This document provides a summary of recent legal and regulatory developments in the financial services industry from the past week. Key updates include the FCA clarifying timeframes for AIFM full-scope applications, ESMA publishing a table of AIFMD MoUs between EU and non-EU regulators, HM Treasury issuing a call for evidence on the UK-EU balance of competences on financial services, and the FCA setting out its proposed approach to implementing the CRD IV bonus cap.

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
IFMD: AIFM full-scope applications
The FCA has amended its updated AIFMD webpage to clarify the timeframe
for deferred determination of AIFM full-scope applications. The FCA
updated its webpage on 11 October to clarify the timeframe for full-scope
applications for authorisation or VoPs for AIFMs. It has now revised the
wording regarding deferral requests by removing the following wording
from the update: "A deferral request, made during the transitional period,
should not extend beyond six months from the submission of the complete
application". The wording has been replaced with an explanation that
applicants "seeking to defer determination beyond the 3 month statutory time
limit may request an authorisation date as late as 21 July 2014 (even if that
date is more than 6 months after the date of submitting a completed
application)". The remainder of the updated webpage remains unchanged
from that reported in last week’s Legal Shorts.
AIFMD: MoU table published
ESMA has published a table showing the state of play of AIFMD MoUs
signed by EU national supervisors with non-EU regulators worldwide. The
AIFMD MoUs are co-operation agreements that allow the exchange of
information between EU and non-EU supervisors, enabling non-EU fund
managers to market alternative funds within the EU. According to the table,

2. the FCA has entered into MoUs with all non-EU regulators listed in the
table.
HM Treasury financial services review
HM Treasury has published a call for evidence on the balance of
competences between the UK and the EU on financial services and the free
movement of capital. Competence in this context means everything deriving
from EU law that affects what happens in the UK. The review is broken
down into a series of reports on specific areas of EU competence and HM
Treasury is leading the review of financial services and the free movement
of capital. The call for evidence focuses on key themes including the
approach to harmonisation of financial services rules, institutional
integration and the shift towards regional supervision, the challenges in the
policy-making process, and the deepening of markets as a result of EU
legislation on the free movement of capital. The call for evidence runs until
17 January 2014.
FCA: CRD IV bonus cap
In its second consultation paper (CP13/12) published last week, the FCA sets
out, amongst other things, its proposed approach to implementation of the
bonus cap. The proposed FCA guidance creates, in practice, a presumption
that all FCA prudentially regulated investment firms will be able to disapply
the bonus cap. The FCA consultation does state that the FCA will reserve
power to apply the bonus cap to the more significant investment firms, on
the basis of individual guidance, and that the FCA may require firms to
provide justification for their disapplication of the bonus cap. CP13/12 does
not, however, deal with how the bonus cap will apply in practice, so many of
the key outstanding issues remain unresolved. The cap is being implemented
in the UK against the backdrop of the UK’s legal challenge against the
bonus cap and will be implemented pending the outcome.
CRD IV
The European Banking Authority has updated its webpage regarding
responses it has received to its July consultation on draft RTS on the
definition of materiality thresholds for specific risk in the trading book. The
draft RTS set out criteria for assessing when the specific risk of debt
instruments in the trading book (considered both at a solo and a consolidated
level) is sufficiently material to trigger an evaluation by the competent
authority. After an evaluation, competent authorities will be able to
determine whether they should encourage banks to enhance their internal
assessment capacity and increase the use of internal models for capital
calculations. Responses include those received from ISDA and the

