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Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs
Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs
Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs
Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs
Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs
Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs
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Legal shorts 10.01.14, including EMIR and regulation on types of AIFMs

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  • 1. Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry. Listen to this week's Legal http://vimeo.com/cummingslaw Shorts on CLTV by going to 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 EMIR ESMA has published an updated version of its Q&A document on the implementation of EMIR. As well as adding a new Part V: "Reporting to TRs – ETD contracts reporting", ESMA has added some new Q&As and modified a number of others. ESMA explains in a related press release that, among other things, the revised Q&As clarify reporting of on-exchange derivatives under EMIR. They also clarify the scope and content of the reporting rules under EMIR and MiFID and which firms are covered by them. The Q&As were originally published in March 2013 and last updated in October 2013. AIFMD: Regulation on types of AIFMs The European Commission has published the text of the delegated Regulation it has adopted recently in relation to the AIFMD. The Regulation supplements the AIFMD with regard to regulatory technical standards (RTS) determining types of AIFMs. The RTS specify the characteristics of AIFMs managing open-ended AIFs as follows: an AIFM of an open-ended AIF
  • 2. manages an AIF, the shares or units of which are, at the request of any of its shareholders or unitholders, repurchased or redeemed prior to the commencement of its liquidation phase or wind-down, directly or indirectly, out of the assets of the AIF and in accordance with the procedures and frequency set out in its rules or instruments of incorporation, prospectus or offering documents. AIFMD: Transitional arrangements The FCA has published a statement in response to HM Treasury's December 2013 announcement about transitional arrangements relating to the AIFMD. The FCA states that it is aware of the Treasury’s announcement regarding their intention to make changes to the transitional arrangements in The Alternative Investment Fund Managers Regulation 2013 and it will make further announcements when it is clear what the particular details of these changes are and how they might impact our implementation of AIFMD. In the meantime, the FCA continues to encourage firms to submit their applications in line with the timelines stated on its website. Investment Manager Exemption (IME) Following its consultation last year, HMRC has published two sets of draft regulations expanding the "white list" of investment transactions relating to the IME. The "white list" specifies transactions, the income from which will not be treated as trading income for authorised investment funds (AIFs), exempt unauthorised unit trusts (UUTs), investment trusts (ITs) and when calculating the reportable income of an offshore reporting fund (OFRs). When certain conditions are met, the IME provides that a fund manager will not constitute a UK representative of the fund when carrying out investment transactions. The Investment Transactions (Tax) Regulations 2014 (Investment Transactions Regulations) set out a consolidated and expanded "white list" of investments that applies to AIFs, UUTs, ITs and OFRs, which replaces the existing lists. The new consolidated list now includes transactions in units relating to emissions of greenhouse gases and rights under a life insurance policy. Financial Transaction Tax (FTT) The EU’s Taxation Commissioner has said he is prepared to accept a more limited tax on financial transactions, following concerns from some Member States that the scope of the original proposal was too wide. The original proposal will tax trades in stocks, bonds, derivatives and other financial
  • 3. transactions, but the EU is considering narrowing the levy's scope to shield pensions, government debt and markets that help the economy. Member States are now examining an "ambitious proposal" by the Commission and discussing exemptions and, according to the Commissioner, a compromise could be agreed by May. Current negotiations centre on key themes such as government bonds and repo trades as well as how to treat primary dealers such as market makers and pension funds. Capital Requirements Regulation: FCA publishes application form The FCA and the PRA have each published the application form that firms should use to apply for permissions under the Capital Requirements Regulation. A CRR permission is a direction given to a firm by the FCA or the PRA, as the case may be, in the exercise of a discretion allowed to Member States' competent authorities under the CRR. The FCA or the PRA, as appropriate, will grant the firm permission to use the relevant discretion if it considers that the applicable criteria set out in the CRR have been met. The FCA and the PRA have also published guidelines for firms on CRR permissions and on issues that may arise when providing information to support their application. Capital Requirements Regulation: own funds The European Commission has published the text of its implementing Regulation relating to the disclosure of own funds requirements under the Capital Requirements Regulation (CRR). The Regulation sets out implementing technical standards (ITS) specifying firms