The AMF Guide on the funding of research
responded to a number of questions from stakeholders : Scope of application, research definition, corporate access, research budget’s operation, etc.
We attended « Les rendez-vous de la régulation financière et de la conformité » by EIFR.
Please find below the presentations; those of you most interested in MIFID/PRIIPS will find information in AFG's and FFA's presentations.
The presentations overview will follow when published.
The provision of investment research is set to change dramatically. The Markets in Financial Instruments Directive II (MiFID II), which comes into effect 3 January 2018, will deliver sweeping reforms to financial markets and business practices.
Amongst many other changes, its requirement for explicit payment for research is set to shake up the investment industry on both the buy-side and the sell-side.
To help inform the state of the market for investment research, CFA Institute conducted a survey of European members. The findings are published in this report: MiFID II: A New Paradigm for Investment Research.
The results show that:
- Most asset management firms intend to absorb research costs rather than charge clients. Yet the survey findings also highlight a disparity between large and small firms, with large asset managers more likely to absorb research costs than small asset managers.
- Most respondents expect to source less research from investment banks.
Expectations over research costs vary within and across asset classes, likely reflecting the diversity of investment strategies as well as uncertainty over pricing with negotiations ongoing.
L’association CFA Society France remercie l’AMF de l’opportunité de répondre à sa consultation sur les propositions de modifications du règlement général et sur une position-recommandation relative à l’évaluation des connaissances et des compétences, dans le cadre de la mise en oeuvre des orientations de l’ESMA sur l’évaluation des connaissances et des compétences (ESMA/2015/1886 FR).
Regulatory authorities around the world have adopted rules requiring companies to
provide financial information in an interactive, machine-readable (i.e., structured) format.
One such format is eXtensible business reporting language (XBRL). The idea was
that this format would enable investors—including CFA Institute members—to capture
and analyze information more effectively as well as help companies automate their
regulatory filings and business information processing, eventually reducing both preparer
and investor costs.
However, XBRL has not achieved its true potential for either investors or companies.
We addressed the challenges faced by users in our 2016 report “Data and Technology:
Transforming the Financial Information Landscape.” We continue to address these
challenges in various forums, including our participation on the XBRL US Data Quality
But companies face impediments as well: they continue to see structured data as a
compliance burden and a cost center. This paper examines—through case studies—
the costs that companies, large and small, bear in preparing and filing their financial
information in a structured format and what can be done to mitigate those costs so
that all parties—preparers, regulators, and users—can avail themselves of the benefits
of structured data.
The European Securities and Markets Authority (ESMA) updated its Q&A on 2 topics:
- Best execution (page 12)
- Inducements (research) (page 41)
Final Comments on Digital Reporting Tips - collaboration between the Financial Reporting Lab (UK) and CRUF
This Feedback Statement provides an overview of the feedback received from stakeholders and the ESMA Securities and Markets Stakeholder Group (SMSG) to the CP on the ESEF as well as the ESMA response to it.
Securities regulators across the globe (US SEC, ESMA, and IOSCO) have respectively updated their guidance on Non-GAAP Financial Measures (NGFM) also referred to as Alternative Performance Measures (APMs)- with a view to curbing the misleading communication of these alternative measures.
Alert to the heightened regulatory scrutiny and in order to engage in the debate and provide investor perspectives on whether or how much to rein in or enhance the quality of NGFMs reporting, CFA Institute recently conducted a comprehensive member survey with responses from more than 550 members.
Below are links to a blog with a summary of key findings within the report and to the new CFA Institute publications.
Links to new publication (two-part publications)
Nous avons répondu à cette consultation en octobre. Cette consultation concerne la recherche ACTIONS. Merci de votre input (sur le groupe linked In de CFA Society France) sur la recherche ACTIONS ou OBLIGATIONS, une seconde consultation devant être lancé par l’AMF.Réponse_Consultation Recherche_CFA Society France Vf.pdf
XBRL Europe is very pleased to announce its Management report 2015 at the following link
XBRL Europe is very pleased to announce the election of its new Chair Bruno Tesnière from XBRL France and the 2 vice chairs Paul Snijders from XBRL Netherlands and Hans Buysse from the European Federation of Financial Analyst societies - EFFAS.
More info: http://bit.ly/1YreJTk
With investors in mind, CFA Institute recently responded to a consultation paper
by the European Securities and Markets Authority on the establishment
of a European Single Electronic Format (ESEF) for regulatory filings for
all European Union member states.
Read Mohini Singh, ACA,'s blog
Read the presentation by Josina Kamerling, CFAI Regulatory Outreach, at the conference organised by CFA Society France – Advocacy Commitee: Réglementation et Enjeux de Place) on January 14th.
