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IMS Asset Management and Securities Regulatory Update 2010 - Issue 1, February
Welcome to IMS Consulting Limited's first regulatory newsletter of 2010. IMS is the largest independent asset management and securities regulatory consultancy in the UK. Our newsletter summarises some of the more material recent regulatory changes, themes and debates for wholesale asset managers and securities firms, focussing on FSA related developments.
The start of 2010 has seen no shortage of significant regulatory developments. While there may be some uncertainty regarding the future shape of regulation post the UK general election, intensified by the FSA’s Chief Executive Hector Sants’ announcement that he will relinquish his position at the end of his current term, there is no sign that the FSA is taking its foot off the pedal.
Of significant interest to all firms are the FSA’s plans to expand the senior management responsibility and registration regime. This will see a widening of the range of individuals brought within the Significant Influence Function regime in Limited Liability Partnerships, and the creation of new, additional senior management controlled functions. In practical terms we are also aware of the FSA intervening more significantly than ever before in the senior management arrangements of regulated firms by requiring some individuals to undergo a re-approval process following poor showings during FSA visits. All of which continues to demonstrate that senior management responsibility is not just a well-worn phrase but is at the very heart of the FSA’s regulatory philosophy.
World-wide demand for increased regulation continues to create challenges for investment firms due to the plethora of (not always coordinated) initiatives. Within Europe, confusion continues to surround the Alternative Investment Fund Managers Directive, with the new Spanish Presidency releasing a further set of “compromise” proposals, and the European Commission reportedly having received over 2000 tabled amendments to the proposed Directive. Further afield, the USA continues to pursue its own agenda for reform, which includes the proposed registration of hedge fund and private equity managers, as well as nostalgic proposals for the future of the investment banking community.
In addition to the broad and far-reaching changes, the FSA is also demonstrating continuing and detailed focus in respect of key existing regulatory requirements. Within this newsletter we comment specifically on the FSA’s detailed observations on firms’ ICAAPs, and the shortfalls the FSA has seen, a recent focus on the distribution of asset management products, and seven cases relating to market abuse and other financial crimes.
If there are any certainties in this uncertain world, it is that compliance with ever-evolving regulatory expectations is becoming more complex and challenging, and that individuals are becoming more personally accountable for their actions than ever before.
If you have any questions regarding any of the articles below, please contact Peter Moore, Stephen Burke or Chris Rexworthy. Alternatively telephone 
020 7408 2448 to speak to your usual IMS contact.
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FSA to increase scrutiny of non-executives and introduce new structure for controlled functions The failure of certain notable firms during the financial crisis has prompted the FSA to re-focus attention upon key decision makers and to examine the quantity and balance of skills, knowledge and experience in the board room. |
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FSA publishes its observations on Limited Licence Firm’s ICAAPs The FSA recently published its observations on the Internal Capital Adequacy Assessment Process (ICAAP) submissions it has received from Limited Licence Investment Firms, such as asset managers and matched principal brokers. The paper provides the latest benchmark firms can use to evaluate the quality of their ICAAP documentation. |
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The FSA comments on regulatory trends and priorities for asset management firms The FSA’s Asset Management Sector Leader has commented on new product development, highlighting the “UCITS III bandwagon” and measure that firms need to take if they are to manage UCITS funds. |
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Hedge fund manager fined and banned for “mis-marking” The FSA has fined and banned a UK based hedge fund manager for mis-marking funds he managed and misleading the FSA during the subsequent investigation. |
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Regulatory sanctions and financial crime round-up Our regulatory sanctions and financial crime round-up seeks to highlight some of the more important recent industry wide developments. |
FSA concerns about firms’ handling of client money and assets
On 19th January 2010, the FSA sent a letter and report to the CEO’s of investment firms which are able to hold client money or assets, drawing attention to FSA’s concerns in this area.
