U.S. Financial Industry Developments

CFTC Approves Amendments to Rules on Intermediary Registration and Review of Adverse Actions

On January 9, 2018, the U.S. Commodity Futures Trading Commission (the "CFTC") approved final rules that update Parts 3 and 9 to integrate existing advisory guidance, incorporate swap execution facilities ("SEFs") and update provisions currently applicable to designated contract markets ("DCMs"). Part 3 governs registration of intermediaries and Part 9 relates to CFTC review of exchange disciplinary, access denial, or other adverse actions. Press Release. Rules.

FINRA's 2018 Regulatory and Examination Priorities Letter Includes Initial Coin Offerings and Cryptocurrencies

On January 8, 2018, the Financial Markets Regulatory Authority ("FINRA") published its 2018 Regulatory and Examination Priorities Letter which identifies topics that FINRA will focus on in the coming year.

Included for the first time are Initial Coin Offerings and Cryptocurrencies. Specifically, the Priorities Letter states: "Digital assets (such as cryptocurrencies) and initial coin offerings ("ICOs") have received significant media, public and regulatory attention in the past year. FINRA will closely monitor developments in this area, including the role firms and registered representatives may play in effecting transactions in such assets and ICOs. Where such assets are securities or where an ICO involves the offer and sale of securities, FINRA may review the mechanisms—for example, supervisory, compliance and operational infrastructure— firms have put in place to ensure compliance with relevant federal securities laws and regulations and FINRA rules."

The full letter is available here.

European Financial Industry Developments

European Central Bank ("ECB") Publishes Recommendation on Dividend Distribution Policies and a Letter on Variable Remuneration Policy

The ECB has published a recommendation and a letter on dividend distribution policies and variable remuneration policy.

Both the recommendation and letter relate to the payment of dividends in 2018 for the financial year 2017 by any credit institutions in the single supervisory mechanism. The contents of the recommendation, as well as the letter, are largely unchanged from the versions of the same published in December 2016.

To view the recommendation in its entirety, please click here. For the letter, please click here.

ESMA Publishes Consultation Paper Containing Draft Guidelines on Anti-Procyclicality Margin Measures for Central Counterparties (CCPs)

On January 8, 2018, the European Securities and Markets Authority ("ESMA") published a consultation paper containing draft guidelines on anti-procyclicality margin measures for central counterparties ("CCPs") (ESMA70-151-1013).

Actions by CCPs such as margin calls and 'haircutting' collateral are known to have procyclical effects. Under Article 41 of the European Market Infrastructure Regulation ("EMIR"), CCPs are required to monitor and, where necessary, revise margin levels to reflect market conditions. Under Article 28 of Commission Delegated Regulation (EU) No 153/2013 (which itself contains various regulatory technical standards ("RTS") on requirements for CCPs), CCPs must adopt (at least) one of three anti-procyclicality ("APC") margin measures to address the above issues.

The draft guidelines seek to clarify how EMIR is applied within the context of the procyclicality of margins. They aim to achieve a consistent application of Article 41 EMIR and Article 28 of the RTS, and cover how margin procyclicality is monitored, how APC margin measures are implemented, and help govern disclosures that are intended to facilitate margin predictability.

The deadline for responses on the draft guidelines is February 28, 2018, and  ESMA expects to publish the final guidelines by the first half of 2018.

To view the draft guidelines, please click here.

ESMA Publishes Consultation Papers on Technical Standards Implementing the Securitisation Regulation

ESMA recently published three consultation papers on technical standards that implement the Securitisation Regulation ("SR").

The SR is a European initiative designed to create a framework for simple, transparent and standardised ("STS") securitisation. As part of the SR, certain information must be reported about securitisations to repositories, including the securitisation structure itself, its cash flow and information on underlying risks and exposures.

Where STS status is sought for a securitisation, it must fulfil further criteria, as well as notify ESMA as to how these criteria have been fulfilled. The consultation papers seek relevant stakeholder views on, amongst other points:

• Application requirements for any non-securitisation (i.e. third party) entities that seek authorisation to be providers of STS verification services;
• The general format and content of underlying exposures and investor report templates (that must aim to meet the SR's reporting requirements); and
• The general content of the notification that must be sent to ESMA to establish a securitisation's STS status.

ESMA will use the feedback from the consultation (which is open until March 19, 2018) to finalise its draft technical standards. ESMA will publish its final report in July 2018 (for STS notification and non-securitisation entity application requirements) and will publish ancillary elements by the end of 2018 (for reporting requirements and operational standards).

Please find the ESMA press release here, and the SR webpage here.

Rating Agency Developments

On January 5, Fitch updated its rating criteria for new-issue U.S. and Canadian multiborrower CMBS. Report.

On January 9, Fitch finalized its rating criteria for U.S. Not-For-Profit Hospitals. Report.