3. Association for Financial Markets in Europe (AFME). The EBA is expected
to submit the draft RTS to the European Commission for endorsement by 1
January 2014.
EMIR
ESMA is consulting on procedural rules for the exercise of its power to
impose fines and periodic penalty payments on trade repositories. The
consultation paper sets out ESMA's preferred options for the rules, which
include the following: (i) a reasonable time limit for written submissions; (ii)
procedures regarding access to files by the persons subject to investigation,
and the protection of confidential information affecting third parties; (iii)
documents to be submitted; (iv) limitation periods for the imposition or
enforcement of penalties; and (v) methods for collecting fines or periodic
penalty payments. ESMA considers that a panel or committee should be
appointed to carry out particular steps of the procedure, considering this to
achieve a more effective process. Comments are invited by 15 November
2013. ESMA has also updated its Q&As on the implementation of EMIR,
which were last updated in August 2013.
LIBOR re-fixing
BBA LIBOR Ltd (BBALL) and the Interim LIBOR Oversight Committee
(ILOC) have published a joint consultation paper on the proposed
introduction of intraday re-fixing for LIBOR. Re-fixing allows the
administrator of a financial benchmark to take account of late submissions or
calculation errors that it may have been notified to it after the initial fixing of
the daily rate. In the case of intraday re-fixing, the re-fixed value is
published several hours later that same day. The consultation paper analyses
what LIBOR re-fixing would entail and seeks views on its introduction. The
consultation closes on 30 November 2013. Meanwhile, the CEO of ISDA
has said that moving away from LIBOR as a benchmark in OTC derivatives
transactions would be difficult because of pervasiveness of the rate and a
lack of better alternatives.
FATF summary
FATF has published a summary of its plenary meeting held in Paris from 16
to 18 October 2013. At the meeting, among other things, FATF published
the following documents as part of the FATF's ongoing work to identify
jurisdictions that may pose a risk to the international financial system: (i) a
public statement on jurisdictions with strategic anti-money laundering
(AML) and combating the financing of terrorism (CFT) deficiencies; and (ii)
a document listing those jurisdictions with strategic AML/CFT deficiencies
for which an action plan has been developed with FATF. It also approved

4. and published a best practices paper on the use of the FATF
recommendations to combat corruption, which aims to provide policy
makers and practitioners with guidance and best practices on how AML/CFT
measures can be used to combat corruption.
IOSCO second hedge fund survey
IOSCO has published the findings of its second hedge fund survey,
which provides an overview of the hedge fund industry as of September
2012. The report covers: (i) qualifying funds, noting that hedge fund
managers and advisers are predominately located in the US and the UK; (ii)
investment strategy, and the report indicates that the single most represented
strategy among active funds is equity-oriented, with macro-oriented and
multi-strategy funds also being significant; (iii) use of leverage and market
exposure; and (iv) liquidity risk, where the survey suggests that under
current market conditions, few funds actually need to restrict investor
liquidity. IOSCO will continue to promote the collection of comparable
hedge fund data among regulators with the aim of creating an internationally
consistent approach. Data collection for the next survey will begin in
September 2014.
Review of fiduciary duties of investment firms
The Law Commission has published a consultation paper on fiduciary duties
of investment intermediaries. The Law Commission is of the view that the
law of fiduciary duties that applies to trustees, investment managers, brokers
and custodians is flexible but uncertain. The Law Commission does not
think that it is desirable to reform the fiduciary law by statute, because this
could create new uncertainties and have unintended consequences, but that
one possibility is to extend the right to sue for breach of FCA rules.
Discussions have emphasised the centrality of FCA regulation and the Law
Commission does suggest that some issues can only be addressed through
FCA regulation. In particular, the consultation asks if there is a need to
review the regulation of investment consultants and custodians. The
consultation closes on 22 January 2014.
GUEST SHORTS
This week Gary Pitts, managing partner of Tetractys Partners LLP, a
compliance and corporate governance consultancy, updates us on the FCA’s
enforcement powers, as follows:
“On 15th October, Policy Statement 13/9 of the Financial Conduct Authority
took effect. This gives the FCA the power to publish warning notices issued
after this date to firms and individuals that they are the subject of

5. enforcement action, before the enforcement action has concluded and any
sanctions decided. While this aligns the practices of the regulatory regime
with the criminal and civil regimes, it raises the stakes for firms that could
previously rely on anonymity until the merits of the enforcement action had
been finally determined.
While the FCA states in PS 13/9 that it has the discretion, rather than a duty,
to publish, the new section 6.7E (1) states that the FCA “expects normally to
consider it appropriate to publish.” The Rules set a high bar for firms and
individuals to demonstrate that publication is “unfair” and there is a lot of
room for FCA discretion. For managers and their key personnel, this makes
proper handling of such issues with key investors and fund boards critical to
preventing the early exit of key assets, leading perhaps to the closure of the
manager itself, even if ultimately the manager is exonerated.”
If you would like to discuss the above or any other compliance matters,
please
contact
Gary
on
+44
(0)
7795
830
636
or
gary.pitts@tetractyspartners.com or visit Tetractys Partners LLP’s LinkedIn
page.
We have taken great care to ensure the accuracy of this version of Legal
Shorts. However, Legal Shorts is written in general terms and you are strongly
recommended to seek specific advice before taking any action based on
the information it contains. No responsibility can be taken for any loss arising from,
action taken or refrained from on the basis of this publication.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
25 October 2013