UK approach to SFTR in line with ESMA – delay to July

The European Supervisory and Markets Authority (ESMA) has published a statement addressing the challenges firms are facing to meet their reporting requirements under the Securities Financing Transactions Regulation (SFTR) before the 13 April 2020 implementation date, at a time where firms are facing significant challenges due to the coronavirus pandemic.

In its statement, the ESMA expects national Competent Authorities to not prioritize supervisory activity towards firms’ compliance with the SFTR reporting obligation between 13 April 2020 and 13 July 2020. This also applies to the requirement for firms to report securities financing transactions (SFTs) under the Markets in Financial Instruments Regulation (MiFIR) when their counterparty is a member of the European System of Central Banks. ESMA also confirmed it will not prioritize trade repository registration ahead of 13 April 2020 but it will ensure TRs are registered before 13 July 2020.

The FCA said it supported ESMA in this. To allow firms to focus their resources on critical functions during this period, the FCA will not prioritize supervision of these reporting requirements until at least 13 July 2020, and will not require firms to back report any securities financing transactions that are concluded between 13 April 2020 and 13 July 2020.

SFTR requires entities that are in-scope to: report details of their SFTs to a registered or recognized TR in the case of funds, meet disclosure requirements relating to the use of securities financing transactions and total return swaps in pre-investment documentation and regular reports to investors; and comply with disclosure obligations to counterparties in relation to the re-use of collateral.

Firms in scope of the first 2 application phase-in dates should continue to plan to meet their requirement to report securities financing transactions under SFTR and MiFIR from 13 July 2020. However, SFTs that meet the criteria specified in Article 4(1)(a)(i) and (ii) (Backloading) should be reported using 13 July 2020 as the application date.

In a statement, the International Securities Lending Association (ISLA) said: “This delaying action will give much needed relief to firms, who like all of us, are working through an unprecedented event.”

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