Legal Headwinds: Quarterly Report – Q3 2020

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Legal Headwinds focuses on key legal and regulatory developments relevant to clients operating in the FI 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 June 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: Financial Institutions. Relevant Subsectors: Financial Institutions: Wholesale Banks; Retail Banks and other consumer credit providers; Fin-tech; Wealth and Insurance..

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

Priority

AIFMD

Integrating sustainability risks and factors

6 July 2020 – European Commission consultation on draft delegated acts in respect of integration of sustainability risks and sustainability factors under AIFMD, UCITS Directive and MiFID closes

European Commission to adopt measures in due course

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

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

Priority

AIFMD

Liquidity stress testing 30 September 2020 – ESMA guidelines on liquidity stress testing in UCITS and AIFs to apply

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

R

AIFMD

Review of working of AIFMD Late Q3 or early Q4 2020 - European Commission consultation on review of AIFMD expected to be published – timing uncertain as result of COVID-19 pandemic

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

Amendment to the Exemptions Regulation under the Financial Supervision Act

Amendment to the Exemption Regulation under the Financial Supervision Act, which provides an exemption (under certain circumstances) to the license requirement for providing consumer credit to firms that are transferees of claims under a consumer credit agreement

Amendment scheduled to enter into force on 1 April 2020. However, entry into force has been delayed

Financial Institutions

All

R

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

Priority

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

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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

Implementation Act UBO Registration MLD IV

This act implements the requirement for entities to obtain and hold adequate, accurate and current information on their beneficial ownership

The Act has been published in the Bulletin of Acts and Decrees (Staatsblad)

Act originally expected to enter into force on 10 January 2020. However, entry into force has been delayed

8 July 2020 - legal entities required to collect and maintain information about their UBOs

27 September 2020 - collected information on UBOs to be registered in UBO register

All All

R

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

Anti-Money laundering

Amendment to the Financial Supervision Act in relation to implementation of the Banking Data Portal Act.

On 25 May 2020, the legislation was published in the Bulletin of Acts and Decrees (Staatsblad)

10 September 2020 - formal implementation deadline Entry into force to be effected by separate Royal Decree

Financial Institutions

Wholesale Banks

Retail Banks R

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

Priority

Anti-Money laundering

Decree to the Banking Data Portal Act

This Decree laid downs general requirements in relation to the banking data portal

Entry into force to be effected by separate Royal Decree

Financial Institutions

Wholesale Banks

Retail Banks

Fin-tech

R

Anti-Money laundering

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

Advice of Council of State (Raad van State) awaited

All All

G

Anti-Money laundering

General Guideline on the Money Laundering and Terrorist Financing (Prevention Act).

Further developments awaited All All

G

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

Priority

Bank crisis management and resolution

Directive 2014/59/EU establishing framework for recovery and resolution of credit institutions and investment firms (Bank Recovery and Resolution Directive (BRRD))

Directive (EU) 2019/879 of 20 May 2019 amending Directive 2014/59/EU as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms and Directive 98/26/EC (BRRD II)

16 July 2020: EBA public hearing on draft regulatory technical standards (RTS) on contractual recognition of stay powers (Article 71a(5) BRRD)

July 2020: EBA final draft implementing technical standards on reporting and disclosures of minimum requirement for own funds and eligible liabilities (MREL) and total loss absorbency requirement (TLAC) expected

11 August 2020: HM Treasury consultation on the transposition of the BRRD II closes for comment

15 August 2020: EBA consultation on draft RTS on contractual recognition of stay powers under Article 71a(5) BRRD closes for comment

31 August 2020: EBA consultation on draft regulatory technical standards on own funds and eligible liabilities closes for comment

25 September 2020: EBA discussion paper on application of early intervention measures in the European Union according to Articles 27‐29 of the BRRD closes for comment

30 September 2020: FSB consultation on evaluation of too-big-to-fail (TBTF) reforms for systemically important banks closes for comment

28 December 2020 - Member States to have transposed BRRD II into national law

28 December 2020: Regulation (EU) 2019/877 of 20 May 2019 as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms (SRM II Regulation) enters into force

December 2020 – EBA deadline for EBA to deliver mandates under BRRD II including setting minimum requirement for own funds and eligible liabilities (MREL). (Previous deadline of December 2019 amended by EBA’s risk reduction packages roadmap (Nov 2019) and formal request submitted to European Commission on 12 June 2020)

Q4 2020 / Q1 2021: Bank of England MREL review report expected

Financial Institutions

Wholesale Banks

Retail Banks and other consumer credit providers

Fin-tech

Wealth

R

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

Priority

Banking – Assignments of claims – third-party effects

Proposed regulation sets out rules for determining the law that governs perfection of assignments of claims

The European Parliament has passed a legislative resolution amending aspects of the European Commission's proposal.

