UK/EU Investment Management Update (December 2020)
1. Brexit update
UK AIFMs — fund marketing in the EU
UK alternative investment fund managers (AIFMs) that are currently marketing an alternative investment fund (AIF) into one or more EU member states under Article 36 AIFMD national private placement regimes (NPPRs) are reminded that they will need to reapply under the relevant Article 42 AIFMD NPPRs in those EU member states, if the UK AIFM intends to continue marketing the AIF to EU investors after 31 December 2020.
2. HM Treasury consults on UK Financial Services Future Regulatory Framework
As mentioned in our November 2020 Update, on 19 October 2020, HM Treasury launched its initial Phase II Consultation on the Future Regulatory Framework (FRF) Review.
On 30 November 2020, HM Treasury updated its webpage on the consultation, extending the deadline for responding to the consultation by one month. The consultation remains open to the public until 19 February 2021 (this was originally 19 January 2021).
The FRF Review aims to determine how the UK’s approach to financial services regulation ought to adapt to account for the UK’s new position outside the EU. Phase II will consist of two consultations. The first (and current) sets out an overall regulatory blueprint for financial services, and the second (to follow in 2021) will contain a final package of proposals.
3. COVID-19 update
FCA statement on working from home
On 9 November 2020, the FCA updated its webpage on “Workplace arrangements and work-related travel.”
The FCA reaffirms the importance of firms continuing to follow relevant UK government guidance, including on who should work from home, if possible, and on ensuring workplaces are safe for those who cannot work from home.
The FCA recommends that a firm’s chief executive officer (SMF1) is responsible for ensuring an adequate process for adhering to government guidance. Accountability in firms with no SMF1 chief executive officer would instead lie with the most relevant senior manager.
4. MiFID II/MiFIR
MiFID II “Quick Fixes”
On 18 November 2020, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published its report on the proposed amendments to MiFID II as published by the Commission on 24 July 2020 (MiFID II Quick Fixes).
The MiFID II Quick Fixes are designed to assist the EU’s economic recovery from the impact of the COVID-19 pandemic and form part of the EU’s Capital Markets Recovery Package.
5. UK Investment Firms Prudential Regime
UK IFPR — HM Treasury, PRA, and FCA joint statement
On 16 November 2020, HM Treasury, the Prudential Regulation Authority (PRA), and the FCA published a joint statement setting out an amended planned timeline for implementing the UK IFPR, amongst other items. Under the new timeline, implementation of the UK IFPR will be delayed until 1 January 2022.
6. LIBOR Transition
IBA Consultation on LIBOR Cessation
On 18 November 2020, Intercontinental Exchange, Inc. (ICE), owner of ICE Benchmark Administration Limited (IBA), published an announcement that IBA will consult on its intention to cease the publication of all GBP, EUR, CHF, and JPY LIBOR settings.
7. AIFMD, UCITS, and FCA sanctions
ESMA annual report on sanctions imposed under AIFMD and the UCITS Directive
On 12 November 2020, ESMA published its first annual report on the imposition of penalties and other sanctions under the AIFMD during 2018 and 2019 by NCAs. On the same day, ESMA also published its third annual report on the same topic, but in relation to the UCITS Directive throughout 2019 only.
8. SFTR — ESMA publishes its first Q&As on data reporting
On 5 November 2020, ESMA published its first set of Q&As on reporting SFTs under the SFTR.
Specifically, the Q&As concern the frequency of reports, the requirement to report settlement fails (and the method for doing so), the reporting of repurchase agreements (repos) initially collateralised on a transaction basis and subsequently on a net exposure basis, trading venue reporting for cleared and non-cleared SFTs, and the reporting of zero collateral for margin lending.
For further information about the EU SFTR, please refer to our Update EU SFTR Reporting for Investment Managers — Top Five Things to Know.
9. Cross-Border Distribution of Collective Investment Undertakings Regulation — ESMA consults on draft guidelines
On 9 November 2020, ESMA launched its public consultation on its draft guidelines on marketing communications under the regulation on facilitating cross-border distribution of collective investment undertakings (CBDF Regulation).
The CBDF Regulation requires EU fund managers (UCITS management companies and EU AIFMs) to ensure that marketing communications addressed to investors are identifiable as such, describe the risks and rewards equally prominently of purchasing units or shares, and contain only fair, clear, and not misleading information.
10. Performance fees — ESMA guidelines on performance fees in UCITS and certain types of AIFs
11. FCA Financial Services Register
On 23 November 2020, the FCA updated its Financial Services Register webpage, announcing the publication of Directory Persons data for dual-regulated firms.
The FCA took the opportunity to remind solo-regulated firms that they must submit their Directory Persons data via Connect by 31 March 2021 using the single-entry submission form.
Taxonomy Regulation — Criteria defining environmentally sustainable activities
On 20 November 2020, the Commission launched a public consultation on a draft Delegated Regulation to establish the first two sets of technical screening criteria for determining which economic activities qualify as environmentally sustainable under the Taxonomy Regulation. The consultation is open for feedback until 18 December 2020. The Commission is due to adopt the relevant Delegated Regulation before 31 December 2020.
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