope of the NIS Regulations to only the most significant service providers in those sectors

Main points for UK organisations to consider are as follows:

(i) Overlap with the EU’s General Data Protection Regulation – Notification requirements, provisions on security and data protection responsibilities of OESs and DSP’s.

(ii) Security provisions that a DSP

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

must have in place when interacting with any organisations ranging from business continuity, audit provisions and incident handling processes

(iii) Incident notification requirements for DSPs where interruption exceeds set thresholds. All incident reports should be submitted to the relevant Competent Authority within 72 hours

(iv) Under NIS Regulations penalties of up to £17 million could be imposed for non-compliance relating to security and incident reporting requirements

ICO (the designated relevant Competent Authority for DSPs) has generally limited its approach to post-incident oversight and attempted to ensure that there is no “double jeopardy” in relation to acts that may also lead to a fine under GDPR

ICO Guidance states that ICO does regulate OESs and DSPs, but only in the context of data protection law where they are acting as data controllers (under GDPR)

ICO has clarified that as the NIS and GDPR are separate laws it is possible to be fined twice for regulatory action under both. However, ICO states that any action it takes will be proportionate and in line with sentiment of

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avoiding “double jeopardy” where possible

Political Declaration on UK’s withdrawal from the EU (published on 22 November 2018) provides for thematic co-operation with EU in areas of cyber-security, but is subject to ratification by the UK Parliament and any conclusion of a withdrawal agreement between the UK and the EU (a “deal” Brexit)

Data protection - Brexit

In a “no deal” Brexit scenario, the UK Government has clarified that it will continue to allow the free flow of personal data in “outbound” transfers from the UK to the EEA (or any other country that has already received a European Commission “adequacy” decision)

On Brexit, “inbound” personal data transfers from the EEA-UK will trigger the GDPR’s requirement to provide “adequate safeguards” when transferring personal data to a third country outside the EEA. In practice, these can be secured by the entry into European Commission approved standard contractual clauses

European Commission approved standard contractual clauses for transfers by a processor to a controller do not currently exist. As such, how transfers from an EEA processor to a UK controller can be legally secured following a “no deal” Brexit is a key area of ongoing uncertainty

Existing Binding Corporate Rules (“BCRs”) authorised by the ICO will

Businesses should continue to monitor Brexit developments up to the end of the transition period in order to assess and manage any uncertainties contemplated by a “no deal” Brexit scenario

UK/EU businesses should continue to monitor developments of negotiations on the UK’s withdrawal from the EU in relation to the regulation of EU-UK personal data transfers following 31 December 2020, when UK will become a “third country” for purposes of personal data transfers under GDPR

It is not clear whether the UK will receive an “adequacy” decision from the EU Commission following the end of the transition period although there have been non-binding indications that the Commission may consider granting this at the end of the transition period

If UK companies continue to be subject to the EU GDPR post-Brexit by virtue of either (i) offering goods or services to individuals in the EU or (ii) monitoring their behaviour, they will need to appoint an EU representative and put in place a written mandate to this effect. The EU GDPR requirements will apply in addition to any requirements applying under the post-Brexit domestic data protection regime in the UK

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

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continue to be recognised in UK domestic law, but the ICO will no longer have a role in the EU BCR community. Once the UK leaves the European Union, the ICO will continue to be able to authorise new BCRs under UK domestic law, but UK entities may need to identify an alternative EU supervisory authority to authorise the use of BCRs within the EU

In a “deal” Brexit scenario, the UK will be treated as part of the EU for data protection purposes until, at the earliest, 31 December 2020. The Political Declaration which sets out the skeleton of the proposed future trading arrangements between the UK and the EU following the execution of the Withdrawal Agreement states that the parties are committed to ensuring a high level of personal data protection to facilitate the flow of information between them. It suggests:

i. UK will be establishing its own international transfer regime;

ii. European Commission is due to start the adequacy assessment as soon as possible after the UK’s withdrawal; and

iii. both parties will endeavour to complete these activities by 2020.

EDPB Guidance has been issued in February 2019 in relation to the regulation of non-EEA data transfers in a “no deal” Brexit

With respect to international data transfers, UK companies subject to the GDPR post-Brexit will need to assess international data flows and ensure adequate safeguards are in place for the transfers of personal data from the EEA to the UK

Once the UK leaves the EU, the ICO will cease to be a "supervisory authority" for the purposes of the GDPR. Organisations should consider which EU data protection regulator it would want to be its lead authority (to benefit from the GDPR one stop shop principle)

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

scenario. Guidance notes that EU Commission approved standard contractual clauses will remain a valid method of transfer from EEA to the UK once UK becomes a “third country” post-Brexit. Such clauses should not be modified, and where any “tailored” standard contractual clauses are used, these must be authorised by a competent national authority, following an opinion of the EDPB. The guidance also reconfirms the UK government’s approach in continuing to permit the free flow of personal data from the UK to the EEA post-Brexit

Data protection

On 19 December 2019, the Advocate General issued his opinion in relation to Schrems 2.0, a case brought by Max Schrems that seeks to challenge the validity of Standard Contractual Clauses (SCCs) and the EU-US Privacy Shield (two of the most commonly used mechanisms used to legitimise the transfer of data from the EEA to a country that is outside the EEA)

