UK/EU Investment Management Update (July 2020)
1. Brexit update
The Political Declaration that accompanied the UK/EU Withdrawal Agreement stated that the EU and the UK would endeavour to conclude financial services equivalence assessments for both sides before the end of June 2020.
2. AIFMD II
Please see our Update AIFMD — European Commission Report — the Groundwork for AIFMD II? for a discussion about the Report.
3. Investment Firm Prudential Regime
As noted above, on 23 June 2020, the FCA published its discussion paper on a new UK investment firm prudential regime (UK IFPR).
The UK IFPR is derived from the EU Investment Firm Directive (IFD) and Regulation (IFR), but there are certain areas in which the FCA may deviate from the IFD/IFR. Please see our Update New EU Investment Firm Prudential (Capital and Remuneration) Regime — Analysis of Final Text for a discussion about the implications of the IFD and IFR for investment managers.
SM&CR implementation — UK FCA extension of implementation for solo-regulated firms
On 30 June 2020, the UK FCA announced an extension of the Senior Managers & Certification Regime (SM&CR) implementation periods for solo-regulated firms. The deadline for solo-regulated firms to have undertaken the first assessment of the fitness and propriety of their Certified Persons has been delayed from 9 December 2020 until 31 March 2021 to allow more time for firms significantly affected by the COVID-19 pandemic to make the necessary changes.
5. Market Abuse
FCA issues public censure to Redcentric PLC
On 26 June 2020, the FCA issued a public censure to Redcentric PLC for committing market abuse between 9 November 2015 and 7 November 2016.
6. New Chief Executive appointment — UK FCA announcement
It is unclear what views Mr Rathi has of the investment management industry, or what regulatory posture he might adopt towards the industry. Prior to joining the London Stock Exchange group in 2014, Mr Rathi worked at HM Treasury where he held a number of senior roles over the course of 11 years.
7. Assessing adequate financial resources — UK FCA guidance for solo-regulated firms
8. New FCA data-collection platform — FCA statement for firm preparation
While the new platform is intended to look similar to Gabriel, and there will be no change to the way firms currently provide data to the FCA, the FCA notes that RegData will be faster and more accessible, the system will be able to send notifications for multiple users, and the reporting schedules will be more user-friendly.
9. LIBOR Transition — new powers for the FCA
10. MiFID II compliance function requirements — ESMA final guidelines
The guidelines are addressed to national competent authorities (NCAs) as well as MiFID investment firms and credit institutions, undertakings for the collective investment of transferable securities (UCITS) management companies and external alternative investment fund managers (AIFMs) when providing investment services and activities in accordance with the UCITS Directive and the AIFMD.
11. ESMA FIRDS — Industry guidance
12. Supervision of costs applicable to UCITs and AIFs — ESMA supervisory briefing
The supervisory briefing was developed in order to promote convergence and reduce regulatory arbitrage on the supervision of costs in UCITS and AIFs throughout the EU. Article 17(2) of the AIFMD Level 2 Regulation provides that AIFMs shall ensure that the AIFs they manage or the investors in these AIFs are not charged “undue costs”; a similar provision applies in the UCITS Directive.
13. Sustainable finance/ESG
EU ESG-related financial regulation
Following the Commission’s publication of the Action Plan on Financing Sustainable Growth in March 2018, the topic of sustainable finance has undeniably been high on the agenda among EU policy makers. For a general overview of the emerging sustainable regulatory framework for ESG considerations in the financial sector, please refer to our Update EU Advances ESG Related Reforms to Financial Services Regulations.
The FCA has, for the first time, authorised a crypto futures venue to operate a multilateral trading facility (MTF). Crypto Facilities Ltd (trading as Kraken Futures) gained an additional regulatory approval to operate an MTF on 6 July 2020. The venue will offer leveraged, cash-settled futures contracts on Bitcoin, Ethereum, XRP, and other cryptocurrencies. Kraken is seeking to target the institutional market with the new licensed offering. Further details on the Kraken blog and the FCA Register.
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