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Implementation in Italy of the V AML Directive
The Legislative Decree, transposing the V AML Directive into national law, has been recently published in the Official Gazette. It provides, inter alia, for:
- the inclusion, among the addressees of the AML obligations, of the Italian branches of EU and non-EU insurance intermediaries;
- the identification of a set of measures relating to customer due diligence and periodic reporting requirements to be complied with by banks and financial intermediaries in relation to clients operating in countries at high risk of money laundering,
- amendments to the sanctionary regime and related administrative proceedings;
- the prohibition of issuance and use of anonymous electronic currency related products; and
- the introduction of the prohibition of the authorisation to open and/or operate branches in Italy by intermediaries established in countries with a high risk of money laundering.
Support measures for innovative start-ups’ provisions
Ministerial Decree of 30th August 2019 (recently published in the Official Gazette) has amended the Ministerial Decree of 24th September 2014 on the reorganization of interventions to support the birth and development of innovative start-ups in Italy, in order to simplify and speed up the procedures for access, granting and disbursement of benefits, as well as to increase the effectiveness of interventions through appropriate methods of intervention to allow the widest participation possible of the interested parties. The obove amendments concern, inter alia, the structuring of corporate plans and expenses’ eligibility for subsidies, by provinding that:
- the corporate plans must be characterised by significant technological and innovative content or aimed at developing products and/or services in the field of digital economy, artificial intelligence, blockchain or internet of things, as well as at exploiting the results of the public and private research systems; and
- tangible and intangible fixed assets’ related expenses, as well as those concerning services instrumental to the implementation of the corporate plan.
Constitution of real estate investment funds
By means of Ministry of the Economy and Finance (“MEF”)’s decree of 20th August 2019, it has been established the set up of one or more real estate investment funds, to which real estate owned by the State and not used for institutional purposes, real estate rights, as well as real estate owned by public bodies could be conferred or transferred.
Corporate/Laws of contract
On the configurability of the activity of management and coordination
Article 2497 of the Italian Civil Code, pursuant to which a company, entity or private individual, who abuse of his/her/its direction and coordination activity, is liable towards the subsidiary company’s shareholders for the damages caused to profitability and the value of the controlling company, as well as towards the company’s creditors for the damages caused to the integrity of the company’s assets, is governed by the effectiveness principle. Therefore, in order to identify beginning, development and termination of the direction and coordination activity, factual elements must be considered, due to the irrelevance of the controlled company’s formal of acts or the simultaneously operations carried out.
Nullity of quotaholders’ resolutions in case of failure to convene the meeting
The decisions taken by the quotaholders of a limited liability company, in case of failure to convene the related meeting, are null and void and may be appealed by anyone holding an interest therein, within three years of their registration in the quotaholders’ resolution book, for this case falls within the scope of “total absence of information” pursuant to Article 2479-ter, paragraph 3, of the Italian Civil Code.
Configurability of abuse of rights in the event of subsequent usury
The Court of Rome has recently issued a decision that has not taken into account an orientation of the Joint Sections of the Court of Cassation on the so-called “subsequent usury”, pointing out that, in the context of a loan agreement, the right to obtain loan interest at a rate that has become usurious during the execution of the agreement may be limited where, due to supervening occurrences, the general rule of good faith has been violated, triggering out to a case of abuse of rights.
Civil Court of Rome, decision no. 16841 of 2nd September 2019.
Banking law
Consolidated version of European Central Bank’s Internal Models Guide
The European Central Bank (“ECB“) has just published the consolidated version of the Guide to Internal Models, bringing together the previously published chapters of the Guide into a single document. The latter consists of a general part that includes (i) implementation of the internal ratings-based (“IRB“) approach, (ii) internal governance, (iii) internal validation, (iv) internal audit, (v) model use, as well as (vi) involvement of third parties, and another part dedicated to the management of specific risks, such as (i) credit, (ii) market, and (iii) counterparty.
ECB, Guide to internal models of October 2019.
Supervisory Provisions for banks updated
The Bank of Italy (“BoI”) has recently published an update of its Supervisory Provisions for banks, providing for the elimination of the guidelines on own funds, securitisation transactions, counterparty risk and credit valuation adjustment risk, for which the European framework (as introduced by Regulation (EU) no. 575/2013 (“CRR”) and following amendments) is complete.
