1. Welcome to Legal Shorts, a short briefing on some of the week’s developments in
the financial services industry.
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Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
EMIR
ESMA has published an updated version of its Q&A document on the
implementation of EMIR. As well as adding a new Part V: "Reporting to
TRs – ETD contracts reporting", ESMA has added some new Q&As and
modified a number of others. ESMA explains in a related press release that,
among other things, the revised Q&As clarify reporting of on-exchange
derivatives under EMIR. They also clarify the scope and content of the
reporting rules under EMIR and MiFID and which firms are covered by
them. The Q&As were originally published in March 2013 and last updated
in October 2013.
AIFMD: Regulation on types of AIFMs
The European Commission has published the text of the delegated
Regulation it has adopted recently in relation to the AIFMD. The Regulation
supplements the AIFMD with regard to regulatory technical standards (RTS)
determining types of AIFMs. The RTS specify the characteristics of AIFMs
managing open-ended AIFs as follows: an AIFM of an open-ended AIF

2. manages an AIF, the shares or units of which are, at the request of any of its
shareholders or unitholders, repurchased or redeemed prior to the
commencement of its liquidation phase or wind-down, directly or indirectly,
out of the assets of the AIF and in accordance with the procedures and
frequency set out in its rules or instruments of incorporation, prospectus or
offering documents.
AIFMD: Transitional arrangements
The FCA has published a statement in response to HM Treasury's December
2013 announcement about transitional arrangements relating to the AIFMD.
The FCA states that it is aware of the Treasury’s announcement regarding
their intention to make changes to the transitional arrangements in The
Alternative Investment Fund Managers Regulation 2013 and it will make
further announcements when it is clear what the particular details of these
changes are and how they might impact our implementation of AIFMD. In
the meantime, the FCA continues to encourage firms to submit their
applications in line with the timelines stated on its website.
Investment Manager Exemption (IME)
Following its consultation last year, HMRC has published two sets of draft
regulations expanding the "white list" of investment transactions relating to
the IME. The "white list" specifies transactions, the income from which will
not be treated as trading income for authorised investment funds (AIFs),
exempt unauthorised unit trusts (UUTs), investment trusts (ITs) and when
calculating the reportable income of an offshore reporting fund (OFRs).
When certain conditions are met, the IME provides that a fund manager will
not constitute a UK representative of the fund when carrying out investment
transactions. The Investment Transactions (Tax) Regulations 2014
(Investment Transactions Regulations) set out a consolidated and expanded
"white list" of investments that applies to AIFs, UUTs, ITs and OFRs, which
replaces the existing lists. The new consolidated list now includes
transactions in units relating to emissions of greenhouse gases and rights
under a life insurance policy.
Financial Transaction Tax (FTT)
The EU’s Taxation Commissioner has said he is prepared to accept a more
limited tax on financial transactions, following concerns from some Member
States that the scope of the original proposal was too wide. The original
proposal will tax trades in stocks, bonds, derivatives and other financial

3. transactions, but the EU is considering narrowing the levy's scope to shield
pensions, government debt and markets that help the economy. Member
States are now examining an "ambitious proposal" by the Commission and
discussing exemptions and, according to the Commissioner, a compromise
could be agreed by May. Current negotiations centre on key themes such as
government bonds and repo trades as well as how to treat primary dealers
such as market makers and pension funds.
Capital Requirements Regulation: FCA publishes application form
The FCA and the PRA have each published the application form that firms
should use to apply for permissions under the Capital Requirements
Regulation. A CRR permission is a direction given to a firm by the FCA or
the PRA, as the case may be, in the exercise of a discretion allowed to
Member States' competent authorities under the CRR. The FCA or the PRA,
as appropriate, will grant the firm permission to use the relevant discretion if
it considers that the applicable criteria set out in the CRR have been met.
The FCA and the PRA have also published guidelines for firms on CRR
permissions and on issues that may arise when providing information to
support their application.
Capital Requirements Regulation: own funds
The European Commission has published the text of its implementing
Regulation relating to the disclosure of own funds requirements under the
Capital Requirements Regulation (CRR). The Regulation sets out
implementing technical standards (ITS) specifying firms are to complete a
template describing the main features of their capital instruments, a general
own funds disclosure template and a transitional own funds disclosure
template, all in accordance with the instructions set out in the Regulation.
The Regulation will apply from 31 March 2014. The final draft ITS were
published by the EBA in July 2013.
ETFs
ESMA is consulting on revising provisions on diversification of collateral in
its guidelines on exchange traded funds (ETFs) and other UCITS issues.
These guidelines were originally published in December 2012. The
consultation paper states that ESMA has been asked to reconsider its
position on the requirements on collateral diversification on the basis that
they have a significant adverse impact on UCITS’ collateral management
policies. Stakeholders have drawn particular attention to the consequences

