1. 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
claire.cummings@cummingslaw.com
AIFMD: FCA Policy Statement (PS13/5)
The FCA has published a policy statement (PS13/5), which summarises the FCA's
response to feedback received about the FSA's November 2012 (CP12/32) and March
2013 (CP13/9) consultation papers in respect of the rules to be adopted by the FCA to
implement the AIFMD. The detailed rules in the policy statement supplement the
framework regulations recently published by HM Treasury (the Alternative Investment
Fund Managers Regulations 2013) and include changes which have been made to
PERG, including guidance about how UK delegates of a non-EEA alternative
investment fund manager (AIFM) will be treated. The FCA specifically states that if
delegation by an AIFM results in it becoming a "letter-box entity", its UK delegate may
be considered to be managing an AIF, and that it is important that firms are
appropriately authorised. The FCA has also aimed to simplify PERG guidance on
marketing at the investor's own initiative. The FCA explains that firms may generally
rely on a confirmation from an investor that the approach is at the investor's initiative
(although the FCA will take account of any evidence suggesting that marketing activity
has been going on when supervising this area). The statement also covers issues relating
to the scope of the AIFMD, operating requirements and prudential rules for AIFMs,
consumer redress, depositaries and remuneration. Appendix 1 to PS13/5 contains a
copy of the AIFMD Instrument 2013 (FCA 2013/51), made by the FCA Board on 27
June 2013.

2. AIFMD: FCA webpage
The FCA has updated its news webpage on the national private placement regime
(NPPR) under the AIFMD. It has also published drafts of the notification forms which
AIFMs need to submit if they want to use the NPPR in the UK, namely: (i) AIFMD
NPPR Article 36 form; (ii) AIFMD NPPR Article 42 form; and (iii) AIFMD NPPR
Small Third Country form. The FCA will accept the forms from 22 July 2013 onwards.
The updated webpage also sets out a number of frequently asked questions (FAQs),
which mainly relate to the notification process. Further, the FCA clarifies that the final
forms for firms that wish to apply for authorisation from 22 July 2013 will be published
during the week beginning 8 July, although this timing will depend upon the changes
which may be necessary as a result of feedback which the FCA may receive to its
consultation on the VoP from, which ends on 5 July 2013.
Investment Manager Exemption
We have placed a new publication on our website regarding the Investment Manager
Exemption, which can be accessed under ‘Publications’ on our website at
www.cummingslaw.com.
FCA Handbook
The FCA has published its Handbook Notice 3, which sets out changes to the FCA
Handbook under certain instruments made by the FCA Board on 27 June 2013. These
instruments relate to inter alia the 2013/14 fees and levies for the FCA and Financial
Ombudsman Service, the Authorised Contractual Schemes Iinstrument, which enables
the FCA to authorise two new legal forms of CIS: co-ownership schemes and limited
partnership schemes and the AIFMD Instrument, which implements the AIFMD in line
with the rules set out in the Policy Statement (PS13/5) referred to above.

3. UCITS V
The European Economic and Monetary Committee (ECON) has voted in favour of the
proposals in UCITS V and also proposed controversial changes to the UCITS
remuneration regime. Its proposals include a limit on bonus payments to 100% of the
fixed fee element, penalties to be imposed where a UCITS fails to perform against its
stated benchmark and 50% of the variable element to be paid in the form of shares in the
UCITS. The UCITS V proposal and the ECON draft report were considered this week
by the European Parliament in its plenary session and a press release indicates
Parliament’s agreement on certain points, including remuneration, depositaries and
penalties.
CRD IV
The CRD IV legislation has been published in the Official Journal of the EU. The CRD
IV Directive is required to be transposed by Member States by 31 December 2013 and
the Capital Requirements Regulation (CRR) will apply from 1 January 2014. The CRR
and the CRD IV Directive, collectively referred to as CRD IV, implement the Basel III
reforms in the EU, as well as introducing certain EU-specific reforms including
imposing restrictions on bonuses. The CRD IV Directive repeals the Capital
Requirements Directive with effect from 1 January 2014.
Joint Money Laundering Steering Group
The JMLSG has announced on a new webpage that it is consulting on proposed
amendments to its money laundering guidance for the financial sector. The JMLSG has
reviewed the guidance over the last few months, looking at areas of omission, provisions
that are difficult to implement or effect, and provisions that no longer reflect current
practice. The board has published mark-ups of each Part of the guidance, showing the
amendments proposed to Parts I, II and III of the guidance and the webpage contains a
summary of these amendments. Comments are invited by 16 September 2013.

4. CASS 7: High Court judgment
The High Court has held in the UK MF Global case that the court's inherent jurisdiction
over the way a trust is administered can be used to facilitate the distribution of trust
assets, despite the existence of unresolved claims. The client money trust was created by
the provisions of CASS, which were drafted with the aim of ensuring the timely return
of client money to clients following the insolvency of the entity holding that money.
However, neither CASS nor the special administration legislation contain procedures
that would enable the special administrators to distribute client money before all actual
and potential claims were identified and dealt with in the courts. The special
administrators therefore proposed a procedure that would allow them to distribute the
majority of the client money, even though claims could still be made or rejected claims
challenged. The court held that its inherent jurisdiction over trusts allowed it to authorise
the proposed procedure.
GUEST SHORT
Bob Sawyer of Foley Hoag LLP, a US law firm which provides regulatory, structural
and compliance advice to investment advisers of hedge funds, other private funds and
separately managed accounts, has updated us this week on CFTC regulation and the
issue of delegation, as follows:
“Managers and directors of pooled investment vehicles (funds) that are subject to
regulation by the U.S. Commodity Futures Trading Commission (CFTC), which
includes any funds that have any US investors and invest in futures, swaps and other
CFTC regulated instruments, should be aware that directors and general partners of such
funds may have a responsibility to registered as a Commodity Pool Operator (CPO) with
the CFTC unless they have properly delegated all CPO functions to a duly registered
CPO. A CPO is generally defined as an individual or organization that operates or
solicits funds on behalf of a commodity pool. While many funds may believe that an
investment manager appointed to operate the pool is the only party to fall within this
regime, the CFTC has clarified in recent interpretive releases that directors and general
partners may, by virtue of such position, be deemed to be CPOs with respect to the fund
with corresponding registration obligations, unless they properly delegated such
functions, including: (i) a specific delegation of all CPO functions to a duly registered
CPO; and (ii) such delegation includes the agreement of the directors or general partners
(as applicable) that, notwithstanding such delegation, the directors and/or general
partner will remain jointly and severally liable for any violations of the Commodity
Exchange Act. In addition, the CFTC may require, in the case of the general partner of
a fund which is a limited partnership, that such general partner affirmatively notify the
CFTC of their reliance on such delegation and that they have agreed to remain jointly

5. and severally liable as noted above. Directors, general partners and investment
managers should re-examine their existing agreements and consult with counsel to
determine whether they have satisfied current CFTC requirements.”
If you would like to receive further information relating to the above, please contact Bob
Sawyer at RSawyer@foleyhoag.com.
________________________________________________________________
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
5 July 2013