STF transparency obligation. Investment company, UCITS, GEFIA. Credit Rating.

STF transparency obligation

Investment company, UCITS, GEFIA. Credit Rating

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In publication 2019-20.05 we dealt with the Securities Financing Transactions (SFT) that until 2014 were not regulated by any legislation. We have turned our attention to Regulation (EU) 2015-2365 which also modifies the regulation (EU) 648/2012 of interest for OTC derivatives, the latter regulation, which among the different rules introduces the obligation of a CCP counterparty and the related conditions of derogation from the obligation. Being the subject of the Securities Financing Transactions the investment funds regulated by the Undertakings for Collective Investment directives in Transferable Securities (UCITS) we have carried out a study of Directive 2009/65/EC and Directive 2014/91/EU which define the current regulatory legislation for the UCITS, with a look at the previous regulations. In identifying the related legislative framework, we carried out research and studies in separate paragraphs identifying the legislation that establishes the obligations for the access of collective investment companies of funds raised among the public, the related management companies, paying attention mainly to the current rules. in force and how they have been changed to date. We have carried out further research and studies with reference to investment companies to the relative requirements for the provision of investment services, capital adequacy, the conditions that allow the provision of investment services to be waived from the legislation defined by the provisions of Directive (EU) 2014/65, directive defining investment services and activities, ancillary services, financial instruments and data communication services. We were interested in the 2011/65/EU directive and subsequent updates that regulate the management companies of the alternative investment funds GEFIA, immediately observing that the AIFs, unlike the management companies, do not have a harmonized regulation given the impossibility caused by the diversification of the financial instruments that build the FIAs themselves in different European and non-European countries. Finally, we were interested in credit rating companies, their importance in financial investments, their evolution both globally and in Europe, with a look at their criticality, roles and consequences of their credit ratings in the economy.

1 - INTRODUCTION 
With a generic definition of Securities Financing Transactions (STF) is defined SFT as any type of transaction in which securities are used to lend money and vice versa. As an example we can refer to sell / buy back transactions, repurchase agreements, securities lending activities. In each of these, the ownership of the securities changes temporarily, in exchange for cash, and then reversed again at the end of the operation. 
The buy-back (or repurchase of own shares) is the purchase of treasury shares from a public limited company. For Italian legislation, for example, the rule defined by Article 2357 of the Italian Civil Code imposes a limit on treasury shares in portfolio, a limit of 20% of the total share capital and in compliance with accounting and accounting principles international, the nominal amount of treasury shares, recorded at historical cost or at fair value, must be allocated to a specific reserve for treasury shares; it is shown in the balance sheet under the equity item, in the net equity within the liabilities (liability and equity items). The consequence of the global financial crisis of 2008, the great recession(1°), is that buy-back transactions have also spread to other financial instruments, such as bonds, and to public law subjects, in particular, with the repurchase of sovereign debt securities by Central Banks aimed at preventing bonds from remaining unsold and avoiding a reduction in demand. 
Repurchase agreements (PCT op/t) defined as contracts in which a seller (usually a bank) sells, in exchange for money, a certain number of securities to a buyer with immediate delivery, then "spot", and commits to same deed, on the repurchase of the securities sold by the same purchaser at a price generally higher and at a predetermined date; delivery is in the future so the contract is "forward (to term)". The transaction consists of a loan of money by the buyer and a loan of securities by the seller. 
Securities lending is a very common practice in the UCITS fund industry (Undertakings for Collective Investment in Transferable Securities) ), this is an operation in which the fund lends a portion or all of the securities held in the portfolio to an external counterparty (the percentages vary from issuer to issuer), with the latter's commitment to return them at a predetermined future date . The fund in return receives a remuneration that, with different percentages from ETF to ETF (also in this case the range of cases are large), is divided between the manager and the fund itself. Exchange Traded Funds (ETFs) are special passive managed funds (or SICAVs). As with all funds, buying an ETF is like buying a basket of stocks. Investing in a fund means putting your savings together with that of other investors, the fund manager will then purchase the instruments on which you will invest. The investment performance will be given by the result of all the individual instruments on which the fund invests . With reference to the lending operations, the remuneration received by the counterparty fund allows the ETF to cover part of the total annual commissions by reducing the tracking error ( the performance deviation of a financial asset just like the fund of investment with respect to its benchmark, an objective reference parameter, established by referring to financial indicators developed by third parties and of common use, as may be the stock indices or the synthesis of the value of the basket of stocks they represent, therefore the total value of the basket calculated from the value of the individual shares that compose it, the price, depending on weighting factors that take into account according to the index of the market capitalization of the issuing companies, or CSR assessments of socio-environmental type ). When an ETF engages in a securities lending transaction, temporarily waiving the availability of the securities, a counterparty risk emerges with the person with whom the transaction was concluded for the percentage of the assets involved in the transaction. In fact, in the event that this counterparty should fail the fund may not get back the securities lent, incurring in a loss. In order to reduce this risk, ETF issuers require the counterparty to constitute a collateral deposit for the duration of the transaction. This collateral is usually deposited in an account of a custodian bank opened in the name of the counterpart on which a pledge is placed in favor of the fund. According to the CESR guidelines on risk measurement, the risk per individual net counterparty generated by securities lending transactions must be included within the limit of 20% provided for in paragraph 2 of article 52 of Directive 2009/65/EC (directive on which we will return to the following paragraphs) while the requirements for the composition of the collateral are left to the national regulation of domiciliation of the fund. In general, the exposure to the counterparty is over collateralised and monitored on a daily basis because if the exposure becomes positive, the counterparty is required to reinstate the collateral (canceling the exposure). In the event of bankruptcy of the counterparty with whom the securities lending operation is carried out, the manager has the right to recover on the collateral, bringing it into its availability and then proceeding with its liquidation. It must be considered that the methods and times for exercising this option do not always guarantee that the money obtained is sufficient to cover the percentage of the value of the fund subject to the securities lending transaction.

(1°) NOTE: the great recession is a global economic crisis that starts in the United States of America in 2007 following a crisis in the real estate market triggered by the bursting of a, real estate bubble (subprime crisis) producing a serious financial crisis in the American economy. Subprime loans (Subprime lending) are loans that in the US financial context are granted to subjects who can not access the interest rates of the markets, for previous problems in his debtor history; they are obviously a form of risky loans for both creditors and debtors, following the dangerous combination of high interest rates, the bad credit history of the debtor and unclear or difficult to document financial dynamics. The recession then gradually assumed a global character, driven by financial mechanisms of contagion, and persisting (with some exceptions such as India and China) with the recessionary spiral that has worsened further, in several European countries (Mediterranean Europe and others), with the debt crisis of European sovereign states. The main factors of the crisis include the high prices of raw materials (oil in the first place), a global food crisis, the threat of a worldwide recession and a credit crisis (followed by the banking crisis) resulting in a collapse confidence in stock market. It is considered by many economists as one of the worst economic crises in history, second only to the great depression of the early twentieth century (also called the crisis of 1929, great crisis or collapse of Wall Street). In 2006 the first signs of the great economic crisis because US savers began not to pay the mortgage installments, a context that worsened in 2008 causing a ponderous increase in foreclosures; the determining cause was the speculative, excessive dynamics of the real estate market in the United States, which occurred with the sharp rise in house prices and the subsequent expansion of investments in the sector. The indebtedness of US households led to the explosion of property prices starting in the first years before 2006, and an increase in debt as real property values increased; the subsequent fall in prices, in 2007-2008 caused a positive difference between the value of the mortgage and the value of real estate, the guarantee of the mortgage itself. It is clear that families invested in a growing increase in value of real estate without considering the possibility of overturning the market. Amplification of the positive difference are the dynamics triggered by the reactions from banks that began to sell the dumbs to third parties (credit assignment, securitization) through various financial instruments by downloading on other subjects the risks incurred and causing a deterioration of the financial system because the financial instruments spread in the system, were burdened by a positive difference between the relative value and the real estate guarantees in support, a difference that made them strongly exposed to the devaluation and that occurring between 2007 and 2008 triggered economic difficulties in some of the largest American credit institutions; Bear Stearns, Lehman Brothers and AIG were collapsed and then secured by US Treasury intervention with the Fed. Also European banks were invested by the devaluation of real estate securities, subsequently being nationalized or forced to recapitalize (increase in capital through reserves, own funds, contribution from shareholders). After several months of weakness and loss of loans, the phenomenon collapsed between 2007 and 2008 causing bank and financial entities to bankrupt and causing a sharp reduction in stock market values and the ability to consume and save for the population, with effects immediately recession on the economy.

2 - REGULATION ON THE TRANSPARENCY OF FINANCING OPERATIONS THROUGH SECURITIES AND RE-USE
2.1 - Securities Financing Transactions (SFT): Regulation (EU) 2015/2365
The EU dealt with Securities Financing Transactions (SFT) in a context of overall review of transparency in financial markets, because until 2015 they were not covered by any legislation. The regulatory proposal dates back to January 29, 2014, which became Regulation (EU) 2015/2365 "on the transparency of securities financing transactions and related re-use and wich amending regulation (EU) 648/2012 on OTC derivatives, central counterparties and trade repositories ".
Excessive speculation, the existence of serious regulatory gaps in the financial system, ineffectiveness of supervision, market opacity and the excessive complexity of financial products contributed to the global crisis that took place between 2007 and 2008. A series of measures, they are adopted by the Union to increase the soundness and stability of the banking system, including the reinforcement of capital requirements, standards for improving governance, supervision and resolution arrangements, aimed at ensuring that the financial system its role of allocating capital to the financing of the real economy; the creation of the Banking Union has brought decisive progress in this direction. The same crisis has highlighted the need to improve transparency and control in both the traditional banking sector and in sectors in which credit intermediation similar to banking takes place, known as the "shadow banking system" , an alarming sector that, according to estimates, is equivalent to about half of the regulated banking system; from this sizing it is obvious that the entire financial sector could be contaminated by the deficiencies related to unregulated credit intermediation, activities similar to those carried out by banks. With the EU regulation 2015-2365 the possible reduction of transparency related to unregulated credit activities is considered as a result of the structural reform of the banking sector of the Union because some activities carried out by traditional banks can migrate to the shadow banking sector and involve financial entities and non-financial, a dynamic that highlights the necessary international convergence towards greater transparency of unregulated transactions, an objective envisaged by the same regulation. The Commission's concern is the fact that "SFTs are widely used by managers of collective investment schemes for efficient portfolio management. Therefore, investments made on the basis of incomplete or inaccurate information about the investment strategy of the collective investment scheme can cause significant losses for investors, therefore it is essential that the collective investment undertakings communicate all the detailed information relevant to the use of SFTs and total return swaps; The same Commission specifies with the regulation that "the complete information on SFTs and total return swaps is an essential safeguard against possible conflicts of interest" since the assets allocated to TFS and Total Return Swap ( TRS) they are owned from investors and not by the managers of collective investment schemes (safeguarding the interests of investors thus avoiding the interests of the managers to the detriment of investors). A total return swap is an interest rate swap contract, based on which two counterparties undertake to reciprocally exchange a flow of interest at a fixed rate and one at a floating rate denominated in the same currency. For example, a counterparty transfers to the other the interest rate of the security plus the possible appreciation of the security, the other gives the former the possible depreciation of the security plus an interest rate linked to a market indicator such as Euribor. With more technical terms, the Total Return Swap can be described as an operation whereby a subject total return payer (protecion buyer) transfers to another subject total return receiver (protection seller) all the risk and return of an underlying asset (reference assets), against a flow that is paid at certain deadlines. The periodic monetary flow is linked to a market indicator added to a spread (Euribor + TRS Spread). The Total Return Swap differs from the structure of the credit default swap because it is based on an exchange of flows that is more complex than the simple periodic payment of a sum in exchange for protection against the default risk of the security. In the figure below, the total return swap scheme (source: wikipedia.org) .

Within the framework of work to limit the shadow banking system, the FSB Financial Stability Board (2°) and the European Systemic Risk Board (CERS (2°) established by Regulation (EU) 1092/2014 of the European Parliament and of the Council have identified the risks posed by securities financing transactions (SFTs), as a result confirms that the SFTs accumulate leverage financial, pro-cyclicity and interconnection in the financial markets; in particular, the work highlighted the lack of transparency in the use of SFTs preventing regulatory and supervisory authorities, as for investors, from correctly assessing and monitoring risks similar to bank risks and the level of interconnection in the financial system in the period before the financial crisis or during the crisis itself. In this context, on 29 August 2013, the FSB adopted a strategic framework entitled "Strengthening the supervision and regulation of the shadow banking system" (FSB's strategic framework) on the risks associated with securities lending and repurchase transactions in the shadow banking sector, endorsed by the G20 leaders in September 2013. Following the publication of the Green Paper on the shadow banking system, published by the European Commission on 19 March 2012 on the basis of numerous contributions received and taking into account developments at international level, on 4 September 2013, the FSB, presents a communication to the Council and the European Parliament entitled The shadow banking system: addressing new sources of risk in the financial sector, which stresses that the complex and opaque nature of SFTs makes it difficult to identify counterparties and monitor risk concentration and also determines the excessive use of leverage in the financial system.The Green Paper is a communication by which the European Commission illustrates the state of a given sector to be regulated and clarifies its point of view regarding certain problems; it is part of the so-called "atypical acts" envisaged but not regulated by the EEC Treaty, this type of communication can be informative, decisive, declarative or interpretative, and is subject to the advertising regime. According to the official definition of the European Union, the Green Papers are reflection papers on a specific policy topic published by the Commission. First of all, documents intended for all those - both organisms and individuals - who take part in the process of consultation and debate. In Italy, for example, these documents are also published by regional administrations and the government. Initially the chosen color was white: so much so that the first publication similar to the current green book was published in May 1984 and is entitled Television without frontiers: white book on the establishment of the common market for radio and television broadcasts, especially via satellite and via cable. Subsequently a white paper meant a document containing action proposals.

(2°) NOTE: FSB, the Financial Stability Board (in English Financial Stability Board, until 2009: Financial Stability Forum) is an international body with the task of monitoring the global financial system. All the G20 countries (represented by both their own governments and their respective central banks), Spain and the European Commission are represented in this body, as well as Saudi Arabia, Argentina, Brazil, China, Korea, India, Indonesia, Mexico, Russia, South Africa and Turkey (source). It has its headquarters in Basel. This body is the evolution of the already existing Financial Stability Forum (FSF), with the aim of promoting the stability of the international financial system, improving the functioning of financial markets and reducing systemic risk, through the exchange of information and international cooperation among Supervisory authorities, central banks, the main supranational organizations. At the Bonn meeting in February 1999, the Finance Ministers and Governors of the Central Banks of the countries of the Group of Seven (G-7) agreed, on the recommendation of the then Bundesbank Governor Hans Tietmeyer, the establishment of an institutional entity appointed to increase cooperation between regulators and national and supranational supervisory authorities, calling it the Financial Stability Forum (FSF). The FSF team included the national supervisory authorities of Australia, Canada, France, Germany, Japan, Hong Kong, Italy, the Netherlands, United Kingdom, Singapore, United States, Switzerland. Also participating were some international organizations such as the World Bank, the ECB, the BIS, the IMF, the OECD and the bodies responsible for issuing international accounting standards.
CERS, the European Systemic Risk Board (in English, European Systemic Risk Board-ESRB) is a European Union agency, headquartered in Frankfurt, responsible for macro-prudential supervision of the Union's financial system. The Council of the EU approved the establishment of the new agency in the meeting of 18 and 19 July 2009. In 2008 the President of the European Commission, José Manuel Barroso, established an independent group of experts led by Jacques de Larosière. In November 2008, the group met for the first time and, at the end of February 2009, prepared a report presenting to the European Commission some recommendations to strengthen the surveillance of the European financial system. The recommendations of the Larosière Group report are accepted and transformed into operational indications by the Community bodies. The Council of the European Union at its meeting of 18 and 19 July 2009 approved the creation of a European Systemic Risk Board or ESRB (European Systemic Risk Board) for the monitoring of financial stability at European level. At the same time the Council also approved the establishment of three new European authorities which together constitute the Joint Committee of the European Supervisory Authorities: 
The European Banking Authority (in English, European Banking Authority - EBA) for the supervision of the banking market;
The European Insurance and Occupational Pensions Authority (EIOPA) for the surveillance of the insurance market;
The European Securities and Markets Authority (European Securities and Markets Authority - ESMA) for the surveillance of the securities market. 
The legislation establishing the European Systemic Risk Board enters into force on 16 December 2010. The ESRB together with the three European authorities and the Member State authorities form the European System of Financial Supervision (SEVIF).
The European Systemic Risk Board is based in Frankfurt and the functioning of its Secretariat is guaranteed by the European Central Bank. The Committee is an independent body of the EU with the task of monitoring the macro-prudential stability of the EU financial system. The Committee helps to prevent and mitigate the systemic risks to the financial stability of the Union which originate within the same European system. The Committee also has the task of contributing to the correct and regular functioning of the internal market and ensuring that the financial system contributes in a sustainable manner to the economic growth of the Union. The organs of the Committee are: the General Council, the Steering Committee, the Secretariat (edited by the ECB), the Scientific Advisory Committee, the Technical Advisory Committee. The strategic objective of the Committee is that of macro-prudential oversight of the European Union's financial system and the prevention or mitigation of the systemic risk that may originate within the European financial system. Furthermore, the Committee must contribute to the correct and regular functioning of the Union's single market and ensure that the financial sector contributes to economic growth. To achieve this strategic objective, the European legislation assigned to the Committee a series of institutional tasks: analyzing and studying the relevant information - identifying potential systemically important risks - communicating, if necessary publicly, the risks that are considered relevant - issuing recommendations, if necessary also publicly, so that corrective measures are taken in response to the reported risks - coordinating its actions with those of international organizations, in particular the International Monetary Fund, the Financial Stability Board and all the authorities belonging to third countries involved in surveillance and macroprudential analysis.

With the 2015-2365 regulation, the European Commission responds to the need to increase the transparency of the securities markets and therefore of the financial system, a regulation that follows the FSB's strategic framework to ensure equal conditions of competition and international convergence. It creates a Union regulatory framework in which information from SFTs can be efficiently reported to trade repositories and information on such transactions and total return swaps are disclosed to investors in collective investment schemes; a data repertoire is a legal entity established in the European Union and registered at ESMA (ESMA in Italian) or recognized by ESMA if established in a third country. The definition of SFT in this regulation does not include derivative contracts as set out in Regulation (EU) no. 648/2012 of the European Parliament and of the Council; it includes the operations commonly known as liquidity swaps and swaps with collateral, which do not fall within the definition of derivative contracts pursuant to Regulation (EU) no. 648/2012. In defining the new regulation, the European Commission took into account the evolutionary state of market practices and technology that allows market participants to make use of transactions other than securities financing, liquidity management and collateral, as a strategy income enhancement, to cover short selling or for tax arbitrage on dividends, transactions that could have an economic effect equivalent to SFTs compared to the risks posed, including the procyclicality induced by fluctuating asset values ??and volatility, transformations maturity or liquidity deriving from the financing of long-term or illiquid assets through short-term or liquid assets, and the financial contagion due to the interconnections of the chains of transactions that entail the re-use of collateral. Consideration is given to the dynamics that could be established between Member States following the adoption of the banking sector's structural reform based on the issues raised by the FSB's strategic framework, dynamics that would induce the Member States to adopt divergent national provisions which would hinder the smooth functioning of the internal market to the detriment of market participants and financial stability; moreover, due to the lack of harmonized transparency rules, national authorities have difficulty comparing micro-level data from different Member States and thus understanding the real risks that individual market participants pose to the system. The EU regulation 2015-2365 has among others intends to avoid creating distortions and obstacles in the Union due to the lack of harmonized transparency rules between Member States; as a consequence, the appropriate legal basis for this regulation should be Article 114 of the Treaty on the Functioning of the European Union (TFEU), interpreted in accordance with the settled case law of the Court of Justice of the European Union, which lays down the adoption of measures for the creation and functioning of the internal market, allowing a Member State to adopt national provisions after the adoption of a harmonization measure to avoid quantitative restrictions between Member States, without prejudice to restrictions due to reasons of public morality, public order, public security, protection of health and life of humans and animals or plant preservation, protection of national artistic, historical or archaeological heritage, or protection of industrial and commercial property, provided they do not constitute a means of arbitrary discrimination or a disguised restriction on the matter between the Member States. The same article allows a Member State to introduce national provisions following the adoption of a harmonization measure only upon approval by the European Commission and based on scientific evidence; the same article establishes in paragraph 2 an exemption as regards tax provisions, provisions concerning the free movement of persons and relating to the rights and interests of employees.

With the regulation, the new rules on transparency are established with the obligation to provide for the reporting of information regarding the SFTs agreed by all market participants, whether they are financial or non-financial entities, including the composition of collateral, if the collateral the replacement of collateral at the end of the day and the warranty haircuts applied are available for re-use or re-use. In order to minimize the additional operational costs of market participants, the new rules and provisions should be based on the infrastructures, operating procedures and pre-existing formats that have been introduced regarding the reporting of derivative contracts to trade repositories. In this context, the European Supervisory Authority (European Securities and Markets Authority, ESMA) established by Regulation (EU) no. 1095/2010 of the European Parliament and of the Council should, to the extent feasible and relevant, minimize overlaps and avoid inconsistencies between the technical standards adopted under this Regulation and those adopted pursuant to Article 9 of Regulation (EU) n. 648/2012 concerning the reporting obligations relating to derivative contracts. The legal framework set out in this SFT Regulation should, to the extent possible, be the same as that introduced by Regulation (EU) no. 648/2012 in relation to the reporting of derivative contracts to trade repositories registered for this purpose. In this way, trade repositories registered or recognized in accordance with this regulation (Articles 55 and 99 of Regulation 648/2012) could fulfill the repertoire function provided for in this Regulation if they meet certain additional criteria, without prejudice to the completion of a procedure of simplified registration. The new rules on the transparency of SFTs and total return swaps are closely linked to Directives 2009/65/EC and 2011/61/EU (which we will deal with in the next paragraph) of the European Parliament and the Council, as directives they constitute the legal framework governing the creation, management and marketing of collective investment schemes, bodies that may operate as undertakings for collective investment in transferable securities (UCITS), administered by management or investment companies of UCITS authorized to the provisions of Directive 2009/65/EC, or in alternative investment funds (AIFs, alternative investment funds) administered by alternative investment fund managers (AIFMs) authorized or registered pursuant to Directive 2011/61/EU. The new rules on the transparency of SFTs and total return swaps introduced by this regulation complement and are applied in addition to the provisions of Directives 2009/65/EC and 2011/61/EU.