The UK announced on 30 July 2018 its intention to opt out of the proposed regulation

12 March 2020 - The Council of the EU published an update stressing its intention to work towards reaching a general approach on the proposal

Financial Institutions

All

G

Benchmarks Regulation following LIBOR rate-setting revelations

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

H2 2020 - Final version of ESMA guidelines on disclosure requirements expected (originally Q2 2020 - delayed as stated in ESMA’s updated annual work programme)

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

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

H2 2020 – CCP Recovery & Resolution Regulation likely to be finalised and published in the EU

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

Financial Institutions

Asset Managers

All

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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

European Commission Delegated Regulation delaying entry into force of settlement discipline to 01 February 2021 (currently 13 September 2020) being considered by the Council of the EU and the European Parliament. If no objection, Delegated Regulation to be published in Official Journal and enter into force three days after publication

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)

01 September 2020 – period for comments on European Commission inception impact assessment closes

06 October 2020 – consultation period for European Commission’s consultation closes

Q2 2021 - European Commission expected to adopt proposal to amend CDD

Financial Institutions

Asset Managers

All

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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

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

Priority

Corporate governance

Directive which amends EU Shareholder Rights Directive (SRDII)

Member States to implement all provisions of SRD II into national law by 10 June 2019 other than provisions coming into force in September 2020

See the following for UK implementation of provisions that took effect in June 2019

SRD2 - are you ready?” for the new obligations on, among others, MiFID firms, AIFMs, UCITS ManCos and self-managed UCITS

“SRD II: UK implementation: new related party transaction regime” for an overview of the new related party transaction regime

“SRD II: UK implementation of remuneration changes” for the directors’ remuneration changes

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 take effect

3 September 2020 – application of 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

See SRD II overview for more information

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Corporate Governance - insurers

International Association of Insurance Supervisors (IAIS) application paper on proactive supervision of corporate governance

Insurers to take note of IAIS guidance as to good practices to promote proactive supervision of corporate governance

Financial Institutions

Insurance

A

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

Priority

Cross-Border Payments – Regulation (CBPR)

Following its Consumer Financial Services Action Plan, in March 2018, the European Commission adopted a proposed Regulation amending the Cross-border Payments Regulation to reduce charges for cross-border transactions in Member States.. The Regulation was published in the OJ on 29 March 2019and applied from 15 December 2019

In context of review of Payment Accounts Directive:

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 payer about 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 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

Financial Institutions

Asset Managers

All

All

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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

Cyber risk and insurance

International Association of Insurance Supervisors (IAIS) Application Paper on Supervision of Insurer Cyber Security

EIOPA report on challenges and opportunities for insurers arising from cyber risk. Overview of cyber risk from an operational and underwriting perspective

Insurers encouraged to standardise policy language and underwriting questionnaires, promote data sharing between stakeholders, develop industry standards, build in-house expertise in cyber security, build offerings around information security and privacy regulations, and adopt a sectoral approach to harmonising language

Non-affirmative cyber still a concern

Financial Institutions

Insurance

R

Cybersecurity

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

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

Organisations should monitor developments of IIA. Review is due to be completed by end of 2020

13 August 2020 - close of consultation period on review document

July 2020 - public consultation to be launched

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

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(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)

(ii) Security provisions that a DSP must have in place when interacting with any organisations ranging from business continuity, audit provisions and incident handling processes

(iii)

(iii) Incident notification requirements for DSPs where

policy initiative

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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 DPSs, 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 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

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Parliament and any conclusion of a withdrawal agreement between the UK and the EU (a “deal” Brexit)