The event flyer is also below.
Read the quote by ESMA's Steven Maijoor as reported by Reuters.
ESMA's Maijoor: Possible 1-year MiFID II delay
Steven Maijoor, chairman of the European Securities and Markets Authority, says he expects the European Commission to propose a postponement of the revised Markets in Financial Instruments Directive. "I am optimistic there will be a delay," Maijoor said. "It's very important for market participants and all of us to know. I would expect that this would be settled in a few weeks. But whether it's a year, or shorter or longer, or whether it's for all of MiFID or only a part of MiFID, that's really a political decision." A one-year delay under discussion might not be long enough if authorities take too long to endorse technical standards, Maijoor says.(source: Reuters)
Welcome and Introductions
Minutes and matters arising
FRC investor engagement programme
The Financial Reporting Council would like to give a brief overview of their investor engagement programme which aims to involve those who invest in UK firms (foreign and domestic investors).
EU Consultation on long-term and sustainable investment
The European Union is conducting a public consultation on long-term and sustainable investment. They have a survey which is can be accessed here
This consultation seeks to gather information on how institutional investors, asset managers and other service providers in the investment chain factor in sustainability (ESG) information and performance of companies or assets into investment decisions. The consultation will also gather information about possible obstacles to long-term, sustainable investment.
IASB Leasing standard
The leasing standard was published in January 2016 and a representative of PwC will give a high level overview of this topic.
IASB materiality practice statement exposure draft
The IASB will give a presentation on the characteristics of materiality, including how to apply the concept of materiality and how to assess whether omissions and misstatements of information are material to the financial statements
Each year, PwC surveys CEOs around the world to get their views on current business issues, and explore what CEOs expect to be the issues of tomorrow. This year, we are also asking members of the investment community for their views on these issues to understand where investors and CEOs are on the same page, and where they see things differently.
CFA Society France has decided to join PwC in this initiative and propose its members to participate to the survey.
If you are a user of company reporting and would like to take part, please complete the survey:
The survey findings are expected to be published in March. CFA Society France and PwC will organise a special event to present and discuss the results
If you have any questions, please contact Hilary Eastman, CFA, at email@example.com.
Please read the latest Blog by CFA Institute on MIFID2 potential delays and implementation difficulties faced by regulators and the industry. The extra time may help to iron out some of the pending issues. These are takeaways from a London event to which the industry and media attended on November 4th.
Read the latest AMF position (text created July 2004, modified august 2012 and Nov 3rd 2015).
Interesting blog by CFAI on steps taken by MiFID II on equity market structure to limit non transparent trading (and strengthen controls & system resilience) with regard to algorithmic and high-frequency trading (HFT). The blog also comments on ESMA's draft RTS published on Sept 28th. 2 fast to mifid2 what does Brussels have in store for HFT?
Interesting blog by CFAI on Liquidity, Transparency and...Bond liquidity assessments (from an asset class to an instrument based approach -'COFIA' to 'IBIA'- with quarter-on- quarter assessment of liquidity). The blog also comments on ESMA's draft RTS published on Sept 28th.
Dr Svi Rosov, CFA, analyst, Capital Markets Policy at CFA Institute and author of the study, analysed data from 50 large and small cap stocks from the US, the UK and France (150 stocks in total), looking at trading and quote data for every stock on 48 days from 2010 to 2014.
Please find below the link to the study:
Liquidity in Equity Markets: Characteristics, Dynamics, and Implications for Market Quality"
The study finds that market quality is high, trading costs are historically low, and liquidity supply is generally resilient, dispelling some of the popular concerns about the state of modern markets. However, a closer inspection of market structure identifies the lack of diversity of liquidity provision as a potential problem in the long run. The study also suggests that a move toward enforcing larger tick sizes in the US may undermine efforts to boost liquidity on lit markets.
Liquidity in Equity Markets investigates two recurring investment practitioner complaints.
-Firstly, the perception that contemporary market structure has increased the "adverse selection" problem, whereby high frequency traders (HFTs) divert their trading to dark venues during stable market conditions, before switching to lit markets just as prices begin to move. This often leaves investors using limit orders on lit venues on the wrong side of the market.
-Secondly, the study investigates the perception that displayed liquidity does not represent the true ability to execute trades. This may arise, for example, when HFTs post numerous duplicate limit orders to increase the probability of execution because they know that they have a speed advantage which enables them to cancel the unnecessary duplicate orders before execution.
The public has until 14 September to comment on initial rules issued by the newly formed Center for Data Quality.
Read more of this post
AFG (Association Française de la Gestion financière) has responded to the consultation from Esma on Credit Rating Agencies. This consultation is part of the announced reform on investment research by the European authorities.