Regulation (EU) 2015/2365 stipulates that the exchange or transmission of personal data by the competent authorities of the Member States or trade repositories is carried out in accordance with the rules on the transfer of personal data referred to in Directive 95/46/EC of the European Parliament and of the Council, repealed by Regulation (EU) 2016/679 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. It is considered appropriate that the exchange or transmission of personal data by ESMA, EBA or EIOPA also takes place in accordance with the rules on the transfer of personal data pursuant to Regulation (EC) no. 45/2001 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies (the institutions, bodies, offices and agencies of the Union established by the TEU, the TFEU or the Euratom Treaty or on the basis of these treaties), as well as the free circulation of such data; to be considered that the regulation (EC) number 45/2001 is subsequently abrogated by the regulation (EU) 2018/1725, now in force. Furthermore, since the new uniform rules on the transparency of SFTs and certain OTC derivatives (in particular total return swaps) defined by the regulation, are strictly linked to the standards of reporting obligations defined by Regulation (EU) no. 648/2012, since OTC derivatives fall within the scope of the same reporting obligations, with Article 32 of Regulation (EU) 2015/2365 some amendments are made to Regulation (EU) 648/2012 to ensure an area of consistent application of both sets of transparency and reporting obligations. In particular, a clear distinction is drawn between OTC derivatives and exchange traded derivatives, regardless of whether these contracts are traded on the Union or third country markets. Article 32 modifies item 7 of Article 2 of Regulation (EU) 648/2012 defining "OTC derivative" or "OTC derivative contract": a derivative contract whose execution does not take place on a regulated market pursuant to Article 4 (1) (14) of Directive 2004/39/EC or on a market in a third country considered to be equivalent to a regulated market pursuant to Article 2a of this Regulation; furthermore, it introduces article 2 bis, which establishes equivalence provisions for the purposes of defining OTC derivatives for a third-country market to a regulated market pursuant to Article 4 of Directive 2004/39/EC and subsequent amendments; therefore the standard is established that allows to identify clearly the markets equivalent to the regulatory markets of third countries in order to be able to trace the clear distinction between derivatives and OTC derivatives.

In Chapter I of Regulation 2015/2365/EU the object, the scope and the definitions of interest are defined. The regulation, as reiterated above, establishes rules on the transparency of securities financing operations (SFT) and reuse; applies to counterparties in an SFT established in the Union, including all its branches, irrespective of where they are located and in a third country, if the SFT is completed in the performance of the activities of a branch in the Union of such counterpart. To management companies of undertakings for collective investment in transferable securities (UCITS) and investment companies UCITS pursuant to Directive 2009/65/EC, the managers of alternative investment funds (AIFMs) authorized pursuant to Directive 2011/61/EU, the counterparty engaged in re-use established in the Union, including all its branches, irrespective of where they are located; it also applies to counterparties engaged in re-use in a third country, if the re-use is carried out in the performance of a branch of that counterparty in the Union, or the re-use relates to financial instruments provided under a collateral security contract by a counterparty established in the Union or by a branch in the Union of a counterpart established in a third country. It provides for exemptions from the reporting and safeguarding obligations of the SFTs defined in Article 4 and for the obligations set out in Article 14, transparency of collective investment undertakings in the pre-contractual disclosure, for members of the European system of central banks (ESCB), other institutions of the Member States carrying out similar functions and other public bodies of the Union responsible for managing the public debt or intervening therein; the Bank for International Settlements and for transactions to which a member of the ESCB is a counterparty.

In Chapter II, Article 4 the reporting obligation for trade repositories is defined: SFT counterparties transmit information on the SFT operations they have concluded, as well as their modification or termination, to a trade repository registered in accordance with Article 5 or recognized in accordance with Article 19. This information shall be transmitted no later than the business day following the conclusion, modification or termination of the transaction. The same article defines the possibility of delegation of information relating to SFTs, also establishes that if a financial counterparty concludes an SFT with a non-financial counterparty that at the balance sheet date is classified as a business average according to the numerical limits of at least two of the three criteria set out in Article 3 (3) of Directive 2013/34/EU of the European Parliament and of the Council (Balance sheet EUR 20 million, Net income EUR 40 million, average number of employees employed during the financial year: 250), the financial counterparty is responsible for reporting to both counterparties; in the event that the counterparty to securities transfer transactions is a UCITS managed by a management company, the latter is responsible for reporting on behalf of the UCITS, if the counterparty is an alternative investment fund, the fund manager last is responsible for reporting on behalf of the fund. The counterparties keep the data relating to the SFTs they have concluded, modified or ceased for a minimum period of five years after their termination. If a trade repository is not available for the registration of information on SFTs, counterparties shall ensure that this information is reported to ESMA, in this case, the European Supervisory Authority (European Securities and Markets Authority). ESMA shall ensure that all the competent entities referred to in Article 12 (2) have access to all the information concerning the SFTs they need to perform their respective tasks and mandates. Regarding the information received pursuant to Article 4 of the Regulation (reporting and safeguard obligation in respect of SFTs), trade repositories and ESMA respect the relevant provisions on confidentiality, integrity and protection of information and comply with the obligations established in particular in Article 80 of Regulation (EU) No 648/2012 concerning the safeguarding and registration of data directories in which the references to Article 9 and the derivative contracts of the same regulation should be replaced with Article 4 of Regulation 2015/2365/EU and with SFTs, substitution aimed exclusively at same Article 4 for compliance with the obligations set out in Article 80 of Regulation 648/2012. Also with Article 4 of Regulation 2015/2365, the European Commission establishes that for a reporting counterparty information relating to an SFT to a trade repository or to ESMA or an entity reporting such information on behalf of a counterparty not is considered in violation of any restrictions on the disclosure of information imposed by the contract or by other laws, regulations or administrative provisions; the person making the report, its directors and employees are excluded from any liability arising from the report. In order to ensure the consistent application of this article and consistency with the reporting made pursuant to Article 9 of Regulation (EU) no. 648/2012 and internationally agreed standards, ESMA, in close cooperation with the ESCB and taking into account its needs, shall develop draft regulatory technical standards to clarify reporting information for the different types of SFTs, which include at least: 
a) the parties to the SFT and, if different, the beneficiary of the rights and obligations arising therefrom; 
b) the amount of the capital; the currency; the assets used as collateral and their type, quality and value; the method used to provide collateral; if the collateral is available for re-use; in the event that the collateral is distinguishable from other assets, if they have been re-used; possible substitutions of collateral; the repurchase price; the loan commission or the margin loan rate; any warranty discrepancies; the value date; the expiry date; the date of the first recall and the market segment; 
c) depending on the SFTs, information concerning: i) the reinvestment of collateral consisting of cash and cash equivalents; (ii) securities or goods granted or borrowed. 
In developing these draft technical standards, ESMA shall take into account the technical specificities of the asset aggregates and, where appropriate, provides for the possibility of reporting the collateral data at the position level. ESMA, in close cooperation with the ESCB and taking its needs into account, has developed draft implementing technical standards specifying the format and frequency of alerts for the different types of SFTs, in particular the format includes: the global identifiers of legal entities (LEI code) or pre-LEI codes, until the global system of identification of legal entities (3°) is fully implemented; b) the international identification numbers of the securities (ISIN code); and c) the unique identifiers of the transactions. In developing these draft technical standards, ESMA took into account international developments and agreed rules at Union or global level.

(3°) NOTE: the identifier of the legal entity (LEI) is an alphanumeric code, consisting of 20 characters, which is based on the ISO 17442 standard defined by the International Organization for Standardization (ISO), it is associated with key reference information that makes it possible to unambiguously identify the legal entities involved in an economic transaction and contains information on the ownership structure of the legal person. A global archive of searchable LEI codes that increases transparency in the global market. The Financial Stability Board (FSB) deems it necessary to globally adopt the LEI code because it enables better risk management by encouraging greater quality and accuracy of financial data as a whole. The set of data associated with publicly available LEI codes provides access to standardized information on legal entities worldwide. Data are recorded and verified regularly in accordance with protocols and procedures defined by the regulatory supervision committee of the LEI codes. In collaboration with its partners in the Global LEI System, the Global Legal Entity Identifier Foundation (GLEIF) continues to strive to further optimize the quality, reliability and usability of data associated with the LEI codes, making it available to market participants. numerous information associated with the population of LEI codes. The promoters of this initiative, namely the Wind Group, the FSB and many regulatory authorities around the world, have emphasized the need to make the LEI code a widespread public good. The Global Index of LEI codes, a tool made available by GLEIF, contributes greatly to achieving this goal. This index makes available to all interested parties, in a practical and free way, all the data associated with the LEI codes. Currently the LEI code is required by companies through GLEIF or its business partner. a Global Legal Entity Identifier Foundation (GLEIF) publishes the 'Entity Legal Forms List (ELF)' ('Entity Legal Form (ELF) Code List'). The first iteration, published in November 2017, lists more. of 1,600 legal forms in over 50 jurisdictions. Among the legal forms include, for example: Limited liability partnership (LLP), Gesellschaft mit beschrankter Haftung (GmbH) and Société Anonyme (SA). The ELF Code List assigns a unique code to each legal form, an alphanumeric code consisting of four characters of the basic Latin character set, the interaction in the standardized set of reference data on a legal entity available in the Global Index of LEI codes further improves 'business card' information included in every register related to a Legal Person ID (LEI). Data enrichment improves the user experience because favors the classification of legal entities and therefore offers more information on the global market. The ELF Code List is based on ISO 20275 'Financial Services - Entity Legal Forms (ELF)', developed by the International Standards Organization and published in July 2017; specifies the elements of a unique system to identify the different legal forms existing in a jurisdiction. It is proposed to codify the existing legal forms in the jurisdictions and thus facilitate the classification of legal entities according to their legal form "where the legal rule means the" type of legal entity in which an organization is classified within the system legal or regulatory framework ", clear knowledge that constitutes an important element of transactions in the financial services sector, in fact, in order to start a business relationship, it is necessary to distinguish the type of legal entity with which the transaction is carried out. (and their organizational structure) involved in financial transactions must be identified within such transactions.The standardization of information on legal or organizational structures will offer greater flexibility and allow better understanding of risk exposure and access to capital " . "Regulatory authorities and market participants have recognized the need to identify legal forms, both nationally and that consistently on global markets, and have called for the development of a standard that can meet this need. 20275 satisfies the need to identify legal forms in a structured way in order also to classify legal entities based on the nature of their legal structure ". The ISO has set up an updating authority for ISO 20275 made up of ISO members and members of the ISO 68 Financial Services Technical Committee. The Swiss Association for Standardization (SNV) was appointed to the Secretariat of the Update Authority. The SNV has assigned "the execution of the updating authority's secretariat activities" and the execution of the related tasks to the GLEIF. In addition to the other functions performed, the GLEIF is responsible for identifying the existing legal forms and assigning a unique ELF code to each legal form under ISO 20275. In conclusion, it is expected that the issuing organizations of LEI codes will report the ELF code in their processes of issuing the LEIs and in their communications. The LEI Common Data File (CDF) format defines the ways in which the organizations issuing LEI codes must communicate their LEI and first level reference data, ie business card type information about a legal entity and from 1° March 2018, all newly issued LEIs must carry the ELF code of the legal entity. Source: GLEIF.

In Chapter III of Article 5 of Article 12, provisions are laid down on the registration and supervision of trade repositories, with reference to the obligations set out in Chapter II through Article 4, the obligation to register data at the ESMA with related procedure it is defined. In Chapter IV of the regulation, transparency obligations with investors are defined by defining with the article 13 the information for investors, the obligation of the UCITS management companies, the same UCITS and AIFM companies to inform investors on the use that these they make SFTs and total return swaps; annex A of the regulation defines the information on the SFTs and the total return swaps to be provided in the semiannual and annual reports of the UCITS and in the annual report of the AIF in addition to the information contained in the semi-annual and annual reports provided for in Article 68 of the Directive 2009/65/EC for UCITS and Article 22 of Directive 2011/61/EU for AIFMs. Article 14 of the same chapter establishes the information obligations for pre-contractual investors by defining in Annex B information on SFTs and total return swaps that UCITS management companies or UCITS investment companies and AIFMs are respectively authorized to use, and include a clear declaration that these operations and tools are used; the information is added to the contents of the prospectus to investors enshrined in Article 69 of Directive 2009/65/EC for UCITS and with Article 23, paragraphs 1 and 3, of Directive 2011/61/EU for AIFMs.

In Chapter V of regulation 2015/2365/EU, transparency of re-use, article 15, are defined the conditions for the right of the counterparty to re-use financial instruments received under a guarantee contract subject to the following conditions: a) the supplying counterparty has been duly informed in writing by the receiving counterpart of the risks and consequences inherent in: i) the consent to a right to use a guarantee provided under a guarantee contract with a real guarantee in accordance with Article 5 of Directive 2002/47/EC on financial guarantee contracts (4°); or ii) to the conclusion of a guarantee contract with transfer of the title of ownership;
b) the supplying counterparty has given express consent, evidenced by a signature, in writing or in a legally equivalent form, of the same supplying counterparty a warranty contract with a real guarantee, the terms of which recognize a right of use in accordance with Article 5 of Directive 2002/47/EC (4°), or expressly agreed to provide collateral by means of a guarantee contract with transfer of the title of property. With regard to letter a) of the first subparagraph, the supplying counterparty is informed in writing at least of the risks and consequences that may arise in the event of default of the receiving counterparty.

(4°) NOTE: Article 5 of Directive 2002/47/EC establishes the right to use the financial guarantee in financial collateral agreements by defining the obligation to replace with collateral security from part of the beneficiary when using the financial guarantee, assuming the obligation to transfer an equivalent guarantee to replace the original financial guarantee, at the latest on the due date for the fulfillment of the covered financial obligations, contemplated by the financial guarantee contract with real guarantee constitution; alternatively, the beneficiary of the guarantee, on the date set for the performance of the financial obligations guaranteed, transfers the equivalent guarantee or, if and to the extent that the terms of the financial collateral arrangement with an effective collateral provide for it, compensates the equivalent guarantee with the guaranteed financial obligation or uses it to settle the guaranteed financial obligation. The equivalent collateral transferred is subject to the financial guarantee contract with a real collateral to which the original financial guarantee was subject and is deemed to be provided under the financial guarantee contract with a real guarantee in the moment in which the original financial guarantee is been provided for the first time. Member States must ensure that the use of the financial guarantee by the beneficiary does not render invalid o not subject to forced execution the rights of the collateral beneficiary under the contract as regards the financial guarantee transferred by the collateral taker. Furthermore, if an event that determines the enforcement of the guarantee occurs while the obligation to transfer the collateral from the beneficiary of the financial guarantee has yet to be fulfilled, this obligation may be subject to close-out compensation.

Also in Article 15 of Regulation 2015/2365/EU it is established that any exercise by the counterparties of the right to reuse is subject to both of the following conditions: a) re-use is carried out in accordance with the terms specified in the warranty contract so it must be preceded and proven by a signature, in writing or in a legally equivalent form of the supplying counterparty, the terms of which recognize a right to use the financial instruments received in accordance with Article 5 of Directive 2002/47/EC, or have expressly agreed to provide collateral securities by means of a guarantee contract with transfer of the title of ownership, b) the financial instruments received under a guarantee contract are transferred from the account of the supplying counterparty. Notwithstanding condition (b), where the counterparty to a guarantee contract is established in a third country and the counterparty's account providing the collateral is kept in a third country and subject to the latter's legislation, re-use is demonstrated by a transfer from the account of the supplying counterpart or other appropriate means. 
Article 15 of the Regulation is without prejudice to the most stringent sectoral legislation, in particular Directives 2009/65/EC and 2014/65/EU, as well as national legislation designed to ensure a higher level of protection for the supplying counterparts and does not affect national legislation regarding the validity or the effect of an operation. Regulation (EU) 2015-2536 under Chapter VI lays down supervisory provisions and competent authorities, in Chapter VII defines the conditions for equivalence between STF trading repositories between Member States and third country countries in order to establish rules that allow recognition and equivalence; in chapter VIII defines the administrative measures and sanctions that the authorities of the member states must impose at least for violations of articles from 4 to 15 of the same regulation.

On 14 October 2014, the FSB published a regulatory framework for the haircuts applicable to non-centrally cleared SFTs (through a central counterparty authorized pursuant to Regulation (EU) No. 648/2012); being the SFT, in the absence of compensation and adequate guarantees, operations exposed to serious risks, the FSB has defined a regulatory framework for the double track collateral scraps: 1) qualitative rules for the methods applied by market participants to calculate royal guarantee haircuts 2) minimum numerical levels of the guarantee differences for non-centrally cleared SFTs in which the financing against collateral other than sovereign debt instruments is granted to non-bank subjects, according to the following table:

2.2 - Credit default swaps: EU regulation 236/2012 
The credit default swap (CDS) is a swap with the function of transferring credit risk, the most common between credit derivatives classified as a hedging instrument. An investor (A) has a credit (for example due to a loan) against a debtor counterpart (B). Investor A to protect himself from the risk of bankruptcy of counterpart B with the credit that loses its value or becomes uncollectible is aimed at a third party C, willing to take on this risk; the counterpart C acts in a manner similar to an insurance, in the technical jargon defined as protection seller, or "protection seller". Part A with commitment pays to C a periodic amount, the amount of which is the "price" of the hedge and is the main object of the contractual agreement; in exchange for this cash flow, the protection seller (C) undertakes to repay to part A the nominal value of the credit instrument, in the event that the debtor B becomes insolvent (an event called credit default). The contractual agreement between A and C on the underlying security B is called a credit default swap (CDS). In the financial world, CDS were born and spread as hedging instruments, allowing the exchange of protection on the market as in the case of currencies or raw materials. Normally the duration of a CDS is five years, duration that can change being a non-standardized contract (there are many variations) and it is traded on the over-the-counter market (not regulated), where it is possible to stipulate any duration. Credit default swaps are also used to hedge against a bankruptcy risk (or rating downgrade) of a state. In this case they are called "CDS sovrani" (sovereign CDS). Credit default swaps intervene, for example, in short-term securities.

The sale of securities not directly held by the seller, carried out against one or more third parties not directly, is called short selling, seller naked; it is a sales technique that is not recommended for long-term investments. Securities, usually provided by a bank or financial intermediary, are instantly lent by their supplier to the short seller (also referred to as a shortlisted seller or seller) and then immediately sold by the latter. Therefore, short selling is a non-money loan, but a bond and, as is usually the case with money, there is an interest to be paid to the lender. The amount of interest to be paid increases in relation to the increase in the duration of this bond loan, since the person who sells it naked must, within a certain period of time, buy the securities on the market (therefore at market price) with refund to the lender: technically defined operation covering the overdraft (in English short covering). For the buyer there is no difference between the securities purchased from a short sale or not in the open because the short selling implemented by the seller is practically invisible. The income generated by the sale of the securities comes before the moment of the actual purchase by the seller (in the first phase of sale to the buyer the sellers lent the securities), the short sale is made when the short seller (because takes the securities on loan) provides that the cost of their subsequent acquisition on the market (the one intended to cover the overdraft, ie to repay the lender) will be lower than the price previously collected (and usually this equivalent value is provisionally placed as collateral on the short up to overcoating performed). In this case, the overall yield of the short selling operation will be profitable. Conversely, if the price of the securities increases during the time of the loan, the return on the transaction will result in loss. Therefore, short selling occurs mainly when the stock markets are in a downturn, a phase that historically has a shorter duration and are less numerous than the ascending phases, which is the reason for the short name.

At the height of the financial crisis in September 2008, the competent authorities of several Member States and the supervisory authorities of third countries such as the United States of America and Japan have taken emergency measures to restrict or prohibit short selling of some or of all categories of securities. These authorities intervened, fearing that, at a time of considerable financial instability, short selling could have aggravated the downward spiral of stock prices, in particular of financial institutions, to such an extent that they ultimately threatened financial solidity and create systemic risks. Events that have created little harmonization between the measures adopted by the Member States precisely because of the lack of a specific common legal framework for short selling.

With the adoption of regulation (EU) 236/2012 the European Commission guarantees the proper functioning of the internal market and improves the conditions of its operation, with particular regard to financial markets, guarantees a high level of protection for investors and consumers; with this regulation, the commission establishes a common regulatory framework regarding the rules and powers relating to short selling and derivative contracts concerning the coverage of the risk of default of the issuer (credit default swap). The regulatory framework ensures a greater degree of coordination and consistency between Member States in which measures must be taken in exceptional circumstances, harmonises the rules on short selling and some relevant aspects of credit default swaps, prevents the creation of obstacles to good functioning of the internal market because it prevents the Member States from continuing to adopt divergent measures. A regulatory legislative framework is adopted (Regulation 236/2012/EU) to ensure that provisions directly providing for the obligation to notify individuals and therefore public disclosure of their relative net short positions certain instruments and related to short selling made in the absence of the availability of securities for investment firms or banks, rules to be applied uniformly throughout the Union. The regulation is also needed to confer on the European Supervisory Authority (European Securities and Markets Authority) (ESMA), established by Regulation (EU) no. 1095/2010 of the European Parliament and of the Council, the powers to coordinate the measures taken by the competent authorities or to adopt the measures itself.

The regulatory framework adopted with Regulation (EU) 236/2012 extends to all financial instruments in exceptional cases and establishes permanent rules proportionate to the risk that short sales generate. It establishes that the competent Asfem authorities may adopt measures relating to all financial instruments in exceptional circumstances beyond permanent measures that only apply to particular types of financial instruments. Requirements are defined for notifying regulatory authorities of significant net short positions relating to sovereign debt securities in the Union, which allow the same authorities to verify whether such positions create systemic risks or are used for improper purposes; such communications must remain private to the authorities to avoid negative effects on the sovereign debt markets where liquidity problems exist. The reporting obligations relating to sovereign debt are applied to debt instruments issued by a Member State and the Union, including the European Investment Bank, a Ministry of a Member State, an Agency, a special purpose vehicle or an international financial institution created by two or more Member States issuing debt on behalf of one or more Member States, such as the European Financial Stability Fund or the future European Stability Mechanism. In the case of federal Member States, notification obligations should also relate to debt instruments issued by a member of the federation. They do not concern other regional, local or semi-public bodies of a Member State, which issue debt instruments. The objective of debt instruments issued by the Union is, in particular, to provide balance of payments support or financial stability for Member States or for macro-financial assistance to third countries. The regulation establishes notification obligations concerning not only short positions created by trading stocks or sovereign debt in trading venues (regulated markets), but also short positions created by trading outside these locations and the net short positions created with the use of derivative products, such as option contracts, standardized futures financial contracts (futures), index-linked instruments, differential financial contracts and spread bets relating to equity securities or sovereign debt. They require complete and accurate information on the positions of a natural or legal person. In particular, information provided to regulators or the market takes into account both short and long positions in order to provide valid information about the net short position in equity securities, sovereign debt and credit default swaps of the natural or legal person.

