SCANNING 7

ELTIFs - Final agreement reached by Council and EU Parliament on the compromise text on European Long-Term Investment Funds Background On 26 June 2013, the Commission issued a Pro- posal for a regulation of the European Parliament and of the Council on European long-term invest- ment funds (“the Regulation”). The Regulation aims at ensuring that uniform requirements apply to the investment and operating conditions of ELTIFs. The main purpose of the proposal is to boost ELTIFs in the real economy. In other terms, the objective of the above-mentioned Regulation is to raise and channel capital towards European long-term investments in the real economy, in line with the European Union objectives of smart, sustainable and inclusive growth. This can be achieved by cre- ating a new form of fund vehicle: the ELTIF. On 17 April 2014, the European Parliament in ple- nary adopted amendments to the Commission’s proposal, following which on 24 April 2014, the Presidency of the Council issued a first compro- mise proposal. The Presidency of the Council sub- sequently issued further compromise proposals on 8 May, 27 May and 4 June 2014 respectively. On 25 June 2014, the Council agreed on a general approach on the latter at the level of COREPER.Thus, the Council Presidency conducted negotiations with the European Parliament and the Commission in or- der to concert on a first reading agreement. What’s in there? On 26 November 2014, a provisional agreement be- tween the EU Council and Parliament was reached, which led to the issue of a final compromise text on 5 December 2014. The majority of amendments to the text outlined in our previous editions of Scanning have been kept. However, several new points have been added. The main changes to the previous compromise version can be summarised as follows: « The European Commission shall prioritise and streamline processes for all applications by ELTIFs for EIB financing. In other terms, the Commission

between CSDs and other market infrastructures), as well as internalised settlement reporting (covering securities transactions settled outside a securities settlement system).

shall streamline the delivery of any opinions or contributions necessary for granting applications that request financing from the EIB which is chan- nelled through ELTIFs; « The possibility to temporarily extend the life of an ELTIF was introduced. This right must however be clearly specified to retail investors, as well as the conditions under which such right may be exercised; « Redemptions before the end of life of ELTIF can take place if certain conditions are fulfilled; « The prospectus should contain a prominent indi- cation of the jurisdictions where the ELTIF is al- lowed to invest; « Investments into other ELTIFs, EuVECAs and Eu- SEFs are permitted up to a maximum of 10% of capital; « Requirements additional to those of Article 22 of the AIFMD in relation to the annual report were added. Please refer to previous editions of Scanning for fur- ther information. What’s next? The EU Council has asked the Permanent Repre- sentatives Committee to approve the final com- promise text. If approved, the text will be sent for adoption to the EU Parliament. The Regulation would then need to be adopted by the Council. The Regulation shall enter into force on the twen- tieth day following its publication in the Official Journal of the European Union. It shall then apply six months after entry into force. EMIR - ESMA to cooperate with Australian regulators on CCPs Background Article 25(2)(c) of EMIR (“European Market Infra- structure Regulation”) requires the establishment of cooperation agreements as a precondition for the European Securities and Markets Authori- ty (“ESMA”) to recognise Central Counterparties (“CCPs”) established in third countries to provide clearing services to clearing members or trading venues established in the European Union. THE FINAL COMPROMISE TEXT IS AVAILABLE HERE.

ESMA’S DRAFT TECHNICAL STANDARDS UNDER THE CSDR ARE AVAILABLE HERE.

II. Draft technical advice on penalties for settle- ment fails and on the substantial importance of a CSD The second Consultation Paper includes draft tech- nical advice on proposed penalties for settlement fails and arrangements to identify CSDs of substan- tial importance for the functioning of the securities markets and the protection of the investors in a host Member State. The proposed level of penalties is based on average borrowing costs for the relevant securities. ESMA’s advice proposes indicators to as- sess the substantial importance based on the core services offered by a CSD. III. Draft guidelines on the access to CCPs or trading venues by CSDs The third Consultation Paper of ESMA’s CSDR pack- age consists of draft guidelines on access to a cen- tral counterparty (CCP) or a trading venue by a CSD. The consultation covers the risks to be taken into account by a CCP or a trading venue when carrying out a comprehensive risk assessment following a request for access by a CSD, as well as when the competent authority of the CCP or the competent authority of the trading venue assesses the reasons for refusal to grant access to a CSD by the CCP or by the trading venue. ESMA’S DRAFT GUIDELINES ON THE ACCESS TO A CCP OR A TRADING VENUE BY A CSD IS AVAILABLE HERE. What’s next? ESMA shall submit its technical advice to the Euro- pean Commission no later than on 18 June 2015, which is the same date as the one fixed for the sub- mission of the CSDR technical standards. ESMA’S DRAFT TECHNICAL ADVICE UNDER THE CSDR IS AVAILABLE HERE.

Scanning - January 2015 - page 3