1. Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial
services industry.
Listen to this week's Legal Shorts on CLTV by going to http://vimeo.com/cummingslaw
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
www.cummingslaw.com
FCA policy statement on review of CASS
The FCA has published a policy statement (PS14/9) setting out its final Handbook changes
relating to its review of the client assets regime for investment business (CP13/5). The
proposals in CP 13/5 were intended to address specific risks and clarify existing CASS
requirements and the final rules reflect a rewrite of the client money rules in CASS 7 and
substantial changes to the custody rules in CASS 6. Other changes relate to client
information, mandate, multiple client money sub-pools and indirect client clearing. The key
CASS changes and the dates upon which they will come into effect are set out in Chapter 2
of PS 14/9 and are being introduced in three stages: (i) 1 July 2014, for rule changes that are
either optional or impose minimal regulatory burden on firms); (ii) 1 December 2014, for
changes requiring firms to revise existing client facing documentation; and (iii) 1 June 2015
for all remaining rules.
AIFMD reporting
The IMA held a question and answer session with the FCA regarding the AIFMD Annex IV
reporting (i.e. Report to Competent Authorities), some of the key points being: (i) firms will
be required to submit Annex IV reports electronically via GABRIEL from the end of 2014
onwards and the FCA will only be accepting ESMA XML schema v1.1; (ii) there will be
three options for filing the report, namely the online form on GABRIEL (although the FCA
would prefer firms not to use this option), an upload of the XML file through the “B2B”
portal online form and by creating an XML document and uploading it to GABRIEL; (iii)
non-EEA AIFMs that market AIFs in the UK (and are therefore required to report to FCA)
will receive an FRN when they submit their marketing application to the FCA, which will
enable them to set up an account on GABRIEL so they can make the required submissions;

2. and (iv) the FCA confirmed that whilst firms are permitted to delegate reporting to external
vendors the AIFM itself is still responsible for the content and filing of the report. Firms
will therefore need to ensure they fully understand what needs to be submitted and be able
to validate any data that has been submitted.
FCA publishes dealing commission changes
The FCA has published Handbook Notice 12, which sets out changes made to the FCA
Handbook in relation to the recent changes to use of dealing commission rules for
investment managers. The Conduct of Business (Use of Dealing Commission) (Amendment
No. 2) Instrument 2014 (FCA 2014/29) came into force on 3 June 2014 and provides clarity
and certainty to firms on the FCA’s definition of research and provides specific guidance on
mixed use assessments i.e. where substantive research is bundled together with services that
firms cannot pay for using dealing commission. A major change to the rules relates to
corporate access and prevents investment managers using dealing commission to pay for
access to senior staff at firms they invest in.
CRD IV
The text of the delegated Regulation on criteria to identify material risk takers under CRD
IV has been published in the OJ. The Regulation sets out regulatory technical standards
(RTS) on criteria to identify categories of staff whose professional activities have a material
impact on an institution's risk profile, commonly known as ‘material risk takers’. The RTS
identify material risk takers at firms within the scope of CRD IV and CRR. The Regulation
comes into force 20 days after publication in the OJ.
ESMA publishes MMoU on co-operation agreements and information exchange
ESMA has published a multilateral MoU on co-operation arrangements and information
exchange between itself and competent authorities. ESMA published guidelines relating to
the MoU in March 2013 and the text of the MoU was set out in an Annex to the guidelines.
ESMA has also published a list of signatories to the MoU, which includes the FCA.
Systemic risk survey results published
The BoE has published the results of its systemic risk survey for the first half of 2014. The
aim of the survey is to quantify and track market participants’ views of risks to, and their
confidence in, the UK financial system. According to the results: (i) the majority of
respondents considered the probability of a high-impact event low or very low over the next
year; (ii) the main risk identified was from an economic downturn, with concerns about
sovereign risk dropping sharply; and (iii) geopolitical risk was widely cited as the most
challenging risk to manage as a firm.

3. ESMA speech on systemic risks in EU fund industry
ESMA has published a speech by its chairman on systemic risks and current policies in the
EU fund industry, which considers whether asset managers can be too big to fail. Amongst
other things, Mr Maijoor outlined ESMA's priorities in relation to AIFMD, confirming that
ESMA had begun preparatory work for the opinion and advice that it must deliver to the EU
institutions in July 2015 regarding the possible extension of the passport to non-EU funds
and managers. ESMA is also continuing its efforts to clarify the reporting obligations on
AIFMs while, at the same time, building an IT system to help centralise reported data.
GUEST SHORTS
This week’s Guest Shorts come from Ian Gobin, partner at Appleby (Cayman) and global
head of investment funds and services, who writes to update us on the new Cayman Islands
Directors Registration and Licensing Law 2014, as follows:
“The Cayman Islands Directors Registration and Licensing Law 2014 (‘DRL Law’) came
into force on 4 June 2014. Under the DRL Law, all directors of open-ended investment
funds registered with, or licenced by, the Cayman Islands Monetary Authority (CIMA)
under the Mutual Funds Law (as amended), and some companies registered as excluded
persons under the Securities Investment Business Law (as amended) (SIBL) (‘Covered
Entities’) are caught. Open-ended investment funds that are structured as partnerships or
trusts or which are exempt from registering with CIMA and all closed-ended investment
funds are not covered by the DRL Law.
Each affected director will need to register with CIMA and to do so will need a unique
identification number (‘Unique ID’) in order to complete the online registration process.
CIMA has now issued these Unique IDs to each Covered Entity’s registered office provider
and each registered office service provider in the Cayman Islands will contact all directors
for whom they have received Unique IDs. In addition to the registration requirement,
‘Professional Directors’, which are defined as any person appointed as a director for 20 or
more Covered Entities, and ‘Corporate Directors’ must apply for a licence. There are a
number of exemptions available from the licensing regime depending on a number of
factors, including the director’s relationship.
To register or apply for a licence, a director must submit an application through CIMA’s
online portal http://www.cimoney.com.ky/ and pay the relevant registration fee. The
aggregate initial and recurring annual fees include the registration fee (US$853.66), the
Professional Director licence fee (US$3,658.54) and the Corporate Director licence fee
(US$9,756.10). Once licensed or registered, any material change to the information
provided in the initial application will need to be filed with CIMA within 21 days of the
change taking effect and annual filing (which includes payment of the annual fee) must be
made no later than 15 January each year. Individuals have until 3 September 2014 to either
register and/or apply for a licence. Corporate Directors have until 3 December 2014 to
apply for a licence, while new directors will have to register before being appointed to the
board of a Covered Entity and can apply for their Unique ID through the CIMA portal.”
For more information on the above or in connection with investment funds and services in
the Cayman Islands, please contact Ian Gobin at igobin@applebyglobal.com.

4. Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
13 June 2014