Scanning Special June 2014

ESMA Q&A on the EuSEF and EuVECA Regulations Background Regulation No 345/2013 on European Ven- ture Capital Funds (EuVECA) and Regulation No 346/2013 on European Social Entrepreneur- ship Funds (EuSEF) came into force on 22 July 2013 (the "Regulations"). These Regulations lay down a common EU regu- latory framework for the managers of EuVECA and EuSEF, who may benefit from an EU management and marketing passport if registered and compli- ant with the Regulations. What’s in there? On 26 March 2014, ESMA published a Q&A (ESMA/2014/311) on the application of the Regu- lations providing the following answers: « EuSEF and EuVECA managers that subsequent- ly exceed the threshold of Article 3(2)(b) of the AIFMD can set up new EuSEF and EuVECA funds once the threshold is exceeded; « EuSEF and EuVECA managers shall register twice with their national competent authorities i.e. once under the AIFMD and once under the EuSEF and EuVECA Regulations; and « EuSEF and EuVECA managers can manage and market AIFs. What’s next? The ESMA Q&A will be updated from time to time.

Directives MAD II and MAR adopted Background The regulatory framework provided by the cur- rent Market Abuse Directive (2003/6/EC) required Member States to have the power to detect and investigate market abuse (ie. insider dealing and market manipulation). « On 20 October 2011, the Commission issued its proposals for a regulation on market abuse (MAR), and a directive on criminal sanctions for market abuse (MAD II). « On 24 June 2013, the European Parliament (EP), the Council and the European Commission reached a political agreement on the MAR text. « On 10 September 2013, EP voted the MAR in plenary session and agreed to its adoption at first reading. « On 20 December 2013, the Council representa- tives approved the final compromise text on the MAD. « On 4 February 2014, EP voted the MAD in ple- nary session and agreed to its adoption at first reading. What’s in there? On 14 April 2014, the Council adopted MAD II / MAR at first reading. The new framework will ensure regulation keeps pace with market developments. It will be adapted to the new market reality, notably by including all financial instruments which are traded on organised platforms and over the counter (OTC), and adapting rules to new tech-

nology. It will strengthen the fight against mar- ket abuse across commodity and related deriv- ative markets, explicitly ban the manipulation of benchmarks, such as EURIBOR and LIBOR, and reinforce the cooperation between financial and commodity regulators. Since the sanctions currently available to supervisors often lack a deterrent effect, sanctions will be tougher and more harmonised. What’s next? After publication of the Directive in the Official Journal, expected in June, Member States shall implement MAD II within 2 years. MAR will apply 2 years after its publication.

THE MAD TEXT IS AVAILABLE HERE. THE MAR TEXT IS AVAILABLE HERE.

European Commission

consultation on FX financial instruments Background Following the letter by ESMA asking the European Commission for clarification, the European Com- mission has the intention to issue an implementing regulation in clarifying the definition of an FX spot contract. In order to define where the boundary lies between an FX forward and an FX spot contract the Com- mission initiated a consultation. What’s in there? In its consultation document from 10 April 2014 on FX financial instruments, the Commission sets out the background and main issues concerning FX financial instruments. The main issues for discussion that the Commis- sion brings up concerning FX financial instruments are:

THE Q&A IS AVAILABLE HERE.

« Foreign exchange markets; « Settlement and delivery; « FX market developments;

FX risks;

«

« Transition periods and international aspects; and « Regulatory implications of classification as a fi- nancial instrument. In total the Commission submits ten questions for discussion in its consultation. The questions range from whether a definition of FX spot contracts is

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