The transparency rules established by the committee provide for notification or communication to the public, when a change in a net short position involves a variation, and are applied regardless of where the natural or legal person has its headquarters, even in a third country, where such person has an important net short position in a company whose shares are admitted to trading on a trading venue in the Union or a net short position in sovereign debt issued by a Member State or the Union. The definition of short selling does not include either a repurchase agreement between two parties, in which one party sells to the other a security at a price determined with the commitment to repurchase it at a later date than another determined price, or a derivative contract where the sale of securities is agreed at a price set at a future date and does not include the transfer of securities on the basis of a securities lending arrangement. The short sales of equity or sovereign debt securities made in the absence of the availability of the securities are considered in the regulation to increase the risk of non-settlement and market volatility; to reduce these risks, restrictions are imposed proportionate to the short selling of these instruments. For the short sale of titles equity in the absence of securities, it is necessary that a natural or legal person has concluded an agreement with a third party pursuant to which the latter has confirmed that the share has been localized, which means that the third confirms that he believes he can have the title available for settlement at the scheduled deadline. For the purpose of this confirmation it is necessary that measures be taken against third parties so that the natural or legal person has the reasonable expectation that the regulation can be carried out at the scheduled expiry. This includes measures such as the assignment by the third party of equity securities for the loan or purchase so that settlement can take place at the scheduled deadline. For short sales to be covered by the purchase of the security on the same day, this includes the confirmation by the third party of considering the security readily obtainable for the loan or purchase. In determining what measures are necessary to have a reasonable expectation that settlement will take place on the due date, AESFEM will take into account the liquidity of equity securities, in particular the level of trade and the ease with which the purchase, sale and loan can be made with minimal impact on the market.

The obligations of central counterparties are defined in relation to enforcement procedures compulsory(buy-ins) and penalties for failure to settle transactions in equity securities. Additional rules are set for measures related to sovereign debt and sovereign credit default swaps, including measures for greater transparency and restrictions on short selling in the absence of the availability of securities that establish proportionate obligations and at the same time avoid a negative impact on the liquidity of sovereign bond markets and sovereign debt repurchase markets. Intervention powers are envisaged for the authorities to demand greater transparency and to impose time restrictions on short selling, credit default swaps or other transactions in order to prevent an uncontrolled reduction in the price of a financial instrument in case of development unfavorable conditions that seriously threaten the stability or confidence of the market in a Member State; measures that may be necessary as a result of various unfavorable events or developments, financial or economic events, natural disasters or terrorist acts. Furthermore, some unfavorable events or developments requiring the adoption of measures could occur only in one Member State and have no cross-border implications. Chapter I of the regulation defines the scope of application, the definitions aimed at settlement, the short and long positions and the position uncovered in a credit default swap on sovereign issuers. In Chapter II the rules on the transparency of net short positions are established, in Chapter III the rules for short selling are defined in the absence of the availability of securities, in Chapter IV the conditions for derogation from the regulation, in Chapter V are defined the powers the intervention of the competent authorities and of Aesfem, and the role of the authorities in Chapter VI.

Therefore, Regulation (EU) 236/2012 on the short selling and certain aspects of derivative contracts to cover the risk of default of the issuer (credit default swap) is amended by Regulation (EU) 909/2014 on which deletes the relevant Article 15 relating to the compulsory buy-in enforcement procedure.

3 - UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN THE TRANSFERABLE SECURITIES
3.1 Introduction
Securities lending is a very common practice in the UCITS fund industry (Undertakings for Collective Investment in Transferable Securities): investments in mutual funds and SICAV regulated by the European Parliament Directive 2009/65/EC, published on January 13, 2009, called Ucits. The directive makes new changes to previous European Parliament Directives, previous Ucits and published on 21st January 2002 (2001/107/EC, Directive manager and 2001/108/EC, Product Directive) and which in turn had constituted an important update of the Directive 85/611/EEC (first Ucits directive), identifies those collective investment schemes, mutual funds and Sicavs, which invest mainly in transferable securities in accordance with the provisions of the regulatory text; in essence, the UCITS directives specifically regulate UCITS as collective investment schemes that invest in transferable securities, including mutual funds and SICAVs (investment companies with variable capital). The investment companies with variable capital SICAV are treated as a unit trust, with the difference that in the investment fund the investor owns a portion of the fund itself, administered by a separate management company (the SGR) , while in the SICAV the investor assumes the status of shareholder of the guarantor company, whose share capital coincides with the assets under administration. The first Ucits directive allowed UCITS authorized by a Member State to be freely distributable in other EU Member States (European passport) promoting greater harmonization of markets. Being the criticality of the first UCITS directive, little attention to the discipline of the UCITS management companies (UCITS) and the depositaries of assets subject to investment and the emergence of new types of UCITS, which did not fall within the scope of the First Directive and which therefore did not enjoy the advantages it offered at the beginning of the 1990s, a second UCITS directive proposal was developed to resolve these issues; the long political disputes between the European countries meant that it was soon abandoned. With the approval of the subsequent Ucits, the third (Directive 2001/107 / EC, directive manager and directive 2001/108 / EC, product directive) the European passport was extended to a much larger number of UCITS, which form that moment fall into in the new definition of harmonized product. The marketing of units or shares of Ucits-compliant funds was also permitted in non-EU countries such as: Switzerland, Asia, South America and South Africa. The fourth Ucits Directive (Directive 2009/65/EC) has laid the foundations for a profound transformation of the European market for collective asset management, further innovating the regulations on the passport of the operator, freedom of establishment and freedom to provide services and creating the conditions for achieving greater economies of scale within the sector. On July 23, 2014, the 2014/91/EU Directive (fifth UCITS) was adopted, which intervenes on the previous UCITS directive to eliminate the disparities between the national rules on the functions and responsibilities of depositaries, with regard to the remuneration policy of managers, on administrative sanctions and with the objectives of increasing investor protection and prevention of systemic financial risks and conforming to the new provisions introduced by the Alternative Investment Fund Managers Directive (AIFMD) which establishes harmonized regulatory standards for AIFM (alternative investment fund managers). Normally, alternative funds differ from other mutual funds because they have the possibility of investing in a wider range of instruments. They belong to them to non-harmonized collective investment funds unlike the UCITS; known as FIA and not regulated at European level, unlike the AIFMs (FIA management companies) as illustrated in paragraph 5, precisely because they consist of highly diversified financial instruments among the member countries, a dynamic that causes impediment to harmonized regulation while remaining subject to the different legislations existing in the individual member countries of the European Union. Prior to the adoption of the Fifth UCITS Directive (EU) 2014/91, the European Commission further reviewed the UCITS regulations by publishing, on July 26, 2012, a new UCITS consultation document entitled "Product Rules, Liquidity Management, Depositary, Money Market Funds, Long Term Investments ". This initiative lays the foundations for a new legislative process aimed at improving the regulatory framework for UCITS, and thus for the definition of a new UCITS, the sixth.

3.2 - Collective investment company: UCITS guidelines (UCITS) 
Directive 2009/65/EC is issued by the European Commission on July 13, 2009, considering that the Directive 85/611/EEC of the Council of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to certain undertakings for collective investment in transferable securities (UCITS), has been substantially amended several times. With the new modifications, a grouping of previous modifications is carried out in the single directive 2009/65/EC. With Directive 85/611/EEC, an important contribution was made to the development of the financial investment sector. "Many improvements have been made that at the turn of the 21st century were inadequate for UCITS for the new millennium financial markets". The Commission Green Paper of 12 July 2005 on strengthening the regulatory framework for investment funds in the EU launched a public debate on how Directive 85/611/EEC should be amended to address those new challenges. This intensive consultation process led to the broadly agreed conclusion that substantial changes to this directive are necessary. The Commission considers that coordination of national laws governing collective investment undertakings should be coordinated to bring the conditions of competition between these bodies closer together at Community level, while at the same time ensuring more effective and more uniform protection for unitholders. Such coordination facilitates the removal of restrictions on the free movement of UCITS units in the EU Community. With regard to the above objectives, the Commission considers it important to lay down common minimum standards with regard to the authorization, supervision, structure and activity of UCITS established in the Member States, as well as the information they are required to publish. It should be noted that the units of UCITS are considered financial instruments in accordance with Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments. The activity of individual management of investment portfolios is an investment service governed by Directive 2004/39/EC subsequently recast with the Directive (EU) 2014/65 studied in the next paragraph and therefore to ensure that the sector is governed by a homogeneous regulatory framework, management companies which are authorized to provide such a service must also be subject to the conditions laid down in that Directive.

The Commission considers that, as a general approach, a Member State of origin should be able to enact stricter rules than those set out in this Directive where it is deemed necessary, with particular reference to the subject of authorization conditions, prudential requirements and requirements in the subject of reports and prospectuses relating to the specific activity, the business object of the collective investment undertakings.

With the directive 2009/65/CE are established the rules that define the preconditions to which a management company (collective portfolio management: management of mutual funds or management of investment companies) can delegate to third parties, on the basis of a mandate, tasks and specific functions for the purpose of increasing the efficiency of their activities. Since the application of the supervisory principle by the home Member State must be ensured, the Member States allowing such a delegation have the task of ensuring that the management companies authorized by them do not delegate all their functions to one or more third parties, so as to become a phantom company, and that the existence of mandates does not prevent an effective supervision of the management company. A management company which has delegated its functions should not prejudice the liability of the company and the depositary vis-à-vis the holders of the units and the competent authorities. With the aim of ensuring a level playing field and adequate supervision over the long term, it is established that the Commission examines the possibility of harmonizing the arrangements for delegation at Community level. As we will see in the next paragraph the companies of investment defined in Directive (EU) 2014/65 are authorized to carry out the predominant activity of providing services and / or investment activities on an individual professional basis, including the raising of funds from the public for investment activities and the provision of investment such as the execution of purchase orders for securities, shares, unlike the management companies of collective investment schemes whose business objective is the management of mutual funds or the management of groups of investment companies UCITS. For UCITS, Directive 2009/65/EC intends the following bodies: a) whose sole object is the collective investment of capital raised from the public in transferable securities or other liquid financial assets referred to in Article 50 (1), and whose functioning is subject to the principle of risk spreading; and b) whose units are, at the request of the holders, repurchased or redeemed, either directly or indirectly, from the assets of the aforementioned bodies.Is assimilated to such repurchases or reimbursements the fact that a UCITS acts to prevent the value of its market shares from moving away significantly from the net asset value. In accordance with national law, UCITS can take the form of a contract (a mutual fund managed by a management company) or a trust (unit trust: a trust deed) or a statutory form (an investment company); in the first case, the management company must be designated, so the same management company can set up a UCITS in a contractual form; for the second case, as we will see in this paragraph, derogation provisions are laid down for the management company's obligation. The investment company may invest the funds raised by the public in collective investment portfolios if authorized with reference to the legal logic defined by Directive 2009/65/EC; therefore, the UCITS investment company within the meaning of this Directive is not subject to the provisions of Directive (EU) 2014/65 for investment companies that provide services on an individual and non-collective level such as investment institutions. Investment companies whose assets are invested, through the intermediation of subsidiaries, mainly in assets other than transferable securities are not subject to this Directive; it is prohibited for UCITS subject to this Directive to be transformed into undertakings for collective investment not subject to this Directive, moreover, a Member State may apply to the UCITS established on its territory additional or stricter provisions, provided these are of general application and are not contrary to Directive 2009/65 / EC. a derogation from this Directive is made for: a) closed-ended undertakings for collective investment; b) collective investment undertakings that raise capital without promoting the sale of their shares among the public within the Community or in any part of it; c) collective investment undertakings whose sale of units is reserved by the fund regulations or by the memorandum of association of the investment company to the public in third countries; (d) the categories of collective investment undertakings established by the legislation of the Member State in which those collective investment undertakings are established, for which the obligations relating to the UCITS investment policy set out in the rules of Chapter VII can not be applied; the general obligations of a UCITS defined by the rules of Article 83, in view of their investment and borrowing policy. Member States may allow a UCITS to consist of several investment compartments and if they comprise more than one sub-fund, for the purposes of the provisions on investment policy obligations, Chapter VII of the Directive (Articles 49 to 57), is adopted the criterion by which each investment sub-fund is considered to be a separate UCITS.

Directive 2009/65/EC establishes an obligation for the authorities of the Member State to refuse or revoke the authorization to a management company if the content of the activity program, geographical distribution or activities actually carried out clearly indicate that it has chosen the legal system of a Member State in order to avoid the stricter criteria in force in another Member State on whose territory it intends to carry out or perform most of its activities. It establishes that a management company should be authorized in the Member State in which its registered office is located. In accordance with the supervisory principle of the home Member State, only the competent authorities of the management company's home Member State should be considered competent to supervise the management company's organization, which should also be subject to the law of the Member State of origin all the procedures and resources necessary for the performance of the administration functions for the collective portfolio management activity (in Annex II of the Directive): Investment management, Administration of investments, activities subdivided into a) legal services and accounting for the management of the fund, b) information service for customers, c) evaluation and determination of the price (also for the purposes of tax returns), d) monitoring of compliance with applicable legislation, e) keeping the register of holders of shares, f) distribution of income, g) issue and redemption of units, h ) settlement of contracts (including sending of certificates), i) keeping of accounting records; in the end of marketing. The Directive stipulates that no management company performs activities other than the management of UCITS authorized pursuant to the same, unless it concerns the additional management of other collective investment undertakings not subject to this Directive and on which the management company it is subject to prudential supervision, but the shares of which can not be traded in other Member States by virtue of it; Derogations from Member States are possible as these may authorize management companies to provide, in addition to UCITS management services, additional services such as management services, on a discretionary and individual basis, of investment portfolios, including those held by pension funds, according to mandates given by investors if these portfolios include one or more of the instruments listed in section C of Annex I of Directive 2014/65/EU; or also, as ancillary services: investment advice in one or more of the instruments listed in Section C of Annex I of Directive 2014/65/EU, custody and administration of units of collective investment schemes (FIA, ad example). Management companies are not under any circumstances authorized under Directive 2009/65/EC to provide only additional services or ancillary services without being authorized to perform UCITS management services; the provision of additional services and accessories nevertheless provides for the application of Article 2 (2) and Articles 15, 16 and Articles 24 and 25 of Directive 2014/65/EU as amended by Directive 2014/91/EU.

The directive lays down the obligation for investment institutions to have initial capital to safeguard the interests of shareholders and to guarantee a level playing field in the market for the same harmonized collective investment undertakings. Furthermore, it imposes constraints on certain investment transactions linked to the own assets defining limits in percentages of the same patrimony with the provisions of chapter VII, (articles from 49 to 57). The Directive 2009/65/EC in article 22 establishes that the assets of the mutual fund are entrusted to the custody of a depositary; with the same article it is established that the depositary is responsible, according to the national law of the UCITS home Member State, against the management company and the unit holders, for any damage suffered by them as a consequence of the gross negligence or incorrect fulfillment of his obligations. With regard to the unitholders, the responsibility can be direct or indirect through the management company, depending on the legal nature of the relationship between the depositary, the management company and the unitholders, moreover, the responsibility of the depositary is not affected by the 'entrusting a third party with all or a portion of the values held in custody. The duties of the depositary include the ascertainment that the sale, issue, repurchase, redemption or cancellation of the units on behalf of the fund or the management company are carried out in accordance with the applicable national law and the fund regulations; ascertains that the value of the units is calculated in accordance with the applicable national law and the fund regulations, also executes the instructions of the management company, unless they are contrary to the applicable national law or fund regulations and ascertains that in transactions relating to the countervalue is remitted to it in terms of use, in addition to ascertaining that the returns of the fund receive the destination in accordance with the applicable national law and the fund regulations. The depositary has its registered office or is established in the UCITS home Member State and is an institution subject to prudential regulation and continuous supervision. It provides sufficient financial and professional guarantees to be able to effectively carry out its depositary activity and to meet the commitments resulting from the exercise of this function. Member States shall establish the categories of institutions that can be chosen as depositaries, an institution which allows the competent authorities of the UCITS home Member State to obtain, upon request, all the information which the depositary has obtained in the performance of its tasks and which they are necessary for the competent authorities to monitor compliance by the UCITS with this Directive. If the management company's home Member State is not the UCITS home Member State, the depositary shall enter into a written agreement with the management company which regulates the flow of information deemed necessary in order to enable it to carry out the functions above and to the other laws, regulations or administrative provisions which are relevant to the depositaries of the UCITS home Member State. The Commission may adopt implementing measures concerning the measures to be taken by the depositary in order to fulfill its obligations regarding a UCITS managed by a management company established in another Member State, including specific information to be included in the standard agreement in use by the depositary and the management company pursuant to the paragraph. These measures, designed to amend non-essential elements of Directive 2009/65/EC by supplementing it, shall be adopted in accordance with the regulatory procedure laid down in Decision 1999/468/EC subsequently repealed by Regulation (EU) No 182/2011 laying down the general rules and principles concerning the methods of control by the Member States in the exercise of implementing powers conferred on the Commission. With the directive 2009/65/CE it is established that the functions of management company and depositary can not be exercised by the same company, moreover in the exercise of the respective functions the management company and the depositary act independently and exclusively in the interest of unitholders. The fund's law or regulation must define the conditions for the replacement of the management company and the depositary and provide for the rules to ensure the protection of unit holders in the event of such replacement. The competent authorities of the UCITS home Member State may not authorize a UCITS if the depositary's corporate officers do not meet the requirement of good repute or do not have sufficient experience with the type of UCITS to be managed. To this end, the identity of the depositary's corporate officers, as well as of any person who replaces them in their office, is immediately notified to the competent authorities. Persons who, under the law or the deed of incorporation, represent the depositary or who actually determine the policy of the depositary's activity are considered corporate representatives.

The delegated regulation (EU) 2016/438 of the commission of 17 December 2015 which complements the Directive 2009/65 / EC of the European Parliament and of the Council as regards the obligations of depositaries, defines the rules regarding the contract of appointment of the same are established depositary by a management company of a UCITS or investment company (authorized pursuant to Directive 2009/65 / EC), defines the functions of the depositary, the defined due diligence duties (due diligence), the separation and protection in the event of the insolvency of the IOCVM. The regulation establishes that at the time of appointment the depositary assesses the risks inherent in the nature, scale and complexity of the investment policy and strategy of the UCITS and in the organization of the management company or investment company. On the basis of this assessment, the depositary defines the supervisory procedures appropriate to the UCITS and the assets in which it invests, which are then implemented and applied. Furthermore, the regulation establishes that these procedures should be updated on a regular basis. Among the rules defined by the regulation are the obligations of independence, in particular Article 21 establishes that no one can sit on the administrative body of the management company and at the same time in the administrative body of the depositary; no one may sit on the management body of the management company and be a part of the depositary's personnel at the same time and no one can sit on the depositary's administrative body and be part of the management company's or the investment company's staff at the same time. If the management body of the management company does not exercise the supervisory functions within the company, the body of the company responsible for the surveillance functions may be composed of a maximum of one third of members who are at the same time administrative body, the body in charge of the supervisory functions or the depositary staff; if the management organ of the depositary does not exercise the supervisory functions within the depositary, the body of the depositary responsible for the surveillance functions may be composed of a maximum of one third of members who are also members of the supervisory board administration of the management company or body responsible for overseeing the management company or investment company or the staff of the management company or investment company. With the article 23 of regulation 2016/438 the norms concerning the conflict of interest are defined: the management companies or the investment company and the depositary united by a link or group bond prepare policies and procedures to identify all the conflicts of interest arising from this link, take all reasonable steps to avoid such conflicts of interest.If the conflict of interest is unavoidable, the management company or the investment company and the depositary shall manage it, monitor it and disclose it so as to avoid adverse effects on the interests of the UCITS and its investors. Regulation (EU) 2016/438 is subsequently amended by Regulation (EU) 2018/1619 defining, this last, stricter provisions regarding the custody of financial instruments by depositaries with particular reference to the intensification of controls to be carried out by same that delegate the custody function to third parties and which in turn can further sub-delegate. It lays down provisions with regard to the omnibus accounts with which the delegates can keep the financial instruments, accounts that a depositary active with a delegate to reduce the administrative burden, taking charge only of the management of accounting records for the various clients while the custody of the financial instruments, is operated by the delegate collecting the financial instruments of all the customers of the same depositary in an omnibus account for the depositary; defines rules for reconciliation and frequency between the omnibus accounts and the accounting records of the depositaries relating to each UCITS or the related management company, establishes provisions to exclude the activities relating to the ownership of the values held for the delegates who are at responsibility of the depositaries. The amendments made to regulation (EU) 2016/438 are considered mandatory starting from 1° April 2020.

In the first part of this paragraph we have seen that Directive 2009/65/EC establishes the authorization only for the investment fund if the competent authorities of its home Member State have approved the request of the management company to manage this mutual fund , the fund regulation and the choice of depositary, moreover, an investment company is authorized only if the competent authorities of its home Member State have approved its deed of incorporation and the choice of depositary, as well as, where appropriate, the request of the management company to manage such an investment company; for investment companies that make up a UCITS as outlined below, the Directive defines conditions for exemption from the obligation to appoint a management company. The same directive in Chapter III establishes the obligations relating to management companies, obligations that constitute the conditions for access to the business, access subject to prior authorization from the competent authorities of the management company's home Member State. The authorization issued to a management company for the purposes of this Directive is valid in all Member States. As seen in the first part of this paragraph, no management company may carry out activities other than the management of UCITS authorized pursuant to this Directive, unless it concerns the additional management of other collective investment undertakings not subject to this Directive and in which the company management, is subject to prudential supervision, but whose shares can not be traded in other Member States by virtue of it; for the purposes of this Directive, the management of UCITS includes the following functions: investment management, investment management, which includes the legal and accounting services related to the management of the fund, the customer information service, the valuation and determination of the price (also for the purposes of tax returns), control of compliance with applicable regulations, keeping the register of unit holders, distribution of income, issue and redemption of units, settlement of contracts (including the sending of certificates), the keeping of accounting records; finally, the marketing of investments is included in the management activity of a UCITS. We have also seen that Member States may authorize management companies to provide management services on a discretionary and individual basis, in addition to UCITS management services, in addition to advising investment portfolios, including some held by pension funds, according to mandates granted by investors (investment portfolios including instruments listed in Section C of Annex I of Directive 2004/39/EC), an authorization that can be extended to the safekeeping and administration of units in collective investment schemes.