The Advocate General confirmed that SCCs continue to be a valid mechanism to legitimise the transfer of data, but he added that whilst the SCCs provide sufficient data protection safeguards for data subjects, data controllers must ensure that the laws of the destination country will not prevent the enforcement or validity of the SCCs

Following this, in its decision announced on 16 July 2020, the European Court of Justice (“ECJ”)

At present, SCCs will continue to be a valid mechanism to support the transfer of personal data from jurisdictions within the EEA to those outside of the EEA. However, the “direction of travel” from the AG’s opinion in the Schrems 2.0 case indicates that any data exporter seeking to use the SCCs to legitimize non-EEA data transfers to a country that has not received an EU Commission based adequacy decision must take measures to assess whether the law of the destination country presents an obstacle to the practical implementation of the SCCs for the relevant individual

Organisations should assess whether and to what extent they rely on the Privacy Shield Decision and implement replacement mechanisms

Organisations should monitor the opinions of relevant “Supervisory Authorities” within the EEA about whether specific countries have data protection legislative regimes capable of implementing the rights permitted to individuals under the SCCs

In the context of the UK's withdrawal from the EU and based on the ECJ’s decision, organisations will be able to continue to rely on the SCCs for transfers of personal data from the EU to the UK after Exit day

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found that the SCCs are valid. On the other hand, the Court struck down EU-US Privacy Shield Decision due to surveillance possibilities of US intelligence services

Data protection

The Presidency of the Council of the EU published a revised draft of the Regulation on Privacy and Electronic Communications on 13 March 2019

Originally, the Regulation was intended to apply from 25 May 2018 together with the GDPR. Unlike with the GDPR, however, the EU states have not yet been able to agree on the draft legislation, and negotiations on the Regulation are still ongoing in 2019

The material scope of the Regulation is wide-ranging. It applies to:

i. the processing of information relating to end-user terminal equipment or processed by end-user terminal equipment (such as cookies);

ii. the placing on the market of software enabling electronic communication, including the retrieval and presentation of information from the Internet (browsers and apps);

iii. the provision of publicly accessible directories of users of electronic communications and;

iv. the transmission of direct marketing to end-users by means of electronic communications.

UK and EU businesses subject to E-Privacy Regulation to review current compliance frameworks and prepare for regulatory changes to take effect

The Council of the European Union has published a Progress Report highlighting the main areas of disagreement with regards to the proposed E-Privacy Regulation – these include disagreements in relation to:

i. requiring the consent of end users to the use of tracking technologies (for example, cookies) as a condition of access to a service or website;

ii. the interaction between the European Data Protection Board (an entity concerned with the consistent application of data protection rules across the EU) and the relevant authorities under the E-Privacy Regulation; and

iii. the ability of Member States to introduce legislation to require the retention of data for certain periods.

Organisations should monitor the developments of the E-Privacy Regulation, however it is unlikely that it will be agreed in the coming months as originally intended, particularly in light of the coronavirus pandemic. The current E-Privacy Directive continues to apply

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An updated draft of the E-Privacy Regulation was published in March 2020

Decree designating AFM as competent authority for certain Regulations and Directives

Decree designating AFM as competent authority This decree designates the AFM as the competent authority with regards to the Regulation on the cross border distribution of AIFs and UCITS and some Regulations on sustainability

1 October 2020 - consultation period ends All All

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Digital Services

On 2 June 2020, the European Commission opened their consultation period on the EU Digital Services Act Package

The consultation highlights that the regulation of online platforms and digital services is firmly back on the agenda for EU legislators. The consultation indicates that the EU Commission may be considering fundamental changes to the way online platforms and digital services are regulated within the EU and the potential exemptions that may be available under the E-Commerce Directive

The Digital Services Act proposes increased and harmonised regulation of online intermediaries and platforms (including the content they facilitate) as well as measures to ensure that large gatekeeper platforms do not distort the digital single market. The consultation seeks views on the following two proposals designed to address rapid developments within the digital services sector including:

Late 2020 - European Commission expected to release proposals for new Digital Services Act

Although this consultation will be of primary interest to large content platforms such as Facebook, Google and Twitter in asking fundamental questions about how to moderate malicious and/or infringing content, the fact that the EU Commission is considering issues arising from online advertising and smart contracts will be of wider relevance for commercial parties

As the consultation is open to the general public, digital service providers, businesses who reach their consumers online, authorities, NGOs, academics, and other concerned parties, organisations that rely on online intermediary services or online platforms should consider responding to the consultation to make their views known to the EU Commission

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(i) a set of rules to better define the responsibilities for digital services providers within the internal market – it does this by analysing how the Digital Services Act (“DSA”) could better modernise the E-Commerce Directive, focusing on six key areas such as online advertising and smart contracts, governance and enforcement;

(ii) a set of rules dealing with the competition implications of the DSA by evaluating whether ex-ante rules can be used to create a fair trading environment and to ensure that online platforms are accessible and contestable to small players and market entrants alike. This part of the consultation seeks comments on the perceived issues relating to large online gatekeeper platforms and potential solutions for addressing such issues; and

(iii) a further proposal for a new competition tool that aims to address structural competition issues in the digital services market

EuVECA

ESG disclosures under Sustainable Finance Disclosure Regulation (SFDR)

Joint Committee of the ESAs to continue work developing draft Level 2 measures under SFDR

