Regulatory developments and hot topics. BVCA Regulatory Committee

Transcription

1 Regulatory developments and hot topics BVCA Regulatory Committee

2 European and UK regulatory developments Margaret Chamberlain, Travers Smith LLP Tim Lewis, Travers Smith LLP Amy Veitch, Macquarie Stephen Robinson, Macfarlanes LLP

3 MiFID II and MiFIR (1): timeline Multiple texts in trilogue Aim to agree by end 2013 Current guess for live date early to mid-2016 MiFID II AIFMD II?

4 MiFID II and MiFIR (2): key proposed reforms Portfolio managers not accept or receive fees, commissions or any [non-] monetary benefits paid or provided by any third party in relation to the provision of the service to clients (similar for independent investment advisers) Third country provisions basis on which third country firms can provide services into the EU: Delegation impact? Transitional provisions No change to professional client definition

5 MAD II / MAR (1): timeline Contingent on adoption of MiFID II Provisional agreement on MAR text between Parliament and Council in June 2013 Trilogue on MAD II text commenced in October 2013 Final texts expected to be adopted during 2014 ESMA to work on Level 2 and 3 texts during 2014 MAR applies 24 months after entry into force MAD II implementation by Member States over 24 month period Expected full application by late 2016 / early 2017

6 MAD II / MAR (2): key proposed reforms Key proposed reforms: Expanded scope (reg. markets / MTFs / OTFs / certain related OTC instruments) Extra-territorial effect outside EU Change to definition of inside information Attempted market manipulation (deleted in Council / Parliament texts) Algorithmic / HFT trading Criminal market abuse sanctions under MAD II (UK opted out)

7 CRD IV (1): Regulatory capital classification / rules MiFID? AIFMD? Pre Post Manager (with placing or client money/assets) BIPRU limited licence IFPRU limited licence 2 Manager (outside 1. above) BIPRU limited licence BIPRU firm 3 Adviser/arranger, no client money/assets Exempt CAD Unchanged 4 MiFID top-up (and client money/assets) Full-scope UK AIFM Collective portfolio management investment firm CPMI/Rules in IPRU(INV) and IFPRU 5 MiFID top-up (no client money/assets) Full-scope UK AIFM Collective portfolio management investment firm CPMI/Rules in IPRU(INV) and GENPRU/BIPRU 6 Full-scope UK AIFM Collective portfolio management firm Unchanged but CRR for own funds/fixed overheads 7 IPRU(INV) 5 Unchanged

8 CRD IV (2): Impacts AIFMs: Fixed overheads Own funds (regulatory capital) IFPRU limited licence firms: Fixed overheads Own funds (regulatory capital) COREP / FINREP EBA Single European Rulebook

9 EMIR (1): Ready or not, EMIR I come... European Market Infrastructure Regulation (EMIR) European regulation on OTC derivatives, central counterparties and trade repositories (TRs) Part of the G20 commitment to reduce counterparty and operational risk and enhance transparency in the OTC market EMIR introduces Clearing obligations Risk mitigation requirements for uncleared trades Trade Reporting of OTC derivatives and exchange traded derivatives to authorised Trade Repositories (TRs) OTC derivatives = MiFID derivatives

10 EMIR (2): Who is impacted? Financial counterparties (FCs) MiFID firms / EU credit institutions Insurance undertakings UCITS AIFs managed by AIFMs authorised pursuant to AIFMD Non financial counterparties (NFCs) Established in the EU but not a FC Above / below clearing threshold (NFC+ / NFC-) Third country entities

11 EMIR (3): What are the new obligations? Obligation Application Key dates Risk mitigation Timely confirmation Portfolio reconciliation Portfolio compression Dispute resolution Risk mitigation Daily valuation Trade reporting to authorised trade repositories Applies to FC, NFC+ and NFC- irrespective of counterparty Third country firms* Applies to FC and NFC+ Third country firms* Applies to FC, NFC+ and NFC- irrespective of counterparty Reporting may be delegated but responsibility may not Applies to OTC and listed derivatives 15 March 2013 (confirmations only) 15 September March 2013 February 2014 for IRS, CDS and other asset classes