4. for money market funds (MMFs) that place cash into reverse repurchase
agreements. Draft revised guidelines are contained in Annex III to the
consultation paper. The consultation closes on 31 January 2014 and the EBA
aims to adopt revised guidelines in the first quarter of 2014.
2014 priorities for the Greek EU presidency
The Greek presidency has published its programme for the period 1 January
to 30 June 2014 on its website, setting out its aims, objectives and priorities,
including in the area of economic and financial affairs. These priorities
include the following issues: the EU banking union; capital markets;
payment accounts; financial crime and the European system of financial
supervision (ESFS). The Greek finance minister has also given a speech,
explaining that the Greek Presidency is working to a tight timeframe because
of the European Parliament elections in May 2014. He points out that the
effect of this is that the current Parliament will conclude its work in April
2014 and that the Presidency will therefore be working on a "frontloaded"
basis.
EU Savings Directive revisions
A proposal to revise the scope of the EU Savings Directive to bring savings
related payments to legal entities and payments of interest equivalents within
its scope failed to gain approval at the ECOFIN meeting held at the end of
last year. The EUSD is broadly aimed at countering cross-border tax evasion
by creating an information exchange system to report individuals that
receive savings income in a Member State other than their own. The
revisions had largely failed due to concerns raised by Luxembourg that
without the conclusion of negotiations with third countries (Switzerland,
Andorra, Monaco, Lichtenstein and San Marino) to apply similar standards,
this would lead to potential capital flight.
GUEST SHORTS
This week, Paul Yau, regulatory counsel with Advise Technologies, LLC
comments on the logistical challenges facing AIFMD filers, as follows:
“Under the AIFMD, AIFMs that market or manage AIFs in the EEA face
extensive regulatory reporting obligations to regulators of the EEA Member
States. With the transition period ultimately set to expire on 22 July 2014,
many managers can no longer delay and must undertake preparations to
report their first AIFMD regulatory filings in the coming months.

5. Similar to managers filing Form PF with the SEC in the US, AIFMs must
periodically report information about themselves and the funds they market
or manage in Europe to Member States’ regulators. Compared with Form
PF, the reporting deadline under the AIFMD is much tighter (one month
after the end of the reporting period, with funds of funds receiving an extra
15 days). Completing a filing with such a short turnaround time will
undoubtedly present an operational challenge for filers. To address this
challenge, AIFMs must ensure that their processes and controls, bolstered
with technological solutions that leverage data automation and validation,
are used to reliably compile and report their filings.
Another issue that AIFMs must consider in preparing their filings is that
reporting requirements under the AIFMD are, to a certain extent, still unclear
at this point. The Directive allows each individual Member State’s regulator
the discretion to request certain additional information on the reporting form
from filers. Individual Member States can also require reporting to be
submitted on a more frequent basis than what is currently prescribed in the
Directive, which is based on the AIFM’s AUM and type of AIF. AIFMs
will need to be aware of what the reporting requirements are for the specific
Member State they plan to file in.
In addition to the issues of what and when to report, how AIFMs will submit
their filings must also be considered. While many Member States have yet
to finalize their reporting infrastructure and guidelines, through our ongoing
correspondence with regulators from various jurisdictions, such as the UK,
Luxembourg, Ireland, and the Netherlands, they have provided us with
valuable insight into the reporting submission process. Regulators have shed
light, for example, on a range of submission issues such as if reporting will
be accepted via XML, whether or not they will adhere to the ESMA
reporting template, and if test filings can be conducted. Such information
regarding the logistics of filing in various jurisdictions will be greatly useful
for AIFMs as they prepare to submit their initial AIFMD filings.”
If you have questions or would like more information on the above, please
contact Paul Yau at: +44 (0) 207 043 4448; +1 (212) 576-1170; or by email:
info@AdviseTechnologies.com.

6. Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
10 January 2014