February 2014

The European Securities and Markets Authority (ESMA) has published a letter from Steven Maijoor, ESMA Chair, to Michel Barnier, European Commissioner for Internal Market and Services.

The letter is in respect of the definition of derivative or derivative contract in the European Markets Infrastructure Regulation (EMIR), which refers to the list of financial instruments in the Markets in Financial Instruments Directive (MiFID). It explains that different transpositions of MiFID across Member States mean that there is no single, commonly adopted definition of derivative or derivative contract in the EU which prevents the convergent application of EMIR. The letter states that this is particularly true in the case of foreign exchange forwards and physically settled commodity forwards.

In October 2005, the Committee of European Securities Regulators (CESR), the predecessor body to the European Securities and Markets Authority (ESMA), published a Recommendation on alternative performance measures (the CESR Recommendation). The purpose of the CESR Recommendation was mainly to reinforce the objectives of the Regulation on the application of international accounting standards.

The Wolfsberg Group (the Group) consists of eleven leading financial institutions and has published a revised version of its anti-money laundering and counter-terrorist financing (AML/CTF) principles for foreign correspondent banking relationships. The principles do not address the risks associated with domestic correspondent relationships.

The Group has also published frequently asked questions on foreign correspondent banking and a questionnaire on firms’ AML/CTF policies, practices and procedures. The questionnaire is intended to act as an aid to firms conducting due diligence and should not be relied on exclusively or excessively.

The FCA has updated its web page on the Alternative Investment Fund Managers Directive (AIFMD) which includes a section on the calculation of additional own funds.

The FCA is currently considering its interpretation of the definition of ‘funds under management’ for the purposes of article 9(3) of the AIFMD due to questions raised from a…

Thematic review
In light of recent press interest and the current concern of an increasing aging population, annuities, which are a financial product that convert pension savings into a fixed income that is paid annually in retirement, have been given much more attention.

As a result, the FCA has published Thematic Review 14/2: Thematic Review of Annuities (TR14/2) which sets out the findings of its thematic review into annuities. The data the FCA analysed in the review covered approximately 330,000 annuity sales in 2012. This represents around 78% of all annuity sales.

The Financial Stability Board (FSB) has announced that it is incorporating an assessment of foreign exchange (FX) rate benchmarks into its on-going programme of financial benchmark analysis. To take this new work stream forward, the FSB has established a new sub-group on FX benchmarks which will be chaired by Guy Debelle (Assistant Governor, Financial Markets,…

The FCA has published a new web page announcing a modification by consent of the meaning of ‘funds under management’ in Chapter 11 of the Interim Prudential sourcebook for investment business (IPRU(INV) 11). The modification changes the meaning of ‘funds under management’ so that firms whose assets under management include derivative instruments can value those…

The FCA has published new web pages announcing modifications of consent relating to the following:

  • 1A.1.1R(3) in the Client Assets sourcebook (CASS), which relates to CASS medium and CASS large firms that have cancelled their authority to hold client money and their permission for safeguarding and administering investments (without arranging);
  • 5.6.22R in the Collective Investment

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The Investment Management Association (IMA) has published a report on the use of dealing commission for the purchase of investment research.

The report reviews the current market for the purchase of externally sourced equity research by investment managers in the UK, with a particular focus on what type of arrangement benefits clients most. It sets out a structured approach for assessing the governance of research procurement. It also proposes opportunities to improve procurement processes and increase transparency to clients.