UK regulatory changes most pressing concern for managers, according to IMS survey

26 Jan, 2012

UK regulatory changes are a more pressing concern for hedge funds than the European Union’s (EU) Alternative Investment Fund Managers Directive (AIFMD), a survey by The IMS Group has found.

Some 33% of managers said UK reforms were having the biggest impact on their business compared with 23% for AIFMD. “The results of the survey did surprise me but I suppose UK regulatory changes are the only thing that is set in stone at the moment. A lot of other regulatory changes are still up in the air. I suspect the biggest UK regulatory change is the Financial Services Authority becoming the Financial Conduct Authority, and changes to the Bank of England’s remit,” said Peter Moore, head of regulatory compliance consulting at IMS. “Although I did expect AIFMD to be higher,” he added.

The FSA has just published a 102 page discussion paper outlining how AIFMD will be implemented in the UK. The paper predictably has come in for criticism. PricewaterhouseCoopers has complained the paper lacks clarity over which entities will be classified as managers and funds or how remuneration issues are to be addressed. “The guidance was not consciously vague in my opinion. It is helpful at giving us a feel of how AIFMD will be implemented on a national level though,” argued Moore.

Several key aspects of AIFMD are still undecided at the European level. Some 31% of managers expressed uncertainty about what AIFMD will look like. “The European Securities and Markets Authority (ESMA) still has a lot to do with clarifying AIFMD. Hedge funds are unsure of what to expect so I suspect some have not got AIFMD at the front of their minds yet,” said Moore.

Fewer than 10% of managers said registering with the Securities and Exchange Commission (SEC), MiFID II and the Foreign Account Tax Compliance Act (FATCA) were major issues. Only 2% of managers said they are worried about the EU’s proposed short-selling restrictions and the push into over-the-counter (OTC) derivatives clearing. “People just don’t know what to expect with OTC derivatives regulation, FATCA and MiFID II so predictably hedge funds’ attention is elsewhere,” commented Moore.