are to complete a template describing the main features of their capital instruments, a general own funds disclosure template and a transitional own funds disclosure template, all in accordance with the instructions set out in the Regulation. The Regulation will apply from 31 March 2014. The final draft ITS were published by the EBA in July 2013. ETFs ESMA is consulting on revising provisions on diversification of collateral in its guidelines on exchange traded funds (ETFs) and other UCITS issues. These guidelines were originally published in December 2012. The consultation paper states that ESMA has been asked to reconsider its position on the requirements on collateral diversification on the basis that they have a significant adverse impact on UCITS’ collateral management policies. Stakeholders have drawn particular attention to the consequences
  • 4. for money market funds (MMFs) that place cash into reverse repurchase agreements. Draft revised guidelines are contained in Annex III to the consultation paper. The consultation closes on 31 January 2014 and the EBA aims to adopt revised guidelines in the first quarter of 2014. 2014 priorities for the Greek EU presidency The Greek presidency has published its programme for the period 1 January to 30 June 2014 on its website, setting out its aims, objectives and priorities, including in the area of economic and financial affairs. These priorities include the following issues: the EU banking union; capital markets; payment accounts; financial crime and the European system of financial supervision (ESFS). The Greek finance minister has also given a speech, explaining that the Greek Presidency is working to a tight timeframe because of the European Parliament elections in May 2014. He points out that the effect of this is that the current Parliament will conclude its work in April 2014 and that the Presidency will therefore be working on a "frontloaded" basis. EU Savings Directive revisions A proposal to revise the scope of the EU Savings Directive to bring savings related payments to legal entities and payments of interest equivalents within its scope failed to gain approval at the ECOFIN meeting held at the end of last year. The EUSD is broadly aimed at countering cross-border tax evasion by creating an information exchange system to report individuals that receive savings income in a Member State other than their own. The revisions had largely failed due to concerns raised by Luxembourg that without the conclusion of negotiations with third countries (Switzerland, Andorra, Monaco, Lichtenstein and San Marino) to apply similar standards, this would lead to potential capital flight. GUEST SHORTS This week, Paul Yau, regulatory counsel with Advise Technologies, LLC comments on the logistical challenges facing AIFMD filers, as follows: “Under the AIFMD, AIFMs that market or manage AIFs in the EEA face extensive regulatory reporting obligations to regulators of the EEA Member States. With the transition period ultimately set to expire on 22 July 2014, many managers can no longer delay and must undertake preparations to report their first AIFMD regulatory filings in the coming months.
  • 5. Similar to managers filing Form PF with the SEC in the US, AIFMs must periodically report information about themselves and the funds they market or manage in Europe to Member States’ regulators. Compared with Form PF, the reporting deadline under the AIFMD is much tighter (one month after the end of the reporting period, with funds of funds receiving an extra 15 days). Completing a filing with such a short turnaround time will undoubtedly present an operational challenge for filers. To address this challenge, AIFMs must ensure that their processes and controls, bolstered with technological solutions that leverage data automation and validation, are used to reliably compile and report their filings. Another issue that AIFMs must consider in preparing their filings is that reporting requirements under the AIFMD are, to a certain extent, still unclear at this point. The Directive allows each individual Member State’s regulator the discretion to request certain additional information on the reporting form from filers. Individual Member States can also require reporting to be submitted on a more frequent basis than what is currently prescribed in the Directive, which is based on the AIFM’s AUM and type of AIF. AIFMs will need to be aware of what the reporting requirements are for the specific Member State they plan to file in. In addition to the issues of what and when to report, how AIFMs will submit their filings must also be considered. While many Member States have yet to finalize their reporting infrastructure and guidelines, through our ongoing correspondence with regulators from various jurisdictions, such as the UK, Luxembourg, Ireland, and the Netherlands, they have provided us with valuable insight into the reporting submission process. Regulators have shed light, for example, on a range of submission issues such as if reporting will be accepted via XML, whether or not they will adhere to the ESMA reporting template, and if test filings can be conducted. Such information regarding the logistics of filing in various jurisdictions will be greatly useful for AIFMs as they prepare to submit their initial AIFMD filings.” If you have questions or would like more information on the above, please contact Paul Yau at: +44 (0) 207 043 4448; +1 (212) 576-1170; or by email: info@AdviseTechnologies.com.
  • 6. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 www.cummingslaw.com 10 January 2014

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