The Directive remains unchanged the other general conditions of application established by the national law of the UCITS home Member State, it states that the competent authorities do not authorize a management company if it does not meet the following requirements: 
a) management company has an initial capital of at least EUR 125 000 taking into account the following: (i) when the value of the portfolios managed by the management company exceeds EUR 250 000 000, the management company must have additional own funds whose amount is 0.02% of the value of the portfolios managed by the management company which exceeds EUR 250 000 000, but the total required of the initial capital and the additional amount must not, however, exceed EUR 10 000 000; ii) for the purposes of this paragraph, the management company's portfolios are to be understood as: - common investment funds managed by the management company, including the portfolios for which the company has delegated the management, but excluding those that it manages in delegation , - an investment company whose management it is a responsibility the management company in question, - other collective investment schemes managed by the management company, including the portfolios for which the company has delegated management, but excluding those that it manages by way of delegation; (iii) irrespective of the amounts indicated above, the own funds of the management company must never be less than the amount established in Article 21 of Directive 2006/49/EC (Directive repealed by Directive 2013/36/EU from 28 to 32, Title IV);
b) the persons who effectively direct the management company meet the requirements of honorability and sufficient experience also in relation to the type of UCITS managed by the management company whose names and names of whoever takes over them in office should be immediately notified to the competent authority; the activity of the management company must be decided by at least two persons who meet these requirements; 
c) the application for authorization is accompanied by a program of activities indicating at least the organizational structure of the management company; and (d) both the central administration and the registered office of the management company are situated in the same Member State. 
For the purposes of letter a) above, Member States may exempt management companies from the obligation to have up to 50% of the additional amount of own funds referred to in point (i) if they receive a guarantee of the same amount provided by a credit institution or an insurance undertaking; they must have their registered office in a Member State or in a third country provided that they are subject to the prudential rules which the competent authorities consider to be equivalent to those established by Community law. 
If there are close links between the management company and other natural or legal persons, the competent authorities shall issue the authorization only if those close links do not impede the effective exercise of their supervisory functions. The competent authorities shall refuse authorization even if the laws, regulations or administrative provisions of a third country to which one or more natural or legal persons are subject to which the management company has close links, or difficulties related to the application of these provisions , hinder the effective exercise of their supervisory functions; management companies are required to communicate the information necessary to verify the absence of obstacles at any time. The competent authorities shall inform the applicant, within six months from the submission of the complete application, of the release or refusal of the authorization, any refusal must be motivated; the management company can start its business as soon as the authorization is issued. The competent authorities may revoke the authorization issued to a management company subject to this Directive only if that company does not use the authorization within 12 months, expressly renounces it or has ceased the activity covered by this Directive for more than six months, if the Member State concerned has not ordered the withdrawal of authorization in such cases; it is also revoked when the company has obtained the authorization by presenting false declarations or by any other irregular means or no longer meets the conditions to which the authorization is subject; other causes of revocation are determined when the company no longer complies with Directive 2006/49/EC (repealed by Directive 2013/36/EU) if the authorization also includes management, on a discretionary and individual basis, of investment portfolios, including those held by pension funds, according to mandates given by investors if such portfolios include one or more of the instruments listed in section C of Annex I of Directive 2014/65/EU (5°). The authorization shall also be revoked when the management company has seriously or systematically infringed the provisions adopted pursuant to this Directive, or falls under one of the cases in which the revocation is required under national law. The Commission established with Directive 2009/65/EU that the competent authorities do not issue a permit to a company to access the business if they have not previously obtained communication of the identity of the shareholders or members, direct or indirect, natural or legal persons, who hold a qualified holding as well as the entity of the same; they also deny authorization if, depending on the need to ensure the sound and prudent management of the management company, they are not certain of the suitability of the shareholders or shareholders referred to in the first paragraph. Member States are prohibited from applying provisions to management companies established outside the Community who are already starting or carrying out their activities in a Member State, the consequence of which is to ensure that they are treated more favorably than those granted by the authorities to branches already operating in a Member State; the competent authorities of the Member State in which the branches already operate are consulted prior to the authorization of any management company which is: a subsidiary of another management company, an investment company, a credit institution or an enterprise insurance companies authorized in another Member State by a subsidiary of the parent company of another management company, an investment company, a credit institution or an insurance undertaking authorized in another Member State, or a subsidiary controlled by the same natural persons o legal entities controlling another management company, investment company, credit institution or insurance company authorized in another Member State.

(5°) NOTE: (1) Transferable securities. (2) Money market instruments. (3) Units of a collective investment scheme. (4) Option contracts, standardized futures contracts (futures), swaps, agreements for future exchange of interest rates and other contracts on derivative instruments related to transferable securities, currencies, interest rates or yields, emission allowances or other financial derivative instruments, financial indices or financial measures that can be settled with physical delivery of the underlying or through the payment of cash differentials. (5) Option contracts, standardized futures contracts (futures), swaps, forward contracts and other derivative contracts related to commodities when execution must be by payment of differentials in cash or may occur in cash at the discretion of one of the parties (for reasons other than non-performance or another event that determines the resolution). (6) Option contracts, standardized futures contracts (futures), swaps and other derivative contracts related to commodities that can be settled with physical delivery provided that they are traded on a regulated market, a multilateral trading facility or an organized system of trading, with the exception of wholesale energy products traded in an organized trading system which must be regulated by physical delivery. (7) Option contracts, standardized futures contracts (futures), swaps, forward contracts and other derivative contracts related to goods that can not be executed in ways other than those mentioned in point 6 of this section and do not have commercial purposes, having the characteristics of other derivative financial instruments. (8) Derivative financial instruments for the transfer of credit risk. (9) Differential financial contracts. (10) Option contracts, standardized futures contracts (futures), swaps, forward interest rate contracts and other derivative contracts related to climate variables, transportation rates, inflation rates or other official economic statistics, when execution is due to the payment of differentials in cash or can be done in this way at the discretion of one of the parties (rather than in case of default or other event that determines the termination of the contract), as well as other derivative contracts related to assets, rights, obligations, indices and measures, not otherwise mentioned in this section, having the characteristics of other derivative financial instruments, considering, inter alia, whether they are traded on a regulated market, an organized trading system or a multilateral trading system; (11) Emission allowances consisting of any recognized unit meeting the requirements of Directive 2003/87/EC (exchange of greenhouse gas emission allowances in the Community among the companies holding such shares for the purpose of carrying out their activities).

In Chapter V of Directive 2009/65/EC the obligations concerning investment companies are established for access to the collective investment activity of capital raised among the public; access shall be subject to prior authorization by the competent authorities of the Member State of origin of the investment company determining its legal form, furthermore the registered office must be situated in the Member State of origin of the collective investment company, which can not carry out activities other than those provided for by the Directive in Article 1 (2), as set out in the first part of this paragraph. Without prejudice to the other general conditions of application established by the national law of the UCITS home Member State, the relevant competent authorities shall not authorize an investment company which has not designated a management company, unless the investment company has capital sufficient initial amount of at least EUR 300 000. In addition, when an investment company has not designated a management company authorized under this Directive, the following conditions shall apply: (a) the authorization must be refused, unless the application for authorization is accompanied by an activity program indicating at least the organizational structure of the investment company; b) the company representatives of the investment company must meet the requisites of adequate honourableness and experience, also in relation to the type of business managed by the investment company and, to this end, the names of the company representatives and of anyone who takes them their office must be communicated as soon as possible to the competent authority; the choice of the investment company's business must be carried out by at least two persons who meet these requirements; a company representative is a person who, according to the law or the deed of incorporation, represents the investment company or effectively determines the address of the activity; (c) where close links exist between the investment company and other natural or legal persons, the competent authorities must issue the authorization only if those close links do not impede the effective exercise of their supervisory functions. The competent authorities of the Member State of origin of the investment firm shall refuse authorization even if the laws, regulations or administrative provisions of a third country to which one or more natural or legal persons are subject with which the investment company has close links, or difficulties inherent in the application of these provisions, hinder the effective exercise of their supervisory functions. The competent authorities of the investment company's home Member State require investment companies to provide the information to the same authorities as they require. In the event that the investment company has not designated a management company, the investment firm shall receive a communication of the release or refusal of the authorization within six months of the submission of a complete application. The refusal must be motivated. An investment company can start its business as soon as the authorization is issued. The competent authorities of the Member State of origin of the investment company may withdraw the authorization granted to an investment company subject to this Directive only when that company: (a) does not use the authorization within twelve months, expressly disclaims or has ceased to exercise the activity covered by this Directive for more than six months, if the Member State concerned has not ordered the authorization to lapse in such cases; b) has obtained authorization by presenting false declarations or by any other irregular means; c) no longer fulfills the conditions to which the authorization was subject; (d) has seriously or systematically infringed the provisions adopted pursuant to this Directive; or e) falls under one of the circumstances in which the revocation is provided for by national law. For investment companies that have not designated an authorized management company in accordance with Directive 2009/65/EC, Articles 13 and 14 of the same directive (operating conditions) are applicable, as compatible, with articles laying down provisions on the possibility of to delegate to third parties for the purpose of more efficient conduct of their activity, the exercise on their behalf of one or more of their functions, and also lay down provisions concerning the drafting of the rules of conduct for investment companies by the investment companies they must observe at all times; in these provisions, the reference to management companies is to be considered an investment company, observing that investment companies manage only the assets of their portfolio and do not receive, under any circumstances, positions regarding the management of assets on behalf of third parties.

The Member State of origin of the investment company draws up prudential rules that investment companies operating without having designated a management company authorized under this Directive must always comply. In particular, the authorities; competent authorities of the investment firm's home Member State, taking also into account the nature of the investment company, require it to have a good administrative and accounting structure, control and safeguard mechanisms for the electronic processing of data and internal control procedures adequate that include, in particular, a discipline for the personal transactions of employees or for the holding or management of investments in financial instruments for the purpose of investment of its initial capital and which, at least, ensure that any transaction in which the company intervenes it can be rebuilt as regards origin, counterparties, nature and place and time at which it was carried out and that the assets of the investment company are invested in accordance with the articles of association and the rules in force.

Directive 2009/65/EC establishes that the assets of an investment company are entrusted to a depositary, a responsible entity, according to the national law of the investment company's Member State of origin, vis-à-vis the investment company itself and the owners of quotas, of any loss suffered by them as a consequence of the negligence or wrongful fulfillment of his obligations. The functions of an investment company and a depositary can not be exercised by the same company; in the exercise of its functions, the depositary acts exclusively in the interests of unit holders. The law or the deed of incorporating investment companies define the conditions for substitution of the depositary and provide for rules to ensure the protection of unit holders in the event of such replacement. The responsibility of the depositary referred to above is not influenced by the fact that it has entrusted to a third party all or part of the values held in custody. The obligations of the depositary enshrined in the directive are to ascertain: a) that the sale, issue, repurchase, redemption and cancellation of the shares made by the investment company or on its behalf are carried out in accordance with the law and the act constitutive of the investment company; b) that in transactions relating to the capital of the investment company, the countervalue is remitted to it within the terms of use; and c) that the returns of the investment company receive the destination in accordance with the law and with the deed of incorporation. The Member State of origin of the investment company can establish an exemption on the obligation to have a depositary in accordance with Directive 2009/65/EC for investment companies established in its territory that market their units exclusively through one or more stock exchanges on whose official listing these units are admitted; articles 76, 84 and 85 of the same directive do not apply to such investment companies. However, the rules for valuing the assets of these investment companies are set out in the applicable national law or in the deed of incorporation. The Member State of origin of the investment company may establish that investment companies established in its territory, which market at least 80% of their shares through one or more stock exchanges referred to in the deed of incorporation, do not have the obligation to have a depositary pursuant to this Directive, provided that such shares are admitted to official listing on the stock exchanges of the Member States on whose territory the shares are marketed and provided that the off-exchange transactions are carried out by the investment company only at market price. The instrument of incorporation of the investment company indicates the stock exchange of the country in which the units are traded, the listing of which determines the price of off-exchange transactions carried out in this country by the said investment company. The Member State shall make use of the exemption referred on the depositary only if it considers that the unitholders benefit from a protection equivalent to that enjoyed by the holders of units of UCITS having a depositary pursuant to this Directive. In particular, investment companies must: a) in the absence of national legislation on the matter, indicate in the deed of incorporation the methods for calculating the net asset value of the units; b) intervene in the market to prevent the market value of their units from diverging from their net asset value by more than 5%; c) establish the net asset value of the units, notify the competent authorities at least twice a week and publish it twice a month. An independent auditor ascertains at least twice a month that the value of the units is calculated in accordance with the law and the articles of association of the investment company. On this occasion, the auditor ensures that the assets of the investment company are invested according to the rules established by the law and by the deed of incorporation of the investment company. Member States shall inform the Commission of the particulars of investment companies which benefit from the exemptions concerning the depositary.

The depositary has its registered office or is established in the same Member State as the investment company and is an institution subject to prudential regulation and continuous supervision. Member States shall establish the categories of institutions among which depositaries may be chosen. The depositary allows the competent authorities of the UCITS home Member State to obtain, on request, all the information which the depositary has obtained in the performance of its tasks and which is necessary for the competent authorities to monitor compliance by the UCITS, to this Directive and if the management company's home Member State is not the UCITS home Member State, the depositary shall enter into a written agreement with the management company which regulates the flow of information deemed necessary to the order to enable it to carry out its obligations and other legislative, regulatory or administrative provisions which are relevant to the depositaries of the UCITS home Member State. Directive 2009/65/EC defines the possibility for the Commission to adopt implementing measures concerning the measures to be taken by the depositary in order to fulfill its obligations regarding a UCITS managed by a management company established in another Member State Member State, including the information to be included in the standard agreement used by the depositary and the management company on the obligations of the depositary. Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny defined by Decision 1999/468/EC and subsequent amendments laying down the procedures for the exercise of implementing powers conferred on the Commission.

Among the obligations of the investment policies set out in the provisions of Chapter VII of Directive 2009/65/EC, it is established that a UCITS may purchase units of other UCITS or other collective investment undertakings referred to in Article 50 (1) e), provided that no more than 10% of its assets are invested in the units of the same UCITS or other collective investment scheme. Member States can raise this limit to a maximum of 20%. Investments in units of collective investment undertakings other than UCITS may not exceed, in total, 30% of the assets of the UCITS. The provisions defining the investment policy for a UCITS with Article 56 establishes that: i) an investment company or management company acting for all the mutual funds it manages and which fall within within the scope of application of Directive 2009/65/EC, does not acquire shares giving voting rights and enabling it to exercise significant influence over the management of an issuer and until subsequent coordination, the Member States must take into existing rules in the law of the other Member States which define the principle; ii) a UCITS may not acquire more than: a) 10% of non-voting shares of the same issuer; b) 10% of bonds of the same issuer; c) 25% of the units of a single UCITS or other collective investment undertaking within the meaning of the same Directive as defined in Article 1 (2), points a and b; or d) 10% of money market instruments of a single issuer; the limits in letters b), c) and d) may be exceeded at the time of purchase if at that time it is not possible to calculate the gross amount of the bonds or money market instruments or the net amount of the securities issued . An investment or management company may acquire the shares held by a UCITS in the capital of a third country company investing its assets principally in securities of issuers having their registered office in that country if, under the legislation of this lastly, such participation represents for the UCITS the only possibility of investing in securities of issuers of that country if the company of the third State complies in its investment policy with the limits established by Articles 52 and 55 and conditions i) and ii) previous. Member States may waive the application of the conditions set out in statutory i) and (ii) above with respect to: a) transferable securities and money market instruments issued or guaranteed by a Member State or its local authorities; b) transferable securities and money market instruments issued or guaranteed by a third State; c) transferable securities and money market instruments issued by an international public body to which one or more Member States belong; (d) shares held by one or more investment companies in the capital of subsidiaries which only manage, advise or market in the country in which the subsidiary is established, with regard to the repurchase of shares at the request of the holders , exclusively for his or their account. In Article 57 of Directive (EU) 2009/65, the Commission defines the derogation conditions for the Obligations of the UCITS investment policy (Chapter VII, Articles 49 to 57), stating that they are not required to observe the indicated limits if exercise the relevant subscription right to transferable securities or money market instruments that form part of their assets. Member States, while ensuring the principle of risk spreading can be respected, may grant exemptions from Articles 52 to 55 to newly created UCITS for a period of six months from the date of their authorization. If exceeding the limits of Chapter VII of the Directive takes place independently of the UCITS's will or following the exercise of the subscription rights, the latter, in its sales operations, has as its priority objective the regularization of this situation while account of the interest of unitholders.

A feeder UCITS is a UCITS or an investment compartment which, by way of derogation from Article 1 (2) (a), Articles 50, 52, and 55 and Article 56 (2) (c), has received approval to invest at least 85% of its assets in units of another UCITS or in its investment funds (master UCITS). 
A master UCITS is a UCITS or an investment compartment: a) has at least one feeder UCITS among its unitholders; b) is not itself a feeder UCITS; and c) does not hold units of a feeder UCITS. The master UCITS is subject to the following exceptions: a) if a master UCITS has at least two feeder UCITS as unit holders, Article 1 (2) (a) and Article 3 (b) do not apply) , giving the master UCITS the option to raise capital or not with other investors; in cases where the master UCITS does not raise capital from the public in a Member State other than that in which it is established but has only one or more feeder UCITS in that Member State, they do not apply the special provisions applicable to UCITS which market their shares in Member States other than those in which they are established and laid down in Chapter XI (Articles 91 to 96), in addition the relevant authorities (of the Member State in which the UCITS markets its units other than the Member State of origin) they can not take measures against this UCITS in the event of infringement of the laws, regulations and administrative provisions in force in that Member State, which fall outside the scope of this Directive or the obligations set out in Articles 92 and 94, (derogation for Article 108 paragraph 1, paragraph 2), interventions implemented by the Authority of the home Member State of the undertaking for collective investment in transferable securities.

It is obligatory for the management companies and for each of the mutual funds it manages, and for the investment company, to publish a prospectus containing the information necessary for investors to make an informed judgment on the investment proposed to them and in particular on the related risks. The prospectus includes, regardless of the instruments in which the investment is made, a clear and easily understandable illustration of the fund's risk profiles. In addition to the prospectus, they must publish an annual report for each financial year within four months of the financial year (balance sheet or balance sheet) and a semi-annual report covering the first six months of each financial year, within the next two months. The UCITS makes public, using methods adequate, the issue or sale price, repurchase, or redemption of its units each time it issues, sells, repurchases or redeems the units and at least twice a month. The competent authorities may allow a UCITS to reduce the frequency to once a month, provided that this derogation does not affect the interests of unitholders. All marketing communications to investors are clearly identifiable as such and must be correct, clear and not misleading. In particular, marketing communications containing an invitation to purchase units of UCITS and bearing specific information on a UCITS shall not contain statements that conflict with the information contained in the prospectus and the "key investor information" and mention the existence of the prospectus and the availability of key investor information by specifying where and in which language investors or potential investors can obtain such information or documents and how they can access it.

The Commission established in Directive 2009/65/EC that key investor information should be provided free of charge to the investors themselves in the form of an ad hoc document, in good time before the UCITS is signed, with the aim of helping them to adopt informed decisions on investments; it is important that such key information contains only the essential elements for making such decisions. The obligation to fully harmonize the nature of the information to be included in the "key investor information" is established to ensure adequate investor protection and comparability, information that should be presented in a short format. A single document of limited length that presents the information in a specific order is the most appropriate way to obtain the clarity and simplicity of presentation required by retail investors, which allow for useful comparisons, in particular the costs and the risk profile, relevant for the purpose of the investment decision. The European Commission has established that the competent authorities of each Member State may make publicly available, in a dedicated section of their website, the key investor information relating to all UCITS authorized in the Member State in question, information that must be presented for all UCITS. Management companies or, where applicable, investment companies are required to provide key investor information to relevant entities, depending on the marketing method used (direct sales or through intermediary), intermediaries must provide such information to customers and potential customers. In order to strengthen legal certainty, it is necessary to ensure that a UCITS which markets its units on a cross-border basis can easily access, in electronic form and in a language commonly used in international financial circles, full information on the laws, regulations and administrative provisions applicable in the UCITS host Member State and which specifically concern the provisions adopted for the marketing of UCITS units. The Commission considers that the obligations related to the publication of such information should be governed by national law.

In order to facilitate the access of UCITS to the markets of the other Member States, it is appropriate to provide that the UCITS is obliged to translate only the key investor information in the official language or one of the official languages of a UCITS host Member State, or in a language approved by its competent authorities; in this information the language (s) in which the other mandatory information documents and additional information are available must be specified. Translations are performed under the responsibility of the UCITS, which decides whether a simple or sworn translation is required. Member States are required to take the administrative and organizational measures necessary for the cooperation between their national authorities and the competent authorities of other Member States, including through bilateral or multilateral agreements between the aforementioned authorities, agreements which may provide for delegation voluntary work.

The European Commission considers it necessary to strengthen the convergence of powers available to the competent authorities with the aim of applying Directive 2009/65/EC in an equivalent manner in all Member States, defining a minimum set of common powers, in line with the provisions of other Community legislation on financial services, to ensure the effectiveness of supervision. Member States are responsible for laying down the rules on penalties, criminal or administrative, and administrative measures applicable in the event of infringement of this Directive including the measures necessary to ensure the enforcement of these penalties. It also considers it necessary to strengthen the provisions concerning the exchange of information between the competent national authorities and to strengthen the duties of mutual assistance and cooperation. With regard to the provisions on disclosure, the Commission considers it necessary to assume the power to adopt measures to indicate the conditions that must be satisfied when the prospectus is provided on a durable medium other than a card or through a website which does not constitute a durable support, complete and detailed content, form and presentation of key investor information taking into account the nature or different components of the relevant UCITS, and the specific conditions for presenting key investor information on a durable medium different from paper or via a website that does not constitute a durable medium.