The Supreme Court on the partial nullity of a surety
A surety that contains some clauses taken from of the Uniform Banking Rules issued by the Italian Banking Association (“IBA”)declared null and void for violation of the Antitrust Law (Law no. 287/1990) is not affected by nullity, unless the balance of interests at issue is concretely prejudiced by the decision of partial nullity of such contract, limited to the aforesaid illicit clauses.
Financial law
Prospectus regulation: published ESMA translations of Guidelines on risk factors
The European Securities and Markets Authority (“ESMA”) has recently published the official translations of its Guidelines on risk factors under EU Regulation no. 1129/2017 (the “Prospectus Regulation”), issued on 29th March last. Accordingly, the National Competent Authorities (“NCAs”) must notify ESMA, within the following two months, whether or not they intend to comply with the Guidelines (and explain why, if they do not). In any case, the Guidelines will enter from 4th December 2019. On this request, the Commissione Nazionale per la Società e la Borsa (“Consob”, the public authority responsible for regulating the Italian financial markets) has already expressed its intention to comply.
Guidelines on risk factors under the Prospectus Regulation of 1st October 2019.
Consultations on the distribution of insurance-based investment products
The Italian Insurance Supervisory Authority (“IVASS”) and Consob have launched a public consultation, which will conclude on 15th November 2019, on the implementation through secondary legislation of the EU Directive on insurance distribution (the no. 2016/97 of 20 January 2016; “IDD”), transposed into Italian law by means of Legislative Decree no. 68 of 21 May 2018. Specifically, the consultation has as object:
- proposed amendment to IVASS Regulations on corporate governance, distribution and disclosure of insurance products (nos. 38/2018, 40/2018 and 41/2018);
- the proposed adoption of a new Regulation on governance and control of insurance products; and
- proposed amendments to the Intermediary Regulation (issued by means of Consob Resolution no. 20307 of 15th February 2018) concerning the rules of conduct and disclosure obligations with which banks, investment firms and Poste Italiane must comply in the distribution of insurance investment products.
IVASS, consultation documents nos. 1/2019 and 2/2019 (text available in Italian only).
The right of withdrawal from a financial services contract entered into at a distance with a retail clients/consumer
In a recent decision on financial services contracts concluded at a distance with retail clients/consumer, the EU Court of Justice has clarified that the laws of a EU Member State (in the case at issue, German law) that do not exclude the right of withdrawal in favor of the consumer in case the contract has been entirely performed by both parties upon explicit request of the consumer before the latter has exercised his/her right of withdrawal, infringes Article 6, paragraph. 2, Lett. c), of Directive (EU) no. 2002/65.
The Court of Cassation on the clients’ classification
The classification as a professional client cannot be inferred only from the fact that he/she habitually invests in financial instruments or has previously purchased securities at risk. Therefore, the intermediary is obliged to provide the client with detailed prior information on the securities offered.
The duty to be informed upon non executive directors
Bank’s directors must act diligently in a way “proportionate with their specific expertise”. Therefore, non-executive directors must ensure an effective management of all areas of the bank in question, as well as to monitor effectively the choices made by executive directors through a constant flow of information from the latter, which cannot be limited to periodic reports. In addition, with regard to administrative sanctions, a liability presumption applies to all bank’s directors, who must prove to have diligently performed the obligations envisaged under the applicable laws.
Termination for default of the individual investment orders
With reference to investment services, the lack of compliance by an intermediary of its information obligations vis-á-vis clients represents a serious breach, per se sufficient to justify an action for termination of the contract relating to the single transaction, as well as constitute mutual obligations on the parties to the contract. In particular, while the intermediary may be obliged to return the capital invested to the investor, the latter could be asked to repay the value of the coupons paid and the securities purchased, without prejudice to the right to claim compensation for further damages that would be judicially ascertained.
Court of Appeal of Venice, decision no. 2550 of 18th June 2019.
Purchase of SICAV shares: suitability assessment
The financial adviser, who has proposed the purchase of SICAV’s shares, must inform the investor of the unsuitability of the investment in question, and may only carry out the related transaction only upon a specific written order of the investor who has been adequately informed. In addition, the damaged investor’s contributory negligence must be excluded where the former, although expressly requested to do so, has omitted to provide information on his/her investment objectives, risk appetite, experience in financial instruments, as well as current financial situation, for the total absence of such information requires a more prudent suitability assessment of the investment itself by the financial adviser.
Civil Court of Brescia, decision no. 1768 of 5th June 2019.
