Global Trustee and Fiduciary Services Bite-Sized Issue 9 2024

8 QUICK LINKS AI DORA FUND LIQUIDITY MIFID II/MIFIR SUSTAINABLE FINANCE/ ESG TOKENISATION AUSTRALIA ASIA EUROPE NORTH AMERICA UNITED KINGDOM Global Trustee and Fiduciary Services Bite-Sized | Issue 9 | 2024 EUROPE ESMA Publishes its Latest Report on Trends, Risks and Vulnerabilities On 29 August 2024, the European Securities andMarkets Authority (ESMA) published its second risk monitoring report of 2024, setting out the key risk drivers currently facing EU financial markets. ESMA says that external events continue to have a strong impact on the evolution of financial markets, and ESMA also sees high or very high overall risks in the markets within its remit. Structural developments Market-based finance : ESMA says that capital availability for European corporates through capital markets has been broadly stable in 2024 so far. Although the market environment remains very challenging for equity issuance, there were signs of improvement in IPO activity. Corporate bond issuance was high in 1Q24 but fell in the second quarter of the year. Sustainable finance : ESMA states that in the last few years, a strong interest in and uptake of sustainable investments has been sending positive signals about investors’ willingness to finance the green transition. However, it adds, that recent ESG-related market developments have sparked concerns on the ability to mobilise private capital, with green bond issuance slowing and sustainable funds facing outflows for the first time in 2H23. Financial innovation : ESMA states that crypto-assets markets continued to surge in the first half of 2024, fuelled by the approval of spot Bitcoin and Ether ETPs in the US, to reach a total global market valuation of EUR 2.2tn by end-June (+40% since end-2023). Market monitoring Securities markets : ESMA says that asset prices in early 2024 trended upwards with little volatility suggesting future rate cuts were being anticipated. Episodes of market volatility took place linked to elections in the EU in June and July, and a short-lived dip in global equity valuations in early August was associated with weaker-than-expected US macroeconomic indicators. Asset management : ESMA also states that EU fund performance was positive across categories and funds exposed to fixed income instruments (bond funds and MMFs) recorded inflows. ESMA says the increase in interest rates has been offset by a broad-based market perception of declining credit risk, reflected in low credit spreads. However, ESMA notes that bond fund portfolio credit quality, as measured by credit rating, has continued to deteriorate, raising the risk of a disorderly repricing of risky assets. Also, risks continue around liquidity risks and potential losses related to interest rate, credit risk and valuation issues. Finally, ESMA says that open-ended real estate funds remain particularly vulnerable given their structural liquidity mismatch and downward pressure on valuations in housing markets. Link to ESMA Report on Trends, Risks and Vulnerabilities No. 2, 2024 here NORTH AMERICA SEC Adopts Reporting Enhancements for Registered Investment Companies and Provides Guidance on Open-End Fund Liquidity Risk Management Programs On 28 August 2024, the Securities and Exchange Commission (SEC) adopted amendments to reporting requirements on FormN-PORT to provide the SEC and investors with more timely information about certain registered investment companies (funds). Form N-PORT reports provide important information about a fund’s portfolio holdings and related information to help assess a fund’s risks. The SEC say that the amendments will provide it with timelier information about funds’ portfolio investments, which will promote more effective regulatory monitoring and oversight of the fund industry for the benefit of fund investors. The SEC go on to say that the amendments will also triple the amount of Form N-PORT data available to investors in a given year, enhancing investors’ ability to review and monitor information about their funds’ portfolios.