10 March 2021 – most provisions in SFDR due to apply (but likely to be delayed), affecting within scope financial market participants, including EuVECAs

Asset managers

All

A

EuVECA

Cross border distribution of collective investment funds

ESMA to continue development of Level 2 and Level 3 measures under Cross-border

02 August 2021 – new legislation on cross-border distribution of collective investment funds to apply

Asset managers

All A

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Distribution Regulation

EuSEF

ESG disclosures under Sustainable Finance Disclosure Regulation (SFDR)

Joint Committee of the ESAs to continue work developing draft Level 2 measures under SFDR

10 March 2021 – most provisions in SFDR due to apply (but likely to be delayed), affecting within scope financial market participants,, including EuSEFs

Asset managers

All

A

EuSEF

Cross border distribution of collective investment funds

ESMA to continue development of Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 – new legislation on cross-border distribution of collective investment funds to apply

Asset managers

All

A

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

EU Directive - Transparent and predictable working conditions

The proposed directive provides for revised obligations to inform workers of key terms of their employment relationship and defines a set of minimum rights for those who meet the criteria (including a threshold of at least 3 hours per week). It is intended to benefit workers without fixed or guaranteed hours, such as "gig economy" workers for companies like Uber and Deliveroo

Some of the new requirements already form part of the UK Government’s Good Work Plan, such as the right to a section 1 statement, although some further legislation would be required to ensure that UK law fully complies with the directive

See here for further information

01 August 2022 - Member States must comply with the directive

Transposition of Directive into UK law will depend upon whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

EU Directive on Gender Equality

In March 2020, the EU Commission launched a five-year Gender Equality Strategy (2020 – 2025)

Key policy objectives include closing gender gaps in the labour market, achieving equal participation across different sectors of the economy and addressing the gender pay and pension gaps, as well as ending gender-based violence and harassment.

Key actions include:

(i) tabling binding pay transparency measures by the end of 2020;

(ii) pushing for the adoption of the 2012 proposal for a Directive on improving gender balance on corporate boards (a minimum threshold of 40% of non-executive board seats);

(iii) improving work-life balance for women and men by implementing the EU Work-Life Balance Directive, which introduces minimum standards for family leave and flexible working (as above)

(iv) developing a new legal framework with preventative and reactive measures against harassment in the workplace.

Next steps likely 2021 and beyond

Transposition of any new Directive into UK law will depend upon whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

EU Whistleblowing Directive

On 23 April 2018, European Commission proposed a new directive to strengthen whistleblower protection

The proposal reflects the fact that only 10 EU countries (including France, Netherlands, Italy, UK) currently have comprehensive laws protecting whistleblowers. Others (including Germany, Spain, Portugal, Belgium) have only partial “coverage” – which includes certain coverage in Financial Services sector but leaves gaps in protection across other sectors. The European Commission is concerned that this uneven and fragmented approach undermines whistleblower confidence and EU legal and policy interests

17 December 2021 - Members States must comply with the Directive

Whether Directive is transposed into UK law will depend upon whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

All All

G

EU Work-Life Balance Directive

Aim of the EU work-life balance directive is to contribute to achieving equality between men and women with regards to opportunities in the labour market and treatment at work, by enabling parents with caring responsibilities to better balance their work and caring duties through improved access to leave and flexible working arrangements.

Some key provisions of the directive include:

i. allowing fathers or second parents to take a minimum of ten working days of paternity leave around the time of the birth of the child, compensated at a level equal to that currently set for EU maternity leave

ii. individual right to four

1 August 2022 - Member States must comply with the Directive

Whether Directive is transposed into UK law will depend upon whether free trade agreement is reached (in which case UK would likely be required to level up to EU standards)

All All

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

months of parental leave

iii. five days of carers’ leave per year, for workers caring for relatives with serious medical conditions, and

iv. extension of right to request flexible working arrangements for all parents and working carers.

See here for further information.

European Commission investigation into bond market

In December 2018, the European Commission announced an investigation into four banks in relation to suspected cartel (sharing of sensitive information) in bond-trading markets (US$ denominated supra-sovereign, sovereign and agency bonds). Statements of Objections have been sent to four banks.

In January 2019, eight banks also received a Statement of Objections in relation to a suspected cartel in trading European government bonds

Individual parties to respond to Statement of Objections (in both cases, ‘in due course’)

European Commission to issue decision following responses from individual parties

Financial Institutions

Asset Managers

All

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

European Commission White Paper on Foreign Subsidies

In June 2020, the EC published a White Paper which proposes new mechanisms to address the distortive effects of foreign state subsidies on single market

Public consultation on White Paper proposals closed on 23 September 2020

White Paper proposes three ‘modules’ to deal with such distortive effects in relation to (1) foreign subsidies in the single market generally, (2) foreign subsidies in context of acquisitions of EU companies, and (3) foreign subsidies during EU public procurement procedures

EC to carry out impact assessment based on results of the public consultation

EC’s impact assessment will be carried out with a view to introducing new legal instrument on levelling the playing field regarding foreign subsidies in 2021

All All

G

European Long-Term Investment Funds (ELTIF)

Regulation introducing European Long-Term Investment Fund (ELTIF), a type of private collective investment fund designed to invest only in businesses needing long-term investment

