ESMA Publishes Draft Technical Standards on the Implementation of EMIR
On September 27 ESMA published its final draft regulatory technical standards (RTS) which detail how the requirements of EMIR are to be implemented. The draft RTS have been developed through a consultation process which began in February 2012 with the publication of ESMA’s discussion paper and continued in June 2012 with the publication of ESMA’s consultation paper. The final draft RTS incorporate several changes to the initial version, and set out:
The final draft RTS have been submitted to the European Commission who have until December 31 to decide whether to endorse them. The RTS, once endorsed, will be directly applicable across the European Union.
EBA Publishes Draft Technical Standards on Capital Requirements for CCPs
On September 26 the EBA published its final draft regulatory technical standards (RTS) which specify the capital requirements for central counterparties (CCPs) under the EMIR Regulation.
The draft RTS provide that a CCP should hold capital, including retained earnings and reserves, that is at all times at least able to cover:
overall operational and legal risks;
otherwise uncovered credit, counterparty credit and market risks; and
business risk (based on a CCP’s own estimate and subject to the approval of the body that regulates the CCP).
A CCP should also hold an additional amount of capital that is able to cover the CCP’s gross operational expenses during an appropriate time span for winding down or restructuring its activities.
The draft RTS will now be sent to the European Commission who have until December 31 to decide whether to endorse them. The RTS, once endorsed, will be directly applicable across the European Union.
FSA Guidance on Proportionality in Relation to its Remuneration Code
On September 25 the FSA published Finalised Guidance 12/19: General guidance on Proportionality: The Remuneration Code (SYSC 19A) & Pillar 3 disclosures on remuneration (BIPRU 11) (FG12/19).
The Remuneration Code (the “Code”) regulates the way in which financial services firms remunerate their staff. Firms are required to apply the Code in a way that is proportionate to their size, internal organisation and the nature, scope and complexity of their activities. The FSA provides guidance which sets out a framework of what it considers to be a proportionate application of the Code to different sized firms. Prior to the publication of FG 12/19, the FSA’s guidance placed each firm into one of four proportionality tiers, determined by its capital resources.
FG 12/19 replaces the old four-tiered proportionality structure with a new framework. In the new framework each firm will be placed into one of three proportionality levels, determined by its total assets.
Tribunal Upholds FSA Decision to Ban and Fine Swiss Fund Manager and Two Former Cantor Fitzgerald Traders for Market Abuse
The Upper Tribunal (Tax and Chancery Chamber) (the “Tribunal”) has directed the FSA to fine Stefan Chaligné, a Swiss-based hedge fund manager £900,000, (plus disgorgement of the financial benefit he obtained of €362,950) and Patrick Sejean, a former senior salesman on Cantor Fitzgerald Europe’s (CFE) London-based French desk £650,000. Chaligné, Sejean and a third trader, Tidiane Diallo, have in addition been banned by the FSA from performing any role in regulated financial services, at the direction of the Tribunal.
Chaligné recruited the assistance of Sejean and Diallo in manipulating the share price of securities in the hedge fund he was managing, thus increasing the value of the hedge fund on portfolio evaluation dates. This practice, known as “window dressing the close”, was achieved by Chaligné placing orders through CFE, effected and executed by Sejean and Diallo, which were designed to increase the closing price of nine securities traded on European and North American exchanges. The practical effect of his market abuse was to increase the performance and management fees paid to him by the beneficiaries of the hedge fund.
The Tribunal described this as “as serious a case of market abuse of its kind as one might conceive”.