In Chapter IX of Directive 2009/65/EC detailed provisions are laid down on the obligations concerning the information to be communicated to investors; in Chapter X the general obligations of a UCITS, in Chapter XI the special provisions applicable to UCITS which market their units in Member States other than those in which they are established, in Chapter XII, provisions concerning the authorities responsible for authorization and supervision. Directive 2009/65/EC is amended by Article 63 of Directive (EU) 2011/61 which inserts Article 50a, modifies paragraph 2 of article 112 and modifies paragraph 1 of article 112a. Further changes are made by Directive 2014/91/EU with reference to market developments and the experience gained so far by market participants and supervisors, in particular to address disparities between national rules on functions and responsibilities depositaries, remuneration policy and sanctions.

Subsequent amendments to Directive 2009/65 /EC are made with Directive (EU) 2014/91; the Commission intervenes to counteract the potentially negative effects of poorly conceived remuneration schemes on the sound risk management and on the control of risk assumption by individuals, providing for the express obligation on asset management companies of collective investment undertakings securities (UCITS) to create and maintain, for the categories of persons whose professional activities have a significant impact on the risk profiles of the UCITS they manage, policies and remuneration practices in line with sound and effective risk management.

With reference to the legal entities designated for the appointment of depositaries, to the related responsibilities in cases where the assets of the UCITS held in custody are lost or in cases of incorrect exercise by the depositary of its oversight duties and with the intention to harmonize the regulatory obligations are adopted through Regulation (EU) 2014/91, additional rules to those already defined by Directive 2009/65/EC. A non-compliant exercise by the depositaries may result in the loss of assets but also in the loss of value of the assets, when, for example, a depositary do not adopt measures regarding investments that are not in line with the fund rules. it is appropriate to establish the obligation for the UCITS to designate a single depositary exercising the general oversight function on the assets of the UCITS and with this obligation it must be ensured that the depositary has an overall view of the activities of the UCITS and that the managers of the fund that investors have a single point of reference in case of problems related to the custody of the assets or the exercise of the oversight functions. The custody of assets includes the keeping in custody of the assets, or in the event that the assets are of such a nature that it does not allow them to be kept in custody, the verification of ownership of the assets as well as the keeping of the records relating to these activities. The directive also imposes an obligation on the depositary to act honestly, fairly, professionally and independently in the interests of the UCITS and investors, while exercising their functions. With a view to ensuring a harmonized approach to the exercise of the functions of depositaries in all Member States, irrespective of the legal form adopted by the UCITS, the Commission introduces a uniform list of oversight obligations for depositaries in relation to the UCITS in the form of a company (investment company) and a UCITS constituted in a contractual form. 
It is mandatory for depositaries to distinguish between assets that can be held in custody and those that can not be held in custody for which it is obligation to register and verify the property; the two categories of activity must be clearly differentiated in order to facilitate the return of the lost assets, applicable only to the first categories of activity. Directive (EU) 2014/91 among other changes made to Article 22 of Directive 2009/65/EC establishes that the assets held in custody by the depositary can not be reused on their own account by the latter or by a third party to whom custody has been delegated. Conditions are stipulated for the re-use of assets on behalf of the UCITS: a) the re-use of these assets is performed on behalf of the UCITS; b) the depositary shall execute the instructions of the management company on behalf of the UCITS; c) re-use takes place to the advantage of the UCITS and in the interest of the unitholders; and (d) the transaction is covered by a high quality liquid collateral received from the UCITS through a contract with the transfer of the ownership title. The market value of the collateral is at all times at least equal to the market value of the reused assets plus a premium. Member States must ensure that in the event of the insolvency of the depositary and / or any third party located in the Union to which the custody of assets of a UCITS has been delegated, the assets of the UCITS retained in custody are unavailable for distribution or to the sale for the distribution of the proceeds among the creditors of such depositary and / or third party.

If a central securities depository (CSD) established in a Member State of the European Union (as defined in Article 2 (1), point 1, of Regulation (EU) No 909/2014), or a CSD of a country third provides the management services of a securities settlement system, as well as at least the initial registration of securities in an accounting system by initial credit, or the provision and management of securities accounts at the highest level, as specified in section A of the Annex to the same regulation 909/2014(6°), the provision of such services by the said CSD in respect of the UCITS securities initially registered in a system of accounting records by initial accreditation by said CSD should not be considered as delegation of custody functions. Custody of custody of UCITS securities to any CSD, or to any CSD of a third country by a depositary is considered to be delegation of custody functions; it is appropriate that the third party to whom custody of the assets is delegated may maintain an omnibus account (single account in which funds or securities of multiple entities converge) as a separate joint account for several UCITS, as set out in Regulation (EU) 2018/1619 for Depositaries amending regulation (EU) 2016/438. As the UCITS (or related management company) is obliged to appoint the depositary, it is obvious that delegating certain functions (such as custody of values, property management) is a possibility that is defined only for depositaries.

(6°) NOTE: Services provided by CSDs that contribute to improving the security, efficiency and transparency of securities markets, which may include, but are not limited to: 
Services related to the settlement service, for example : a) organization, as agent, of a securities lending mechanism between participants in a securities settlement system, b) supply, as agent , guarantee management services for participants in a securities settlement system, c) settlement of settlement orders, addressing of instructions, confirmation and verification of transactions. Services related to notary and centralized administration services, for example: a) provision of services related to shareholder registers, b) support for the processing of corporate transactions, including aspects related to taxation, to assemblies c) provision of services for new issues, including the assignment and management of ISIN codes and the like, d) addressing and processing of instructions, collection and processing of commissions and related communication. Establishment of links between CSDs, provision, maintenance or management of securities accounts in relation to the settlement service, collateral management and other ancillary services. Other services, such as: a) general warranty management services as agent, b) disclosure, c) providing information, data and statistics to the markets / statistical offices or other governmental entities or intergovernmental, d) IT services.

Investors in UCITS may assert the depositary's responsibility, directly or indirectly, through the management company or the investment company. The appeal against the depositary must not depend on the legal form of the UCITS (corporate or contractual) or on the legal nature of the relationship between the depositary, the management company and the unitholders. The right of unitholders to enforce the responsibility of depositaries does not result in duplication of recourse or unequal treatment of unitholders. Depositaries are subject to the same obligations regardless of the UCITS legal form. The uniformity of obligations enshrined in Directive (EU) 2014/91 increases legal certainty, improves investor protection and contributes to the creation of uniform market conditions; Section 3 of Chapter 5 is deleted, obligations concerning the depositary, with reference also to the condition of derogation from the obligation to appoint the depositary for the UCITS defined in this section because the Commission has not received any notification of cases of appeal of the investment company to the exemption from the general obligation to entrust the assets to a depositary, moreover it considered the obligations in this section redundant with respect to the same Directive 2009/65/EC which included the provisions of the same section (Chapter IV) to exception of paragraph 4 of article 32, deemed not used beyond the strengthening of investor security caused by its deletion . The Commission with Directive (EU) 2014/91 has decided to impose stricter sanctions against the illegal behavior of those concerned, and also establishes that all sanctions communicated to the public must be communicated to ESMA at the same time, which publishes an annual report on all penalties imposed to allow further uniformity to be strengthened supervisory performance, in accordance with Regulation (EU) No 1095/2010.

In conclusion, the legislative framework of UCITS and related management companies is currently defined by Directive 2009/65 /EC and subsequent amendments made by Directive (EU) 2014/91 which establish the provisions for access to the activity; the capital adequacy of the management companies is defined in Directive 2013/36/EU to which reference is made to the same Directive 2009/65/EC and subsequent amendments, for investment companies that make use of the exception to not designate the management company, the capital adequacy is enshrined in Directive (EU) 2014/65 for Member States, the same directive that dictates the provisions for access to the activity of investment companies that do not carry out collective investment and management activities, a directive that is the object of studies in the next paragraph.

4 - INVESTMENT COMPANY: DIRECTIVE (EU) 2014/65
Shortcomings in the corporate governance of numerous financial institutions, the absence of valid control and balance systems within them contributed to the financial crisis as advocated by regulatory bodies (public bodies) at international level. When risk-taking is excessive and imprudent it can lead to the failure of individual financial institutions and cause systemic problems both in the Member States and globally; further negative and harmful effects on the market derive from incorrect behavior of companies that provide services to customers, as they can damage investors and cause their loss of trust. Due to the negative effects caused by weaknesses in corporate governance mechanisms, Directive 2004/39/EC (MiFID directive: Markets in Financial Instruments Directive) is repealed with Directive (EU) 2014/65 (MiFID II directive). The High Level Group of Experts on Financial Supervision in the EU called on the EU to develop a more harmonized set of financial rules. In the context of the future European supervisory architecture, the European Council of 18 and 19 June 2009 emphasized the need to develop a single European code applicable to all financial institutions in the internal market. The MiFID Directive (2004/39/EC) immediately underwent several changes including Directive 2006/49/EC currently repealed by Directive 2013/36/EU, therefore the Commission considers that it should proceed to the recast in the new amendments made with the MiFID II directive (2014/65/EU).

Directive (EU) 2014/65 applies to investment firms, market operators, regulated markets, data communication service providers and third country companies offering services or carrying out investment activities through the establishment of a branch in the Union and establishes requirements in relation to the following elements: (a) authorization and operating conditions for investment firms; (b) provision of investment services or investment activity by companies from third countries through the establishment of a branch, c) authorization and operation of regulated markets, d) authorization and operating conditions of data communication service providers and e) supervision, collaboration and monitoring of the application of the legislation by the competent authorities. Paragraphs 3 and 4 of Article 1 define the provisions that also apply to investment firms and credit institutions authorized under Directive 2013/36/EU, when they sell or recommend to customers structured deposits (consisting of several options, such as the repayment of the credit upon expiry of the deposit and a periodic remuneration). Investment firms may receive authorization under the conditions set out in Chapter I of the MiFID II Directive, (from Article 6 to Article 20); articles that also establish the conditions for market managers managing a multilateral trading system or an organized trading system. Article 15 defines the capital endowment of an investment firm: Member States shall ensure that the competent authorities issue the authorization only on condition that the investment firm has sufficient initial capital that meets the requirements of the regulation (EU) no. 575/2013, taking into account the nature of the services or activities in question.

This directive is intended to regulate the companies whose predominant activity is to perform professional services and / or investment activities and excludes from its field of application anyone who carries out other professional activities defining in particular conditions of derogation from the same with the article 2 and optional derogation conditions at description the Member State of origin in Article 3. Article two of Directive (EU) 2014/65 states that the Directive does not apply: to insurance undertakings or to undertakings performing reinsurance and retrocession (a tool that insurance companies use to insure themselves), it is possible, in fact, that they do not have the means necessary to compensate the insured for disasters linked to large-scale events (natural disasters, a chain); there is talk of retrocession when the reinsurer it is reassured, in turn, for the same reasons. The article provides an exemption from the authorization restriction for investment companies in transferable securities also for collective investment schemes and pension funds, whether they are harmonized or not at Union level, as well as depositaries and managers of such securities organisms. Article 2 of the Directive defines a derogation also for persons who take on the role of market makers, who negotiate on their own account derivative instruments on commodities or emission quotas or derivatives thereof, (excluding those that negotiate on their own account by executing orders from customers) ; same for persons providing investment services other than proprietary trading, in commodity derivatives or emission allowances or instruments derived from the same to customers or suppliers of their principal business with the conditions for each of those cases, considered both individually and in aggregate form, this is an activity ancillary to their principal activity within the group, provided that such main activity does not consist in the provision of investment services within the meaning of this Directive, of banking activities within the meaning of the Directive 2013/36/EU or in market making activities in relation to commodity derivatives, these persons must not apply a high frequency algorithmic trading technique and must formally communicate each year that uses this exemption and, at the request of the competent authority, on what grounds they consider that their activity is ancillary to The main activity.

Excluding the previous dynamics of derogation, the Directive does not apply to persons providing investment services exclusively to filiation network, controlling and controlled; it does not apply to persons providing ancillary investment services in the context of a professional activity, if this activity is governed by legislative or regulatory provisions or by a professional code of conduct that does not specifically exclude the provision of such services; to persons who negotiate on their own account in financial instruments other than commodity derivatives or emission allowances or related derivative instruments and who do not provide other investment services or exercise other investment activities in financial instruments other than commodity derivatives, from the emission quotas or related derivatives, apart from the cases in which such persons assume the role of market maker (operator or financial institution capable of influencing the stock market through the purchase or sale of a considerable number of securities), or are members or participants of a regulated market or MTF or have direct electronic access to a trading venue, or apply a high frequency algorithmic trading technique, or trade on their own account when they execute customer orders.

A further derogation concerns operators subject to supplementary supervision of credit institutions, insurance companies and investment firms belonging to a financial conglomerate, regulated supervision of Directive 2002/87/EC, when they process emission allowances, they do not execute customer orders and do not provide investment services or activities other than proprietary trading, provided they do not apply high frequency algorithmic trading techniques; and exemption for persons providing investment services consisting exclusively in the management of employee participation schemes, to persons providing investment services consisting exclusively in managing worker participation schemes and in providing investment services exclusively for their parent enterprise , its subsidiaries or other subsidiaries of its parent company. Are derogatedfrom the Directive the members of the ESCB and other national bodies carrying out similar functions in the Union, other public bodies which are responsible for or involved in the management of public debt in the Union and to international financial institutions created by two or more Member States, that mobilize resources and provide financial assistance to those, among their members, who are facing or are threatened by severe financial difficulties; same for the persons providing investment advice in the exercise of another professional activity not covered by this Directive, provided that such advice is not specifically remunerated. The associations established by Danish and Finnish pension funds are exempted, whose the only objective being the management of the activities of the affiliated pension funds, are derogated the stockbrokers (the financial intermediary that searches and buys, on behalf of the client, in the reference market , the product that offers the best value for money, in English also called stock brokers, often shortened in brokers, by broking, ie "intermediation").

A further derogation is made for electricity transmission system operators (Article 2 (4) of Directive 2009/72/EC (Directive on common rules for the internal market in electricity) and Article 2 (4) of Directive 2009/73/EC (Directive on common rules for the internal market in natural gas) when carrying out their tasks in accordance with the aforementioned Directives or Regulation (EC) No 714/2009 or Regulation (EC) No 715/2009 or the network codes or guidelines adopted pursuant to these regulations, to persons acting as providers of services on their behalf to carry out their tasks under those legislative acts or network codes or guidelines adopted pursuant to these regulations, or to any manager or director of an energy balancing mechanism, network or pipeline system to balance energy supplies and consumption when they perform these tasks; the exemption applies to persons who carry out the activities mentioned here only when they perform investment activities or provide investment services related to commodity derivatives in order to carry out such activities. It does not apply in relation to the management of a secondary market, including platforms for the secondary trading of financial transmission rights. Central securities depositaries (CSDs) governed by Union law are also exempted from the application of Directive (EU) 2014/65 insofar as they are governed by this right. Finally, a derogation is also made for the rights conferred by this Directive for the provision of services as a counterparty in transactions carried out by public bodies managing the public debt or by the members of the ESCB in the framework of the tasks assigned to them by the TFEU and Protocol No. 4 on the statute of the European System of Central Banks and of the European Central Bank or performing equivalent tasks pursuant to provisions of national law. The Directive 2014/65/EU in Chapter III, lays down provisions on the rights of investment firms by defining for them and credit institutions authorized under Directive 2013/36/EU (and the provisions of this Directive of Article 1 paragraph 4) the right to freedom to provide services and to engage in investment activities in the internal market (between the Member States of the European Union), the possibility of establishing branches, the right of access to regulated markets, the right of access to central counterparty, clearing, settlement and right to designate the settlement system; in the same chapter provisions relating to the CCP, clearing and settlement agreements in the context of multilateral trading systems are laid down. Chapter IV sets out provisions for the provision of investment services and activities by companies from third countries.

The Commission may adopt delegated acts to clarify when an activity is exercised sporadically; ESMA shall develop draft regulatory technical standards to specify the criteria for determining when an activity should be considered ancillary to the main activity at group level. The criteria issued by the ESMA consider: the need for ancillary activities to constitute a minority of the activities at group level and the size of the trading activity compared to the overall market trading activity in that asset class. In determining the extent to which ancillary activities constitute a minority of group-level activities, ESMA may establish that is taken into consideration the capital employed for ancillary activities in relation to the capital employed for the principal activity. In any case, however, this element is not sufficient to prove that the activity is ancillary to the main activity of the group. They are however excluded the intergroup transactions referred to in Article 3 of Regulation (EU) no. 648/2012 aimed at creating group liquidity or risk management (derogated from the norm as operations in the filiation network), transactions in derivative instruments are also excluded, whose ability to reduce risks directly related to commercial activities or treasury financing activities can be measured objectively and are excluded transactions in commodity derivatives and in emission quotas made to comply with the obligation to provide liquidity to a trading venue, when such obligation is prescribed by the regulatory authorities in accordance with Union law or national laws, regulations and administrative provisions or negotiating venues.

With Article 3, the Commission defines the possibility for Member States not to apply this Directive to the persons of which they are the Member State of origin, whose activities are authorized and regulated at national level and which: authorized to hold funds or securities belonging to customers and for this reason can never be in debt with their customers; are not authorized to provide investment services, except for the receipt and transmission of orders in transferable securities and units of collective investment undertakings and / or investment advisory services relating to such financial instruments, and in connection with the provision of services such services are authorized to transmit orders only to: i) investment firms authorized under this Directive, ii) credit institutions authorized under Directive 2013/36 / EU, iii) branches of investment firms or credit institutions authorized in a third country and which are required to comply with and comply with prudential rules considered by the competent authorities to be at least as stringent as those laid down in this Directive, in Regulation (EU) no. 575/2013 or in Directive 2013/36 / EU, iv) collective investment undertakings authorized under the law of a Member State to sell shares to the public, as well as managers of such bodies, or c) investment companies with fixed capital, pursuant to Article 17 (7) of Directive 2012/30 / EU of the European Parliament and of the Council, whose securities are listed or traded on a regulated market in a Member State. Member States may also waive the application of the Directive to persons who provide investment services exclusively in commodities, emission allowances and / or derivative instruments on the same goods for the sole purpose of limiting the commercial risks of their clients, when the latter are exclusively local power companies within the meaning of Article 2 (35) of Directive 2009/72 / EC (Directive laying down harmonized European standards for the internal electricity market) and / or natural gas undertakings within the meaning of 2 (1) of Directive 2009/73 / EC (Directive laying down harmonized European rules for the internal market in natural gas), provided that such customers jointly hold 100% of the capital or the voting rights of such persons, they exercise joint control and are exempt under Article 2 (1) (j) of the same Directive, the conditions described above, in the case in which they carry out such investment services personally. Article 3 establishes the optional exemption for the Member State of origin for persons who provide investment services exclusively in emission allowances (any unit recognized to comply with the requirements of Directive 2003/87 / EC which quantifies the same emission allowances as greenhouse gases) and / or derivative instruments on them for the sole purpose of limiting the commercial risks of their customers, when the latter are exclusively managers, then the person who manages or controls a plant or, if required by national legislation, to which delegated a decisive economic power as regards the technical exercise of the same (Article 3 (f) of Directive 2003/87 / EC establishing a system for greenhouse gas emission allowance trading within the Community, allocated to operating in sectors which are likely to produce polluting emissions), provided that such customers jointly hold 100% of the capital or the votes of such persons, exercise joint control and are exempt under Article 2 (1) (j) of this Directive if they are to carry out such investment services personally.With the same article and therefore for the exempted persons, obligations are defined for the Member States to define requirements similar to those established by the same directive with regard to the conditions and procedures for authorization and continuous supervision, behavioral standards or provisions aimed at ensuring the protection of investors as registration of all the operations necessary for the authorities to perform their duties, telephone communications, telephone records, organizational requirements established as effective organizational provisions in order to prevent conflicts of interests between companies, managers, employees, agents connected persons, persons connected directly or indirectly, customers, or conflicts of interest determined by the obtaining of undue incentives by third parties or by remuneration and by incentive plans of the same investment company; similar provisions regarding the information to be provided to customers when the actions taken to prevent conflicts of interest are not sufficient.

Directive (EU) 2014/65 establishes provisions identifying a professional client with Annex II allowing investment companies to be able to implement lower security conditions in view of their knowledge and expertise necessary to make their own decisions regarding investments and properly assess the risks they take. The investment firm is obliged to notify the client that the information in the possession is a professional client and therefore a lower level of contractual security; however, the customer can decide whether or not to accept security conditions at a lower level, and therefore whether or not to limit their decision-making power with regard to the transactions to be carried out with the financial instruments involved in the investment. In Annex I of the Directive Section A defines the investment services provided by investment companies: 1) Receipt and transmission of orders relating to one or more financial instruments, 2) Execution of orders on behalf of clients, 3) Trading on own account 4) Management of portfolios, 5) Advice on investments, 6) Underwriting of financial instruments and / or placement of financial instruments on the basis of an irrevocable commitment, 7) Placing of financial instruments without irrevocable commitment, 8) Management of multilateral trading systems, 9) Management of organized trading systems. Section B of the same annex defines ancillary services: 1) Custody and administration of financial instruments on behalf of clients, including custody and related services such as cash / collateral management and excluding the management of securities accounts at the level higher, 2) Granting loans or loans to investors to allow them to carry out a transaction related to one or more financial instruments, in which the company granting the credit or loan intervenes, 3) Business consultancy relating to the structure capital, industrial strategy and related matters, as well as consultancy and services relating to mergers and the purchase of companies, 4) Exchange service when this service is linked to the provision of investment services, 5) Investment research and analysis financial or other forms of general recommendation concerning transactions in financial instruments, 6) Services related to underwriting, 7) Investment services and activities, as well as ancillary services of the type referred to in sections A or B of Annex 1, linked to the derivative instruments referred to in Section C, points 5), 6) , 7) and 10), if linked to the provision of investment or accessory services. Section C defines the financial instruments: 1) Transferable securities, 2) Money market instruments, 3) Units of a collective investment scheme, 4) Option contracts, standardized futures contracts (futures), swaps, agreements for future exchange of interest rates and other contracts on derivative instruments related to transferable securities, currencies, interest rates or returns, emission allowances or other financial derivative instruments, financial indices or financial measures that can be settled with physical delivery of the underlying or through payment of differentials in cash, 5) Option contracts, standardized futures contracts (futures), swaps, forward contracts (futures) and other derivative contracts related to commodities when execution is due to the payment of differentials in cash or in cash at the discretion of one of the parties (for reasons other than non-performance or by another event that determines the resolution), 6) Option contracts, standardized futures contracts (futures), swaps and other derivative contracts related to commodities that can be settled with physical delivery provided that they are traded on a regulated market, a system multilateral trading facility or an organized trading facility, with the exception of wholesale energy products traded on an organized trading system that are to be settled with physical delivery, 7) Option contracts, standardized futures contracts (futures), swaps, contracts forward contracts and other derivative contracts related to goods that can not be executed in ways other than those mentioned in point 6 of this section and do not have commercial purposes, having the characteristics of other derivative financial instruments, 8) Financial instruments derivatives for the transfer of credit risk, 9) Differential financial contracts 10) Option contracts, standardized futures contracts (futures), swaps, forward interest rate contracts and other derivative contracts related to climate variables, transportation rates, inflation rates or other official economic statistics , when the execution should take place through the payment of differentials in cash or can be done in this way at the discretion of one of the parties (rather than in case of default or other event that determines the termination of the contract), as well as other contracts on instruments derivatives related to assets, rights, obligations, indices and measures, not otherwise mentioned in this section, having the characteristics of other derivative financial instruments, considering, inter alia, whether they are traded on a regulated market, an organized trading system or a multilateral trading facility; 11) Emission allowances consisting of any unit; recognized as complying with the requirements of Directive 2003/87 / EC (emission allowance trading system). Finally, data communication services are defined in Annex I in section D: 1) Management of an authorized publication device, 2) Management of a consolidated publication system, 3) Management of an authorized reporting mechanism.

