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On 28 September 2023, the European Supervisory Authorities (ESAs) published their second annual report (Report) on the extent of voluntary disclosures of principal adverse impacts (PAIs) under the EU Sustainable Finance Disclosure Regulation (SFDR). Based on feedback from national competent authorities (NCAs), the ESAs made some preliminary recommendations to the European Commission on best practices, on entity-level statements and, in the context of the European Commission's comprehensive assessment of SFDR,  asked the Commission to consider wider points that would require changes to SFDR itself. This is separate from the Commission's Targeted Consultation and Public Consultation on SFDR – see our briefing.

Welcome to the first edition of the Travers Smith Outsourcing Spotlight. This issue highlights a number of hot topics, including the impact of AI on outsourcing, changes to the UK's regimes for data protection and cybersecurity and proposed reforms to UK employment law, including TUPE.

The Financial Conduct Authority (FCA) has issued CP23/20: Diversity and inclusion in the financial sector which sets out its long-awaited proposals to introduce a new regulatory framework on Diversity and Inclusion (D&I) in the financial sector.

The European Commission has issued a Targeted Consultation and a Public Consultation on the implementation of the Sustainable Finance Disclosure Regulation (SFDR).  The Consultations include a series of questions on the practical functioning of the SFDR and its possible reform. The EU appears to have recognised that the SFDR is not as user-friendly as it had hoped and is seeking to assess its potential shortcomings and explore potential changes. 

The FCA has issued its near final rules (PS23/13) on its new regime for firms seeking to approve financial promotions. This takes effect on 7 February 2024.

Travers Smith LLP has advised the Trustees of BAE Systems Pensions Schemes on the outsourcing of the investment management of approximately £23bn of pension scheme assets to Goldman Sachs Asset Management (GSAM). The appointment of GSAM as its Outsourced Chief Investment Officer (OCIO) is the largest OCIO appointment in the UK to date. 

The US Securities and Exchange Commission (the "SEC") has recently adopted new rules under the Investment Advisers Act of 1940 (the “Advisers Act”) (together, the “New Rules”), based on a set of proposals originally set out in February 2022 (the “Original Proposals”).

In October 2022, we issued our briefing Strengthening the Financial Promotion Rules | Travers Smith, discussing the FCA's new rules on financial promotions, with a particular focus on the promotion of higher risk investments to retail investors. The FCA indicated at the time that such a category would include cryptoassets; however, at that point the legislation extending the FCA's remit to those financial promotions was not in force.

At the end of last year, Travers Smith gave its asset manager clients access to an app to help them understand their obligations under UK and EU sustainability reporting requirements. The app is now available more widely.

The Commission de Surveillance du Secteur Financier ("CSSF") recently published its observations and recommendations on the implementation of sustainability-related provisions in the investment fund industry as part of its supervisory work in the area of sustainable finance.

On 29 June 2023, having completed its passage through parliament, the Financial Services and Markets Bill received Royal Assent.

The European Commission issued, on 13 June 2023, a Sustainable Finance Package with a number of additional ESG measures including:  

On 15 June 2023, the scope of the UK criminal insider dealing rules will be extended. Additional markets and financial instruments will fall within the scope of the criminal offence of insider dealing.

On 24 May 2023, the European Commission unveiled its long-awaited Retail Investment Strategy, comprising a proposal for a Retail Investment Directive amending the UCITS Directive, AIFMD, MiFID and the Insurance Distribution Directive, and a proposal for a new Retail Investment Regulation amending the PRIIPS Regulation.  

A regular briefing for the alternative asset management industry. 

Travers Smith is advising Numis Corporation Plc ('Numis') on their £410m recommended offer by Deutsche Bank AG ('Deutsche Bank'), the largest bank in Germany. The transaction was announced on 28 April and is subject to Numis shareholder approval and customary regulatory clearances.

A regular briefing for the alternative asset management industry. 

The European Commission (Commission) has issued further guidance on the interpretation of the Sustainable Finance Disclosure Regulation (SFDR).  This is in the form of responses to questions put to it in September 2022 by the European Supervisory Authorities (ESAs).  The responses include guidance on the definition of sustainable investment, disclosures around the reduction of carbon emissions and principal adverse impact disclosures.

The European Supervisory Authorities (ESAs) have published a Joint Consultation Paper on proposed amendments to the Sustainable Finance Disclosure Regulation Delegated Regulation Regulatory Technical Standards (SFDR RTS).  The Consultation Paper focuses on the principal adverse impact (PAI) indicators, financial product disclosures, as well as addressing some technical issues. 

The UK government has published its 2023 Green Finance Strategy (Strategy) which sets out its proposals for mobilising green finance and investment in the UK. This supports the UK commitment at COP26 to become the world's first Net Zero-aligned Financial Centre.