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

Sponsored Profiles

SPONSORED FEATURE: Alternative thinking

Mar 16, 2017

Portfolio Manager Davide Cataldo discusses the results of the Pioneer Investments’ survey on liquid alternatives and how investors can be encouraged to increase their allocation.

SPONSORED FEATURE: Interest rate risk hedging: Swapping to other options

Mar 16, 2017

Heightened margin requirements for cleared and uncleared OTC derivatives pose a challenge for legitimate hedging activities and are driving financial institutions to explore alternative hedging...

SPONSORED FEATURE: Why blockchain could be the fund industry’s next Ford Model T

Mar 16, 2017

Blockchain aims to radically change the way investors can access funds, says Olivier Portenseigne, Managing Director and Chief Commercial Officer of Fundsquare.

SPONSORED FEATURE: Open architecture: In need of protection

Mar 16, 2017

Greater efficiency must be embraced to ensure regulatory changes do not destroy choice for fund buyers, says Bernard Tancré of Clearstream.

Executive Interviews

INTERVIEW: Finding managers that can (and do)

Apr 18, 2017

Fabrice Kremer, a fund selector at Banque de Luxembourg Investments, has berated fundamental managers for failing to beat indices, but he remains committed to active funds. He speaks to Nick...

JERSEY INTERVIEW: ‘A steady sort of place’

Mar 21, 2017

The chief executive of Jersey Finance is keen to portray the island as a stable, trustworthy jurisdiction. He talks to George Mitton.

Roundtables

ROUNDTABLE: The issue is perception

Mar 21, 2017

Our panel discuss tax transparency, the elegance of private placement and why Jersey could do more to promote itself. Chaired by Tom Cowsill in Saint Helier.

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.