Asset Management Regulatory Roundup - October 2017, Issue 8

October 18, 2017

A compact summary of the most recent regulatory developments relevant to the UK asset management industry. This issue includes details on US-EU equivalence of certain OTC derivative rules; the FCA asset management authorisation hub; updated Q&As on AIFMD, UCITS and MiFID II; ESMA’s review of its guidelines on ETFs and other UCITS issues; proposals on Legal Entity Identifiers and Unique Product Identifiers; final report on the MiFID II derivatives trading obligation; and changes to benchmarks.


FCA asset management hub

The FCA has launched an asset management authorisation hub designed to assist start-ups through website portal access, pre-application meetings and dedicated case officers. It will also become easier for firms to engage directly with their supervisors after authorisation. It was stressed that the hub is not intended to lower entry standards; entrants will still need to meet the same “rigorous standards” as current authorised firms before receiving authorisation.

Read wheres next for investment and asset management regulation »

Commission adopts EMIR equivalence decision for derivatives transactions in the United States

The European Commission has determined that the United States’ regime for non-centrally cleared over-the-counter (OTC) derivatives transactions is “equivalent” to the EU regime under the European Market Infrastructure Regulation (EMIR), in terms of the legal, supervisory and enforcement arrangements. In particular, the decision concludes that Commodity Futures Trading Commission (CFTC) rules on risk monitoring and mitigation for OTC derivative contracts not cleared by a central counterparty are equivalent to EMIR. It also determines that US rules on obligations on the exchange of collateral between counterparties are equivalent to EU rules.

The decision will alleviate the regulatory burden for EU and US companies as it will allow market participants to comply with only one set of rules and avoid duplicative or conflicting rules.

The decision takes the form of an implementing act, and will enter into force on the twentieth day following its publication in the Official Journal of the EU.

Read the press release »

AIFMD and UCITS: ESMA updates Q&As

The European Securities and Markets Authority (ESMA) has updated its questions and answers documents (Q&A) on the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive. Both of those contain new Q&As on periodic reporting under Article 13 of the Securities Financing Transactions Regulation (SFTR) for UCITS and AIFs to investors on the use of SFTs and total return swaps.

The AIFMD Q&A also includes new Q&As on the remuneration disclosure requirements in relation to staff of the AIFM’s delegates.

Read the AIFMD Q&As »

Read the UCITS Q&As »

ESMA to review the Guidelines on ETFs and other UCITS Issues

As part of its 2018 Work Programme, ESMA has announced that it will conduct a peer review on its 2012 Guidelines on ETFs and other UCITS Issues (the Guidelines). The Guidelines cover a range of UCITS-related matters but crucially also introduce the first pan-European ETF specific rules for UCITS. These also contain additional disclosure requirements regarding portfolio transparency; and additional rules with respect to the eligibility of financial indices.

ESMA will seek to obtain the views of the various national competent authorities on the implementation of the Guidelines and will encourage an “exchange of supervisory experience”.

Read the Dechert Newsflash »

MiFID II: ESMA updates Q&As

ESMA has updated its Q&As on the Markets in Financial Instruments Directive (MiFID) II and the Markets in Financial Instruments Regulation (MiFIR) investor protection and intermediaries topics, including:

  • client categorisation;
  • post-sale reporting;
  • recording of telephone conversations;
  • best execution; and 
  • information on costs and charges

Read the Q&As »

ESMA has also updated its Q&As on MiFID II and MiFIR and added new Q&As on market structure and transparency issues.

Read the updated Q&As »

MiFID II / MiFIR: Legal Entity Identifiers

ESMA has published a Briefing on the Legal Entity Identifier (LEI) to raise industry awareness and facilitate compliance with the LEI requirements under MiFID II ahead of 3 January 2018.

Read the Briefing »

MiFID II / MiFIR: Final report on the derivatives trading obligation

ESMA has published a final report on its draft Regulatory Technical Standard (RTS) on the trading obligation for derivatives under MiFIR. ESMA’s draft RTS provides the implementing details for on-venue trading of interest rate swaps (IRS) and credit default swaps (CDS).

MiFIR’s trading obligation is closely linked to the clearing obligation under EMIR and will move over-the-counter (OTC) trading in liquid derivatives onto organised venues. Once a class of derivatives needs to be centrally cleared under EMIR, ESMA must determine whether these derivatives, or a subset of them, should be mandatorily traded on-venue on a regulated market (RM), multilateral trading facility (MTF), organised trading facility (OTF) or an equivalent third-country trading venue.

ESMA has decided to make the following fixed-to-float IRS and CDS indices (which are deemed sufficiently liquid) subject to on-venue trading:

  • fixed-to-float interest rate swaps denominated in EUR;
  • fixed-to-float interest rate swaps denominated in USD;
  • fixed-to-float interest rate swaps denominated in GBP; and
  • index CDS – iTraxx Europe Main and iTraxx Europe Crossover.

ESMA’s draft RTS have been submitted to the European Commission for its endorsement and 3 January 2018 is the envisaged date of application.

Read the draft RTS »

OTC Derivatives: FSB consultation

The Financial Stability Board (FSB) is consulting on governance arrangements for the unique product identifier (UPI) which is a key harmonised identifier aimed at facilitating aggregation of transaction reports about OTC derivatives markets.

Proposals include: UPI service providers; cost recovery and fees.

Comments may be made until 17 November 2017.

Read the consultation »

Benchmarks: cessation of or change to existing benchmarks

The European Commission has adopted a delegated regulation under the Benchmarks Regulation on cessation of, or changes to, existing benchmarks which do not meet the requirements under this Regulation. It sets out a non-exhaustive list of conditions to help competent authorities to assess whether a change of the provider of an index could result in a force majeure event, or frustrate or otherwise breach contractual terms or rules of a fund or financial instrument.

If neither the Council of the EU nor the European Parliament object, the delegated regulation will enter into force 20 days after its publication in the Official Journal of the EU (OJ).

Read the delegated regulation »

Dechert's World Passport recognised by Financial Times

2017 European Innovative Lawyers Report

Dechert has been recognised by the Financial Times in the 2017 "European Innovative Lawyers" Report for World Passport, the firm's service that offers investment firms a global registration, marketing and compliance solution for UCITS and AIFs.


Fund distribution resources

Dechert maintains two services designed to assist managers with global fund distribution and registration.

World Compass - A global web-based service offering investment firms 24/7 access to detailed information on fund marketing, separate accounts and beneficial ownership reporting

World Passport - An outsourced solution for fund registration globally for both UCITS and AIFs





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