Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

The 'buried' regulation putting fund firms at risk

2 Comments
The 'buried' regulation putting fund firms at risk

Asset management firms could be caught out by 'onerous' new securities settlement regulation coming into force this summer. 

That is the view of global financial services regulatory consultancy Bovill, which warned that hundreds of firms could be at risk.

Bovill has found evidence that firms believe they are not impacted by the incoming EU reporting rules of the Central Securities Depositories Regulation (CSDR). 

Under this new regime, financial services companies that settle transactions in a CSD-recorded security on their own books rather than through those of a CSD must report the volume and value of such transactions. All such ‘internalised’ settlements must be reported to the European Securities and Markets Authority each quarter.

For a firm to be considered as internalising settlement, the rules require that it receives a settlement instruction from a client and does not forward this in its entirety to another intermediary or a CSD.

The regime also requires that the instruction results, or is supposed to result, in a transfer of securities from one securities account to another in the books of the firm.

'If those conditions are met and the security and the transaction are in scope, then your organisations is likely subject to the reporting obligation,' Bovill said. 

The breadth of transaction types covered by the new reporting requirements includes: securities purchases and sales, collateral management operations, securities lending and borrowing, repo transactions and transfers of securities between funds and client accounts.

'The scope of instruments covered by the new regulation is broad and the threshold of activity is minimal,' Bovill consultant Christian Krohn said. 

'From our conversations with financial services firms, the majority had overlooked the new rules on internalised settlements. It’s the forgotten reporting regime. Companies simply don’t think it applies to them. Yet, in a worrying number of cases it does.' 

Krohn said that while the large asset managers and custodians with large client bases appear to be prepared, it is among the smaller firms where the real concern lies. 

'The market participants with more modest post-trade operations and who comprise the vast majority of the market may fall foul (of the new rules),' Krohn added. 

'If ignored, this buried regulation will catch financial services firms out in 2019.' 

'If [your] organisation is anywhere in the chain of a securities holding, then this new – and onerous – reporting regime is coming your way in the new year.'    

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: Altor's Towry graduates on launching a family business

Profile: Altor's Towry graduates on launching a family business

Altor Wealth Management was launched on of a shared vision to form a family-style company that would charge fairly and differently.

Wealth Manager on Twitter