With the directive being studied in this paragraph, the European Commission has considered the evolution of negotiation technology in the last decade, widely used by market participants; numerous participants use algorithmic negotiation, in which a computerized algorithm automatically determines some aspects of an order with minimal or no human intervention. Therefore it believes that it is necessary to define provisions regarding the risks deriving from the same negotiation technique; the provisions take into account that the use of algorithms in the post-trade treatment of the operations performed does not constitute an algorithmic negotiation. This directive definesalgorithmic negotiation : trading of financial instruments in which an automated algorithm automatically determines the individual parameters of orders, such as whether to initiate the order, timing, price or quantity of 'order or how to manage the order after its presentation, with minimal or no human intervention and does not include the systems used solely to transmit orders to one or more trading venues, to process orders that do not involve the determination of trading parameters, to confirm orders or to perform post-trade processing of operations performed. The term high frequency algorithmic negotiation technique is defined: any algorithmic negotiation technique characterized by: a) infrastructures aimed at minimizing network and other latencies, including at least one of the structures for algorithmic insertion of the order: co-location (distance from the trading venue), proximity hosting or direct electronic access at high speed; b) determination by the system of the initialization, generation, transmission or execution of the order without human intervention for the individual order or negotiation, and c) high intraday traffic of messages consisting of orders, quotations or cancellations. The Commission has established provisions for investment firms operating with algorithmic negotiations to pursue a market making strategy to carry out this activity on a continuous basis in a specific range of trading hours of the trading venue. Regulatory technical standards clarify what constitutes a specific range of trading hours of the trading venue ensuring that this specific range is relevant with respect to the total trading time, taking into account the liquidity, the size and nature of the specific market and the characteristics of financial instruments traded. Investment firms that carry out algorithmic negotiations, pursuing a market making strategy, are obliged to put in place controls and adequate systems for this activity, understood in a specific way in relation to its context and its purpose. The definition of this activity is therefore independent of definitions such as that of "market support activities" as set out in Regulation (EU) no. 236/2012 of the European Parliament and of the Council. Regulation 236/2012/EU defines activities to support trade (market making), the activities of an investment firm, a credit institution, a third country entity or a company that trade on behalf of precisely in application of the derogation conditions of the MiFID Directive and being a member of a trading venue or a market in a third country whose legal and supervisory framework has been declared equivalent by the Commission pursuant to Article 17 (2), when acting as the principal operator for a financial instrument traded on or on a trading venue, in one of the following ways: (i) simultaneously communicating fixed and competitive courses of purchase and sale at a comparable level, thereby providing liquidity regular and continuous market, ii) as part of its usual business, by executing orders initiated by customers or by responding to requests for sale or purchase of clients, iii) covering the positions deriving from the execution of the tasks referred to in points i) and ii). A specific subset of the algorithmic negotiation is constituted by the high frequency algorithmic negotiation, in which a trading system analyzes data or high-speed market signals and then send or update a large number of orders within a very short time in response to the analysis. In particular, high frequency algorithmic negotiation can contain elements such as initialization, generation, transmission and execution of the order that are determined by the system without human intervention for each individual order or negotiation, a short time for the creation and the liquidation of positions, a high daily portfolio turnover rate, a high intra-day order / transaction ratio and the close of trading day in a flat position, or close to it. High-frequency algorithmic negotiation is characterized, among other things, by high-level intra-day trades of messages that constitute orders, quotations or cancellations. In determining what constitutes a large intraday of message traffic, account must be taken of the identity of the customer to which the activity ultimately relates, the length of the observation period, the comparison with the overall market activity during that period. period and concentration or relative fragmentation of activity. High frequency algorithmic negotiation is generally used by traders who engage in trading capital and, rather than being a strategy in itself, consists rather in the use of sophisticated technologies to implement more traditional trading strategies, such as trade support activities. (market making) or arbitrage: operate with maket making strategies without having to submit to the stringent constraints imposed on the latter as always present as a counterpart in the market to guarantee liquidity to the participants (liquid markets, as defined at the end of this paragraph) and the possibility of action in a short time to buy financial instruments at the most convenient prices.

The need to create a technological infrastructure capable of guaranteeing traders access to the bargaining price present on each market, at any moment derives from the obligation to execute the bargaining orders to the NBBO (USA) or the Best Price ( Europe), in concomitance with the trend towards the fragmentation of the markets in progress in recent years. The order protection rule states that "markets create, maintain and reinforce regulations and procedures reasonably aimed at avoiding trade-throughs - the execution of trades at prices worse than protected quotations (NBBO) .Obligation that causes the connection between regulated markets and ECN (or MTF), and above all systems able to analyze the prices and the relative quantities present on every single trading venue (place of bargaining) and then offer the best price to the investor.

Multilateral Trading Facilities MFTs, private trading systems that offer the possibility to trade listed financial instruments on an exchange, without regulatory admission and disclosure tasks; they have the obligation to have specialists required to support the liquidity of trading books. The objective is that of growth on a European scale facilitated by the new regulatory framework more flexible and open, in fact the MiFID directive (this Directive 2014/65/EU) introduces multilateral trading systems or MTFs (Multilateral Trading Facilites), trading circuits managed by individuals who, unlike regulated markets, do not have an exclusive corporate purpose, but can also be managed by an investment firm. In its debut, only securities in euros are listed, but in the future securities in other currencies could be introduced, such as the dollar or the pound. ECN Brokers differ from Broker Market Makers because they are not limited to acting as an intermediary between the seller and the buyer but, ensuring the execution of orders create a self-managed market, or a market where they are almost always configured as contractual counterparty. Broker Market Maker earnings come essentially from the spread, so these brokers are very critical as they can work very often in situations of conflict of interest. On the contrary, ECN Brokers, acting as real intermediaries, essentially carry out the task of linking two contractual parties against payment of commissions. So by not gaining on spreads and having commissions on each trade, they have no interest in gaining or losing customers and therefore there is no conflict of interest. The main advantages of ECN brokers are: Direct access to the market, Low spreads averaging around 0.5 pips (variation of the spreed in 4 decimal places or even pipettes if the decimal figure is 5 of the sale price of the financial instrument ), Possibility of using different types of trading as expert advisor and scalping (intervene on the analysis of a series of information in a short time), fast orders, Market Depth or the ability to measure the liquidity of the market by viewing all orders placed by customers ; main disadvantages: Commissions on each trade, High spread variability, Stop Loss not always present (a price limit that is activated when the financial instrument reaches the limit value to minimize losses), Increased complexity of trading platforms.

High Frequency Trading (Hfts) is a term associated with a wide range of automated operating strategies, often confusing it with the simplest algorithmic trading; high frequency systems, although belonging to the family of algorithmic trading, differ from them, representing a sort of successive evolutionary step. Moreover, Hfts are often programmed to take advantage of the presence on the bargaining books of less advanced and easily predictable algorithmic systems. A Hft system can be described as a completely automated type of trading (of the family of algorithmic trading) able to perform a multitude of calculations in a very short time; has an extremely fast market connection, analyzes tick - by - tick data using technological and IT infrastructures able to perform operations over a period of a few milliseconds. A high frequency system is designed in such a way as to execute its own strategies independently, analyzing the market and transmitting thousands of purchase and sale messages per second and simultaneously entering execution, cancellation or replacement orders that are immediately adapted to the information flow available. The main objective of a high-frequency system is to identify and take advantage of rapid liquidity imbalances or very short-term price inefficiencies; usually closes the day of flat bargaining. While forTrading Algorithmico (AT) we mean a trading method whose parameters are determined by a specific set of rules with the aim of automating investment decisions, eliminating the emotional and behavioral component. Trading algorithms typically specify timing, price, quantity and order wheels, monitoring the market conditions continuously. Source: PUORRO, Alfonso. High Frequency Trading: An Overview (High Frequency Trading: An Overview), 2013.

Technical progress has made it possible to negotiate at high frequency and the evolution of business models, negotiation facilitated by the co-location of the plants of the market participants in close physical proximity to the comparison engine of a trading venue; with the intention of guaranteeing orderly and fair trading conditions, the trading venues are obliged to provide co-location services on a non-discriminatory, fair and transparent basis. The use of negotiation technology has increased the speed, capacity and complexity of investor trading arrangements. In general, trading technology has benefited the market and market participants, such as broader market participation, increased liquidity, lower spreads, lower short-term volatility and the means to achieve better order execution for customers; however, it is affected by a series of potential risks, such as an increase in the risk of system overload in trading venues due to the large number of orders, the risks that the algorithmic negotiation generates erroneous or double orders or that in any case does not work properly and creates so a messy market. There is also a risk that algorithmic trading systems will react excessively to market events (events that cause changes in purchase or Stop Loss volumes), thus worsening volatility if a market problem exists; finally, the algorithmic negotiation or the high frequency algorithmic negotiation technique can, like any other form of negotiation, lend itself to certain forms of behavior, if not used correctly, prohibited under Regulation (EU) no. 596/2014 which dictates the provisions against market abuse, for example to avoid risks deriving from regulatory arbitrage and ensure the assumption of responsibility in case of attempted manipulation. High frequency negotiation is a technique that brings advantages in terms of information provided to those who practice it, can induce investors to choose to carry out exchanges in locations where they can avoid contacts with operators who conduct high frequency negotiations, therefore the With the MiFID directive, the Commission deems it appropriate to subject high frequency algorithmic trading techniques that respond to certain characteristics to a special regulatory control, also in the case of techniques based on proprietary trading, regulatory control is also required in cases in which the execution of the technique is structured in such a way as to prevent it being carried out on its own account. With the MiFID directive it is considered as the best way to mitigate these potential risks deriving from a greater use of technology, be it a combination of risk-specific measures and controls for companies that use algorithmic negotiations or adopt high frequency algorithmic negotiation techniques and providing direct electronic access, and other measures directed at the operators of the trading venues to which such firms have access. In order to enhance the resilience of markets to technological developments, the necessary measures and controls will have to follow the technical guidelines adopted by the European Securities and Markets Authority established by Regulation (EU) no. 1095/2010 of the European Parliament and of the Council, ESMA, published in February 2012 and entitled "Systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities" (Systems and controls in an automated trading environment for trading platforms, investment firms and competent authorities - ESMA / 2012/122). The Directive establishes for all companies carrying out high-frequency algorithmic negotiations the authorization requirement in the sense of this Directive, authorization to ensure the existence of adequate organizational requirements and adequate supervision. However, institutions that are authorized and controlled under Union law governing the financial sector and exempt from the application of this Directive, but which perform algorithmic trading or trading with high frequency algorithmic techniques, are not required to obtain an authorization pursuant to this Directive and are subject exclusively to measures and controls aimed at combating the specific risk arising from these types of trading. In this sense, ESMA plays an important coordinating role by defining the appropriate size of the price deviation so as to ensure the orderly functioning of markets at Union level.

With this directive, it is mandatory for investment firms and trading venues to ensure that robust measures are put in place to ensure that algorithmic or high frequency algorithmic trading techniques do not create a disordered market and not can be used for prohibited purposes. The trading venues are obliged to ensure that their trading systems are resistant and adequately tested to cope with an increase in order flow or in critical market conditions and that at trading venues they are switches to temporarily stop or constrain trades if unexpected price movements occur unexpectedly; the obligation, for the committees' structures, of transparency of fairness, non-discrimination and not to favor anomalous market conditions is also ratified. It is therefore permitted to the trading venues to adjust the commissions related to the canceled orders according to the time frame in which the order has been maintained and to calibrate the commissions according to the financial instrument to which they apply. Furthermore, Member States may authorize trading venues to impose higher fees to execute orders that are subsequently canceled or to impose such fees on participants with a high percentage of canceled orders and those using an algorithmic trading technique high frequency, in order to take into account the additional burden on the capacity of the system without necessarily benefiting other market operators. In addition to measures related to algorithmic trading technique and high frequency algorithmic trading, it is forbidden for investment firms to provide customers with direct electronic access to markets if such access is not subject to adequate systems and controls. Irrespective of the form of direct electronic access provided, companies offering such access shall evaluate and review the suitability of customers using the service in question and shall ensure that risk controls are imposed on the use of the service and must also maintain responsibility for trades transmitted by their clients through the use of their systems or the use of their trading codes.Detailed organization requirements concerning these new forms of negotiation are more specifically prescribed in regulatory technical standards to ensure that requirements can be modified as needed and to take account of further innovations and developments in the sector. The Directive lays down provisions to ensure effective supervision and to allow competent authorities to take appropriate and timely measures against defective or incorrect algorithmic strategies, defining the obligation to report all orders generated by algorithmic negotiation in order that the competent authorities can be able to identify and distinguish orders from different algorithms and to reconstruct and effectively evaluate the strategies used by the operators that perform algorithmic negotiations; with this set of rules established by the MiFID directive for the control of algorithmic and high frequency trading, the risk that orders are unequivocally assigned to an algorithmic strategy or to an operator is mitigated. The reporting enables the competent authorities to react efficiently and effectively against algorithmic trading strategies that constitute prohibited behavior or create risks for the proper functioning of the market. In order to ensure the maintenance of market integrity as a result of technological developments in the financial markets, ESMA periodically makes use of national expert contributions on developments in trading technology, including high frequency trading and new sensitive practices. to constitute market abuse, to identify and promote effective strategies for the prevention and treatment of such abuses.

With the amendments made to Directive 2011/61/EU, given the legislative harmonization achieved for the services provided by AIFMs, the regulation that allows the provision of services in other EU Member States other than the Member State of origin, where the AIFM is authorized, it is revised. In the current legal framework, AIFMs authorized to provide such investment services and intend to provide them in Member States other than their home countries are required to comply with additional national obligations, such as the establishment of a separate legal entity. The amendments made by Directive (EU) 2014/65 are intended to eliminate obstacles in the context of cross-border provision of harmonized investment services and to ensure a level playing field between the entities providing the same investment services in compliance with the same requirements of law; an AIFM authorized to provide such services should be able to do so across borders, without prejudice to the appropriate notification requirements, defined in the authorization granted by the competent authorities of the Member State of origin. Article 92 of Directive (EU) 2014/65 makes changes to Article 4 (paragraph 1, point r) and Article 33 of Directive 2011-61-EU by stipulating that an AIFM authorized to provide such services should be able to do it on the level cross-border, subject to the appropriate notification obligations, by virtue of the authorization granted by the competent authorities of the relevant Member State of origin; with Article 94, it repeals Directive 2004/39/EC which lays down the provisions for systems authorized to operate the quality of regulated markets and the provisions that investment firms must comply with to be authorized to carry out their business: o more investment services to third parties and in carrying out one or more investment activities on a professional basis: receipt and transmission of orders relating to one or more financial instruments, execution of orders on behalf of clients, trading on own account, portfolio management, consulting in the field of investments, underwriting of financial instruments and placement of financial instruments on the basis of an irrevocable commitment or even without irrevocable commitment, management of multilateral trading systems. Directive 2004/39/EC in turn repeals the Directive of the Council of the European Communities on investment services in the securities sector, Directive 93/22/EEC; a directive which constituted an essential tool for the creation, in the investment firm sector, of the internal market, decided by the Single European Act and programmed in the Commission's White Paper, from the dual point of view of freedom of establishment and freedom to provide services in the field of investment firms, (the first provisions concerning the freedom of establishment date back to 1973 with the enactment of Directive 73/183/EEC). Directive 2004/39/EEC amends Directive 85/611/EEC in which the Commission's objective was to coordinate the national laws governing collective investment undertakings, to bring the conditions of competition between these bodies closer together at Community level and be able to enforce more effective and more uniform protection of the participants; objectives that would have facilitated the marketing of the units of collective investment undertakings located in a member state, in the territory of other Member States of the European Community. Amendment of Directive 93/6/EEC on the capital adequacy of investment firms and credit institutions, amending Directive 2000/12/EC on access to the business of credit institutions and its exercise, which brings together in a consolidated text Council Directive 73/183/EEC of 28 June 1973 on the abolition of restrictions on freedom of establishment and freedom to provide services in the field of self-employed activities of banks and other financial institutions, the first Directive (77/780/EEC) of the Council of 12 December 1977 on the coordination of laws, regulations and administrative provisions concerning access to and the exercise of credit institutions, Council Directive 89/299/EEC of 17 April 1989 concerning the own funds of credit institutions, the Second Council Directive (89/646/EEC) of 15 December 1989 on the coordination of laws, regulations and and administrative provisions concerning access to and the exercise of credit institutions, Council Directive 89/647/EEC of 18 December 1989 on the solvency ratio of credit institutions, Council Directive 92/30 / EEC Council of 6 April 1992 on the supervision on a consolidated basis of credit institutions and finally Council Directive 92/121/EEC of 21 December 1992 on the supervision and control of large exposures of credit institutions. The directive (EU) 2014/65 has undergone changes with the enactment of directive (EU) 2016/1034. Changes are also made by Regulation (EU) 909/2014 on the improvement of securities settlement in the European Union and the central securities depositaries of the CSD and amending Directives 98/26/EC ( concerning the definitive nature of the regulation in payment systems and securities settlement systems ) and Regulation (EU) no. 236/2012, illustrated in the previous paragraphs, paragraph 2.2 ( relating to short selling and certain aspects of derivative contracts concerning the coverage of the risk of default of the issuer "credit default swap" ); the latter introduces into the legislation the references to the same regulation (EU) 909/2014 with regard to CSDs, central securities depositories. Integrations to Directive 2014/65/EU were implemented with the adoption of regulation (EU) 2017/568 with reference to Article 51 paragraph 6, paragraph 3, projects and regulatory standards that ESMA elaborates with reference to which the regulated market must provide to verify that issuers of securities admitted to trading on the regulated market comply with their obligations under Union law with regard to initial disclosure obligations, continuous and ad hoc to facilitate its members and its participants access to information that has been published under the conditions established by Union law. Directive 2014/65/EU is also complemented by the implementation of regulation (EU) 2017/576, as regards the regulatory technical standards for the annual publication by the investment firms of information on the identity of the execution venues and on the quality of the execution.

Further obligations for companies that provide investment services are set out in Regulation (EU) 600/2014 (MiFIR regulation: Markets in Financial Instruments Regulation) adopted by the European Commission due to the weaknesses that the financial crisis between 2006 and 2008 (years in which the crisis produced the greatest effect) highlighted weaknesses in the transparency of financial markets that could have negative socio-economic consequences. The committee believes that greater transparency is one of the shared principles for strengthening the financial system, as confirmed by the declaration of G20 leaders made in London on 2 April 2009. Adopting a new regulatory framework aimed at achieving greater transparency and making operation more effective of the internal market for financial instruments, uniform requirements are defined for the transparency of transactions carried out in the markets of financial instruments; the new regulatory framework defined in Regulation (EU) 600/2014 provides a comprehensive set of rules applicable to a wide range of financial instruments and includes transparency requirements applicable to orders and transactions in shares in accordance with the provisions of Directive 2004/39/ EC of the European Parliament and of the Council replaced by the new Directive (EU) 2014/65. The regulation establishes uniform requirements in relation to: a) public disclosure of trading data, b) reporting of transactions to competent authorities, c) negotiation of derivative instruments in organized venues, d) non-discriminatory access to compensation and non-discriminatory access to negotiation of benchmarks, e) powers to intervene on products conferred on the competent authorities, ESMA and EBA as well as powers conferred to ESMA on controls on the management of positions and limitations on positions, f) provision of services or investment activity by companies from third countries, following an applicable equivalence decision by the Commission, with or without a branch. It applies to investment firms authorized under Directive 2014/65/EU and credit institutions authorized under Directive 2013/36/EU of the European Parliament and of the Council when they provide investment services and / or carry out activities; investment companies, as well as market managers, including any trading venue operated by them. The regulation also applies to central counterparties in OTC transactions, in particular Title V applies to all financial counterparties pursuant to Article 2 (8) of Regulation (EU) no. 648/2012 and to all non-financial counterparties referred to in Article 10 (1) (b) of that Regulation and Title VI of this Regulation shall also apply to CCPs and to persons holding property rights over reference values.

The rules established by regulation (EU) 600/2014 regarding the transparency of transactions with financial instruments also affect market operators and investment companies that manage their own trading venue; obligations are also established for transactions involving non-equity instruments such as bonds, structured financial instruments (characterized by the combination of a security and one or more derivatives), emission allowances (harmful gases) and derivative instruments (OTC). Provisions are made to allow a third-country enterprise to provide investment services without the need for a branch in the member country. For the purposes of this regulation, liquid markets are defined, and liquidity fragmentation definitions: 
liquid market: the market of a financial instrument or a category of financial instruments in which there are sellers and buyers ready and available on a continuous basis, and where the market is assessed according to the criteria listed below, taking into account the specific market structures of the particular financial instrument or particular category of financial instruments: 
i) the frequency and size averages of transactions in a range of market conditions, taking into account the nature and life cycle of products in the financial instrument category, ii) the number and type of market participants, including the relationship between market participants and financial instruments traded in relation to a given product; iii) the average size of the spreads, where available; a financial instrument that is traded daily, when it is valued according to the following criteria: i) the free float; ii) the average daily number of transactions relating to these financial instruments; iii) the average daily turnover of these financial instruments. 
Liquidity fragmentation: a situation in which: 
a) the participants in the trading venue are not able to conclude a operation with one or more participants from the same venue because there are no clearing agreements accessible to all participants, or b) a clearing member or its clients are forced to hold their positions in a financial instrument in more than one CCP, which would limit the possibilities for offsetting financial exposures.
Sovereign debt: a debt instrument issued by a sovereign issuer (government bond). 
Regulation (EU) 600/2014 is supplemented by Regulation (EU) 2017/583 as regards regulatory technical standards on transparency obligations for trading venues and investment firms in relation to bonds, structured financial instruments, emission allowances and derivatives.

