Asset Management Regulatory Roundup - July 2017 - Issue 1

by Dechert LLP

Dechert LLP

A compact summary of the most recent regulatory developments relevant to the UK asset management industry. In this issue we look at the extension of the PSC regime to Scottish limited partnerships and AIM listed companies, the findings of the FCA's asset management study, the new EU Prospectus Regulation, MiFID II developments, ESMA's Q&As on PRIIPs and the newly published Money Market Funds Regulation.

The PSC regime will be extended to Scottish limited partnerships and AIM listed companies from 24 July 2017

The UK Persons with Significant Control (PSC) regime will be extended to AIM listed companies and Scottish eligible partnerships (as a result of the implementation of the Fourth Money Laundering Directive (MLD4) in the UK) from 24 July 2017. It should be noted that eligible Scottish partnerships include Scottish Limited Partnerships which are commonly used as carried interest vehicles in tiered UK limited partnerships.

Read Dechert’s OnPoint "AIM companies and Scottish partnerships to be brought within the scope of the PSC register regime".

Read the Regulations, Explanatory Memorandum and Impact Assessment. 

Read the Scottish Regulations. 

Read the draft statutory guidance on the meaning of significant control. 

Read the Investment Association transposition note. 

FCA’s asset management market study contains remedies including an “all-in fee”

The Financial Conduct Authority’s (FCA) final report in its asset management market study, confirms weak price competition in a number of areas. Other findings include lack of clarity around fund objectives and failure to use appropriate benchmarks. One of the proposed remedies is an “all-in fee” intended to help investors understand the total fees payable/deducted from the fund. It remains to be seen how this will fit in with the PRIIPs and MiFID cost disclosures which are much more detailed.

Read the FCA's related webpage.

Read Dechert's Newsflash: "FCA Publishes the Final Version of Its Asset Management Market Study".

The EU Prospectus Regulation has been published in the OJ

The new EU Prospectus Regulation has been published in the Official Journal of the European Union (OJ) and will apply from 21 July 2019 (other than certain exemptions from the prospectus requirement which will apply from 21 July 2017 and 22 July 2018 respectively). The changes are welcome as they are designed to simplify and improve the current EU prospectus regime. The main changes include:

  • a higher threshold for what constitutes a “public offer” (including where the offer has a total consideration in the EU that exceeds EUR 1 million calculated over a 12-month period);
  • issues of less than 20% of existing securities admitted to a regulated market in any 12-month period will not require a prospectus (the current limit is 10%);
  • the new prospectus summary will be based on the PRIIPs Regulation;
  • a simplified regime for secondary issuance;
  • a simpler “EU growth prospectus” for SMEs;
  • a simplified and streamlined frequent issuer regime; and
  • all EU prospectuses will be available on ESMA’s website.

Read the OJ here.

MiFID II developments

Recent MiFID II developments include the following:

  • FCA’s final policy statement on MiFID II has been published. It contains various important policy changes including that the MiFID best execution rules will not be extended to AIFMs. There are also improvements to the tests which will make it easier for local authorities to opt up to professional client status. Other changes include the extension of the scope of the inducements rule to collective portfolio managers and added flexibility around the research payment account; and amendments to the proposals on ‘taping’, ie, recording of phone and electronic communications.

Read the FCA's policy statement.

  • ESMA has published an opinion to help market participants assess whether their commodity derivatives activities can be considered as ancillary to their main business. Under the MiFID II Directive market participants are required to measure their own activity against total market sizes in commodity derivatives. Those market participants exceeding a certain market share are required to apply for authorisation as an investment firm. The aim of the opinion is to help market participants perform the ancillary activity test in MiFID II in the absence of publicly available data for commodity derivatives and emission allowances.

Read ESMA's opinion.

  • ESMA has also published an opinion on interim transparency calculations for liquid non-equity instruments and accompanying FAQs. The opinion sets out the outcomes of transitional transparency calculations based on data submitted by EU trading venues. Interim calculations for bonds will be published in August.

    Read the ESMA webpage on MiFID II transitional transparency calculation.


The European Banking Authority, ESMA and the European Insurance and Occupational Pensions Authority have published joint Q&As on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs).

PRIIPs include new and existing alternative investment funds (AIFs) (regardless of domicile and place of management) that are available to retail investors (as defined in MiFID II, notably this will include high net worth individuals and sophisticated individuals as well as local and public authorities) in the EEA, as well as UCITS. These investors must be provided with a short three-page KID in the required format pre-investment. The performance scenarios have been particularly challenging as it is necessary to indicate anticipated future performance in various scenarios.

The PRIIPs Regulation applies to AIFs from 1 January 2018 and to UCITS and Non UCITS retail schemes (NURS) with key investor information documents (KIID) from 31 December 2019.

Read the PRIIPs Q&As.

Money Market Funds Regulation published in the OJ

The text of the Regulation on money market funds (MMF Regulation) has been published in the OJ.

Money market funds (MMFs) are important short-term financing tools for financial institutions, corporates and governments and come in two main forms:

  1. MMFs with variable net asset value (VNAV); and
  2. MMFs with constant net asset value (CNAV) (CNAV can offer share purchases and redemptions at a fixed price).

The MMF Regulation will affect MMFs established, managed or marketed in the EU - both UCITS and AIFs - and imposes an extra layer of regulation on top of the UCITS directives and the AIFMD which is intended to make MMFs more robust. Aspects covered in the MMF Regulation include: liquidity and diversification requirements, permitted assets, transparency provisions.

The MMF Regulation will apply from 21 July 2018 - before this date various implementing regulations and technical standards will be developed.

Read the MMF Regulation.


A Softer Brexit Back on the Table - What Could This Mean for Asset Managers?

The result of the UK’s general election on 8 June has reignited speculation that the UK Government might pursue a softer Brexit. In this update, we provide a reminder of the main “softer” Brexit models which had previously been ruled out and how these might affect the asset management industry. 

Read "A Softer Brexit Back on the Table - What Could This Mean for Asset Managers?"


New Governance and Organisational Requirements Under MiFID II

MiFID II planning and implementation is a top priority for asset managers affected by European regulators and brings with it both challenges and opportunities. This fact sheet looks at the new governance and organisational requirements under MiFID II. 

Read the fact sheet: MiFID II: Governance and Organisation.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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