The raft of sweeping new EU regulations being introduced this year is creating an almighty headache for the asset management industry, says Denise Voss, chair of the Association of the Luxembourg Fund Industry (Alfi), the investment trade body.
2018 has already seen the introduction of the Markets in Financial Instruments Directive (Mifid II), key information documents (the Kid regulation) and the Packaged Retail and Insurance-based Investment Products (Priips), and the General Data Protection Regulation (GDPR) looms in May.
“We need regulation that makes sense across the board,” Voss says, adding, by way of example, that the definition of a ‘retail investor’ can change depending on the piece of regulation. Complying with the various definitions can be very time-consuming for asset managers, she added.
The Ucits definition of a ‘retail investor’ has long been used institutional investors, Voss explains. However, the new Kid regulation is “required to be made available to all investors, even so-called ‘professional’ investors, so the latter are effectively being treated as retail investors for the purposes of [the Kid regulation].”
Mifid II’s enormous remit, meanwhile, includes a product governance component encouraging asset managers to provide distributors with target market information.
Voss continues: “Mifid II defines a ‘retail’ or ‘professional’ investor or an ‘eligible counterparty’ and what is required in respect of each category from a distribution perspective.
“We’re spending so much time implementing [different] regulations that it doesn’t give us much time to do other things.”
Britain’s former European commissioner Jonathan Hill was a strident advocate of “better regulation” and making sure that different pieces of EU legislation complement each other. But Lord Hill, who represented the UK’s financial services industry in Brussels, resigned from his position after the Brexit vote in June 2016.
“[Since then] the idea of better regulation and making sure [the different pieces of EU regulation] hang together well… has gotten a bit lost in the shuffle,” Voss, who is also a director at Franklin Templeton, says.
“We do not have the spirit or actions in the direction of better regulation. We’re just chasing after regulation after regulation to implement it.”
“Obviously the focus of our business is managing assets and solutions for investors and it just means that there is less money and time to do that because we’re dealing with regulation,” she says. “It’s very much a concern.”