We have the Walker review, the RDR and the Treasury White Paper on reforming financial markets.
The Walker review was published in the summer, looking at corporate governance and how it might be amended to address systemic risk. We are in the final stages of consulting with members on our response.Walker came up with 39 recommendations. Many of these relate to the banks or Bofis (the largest banking and other financial institutions) but the report suggests its findings could be implemented via the combined code. This means it could apply to all listed companies, many of which are not in financial services – but would not be applicable to unlisted financial institutions where there may be well be significant systemic risk. At the same time as this, there is a separate consultation on the combined code.
The RDR is likely to have a much more direct impact on advisers and clients. We are consulting with members and will be responding at the end of September. The RDR will bring into play new categories of adviser, a new professional standards body and changes in how advisers are paid.
Then there’s Europe. The European Commission is consulting on the role of the depositary under the Ucits’ regime.
The aim is to provide greater clarity, which it is hoped will bring a greater level of consistency and investor protection across the EU. However, the committee of European securities regulators has been working on a review of the working of Ucits depositaries in member states so the IMA has called for the commission to wait until CESR’s review is complete and to use this analysis as a foundation for proposing any further changes, taking into account a full cost-benefit analysis.
The commission is also consulting on the over-the-counter derivatives market. It will bring about a central clearing house which will bring greater clarity to this complex market and allow for better risk management and greater certainty and speed of action in the event of default. It will also help with pricing. The IMA is supportive and submitted its response a few weeks ago.
The directive on alternative investment fund managers is not just about regulating hedge funds. It aims to introduce a passport which will enable funds to be offered across the EU.
However, as currently drafted, this will change many aspects of fund management, potentially reducing the choice of funds available, adding cost and preventing certain categories of investment being offered in the UK, let alone Europe.
The IMA is fully engaged on looking into the impact and consulting with a range of bodies as well as its members on how to address many of these issues.
It is interesting to reflect that many of these initiatives have been prompted by the credit crunch. Yet the fund management industry, which will be greatly affected by many of them, itself stood up well to the stress-test of recent events.
Ginny Broad is head of communications at the Investment Management Association