ISLA clarifies SFTR launch date of Q2 2020

In relation to a previous ISLA communication on the SFTR reporting RTS, in which we suggested that the Council of the EU had extended the period to scrutinize the relevant RTS until 13 June 2019, we have taken note that a Council official has refuted this claim in the press, instead saying that the Council’s scrutiny period will end on 13 February 2019.

We take note of this comment, and have removed our previous communication in order to avoid confusion.

Our assessment was based on our understanding that the Council of the EU’s decision – at its 7th January 2019 meeting of EU Ambassadors – to extend the scrutiny period of the SFTR reporting RTS should, in the absence of precision in the decision, be interpreted as adding 3 months to an existing 3 month scrutiny period, which would therefore end on 13 June 2019.  We based our assessment on Article 13.1 of the ESMA founding Regulation (REGULATION (EU) No 1095/2010) (see extract below) and concluded that the alternative, the extension of a 1 month scrutiny period, could not apply to such RTS given the Delegated Act on the RTS published by the European Commission on 13 December contains clear and substantial changes compared to the final draft RTS submitted by ESMA to the European Commission.

From the Council official’s statement in the press, we now understand that the agreed extension by Council was an extension of a 1 month scrutiny period, by 1 more month.

According to this, the scrutiny period in Council would therefore end on 13 February 2019 at the latest. We understand that the European Parliament, on the other hand has taken a view that a 3 month scrutiny period is appropriate, meaning the Parliament scrutiny period would end on 13 March 2019 at the latest. As per Article 13 of the ESMA Regulation, the Parliament has the right to extend this scrutiny period by 3 months, once.

Therefore, assuming that the scrutiny process will have ended by 13 March 2019, we can expect publication in the Official Journal of the EU in the weeks after the end of this period (exact date is to be determined). The RTS will enter into force on the twentieth day following this. As per our previous assessments, this would mean that the first reports for tier 1 firms can be expected in Q2 2020 (exact date = entry into force of RTS + 12 months).

We would like to apologise for the confusion, but we do welcome that this will mean the timelines will not be delayed further.

Andy Dyson, CEO

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