ESMA Public Statement: Postponement of the reporting obligations under the Securities Financing Transactions Regulation (“SFTR”)

In a Public Statement issued by the European Securities and Markets Authority (“ESMA”) on 18 March 2020, ESMA acknowledges that it was made aware of the pressure being made on the financial industry to comply with the new regulatory obligations under Regulation 2015/2365 (“SFTR”) amidst the current challenging times due to the COVID-19 virus.

Individual firms are taking actions to respond to the pandemic to protect their business and employees’ health. They need to ensure core business continuity in extremely stressed market conditions. The impact on the personnel, exacerbated by the pressures on firms caused by increases in market volatility and volumes, has thus seriously compromised the SFTR implementation programmes.

As part of ESMA’s active support to international supervisory coordination between the national competent authorities (“NCAs”), it decided to issue this statement to ensure that the various NCAs adopt convergent supervisory actions when it comes to the SFTR requirements, particularly those regarding the reporting start date.

SFTR mandates reporting of all Securities Financing Transactions (“SFTs”) to a registered Trade Repository (“TR”) on particular deadlines applicable to different entities. EMSA is aware of the limited time left ahead of the SFT reporting first deadline, which is that of 13 April 2020, imposed on inter alia certain investment firms and credit institutions. This is followed by central counterparties (“CCPs”) and central security depositaries (“CSDs”) which need to report on 13 July 2020, by certain insurance companies, funds, institutions for occupational retirement provision (“IORPs”) on 12 October 2020 and by non-financial counterparties on 11 January 2021. ESMA states that the ‘business as usual’ implementation by TRs and market participants is being continuously monitored.

ESMA acknowledges the challenges that the TRs, the relevant counterparties, the entities responsible for reporting or the report submitting entities may face in finalising their implementation of the SFT reporting requirements and in completing the necessary technical set-up before 13 April 2020 due to the COVID-19 pandemic. It also states that it is also not available to record details of SFTs. As a result, counterparties, entities responsible for reporting and report submitting entities will be unable to report by the reporting start date.

ESMA informs NCAs (including the Malta Financial Services Authority) not to prioritise their supervisory actions towards entities subject to SFT reporting obligations as of 13 April 2020 and until 13 July 2020. ESMA however expects TRs to be registered sufficiently ahead of the next phase of the reporting regime, i.e. 13 July 2020, for credit institutions, investment firms, CCPs and CSDs and relevant third-country entities to start reporting as of this date. The 13 April 2020 SFTR reporting deadline has been postponed to 13 July 2020 due to the COVID-19 pandemic.

ESMA continues to monitor closely the implementation by the relevant market participants as well as the impact of the relevant measures taken with regards to COVID-19 to ensure alignment of SFT reporting requirements and supervisory practices in the EU.

We shall be monitoring the situation closely and will issue further updates as things develop.

This update is for informational purposes only and does not contain or convey legal advice. The information contained in this note should not be used or relied upon in regard to any particular facts or circumstances without first obtaining specific legal advice.