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

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

UK withdrew from the EU on 31 January 2020. There is now a transition period until 31 December 2020 while UK and EU negotiate additional arrangements. During this period EU law continues to apply to and within UK

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

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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in February 2019 in relation to the regulation of non-EEA data transfers in a “no deal” Brexit 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 has confirmed SCCs continue to be a valid mechanism to legitimise the transfer of data, but he has 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. The Advocate General has decided to not make a

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

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. Overall, as the AG’s opinion may not be followed by the ECJ, businesses would be best to adopt a “wait and see” approach at this stage. The ECJ is due to pass on its decision in the case by the 16 July 2020

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formal decision as to whether the Privacy Shield offers adequate protection but has stated that he has “doubts” about its validity

The European Court of Justice is not bound to follow the Advocate General’s opinion and we can expect a final decision in relation to this case within the next six months

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

UK and EU businesses subject to Regulation should begin to review current compliance frameworks and prepare for regulatory changes to take effect

Council of the EU Progress Report highlights main areas of disagreement with regards to proposed E-Privacy Regulation – these include disagreements in relation to:

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

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

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

Organisations to monitor ongoing developments of Regulation as discussions continue, as likely to be further changes made before final text published by Council of the EU

Organisations to monitor developments of E-Privacy Regulation - however unlikely to be agreed in coming months as originally intended, particularly in light of coronavirus pandemic. Current E-Privacy Directive continues to apply

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and;

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

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

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:

i. a set of rules to better define the responsibilities for digital services providers within the

8 September 2020 – end of consultation period Although consultation 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 EU Commission considering issues arising from online advertising and smart contracts of wider relevance for commercial parties

As consultation open to 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 consultation to make their views known to EU Commission

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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.

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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

Legal Headwinds: Quarterly Report – Q3 2020

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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

A

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 the single market

The 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 the context of acquisitions of EU companies, and (3) foreign subsidies during EU public procurement procedures

23 September 2020 - public consultation on the White Paper proposals for new review mechanisms closes. Stakeholders are invited to set out their views on the proposals

The outcome of the public consultation will help form the EC’s view on appropriate legislative developments in this area

All All

A

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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

European Commission due to have started review of application 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

Liquidity stress testing 30 September 2020 – ESMA guidelines on liquidity stress testing in UCITS and AIFs to apply

Financial institutions

Asset managers

All

R

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

Pending before Parliament (Tweede Kamer) All All

G

Financial Supervision Amendment Act 2021

Part of an annual review of the FSA and related legislation for general amendment, updates and clean-up

Mid-2021 - Financial Supervision Amendment Act 2021 scheduled to enter into force

Financial Institutions

All

G

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

Financial Supervision Funding Decree 2019

Amendments to the Supervision Funding Decree 2019 These amendments regard the distribution of the AFM’s supervisory costs among different supervisory categories.

Awaiting further developments, following expiry of the consultation deadline on 7 July 2020

Entry into force to be effected by separate Royal Decree

Financial Institutions

All

G

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

Awaiting further developments, following expiry of consultation deadline on 11 March 2020

28 December 2020 - formal implementation dates

Entry into force to be effected by separate Royal Decree

Financial institutions

Asset Managers

Wholesale Banks

Retail Banks

All

A

Insurance Regulation – Covid 19

The ESAs and EIOPA have taken steps to mitigate the impact of 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

Financial Institutions

Insurance

R

Insurance Regulation

EIOPA’s work programme 2020-22

EIOPA’s single programming document 2020-22 includes its annual work programme 2020. EIOPA will focus on the delivery of its strategic priorities, with two key themes of digitalisation and sustainability and reference to establishing a new relationship between UK and the EU

Financial Institutions

Insurance

G

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

Insurance Law - Brexit

Lloyd’s Market Bulletin Y5211 - grandfathering process for European coverholders

Coverholders wishing to bind risks located in EEA only able to do so under Coverholder Appointment Agreement (CAA) with Lloyd’s Brussels. EEA risks no longer to be permitted under Lloyd’s Binding Authority

LMA bulletin LMA18-044-AC sets out model clauses for guidance

Financial Institutions

Insurance

R

Legal Entity Identifiers, Unique Transaction Identifiers and Unique Product Identifiers

