Response to consultation on Guidelines on internal governance for investment firms
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Subject matter
In setting the subject matter of the draft guidelines, it is implied that there may be overlaps with a number of provisions under MiFID II, including the Commission Del-egated regulation (EU) 2017/565. The DAAMIF is of the opinion that dual regulation in this area is unjustified, unnecessary and burdensome to investment firms and we find that appropriate carve outs should be made, in particular with respect to the spe-cific regulation of the compliance function, the risk management function and the internal audit function respectively.
Date of application
Given that the draft guidelines address the obligations under a new set of rules and that there is not identity between the investment firms previously regulated under the CRD rules and the firms subject to the draft guidelines, we find that a suitable transi-tional period should apply. Due to the limited period remaining until June 2021 we would recommend a transitional period of at least six months in order for the firms to be provided with a reasonable implementation period.
With respect to requirements to the compliance function and the risk management function we note that there might be inconsistencies between the references to the responsibilities of the management body of MiFID II and the draft guidelines, partly due to differences in the definitions of the management body applied in MiFID II and the IFD/IFR. In this respect we note it is not always clear from the guidelines when the management body is referred to in its supervisory function.
In particular with respect to the risk management function we note that the relevant provisions MiFID II and Regulation (EU) 2017/565 do not include references to the management function. References are instead made to senior management of the in-vestment firm.
Should EBA decide to uphold the dual regulation of this area, the DAAMIF is of the view that the competences of the management body should be aligned with MiFID II.
Question 1: Are subject matter, scope of application, definitions and date of application appropriate and sufficiently clear?
See also the attached document for further remarksSubject matter
In setting the subject matter of the draft guidelines, it is implied that there may be overlaps with a number of provisions under MiFID II, including the Commission Del-egated regulation (EU) 2017/565. The DAAMIF is of the opinion that dual regulation in this area is unjustified, unnecessary and burdensome to investment firms and we find that appropriate carve outs should be made, in particular with respect to the spe-cific regulation of the compliance function, the risk management function and the internal audit function respectively.
Date of application
Given that the draft guidelines address the obligations under a new set of rules and that there is not identity between the investment firms previously regulated under the CRD rules and the firms subject to the draft guidelines, we find that a suitable transi-tional period should apply. Due to the limited period remaining until June 2021 we would recommend a transitional period of at least six months in order for the firms to be provided with a reasonable implementation period.
Question 2: Is tiltle II sufficiently clear? Do you see other criteria to add or to delete as inappropriate?
We assume for the purpose of our answer to this question that it covers both Title I and Title II regarding proportionality and the role of composition of the management body respectively. We find that the list of criteria under paragraph 20 should include the activities of the subsidiaries in the question of proportionality of applicability on a consolidated level.Question 3: Is title III sufficently clear and appropriate?
The DAAMIF finds that the items 18, 19, 20 and 21 should be excluded from the draft guidelines. In this respect we refer to the fact that MiFID II, and in particular its Regu-lation (EU) 2017/565, includes appropriate provisions on compliance, risk manage-ment and internal audit which have been adapted to the activities of investment firms. Moreover, we note that ESMA has developed guidelines regarding the compliance function. Therefore, this dual regulation seems inappropriate and unnecessarily bur-densome to firms.With respect to requirements to the compliance function and the risk management function we note that there might be inconsistencies between the references to the responsibilities of the management body of MiFID II and the draft guidelines, partly due to differences in the definitions of the management body applied in MiFID II and the IFD/IFR. In this respect we note it is not always clear from the guidelines when the management body is referred to in its supervisory function.
In particular with respect to the risk management function we note that the relevant provisions MiFID II and Regulation (EU) 2017/565 do not include references to the management function. References are instead made to senior management of the in-vestment firm.
Should EBA decide to uphold the dual regulation of this area, the DAAMIF is of the view that the competences of the management body should be aligned with MiFID II.