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Welcome to Legal Shorts, a short briefing on some of the week’s developments in
the financial services industry.
Listen to this week's Legal Shorts on CLTV by going to
http://vimeo.com/cummingslaw
If you would like to discuss any of the points we raise below, please contact me or
one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
Cayman proposes registration and licence regime for directors
The Cayman Islands government has announced its intention to introduce a
registration and licensing regime for directors of certain regulated entities in
the Cayman Islands. The proposed new law has been published in the form
of The Directors Registration and Licensing Bill 2014 and there is a short
consultation period. The proposed law will require all directors of regulated
mutual funds and companies which maintain a registration as an excluded
person pursuant to the Securities Investment Business Law to register with
CIMA. The requirement will apply to both resident and non-resident
directors. Directors who hold more than 20 such directorships will need to
be licensed by CIMA and will be subject to enhanced regulatory
requirements. Corporate directors, irrespective of directorship numbers held,
will also need to be licensed by CIMA. Directors to whom the new law will
apply will have three months from the date the new law is passed to
complete their respective applications and be registered or licensed. The

2. new law could come into effect by mid-April 2014.
EMIR derivative definition
The European Commission has responded to ESMA’s request for
clarification on the definition of derivative under EMIR. The Commission
agrees that there is a lack of clarity about the precise delineation between
FX forward contracts and currency spot contracts and its preliminary views
are: (i) the Commission will need to consider which delivery periods are
appropriate when delineating derivative and spot contracts; (ii) ‘commercial
purpose’ is only a criterion for physically settled commodity derivative
contracts; and (iii) further work is required on the definition of commodity
forwards that can be physically settled.
FCA reports on hedge fund survey
The FCA has published the findings of its hedge fund survey based on data
reported at September 2013. The survey presents an aggregated picture of
industry activity in the UK, illustrating key trends and risks and includes
information on the following: size and scale of the hedge fund industry, size
and scale of hedge fund activity in financial markets and portfolio
characteristics of hedge funds. The FCA envisages that there will be at least
two more versions of the survey with data reported as at March 2014 and
September 2014. The AIFMD and its reporting framework are then expected
to supersede the FCA survey, providing similar data on a broader range of
firms and funds.
FCA updates webpage on COBS and COLL
The FCA has updated its webpage relating to the modification by consent of
COBS and COLL. The modification allows alternative fund managers of a
non-UCITS retail scheme (NURS) to choose to produce an equivalent
document to the UCITS KIID, the ‘NURS-KII’ document, instead of the key
features document or the simplified prospectus. The webpage states that
firms which previously held the modification will need to re-apply to the
Central Waivers team for a new modification to replace the modification
that expires on 30 June 2014. The modification is set out in a direction and
is valid until 30 June 2016 unless subsequently withdrawn.

3. EuSEF and EuVECA Regulations
ESMA has published Q&As on the application of the EuSEF and EuVECA
Regulations. The questions relate to the following: (i) management of
EuSEF and EuVECA by AIFMs; (ii) registration of EuSEF and EuVECA
managers; and (iii) management and marketing of AIFs by EuSEF and
EuVECA managers. ESMA intends to continually edit and update the Q&A
as and when new questions are received. It will periodically review the
Q&A to identify if, in a certain area, there is a need to convert some of the
material into ESMA guidelines.
NAO report on FCA and PRA
The National Audit Office has published a report that examines the progress
made by the FCA and the PRA in developing and implementing their
regulatory approaches to date. The NAO recommends, among other things:
(i) a more structured approach to evaluation by the FCA and PRA of their
work; (ii) establishing a body of evidence with regard to experience of
managing potential conflicts between prudential and conduct regulation; (iii)
reviewing the effect that staff turnover rates are having in practice; and (iv)
evaluation by the FCA and PRA of the impact of their new approaches to
regulatory data requests. The NAO was made statutory auditor of the FCA
and PRA from April 2013.
CRD IV Q&As
The European Banking Authority has updated its Q&As on the single
rulebook relating to the CRD IV package of reforms and the related
technical standards and guidelines developed by the EBA. The Q&As
contain 32 answers on supervisory reporting, own funds, large exposures,
credit risk, liquidity risk and leverage ratio.
ETFs and UCITSs issues
ESMA has published its final report on diversification of collateral in its
guidelines on exchange traded funds and other UCITS issues. Annex I to the
report sets out ESMA's position on collateral management by UCITS. The
guidelines in Annex II modify the rules on collateral diversification in
paragraph 43(e) of the existing guidelines and introduce some further
consequential changes. ESMA has also published an updated version of its

4. Q&As paper on its guidelines on ETFs and other UCITS-related issues and
new questions and answers have been added to the financial indices section
of the Q&A.
EMIR RTS on non-EU counterparties
The European Commission delegated Regulation supplementing EMIR with
regard to regulatory technical standards (RTS) specifying the contracts that
are considered to have a direct, substantial and foreseeable effect within the
EU, and to prevent the evasion of rules and obligations, was published in the
Official Journal of the EU. The delegated Regulation will enter into force 20
days after the date of its publication in the OJ. However, Article 2 will apply
from 10 October 2014.
Cummings
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
www.cummingslaw.com
28 March 2014