12 EMIR (4): What are the new obligations (cont)? Obligation Application Key dates Mandatory clearing Risk mitigation Margining Risk mitigation Capital Applies to FC and NFC+ Third country firms* Est. April September 2014 for? Applies to FC? Est. October 2013 March 2014 for first CCP authorisation and commencement of frontloading period Est. April September 2014 for first clearing obligations NFC+ notification NFC+ only 15 March 2013 * Uncertain timing for extra-territorial clearing and risk mitigation obligations

13 EMIR (5): FCA implementation reviews FCA has been reviewing how firms are approaching some of the main EMIR obligations Factsheets published 25 October 2013 Areas of focus for NFCs include: Correct calculation of the clearing threshold Classification of hedging and non hedging transactions, particularly IRS that provide exposure to market movements? Relevance of group wide NFC OTC derivatives? Updates to documentation and operational processes following15 September 2013 deadline Planning for commencement of reporting obligations

14 Client assets rules (1): FCA CASS Review FCA CP 13/5 published 12 July 2013 Key concerns in proposed rules: Cumulative effect of many smaller changes Required immediate segregation of client money Consent to transfer money back to clients accounts Application of CASS 7 where firm allows third party to hold client money Repapering of existing acknowledgement letters Increased frequency of reconciliations Requirement to make good shortfalls immediately, potentially even where firm not reasonably responsible

15 Client assets rules (2): BVCA response Key proposed amendments in BVCA response: Maintain requirement for prompt segregation Remove consent to transfers or allow standing consent Limit CASS 7 application to transfers to third parties specifically instructed by firm which would otherwise have been received by firm Use new template acknowledgement letters only prospectively, provided existing arrangements give reasonable protection Reduced reconciliation frequency for PE / VC firms due to less frequent transactions Reinstating requirement to correct shortfalls promptly and only if firm is reasonably responsible

16 EuVECA Regulation Came into force on 22 July 2013 in conjunction with AIFMD Cannot qualify as a EuVECA Manager if assets over 500m threshold If just managing qualifying EuVECA funds then will be a small registered UK AIFM If managing other funds as well, may also be a small authorised UK AIFM FCA have published this application for entry on register of EuVECA managers Is a voluntary regime but can only use the marketing passport if conditions met and entered on the register

17 Hot topics Ed Kingsbury, WHEB Group Amy Veitch, Macquarie Barry Lawson, The Private Equity Consultancy James Dawes, LGV Capital

18 Market conduct and market abuse FCA Financial Crime Guide April 2013 What is it? Actions: LIBOR ICAP fine RBS Transaction reports 5.6m Goenka Recent FCA arrests

19 Anti-financial crime (1) Six key components Key area for the FCA Review of banks AML systems (2010/11 and 2013) Review of platforms and asset managers (TR13/9, Oct. 2013) Resources FCA Financial Crime Guide, Newsletter, JMLSG

20 Anti-financial crime (2) Level of CDD simplified, standard, enhanced Who investors, investments and counterparties Lessons learnt Use of commercial intelligence firms high risk persons Proposed changes to JMLSG Guidance Anti-bribery and corruption

21 Promoting UCIS FCA concern PS13/3 That they (still) aren t being properly promoted So why should I worry? Do you have individuals in your funds? Have you confirmed that they can be marketed to? Have you upgraded them from Retail to Elective Professional? FCA action

22 Crowd funding Consultation paper CP 13/13 Equity and Loan based portals Equity: Existing promotion regime applies Service providers are Arranging Challenge of the internet Loan: Service providers shortly to be regulated as part of FCA s expanded consumer credit / lending role

23 Warning notices New power to publish a notice saying that you are being investigated Will publish a notice saying that the investigation has been dropped But will leave the notices on their website

24 Checklist of things to do tomorrow Download: Financial Crime: A Guide for Firms Anti-money Laundering and Anti-Bribery Systems and Controls TR13/9 Financial Crime Newsletter make sure you subscribe Do you tell senior management enough and often enough about financial crime? NCA change references in Compliance Manual Quoted shares check reporting procedures Individual investors proper forms? Read & Action them!

25 Supported by Ipes since 2009 Exhibitors