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Legal Shorts 03.11.17 including GDPR Podcast and AIFMs within the scope of MiFID II

Published: 03 Nov 2017

Welcome to Legal Shorts, a short briefing on some of the week’s developments in the financial services industry.

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




GDPR Podcast

A podcast of our webinar “GDPR in the Alternative Investment Sector” will be available online next week on our website at: www.cummingslaw.com. Wednesday’s webinar was held in conjunction with Portman Compliance and RFA. If you would like more details about the GDPR, please e-mail Claire at: claire.cummings@cummingslaw.com.


AIFMs within the scope of MiFID II

The FCA has made it clear that AIFMs will be bought within scope of MiFID II in certain areas of business when the new rules come into force on 3 January 2018.  The key areas of change for AIFMS are: (i) the unbundling of research and research payment accounts (RPAs); (ii) taping and record-keeping; (iii) product governance and suitability; (iv) conflicts of interest; and (v) transaction reporting.

This will require a review and update of client documentation, including offering memoranda, investment management and advisory agreements, distribution agreements and commission sharing arrangements.  If you would like to discuss how we can help ensure that your documents and arrangements are compliant by 3 January 2018, please e-mail Claire at: claire.cummings@cummingslaw.com


MiFID II: EC FAQs on inducements and research

The European Commission has published FAQs to clarify EU investment firms' obligations when they seek out brokerage and research services from broker-dealers in non-EU countries. The FAQs are only guidance and answer two questions on how EU firms can procure international research and brokerage services in full compliance with their obligations under MiFID II. The Commission's guidance also explains how such services might be obtained from third country jurisdictions. Following discussions with the Commission, the US SEC has also published the steps it has taken (in the form of "no-action letters") to facilitate the cross-border implementation of the MiFID II research provisions. The FCA has welcomed the guidance and added that arrangements in which a UK asset manager pays the EU entity of a broker for global research content, or research is circulated within a buy-side group, can also be an acceptable way of achieving arrangements that comply with MiFID II, provided that they do not influence the firm's order routing decisions, execution costs and ability to act in its clients' best interests.


Crowdfunding framework

The European Commission has published an inception impact assessment for a legislative proposal for an EU framework on crowd and peer-to-peer finance as part of its CMU action plan. The aim of the initiative is to create a framework that will encourage cross-border activity relating to crowdfunding platforms and to provide platforms with a proportionate and effective risk management framework. The Commission is concerned that, to date, crowdfunding activities have been confined to national markets with very little cross-border activity. The Commission sets out three potential options for an EU framework on crowdfunding: (i) a self-regulatory approach with minimum EU standards; (ii) a comprehensive EU framework, consisting of a specific crowdfunding licence under the passporting framework; and (iii) a standalone opt-in EU framework. The Commission indicates that the next steps for this initiative will take place in the first quarter of 2018. Comments are invited by 27 November 2017.



The European Commission has adopted a Delegated Regulation amending the Commission's list of high-risk third countries under the Fourth Money Laundering Directive (MLD4) to include Ethiopia. The Commission explains that Ethiopia has provided a written high-level political commitment to address the identified deficiencies and has developed an action plan with the FATF with a view to fulfilling the MLD4 requirements. The Commission welcomes this commitment and calls on Ethiopia to complete the implementation of the action plan expeditiously and within the proposed timeframes. The next step will be for the Council of the EU and the European Parliament to consider the amending Delegated Regulation and raise any objections.


ESMA updates Q&As on alternative performance measures

ESMA has updated its guidelines on alternative performance measures (APM), adding six new Q&As which relate to: (i) financial measures which qualify as APMs; (ii) the exceptions applying to APM guidelines; (iii) the requirement to provide definitions of the APMs used and details of their components; and (iv) fair labelling, namely how APMs representing a biased measure of performance may, depending on the facts and circumstances, violate the principles set out in articles 4 and 5 of the Transparency Directive and be contrary to the overall objective of the APM guidelines.


FCA webpage on model driven machine executable regulatory reporting

The FCA has published a new webpage on model driven machine executable regulatory reporting, which explores how technology can be used to link regulation, compliance procedures, firms' policies and standards, together with firms' transactional applications and databases. The FCA believes that this would benefit both firms and regulators, including by: (i) improving the accuracy of data submissions and reducing their costs; (ii) more rapid implementation of regulatory requirements; and (iii) reducing compliance costs, which could lower barriers to entry and promote competition. The FCA, together with the Bank of England, will launch a two week TechSprint to explore the potential for model driven machine readable regulation on 20 November 2017.


FSB report on AI and machine learning

The Financial Stability Board has published a report that considers the financial stability implications of artificial intelligence (AI) and machine learning in financial services. This is a follow-up to the FSB’s report in June on the financial stability implications of FinTech. The FSB notes that financial institutions are increasingly using AI and machine learning in a range of applications across the financial system. This includes assessing credit quality, pricing and marketing insurance contracts, automating client interactions, analysing the market impact of trading large positions, optimising trading execution, and regulatory compliance. The FSB's report discusses the potential benefits and risks for financial stability and a list of matters that should be monitored.


FCA policy statement on listing rules

The FCA has published a policy statement setting out its response to its consultation paper, Review of the Effectiveness of Primary Markets: Enhancements to the Listing Regime (CP17/4), which finalises the rules and technical notes as proposed in the consultation, subject to minor amendments. The amendments to the Listing Rules and technical notes take effect on 1 January 2018. The FCA states that companies seeking admission to premium listing after 1 January 2018 should prepare any submission regarding their eligibility on the basis of the new requirements. The FCA has also published a feedback statement on DP17/4 and has decided that the following areas merit further exploration: (i) the current split between standard and premium listing; and (ii) supporting the growth of science and technology companies by exploring areas where improvements to listing rules might facilitate the right environment for investment.



This week, Tim Haynes, Parliamentary Adviser to HM Government of Gibraltar, provides us with details of a Gibraltar Day being held in each of Geneva, Lausanne and Zurich next week, as follows:

“Gibraltar Finance, in conjunction with the Gibraltar Funds and Investment Association, will be hosting the following funds events in Geneva, Lausanne and Zurich from the 7th – 9th November 2017. The events in Geneva and Lausanne will be hosted by the Hon. Albert Isola MP, Minister for Financial Services. The event in Zurich will be hosted by the Finance Centre Director on the Minister’s behalf.

The following topics will be covered:

New Fund Regime & new opportunities

Dual regime EU/Non-EU

Private Scheme (incubator)

Experienced Investor Funds


Managers Regime

Small AIFM licence

FinTech/Start-Up Hub

Innovation, new regulation and Cryto fund as a business case

DLT regulation


If you would like to receive further information regarding the Gibraltar Day in Switzerland, please contact Tim Haynes at: tim.haynes@gibraltar.gov.gi.



Tel: + 44 20 7585 1406

Mob: + 44 7734 057 327


3 November 2017

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

  • 42 Brook Street
    W1K 5DB

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