Euro shorts 14.02.14 including AIFMD funds under management and emir reporting deadline

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Euro shorts 14.02.14 including AIFMD funds under management and emir reporting deadline

  1. 1. Welcome to Euro Shorts, a short briefing on some of the week’s developments in the financial services industry in Europe. If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers. Claire Cummings 020 7585 1406 claire.cummings@cummingslaw.com www.cummingslaw.com AIFMD funds under management The FCA has published a new webpage on which it announces a modification by consent of the meaning of "funds under management" in Chapter 11 of the Interim Prudential sourcebook for investment business (IPRU (INV) 11). This modification changes the meaning of "funds under management" so that firms whose assets under management include derivative instruments can value those instruments at market value, instead of converting them into their equivalent positions in the underlying assets and then valuing them on the basis of that equivalent position. The modification is valid until 31 January 2015 or on the change of the Glossary definition of "funds under management" that is used in IPRU (INV) 11, unless subsequently withdrawn. Those firms wishing to take advantage of this modification by consent should contact the FCA's Central Waivers Team. Modification directions granted will be published on the FCA website. AIFMD allows passporting of MiFID services The FCA has explained that an amendment to the AIFMD will make it explicit that an AIFM's right to passport AIFM services into other Member States will include services that it is authorised to provide in its home Member State under Article 6(4) of the AIFMD i.e. MiFID services, such as investment advice, safekeeping of certain investments and reception and transmission of orders. The AIFMD provides the mechanism to allow this, explaining that the AIFM may
  2. 2. request its home state regulator to issue a notification to the relevant host state regulator to that effect. In June 2013, the FCA published a statement explaining that the European Commission did not share its view that a passport exists for MiFID services under the AIFMD. The FCA warns that some Member States may have already implemented into their national law the original view of the EC, in which case it is likely to take them some time to change the law and begin accepting the passporting of MiFID services, but that the Commission's revised view is that a notification for a full-scope UK AIFM to provide MiFID services in another Member State should be accepted by the host Member State regulator. EMIR reporting deadline This week saw the reporting obligation under EMIR come into force. From Wednesday, all relevant derivatives trades will need to be reported to one of the six new trade repositories. According to reports, the FCA has acknowledged that reporting will not be perfect on the first day and that it recognised the challenges; as a result, its response to any instances of non-compliance will be proportionate, although it warns that non-compliance could lead to enforcement action. It is also reported that the majority of the TRs, which include the LSE, CME, Warsaw SE, Deutsche Borse with the Madrid Exchange, and ICE see their repositories as simply a way of offering a non-stop service in derivatives. This proliferation has caused the Financial Stability Board to launch a public consultation on how to link and consolidate all the repository date globally. Mark Carney revises forward guidance on UK growth This week the Governor of the BoE has presented the Bank’s latest growth, inflation and unemployment forecasts and has warned that the UK economy is still too weak to withstand a rate increase in the near future. Mr Carney has revised the forward guidance he gave at his first inflation report in August by dramatically broadening the number of economic indicators used by the BoE to decide when it will be appropriate to raise interest rates. He has also ramped up the number of public events by Bank officials in an attempt to communicate its thinking on the economy more effectively, in order to reassure markets that a rate rise is not imminent even though unemployment is fast approaching the 7% level which he named as a threshold for the Bank to consider an increase.
  3. 3. US trading on European platforms The CFTC has confirmed that US banks can trade on European platforms that are not registered with the US. The decision was welcomed in Europe, as traders had been waiting for clarification on the new US rules coming into effect next week, which permit US banks to trade only on those European platforms registered with the CFTC. It is now clear that US banks can keep trading on European platforms which are not registered, provided the rules on the platform are as stringent as those of the CFTC. European Commission publishes speech on competition The European Commission has published a speech on competition in the financial markets by its Vice President, Joaquin Almunia. In his speech, Mr Almunia stated that a competitive and open internal market and the implementation of EU competition law are key elements of public policy that will help put the EU back on track after the recession. He said that the foundations for a strong growth strategy are based on a more competitive single market and that this means continuing work to open up markets in banking and finance and the re-regulation of the financial markets following the financial crisis. ECON report on financial services legislation The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published an informal report on enhancing the coherence of EU financial services legislation. The report sets out the conclusions ECON has drawn from its May 2013 consultation on ways to further enhance the coherence of EU financial services legislation and contains a number of steps that ECON intends to take as a result of the consultation. In its introduction to the consultation last year, ECON explained that, given the transition to a single financial services rule book across the EU, it was increasingly important that legislation fits together seamlessly. The report was adopted by ECON on 30 January 2014.
  4. 4. ESMA 2014 regulatory work programme ESMA has published its 2014 regulatory work programme, which provides a detailed breakdown of the individual workstreams outlined in ESMA's 2014 work programme. The regulatory work programme covers various areas including the following initiatives: MiFID II, the CRA III Regulation, the CSD Regulation, which is the proposed Regulation on improving securities settlement and regulating central securities depositories, and the proposed Market Abuse Regulation (MAR). EMIR The European Commission has updated its webpage on EMIR to announce that it has adopted regulatory technical standards (RTS) specifying the contracts that are considered to have a direct, substantial and foreseeable effect within the EU. The RTS also detail the cases where it is necessary or appropriate to prevent the evasion of rules and obligations. The Regulation will come into effect 20 days after the date it is published in the OJ, although the Article relating to the circumstances under which a contract will be considered to have a direct, substantial and foreseeable effect will not apply until six months after the Regulation comes into force. ESMA has also published an updated version of its Q&As on the implementation of EMIR, acknowledging in an accompanying press release that both reporting firms and TRs will need a certain amount of time to properly incorporate the new guidance. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 www.cummingslaw.com 14 February 2014

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