LEI ROC Policy on Fund Relationships in the Global LEI System (GLEIS)

20 May 2019 – Policy on Fund Relationships and Guidelines for the registration of Investment Funds in the Global LEI System published

November 2020 - Implementation expected Financial Institutions

All

G

Legal Entity Identifiers, Unique Transaction Identifiers and Unique Product Identifiers

The establishment of governance arrangements within the LEI ROC (under the auspices of the Financial Stability Board (FSB), Committee on Payments and Market Infrastructures (CPMI) of Bank for International Settlements and Board of International Organization of Securities Commissions (IOSCO) together the Harmonisation Group) for the adoption of the Unique Transaction Identifiers (UTIs), Unique Product Identifier (UPIs) and other critical OTC derivatives data elements (CDE)

Mid-2020 – LEI ROC to become single international governance body for UPI, UTI and CDE provided LEI ROC makes appropriate adjustments to its existing governance arrangements to make it fit for purpose for these identifiers

End 2020 - FSB recommends jurisdictions implement UTI following its governance arrangements and implementation plan for UTI

End Q3 2022 - FSB recommends jurisdictions implement UPI technical guidance and governance arrangements following its governance arrangements

End Q3-2022 - Harmonisation Group recommends jurisdictions implement governance arrangements following its governance arrangements for CDE

Financial Institutions

All

G

Market Abuse Regulation (MAR)

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

Q3 2020 - Council of the EU and European Parliament to consider Commission’s Final Report on implementation of CSMAD

Q3 2020 - ESMA to submit Final Report to Commission following its consultation paper, “MAR review report”

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

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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)

July 2020 – ESMA expected to submit final report to European Commission on the transparency regime for non-equity instruments and the trading obligation for derivatives

July 2020 – ESMA expected to submit final report to European Commission on the transparency regime for equity and equity-like instruments, the double volume cap mechanism and the trading obligations for shares

3 July 2020 - transition period set out in Article 54(1) of MIFIR on disapplication of access rights to CCPs and trading venues ends

3 January 2021 - transitional period set out in Article 95 of MIFID 2 Directive on application of clearing obligation and risk mitigation techniques to certain C6 energy derivative contracts ends

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

Liquidity stress testing 30 September 2020 – ESMA guidelines on liquidity stress testing in UCITS and AIFs to apply

Financial institutions

Asset managers

All

R

Narrative reporting

EU consultation on review of Non-Financial Reporting Directive (NFRD)

Responses were due by 11 June 2020

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

G

OTC derivatives

Regulation (EU) No 648/2012 of OTC derivatives, central

09 July 2020 – European Commission feedback period closes for three draft Commission

21 December 2020 – temporary exemption from margin requirements for intragroup transactions

Financial Institutions

All R

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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 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

Delegated Regulations covering (i) systemic importance of non-EU central counterparties (CCPs); (ii) fees to be charged to non-EU CCPs; and (iii) compliance of non-EU clearing houses

expires (deferred date under ESAs proposed amendments – originally 04 January 2020)

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 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)

Asset Managers

All

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

03 July 2020 – ESMA consultation closes on proposed Technical Standards on reporting data quality, data access and registration of Trade Repositories

18 June 2021 - Clearing services under FRANDT become applicable

Financial Institutions

Asset Managers

All

All R

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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 act on systemic third country CCPs

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

Financial Institutions

Asset Managers

All

All

G

Payment Accounts Directive

Payment Accounts Directive (PAD) imposing EU wide regime for payment accounts, including fee comparisons, switching and basic payment accounts, with development of standardised terminology for certain payment services

2020 – European Commission review of PAD has been started, but not yet completed

20 April 2022 – FCA to update linked services list according to Payment Accounts (Amendment) (EU Exit) Regulations 2019, (first review date after UK’s departure from EU) and at least every four years thereafter

Financial Institutions

Retail Banks and other consumer credit providers R

Payment Services Directive 2, electronic payments, and interchange fee caps in MIF Regulation

New Payment Services Directive (PSD2) updates payment services regime, expanding geographical and currency scope, enhancing consumer protections and regulated activities. PSD2 is tailored to suit new services, such as internet and mobile payments

