In context

Financial markets in brief – new regulation and publications

September 10, 2014
In context

There have been many developments in national and European financial markets regulation during the past month. For example, legislation implementing the EU directive and regulation on capital requirements took effect on 1 August. And new remuneration rules for financial undertakings came into force on the same date. The government has also proposed that all bank employees be subject to disciplinary rules. In addition, supervisory authorities have published a large number of consultation documents, draft rules and other information since the last edition of In context. The AFM, for example, published interpretations of the term “market manipulation”, and ESMA has launched a consultation on the new market abuse regime. And finally, we signal important court decisions and list relevant articles in international legal journals.

Dutch regulation 


Implementation of EU capital requirements directive and regulation
This implementing legislation took effect on 1 August 2014. It bans any distributions undermining capital buffers, raises administrative fines, increases the cap on bonuses, and limits the requirement to obtain a declaration of no objection to CET1 capital reductions. It also offers the Dutch Central Bank wider powers to take measures, and it changes the limits – for certain significant banks and investment firms – on the number of management or supervisory positions that a person may hold. An additional duty is imposed on the Dutch Central Bank to provide resolution plans for banks and certain investment firms. A more extensive summary of the main changes are set out in In context of February 2014. 


Bank employees subject to disciplinary rules
The government wants to make bank employees who are required to take the banking oath subject to disciplinary rules. The banking oath will simultaneously be extended to generally include all bank employees. These changes have been introduced at the request of the banking sector. The Dutch Central Bank and the financial markets supervisor, the AFM, will monitor the existence of disciplinary rules for bank employees, but the banks themselves are expected to organise and set up the disciplinary rules.


The Council of State, however, has expressed reservations about these proposals. It questions whether the group of employees taking the oath should be this wide and whether a statutory introduction of disciplinary rules for bank employees is really necessary, since the sector has shown self-regulating ability on this point.


The new rules are included in the Financial Markets Amendment Bill 2015, which is expected to take effect on 1 January 2015.


New remuneration rules for financial undertakings
The Dutch Central Bank’s new rules on remuneration policy and practice at financial undertakings came into force on 1 August 2014. The rules implement provisions on remuneration policy contained in the new Capital Requirements Directive, except for the cap on variable remunerations, which is directly implemented in the Financial Markets Supervision Act. 


Dutch supervisors


Prospectus requirement applies to pre-subscription
Investors may not be offered the possibility of pre-subscribing for securities if a prospectus has not yet been approved. The financial markets authority, AFM, has confirmed this in a notice on its website. The same applies to “no strings attached’ reservations where no agreement is concluded and investors have to reconfirm (in writing), after the prospectus has been approved, that they wish to purchase the securities. But providing general information about an imminent offer is permitted before the prospectus is approved, according to the AFM.


AFM publishes interpretations of market manipulation
The AFM has explained (in Dutch) on the basis of practical examples when market abuse might exist. These interpretations relate to:

  • manipulation by transactions aimed at influencing price
  • manipulation by misleading orders or transactions


AFM explains exception to ban on commissions
The AFM has explained (in Dutch) on its website when the ban on inducements for financial service providers may not apply. The AFM has described a number of situations in which the ban applies.


European regulation


New regulations: 

  • Resolution of credit institutions and certain investment firms


A regulation has entered into force that sets out a procedure for the resolution of credit institutions and certain investment firms. The regulation will be operational from 1 January 2016, except for provisions relating to the cooperation between the Single Resolution Board and the national resolution authorities, which will take effect on 1 January 2015.


  • Securities settlement and central securities depositories


A regulation aimed at improving securities settlement in the EU and regulating securities depositories will enter into force on 17 September 2014.


European and international supervisors


Consultation on new market abuse regime
ESMA has launched a consultation on the new Market Abuse Regulation, which entered into force on 2 July 2014 and will be operational from 3 July 2016.


The consultation, which ends on 15 October 2014, covers the following subjects:

  • prevention and detection of market abuse
  • market manipulation indicators
  • criteria for identifying accepted market practices
  • conditions for and disclosure of buy-back programmes and transaction stabilisation
  • reporting transactions executed by directors
  • format of insider lists
  • disclosure of price-sensitive information, including possible exemptions and reasons for delay
  • investment recommendations and conflicts of interest


ESMA – publications


European Banking Authority – publications


IOSCO – publications


International publications


Capital Markets Law Journal

  • Interpreting ISDA terms: when market practice is relevant, as of when is it relevant? / Jeffrey Golden – CMLJ 2014, Vol. 9, No 3
  • Interpreting the pari passu clause in sovereign bond contracts: it is all Hebrew (and Aramaic) to me / Mark L.J. Wright – CMLJ 2014, vol. 9, No. 3


Journal of International Banking Law & Regulation

  • Interest Rate Benchmarks Regulation: Work in Progress / Aikaterini Theodosopoulou – J.I.B.L.R. 2014, issue 9
  • Automaticity in International Financial Regulation – Part II / Dr Toussant Boyce – JIBLR 2014, issue 9
  • European Market Infrastructure Regulation and Central Clearing: A Conceptual, Legal and Compliance Perspective / Gerry G. Kounadis, LL.M., M.Sc. – JIBLR 2014, issue 9
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