Q&As and FAQs Updated by the Basel Committee, the FCA, the European Commission and the European Banking Authority

On October 7, the Basel Committee on Banking Supervision issued frequently asked questions on the Basel III leverage ratio framework.

On October 6, the Financial Conduct Authority (FCA) published a Q&A paper for alternative investment fund managers (AIFM) on reporting transparency information to the FCA.

On October 3, the European Commission published a frequently asked questions paper on the Regulation on improving securities settlement and regulating central securities depositories (CSDR).

On October 3, the European Banking Authority updated its Q&As on the single rulebook, publishing 16 new answers to questions largely relating to supervisory reporting and credit risk. Basel FAQs. FCA Q&As. European Commission FAQs. EBA Q&As.

Amendments to Offshore Fund Rules to Reflect Finance Act 2014 AIFM Partnership Tax Changes

Regulations amending the Offshore Funds Regulations 2009 (the 2009 Regulations) to reflect the Finance Act 2014 changes to the taxation of alternative investment fund managers operating as partnerships (AIFM firms) were made on July 21 and have effect for disposals made on or after August 12, 2014.  The changes to the taxation of AIFM firms permit AIFM firms to elect for all or part of a partner’s “relevant restricted profit” to be allocated to the AIFM firm rather than from part of the partner’s profit share.  Accordingly, the partner is not subject to tax on the profit. Instead, the AIFM is treated as a partner in the AIFM firm and is subject to income tax at the additional rate (currently 45 percent) on the allocated amount.  The partner is subsequently subject to tax on the amount that vests, but will receive a tax credit for the tax paid by the AIFM firm.  Regulations.

FCA Publishes Statement on Reporting Requirements of AIFMs

On November 4, the FCA published a statement on reporting requirements for managers of AIFs (AIFMs) under the AIFMD.

In certain circumstances, firms already authorized as AIFMs will be required to provide regulatory reports to the FCA in the first quarter of 2014, using the XML v1.0 reporting template, which was published by ESMA in October 2013.

Further details on the reporting mechanism are due to be published on the FCA website in due course.  Statement.

ESA Issues ESMA and EBA Consultation for Securities and Banking Complaints Handling

On November 6, the Joint Committee of the European Supervisory Authorities (ESAs) issued a consultation paper by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) concerning draft guidance for the handling of complaints in the securities and banking industries. This guidance aims to:

  • clarify expectations on firms’ procedures for complaints handling;
  • give guidance on the provision of information to complainants and the procedures for answering complaints;
  • harmonize the complaint handling arrangements of firms in order to help protect consumers; and
  • set a minimum level of supervision for firms’ complaint handling arrangements on an EU-wide basis.

The guidance applies to investment firms, UCITS management companies and UCITS investment companies that have not designated a management company, AIFMs providing MiFID services, credit institutions and e-money institutions.

The deadline for responses to the consultation is February 7, 2014, with the final report scheduled to be published in the first quarter of 2014.  Consultation Paper.

Publication of Final Alternative Investment Fund Managers Directive

On July 1, the Official Journal of the European Union published the final agreed text of the Alternative Investment Fund Managers Directive (AIFM Directive). The AIFM Directive creates a framework for subsequent rulemaking measures, which will be proposed by ESMA no later than November 16 and published in early 2012. The AIFM Directive will be effective on July 22 and EU member states will be required to transpose the AIFM Directive and such subsequent rulemaking provisions into national law by July 22, 2013. AIFM Directive.

Council of the European Union Adopts Rules for AIFM

On May 27, the Council of the European Union adopted a directive to establish common requirements for the authorization and supervision of alternative investment fund managers (AIFM) and provide a coherent approach to risk management and the impact thereof on investors and markets in the European Union (EU). Key features of the directive include: (i) minimum capital requirements; (ii) requiring an AIFM to appoint independent depositories to ensure that a fund’s assets are appropriately protected; (iii) authorizing member states to establish leverage limits and requiring AIFM using leverage on a systematic basis to disclose aggregate leverage to their member state regulatory authority; (iv) authorization requirements for non-EU funds, managed by either EU AIFM or AIFM based outside of the EU; and (v) authorizing member states to exempt AIFM from compliance with the directive, though not from minimum registration and reporting requirements, if they have managed assets below €100 million, if they use leverage, or below €500 million, if they do not. Publication in the Official Journal is expected in mid-June. Council Press Release.