PSD2 came into force across EU on 12 January 2016

Capping interchange fees in Multilateral Interchange Fee Regulation (MIF Regulation) in force since 09 December 2015

European Commission to adopt Regulatory Technical Standards (RTS) on information provided by competent authorities to EBA under Article 15(5) of PSD2

European Parliament to publish draft RTS relating to central contact point under Article 29(4) of PSD2

EBA to publish draft RTS on home-host co-operation under Article 29(6) of PSD2

EBA to continue to develop guidelines addressed to payment service providers and competent authorities, aimed at contributing to objective of PSD2 to increase security of retail payments in EU

31 December 2020 – deadline for migration to Strong customer authentication for e-commerce card-based payment transactions

14 March 2021 – Strong customer authentication implementation must be completed

13 January 2021 - European Commission to submit report on application and impact of PSD2

Financial Institutions

Wholesale Banks

Retail Banks and other consumer credit providers

Fin-tech

Wealth R

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

04 June 2020, European Commission published draft regulations to amend and correct Commission Delegated regulations (EU) 2019/980 and (EU) 2019/979, which both supplement the Prospectus Regulation. Regulations come into force on the third day following their publication in the EU Official Journal and some provisions apply retrospectively from 21 July 2019

16 June 2020, European Commission published for consultation a draft regulation with the minimum content requirements for an ‘exemption

All All

A

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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

On also, ESMA updated Q&As.(February 2020)

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 due by 14 July 2020

Regulatory capital

Basel Accord (Basel 3) – finalised in December 2017 with a set of amendments sometimes known informally as “Basel 3.1” or “Basel 4”

Other Basel consultation papers:

• Consultation on targeted revisions to the credit valuation adjustment risk framework. Firms may have to comply with any obligations implemented in national law.

• Consultation on capital treatment of securitisations of non-performing loans. Firms may have to comply with any obligations implemented in national law.

• Consultation on prudential treatment for crypto assets (now closed). Firms may have to comply with any obligations implemented in national law.

The BCBS has published guidance and amended standards 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

01 January 2023: revised standardised approach to credit risk, IRB framework, CVA framework, market risk framework and operational risk framework. Output floor set at 50%, rising in steps to 72.5% on 01 January 2028. (Original dates extended by 1 year due to COVID-19)

Financial Institutions

Wholesale Banks,

Retail Banks

A

Regulatory capital: CRD4

Phased implementation of CRD4

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

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

Financial Institutions

Wholesale Banks R

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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

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

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)

Asset Managers

Retail Banks and Investment Firms

All

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

Asset Managers

Wholesale Banks

Retail Banks and Investment Firms

All

R

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

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

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

Key dates are:

Financial Institutions

Wholesale Banks

Retail Banks and Investment Firms

R

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

ratio) and also EU specific measures (e.g. lending to SMEs)

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

28 June 2021 – Most of CRR2 applies

Asset Managers

All

Regulatory capital: CRD 6 and CRR 3

EU proposals implementing Basel 4. See here and here for impact assessment and here for the EBA’s Basel 4 monitoring exercise

2021 - likely to be introduced

2023 – Rules likely to come into force

Financial Institutions

Wholesale Banks

Retail Banks and Investment Firms

All

A

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

Asset Managers

Wholesale Banks

Retail Banks and Investment Firms

All

R

Remuneration Policy (Financial Enterprises) Act Amendment

The Remuneration Policy (Financial Enterprises) Act is to be amended

The amendments include (i) the requirement to retain certain components of fixed pay for five years, (ii) the requirement to consider the social function of the firm in the renumeration policy and (iii) a tightening of an exemption to the bonus cap

Pending before Parliament (Tweede Kamer) Scheduled to enter into force on 1 July 2021 Financial institutions

All

G

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

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

Q2 2020 – Joint Committee of ESAs to submit proposed amendments to Commission Delegated Regulation (still awaited)

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

European Commission expected to complete review of PRIIPs Regulation during 2020

Financial Institutions

Asset Managers

All

All

A

Risk-weighting of mortgage loans

Amendment to the Further Regulation on specific provisions CRD IV and CRR 2019

Entry into force has been deferred by DNB from 20 September 2020 until further notice in the light of the COVID-19 crisis