5 - ALTERNATIVE INVESTMENT FUNDS: DIRECTIVE (EU) 2011/65 GEFIA
5.1 - Directive (EU) 2011/65 GEFIA
The directive 2011/61/EU which, as we saw in the previous paragraph, was amended by Article 92 of Directive (EU) 2014/65, establishes rules on the authorization, operation and transparency of alternative investment fund managers (GEFIA) which they manage and / or market alternative investment funds (AIFs) in the Union. The Directive aims to create an internal market for AIFMs and a harmonized and rigorous regulatory and supervisory framework for the activities within the Union of all AIFMs, including those having their registered office in a Member State (EU AIFM) and those having their registered office in a third country (non-EU AIFM). As the practical consequences and possible difficulties arising from a harmonized regulatory framework and an internal market for non-EU AIFMs carrying out management and / or marketing activities within the Union and for EU AIFMs managing alternative investment funds (FIA) non-EU are uncertain and difficult to predict due to lack of previous experience in this area, the European Commission foresees a review mechanism with Directive 2011/65/EU. The objective pursued, after a transitional period of two years, is that a harmonized passport regime will become applicable to non-EU AIFMs that carry out management and / or marketing activities in the Union and EU AIFMs managing non-EU AIFs afterwards entry into force of a Commission delegated act in this regard. The aim is that the harmonized regime, during a further transitional period of three years, will coexist with the national systems of the Member States in compliance with certain minimum harmonization conditions. After this three-year coexistence period, the objective is to delete the national schemes on the date of entry into force of a further delegated act of the Commission. Objective enshrined with the amendments made by Directive (EU) 2014/65 (Article 92) evaluated in more detail in the precedent paragraph. Directive (EU) 2011/61 applies to AIFMs, without depending on the legal or contractual arrangements on the basis of which the task was assigned to them, which manage all types of funds that do not fall within the scope of the 2009 Directive/65/EC of the European Parliament and of the Council of 13 July 2009 and subsequent amendments referred to in paragraph 3 concerning the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS). It is established that AIFMs can not manage UCITS under Directive 2009/65/EC on the basis of an authorization granted under Directive 2011/61/EU; for a management company authorized under Directive 2009/65/EC applying for an authorization as an AIFM, it is not required by the competent authorities to provide information or documents already provided at the time of application for authorization for the management of UCITS, provided that such information or documents are updated, and investment firms authorized under the 2014/65/EU Directive relating to financial instrument markets, credit institutions authorized under Directive 2013/36/EU on access the activity of credit institutions and its operation, must not obtain an authorization under this Directive in order to provide investment services such as the management of individual portfolios in relation to the AIFs. For investment firms, it is possible to offer, directly or indirectly, units or shares of an AIF to investors in the Union or to place such units or shares with investors in the Union only to the extent that the units or shares can be marketed in accordance with the this Directive. In transposing this Directive into national law, Member States must take into account the regulatory purpose of this provision and should ensure that investment firms established in a third country can also provide investment services in accordance with the relevant national law. FIA fall within the scope of this provision. The provision of investment services by such entities, in relation to the FIA, is not intended to constitute a de facto circumvention of this Directive by transforming the AIFM into a phantom company, regardless of whether it is established in the Union or in a third country.

Alternative investment funds, FIAs, are defined as collective investment schemes, including the relevant sub-funds, which: i) collect capital from a number of investors in order to invest them in accordance with a defined investment policy for the benefit of such investors; and ii) do not require an authorization pursuant to Article 5 of Directive 2009/65/EC. The AIF identifies all non-harmonized collective investment funds and therefore do not fall under the provisions of the said Directive for UCITS (Undertakings for collective investment in harmonized transferable securities, therefore regulated at Community level); an AIF may be established under contract law, in the form of a fiduciary shop, by law or may have other legal form and are governed by the legislation of the member country in which they are established unlike the management companies for which harmonized legislation is implemented at the European level, right from the directive 2011/65/EU. AIFMs are defined as legal entities that usually carry out the business of managing one or more AIFs, branches in the case of an AIFM are the place of business that constitutes a part, without legal personality, of an AIFM and provides services for which the AIFM has been authorized. All business locations established in the same Member State by an AIFM with its registered office in another Member State or in a third country shall be considered as a single branch; the commission of management (carried interest) is the portion of the FIA's profits due to the AIFM as compensation for the management of the AIF, excluding any participation in the fund's profits due to the AIFM as a profit on an investment by the AIFM in the FIA. The Directive establishes the obligation for Member States to ensure that each AIF managed under this Directive has a single AIFM which is responsible for compliance with this Directive. The AIFM can be: a) an external manager, which is the legal entity appointed by the AIF or on behalf of the AIF and who is responsible for the management of the AIF (external GEFIA) through this appointment; or b) where the FIA's legal form allows internal management and the board of directors of the fund chooses not to appoint an external AIFM, the FIA itself, which is therefore authorized as an AIFM. 
An external AIFM, where is unable to ensure compliance with the requirements of this Directive for which the AIF or another entity is responsible for it, shall immediately inform the competent authorities of its home Member State and, where appropriate, the competent authorities of the EU FIA concerned. The competent authorities of the AIFM's home Member State require the AIFM to remedy the situation. If, despite the adoption of the measures, the non-compliance persists, and to the extent that it concerns an EU AIFF or an EU AIF, the competent authorities of the AIFM's home Member State require the resignation of this as an AIF manager . In this case, the AIF can no longer be marketed in the Union. In the case of a non-EU AIFM operating a non-EU AIF, this fund can no longer be marketed in the Union and the competent authorities of the reference Member State (where the AIFM is not authorized for the management of EU AIFs and not EU in compliance with Directive 2011/65/EU) of the AIFMIA immediately inform the competent authorities of the AIFM host Member State of the change.

A number of provisions of this Directive require AIFMs to ensure compliance with obligations for which, in some fund structures, the manager is not responsible. Examples are the structures of the funds in which the responsibility of appointing the depositary lies with the FIA or another person acting on behalf of the fund itself. In this case the AIFM has no definitive control over the effective appointment of the depositary, unless the fund is internally managed by the latter; Directive 2011/61/EU does not regulate the AIFs, it can not impose on the funds the obligation to appoint a depositary. It is the obligation for AIFMs to ensure compliance with current obligations that fall on a fund or another entity on its behalf and in the event of a breach of these obligations it is mandatory for the competent authorities to request the AIFM from adoption of measures necessary to remedy the situation and if, despite these measures, non-compliance persists and whether an EU AIFM or an authorized non-EU AIFM manages a Union AIF, they must renounce the management of the fund; if they do not renounce, the competent authorities of their home Member State must impose the waiver by prohibiting the marketing of the AIF in the Union. The same prohibition is applied to the authorized non-EU AIFM which markets an alternative investment fund outside the European Union in the Union. Directive 2011/61/EU also provides for a facilitated scheme (waivers) for AIFMs in the event that the cumulative AIFs managed do not exceed the threshold of EUR 100 000 000 or EUR 500 000 000 for AIFMs managing only funds that they do not use leverage and do not grant investors repayment rights for a period of five years. Although the activities of the AIFMs in question are unlikely to have significant individual consequences for financial stability, it could happen that, jointly, these activities generate systemic risks. As a consequence, these AIFMs should be subject not only to the full authorization but to the registration requirement in their Member State of origin and to provide competent authorities with relevant information on the main instruments they trade and on the main exposures and more important concentrations of the AIFs they manage. The derogations provided for by the Directive, however, provide that smaller AIFMs are treated as AIFMs subject to the accession procedure provided for in the Directive itself and any exemption should not prevent Member States from imposing more stringent obligations on AIFMs that have not joined; in particular, Member States shall ensure that AIFMs that benefit from derogations, at least: (a) are subject to registration with the competent authorities of their home Member State; (b) identify themselves and the AIFs they manage with the competent authorities of their Member State of origin at the time of registration, (c) provide information on the investment strategies of the AIFs that they manage to the competent authorities of their home Member State when registering; (d) provide periodically to the competent authorities of their Member State source information on the main instruments in which they trade and on the main exposures and major concentrations of the AIFs they manage in order to allow the competent authorities to effectively monitor the systemic risk, and e) notify the competent authorities of their home Member State of the fact no longer to meet the derogation conditions. AIFMs benefiting from the said facilitations may not avail themselves of any of the rights granted under this Directive, unless they choose to submit to the rules of this Directive. Where an AIFM makes this choice, this Directive becomes fully applicable.

It is established that the management of FIA must consist in providing at least investment management services. The individual AIFM to be appointed under this Directive may not be authorized to provide a portfolio management service without providing a risk management service or vice versa, and the exercise of administrative and administrative functions must not be precluded marketing of an AIF, or functions related to the activities of the FIA. An external GEFIA may also provide investment portfolios management services, with mandates given by investors on a discretionary and individual basis, including portfolios owned by pension funds and institutions for occupational retirement provision covered by Directive 2003/41/EC (repealed from Directive 2016/2341/EU), concerning the activities and supervision of institutions for occupational retirement provision, or the provision of advisory services relating to the investment, custody and administration of units in collective investment schemes and the receipt and transmission of orders . In accordance with the authorization set out in Directive 2009/65/EC and subsequent amendments (Directive 2014/91/EU), the management of UCITS is permitted to an external AIFM.

The directive establishes robust governance control systems for AIFMs by defining provisions to minimize conflicts of interest; establishes organizational requirements without prejudice to the regimes and controls provided for under national law concerning the registration of persons working for or for an AIFM. The activities managed by an AIFM are listed below:
1. Minimum investment management functions that an AIFM performs in the management of an AIF: a) portfolio management; b) risk management. 
2. Other additional functions that an AIFM may perform during the collective management of an AIF: a) administration: i) legal and accounting services relating to the management of the fund; ii) information service for customers; iii) evaluation and determination of the price, also for the purposes of tax declarations; iv) verification of compliance with applicable legislation; v) keeping the register of the holders of shares / shares; vi) distribution of proceeds; vii) issue and redemption of units / shares; viii) settlement of contracts, including sending certificates; ix) keeping of accounting records; 
b) marketing; c) activities related to the assets of the AIFs, notably the services necessary to meet the fiduciary obligations of the AIFM, the management of the structures, activities of administration of real estate, advice to companies on the capital structure, the industrial strategy and related matters, consultancy and services related to mergers and acquisitions of companies and other services related to the management of the AIF and to the companies and other assets in which it has invested. 
Some of the activities listed above may be delegated and the relevant directive establishes strict constraints and requirements and the delegation of auxiliary tasks, such as for example the administrative or technical tasks performed by the AIFM in the context of its management tasks, should not be subject to the specific constraints and requirements set out in this Directive.

Recent developments in the market for alternative investment funds underline the important need to separate the safekeeping of assets from management functions and to distinguish the assets of investors from that of the manager; the directive establishes the obligation to appoint a depositary other than the AIFM appointed to perform the depositary functions with respect to AIFs. The commission establishes provisions concerning the designation and functions of a depositary to be applied to all AIFs managed by an AIFM subject to this Directive and, therefore, to all the business models of the AIFs.

For AIFs that do not provide for the possibility of exercising the right of redemption in the five years following the date of initial investments and which, according to their fundamental investment policy, do not normally invest in assets that must be held in custody in accordance with this Directive o generally invest in issuers or unlisted companies with the potential to gain control over such companies under this directive, such as investment funds in private capital, venture capital funds and real estate funds , Member States may allow the appointment of a notary, a lawyer, a conservative or another person acting as depositary. In such cases the depositary functions fall within the framework of professional or commercial activities for which the appointed person is bound to the obligation of professional registration recognized by law or laws or regulations or ethical standards and can offer sufficient financial and professional guarantees to enable him / her to effectively exercise the relevant depositary functions of the fund and honor the commitments inherent to these functions, provisions established by Directive 2011/61 / EU to take into account existing practices for certain types of closed-end funds. For all other AIFs, the depositary should be a credit institution, an investment firm or another entity admitted in accordance with Directive 2009/65 / EC, given the importance of the custody function. For non-EU AIFs, the depositary should be able to be a credit institution or any other entity subject to effective prudential regulation and supervision, having an effect similar to that of Union law and effectively applied. The depositary where to have the registered office or a branch in the same country of the FIA. For a non-EU AIF it is possible to have a depositary established in the third country in question only if certain additional conditions are met. On the basis of the criteria established in delegated acts, the Commission has the power to adopt implementing measures, stating that the prudential regulation and supervision of a third country have the same effects as EU law and are effectively applied. Furthermore, where the competent authorities disagree on the correct application of the other additional conditions, the mediation procedure provided for in Article 19 of Regulation (EU) No 1095/2010 (establishing ESMA). Alternatively, for non-EU AIFs, the depositary has the possibility of establishment in the Member State of origin or in the reference Member State of the AIFM which manages the AIF.

The depositary is responsible for the appropriate monitoring of the FIA's cash flows, ensuring in particular that the money and cash of investors belonging to the AIF, or the AIFM acting on behalf of the fund, are correctly registered on accounts held by the AIF or the AIFM which acts on behalf of the fund or the depositary acting on behalf of the AIF for custody of assets of the AIF including the custody of financial instruments that may be recorded in an account of financial instruments opened in the accounting records of the depositary and all instruments financial statements that can be physically delivered to the latter, as well as for the verification of ownership of all other assets held by the FIA or the AIFM on behalf of the fund itself. When ensuring that investor money is correctly recorded in a liquidity account, the depositary should take into account the provisions set out in Article 13 (7) and (8) of Directive 2004/39/EC for the protection of the assets of the customers; the aforementioned paragraphs establish that an investment company and therefore in this case the depositary (which may also be an investment company) when holding financial instruments belonging to the clients, take appropriate measures to safeguard the property rights of the latter, in particular in the case of insolvency of the investment firm, and to prevent customers' tools from being used by the investment company on their own behalf, unless the customer explicitly approves them; when they hold funds belonging to clients, investment firms take appropriate measures to safeguard their rights and to prevent clients' funds from being used by their own companies, except in the case of credit institutions (bank). Directive 2004/39/EC was repealed by Directive 2014/65/EU (Article 94 thereof) which in turn is amended by Directive 2016/1034/EU. The European Commission with Directive 2011/61/EU takes into account the fact that numerous FIAs, in particular hedge funds, are currently using a main broker (prime broker) and ensure that the AIFs continue to make use of the services of the main intermediaries; furthermore, it establishes that unless there is a functional and hierarchical separation between the exercise of the depositary functions and the principal intermediary functions and that potential conflicts of interest have not been appropriately identified, managed and communicated to the FIA's investors, a principal intermediary can not being appointed as depositary, since the principal intermediaries act as counterparties to the AIFs and can not therefore act simultaneously in the best interest of the fund as required by the depositary. Depositaries may delegate custody duties to one or more major intermediaries or other third parties; in addition to the delegated custody functions, the main intermediaries may be authorized to provide the FIA with principal brokerage services that do not form part of the delegation agreements. The depositary remains responsible for any losses incurred by the AIFM, the FIA and investors; the loss of financial instruments held in custody with other types of loss is distinguished. In the event of a loss other than that of financial instruments in custody, the depositary is liable in the event of fraud or negligence. If the depositary holds assets in custody and these assets are lost, the depositary is liable, unless it is able to demonstrate that such loss is related to an external event outside of any reasonable control, the consequences of which would have been inevitable despite all reasonable effort to avoid them. In this context, a depositary should not, for example, be able to invoke internal situations as a fraudulent act committed by an employee to exempt himself from his responsibilities. The depositary is held liable in the event of the loss of financial instruments whose custody has been delegated to third parties. However, as long as the depositary is expressly authorized to exempt itself from its responsibilities subject to the contractual transfer of such responsibilities to the third parties in question, on the basis of a written contract between the depositary and the AIF or the AIFM acting on behalf of the FIA, in which this exemption is objectively justified, and provided that the third parties in question can actually be held liable for loss under a contract between the depositary and such third parties, the depositary may exonerate from its responsibilities if it is able to demonstrate that it acted with the competence , the care and diligence due and having satisfied the specific provisions for the delegation. Prescribing the need for contractual transfer of liability to third parties, Directive 2011/61/EU intends to attribute external effects to this contract, making third parties directly responsible to the AIF or investors of this fund for the loss of financial instruments held in custody. Furthermore, where the legislation of a third country requires that certain financial instruments be held by a local entity and where there are no local entities meeting all the requirements for delegation by the depositary, the depositary may exonerate from its responsibility provided that the regulation or documents of the FIA concerned expressly provide for such exemption; Investors must have been duly informed of such waiver and of the circumstances justifying it prior to making the investment, furthermore the AIF or AIFM on behalf of the AIF must instruct the depositary to delegate the custody of such financial instruments to a local entity . Between the depositary and the FIA or the manager acting on behalf of the FIA there must be a written contract expressly authorizing such exemption, and there must be a written contract between the depositary and the third parties expressly transferring to the latter the responsibility of the depositary and allowing the FIA or, to the manager on behalf of the FIA, to claim compensation from third parties for the loss of financial instruments or allow the depositary to submit such a request on their behalf.

Directive 2011/65/EU defines transparency obligations by establishing for an AIFM to publish, for each EU AIF that it manages and for each AIF it markets in the Union, an annual report for each financial year within six months of the end of the financial year, in to this Directive. This six-month period should be without prejudice to the right of Member States to impose a shorter deadline. As it is possible for an AIFM to sell or buy financial instruments for an amount exceeding the capital held, then to resort to leverage and, in certain circumstances, to contribute to increasing systemic risks or disorder on the markets, specific obligations must be imposed on AIFMs that they use leverage. The information needed to identify, monitor and respond to these risks has not been uniformly collected across the Union and exchanged between Member States so as to identify potential sources of risks to the stability of the financial markets in the Union. To remedy this situation, specific requirements are applied to AIFMs that make substantial recourse to leverage at the AIF level. These AIFMs are required to disclose information relating to the general level of leverage used, leverage arising from the loan of cash or securities and the leverage arising from a position held in derivatives, from the reuse of assets and from the main sources of leverage in their FIA. The information collected by the competent authorities should be shared with other authorities in the Union, with ESMA and with the European Systemic Risk Board (CESR) established by Regulation (EU) no. 1092/2010 of the European Parliament and of the Council of 24 November 2010 on the macroprudential oversight of the financial system in the European Union and establishing the European Systemic Risk Board, so as to promote a collective analysis of the impact of leverage financial management of the AIFs managed by the AIFMs on the Union's financial system, as well as a common response. In the event that one or more AIFs managed by an AIFM are potentially an important source of counterparty risk for a credit institution or other systemically important institutions in other Member States, this information must also be shared with the competent authorities. To ensure an adequate assessment of the risks represented by the leverage by an AIFM in relation to the AIFs it manages, the AIFM is obliged to demonstrate that the limits of leverage for each AIF managed are reasonable and to comply with these limits at any time. When the stability and integrity of the financial system is threatened, the competent authorities of the AIFM's home Member State are obliged to impose limits on the level of leverage an AIFM can use in the AIFs it manages. ESMA and CESR must be informed of any action taken in this regard. The directive allows the ESMA, taking into account the advice of the ESRB, to determine whether the leverage used by an AIFM or a group of AIFMs poses a substantial risk to the stability and integrity of the financial system and to direct competent authorities an opinion specifying the corrective measures to be taken. The Commission considers it necessary to ensure that the competent authorities of the AIFM's home Member State, the companies on which the AIFs exercise control, and the staff of those companies receive certain information necessary for such companies to assess the manner in which such control will affect their situation.

For AIFM, managers of FIAs who control an issuer whose shares are admitted to trading on a regulated market, the information is generally provided in accordance with Directive 2004/25/EC on bids for public purchase, and of the Directive 2014/109/EC on the harmonization of transparency obligations concerning information on issuers whose securities are admitted to trading on a regulated market. For FIA managers exercising control over unlisted companies, specific obligations must be applied to ensure transparency in relation to the subsidiary, applying stricter transparency, disclosure and information requirements. The European Commission believes that the annual reports of the relevant AIF are complemented by specific information about the subsidiary or that this additional information is included in the annual report of the subsidiaries. This information is made available to the employees' representatives of the company or, failing these, to the workers themselves, as well as to the investors of the AIF concerned. Specific information requirements for workers of certain companies apply in cases where the AIFs acquire control over companies within the meaning of this Directive. However, in most cases, the AIFM has no control over the AIF unless it is an internally managed AIF. Furthermore, according to the general principles of company law, there is no direct relationship between the shareholders and the employees' representatives or, in the absence of these, the workers themselves. For these reasons, a shareholder or his manager, ie the AIF and the AIFM, may not be required to inform workers' representatives, or, failing that, to the workers themselves in accordance with this Directive. As regards the obligations to inform those workers' representatives, or, failing that, to the workers themselves, this Directive should provide the AIFM concerned with the obligation to do their best to ensure that the company's board of directors concerned, they make the relevant information public to the representatives of the employees of the company or, failing these, to the workers themselves. If an AIFM operates one or more AIFs that gain control of an unlisted company, that AIFM is obliged to provide the competent authorities of its home Member State with information on the financing of the acquisition. This obligation to provide information on financing also applies in the event that an AIFM manages AIFs that acquire control over an issuer of shares admitted to trading on a regulated market.

When an AIFM operates one or more AIFs that gain control over an unlisted company or an issuer, for a period of twenty-four months from the acquisition of control over the company by the AIFs, the AIFM is not authorized to facilitate, support or order any distribution, reduction of capital, redemption of shares and / or purchase of treasury shares by the company in accordance with this Directive; to the extent that it is authorized to vote on behalf of the AIFs in the management bodies of the company, it may not vote in favor of a distribution, a reduction in capital, a redemption of shares and / or a purchase of treasury shares by the company in accordance with the this Directive and must in any case carry out everything in its power to prevent distributions, reductions in capital, redemptions of shares and / or purchases of treasury shares by the company in accordance with this Directive. Upon receipt of this Directive under national law, Member States are obliged to give due importance to the need for a level playing field between EU and non-EU AIFs when they acquire control of companies established in the Union.

