UK/EU Investment Management Update
Please feel free to contact a member of our UK/EU Financial Services Regulatory Group if you would like to discuss any of the topics covered in this Update.
UK-EU future relationship negotiations
On February 25, 2020, the Council of the European Union adopted a decision authorizing the opening of future partnership negotiations with the UK and appointed the European Commission as the EU negotiator. The EU intends to establish a free trade agreement with the UK, which would involve zero tariffs and quotas on traded goods and cooperation for customs and regulatory aspects. The EU-UK trade negotiations will initiate in the first week of March.
2. EU Short Selling Regulation – new UK FCA Electronic Submission System
On February 24, 2020, the FCA launched a new platform for reporting net short positions, the Electronic Submission System (ESS). This change has taken place with immediate effect, meaning that firms holding positions should create a new account with ESS without delay as the FCA will no longer accept notifications by email. Once the FCA has approved a firm account, the firm will also need to ensure that all individuals who will making the notifications are registered to make SSR notifications separately, as a reporting person.
3. EU SFTR reporting
4. EMIR reporting – UK notifications via FCA Connect
We note that most investment managers would be filing EMIR reports with the regulator of the actual derivatives counterparty, which will typically be a fund or managed account. In the case of private funds, this would often be Ireland or Luxembourg rather than the UK.
5. Market Abuse Regulation – FCA data and strategic approach
On February 28, 2020, the FCA announced that it received close to 5,500 suspicious transactions and order reports (STORs) in 2019. The STOR regime requires companies to report suspicions of potential market abuse and is used by the FCA as an indicator for the type and level of harm being committed in financial markets. The FCA highlighted that the STOR figure for 2019 had dropped for the first time since 2016, which may have been caused by stronger steps being taken by firms and the FCA toward tackling financial crime risks. The FCA also emphasized that firms should continue to submit market observations where they wish to submit information that is not necessary appropriate as a STOR.
6. LIBOR transition – UK FCA “Dear CEO” letter
7. UK FCA Sector Views 2020 – investment management
8. EU EMIR-MiFID II alignment
9. EU MiFID II review
On February 17, 2020, the European Commission launched a public consultation to review the regulatory framework for MiFID II and MiFIR. Its priority topics include the establishment of an EU consolidated tape, investor protection, research unbundling and commodity markets. The deadline for responses is April 20, 2020. The commission is expected to publish legislative proposals in the second half of 2020.
10. EU AIFMD – framework issues
11. EU AIFMD – updated ESMA list of cooperation arrangements
The AIFMD sets out conditions that need to be satisfied for non-EU funds to be marketed in the EU as well as for non-EU managers of such funds. In essence, both manager and fund need to be in a jurisdiction that has entered into a cooperation arrangement (memorandum of understanding (MoU)) with the EU member state into which it is intended such fund will be marketed.
On February 20, 2020, ESMA updated its list of MoUs entered between EU regulators and third-country authorities on AIFMD. Interestingly the UK is still listed on the EU member state axis.
12. Cayman Islands – EU list of non-cooperative jurisdictions for tax purposes
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