This document provides a summary of recent legal and regulatory developments in the financial services industry. It discusses regulations related to clearing financial transactions through central counterparties under EMIR, CRD IV guidelines on remuneration practices, and EU proposals regarding single-member private companies. It also provides an update on implementation deadlines for various EMIR requirements, including trade reporting, valuation of positions, and mandatory clearing of certain derivatives.

1. Welcome to Legal Shorts, a short briefing on some of the week’s developments in
the financial services industry.
If you would like to discuss any of the points we raise below, please contact me or
one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
EMIR Regulations published
Amended Regulations relating to the clearing of financial transactions
through recognised clearing houses (RCHs) under EMIR have been
published. The Financial Services and Markets Act 2000 (Over the Counter
Derivatives, Central Counterparties and Trade Repositories) (Amendment)
Regulations 2014 amend the transitional provisions that deal with the period
during which a RCH is applying for authorisation to act as a CCP under
EMIR and is waiting for its application to be determined. The amendment
provides that while such an application made by a recognised overseas
clearing house (ROCH) is awaiting determination, the clearing house will
not be under a duty to maintain a recovery plan as would otherwise be
required. The Regulations come into force on 1 May 2014.
CRD IV and remuneration practices
The European Banking Authority is consulting on two matters relating to
remuneration practices under CRD IV. The first consultation paper sets out
draft guidelines detailing which information competent authorities should
collect from firms to enable the EBA to benchmark remuneration trends at

2. an EU level. The second sets out draft guidelines on the data competent
authorities are required to collect on the number of individuals per firm in
pay brackets of more than EUR 1 million. The data has to be passed to the
EBA who will disclose it on an aggregate home Member State basis in a
common reporting format. The deadline for responses to both consultations
is 7 May 2014 and the EBA expects to finalise both sets of guidelines by 30
June 2014.
EU Council publishes update on financial services legislative proposals
The Council of the EU has published a summary of an ECON meeting
during which ECON agreed to table agreed texts relating to the following
legislative proposals: (i) MAD II, which includes revised tests of the Market
Abuse Regulation and the Directive on criminal sanctions for insider dealing
and market manipulation (CSMAD); (ii) the Single Resolution Mechanism
(SRM) Regulation; and (iii) the Payments Account Directive (PAD).
OTC derivatives reforms
The Financial Stability Board has published its seventh progress report on
progress made to reform the OTC derivatives markets. The report finds that
there are clear signs of progress in implementing matters relating to trade
reporting, capital requirements and central clearing and that substantial
progress has been made towards meeting the G20 commitments through
international policy development, jurisdiction's adoption of legislation and
regulation and expansion in the use of market infrastructure. The report also
discusses areas where further work is needed to complete the reforms and
achieve the G20 objectives. The FSB will continue to monitor jurisdictions'
implementation of the OTC derivatives reform programme, as well as the
extent to which the implemented reforms meet the G20's underlying goals of
improving transparency, mitigating systemic risk and protecting against
market abuse.
FATF and AML/CFT assessments
FATF has published two speeches by its President, Vladimir Nechaev,
relating to FATF assessments and AML/CTF and data protection
requirements. In the first speech, Mr Nechaev focussed on the risk based
approach, technical and effectiveness compliance, quality of reports, and

