Asset Management Regulatory Roundup - September 2017, Issue 5

September 06, 2017

A compact summary of the most recent regulatory developments relevant to the UK asset management industry. This issue includes details on the European Commission’s consultation on post-trade barriers, the responses received by ESMA to its consultation on CRA endorsement guidelines, updated Q&As on the KID requirements for PRIIPs as well as a case on liability for an appointed representative's actions.


CMU: Consultation on post-trade barriers

As part of its work on the Capital Markets Union (CMU), the European Commission has published a consultation on post-trade services (including clearing, settlement and collateral management services that are performed after the execution of a trade).

The Commission wishes to understand the current state of the post-trade markets, the existence and scale of barriers, the associated risks and the best ways to address them.

Responses are requested by 15 November 2017.

Read the consultation »

Respond to the consultation »

CRA ENDORSEMENT GUIDELINES: Consultation responses published

ESMA has published the responses received to its consultation on updating the 2011 guidelines on the application of the endorsement regime under the Credit Reference Agencies (CRA) Regulation.

The updated guidelines will be finalised and a final report published in the last quarter of 2017. The guidelines themselves should enter into force on 1 June 2018.

Access the responses »

PRIIPs KID: Publication of updated Q&As and risk and reward calculations

The Joint Committee of the European Supervisory Authorities (ESAs) (i.e. the EBA, EIOPA and ESMA) has published updated Q&As on the key information document (KID) requirements for packaged retail and insurance-based investment products (PRIIPs), and a flow diagram for the risk and reward calculations in the PRIIPs KID which sets out the calculation steps for the Summary Risk Indicator (market risk and credit risk assessment) and Performance Scenario calculations described in The Commission Delegated Regulation (EU) 2017/653.

The updated Q&As include a new section covering "General topics" (which includes a Q&A on the categorisation of a retail investor) and new Q&As on:

  • Market risk assessment;
  • Methodology for assessing credit risk;
  • Summary risk indicator; and
  • Presentation of costs.

Read the Q&As »

Access the flow diagram »

APPOINTED REPRESENTATIVES: Liability and agency issues

In Ovcharenko and Moskaltsov v Investuk Limited and Anglo-Sino Capital Partners Limited the High Court addressed several issues concerning the liability of a principal firm for the loss caused by the acts of its appointed representative (AR) and the application of s. 39(3) of the 2000 Financial Services and Markets Act (FSMA).

Under s. 39(3), a firm which has engaged an AR is liable for that representative’s acts and omissions when carrying on the business for which it has accepted responsibility, “to the same extent as if he had expressly permitted it”.

In refusing to overturn a default judgment, the court held that:

  • The claimants could rely on s. 39(3) as a clear and freestanding statutory basis of liability (which is not linked to the law of agency). The principal firm’s argument that it was not liable to the claimants on the basis that the AR had acted outside the scope of the AR agreement was rejected. The Court held that the AR agreement regulate the position inter se between the principal firm and the AR. To construe the AR agreement otherwise would deprive the AR’s clients of the failsafe protection under s. 39(3).

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