HM Treasury Publishes Draft Brexit Statutory Instruments for Investment Funds and Their Managers

On October 8, HM Treasury published two draft statutory instruments (SIs), together with explanatory notes, which will make amendments to retained EU law relating to collective investment schemes (CIS) and alternative investment fund managers (AIFMs).

The purpose of the draft SIs is to ensure that the regimes established under the latest Undertakings for the Collective Investment in Transferable Securities Directive (UCITS IV Directive) and the Alternative Investment Fund Managers Directive (AIFMD) continue to operate effectively for investment funds and their managers after the United Kingdom’s withdrawal from the European Union (Brexit) on March 29, 2019 (Exit Day).

The draft version of the Alternative Investment Fund Managers (Amendment) (EU Exit) Regulations 2018 (Draft SI for AIFMs), among other things:

1. Amends the definition of alternative investment fund (AIF);

2. Disapplies the UK National Private Placement Regime information and reporting requirements for funds marketing to retail investors;

3. Sets out the design and structure of a “temporary permissions regime” for AIFs and AIFMs, including, for example, money market funds using an AIF structure; and

4. Ensures that a UK AIFM will only be required to report on portfolio companies and comply with the restrictions on asset stripping when it acquires control of a UK company, instead of an EU company.

The draft version of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2018 (Draft SI for CIS), among other things:

1. Sets out the design and structure of a “temporary permissions regime” for EEA UCITS; and

2. Introduces a UK UCITS regime for funds established and authorized in the United Kingdom, which will be called “UK UCITS.”

HM Treasury will lay the draft SIs before Parliament in autumn 2018, and the SIs will come into force on Exit Day.

The Draft SI for AIFMs is available here and its explanatory note is here.

The Draft SI for CIS is available here and its explanatory note is here.

HM Treasury Publishes Draft Brexit Statutory Instruments Relating to MiFID II and Trade Repositories

On October 5, HM Treasury published two draft statutory instruments (SIs) together with explanatory notes, which will make amendments to retained EU law relating to the revised Markets in Financial Instruments Directive (MiFID II) and Trade Repositories (TRs).

The purpose of the draft SIs is to ensure that the regimes established under MiFID II and the regime relating to the reporting of derivative trades to TRs under the European Market Infrastructure Regulation (EMIR) continue to operate effectively after the United Kingdom’s withdrawal from the European Union (Brexit) on March 29, 2019 (Exit Day).

The draft version of the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 (Draft MiFID SI) includes provisions relating to:

1. The transfer of MiFID II functions carried out by the European Securities and Markets Authority (ESMA) to the UK Financial Conduct Authority (FCA) and UK Prudential Regulation Authority (PRA). Functions of the EU Commission will transfer to HM Treasury;

2. Equivalence decisions and the temporary permissions regime being introduced by HM Treasury (for further details of the temporary permissions regime, see the July 27 edition of Corporate & Financial Weekly Digest);

3. The MiFID II transparency regime. The FCA will be granted temporary powers to amend certain transparency calibrations (which are otherwise frozen on Exit Day), direct the application of certain waiver mechanisms and freeze the obligation to publish trading information in respect of certain instruments; and

4. Transaction reporting, so that UK branches of EU firms will be required to send transaction reports to the FCA. The scope of instruments that need to be reported (those admitted to trading or traded on trading venues in the UK and in the EU) will remain the same.

The draft version of the Trade Repositories (Amendment and Transitional Provision) (EU exit) Regulations 2018 (Draft SI for TRs) includes provisions designed to:

1. Amend the retained version of EMIR to transfer ESMA’s functions concerning the registration of TRs to the FCA;

2. Establish a temporary registration regime for UK and EU TRs. Such a regime will last for three years from Exit Day and will allow TRs that wish to establish a new UK legal entity to benefit from temporary registration while their application is being considered by the FCA; and

3. Create a conversion regime that allows for UK TRs that are currently registered by ESMA to be registered as authorized UK TRs by the FCA from Exit Day.

HM Treasury will lay the draft SIs before Parliament in autumn 2018, and the SIs will come into force on Exit Day, with the exception of certain provisions of the Draft MiFID SI.

The Draft MiFID SI is available here.

The Draft SI for TRs is available here.