Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 14 October 2016, which provide news updates and a comprehensive list of dates for your diary.This week’s edition features: the FCA’s latest policy development update; the FRC’s guidance on annual reports; ESMA’s new Q&A on investor protection under MiFID II; ESMA’s consultation on MiFID II guidelines on trade halts; ESMA’s updated Q&A on AIFMD; ESMA’s opening statement at the ECON hearing on AIFMD passporting; the BVCA survey looking at economic optimism post-Brexit, business concerns and company perspectives on the EU; and details of the disclosure by the signatories to the Women in Finance Charter of their gender diversity targets. It also includes analysis on the lessons which can be learnt from the Yahoo hack; the Fourth Money Laundering Directive; and the decision in Hosking v Marathon regarding whether a partner's profit share can be subject to forfeiture if the partner has breached his/her fiduciary duties to the partnership.
Equity capital markets—FCAFCA publishes policy development updateThe Financial Conduct Authority (FCA) has published its latest policy development update, which provides information on its recent and upcoming publications, including forthcoming consultations on the revised Markets in Financial Instruments Directive (MiFID II) (Directive 2014/65/EU), the Market Abuse Regulation and pension transfers.The document highlights the following prospective developments: a fourth consultation paper on MiFID II implementation will be published in late 2016; a one-month consultation regarding proposed changes to the FCA Handbook will be launched in Autumn 2016; a three-month consultation on the redress methodology for pension transfers will be launched in Autumn 2016; a three-month consultation on creditworthiness assessments in consumer credit will be launched in November 2016; a two-month consultation on regulatory fees and levies will be launched in November 2016; a three-month consultation on the Financial Services Compensation Scheme funding review will be launched at the end of 2016; and a policy statement on Pension Wise standards will be published in either December 2016 or January 2017.Accounts and reportsGuidance on annual reports published by FRCGuidance for preparers of the annual reports of around 1,200 large and smaller listed companies has been published by the Financial Reporting Council (FRC). The FRC’s letter outlines the key issues and improvements to be made to such reports in the 2016 reporting season in order to foster investment in the UK.The FRC advises that annual reports should be presented in a user-friendly, clear and concise manner. It further states that companies should also consider a broad range of factors when determining principal risks and uncertainties, including cyber-risk and climate change.The FRC also sets out that investors expect the following from annual reports: a clear explanation of the relationship between IFRS or UK GAAP measures, and any alternative performance measures used; business model reporting should provide clear explanations of how the company makes money and what differentiates it from its peers; a clear link should be disclosed between sources of income described in the business model and the revenue recognition policies; and dividend disclosures should detail how dividend policies operate in practice and the potential impact of risks and capital management decisions on such policies.MiFID II related developmentsESMA publishes new Q&A on investor protection under MiFID IIThe European Securities and Markets Authority (ESMA) has published a Questions and Answers (Q&A) document regarding the implementation of investor protection topics under MiFID II and Regulation (EU) 600/2014 (MiFIR). MiFID II will enter into application on 3 January 2018 and will strengthen the protection of investors by both introducing new requirements and strengthening existing ones.The Q&A provides clarifications on the following topics: best execution; suitability and appropriateness; recording telephone conversations and electronic communications; record keeping; investment advice on an independent basis; underwriting and placement of a financial instrument; and inducements (research).ESMA consults on MiFID II guidelines on trade haltsESMA has published consultation paper 2016/1440 which contains proposed guidelines aimed at providing guidance to regulated markets on the calibration of trading halts in reaction to a significant price movement in a financial instrument on that market during a short period.Article 48(5) of MiFID II provides that Member States shall require a regulated market to be able to temporarily halt or constrain trading if there is a significant price movement in a financial instrument on that market or a related market during a short period. Article 48(13) mandates ESMA to develop guidelines in relation to such trading halts.The proposed guidelines apply to National Competent Authorities (NCAs) and trading venues including those that allow or enable algorithmic trading and set out principles for trading venues to calibrate volatility parameters according to a pre-defined, statistically supported methodology. The proposed guidelines consider such matters as: the nature of the financial instrument; the liquidity profile and the quotation level of the financial instrument; the order imbalance; trading venue mode and rules; external references; duration of the halts; and newly-issued instruments.ESMA will consider the responses received to the consultation paper and aim to finalise the guidelines and publish a final report in Q1 2017.AIFMD related developmentsESMA publishes updated Q&A on AIFMDESMA has published an update to its Q&A document (including one new Q&A) on the application of the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD).Pursuant to the requirements of the Securities Financing Transactions Regulation for Alternative Investment Fund Managers (EU) 2015/2365, Art 13, the Q&A document includes one new Q&A on the commencement of periodical reporting. It clarifies that the information to investors required by Article 13 should be included in the next annual or half-yearly report to be published after 13 January 2017.ECON hearing on AIFMD passporting—ESMA opening statementESMA has published the opening statement of Steven Maijoor, ESMA chair, at the hearing of the Economic and Monetary Affairs Committee of the European Parliament (ECON) on passporting under AIFMD. Mr Maijoor summarised the advice which ESMA gave in July 2015 and July 2016 on the application of the AIFMD passport to Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs) in a number of non-EU countries and the further steps that ESMA will need to take, including focussing on putting in place the extensive framework foreseen by the EU co-legislators in case the decision is made to extend the AIFMD passport to one or more non-EU countries.