Legal shorts 13.06.14 including FCA policy statement on review of CASS and AIFMD reporting


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Legal shorts 13.06.14 including FCA policy statement on review of CASS and AIFMD reporting

  1. 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 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 FCA policy statement on review of CASS The FCA has published a policy statement (PS14/9) setting out its final Handbook changes relating to its review of the client assets regime for investment business (CP13/5). The proposals in CP 13/5 were intended to address specific risks and clarify existing CASS requirements and the final rules reflect a rewrite of the client money rules in CASS 7 and substantial changes to the custody rules in CASS 6. Other changes relate to client information, mandate, multiple client money sub-pools and indirect client clearing. The key CASS changes and the dates upon which they will come into effect are set out in Chapter 2 of PS 14/9 and are being introduced in three stages: (i) 1 July 2014, for rule changes that are either optional or impose minimal regulatory burden on firms); (ii) 1 December 2014, for changes requiring firms to revise existing client facing documentation; and (iii) 1 June 2015 for all remaining rules. AIFMD reporting The IMA held a question and answer session with the FCA regarding the AIFMD Annex IV reporting (i.e. Report to Competent Authorities), some of the key points being: (i) firms will be required to submit Annex IV reports electronically via GABRIEL from the end of 2014 onwards and the FCA will only be accepting ESMA XML schema v1.1; (ii) there will be three options for filing the report, namely the online form on GABRIEL (although the FCA would prefer firms not to use this option), an upload of the XML file through the “B2B” portal online form and by creating an XML document and uploading it to GABRIEL; (iii) non-EEA AIFMs that market AIFs in the UK (and are therefore required to report to FCA) will receive an FRN when they submit their marketing application to the FCA, which will enable them to set up an account on GABRIEL so they can make the required submissions;
  2. 2. and (iv) the FCA confirmed that whilst firms are permitted to delegate reporting to external vendors the AIFM itself is still responsible for the content and filing of the report. Firms will therefore need to ensure they fully understand what needs to be submitted and be able to validate any data that has been submitted. FCA publishes dealing commission changes The FCA has published Handbook Notice 12, which sets out changes made to the FCA Handbook in relation to the recent changes to use of dealing commission rules for investment managers. The Conduct of Business (Use of Dealing Commission) (Amendment No. 2) Instrument 2014 (FCA 2014/29) came into force on 3 June 2014 and provides clarity and certainty to firms on the FCA’s definition of research and provides specific guidance on mixed use assessments i.e. where substantive research is bundled together with services that firms cannot pay for using dealing commission. A major change to the rules relates to corporate access and prevents investment managers using dealing commission to pay for access to senior staff at firms they invest in. CRD IV The text of the delegated Regulation on criteria to identify material risk takers under CRD IV has been published in the OJ. The Regulation sets out regulatory technical standards (RTS) on criteria to identify categories of staff whose professional activities have a material impact on an institution's risk profile, commonly known as ‘material risk takers’. The RTS identify material risk takers at firms within the scope of CRD IV and CRR. The Regulation comes into force 20 days after publication in the OJ. ESMA publishes MMoU on co-operation agreements and information exchange ESMA has published a multilateral MoU on co-operation arrangements and information exchange between itself and competent authorities. ESMA published guidelines relating to the MoU in March 2013 and the text of the MoU was set out in an Annex to the guidelines. ESMA has also published a list of signatories to the MoU, which includes the FCA. Systemic risk survey results published The BoE has published the results of its systemic risk survey for the first half of 2014. The aim of the survey is to quantify and track market participants’ views of risks to, and their confidence in, the UK financial system. According to the results: (i) the majority of respondents considered the probability of a high-impact event low or very low over the next year; (ii) the main risk identified was from an economic downturn, with concerns about sovereign risk dropping sharply; and (iii) geopolitical risk was widely cited as the most challenging risk to manage as a firm.
  3. 3. ESMA speech on systemic risks in EU fund industry ESMA has published a speech by its chairman on systemic risks and current policies in the EU fund industry, which considers whether asset managers can be too big to fail. Amongst other things, Mr Maijoor outlined ESMA's priorities in relation to AIFMD, confirming that ESMA had begun preparatory work for the opinion and advice that it must deliver to the EU institutions in July 2015 regarding the possible extension of the passport to non-EU funds and managers. ESMA is also continuing its efforts to clarify the reporting obligations on AIFMs while, at the same time, building an IT system to help centralise reported data. GUEST SHORTS This week’s Guest Shorts come from Ian Gobin, partner at Appleby (Cayman) and global head of investment funds and services, who writes to update us on the new Cayman Islands Directors Registration and Licensing Law 2014, as follows: “The Cayman Islands Directors Registration and Licensing Law 2014 (‘DRL Law’) came into force on 4 June 2014. Under the DRL Law, all directors of open-ended investment funds registered with, or licenced by, the Cayman Islands Monetary Authority (CIMA) under the Mutual Funds Law (as amended), and some companies registered as excluded persons under the Securities Investment Business Law (as amended) (SIBL) (‘Covered Entities’) are caught. Open-ended investment funds that are structured as partnerships or trusts or which are exempt from registering with CIMA and all closed-ended investment funds are not covered by the DRL Law. Each affected director will need to register with CIMA and to do so will need a unique identification number (‘Unique ID’) in order to complete the online registration process. CIMA has now issued these Unique IDs to each Covered Entity’s registered office provider and each registered office service provider in the Cayman Islands will contact all directors for whom they have received Unique IDs. In addition to the registration requirement, ‘Professional Directors’, which are defined as any person appointed as a director for 20 or more Covered Entities, and ‘Corporate Directors’ must apply for a licence. There are a number of exemptions available from the licensing regime depending on a number of factors, including the director’s relationship. To register or apply for a licence, a director must submit an application through CIMA’s online portal and pay the relevant registration fee. The aggregate initial and recurring annual fees include the registration fee (US$853.66), the Professional Director licence fee (US$3,658.54) and the Corporate Director licence fee (US$9,756.10). Once licensed or registered, any material change to the information provided in the initial application will need to be filed with CIMA within 21 days of the change taking effect and annual filing (which includes payment of the annual fee) must be made no later than 15 January each year. Individuals have until 3 September 2014 to either register and/or apply for a licence. Corporate Directors have until 3 December 2014 to apply for a licence, while new directors will have to register before being appointed to the board of a Covered Entity and can apply for their Unique ID through the CIMA portal.” For more information on the above or in connection with investment funds and services in the Cayman Islands, please contact Ian Gobin at
  4. 4. Cummings Tel: + 44 20 7585 1406 Mob: + 44 7734 057 327 13 June 2014