European and Regulatory Development and Prospects Seminar

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Arline Banks
5 years ago
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an and Regulatory Development and Prospects an Fund Manager Perspective TISA an and Regulatory Development and Prospects Dan Hedley Head of an

1 an and Regulatory Development and Prospects an Fund Manager Perspective TISA an and Regulatory Development and Prospects Dan Hedley Head of an Regulatory Policy Contents The fund management industry Lorem ipsum dolor sit amet, consectetur adipiscing elit. 3 UK 78

2 an and Regulatory Development and Prospects The Fund Management Industry The plan Commission should open fund markets Tilman Lueder to Index Universe June 03 Rationale Quid pro quo: should open market to Asian + Latin American products to ensure reciprocal openness of overseas markets to an UCITS. Distribution to more important that investment in overseas markets. Surprise this has not been raised before. Failure of US mutual recognition Sale of UCITS in international markets far exceeds sale of US 40 Act funds Emerging Asian mutual recognition ASEAN passport PRC / HK mutual recognition: Barnier to intervene on behalf of UCITS at end of June Execution ASEAN passport to replicate UCITS UCITS to stabilise: ESMA strengthened as single regulator. Pace of legislative change to slow down (post June 04). MMF legislation to act as model of more flexible legislation. UCITS acknowledged as stable from 985 (I) 00 (III): but no complex / non-complex divide 79 The Fund Management Industry The plan HMT The UK Investment Management Strategy March 03 Rationale Whilst the UK remains s leading centre for fund management, our share of fund domicile has fallen in the last decade. d We must act now to rebuild our share of this global l business, to take advantage of growth opportunities in Asia and to respond to changes in an regulation. Regulation: we will ensure a regulatory environment that applies high internationally consistent regulatory standards and that remains responsive. Fund authorisation: application process + streamlined forms FCA improved regulatory atmosphere HMT engagement with industry: Limited Partnership Act (907) + minimising costs / maximising benefits HMT engagement with : Banking Union + AIFMD Marketing: we will work closely with key industry bodies to carry a co-ordinated marketing approach to all corners of the globe. Financial Services Trade and Investment Board (FSTIB): City UK + UK Trade and Investment (UKTI): better marketing material distributed in >00 international markets BRIC, Gulf Cooperation Council (GCC) countries + Turkey 80

3 an and Regulatory Development and Prospects The Fund Management Industry The plan FCA Regulation as a spur to growth Martin Wheatley to IMA June 03 Rationale [H]igh standards help explain why this industry remains one of the most successful in the UK But the truth is that these are difficult times. Much of the trust in financial services more broadly has been damaged in the last few years. Successive scandals, a seeming detachment from the society it serves pay levels that the average citizen cannot understand And that is why you have a new regulator the Financial Conduct Authority (FCA) to help with that process of repair. Markets working well not looking for markets where consumers never lose money / where firms never make money.new philosophy: forward-looking + judgment-based regulation. Follow the money + intervene Cooperation [P]roductive, predictable and transparent relationship between FCA + Industry. More intermediation from IMA + other associations Competition Competitive markets: lower costs, keener prices, greater choice + innovative products but require rational consumers. Behavioural economics can firms help consumers make rational decisions: disclosure, promotion Client Focus Conflicts of interest. IMA Enhanced disclosure of fund charges and costs 8 The fund management industry Lorem ipsum dolor sit amet, consectetur adipiscing elit. 3 UK 8 3

4 an and Regulatory Development and Prospects Commission UCITS 5 Depositaries: enhanced liability without option for contractual discharge. Costs/ Sanctions: FCA already compliant with proposed minimum Remuneration: to cap or not to cap that is the question. Performance fees. Commission UCITS 6 Eligible assets + FDIs: not commodities Efficient Portfolio Management (EPM): what is EPM? + collateral management Depositary Passport MMFs now proposed MMF Regulation + Shadow Banking Long-term investments now Long-term investment Green Paper 83 ESMA UCITS Guidelines ETFs and other UCITS Issues UCITS ETFs: nomenclature + direct redemptions when ndry markets illiquid EPM: investor disclosure Securities lending: recallability + 00% securities lending income net of operating costs. FDI: collateral management Indices: investor disclosure + eligibility criteria Repo + reverse repo: partial recallability + counterparty management Trash Bucket : 0% trash bucket investment must be in CIS with Art. 50()(e) protections i.e. no unregulated hedge funds. Commission MMF Regulation 3% segregated NAV buffer for CNAV MMFs but convergence with US prime CNAV / sub-prime VNAV taxonomy? 84 4

5 an and Regulatory Development and Prospects Commission AIFMD UCITS synergy: some NCA interpretation may deny AIF manco passportability. Out of synch with UCITS 4 + will prevent operation of a single central UCITS-AIF management company Delegation: letterbox entity provisions down to NCA interpretation Depositary: likely costs for enhanced liability + cashflow monitoring beginning to come in ESMA AIFMD Guidelines Remuneration: Proportionality: size + complexity of structure / activities down to NCA interpretation. Pay-out: non-cash instruments? Scope: implications for delegate portfolio managers (MiFID firms) Regulatory Reporting to NCAs: still problematic: definitions (NAV, AuM, VaR) + operation EuVCF EuSEF Commission Long-term investing Taxonomy: long-term asset matching ; long-term investment needs; long-term finance needs? 85 The fund management industry Lorem ipsum dolor sit amet, consectetur adipiscing elit. 3 UK 86 5

6 an and Regulatory Development and Prospects UK FCA Priorities for fund management industry Product design / charging structures Financial incentive sales schemes + RDR implementation esp. retail investment advice market Conflicts of interest regarding use of client commissions: CSA, corporate access + hospitality Culture of wholesale market relationships Use of technology: both retail (e.g. comparison websites, supermarkets) and wholesale (e.g. HFT + algorithmic trading) Funds: Liquidity in bond funds + absolute return funds that under deliver perceived "promises" Outsourcing of fund administration Embedding and evidencing a client focused culture. Appropriate Agency Kay Review of UK Equity Markets and Long-Term Decision Making + Law Commission study into the fiduciary duties of investment intermediaries: fund managers, pension trustees, advisers. 87 6

AIFMD. Fundamental considerations to be addressed at a strategic level for marketing in the EU:

AIFMD. Fundamental considerations to be addressed at a strategic level for marketing in the EU: AIFMD Are you ready? The Alternative Investment Fund Managers Directive ( AIFMD or the Directive ) came into force on July 22, 2013 with certain activities or requirements being governed by transitional