Laws and Regulations

The European Securities and Markets Authority (Esma), the EU’s financial markets regulator and supervisor, on Tuesday said it plans a comprehensive review next year of industry efforts to integrate sustainability in investment firms’ suitability assessment and product governance processes and procedures.

The review will be shaped as a Common Supervisory Action, or CSA, in which it closely involves national supervisors such as the CSSF in Luxembourg.

The European Securities and Markets Authority, Esma, on Thursday posted its 2024 work programme, emphasising digital and green transitions against a backdrop of economic challenges including inflation and geopolitical strains.

Esma said it plans to reinforce its market and risk monitoring efforts and support the European regulatory framework’s implementation, particularly in digital and sustainability sectors. This is in line with the regulator’s aim to address challenges for the European Union and its citizens, including investors.

Luxembourg needs to make a bigger effort to supervise the non-financial sector and better scrutinize real estate firms, trust companies, notaries and services firms, the world’s top body to fight money laundering and the financing of terrorism said on Wednesday.  Both the Luxembourg government and financial sector supervisor CSSF issued statements underling the FATF report’s “overall good result” for Luxembourg.

European fund and asset management association Efama has raised significant concerns over the proposed regulatory technical standards and implementing technical standards for the Digital Operational Resilience Act, the cybersecurity plan known as Dora, criticising the measures as excessively broad and disproportionate. Efama, whose Luxembourg member is Alfi, the Association of the Luxembourg Fund Industry,  argues that a “one size fits all” approach will be inordinately burdensome, particularly for asset management companies. 

An inconvenient truth about the financial industry is that it cannot be trusted; there have been too many scandals to remember. Common solutions, such as rules and regulations, no longer seem to be improving trust, necessitating the exploration of new measures.

Trust

A positive correlation exists between economic growth and trust; people who trust each other are more likely to engage in transactions together. The purpose of rules and regulations is to foster trust among economic participants so that they can transact securely.

The Sustainable Finance Disclosure Regulation (SFDR) framework’s Article 6 has often been perceived as a dumping ground for non-sustainable investments. However, experts question whether this perception is accurate. Some argue that an Article 6 fund can sometimes be even greener than an Article 8 fund.

The European Commission this week disappointed sustainable investment organisations by ignoring their collective call for mandatory reporting requirements that would force companies to make public core indicators for their non-financial sustainability performance.

The Luxembourg Sustainable Finance Initiative (LSFI) on Wednesday launched a new toolkit to support financial professionals in navigating the complex maze of the European Union’s sustainable finance regulation.

Negotiators from the European Council and European Parliament have reached a provisional agreement on new rules aimed at enhancing European capital markets and bolstering investor protection within the EU. The deal, reached during the early hours on Thursday, includes consensus on leverage limits and passporting rules for Loan Originating Funds (LOFs), marking a significant milestone in the regulatory landscape.

Luxembourg’s Fuchs & Associés Finance SA is no longer allowed to provide services in Belgium after its Luxembourg licence as a financial services professional was revoked by CSSF, Belgium’s financial markets supervisor FSMA said.