CBI consultation paper on treatment, correction and redress of errors in investment funds
On 9 September 2019, the Central Bank of Ireland (CBI) released consultation paper CP130 on the treatment, correction and redress of errors in investment funds. The publication forms the long-awaited regulatory framework that aims to set– out rules and guidance on errors in investment funds. Directly affected by the new framework are fund Undertakings for Collective Investment in Transferable Securities (UCITS) management companies;, authorised Alternative Investment Fund Managers (AIFMs); including AIFMs appointed to non-Irish authorised funds; self-managed UCITS investments companies; and internally managed Alternative Investment Funds. The key message in the framework is that once an error has occurred it must be rectified appropriately. This involves identifying and classifying the error, correcting in-line with compliance and notification obligations, and redressing the error with appropriate payments to investors. The consultation paper goes on to discuss the different types of errors and the appropriate means to treat these. Responses are welcomed up until 9 December 2019.
Culture complexities: SM&CR on the ground so far?
UK Finance recently published a report on the evolution of the Senior Managers & Certification Regime (SM&CR) in the banking sector. The report seeks to identify what changes have occurred as a result of the regime after speaking with 25 institutions and contains useful information for firms about to become regulated under the extended SM&CR regime.
Some highlights from the report:
- SM&CR has resulted in “positive“, and “meaningful” changes in culture and “for the better“.
- 27% of institutions feel their firm’s culture remained unchanged (they generally felt that the principles were already embedded in their firm).
- Some, however, view SM&CR as “the dawn of a new culture“.
- Change had occurred for one respondent around documenting decisions.
- Some respondents consider that the changes have created too much complexity and “engendered a focus on recording decisions and actions, rather than looking at culture more holistically“.
One of the recommendations made by the report is to create guidance on what amounts to reasonable steps when fulfilling your duty of responsibility. It is possible that some collective work may be done by industry in future.
SM&CR: updated webpages
On 11 September 2019, the Financial Conduct Authority (FCA) updated its checklists webpage to include additional information relating to the form firms must submit to convert an approved person (CF2) over to a Senior Management Functions (SMF) function SMF9 (Form K). This must be submitted before midnight on 24 November 2019. Most firms will have their Approved Persons Regime converted automatically, but some cCore fFirms and Enhanced Firms will need to complete the Form K notification. Full guidance can be found in the FCA press release.
Updated industry guidance: electronic signatures
On 12 September 2019, the Investment Association published an update on its guidance on electronic signatures and changed the title to “Reasonable steps to ensure the authenticity of electronic instructions”. The FCA has confirmed the new version of this industry guidance on its webpage.
Council of EU agrees position on proposed regulation on sustainable investment framework
On 25 September 2019, the Council of the EU announced that it has now agreed its position on the proposed Taxonomy Regulation to create a unified EU classification system, as part of the strategy and framework which aims to facilitate sustainable investment. The Council has indicated that the taxonomy should be established by the end of 2021, with full application being implemented by the end of 2022.
ESMA press release: high impact of costs on performance
On 27 September 2019, the European Securities and Markets Authority (ESMA) issued a press release on the high impact of costs on performance, especially for active equity funds. The article provides an overview of the EU equity UCITS market, analyses the performance of equity UCITS (both actively and passively managed) and compares fund performance against the benchmark.
If you would like to discuss any of these developments, please get in touch with one of the experts listed below.