Notification and advertising obligations and specific guarantees against asset unbundling, in the case of control of an unlisted company or an issuer, are subject to a general exception with regard to control over small and medium companies and vehicle companies for the acquisition, holding or administration of real estate. These obligations are not intended to disclose proprietary information that would disadvantage the manager to potential competitors, such as sovereign wealth funds or competitors who may wish to expel the target company using the above information to their advantage (for example, confidential management information that if public can jeopardize the feasibility of the company's entrepreneurial intend). The obligations to notify and publish the information must therefore be applied subject to the conditions and restrictions relating to confidential information established by Directive 2002/14/EC, which establishes a general framework for informing and consulting employees, and without prejudice of the directives 2004/25/CE and 2004/109/CE. Therefore, Member States shall ensure that, within the limits and under the conditions established by national law, workers' representatives and any person assisting them are not authorized to disclose to employees or third parties information that affects the legitimate interests of the company and that they are have been expressly provided to them on a confidential basis. However, Member States have the possibility to authorize workers' representatives and anyone who can assist them to transmit confidential information to workers or third parties who are bound by the obligation of confidentiality; shall ensure that the affected AIFMs do not require disclosure of information by the Management Board to the employees' representatives or, failing that, to the workers themselves, when the nature of the information in question is likely to seriously harm, according to criteria objective, to the operation of the company concerned or to cause it injury. Notification and publicity obligations and specific safeguards against asset unbundling are without prejudice to any stricter rules adopted by the Member States.

Chapter II of the directive defines provisions related to the conditions for access to the activities of AIFM, in Chapter III the operating conditions including the general principles, the provisions for the delegation of functions, provisions regarding the depositary; in chapter IV the obligations of transparency are defined, in the Chapter V provisions concerning AIFMs that manage specific alternative investment funds as excessive financial leverage, obligations imposed on the AIFMs that manage the AIFs that acquire control of unlisted companies and issuers are established . Chapter VI of the directive establishes the right for AIFMs to market and manage EU AIFs in the union; in Chapter VII, conditions are defined for EU AIFMs managing non-EU AIFs that are not marketed in the Member States and for the authorization of non-EU AIFMs that want to manage AIFs in the European Union; there are conditions for derogation of certain provisions for non-EU AIFMs seeking authorization in a reference Member State in cases where it is not possible to reconcile them with provisions of the third state to which it is subject or these are equivalent to the provisions of Directive 2011/65/EU, therefore with the same regulatory purpose and which offer the same level of protection for investors. Provisions are made for Member States in Chapter VIII to enable AIFMs to market for AIFs in the retail investors in their territory shares or AIFs that they manage under this Directive, regardless of whether such AIFs are marketed on a national or transnational basis or are EU or non-EU FIAs; in the latter two chapter, provisions are made on the competent authorities (designations, powers and appeals) and the transitional and final provisions of the Directive.

With Directive 2011/61/EU as seen in the previous paragraph, Directive 2009/65/EC (UCITS IV) is amended, Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision is amended, is amended the Regulation (EC) 1060/2009 on credit rating agencies, ECAI agencies encountered in studies related to regulation (EU) 573/2013 (7°) with reference to the assessment of the risk assumed by 'public interest entities' (credit institutions, financial institutions) for the determination of regulatory capital. The regulation (EU) no. 1095/2011 is also amended, the regulation establishing the ESMA (European Securities and Markets Authority) and repealing the Decision 2009/77/EC, being defined in the same regulation that ESMA assumes all the current tasks and powers of the Committee of European Securities Regulators CEBS, authority established by its own committee by Decision 2009/77/EC and then repealed by Regulation 1095/2011 which also amends decision no. 716/2009/EC of the Commission with regard to the removal of CEBS from the beneficiaries of grants awarded by the Commission on the Community program established by the same decision to support specific activities in the field of financial services, financial reporting and audit.

(7°) NOTE: a rating agency or rating agency is a company that assigns a judgment or evaluation (rating) to the soundness and solvency of a company issuing securities on the financial market. The "ratings" constitute votes on a predetermined scale, generally expressed in terms of letters and / or other symbols. There are many existing rating agencies, but the most important, influential ones are Standard & Poor's, Moody's Investor Service and Fitch Ratings, all three companies owned by large multinationals. The latter have the role of helping to deal with the problems of information asymmetry on the market in order to increase its efficiency at a global level by providing useful investment information. Investors operating in the markets rely on ratings issued by rating agencies to decide which securities to buy and to what extent, depending on the risk predisposition of investors. The supervision of rating agencies is entrusted to the competent authority of the home Member State (for example, in Italy Consob, SEC for the United States), in cooperation with the competent authorities of the other Member States concerned, availing itself of the competent college and appropriately involving the European Securities and Markets Authority (ESMA). In July 2011, at the beginning of the sovereign debt crisis (started in 2010 after the great recession in previous years, Consob called the representatives of the rating agencies Standard & Poor's Italia and Moody's Italia to ask for clarifications on a report released by the agencies the previous year on the corrective maneuver launched by the government of Silvio Berlusconi, (towards a downgrading of the Italian Banks).

5.2 - Credit Rating: Regulation (EC) 1060/2009 
The ratings of credit rating agencies are used in the in securities markets and banking markets by investors, borrowers, issuers and governments as elements that contribute to the formation of informed decisions on investment and financing. Another important role is the possibility of using ratings as a reference for calculating capital requirements for solvency or for calculating risks in investment activities for credit institutions, investment firms, life and non-life insurance companies, reinsurance undertakings, undertakings for collective investment in transferable securities (UCITS), for FIA alternative investment funds and institutions for occupational retirement provision. The obvious consequence is that credit ratings have a significant impact on the functioning of the market and on investor and consumer confidence. It is therefore essential that credit rating activities are conducted in compliance with the principles of integrity, transparency, accountability and management correctness, so that the ratings used in the Community issued by these agencies are independent, objective and of adequate quality. A major problem in the market is that most credit rating agencies are located outside the European Community, and most of the Member States do not regulate the activities of credit rating agencies, even for the terms of issuance, of ratings. Although of considerable importance for the functioning of the financial markets, credit rating agencies are regulated by Community legislation only in limited areas, in particular Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on abuse of insider information and market manipulation (market abuse), directive repealed by Regulation (EU) 596/2014. Further reference to credit rating agencies can be found in Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 on access to and the exercise of credit institutions and in Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions; both directives are repealed by Directive 2013/36/EU. References to credit rating agencies are also present in the Regulation (EU) 575/2013 on prudential requirements for credit institutions and investment firms. From the above studies, the Commission considered it important to lay down rules ensuring for all credit ratings issued by credit rating agencies registered in the Community, appropriate quality and issued by credit rating agencies subject to strict requirements. After a continuous collaboration with international partners, the Commission intervenes and will intervene to ensure the convergence of the rules that apply to credit rating agencies, convergence aimed at harmonizing legislation and therefore to common regulatory standards at Community level and also compliant at international level. By Regulation (EC) 1060/2009 it is considered appropriate to exempt certain central banks issuing credit ratings, provided they meet all the applicable conditions on the matter which guarantee the independence and integrity of their credit rating activities and which are just as stringent as the requirements of this regulation.

The European Commission with Regulation (EC) 1060/2009 on credit rating agencies introduces a common regulatory approach to improve the integrity, transparency, accountability, good governance and reliability of credit rating activities , contributing to the quality of ratings issued in the Community and thus to the smooth functioning of the internal market while achieving a high level of investor protection. It establishes the conditions for issuing ratings and set provisions on the organization and performance of credit rating agencies to promote their independence and the prevention of conflicts of interest. As a general opinion that credit rating agencies have not been able, in the first place, to promptly adjust their ratings to the worsening market conditions and, secondly, to adapt their credit ratings in good time following the worsening of the market crisis after 2006, the committee believes that taking measures on conflicts of interest, quality of ratings, transparency and internal governance of credit rating agencies, and monitoring of the activities of credit rating agencies, results in best way to remedy the inability shown by the agencies in the crisis. Those who use credit ratings should not rely blindly on these assessments but should always proceed with the utmost attention to their own analysis and due diligence due before relying on such ratings, which implies the availability by the agencies of all information regarding the assessments to allow users all the checks deemed necessary for the assessment of the reliability and quality of the ratings; therefore the commission with regulation 1060/2009 establishes the obligation for agencies to provide such information. It establishes a framework of common rules concerning the improvement of the quality of ratings, with particular reference to the quality of credit ratings used by financial institutions and persons regulated by harmonization rules in the Community, because in the absence there is a risk that Member States will adopt divergent measures at national level, divergences which would have a direct negative impact on the internal market and would create obstacles to its proper functioning, as the rating agencies would be subject to different rules in the individual Member States. These differences in rating quality would result in different levels of investor and consumer protection; it is also necessary for users to compare ratings issued in the Community with ratings issued internationally.

The possibility of using the ratings issued by agencies in third countries within the Community established by Regulation 1060/2009, only if they comply with equally stringent requirements as those established by the same regulation, introduces an endorsement system that allows the rating agencies of the credit established in the Community and registered in accordance with its provisions to endorse credit ratings issued in third countries. It is mandatory for an agency within the community when he committed with endorsement a rating issued in a third country, to determine and control on an ongoing basis whether the rating activity aimed at issuing said ratings meets the requirements for the issue of ratings of credit and which are just as stringent as those of the same regulation and are suitable for achieving the same objective and the same practical effects.

Considering that the establishment outside the Community could constitute a serious impediment to effective supervision in the interest of the Community's financial markets, an endorsement system is introduced for credit rating agencies which are affiliated or work in close cooperation with credit rating agencies based in the Community; therefore, the rating is guaranteed by an agency registered in the European Union which is usually a branch of the non-EU agency or cooperates for the ratings for which endorsement is necessary. The need to adapt in some cases the requirement of physical presence in the Community is foreseen, with particular reference to the smaller credit rating agencies of third countries which are not present, nor are they affiliated in the Community. A certification system is established for these agencies, provided that they are not systemically relevant for the financial stability or the integrity of the financial markets of one or more Member States, hence smaller agencies. Certification is possible after the Commission has established the equivalence of a third country legal and supervisory framework with the requirements of Regulation (EC) 1060/2009. The intended equivalence mechanism does not provide automatic access to the Community, but allows eligible credit rating agencies to be assessed on a case-by-case basis and to obtain exemption from some of the organizational requirements applicable to credit rating agencies operating in the Community, including the requirement for physical presence in the Community. Third country rating agencies are required to comply with the criteria considered as general requirements for the integrity of credit rating activities, with the aim of preventing interference with the content of credit ratings by the competent authorities and other public authorities this third country and provide for an appropriate policy on conflicts of interest, as well as the rotation of rating analysts and periodic and continuous communication. The committee with the regulation provides for the possibility of stable cooperation agreements between the competent authorities of the home Member States and the corresponding competent authorities of third countries in which credit rating agencies are based; furthermore, it establishes that a credit rating agency that endorses credit ratings issued in a third country must be fully and unconditionally responsible for these endorsed credit ratings and for compliance with the related conditions defined in the same regulation.

Derogation to the regulation is defined for the ratings produced by a credit rating agency following a single order and provided exclusively to the person who commissioned them and which are not intended for public disclosure or distribution by subscription; furthermore, it establishes that investment research and recommendations and any other opinions regarding the value or price of a financial instrument or a financial obligation should not be considered credit ratings. An unsolicited credit rating, ie a credit rating not initiated at the request of the issuer or the rated entity, must be clearly identified as such and where it can be distinguished by appropriate means from the requested credit ratings. Credit rating agencies focus their professional activity on rating issues to avoid potential conflicts of interest. It is not advisable for a credit rating agency to provide advisory services, and in particular to make proposals or recommendations regarding the design of a structured financial instrument, it may lend ancillary services when the benefits do not create potential conflicts of interest with the issue of credit ratings; must use rigorous, systematic, continuous and validated rating methodologies based on relevant historical experience and backtesting, which is not a requirement for interference with the content of ratings and methodologies to be used from part of the competent authorities and of the Member States. The regulation provides for the requirement of at least annual review of the ratings by credit rating agencies, a requirement which must not prejudice their obligation to monitor ratings on an ongoing basis and to revise them where necessary. These requirements should not be applied in a way that prevents new credit rating agencies from entering the market. Credit ratings must have solid and motivated foundations in order to avoid compromise solutions.

The commission with Regulation (EC) 1060/2009 establishes the obligation for credit rating agencies established in the Member States to disclose information on the methodologies, models and main rating assumptions used in their rating activities. The degree of detail of the information to be made public regarding the models should be such as to provide the users of the ratings with information to enable them to use due diligence in assessing whether or not to rely on such ratings. The information to be made public regarding the models should not constitute sensitive commercial information or seriously impede innovation; they must take measures to ensure that the information used for the purpose of assigning a credit rating is reliable. To this end, an agency must include, inter alia, the assignment to independent audited financial statements and communications to the public, checks by reputable service providers, random sample checks of the information received, or contractual provisions which clearly establish the liability of the rated entity or of related third parties if the information provided under the contract is notoriously materially false or misleading or if the rated entity or third parties related to it have not conducted, as required by the contract, a adequate supervision of the accuracy of the information. The credit rating agency in issuing the credit ratings will have to report appropriately any risk, including a sensitivity analysis for the relevant assumptions used, explaining how the various market developments that move the parameters integrated into the model (to volatility) may influence rating changes. It should ensure that information on the historical default rates associated with its rating categories is verifiable and quantifiable and provides a sufficient basis for the relevant parties to understand the historical returns associated with each rating category, and whether and how the rating categories are changed. If the nature of the rating or other circumstances result in a historical default rate that is not appropriate or statistically valid or may otherwise mislead the users of the credit rating, the credit rating agency must provide appropriate clarifications. This information should be as comparable as possible to existing models in the sector, so as to help investors compare the results of the various credit rating agencies.

The same agencies are required to take measures to avoid situations in which issuers request a preliminary credit rating of the structured financial instrument in question simultaneously with several credit rating agencies in order to identify the one offering the best rating for the credit rating proposed instrument; issuers should also avoid using such practices. With Regulation 1060/2009, the Commission establishes that the established procedure for the recognition of external credit assessment agencies (ECAIs) should not be replaced, pursuant to Directive 2006/48/EC (on access to credit institutions and its exercise, recast of Directive 2000/12/EC and subsequent amendments, subsequently repealed by Directive 2013/36/EU). It is anyway mandatory for ECAIs already recognized in the Community to apply for registration under this Regulation. A credit rating agency registered by the competent authority of the Member State concerned is authorized to issue credit ratings throughout the Community. For this purpose, a single registration procedure is envisaged for each credit rating agency which produces effects throughout the Community. The registration of a credit rating agency should take effect following the entry into force of the registration decision taken by the competent authority of the home Member State in the relevant national legislation.

The Commission shall present a report to the European Parliament and the Council assessing the incentives for issuers to use credit rating agencies established in the Community for part of their ratings, possible alternatives to the "issuer pays" model, including the creation of a public credit rating agency, and the convergence of national rules in case of violation of the provisions of this regulation. Based on this assessment, the Commission should make appropriate legislative proposals.

Regulation (EC) number 1060/2009 in Annex I sets out the provisions on independence and prevention of conflicts of interest by defining the organizational requirements in section A of the annex, the operational requirements in section B, the provisions concerning rating analysts and other persons directly participating in the credit rating activities in Section C, the provisions on the presentation of credit ratings in section D and the information making available including those regarding any actual and potential conflicts of interest. From the research conducted in this study with reference to the conflicts of interest that affect the credit rating agencies we have found non-negligible opinions that would confirm the existence of conflicts of interests with the shareholders. 
Below is an extract of the information collected on the agencies credit rating for possible conflicts of interest in their exercise;

... in the US financial crisis from subprime mortgages in 2008, it highlighted the problems associated with Rating Agencies, both in terms of incentives and in the performance of their business. In Italy in 2012 and in the context of the great recession, an investigation was initiated by the Public Prosecutor of Trani to assess the reliability and objectivity of ratings by rating agencies under the assumption of a crime of enforcement, (disruption and market manipulation and abuse of privileged information). In particular, among the first conclusions of the investigation, the American Standard & Poor's agency, in relation to the downgrading of Italian banks, is contested for having put in place "a series of devices which are concretely capable of causing a destabilization of the image, prestige and Italy's credit on the financial markets "also due to" incompetent" (unidentified) and inexperienced "analysts" by means of communications to the markets made "in a selective and targeted manner in relation to the moment of greater criticality of the Italian political and economic situation causing the Republic Italian patrimonial damage of considerable gravity "...

Below are some published editorial information: 
... The rating lords who downgrade nations. With their votes they have knocked out Greece and the Spain. Who are they and how they work the agencies that draw the report cards of the Nations. ...

... NEW YORK - The address is 250 Greenwich Street a few steps from Ground Zero. Here on the twentieth floor of the Moody's skyscraper, the visitor is greeted by a golden plaque: "Credit: the trust of man in man". Arturo Cifuentes, former manager of Moody's, thinks otherwise. Today it defines "a shame the way in which rating agencies set their report cards on credit, solvency ratings". Eric Kolchinsky, also a repentant manager of Moody's, pronounces the word "fraud". Frank Raiter, who worked for Standard & Poor's, talks about "oligopoly accumulating profits thanks to the role of referees". E-mails in Standard & Poor's describe the relationship between this agency and Goldman Sachs as "the Stockholm syndrome". ...

To allow an objective assessment of the problems inherent in the conflict of interest and with reference to the international credit rating agency among the best known worldwide, the Standard & Poor's, we consider appropriate to report some comments by Maria Pierdicchi, is Head of Southern Europe by Standard & Poor's:

... it is important to underline that Standard & Poor's has no privileged information on the strategies or shareholdings of the shareholders of McGraw Hill, our parent company. being a publicly traded company, McGraw Hill has some of the largest international funds among its shareholders, investing in thousands of stocks worldwide. The holding they hold in McGraw Hill is not, as a rule, a small percentage of their global portfolio. For its part, S & P publishes ratings on more than one million debt securities, has no information on which companies; make up the portfolio of these investors. More importantly, institutional investors, including those holding shares in McGraw-Hill, have neither the opportunity nor the ability to influence our rating decisions and do not have access to relevant information to analysis or unpublished rating opinions. To them we reserve the same treatment applied to any external user of our ratings. ... 
In addition to the measures adopted in compliance with European regulations, S & P has long-established procedures to protect the integrity and independence of rating processes from any conflicts of interest. For example, form years our analysis activities are separated from commercial ones, so analysts are not involved, nor do they have information about contracts with our customers. Not only that: the remuneration of our analysts has never been correlated with the remuneration recognized by the issuers. ... 
We have also created independent functions responsible for internal quality and definition of the criteria, appointed external and independent directors on the boards of directors of our companies in Europe and in the United States. We expect a constant rotation of analysts so that no one takes care of an issuer beyond a certain time frame. When an analyst leaves S & P, we conduct a retroactive analysis of his work to ensure greater protection of the integrity and independence of our ratings. We impose strict limitations to ours analysts on the investments in companies or sectors of which they formulate the rating and on the acceptance of any gifts. The investments made since 2007 in the governance and control functions amount to about 200 million euros. ... 
The effectiveness of internal controls is monitored by the Compliance Department, but above all it is subject to active and continuous supervision by securities regulators around the world, including the ESMA in the European Union and the SEC in the United States. These authorities have extensive powers to carry out inspections in registered rating agencies and to sanction them in case of violation of regulations. ... 
Other critics argue that the ratings are unduly influenced by the business model adopted by almost all rating agencies, under which issuers are paid ("issuer-pays"), forgetting that many of the most ferocious criticisms have been moved precisely by those to whom we issue ratings. ... 
We believe that the "issuer-pays" model represents the best system available to the markets if the conflicts are appropriately managed, because it allows the rating to be available to all investors at the same time and free of charge. The model according to which investors would pay ("investor pays"), on the other hand, places restrictions on the disclosure of ratings, which would not be public. It also presents potential conflicts, as investors may have an interest in a higher or lower rating depending on the positions held. As has been demonstrated by many independent analyzes, no activity is immune to potential conflicts of interest. What makes the difference is the way in which these potential conflicts are managed and monitored and which is the most effective system for rating users. Constant public monitoring is legitimate and healthy, but should be based on the assessment of the facts and on the awareness that the existing system is able to promote transparency, correct governance and continuous supervision by regulatory authorities. ...

Sources for research: Regulations (EU) 2015/2365, SFT | Regulations (UE) 648/2012, OTC derivatives |Directive 2009/65/EC, UCITS IV | DIRECTIVE 2014/91/EU, UCITS V | DIRECTIVE 2014/65/EU, MiFID, amending directive 2011/61/EU | Article 2357, Civil Code Italy | DIRECTIVE 2011/61/EU, FIA, GEFIA |Regulation 236-2012, credit default swaps | Regulations 2016/438/EU, obligations depositaries |Regulations (EU) 2018/1619, amending regulations 2016/438/EU | Directive 2006/49/EC, capital adequacy | Directive 2013/36/EU, repealing directive 2006/48/EC | ESMA 2012/122, guigelines automated trading | Regulation 2017/576/UE, supplementing 2014/65/EU | Regulations (EU) 2017/568, supplementing 2014/65/EU | REGULATION (EU) No 600/2014, MiFIR | Regulation (EC) 1060/2009, credit rating agencies | RAPITI, Eleonora Maria. The new frontier of the financial market: high frequency trading. 2016 | HENDERSHOTT, Terrence; JONES, Charles M.; MENKVELD, Albert J. Does algorithmic trading improve liquidity?. The Journal of Finance, 2011, 66.1: 1-33. | KIRILENKO, Andrei, et al. The Flash Crash: High-frequency trading in an electronic market. The Journal of Finance, 2017, 72.3: 967-998. | BROGAARD, Jonathan; HENDERSHOTT, Terrence; RIORDAN, Ryan. High-frequency trading and price discovery. The Review of Financial Studies, 2014, 27.8: 2267-2306 | PUORRO, Alfonso. High Frequency Trading: An overview (High Frequency Trading: An Overview). 2013. |