October 2020 – European Commission due to publish consultation paper on review of ELTIF Regulation

Q3 2021 – European Commission to adopt report on review of ELTIF Regulation

ESMA to reconsider draft Level 2 measures on costs disclosure and submit draft RTS to European Commission upon finalisation of review of PRIIPs Delegated Regulation

Financial Institutions

Asset managers

Insurance

All

A

ELTIF

ESG disclosures under Sustainable Finance Disclosure Regulation (SFDR)

Joint Committee of the ESAs to continue work developing draft Level 2 measures under SFDR

10 March 2021 – most provisions in SFDR due to apply (but likely to be delayed), affecting within scope financial market participants,, including ELTIFs

Asset managers

All

A

ELTIF

Cross border distribution of collective investment funds

ESMA to continue development of Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 – new legislation on cross-border distribution of collective investment funds to apply

Asset managers

All

A

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

European System of Financial Supervision (ESFS) reform - ESAs

European Commission Proposal reforming European Supervisory Authorities (ESAs) to improve mandates, governance and funding

01 January 2022 – provisions in Regulation amending powers of ESAs to apply in respect of Benchmarks Regulation and MiFIR

Financial Institutions

Asset Managers

Wholesale Banks

Retail Banks and other consumer credit providers

Insurance

All

A

Financial Supervision Amendment Act 2020

Amendment Act to the FSA and related legislation for correcting flaws and omissions of implementation EU legislation into Dutch law

14 October 2020 Amendment Act will enter into force

All All

R

Implementing decree capital buffers 2020

Implementing decree capital buffers 2020

Awaiting further developments, following expiry of consultation deadline on 26 June 2020

Scheduled to enter into force gradually as of 29 December 2020 to 28 July 2021

Financial Institutions

Asset Managers

Wholesale Banks

Retail Banks

All

A

Implementing law CRD IV and CRR II

Implementing legislation and explanatory notes thereto on the implementation of CRD V and changes relating to CRR II.

Pending before Parliament (Tweede Kamer)

28 December 2020 - formal implementation date

Entry into force to be effected by separate Royal Decree

Financial institutions

Asset Managers

Wholesale Banks

Retail Banks

All

R

Implementing law IFD

Implementing legislation and draft explanatory notes thereto on the implementation of IFD

The Dutch draft legislation includes the gold plating of the prudential requirements under IFD/IFR by applying these to AIFMs and UCITS Mancos with a MiFID top-up as well

Awaiting further developments, following the publication of the report on the responses received to the consultation documents

26 June 2021 – formal implementation date Asset Managers

All

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Market Abuse Regulation (MAR)

Revision of scope of MAD (MAR/CSMAD) (including provisions relating to manipulation of benchmarks)

Q4 2020 – European Commission to consider amendments to MAR in light of ESMA Final Report on review of MAR

Financial institutions

Asset managers

Energy and infrastructure

All

All G

Markets in Financial Instruments Directive (MiFID)

Post-implementation review of MiFID and possible amendments (MiFID2), including introduction of EU regime on recording/ retention of telephone calls and electronic communications (in particular minimum retention period of five years)

Q4 2020 - Commission to endorse RTS and ITS on provision of investment services and activities in EU by third-country firms under MiFID2

3 January 2021 – end of transitional period under Article 95 of MIFID 2 on application of clearing obligation and risk mitigation techniques to certain C6 energy derivative contracts

By March 2021 – ESMA to submit to Commission final review report on functioning of Organised Trading Facility regime

Q1 2021 – ESMA to submit to Commission final review report on MiFIR reference data and transaction reporting

31 May 2021 – end of application of transparency requirements based on results of annual transparency calculations for non-equity instruments

Financial Institutions

Asset Managers

Wholesale Banks

Retail Banks and other consumer credit providers

Insurance

All R

Money Market Funds (MMF) Regulation

Regulation applicable to Money Market funds (MMFs) established, managed or marketed in EU, imposing requirements in respect of, inter alia, authorisation, investment policies, internal credit quality; risk management; valuation, external support and transparency and reporting requirements

22 August 2020 – ESMA Guidelines on reporting to NCAs under Article 37 of MMF Regulation apply

September 2020 – deadline for managers of MMFs to submit quarterly report to NCAs under Article 37 of MMF Regulation (extended from April 2020)

Financial institutions

Asset managers

Wholesale banks

All

R

MMF

Cross border distribution of collective investment funds

ESMA to continue development of Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 – new legislation on cross-border distribution of collective investment funds to apply

Asset managers

All

A

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

MMF

Review of MMF Regulation July 2022 – European Commission to review adequacy of MMF Regulation

Financial institutions

Asset managers

All

G

MMF

Stress test scenarios Q4 2020 – ESMA expected to update guidelines on stress test scenarios in light of COVID-19

Financial institutions

Asset managers

All

A

Narrative reporting

Review of Non-Financial Reporting Directive (NFRD)

Responses were due by 11 June 2020

EU consultation on possible changes to the NFRD to improve the disclosure of climate, environment and other data by companies. Also considering whether the scope of the NFRD should be extended to include other categories of public interest entities, for example by redefining large public interest entities to set the threshold at 250 employees (rather than 500) or to all public interest entities regardless of size. European Commission response awaited

European Commission published an adjusted work programme for 2020 which indicates that the planned adoption date for its review of the NFRD has moved to Q1 2021

