The document provides a weekly legal briefing on developments in the financial services industry from Cummings Law. It summarizes recent statements, reports and consultations from various regulatory bodies including ESMA, IOSCO, the European Commission, the FCA and the EBA on topics such as MiFID II implementation, ESMA's new strategy, EMIR frontloading rules, the Capital Markets Union, FCA's Project Innovate, equivalence of third country GAAP standards, and responses to consultations on remuneration guidelines and securities financing transactions. Readers are invited to contact the firm to discuss any of the points raised.

1.
Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services
industry.
Listen to this week's Legal Shorts on CLTV by going to http://vimeo.com/cummingslaw
If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
MiFID II
ESMA has published a statement on its work on implementing measures under MiFID II.
According to ESMA, the three areas which are receiving most attention and are also technically
complex are: (i) non-equity transparency – ESMA acknowledges that it will not be able to find
the ideal system that perfectly balances transparency and liquidity and that will satisfy the
preferences of all market participants, but that it is trying to find reasonable and workable
compromises and is prepared to review the non-equity rules once they are in operation, to react to
potential deficiencies; (ii) position limits – ESMA acknowledges that a one-size-fits-all approach
cannot be the solution, due to the wide variation of contracts from highly liquid to completely
illiquid; (iii) ancillary activity - there will be major refinements in relation to the test of whether
non-investment firms perform investment services as an ancillary activity to their main business.
ESMA launches new strategy
ESMA has announced its new strategy for 2015 – 2020 following a strategic review to set new
direction and priorities. Under its new strategy, ESMA will focus on the following three key
objectives: investor protection, orderly markets and financial stability. According to its press
release, ESMA will achieve these objectives by focusing on the following activities: (i) assessing
risks to investors and financial stability; (ii) promoting supervisory convergence; (iii) by direct
supervision of specific financial institutions; and (iv) completing a single rulebook for EU
financial markets. ESMA will make some organisational changes, including merging all
supervisory activities in one department, to bring about its strategy.

2. EMIR: ISDA frontloading amendment agreement
ISDA has published its EMIR Frontloading Additional Termination Event Amendment
Agreement, which allows parties to an ISDA Master Agreement (1992 or 2002) to amend the
agreement to incorporate a new additional termination event covering frontloading. Frontloading
refers to the requirement for certain derivative transactions to be cleared in accordance with the
clearing obligation under EMIR where the transactions are entered into during a given period
before the clearing obligation takes effect. The amendment agreement provides an additional
termination right, in the event that clearing is not possible by the time the clearing obligation takes
effect, thereby reducing the risk of regulatory breach faced by market participants subject to
frontloading.
Capital Markets Union (CMU)
The European Parliament’s Economic and Monetary Affairs Committee (ECON) has adopted a
resolution on the CMU. According to the Parliament’s press release, ECON wants to see a
balanced approach towards the CMU, with non-bank sources of finance being developed. The
resolution also highlights the need for effective cross-border insolvency rules to be addressed and
that possible changes and additions to the existing regulatory regime should aim at removing
entry barriers for small and medium-sized enterprises (SMEs).
FCA calls for input on Project Innovate
The FCA has called for input on digital and mobile solutions as part of its Project Innovate, which
it launched in 2014. The FCA is interested in learning whether there are any regulatory barriers,
in the UK or at EU level, preventing the development of digital solutions or mobile solutions (or
both) in the financial services industry. The FCA considers that new digital technologies can
create opportunities for the financial services industry and consumers and can break current
structures and that mobile solutions, in particular, could be a tool to help reduce financial
exclusion in the UK. The call for input also provides a brief summary of, and update on, the
FCA's previous and current work to date in the digital and mobile space; the FCA notes that there
is a demand from firms for regulation for digital currencies and HM Treasury is currently leading
on the development of an AML regime for digital currency exchanges and will consult shortly.
Responses to the call for input are invited by 7 September 2015.
Equivalence of GAAP for third countries
The European Commission has published a delegated regulation to establish a mechanism for the
determination of equivalence of accounting standards applied by third country issuers with the
aim of giving countries that are still working to converge towards or adopt IFRS in their national
systems more time. The regulation extends the period for accepting relevant third country
accounting standards until 31 March 2016. As the conditions for granting equivalence to third
country GAAP expired on 31 December 2014, the delegated regulation shall apply from 1 January
2015.
FCA updates its ninth quarterly consultation paper
The FCA has updated its ninth quarterly consultation paper (CP15/19) to include additional
proposed amendments to its Handbook relating to HM Treasury's small and medium-sized entity
(SME) finance measures. These changes are being made to ensure that the FCA has arrangements
in place that are consistent with the requirements of the Small Business, Enterprise and

3. Employment Act 2015, and the regulations made under the Act. Comments on the proposals are
invited by 5 August 2015.
IOSCO report on enforcement
IOSCO has published a report on credible deterrence in the enforcement of securities regulation,
which: (i) identifies seven key elements for credible deterrence, namely legal certainty, detecting
misconduct, co-operation and collaboration, investigation and prosecution of misconduct,
sanctions, public messaging and regulatory governance; and (ii) encourages regulators operating
in both emerging and developed markets to consider how they might integrate credible deterrence
into new or existing enforcement strategies. The report contains real examples of effective
approaches to achieving credible deterrence, including timely enforcement intervention,
individual accountability and robust sanctions.
IOSCO developments
IOSCO has reported on developments during its annual conference this week, which include the
following: (i) the IOSCO presidents' committee has approved the strategic direction for IOSCO
to 2020; (ii) the IOSCO growth and emerging markets (GEM) committee agreed to conduct
policy work regarding the impact of digitisation and innovation on capital markets; (iii) a report
on progress, including the challenges of cross-border regulation, promoting the resiliency of
central counterparties and facilitating capital raising by SMEs, including through crowd funding,
while maintaining investor protection; and (iv) the board has concluded that a full review of asset
management activities and products in the broader global financial context should be the
immediate focus of international efforts to identify potential systemic risks and vulnerabilities.
Proposed SFT Regulation
ECON has announced that an informal deal has been reached with the EU Council on the
proposed Regulation on reporting and transparency of securities financing transactions (SFT
Regulation). ECON explains that the political agreement will now be subject to "technical
finalisation" before a draft can be endorsed by the Council and ECON. The European
Commission has welcomed the political agreement and considers that the SFT Regulation will
significantly improve the transparency of securities financing transactions, and help identify their
risks and magnitude. The Parliament will put the text of the SFT Regulation to a plenary vote in
October 2015, which will also need to be endorsed by member states.
CLLS response to CRD IV remuneration guidelines
Following AIMA and EFAMA’s response to the European Banking Authority's (EBA)
consultation on remuneration guidelines, which was issued in March 2015 (see last week’s Legal
Shorts), the City of London Law Society (CLLS) has published its own response. The CLLS is
also concerned with the EBA's interpretation of the proportionality principle and considers that a
reading of the relevant provisions put forward by the EBA is contrary to the plain words used on
the face of the CRD IV Directive itself. The CLLS' conclusion is that there is "no sound legal

4. http://safemailer.safeserve.com/admin/index.php?Page=Newsletters&Action=View&id=4612[19/06/2015 11:07:48]
basis" for adopting the proposed changed approach to the interpretation of the relevant CRD IV
Directive provisions and it urges the EBA to reconsider.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
19 June 2015