ESMA AIFMD guidance. The European Securities and Markets Authority published guidance on the Alternative Investment Fund Managers Directive. (2/17/2014) ESMA notice. 

EBA consults on the volatility of own funds and their treatment in defined benefit plans. The European Banking Authority published a discussion paper on the impact on the volatility of own funds of the revised International Accounting Standard for employee benefits (IAS 19) and the deduction of defined benefit pension assets from own funds in accordance with the Capital Requirements Regulation. The discussion paper gives the EBA’s preliminary views based on: (i) a qualitative analysis of the accounting and prudential changes and their impact on the volatility of own funds, (ii) a quantitative analysis of this impact for a sample of EU institutions, and (iii) a qualitative analysis of the factors that may impact the volatility of own funds in the future. Comments should be submitted by April 14, 2014. (2/17/2014) EBA press release. 

EBA 2013 fourth quarter risk dashboard. The European Banking Authority publishes the risk dashboard for the fourth quarter of 2013, which summarizes the main risks and vulnerabilities in the banking sector in the European Union. (2/14/2014) EBA press release. 

UK court finds two unauthorized collective investment schemes. The UK Financial Conduct Authority announced the High Court has found that two investment schemes were unauthorized collective investment schemes because the promoters or operators were not properly authorized. (2/17/2014) FCA press release. 

UK publishes code of practice for deferred prosecution agreements. The Director of the UK Serious Fraud Office and the Director of UK Public Prosecutions published a joint code of practice on the use of Deferred Prosecution Agreements (DPA), which become available to prosecutors on February 24, 2014. A DPA is an agreement reached under judicial supervision between the prosecutor and an organization. DPAs will only apply to organizations in cases of economic crime. Conditions attached to a DPA may include disgorgement of profits; payment of a fine; compensation for victims and costs; cooperation in any prosecution of individuals; and implementation of a compliance program. (2/14/2014) SFO press release. 

FCA focuses on annuities. The UK Financial Conduct Authority published its thematic review of the annuities industry. The review found that some parts of the annuities market are not working well for some consumers. The FCA will now undertake a Competition Market Study into retirement income to assess competition and gain an understanding of why consumers do not shop around. As part of the Competition Market Study, the FCA will conduct further supervisory work looking at how pension provider sales teams act when selling annuities to existing customers. (2/14/2014) FCA press release. 

FCA annuities guidance consultation. The UK Financial Conduct Authority, as part of its review of the annuities industry, proposed guidance on what it would expect to see on annuity comparison websites. Comments should be submitted by March 14, 2014. (2/14/2014) FCA guidance consultation notice. 

ESMA seeks clarification on derivatives terms. The European Securities and Markets Authority asked the European Commission to clarify the definition of a derivative or derivative contracts under the European Market Infrastructure Regulation (EMIR). ESMA notes that these definition are not harmonized across the EU. (2/14/2014) ESMA notice. 

ESMA consults on alternative performance measures. The European Securities and Markets Authority launched a consultation on Guidelines on Alternative Performance Measures (APM). The aim of the guidelines is to encourage European issuers to publish transparent, unbiased and comparable information on their financial performance in order to provide users with a better understanding of their performance. Some examples of APMs include EBIT (Earnings Before Interest & Tax), EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), free cash flow, underlying profit or net-debt. Comments should be submitted by May 14, 2014. (2/13/2014) ESMA notice. 

ESMA consultation on new credit rating agency requirements. The European Securities and Markets Authority published a consultation paper setting out the draft Regulatory Technical Standards (RTS) required for the implementation of the CRA3 Regulation. The draft RTS, which complements the existing regulatory framework for credit rating agencies (CRAs), cover disclosure requirements on structured finance instruments; the European Rating Platform; and the periodic reporting on fees charged by CRAs. Comments should be submitted by April 11, 2014. (2/11/2014) ESMA notice. 

Review of transition management services. The UK Financial Conduct Authority published the results of its review of firms providing transition management services. The review looked at how firms move investment portfolios between different managers and markets for asset owners (such as pension funds), exploring the size of the market, the business models employed and the levels of oversight, governance and controls within the firms conducting transition management. (2/10/2014) FCA press release.

ESMA opinion on selling complex products. The European Securities and Markets Authority published an opinion on practices to be observed by investment firms when selling complex financial products to investors. The opinion sets out ESMA’s minimum expectations with respect to the conduct of firms when selling complex products to retail investors. (2/7/2014) ESMA notice. 

European regulators issue final report on credit rating references. The Joint Committee of the three European Supervisory Authorities (European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority) published its final report on mechanistic references to credit ratings in the ESAs’ guidelines and recommendations and on the definition of “sole and mechanistic reliance” on such ratings. The EBA, ESMA and EIOPA have reviewed all their existing guidelines and recommendations in order to identify, and where appropriate remove, references to external credit ratings that could trigger sole or mechanistic reliance on such ratings. (2/6/2014) ESMA notice. 

European regulators consult on credit assessments. The Joint Committee of the three European Supervisory Authorities (European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority) launched a consultation on draft Implementing Technical Standards (ITS) on the mapping of the credit assessments to risk weights of External Credit Assessment Institution (ECAI). These ITS will be part of the Single Rulebook in banking aimed at enhancing regulatory harmonization across the European Union. The draft ITS specify the elements that should be taken into consideration to determine the correspondence between risk weights and credit assessments provided by a particular ECAI. Comments should be submitted by May 5, 2014. (2/5/2014) ESMA notice.