SFTR Newsflash: ESMA publishes reporting guidelines

On 6 January 2020, ESMA published its Final Report on its Guidelines on reporting under the SFTR, amended reporting Validation Rules and a statement on Legal Entity Identifiers (LEIs).  These constitute the long-awaited output following ESMA's consultation paper published in May 2019 and are intended to provide clarification regarding compliance with the SFTR reporting technical standards that were published in March 2019.

The Final Report and Guidelines are long - the Guidelines themselves run to over 200 pages - and provide granular guidance and examples of how to populate the required reporting fields.  However, there are a few key high-level points that are of particular interest:

• ESMA has stated, in paragraph 132 of the Final Report, that non-EU AIFs with authorised or registered AIFMs (which, in practice, means EU AIFMs) are subject to the SFTR reporting obligation.  This is a point that had always been ambiguous under SFTR, as the stated policy intent of mirroring the EMIR reporting regime was potentially at odds with a strict interpretation of the text of the scope provisions in SFTR.  A number of industry bodies had responded to the consultation paper and encouraged ESMA to provide the contrary clarification.

• ESMA has reconfirmed that a non-EU AIFM of an EU AIF can also be subject to the SFTR reporting obligation pursuant to the "automatic delegation" provisions, but only if the relevant EU AIF is marketed in the EU under national private placement regimes pursuant to Art. 42 of AIFMD and the relevant national regime requires such automatic delegation.  In the absence of such "gold plating" requirements, the reporting obligation will remain with the EU AIF.

• In the LEI statement, ESMA has reaffirmed the obligation to include in the reports details of the LEI of not only the two counterparties to the SFT, but also the LEI of the issuers of the securities that are subject of the SFT.  However, ESMA recognised that there is a practical problem in that many issuers, particularly non-EU issuers, still have not obtained LEIs. Therefore ESMA has encouraged national competent authorities to exercise regulatory forbearance until 13 April 2021, and "not to prioritise their supervisory actions", but only in respect of the reporting LEI of non-EU issuers.

By way of reminder, the SFTR reporting obligation commences on the phased-in basis, with the obligation applying as follows:

MiFID firms, credit institutions:
11 April 2020

UCITS, AIFs with authorised/registered AIFMs, IORPs, insurance/reinsurance firms:
11 October 2020

Non-financial counterparties:
11 January 2021