Legal shorts 14.03.14 including LLP tax changes delay and delegated regulation on types of AIFMS
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Legal shorts 14.03.14 including LLP tax changes delay and delegated 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 Shorts on CLTV by going to http://vimeo.com/cummingslaw 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 LLP tax changes delay The House of Lords has called for the new LLP tax rules to be delayed and urged the government to consult further before making any changes. In its report on the draft Finance Bill 2014, the HL Economic Affairs Committee has said that implementation should be delayed for a year as the measures are so different from those consulted upon, that more time is needed to get the legislation right. The new rules would remove the presumption that an LLP member is a self-employed partner for tax purposes and replace it with a three-condition test based on profit sharing, management and capital. The rules are due to come into effect on 6 April 2014. AIFM partnership guidance HMRC has published the guidance form that allows members of an AIFM partnership to allocate certain restricted profits to the partnership. One issue highlighted was that the interaction of the AIFMD and the rules regarding the taxation of partnerships could adversely affect AIFM partnerships. The partners involved could become subject to tax on profits that they cannot
  • 2. access due to AIFMD's restrictions. As a result, the draft legislation allows an AIFM firm to elect, from 6 April 2014, for all or part of a partner's "relevant restricted profit" to be allocated to the firm. The firm is then taxed on that profit but once any, or part, of an allocated amount vests in the partner, it is treated as part of the partner's profit share. The guidance explains, among other things, when and where to send the election and the information to include. Delegated Regulation on types of AIFMs The European Parliament has updated its procedure file on the proposed Regulation setting out RTS determining types of AIFMs. The procedure file indicates that the Parliament has extended the time frame it has for examining the Regulation by three months. The RTS specify the characteristics of AIFMs managing open-ended AIFs and ESMA submitted an opinion on them last August to the European Commission following concerns raised by the Commission. FCA quarterly consultation (No. 4) The FCA has published its fourth quarterly consultation on proposed amendments to a number of different parts of the FCA Handbook. The amendments include: (i) changes to the Handbook impacting AIFMs, UCITS managers and certain AIF depositaries; (ii) changes to the complaints data reporting form and updating Handbook guidance; (iii) technical changes to implement the FPC’s recommendation on interest rate stress tests for mortgages. Comments are invited by 6 May 2014. CRD IV delegated Regulations The European Commission has published the texts of seven delegated Regulations that it has adopted containing RTS required by the CRR and CRD IV. The delegated Regulations contain RTS relating to the following issues: market risk, credit risk and operational risk, credit valuation adjustment risk, covered bonds and information exchange between competent authorities on firms passporting under CRD IV. The next step will be for the Council of the EU and the European Parliament to consider these delegated Regulations.
  • 3. Proposed Benchmark Regulation delay According to reports, the European Parliament has postponed its vote on the proposed Benchmark Regulation following disagreement regarding the inclusion of commodities within its scope. It has now been agreed that it will be postponed until after the May 2014 elections, when the next Parliament will consider and vote on it. It was also stated that, in addition, the main centre right EPP party had sought a delay so that lessons from current regulatory concerns regarding the FOREX market could be applied to the Benchmark Regulation. It also notes that some MEPs blame the vote postponement on lobbying by industry interests. Treasury publishes report regarding November 2013 Financial Stability Report The Treasury has published the record of a meeting held between the BoE governor and the Chancellor to discuss the November 2013 Financial Stability Report. The record states that the discussion focussed on three areas; (i) the FSR assessment of financial stability; (ii) UK housing market developments; and (iii) the Financial Policy Committee’s priorities over the next 18 months, identified as the medium-term capital framework for banks, ending ‘too-big-to-fail’ and shadow banking. The Chancellor emphasised the government’s support for high prudential standards in line with the Basel agreements and welcomed the FPC’s focus on this. ESMA publishes risk dashboard ESMA has published its risk dashboard for the first quarter of 2013, together with a report on trends, risks and vulnerabilities for the second half of 2013. The report assesses the performance of EU securities markets, considering trends and risks, to develop a comprehensive picture of systemic and macro- prudential risks in the EU for the use of national and EU bodies in their risks assessments. In the report, ESMA identifies that, during the period covered, EU securities markets and investment conditions in the EU improved, based on better macro-economic prospects, which also contributed to reduced systemic risk. However, overall risks remained at high levels for EU securities markets, especially surrounding the global economic outlook and potential vulnerabilities in emerging markets.
  • 4. New FCA Handbook forms on consumer credit The FCA has updated its Handbook with details of new forms and amendments or deletions of existing Handbook forms in light of the CA's final policy for a consumer credit regime. Among other things, the forms relate to: variation of permission (VoP), complaints reporting, appointed representative appointment and notification, applications for certain directions under the Consumer Credit Act 1974 and auditor's client assets reports. The updates are due to take effect on 1 April 2014. GUEST SHORTS This week, Rosie Wild, associate at specialist financial and commercial disputes law firm Cooke, Young & Keidan, updates us on the new Banking Reform Act, as follows: “The Banking Reform Act, which received Royal assent last December, introduces the new criminal offence of reckless misconduct in the management of a bank (sections 36 - 38). The offence will cover senior persons (covered by the new Senior Managers Regime) in banks and building societies, but not credit unions or insurers. Senior persons will be liable for the offence if: (i) they take a decision, or fail to prevent a decision, which they were aware may cause the bank to fail; (ii) their conduct falls far below what could reasonably be expected of a senior manager in that position; and (iii) the bank does indeed fail as a consequence. The Commission envisages ‘failure’ to encompass very serious cases only, such as where there is a substantial cost to the taxpayer or the bank’s customers, or where there are lasting consequences for the financial system. The maximum penalty on indictment is seven years in prison.” If you would like to discuss the above or receive further information regarding the new Act and/or the Senior Managers Regime, please contact Rosie Wild at Rosie.Wild@cyklaw.com.
  • 5. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 www.cummingslaw.com 14 March 2014