Compliance
Legislative Decree no. 231/2001
The application of the disqualification penalty presupposes the repetition of the offence
The disqualification penalty, provided by Legislative Decree no. 231/01 (the “Decree”), may apply only when the legal entity condemned pursuant to the Decree has derived a significant profit from the committed offence, or, alternatively, when it commits another predicate offence in the following five years, even though already sanctioned on the basis of final decision.
Data protection
The EU Court of Justice rules on the right to be forgotten
Where a search engine operator grants a request for de-referencing, such operator is not required to carry out that de-referencing on all versions of its search engine, but on the versions of that search engine corresponding to all the UE States, using measures which effectively prevent or, at the very least, seriously discourage an internet user conducting a search from one of the Member States on the basis of a data subject’s name from gaining access, via the list of results displayed following that search, to the links which are the subject of that request.
Judgment of the Court (Grand Chamber) of 24th September 2019, C-507/17.
The right to be forgotten of the rehabilitated offender
The rehabilitation, while not extinguishing the offence, entails the cessation of the accessory penalties and any criminal effects of the related decision as a premium measure aimed at the social reintegration of the offender, with the consequence that the availability online of information relating to the same proceedings has a disproportionate impact on the data subject’s rights, if there is no current public interest of the to be informed on the case at issue.
Anti-money laundering
European Supervisory Authorities’ Joint Opinion on anti-money laundering in the financial sector
The European Banking Authority (“EBA”), the European Insurance and Occupational Pensions Authority (“EIOPA”) and ESMA (jointly, the European Supervisory Authorities (“ESAs”)) have recently published their second Joint Opinion on the risks of money laundering and terrorist financing affecting the EU financial sector, pointing out, inter alia:
- the weaknesses in the control frameworks put in place by financial institutions, particularly for transactions monitoring and suspicious transactions reporting in sectors with high volumes of transactions;
- the existence of divergences between certain provisions of the IV AML Directive and other EU legal acts; and, finally
- the development of an interactive tool, which provides EU citizens, competent national Authorities (“NCA”) and financial institutions with a snapshot of all AML related risks covered by the Joint Opinion.
The bank’s employee who violates AML laws can be legitimately dismissed
Confirming the decision of the competent Court of Appeal, the Supreme Court has deemed legitimate the dismissal of a bank branch’s manager who, in violation of AML law, had (i) failed to report suspicious transactions, (ii) allowed transaction by a current account holder subject to criminal investigation for tax fraud and money laundering, as well as (iii) prepared, in violation of the bank’s internal rules, the preliminary inquiry for granting a loan in favor of the above account holder’s parent and approved a further credit line without adequate bank guarantees. Indeed, the afore-said behaviors breaches constitute a “serious breach of the fiduciary element”, as well as a violation of the duty of customer due diligence, specifically provided for under AML laws.
Verification of money laundering and self laundering’s predicate offence
For the purpose of the configurability of the offences of money laundering (and self-laundering), it is not necessary that the commission of the predicate offence has been ascertained by a final decision (res judicata), being it sufficient that the fact constituting the offence has not been definitively excluded and has been ascertained, in its materiality, by the judge who has proceeded for the crime of money laundering (or self-laundering). Should this not be the case, the defendant must be acquitted because the fact did not represent a crime.
Criminal Court of Cassation, decision no. 42052 of 19th June 2019 (text available in Italian only).
Capital Markets
ESMA guidelines on standardised procedures and messaging protocols
ESMA has recently published its final report on the Guidelines on standardised procedures and messaging protocols aimed at guaranteeing the requirements set out in the Central Securities Depositories Regulation no. 909/2014 (CSDR), providing for some measures to limit the number of settlement fails, among which (i) the conclusion of agreements with professional clients to ensure the timely communication of the allocation of securities funding the transaction, as well as (ii) the communication, before the scheduled settlement date, of the confirmation of the allocation, acceptance or rejection of the terms of the transaction at issue.
ESMA final report, “Guidelines on standardised procedures and messaging protocols under Article 6(2) of UE Regulation no. 909/2014” of 8th October 2019.
Procedural law
Investment funds do not have legitimatio ad processum
An investment fund does not have legal autonomy, for it represents a separate asset of the related asset management company. As a result, in case of purchase of a real estate in the interest of the fund at issue, the management company will hold the formal ownership of such real estate, thereby being the legal entity that is entitled to sue for the acknowledgement of the rights relating to the fund itself.
Civil Court of Cassation, Sec. I, decision no. 12062 of 8th May 2019 (text available in Italian only).