All All

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Narrative reporting

Taxonomy Regulation

Taxonomy Regulation imposes new non-financial reporting obligations on certain large corporates. These large companies will have to report on certain climate-related key performance indicators (KPIs) that are based on the framework established by this Regulation. In particular, information on the proportion of the turnover, capital expenditure and operating expenditure that is associated with environmentally sustainable economic activities

It applies to undertakings that are required to publish non-financial information under the Accounting Directive (Directive 2013/34/EU), as amended by the NFRD. This includes large banks, large insurance companies, and large listed companies, with more than 500 employees

1 January 2022 and 1 January 2023 - New disclosure obligations will apply

All Large banks, insurance companies and listed companies

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Legal Headwinds: Quarterly Report – Q4 2020

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Narrative reporting

Substantiation of green claims

EU Commission consultation on an initiative which will require companies to substantiate the green claims they make about the environmental performance of their products or services

The initiative aims to develop a standard methodology against which companies' environmental claims can be assessed to tackle both the inconsistency, and potential unreliability, of current environmental labelling methods, as well as the issue of 'greenwashing’ where companies give misleading impressions of their environmental impact

3 December 2020 - consultation closes All Companies

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OTC derivatives

Regulation (EU) No 648/2012 of OTC derivatives, central counterparty clearing and reporting requirements (EMIR)

04 May 2020: The European Supervisory Authorities (ESAs) published a revised Final Report setting out proposed updates to the Margin RTS. The draft RTS have been submitted for endorsement in the form of a Commission Delegated Regulation. The ESAs expect competent authorities to apply the EU framework in a risk-based and proportionate manner until the amended RTS are in force

16 April 2020 - Commission Delegated Regulation (EU) 2020/447 of 16 December 2019 on specification of criteria for establishing arrangements to adequately mitigate counterparty

21 December 2020 – temporary exemption from margin requirements for intragroup transactions expires (proposed amendments are still awaiting endorsement from European Commission)

01 January 2021: ESMA formal recognition of three UK CCPs as third-country CCPs under Article 25 of EMIR takes effect from this date for a time-limited period of 18 months

04 January 2021 – temporary exemption from margin requirements for single-stock equity options or index options expires (deferred date under ESAs proposed amendments – originally 04 January 2020)

June 2021 – ESMA RTS on Initial Margin Model Validation expected under Article 11 of EMIR

01 September 2021 – Phase 5 implementation deadline applies to counterparties with an Aggregate Average Notional Amount (AANA) of EUR 50 billion across the last business day of March, April and May 2021 (deferred date under ESAs proposed amendments – originally 01 September 2020)

01 September 2022 – Phase 6 implementation

Financial Institutions

Asset Managers

All

All

R

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

credit risk associated with covered bonds and securitisations entered into force

16 April 2020 - Commission Delegated Regulation (EU) 2020/448 of 17 December 2019 on specification of treatment of OTC derivatives in connection with certain simple, transparent and standardised securitisations for hedging purposes entered into force

deadline applies to counterparties with an AANA of over EUR 8 billion across the last business day of March, April and May 2022 (deferred date under ESAs proposed amendments – originally 01 September 2021)

OTC derivatives

17 June 2019: Regulation (EU) 2019/834 amending EMIR Regulation (648/2012) (the EMIR Refit Regulation) entered into force and, with some exceptions, applies from that date

18 June 2021 - Clearing services under FRANDT become applicable

Financial Institutions

Asset Managers

All

All R

OTC derivatives

01 January 2020: Regulation (EU) 2019/2099 amending EMIR Regulation (648/2012) (EMIR 2.2) to amend EMIR supervisory regime for EU and third country CCPs

01 January 2021 - Adoption of delegated acts under EMIR 2.2

01 July 2022 – ESMA to complete evaluation of the systemic importance of third country CCPs

Financial Institutions

Asset Managers

All

All

G

Parallel investments – European Commission

European Commission interested in impact on competition effects of investment firms holding parallel minority shareholding in competing companies

15 May 2020 - European Parliament commissioned study into Joint Ownership by Institutional Investors published

German Monopolies Commission also interested in issue

29 September 2020 – European Commission Joint Research Centre report on Common Shareholdings published

Commission to consider report by Joint Research Centre and potential policy implications

European Parliament commissioned study be further considered by the European Commission and European Commission report may trigger further research – further developments are awaited but no immediate action anticipated

Asset Managers

All

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Prospectus Regulation

Prospectus Regulation (2017/1129)

Repealed and replaced the Prospectus Directive with effect from 21 July 2019

Prospectus Regulation was amended by Regulation (EU) 2019/2115 amending MiFID II, MAR and the Prospectus Regulation as regards the promotion of the use of SME growth markets (the SME Amending Regulation) with effect from 31 December 2019

See Prospectus Regulation Tracker for more information on ESMA’s technical advice and standards and the status of EU Commission delegated legislation under the Prospectus Regulation

30 September 2020, ESMA published an update on the revision of its guidance published under the Prospectus Directive and the applicability of the CESR recommendations concerning specialist issuers

14 September 2020, Commission Delegated Regulation (EU) 2020/1272 amending and correcting Commission Delegated Regulation (EU) 2019/979 (RTS Regulation) published in the EU’s Official Journal. The final regulation is in substantially the same form as the draft regulation and annexes published by the Commission in June 2020

