European banking and securities authorities published guidelines on the assessment of the suitability of members of the management body and key function holders
ESMA and EBA published joint guidelines regarding the suitability of members of the management body of credit institutions, investment firms, financial holding companies and mixed financial holding companies on 21 March 2018. With the guidelines the respective authorities specify the requirements in accordance with the Capital Requirements Directive 2013/36/EU (CRD IV) and the Markets in Financial Instruments Directive 2014/65/EU (MiFID II).
The guidelines set out supervisory practices regarding the notions of sufficient time commitment; honesty, integrity and independence of mind of management body members; adequate collective knowledge, skills and experience of the management body; and adequate human and financial resources devoted to the induction and training of management members. In addition to that, also diversity aspects have to be taken into account for the selection of members of the management body.
The ESMA guidelines are not directly binding for financial institutions and have to be incorporated by the local competent authorities. BaFin had to notify EBA and ESMA as to whether they intend to comply with the guidelines, by May 21th 2018. Depending on the feedback of BaFin, the guidelines shall apply from 30 June 2018.
For addressed financial institutions the proposed guidelines might in particular become relevant in authorisation procedures regarding the provision of financial services. Provided BaFin complies with the guidelines, institutions would have to consider the requirements in their governance structure when appointing new board members.
ESMA published new statement on LEI (Legal Identity Identifier)
ESMA announced on 20 June 2018, that the temporary period allowing for a smooth introduction of the use of Legal Identity Identifiers (LEIs), originally brought-in in December 2017, will not be further extended and cease in July 2018. Since beginning of this year MiFID firms generally have to use LEIs to report trades under the Markets in Financial Instruments Regulation (MiFIR). The six months period was introduced due to the fact that not all firms succeeded in obtaining LEIs in time for the MiFID II start.
The LEI provides a unique identifier for all entities participating in financial transactions which can be used cross-border, through a free and open database updated on a daily basis. The LEI requirements cover all clients of EU investment firms and any entity that has issued financial instruments traded on European trading venues. EU investment firms and trading venues are obliged to report the LEI of these entities regardless of where they are based and regardless of whether the entity is subject to LEI requirements in its own jurisdiction. Due to the principle “no LEI, no trade” also asset management companies (Kapitalverwaltungsgesellschaften) have to make sure that they provide their LEI code when transmitting orders to financial institutions.
Read: The LEI database
German legislator plans to extend product governance rules to financial agent
In the context of MiFID II the German Federal Government has presented a new bill with adjustments to the German industrial code (“Gewerbeordnung”). According to the draft law financial agents (“Finanzanlagenvermittler”), which are currently not directly covered by MiFID II, would have to identify a target market on their own and would need to consider the respective target market when providing investment advice and investment brokerage services. MiFID II only requires that intermediaries exempt from MiFID must take into account the target market of the manufacturer.
Read: The bill (in German)
Investment statistics as of 30 April 2018
The German Investment Fund Association BVI issued its latest investment statistics report on 30 April 2018, giving an overview of the net assets and net sales within the German investment fund and asset management markets. The statistics are broken down by asset class and provider. They provide information on net assets and net inflows of investment funds and assets outside investment funds.
The latest statistic report is highlighting that in April, investment funds raised EUR 5.5 billion net, with the lion's share of EUR 5.1 billion having been contributed by Spezialfonds. Retail funds recorded inflows of EUR 0.3 billion, after having registered outflows in the amount of EUR 1.3 billion in March. At EUR 2.1 billion, balanced funds once again topped the sales chart. Equity ETFs saw outflows of EUR 2 billion while actively managed equity funds collected EUR 0.1 billion. As at the end of April 2018, fund companies managed assets totalling EUR 3 trillion.
Read: The statistic
