The UK will have to work increasingly hard next year to make sure it has its say on a number of incoming European financial regulations, the Investment Management Association (IMA) says.
Richard Saunders, chief executive of the IMA, predicts that 2012 will be a year of major change for the UK’s asset management industry. Several important regulations from the European Union (EU) will come into force, while the sector has to undergo final preparations for the implementation of the retail distribution review (RDR) on the domestic front, he points out.
“Following [this month’s] European summit, we will have to work hard to ensure the UK industry’s voice is heard in Brussels. The EU regulatory agenda is enormous and the myriad of proposals will require a lot of effort from firms and trade bodies,” Saunders says.
In early December, 26 members of the EU backed plans to overhaul the union’s treaty in a bid to save the eurozone, with the UK being the only state to withhold consent.
Prime minister David Cameron held back on the proposals in an apparent bid to protect the UK from financial regulation that is expected to hit London especially hard, although some commentators have claimed this move has left the country isolated.
The IMA says the industry has to keep itself protected from a number of regulations. The trade body plans to “engage closely” with the EU about the Markets in Financial Instruments Directive (Mifid) over a number of concerns with the regulations.
Guy Sears, the trade association’s director of wholesale, highlights some of the problems that Mifid could create in equity markets during 2012.
“The inconsistent and overlapping EU regulatory approaches to third country investors and firms could expose the EU to retaliatory legislation from those who are and should remain our main trading partners,” he claims.
Jane Lowe, director of markets at the IMA, adds: “We are perturbed by pre-trade proposals for fixed income and direct markets. These run a very serious risk of undermining market liquidity.”
In addition, Julie Patterson, director of authorised funds and tax at the IMA, says the UK asset management industry will have to prepare for changes linked to the Alternative Investment Fund Managers Directive (AIFMD) and Ucits.
She notes that “extensive work” is expected to be carried out over 2012 on many details of the AIFMD, which she says will take up a great deal of asset managers’ time. Furthermore, the European Commission is likely to make “comprehensive proposals” for Ucits, which will also demand their attention.
Outside of Europe, Patterson warns that a number of regulations coming out of the US could have “detrimental consequences” for fund managers in the UK and elsewhere.
“We continue to seek workable rules on [the Foreign Account Tax Compliance Act] in order to prevent a penal 30% tax on any fund invested in US equities. Members are also grappling with the extra territoriality provisions in Dodd-Frank on derivatives.”
Patterson also points out that the so-called Volcker Rule includes a number of “troublesome proposals” for asset managers owned by US banks.
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