Asset Management Regulatory Roundup - December 2017, Issue 12

December 13, 2017

A compact summary of the most recent regulatory and tax developments relevant to the UK asset management industry. This issue includes details of the FCA’s stance on the reporting of cyber attacks; the Government’s opinion on the proposed EMIR amending regulation; the FCA's support for the ESAs' statement on variation margin requirements for physically settled FX forwards; the Government’s strategy for the long term success of the UK’s investment management industry; and the new EU list of non-cooperative tax jurisdictions.


CYBER SECURITY: FCA expectations 

In a recent speech, Megan Butler, Director of Supervision – Investment, Wholesale and Specialists at the FCA, spoke about the ongoing threat to firms posed by cyber attacks. 

It is the responsibility of firms to report material breaches. The FCA is realistic that some cyber-attacks will succeed, and does not operate a zero-failure regime. That being said, the regulator expects firms to tell it about cyber breaches as soon as they are aware something is wrong. The FCA suspects that there is currently a material under reporting of successful cyber attacks and stressed that it expects all businesses to deal with it in an open, transparent manner in reporting such attacks. Ms Butler referred to the infographic published in June which was aimed at smaller organisations but whose messages are relevant to all firms. 

The FCA infographic » 

Read Megan Butler’s speech » 

EMIR: UK sets out its position on the proposed amending regulation 

The Department for Exiting the European Union (DExEU) has published an explanatory memorandum on the European Central Bank’s opinion on the proposed regulation to amend EMIR. The UK government fully supports the implementation of G20 commitments to increase the safety of OTC derivatives markets as well as the proposals to amend deficiencies in EMIR, ensure end-users can access the OTC derivatives market to hedge risks and to reduce reporting costs. 

Read the explanatory memorandum » 

EMIR: Variation margin requirements 

The FCA has updated its webpage on EMIR indicating its support for the European Supervisory Authorities’ (ESAs) 24 November 2017 statement on the variation margin requirements for physically settled FX forwards. The FCA will not require firms whose physically settled FX forwards are likely to be outside the scope of the amended requirements to continue putting processes in place to exchange variation margin. 

Visit the FCA’s EMIR webpage » 

Read the ESAs’ statement » 

INVESTMENT MANAGEMENT STRATEGY: Publication of second report 

HM Treasury has published its second Investment Strategy Report setting out the UK government’s strategy for long term success of the UK’s investment management industry.

Dechert has published an OnPoint highlighting the government’s plans in this regard. 

Read the OnPoint » 

Read the Report » 

TAX: EU list of non-cooperative tax jurisdictions published 

On 5 December 2017, the EU published a “black list” of non-cooperative jurisdictions in taxation matters. It also agreed on ‘defensive’ measures which the EU and its member states could apply to the listed jurisdictions. These measures are aimed at preventing the erosion of the EU member states’ tax bases (for example, non-deductibility of costs, withholding tax measures, reversal of burdens of proof in tax enquiries to the taxpayer, and special documentation requirements). 

The non-cooperative tax jurisdictions are: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates. 

In addition, certain common fund jurisdictions (including most of the UK Overseas Territories and Crown Dependencies – Cayman Islands, Guernsey, Isle of Man, Jersey, Bermuda) are on a “grey list” (meaning they will be closely monitored by the EU) and have made commitments to cooperate with the EU. In particular they must, by the end of 2018, satisfy the EU that their tax regime is not designed to facilitate shifting profits from high tax jurisdictions to entities in low tax jurisdictions where those entities have no real economic substance or do not carry on real economic activities. 

The EU will regularly review and update the list in the years to come. 

EU list of non-cooperative tax jurisdictions » 

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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