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ESMA Issues SFTR Guidelines

On January 6, the European Securities and Markets Authority (ESMA) issued a series of documents concerning the Securities Financing Transaction Regulation (SFTR). SFTR came into force in January 2016, and the reporting obligations will “go live” on April 13.

ESMA issued the following documents:

  • Final Report: Guidelines on reporting under Article 4 and 12 SFTR (available here);

  • Guidelines: Reporting under Article 4 and 12 SFTR (available here);

  • Amended SFTR validation rules (available here); and

  • ESMA statement on implementation of the Legal Entity Identifier (LEI) requirements under the SFTR reporting regime (available here).

The two articles addressed in the Final Report and the Guidelines comprise the two major changes introduced by SFTR: the Article 4 obligation on counterparties to report to a trade repository all Securities Financing Transactions (SFTs) that the counterparty has concluded; and the Article 12 obligation on trade repositories to regularly publish aggregate positions and provide the relevant authorities with “direct and immediate” access to the reported data.

The Final Report and the Guidelines, therefore, cover many different areas, from the types of transactions and financial instruments that must be reported under SFTR, to more technical questions of how to fill in the various fields of the report. The Final Report and the Guidelines are the outcome of a consultation, which closed in July.

Regarding LEIs, ESMA observed in the Statement that “numerous pieces of EU legislation,” as well as legislation in other jurisdictions, require or will require the use of an LEI. ESMA also acknowledges that use of LEIs is not widespread outside of the EU and that “EU investors will face problems in using securities issued by non-EU issuers which have not yet obtained an LEI.”

For that reason, ESMA is allowing a 12-month “partial relaxation of the validation rules,” so that reports for third-country issuers without LEIs will be accepted until April 13, 2021. EU-based issuers and third-country issuers who have an LEI will not benefit from this “partial relaxation.” During this 12-month period, ESMA expects counterparties to liaise with third-country issuers “to ensure that they are aware of the requirements” and to encourage them to obtain an LEI.

©2020 Katten Muchin Rosenman LLP


About this Author

John Ahern, Financial Attorney, London, Katten Law Firm

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...