XBRL France has presented a proof of concept for an enhanced financial reporting solution (see attached document).
CFA Society France will continue to inform you about new developments in electronic reporting after our conference last December
Please do not hesitate to contact us to know more about the regulatory agenda.
A newly published CFA Institute report, Analyzing Bank Performance: Role of Comprehensive Income highlights the need for investors to pay attention to information reported on the Other Comprehensive Income (OCI) statement.
The report is based on review of academic evidence and the analysis of income and OCI statement line items of 44 large, complex banks (US, EU and Canada-including most SIFIs) over an eight year period (2006 to 2013). The report highlights that OCI statement has economic information content and is worthy of investor attention- for instance whilst monitoring the potential interest rate change effects on bank regulatory capital and balance sheets.
Though focused on analyzing banks, the report also shows the relevance of OCI information for insurance companies and non-financial institutions. An overview of the report is available on the CFA Institute Market Integrity Insights Page-
· OCI Study: Understanding Bank Performance, Risk Through “Forgotten Income Statement” .
CFA Institute published a comprehensive 12 page document on MIFID II, summarizing both the content of MIFID II and CFA Institute’ s main positions : (‘MIFID II, Implementing the Legislation’). [see attached]
As a reminder, European Securities and Markets Authority (ESMA) had launched in May 2014 the consultation process for the implementation of the revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), to which CFA institute has answered (see our news dated 25-05-2014 further on this page).
MIFID II/MIFIR R is a huge piece of legislation impacting both Financial Markets (Structure, Transparency and Regulation) and Investor Protection. On investor protection: it aims at strengthening protection for retail investors through limits on the use of commissions; conditions for the provision of independent investment advice; stricter organisational requirements for product design and distribution; product intervention powers; and the disclosure of costs and charges.
Please also note that on Inducements & transparency (a sub-theme of MIFID), CFA institute has published a unique piece of research covering major european markets: Restricting Sales Inducements: Perspectives on the Availability and Quality of Financial Advice for Individual Investors
In anticipation of the transposition of the revised Transparency Directive into national law, the AMF is publishing a draft recommendation to accompany the abolition in 2015 of the obligation to produce quarterly financial information.
The EDTF, a private sector task force formed at the initiative of the FSB, published on 30 September its second progress report on major banks' actions to improve risk disclosures in their 2013 annual reports in line with the EDTF's October 2012 report.
The EDTF's principles and recommendations for improved bank risk disclosures and leading disclosure practices are designed to provide timely information, which continue to assist in strengthening confidence of investors and other stakeholders in banks' reporting.
Executive Summary – Webinar on 27 June 2014
IFRS 15 - Converged Standard on Revenue Recognition
Issued by IASB and FASB
IASB and FASB jointly issued IFRS 15 a converged Standard on the recognition of revenue from contracts with customers on 28th may 2014.
The Standard IFRS 15 will replace all existing IFRS and US GAAP revenue requirements, and improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. Application is required for annual periods beginning on 1 January 2017 for companies applying US GAAP, but early adoption is permitted under IFRS.
To assist investors with this process, the CFA Institute, in conjunction with the IASB and the FASB, had hosted a live webinar on 27 June 2014. The live webinar had provide an overview of the newly released Standard as it impacts investors, highlighted questions that investors should consider as a part of their analysis and evaluation of companies and discussed the areas of greatest potential impact for change.
Core Principle of the new Standard IFRS 15
The core principle is for companies to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services.
The new Standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.
Preparation of financial statements
The core principle of the new Standard is delivered in a five-step model framework:
• Identify the contract(s) with a customer
• Identify the performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to the performance obligations in the contract
• Recognise revenue when (or as) the entity satisfies a performance obligation.
Application of this guidance will depend on the facts and circumstances present in a contract with a customer and will require the exercise of judgment.
Presentation in financial statements
Contracts with customers will be presented in an entity’s statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s performance and the customer’s payment.
A contract liability is presented in the statement of financial position where a customer has paid an amount of consideration prior to the entity performing by transferring the related good or service to the customer.
Where the entity has performed by transferring a good or service to the customer and the customer has not yet paid the related consideration, a contract asset or a receivable is presented in the statement of financial position, depending on the nature of the entity’s right to consideration. A contract asset is recognised when the entity’s right to consideration is conditional on something other than the passage of time, for example future performance of the entity. A receivable is recognised when the entity’s right to consideration is unconditional except for the passage of time.
Any difference between the initial recognition of a receivable and the corresponding amount of revenue recognised should also be presented as an expense, for example, an impairment loss.
Disclosures in financial statements
An entity should disclose qualitative and quantitative information about all of the following:
• its contracts with customers;
• the significant judgments, and changes in the judgments, made in applying the guidance to those contracts; and
• any assets recognised from the costs to obtain or fulfill a contract with a customer.