3. resources in the context of the FATF recommendations and stated that: (i)
countries should begin work on risk assessment to implement the risk based
approach today, warning that it takes a long time to undertake a risk
assessment and even more time to implement the results; and (ii) that FATF
is shifting its focus to include an assessment of effectiveness of compliance,
as opposed to countries that might simply translate the FATF
recommendations into their legislation and become compliant without
achieving any real results, and that work would begin on this as soon as
possible. In the second speech, Mr Nechaev referred to an experts seminar
held on 24 March 2014 on data protection and AML/CFT measures, during
which it was recognised that both AML/CFT and data protection
requirements serve important objectives that are not inherently mutually
exclusive, and Mr Nechaev stated that FATF will remain vigilant so that
AML/CFT measures are implemented effectively in all jurisdictions.
Exchange-traded funds
Regulations abolishing stamp duty and SDRT on the acquisition of units in
exchange traded funds (ETFs) were made on 3 April 2014. The ETF
regulations, which are substantively the same as the draft published on 13
February 2014, come into force on 28 April 2014.
Barclays settles LIBOR mis-selling test case
According to a report, Barclays has settled a key case concerning alleged
mis-selling relating to the manipulation of LIBOR. The case involved two
derivative contracts entered into by Barclays, in which the interest rates used
were based on LIBOR, and had been regarded as a likely test case for how
the English courts would decide on interest rate swap misselling and LIBOR
manipulation cases. The article notes that the settlement is the "first of its
kind" and suggests that it "will make it easier for other firms to make similar
claims against banks".
Single-member private company proposed directive
The European Commission has published a proposal for a directive on
single-member private limited liability companies. The proposed directive
will require member states to provide in their national company law for a
form of single-member limited liability company to be established, which

4. will be known as a SUP (Societas Unius Personae). The proposed directive
sets out various features of SUPs that member states must provide for within
their national laws, including in relation to electronic registration, share
capital, the articles, distributions and single-member decisions. The
proposal will next be considered by the Parliament and the Council under the
ordinary legislative procedure. It is intended that the proposed directive must
be implemented within two years of adoption.
GUEST SHORTS
This week Ian Sutherland of Kellian Consulting updates us on the
implementation deadlines for EMIR, as follows:
“With the recent fanfare around EMIR reporting it is tempting for some to
sigh with relief and think it is all over. Unfortunately this is not true. It is
worth remembering that EMIR entered into force over a year ago on the 15
March 2013. A number of alternative funds will also find themselves falling
within EMIR’s scope once they are recognised as AIFs under AIFMD.
The regulation is complex with many implementations each with their own
timelines and phasing, some of which are triggered by other events. To date
an entity covered by EMIR is expected:
(i) to know its own EMIR classification and have processes in place to
monitor and report any changes – 15 March 2013;
(ii) to undertake daily valuation of in-scope positions – 15 March 2013;
(iii) to confirm OTC trades to specified standards, monitoring and reporting
exceptions – 15 March 2013 (with ratchet dates that tightened standards on
31 August 2013, 28 February 2014 and finally 31 August 2014);
(iv) to have dispute resolution processes agreed and in place with associated
reporting and escalation to a firm's NCA – 15 September 2013;
(v) to have agreed and put in place practices to regularly reconcile
outstanding OTC positions – 15 September 2013;
(vi) to review at least semi-annually the opportunity to effect a portfolio
compression across its OTC positions – 15 September 2013;
(vii) to ensure that in-scope trades (OTC and ETD) are reported to an TR by
the end of the next day after trading – 12 February 2014; and
(viii) to back fill the trade reporting of open positions as at 12 February
2014.
Coming up, on 11 August 2014, the reporting of daily valuation of open

5. positions along with any associated collateral becomes mandatory.
Added to this, the recent authorisation of two CCPs under EMIR (NASDAQ
OMX in March and EuroCCP this week) has started the timeline related to
mandatory clearing. ESMA has until 18 September this year to issue draft
technical standards, which are then subject to ratification by the EU Council.
This could lead to initial clearing by the end of 2014 or early 2015 and will
be just the start. Further timetables will be issued as ESMA is satisfied that
there is the capability and capacity to cope with the specified asset(s). The
intent is to clear as much as possible. Not withstanding this, the bilateral
margining of all uncleared trades is expected to start phasing in from
December 2015. The BCBS-IOSCO recommendations on what should be
margined and how are being considered by ESMA and further details will
emerge in due course.”
If you would like to discuss the above or receive further information on
EMIR compliance, please contact Ian at ian.sutherland@kellian.com.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
11 March 2014