Investment Funds Update - Europe: Legal and regulatory updates for the funds industry from the key asset management centres and primary European fund domiciles: UK

by Dechert LLP

AIFMD: FCA Consults on Rule Changes

The FCA published a quarterly consultation paper (CP15/8), which includes proposed changes to its Handbook to:

  • add new guidance on the AIFM valuation function, including guidance that:
    • calculation and disclosure of NAV does not form part of the valuation function, and
    • the person undertaking the valuation function may obtain assistance from other persons in coming to its final valuation and, in certain circumstances, may accept the advice from individuals undertaking portfolio management for an AIF on the value of individual assets; and
  • make non-EEA AIFMs with AIFs qualified for marketing in the UK under AIFMD Art. 42 and small registered UK AIFMs, which fail to submit their AIFMD Annex IV reports to the FCA on time subject to the same administrative fee of £250 that applies to full-scope UK AIFs and small authorised UK AIFMs.

The deadline for responses to CP15/8 is 5 May 2015. 

Read FCA Quarterly Consultation - March 2015

MiFID II - FCA Updates Implementation Timetable

The FCA has updated the timetable setting out their plans for making the necessary changes to UK legislation and the FCA and PRA Handbooks.

The current timetable is as follows:

  • March 2015: Publication of FCA Discussion Paper (DP) on issues where they have discretion in implementation.
  • July 2015: Publication of delegated acts by the European Commission (EC).
  • December 2015: Publication of FCA Consultation Paper (CP) re the technical implementation of MiFID into the handbook.
  • June 2016: Deadline for final implementation of MiFID by FCA.
  • 3 January 2017: MiFID II and MiFIR come into force.

Investment Companies: Updated Corporate Governance Code

The Association of Investment Companies (AIC) has published updated versions of its Code of Corporate Governance (AIC Code) and its Corporate Governance Guide for Investment Companies (AIC Guide).

The majority of changes to the AIC Code have been made to reflect recent changes to the UK Corporate Governance Code of the Financial Reporting Council (FRC), which applies to accounting periods beginning on or after 1 October 2014. All companies with a Premium Listing of equity shares in the UK are required to comply with the UK Corporate Governance Code.

The AIC’s updates ensure that the FRC can continue to endorse the AIC Code as an alternative means for AIC members to meet their obligations in relation to the UK Code and the Listing Rules.

Read The AIC Code of Corporate Governance - February 2015

Read Corporate Governance Guide for Investment Companies - February 2015

Tax: HMRC Publishes Filing Dates for New AIFM Mechanism for Partnership Deferred Remuneration Arrangements

The Finance Act 2014 introduced a provision intended to help partnerships (including LLPs) that are AIFM businesses (including those acting as a delegate of an AIFM) to comply with deferred remuneration arrangements - whether these are imposed under the AIFMD, under other regulatory regimes or adopted voluntarily – by enabling such arrangements to be operated net of tax and national insurance contributions. Where a partnership has elected to apply the AIFM mechanism, a partner may allocate to the partnership itself for tax purposes all or part of his or her share of the partnership’s taxable profits which is subject to a deferral requirement or which has to be received and retained in the form of fund equities (restricted profits). The consequence of the allocation is that payment of income tax (charged at the additional rate) on the restricted profits allocated to the partnership becomes the responsibility of the partnership rather than the partner; and the restricted profits are treated as part of the partner’s taxable income, with a corresponding tax credit, in the tax year when they vest in accordance with the deferred remuneration arrangements. Adoption of the AIFM mechanism thus enables such deferred remuneration arrangements to be operated net of tax and national insurance contributions.

Partnerships carrying on an AIFM business in the UK must make any election to adopt the AIFM mechanism in a prescribed form within six months after the end of the first accounting period for which it is to apply. Where a partner chooses to allocate restricted profits to the partnership, this allocation must be included by the partnership in its own tax return and annual statement in the prescribed form, which, as these are available only in paper format, must be filed by 31 October (rather than 31 January) following the end of the tax year. HMRC has published forms and guidance.

Download a copy of the legislation and guidance on the new AIFMD mechanism

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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