Global Trustee and Fiduciary Services Bite-Sized Issue 11 2024

15 QUICK LINKS CULTURE CRYPTOASSETS ELTIFS EMIR FINANCIAL STABILITY BOARD FINTECH MIFID II/MIFIR OPERATIONAL RESILIENCE SUSTAINABILITY T+1 ASIA/PACIFIC EUROPE LUXEMBOURG NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 11 | 2024 LUXEMBOURG CSSF Thematic Review on the Delegation of the Portfolio Management Function by IFMs – CSSF Feedback Report Published on 23 October 2024, the Commission de Surveillance du Secteur Financier (CSSF) announced that from 2021 to 2024, it had carried out a thematic review on the supervision of the delegation of the portfolio management function by investment fund managers (IFMs) with a view to monitoring compliance with the UCITS and/or AIFMD framework and protecting the investors’ interests. Following the analysis of the collected information, the CSSF is providing the market with feedback on the CSSF’s main findings and recommendations with the publication of its Feedback Report. The CSSF says that the purpose of this document is to inform the industry of the main findings made by the CSSF in the course of its supervisory activities and the related recommendations for improvement in accordance with the applicable laws and regulations. In this context, the CSSF invites all IFMs to perform, at the latest by the end of Q1/2025, a comprehensive assessment of how they monitor the delegation of their portfolio management function in the light of the observations mentioned in the thematic review document and of the applicable regulatory requirements. Link to CSSF Feedback Report here NORTH AMERICA SEC Adopts Rule Amendments and New Rule to Improve Risk Management and Resilience of Covered Clearing Agencies On 25 October 2024, the Securities and Exchange Commission (SEC) adopted rule amendments and a new rule to improve the resilience and recovery and wind-down planning of covered clearing agencies. The SEC says that the rule amendments establish new requirements regarding a covered clearing agency’s collection of intraday margin, as well as a covered clearing agency’s reliance on substantive inputs to its risk-based margin model. The new rule prescribes requirements for the contents of a covered clearing agency’s recovery and wind-down plan. Specifically, regarding intraday margin collection, the rule amendments require that a covered clearing agency that provides central counterparty services has policies and procedures to establish a risk-based margin system that monitors intraday exposures on an ongoing basis, includes the authority and operational capacity to make intraday margin calls as frequently as circumstances warrant (including when risk thresholds specified by the covered clearing agency are breached or when the products cleared or markets served display elevated volatility), and documents when the covered clearing agency determines not to make an intraday call pursuant to its written policies and procedures. The SEC states that the rule amendments regarding substantive inputs require that a covered clearing agency that provides central counterparty services has policies and procedures to establish a risk-based margin system that uses reliable sources of substantive inputs, uses procedures to address circumstances in which substantive inputs are not readily available or reliable (to ensure that the covered clearing agency can continue to meet its credit exposures to its participants), and that such procedures must include either the use of price data or substantive inputs from an alternate source or a risk-based margin system that does not rely on substantive inputs that are unavailable or unreliable. Finally, the SEC says that existing rules require a covered clearing agency to have a recovery and wind-down plan, and the new rule requires such an entity to specify nine elements for its plan. The new rule’s required elements address: planning (e.g., the identification and use of scenarios, triggers, tools, staffing, and service providers); timing and implementation of the plans; and testing and board approval of the plans.