The final text of the amendments to EMIR1 (the "EMIR 2.1 Amendments" and EMIR as thereby amended, "EMIR 2.1") was published in the European Union's Official Journal on Tuesday, 28 May 2019, and will enter into effect twenty days after publication on 17 June 2019. In addition, ESMA updated its EMIR Q&A to reflect the EMIR 2.1 Amendments on 28 May 2019 (the "Updated Q&A").
Significantly, many of the EMIR 2.1 Amendments do not provide for any delay in their implementation and much of EMIR 2.1 will apply as soon as the EMIR 2.1 Amendments enter into force. It is, therefore, essential for in scope entities (including those brought in scope by the amendments) to take now the measures necessary to ensure that they can comply with EMIR 2.1 from the day the EMIR 2.1 Amendments enter into force.
The European Commission's original proposed amendments to EMIR were published in May 2017, with a view to simplifying certain of the requirements, and removing certain disproportionate costs, of EMIR. See our previous briefings here and here. Since the original Commission EMIR 2.1 proposal was published, certain counterparties have become subject to certain EMIR requirements which will cease to apply to those counterparties under EMIR 2.1. ESMA had issued "regulatory forbearance" statements in respect of these requirements, in which it stated that it expected competent authorities generally to apply their risk-based supervisory powers in their day-to-day enforcement of EMIR in a proportionate manner and not to prioritise their supervisory actions towards entities that were not expected to be subject to specified EMIR requirements, once EMIR 2.1 entered into force (see our previous briefings here, here and here).
Definition of Financial Counterparty
The EMIR 2.1 Amendments expand the definition of a "financial counterparty" ("FC") to encompass certain additional categories of counterparties perceived to pose important systemic risk to the financial system, so that:
- every AIF established in the EU, or managed by an AIFM authorised or registered in the EU under AIFMD2, will be an FC and any AIFM established in the EU of such an AIF will also be an FC. Currently, only AIFs managed by AIFMs authorised or registered under AIFMD are FCs; and
- central securities depositaries are now encompassed as FCs.
While the existing definition of "financial counterparty" under EMIR includes UCITS and, where relevant, UCITS management companies, EMIR 2.1 introduces a new carve-out for both UCITS and AIFs which are set up exclusively for the purpose of serving one or more employee share purchase plans. It also provides for a carve out for an AIF that is a securitisation special purpose entity.