EU Recovery prospectus: As part of the EU's Capital Markets Recovery Package, announced on 24 July 2020, the EU is proposing a new type of short-form prospectus for companies that have a proven track record in the public market ('EU Recovery Prospectus'). Other changes to the EU prospectus regime are also proposed relating to financial intermediaries and credit unions

The EU Recovery Prospectus is a temporary measure only that has been conceived in direct response to the COVID-19 pandemic. It will be available for secondary offerings of shares and will only be available for 18 months

16 June 2020, European Commission published for consultation a draft regulation with the minimum content requirements for an ‘exemption document’ that can be published in connection with a takeover by means of an exchange offer, a merger or a division instead of a prospectus. Comments were due by 14 July 2020. Response awaited

All All

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

The RTS Regulation supplements Regulation

(EU) 2017/1129 (Prospectus Regulation) in relation to regulatory technical standards on: the minimum content and the format of key financial information in the prospectus summary; the publication and classification of prospectuses; content and dissemination of advertisements for securities; situations where a supplementary prospectus may be required; and technical arrangements necessary for the functioning of the notification portal

The regulation came into force on 17 September 2020. Its provisions apply retrospectively, with effect from 21 July 2019, apart from the insertion of new Article 22a (relating to summaries of prospectuses approved between 21 July 2019 and 16 September 2020 for non-financial entities issuing equity securities) which applies from 17 September 2020

14 September 2020, Commission Delegated Regulation (EU) 2020/1273 amending and correcting various aspects of Commission Delegated Regulation (EU) 2019/980 (Prospectus Delegated Regulation) published in the EU’s Official Journal. The final regulation is in substantially the same form as the draft regulation and annexes published by the Commission in June 2020

The Prospectus Delegated Regulation supplements Regulation (EU) 2017/1129

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

(Prospectus Regulation) in relation to the format, content, scrutiny and approval of prospectuses prepared in connection with an offer to the public or an admission to trading on a regulated market

The regulation came into force on 17 September 2020 save that Article 1(1) to (8) (amendments to Articles 2, 4, 12, 13, 24, 25, 28 and 30) and Article 2 (corrections to Article 33 and 42(2)(g)) apply retrospectively, with effect from 21 July 2019

Regulatory capital: CRD4

Phased implementation of CRD4

CRD 4 confers power on the European Commission and the ESAs to adopt Level 2 and Level 3 measures respectively

Current state of play on RTS and ITS can be found here and here, or speak to your usual Simmons contact for further information.

EBA has published guidance on COVID-19. As this can change frequently and at short notice, it is not included in Headwinds, but more details can be obtained through your usual Simmons & Simmons contact

Current state of play on RTS and ITS can be found here and here, or speak to your usual Simmons contact for further information.

Phased implementation

26 June 2021: end of application of transitional arrangements for large exposures for certain derivatives firms

31 December 2021: Grandfathering of existing capital instruments ends

31 December 2024 - transitional arrangements for entry into force of IFRS9 apply in stages (date extended by CRR quick-fix regulation)

Financial Institutions

Asset Managers

Wholesale Banks

Retail Banks and Investment Firms

All

R

Regulatory capital: covered bonds

Regulation and Directive of the European Parliament and of the Council regarding covered bonds.

Regulation and Directive entered into force on 6 January 2020

08 July 2022 - Regulation and Directive apply Financial Institutions

Wholesale Banks

Retail Banks and Investment Firms

R

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Asset Managers

All

Regulatory capital: sovereign-bond backed exposures

Proposed Regulation of the European Parliament and of the Council to enable a market demand-led development of sovereign bond-backed securities. Amends the CRR

Council of the EU to adopt its initial position Financial Institutions

Asset Managers

Wholesale Banks

Retail Banks and Investment Firms

All

G

Regulatory capital: CRD V and CRR II

Legislative package to amend the CRR and the CRD4 Directive. These reforms comprise amendments to reflect the Basel standards (e.g. a binding leverage ratio) and also EU specific measures (e.g. lending to SMEs)

Implementation of CRR2 and CRD5 progresses in stages until about 2023. Please speak to your usual Simmons contact for further information

2020 - EBA to consult on and produce RTS, ITS and guidelines

28 December 2020 - Deadline for member states to adopt and publish measures necessary to comply with CRD5

29 December 2020 - coming into force date of CRD5 (exact date depends on national implementing legislation). Includes IPU/IHC and new remuneration rules

Implementation of CRR2 and CRD5 progresses in stages until about 2023. Please speak to your usual Simmons contact for further information

Key dates are:

2021 - EBA to consult on and produce RTS, ITS and guidelines

28 June 2021 – Most of CRR2 applies

28 June 2022 - Deadline for European Commission to produce report, with legislative proposal if appropriate, on impact of own funds requirements on lending to infrastructure project entities

01 January 2023 - Leverage ratio buffer for G-SIBs requirements applies

Financial Institutions

Asset Managers

Wholesale Banks

Retail Banks and Investment Firms

All R

Regulatory capital: new prudential regime for investment firms

Legislative package to amend the CRR and CRD4 to create a dedicated prudential regime for non-systemic investment firms in the EU. Legislation published in Official Journal on 5 December 2019

