AIMA has highlighted the key changes set to be introduced by the EU Capital Requirements Directive (CRD) on 1 January 2007.
The new Directive, based in part on the existing regulatory capital directive, applies to banks, building societies and investment firms, including hedge fund managers. AIMA has assessed that most FSA regulated hedge fund managers will be affected by the new Directive. Key changes, which will be implemented by 1 January 2007, include;
- Changes to the calculation of 'regulatory capital'
- Changes to the 'systems and controls' governing outsourcing, conflicts of interest etc
- Existing waivers will cease, so firms will need to reapply for new waivers
- New reporting arrangements.
In addition, firms who operate within a UK or EEA management grou must meet a group capital requirement for the first time.
Matthew Jones, AIMA's Regulatory and Legal Manager, said: 'The FSA must implement the new Directive into its Rules by 1 January next year. Hedge fund managers will need to determine their capital requirements and whether there is a need for further monies. Given the scope of the regulations, certain parent companies will also have to consider their capital situation'.
'Companies with existing capital waivers will also have to consider renewing them or applying for the first time. Although some changes will not affect managers for twelve months after the rules are implemented, others will have immediate impact and we urge affected hedge funds, if they are uncertain, to take advice.'
AIMA has circulated a Guidance Note on the regulatory changes to all its UK members with further Notes to be issued shortly, which will guide Members through the main issues, which the Directive raises. The Note is only available to AIMA members. The note was prepared by the AIMA Regulatory Capital Working Group.