Regulatory Update: December 2021

Each month, FactSet's Regulatory team offers a rundown of the most important developments in compliance and regulatory news. Read on to see which stories dominated the conversation last month.

Environmental, Social, and Governance (ESG)

European Union

• The European Commission (EC) has sent a letter to announce they were not able to adopt the Sustainable Finance Disclosures Regulation (SFDR) regulatory technical standards (RTS) within the official three-month period, given their length and technical detail, which require additional time in the adoption process. Accordingly, the EC now proposes to defer the application date to January 1, 2023.
• The Institut der Wirtschaftsprüfer in Deutschland (Institute of Public Auditors in Germany, IDW) conjointly with the German Federal Financial Supervisory Authority (BaFin) issued advice on SFDR to help auditors work towards minimizing the risks of greenwashing and ensure the information disclosed by financial market participants is correct and complete.

Rest of World

• IOSCO published a set of five recommendations regarding sustainability-related practices, policies, procedures, and disclosures in the asset management industry that address, among others, the risk of greenwashing.
• The Basel Committee on Banking Supervision seeks comments on its “Principles for the effective management and supervision of climate-related financial risks.” The Committee welcomes comments on the principles, which should be submitted here by February 16, 2022.
• The International Organization of Securities Commissions (IOSCO) published a set of 10 recommendations to regulators to help them oversee ESG ratings and ESG data providers. IOSCO suggests that regulators could consider focusing greater attention on the use of ESG ratings and data products and the activities of ESG rating and data products providers in their jurisdictions.
• The International Platform on Sustainable Finance (IPSF), which was jointly launched by economies including China and the EU, released the Common Ground Taxonomy-Climate Change Mitigation (CGT). The CGT includes a list of economic activities that are recognized both by China’s and EU green taxonomies and have substantial contribution to climate change mitigation.
• The Association of Southeast Asian Nations (ASEAN) sectoral bodies released the ASEAN Taxonomy for Sustainable Finance. The ASEAN Taxonomy represents the collective commitment of ASEAN member states in transitioning towards a sustainable region. It is a classification system for sustainable activities and aims to attract investments and financial flows into sustainable projects in the region.

World

• BCBS finalized and published the revised “Market Risk Disclosure Requirements” including adjustments to reflect the revised market risk framework introduced in minimum capital requirements for market risk. The revised disclosure requirements come into effect on January 1, 2023.
• The Financial Stability Bureau (FSB) published its 2021 List of Global Systemically Important Banks. The 30 banks on the list remain the same as the 2020 list.
• Australian Parliament passed the “autonomous sanctions amendment” (Magnitsky-style Sanctions Law) that will allow Australia to expend its actual sanctions regime directly addressing an entity or individual for gross human rights violations, serious corruption, malicious cyber activity, etc.

European Union

• The UCITS (Undertakings for the Collective Investment in Transferable Securities) to PRIIPs (packaged retail and insurance-based investment products) transition period has been proposed to be delayed to December 31, 2022. meaning UCITS funds will have an additional six months before having to produce a PRIIPs key information document (KID).
• The European Single Access Point (ESAP) proposal has been published as part of the Capital Market Union (CMU) package in November. The package of measures was adopted to ensure that investors have better access to company and trading data. The package includes four legislative proposals in total, as well as a communication explaining how the different measures fit together. The three other proposals are:
  • The Review of the European Long-Term Investment Funds (ELTIFs) Regulation to encourage long-term investment, including by retail investors
  • The Review of the Alternative Investment Fund Managers Directive (AIFMD) to harmonize the rules around loan-originating funds (debt funds) to facilitate lending to real economy
  • The Review of the Markets in Financial Instruments Regulation (MiFIR) to enhance transparency by introducing a “European consolidated tape” for easier access to trading data by all investors

United Kingdom

• The Financial Conduct Authority (FCA) consults on its discussion paper about new sustainability disclosure requirements for asset managers and FCA-regulated asset owners, as well as a new classification and labeling system for sustainable investment products. The consultation is open until January 7, 2022.
• The FCA has delayed publishing the final PRIIPs KID rules from January 2022 to Q1 2022

United States

SEC Proposed Rules

In November, the U.S. Securities and Exchange Commission (SEC) published several proposed rules that broadly continue the SEC’s multi-year reporting modernization effort (broadening electronic filing and machine-readable formats) and increased transparency (expanding data to be reported centrally).

• Release Nos. 34-93518; IA-5903; IC-34415; File No. S7-15-21 Electronic Submission of Applications for Orders under the Advisers Act and the Investment Company Act, Confidential Treatment Requests for Filings on Form 13F, and Form ADV-NR; Amendments to Form 13F
• Release Nos. 33-11005; 34-93519; File No. S7-16-21 Updated EDGAR Filing Requirements
• Release No. 34-93595; File No. S7-17-21 Proxy Voting Advice
• Release No. 34-93613; File No. S7-18-21 Reporting of Securities Loans
• Release No. 34-93614; File No. S7-19-2 Electronic Recordkeeping Requirements for Broker-Dealers, Security-Based Swap Dealers, and Major Security-Based Swap Participants

SEC Final Rules

In November, the SEC published two final rules: IA-5904, updating rule 205-3 to replace the specific dollar-amount thresholds for the net worth and assets-under-management tests; and 34-93596, the Universal Proxy rule, requiring the use of a universal proxy card in all non-exempt solicitations involving director election contests, except those involving registered investment companies and business development companies.

Marine Hutinel and Nels Ylitalo contributed to this article.

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.