AIFMD Comes Into Force in the UK
On July 22, the UK law implementing the Alternative Investment Fund Managers Directive (AIFMD) came into force. The scope of the AIFMD is broad (with a few exceptions), creating a tighter regulatory framework for alternative investment fund managers (AIFMs), including managers of investment trusts, hedge funds and private equity firms.
On July 23, the Financial Conduct Authority (FCA) published a new webpage to record permissions and passports granted under the AIFMD. The FCA is updating the Financial Services Register to make the necessary changes, and in the meantime, the FCA will publish the details of firms who have been granted the new AIFMD permissions and any associated management passports. Webpage.
The FCA Fines RBS £5.6 Million for Serious Transaction Reporting Failings
On July 24, the FCA published the final notice that it issued to The Royal Bank of Scotland plc and The Royal Bank of Scotland N.V. (together, RBS) on July 16. Many of the problems at RBS detailed in the Notice arose as a result of significant system challenges posed by the takeover of ABN Amro Bank N.V. by The Royal Bank of Scotland plc.
RBS agreed to settle with the FCA at an early stage in their investigation and so qualified for a 30% reduction in the financial penalty imposed on them, from £8,029,100 to £5,620,300. The FCA found that:
Between November 5, 2007 and February 1, 2013 (the Relevant Period), RBS failed to accurately report approximately 44.8 million transactions; and
Between November 5, 2007 and February 1, 2012, RBS failed entirely to report approximately 804,000 transactions that it executed.
This represents a failure in relation to 37% of transactions reportable by RBS during the Relevant Period. The FCA regarded these failures by RBS to be particularly serious because (i) the FCA has provided significant guidance to firms on how to report and check those reports; and (ii) during the Relevant Period the FCA published a number of enforcement actions taken in relation to similar failings by other firms. Final Notice. Press Release.
European Commission Updates MiFID Q&A Website
On July 22, the European Commission answered the question on whether a rolling spot Foreign Exchange on margin takes the form of a derivative contract or a contract for difference to be considered a financial instrument under the Markets in Financial Instruments Directive (MiFID).
The European Commission confirmed in its answer that a rolling spot FX contract can be indefinitely renewed, and no currency is actually delivered until a party affirmatively closes out its position, which exposes both parties to fluctuations in the underlying currencies. Hence, rolling spot foreign exchange contracts are a type of derivative contract relating to currencies and are considered financial instruments as defined under MiFID. Answer.
FCA and SEC Publish a MoU on Investment Fund Supervision
The FCA and the SEC published a memorandum of understanding (MoU) on July 19 on the supervision of the asset management industry, which came into force on July 22.
The accompanying press release states that the MoUs were concluded with 25 European Union (EU) and 3 European Economic Area (EEA) member-state regulators. They provide a framework for supervisory cooperation and exchange of information between the SEC and the EU/EEA member state national regulators in the asset management industry, as part of a long-term strategy to improve the oversight of entities in the industry that operate across national borders.
In May 2013, the European Securities and Markets Authority (ESMA) announced that it had approved cooperation agreements between EU regulators with responsibility for supervising Alternative Investment Funds (AIFs) and 34 of their global counterparts, including the SEC. These agreements are key in allowing the national regulators to monitor the way non-EU AIFMs comply with the AIFMD. Memorandum of Understanding. Press Release.