26 June 2021 – legislation to apply with extensive transitionals

Financial Institutions

Wholesale Banks

Retail Banks and Investment Firms

R

Legal Headwinds: Quarterly Report – Q4 2020

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Asset Managers

All

Retail structured products

New horizontal legislation to apply to Packaged Retail Insurance-based Investment Products (PRIIPs) with respect to product disclosure (Regulation (EU) 1286/2014)

The PRIIPs Regulation (EU) 2016/2340 of 14 December 2016 apply from 01 January 2018

European Commission expected to complete review of PRIIPs Regulation during 2020

31 December 2021 - transitional period for UCITS due to end (delayed by two years as amended by Regulation (EU) 2019/1156)

Financial Institutions

Asset Managers

All

All

R

Securities Financing Transactions Regulations

EU Securities Financing Transactions Regulation (SFT Regulation) establishing a safer and more transparent financial system by placing additional requirements on counterparties to SFTs

11 October 2020 – reporting to trade repositories commences for financial counterparties incl. UCITS, AIFs, insurance/ reinsurance firms and third country entities

However, see here for details about how supervisory actions are delayed

2020 - European Commission to submit report to European Parliament and Council on effectiveness, efficiency and proportionality of obligations in SFT Regulation

2020 - ESMA to submit report to European Commission on fees charged to trade repositories

2020 – ESMA to continue developing the SFT Regulation data quality framework (according to its supervision work programme)

11 January 2021 - Reporting obligation for non-financial counterparties commences

Q4 2020/ Q1 2021 – ESMA to finalise Guidelines on calculation of positions

2020/2021 - European Commission to submit report to European Parliament and Council on the application of supervisory fees

Financial institutions

Asset managers

Wholesale banks

All

R

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Shareholder Reporting Requirement Act

Amendment to the FSA, which includes the proposal to lower the threshold for triggering reporting requirements with respect to substantial shareholdings and short positions to 2%

Consultation period ended on 4 July 2019

To be submitted to Parliament (Tweede Kamer) All All

G

Short Selling Regulation

Regulation creating pan-European short selling regime

18 December 2020 – ESMA temporary reduction in reporting threshold due to end

European Commission to consider adoption of Level 2 measures following ESMA Final Report (21 December 2017) on evaluation of certain elements of Short Selling Regulation

European Parliament and Council of the EU to consider Commission Report on functioning of SSR

Financial institutions

Asset managers

All

All G

Sustainability and ESG

Published in March 2018, the European Commission’s Action Plan on Financing Sustainable Growth sets out objectives and action points to enable the transition to a low-carbon economy and a sustainable financial system

H2 2020 - Commission to gather feedback on use of guidelines on non-financial reporting and conduct work on improving association between corporate governance and sustainable investments

Financial Institutions

Asset Managers

All

A

Sustainability and ESG

Mandatory ESG reporting By 2022 - asset owners and investment managers subject to mandatory climate change reporting in accordance with TCFD framework

Asset Managers

All

G

Sustainability and ESG

Capital Requirements Regulation (CRR) II and Capital Requirements Directive (CRD) V Miscellaneous reforms

28 June 2021 – EBA to submit report on potential inclusion of ESG risks in SREP and, if deemed appropriate, to issue guidelines on uniform inclusion of ESG risks in SREP

28 June 2025 - EBA to submit report on whether dedicated prudential treatment would be justified in respect of exposures related to assets or activities associated substantially with environmental and/or social objectives

Financial Institutions

Asset Managers

All

All

G

Sustainability and ESG

EU Framework Regulation 1 January 2022 – Rules on financial and non-financial disclosures under Articles 4,5,6,7,8(1),8(2) and 8(3) of Framework Regulation apply in relation to climate change mitigation and

Asset Managers

All

A

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

climate change adaptation environmental objectives.

1 January 2023 - Rules on financial and non-financial disclosures under Articles 4,5,6,7,8(1),8(2) and 8(3) of Framework Regulation apply in relation to other environmental objectives.

Sustainability and ESG

EU Sustainable Finance Disclosure Regulation (SFDR)

10 March 2021 – majority of provisions of SFDR to apply

1 January 2022 – remaining provisions to apply

Financial Institutions

Asset Managers

All

All

Public Companies

Asset owners/ Investors

NCAs

A

Tax – EU Commission tax package

The EU Commission has published a Tax Package of measures which it hopes to implement to promote a fairer system of taxation in the EU as well as promoting economic recovery and long-term growth.

It includes measures designed to prevent tax evasion and avoidance, curb unfair tax competition and increase tax transparency. In addition, it focusses on simplifying tax rules and procedures to improve the environment for businesses across the EU

Various proposed implementation dates for different parts of the Tax Package

All All

G

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Tax - Disclosure of cross-border tax avoidance arrangements (DAC 6)

Council of the EU has adopted new mandatory rules for disclosure and automatic exchange of information concerning reportable cross-border tax avoidance arrangements which came into force from 1 July 2020

Disclosure of affected transactions during transitional period (25 June 2018 to 30 June 2020) required by 31 August 2020.

