Investment Management Update

A round-up of recent legal and regulatory developments of interest to the investment management sector.

This issue includes:


Financial crime


AIFMD national private placement regime: FCA updates notification process

The Financial Conduct Authority (FCA) has updated its webpage with regards to the national private placement regime (NPPR) notification process under the Alternative Investment Fund Managers Directive (AIFMD). AIFMs marketing AIFs under:

  • regulation 57 of the Alternative Investment Fund Managers Regulation 2013 (AIFMR) (marketing AIFs managed by UK AIFMs);
  • regulation 58 AIFMR (marketing AIFs managed by small third-country AIFMs); and
  • regulation 59 AIFMR (marketing, without a passport, AIFs managed by non-EU AIFMs) 

will need to use the FCA’s online system, Connect, to submit marketing notifications and notifications of material changes going forward. Previously, such notifications were required to be emailed to the FCA.

Stylish regulation: BoE speech on post-Brexit regulation

The Bank of England (BoE) has published a speech by Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority, in relation to the post-Brexit regulatory landscape. In his speech, Mr Woods advocates that the future of financial regulation in a post-Brexit environment should be based on the six principles below:

  • robust prudential standards to ensure continuity in the supply of vital financial services to the real economy;
  • responsible openness based on international collaboration and standards given the government’s policy of maintaining the UK as a leading international financial centre;
  • proportionality and sensitivity to business models, and promoting competition to ensure that burdens on firms created by regulation are no greater than they need to be to achieve Parliament’s objectives;
  • dynamism and responsiveness where regulation should be future-facing and kept fit for purpose;
  • consistency in the approach of regulators to activities carried out by firms; and
  • accountability where regulators are held properly accountable, in particular to Parliament.

Mr Woods uses the Senior Manager & Certification Regime (SMCR) as an example of how the legislative style adopted to implementing the regime best fits the six principles. In contrast to a heavily rules-based EU model, Mr Woods notes that the approach to the SMCR contained significantly less detail in legislation giving more discretion to the regulators. Therefore, this approach is attractive for any future regulation in a post-Brexit landscape as it combined core aspects of primary legislation with a considerable discretion for the regulators to fill in the detail of the legislation.

The FCA also echoed a similar theme of principles and outcomes based regulation in a recent speech on the future of financial conduct regulation. See our update of 8 May 2019 for a discussion on this.

Financial crime

Delegated Regulation on measures to mitigate money laundering and terrorist financing risk under 4MLD

A Delegated Regulation (DR) supplementing the Fourth Money Laundering Directive (4MLD) has been published. The DR is in relation to regulatory technical standards for the minimum action and the type of additional measures credit and financial institutions must take to mitigate money laundering and terrorist financing risk in certain third countries. Article 45 of the 4MLD outlines the requirements for the implementation of group-wide policies and procedures for anti-money laundering (AML) and combating the financing of terrorism (CFT). 

In particular, Article 45(5) of 4MLD requires firms with branches and majority-owned subsidiaries in a third country to apply additional measures where the law of that third country does not allow implementation of AML/CFT group-wide policies. The DR specifies the additional measures, including minimum action, which firms should take to comply with Article 45(5) of 4MLD. The DR will enter into force on 3 June 2019 and will apply from 3 September 2019.