In its circular published on the 20th March 2020, the Malta Financial Services Authority (“MFSA”) announced that reporting obligations in terms of the SFTR will be postponed to a later date as a consequence of the COVID-19 pandemic. This was in response to the European Securities and Markets Authority (“ESMA”)’s public statement issued on 18th March 2020 with respect to actions to be taken by national competent authorities in order to mitigate the impact of COVID-19 on the European financial markets - one of which being the postponement of the reporting start date of securities financing transactions (“SFT”) under the SFTR.
The SFTR regulates SFT activities such as securities lending, repurchase agreements, reverse repos, margin lending transactions and total return swaps. In terms of the SFTR, the rules apply to financial counterparties to an SFT that are: (i) established in the European Union, including all its branches irrespective of where they are located; or (ii) established in a third country, if the SFT is concluded in the course of the operations of a branch in the European Union of that counterparty.
In terms of the reporting obligations under the SFTR, both parties to trade (whether they are financial and non-financial market participants) are required to report details of their SFTs to an approved EU trade repository (“TR”), or to ESMA where there is no available TR.
Postponement of Reporting Obligations Effective Dates
With reference to Article 33(2)(a) of the SFTR, the reporting obligations in terms of Article 4(1) of the SFTR are applicable as from:
- 13 April 2020 – for Credit Institutions and Investment Firms;
- 13 July 2020 – for CCPs and CSDs;
- 12 October 2020 – for Insurance Companies, AIFs, UCITs and pension funds; and
- 11 January 2021 – for non-financial counterparties.
In light of the COVID-19 outbreak, the MFSA has been advised by ESMA not to prioritise its supervisory actions towards credit institutions (licensed in terms of the Banking Act, Cap. 371 of the laws of Malta) and investment firms (licensed in terms of the Investment Services Act, Cap. 370 of the laws of Malta) that need to adhere to the reporting obligations under SFTR with effect from 13 April 2020, until 13 July 2020. This includes the supervision of SFTs concluded during that period.
The is also linked to the fact that ESMA will not be available to record the details of SFTs for the time being. Counterparties, entities responsible for reporting and report submitting entities will be unable to report on SFTs concluded by 13 April 2020. ESMA expects TRs to be registered sufficiently ahead of the next phase of the reporting regime, i.e. 13 July 2020, in order for credit institutions, investment firms, CCPs and CSDs and relevant third-country entities to start reporting as of this date.
The MFSA will continue to monitor closely the situation surrounding COVID-19 and will inform market participants of any further communication from ESMA accordingly.
Should you require any assistance or further information in this respect, please contact Diane Bugeja (firstname.lastname@example.org) or Kyle Debattista (email@example.com).