EU Council agreed to allowing Member States to delay reporting deadlines for six months: Council Directive 2020/876

UK has deferred reporting obligations under the Directive by 6 months. As a result, for arrangements where the first step in the implementation took place between 25 June 2018 and 30 June 2020, reports must be made by 28 February 2021, instead of by 31 August as originally required. For arrangements which are made available for implementation, or which are ready for implementation, or where the first step in the implementation takes place between 1 July 2020, and 31 December 2020, reports must be made within the period of 30 days beginning on 1 January 2021. Under the original rules, such arrangements would have had to be reported within 30 days of the reporting trigger point being reached

All All

Lawyers, Accountants, Banks and other Financial Advisers

R

Tax - EU Financial Transaction Tax (FTT)

Proposal to use enhanced cooperation procedure (ECP) to introduce multilateral EU tax on certain financial transactions entered into by financial institutions

2019 reports had suggested that the ten Member States taking part in the ECP may have reached broad agreement on the terms of the FTT but official confirmation of any final agreement is still awaited

Financial Institutions

Asset Managers

All

All

G

Tax – EU joint tax audits

EU Commission has proposed inclusion of a framework for the conduct of joint audits between two or more EU Member States within amendments to the Directive 2011/16/EU (DAC 7).

Member States involved would be able to coordinate the tax examination of a case relating to one or more taxpayers where there is a common or related interest to them.

It is proposed that Member States must implement DAC 7 in their country by 31 December 2021 with the provisions applying from 1 January 2022

All All

G

Legal Headwinds: Quarterly Report – Q4 2020

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Tax – EU VAT e-commerce package

The EU is implementing a range of reforms to the VAT system involving a mixture of administrative easements around the existing VAT MOSS schemes, new import rules for goods as well as making online marketplaces responsible for accounting for VAT in certain circumstances

The EU Council has approved a delay to the implementation of the measures, which were due to come into force from 1 January 2021, until 1 July 2021, due to the impact of the COVID-19 pandemic

1 July 2021 – new measures due to come into force

All All

A

Tax - Proposal to strengthen the exchange of information on income generated via digital platforms (DAC 7)

EU Commission carried out a public consultation from 10 February 2020 until 6 April 2020

In addition, the OECD has also published a new global tax reporting framework entitled “Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy”

EU Commission is considering the need for further measures

It is proposed that Member States must implement DAC 7 in their country by 31 December 2021 with the provisions applying from 1 January 2022

All All

G

Tax - Public Country by Country Reporting (CBCR)

EU Commission has proposed making CBCR public for the largest multinationals

EU Parliament has supported adoption of public CBCR

The proposal failed to progress at a November 2019 Council Meeting. Discussions are to be advanced in the Economic and Financial Affairs Council (ECOFIN)

All All

G

Legal Headwinds: Quarterly Report – Q4 2020

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

Tax - Taxation of the digital economy

Increasing pressure for a new approach to the tax treatment of certain digital businesses, including those operating social networking and search engine sites and operators of auction site.

European Commission has proposed measures and OECD is progressing its programme to take forward proposals to address challenges of digital economy as part of BEPS 2.0

Meanwhile, individual countries such as France, Italy and the UK are introducing unilateral measures

Further drafts of Pillars One and Two of OECD BEPS 2.0 programme expected

By end of 2020 - OECD is seeking to agree proposals

All All

G

Transparency Directive

European Single Electronic Format (ESEF).

12 July 2019, ESMA published an updated version of its ESEF Reporting Manual

Reporting in 2021: EU issuers must prepare annual financial reports for financial years beginning or after 01 January 2020 in an European single electronic format (as required by the Transparency Directive). The digital format to be used is set out in the European Single Electronic Format Regulation (ESEF Regulation), namely XHTML format with iXBRL tagging

All EU issuers

R

UCITS

Cross border distribution of collective investment funds

ESMA to continue development of Level 2 and Level 3 measures under Cross-border Distribution Regulation

02 August 2021 – new legislation on cross-border distribution of collective investment funds to apply

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

Legal Headwinds: Quarterly Report – Q4 2020

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

UCITS

Integrating sustainability risks and factors

European Commission to adopt measures on integration of sustainability risks and sustainability factors under AIFMD, UCITS Directive and MiFID in due course

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

UCITS

ESG disclosures under Sustainable Finance Disclosure Regulation (SFDR)

Joint Committee of the ESAs to continue work developing draft Level 2 measures under SFDR

10 March 2021 – most provisions in SFDR due to apply (but likely to be delayed), affecting within scope financial market participants, including EuSEFs

Asset managers

All

A

UCITS

Performance fees in UCITS and certain types of AIFs

Q4 2020 – ESMA final Guidelines on performance fees in UCITS and certain AIFs expected to be formally published – apply two months after publication

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

R

Legal Headwinds: Quarterly Report – Q4 2020

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Headwind topic Region Principal issue This quarter Looking ahead Relevant to Relevant Subsector

Priority

UCITS

Review of AIFMD Q4 2020 - European Commission consultation on review of AIFMD expected to be published – timing uncertain as result of COVID-19 pandemic. Likely to contain proposals to amend UCITS Directive to achieve greater alignment in certain areas (e.g., reporting) with AIFMD regime

Q2 2021 European Commission expected to publish proposals (if any) to change text of UCITS Directive

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

Priority–Key

R Red–Requires immediate attention

This column reflects the level of attention which will be required to deal with the developments identified

A Amber–Important but not likely to require attention until the first quarter of 2021

G Green–Is not likely to require much attention until beyond the first quarter of 2021