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Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.


Claire Cummings

020 7585 1406

Draft Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018 laid before Parliament

On 29 November 2018, a draft version of the Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018, together with an explanatory memorandum, was published on The purpose of the Regulations is to address deficiencies in domestic and retained EU law and ensure that the regulatory framework established under the AIFMD for investment funds and their managers concerning the management, administration and marketing of AIFs continues to operate effectively after Brexit.

The Regulations contain amendments to the Alternative Investment Fund Managers Regulations 2013 (SI 2013/1773) and the Alternative Investment Fund Managers (Amendment) Regulations 2013 (SI 2013/1797). They also amend the retained versions of:

  • Commission Delegated Regulation (EU) 231/2013 supplementing the AIFMD with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision, as well as other delegated and implementing regulations under the AIFMD.

  • Commission Implementing Regulation (EU) 447/2013 establishing the procedure for AIFMs that choose to opt in under the AIFMD.

  • The Regulations revoke Commission Delegated Regulation (EU) 2015/514 on the information to be provided by competent authorities to ESMA under Article 67(3) of the AIFMD.

The Regulations come into force on exit day.


Council of the EU conclusions on AML action plan

On 4 December 2018, the Council of the EU published a document setting out its conclusions on an AML action plan. This follows the Council publishing a press release announcing that it has adopted the AML action plan. Among other things, the Council:

  • Urges all member states to swiftly complete the implementation of the Fourth Money Laundering Directive.

  • Invites member states to transpose the Fifth Money Laundering Directive ahead of the 2020 deadline.

  • Underlines the importance of achieving rapid progress on further strengthening the EU legislative AML framework, in particular with regard to financial services.

  • Invites the European Commission to propose, as necessary, longer-term actions to bring about further improvements in the prudential and AML frameworks identified on the basis of a thorough assessment, in consultation with member states.

  • Invites the Commission to report back every six months on the progress made in the implementation of the action plan, starting in June 2019.


ECON votes to adopt draft reports on proposed Regulation and Directive on cross-border distribution of collective investment funds

On 4 December 2018, ECON published a press release announcing that it has voted to adopt draft reports on the European Commission's legislative proposals for a Regulation and a Directive on the cross-border distribution of collective investment funds. In the press release, ECON highlights changes that it proposes to make to the Commission's proposal, including:

  • Marketing communications targeted at small investors in funds should present a detailed account of risks, summary of investors’ rights and information about national collective redress mechanisms in case of litigation. ESMA should produce guidelines on marketing communications.

  • If a fund makes an offer to repurchase all its UCITS units held by investors in a member state, following a decision to cease activities in that state, it should inform investors of the consequences if they choose to continue to hold the units.

  • The exemption for UCITS concerning obligations under the PRIIPs Regulation relating to KIDs should be prolonged for a further two years.

The proposed Regulation sets out a harmonised framework concerning certain aspects of the cross-border distribution of funds, such as marketing communications and member states' marketing requirements. The proposed Directive contains amendments to the UCITS Directive and the AIFMD relating to, among other things, pre-marketing and the discontinuation of marketing.


ICE Benchmark Administration launches survey on the use of LIBOR

On 4 December 2018, ICE Benchmark Administration Limited (IBA) launched a survey to identify the London Interbank Offered Rate (LIBOR) settings that are most widely used. The IBA intends to use the results of the survey to inform its work in seeking the support of globally active banks for the publication of certain LIBOR settings after year-end 2021, with the aim of providing those LIBOR settings to users with outstanding LIBOR-linked contracts that are impossible or impractical to modify. Any such settings would need to be compliant with relevant regulations, in particular those regarding representativeness. The IBA states that work on the possible continued publication of certain LIBOR settings is not intended as an alternative to the transition to risk-free reference rates for new business.

The survey is open to all users of LIBOR until 15 February 2019.


Banking industry to fund new ADR scheme for larger SMEs

On 30 November 2018, UK Finance published its response to a report following an independent review of the complaints and resolution landscape for UK SMEs. In the response, it states that seven UK banks (Barclays, CYBG, Danske Bank, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander) have agreed a series of proposals to deliver stronger and fairer outcomes for SME customers. These relate to:

  • Supporting the proposed extension of the Financial Ombudsman Service (FOS) to provide more SMEs with access to a simple and independent complaints review and redress mechanism.

  • Providing a voluntary ombudsman scheme offering support to larger SMEs that are not eligible to complain to the FOS, or captured under the extended scope of the FOS coming in to effect in April 2019. This will apply to SMEs with a turnover between £6.5 million and £10 million, and a balance sheet up to £7.5 million.

  • Backing a historic review of unresolved SME complaint cases. This will cover disputes involving SMEs that have arisen since 2008 and have not already been addressed by an independent review process.

  • Establishing an independent SME advisory council. The aim of the council will be to consider emerging trends and issues regarding access to finance and the treatment of SME customers by financial services providers. It will also provide appropriate support to SMEs to ensure that there is an ongoing dialogue to address potential challenges early and effectively.

To deliver the new voluntary arrangements, the industry will establish an independent implementation steering group. The industry aims to implement the voluntary ombudsman arrangements by September 2019.


Council of EU agrees position on proposed Regulation amending EMIR supervisory regime for EU and third-country CCPs

On 3 December 2018, the Council of the EU published a press release announcing that it has agreed its position relating to the proposed Regulation amending EMIR as regards the procedures and authorities involved for the authorisation of central counterparties (CCPs) and requirements for the recognition of third-country CCPs.
Among other things, the proposed Regulation introduces a mechanism within ESMA to bring together expertise in the field of CCP supervision, and ensure closer co-operation between supervisory authorities and central banks responsible for EU currency. It also strengthens the existing system for recognising and supervising third-country clearing houses. In particular, it introduces a two-tier system differentiating between non-systemically important CCPs and systemically important CCPs (tier 2 CCPs). Tier 2 CCPs would be subject to stricter rules in order for them to be recognised and authorised to operate in the EU. There are currently 16 CCPs established and authorised in the EU. An additional 32 third-country CCPs have been recognised under EMIR's equivalence provisions. Following Brexit, the three CCPs based in the UK will become third-country CCPs. The press release states that the Council and the Parliament are now able to begin trilogue negotiations.


Prospectus Regulation: draft Commission delegated regulation on the format, content, scrutiny and approval of prospectuses

On 28 November the Commission published the draft text of its delegated regulation supplementing the new Prospectus Regulation. The draft regulation will repeal and replace the Prospectus Regulation and determine the content and format of prospectuses, as well as their scrutiny and approval. Among other things, it makes provision for:

  • The minimum information to be included in the registration documents and the securities note, and additional information to be included in the prospectus.

  • The format of a prospectus and of a base prospectus, and the use of a prospectus summary.

  • The content of the specific summary for the EU Growth prospectus, the content of the EU Growth registration document, the content of the EU Growth securities note, and the format of the EU Growth prospectus.

  • Criteria for the scrutiny of the prospectus, the proportionate approach in the scrutiny of draft prospectuses and review of the universal registration document, approval of the prospectus, approval and filing of the universal registration document, and changes to a draft prospectus during the approval procedure.

The regulation will enter into force on the twentieth day following that of its publication in the Official Journal. It will apply from 21 July 2019, which is the date on which most of the provisions of the new Prospectus Regulation come into effect. This date falls after Brexit, meaning that it will not be converted into UK law pursuant to the EU Withdrawal Act. It will be necessary for the government to domesticate the provisions of the regulation into UK law if they are to apply in the UK.

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19 06 2019

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