Investor protection rules causing uncertainty, says Afme

There is uncertainty about how to segregate assets for the protection of investors within the Ucits regulatory regime, a leading markets body says. Rules for segregation of assets feature in Ucits and a number of other regulations with investor protection at their core, including the Markets in Financial Instruments Directive II (MiFID II) and the Alternative Investment Managers Directive (AIFMD). But the Association for Financial Markets in Europe (Afme) says there is no consistency in the meaning of “account segregation” between regulations. In a report that focuses on the account segregation rules of various regulations, Afme says that in relation to Ucits there are differing views about how to interpret draft asset segregation regulations that would supplement the Ucits V directive. “In particular, there is no common view as to whether at certain levels of intermediaries that are involved in holding Ucits assets, such assets should be held in ‘segregated omnibus accounts’, or ‘concentrated omnibus accounts’ divided between Ucits and non-Ucits clients,” the reports says. Afme adds that uncertainty about whether a central securities depositary is considered a ‘delegate’ under Ucits V “creates further uncertainty about rules of segregation of Ucits assets…” Werner Frey, managing director of the Afme post-trade division, said: “EU regulations currently create a fragmented approach to account segregation. Given this patchwork of legislation, asset segregation lacks coherence and creates a level of uncertainty and confusion among industry participants.” Afme has produced a list of principles to provide a “holistic view of asset segregation” for European policymakers and financial institutions. These include: full segregation of internal accounts – such as by a global custodian – to identify the immediate client whose assets are being held; segregation of external accounts between proprietary assets and ‘securities account holder’ assets. Afme’s report is called ‘Principles of asset segregation, due diligence and collateral management’ and is written by 16 contributors from various banks and law firms, including Northern Trust and Barclays Bank. ©2016 funds europe

Executive Interviews

CEO INTERVIEW: Munro gains three-year track record

Mar 16, 2017

Aviva Investors’ annual results this month were the third set since Euan Munro took over as CEO. Nick Fitzpatrick speaks to him about the ‘Aims’ fund at the heart of the firm’s outcome strategy.

DISTRIBUTION INTERVIEW: Tales of the unexpected

Mar 16, 2017

Laurence Terryn, a fund selector at Candriam, tells David Stevenson how the twists and turns of the past year’s macro environment flavoured her approach to fund selection.

Roundtables

ASSET SERVICING ROUNDTABLE: Under pressure

Mar 07, 2017

Funds Europe speaks to leading Luxembourg industry figures about the growing regulatory demands on asset servicers and how to remain profitable in spite of major investments in technology.

SEC LENDING ROUNDTABLE: Both a borrower and a lender be

Jan 11, 2017

Industry heavyweights, including agent lenders, discuss issues affecting the securities lending sector such as regulation and the types of collateral being used.