ICYMI: Regulation watch for Dec/Jan

The SEC appoints its OCIE head and the FCA and ESMA disagree over delegation rules.

SEC names Driscoll OCIE head

The Securities and Exchange Commission has confirmed Peter Driscoll as director of the Office of Compliance Inspections and Examinations, a role he has held as acting director since January. Driscoll will be responsible for the SEC’s examination program for registrants across the US.

Prior to becoming acting director of the OCIE this year, he was named the division’s first chief risk and strategy officer in March 2016.
Driscoll replaced former OCIE director Marc Wyatt after he stepped down at the end of January.

ESMA and FCA at loggerheads over delegation

A war of words has broken out between the UK and European regulator over whether asset managers, including those running private fund firms, should be allowed to domicile funds in one country, but run their operations in another.

The Financial Conduct Authority’s chief executive hit back at recommendations from the European Securities and Markets Authority to limit UK fund managers’ ability to base funds in countries where they do not have a physical presence after Brexit.

Andrew Bailey said the practice – known as delegation under the Alternative Investment Fund Managers Directive – is applied across the world with fund managers in the US and Asia running EU-based funds.

“Does it require membership of the EU to make this work? No, it does not,” Bailey said adding the UK regulator was “committed to making open markets work.”

Germany scraps ‘lump sum’ tax on alternatives

‘Lump sum’ taxation on German investors’ holdings in foreign alternative investment funds will be abolished, the country’s tax authorities have confirmed.

The lump-sum tax was ruled a breach of the EU principle of free movement of capital in a European Court of Justice decision in 2014. German tax authorities hope the changes will make alternative investment funds more attractive for domestic institutional investors, according to a client update from PwC.

The lump-sum tax was payable by German investors at a minimum of 6 percent of net asset value by investors in real estate and private equity funds, which are categorized as ‘non-transparent’ investment funds. It was also payable if a fund, foreign or domestic, did not complete tax reporting requirements for its German investors on time.


Encryption is an easy win for aspects of GDPR compliance

Firms may have a difficult time justifying a decision not to encrypt certain data when new data protection rules are brought into force next year, according to an expert.

While the Global Data Protection Review does not require firms to encrypt data, the simplicity of doing so in some cases makes it an easy way to add a layer of protection to your files, Bernard Parsons, CEO and co-founder of Becrypt, told pfm.

Encryption software works by running data through an algorithm, which scrambles and makes them unreadable to anyone that does not have the key, which is usually a password.

“If a laptop that has encryption software on it is stolen or lost, a firm would still have to notify the authorities under GDPR but it is classified as a physical loss, not a data loss. You wouldn’t have to inform every individual whose information is held on the computer as you would if the data was accessible,” Parsons said.