Regulatory update

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This regulatory update covers major new regulatory requirements
and substantial developments that affect the investment management industry.

CONSULTATION ON GREATER REGULATION FOR UCITS DEPOSITARIES

The Directorate General Internal Market and Services (DGIMS) issued a consultation paper on extending to private investors, existing proposed regulation of professional investor depositaries.

In April 2009, the European Commission proposed a Directive on Alternative Investment Funds Managers (AIFM), which was aimed at organising a regulatory regime for investment products that are mainly aimed at professional investors. Part of these proposals was that an alternative fund should appoint a depositary to safe-keep its assets. In light of the Lehman collapse and the Madoff fraud, the DGIMS has issued a consultation questionnaire with a view to stipulating similar depositary protections to investors in UCITS compliant investment products.

Although the consultation period closed on 15 September those wishing to learn more about the proposals can find details at: http://ec.europa.eu/internal_market/consultations/2009/ucits_depositary_function_en.htm

KEY DECISIONS ON GIPS

On 19 October, the executive committee (EC) that governs the Global Investment Performance Standards (GIPS) released a list of its key decisions.

Although the final version of the revised standards is not due to be published until the end of the year, the EC expects that they are unlikely to be changed. They cover areas such as fair value, risk, standard deviation, non-fee-paying portfolios, proprietary assets, error correction, taxation issues, compliance statements and verification status. Readers may learn more about the EC’s decisions at: www.gipsstandards.org/news/releases/2009/singapore_summary.html

SOLVENCY II IMPLEMENTATION MEASURES

CEIOPS – the Committee of European Insurance and Occupational Pensions Supervisors has reported that it received over 20,000 comments from 105 stakeholders in the context of Solvency II consultations. It is currently examining these submissions and will put forward a third set of draft advice to its members by the end of October. Consultation on this advice will then remain open until 11 December 2009. See: www.ceiops.eu//content/blogsection/9/1/5/5/

BASEL II – ENHANCEMENTS TO FRAMEWORK

The Basel Committee on Banking Supervision announced in July that it had finalised its proposals for enhancing the Basel II framework. It is strengthening the ‘Pillar 1’ minimum capital requirements for certain securitisations. It has addressed some weaknesses in the ‘Pillar II’ supervisory review process that came to light in the course of the financial turmoil since 2007. ‘Pillar 3’ market discipline requirements have been strengthened in certain areas. The Committee expected banks and their supervisors to begin implementing the Pillar 2 guidance immediately and that in respect of Pillars 1 and 3 no later than 31 December 2010. For details of these proposals see: www.bis.org/publ/bcbs157.htm