Financial institutions

Wholesale Banks

Retail Banks

G

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 July 2020 - reporting to trade repositories under SFT Regulation commences for CSDs and CCPs

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

13 July 2020 - Regulators not to prioritise supervisory actions towards entities subject to SFT reporting obligations until 13 July 2020

13 July 2020 - Trade repositories to be registered ahead of this date (but not before 13 April 2020)

31 July 2020 – ESMA expects trade repositories reporting under its guidelines to start reporting

Reporting to trade repositories under SFT Regulation commences: (i) 11 October 2020 – for all other financial counterparties incl. UCITS, AIFs, insurance/ re-insurance firms; (ii) 11 January 2021 – for non-financial counterparties and third countries entities

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 under SFT Regulation

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

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

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

Legal Headwinds: Quarterly Report – Q3 2020

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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

Shareholder Rights Directive II

Implementation into Dutch law of the EU’s Shareholder Rights Directive II

3 September 2020 - following provisions to enter into force:

i. provisions relating to the identification of shareholders (amending the Dutch Securities Giro Act);

ii. requirement for listed companies to provide shareholders (voting electronically) with an electronic confirmation of receipt; and

iii. requirement for listed companies to provide (upon request) shareholders with a confirmation of recording and counting of votes.

Financial institutions

Asset managers

All

All

R

Short Selling Regulation

Regulation creating pan-European short selling regime

17 September 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

Commission to conduct work on improving association between corporate governance and sustainable investments

Financial Institutions

Asset Managers

All

A

Sustainability and ESG

Capital Requirements Regulation (CRR) II and Capital Requirements

28 June 2021 – EBA to have produced report on potential inclusion of ESG risks in SREP and, if

Financial Institutions

All

G

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

Directive (CRD) V Miscellaneous reforms

deemed appropriate, to issue guidelines on uniform inclusion of ESG risks in SREP.

28 June 2025 - EBA to produce report examining whether dedicated prudential treatment of exposures related to assets or activities associated substantially with environmental or social objectives (or both), would be justified

Asset Managers

All

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 - 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

Affected taxpayers and intermediaries should consider their obligation to collect information for disclosure during the transitional period commencing on 25 June 2018

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

1 July 2020 - new rules come into force, although disclosure of affected transactions during transitional period is required by 31 August 2020 (subject to Member States taking advantage of the option to delay reporting by six months)

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

Legal Headwinds: Quarterly Report – Q3 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 Commission has proposed that the measures, which were due to come into force from 1 January 2021, should be delayed 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 also released a consultation 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

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 – Q3 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 progress awaited on Pillar One of OECD BEPS 2.0 programme

US is reported to have withdrawn from the OECD process

By end of 2020 - OECD is seeking to agree proposals

All All

G

Transparent and predictable working conditions – EU Directive

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)

All All

G

Transparency Directive

European Single Electronic Format (ESEF).

12 July 2019, ESMA published an

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

First reporting using this format will be in 2021 All All

R

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

updated version of its ESEF Reporting Manual

digital format to be used is set out in the European Single Electronic Format Regulation (ESEF Regulation), namely XHTML format with iXBRL tagging

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

UCITS

Integrating sustainability risks and factors

6 July 2020 – European Commission consultation on draft delegated acts in respect of integration of sustainability risks and sustainability factors under AIFMD, UCITS Directive and MiFID closes

European Commission to adopt measures in due course

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

A

Legal Headwinds: Quarterly Report – Q3 2020

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

Priority

UCITS

Liquidity stress testing 30 September 2020 – ESMA guidelines on liquidity stress testing in UCITS and AIFs to apply

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

R

UCITS

Performance fees in UCITS Q3 2020 – ESMA final Guidelines on performance fees in UCITS and certain AIFs expected to be formally published – apply two months after publication

H2 2020 – ESMA guidelines on performance fees in UCITS and certain types of AIF likely to be published on website, to apply two months following publication

Financial institutions

Asset managers

Wholesale banks

Retail banks and other consumer credit providers

Hedge funds

Institutional managers

Service providers

R

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 fourth quarter of 2020

G Green–Is not likely to require much attention until beyond the fourth quarter of 2020