Ten Practical Consequences for Hedge Fund Managers of the FCA’s Thematic Review of Asset Managers and the EU Market Abuse Regulation

Over the next eighteen months, compliance officers at UK hedge fund managers will be facing significant additional regulatory burdens.  In the context of market abuse, there is going to be significant legislative change coming from Europe.  Whilst the core market abuse offences will largely be unchanged, the market abuse regime across the EU will be significantly strengthened and broadened by the EU Market Abuse Regulation (MAR) that will replace the Market Abuse Directive with effect from July 3, 2016.  At the same time, there have been a number of regulatory enforcement actions that have shown a more assertive approach by regulators to the regulation of markets across the EU.  In February, the UK Financial Conduct Authority issued a thematic review into asset management firms and the risk of market abuse in equity markets.  This review made clear that the UK regulator considers that firms need to do further work to clarify and extend their compliance procedures to comply with current rules.  These changes will be required in addition to the new detailed obligations and processes under MAR.  For these reasons, compliance teams will have considerable work to undertake in relation to market abuse compliance policies, procedures and monitoring.  For many asset management firms, this will create a significant additional administrative burden and may have an impact on how managers interact with issuers.  In a guest article, Douglas Armstrong, a partner and Head of Funds and Financial Services for Dickson Minto W.S., offers a detailed discussion of MAR and the FCA thematic review, then identifies ten practical consequences of both for UK and global hedge fund managers.  See also “U.K. Financial Conduct Authority Issues Feedback Statement Supporting Proposed E.U. Limits on Soft Dollars,” Hedge Fund Law Report, Vol. 8, No. 9 (Mar. 5, 2015).

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