Entities will need to consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the requirements. An entity should aggregate or disaggregate disclosures to ensure that useful information is not obscured.
Further implementation guidance
Topics should be considered carefully when applying the new Standard include:
• Performance obligations satisfied over time
• Methods for measuring progress towards complete satisfaction of a performance obligation
• Sale with a right of return
• Principal versus agent considerations
• Customer options for additional goods or services
• Customers’ unexercised rights
• Non-refundable upfront fees
• Repurchase arrangements
• Consignment arrangements
• Bill-and-hold arrangements
• Customer acceptance
• Disclosures of disaggregation of revenue
The European Securities and Markets Authority (ESMA) has launched the consultation process for the implementation of the revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). MIFID II / MIFIR is a major piece of regulation covering both financial markets and investor protection.
CFA Institute is preparing an answer to the consultation and discussion papers (around 700 pages).
- Highlights on MIFID II/MIFIR:
MIFID II/MIFIR R impacts both Financial Markets (Structure, Transparency and Regulation) and Investor Protection. On investor protection: it aims at strengthening protection for retail investors through limits on the use of commissions; conditions for the provision of independent investment advice; stricter organisational requirements for product design and distribution; product intervention powers; and the disclosure of costs and charges.
- Full Press release & consultation/discussion papers: please click here.
APM (alternative performance measures) are now widely used as analysts need complementary information to assess companies. They include financial ratios such as ebitda, free cash flow, net debt, earnings before one-time charges etc.
By definition APM are not regulated and investors are frequently misled.
Esma is consulting analysts in order to issue guidelines aiming at strengthening the use of APM.
This will include the disclosure of the definition of APM, their detailed calculation method and the reconciliation with financial statements. Also Esma recommends companies to be consistent in their use of APM and to justify any change or termination.
CFA Advocacy FAR did participate to the consultation and is supportive to set-up a framework. This will promote transparency and add confidence in the use of APM. Final guideline will be published end of 2014 and we encourage our members to send their comments.
Read the consultation paper
The AMF has released a detailed document updating its recommendations applicable to financial analyst. This will be enforced by June 2014.
- European regulation (MIFID) states that organization rules must comply with the country of origin whereas conduct rules must comply with the recipient country. As such financial analysts may have to comply with several jurisdictions.
- The financial analyst position will be extended to sell-side credit and quantitative analysts. Buy-side analysts, strategists and economists are not included except for some specific cases. They include the case where strategists or economists are integrated with financial analysts, or are in relationship with issuers, or when buy-side analysis is published externally.
- The AMF issues several principles to preserve the independence of the financial analyst and to avoid the risk of conflicts of interest, including the rules attached to remunerations, personal trading, relations with issuers or with other internal activities.
- MIFID will apply to the financial analyst position notably with regards to the communication process (written and oral). This aims at preserving fairness in accessing research and investment recommendations.
Contact: Jean-Philippe Dorp, CFA, Advocacy - Financial Analysis & Reporting, CFA Society France
During our October panel event "Banks, what does enhanced transparency look like?" panelists discussed progress made by the EDTF (Enhanced Disclosure Task Force), a first-time-ever private sector project to enhance the risk disclosures of banks. EDTF gathers all stakeholders: banks, analysts, asset management firms, investors, credit rating analysts and auditors, at the initiative of the FSB (Financial Stability Board). This event was labelled as part of the "Future of Finance" campaign launched by CFA Institute worldwide, illustrating theme No4: Transparency and Fairness.
Contact: Séverine Vadon-David, CFA, Advocacy Chair, CFA Society France
On 15th January 2014, EIFR - European Institute of Financial Regulation - invited Philippe Maystadt (former Belgium Finance Minister, President of the Interim Committee of IMF and President of EIB) to share his conclusions on the proposition of a new organization where Europe should be better represented in the design of new accounting rules.
1. The crisis revealed that the adoption of the IFRS in 2005 without consulting Europe (due to a lack of consensus) had negative economic impacts for countries having renounced to their regulatory sovereignty.
2. Philippe Maystadt’s propositions includes to expand the EFRAG's mandate, to modify the board structure and to arrange a stable funding mechanism in order to achieve a greater representation of European interests vis-à-vis other international accounting bodies.
3. National standard setters will be encouraged to better collaborate with EFRAG while the European Parliament would be represented at the board. Both public and private sectors should be represented.
This new organization, which could be set-up in 2014, aims at contributing to a greater stability and improved economic development in Europe. By limiting carve-out possibilities, this should also enhance the credibility of European companies for international investors and offer better access to capital markets.
We encourage our member to read the very comprehensive report.