Shedding Light on Non-Financial Risks – a European Survey

Shedding Light on Non-Financial Risks – a European Survey — January 2012

3. The Need for Change in Regulation and Risk Management Practices

investors where asset eligibility will be restricted (there need not be a single type of fund, UCITS). We asked respondents how important it would be for rules to be aligned in both, regarding depositaries’, asset managers’, distributors’ and promoters’ duties and obligations. Responsibilities should be aligned between AIF/PE funds and UCITS funds, except for distributors and promoters The conclusions from respondents are limpid: on the whole, responsibilities should be aligned for most actors but not for distributors and promoters. This alignment of responsibilities, in particular those of restitution, mean that an asset class approach for the responsibilities of depositaries is the relevant approach. The discrepancies between distribution roles means that product regulations (such as UCITS) should be characterized both by restriction of assets and distribution role (which also naturally means differing transparency requirements). More precisely, more than 70% of respondents believe it is important or very important for rules to be aligned between funds regulated under the AIFM and UCITS directives. It is the case of 71% of respondents for the rules on the depositary's fiduciary duties (irrelevant for 7%), 76% for the rules on the depositary's obligations of due diligence (irrelevant for 6%), 74% for the rules on the depositary's obligation of restitution (irrelevant for 5%), 79% believe that it was important or very important for the rules on the asset manager's fiduciary duties (irrelevant for

to actually become a Savings Protection Agency similar to the U.S. Bureau of Consumer Financial Protection. The French regulator, the AMF, argues that the ESMA should contribute to a rulebook that would encompass all markets and securities regulators. Regarding mediation through the ESMA, the project is currently limited to cooperation and coordination in supervision. The AMF argues that it should be extended to the application of all directives entering the national regulators’ field. Respondents to the survey seem to agree on the need to ensure homogenisation of European laws and to reinforce means of actions of supervisory authorities as well as investors. 3.7. Different Protection Needs for Different Categories of Investors MIFID defined two main categories of investors: retail and professional investors, and each deserve a different treatment. More precisely, this distinction not only means that actors have differing duties, it also is embedded in product regulations in the sense that assets eligible to retail investors are restricted (see UCITS rules). In terms of responsibility, AIFMD does not provide any clarity with respect to investor characteristics. After all, AIFMD is a global framework and it does not solve product characteristics explicitly, even though as far as depositary liabilities are concerned, it suggests that duties should differ according to asset classes, not with regard to the type of end investor nor the type of fund. This suggests that there should be fit for purpose product directives, with some product types dedicated to retail

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An EDHEC-Risk Institute Publication