Global Trustee and Fiduciary Services Bite Sized Issue 7 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 7 | 2023 12 QUICK LINKS CRYPTOASSETS CYBER DORA ELIGIBLE ASSETS DIRECTIVE FINANCIAL STABILITY BOARD FINTECH LTAF MICA MIFID II/MIFIR NBFI SUSTAINABLE FINANCE/ ESG ASIA EUROPE LUXEMBOURG NORTH AMERICA UNITED KINGDOM LUXEMBOURG CSSF Thematic Review: Validation of Value-at-Risk models Used by UCITS for Global Exposure Calculation – Results On 13 June 2023 the Commission de Surveillance du Sectuer Financier (CSSF) published the results of its Thematic Review on the Validation of Value-at-Risk models used by UCITS for global exposure calculation. The thematic review was carried out on the basis of a representative sample of 20 Luxembourg IFMmanaging Luxembourg UCITS that use the VaR for the calculation of the global exposure. The questionnaire used in the thematic review covered various aspects, such as the organisational set-up of the validation, the aspects of the models covered by the validation, the tests performed, and the conclusions drawn by the IFMs from the validation exercise. In addition, the CSSF also based its observations on the VaR validation reports provided by the IFMs. CSSF observations in the thematic review covered: • Governance around the VaR model validation. – Independent validation; – UCITS coverage; and – VaR validation report. • Content of the VaR validation. – Initial validation of the VaR model; and – Ongoing validation of the VaR model. » Back-testing; » Back-testing methodologies; and » Stress-testing. In the Results of the thematic review the CSSF asks all IFMs using VaR models for the calculation of the global exposure to perform: i. By the end of the 2023 a comprehensive assessment of their existing VaR model validation framework against these observations, and ii. To take on that basis, in accordance with a given timeline, the necessary corrective measures (if applicable). Link to Results here NORTH AMERICA SEC Adopts Amendments to Remove References to Credit Ratings FromRegulation M On 7 June 2023 the Securities and Exchange Commission (SEC) adopted rule changes to remove and replace references to credit ratings from existing exceptions provided in Rule 101 and Rule 102 of Regulation M, a set of rules that prohibits activities that could artificially influence the market for an offered security. The amendments, when effective, will remove certain existing rule exceptions in Rule 101 and Rule 102 of Regulation M that reference credit ratings for nonconvertible debt securities, nonconvertible preferred securities, and asset-backed securities and substitute in their place new exceptions that are based on alternative standards of creditworthiness. These substitutes include exceptions for nonconvertible debt securities and nonconvertible preferred securities of issuers who meet a specified probability of default threshold and exceptions for asset-backed securities that are offered pursuant to an effective shelf registration statement filed on the SEC’s Form SF-3.